Corporate Managers’ Operational Discretion to Sacrifice Corporate Profits in the Public Interest

Einer R.Elhauge

Let’s start concrete before we get theoretical. Suppose clear-cutting is profitable and legal, but is nonetheless regarded as environmentally irresponsible under prevailing social norms. Can management of a timber corporation decline to clear-cut its timberland even though it sacrifices profits? One might be tempted to evade the question by claiming that being environmentally responsible is profitable in the long run, either because it preserves the forest for future harvesting or because it maintains a public goodwill that aids future sales. But suppose, in an incautious

moment, management admits that the present value of those ...

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