Corporate Power in Civil Society
Publication Year: 2001
The corporate mega-mergers of the 1980s and 1990s raise many troubling questions for social scientists and legal scholars. Do corporate globalism and the new, streamlined corporation help or hinder the development of civil society? Does the new power that increasingly deregulated businesses wield undermine the rights of citizens, or is this threat being exaggerated? Who has the authority to get things done in a corporation's name and who can be held legally responsible for a corporation's misbehavior? What role, if any, should the courts play in strengthening the rights of individuals who challenge the actions of big business?
David Sciulli maps the legal limits of corporate power in our democratic society, and explores the role of the corporate judiciary in creating public policy. He argues that the judiciary must be more vigilant and act to curb corporate abuses. He demonstrates that when corporations exercise their private power in civil society, they are just as capable as the state of exercising it in ways that are dangerous, arbitrary, and challenge the basic institutional arrangements of society. Finally, Sciulli calls for sociologists to involve themselves more deeply in issues of corporate governance and commit their discipline to influencing the decisions of the courts.
Published by: NYU Press
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Early drafts of this volume contained lengthy discussions of the history of corporate law in the United States along with this volume’s discussion of contemporary debates over corporate law and judicial practice. Early readers, therefore, commented on what turned out to be two books—the first, historical part was published as Corporations vs. the...
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In monitoring how management governs publicly traded corporations, the American corporate judiciary bears two major responsibilities. One is to identify who acts on the corporation’s behalf. Who has the authority and power to get things done in the corporation’s name and, as a result, can be held legally responsible for the corporation’s behavior? This is a...
1. Corporations and Civil Society: Institutional Externalities of Corporate Power
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Hostile corporate takeovers and leveraged buyouts of publicly traded corporations in the United States disrupted the lives of millions of Americans in the 1980s. Although the typical business in the United States is not organized as a corporation, but rather as a proprietorship or partnership, corporations account for 90 percent of all business sales and...
2. The Turbulence of the 1980s
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Over a decade has passed since the last hostile takeovers and leveraged buyouts of the 1980s.1 More memory today than living experience, it is worthwhile to recall how disruptive this period was both for individuals and for institutional arrangements. It is also worthwhile to trace the sources of disruption. The hostile activity of the 1980s was antedated and...
I. Overview and Background
3. Contractarians and Imposers
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As early as the mid-1970s, legal contractarians were anticipating how shareholders and managers would behave in a market for corporate control.We just reviewed how and why this market emerged in the United States in late 1983. Legal contractarians anticipated this development by analyzing corporations and law in strictly economic terms.1 Thus, they define...
4. Contractarians and Balancers
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Many legal scholars questioned the “realism” of contractarian approaches to corporations and law in the 1980s and many continue to do so today. But, then as now, most appreciate the great merit of contractarians’ central point about corporate law’s mandatory rules. The new market for corporate control did demonstrate that it is no longer necessary...
5. Major Delaware Decisions of the 1980s and 1990s
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We focus on Delaware courts in this chapter for a straightforward reason: Over 40 percent of the corporations listed on the New York Stock Exchange are incorporated in Delaware, over 60 percent of the Fortune 500, and over 50 percent of the Dow Jones Industrial Average.1 In addition, most corporations that reincorporate choose in overwhelming...
II. Sources of Judicial Drift
6. Why Contractarians Fail to Explain Judicial Behavior
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The conceptual fissures latent in corporate law doctrine metamorphosed into full-blown doctrinal crisis beginning in 1985. We saw in Chapters 3 and 4 that contractarians’ criticisms of existing doctrine have considerable merit. But we have just seen that Delaware courts nonetheless resist adopting an economic approach to corporate governance disputes...
7. Why Imposers Fail to Explain Judicial Behavior
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Having identified some general limitations in legal contractarianism, we can now consider some problems legal traditionalists face. Proponents of judicial imposing defend corporate law’s core of mandatory rules. But limitations in the ways they approach corporations and law come into view when we pose a sociological issue: What if judicial deference to...
8. Legislative Action: Stakeholder Balancing and Its Limits
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Contractarians convert the sociological issue of corporate purpose into a narrower economic issue—how to maximize investor wealth. This removes from view many immediate externalities of corporate governance, namely, harms done to stakeholders that elude pricing. It also removes from view all institutional externalities, harms done to institutional...
9. Contractarian Reaction: Opting Out
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Contractarians had some significant victories even in the mid- 1980s. Delaware’s General Assembly, for instance, notably resisted the tide of anti-takeover legislation, even as the state’s governor urged it to go along. At most, it adopted what Easterbrook and Fischel call an “innocuous” antitakeover statute, one “inimical to shareholders’ welfare, though less so than...
III. Corporate Law and Judicial Practice in a Global Economy
10. America’s Constitutional Court forIntermediary Associations
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Some contractarians and some traditionalists see the Delaware courts as deliberative bodies that sometimes act on a broad social mandate. They see Delaware’s Chancery and Supreme Court as this country’s constitutional court for corporate persons. More cynical legal scholars in both camps look at the same judicial behavior and see an extended exercise in...
11. Beyond the Failures: A Threshold of Procedural Norms
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When contractarians assume or assert that maximizing share price automatically increases social wealth and supports institutional design, they are complacent liberals. When balancers assume or assert the same two consequences follow automatically from broadening stakeholder representation in corporate decision making, they are complacent liberals.
12. Time-Warner and Institutional Externalities: From Culture to Form
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One-sided exercises of positional power can increase in frequency and broaden in scope across corporate America even as shareholder wealth is increasing. One-sidedness can also increase as stakeholder representation is broadening, and, arguably, as social wealth is increasing.Today’s orthodoxy holds true empirically, however, only when corporate governance...
13. Explaining and Predicting Judicial Behavior in a Global Economy
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The corporate judiciary is grappling today with two major issues of corporate governance: • Whether to keep corporate agency unified or to divide it along with legal responsibility for corporate power. This is the issue of corporate agency. • Whether to impose mandatory rules on corporate officers or to drift, toward unilateral managing, shareholder contracting, or stakeholder...
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About the Author
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David Sciulli is a member of the Governing Bureau of the International Institute of Sociology and Professor of Sociology at Texas A&M University. He is the author of Theory of Societal Constitutionalism (1992),...
Page Count: 416
Publication Year: 2001