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Trinks, P.J.

Department of Ethics, Social and Political Philosophy

Shareholder Responsibility for Corporate Irresponsibility

Recent years have exposed serious issues of corporate irresponsibility and failures of financial institutions, harming society at large. The rapidly expanding field of Socially Responsible Investing (SRI), however, emphasizes that investors can and should achieve moral goods. The movement wants investors to take responsibility for corporations’ irresponsibility and to improve corporations’ social performance. This thesis assesses whether such a premise makes sense through a careful evaluation of moral responsibility in the context of secondary market investing in publicly listed corporations. We ask ‘To what extent are shareholders morally responsible for the activities of the corporations they invest in?’

After clarifying the economic concepts involved, we first consider how a ‘traditional model’ of moral responsibility can be applied to the case of corporate shareholders. This first model is based on notions of causation and control. We notice that both causation and control have plausible weak interpretations, which can accommodate for collective action settings such as investing. Applying the traditional model to shareholders, however, seems unfruitful. Causal effects of secondary market investment decisions seem dubious (effects are marginal, not well-established, and can have different directions). In addition, investors generally lack control over corporate activities and cannot reasonably be asked never to be linked to any harm corporations produce. As a second attempt, we consider an alternative account offered by Christopher Kutz, which ascribes moral responsibility to individuals based on their (overlapping) intentions to participate in collective endeavors. Here, we encounter obstacles as well. In general, it is not clear that investors intentionally participate in specific corporations’ harmful activities.

In the absence of a reasonable conception of extensive forms of shareholder responsibility we conclude that the actions of SRI investors generally do not fulfill any moral duties. The SRI movement should clarify its normative contentions as well as how the means employed help achieve their stated ends. One critical issue we raise is how ‘responsible share ownership’ could be given substance, particularly in light of the mutual exclusive nature of exclusions and shareholder activism. In all, it seems that harmful company activity might best be addressed by changing organizational and financing structures, which enable more direct causal and intentional links compared to secondary market equity investing.

Last modified:01 May 2015 3.47 p.m.