Responsible Profitability - Not on My Balance Sheet, 61 Cath. U. L. Rev. 651 (2012)

Many free-market capitalists believe in the syllogism that if a free market results in progress, and if progress is good, then by definition a free market must be good. Two hundred years of economic development support this proposition. The capitalist model, which is premised on free-market ideology, is credited with producing many of the riches enjoyed by society as a whole. Indeed, the pursuit of economic freedom ranks among the primary motivations for the founding of the United States. The corporation has enabled that pursuit and can be credited with greatly contributing to the advancement of free-market capitalism. Proponents of the corporate enterprise argue that corporations have benefitted the American economy and, by extension, American society. Undoubtedly, the corporation has created economic opportunity for shareholders, and it is undeniable that “America owes much of its early development to these business enterprises.” However, the use of the corporate device has exacted a heavy price on society, and observers have called its social utility into question. Concerns about abusive practices have resulted in calls for additional regulation of corporations and increased corporate social responsibility (CSR).13 Although corporations have yielded many great benefits to society, they also have imposed many substantial burdens. This Article contends that traditional legal theories have not adequately discouraged corporations from making socially undesirable choices and have not encouraged corporations to take socially responsible action. In response to the inadequacies of prior law, the CSR movement surfaced as an alternative and has become an important voice in the effort to call attention to corporations\u27 irresponsible and unfettered actions. The CSR movement has contributed to gains in labor, environmental, and safety policies. However, the CSR voice lacks the power of legislation, and without legislation, its voice lacks legal authority. Without legislation mandating responsible corporate behavior, corporations will continue to engage in behavior that is socially undesirable, albeit profitable, for its shareholders.With the benefit of enabling legislation, the corporate entity can be both a profit-making device for its shareholders and a responsible corporate citizen. This dual function may translate into customer loyalty, consumer preference, and ultimately corporate profits. Part I discusses the corporation\u27s early role and the debate concerning its purpose. Part II explores the legal justifications for the pursuit of profit and discusses how modern financial theory contributed to profit-maximization efforts. Part III then discusses the failure of traditional legal theories to provide either adequate public protections or corporate incentives for responsible action. Finally, Part IV proposes encouraging responsible corporate action through the use of accounting rules and tax law