Environmental Protection and the Social Responsibility of Firms

Comment on Elhauge

On Sacrificing Profits in the Public Interest

Mark J. Roe

In his excellent and complex inquiry, Einer Elhauge argues in his chapter that American corporations should be able to sacrifice profits in the public interest. He observes first that external enforcement is incomplete. Gaps in rules exist and will persist because regulators are not omniscient. If corporate players could fill in these gaps voluntarily, even while sacrificing profits, the public interest could be furthered. Corporate law allows managers to do so (1) indirectly, through the business judgment rule, and (2) directly and explicitly, once we wind through the doctrinal maze. But in recent decades, Einer points out, new transactions, such as hostile takeovers, ...