The principal-agent problem is a well known example, and I’ve written a number of papers on it, as well as several chapters in the book that’s linked on CT. In the presence of principal-agent problems (such as that between shareholders and managers) factor returns will often deviate from marginal product.

Why not the [duties] they have to their neighborhoods, communities etc? Why not the same they have to everything?

Why not, indeed?

If the answer to that is they don’t have any, better make sure your bunker is well-stocked.

Why on earth would that be the answer?

Being a moral person is not synonymous with not breaking the law

I agree. Why would you expect me not to? My points were:

(1) that we need a way of justifying and criticising claims about obligations. My pick is consequentialism: obligations, rights, laws, institutions, etc. are convenient inventions, justified to the extent that they promote impartial welfare. If they don’t do that, they’re not justified – which is why being a moral person is not synonymous with not breaking the law.

(2) that it’s not only managers or only shareholders who have obligations within another of our convenient inventions, the limited-liability company. What we need to think about is the consequences of organising ourselves this way rather than some other way.

I have the feeling that you rather misunderstood me. When I asked what duties people have with respect to institutions they’re involved in, did you perhaps think I meant what duties people have to the institutions they’re involved in? I meant something much wider: given that I have some power (e.g. by being a shareholder), how should I use it? To influence the company to pursue profit, or to influence it to do something else?

#14: It is meaningless to apply morality to a corporation. How would you determine what set of moral values should govern its actions?

The same way individuals have their actions governed by sets of moral values. Law and custom. Why is that not obvious? Corporations are the ultimate sociopathic entities. People who can only recognize morality as an external force are held in moral check by the strength of that force and its willingness to govern their behavior. What’s lost in this age is morality precedes the regulation.
It originates somewhere less available to chopping logic, more emotional than rational, thus bewildering people whose only engagement with life is mechanical.

#10 The question should be what duties people (managers, workers, shareholders, customers…) have with respect to institutions they’re involved in.

Why not the same they have to their neighborhoods, communities etc? Why not the same they have to everything?
If the answer to that is they don’t have any, better make sure your bunker is well-stocked.
The human co-operative drive is far more need than notion.
Being a moral person is not synonymous with not breaking the law. It can be the diametric opposite, sometimes.
Greenpeace, for instance.

In the US, libertarians, like Posner, have taken a catch phrase “maximize profits” to an extreme, just as they do in other cases (individual liberty, government regulation). So they pursue an intellectually dishonest game of fostering a utopian system on the public while ignoring the realities. Enough people seem to be fooled often enough that they become champions of policies that will harm themselves personally. This is an amazing feat of intellectual misdirection, which is usually confined to promises about the hereafter.

To give some concrete examples: firms can be required to include labor in their management (Germany), they can be required to set aside a fixed amount for benefits and even to place it in an arms-length entity; they can be required to clean up after themselves by paying into a fund that will exist after they have ceased to operate.

Then there are non-profit firms, some of which even make stuff, like Paul Newman’s food enterprise. In his case the “profit” goes to charity, in the case of the Ford Foundation their “profit” (from their endowment) goes to the projects they fund. Such foundations are required by law to disburse a minimum amount of their wealth each year to maintain their tax exempt status, but if they were solely interested in maximizing their “profit” over the long term they would prefer not to. This is the situation with some college endowments at present, they have ignored the reason they were set up to begin with and are acting like for-profit firms. So the Ford Foundation is choosing not to maximize their “profit” while Harvard is.

The second dishonest argument from Posner is to ignore how things really work. There are no examples of firms with more than a few shareholders where these “owners” have any say in the operation of the firm. Proxy votes are a fiction, and boards of directors are self perpetuating. This is true in every developed country and we must, therefore, take it as an unanticipated result of modern capitalism. Since this is true, any governance claims which are allegedly to benefit the stockholders are false. Denying this is a form of intellectual dishonesty.

So, given the reality, the issue becomes a moral one, what does society want for-profit firms to do? Whatever this is, it has to be combined with legal constraints which work and force the firms to confirm to the goals. It is clear that pushing up the stock price for the benefit of option holders does not match the nominal mandate that current law ostensibly demands.

Maybe legal scholars have the luxury of debating theoretical systems, but we in the real world need some practical fixes to what is broken and Posner isn’t offering any.

Then how do profits end up being equal to the marginal product of capital? What mechanism, other than profit-maximizing by managers, is supposed to bring this about?

So companies exist to make money and not to make and market good products to their customers? Which would you rather invest in: a company that saw its primary purpose as making money, or a company that saw its purpose as creating a good value proposition for its customers that also allowed a reasonable return to the company and its workers? I suspect the second company would be a better long-term bet.

Also, Ambrose in comment 12 is quite correct.

The issue is not one of “creative capitalism,” a grotesque misnomer, but on more amorphous notions of social obligation. How one would discourage people from thinking in such limited terms should be seen as is a moral issue but from there as a societal issue not strictly as a legal one.
Laws and Social Contracts are by definition non-conflicting and are inadequate as terms of description. Better, more precise (not less) to use the language of social obligations, seen as overlapping and in conflict and need to be understood as such. These problems should be dealt with at that level. Social life is not Aristotelian.
Dream less. Observe and describe.

If the managers of the corporation fail to pay attention to the interests of the community, to other stakeholders, and other similar moral obligations, they are failing to fulfill the moral obligations of the owners which, as their agents, it is now their responsibility to fulfill.