In: Administrative science quarterly: ASQ ; dedicated to advancing the understanding of administration through empirical investigation and theoretical analysis, Band 46, Heft 1, S. 161-163
This article comments on Isabelle Ferreras's "Democratizing the Corporation." The focus is on the conceptual framing, which arguably contains a number of problems that are quite common on the left and are thus doubly deserving of commentary and explanation.
Abstract Historically, a corporation was regarded as an artificial creation of law possessing only what rights and powers its constituting charter confers upon it. This "concession" or "grant" theory has been eclipsed, especially in the United States, by the view that the corporation is a mere association of natural persons, and that its rights are those of its "members" and "owners," the shareholders, who, as persons and citizens, bring even constitutional rights to the corporation. This associational view rests on a triple confusion. First, it confuses the corporation (the rights-bearing corporate entity) with the corporate firm, which is associational, leaving the impression that the corporation can be reduced to natural persons. This underwrites the second confusion, that the business corporation is a member corporation, with the shareholders as members, when in fact it is a property corporation without members. The histories of the Dutch and English East India Companies are drawn on to explain the origins of this second confusion. Third, it confuses the member corporation with a partnership, when it imagines that the rights of the corporation are simply those of its individual shareholders. Instead, as maintained by the grant theory, a corporation should only receive such rights as are conferred on it by charter or statute on the basis of policy considerations.
Examines different views of the relationship between corporations, shareholders, and society; argues that the capitalist philosophy of the 1990s precludes a socially responsible role for corporations.
The incidents of a shareholder's interest & his relationship to the corporation depend upon the characteristics of the corporation as well as the legal theory of such interests. The most common form of shareholding in the US is ownership of shares in a large corporation whose shares are widely held & actively traded, usually on a nat'l exchange. In such companies, shares are so widely scattered that the traditional legal concept of control exercised by the shareholders becomes unworkable. Corporate management becomes virtually independent of any kind of internal control, raising questions of the proper definition of its legal & ethical responsibilities & the means of their enforcement. management responsibilities to shareholders should be defined with reference to shareholders' legitimate expectations, a reflection of goals of passive investors rather than those of co-owners in a business enterprise. AA.
Shareholder-owned corporations were the central pillars of the US economy in the twentieth century. Due to the success of the shareholder value movement and the widespread "Nikefication" of production, however, public corporations have become less concentrated, less integrated, less interconnected at the top, shorter-lived, and less prevalent since the turn of the twenty-first century, and there is reason to expect that their significance will continue to dwindle. We are left with both pathologies (heightened inequality, lower mobility, and a fragmented social safety net) and new technologies suitable for being repurposed in more democratic forms. Local solutions for producing, distributing, and sharing can provide functional alternatives to corporations for both production and employment; what is needed is the social organization to match the tools that we already have, or will have shortly. The time for democratic local economic forms prophesied by generations of activists may finally be at hand.