The corporate form has been compared and contrasted favorably and unfavorably with government. The literature is broad and deep. Having said that, there is, perhaps, no one who writes more passionately on this topic than Daniel Greenwood. Set forth below are two examples of text from his work that illustrate my point.
We live in a democratic age, in which the sole legitimate source of political power is the consent of the governed. Yet our business corporations defy every norm of democracy.
Most fundamentally, corporate law and our major business corporations treat the people most analogous to the governed, those most concerned with corporate decisions, as mere helots. Employees in the American corporate law system have no political rights at all—not only no vote, but not even virtual representation in the boardroom legislature. Board members owe a fiduciary duty to the corporation, according to most of the statutes, and to the shareholders, according to the popular shareholder primacy narratives, but they owe no consideration at all to employees.
Daniel J.H. Greenwood, Essay: Telling Stories of Shareholder Supremacy, 2009 Mich. St. L. Rev. 1049, 1060 (2009).
The corporation as a state-within-the-state . . . cannot be justified under any democratic theory, because this state-like entity defies all democratic norms internally. No corporation operates by the principle of one person, one vote. All economically significant corporations disenfranchise a substantial portion of the affected populace, while even shareholders vote according to the number of shares they hold. Moreover, standard corporate law sharply limits the control that even the “voters” have over “their” entity. The law bars them, in the absence of unanimous consent, from making fundamental value choices, for example, from balancing the pursuit of profit against other potential corporate goals, such as quality products, interests of non-shareholder participants or even the actual financial interests of the real human beings who own the shares. Moreover, it even bars them from electing directors pledged to particular interests: directors, unlike ordinary politicians, are bound by law to pursue the interests of all (and only) shares, and courts will enforce this duty-subject to the often significant limitations of the business judgment rule-at the behest of any shareholder, regardless of election results. Theorists, therefore, usually resort to market-based explanations of why the corporation is unable to exert any power over its shareholders, employees and other participants.
Daniel J.H. Greenwood, Markets and Democracy: The Illegitimacy of Corporate Law, 74 UMKC L. Rev. 41, 54–55 (2005) (footnotes omitted). Whether you agree with Daniel or not on the substance, his views are transparent and his belief and energy are palpable.
With politics in the news every day and corporations on my mind, I have been pondering certain elements of democracy as they play themselves out in corporate governance. In particular, of late, I have focused in on accountability as a core democratic norm.
