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

David Hess and Thomas W. Dunfee

Business Ethics Quarterly, 2007, vol. 17, issue 1, 5-32

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.

Date: 2007
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