Lisa M. Fairfax · 8. See, e.g., infra note 41 and accompanying text. 9. See infra Appendix A...

* AB Harvard College, JD Harvard Law School. Professor of Law and Director of BusinessLaw Program, University of Maryland School of Law. I would like to thank the organizers andparticipants of the Journal of Corporation Law’s Symposium, Robert Clark’s Corporate Law:Twenty Years of Change, particularly Hillary Sale, Robert Clark, Jill Fisch, Lucian Bebchuk, andCynthia Williams for their helpful comments and suggestions on earlier versions of this draft. ThisArticle also benefitted from comments and suggestions I received at faculty presentations at theUniversity of Pennsylvania Law School, Institute for Law and Economics, and the GeorgetownUniversity School of Law. In addition, I would like to thank Jeffrey D. Bauman, William Bratton,Danielle Citron, Roger A. Fairfax, Jr., Sarah Barringer Gordon, Joan Heminway, Emma ColemanJordan, Michael Knoll, Donald C. Langevoort, Amanda Leiter, Kristen Madison, Milton C. Regan,David Skeel, Daniel Tarullo, Amy Wax, and R. Polk Wagner. Special thanks to Sarah Kotula andPuja Mehta for their invaluable research assistance. All errors, of course, are mine.

771

EASIER SAID THAN DONE? A CORPORATE LAW THEORY FORACTUALIZING SOCIAL RESPONSIBILITY RHETORIC

Lisa M. Fairfax*

Post Enron has witnessed renewed concern regarding corporations’failure to behave responsibly, both in terms of their ethical responsibilityand in terms of their responsibilities to advance issues beyond financialmatters, such as those that impact employees, customers, and the broadercommunity. Many scholars, legislators, and members of the businesscommunity have struggled to find strategies for restoring corporateresponsibility. This Article argues that a corporation’s own words orrhetoric may be useful in solving its behavioral defects. In fact, the vastmajority of corporations issue statements or otherwise engage in rhetoricthat suggest a commitment to issues and concerns beyond financialmatters. Most people dismiss this rhetoric as meaningless speech, and asa result there has been very little attempt to analyze its relevance tocorporate conduct. This Article insists that such dismissals areshortsighted. First, by critically examining the available empiricalevidence, this Article demonstrates that corporate rhetoric has a greaterconnection to corporate behavior than most would presume. Second, thisArticle draws on social psychology literature to illuminate how corporaterhetoric on responsibility can be used strategically to increase thelikelihood that corporations will engage in behavior consistent with thatrhetoric. By highlighting the behavioral significance of corporate rhetoric,this Article offers a unique and novel solution to the problem of corporateirresponsibility.

772 FLORIDA LAW REVIEW [Vol. 59

I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 772

II. THE (RE-)EMERGENCE OF CORPORATE STAKEHOLDER

RHETORIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 779A. The Evidence on the Dominance of Stakeholder

Rhetoric. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 780B. A Re-Emergence.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 785C. The Dismissal.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786

III. THE EVIDENCE ON THE LINK BETWEEN RHETORIC

AND REALITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 787A. Socially Responsible Funds. . . . . . . . . . . . . . . . . . . . . . . . . 789B. Socially Responsible Lists. . . . . . . . . . . . . . . . . . . . . . . . . . 791C. Behavioral Anecdotes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 792D. Concluding Assessments. . . . . . . . . . . . . . . . . . . . . . . . . . . 795

IV. THE CONSISTENCY PRINCIPLE. . . . . . . . . . . . . . . . . . . . . . . . . . 798A. The Power of Consistency. . . . . . . . . . . . . . . . . . . . . . . . . . 798B. Some Principles of Commitment and Consistency.. . . . . . . 800C. Some Limitations of the Consistency Principle. . . . . . . . . . 803

1. The Multiplicity Problem. . . . . . . . . . . . . . . . . . . . . . . . 8032. The Ownership Problem.. . . . . . . . . . . . . . . . . . . . . . . . 803

V. A CONCEPTUAL FRAMEWORK FOR ADAPTING THE

CONSISTENCY PRINCIPLE TO CORPORATE RHETORIC. . . . . . . . 804A. Corporate Identity and Reputation. . . . . . . . . . . . . . . . . . . 805B. Transferring Commitments from the

Corporation to the Individual. . . . . . . . . . . . . . . . . . . . . . . 8081. Measuring the Strength of Corporate

Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8102. Active Involvement in Rhetorical Commitments. . . . . . 8113. Executive Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . 812

C. Issues Regarding Corporate Decision-Making. . . . . . . . . . 813D. Addressing the Multiplicity Problem. . . . . . . . . . . . . . . . . . 815E. Implications for Corporate Policy. . . . . . . . . . . . . . . . . . . . 816

VI. CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 817

I. INTRODUCTION

Recent corporate governance failures have sparked renewed concernabout corporations’ lack of responsibility towards their ethicalcommitments and towards their commitments to matters beyond financial

2007] A CORPORATE LAW THEORY FOR ACTUALIZING SOCIAL RESPONSIBILITY RHETORIC 773

1. See, e.g., Note, The Good, the Bad, and Their Corporate Codes of Ethics: Enron,Sarbanes-Oxley, and the Problems with Legislating Good Behavior, 116 HARV. L. REV. 2123, 2123(2003) [hereinafter Corporate Codes of Ethics] (noting that the corporate misdeeds of high-profilecompanies gave rise to “widespread” calls for reform of corporations and focused attention onstrategies for improving corporate ethics and behavior).

2. See infra Part II.3. See Federal Express Corp., About FedEx: The Environment,

http://www.fedex.com/us/about/responsibility/environment.html?link (last visited July 16, 2007).4. See Procter & Gamble Co., Our Commitment, http://www.pg.com/company/our_

commitment/index.jhtml (last visited July 16, 2007).5. See The Good Company, ECONOMIST, Jan. 22, 2005, at 3; The World According to CSR,

ECONOMIST, Jan. 22, 2005, at 10; The Good Company: Capitalism and Ethics, ECONOMIST, Jan.22, 2005, at 11; Profit and the Public Good, ECONOMIST, Jan. 22, 2005, at 15; The Ethics ofBusiness, ECONOMIST, Jan. 22, 2005, at 20.

6. See infra Appendix A. Business schools mirror this focus on stakeholders not only byincreasingly offering core and elective courses on topics involving responsibility to stakeholders,

issues. In response, a wide variety of groups from legislators to academics1

have offered strategies to reform corporate behavior. This Articlemaintains that a corporation’s own speech or rhetoric may be useful inthese reform efforts.

Corporate “stakeholder rhetoric”—statements or discourse suggestingcorporate commitment to the concerns of non-shareholders such asemployees, customers, creditors, and society at large—permeates corporatewebsites and documents from annual reports to mission statements.2

Virtually every corporation not only professes a desire to engage incharitable endeavors but also generates a report regarding those endeavors.Corporations also express a commitment to enhancing the workenvironment and the quality of life of their employees. To this end, manycorporations adopt codes of conduct saturated with rhetoric regarding thecorporation’s commitment to promoting an inclusive and supportiveworkplace. In addition, corporations increasingly trumpet theircommitment to adopting and implementing environmentally friendlypractices, even producing reports highlighting their environmental efforts.

In this vein, FedEx refers to effective environmental management as“one of its most important corporate priorities.” Then too, corporations3

claim to recognize a responsibility for making positive contributions to thelocal and global community. As Procter & Gamble explains, “Ourcommitment . . . [i]t’s about taking responsibility for improving ourcommunities around the world through the work we do, as a Company andas individuals.”4

Indeed, in 2005 the Economist dedicated an issue to the dominance inofficial corporate discourse of this pervasive rhetoric. My study of5

Fortune 100 companies reveals that all but two of such companiesincorporate stakeholder rhetoric in at least one corporate document or ontheir websites.6


but also by sponsoring conferences on such topics and even housing centers in their schoolsdedicated to advancing stakeholder concerns within the corporate arena. For recent data on thisphenomenon, see generally THE ASPEN INST. & WORLD RES. INST., BEYOND GREY PINSTRIPES 2005:PREPARING MBAS FOR SOCIAL AND ENVIRONMENTAL STEWARDSHIP 2 (2005) [hereinafter BEYOND

GREY PINSTRIPES], available at http://www.beyondgreypinstripes.org/pdf/2005_beyond_grey_pinstripes.pdf (describing data from survey of MBA programs conducted in 2005).

7. See The Good Company, supra note 5, at 3 (noting that the dominance of the rhetoricrelated to social responsibility suggests that it has won the “battle of ideas”).

8. See, e.g., infra note 41 and accompanying text.9. See infra Appendix A (indicating that 28% of Fortune 100 companies open their annual

report with some reference to stakeholders).10. See infra Appendix A (indicating that 68% of Fortune 100 companies focus on

stakeholders within the first five pages of their annual report).11. See infra note 38 and accompanying text.12. See JOHNSON CONTROLS, INC., 2005 BUSINESS AND SUSTAINABILITY REPORT 3, available

at http://www.johnsoncontrols.com/publish/us/en/about/sustainability/sustainability_report.-CenterPar-000111-DownloadFile.tmp/JC_05report_single.pdf [hereinafter JOHNSON CONTROLS

ANNUAL REPORT].

Nonetheless, corporations do not ignore shareholders and finances.Hence, every corporation devotes some attention to shareholders’ and tothe firm’s values both in annual reports and on its website. Corporationsalso include shareholders among the many constituents to whom they owean obligation.

In recent years, however, rhetoric emphasizing a corporate commitmentto other concerns appears to have increased, and in some cases it has eveneclipsed corporate discourse on shareholders and wealth-maximization.7

For example, on most corporate websites, stakeholder discourse can befound in a variety of different locations while financial information istypically relegated to one portion of a website. Also, many corporationshighlight their commitment to other groups before focusing onshareholders. Indeed, several corporations open their annual report with8

a discussion of their activities and responsibilities to other groups. Many9

other corporations make sure to mention stakeholder concerns within thefirst five pages of the annual report. In this regard, while corporate10

discourse does not ignore shareholders, non-shareholders have managedto grab an increasingly large share of a corporation’s focus.

Moreover, corporate discourse conveys the impression that corporationsfeel an affirmative responsibility to address the concerns associated withthese other groups and issues. In fact, many corporations’ rhetoric suggeststhat their commitment to other groups is on par with their responsibility toshareholders. As one corporation explains, “[W]e define success more11

broadly than just by financial results. We also define it by ourenvironmental and social performance.” Perhaps most striking, some12

corporations engage in rhetoric suggesting that their obligations to other

http://www.beyondgreypinstripes.org/pdf/

http://www.johnsoncontrols.com/publish/us/


13. See infra notes 41, 111 and accompanying text (describing among other corporatedocuments, Johnson & Johnson’s credo that refers to its responsibility to shareholders as its “final”obligation).

14. In this regard, the rhetoric may be consistent with the “shareholder primacy” theory ofthe corporation because—particularly if one takes a long-term view of shareholders’interests—advancing the concerns of other corporate constituents may serve to enhance shareholdervalue. See Ronald Chen & Jon Hanson, The Illusion of Law: The Legitimating Schemas of ModernPolicy and Corporate Law, 103 MICH. L. REV. 1, 46-48 (2004). However, one also may argue thatthe rhetoric is more consistent with the “stakeholder” theory of the firm because rather than givingpriority to shareholders, the rhetoric suggests that corporations should balance the interests of avariety of groups and even give preference to those groups. This Article does not seek to addressthat normative claim, but rather seeks to ascertain the extent to which corporate adoption of rhetoricfocusing on concerns beyond shareholders will impact corporate behavior with respect to thoseconcerns.

15. For an example of an effort to assess the impact of judicial rhetoric within the context ofcorporate law, see Sean J. Griffith, Good Faith Business Judgment: A Theory of Rhetoric inCorporate Law Jurisprudence, 55 DUKE L.J. 1 (2005).

16. See infra Part II.C (discussing rhetoric as a marketing strategy designed to curry favorwith the public).

17. See AMERICAN HERITAGE DICTIONARY OF ENGLISH LANGUAGE (4th ed. 2000), availableat http://www.bartleby.com/61/80/R0218000.html. This definition is distinct from the classicaldefinition of rhetoric, defined as the art of persuasion or persuasive discourse. See id; see alsoDictionary.com, http://dictionary.reference.com/browse/rhetoric; Merriam Webster OnLine,http://www.m-w.com/dictionary/rhetoric.

groups can take precedence over their duty to shareholders. Certainly13

corporations may adopt this other-regarding rhetoric because of a beliefthat professing to focus on other groups—and even sacrificing short-termprofits to do so—may have a long-term benefit on the corporateenterprise. Regardless of the rationale, the content and extent of14

stakeholder rhetoric suggest that corporations feel obliged to pay heed toconcerns related to groups and issues beyond shareholder profit.

But to what extent does that rhetoric translate into actual corporatepractice? Most commentators have either ignored or dismissed thepossibility that corporate stakeholder rhetoric could have any meaningfulimpact on corporate behavior. In fact, outside of the aforementionedEconomist issue, there has been no comprehensive effort to analyze therelevance of stakeholder rhetoric in corporate law. This lack of analytical15

assessment no doubt stems from the general presumption that corporationsadopt stakeholder rhetoric as a marketing ploy aimed at boosting theirpublic image. Embedded in that presumption is the notion that such16

rhetoric has little, if any, impact on actual corporate practices. Indeed, wegenerally use the term rhetoric to refer to “intellectually vacuous” or“insincere” speech. Therefore, labeling corporate discourse in this area17

as “rhetoric” supports the notion that such discourse represents a marketingstrategy lacking significant behavioral implications.

This Article contends that scholars have dismissed too readily the


18. See infra Part III (explaining principles explored by social psychologist Robert Cialdiniand others who suggest that people who are inconsistent are viewed as morally bankrupt).

19. See infra notes 138-44 and accompanying text.

potential behavioral ramifications of corporate stakeholder rhetoric. First,by more deeply probing the available anecdotal and empirical evidence onthe link between corporate rhetoric and practices, this Article reveals thatthere are numerous corporations whose practices appear to be aligned withtheir rhetoric. Second, drawing upon social psychology literature regardingthe impact of speech on behavior, this Article sets forth a conceptualframework raising the possibility that corporate adoption of a particularrhetoric can play a crucial role in shaping a corporation’s behavior. In thisregard, this Article not only debunks the notion that corporate rhetoric hasno connection to actual practices, but also demonstrates the manner inwhich such rhetoric can be used strategically to encourage or enhancecorporate engagement in behavior beneficial to stakeholders.

Part II of this Article provides evidence on the prevalence ofstakeholder discourse within a variety of corporate settings and revealshow that prevalence has increased within the last five years. Part IIIexamines the evidence on the degree to which corporations that adoptstakeholder-focused rhetoric engage in practices consistent with thatrhetoric. That examination reveals that while many corporations fall shortof their rhetorical commitments, other corporations appear to have greaterfealty to their rhetoric, particularly corporations that engage in significantamounts of rhetoric.

Part IV develops a theoretical framework for exploring the manner inwhich the adoption of stakeholder rhetoric can be used to increase thelikelihood that corporations will engage in stakeholder-oriented practices.This Part relies upon social psychology literature regarding the impact ofwritten speech on individual behavior. That literature reveals thatconsistency plays an integral role in shaping human behavior—aphenomenon referred to in this Article as the “consistency principle.” Thisprinciple captures the notion that society places a high value onconsistency, associating it with moral integrity and trustworthiness.Inconsistency, on the other hand, breeds dislike and distrust. The18

consistency principle suggests that when an individual expresses acommitment to a given idea or principle, the human preference forconsistency generates internal and external pressures to engage in behaviorconsistent with that commitment.

This pressure is most pronounced when the speech or commitment iswritten. Several studies confirm that the best way to ensure an individual’scompliance with a request to engage in a particular behavior is to extracta written commitment from the individual prior to making the request.19

For example, research suggests that if two similarly situated groups of


20. See infra notes 138-44. In this respect, the evidence distinguishes between correlation andcausation, suggesting that there is not merely a correlation between commitment and behavior, butrather that the commitment causes the behavior.

21. See ROBERT B. CIALDINI, INFLUENCE: THE PSYCHOLOGY OF PERSUASION 70-71 (1993)(describing impact of the consistency principle on prisoners of war in China encouraged to writea pro-Chinese or anti-American statement).

22. See infra notes 154-55 and accompanying text.23. As a general matter, social psychology literature on group behavior reveals that certain

kinds of groups are particularly susceptible to “groupthink,” conformity, and other phenomena thatcause individuals within the group not only to de-emphasize their own attitudes and instincts butalso to engage in destructive behavior. See, e.g., IRVING L. JANIS, GROUPTHINK: PSYCHOLOGICAL

STUDIES OF POLICY DECISIONS AND FIASCOES 174-77 (2d ed. 1982) (discussing the process ofgroupthink); Marleen A. O’Connor, The Enron Board: The Perils of Group Think, 71 U. CIN. L.REV. 1233, 1257-93 (2003) (applying components of groupthink to Enron). This Article presumesthat these kinds of phenomena can be overcome so that individuals’ natural tendencies can bestimulated, and the literature supports this presumption. See James Fanto, Whistleblowing and thePublic Director: Countering Corporate Inner Circles, 83 OR. L. REV. 435, 462 (2004) (noting thatflaws associated with group decision-making can be overcome); Gregory Todd Jones, Trust,Institutionalization, & Corporate Reputations: Public Independent Fact-Finding from a RiskManagement Perspective, 13 U. MIAMI BUS. L. REV. 121, 136 (2005) (noting that institutions can

people were asked to recycle, the group whose members had made somewritten commitment to such behavior would recycle at a significantlyhigher rate than the group whose members did not make such acommitment. In this regard, research supports the proposition that20

commitments, especially written commitments, influence people’sbehavior, even when they are initially reluctant to engage in a particularbehavior. 21

The social psychology literature also reveals that repetition enhances aperson’s sense of commitment. The more often someone makes a22

commitment, the more likely she is to engage in corresponding behavior.Also, a small commitment to a given idea can facilitate a person’sparticipation in a broad range of conduct deemed consistent with thatcommitment.

