Why Companies May Behave Themselves Even as Regulations Are Eased

The Trump administration has pledged to boost economic growth by cutting two regulations for every new one created. Investors have responded by bidding up stocks in the hope that profits will surge.

In the past companies would have been off to the races, building belching smokestacks and cutting back on worker safety, though, all in the name of profits. Today, businesses will rejoice at reduced red tape and might invest in areas they have avoided, but few will pollute more or risk damaging their reputations as good corporate citizens. The extent to which businesses will take advantage of the easier regulations will determine whether the economy gets the boost the administration is seeking. Business that sell to consumers are especially sensitive to their reputations. But all U.S. companies are increasingly wary of how their shareholders might respond to their behavior. Investors that incorporate businesses’ records on the environment, social factors such as diversity and good governance characteristics into their decisions account for $9 trillion in investment assets in the US.