The Role of Corporate Law in Wealth Distribution and Capitalism

On Saving the World with or from Corporate Law

A Silent Death for the Corporation?

Michael Galanis

Fogel & Egerman (1974), 

Time on the Cross

T. Piketty (2013),

Capital in the Twenty-First Century

…unequal 

 wealth distribution.

P. Ireland (1996) 

“Capitalism without the Capitalist” :

…the corporation symbolises industrial capital

Social-historical Embeddedness of the Corporation

Social-historical Embeddedness of the Corporation

Antiquity – Mercanitilism

Antiquity – Mercanitilism

Corporation as a (quasi-)public organisation

Corporation as a (quasi-)public organisation

Early Capitalism

Early Capitalism

Late 18

Late 18

th

th

 cent. – 1840s: Private Partnership / Trust & 

 cent. – 1840s: Private Partnership / Trust & 

still

still

 state-controlled Corporation

 state-controlled Corporation

1840s:  Corporation 

1840s:  Corporation 

privatized

privatized

Corporate capitalism

Corporate capitalism

1840 – 1980s: Chandler (1990), 

1840 – 1980s: Chandler (1990), 

Scale & Scope 

Scale & Scope 

=> 

=> 

Corporate Bureaucracy

Corporate Bureaucracy

- 

- 

M-Form

M-Form

- Subsidiarisation

- Subsidiarisation

1980s – 21

1980s – 21

st

st

 cent.: Financialised & commodified corporation – 

 cent.: Financialised & commodified corporation – 

STILL

STILL

Corporate

Corporate

Bureaucracy

Bureaucracy

1.

The Corporation and its goals are (re)conceptualised by social-historical context

The Corporation and its goals are (re)conceptualised by social-historical context

      (Paddy is partly correct)

      (Paddy is partly correct)

Bureaucratic Corporation & Infinite Wealth Accumulation

Bureaucratic Corporation & Infinite Wealth Accumulation

Primary Goals of Corporate Bureaucracy within Capitalism

Primary Goals of Corporate Bureaucracy within Capitalism

Managerialism : 

Managerialism : 

Growth in scale & scope (Sales Revenue)

Growth in scale & scope (Sales Revenue)

Financialized Managerialism: 

Financialized Managerialism: 

Growth &

Growth &

Asset-Price Speculation (Growth vs Profit)

Asset-Price Speculation (Growth vs Profit)

2. Within capitalism the corporate goal has been aligned with infinite wealth

2. Within capitalism the corporate goal has been aligned with infinite wealth

accumulation

accumulation

Causal link between managerialism and infinite accumulation?

Causal link between managerialism and infinite accumulation?

Bureaucratic Corporation & Infinite Wealth Accumulation

Bureaucratic Corporation & Infinite Wealth Accumulation

Max Weber, 

Max Weber, 

The Protestant Ethic and the Spirit of Capitalism (1905)

The Protestant Ethic and the Spirit of Capitalism (1905)

[…] the earning of more and more money […] is thought of so purely 

[…] the earning of more and more money […] is thought of so purely 

as an end in itself

as an end in itself

, that from the

, that from the

point of view of the happiness of, or utility to, the single individual, it 

point of view of the happiness of, or utility to, the single individual, it 

appears

appears

 entirely 

 entirely 

transcendental

transcendental

and absolutely 

and absolutely 

irrational

irrational

. Man is dominated by the making of money, by acquisition as the ultimate

. Man is dominated by the making of money, by acquisition as the ultimate

purpose of his life. Economic acquisition is no longer subordinated to man as the means for the

purpose of his life. Economic acquisition is no longer subordinated to man as the means for the

satisfaction of his material needs. 

satisfaction of his material needs. 

This reversal of what we should call the natural relationship

This reversal of what we should call the natural relationship

, so

, so

irrational from a naïve point of view, is evidently as definitely a leading principle of capitalism as it is

irrational from a naïve point of view, is evidently as definitely a leading principle of capitalism as it is

foreign to all peoples not under capitalistic influence.

foreign to all peoples not under capitalistic influence.