After illuminating the concepts underlying the consistency principle,Part V examines whether that principle has any relevance to corporaterhetoric. On the one hand, if one conceptualizes corporate rhetoric as aform of commitment, the consistency principle raises the possibility thatthe adoption of such rhetoric can have a powerful impact on corporatebehavior. That principle suggests that the tendency towards consistencymay compel corporations to engage in behavior more consistent with theirrhetoric—even when the rhetoric is relatively insignificant or adoptedreluctantly. Moreover, the fact that the rhetoric is written and oftenrepeated should enhance the behavioral impact. On the other hand, thereare limits to the extent to which a theory developed to explain individualbehavior can be applied to explain and shape corporate behavior. 23


either serve as a source of support or deterrence for positive individual behavior); O’Connor, supra,at 1257-58, 1294 (noting that the empirical studies on the validity of groupthink have producedmixed results and pinpointing methods for overcoming behavioral defects associated with groupdecision-making); Brian Allen Warwick, Reinventing the Wheel: Firestone and the Role of Ethicsin the Corporation, 54 ALA. L. REV. 1455, 1468 (2003) (noting that corporations can facilitateappropriate ethical conduct on the part of individuals).

The consistency principle is predicated upon basic human reactions toparticular scenarios and influences. Arguably, as a fictional entity,corporations may experience difficulties replicating these reactions.However, Part V explores several ways in which these difficulties can beovercome. First, Part V relies on literature related to corporations’ desireto protect their brand and reputation to demonstrate how corporate speechmay be analogous to individual speech for purposes of the consistencyprinciple. Specifically, this Part reveals that just as individuals gravitatetowards consistency to appear trustworthy, corporations may be compelledto engage in behavior consistent with their rhetoric to project and maintainthe corporation’s reputation of trustworthiness. Second, Part V pinpointsfactors that may both undermine and enhance the extent to whichindividuals within the corporation feel sufficiently responsible forcorporate rhetoric to influence their behavior. Indeed, one criticaldistinction between corporate commitment and individual commitment isthat the corporate commitment is made by and on behalf of a corporationwhile the individual commitment is made by and on behalf of anindividual. This distinction means that for the consistency principle to haveany relevance to corporate rhetoric, individuals within the corporation mustfeel some degree of ownership and responsibility for that rhetoric. To thisend, Part V illustrates roadblocks to ensuring that individuals takeownership of corporate rhetoric and then offers suggestions regarding themanner in which those roadblocks may be overcome. Hence, Part Vdemonstrates that the consistency principle can be applied to corporaterhetoric under the right circumstances. This application also illustrates thatsuch rhetoric can influence corporate behavior.

Part VI concludes by emphasizing the importance of stakeholderrhetoric in the corporate environment in both reflecting and shapingcorporate behavior. The failure to appreciate the behavioral ramificationsof stakeholder rhetoric not only leads us to underestimate the extent ofcorporate engagement in stakeholder practices, but also causes us tooverlook the possibility that such rhetoric can serve as a useful tool forenhancing that engagement. In this respect, this Article reveals thatcorporate rhetoric may represent an important tool in the ongoing searchfor mechanisms that will enhance corporate responsibility.


24. In other words, stakeholder rhetoric can be viewed as rhetoric endorsing some versionof the “stakeholder theory” of the corporation. A number of scholars have defined this theory. See,e.g., William W. Bratton, The Economic Structure of the Post-Contractual Corporation, 87 NW.U. L. REV. 180, 208-15 (1992) (discussing the stakeholder theory); Timothy L. Fort, TheCorporation as Mediating Institution: An Efficacious Synthesis of Stakeholder Theory andCorporate Constituency Statutes, 73 NOTRE DAME L. REV. 173, 184-86 (1997) (discussing thestakeholder theory along with its development and critiques); David Hess, Social Reporting: AReflexive Law Approach to Corporate Social Responsiveness, 25 J. CORP. L. 41, 52 (1999)(defining corporate social responsibility).

Corporate scholars have long debated the contours of the fiduciary duties owed by corporatedirectors and officers. See, e.g., Henry N. Butler & Fred S. McChesney, Why They Give at theOffice: Shareholder Welfare and Corporate Philanthropy in the Contractual Theory of theCorporation, 84 CORNELL L. REV. 1195, 1195 (1999) (noting that the issues have been debated adnaseum). One of the most prominent of these debates dates back to the 1930s between professorsAdolf Berle and Merrick Dodd. See A.A. Sommer, Jr., Whom Should the Corporation Serve? TheBerle-Dodd Debate Revisited Sixty Years Later, 16 DEL. J. CORP. L. 33, 36-37 (1991). Within thisdebate, some embrace a “shareholder primacy” ideal and insist that corporate actors have anobligation primarily, if not exclusively, to shareholders and the maximization of their wealth. SeeStephen Bainbridge, Director Primacy: The Means and Ends of Corporate Governance, 97 NW.U. L. REV. 547, 563 (2003); Henry Hannsmann & Reinier Kraakman, The End of History forCorporate Law, 89 GEO. L.J. 439, 439 (2001). Others endorse a “stakeholder” theory and maintainthat corporate directors and officers are obligated to address the concerns of all corporateconstituents or “stakeholders” including customers, creditors, suppliers, employees, and the broadercommunity. Despite this difference in viewpoints, there currently appears almost unanimousagreement that the debate regarding corporate director and officer responsibility has been settledin favor of shareholder primacy. See Bainbridge, supra, at 563 (noting that most scholars embracesome variant of shareholder primacy); Jill Fisch, Measuring Efficiency in Corporate Law: The Roleof Shareholder Primacy, 31 J. CORP. L. 637, 647 (2006) (noting the resounding support forshareholder primacy); Kent Greenfield, New Principles for Corporate Law, 1 HASTINGS BUS. L. J.89, 89 (2005) (noting the dominance of the shareholder primacy model); Hannsmann & Kraakman,supra, at 439 (noting the “recent dominance of a shareholder-centered ideology or corporate law”).But see Margaret M. Blair & Lynn A. Stout, Director Accountability and the Mediating Role of theCorporate Board, 79 WASH. U. L. Q. 403, 406 (2001) (noting that shareholder primacy in theabsolute sense may be neither normatively nor positively accurate). Although beyond the scope ofthis Article, the prevalence of stakeholder rhetoric—and the seeming focus on the concerns of avariety of different constituents—may reflect some erosion in the normative preference for theshareholder primacy theory, at least in its absolute sense.

II. THE (RE-)EMERGENCE OF CORPORATE STAKEHOLDER RHETORIC

This Article defines corporate stakeholder rhetoric as discourse orcommunication evidencing a corporation’s commitment to or concern forgroups and interests beyond shareholders, including customers, employees,creditors, suppliers, and society. As defined, stakeholder rhetoric can beviewed as rhetoric embracing a concern for stakeholders or socialresponsibility. It should be noted that there is some disagreement about24

how best to define corporate social responsibility. There is alsodisagreement regarding the type of groups that should be included withinthe meaning of stakeholders. Indeed, some adopt a broad definition of


25. See, e.g., Calvert Funds, Social and Environmental Analysis Criteria,http://www.calvert.com/sri_647.html [hereinafter Calvert Funds] (last visited July 22, 2007) (usinga broad range of factors to identify socially responsible corporate behavior).

26. See infra Appendix A. The two companies that do not engage in such rhetoric areBerkshire Hathaway, Inc. and American International Group, Inc.

27. See infra Appendix A. These percentages increase within the top fifty corporations.Ninety-four percent of such corporations (47 out of 50) adopt such rhetoric within their annualreports, 28% (14 out of 50) open their annual report with a focus on stakeholders, and 80% (40 outof 50) focus on stakeholders within the first five pages of the report.

28. See infra Appendix A.

social responsibility, even including those actions that advance admirablecorporate governance practices. Others adopt a more limited approach25

by excluding such actions merely as charitable giving and encompassingonly a narrow set of stakeholders such as employees and creditors. ThisArticle’s definition of stakeholder rhetoric is broad in the sense that itencompasses rhetoric aimed at a wide range of stakeholders fromemployees to customers. It also encompasses a definition of socialresponsibility that includes donating resources to charity, respecting theenvironment, or otherwise involving the corporation with endeavors thatsupport the local, national, and international community. However, thedefinition of stakeholder rhetoric does not extend to rhetoric regardingcorporate governance practices because that rhetoric appears to be aimedprimarily at advancing financial objectives. In particular, this Articlefocuses on stakeholder rhetoric that appears in the written wordsarticulated by corporations.

A. The Evidence on the Dominance of Stakeholder Rhetoric

My study of Fortune 100 companies reveals that the vast majority ofcorporations espouse stakeholder rhetoric in some official corporate arena.All but two Fortune 100 companies feature such rhetoric within theirannual reports, separate “citizenship” reports, or on their corporatewebsites. Eighty-eight percent of these companies include stakeholder26

rhetoric within their annual report, with 28% adopting such rhetoric on thevery first page of the report, and 68% addressing stakeholder concernswithin the first five pages. Moreover, many annual reports devote entire27

sections to spotlight the company’s commitment to improving employees’quality of life, enhancing the environment, or engaging in communityactivities.

The websites of 90% of Fortune 100 companies highlight issuesassociated with a group other than shareholders. Thus, the websites28

include discussions of stakeholders under such headings as “socialresponsibility,” “corporate citizenship,” “our values,” or “ourcommitment.”


29. See infra Appendix A.30. See, e.g., AMERADA HESS CORP., 2004 HESS US ENVIRONMENTAL, HEALTH, SAFETY &

SOCIAL RESPONSIBILITY REPORT, available at http://www.hess.com/downloads/reports/EHS/US/2004/intro.htm; EXXON MOBIL CORP., 2005 CORPORATE CITIZENSHIP REPORT, available athttp://www.exxonmobil.com/Corporate/Files/Corporate/ccr05_fullreport.pdf; FORD MOTOR CO.,2005/06 SUSTAINABILITY REPORT, available at http://www.ford.com/en/company/about/sustainability/2005-06/default.htm; MOTOROLA, INC., 2005 GLOBAL CORPORATE CITIZENSHIP

REPORT, available at http://www.motorola.com/mot/doc/6/6219_MotDoc.pdf; VERIZON

COMMUNICATIONS, INC., 2005 CORPORATE RESPONSIBILITY REPORT, available athttp://multimedia.verizon.com/responsibility/pdf/CRReport2005.pdf; WELLS FARGO & CO., 2005CORPORATE CITIZENSHIP REPORT, available at http://www.wellsfargo.com/downloads/pdf/invest_relations/wf2005corporate_citizenship.pdf.

31. See EXXON MOBIL CORP., 2005 CORPORATE CITIZENSHIP REPORT, supra note 30, at 20-34.

32. See infra notes 33, 35 and accompanying text.33. See CHRIS KELLY ET AL., THE ASPEN INST. & BOOZ ALLEN HAMILTON INC., DERIVING

VALUE FROM CORPORATE VALUES 2, 3-5 (2005), available at http://extfile.bah.com/livelink/livelink/145534/?func=dOc.Fetch&nodeid=145534. The report notes that 89% of the companies itsurveyed had some written value statement. See id. at 2-3. Such statements focus on corporateresponsibility to customers, employees, and engaging in socially responsible practices. Id.

34. See id. at 2.35. See Joshua A. Newberg, Corporate Codes of Ethics, Mandatory Disclosure, and the

Market for Ethical Conduct, 29 VT. L. REV. 253, 261-62 (2005) (describing the structure andcontent of various types of codes).

Almost half of Fortune 100 companies publish “corporateresponsibility” or “corporate citizenship” reports focusing on thecorporation’s commitment to non-shareholders. These reports are29

generated as counterparts to financial reports and are not legally required.These reports focus exclusively on groups and interests beyondshareholders and profit concerns. For example, one portion of Exxon30

Mobil’s Corporate Citizenship Report focuses on company projects aimedat enhancing the environment, such as reducing oil spills, fuelconsumption, and gas emissions.31

My research complements other studies reflecting significantstakeholder rhetoric in the corporate arena. Studies indicate, for example,that many corporations adopt mission statements replete with stakeholderrhetoric. One study revealed that almost 90% of corporations around the32

globe have adopted mission or value statements. These statements33

embody the principles that guide a particular corporation’s conduct. Themost prominent principles within such statements are those associated withstakeholders, such as social responsibility, good citizenship, andcommitment to employees, customers, and the environment. Other34

studies reveal that many corporations have adopted codes of conductfocusing on stakeholder issues. Such studies support my findings35

regarding the prevalence of stakeholder rhetoric.This prevalence is evident even though corporations also refer

http://www.hess.com/

http://www.ford.com/en/company/about/

http://multimedia.verizon.com/

http://www.wellsfargo.com/downloads/pdf


36. See infra Appendix A.37. See infra Appendix A. However, Warren Buffet, head of Berkshire Hathaway, uses his

personal resources to promote charitable endeavors outside of the corporate enterprise. See CarolJ. Loomis, Warren Buffet Gives It Away, FORTUNE, June 25, 2006, at 56 (describing Buffet’s pledgeof 85% of his stock to philanthropic organizations, the lion’s share of his gift going to the Bill andMelinda Gates Foundation); Brooke A. Masters & Yuki Noguchi, Corporate Titans Create aColossal Charity; Buffet, Gates to Test the Limits of Giving, WASH. POST, June 27, 2006, at Al.Berkshire Hathaway’s lack of stakeholder rhetoric may appear curious given that it was the subjectof much discussion regarding corporate responsibility when it became the only public corporationto allow its shareholders to designate recipients of charitable funds. See, e.g., Jill E. Fisch,Questioning Philanthropy from a Corporate Governance Perspective, 41 N.Y.L. SCH. L. REV.1091, 1100-01 (1997) (discussing “The Berkshire Program”). Such an action appears to suggestsome commitment to corporate social responsibility. In this regard, it may be an oddity thatBerkshire Hathaway neither engages in stakeholder rhetoric nor appears on any list or within anyfund highlighting its socially responsible behavior. This may suggest that such lists are under-inclusive. However, Berkshire Hathaway’s absence in this arena may in fact stem from itsphilosophy that individuals, not corporations, should make decisions about charitable endeavors.This philosophy is consistent with Warren Buffet’s record on charitable giving as well as hisattempt to allow individual shareholders, rather than the corporation, to control the charitablecontribution process.

38. See infra Appendix A.39. For example, significant discourse can be found on both the websites of Home Depot, Inc.

(www.homedepot.com), Caterpillar, Inc. (www.cat.com/cda/layout?m=37406&x=7), DuPont(www2.dupont.com/Social_Commitment/en_US/), FedEx Corp. (www.fedex.com/us/about/responsibility/?link=4), and Merck & Co., Inc. (www.merck.com/cr/) and within their annualreports. See, e.g., DUPONT, 2005 ANNUAL REVIEW, available at http://library.corporate-ir.net/media_files/nys/dd/reports/AR.2005.pdf; HOME DEPOT, INC., 2005 ANNUAL REPORT,available at http://ir.homedepot.com/downloads/HD_2005_AR.pdf [hereinafter HOME DEPOT

ANNUAL REPORT].

shareholders and financial concerns. To be sure, corporations do not ignoreshareholders completely in their rhetoric. Every corporation focuses onshareholders and wealth maximization in some arena. Indeed, every annualreport concludes with several pages of financial statements. Interestingly,at least two corporations focus their rhetoric exclusively on shareholders.36

For example, Berkshire Hathaway completely ignores stakeholders in itscorporate documents and official settings, instead focusing only onshareholders and financial matters. In a similar vein, other corporations37

focus the bulk of their rhetoric on shareholders, including stakeholderrhetoric only in the final pages of their annual report or otherwisededicating only a few sentences or pages to non-shareholders and relatedissues. This kind of inclusion gives the impression that stakeholder38

rhetoric, and its underlying issues, represent an after-thought to thesecompanies.

However, most corporate documents incorporate a more pronounceddiscussion of stakeholders, thereby suggesting that stakeholders have amore pronounced role in the corporate domain. Thus, some companies39

generate separate reports aimed at addressing non-shareholder concerns

http://www.fedex.com/us/about/

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40. See, e.g., CAREMARK RX, INC., 2005 ANNUAL REPORT 1, available athttp://media.corporate-ir.net/media_files/irol/77/77771/reports/2005_AR.pdf [hereinafterCAREMARK ANNUAL REPORT] (noting its focus on customers); GENERAL DYNAMICS, INC., 2005ANNUAL REPORT 6-8, available at http://library.corporate-ir.net/library/85/857/85778/items/229139/2005ar.pdf [hereinafter GENERAL DYNAMICS ANNUAL REPORT] (noting its focus onemployees); THE HARTFORD FINANCIAL SERVICES GROUP, INC., 2005 ANNUAL REPORT 6, 8-9,available at http://files.shareholder.com/downloads/HIG/138190873x0x35042/E0F97C47-5007-4E39-9828-D1F118B5F99C/HFSG2005AnnualReport3.pdf [hereinafter HARTFORD ANNUAL

REPORT] (noting the company’s commitment to act in the best interests of customers).41. See infra Appendix A; Johnson & Johnson, Our Credo, http://www.jnj.com/our_

company/our_credo/index.htm [hereinafter Johnson & Johnson Credo].42. See, e.g., HARTFORD ANNUAL REPORT, supra note 40, at 6 (noting the company’s

commitment to serving the best interests of customers and shareholders); MEDCO HEALTH

SOLUTIONS, INC., 2005 ANNUAL REPORT 2, available at http://library.corporate-ir.net/library/13/131/131268/items/192482/Medco_2005_AR.pdf [hereinafter MEDCO ANNUAL

REPORT] (expressing commitment to enhance the value to customers, members, patients, andshareholders); PRUDENTIAL FINANCIAL, INC., 2005 ANNUAL REPORT 2, available athttp://www3.prudential.com/annualreport/report2006/annual/HTML2/prudential_ar2005_0002.htm (noting that the company measures its success in terms of its ability “to deliver value toshareholders, meet customers needs, offer an inclusive environment where employees can developto their full potential and give back to the communities where we live and work”); RAYTHEON CO.,2005 ANNUAL REPORT 1 (expressing commitment to customers, shareholders, and employees); seealso KELLY ET AL., supra note 33, at 2-3 (explaining that most mission statements discussshareholders without giving them any particular prominence).

