Iowa Law Review
This Article proposes a novel justification for the socially responsible investment of pension funds based upon traditional principles of charitable corporate giving and populism. This Article asserts that the justifications employed by courts in the first half of the twentieth century to expand the direct benefit doctrine in the charitable corporate giving context provide a foundation for allowing socially responsible investing in the pension fund context today. In formulating this thesis, Part I of this Article surveys the present limitations placed upon pension fund fiduciaries in the context of socially responsible investing. Part II then describes the traditional legal model of the corporation. Part III reviews the history of charitable corporate giving and introduces the doctrine of direct corporate benefit. More specifically, Part III argues that courts expanded the legally permissible scope of charitable corporate giving as they sought to encourage charitable contributions in response to the changing structure of the country's economy and the corporate accumulation of surplus social wealth. Part III, then, exposes the doctrine of direct corporate benefit as a fiction designed to allow greater access to private capital for public use. Part IV examines the corresponding changes in the tax code which resulted in the inversion of the traditional direct corporate benefit doctrine under the guise of the direct benefit rule. Finally, Part V demonstrates that the jurisprudential trends surrounding the expansion of permissible charitable corporate giving are best understood by reference to state-level populist influences demanding increased public access to private wealth. Part V suggests that the jurisprudence underlying modern corporate charitable giving presents a persuasive justification for the socially responsible investment of pension funds.
Edward S. Adams and Karl D. Knutsen, A Charitable Corporate Giving Justification for the Socially Responsible Investment of Pension Funds: A Populist Argument for the Public Use of Private Wealth, 80 Iowa L. Rev. 211 (1995), available at http://scholarship.law.umn.edu/faculty_articles/394.