Purpose of the Firm
Perverse Incentives Have Ruined America’s Railroads
Thomas Malthouse explores the skewed financial models that lead American railroads to underinvest in maintenance and profitable expansion, producing delays, derailments, and environmental catastrophes such as those that occurred in East Palestine, Ohio, in 2023.
Repercussions From Florida’s Stop WOKE Act Show Investors Value DEI
In new research, Hoa Briscoe-Tran finds that some investors pulled funds from Florida-based firms in response to the state’s Stop Woke Act, suggesting that they value diversity, equity, and inclusion (DEI) initiatives.
Exxon’s Suit Against Its Own Shareholders Threatens Valuable Bargaining
Colleen Honigsberg and Robert J. Jackson, Jr. write that Exxon Mobil’s decision to sue its own investors over a shareholder proposal threatens to enervate an admittedly imperfect but ultimately valuable mechanism that provides shareholder feedback to corporate managers and helps both parties negotiate better governance outcomes.
Is Democracy Relevant to the Way We Govern Public Companies?
On May 29, Exxon Mobil held its 2024 corporate election. Before the election, the company sued two investors over their proposal to include a commitment in its proxy statement to accelerate the company’s reduction of greenhouse gas emissions. Sarah Haan argues that the election and the lawsuit shed more light on current upheavals in corporate democracy than they do on the success of the ESG movement.
The Costs of India’s Mandatory Corporate Social Responsibility Rule
In new research, Jitendra Aswani finds that India’s mandatory corporate social responsibility contribution for large firms increased corporate borrowing costs, but transparency and clear communication to investors about these contributions reduced the additional costs.
Minority and Labor Representation Helps Worker Welfare and Productivity
Matthias Breuer, Wei Cai, Anthony Le, and Felix Vetter find that gender minority representation on German works councils helps to improve worker welfare and productivity.
The Fight for the Purpose of the Firm
The following is an excerpt from Kyle Edward Williams' new book, "Taming the Octopus: The Long Battle for the Soul of the Corporation," now out at W. W. Norton & Company.
Why Business Should Be More Prosocial, and Ten Guidelines for How
Business and economic thought instituted at least since the Reagan revolution in the United States have promoted firms’ narrowly self-interested, profit-maximizing conduct even at the expense of consumers and workers. This paradigm leads to social distrust and insufficient cooperation. Steven C. Salop explains this distortion and proposes 10 guidelines by which firms can self-moderate their behavior to produce prosocial outcomes.
