Edited by Stephen Tully
Chapter 1: The Theoretical Background: The Nature of the Actors in Corporate Social Responsibility
Nicholas H.D. Foster1 Introduction The aim of this chapter is to provide a brief overview of the theoretical background to the corporation (‘corporate law theory’) and its impact on the study of corporate social responsibility. Corporate law theory examines such issues as the definition of the corporation, the nature of, reasons for, and means of, its existence, and the ways in which it functions. These questions are surprisingly difficult and controversial. The chapter starts by explaining the key distinction in corporate law theory and the nature of the two most important phenomena. It then provides a historical summary. The next section describes and critiques some influential theories, both old and new. The chapter ends with an application of the theoretical background to corporate social responsibility. Real and legal entities2 The usual first step in a theoretical discussion is the definition of the subject matter. In other words, we look for the answer to the question: what is a corporation? This question has two fundamental flaws. First, it assumes that the word ‘corporation’ denotes one ‘thing’. In fact it denotes two, enterprises (a subcategory of real entities) and legal entities. The difference between them (explained below) is the key distinction in corporate law theory. So let us change our approach in order to take account of this distinction, and ask two questions rather than one: 1. What is the enterprise? 2. What is the legal entity? This is an improvement, but a second flaw remains, the way in which the questions...
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