May 06, 2009
Why It Matters
Posted by Lyman Johnson

I really appreciate Gordon's comment to my second post. I think the faith/corporate law link matters to corporate law for at least two reasons. First, descriptively, many on this blog may agree that shareholder primacy is not mandated by law, but that remains a contested point, rather remarkably. I doubt Steve Bainbridge, to cite one respected commentator, would yield reaily to my assertion on the corporate goal issue but I think the authority he would rely on is thin and largely a matter of custom and other factors, as I noted before.  Many corporate law professors/casebooks seem to assume shareholder primacy and I can't tell you the number of business people and economists, among others, who I have encountered who think such a goal is the 11th commandment, apparently based on the gospel according to Milton Friedman, vintage 1970.  Yes, markets constrain as Elizabeth notes, but markets work at a pretty crude level and shareholders themselves are not always the narrow, stereotyped money-maximizers we sometimes portray them as being, as Einer Elhauge argued in his 2005 NYU piece. Thus, corporate law as taught, written about, and practiced, requires candid attention to the question of what does the law really does require/permit. This is true both in law schools and in B schools.

Second, there remains a normative debate about what the goal(s) of corporate law should be. Here, professors should deal openly with this issue in a democratic society that entrusts production to the (still) private sector. Again, this is true in legal education where future legal counsellors with vast influence are trained and, even more importantly, in B schools and other venues where business people hone business skills and absorb core beliefs.   

Without meaning to sound like a "crit," I think this is an example of how we need to expose some latent assumptions and lay them bare for examination, both for students and for ourselves.  What is not said and assumed can be more influential than what is said openly.

Finally, needless to say, all this makes a real difference in corporate life too, where what decision-makers do is often shaped by the horizons of how they conceive and frame what is permitted and possible. One of my legal mentors once told me how liberated he was as a young associate to discover that his senior partner felt free to talk to clients about what they should consider doing from a moral perspective;he found it remarkably emancipating to realize that his cramped sense of role had unduly bound him as to what was possible. Of course, we will not consider something possible unless we first believe it is permitted. So, how religion might shape corporate law and life remains open to discussion as we are doing here, but there is much prior work remaining to convince folks in the teaching and professional worlds that the precondition of discretion necessary for meaningful choice genuinely does, and should, exist.

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