Wednesday, August 14, 2019

New Paper: "The Case for Mandatory Stakeholder Disclosure"

In a previous post, I plugged a short piece that was published in the Georgetown Online Journal, and at that time, I explained it was a preview of a longer, in-progress article about the need for a corporate disclosure system intended for non-investor audiences.  I have now posted a draft of that longer paper to SSRN.  Here is the abstract:

Not Everything is About Investors: The Case for Mandatory Stakeholder Disclosure

Corporations are constantly required to disclose information, but only the federal securities laws impose generalized public disclosure obligations that offer a holistic overview of corporate operations.  Though these disclosures are intended to benefit investors, they are accessible by anyone, and thus have long been relied upon by regulators, competitors, employees, and local communities to provide a working portrait of the country’s economic life.

Today, that system is breaking down.  Congress and the SEC have made it easier for companies to raise capital without becoming subject to the securities disclosure system, allowing modern businesses to grow to enormous proportions while leaving the public in the dark about their operations.  Meanwhile, the governmentally-conferred informational advantage of large investors allows them to tilt managers’ behavior in their favor, at the expense of consumers, employees, and other corporate stakeholders.  As a result, securities disclosures do not provide the comprehensive picture necessary to maintain social control over corporate behavior.

This Article recommends that we explicitly acknowledge the importance of disclosure for noninvestor audiences, and discuss the feasibility of designing a disclosure system geared to their interests.  In so doing, this Article excavates the historical pedigree of proposals for stakeholder-oriented disclosure.  Both in the Progressive Era, and again during the 1970s, efforts to create generalized corporate disclosure obligations were commonplace.  In each era, however, they were redirected towards investor audiences, in the expectation that investors would serve as a proxy for the broader society.  As this Article establishes, that compromise is no longer tenable.

As you can see, this one is a work in progress, so I’m very much interested in hearing everyone’s thoughts.

Ann Lipton | Permalink


I very much enjoyed the episode of the Ipse Dixit podcast you did on this paper.

Posted by: H. Justin Pace | Aug 14, 2019 10:15:46 AM

Oh wow, thank you - I'm so glad to know someone was interested (I'm sure Ben and Brian Frye will be happy to know as well!)

Posted by: Ann Lipton | Aug 14, 2019 10:21:15 AM

Glad to know! It's a great paper and it was a pleasure to talk about it on the podcast.

Posted by: Ben Edwards | Aug 14, 2019 11:01:07 AM

I'm looking forward to reading your paper and working it into my Business Associations class. I'll also check out the Ipse Dixit podcast.

Posted by: James Hayes, Jr. | Aug 14, 2019 11:43:26 AM

Thank you! I'm glad of your interest :-)

Posted by: Ann Lipton | Aug 14, 2019 11:48:06 AM

I also plan to integrate it into my class and look forward to reading more from you on this topic.

Posted by: Marcia L. Narine Weldon | Aug 16, 2019 9:13:01 PM

Thank you, Marcia! I am so glad you think it will be useful to discuss with your students!

Posted by: Ann Lipton | Aug 17, 2019 2:25:35 AM

Great article!

Posted by: Drew Stevens | Aug 22, 2019 2:30:58 AM

Thank you so much!

Posted by: Ann Lipton | Aug 22, 2019 3:11:27 AM

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