Abstract: After some seventy years, most law academics have come to agree with Berle and Means' famous descriptive argument that decisionmaking power is denied to shareholders and is instead heavily concentrated in board of directors and upper management.1 As with most issues in law academia, normative discourse about this concentration of power consists mainly of debating whether this arrangement is economically efficient. That is, corporate is both descriptively inaccurate and normatively marginalized. Outside ivory tower, however, law continues to use concept both descriptively and normatively. The Delaware Supreme Court, for example, has invoked term in a number of prominent cases.2 The United States Supreme Court has treated some political spending as protected political speech on theory that such spending is product of the procedures of democracy.3 Many reformers who disagree with this rosy descriptive view call for increased shareholder power in order to make governance more democratic.4Dalia Tsuk Mitchell's contribution to this Symposium, Shareholders as Proxies: The Contours of Shareholder Democracy,5 is an intellectual history of changing views of regulators, reformers and scholars as to meaning of corporate democracy. Tsuk Mitchell identifies three theories that reformers have invoked to justify increased shareholder participation in governance. These theories make varying assumptions about relationship between corporations' role in society (in Tsuk Mitchell's terminology, corporate power) and allocation of control rights between shareholders and management (corporate hierarchy). First, Tsuk Mitchell argues, Progressive Era reformers believed that reforming hierarchy to increase shareholder participation would enable shareholders to tame power for benefit of society.6 Second, Tsuk Mitchell contends that primary concern, from New Deal Era through 1970s, was protecting rights of individual shareholder against potential abuses of power by management.7 Third, neoclassical economists since 1970s have argued that shareholder participation empowers shareholders to shape their own economic (and political) destinies.8 In sum, she argues, focus of analysis has shifted from power in society to internal hierarchies to market.9Although I have a different view of Progressives' approach, I otherwise agree with Tsuk Mitchell's insightful intellectual history. In this Comment, I would like to expand upon normative implications of her account. After Progressive Era, as Tsuk Mitchell argues, was redefined as hierarchy rather than power.10 The focus on this problem, and ostensible solutions to it, played an important role in legitimating power by portraying it as result of a democratic process. Today, neoclassical economic model assumes that all outcomes are voluntary result of market mechanisms. I agree with Tsuk Mitchell's conclusion that law has come to see market as democracy's sustaining and legitimating force.11 Most law academics, however, have been relatively frank about their narrow focus on efficiency and their lack of interest in democracy as a normative value. To extent that nonacademic discourse about remains interested in democracy, academics' efficiency-minded analyses of governance have limited relevance. Policymakers and reformers must resist temptation to conflate democracy with either that old favorite, shareholder power, or current academic darling, market.In late 1800s and early 1900s, corporations problem was emerging potential of large businesses to affect social conditions such as prices and wages, primarily through formation of trusts. …
Publication Year: 2006
Publication Date: 2006-10-01
Language: en
Type: article
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Cited By Count: 2
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