July 23, 2019

Social Responsibility — Doing Good While Also Making Money And Protecting Owner Interests

BLI_2015Editor’s Note: The following article is excerpted from Herrick Lidstone’s materials for the 2015 Business Law Institute on October 28, 2015. Mr. Lidstone is leading a panel discussion about social responsibility in business. For discussion of the questions he raises below, attend the Business Law Institute. Register here or by clicking the links below.

By Herrick K. Lidstone, Jr.

There are a huge number of issues surrounding corporate/entity social responsibility. Even understanding what “social responsibility” is in this context has a divergent path. For the purposes of this discussion, it can be described as “Doing Good While Also Making Money And Protecting Owner Interests.”[1] This demonstrates the potential conflict – should an investor in a business entity (the owner) look to the entity to “do good” or merely to comply with legal requirements (do not pollute; do not violate the law) while making money for the owners (profit maximization). Should the owner have a say in the business entity’s choices?

Should an entity selling t-shirts worry about the workers in Bangladesh? Should an entity selling coffee worry about how it is grown and harvested? Should an entity selling beef burritos worry about how the cattle are slaughtered?

The legal landscape in which these questions must be considered has changed dramatically in the last five years. Consumer attitudes toward many of these issues have also changed. Some businesses are now extolling their social responsibility, while others apparently continue to consider that to be a secondary consideration, at best. Citizens United v. Federal Election Comm’n, 130 S. Ct. 876 (2010), interprets the Constitution to give business entities the right of free speech in political campaigns in a manner that is not necessarily answerable to the owners.[2] Has Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751 (2014), done similarly for social responsibility and business philanthropy?

The following points are more than can be discussed at one sitting, but hopefully will form a basis for an interesting presentation.

  1. Does Hobby Lobby change the landscape for business enterprises to consider factors other than profit in making their business decisions?
  2. The duties of the Board of Directors after Hobby Lobby – can a for-profit corporation consider social responsibility even if it has the effect of reducing profits?
  3. Where investors are concerned, what is the role of disclosure regarding consideration of alternative constituencies?
  4. Should a for-profit corporation desiring to include a focus on social responsibility at the expense of profit expressly so state in its articles of incorporation or adopt a form such as (in Colorado) a public benefit corporation?
  5. Is there a religious and moral side to profit maximization and corporate social responsibility?
  6. Is there a difference between corporate social responsibility and social entrepreneurship?
  7. Are alternative entities important, and must they be carefully crafted?
  8. Is it a question of marketing?
  9. Where does “blind philanthropy” fit in?
  10. Once you have done it, can you go back?
  11. Is it the Millennials (born 1980-1995) versus the Baby Boomers (born 1945-1960)?
  12. Whither the future?

[1] Of course, the concept of “doing good” has potentially a variety of meanings depending on political, moral, religious, and other deeply held beliefs. This paper will not focus on the potentially contradictory definition of “good.” In the most controversial extreme, consider the “rights of the unborn” versus “freedom of choice” as a justification for abortion. This paper will leave the definition of “good” to others.

[2] In August 2011, the “Committee on Disclosure of Corporate Political Spending” filed a petition for rehearing with the Securities and Exchange Commission (http://www.sec.gov/rules/petitions/2011/petn4-637.pdf) in which the committee asked “that the Commission develop rules to require public companies to disclose to shareholders the use of corporate resources for political activities.” Those rules still do not exist for 1934 Act reporting companies. The SEC does have rules prohibiting investment advisors from making political contributions to encourage political subdivisions to hire them as advisors. See 17 CFR § 275.206(4)-5.

Herrick K. Lidstone, Jr., Esq., is a shareholder of Burns Figa & Will, P.C. in Greenwood Village, Colorado. He practices in the areas of business transactions, including partnership, limited liability company, and corporate law, corporate governance, federal and state securities compliance, mergers & acquisitions, contract law, tax law, real estate law, and natural resources law. Mr. Lidstone’s work includes the preparation of securities disclosure documents for financing transactions, as well as agreements for business transactions, limited liability companies, partnerships, lending transactions, real estate and mineral property acquisitions, mergers, and the exploration and development of mineral and oil and gas properties. He has practiced law in Denver since 1978.


CLE Program: Colorado Business Law Institute

This CLE presentation will take place Wednesday, October 28, 2015 at the Grand Hyatt Denver Downtown. Live program only – click here to register or call (303) 860-0608.

Can’t make the live program? Click here to order the CD homestudy or click here for the MP3 audio homestudy.

Five Reasons to Become an Active Member of the Colorado Bar Association

Deanna[This article is directed primarily to new attorneys, but if you are an experienced attorney who has not been active in the Bar, this is for you too!]

As you start your practice, you will be faced with many new challenges. First, there really are only 24 hours in the day. Second, if you are fortunate enough to have a legal job, your employer would like you to commit the first 23 hours each day to them. Meanwhile, you desire to have some balance in your life. Finally, the Bar Association keeps asking you to join.

Your time at the Bar Association is not billable. It is not guaranteed to lead to a better job offer or new clients. However, it is one of the most valuable investments you can make in your career. In no specific order, here are my five top reasons for being active in the Colorado Bar Association:

  1. Networking: My favorite part about being an active member of the Bar is networking. I used to think networking meant meeting people and figuring out how they could help me in my professional career. While that is still part of networking, I have embraced a larger definition that includes finding ways to spend time with amazing people and, sometimes, improve our society along the way.
  2. Opportunities: Many of my relationships that were started at the Colorado Bar Association offices have led to opportunities. These opportunities have often been unpaid, such as serving on a committee, writing an article, or teaching a seminar. In addition to aiding in my education and professional development, these opportunities have been incredibly enjoyable.
  3. Resources: Because I have served in many roles at the Bar Association, I now know attorneys who are experts in diverse areas of practice who return my phone calls willingly. When I don’t know who to call, the Bar Association will provide me with names of experts who are likely to be willing to discuss a novel legal issue with me.
  4. Legislative Collaboration: I spend time with smart, caring people working on important issues that affect all Coloradans. The attorneys who serve on the various Bar committees check their personal politics at the door and work hard to obtain results that provide real benefits to Colorado.
  5. Continuing Education: I started attending Bankruptcy Subsection meetings because I learned a lot at the case law updates, without much effort. I also met a lot of people who were also interested in bankruptcy. I continue to learn from case law updates, meetings, and sponsored lectures. Learning in a social, interactive setting is more enjoyable and more interesting than reading cases in my office.
  6. A Bonus—Sense of Satisfaction and Fulfillment: When I reflect upon my experiences as a lawyer, many of the most fulfilling happened at Bar Association functions. Practicing law is hard, but it can also be satisfying. For me, the Bar Association is a place to reach beyond the day to day practice and engage in the greater legal community.

I highly recommend taking the time to attend Bar functions and find your own niche in the Colorado Bar Association. There is room for all of us.

If you would like to join the CBA or the Business Law Section, you can send an email to membership@cobar.org or go to http://www.cobar.org/index.cfm/ID/767/dpmem/Membership-Applications/.
You can also contact Jill Lafrenz to become more involved in the Section.

DEANNA L. WESTFALL is the Managing Attorney for the bankruptcy department in the Colorado office of Castle Stawiarski, LLC.  Ms. Westfall is Chair of the Business Law Section of the Colorado Bar Association.  In addition, she is Chair of the Bankruptcy Section of the USFN. Ms. Westfall is a member of the Colorado and Denver Bar Associations.  She is a frequent speaker on bankruptcy and creditors’ rights for CLE Colorado and other organizations. Additionally, she serves as a board member of CLE Colorado.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.