Edited by Adolfo Paolini
Chapter 9: In loco parentis: directorial duties to consumers
This just in – not all decisions made by economic actors are completely rational. Social psychologists have long taught, and legal analysts now often concede, that human beings have cognitive limits that may be routinely exploited in a variety of ways, including the method in which an issue is framed. Unsurprisingly, corporate America has been paying psychologists and other social scientists for years and has handily plumbed their insights in devising products and marketing campaigns. The result is a marketplace in which ads for fast food and diet aids compete for position before the eyes of a progressively overweight population, and billions of dollars are spent on products for children that, by and large, their parents may not really want them to have. The traditional view of corporate law asserts that the corporation serves society via the satisfaction of consumers’ revealed preferences, which dictate the ultimate allocation of resources contributed by corporate investors, workers, and managers. The recognition that there are easily manipulable “bounds” on rationality, self-interest and free will severely weaken this theory’s underpinnings. If corporations in fact create the preferences they then satisfy, it is corporate managers and their social science advisors who are deciding that a tsunami of wealth should go into the production and consumption of junk food and violent video games.
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