An earlier post set up the month’s agenda: explore theoretical, doctrinal, and empirical opportunities presented by “contract (as) social responsibility” (KSR). Before going further, it may be useful to provide some examples and define what I mean by KSR.
Labor-related terms in supply chain contracts, discussed in the prior post, are a well-known example of KSR, but not the only ones. Michael Vandenbergh, for example, has argued that supply chain agreements can also be used to advance environmental goals.
But there is a world of KSR beyond supply chain contracts. Frances McDormand’s speech at the Academy Awards, for example, implored the A-listers in the audience to negotiate for “inclusion riders,” contract terms that would require movie productions to have a certain level of social diversity (e.g., race, gender). “Impact investing,” according to one enthusiast, “could be one of the most important social innovations in our lifetimes, leveraging the massive power of the capital markets to a higher purpose than maximizing returns for shareholders.” The oldest example I have found so far—and I suspect there are still older ones—is the Beatles’ early performance agreement, which apparently required venues to integrate racially.
KSR can be seen as part of a longer arc of social activism through market action. From the contested notion that African Americans could use market power to counter the pernicious effects of racism, to Cesar Chavez’s lettuce boycotts of the 1960s, to the South African divestment campaigns of the 1980s, the socially active have long believed that money can do more than talk: it may compel others to walk. Sometimes, as in apartheid, they may have been right. In other cases, such as black banking, they may not.
Still, we (want to believe that we) can achieve social justice through the beer and coffee we choose to purchase. Who we see in the media may affect what we believe to be possible in reality, in terms of gender and racial diversity. Eric Posner and Glen Weyl argue that the “emancipatory force” of “radical markets” “can reawaken the dormant nineteenth-century spirit of liberal reform and lead to greater equality, prosperity, and cooperation.” Whether or not that is true, there is little doubt that there is demand for social change through market participation.
Because contracting is an important mechanism in market function, the rise of KSR seems, from this perspective, inevitable. Yet, not all market participation involves contract in any formal sense, and of course most contracting probably does not purport to be socially responsible in the sense that interests me. So, KSR is at most a (small?) (very small?) subset of contract-based market activity.
Business lawyers love their defined terms–and I am at heart a business lawyer–so what might a definition of KSR look like? Read More