#MeToo and the Convergence of CSR and Profit Maximization

Companies are more concerned with the #MeToo movement than they used to be.  Why this is the case is obvious, but much about the topic is not clear. What does this concern lead companies to do? What should this concern lead them to do? This last question could be answerable by reference to fear of liability, fear of reputational loss, projections about the future as to both these areas, a desire to do the right thing or some combination thereof.

In a new article, I briefly describe the recent trajectory of #MeToo in the press and in the courts, noting the relationship between the paradigmatic instances that effectively began the movement and the broader penumbra of gender issues in companies.   The paradigmatic instances are crimes or behavior that, at least by present sensibilities, is considered offensive.  This includes behavior by a company to quietly pay off an offender.  The broader penumbra now includes behavior that was probably always considered undesirable but was generally tolerated at points in the not-so-distant past.  However, it also now includes affirmative steps to take gender parity into account in compensation, decision-making, and leadership roles.

Along with other related papers I have written, this paper argues that the present environment, with its increased emphasis in all spheres, including as to #MeToo, on avoiding reputational harm but also on participating in affirmative acts of good corporate citizenship, is yielding a convergence between profit maximization and good corporate citizenship.   In particular, costs broadly construed, notably including reputational costs, cannot be estimated with precision.  While a more orthodox profit-maximizing perspective might suggest attempts to measure those costs that are balanced and not too conservative but emphatically not too generous, there are various reasons to measure them less conservatively.   These include an assessment that sensitivity to the issues is increasing, yielding possible litigation as well as reputational costs; that attempts to measure with precision with a view towards justifying fewer expenditures and efforts potentially carries its own reputational costs; and that there will be agency costs as top managers consider the effect on their own reputations of being associated with a company deemed not to be vigilant enough as to these issues.

These considerations make potential costs, especially reputational costs, associated with #MeToo issues, including the more expansive penumbra, salient.  This should at least motivate companies to say the right things; we will see what else it motivates.  How felicitous this development turns out to be, both in broad brush and in its particular manifestations, is complicated, although on balance, my paper and the related papers argue, the grounds for optimism are stronger than those for wariness.

This post comes to us from Professor Claire A. Hill at the University of Minnesota Law School. It is based on her recent paper, “#Metoo and the Convergence of CSR and Profit Maximization,” available here.