American Theoretical Debates over CSR
© Springer India 2015
Jeehye YouLegal Perspectives on Corporate Social Responsibility10.1007/978-81-322-2386-3_33. American Theoretical Debates over CSR
(1)
Associate Professor of Law, Galgotias University School of Law, Greater Noida, India
Keywords
Purpose of corporationsNature of corporationsFiduciary dutyShareholder primacyNexus of contractsContractarian theoryAggregate theoryResidual claimantsAgency costsLong-term profitsStakeholder theoryStakeholder modelLegal entityReal entity theoryCorporate personhoodIn recent years, corporate social responsibility (CSR)-specific business practices have emerged as a major focal point of management strategy in the United States.1 Such practices, however, do not comprise normative CSR.2 Meanwhile, proponents of implementing this type of CSR have gradually found their voice in American legal scholarship.3 Chapter 3 thus examines the legal debate surrounding normative CSR in the United States.
As Sect. 2 illustrated, the controversy in the American debate over CSR’s legal implementation stems from the need to clearly define the purpose of corporations with respect to the nature of the fiduciary obligations of managers.4 This will be demonstrated in the first part of this chapter, which provides a brief analysis of the theoretical fundamentals regarding CSR in the United States by reviewing general perceptions about the fiduciary duties of managers as they relate to shareholders. This analysis is then followed by an overview of the main controversy in the American CSR debate, i.e., whether managers can (or should) be fiduciaries for stakeholders other than the shareholders of the corporations. Indeed, the critical question was precisely articulated in the Berle–Dodd debate examined in the previous chapter.5 Accordingly, the second part of the chapter introduces the pertinent traditional corporate theory, i.e., the shareholder primacy model, which denies normative CSR pursuant to Berle’s initial arguments; it then proceeds to analyze the theoretical foundation of this model. The chapter concludes by charting the emergence of the stakeholder model supporting CSR legalization in the vein of Dodd’s refutation of shareholder primacy, and examines the model’s rationale. By exploring these theoretical models, this book assesses whether and to what extent non-US legal systems, in particular, Korean law, can tap the American legal debate in order to selectively transplant and codify such corporate theories articulating CSR.
3.1 Managers as Fiduciaries for Shareholders
As Sect. 2 illustrated, the controversy in the American debate over the legal implementation of (CSR) centers on defining the purpose of corporations with respect to the fiduciary obligations of managers.6 In upholding the shareholder primacy model, which sees managers as the exclusive fiduciaries of shareholders , Berle saw the potential to overcome the problems caused by separation of ownership from management in US business.7 Dodd, meanwhile, concurred on the stakeholder theory—that managers owe a fiduciary duty not only to shareholders but also to all (societal) stakeholders who can be affected by the managerial decisions of a corporation.8 Nevertheless, at the least, US corporate law clearly and unambiguously establishes the scope of managerial fiduciary duties vis-à-vis corporate shareholders. During the formative stage of the long-running CSR debate in the United States, Berle contended that managers owe shareholders the fiduciary duty to protect their wealth;9 Dodd concurred on this aspect of managers as fiduciaries for shareholders.10 Indeed, US corporate jurisprudence has repeatedly validated the assertion. Fundamentally, statutes create corporations; thus, “statutory law primarily defines the powers and duties of corporate officers and directors. ”11 Accordingly, US corporate law establishes that corporate directors owe fiduciary duties to shareholders as well as to the corporation .12
In many US states, corporate laws stipulate that “a board of directors owes a fiduciary duty to the corporation, and… the [shareholders].”13 Most state courts have firmly established that managers are agents of corporations and subject to the fiduciary duties of agents under agency law .14 US federal jurisprudence has also clearly vindicated the theoretical groundwork of Berle’s contention regarding the fiduciary relationship between managers and shareholders, with the court in one case declaring that “The insider’s duty is owed directly to the corporation’s shareholders;”15 and that “Directors hold a place of trust and by accepting the trust are obliged to execute it with fidelity, not for their own benefit, but for the common benefit of the [shareholders] of the corporation.”16 Some courts have also likened the fiduciary relationship that managers have with corporations and shareholders to that of a trust ,17 whereas others judge that managers stand in fiduciary relation to the corporation and the shareholders, even though they are technically not trustees.18
In other words, jurisprudential tradition justifies “the fiduciary obligation of corporate officers and directors,” relying firmly on US trust law: “shareholders entrust assets to directors and officers for them to manage for their benefit. [Thus, managers] owe a fiduciary obligation to shareholders because property has been entrusted to the corporate fiduciaries to be managed for the shareholders’ benefit.”19 The fiduciary duty was originally enshrined in the law of trusts, “where its literal meaning—faithfulness—correctly described the duty or responsibility owed by one who held title, but not ownership, to property of another, who lacked legal title but could, in equity, claim the benefits of ownership .”20 In the corporate law context, this fiduciary obligation is embodied as a duty of care 21 and a duty of loyalty 22 that directors owe to the corporation and the shareholders. Although managers may not be “in a strict sense trustees ,”23 it seems clear that they are “fiduciaries,”24 or have “a quasi-fiduciary ” relation to the corporation, as well as to the shareholders.25 Even stakeholder advocates, including Dodd, accept that managers have a fiduciary duty to the shareholders.26 US legal precedent and tradition thus unambiguously acknowledge this dual obligation to both shareholder and corporation.