43. DEERE & CO., 2005 ANNUAL REPORT 5, available at http://www.deere.com/en_US/investinfo/media/pdf/reports/2006/2005annualreport.pdf.

specific to their industries. Other companies focus on a variety of groupsthroughout their websites. Still other companies focus on one or two non-shareholder issues throughout their annual reports or websites. And a40

sizeable minority, such as Johnson & Johnson, not only incorporatestakeholder rhetoric within many arenas, but also open the annual reportwith an in-depth discussion of the corporation’s commitment to customersand employees; shareholders appear last among those groups on which itsdiscussion focuses. Thus, while the extent and nature of stakeholder41

rhetoric varies among corporations, when viewed as a whole, it seems clearthat stakeholders represent a central component of corporate discourse.

Moreover, the rhetoric reflects an affirmative acknowledgment of thecorporation’s obligation to address concerns beyond strict profit-maximization. In this regard, much of the rhetoric treats shareholderinterests as equivalent to those of other groups. Indeed, some42

corporations suggest that they have a dual commitment to shareholders andnon-shareholders. For example, Deere & Co. notes that “[s]ustainedcorporate responsibility is as much a part of John Deere as green andyellow [the company’s official colors].” In a move reflective of such43

multiple commitments, Johnson Controls not only defined itself in terms

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44. It should be noted that international companies are encouraged to make disclosuresregarding their “triple bottom line,” and hence Johnson Controls’s use of this terminology is notnovel. However, its decision to meld its financial and social reporting into one document doesappear to be novel.

45. See JOHNSON CONTROLS ANNUAL REPORT, supra note 12, at 2.46. See, e.g., THE BOEING CO., 2005 ANNUAL REPORT 3, available at

http://www.boeing.com/companyoffices/financial/finreports/annual/05annualreport/05AR_03.pdf(letter to shareholders and employees); CATERPILLAR, INC., 2005 LETTER TO STAKEHOLDERS 1,available at http://www.cat.com/cda/files/329217/7/cat_05ar_letter.pdf; DELL COMPUTER CORP.,2006 ANNUAL REPORT 1, available at http://www.dell.com/downloads/global/corporate/annual/2006_dell_annual.pdf (letter to customers, partners, shareholders, and colleagues); GENERAL

ELECTRIC, 2005 ANNUAL REPORT 4-12, available at http://www.ge.com/ar2005/files/pdfs/ge_ar2005_letter.pdf [hereinafter GE ANNUAL REPORT] (letter to stakeholders); HOME DEPOT ANNUAL

REPORT, supra note 39, at 1 (letter to shareholders, customers, associates, communities, andsuppliers); MEDCO ANNUAL REPORT, supra note 42, at 2 (letter to shareholders, clients, andemployees); MICROSOFT CORP., 2005 ANNUAL REPORT, SHAREHOLDER LETTER, available athttp://www.microsoft.com/msft/reports/ar05/flashversion/10k_sl_eng.html (letter to shareholders,customers, partners, and employees); WAL-MART STORES, INC., 2006 ANNUAL REPORT 1, availableat http://www.walmartstores.com/Files/2006_annual_report.pdf [hereinafter WAL-MART ANNUAL

REPORT] (letter to customers and community).47. See infra Appendix A. Twenty-eight percent of Fortune 100 companies open their annual

reports in such a way. See supra note 26 and accompanying text.48. See supra note 24 (explaining the stakeholder theory of the firm and the debate regarding

the benefits of that theory over the shareholder primacy theory).49. See supra notes 32-34 and accompanying text.

of a “triple bottom line” focusing on financial results, environmental44

performance, and social performance, but also chose for the first time tocombine information on all three of those elements into a single document,presenting the document as its annual report to shareholders. Other45

companies appear to embrace this multiple commitment by addressingtheir annual report to two or more “stakeholders,” as opposed to thetraditional address solely to shareholders. Still other companies highlight46

the importance of stakeholders by incorporating some discussion ofstakeholders on the very first page of their annual report. In this regard,47

the corporate rhetoric reveals some conscious acknowledgment of thecorporate obligation to non-shareholders—an acknowledgment thatappears to be embraced by the vast majority of corporations.

From a normative perspective, one can argue that such rhetoric is morealigned with a stakeholder theory of the corporation. That theory favors acorporate balance of stakeholders, including shareholders, which balanceseems to be reflected in both the manner and content of corporatestakeholder rhetoric. The theory also emphasizes a corporate48

responsibility to prefer non-shareholder interests over shareholder issuesat appropriate times. Such a preference can be found in some corporations’rhetoric. Yet, stakeholder rhetoric does not necessarily negate a norm in49

favor of shareholder primacy. Even shareholder primacy envisions a

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http://www.ge.com/ar2005/files/pdfs/

http://www.walmartstores.com/Files/


50. See THE BUSINESS ROUNDTABLE, PRINCIPLES OF CORPORATE GOVERNANCE 30 (2000),available at http://www.brtable.org/pdf/704.pdf (“Corporations are often said to have obligationsto stockholders and to other constituencies, including employees, the communities in which theydo business, and government, but these obligations are best viewed as part of the paramount dutyto optimize long-term stockholder value.”); see also Chen & Hanson, supra note 14, at 46-48.

51. See, e.g., CAREMARK ANNUAL REPORT, supra note 40, at 1 (“our customer focus . . . hasdriven superb financial results”); LEHMAN BROTHERS, 2005 ANNUAL REPORT 34, available athttp://www.lehman.com/annual/2005/download/LehmanBros2005AR.pdf (noting that “[t]he[n]umbers [w]ill [f]ollow” the company dedication to clients and other groups); BEST BUY CO.,INC., 2006 ANNUAL REPORT, LETTER TO SHAREHOLDERS 2, available at http://media.corporate-http://media.corporate-ir.net/media_files/irol/83/83192/BestBuyARCode/downloads/BBuy%20Annual%2006.pdf [hereinafter BEST BUY CO. ANNUAL REPORT] (noting that the company’s themeof customer centrality is associated with financial growth).

52. See BEST BUY CO. ANNUAL REPORT, supra note 51, at 1-2.53. Such rhetoric is evidenced in the 1930s debate between Berle and Dodd. See, e.g., A.A.

Berle, Jr., For Whom Corporate Managers Are Trustees: A Note, 45 HARV. L. REV. 1365 (1932)(arguing that corporate directors should represent only their corporation’s shareholders); E. MerrickDodd, Jr., For Whom Are Corporate Managers Trustees?, 45 HARV. L. REV. 1145, 1147-48 (1932)(arguing that corporations have responsibilities to all corporate constituents).

54. See Stephen M. Bainbridge, Community and Statism: A Conservative ContractarianCritique of Progressive Corporate Law Scholarship, 82 CORNELL L. REV. 856, 902-03 (1997)(noting the cycles of the corporate responsibility debate); C.A. Harwell Wells, The Cycles ofCorporate Social Responsibility: An Historical Retrospective for the Twenty-First Century, 51 U.KAN. L. REV. 77, 78 (2002) (discussing the cycles of stakeholder debates).

55. See Wells, supra note 54, at 123-31. The rise in so-called “other constituency” statutes,which explicitly permit corporations to consider interests beyond shareholder maximization, fueledthe increased stakeholder rhetoric. See Fort, supra note 24, at 184; Lawrence E. Mitchell, A

corporate concern for constituents other than shareholders because such aconcern impacts shareholders and firm value. Hence, one would expect50

some degree of stakeholder rhetoric in any corporate document. To thisend, some stakeholder rhetoric reflects a connection between stakeholdersand profit considerations. This connection appears most pronounced51

when the stakeholder group focused on by corporations is its customers.52

In this respect, the rhetoric supports a shareholder primacy view of thecorporation, at least one that focuses on the long-term interest ofshareholders. Regardless of the theory reflected by the rhetoric, however,this Article contends that such rhetoric illustrates corporations’ embrace ofa more widespread obligation to various corporate constituents.

B. A Re-Emergence

While stakeholder rhetoric is not new, its current prevalence is a recentphenomenon. Stakeholder rhetoric has always played a role in corporatediscourse. But its prominence has ebbed and flowed. Most recently,53 54

stakeholder rhetoric played a significant role in corporate discussion duringthe 1980s as part of the response to the takeover movement and thenegative impact that movement had on corporate constituents. However,55


Theoretical and Practical Framework for Enforcing Constituency Statutes, 70 TEX. L. REV. 579,588-90 (1992); Eric W. Orts, Beyond Shareholders: Interpreting Corporate Constituency Statutes,61 GEO. WASH. L. REV. 14, 24 (1992).

56. See supra note 14.57. See infra Appendix A (noting that 47 out of 100 companies have published corporate

citizenship reports).58. See infra Appendix A.59. See John M. Conley & Cynthia A. Williams, Engage, Embed, and Embellish: Theory

Versus Practice in the Corporate Social Responsibility Movement, 31 J. CORP. L. 1, 3-4, 6 (2005)(between 1999 and 2002, the percentage of Fortune Global 250 companies producing social,environmental, or sustainability reports increased from 35% to 45%).

60. See KELLY ET AL., supra note 33.61. See Newberg, supra note 35, at 261-62; Corporate Codes of Ethics, supra note 1, at

2126.

since that time the rhetoric of corporate law fixated on notions ofshareholder primacy and the importance of maximizing shareholdervalue. 56

The amount of stakeholder rhetoric identified in various contemporarycorporate documents reflects a re-emergence of that rhetoric. For example,about half of Fortune 100 companies prepare “corporate responsibility” or“corporate citizenship” reports that include rhetoric highlighting thecorporation’s commitment to non-shareholder groups. Most of those57

reports were generated within the last two years. However, only one wasprepared before 2000. Similarly, the percentage of Fortune Global58

companies that produce such reports increased to 45% between 1999 and2002. The percentage of companies adopting mission statements59

incorporating stakeholder ideals has also increased over the last fiveyears. The stakeholder rhetoric in various corporate codes also appears60

to have emerged within the last five years. This evidence supports the61

proposition that the dominance of stakeholder rhetoric is a recentdevelopment.

Regardless of when it emerged, empirical evidence suggests a broadadoption of stakeholder rhetoric within the corporate arena. While thatadoption is not universal, the evidence indicates that most corporationsfocus on stakeholders in some respect when explaining their corporateresponsibility.

C. The Dismissal

Despite the fact that stakeholder rhetoric permeates the corporate arena,most commentators tend to ignore or dismiss its repercussions. In fact,there is little in-depth discussion regarding the significance of that rhetoricto corporate conduct. Although the Economist dedicated an issue todiscussing the increased rhetoric related to stakeholders within corporatedocuments, that issue concluded that such rhetoric did not signal any


62. See supra note 5 and accompanying text.63. See Lisa M. Fairfax, Form Over Substance?: Officer Certification and the Promise of

Enhanced Personal Accountability Under the Sarbanes-Oxley Act, 55 RUTGERS L. REV. 1, 10(2002).

64. See id. at 10 n.42.65. See Brian Grow et al., The Debate Over Doing Good, BUS. WK., Aug. 15, 2005, at 76

[hereinafter The Debate Over Doing Good] (noting that social outreach reflects a way to gain thehigh ground in the midst of social scandals such as Enron and WorldCom).

lasting behavioral implications. This conclusion stems from the62

presumption that corporations, or rather corporations’ public relationsofficers, use rhetoric to project a favorable public image but do not intendfor the rhetoric to reflect or shape corporate practices. In essence, becauseeveryone understands the rhetoric to be a marketing stunt, neithercorporations nor the general populace have an expectation that the rhetoricwill progress beyond mere words.

This marketing rationale appears to account for the recent rise instakeholder rhetoric. Corporate governance scandals generated significantnegative publicity for corporations in general. Indeed, consumer63

confidence in corporations plummeted, creating what some referred to asa crisis of confidence in the nation’s corporate governance system. As a64

result of this crisis, the public sought assurances not only that corporationswould not engage in misconduct, but also that corporations would take amore other-regarding stance—which the public viewed as more alignedwith good citizenship. Corporate stakeholder rhetoric reflects one methodof assurance. Hence, it is not fortuitous that the surge in stakeholderrhetoric arose after increased corporate misconduct and public disfavorwith that misconduct. Viewed in this light, the rhetoric represents “agussied-up bid for good favor.” Such a view supports dismissing rhetoric65

as inconsequential. By contrast, the remainder of this Article demonstratesthat such a dismissal may be shortsighted. Instead, this Article contendsthat corporate rhetoric may serve as a useful, overlooked vehicle forachieving the public’s goal of enhanced corporate responsibility.

III. THE EVIDENCE ON THE LINK BETWEEN RHETORIC AND REALITY

There is no precise method for measuring whether and to what extenta corporation engages in behavior consistent with its stakeholder rhetoric.This section focuses on three areas: (1) the inclusion of specificcorporations in socially responsible mutual funds; (2) the inclusion ofspecific corporations on lists aimed at evaluating corporate engagement instakeholder-centered practices; and (3) anecdotal evidence regardingcorporate behavior. This Article acknowledges that such indicators may beflawed. Indeed, any effort to measure corporate conduct related tostakeholders is limited because as a general matter corporations are not


66. See infra note 74 and accompanying text (listing the criteria upon which Calvert screenscorporations for inclusion in its mutual fund).

67. See infra Appendix B.68. See infra Appendix B.

required to provide information to the public regarding their conductrelated to stakeholders. Thus, entities seeking to gather data on acorporation must rely, at least in part, on data voluntarily reported by thecorporation at issue. This methodology may skew the data becausecorporations will seek to highlight their positive actions in this area.

Moreover, reliance on these indicators may produce imprecise andconflicting results because of the divergent views regarding the kinds offactors that should be considered when assessing a corporation’s behavior.First, socially responsible mutual funds focus on a variety of differentfactors when analyzing corporate behavior. Indeed, some sociallyresponsible mutual funds focus on corporate governance issues whenassessing a corporation’s behavior. This means that some corporations66

identified as engaging in responsible behavior may achieve suchrecognition based on conduct that is not compatible with one’s conceptionof stakeholder-oriented practices.

Second, the fact that entities use different criteria to judge acorporation’s behavior means that various lists produce inconsistent resultseven when they are aimed at measuring the same behavior. Part of thisinconsistency stems from the fact that each evaluating entity must make avalue judgment about the kinds of policies that are consistent with a givenfactor and whether a corporation’s specific practices comport with thosepolicies. That judgment yields some divergent results. As an example, bothFortune and Diversity, Inc. publish a list of the top fifty companies fordiversity. However, there are many companies that appear on one of the67

lists but not the other. Twenty of the forty-nine companies appearing insocially responsible mutual funds appear in one fund but not the other.68

This divergence suggests that there may be a lack of agreement regardingthe kind of policies that merit recognition as stakeholder-friendly. Such alack of uniformity means that measurements of such behavior inevitablywill be imprecise.

However, by examining a variety of different indicators, this Articleoffers some broad perspectives on the degree a corporation engages insocially responsible behavior and hence establishes the link between thatengagement and corporate rhetoric. To be sure, more work needs to bedone to develop mechanisms that more accurately reflect the extent ofcorporate participation in socially responsible behavior. Currently,however, reliance on these lists and funds represents one of the bestavailable methods for pinpointing the extent to which corporate practicescomport with stakeholder rhetoric.


69. See, e.g., George Djurasovic, The Regulation of Socially Responsible Mutual Funds, 22J. CORP. L. 257, 260-62 (1997); Michael S. Knoll, Ethical Screening in Modern Financial Markets:The Conflicting Claims Underlying Socially Responsible Investment, 57 BUS. LAW. 681, 681-89(2002).

70. See Domini Social Investments LLC, Welcome to Domini, http://www.domini.com/about-domini/index.htm (last visited July 22, 2007).

71. See id.72. See id.73. See Calvert Funds, supra note 25.74. The seven broad areas are corporate governance and ethics, environment, workplace,

product safety and impact, international operations and human rights, indigenous peoples’ rights,and community relations. See id.

75. Of course, because both Domini and Calvert select corporations based on the company’sperformance related to a broad range of issues, it is possible that a company will be excluded fromsuch funds because of its poor or weak record on a particular issue, even when it has a strong recordon other issues that are compatible with its rhetoric. This problem is addressed in later sections ofthis Article. See infra notes 80-83 and accompanying text.

