CEOs and Same Sex Marriage: Echoes of a Longstanding Debate

A recent open letter to the Prime Minister signed by a number of Australian corporate leaders advocating the legalisation of same sex marriage sparked both approbation, on the basis that they were championing an issue relevant to their businesses, and critique, on the basis that they were improperly intervening on a moral issue. Each side is, perhaps without knowing it, picking a side in a debate that has echoes back to the 1930s about the role of corporations in society.

This is not the first instance where business leaders have been the focus of critique for either taking or not taking a social position. The furore about donations by Australian corporations that emerged in the wake of the Boxing Day tsunami in 2004 also canvased exactly these issues. It also came to the fore when the James Hardie group of companies moved its parent company offshore and made insufficient provision for current and future liabilities arising from the manufacture and sale of asbestos by its subsidiaries. Coopers found itself at the pointy end of this discussion recently.

At the heart of this debate is a tension between those seeing corporations as having purely economic goals, and those who would place social expectations on corporations to make the world a better place, but not simply by their economic success. Alan Joyce, the Qantas CEO, channels the second argument when responding to the criticism of CEOs for speaking out.

“A company’s first responsibility is to its shareholders and delivering sustainable returns on their investment. To do that, you’re automatically part of the community you operate in. Society is your customer base. And just because there is money changing hands doesn’t mean it is only ever an economic transaction. There’s an implicit social contract between companies and communities – just ask any brand that has ever been on the receiving end of a boycott.”

The argument that corporations should focus solely on the economic was forcefully put by Immigration Minister Peter Dutton. He asserted:

“the decision of a CEO or a board to spend shareholders’ money — not in pursuit of a greater return on capital or a better service for customers — but on a personal agenda, [is] particularly galling.”

It is unlikely that this debate will be resolved in the context of this latest episode. Of course, there is a risk in telling our CEOs not to think and talk about the social and ethical effects of their conduct. Do we want our corporate leaders to ignore those effects? Corporate Social Responsibility anyone?

So where does the law sit on this? In essence, it suggests that certain aspects of corporate conduct are unproblematic. That is, any conduct that advances the interests of shareholders is clearly acceptable. This could include conduct that enhances the corporate brand, increases employee, shareholder and consumer motivation and loyalty and avoids negative publicity, or regulatory sanctions. These rationales, on their face, provide significant latitude and support for those governing corporations to develop and support ethical conduct.

Where activity does not benefit the corporation and its shareholders, then the law would potentially hold the CEO responsible, perhaps for a breach of the duty of care or for failing to act in the best interests of the company (Corporations Act 2001 (Cth) ss 180 and 181). Further, shareholders can exercise discipline by doing the ‘Wall St walk”; that is, either exiting the company by selling their shares or (at least in theory) using their voting power at the general meeting to respond to director conduct.

Arguing that these activities are off limits is not consistent with the legal position. Perhaps the better question is, does this kind of activity benefit the corporation and its shareholders?

Suzanne Le Mire

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