Hostname: page-component-586b7cd67f-g8jcs Total loading time: 0 Render date: 2024-11-24T15:39:48.909Z Has data issue: false hasContentIssue false
  • English
  • Français

The Kasky-Nike Threat to Corporate Social Reporting: Implementing a Standard of Optimal Truthful Disclosure as a Solution

Published online by Cambridge University Press:  23 January 2015

David Hess  and
Thomas W. Dunfee
Get access Rights & Permissions [Opens in a new window]

Abstract:

In the recent case of Nike v. Kasky both sides argued that their standard for distinguishing commercial speech from political speech would create the better policy for ensuring accurate and complete disclosure of social information by corporations. Using insights from information economics, we argue that neither standard will achieve the policy goal of optimal truthful disclosure. Instead, we argue that the appropriate standard is one of optimal truthful disclosure—balancing the value of speech against the costs of misinformation. Specifically, we argue that an SEC-sanctioned safe harbor available under a closely supervised system for social reporting will bring about optimal truthful disclosure. The scheme is intended to enhance stakeholder confidence in corporate social and political commentary, while at the same time encouraging corporations to provide accurate information in a fair playing field of public debate.

Type
Special Section on Commercial Speech
Information
Business Ethics Quarterly , Volume 17 , Issue 1 , January 2007 , pp. 5 - 32
Copyright
Copyright © Business Ethics Quarterly 2007