76. See Domini Social Investments LLC, Domini Social Equity Fund Overview,http://www.domini.com/domini-funds/index.htm [hereinafter Domini Social Fund Index] (last

A. Socially Responsible Funds

One barometer for assessing if corporate behavior reflects stakeholderrhetoric is to ascertain whether companies espousing stakeholder rhetorichave been selected to participate in a socially responsible investment fund.Recently, financial and investment management firms have establishedmutual funds that invest only in companies deemed to be sociallyresponsible. These funds screen companies based on their commitment69

to the kinds of issues embodied in stakeholder rhetoric. For example,Domini Social Investments manages investment funds that specialize insocially responsible investments. The Domini 400 Social Index includes70

400 corporations based on an evaluation of their record with regard to theenvironment, diversity, employment relations, and product safety. The71

fund favors inclusion of companies with a positive record on these issuesand that have shown a strong social commitment. Similarly, Calvert72

evaluates a variety of corporations for inclusion in its socially responsiblemutual funds. Corporations are selected to participate in Calvert funds73

based on a demonstrated track record of performance within several broadareas including ethical issues, the environment, the workplace, productsafety, and community relations. A corporation’s inclusion within funds74

managed by either of these firms may serve as an indication that acorporation’s rhetoric on social responsibility matches its behavior.75

Many corporations that espouse stakeholder rhetoric are not includedin any of these socially responsible mutual fund portfolios. For example,62% of Fortune 100 companies are not included in the Domini 400 SocialIndex. Similarly, 61% of Fortune 100 corporations do not appear in76


visited July 22, 2007). See also infra Appendix B.77. See Calvert Group, Ltd., Calvert Social Index, http://www.calvert.com/sri_calvert

index.html?format=&letter=All [hereinafter Calvert Index] (last visited July 22, 2007); see alsoinfra Appendix B.

78. See Calvert Group, Ltd., Calvert Ratings, http://www.calvert.com/sri_calvertratings.html[hereinafter Calvert Ratings] (last visited July 22, 2007).

79. See id.; see also infra Appendix B.80. See Calvert Ratings, supra note 78 (35 of the 63 Fortune 100 companies have been

screened out for low scores in various categories).81. See id.82. See infra Appendix A (demonstrating that General Electric incorporates stakeholder

rhetoric within the first five pages of its annual report, on its website, and within a voluntarilygenerated citizenship report); see also GE ANNUAL REPORT, supra note 46, at 4 (addressing itsannual report to “stakeholders”).

83. See Calvert Ratings, supra note 78; ALLSTATE INS. CO., THE ALLSTATE CORPORATION

2005 SUMMARY ANNUAL REPORT, available at http://www.allstate.com/investor/annual_report/2005/pdf/2005AllstateSAR.pdf [hereinafter ALLSTATE ANNUAL REPORT]; ALLSTATE INS.CO., THE ALLSTATE CORPORATION 2005 CORPORATE SOCIAL RESPONSIBILITY REPORT, availableat http://www.allstate.com/content/refresh-attachments/citizenship/2005_allstate_csr.pdf.

84. See Domini Social Fund Index, supra note 76.85. See Calvert Index, supra note 77. 86. See infra Appendix B.

Calvert’s index. Calvert specifically evaluated the largest one-hundred77

companies by market cap for inclusion in one of its index funds. Sixty-78

three of those companies are Fortune 100 companies. Of those79

companies, Calvert screened out more than half because of their poorrecords on a variety of different issues. As an example, General Electric80

has been screened out of the index because of its poor record on issuesassociated with the environment and business practices. Yet General81

Electric’s rhetoric regarding its commitment to stakeholders is quitestrong. Similarly, Allstate has been screened out of the Calvert fund82

apparently because of its poor record on practices related to thecommunity, even though Allstate’s annual report and social responsibilityreport boast of its efforts in the community. These companies’83

elimination from funds that measure a corporation’s behavioralcommitment to stakeholder-centered issues suggests an inconsistencybetween these corporations’ official rhetoric and their practices.

If one flips the proverbial coin, however, the available data suggest thatat least some companies probably do live up to their rhetoric. In fact, 38%of Fortune 100 companies are included in the Domini Social Index.84

Similarly, 39% of Fortune 100 companies are included in Calvert’s indexof funds. Taken together, 49% of Fortune 100 companies appear in one85

of these two indices. Because such companies espouse rhetoric consistent86

with the practices captured by these funds, the inclusion of such companiesin these funds reveals that at least some corporations’ rhetoric corresponds

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87. See Calvert Ratings, supra note 78.88. See id. Other companies that received such recognition but are not members of the

Fortune 100 are Applied Materials, Inc., Colgate Palmolive Co., and Texas Instruments Inc. Seeid.

89. See id.90. See The 100 Best Companies to Work For 2006, FORTUNE, Jan. 23, 2006, at 89. Those

eight companies are American Express Corp., Cisco Systems, Inc., Federal Express Corp., TheGoldman Sachs Group, Inc., Intel Corp., Valero Energy, and Washington Mutual Inc. See infraAppendix B.

91. See 100 Best Companies 2006, WORKING MOTHER, Oct. 2006, at 70, available athttp://www.workingmother.com/100_fulllist.html; see also infra Appendix B.

92. See David Raths, Business Ethics 100 Best Corporate Citizens for 2006, BUS. ETHICS,Spring 2006, at 22, available at http://www.business-ethics.com/whats_new/100best.html. Thosecompanies are American Express Corp.; Cisco Systems, Inc.; Citigroup, Inc.; Dell Inc.; TheHartford Financial Services Group; Hewlett-Packard Company; Intel Corp.; International BusinessMachines; Johnson Controls, Inc.; Johnson & Johnson; Motorola, Inc.; PepsiCo, Inc.; Procter &

to actual corporate practices. When Calvert evaluated the top one-hundred companies by market cap,

it found that twenty-eight out of sixty-three Fortune 100 companiesmerited inclusion in its social fund index. Thus, Calvert found that 44%87

of the Fortune 100 companies it evaluated were engaged in practicesdemonstrating a strong commitment to various stakeholder groups. Thisevaluation provides evidence that a sizeable minority of corporations’practices correspond to their stakeholder rhetoric. Calvert even designatedfour Fortune 100 companies—Procter & Gamble, Dell, Microsoft, andIntel—as a “Calvert Leader” based on their activities. The designation88

reflects a near superior ranking across all of the criteria Calvert uses tomeasure corporate performance. Given that all of these companies89

heavily espouse stakeholder rhetoric, such a designation suggests that thesecompanies’ rhetoric reflects genuine practices.

B. Socially Responsible Lists

On the one hand, the data with respect to corporations’ appearance onlists aimed at identifying corporations involved in socially responsiblebehavior reveal a significant divergence between rhetoric and reality. Onlyeight Fortune 100 corporations appear on Fortune’s 2006 list of 100 BestCompanies to Work For, a list which reflects employees’ relativesatisfaction with their work environment. In addition, only 26% of90

Fortune 100 corporations appear on Working Mother’s Best Places toWork for Mothers, a list aimed at analyzing corporate work-life forwomen. Similarly, only seventeen companies in the Fortune 100 appear91

on the list of the top 100 Best Corporate Citizens, a list which comprisesthe public companies that best serve stakeholders, including stockholders,employees, customers, the community, and the environment. This92


Gamble Co.; St. Paul Travelers Co., Inc.; United Parcel Service, Inc.; and Wells Fargo & Co. Id.93. General Motors, Ford, and Pfizer—all companies whose annual reports contain many

references to stakeholders—did not make the list. See FORD MOTOR CO., FORD 2006 ANNUAL

REPORT, available at http://www.ford.com/en/company/investorInformation/companyReports/annualReports/2006annualReport/2006_pdfs.htm; GENERAL MOTORS CORP., GENERAL MOTORS

2006 ANNUAL REPORT, available at http://www.gm.com/company/investor_information/docs/fin_data/gm06ar/download/gm06ar.pdf; PFIZER, INC., PFIZER 2006 ANNUAL REPORT, available athttp://www.pfizer.com/pfizer/annualreport/2006/annual/review2006.pdf.

94. See Cora Daniels, 50 Best Companies for Minorities, FORTUNE, June 28, 2004, at 136,available at http://nyjobsource.com/top50diversity.html (listing nineteen out of fifty Fortune 100companies); Top 50 Companies for Diversity, DIVERSITY, INC., June 2006, at 40, available athttp://www.diversityinc.com/public/21029.cfm (listing seventeen out of fifty Fortune 100companies); see also infra Appendix B.

95. See Liz Moyer, The Most Charitable Companies, FORBES, Nov. 11, 2005, available athttp://www.forbes.com/2005/11/11/charities-corporations-giving-cx_lm_1114charity_2.html.

relatively low percentage is striking given the strong stakeholder rhetoricespoused by most Fortune 100 companies. Moreover, some corporationswhose annual reports and websites are replete with stakeholder referencesdo not appear on the Best Corporate Citizen list. The fact that only 17%93

of Fortune 100 companies appear on this list while 98% of such companiesembrace rhetoric suggesting a responsibility towards stakeholders reflectsa seeming divergence between corporate rhetoric and reality.

On the other hand, corporations espousing stakeholder rhetoric doappear on some stakeholder-oriented lists, at least with regard to specificissues. For example, 38% of Fortune’s Top 50 Best Places for Minoritiesand 34% of Diversity, Inc.’s Top 50 Companies for Diversity are Fortune100 companies. Both of these lists evaluate a corporation’s commitment94

to diversity, particularly as it relates to employment matters. Hence, acorporation’s inclusion on this list also reflects its commitment to a diversework environment. The fact that the included companies expressed acommitment to enhance employee welfare suggests that a sizeable minorityof companies engage in practices consistent with their rhetoricalcommitments in this area. Also, 68% of Fortune 100 corporations appearon Forbes’ 100 Most Charitable Companies list. Because virtually all95

Fortune 100 companies espouse a commitment to engage in charitableendeavors, such a high percentage of Fortune 100 corporations on the listssuggests a strong connection between a corporation’s rhetoric and its actualpractices with respect to charitable giving.

C. Behavioral Anecdotes

Anecdotal evidence abounds regarding companies that appear to engagein acts that run afoul—and in some instances egregiously so—of theirrhetorical commitment to stakeholders. Many companies appear to engagein labor practices that contradict their rhetoric. One notorious example is

http://www.gm.com/company/investor_information/docs/

http://www.pfizer.com/pfizer/annualreport


96. Wal-Mart faces an onslaught of public criticism, focusing particularly on its treatment ofworkers. Indeed, websites have been created to document Wal-Mart’s alleged abuses. See, e.g.,Wake Up Wal-Mart, http://www.wakeupwalmart.com/facts/ (last visited July 22, 2007).

97. See id.; University of Wisconsin, UW System Trust Funds Investments and SocialResponsibility: Wal-Mart Corporate Record (Dec. 2004), available at http://www.uwsa.edu/tfunds/walmart1204.htm.

98. See WAL-MART ANNUAL REPORT, supra note 46, at 43.99. See Michael Barbaro, Wal-Mart to Pay $11 Million; Chain Settles Illegal-Worker

Investigation, WASH. POST, Mar. 19, 2005, at E01; Steven Greenhouse, Wal-Mart to Pay U.S. $11Million in Lawsuit on Immigrant Workers, N.Y.TIMES, Mar. 19, 2005, at A1; Michael Maiello, It’sNot Over for Wal-Mart, FORBES, Mar. 18, 2005, http://www.forbes.com/management/2005/03/18/cz_mm_0318wmt.html. The settlement covered more than 300 workers in twenty-one stateswho claimed, among other things, that they were forced to work long hours off the clock. Inaddition to these kinds of suits, Wal-Mart faces a sex discrimination class action suit involving 1.6million workers, the largest class-action certification in history for employment discrimination suits.See Steven Greenhouse & Constance L. Hays, Wal-Mart Sex-Bias Suit Given Class Action Status,N.Y. TIMES, June 23, 2004, at A1; Amy Joyce, Wal-Mart to Appeal Status of Class-Action BiasSuit, WASH. POST, Aug. 6, 2005, at D1. In certifying the class, the judge stated that statisticalevidence supported the plaintiffs’ claim that female workers at Wal-Mart receive less pay and fewerpromotions. See Greenhouse & Hays, supra.

100. See WAL-MART ANNUAL REPORT, supra note 46, at 1 (stating that Wal-Mart is a “goodand respectful employer” and that it “foster[s] an environment where people are treated honestlyand with respect”). In fact, people often pinpoint the discrepancy between its rhetoric and practices.See Michael Barbaro, Wal-Mart Discussing Settlement: Probe Involves Use of Illegal Workers,WASH. POST, Sept. 4, 2004, at E01 (noting that investigations regarding treatment of workers“undercut” Wal-Mart’s “claims of being a good corporate citizen”).

101. See Verizon Communications, Inc., Corporate Responsibility, Empowering Employees,http://multimedia.verizon.com/responsibility/ (last visited July 22, 2007).

102. See Amy Joyce, Verizon Bias Suit Deal Sets Record: Pregnancy Case Yields Payout of$48.9 Million, WASH. POST, June 6, 2006, at D1 (corrected June 13, 2006). The suit involved morethan 12,000 former and current female employees. Id.

103. See CHEVRONTEXACO, A NEW EQUATION: 2004 ANNUAL REPORT 2, 19, available athttp://www.chevron.com/investor/annual/2004/pdfs/cvx_annual_2004.pdf (expressing its

Wal-Mart. Wal-Mart has a reputation for bad labor practices apparently96

supported by its long history of labor-related complaints. For example,97

Wal-Mart’s annual report notes that it faces “numerous” lawsuits allegingviolations of federal labor standards, and the company recently settled a98

suit for $11 million relating to the hiring of illegal immigrants—the largestcivil immigration settlement ever. These allegations belie Wal-Mart’s99

rhetoric, which includes a commitment, on the first page of its annualreport, to treat workers fairly. Similarly, Verizon’s rhetoric emphasizes100

its commitment to employees and a diverse workforce, yet it recently101

agreed to pay $49 million to settle a suit involving pregnancydiscrimination—the largest such suit in history.102

Along these same lines, Chevron not only emphasizes its commitment,on the first page of its annual report, to local communities and theenhancement of the residents’ quality of life, but also publishes a103

http://www.wakeupwalmart.com/facts/

http://www.uwsa.edu/tfunds/

http://www.forbes.com/management/


commitment to local communities, self-sufficiency, and developing local workforce). 104. See CHEVRON CORP., CORPORATE RESPONSIBILITY REPORT 2005, available at

http://www.chevron.com/cr_report/2005/; CHEVRON CORP, 2004 CORPORATE RESPONSIBILITY

REPORT, available at http://www.chevron.com/cr_report/2004/documents/cr_report_2004_complete.pdf. In addition, stakeholder references appear both within its annual report and on itswebsite. See CHEVRON CORP., HUMAN ENERGY: 2005 ANNUAL REPORT 1, available athttp://www.chevron.com/investor/annual/2005; Chevron Corp., Corporate Responsibility,http://www.chevron.com/social_ responsibility (last visited July 16, 2007).

105. See Terence Chea, Chevron Fights Allegations of Human Rights, Environmental Abuses,ASSOCIATED PRESS, Jan. 1, 2006, available at http://www.chevrontoxico.com/article-php?id=283;Terence Chea, Lawsuit Takes Aim at Chevron; Toxic-waste Dumping Alleged, MONTEREY COUNTY

HERALD, Jan. 2, 2006, 2006 WLNR 51883; Abby Ellin, Suit Says ChevronTexaco Dumped Poisonsin Ecuador, N.Y. TIMES, May 8, 2003, at C8. For more information on the actual lawsuit, seeAguinda v. Texaco, Inc., 303 F.3d 470 (2d Cir. 2002) (affirming motion to dismiss on forum non-conveniens grounds); Brief for Plaintiffs-Appellants, Aguinda v. Texaco, Inc., 2001 WL 34369153(2d Cir. 2001).

106. See Bob Herbert, Rain Forest Jekyll and Hyde?, N.Y. TIMES, Oct. 20, 2005, at A27.107. For example, General Electric expresses a strong commitment to the environment. See

Gen era l E l ec t r i c C o . , C i t i zensh ip : Environment , Heal th & Safe ty,http://www.ge.com/company/citizenship/ (last visited July 16, 2007). However, its annual reportnotes that the company is involved with numerous remediation actions to clean up hazardouswastes. See GE Annual Report, supra note 46, at 92. These actions apparently have led to its poorratings with Calvert, excluding the company from participation in Calvert’s fund. See CalvertRatings, supra note 78. General Electric received a “1,” representing a rating of “substantiallybelow Calvert standards” for its record on the environment. Id.

108. See supra note 39 and accompanying text.109. In 2005, Home Depot announced plans to spend $25 million to build 1,000 playgrounds

within three years. See The Debate Over Doing Good, supra note 65. That same year, HomeDepot’s CEO invited executives from twenty-four companies and foundations to discuss increasing

citizenship report detailing its commitment to the communities in whichit serves. Yet a multi-billion dollar lawsuit brought by 30,000 citizens of104

Ecuador alleges that the company poured nearly 18 billion gallons of toxicwastewater into the Ecuadorian rainforest, contaminating the water andexposing livestock and millions of people to disease. One commentator105

referred to Chevron as a “Jekyll and Hyde” for touting its commitment tothe environment in the face of these damaging allegations. But Chevron106

is not alone. Many companies appear to engage in behaviors that discredittheir strong rhetorical commitment to one or more stakeholder concerns.107

This anecdotal evidence lends credence to the notion that corporaterhetoric is unconnected to actual behavior. Yet, like the evidence relatedto socially responsible funds and lists, there is some anecdotal evidencerevealing a strong connection between a corporation’s rhetoric and itsactual practices. For example, Home Depot’s annual report and website arereplete with stakeholder rhetoric. Apparently consistent with this108

rhetoric, not only does Home Depot appear in both the Domini and Calvertindex, but it has also been actively involved with community projects, andit encourages other companies to become involved in such projects.109

http://www.chevron.com/cr_report/2004/documents/

http://www.chevron.com/social_responsibility

http://www.ge.com/company/citizenship/


their involvement in community service projects. Id. As a result, such executives announced plansto implement a nationwide corporate volunteer program that would increase the number ofcorporate employees engaging in some aspect of community service by 10%. See id.

