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1 - The Social Impact Challenge

Published online by Cambridge University Press:  13 August 2026

Stavros Gadinis
Affiliation:
University of California, Berkeley
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Summary

Corporate executives increasingly find that ordinary operational choices, from algorithm design to supply chain management to pricing, generate intense social and political controversy. This chapter argues that such episodes are not anomalies caused by polarized politics or activist overreach, but inevitable consequences of how modern corporations operate. Three interconnected forces drive this transformation. First, the drive for efficiency at scale leads corporations to impose uniform standards and comprehensive monitoring across vast operations, turning routine business decisions into de facto social policy. Second, forced transparency in the digital age means companies now possess detailed data about their social consequences, while stakeholders wield powerful tools to monitor corporate behavior and mobilize responses. Third, profit maximization no longer yields uniform investor preferences, as shareholders bring heterogeneous values and irreconcilable visions of how profitability should be achieved. These forces interact to make corporate social impact unavoidable, yet corporate law, shaped by Delaware precedent and federal securities regulation, neither accounts for the full extent of that impact nor builds decision-making processes capable of accommodating it. The chapter establishes a diagnostic framework for understanding why conventional governance approaches fail and what new approaches companies actually need.

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