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ackerman, B., & Fishkin, J. S. 2004. Deliberation day. New Haven, CT: Yale University Press.Google Scholar
Adams, C. A. 2002. Internal organizational factors influencing corporate social and ethical reporting: Beyond current theorizing. Accounting, Auditing & Accountability Journal, 15 (2): 223–50.Google Scholar
Baird, D. G., Gertner, R. H., & Picker, R. C. 1994. Game theory and the law. Cambridge, MA: Harvard University Press.Google Scholar
Ball, A., Owen, D., & Gray, R. 2000. External transparency or internal capture? The role of third party statements in adding value to corporate environmental reports. Business Strategy and the Environment, 9 (1): 1–23.Google Scholar
Bazerman, M. H., Curhan, J. R., Moore, D. A., & Valley, K. L. 2000. Negotiation. Annual Review of Psychology, 51 (1): 279–314.CrossRefGoogle ScholarPubMed
Berthelot, S., Cormier, D., & Magnan, M. 2003. Environmental disclosure research: Review and synthesis. Journal of Accounting Literature, 22 (1): 1–44.Google Scholar
Brandts, J., & Charness, G. 2003. Truth or consequences: An experiment. Management Science, 49 (1): 116–31.Google Scholar
Business Wire. 2002. New national cone survey finds americans intend to punish and reward companies based on their corporate citizenship practices. (Available in Lexis/Nexis, Business and Finance database), October 2, 2002.Google Scholar
Cason, T. N., & Gangadharan, L. 2002. Environmental labeling and incomplete consumer information in laboratory markets. Journal of Environmental Economics and Management, 43 (1): 113.CrossRefGoogle Scholar
Cormier, D., & Gordon, I. M. 2001. An examination of social and environmental reporting strategies. Accounting, Auditing & Accountability Journal, 14 (5): 587–617.Google Scholar
Cormier, D., & Magnan, M. 1999. Corporate environmental disclosure strategies: Determinants, Costs and benefits. Journal of Accounting, Auditing and Finance, 14 (4): 429–51.CrossRefGoogle Scholar
Cowe, R. 2003. A magnifying glass on businesses’ impact. Financial Times, October 30: 14.Google Scholar
Crawford, V. 1998. A survey of experiments on communication via cheap talk. Journal of Economic Theory, 78: 286–98.Google Scholar
Croson, R., Boles, T., & Murnighan, J. K. 2003. Cheap talk in bargaining experiments: Lying and threats in ultimatum games. Journal of Economic Behavior & Organization, 51 (2): 143–59.CrossRefGoogle Scholar
Cushman, J. H. Jr., 1998. Nike pledges to end child labor and apply U.S. rules abroad. New York Times, May 13: D1.Google Scholar
Dando, N., & Swift, T. 2003. Transparency and assurance: Minding the credibility gap. Journal of Business Ethics, 44 (2/3): 195.Google Scholar
Deegan, C. 2002. The legitimising effect of social and environmental disclosures: A theoretical foundation. Accounting, Auditing & Accountability Journal, 15 (3): 282–311.CrossRefGoogle Scholar
Deegan, C., & Rankin, M. 1996. Do Australian companies report environmental news objectively? An analysis of environmental disclosures by firms prosecuted successfully by the environmental protection authority. Accounting, Auditing & Accountability Journal, 9 (2): 50.CrossRefGoogle Scholar
Deegan, C., Rankin, M., & Tobin, J. 2002. An examination of the corporate social and environmental disclosures of BHP from 1983–1997. Accounting, Auditing & Accountability Journal, 15 (3): 312–43.Google Scholar
Deegan, C., Rankin, M., & Voght, P. 2000. Firm's disclosure reactions to major social incidents: Australian evidence. Accounting Forum, 24 (10): 101–31.Google Scholar
Dye, R. A. 1985. Disclosure of nonproprietary information. Journal of Accounting Research, 23 (1): 123–15.CrossRefGoogle Scholar
Earnhardt, J. W. 2004. Nike, v. Kasky: A golden opportunity to define commercial speech—why wouldn't the Supreme Court finally “just do ITTM”? North Carolina Law Review, 82: 797.Google Scholar
Environment Policy Centre. 2004. enhesa 2004 global forecast. Available online at http://www.ehstrends.com (accessed June 24, 2004).Google Scholar
Footwear News. 2002. Commercial appeal: The top athletic advertisers. September 30: 18.Google Scholar
Franco, J. A. 2002. Why antifraud prohibitions are not enough: The significance of opportunism, candor and signaling in the economic case for mandatory securities disclosure. Columbia Business Law Review, 2002: 223–362.Google Scholar
Gevurtz, F. A. 2000. Corporation law. St. Paul, MN: West Group.Google Scholar
Global Reporting Initiative. 2003. Annual review. Available online at http://www.glo-balreporting.org/about/Annual2003.pdf (accessed June 24, 2004).Google Scholar
Gray, R. 2001. Thirty years of social accounting, reporting and auditing: What (if anything) have we learned? Business Ethics: A European Review, 10: 9–15.Google Scholar
Greenwood, D. J. H. 1998. Essential speech: Why corporate speech is not free. Iowa Law Review, 83: 995–1070.Google Scholar
Hess, D. 2001. Regulating corporate social performance: A new look at corporate social accounting, auditing, and reporting. Business Ethics Quarterly, 11: 307–30.Google Scholar
Investors Responsibility Research Center. 2002. New shareholder effort focuses on gri. Corporate Social Issues Reporter, November: 5–8.Google Scholar
Kolk, A. 2003. Trends in sustainability reporting by the Fortune global 250. Business Strategy and the Environment, 12 (5): 279.Google Scholar
KPMG. 2002. International survey of sustainability reporting.Google Scholar
Lewicki, R., & Stark, N. 1996. What is ethically appropriate in negotiations: An empirical examination of bargaining. Social Justice Research, 9: 69–95.CrossRefGoogle Scholar
Li, Y., Richardson, G. D., & Thornton, D. B. 1997. Corporate disclosure of environmental liability information: Theory and evidence. Contemporary Accounting Research, 14 (3): 435–74.Google Scholar
Liptak, A. 2003. Nike move ends case over firms’ free speech. New York Times, September 13: A8.Google Scholar
Maitland, A. 2004. Companies face an avalanche of questionnaires. Financial Times, March 26: 10.Google Scholar
Mathios, A. D. 2000. The impact of mandatory disclosure laws on product choices: An analysis of the salad dressing market. Journal of Law and Economics, 43: 651.Google Scholar
Murray, S. 2002. Seeking the golden rules for sri investors. Financial Times, October 2: 24.Google Scholar
O'Donovan, G. 2002. Environmental disclosures in the annual report: Extending the applicability and predictive power of legitimacy theory. Accounting, Auditing & Accountability Journal, 15 (3): 344–72.Google Scholar
Oliver, C. 1997. Sustainable competitive advantage: Combining institutional and resource-based views. Strategic Management Journal, 18 (9): 697–713.Google Scholar
Orts, E. W. 1995. Reflexive environmental law. Northwestern University Law Review, 89: 1227–1340.Google Scholar
Owen, D. L., Swift, T., & Hunt, K. 2001. Questioning the role of stakeholder engagement in social and ethical accounting, auditing, and reporting. Accounting Forum, 25 (3): 264–82.Google Scholar
Patten, D. M. 2002. The relation between environmental performance and environmental disclosure: A research note. Accounting, Organizations and Society, 27: 763–73.Google Scholar
Pindyck, R. S., & Rubinfeld, D. L. 1995. Microeconomics. Englewood Cliffs, NJ: Prentice Hall.Google Scholar
PricewaterhouseCoopers. 2002. Sustainability reporting becomes law in France. World-Watch, October: 25. Available online at http://www.pwcglobal.com (accessed June 24, 2004).Google Scholar
Suchman, M. C. 1995. Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20 (3): 571–610.Google Scholar
Swift, T. 2001. Trust, reputation and corporate accountability to stakeholders. Business Ethics: A European Review, 10 (1): 16–26.Google Scholar
Varian, H. R. 1992. Microeconomic analysis. New York: W. W. Norton and Company.Google Scholar
Walden, W. D., & Schwartz, B. N. 1997. Environmental disclosures and public policy pressure. Journal of Accounting and Public Policy, 16 (2): 115–244.Google Scholar
Williams, C. A. 1999. The securities and exchange commission and corporate social transparency. Harvard Law Review, 112: 1197–1310.Google Scholar
Willis, A. 2003. The role of the global reporting initiative's sustainability reporting guidelines in the social screening of investments. Journal of Business Ethics, 43 (3): 233–37.Google Scholar
Wilson, R. K., & Sell, J. 1997. Liar, liar … : Cheap talk and reputation in repeated public goods settings. The Journal of Conflict Resolution, 41 (5): 695–717.Google Scholar