110. See, e.g., Johnson & Johnson Credo, supra note 41. 111. See infra Appendix B. Johnson & Johnson is also touted for being a good citizen because

it recalled bottles of Tylenol from the entire country after seven people in the Chicago area died asa result of someone lacing Tylenol bottles with poison after the medicine was placed on the shelves.See Johnson & Johnson Credo, supra note 41; see also Stephen Greyser, Johnson and Johnson:The Tylenol Tragedy, HARV. BUS. REV., Oct. 12, 1982; Richard W. Stevenson, Johnson &Johnson’s Recovery, N.Y. TIMES, July 5, 1986 (describing a similar response by Johnson &Johnson when a woman died as a result of a cyanide-laced Tylenol capsule). Many people arguethat the decision was based on Johnson & Johnson’s commitment to the community, particularlybecause it cost Johnson & Johnson about $100 million. See Stevenson, supra; see also Avner Ben-Ner & Louis Putterman, Trusting and Trustworthiness, 81 B.U. L. REV. 523, 536 n.21 (2001).Moreover, Johnson & Johnson’s behavior is viewed as noteworthy because the public apparentlydid not fault the company for the occurrences, and hence the company could have decided to donothing. However, its behavior can nonetheless be viewed as profit maximizing because Johnson& Johnson may have needed to take some action to preserve its reputation and customer loyalty.See Ben-Ner & Putterman, supra, at 536 (discussing the boost in customer confidence and restoredtrust Tylenol and Johnson & Johnson received as a result of its actions).

112. See INTEL CORP., CORPORATE RESPONSIBILITY REPORT 2005 3-4, available athttp://download.intel.com/intel/finance/gcr05/05CRpdfF2.pdf [hereinafter INTEL RESPONSIBILITY

REPORT]; Intel Corp., Corporate Responsibility, http://www.intel.com/intel/finance/social.htm (lastvisited July 16, 2007).

113. See INTEL RESPONSIBILITY REPORT, supra note 112, at 31 (discussing the corporateGlobal Earth Day events).

114. See INTEL CORP., THE INTEL WORLD AHEAD PROGRAM 3 (2007), available athttp://www.intel.com/ intel/worldahead/pdf/intel_wa_bro.pdf.

Similarly, Johnson & Johnson embraces a significant amount ofstakeholder rhetoric on its website and within its annual report. Its110

behavior appears consistent with that rhetoric. Indeed, it appears in boththe Domini and Calvert index as well as on the list of Best CorporateCitizens. 111

Intel also professes a commitment of responsibility in its corporatedocuments and on its website. It has a consistent, strong record of112

engaging in practices corresponding to that rhetoric. Indeed, each year thecompany sponsors a day when employees engage in Earth-enhancingcommunity service projects. The company also has trained more than113

3.5-million teachers in how to effectively use technology. In this regard,114

Intel’s rhetoric appears to be supported by its practices. These anecdotesprovide some competing evidence discrediting the view that corporationsengage in rhetoric wholly inconsistent with their behavior.

D. Concluding Assessments

When viewed in its entirety, the empirical and anecdotal evidencereveals that corporate rhetoric reflects reality for a considerable number of

http://download.intel.com/intel/finance/gcr05/05CRpdfF2.pdf


115. See supra notes 84-86 and accompanying text.116. See supra Parts II.B and II.C.117. See infra Appendix A. The fact that the rhetoric appears in a variety of different places

does not necessarily indicate a quantity of rhetoric in a given document. Some corporations havea significant amount of rhetoric but confine it to one venue. However, my analysis of the datareveals that the identified corporations’ decisions to publish a voluntary citizenship report inaddition to rhetoric in other areas reflects a strong rhetorical commitment to stakeholder concepts.

118. See infra Appendix A, Appendix B.119. See supra note 26; infra Appendix B.120. See infra Appendix A. These seven corporations are Comcast Corp., Delphi Corp.,

General Dynamics Corp., Ingram Micro Inc., Nationwide Mutual Ins. Co., News Corp., and PlainsAll American Pipeline, L.P. See infra Appendix A.

121. See infra Appendix B. Only Nationwide appears on such lists or in such indexes. Seeinfra Appendix B.

companies. Indeed, data associated with socially responsible mutual fundsreveal that nearly 40% of corporations’ rhetoric appears to be aligned withtheir corporate behavior. The data associated with lists and anecdotes are115

more mixed, but even that evidence indicates that anywhere from 20% to68% of corporations engage in some specific behavior consistent with theirrhetoric. In this regard, corporate rhetoric is notable because it is a116

reflection of at least some corporations’ actual practices. Moreover, the data indicate that the connection between rhetoric and

reality increases among those corporations that engage in a significantamount of rhetoric. There are forty-four Fortune 100 companies thatengage in a significant amount of stakeholder rhetoric, incorporating thatrhetoric in their annual report, on their website, and in a voluntarycitizenship report. All but two of those corporations appear in at least117

one or more lists aimed at identifying corporations engaged in conductbeneficial to stakeholders. This suggests that, at least when a corporation118

engages in significant rhetoric, there is a strong likelihood that the rhetoricreflects that the company actually engages in pro-stakeholder practices.Such a suggestion underscores the behavioral significance of corporaterhetoric.

By comparison, corporations that appear to engage in very little or nostakeholder rhetoric predictably do not appear on any such lists indicatingan engagement in stakeholder-centered conduct. The two Fortune 100corporations that do not espouse stakeholder rhetoric cannot be found onany such lists. Similarly, seven Fortune 100 corporations espouse119

rhetoric in only one arena, and if that arena is the annual report, suchcorporations relegate stakeholder discourse to the end of that report. Six120

of these seven corporations do not appear in any socially responsiblefund’s index or on any stakeholder-focused lists. 121

This evidence albeit limited suggests that a corporation’s lack ofengagement in stakeholder rhetoric will be a strong indicator of that


122. See supra notes 70-74 and accompanying text (pinpointing criteria for the Calvert fundand the Domini index).

123. See Calvert Ratings, supra note 78 (noting the exclusion of Anheuser Busch from CalvertFunds because of its alcohol sales even though the company rated fairly high in other arenas).

124. See Press Release, Chevron Corp., ChevronTexaco Asks Judge to Dismiss Lawsuit inEcuador; Company Cites Lack of ‘Credib le, Substantiated Evidence,’http://www.chevron.com/news/press/2003/2003-10-21_1.asp (last visited July 22, 2007). Duringthese time frames, Chevron apparently was not engaging in stakeholder rhetoric.

corporation’s lack of engagement in stakeholder-centered practices. Thefact that the amount of a corporation’s rhetoric appears to correspond withits behavior suggests that the link between rhetoric and reality is notrandom. Instead, such a correspondence indicates that corporate rhetorictruly reflects corporate behavior, either because it confirms corporatecommitment to that behavior or underscores a corporation’s lack ofcommitment. This suggests that corporate rhetoric is not only significant,but is a good signal of corporate conduct.

There are several reasons to believe that the available data may beunder-inclusive, potentially underestimating the extent to which acorporation’s rhetoric comports with its behavior. First, funds and otherentities use a variety of different criteria when determining whether acorporation has engaged in socially responsible behavior. As a result, a122

company may be excluded from a list or fund because of poor performancein one category, even if it engages in admirable practices in othercategories. Some corporations are automatically excluded based onparticular products they sell, without regard to whether their conduct inother respects may be deemed socially responsible. For example, Calvertexcludes companies that derive a significant portion of their revenue fromalcohol sales, apparently irrespective of their commitments to employeesand other stakeholders. Because funds and lists use a multitude of factors123

to judge a company’s behavior, those funds and lists may fail to capturemany corporations whose practices live up to their rhetoric.

Second, it is possible that a corporation’s practices may be improperlycharacterized as inconsistent with its rhetoric. For example, it is possiblethat a corporation’s incompatible behavior may pre-date its rhetoric. Thisappears to account for at least some of the disconnect between rhetoric andreality. For example, the activities related to Chevron occurred between1972 and 1990 and were committed by Texaco before its merger withChevron. This time frame pre-dates the company’s existing discourse on124

stakeholder concerns contained on its website and within its annual reports.Hence, it may be inappropriate to rely on these practices as indicative ofthe inconsistency between Chevron’s rhetoric and its behavior.

Timing considerations may also explain the seeming disconnectbetween Verizon’s rhetoric and its practices. A spokesperson for Verizon


125. Joyce, supra note 102.126. Id.127. Id.128. See, e.g., Domini Social Fund Index, supra note 76.129. Of course, even when corporate conduct reflects outdated belief systems, one can still

assess whether a corporation’s practices are consistent with its rhetoric by focusing on thecorporation’s current response to the allegations regarding its practices. If a corporation defendsor otherwise refuses to address the ramifications of those practices, those actions not only fall shortof corporate stakeholder rhetoric but also cannot be blamed on historical misdeeds. For example,with regard to Chevron, some may argue that Chevron can still be charged with acting inconsistentwith its rhetoric because it continues to defend or find excuses for the practices of its predecessor.Of course given that it is in the midst of a lawsuit, it is difficult to imagine that Chevron wouldbehave in a different manner.

stated that the allegations of discrimination within the company “come[]out of a different era.” In fact, those allegations related to conduct125

between 1965 and 1979 involving Verizon’s predecessor companies. In126

comparison, Verizon noted “our record today is exemplary.” This127

statement actually finds support in the fact that Verizon has been identifiedas a socially responsible company by several screens and lists. By failing128

to account for nuances such as these timing issues, the examples ofVerizon and Chevron suggest that the evidence may overstate thedisconnect between corporate rhetoric and behavior. This failure,129

coupled with the fact that screening criteria in this area may sweep toobroadly, provides at least some reasons to doubt the extent of thedivergence between a corporation’s rhetoric and its behavior.

Even taking these reasons into account, however, the evidence clearlyreveals that there are many corporations whose rhetoric appears to belietheir actual practices. In this regard, while the evidence reflecting someconnection between rhetoric and reality should caution against labelingcorporate rhetoric as inconsequential, it does appear that manycorporations adopt rhetoric as a kind of public relations shield, designedto project a positive image of responsibility and thus insulate themselvesfrom criticism. The next Parts seek to determine whether that rhetoric canbe used as a sword as opposed to a shield.

IV. THE CONSISTENCY PRINCIPLE

A. The Power of Consistency

Social psychology literature reveals that when people makecommitments through some speech—written or oral—they feel pressuredto engage in actions that support those commitments. This pressure stemsfrom the desire for consistency, which theorists view as a central motivator


130. See CIALDINI, supra note 21, at 59 (noting that many prominent theorists, includingTheodore Newcomb and Fritz Hider, believe that consistency has a strong power to direct humanaction). I would like to thank Robert Clark for guiding me towards Cialdini’s work and illuminatingits relationship to my scholarship on corporate rhetoric.

131. See id. at 57.132. See id.133. See id. at 60; see also ROBERT B. CIALDINI, INFLUENCE: SCIENCE AND PRACTICE 53

(1985) (“The person whose beliefs, words, and deeds don’t match may be seen as confused, two-faced, or mentally ill.”); PHILIP G. ZIMBARDO & MICHAEL R. LEIPPE, THE PSYCHOLOGY OF

ATTITUDE CHANGE AND SOCIAL INFLUENCE 79 (1991) (“Going back on one’s word is a mortalcultural sin. It breeds dislike and distrust.”).

134. See CIALDINI, supra note 21, at 67; CIALDINI, supra note 133, at 59-60.135. CIALDINI, supra note 21, at 67-68 (describing a study by social psychologist Steven J.

Sherman conducted in Bloomington, Indiana, related to the American Cancer Society).136. Id. at 68.137. Id. at 68 (describing a study led by Anthony Greenwald in Columbus, Ohio).138. See id. at 68-69; ZIMBARDO & LEIPPE, supra note 133, at 79-80.

of human behavior. Social psychologist Robert Cialdini states that130

humans have a “nearly obsessive desire to be (and to appear) consistentwith what we have already done.” As a result of this desire, “[o]nce we131

have made a choice or taken a stand, we will encounter personal andinterpersonal pressures to behave consistently with that commitment.Those pressures will cause us to respond in ways that justify our earlierdecision.” Cialdini and others explain that the desire for consistency132

influences behavior because of the value society places on consistency.Consistency is associated with integrity, and inconsistency is thought to be“an undesirable personality trait.” 133

According to Cialdini, the power of consistency is formidable and isengaged through commitment. That power means that commitment134

shapes behavior. For example, one social psychologist conducted a studyseeking to increase participation among residents who had not previouslyvolunteered for a charity. He called town residents, asking them to135

predict how they would respond if asked to spend time collecting moneyfor a charity. Apparently because it was a worthy cause and seemed theright thing to say, most people said that they would volunteer. This verbalcommitment had a significant influence on their conduct. Thus, when arepresentative from the charity later asked the residents to volunteer, mostresidents did, resulting in a 700% increase in volunteers. In a similar136

study designed to increase voter turnout, researchers found that by gettingpeople to commit to saying they would vote, the researchers were able tosignificantly increase voter turnout. In both studies, researchers found137

that obtaining a commitment prior to requesting some action greatlyenhanced the extent to which people complied with the subsequent request.These and similar studies reveal that when an individual expresses a belief,that expression impacts her behavior because she desires consistency. 138


139. CIALDINI, supra note 21, at 76.140. See id. at 85.141. See id. at 79. Cialdini notes that the Amway Corporation has had much success by

encouraging people to commit to written statements. Id. He also notes that business organizationsused written customer commitments to ameliorate the effects of cooling-off laws—laws requiringthat customers be allowed a few days to think about a purchase before committing to buy it. Id.While such laws initially led to many cancellations, the written commitments drastically reducedthe number of cancellations such organizations received. Id.

142. Id. at 82-83 (describing a study conducted by Morton Deutsch and Harold Gerard).143. Id.144. Id. at 83.145. Id.146. Id.

B. Some Principles of Commitment and Consistency

The impact of commitment and consistency has a variety ofrepercussions on behavior. First, when a commitment takes a written form,it has an even greater impact on behavior. Cialdini notes that a writtendeclaration is a critical form of commitment because it provides physicalevidence, undermining the ability to forget or deny. Also, research139

reveals that if people put more effort into a commitment, it will have agreater ability to influence their actions. A written commitment requires140

greater work than an oral one, and thus its impact is enhanced. Hence,business organizations have found that when they encourage customers,rather than salespeople, to fill out sales agreements or otherwise writedown their sales goals—even when they are not binding—these writtendeclarations serve as a powerful commitment that encourages people tofollow through on the sales orders. Similarly, in a famous experiment,141

Morton Deutsch and Harold Gerard, two prominent social psychologists,told a group of students to predict the length of various lines. Some142

students were told to write down their predictions, while other studentswere told to make a prediction but not record it. The experiment revealed143

that the students who did not make written commitments were the leastloyal to their predictions and more willing to change their minds when theylearned that their predictions were incorrect. By contrast, those who144

wrote down their choices remained loyal to them even when they receivedinformation that the choice was incorrect. These studies indicate that145

written commitment generates internal pressure to bring behavior in linewith that commitment.

Second, a public commitment has an enhanced influence on behavior.The Deutsch and Gerard study revealed that those students most weddedto their commitment were those who had publicly recorded them. Other146

research indicates that publicly setting forth a view influences behavior by


147. See ZIMBARDO & LEIPPE, supra note 133, at 79.148. See CIALDINI, supra note 21, at 83-84 (noting the use of this technique with weight

reduction clinics).149. Id. at 81.150. See id. at 81-82.151. Id. at 61.152. Id. at 60-61.153. Id. at 64. Cialdini argues that automatic consistency acts to shield us from the hard work

of thinking. In this sense, it represents a luxury, but the tendency to be automatically consistent canbe dangerous because it can be used by exploiters who would prefer that we not think too seriouslyabout requests. See id. at 64.

154. See ZIMBARDO & LEIPPE, supra note 133, at 179. However, you must be cautious withrepetitions because too much repetition may cause you to reject the message because it may appearas being “forced down your throat.” See id. at 178.

155. See CIALDINI, supra note 21, at 70-71.156. Id. at 73 (describing a study by social scientists Jonathan Freedman and Scott Frasier).

The scientists explained that people react to be compliant with their self-image, an image that canbe shaped by commitments. Id. at 73-74.

compelling people to be consistent with that public view. Because of147

this, organizations aimed at ridding people of bad habits not only forcepeople to write down their goal of eliminating the habit but also encouragepeople to show their written goal to others. Such organizations contend148

that this written and public declaration tremendously improves chances ofsuccess because people feel more compelled to conform their behavior totheir public declaration. A written commitment has the advantage of beingable to be made public. When it is made public, the written statement149

becomes a form of public commitment, thereby augmenting its behavioralimpact.150

Third, researchers find that the tendency towards consistency is sostrong that it breeds automatic consistency. Researchers note that if an151

individual can be persuaded to make a commitment, the persuader has setthe stage for automatic consistency with that commitment because there isa reflexive tendency to behave in ways that are consistent with thecommitment. Some theorists note that humans fall into the pattern of152

automatic consistency because it does not require much thought. 153

Fourth, repetition strengthens the commitment and hence, thelikelihood of compliance with the commitment. Research suggests thatwhen people repeatedly express a commitment, the repetition enhances theprobability that their conduct will be affected. This is because the154

repetition cements the commitment.155

Fifth, making a commitment alters a person’s view of herself becausethe person will desire to see herself as consistent with that commitment.For example, studies reveal that once a person makes a commitment theybegin to view themselves as the kind of person who would engage in aparticular action. In this way, researchers conclude that you can use156


157. Id. at 70-71.158. Id.159. Id. at 73-74 (explaining that an initial commitment changes the view you have of yourself,

prompting you to engage in consistent behavior); see ZIMBARDO & LEIPPE, supra note 133, at 82.160. See ZIMBARDO & LEIPPE, supra note 133, at 82. This study was first conducted in 1966

by Jonathan Freedman and Scott Fraser. See CIALDINI, supra note 21, at 72.161. CIALDINI, supra note 21, at 72.162. Id. at 72.163. See id. at 72-73. Cialdini explains that Freedman and Frasier were “bewildered” to

discover that encouraging people to sign a petition to “keep[] California beautiful” impactedpeople’s decision to post a sign because the topic on which they had made the commitment seemedentirely different and more broad. Id. at 73.

