The securities and exchange commission and corporate social transparency

The financial transparency for which U.S. capital markets are renowned derives primarily from mandatory disclosure of operating results under the federal securities laws. In this Article, Professor Williams defends the view that the Securities and Exchange Commission (SEC) can and should require expanded social disclosure by public reporting companies to promote corporate social transparency comparable to the financial transparency that now exists. As used in this Article, "social disclosure" refers to disclosure of information about reporting company's products, the countries in which a company does business, and the labor and environmental effects of a company's operations in the United States and around the world. Professor Williams shows that the SEC has the statutory authority in fashioning proxy disclosure to require disclosure either to promote the public interest or to protect investors. To construe the SEC's public interest disclosure power, she examines the intellectual derivation of the securities laws and their legislative history, demonstrating that increasing corporate accountability to shareholders and to the public was a central goal of Congress in 1933 and 1934, as was constraining the exercise of corporate power and inculcating a greater sense of public responsibility into corporate managers. Thus, she argues that it is fully consistent with the language, purpose, and legislative history of the securities laws for the SEC to use its authority to require expanded disclosure about management's policies and practices with respect to social and environmental issues. A close examination of the SEC's rejection of requiring expanded social disclosure in the 1970s buttresses this conclusion. Professor Williams concludes by making the affirmative case for expanded corporate social transparency and for the SEC's legitimate role in promoting such transparency, both from the perspective of the "economic" investor, who is assumed to be interested primarily in the financial returns from an investment, and from the perspective of the "social" investor, who is concerned more broadly with the social and environmental effects of corporate conduct.