A Rawlsian View of CSR and the Game Theory of its Implementation (Part I): the Multi-stakeholder Model of Corporate Governance

Abstract

This is the first part of a comprehensive essay on the Rawlsian view of corporate social responsibility (in short CSR). CSR is defined as a multi-stakeholder model of corporate governance and objective function based on the extension of fiduciary duties toward all the firm's stakeholders (see sec. 2). A rationale for this idea is firstly given within the perspective of new-institutional economic theory in terms of transaction costs efficiency. From this perspective, abuse of authority in regard to the non-controlling stakeholders emerges as the main unsolved problem, and which makes it impossible to sever efficiency from equity within the domain of corporate governance (sec. 3). Intuitively, a Rawlsian principle of redress emerges as the natural answer to the legitimization problem of ownership and control rights allocations when, in order to provide incentive to one party (incentive to undertake important specific investments), they give it a disproportionate advantage over other non-controlling stakeholders. Moreover, in accordance with the prevailing opinion about its voluntariness, CSR is viewed here as a model of corporate governance that companies may undertake by autonomous selfregulation in terms of the explicit adoption of expressed self-regulatory norms and standards. This is to be understood as an institution in Aoki's sense of the term: i.e. roughly put, as a rule in the behavior of a group of players which is maintained through the repeated plays of a given game, thanks to a system of mutually consistent beliefs by players predicting each

Moral Agency in Charities and Business Corporations: Exploring the Constraints of Law and Regulation

“…It can therefore be argued that despite shareholders' position at the centre of corporate governance having received sustained criticism in recent years (e.g. from Ireland 2010;Sacconi 2011;Deakin 2012;Stout 2012b;Veldman and Parker 2012), while the law concentrates authority in their hands, there is reason to ask to what end they should use it. This is especially the case in the context of 'shareholder activism' and calls for greater 'say on pay' (Marriage 2017;Marlow 2017).…”

Justice and Corporate Governance: New Insights from Rawlsian Social Contract and Sen’s Capabilities Approach

“…However, when specific investments are multiple and interdependent, one-side control will not prevent the risk of 'abuse of authority' (Sacconi 1999(Sacconi , 2000(Sacconi , 2011a. The individual (or class of individuals) who has the authority may protect her/his investment from expropriation, but at the same time may 'legally' expropriate other parties' investments by appropriating all the corporate surplus also deriving (by means of joint production) from other stakeholders' investments.…”

“…In the perspective joining NIE (Williamson 1975(Williamson , 1986Grossman and Hart 1986;Hart and Moore 1990;Hart 1995) with the stakeholder approach (see Freeman 1984), the firm appears as team production among holders of specific investments, with some other stakeholders potentially subject to the (negative or positive) externalities deriving from it (Blair and Stout 1999;Sacconi 2000Sacconi , 2006aSacconi , 2011a. The abuse of authority in the presence of multilateral specific investments and externalities then poses a challenge to the unilateral hierarchical solution.…”

“…Some examples are the American tradition of corporate law that understands the firm as a ''mediating hierarchy'' (Blair and Stout 1999;Stout 2012), the Co-determination model of German large corporations (Gelter 2009); the Japanese model of managerial capitalism (Aoki 2010), Benefit Corporations (Hiller 2013), and European social cooperatives (Sacchetti 2015). CSR self-regulations and policies can be also interpreted as attempts at the corporate level to introduce some balances that extend the governance mechanism by additional responsibilities toward non-controlling stakeholders (Sacconi 2006a(Sacconi , 2011a .…”

“…4 Neither of these formulations of the stakeholder model, however, provides a logical analysis of the stakeholders' agreement at the microlevel of the firm that-by exploiting the analytical tool of the theory of choice-is able to account for the fair and efficient agreement amongst the firm's stakeholders. This endeavor has been accomplished by the SCTF (Sacconi 1999(Sacconi , 2000(Sacconi , 2006a(Sacconi , b, 2007(Sacconi , 2011a that analytically works out the firms' multi-stakeholder objective function that socially responsible firms maximize. That is the joint plan of action that corresponds to their agreement, solving their mixed motive interaction in which both mutual advantage for cooperation and distributive conflict are interlocked.…”