Achieving Corporate Social Responsibility Under Self-Interest and
On July 17, 2020, the former president of the Judicial Yuan In-Jaw Lai was invited by WT Microelectronics to give a speech on Corporate Social Responsibility and Insider Trading. After the speech, a Q&A session was held where he took questions alongside board members, independent directors, and senior-level management.
Former President Lai starts his talk immediately by using examples of corporations realizing their corporate social responsibility (CSR) in the pandemic to explore the feasibility of companies using resources to help clients and the public survive or sustain their business during extreme situations. For example, the Four Seasons Hotel in New York responded to the call of the New York State authorities to provide free 5-star accommodations to health care workers in response to the devastating epidemic.
Yet another example comes from American insurance companies Allstate and American Family Insurance. The two companies announced that they will be giving back approximately 800 million USD in insurance fees to car insurance clients due to an abrupt drop in traffic accidents as people chose to stay at home during the COVID-19 pandemic, resulting in 20 to 40% fewer claims made.
They further issued statements saying that customers who encountered financial problems due to the COVID-19 pandemic could contact them to apply for delayed payment of their insurance premiums without penalty.
From a legal perspective, can companies legally use their funds like this? The reality is that a profit-making company is allowed to use the company’s capital to engage in CSR activities to help solve societal problems. Taiwan’s Company Act, which was amended in 2018, made it clear that “When conducting its business, every company shall comply with the laws and regulations as well as business ethics and may take actions which will promote public interests in order to fulfill its social responsibilities.”
Capital and economic market have always been divergent topics for many. Bill Gates, for one, proposed the idea of “creative capitalism” as a solution to the wealth inequality caused by traditional capitalism. The market only responds to the needs of those who can afford the solutions, but the needs of the poor and downtrodden are often ignored because they are unprofitable. More than one million people suffer from malaria every year, but drug companies give preference to the development of new drugs treating baldness because malaria patients are seldom able to afford their life-saving cures.
It is natural that businesses are profit-oriented and tend to overlook everything but what is on their earnings sheet. However, are businesses also allowed, in a legal sense, to use company resources for the good of the society besides the interests of the stakeholders? According to Mr. Lai, companies can make a profit while giving back to society. Actions driven by self-interest and altruism that are recognized by the public or the government can not only enhance the company’s reputation but also motivate employees.
Former president Lai also mentioned a case of insider trading related to COVID-19 in the U.S. A U.S. senator was charged with insider trading after he sold a large portion of stocks in late January following a briefing he received on the COVID-19 pandemic. The senator had hoped to make a profit with his stocks before the outbreak affected the U.S. market.
Lastly, former premier Lai cited the wind and flag koan from the Platform Sutra of the Sixth Patriarch to warn against any insider trading presumptions. Laws and regulations governing the stock market are based on the principles of honesty, fairness, good faith, and transparency.
Education: Graduate of National Chung Hsing University, LL.M., National Taiwan University, J.D., Harvard University.
Experience: Lai was formerly a professor and the director at the research institute at National Chung Hsing University, an associate professor at National Taiwan University, the Director at the Customs Administration, Ministry of Finance (MOF), the MOF Administrative Deputy Minister, the MOF Political Deputy Minister, the Minister of Finance at Taiwan Province, the Deputy Governor of Taiwan Province, the Vice President of the Executive Yuan, and the President of the Judicial Yuan.
Editor’s Notes: There is a famous koan from the Platform Sutra of the Sixth Patriarch taught through the ages, which reads as follows:
(Hui Neng) went to Fa Hsing Monastery in Canton, where Dharma Master Yin Tsung was giving a talk on the Nirvana Sutra. At that time, the wind blew and a flag moved. Two bhikshus then got into an argument. One said, ‘The wind is moving.’ The other said, ‘The flag is moving.’ They quarreled incessantly. Hui Neng stepped forward and said, ‘The wind is not moving, nor is the flag. Your minds are moving.’ Everyone was startled.”