Business firms are increasingly expected to take forceful stands against injustice and demonstrate the positive social impact of their activities. However, the justification for this public expectation remains contested. Many appeal to stakeholder theory to support the position that firms should conduct themselves as good corporate citizens. According to stakeholder theory, firms are accountable to all individuals who are affected by the firm’s activities. Since a firm’s activities can affect virtually everybody, stakeholder theory supports wide duties of corporate beneficence. Stakeholder theory is supposed to offer a superior replacement for shareholder primacy theory, which holds that firms’ sole duties are to maximize profits for their shareholders. While we agree with critics of shareholder primacy that it offers an implausibly narrow understanding of firms’ social obligations, we hold that democratic worries about corporate power impose important limitations on corporate duties of beneficence. We contend that stakeholder theory, as currently understood, unwittingly grants to firms a degree of political power that is incompatible with democratic legitimacy. Ultimately, we argue for an alternative approach to CSR that better incorporates the distinctive demands that democracy makes on corporate actors.
