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 towards all of the firm’s stakeholders (see section 2). A rationale for this idea is given firstly 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 makes it impossible to sever efficiency from equity within the domain of corporate governance (section 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 incentives to one party (the incentive to undertake important specific investments), they give it a disproportionate advantage over other non-controlling stakeholders.