Picking on Corporations [Stephen]

Everybody's picking on corporations lately. In an earlier post, Labor good, gays and corporates bad, Liz noted polling data suggesting that being endorsed by business groups is a major negative for politicians this election cycle. A Firedoglake blogger complains (erroneously) about a supposed corporate tax cut:

Wow, it’s been what? two nanoseconds since BushCheneyCo did something nice for corporations! Wouldn’t want corporations to feel overlooked.

As someone whose vocation is the study of corporate governance, this sort of thing no longer surprises me, but it nevertheless still pains me. In their wonderful book, The Company: A Short History of a Revolutionary Idea, which I reviewed here, John Micklethwait and Adrian Wooldridge persuasively argue not only that the corporation is one of the West's great competitive advantages, but also that the number of private-sector corporations a country boasts is a relatively good guide to the degree of political freedom it provides its citizens. Indeed, they make the strong claim that the corporate form is “the basis of the prosperity of the West and the best hope for the future of the rest of the world.” (at p. xv) After 20 years of studying the corporation, I've come to agree.

I've addressed the corporation's social role in a number of papers, all of which are available free from SSRN.com (although some readers may need to register). In Catholic Social Thought and the Corporation, for example, I explored "Catholic social thought on corporate governance. Human dignity and freedom are central principles of Catholic social thought." I argued "that preserving the economic freedom of corporations to pursue wealth is an essential part of effective means for achieving human freedom. To the extent prudential judgments about corporate regulation are required, the Church and civil society should strive towards a nuanced balancing of freedom and virtue."

In The Bishops and the Corporate Stakeholder Debate, I again critiqued "Catholic social teaching on corporate social responsibility. Specifically, the essay focuses on one of the policy recommendations made by the U.S. Bishops in their pastoral letter on economic justice, Economic Justice for All: Pastoral Letter on Catholic Social Teaching and the U.S. Economy. In that letter, the Bishops addressed the so-called stakeholder debate; i.e., whether decisionmaking by directors of public corporations should take into account the interests of corporate constituencies other than shareholders. This essay focuses on the Bishops' position as matter of public policy rather than as a matter of theology. The essay evaluates three ways in which the Bishops' position might be translated into public policy: (1) directors could be given nonreviewable discretion to make trade-offs between shareholder and stakeholder interests; (2) directors could be given reviewable discretion to make such trade-offs; or (3) directors could be required to make such trade-offs subject to judicial (or regulatory) oversight. None of these approaches is an improvement on current law; to the contrary, all are worse. The first approach would be toothless, the second would increase agency costs, and the third would either prove unworkable or pose an unwarranted threat to economic liberty (or both)."

In Community and Statism: A Conservative Contractarian Critique of Progressive Corporate Law Scholarship, which nominally was a review of Progressive Corporate Law (Lawrence E. Mitchell ed. 1995), I used that book "principally as a jumping off point for a critique of the strain of left communitarianism that has recently emerged in corporate law scholarship. The essay begins with a review of left communitarian critique of the nexus of contracts model of the firm and of rational choice. Because the arguments on both sides are well-developed in the literature, the essay focuses on the specific spin given the debate by Progressive Corporate Law's authors. The remainder of the essay is devoted to exploring the emerging communitarian theory of the firm. In the course of doing so, however, I also begin developing an explicitly conservative version of the law & economics account of corporate law. The essay looks to the intellectual tradition that runs from Edmund Burke to Russell Kirk to articulate an alternative to both the left communitarianism of progressive corporate law scholars and the classical liberalism embraced by many practitioners of law and economics."