Charity, Truth and Corporate Governance

Abstract

Charity and truth seem very foreign to corporate governance. Yet, both are absolutely necessary to answer fundamental questions – even those that arise in corporate law. Corporate law scholars long have debated whether managers, in making decisions for a corporation, should employ a shareholder wealth maximization norm or a norm that emphasizes social responsibility. That debate continues. Its resolution rests in discovery of the truth about corporate governance. About a decade or so ago, scholars began using the lens of Catholic Social Thought to search for this truth. Since then, two differing schools of thought have emerged. One emphasizes the fundamental importance of human freedom in Catholic Social Thought; the other emphasizes Catholic Social Thought’s long-standing adherence to communitarian principles. In June 2009, Pope Benedict XVI issued Caritas in Veritate, a social encyclical that clearly articulates what Catholic Social Thought requires of corporate governance. This Article considers what Caritas in Veritate offers the debate about the appropriate norm for corporate governance. It begins with a description of the fundamental principles of Catholic Social Thought and a discussion of how modern popes before Pope Benedict XVI have explained those principles in addressing matters important to corporate governance. It then discusses the focus of Caritas in Veritate and its explanation of principles of Catholic Social Thought relevant to corporate governance. The Article then examines how scholars applied Catholic Social Thought to the corporate governance debate before Caritas in Veritate was issued and how Caritas in Veritate informs the debate. Finally, this Article concludes that Caritas in Veritate offers important lessons to those on both sides of the corporate governance debate by stressing that shareholder wealth maximization must be tempered by charity and that corporate social responsibility must be grounded in truth.