164. See id. at 71-74 (describing the concept); RICHARD E. PETTY & JOHN T. CACIOPPO,ATTITUDES AND PERSUASION: CLASSIC AND CONTEMPORARY APPROACHES 167 (1981); ZIMBARDO

& LEIPPE, supra note 133, at 81.165. PETTY & CACIOPPO, supra note 164, at 167; see also ZIMBARDO & LEIPPE, supra note

133, at 81.

commitments to manipulate a person’s self-image. Once a person’s self-157

image is affected, she will automatically engage in behavior consistentwith that image. In fact, subsequent behavior helps bolster the person’s158

positive vision of herself. 159

Sixth, the consistency principle continues to have force even when acommitment is not made to a particular person and when the commitmentis to a general idea. Illustrative of this point, researchers asked Californiahomeowners to place a large and admittedly ugly sign on their lawn withthe words “Drive Carefully” on it. Predictably, virtually everyone160

refused to do so, except one group of residents where 76% agreed to therequest. The difference was that this latter group had been asked two161

weeks earlier to sign petitions expressing their commitment to the idea thatpeople should be safe drivers. This study has been performed a number162

of different times with similar results; the prior commitment had asignificant influence on people’s behavior. Moreover, when performingthis study, researchers were surprised to discover that merely askingresidents to sign a petition expressing their desire to keep Californiabeautiful had similar results to the study where people were asked to signa petition with a more specific commitment—that is to safe driving.163

Such results confirm the hypothesis that the consistency principle impactsbehavior even when it is relatively general in nature and even when thecommitment is not made to a specific individual or in connection with aparticular course of action.

Finally, small commitments pave the way for larger forms ofcommitment. Researchers describe this concept as “the foot-in-the-door.” In sales, marketers use this tactic by starting with small requests164

in order to gain eventual compliance with larger ones. Often the larger165


166. See CIALDINI, supra note 21, at 73-74; ZIMBARDO & LEIPPE, supra note 133, at 82.167. See CIALDINI, supra note 21, at 72; ZIMBARDO & LEIPPE, supra note 133, at 82.168. See discussion infra Part III.C.1.169. See discussion infra Part III.C.2.170. See ZIMBARDO & LEIPPE, supra note 133, at 107-08. 171. Id. at 195.172. Id. at 109.173. Id. at 109, 117.

commitments are only tangentially related to the smaller ones. Thus, in166

a variety of different experiments, psychologists found robust evidencesuggesting that compliance with a small request enhances the chances ofcompliance with a larger request. Psychologists believe this phenomenon167

stems from the consistency principle. In other words, people make thelarger commitments because those requests appear consistent with theirearlier, smaller commitments.

C. Some Limitations of the Consistency Principle

Research reveals that not all commitments lead to consistent behavior.In fact, there are at least two factors that limit the behavioral effect of theconsistency principle: the existence of multiple commitments and the168

degree to which there is ownership of the commitment.169

1. The Multiplicity Problem

First, when individuals make multiple commitments it weakens theirability to be consistent. In fact, because individuals desire to be internallyconsistent, these multiple commitments cause them to justify their actionsin a way that reduces the conflicts among commitments. Socialpsychologists refer to the human phenomenon of dealing with thesemultiple—and often inconsistent—commitments as cognitivedissonance. In other words, situations requiring someone to behave170

consistently towards a variety of different commitments create complicatedconsiderations “which impede the simple, uncluttered translation of a givenattitude into specific behavior.” Cognitive dissonance theory suggests171

that people will respond to these multiple commitments by seeking toreduce the dissonance. Often this will result in people acting172

inconsistently with their commitments but seeking to justify their actionsin a way that appears to minimize that inconsistency.173

2. The Ownership Problem

Second, commitment breeds internal consistency only when an actortakes ownership of the commitment. Individuals engage in consistentbehavior only when they believe that their initial commitment stemmed


174. See id. at 125.175. Id. at 111-13.176. Id. at 110-11; see also CIALDINI, supra note 21, at 92-97; PETTY & CACIOPPO, supra note

164, at 167.177. See CIALDINI, supra note 21, at 93-94.178. See id. at 96-97; ZIMBARDO & LEIPPE, supra note 133, at 111, 113.179. ZIMBARDO & LEIPPE, supra note 133, at 112-13; Jon D. Hanson & Douglas A. Kysar,

Taking Behaviorialism Seriously: The Problem of Market Manipulation, 74 N.Y.U. L. REV. 630,652-53 (1999) (noting that when individuals generate their own rationales for a particular behavior,their belief in the correctness of that behavior perseveres).

180. See supra Part IV.B.

from their own choice and represented a decision that they wereresponsible for making. This belief does not surface when behavior174

results—or is perceived to have resulted—from strong outside pressure.175

Research reveals that when people are encouraged to behave in particularways because of a strong reward or sanction, they are less likely to repeatthat behavior. Instead, such reward or sanction will generate temporary176

compliance. Thus, the consistency principle requires parties to walk a177

fine line that seeks to influence behavior but does not negate a person’sperceived free choice and sense of inner responsibility for that behavior.178

Researchers find that this line is best navigated when individuals areencouraged to generate their own arguments or rationales for a particularkind of behavior, even if they disagree with that behavior.179

V. A CONCEPTUAL FRAMEWORK FOR ADAPTING THE CONSISTENCY

PRINCIPLE TO CORPORATE RHETORIC

If the consistency principle applies within the corporate arena, itpredicts that corporations’ adoption of stakeholder rhetoric will have apowerful effect on their subsequent behavior. Like other forms of speech,corporate stakeholder rhetoric can be viewed as a form of commitment.Indeed, research reveals that the consistency principle can be applied tostakeholder rhetoric although it may involve relatively generalcommitments that are not targeted at a specific individual. Therefore,180

once corporations espouse stakeholder rhetoric, the desire for consistencyshould compel the corporations to align their behavior with that rhetoric.Because the rhetoric is not only behavior-inducing, but also view-altering,this theory predicts that corporations will begin to identify themselves withparticular rhetoric. This identification increases the potential that therhetoric will translate into behavior. Moreover, the desire for consistencycould lead corporations to automatically engage in such behavior.Similarly, corporate repetition of the commitment may result in greatercorporate engagement. Finally, the “foot-in-the-door” concept suggests thatcorporate behavior can increase over time. The fact that the rhetoric is both


181. Special thanks to the faculty at the Georgetown University Law Center, particularlyWilliam Bratton, Jeffrey Bauman, Emma Coleman Jordan, David Luban, and Daniel Turillo, forfocusing my attention on developing strategies that bridge the gap between the application of theconsistency principle in the individual context and the corporate context.

182. See, e.g., Marjorie E. Kornhauser, Corporate Regulation and the Origins of theCorporate Income Tax, 66 IND. L.J. 53, 59 (1990) (discussing the rise of the “natural entity” viewof the corporation as a person with many, if not all, of the characteristics of a natural person). Theseminal case establishing this concept is Santa Clara County v. S. Pac. R.R. Co., 118 U.S. 394, 396(1886) (recognizing the corporation as a natural person under the Constitution). See also Smyth v.Ames, 169 U.S. 466 (1898).

183. See, e.g., Kornhauser, supra note 182, at 55-136 (discussing the tax code’s view ofcorporation); see also Jill E. Fisch, Frankenstein’s Monster Hits the Campaign Trail: An Approachto Regulation of Corporate Political Expenditures, 32 WM. & MARY L. REV. 587, 599-601 (1991)

written and public likely accentuates these effects. In this regard,application of the consistency principle posits that stakeholder rhetoric willtranslate into sustained actions consistent with that rhetoric.

Of course there is reason to be skeptical about applying a theorydeveloped in the context of individual behavior to corporate behavior.181

Indeed, the consistency principle is based upon our expectations regardingindividual impulses and reactions and upon how commitments made byindividuals are impacted by these impulses and reactions. This raises twoapplicability conundrums.

First, whether the consistency principle can be applied to thecorporation at all given that the corporation is a fictitious entity and not aperson. Indeed, as a fictitious or artificial entity, corporations do not havesuch impulses and hence there may be no reason to presume that suchentities would respond to the same stimuli that animates the consistencyprinciple. Second, whether the consistency principle can be applied tocorporate actors given that their behavior occurs within the framework ofthe corporate enterprise. To be sure, the corporation is a fictitious entity.However, the corporation is composed of individuals, and thoseindividuals do have the reactions and impulses upon which the consistencyprinciple is based. Yet the fact that individuals act within the corporateframework may mute or alter these impulses, thereby hindering theapplicability of the consistency principle. This Part examines whether theseconundra can be resolved in a manner that enables the consistencyprinciple to have some traction within the corporate setting.

A. Corporate Identity and Reputation

There are circumstances in which corporate behavior resemblesindividual behavior. Although corporations are legal fictions, the lawrecognizes the corporation as a “person” with a distinct identity. Indeed,182

a corporation is recognized as a person not only for tax and bankruptcypurposes, but also for protected speech purposes. Recent literature183


(discussing competing theories regarding the Supreme Court’s decision related to corporate speechrights); Michael R. Siebecker, Corporate Speech, Securities Regulation, and an InstitutionalApproach to the First Amendment, 48 WM. & MARY L. REV. 613, 636-37 (2006) (discussing theSupreme Court’s approach relating to the protection of corporate speech).

184. See GREGOR HARTER ET AL., MANAGING BRANDS FOR VALUE CREATION 1 (2005),available at http://www.boozallen.com/media/file/145647.pdf (noting that in a European study byBooz Allen Hamilton and Wolff Olins over 90% of companies believed that branding was a keyelement of their success); KEVIN LANE KELLER, STRATEGIC BRAND MANAGEMENT: BUILDING,MEASURING, AND MANAGING BRAND EQUITY 546 (2d ed. 2003) (discussing the “Science ofBranding”); KELLY ET AL., supra note 33, at 3 (pinpointing global study by Booz Allen Hamiltonand the Aspen Institute on recent corporate efforts to integrate values and identity into corporatestructures); Victor Fleischer, Brand New Deal: The Branding Effect of Corporate Deal Structures,104 MICH. L. REV. 1581, 1631-37 (2006) (noting that brand image is a “powerful form ofcommunication with the consumer”). See generally Ben-Ner & Putterman, supra note 111 (notinghow companies build their identity and reputation through brands and other means of disseminatinginformation to the public).

185. See Ben-Ner & Putterman, supra note 111, at 534-35 (noting that companies develop“character” aimed at building a particular reputation and culture).

186. See HARTER ET. AL., supra note 184, at 2, 4; KELLY ET AL., supra note 33, at 3-4; DavidBernstein, Strategic Reputation Risk Management, 7 J. COMM. MGMT. 275 (2003).

187. See, e.g., R. William Ide III & Douglas H. Yarn, Public Independent Fact-Finding: ATrust-Generating Institution for an Age of Corporate Illegitimacy and Public Mistrust, 56 VAND.L. REV. 1113, 1127-28 (2003) (noting the importance of trust and reputations for corporations);Jones, supra note 23, at 139-40 (noting corporations’ focus on developing a reputation oftrustworthiness). See generally Ben-Ner & Putterman, supra note 111, at 527-28 (noting theimportance of a reputation of trust for business interactions); Margaret M. Blair & Lynn A. Stout,Symposium Norms & Corporate Law: Trust, Trustworthiness, and the Behavioral Foundations ofCorporate Law, 149 U. PA. L. REV. 1735 (2001) (discussing the role of trust in the business worldand in corporate law); Larry E. Ribstein, Law v. Trust, 81 B.U. L. REV. 553, 568-71 (2001) (notingthe importance to corporations of building a reputation of trustworthiness).

188. See KELLER, supra note 184, at 545-47; Fleischer, supra note 184, at 1634.

regarding corporate brands reveals that corporations, or more preciselyparticular agents within corporations, spend considerable effort creatingand protecting the corporate identity through the use of such techniques asbrands and slogans. In this regard, a corporation is not merely recognized184

as a separate person, it also has an identity and even a personality that maybe analogous to an individual. 185

Once corporations generate an identity, corporate actors are chargedwith protecting and maintaining that identity. Recent studies reveal thatcorporations are increasingly devoting more resources to managing theiridentity to project a favorable, distinct corporate image. Reputation186

represents a key component of corporate identity, and corporations aim tobuild a reputation of trustworthiness. With regard to brands, this means187

ensuring that a corporation’s brand has and maintains a reputation forbeing reliable and of high quality. The crux of recent literature is that188

once a corporation constructs an identity, people within the corporationfeel a responsibility to engage in actions that protect and preserve that


189. See KELLER, supra note 184, at 156; Fleischer, supra note 184, at 1604 (noting theprocess of internal branding pursuant to which corporations ensure that employees embrace thecorporate brand).

190. See KELLER, supra note 184, at 156.191. See CIALDINI, supra note 21, at 82.192. Id. at 60; ZIMBARDO & LEIPPE, supra note 133, at 79.193. The social psychology literature regarding group behavior supports this parallel. That

literature reveals that people tend to identify themselves with groups and thus form their “socialidentity” based on the group’s norms and ideologies. See Fanto, supra note 23, at 462 (noting that,as social beings, humans tend to derive their identity through social groups); Michael A. Hogg,Social Identity and Misuse of Power: The Dark Side of Leadership, 70 BROOK. L. REV. 1239, 1241-42 (2005) (noting that people locate themselves within groups); Michael A. Hogg & Barbara-A.Mullin, Joining Groups to Reduce Uncertainty: Subjective Uncertainty Reduction and GroupIdentification, in SOCIAL IDENTITY AND SOCIAL COGNITION 249, 250-55 (Dominic Abrams &

identity, thus fostering a quality reputation.Like its brand, a corporation’s rhetoric also can represent a component

of its corporate identity. This occurs if corporate rhetoric becomesassociated with a corporation’s image and persona. When this occurs,corporate actors may feel some responsibility for that rhetoric. Just as189

corporate actors must preserve the corporation’s reputation oftrustworthiness in relation to its brand, in the context of rhetoric, the desireto project an image of trustworthiness should compel actors to engage inactions consistent with corporate rhetoric. This is because the failure to beconsistent with regard to their rhetoric may generate an appearance ofuntrustworthiness that could damage a corporation’s reputation and henceits identity. In this regard, a critical aspect of managing corporate190

reputation is managing a corporation’s rhetorical commitments in a waythat gives an appearance of consistency and hence trustworthiness.

This desire to both protect image and appear trustworthy is a trait uponwhich the consistency principle rests. The consistency principle is basedupon the idea that individuals desire to appear and be trustworthy. This191

desire generates internal and external pressure on individuals to behaveconsistently with their commitments because their failure to do so isassociated with dishonesty and a lack of good moral character. In this192

regard, there appears to be a parallel between the individual’s desire toappear consistent with her commitments and the corporate concern forreputation and identity that may compel individuals within the corporatecontext to ensure that the corporation is consistent with its rhetoricalcommitments.

This parallel suggests that there are some similarities betweenindividuals and corporations that may facilitate the application of theconsistency principle within the corporate context. Such a suggestionaugments the possibility that the consistency principle has traction withinthe corporate context. Confirming this possibility, even Cialdini has193


Michael A. Hogg eds., 1999). This social identity then influences their view of themselves andshapes their behavior to act in ways consistent with the group norm. See Fanto, supra note 23, at464 (noting that individuals tend to adopt the features and characteristics of the group); Hogg,supra, at 1242 (discussing how social groups provide an individual with a social identity); Hogg& Mullin, supra, at 250-55 (discussing how groups define behavioral patterns). In this regard, theidentity of the corporate group could influence the behavior of individuals within that group.Hence, to the extent the corporation has developed a norm in favor of other-regarding behavior,group members will feel compelled to alter their behavior to comply with that norm. Of course, thesocial psychology literature also reveals that individual behavior within groups can become extremeand counterproductive as members of the group begin to act to protect other group members asopposed to the group’s mission. See JANIS, supra note 23, at 174-77; Fanto, supra note 23, at 462-63, 465 (noting groups’ tendencies to be extreme and polarized). For a discussion of groupthinkand its application to Enron, see O’Connor, supra note 23, at 1258-95. Hence, groups must bemonitored to ensure that these tendencies are decreased. See Fanto, supra note 23, at 471 (notingthat the flaws within groups are not fatal).

194. See Robert B. Cialdini, Social Influence and the Triple Tumor Structure ofOrganizational Dishonesty, in CODES OF CONDUCT: BEHAVIORAL RESEARCH INTO BUSINESS ETHICS

53-56 (David M. Messick & Ann E. Tenbrunsel eds., 1996).195. See Deborah Rhode, Profits and Professionalism, 33 FORDHAM URB. L.J. 49, 53-54

(2005) (pinpointing various studies).196. The social psychology literature regarding groupthink and conformity suggest that certain

group dynamics may prevent individual impulses from having any impact within a group setting.Indeed, that literature suggests that individuals subordinate their own inclinations within a groupsetting to conform to the group norm. See Fanto, supra note 23, at 462-63 (discussing consequencesfor failure to conform to the thoughts of the group); Hogg, supra note 193, at 1242 (noting thatassuming the identity of a group often means depersonalizing the individual); Hogg & Mullin,supra note 193, at 254 (describing depersonalization that occurs within the group context). Thisis particularly true with regard to cohesive or homogenous groups. See Fanto, supra note 23, at 464.However, the literature also suggests that one method of combating these phenomena is to foster

maintained that an organizational commitment can influence individualsto engage in behavior corresponding to that commitment. Moreover,194

empirical studies suggest that company commitments can have an impacton an individual corporate agent’s behavior.195

B. Transferring Commitments from the Corporation to the Individual

The prior section suggests that corporations’ concern for theirreputation and identity puts pressure on corporate agents to protect thatreputation and identity, and therefore, to maintain consistency with theirrhetoric, at least when that rhetoric is associated with identity. Theconsistency principle suggests that if individuals take ownership ofcommitments, they feel some responsibility for honoring thosecommitments. The crucial question then is how can corporations instill asense of responsibility in their individual agents that engages their senseof individual commitment, and hence, their natural tendency towardsconsistency? To be sure, there is considerable literature on how individualbehavior changes in the context of groups and corporations. This Article196


a sense of individual commitment. See, e.g., Jones, supra note 23, at 159-60; Warwick, supra note23, at 1468.