As shown above, there is no juridical disagreement that directors owe a fiduciary obligation to the corporation. However, controversies have arisen in the American CSR debates over whether this fiduciary duty of managers can extend to the stakeholders. The dispute centers on whether directors’ fiduciary obligations should be exclusively beholden to shareholder wealth , even while overlooking the interests of employees, creditors, suppliers, customers, and society at large.
Shareholder primacy advocates have limited this fiduciary duty of managers to the corporation and the shareholders.27 The notion of managerial duty to shareholders has prompted traditional shareholder primacy-inclined American scholars to argue that corporate directors are fiduciaries of shareholders, and thus cannot (or should not) serve the interest of corporate stakeholders (employees, consumers, suppliers, communities, environment, and the general public) to the diminishment of shareholders’ interests.28
Arrayed on the other side are stakeholder advocates, who argue that the fiduciary duty of directors can (or should) extend to stakeholders beyond the corporation and its shareholders.29 Dodd rebutted Berle’s model by emphasizing that managers hold fiduciary duties—analogous to those of trustees—to their corporations and to constituencies beyond the shareholders.30 In turn, shareholder primacy advocates have countered Dodd’s argument by contending that corporate directors are fiduciaries of shareholders, and thus cannot or should not serve the interests of corporate stakeholders (employees, consumers, etc.) to the diminishment of shareholder interests.31 The debate in legal circles continues over whether directors owe their fiduciary obligations to the stakeholders or not.32 The following sections will examine the theoretical arguments of both sides in the US debate: shareholder primacy theory (rejecting CSR) versus stakeholder theory (advocating CSR).
3.2 Shareholder Primacy
As Sect. 2 outlined, Dodd, countered Berle’s shareholder primacy theory by arguing that corporate managers owe a fiduciary duty not only to shareholders but rather to all stakeholders who can be affected by managerial decisions.33 Some scholars soon began aligning themselves with Dodd’s argument that the fiduciary duties of directors can (or should) extend to stakeholders beyond the corporations and their shareholders,34 thus setting the stage for the forthcoming clash. These two diametrical approaches (shareholder vs. stakeholder) thus encapsulate the essence of the contemporary CSR debate in the United States.
Indeed, it is a significant challenge to define the nature of the “corporation” in the context of a reality that is “so complex and in such rapid flux.”35 In this respect, American corporate scholars have developed plausible models clarifying the purpose of corporations, and thereby the pertinent fiduciary duties of the managers, as a practical instrument. Two main conflicting models have emerged from this process: the shareholder primacy theory and the stakeholder theory. Critics of CSR generally adhere to the traditional corporate theory that a corporation exists exclusively for the purpose of maximizing returns to shareholders as owners of the business, i.e., Berle’s “shareholder primacy.”36 Proponents of a more expansive notion of CSR, however, emphasize that a corporation can (and should) consider the interests of constituencies other than shareholders in making business decisions, as advocated in Dodd’s “stakeholder” theory.37
3.2.1 Dominance of Shareholder Primacy Norm
For decades, the shareholder primacy model has been widely recognized as the dominant norm in American corporate law.38 Indeed, many scholars continue to accept this model as a fundamental standard for corporate governance and law. Professors Henry Hansmann and Reinier Kraakman have stated their strong affirmation of the dominance of shareholder primacy, declaring that “[t]he triumph of the shareholder-oriented model of the corporation over its principal competitors is now assured.”39 “Even proponents of the stakeholder theory grudgingly agree” to the dominance of shareholder primacy.40 The official commentary of the Model Business Corporation Act itself upholds this model by defining the corporation as the “shareholder body .”41
Shareholder primacy first emerged as a norm in American corporate law in the Michigan Supreme Court case of Dodge v. Ford Motor Co. in 1919.42 The court in Dodge defined the corporation as an entity that “is organized and carried on primarily for the profit of the stockholders.”43 Accordingly, the court stated that directors are employed to earn stockholder profit, and are thus not allowed to make decisions for the welfare of the community at the cost of shareholders.44 The court also noted that “The discretion of directors is to be exercised in the choice of means to attain that end, and does not extend to a change in the end itself, to the reduction of profits, or to the non-distribution of profits among stockholders in order to devote them to other purposes.”45
Berle subsequently introduced the shareholder primacy model to American legal scholarship in the 1930s,46 setting in motion a decades-long debate in corporate law and academia.47 Berle supported the shareholder primacy model by contending that corporate managers were charged with fiduciary duties as trustees of the shareholders’ property, i.e., the corporation.48 In the years following Berle’s defining of the nature of corporations as a property of the shareholders, the majority of American corporate scholars have come to accept his model as a fundamental norm of corporate governance .
