American Law and Justice

Topics: Corporation, Law, Management Pages: 1 (306 words) Published: April 22, 2013
American Law Institute, Principles of Corporate Governance: Analysis and Recommendations (1994)

Section 2.01. The Objective and Conduct of the Corporation (a) [With some exceptions regarding directors’ obligations with respect to unsolicited tender offers], a [business] corporation should have as its objective the conduct of business activities with a view to enhancing corporate profit and shareholder gain. (b) Even if corporate profit and shareholder gain are not thereby enhanced, the corporation, in the conduct of its business: (1) Is obliged, to the same extent as a natural person, to act within the boundaries set by law; (2) May take into account ethical considerations that are reasonably appropriate to the responsible conduct of business; and (3) May devote a reasonable amount of resources to public welfare, humanitarian, educational, and philanthropic purposes. Discussion questions: 1. It is sometimes said that business corporations should “maximize shareholder wealth.” Is the American Law Institute’s perspective consistent with this view? Why or why not? 2. With respect to Section 2.01(b)(1), are some laws more important to obey than others? How should one decide as a corporate manager, officer, or employee whether or not to follow the law? Does it make sense conduct a cost-benefit analysis to determine the relative risks and rewards? Or does a different principle require following the law (or at least some kinds of laws)? If so, what is this principle? 3. With respect to Section 2.01(b)(1), what “ethical considerations” are “reasonably appropriate to the responsible conduct of business”? A comment following the section says that “ethical responsibilities . . . may be owed to persons other than shareholders with whom the corporation has a legitimate concern, such as employees, customers, suppliers, and members of the communities within which the corporation operates.” Does consideration of these other groups dilute or enhance the business objective?...
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