What’s the Purpose of the Corporation?

Law & Economics Center at Scalia Law Holds Luncheon Panel Reflecting on the Debate Generated by the Revolutionary Business Roundtable Statement Made Two Years Ago

At an August 18, 2021 program titled Business Roundtable v. Milton Friedman: Reflections on the Second Anniversary of “Redefining” the Purpose of the Corporation, the Law & Economics Center at George Mason University Antonin Scalia Law School convened a panel of corporate governance experts who evaluated the economic and legal arguments involved in the debate over the proper purpose of the corporation. More than 50 thought leaders were in attendance at the luncheon panel at The Sofitel Lafayette Square hotel in Washington, D.C.

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 panelists reflecting on this debate included: Lisa Fairfax (Presidential Professor and Co-Director, Institute for Law and Economics, University of Pennsylvania Carey Law School), Donald J. Kochan (Professor of Law and Deputy Executive Director, Law & Economics Center, George Mason University Scalia Law School), Robert T. Miller (F. Arnold Daum Chair in Corporate Finance and Law, University of Iowa College of Law), and Roberto Tallarita (Lecturer on Law, and Associate Director of the Program on Corporate Governance, Harvard Law School). The panel was moderated by The Honorable David J. Porter (class of 1992), Judge, U.S. Court of Appeals for the Third Circuit; and welcome remarks were given by Ken Randall (Allison and Dorothy Rouse Dean and George Mason University Foundation Professor of Law).

Full video of the event is available here: https://vimeo.com/589453571