In the formative years of the CSR debate, however, such consensus on Berle’s shareholder primacy formulation remained elusive. Dating back to the early stages of the debate in the 1930s, “it had long been assumed that the shareholder franchise was relatively meaningless—a de jure power with little de facto effect.”49
American scholars, however, began stressing the shareholder primacy model as a standard for reforming corporate governance from the 1970s.50 The Delaware Supreme Court lent further credence to the shareholder primacy model by reaffirming the findings of Dodge in Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc. in 1986.51 In its ruling, the court stated that the duty of the board of directors was “the maximization of the company’s value… for the stockholders’ benefit.”52 Following Revlon, many courts continued confirming shareholder primacy as a norm and essentially prohibited corporate managers from considering benefits for other constituencies over shareholders’ profits.53 Up to this period of unchecked dominance of shareholder primacy in American jurisprudence, US courts had denied normative implementation of CSR, emphasizing that corporations existed solely for the purpose of providing shareholder welfare.
Today, most corporate scholars apparently believe that the shareholder primacy norm captures the corporation’s purpose most precisely and is the dominant standard in corporate law .54 Milton Friedman , one of the most enthusiastic advocates of shareholder primacy, has maintained that the “one and only social responsibility of business… [is] to increase its profits.”55 Former Yale Law School Dean Eugene Rostow has also backed Friedman’s view, declaring that the corporate practice of profit maximization was a successful one and that it would be unwise to replace it with CSR .56 One leading corporate scholar Professor Melvin Eisenberg has likewise upheld the notion of shareholder primacy, asserting that “a basic premise of corporation law is that a business corporation should have as its objective… enhancing the corporation’s profit and the gains of the corporation’s owners, that is, the shareholders.”57 Shareholder primacy is a corporate governance approach directing that the top priority be allocated to shareholder profit, even when this profit maximization does not consider the interests of other stakeholders. Professor Mark Roe argues that shareholder primacy may be the best norm in corporate governance because “a stakeholder measure of managerial accountability could leave managers so much discretion that managers could easily pursue their own agenda, one that might maximize neither shareholder, employee, consumer, nor national wealth, but only their own.”58 In order to check such potential managerial abuse, this approach allows shareholders to intercede in corporate decision-making. Professor Lucian Bebchuk has also supported this view in numerous papers.59
Many legal scholars have written in favor of the shareholder primacy model, contending that “other corporate constituencies, such as creditors, employees, suppliers, and customers, should have their interests protected by contractual and regulatory means rather than through participation in corporate governance.”60 These scholars typically refer to the objective of modern corporations as satisfying the “best interests of the corporation .”61 Indeed, they voice a belief that shareholder primacy, under which corporate law should try to maximize shareholders’ interests, has dominated corporate governance practices.62 This is because most corporate scholars recognize corporate law as dealing with internal structures among shareholders, boards of directors, managers, and other creditors, but overlooking the external role of corporations vis-à-vis society.63
3.2.2 Rationale for Shareholder Primacy
Shareholder primacy proponents base their support for the notion on six main reasons: (1) the corporation is the property of shareholders; (2) the corporation is a nexus of contracts; (3) the corporation is an aggregate of shareholders; (4) shareholders are the only residual claimants; (5) corporations need to reduce agency costs; and (6) stakeholder practices can be based on the long-term profits of shareholders.
