Bridging the Gap Between Social Justice and Corporate Law
“There is a deeply entrenched belief that the sole purpose of corporations is to maximize profit above all else – but this is simply not reflective of corporate laws around the world”
“The next few decades will be a critical period of domestic and international corporate legal reform – businesses are adapting to changing consumer demands, and there is global pressure to increase sustainable practices,” explains Allard School of Law Professor Carol Liao, who has recently been appointed UBC Sauder Distinguished Scholar of the Peter P. Dhillon Centre for Business Ethics at the Sauder School of Business for a three-year term.
Professor Liao’s appointment is in recognition of her exceptional research record relative to peers at a comparable career stage, as well as her ability to engage with the UBC Sauder research community. The appointment provides generous funding that enables her to promote both Allard and Sauder’s research missions through collaboration and engagement, while enhancing UBC’s position as a world leader in business and business law.
Professor Liao’s research focuses on the role of law in shaping corporate behaviour, as she examines both incremental and radical ways in which legal infrastructure can bring about social change from private sector organizations.
“There is a deeply entrenched belief that the sole purpose of corporations is to maximize profit above all else – but this is simply not reflective of corporate laws around the world,” says Professor Liao. Supported by SSHRC as well as funding from the Canadian Foundation for Governance Research and Institute of Corporate Directors, Professor Liao’s past research projects have demarcated the legal and cultural differences between Canadian and American models of corporate governance.
Professor Liao finds it remarkable how much governance practices have developed in the past few decades. The continual evolution of corporate governance in Canada also means there is great opportunity for more study.
“Governance principles evolve from various laws, customs, and processes, with legal, regulatory, and institutional pressures as well as issues tied to particular product and service markets. And of course, crises can also bring about significant reforms in corporate governance – so it is important that scholarship is continually updated to be robust.”
The development of corporate governance and the search for new and sustainable forms of business relationships have been accelerated by public awareness of climate change and how it is impacted by human behaviour.
“The business case for sustainability is clear,” explains Professor Liao, “but beyond the business case, legal and ethical drivers indicate that corporations will need to transform their business models in order to stay ahead of the curve as we usher in a new era of corporate governance.”
She notes that cases are working their way up the courts that may be game-changers in how Canadian multinational corporations approach human rights due diligence and liability. Law firms are developing corporate social responsibility practice groups in response to changing regulatory frameworks and client needs. Professor Liao’s research offers novel perspectives on emerging business trends, and how they interact within legal frameworks.
Professor Liao’s other ongoing projects which will be funded by her Sauder appointment address another aspect of regulating corporate behaviour – using business as a potential solution to combat global risks. The integration of business concepts with social activism is growing in popularity. Professor Liao is examining the law developing in reaction to a new class of values-driven entrepreneurs seeking to positively change the world while maintaining the ability to generate economic returns. Lawmakers around the world are beginning to create new legal forms for social enterprise to meet growing demands from this new wave of entrepreneurs.
One of the questions Professor Liao has been asking is whether certain social enterprise laws may perpetuate the status quo by shifting the expectation of social output into a niche sector of the market, while also funneling resources away from the non-profit sector. It is an issue she explores in her chapter in The Cambridge Handbook for Corporate Law, Corporate Governance, and Sustainability, a volume by leading corporate scholars across the globe to be published later this year as the most up-to-date and comprehensive perspective within the field.
While there are strongly held ideological beliefs that perpetuate the continued domination of short-term shareholder wealth maximization, Professor Liao believes values-driven business may be the new normal in the coming decades.
Further Reading for You
Today in the United States corporations are formed under state rather than federal law. Corporate law scholars have spent decades debating the policy advantages and disadvantages of this system. Yet the reasons it exists may lie less in current policy rationales than in the vicissitudes of history.