197. See supra notes 174-79 and accompanying text.198. See 3A WILLIAM MEADE FLETCHER ET AL., FLETCHER CYCLOPEDIA OF THE LAW OF

PRIVATE CORPORATIONS § 1118, at 156-64 (perm. ed., rev. vol. 2002) (noting that a corporateofficer’s signature on a contract binds the corporation, not the officer); see also Ace Dev. Co. v.Harrison, 76 A.2d 566, 570 (Md. 1950) (citing Llewellyn v. Queen City Dairy, 48 A.2d 322 (Md.1946) (stating that a corporate officer’s signature on a contract binds the corporation, not theofficer)). But see Fairfax, supra note 63, at 22 (noting that the CEO’s and CFO’s signatures on anannual report may impose personal liability because by signing the report those officers “implicitlyindicate their belief that the report is accurate”).

199. See supra note 198 and accompanying text. This is true unless the corporate officer ordirector signs the annual report in his or her own capacity or otherwise is deemed to have made thestatement because he or she signed some document with an intent to deceive. See, e.g., Howard v.Everex Sys., Inc., 228 F.3d 1057, 1061-63 (9th Cir. 2000).

does not focus on that literature. Instead, this Article relies upon theconsistency principle to illuminate challenges posed by seeking to attributecorporate commitments to individual actors within the corporation.

The consistency principle suggests that the issue of individualresponsibility or ownership for corporate rhetoric may pose the greatestproblem for the applicability of that principle within the corporateframework. In other words, whether and to what extent individuals withinthe corporate arena feel responsible for corporate rhetoric will have animpact on whether that rhetorical commitment stimulates their behavior.This is because the consistency principle focuses on the need for personalownership—the need for the speaker to believe that the rhetoric sheembraces is the product of her own choice and represents discourse forwhich she feels personally responsible. While issues of responsibility197

may be a concern with regard to individual commitments, that issue is atremendous stumbling block in the corporate context.

An individual commitment is made by an individual. As a result, theremay be a rebuttable presumption that the individual bears ownership andresponsibility for that speech and related commitment. However, when thecorporation “speaks,” it is not clear who takes ownership. To be moreprecise, it is not clear which individuals within the corporate enterprise feelpersonally responsible for the corporation’s rhetorical identity. As a legalmatter, corporate statements are attributable to the corporate entity, not theindividual corporate officers or directors who sign them, unless they signin their individual capacity. Thus, statements within a corporation’s198

citizenship report or annual report are generally attributable to thecorporate entity, not individual officers and directors. Because of this,199

those officers and directors within the corporation may not feel personallyresponsible for those statements. This lack of clear ownership mayundercut the ability of the consistency principle to have any applicability


200. See supra notes 174-79 and accompanying text.201. See Fleischer, supra note 184, at 1604, 1621.202. See id.

within the corporate arena. Then too, corporate agents may feel disconnected from corporate

rhetoric even when they make or sign specific statements. Indeed, evenwhen corporate officers and directors make statements attributable to them,their statements are often drafted by the corporation’s attorney or bysomeone in the corporation’s marketing department. The fact that someoneelse may have drafted the statement could diminish the sense ofresponsibility for the statement. Moreover, the very fact that officersappreciate that the statement is made on behalf of the corporation and notfor their own personal purposes may undercut the officers’ sense ofownership. The consistency principle reveals that when individuals havestrong outside justification for their commitments, they do not feel a senseof responsibility, and hence, do not experience any compulsion to aligntheir behavior to those commitments. This phenomenon also suggests200

that if corporations actively encourage corporate actors to take someresponsibility for corporate “identity” and rhetoric, such encouragementmay undermine the sense of free will necessary to make the commitmenthave any meaning for those actors.

As this discussion reveals, the issue of ownership represents asignificant impediment to the application of the consistency principle to thecorporate setting. Certainly the challenge is to generate a sense ofresponsibility within the individuals who comprise the corporateenterprise. How can this be accomplished?

1. Measuring the Strength of Corporate Commitment

As an initial matter, the ability to instill a sense of ownership withinindividual corporate actors may depend upon the degree to which acorporation’s rhetoric is closely associated with its identity. From thisperspective, there may be three categories of corporations. On one end ofthe spectrum are those corporations whose rhetoric is closely associatedwith their corporate identity. For example, corporations such as Ben &Jerry’s and Google espouse rhetoric of responsibility that appears to beintimately related to their corporate image and identity. For these201

companies, their rhetoric appears to be inextricably linked with theiridentity. In other words, the rhetoric represents a key aspect of the202

corporation’s culture. Application of the consistency principle to thesecorporations may be most effective because individuals within thecorporate enterprise may experience significant pressures to ensure that thecorporation engages in behavior consistent with the corporation’s


203. See supra notes 108-14 and accompanying text.204. See supra notes 164-67 and accompanying text.

rhetorical commitment. This means that such individuals may feel pressureto align their behavior with that rhetoric. This supposition appears to besupported by the empirical evidence, which reveals that there is a greaterconnection between rhetoric and behavior when corporations appear tohave some strong fealty to their rhetoric. In this regard, the consistency203

principle may have greater traction for corporations engaging in significantrhetoric because it is more likely that individuals within those corporationsbelieve that the corporation has embraced a commitment for which they areobliged to comply. Of course, it is likely that these corporations alreadyengage in behavior consistent with their rhetoric and hence, there may beno need to focus attention on such entities.

On the other end of the spectrum are those corporations that appear toengage in rhetoric as an afterthought. Application of the consistencyprinciple to these firms may be less effective because there may not besufficient connection to corporate identity for individuals within thecorporation to feel any obligation to adhere to the rhetoric. From thisperspective, it may prove especially challenging to focus efforts on suchcorporations.

However, the vast majority of corporations likely fall within the middleof the spectrum, where the rhetoric represents a component of thecorporation’s identity, though not necessarily the core component. Thesecorporations seem to merit our attention because they have made somecommitment (even if limited), and the consistency principle suggests thateven small commitments can pave the way for behavioral changes.204

Hence, these commitments must be exploited to strengthen thecorporation’s sense of association with them. This may mean focusing onensuring that executives and directors take more ownership of the existingcorporate rhetoric. Indeed, while such officials may not affect everydecision, they may be able to impact corporate culture so that individualscharged with making day-to-day decisions feel compelled to align thosedecisions with the corporation’s rhetorical commitment.

2. Active Involvement in Rhetorical Commitments

First, with regard to those corporations that have at least somerhetorical commitments, attention must be focused on ensuring thatcorporate actors take an active role in crafting stakeholder rhetoric. In otherwords, corporate agents must draft or play a role in drafting missionstatements and other documents containing stakeholder commitments. Theconsistency principle suggests that such a process may increase the extentto which such corporate officials feel personally responsible for those


205. See supra note 197 and accompanying text.206. See CIALDINI, supra note 21, at 75-76; ZIMPARDO & LEIPPE, supra note 133, at 113

(revealing an attitude shift in students who were asked to write essays on the merits of free parking).207. See generally supra notes 174-79 and accompanying text (discussing how ownership

affects consistency).208. See, e.g., Paul Hribar & Holly Yang, CEO Overconfidence, Management Earnings

Forecasts, and Earnings Management, JOHNSON SCHOOL RESEARCH PAPER NO. 22-06, July 2006,available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=929731 (discussing various studieswhere overconfident CEOs were more likely to miss earnings projections).

commitments. In this regard, the manner in which corporations adopt205

stakeholder-centered commitments may have a significant impact on theextent to which those commitments will lead to corporate engagement inpractices consistent with them.

Second, the consistency principle suggests that attention should begiven to developing strategies that encourage corporate actors to articulatetheir own reasons for corporate rhetoric. Indeed, studies suggest that evenwhen people are forced by external actors to make a commitment, thecommitment nevertheless can alter their behavior if they are also forced toarticulate their own rationales about why the commitment may beappropriate. This is because such people feel a sense of responsibility for206

the rationales they have articulated. Thus, developing methods forencouraging corporate officials to find their own justifications forcorporate rhetoric not only may enhance their sense of ownership, but alsomay decrease the significance of external pressure. The consistencyprinciple suggests that augmenting corporate actors’ responsibility in theseways will better ensure that stakeholder rhetoric translates into corporatebehavior.207

3. Executive Ownership

Given the corporate framework, it is likely that these strategies will bemore effective if aimed at corporate executives and directors. First, suchcorporate officials may bear responsibility for crafting corporate policiesand hence, are most likely to feel some degree of ownership for corporatepolicies and statements. Second, even when individual executives anddirectors do not generate corporate statements, executives are more likelyto take ownership of corporate commitments than rank-and-file employees.In fact, recent literature reveals that high-ranking corporate officials tendto be overly confident and that this overconfidence may increase theirsense of responsibility for corporate affairs. Moreover, many directors208

or executives become so closely affiliated with the corporation that eitherthey feel a personal connection with its statements or statements getattributed to them such that they feel some responsibility for these


209. See Hogg, supra note 193, at 1245-46 (explaining attribution tendencies associated withgroup leaders); see also JAMES A. BAKER III, ET AL., THE REPORT OF THE BP US REFINERIES

I N D E P E N D E N T S A F E T Y R E V I E W P A N E L 6 6 - 6 7 ( 2 0 0 7 ) , a v a i l a b l e a thttp://www.bp.com/liveassets/bp_internet/globalbp/STAGING/global_assets/downloads/Baker_panel_report.pdf [hereinafter BP REPORT] (noting the ways in which the BP CEO served as thevoice of the corporation).

210. The social psychology literature on group decision-making suggests that a focus onexecutives may be particularly appropriate because groups tend to gravitate towards a leader andallow that leader to define the group’s norms and appropriate forms of behavior. See Fanto, supranote 23, at 464 (noting that group members consider the group leader to be representative of thegroup ideal); Hogg, supra note 193, at 1245 (noting that “prototypical” group members developbehaviors that become the standard for the group). In other words, groups take their cue from, andconform to the expectations of, identified leaders of the group. See Fanto, supra note 23, at 464.Therefore, as the leaders of the corporate enterprise, executives and directors may have enhancedability to influence the group’s attitudes and actions. See Fanto, supra note 23, at 464; Hogg, supranote 193, at 1245. As a result, merely altering the commitment level of those individuals is likelyto influence the commitment level and behavior of all the members within the corporate enterprise.

211. It is also true that corporate decision-making structures change over time because thepeople within the corporation constantly change, either as a result of changes in employment or asa result of changes in the corporate entity due to merger or some other corporate event. This Articlerecognizes that these changes may impact the ability of a corporation to sustain its commitment to

statements. This is in contrast to rank-and-file employees who are not209

perceived as the “face” or “voice” of the corporation and its policies. Thentoo, the fact that executives may initially feel greater responsibility for, andpersonal connection to, a corporation’s rhetoric may reduce the likelihoodthat executives will view the commitments as being forced upon them. Bycontrast, even if you encourage employees to make various corporatecommitments, they may feel a lack of choice regarding whether to makesuch commitments, thereby undermining their sense of personalaccountability for those commitments. In this regard, it may prove moreeffective to aim any strategies at executives and directors, rather than allmembers of the corporate enterprise.210

The focus on executive level ownership means that the trend towardscreating special officers or departments to respond to stakeholder concernsmay undercut the ability of corporate rhetoric to translate into reality.Indeed, that trend may result in corporations relegating such issues andrhetoric to people who do not feel sufficient responsibility for the rhetoricto ensure that it impacts corporate behavior.

C. Issues Regarding Corporate Decision-Making

To be sure, even if individuals experience some pressure to conformtheir behavior to corporate rhetoric, their ability to influence corporatebehavior may depend on the decision-making structure at their corporation.Indeed, corporations are extremely complex enterprises where there areoften layers of decision-making. For example, in a company that is very211


a given rhetoric in the long-term. Indeed, if the individuals who feel responsible for the commitmentare no longer with the corporation, then it is likely that the corporation will no longer engage inpractices consistent with those commitments. However, at the very least, focusing on makingindividuals currently within the corporate structure more responsible for corporate rhetoric at leastenhances the likelihood of those individuals to influence behavior at present.

212. See infra notes 213-17 and accompanying text.213. See British Petroleum p.l.c., About BP, How We Run the Business,

http://www.bp.com/subsection.do?categoryId=7&contentId=2006634 (last visited on July 22, 2007)(containing numerous links to content containing extensive rhetoric on responsibility).

214. See BP REPORT, supra note 209, at 17.215. Id. at 17-18.216. See id. at ii-vii (listing the members of the “Panel”).217. See id. at xii (noting the affect that the decentralized management system had on not

clearly defining process safety); see also id. at 27, 36-41, 60 (pinpointing the many peopleresponsible for safety process issues).

218. Id. at xvi (noting the need to develop a more integrated safety process system).

decentralized, even if certain individuals within the corporation feelpressure to adhere to the corporation’s rhetoric, their actions may notimpact the overall corporate operations in a significant manner. Indeed, inmany cases when corporations come under fire for engaging in someimproper act, corporate executives claim that the behavior reflectsdecisions made by isolated individuals. 212

The situation at BP illustrates this point. Indeed, BP is a corporationthat appeared to have defined itself by its rhetoric on stakeholder-centeredcommitments, particularly environmental responsibility. Yet, reports213

suggest that it engaged in practices incompatible with that rhetoric.Specifically, BP’s Texas refinery experienced one of the most seriousworkplace disasters of the last two decades; 15 people were killed and over170 were injured. A report assessing the reasons for the disaster found214

that it resulted from, among other things, deficiencies in safety proceduresand processes at BP. In assessing the reasons why BP rhetoric appears215

to be incompatible with its actions, an independent review panel, chairedby former Secretary of State James A. Baker, III, pointed out that the216

decentralized structure of the corporation provided managers with broadlatitude to make process safety decisions without paying heed to thecorporate mission. Thus, even when certain executives embraced the217

corporate rhetoric, others within the corporation did not, and theirdecisions had more immediate effects.

As a result of its findings, the Panel recommended that BP create amore centralized structure so that individual managers would not have theability to make decisions contrary to corporate commitment and culture,thereby thwarting the will of the corporate enterprise. BP’s experience218

suggests that the more centralized the corporate governance structure, thegreater likelihood that individual behaviors will have an impact on thecorporate enterprise and therefore that the consistency principle will take

http://www.bp.com/subsection.do?categoryId=7&contentId=2006634


219. See id. at 61.220. See id. at 92. 221. Id.222. Id. at xvi.

root within the corporation. This concern about decision-making structures may strengthen the need

to focus on corporate executives and directors. Indeed, even in a diffusedcorporate setting, it is more likely that managers and directors will be ableto impact policies on a broader level than individual employees. Further,within a more centralized setting, it is clear that executives and directorscan impact a broader range of policies. In fact, the Panel’s findings suggestthat within any corporate governance setting there must be some sense ofcommitment from the top levels of the enterprise for others to feelobligated to align their behavior to the corporation’s rhetoric. 219

Moreover, executives must then be accountable for the behaviors ofother individuals within the corporate regime. In other words, there mustbe top-down accountability so that when executives make commitmentsthey also bear responsibility for ensuring that everyone within their chainof command follows through with that commitment. While corporationsmay have complex chains of command, the Panel in the case of BP foundthat there were too many lines of authority. The result was that not only220

did employees receive mixed messages, but there was no clear individualor individuals to whom employees were accountable. The Panel221

recommended that BP adopt a more structured and clear system to alleviatethis problem.222

D. Addressing the Multiplicity Problem

In addition to corporate decision-making issues, the multiplicityproblem may hinder the translation of corporate commitment intobehavior. The consistency principle reveals that when multiplecommitments are made, the ability to translate those commitments intobehavior is weakened. Multiplicity appears to be a problem that swallowsthe general presumption of consistency for purposes of corporate rhetoric.Corporations clearly make multiple commitments. Stakeholder rhetoric, byits very nature, encompasses commitments to an array of groups fromemployees and creditors to the general society. The consistency principlesuggests that these multiple—and sometimes conflicting—commitmentsmay undermine the extent to which a corporation’s rhetoric will translateinto compatible actions. More significantly, because there are manyindividuals within the corporation, those individuals may resolve thesemultiple commitments in a different manner, leading to inconsistentbehavior on behalf of the corporation. The multiplicity problem suggests


223. Indeed, the consistency principle suggests that the multiplicity problem may undermineachievement of all the goals encompassed by the stakeholder rhetoric, including goals associatedwith shareholder concerns. See supra notes 170-73 and accompanying text.

