The Right Strategy: Benchmarks for Just Corporate Action

Abstract

Facing escalating criticism, firms and their owners have rushed to argue that their profits are for the common good, often via perfunctory social or philanthropic initiatives that fail to demonstrate real impact. In this context, I argue that the highest-order problem faced by corporations and their owners is to choose a certain benchmark of justice to follow. I combine Rawls’s theory of justice with Coase’s comparative efficiency analysis to come up with a set of ordered criteria that firms can voluntarily choose: unconditional respect for basic rights and liberties, open access to market opportunities, evidence of improved lives of vulnerable people, and distinct competence to improve lives. Choosing a higher-level benchmark implies that the other lower-order conditions are met — avoiding, for instance, investments in social projects simply to compensate for the neglect of more fundamental actions. I also discuss the role of ultimate principals in selecting a certain benchmark of justice to guide corporate strategies.