Chapter two examines why existing corporate law fails to address the social dimensions of corporate decision-making. It focuses on the fiduciary duties of care and oversight, disclosure obligations, and shareholder proposals and engagement. While these doctrines provide broad managerial discretion, they offer little guidance when decisions involve social tradeoffs that cannot be separated from business strategy.

The chapter explains how corporate law was built for an era in which social impacts were treated as externalities to be addressed by regulation. As a result, boards are required to monitor compliance and financial performance but not the social consequences of operational choices.

The chapter also shows why expanding substantive duties is not a solution. Courts lack the institutional capacity to resolve contested social questions. Prescribing outcomes would undermine managerial discretion without improving decision quality.

The core claim is that corporate law contains a governance gap. It authorizes discretion without requiring deliberation when social stakes are high. This gap explains why corporations develop their own governance structures rather than relying on law for guidance. The chapter sets up the need for a procedural approach that focuses on decision-making capacity rather than substantive results.