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Title: Progressive Corporate Law (New Perspectives on Law, Culture, and Society) by Lawrence E. Mitchell ISBN: 0-8133-2363-0 Publisher: Perseus Books Pub. Date: 01 January, 1996 Format: Hardcover List Price(USD): $59.00

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Summary: Eclectic collection of left-ish/communtarian perspectives
Comment: To the uninitiated, the idea of corporate law academic scholarship doubtless sounds dry and boring. Yet, for those of us who labor in that vineyard, the scene is often reminiscent of Jutland or Trafalgar--broadsides thundering among ships passing in the night. Over the last couple of decades, a group of scholars working in the so-called "law and economics" tradition have mounted a largely successful hostile takeover of the corporate legal academy. Although both traditionalists and leftists fought separate rear-guard actions against the law and economics juggernaut for many years, the principal resistance is now being offered by a group of (no longer quite so) young academics loosely centered around the corporate law faculties of the Washington & Lee and George Washington law schools. George Washington University law professor Larry Mitchell brought together 10 of the most prominent of these scholars in a collection of essays that, taken together, provides a useful introduction to the genre.

Reviewing a collection of essays is never easy, but it is especially complicated here by the diversity amongst PROGRESSIVE CORPORATE LAW's authors. In a very real sense, those scholars are far more firmly united by what they oppose--Chicago School-style law and economics--than by what they support. Nonetheless, at least some of the authors are groping towards a common set of ideas, albeit one perhaps more accurately characterized as "left communitarian" than as "progressive" in the traditional sense of the latter term.

The left communitarian view of corporate law and governance posits that relationships within the corporation are not arms-length market relationships, but rather are based on trust and mutual interdependence. As the story goes, this requires corporate decisionmakers to be sensitive to the needs of all of a corporation's constituencies: Fair dealing requires that intra-corporate relationships not be unilaterally abrogated to benefit shareholders. In the interest of brevity, I focus on a single variant of this argument, which we might term "stakeholderism." There has been a longstanding debate over the notion that corporations ought to be run so as to maximize shareholder profits. The corporate law communitarians typically stand in the tradition claiming that corporations should be responsive to the interests of various nonshareholder constituencies--workers, consumers, and communities--not just those of shareholders. (Note the parallels with the emphasis on stakeholders in Tony Blair's version of the so-called Third Way.") Law and economics scholars, in contrast, contend that nonshareholder constituencies are adequately protected through contract and general welfare legislation and, accordingly, corporate law should not provide them with extra-contractual protections.

Space does not permit one to do full justice to the arguments on either side. Interestingly, however, the stakeholderist traditions of both Germany and Japan are under attack. In Germany, the combined pressure of high production costs and international competition have encouraged large German firms to shift production abroad and led to growing political pressure to deregulate German labor laws. Similarly, some large Japanese firms appear to be shifting their focus to shareholder wealth maximization.

At bottom, however, stakeholderism ought to be rejected because it is inconsistent with economic liberty. To be sure, one cannot charge left communitarians with precisely the same statist faults associated with old-time collectivists. Instead of nationalization, the communitarians advocate regulation designed to protect nonshareholder constituencies and, in particular, to encourage their participation in corporate governance. But this is a difference only in degree, not in kind. The left communitarian seeks to empower state-sponsored constituency groups (such as labor unions or environmentalists) to exercise some as yet ill-defined degree over control corporate decisions.

As a societal decisionmaking norm, the economic freedom to pursue wealth does more than just expand the economic pie. A legal system that pursues wealth maximization necessarily must allow individuals freedom to pursue the accumulation of wealth. Economic liberty, in turn, is a necessary concomitant of personal liberty-the two have almost always marched hand in hand. The pursuit of wealth has been a major factor in destroying arbitrary class distinctions, moreover, by enhancing personal and social mobility. At the same time, the manifest failure of socialist systems to deliver reasonable standards of living has undermined their viability as an alternative to democratic capitalist societies in which wealth maximization is a paramount societal goal. Accordingly, it seems fair to argue that the economic liberty to pursue wealth is an effective means for achieving a variety of moral ends.

In turn, the modern public corporation has turned out to be a powerful engine for focusing the efforts of individuals to maintain the requisite sphere of economic liberty. Those whose livelihood depends on corporate enterprise cannot be neutral about political systems. Only democratic capitalist societies permit voluntary formation of private corporations and provide a sphere of economic liberty within which they may function, which gives those who value such enterprises a powerful incentive to resist both statism and socialism. Because tyranny is far more likely to come from the public sector than the private, those who for selfish reasons strive to maintain both a democratic capitalist society and, of particular relevance to the present argument, a substantial sphere of economic liberty therein serve the public interest.

Although all the essays are worth reading, I would venture to single out for special attention David Millon's introductory overview for its even-handed treatment of the contending perspectives, William Bratton's provocative essay on the role of honor in the duty of loyalty, Eric Ort's careful critique of multinational corporations, and Marleen O'Connor's thoughtful analysis of employee rights in plant closings.