More on "Progressive" Corporate Law Scholarship

In a post over at the Conglomerate last week, I discussed what I consider to be the progressive dilemma of corporate law scholarship.  The dilemma is this: neither the shareholder primacy model nor the stakeholder model really fits well with a progressive agenda for corporate law.  I received a number of thoughtful comments which I'd like to respond to here.

One set of responses generally asked: what is progressive corporate law?  The laissez-faire economics accompaniment to this question is: it is nonsensical to speak of "progressive" corporate law, just as it is nonsensical to speak about a "progressive" theory of relativity.  (See comments by Geoffrey Manne here and Kate Litvak here.)  Another set of responses is a variation on this theme -- namely, corporate law is not a good place for "progressive" notions to flourish.  Instead, progressives should focus on labor law, tax, consumer law, etc.  (See this post by Victor Fleischer as well as comments here and here by Michael Guttentag.)

Both sets of responses place some weight on a "non-ideological" notion of corporate law.  But anyone who writes about corporate law -- anyone -- has to have some view about how society should work.  It may be a mild view -- "things are pretty good, but we can tinker in certain situations" -- or it may be a wild view -- "We need to tear down the existing institutions and remake the world anew."  But you have to have some notions about what makes the world a better place.  And those views have to inform your scholarship.  If you have no normative views, you can draw no normative conclusions in your scholarship.  There has to be some basis -- call it ideological, normative, political, values-based, what have you -- upon which you judge that which you study.

So here's my point -- even if you think you are doing "non-ideological" corporate law scholarship, you aren't.  You bring a core of opinions, experiences, responses, and values with you when doing your work.  Those filters affect how you see the world, what you choose to study, and how you study it.  Now, if you fit comfortably within the mainstream, you may seem "non-ideological."  But you're really just "mainstream ideological."  I put myself in that category on a lot of issues.  But c'mon -- mainstream ideology is not an absence of ideology. 

And economics and corporate law are filled with ideological questions.  More importantly, they're filled with ideological questions that should matter to progressives.  How is power allocated within a corporation?  What duties do executives and directors owe to shareholders?  How is compensation controlled?  How are fiduciary breaches punished?  What is the purpose of the corporation?  These are all normative -- ideological --- questions, and the answers have big effects on society.

Sure, we may all agree that corporate law should be oriented so as to maximize social utility.  (Even this is normative, but I'll grant some consensus on this.)  But it's a long way from that principle to a strong version of shareholder primacy.  And getting there is not a question of applying the laws of mathematics.  Economics is not physics.  A lot has been said on this, so I'm surprised there's still some controversy about it.  Mathematics is a useful tool, surely, but normative positions underlie baseline economic assumptions as well as the empirical assumptions we make about reality.

I do agree that I need to say more about what a "progressive" corporate law agenda would look like.  But in fact, that was the point of my post -- I think it's a tough question.  In my view, being a corporate law progressive is not being "pro-regulation."  It's not being "anti-market."  It is instead an approach that tries to identify power imbalances -- imbalances that often decrease social utility.  It is an approach that tries to address economic inequality, while recognizing the importance of economic incentives.  It is, perhaps, more of an inclination than a hard and fast agenda.  An inclination to question why executives make so much more than lower-level employees.  An inclination to question whether the ability to pay matches the social utility in question.  (And no, it's not all about redistributing wealth.)  Of course, my description of the progressive agenda may be quite different than others' descriptions.  But again, that was part of the point of my post.  (Michael Guttentag contributes here about mandatory disclosure as a progressive corporate law issue, while David Zaring sketches a progressive agenda here.)

You don't see many debates about what a "progressive" corporate law agenda would be, but I think there should be.  For example, many folks might assume that progressives would reject shareholder primacy and embrace a stakeholder system.  As I mentioned over at the Glom, I think the question is more complicated than that.  A thought experiment: if stock ownership were much more broadly distributed across the economic levels within society, would shareholder primacy look better?  In a lot of ways, I think it would.

Certainly, scholars work on policy recommendations that appeal to a broad range of normative approaches.  Such papers can focus on a narrow question of interpretation or can suggest a significant change in the statutory scheme.  But they marshall arguments from across the spectrum in favor of the suggested proposal.  Such papers form the core of many scholarly agendas, and I have written and will write papers like these myself.  But at the same time, I think we miss something by not talking more about values, norms, and ideology in corporate law.  As this paper by William Klein argues, corporate law scholars need to ground their proposals more explicitly in certain goals or objectives.  (See the conference about his paper here.)  Yes, to some extent, we are all efficiency-maximizers now.  But beyond that, there is a fair amount of disagreement.  And I think it makes sense to consider these questions on a broader scale as we approach our academic endeavors.