3.2.2.1 The Corporation as Property of Shareholders
The strongest argument for shareholder primacy claims that corporations are owned by shareholders, and managers thus have a fiduciary duty to the latter. Shareholders are the principal, and a manager is an agent thereof because the shareholders own the corporation.64 A shareholder who owns stock in a corporation receives an ownership interest proportionate to his original investment, rather than the usual rights conforming to the ownership of property.65 Shareholder primacy proponents have equated this interest ownership of shareholders to property ownership of the corporation . They have developed two main arguments supporting the premise that shareholders who do not hold traditional property rights are actually the owners of the corporation.
First, shareholders are property owners who convey their management right to managers in order to enjoy a limited immunity from the potential harms produced by ordinary corporate activity.66 This immunity allows shareholders to cede the right to their property, which is represented by the managers of a corporation.67 Therefore, managers have a responsibility to maximize the profits of shareholders—the owners of a corporation .68
Second, corporate managers occupy a trustee-like position in relation to shareholders and should thus advance shareholders’ interests.69 This view is based on Berle’s argument in the 1930s that shareholders own passive property, a “set of economic expectations .”70 Berle explained shareholder property rights vis-à-vis a corporation as a passive expectation but not an active ownership right.71 Therefore, he argued, managers should protect this passive property right of shareholders by maximizing their profits. This understanding conforms with the view of Friedman, i.e., that corporate executives who are employees of the corporate owners in a free-enterprise private-property system have direct responsibilities to their employers, the shareholders.
On these grounds, shareholder theories set out their argument that no CSR legalization can undermine the shareholders’ property right, which is consecrated in the US Constitution.72 They argue that shareholders, as owners of the corporate body, have the exclusive property right to govern a corporation in line with their own desires; thus, the shareholders’ interest is equated with that of the corporation’s.73 Indeed, as this argument tacitly reminds us, property rights are of critical value, imbued with a sense of absolutism in the modern legal system.74
3.2.2.2 The Corporation as Nexus of Contracts
Shareholder primacy theorists have also relied on a neoclassical economic approach, the “nexus of contracts ” or the so-called “contractarian” theory .75 Contractarian theorists are those who assume that the corporation is an aggregation of contracts for the benefit of shareholders and administrative convenience.76 Many scholars have employed and expanded this theory to clarify corporate governance issues.77 In particular, shareholder primacy proponents have actively adopted the notion as their own argument.78
The contractarian theory defines a corporation as a “complex set of explicit and implicit contracts.”79 According to this approach, the corporation becomes a set of contracts between various individual stakeholders related to the formal corporate activity.80 The corporate entity , however, “makes little or no sense to try to distinguish between the things which are ‘inside’ the firm… from the ones that are ‘outside’ of it.”81 Thus, an independent corporate entity does not exist, and the concept of corporate personhood vanishes.82 The contractarian theory focuses on the shareholders but not on the corporation itself as an independent entity. This point provides potent discursive support to shareholder primacy proponents in its assertion that shareholders are the real stakeholders of corporations and should be the beneficiaries of the profits arising from corporate activities. It also provides a fundamental basis for stakeholder primacy proponents in its argument that corporations do not exist for and cannot enjoy the managers’ fiduciary duty.
