Contemporary discussions of the corporation tend to fall into one of two camps. The side that dominates much of public discourse is those who conceive of the corporation as purely economic. According to this view, corporations are “nexuses of contracts” that have no greater duties than to maximize profits for their shareholders and that should be given legal and political deference to do so. On the other side are those who conceive of the corporation in almost entirely political terms. In this view, corporations are created by government and exercise powers and privileges that are conceded to ... More

Contemporary discussions of the corporation tend to fall into one of two camps. The side that dominates much of public discourse is those who conceive of the corporation as purely economic. According to this view, corporations are “nexuses of contracts” that have no greater duties than to maximize profits for their shareholders and that should be given legal and political deference to do so. On the other side are those who conceive of the corporation in almost entirely political terms. In this view, corporations are created by government and exercise powers and privileges that are conceded to it by the state; governments have a responsibility to organize and constrain corporations such that they act for the benefit of society as a whole. This book offers a third way that sees the corporation as being both economic and political. It begins historically, by exploring and explaining the development and strength of the economic theory of the corporation. Despite their strength, such approaches miss the mark: while corporations exist largely to increase economic efficiency, they achieve this in ways that distinguish them from standard economic processes in markets. Corporations are not natural outgrowths of the free market, but institutions that use “norm-governed productivity”—social power, norms, and state-sanctioned authority—to effect economic cooperation that markets cannot. Corporations serve economic ends, but with political and social means. These facts suggest a radical rethinking of how corporations should be legally ordered, who should control them, and what sorts of obligations corporate managers have.