Corporate Objectives-Maximizing Social versus Private Equity
Author(s)
Zalewski, David A.
Abstract
Is it possible to modify corporate objectives so that activities that promote the common good also personally benefit executives and stockholders? As Rodney Stevenson (2002) observed, institutional economics is particularly well suited to addressing this type of issue because of its reliance on ethical principles in its policy prescriptions. In this spirit, this paper develops a new standard of corporate performance–social equity–that balances fairness and economic justice with traditional financial goals such as earnings per share. Not to be confused with “social capital,” I use the term social equity to describe a set of corporate goals that extends beyond profits to include social and environmental standards. To provide incentives to accomplish these objectives, the paper concludes by suggesting a modification of the tax code so that a firm’s income tax liability reflects its contribution to society.