224. See BP REPORT, supra note 209, at 61.225. See id. 226. See supra note 41 and accompanying text.227. See BP REPORT, supra note 209, at 24.228. Id. at xvi.

that corporations may inevitably fail to achieve the commitments embodiedin their rhetoric. 223

However, the multiplicity problem should not be viewed as a completeobstacle to ensuring that corporate rhetoric more closely resembles reality.The fact that a sizeable number of corporations have practices moreconsistent with their rhetoric suggests that this problem can be overcome.Hence, more work should be done in assessing those corporations that havesuccessfully navigated this hurdle. A brief analysis of those companiessuggests some areas that may ameliorate this problem. First, corporationsmay need to limit the groups to which they make rhetorical commitments,possibly limiting the sense of conflict among such groups. With regard toBP, the Panel found that the corporation had identified too many goals,stretched itself thin with commitments, and sent mixed messages to itscorporate agents. The Panel concluded that BP needed to focus on a few224

commitments to ensure clarity and increase the likelihood of individualcompliance with them. Second, corporations may need to prioritize their225

concerns. Certainly, Johnson & Johnson appears to have engaged in suchprioritizing. Finally, companies should develop strategies that focus their226

attention on rhetoric involving the appropriate balance for the multipleinterests embodied in stakeholder rhetoric. Indeed, the Panel assessing BPsuggested that this multiplicity problem could be resolved by ensuring thatthe corporation articulated the appropriate balance to be achieved withregard to their commitments. Moreover, the Panel indicated that227

ensuring sufficient ownership, particularly at the executive level, wouldserve to ameliorate the problems associated with multiple objectives.228

E. Implications for Corporate Policy

This Part illustrates that corporations do have characteristics similar toindividuals for purposes of the consistency principle. Indeed, corporationsform identities, and their rhetorical commitments may represent a criticalcomponent of those identities. The challenge is to ensure that individualswithin the corporation feel responsible for corporate commitments. Bybuilding this responsibility, we can increase the likelihood that individuals’natural inclination to be consistent can be harnessed even within thecorporate setting. Certainly, more work needs to be done in this area.


However, this Part begins this work discussing how corporatecommitments can be transformed into corporate behavior. Hence, we mustmonitor the level of individual ownership of corporate commitments, thecorporation’s embrace of multiple commitments, and its decision-makingstructures. Such issues play a critical role in assessing whether theconsistency principle can take root at a corporation.

This Part also offers some strategies for overcoming these issues. Mostimportantly, strategies must be developed for strengthening the linkbetween individual ownership by encouraging actors to draft and createrationales for corporate commitments. This process may have the mostsuccess if it begins at the top of the corporate ladder, focusing on ensuringthat executives and directors take greater responsibility for corporaterhetoric. Second, the decision-making apparatus must be monitored toensure that those individuals who feel connected to corporate rhetoric alsohave the ability to influence corporate behavior on a broad level. In thisregard, corporations with structures with greater top-down accountabilitywill be most successful in ensuring that their rhetorical commitments arecarried out by everyone within the corporate regime. Finally, strategiesmust be developed to manage the multiplicity problem so that individualsappreciate how to make decisions that enable them to address the concernsof the many groups embraced by corporate stakeholder rhetoric. Thesestrategies may facilitate the translation of corporate rhetoric into behavior.

VI. CONCLUSION

The most recent wave of corporate governance failures highlightedsignificant shortcomings in our corporate governance apparatus. As aresult, we have struggled to pinpoint strategies to correct thoseshortcomings. More specifically, we have struggled to find mechanisms forensuring that corporations honor their commitment to be good andresponsible corporate citizens.

This Article argues that the corporation’s own words may provide somesolution to this critical problem. First, this Article reveals that people mayhave underestimated the extent of corporate engagement in sociallyresponsible behavior because an analysis of the empirical evidence revealsthat there is some link between corporate rhetoric and conduct. To be sure,there are many instances where corporate rhetoric appears to camouflageor belie actual corporate practices. Yet, there is also a substantialpercentage of corporations whose practices appear compatible with theirrhetoric. This evidence undercuts the prevailing view that rhetoric has noconnection to corporate conduct.

More importantly, this Article demonstrates that even when rhetoricfails to correspond with corporate conduct, there exists a strong possibilitythat the rhetoric can facilitate that correspondence. Social psychology


literature suggests that when an individual makes a commitment, sheexperiences internal and external pressure to align her behavior with thatcommitment. In other words, the expression of a commitment dramaticallyincreases the likelihood that the speaker will engage in conduct consistentwith the commitment. Moreover, the chances that a commitment willinfluence behavior are increased even further when the commitment iswritten, made public, or repeated.

If corporate rhetoric can be viewed as a corporate commitment, thisliterature suggests that such rhetoric can have a powerful impact oncorporate behavior. Indeed, the evidence reveals that the vast majority ofcorporations make commitments to engage in responsible behavior,expressing commitments to protect the environment, enhance employees’quality of life, and improve the lives of the communities in which they dobusiness. These commitments are written and public. They can be foundin corporate annual reports, mission statements, and on corporate websites.They are also repeated in all of these venues. The consistency principlesuggests that the nature of these corporate commitments should augmenttheir ability to influence corporate behavior.

To be sure, there are impediments to applying a theory developed inregard to individuals to the corporate context. As an initial matter, thecorporation is a fictitious entity and may not be motivated by the sameimpulses that motivate natural persons, a concept upon which theconsistency principle is based. Then too, even though a corporation iscomprised of individuals who do have such impulses, those impulses maybe muted in a group or corporate context.

However, this Article maintains that these impediments can beovercome, especially if we focus on strategies that strengthen an individualcorporate agent’s sense of personal responsibility for corporate rhetoric.More work needs to be done in this area, but this Article highlights thoseissues on which we must focus our attention. This Article then pinpointsfactors that must be monitored, as well as affirmative steps that can betaken to increase the likelihood that individuals within the corporation notonly feel a commitment to corporate rhetoric but also can transform thatcommitment into behavior. Indeed, increasing individual corporate actors’participation in drafting and generating rationales for the rhetoric mayenhance their sense of commitment. Ensuring that executives embracethese commitments may also increase the likelihood that others in thecorporation will follow suit. Additionally, encouraging corporate agents toidentify their own strategies for balancing their multiple commitments mayenable those commitments to better translate into corporate behavior.

Ultimately, this Article contends that corporate rhetoric represents animportant phenomenon in corporate governance that could have a profoundimpact on corporate conduct. In this regard, the existence of stakeholderrhetoric is important not only for its current impact on corporate conduct,


but also because of the role it can play in shaping future behavior. Theempirical evidence certainly reveals that the corporate arena is saturatedwith the rhetoric of responsibility. The consistency principle suggests thatif we can find ways to harness that rhetoric, we will have unleashed apowerful weapon in our struggle to ensure a more responsible corporation.


Fortune 100 Rhetoric DataAppendix A

Methodology: This study reflects data regarding Fortune Magazine’s 2006l i s t o f F o r t u n e 1 0 0 c o m p a n i e s , a v a i l a b l e a thttp://money.cnn.com/magazines/fortune/fortune500/full_list/. Data wasgathered from the most recent annual reports and proxy statements of suchcorporations as well as corporate websites and corporate press releases.This study uses the term “stakeholder rhetoric” to refer to language thatfocuses on corporate constituents other than shareholders, includingemployees, creditors, customers, suppliers, and the community. Suchrhetoric also includes discussion of corporate social responsibility and acorporation’s commitment to engage in charitable endeavors.

The following Table presents data on the presence of stakeholderrhetoric within various corporate documents, or contained on acorporation’s website. “AR” represents annual report; “CSR” representsa social responsibility or good citizenship report; “Website” representswebsite; “AR-1” indicates that appearance of stakeholder reference on thefirst page of the annual report, while “AR-5” indicates the appearance ofsuch reference within the first five pages of the annual report.


Appendix A

Rank Company Name CSR Website AR AR-1 AR-5

1 Exxon Mobil Corp. X X X

2 Wal-Mart Stores, Inc. X X X

3 General Motors Corp. X X X X

4 Chevron Corp. X X X X X

5 Ford Motor Co. X X X X

6 ConocoPhillips X X X X

7 General Electric Co. X X X X

8 Citigroup, Inc. X X X X X

9 American Int’l Group*

10 Int’l Business Machines Corp. X X X

11 Hewlett-Packard Co. X X X

12 Bank of America Corp. X X X

13 Berkshire Hathaway, Inc.*

14 Home Depot, Inc. X X X X X

15 Valero Energy Corp. X X X

16 McKesson Corp. X X

17 J.P. Morgan Chase & Co. X X X

18 Verizon Communications X X X X

19 Cardinal Health, Inc. X X X X

20 Altria Group, Inc. X X X

21 The Kroger Co. X X X

22 State Farm Insurance X X X

23 Marathon Oil Corp. X X X X

24 Procter & Gamble Co. X X X X

25 Dell, Inc. X X X X

26 The Boeing Co. X X X

27 AmericourseBergen Corp. X X

28 Costco Wholesale Corp. X X

29 Target Corp. X X X X X

30 Morgan Stanley X X X X X

31 Pfizer, Inc. X X X X X

32 Johnson & Johnson X X X X X

33 Sears Holdings X X X

34 Merrill Lynch & Co., Inc. X X X

35 MetLife, Inc. X X X X X

36 The Dow Chemical Co. X X X X

37 United Health Group X X X X

38 WellPoint Health Networks X X X X X

39 AT&T Corp. X X

40 Time Warner, Inc. X X

41 The Goldman Sachs Group, Inc. X X X



42 Lowe’s Companies, Inc. X X X

43 United Technologies Corp. X X X X

44 United Parcel Service of America, Inc. X X X X

45 Walgreen Co. X X X X

46 Wells Fargo & Co. X X X

47 Albertson’s, Inc. X X X

48 Microsoft Corp. X X X X

49 Intel Corp. X X X X X

50 Safeway, Inc. X X X

51 Medco Health Solutions, Inc. X X X

52 Lockheed Martin Corp. X X X X X

53 CVS Corp. X X

54 Motorola, Inc. X X

55 Caterpillar, Inc. X X X X

56 Archer Daniel Midlands Co. X

57 Wachovia Corp. X X X

58 The Allstate Corp. X X X X

59 Sprint Nextel Corp. X X X

60 Caremark Rx, Inc. X X X X

61 PepsiCo, Inc. X X

62 Lehman Brothers Holding X X X

63 The Walt Disney Co. X X

64 Prudential Financial, Inc. X X X X

65 Plains All American Pipeline, L.P. X

66 Sunoco Inc. X X X X X

67 Northrop Grumman Corp. X X X

68 SYSCO Corp. X X X X

69 American Express Co. X X

70 FedEx Corp. X X

71 Honeywell International X X X X

72 Ingram Micro, Inc. X

73 DuPont X X X X X

74 New York Life Insurance Co. X X

75 Johnson Controls, Inc. X X X X X

76 Best Buy Co., Inc. X X X X

77 Delphi Corp. X

78 Hartford Financial Services Group X X

79 Alcoa, Inc. X X X X

80 Tyson Foods, Inc. X X X

81 TIAA-CREF X X X

82 International Paper Co. X X

83 Cisco Systems, Inc. X X X X

84 HCA, Inc. X X X X



85 St. Paul Travelers Co. X X X

86 News Corp. X

87 Federated Department Stores X X X X

88 Amerada Hess X X X X

89 The Coca-Cola Co. X X

90 Weyerhaeuser Co. X X X X

91 Aetna X X X

92 Mass Mutual Life Insurance X X X

93 Abbott Laboratories X X X

94 Comcast Corp. X

95 Merck & Co, Inc. X X X

96 Deere & Co. X X X X

97 Raytheon Co. X X X X

98 Nationwide Mutual Insurance Co. X

99 Washington Mutual X X X

100 General Dynamics X

Total Number of Cos. 47 90 88 28 68

Total Percentage of Cos. 47% 90% 88% 28% 68%

*Companies that do not adopt stakeholder rhetoric in any of the noted venues.


Appendix B

The following table collects data from a variety of differentsources to demonstrate the extent to which Fortune 100corporations have been selected for inclusion in various lists ormutual fund indexes aimed at identifying companies who engagein certain forms of stakeholder-centered conduct. The tableprovides data as follows:

1. EE refers to corporations that were included on Fortune’s100 Best Companies to Work for, available athttp://money.cnn.com/magazine/fortune/bestcompanies/full_list/.

2. DIV refers to corporations that were either included inDiversity, Inc.’s Top 50 Companies for Diversity, availableat http://www.diversityinc.com/public/21029.cfm, or inFortune’s Top 50 Best Places for Minorities, available athttp://nyjobsource.com/Top50diversity.html. On the table,(d) designates a corporation on the Diversity, Inc. list while(f) designates a corporation on Fortune’s list.

3. WW refers to corporations that were included in WorkingMother’s 100 Best Places to Work for Mothers, available athttp://www.workingmother.com/100_fulllist.html.

4. Charity refers to corporations that were included in Forbes100 Most Charitable Companies, available at RLINK“http://www.forbes.com/2005/11/11/charities-corporations-g i v i n g - c x _ l m _ 1 1 1 4 c h a r i t y _ 2 . h t m l ”http://www.forbes.com/2005/11/11/charities-corporations-giving-cx_lm_1114charity_2.html.

5. CAL refers to corporations that were included in Calvert’sindex of socially responsible corporations, available athttp://www.calvert.com/SRI_calvertindex.html?format=&letter=All.

6. DOM refers to corporations that were included in Domini’sindex of socially responsible corporations, available athttp://www.domini.com/domini-funds/index.htm.

7. CZN refers to corporations that were included in BusinessEthics’ 100 Best Corporate Citizens, available athttp://www.business-ethics.com/whats_mew_/100best.html.


Some Key Findings

1. 44% of corporations appear in one or both of the Calvert orDomini index

2. 84% of corporations appear in one or more list or fund index


Appendix B

Rank Company Name EE DIV WW Charity CAL DOM CZN

1 Exxon Mobil Corp. X

2 Wal-Mart Stores, Inc. X

3 General Motors Corp. X (f) X X

4 Chevron Corp. X

5 Ford Motor Co. X (d) X X

6 ConocoPhillips X

7 General Electric Co. X X

8 Citigroup, Inc. X (d)(f) X X X

9 American Int’l Group*

10 Int’l Business Machines Corp. X X X X

11 Hewlett-Packard Co. X (d) X X X X

12 Bank of America Corp. X (d) X X X

13 Berkshire Hathaway, Inc.*

14 Home Depot, Inc. X X

15 Valero Energy Corp. X

16 McKesson Corp. X X X

17 J.P. Morgan Chase & Co. X (d)(f) X X X X

18 Verizon Communications X (d) X X X

19 Cardinal Health, Inc. X

20 Altria Group, Inc. X

21 The Kroger Co. X X

22 State Farm Insurance*

23 Marathon Oil Corp.*

24 Procter & Gamble Co. X X X X X

25 Dell, Inc. X X X X

26 The Boeing Co. X

27 AmericourseBergen Corp. X

28 Costco Wholesale Corp. X X X

29 Target Corp. X X X

30 Morgan Stanley X X

31 Pfizer, Inc. X X X

32 Johnson & Johnson X X X X X

33 Sears Holdings*

34 Merrill Lynch & Co., Inc. X (d) X X

35 MetLife, Inc. X X

36 The Dow Chemical Co. X

37 United Health Group X

38 WellPoint Health Networks X (d)

39 AT&T Corp. X (f) X X



40 Time Warner Inc. X (f) X X X

41 The Goldman Sachs Group, Inc. X X

42 Lowe’s Companies, Inc. X X

43 United Technologies Corp. X

44 United Parcel Serv. of Am., Inc. X (f) X X X X

45 Walgreen Co. X X

46 Wells Fargo & Co. X (d)(f) X X X X

47 Albertson’s, Inc. X

48 Microsoft Corp. X X X X X

49 Intel Corp. X X (f) X X X X X

50 Safeway, Inc. X (f) X X

51 Medco Health Solutions Inc.*

52 Lockheed Martin Corp. X

53 CVS Corp. X X X

54 Motorola, Inc. X X X X

55 Caterpillar, Inc. X

56 Archer Daniel Midlands Co. X X

57 Wachovia Corp. X (d) X X X X

58 The Allstate Corp. X (d) X X

59 Sprint Nextel Corp. X X

60 Caremark Rx, Inc. X

61 PepsiCo, Inc. X (d)(f) X X X

62 Lehman Brothers Holding X X

63 The Walt Disney Co. X X

64 Prudential Financial, Inc. X (d)(f) X X

65 Plains All Am. Pipeline, L.P.*

66 Sunoco Inc. X

67 Northrop Grumman Corp.* X

68 SYSCO Corp. X X

69 American Express Co. X X (d) X X X X

70 FedEx Corp. X X (f) X X

71 Honeywell International X

72 Ingram Micro, Inc.*

73 DuPont X (f) X X

74 New York Life Insurance Co.*

75 Johnson Controls, Inc. X X

76 Best Buy Co., Inc. X X X

77 Delphi Corp.*

78 Hartford Financial Servs. Group X X X X

79 Alcoa, Inc. X (f) X

80 Tyson Foods, Inc. X



81 TIAA-CREF X (f)

82 International Paper Co. X

83 Cisco Systems, Inc. X X (f) X X X X X

84 HCA, Inc. X

85 St. Paul Travelers Co. X X X X

86 News Corp.*

87 Federated Department Stores X

88 Amerada Hess*

89 The Coca-Cola Co. X (d)(f) X X

90 Weyerhaeuser Co. X X

91 Aetna X (f) X

92 Mass Mutual Life Insurance*

93 Abbott Laboratories X (d)(f) X

94 Comcast Corp.*

95 Merck & Co., Inc. X (d) X X X

96 Deere & Co. X X X

97 Raytheon Corp. X

98 Nationwide Mutual Ins. Co. X X X

99 Washington Mutual X X X X

100 General Dynamics*

Total Number of Cos. 8 29 26 68 39 38 17

Total Percentage of Cos. 8% 29% 26% 68% 39% 38% 17%

*Companies represent those companies that do not appear on any lists or in any fund index.

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