Shareholder primacy theorists have also appropriated the contractarian theory, which points out that all corporate stakeholders voluntarily enter into their contracts for the sake of their own wealth, with the contracts determining their rights and obligations.83 In this respect, they argue that the contract between a corporation and its shareholders obliges the corporation to protect shareholder interests over those of other constituencies.84
3.2.2.3 The Corporation as Aggregate of Shareholders
Shareholder primacy advocates further base their argument on the “aggregate theory ,” which considers a corporation as a mere aggregate of individual shareholders.85 The “aggregate theory,” which has intrigued legal academics for decades,86 posits that corporations do not have a physical aspect, and thus cannot be beholden to society.87 Readily adopting this theory, shareholder primacy advocates have averred that this recognition provides “a normative framework for how we should view corporations, how they should be treated, and how they should treat us.”88
The “aggregate theory” defines a corporation as an aggregate of individual shareholders by relying in turn on the theory of “nexus of contract.”89 The corporation is “an association forged by the mutual agreement of the individuals composing it… no corporation would exist and no corporate action would occur without the actions and consent of the human beings who make up the corporate entity .”90 The corporation exists only as a “collection, or aggregate, of its individual human constituents, without whom the corporation would have no identity or ability to function at all.”91 Therefore, it remains a product of private initiative, private contract, and private property arrangements.92
According to the “aggregate theory,” since corporations exist as an aggregate, CSR is thus pointless in corporate law because only an individual can owe social responsibility to society.93 This approach conforms with the views Friedman held in the 1970s, when he deemed CSR an immoral concept because only people—shareholders as the owners of the corporation—can have responsibilities, whereas the corporation as a whole cannot.94 In line with Friedman’s view of corporations, shareholder primacy advocates contend that only individuals can possess legal personhood, and hence owe any responsibility to society.95
3.2.2.4 Shareholders as Residual Claimants
Shareholder primacy advocates reject the stakeholder model because shareholders are the only residual claimants to profits of a corporation; this obliges corporate managers to serve only the shareholders.96 According to the “nexus of contracts” theory, managers must pursue the maximization of shareholders’ profits as the only residual claim within the contract.97 Only shareholders can claim residual interest upon their implicit contract, whereas creditors, suppliers, and employees have fixed contractual claims against the corporation: debt repayment, secured transactions, and compensation schedules, etc.98
Shareholders have incentives to make corporate decisions because every decision of the corporation may affect their undefined residual claim on the corporation’s income.99 Therefore, the fixed claims of other constituents are subordinate to the residual claims of shareholders, the corporate constituency owing the highest duty.100 On these grounds, shareholder primacy advocates contend that a corporation should maximize shareholders’ wealth through the use of managers who serve as fiduciaries for the former.101 This theory has significantly influenced contemporary corporate law literature by reinforcing the shareholder primacy argument.102
3.2.2.5 Agency Costs
Shareholder primacy advocates employ “agency costs” to strengthen their argument. “Agency costs” are expenditures accrued to mitigate the problems incurred by using an agent in business.103 Shareholder primacy advocates contend that the shareholder primacy norm helps to minimize “agency costs.”104 They argue that shareholders should have the power to supervise managerial actions because the separation of ownership from control creates these costs in modern corporations.105 In other words, the act of maximizing shareholder profit would effectively minimize these agency costs . If managers were to consider the interests of stakeholders other than shareholders, the agency costs would be increased.106 Shareholder primacy advocates conclude, therefore, that the stakeholder model would ironically reduce the “wealth” of society.107
3.2.2.6 Long-term Profits
Whereas stakeholder theory advocates insist that CSR activities contribute to “long-term profits ” of corporations, shareholder primacy supporters contend that corporate activities should serve to increase the profits of shareholders. This approach allows corporate managers to make specific managerial decisions involving social activities.108 Admittedly, this approach might reduce profits in the short term, but it also arguably promotes shareholders’ profits in the long term.109
Moreover, shareholder primacy relies on the traditional approach of Friedman: “[the] one and only social responsibility of business… [is] to increase its profits.”110 The profits of shareholders can be realized not only in the short term, but also in the long term. Thus, shareholder primacy technically allows any corporate activity—even those that appear to serve stakeholders—if the activity contributes to shareholders’ wealth over the long term. On these grounds, shareholder primacy advocates contend that “long-term profit”—which is frequently invoked as a reason to promote CSR—confirms shareholder primacy as a corporate norm.
3.3 Stakeholder Theory
3.3.1 Emergence of Stakeholder Rhetoric
Successful corporations benefit society by providing wealth. The long-running legal debate pertaining to this point centers on how corporate law governs corporations’ activities in producing such wealth. The conventional answer to this question is shareholder primacy. The progressive answer, however, is that the law should regulate corporate activities so that wealth is distributed fairly among all stakeholders, i.e., the stakeholder model .
