GMU Law Panel on Purpose of a Corporation
On August 18, the Law & Economics Center at George Mason University Antonin Scalia Law School hosted a panel of corporate governance experts entitled “Business Roundtable v. Milton Friedman: Reflections on the Second Anniversary of ‘Redefining’ the Purpose of the Corporation.” The panel evaluated the economic and legal arguments involved in the debate over the proper purpose of the corporation.
Almost 51 years ago, on September 13, 1970, Milton Friedman published an essay in The New York Times with a title that captured his thesis that “The Social Responsibility Of Business Is to Increase Its Profits.” This shareholder value maximization metric for evaluating the legal and financial fiduciary duties of corporate officers has served as the dominant paradigm for defining the purpose of the corporation both before and certainly for the fifty years after publication of Friedman’s influential essay. Yet, on August 19, 2019 – two years ago – the influential Business Roundtable attempted to effect a dramatic shift away from the purpose of the corporation being defined by the single metric of shareholder wealth maximization. It released what it called a “new Statement on the Purpose of a Corporation" signed by 181 CEOs who commit to lead their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders.” This move was received with both applause and condemnation, each of which continue two years later.
The August 18 event reflecting on this debate featured ALI members Lisa A. Fairfax of George Washington University Law School (panelist), Donald J. Kochan of GMU Antonin Scalia Law School(panelist), David J. Porter of the U.S. Court of Appeals for the Third Circuit (moderator), and Ken Randall of GMU Antonin Scalia Law School (introductory remarks).
Full video of the event is available here.