Recently, some corporate managers have begun openly accepting the stakeholder model,111 which “posits that companies are beholden not just to stockholders—but also to suppliers, customers, employees, community members, and even social activists.”112 Some corporate scholars have also argued that shareholder primacy may no longer be an accurate assessment model of contemporary corporate law.113 The recent trend toward a more general acceptance of stakeholder theory has apparently emerged as a manifestation of the desire of corporations to present an image of themselves as good citizens.114 Stakeholder engagement offers a redeeming counterweight to the negative images spawned by corporate scandals such as the Enron debacle and Wall Street bailout.115
The stakeholder model remains the most persuasive justification for CSR. It recognizes that corporations should serve community interests not only by devoting resources to charitable causes but also by considering “the ‘stakeholder’ to encompass the concerns of non-shareholder constituents, including employees, creditors, customers, and the larger society.”116 Whereas many scholars assume that corporate law deals with the internal structure of corporations,117 legal scholars who wish to discuss the corporation’s role in society also discuss CSR.118 This stakeholder model does not require corporations to abandon their role of profit-making.119 Rather, the stakeholder theory advocates that corporations realize a balance of all interests among its stakeholders, including those of the shareholders.120 This stance also argues that corporations should have a social responsibility beyond the mere maximization of shareholder wealth. In this regard, US courts, which had traditionally resisted normative implementation of CSR by emphasizing that corporations existed solely for the purpose of providing shareholder welfare , apparently began to criticize extreme shareholder primacy. In Burwell v. Hobby Lobby Stores , the court states “[although] a central objective of for-profit corporations is to make money, modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so. For-profit corporations , with ownership approval, support a wide variety of charitable causes, and it is not at all uncommon for such corporations to further humanitarian and other altruistic objectives.”121
The stakeholder theory traces its roots back to Dodd’s statement in favor of CSR in the 1930s.122 In the 1950s, CSR advocates began to actively demand that managers be freed from the shackles of shareholder primacy,123 but the shareholder primacy approach prevailed in corporate law until the late 1970s.124 Nonetheless, the enactment of constituency statutes marked a resurgence in stakeholder rhetoric in the 1980s.125
Since 2000, stakeholder rhetoric has noticeably reasserted itself in the corporate discourse. In 2005, the Economist highlighted this apparent dialectic shift, noting that “[t]he movement for corporate social responsibility has won the battle of ideas.”126 Corporate managers are increasingly willing to accept the concept.127 Nevertheless, for the time being, the shareholder primacy norm is generally viewed as having eclipsed stakeholder rhetoric.128 Opponents of CSR with somewhat moderate views contend that although CSR comprises a merely moral commitment to fairness in competition, it should not be a legal obligation.129 Other detractors consider CSR an empty slogan that is useful only for corporate marketing as a business strategy.130 By tackling this and other arguments, the stakeholder theory seeks to provide the legal grounds for the implementation of CSR. The section below will analyze how the stakeholder theory refutes the arguments of shareholder primacy with its own proposed legal framework regarding the nature and purpose of corporations.
3.3.2 Rationale for the Stakeholder Theory
3.3.2.1 The Corporation as Non-shareholder Property
Adherence to shareholder primacy is the domain of traditionalists in US corporate law literature. However, critics attack the notion for recognizing a corporation as being the exclusive property of shareholders.131 They put forward four major arguments disputing the legitimacy of shareholder primacy.
First, they argue that shareholders are proprietors, different from traditional property owners.132 Whereas traditional property owners have proprietorship of their property, shareholders own only their shares, and not the corporation itself.133
Second, although traditional property owners enjoy direct control over or even access to their assets, shareholders hold limited financial rights in proportion to their shares in the corporation.134 Shareholders are not able to manage the assets of corporations. In sum, they enjoy only indirect rights to corporations insofar as the law guarantees these rights.135
Third, corporate managers are not directly controlled by shareholders, in contrast to traditional agent–principal relations . Indeed, shareholders do not resemble traditional owners, either from a legal perspective or in a practical sense.136 Additionally, some shareholders hold only short-term interests . This renders the whole group of a corporation’s investors too erratic and temporary to control managers in the way that traditional property owners control their properties.137
Fourth, shareholder primacy is grounded in the concept of “nexus of contracts”; however, this does not necessarily mean that contractarian theorists support the shareholder primacy norm.138 Contractarian theorists generally do not recognize the ownership of the corporation as a meaningful concept.139 Thus, they disagree with the premise of shareholder primacy that considers shareholders the owners of the corporation.140 They even criticize the idea of characterizing a corporation as the property of shareholders, even though shareholder primacy advocates employ the “nexus of contracts” concept as a mainstay of their argument.141 Contractarians perceive a corporation as an aggregate of links that cannot be owned, and shareholders as investors.142 Unlike shareholder primacy advocates, contractarian theorists contend that shareholders enjoy equal status with all other stakeholders, recognizing the interests of all stakeholders as equal.143 Thus, shareholders do not enjoy primary rights over other stakeholders.144 But this logic does not necessarily translate into an advocacy of normative CSR