[…]

[…]

But capitalism is identical with the pursuit of profit, and 

But capitalism is identical with the pursuit of profit, and 

forever renewed profit

forever renewed profit

, by means of

, by means of

continuous, rational, capitalistic enterprise in a wholly capitalistic order of society. For it must be so: an

continuous, rational, capitalistic enterprise in a wholly capitalistic order of society. For it must be so: an

individual capitalistic enterprise which did not take advantage of its opportunities for profitmaking

individual capitalistic enterprise which did not take advantage of its opportunities for profitmaking

would be doomed to extinction.”  [emphasis added]

would be doomed to extinction.”  [emphasis added]

‘Disenchantment’ and the prevalence of instrumental (economic) ‘rationality’

‘Disenchantment’ and the prevalence of instrumental (economic) ‘rationality’

e.g. slave labour is efficient…

e.g. slave labour is efficient…

The 

The 

Stable

Stable

 “Anatomy of Corporate Law” & the Spirit of Capitalism

 “Anatomy of Corporate Law” & the Spirit of Capitalism

Corporate personality

Corporate personality

Limited liability

Limited liability

Directors’ Duties & Governance Structure

Directors’ Duties & Governance Structure

Share as a transferable instrument

Share as a transferable instrument

1.

(Privatised) Corporate Law’s fit with infinite wealth accumulation

(Privatised) Corporate Law’s fit with infinite wealth accumulation

2.  Key factor/organisational tool for the emergence of bureaucratic capitalism

2.  Key factor/organisational tool for the emergence of bureaucratic capitalism

Impact of Corporate Bureaucratisation: Accusations & Justifications

Impact of Corporate Bureaucratisation: Accusations & Justifications

Weberian “ideal-type” & instrumental rationality

Weberian “ideal-type” & instrumental rationality

“Bureaucracy as such is a precision instrument which 

“Bureaucracy as such is a precision instrument which 

can put itself at the disposal of quite varied,

can put itself at the disposal of quite varied,

purely political as well as purely economic, or other sort of interests of 

purely political as well as purely economic, or other sort of interests of 

domination.

domination.

”

”

(Weber, 

(Weber, 

Economy and Society

Economy and Society

, 1922)

, 1922)

Heterodox critique & bureaucratic irrationality

Heterodox critique & bureaucratic irrationality

- 

- 

Procedural divergence from (instrumental) rationality

Procedural divergence from (instrumental) rationality

- Consumerism (e.g. Herbert Marcuse) and economic determinism

- Consumerism (e.g. Herbert Marcuse) and economic determinism

- 

- 

Closure of meaning through formalisation and exclusion of alternatives (e.g. B. Hibou)

Closure of meaning through formalisation and exclusion of alternatives (e.g. B. Hibou)

- Destruction of meaning by treating qualitative  differences as quantitative (C. Castoriadis)

- Destruction of meaning by treating qualitative  differences as quantitative (C. Castoriadis)

3. Corporate bureaucracy is a (not perfect) driver of instrumental rationality, BUT

3. Corporate bureaucracy is a (not perfect) driver of instrumental rationality, BUT

4. Within corporate capitalism Weber’s instrumentality claim is reversed and creates a

4. Within corporate capitalism Weber’s instrumentality claim is reversed and creates a

feedback loop of economic determinism

feedback loop of economic determinism

Impact of Corporate Bureaucratisation: Accusations & Justifications

Impact of Corporate Bureaucratisation: Accusations & Justifications

Hamel & Zanini (2016)  

Hamel & Zanini (2016)  

     Deloite Australia (2014)

     Deloite Australia (2014)

Relative growth of managerial employment 

Relative growth of managerial employment 

     Share of time spent on internal rules (rather than

     Share of time spent on internal rules (rather than

versus other occupations in the US

versus other occupations in the US

     government rules)

     government rules)

Corporate Law Theory Justifications – a Meaningless Debate

Corporate Law Theory Justifications – a Meaningless Debate

Traditionalists vs Progressives

Traditionalists vs Progressives

      -

      -

Private vs public corporate law (mandatory vs default)

Private vs public corporate law (mandatory vs default)

      - Shareholder primacy vs stakeholders/CSR

      - Shareholder primacy vs stakeholders/CSR

Common ground:

Common ground:

      - Objective of infinite wealth accumulation retained

      - Objective of infinite wealth accumulation retained

      - Instrumental rationality (e.g. stakeholderism for sustainable growth)

      - Instrumental rationality (e.g. stakeholderism for sustainable growth)

      - Corporate governance is a distributional problem

      - Corporate governance is a distributional problem

5. Normative issue 

5. Normative issue 

unreflexively presumed 

unreflexively presumed 

as an economic one, i.e. part of the determinist

as an economic one, i.e. part of the determinist

loop of infinite wealth accumulation

loop of infinite wealth accumulation

“Social imaginary” – Castoriadis (1975)

“Social imaginary” – Castoriadis (1975)

      - Psyche is socialized/determined but 

      - Psyche is socialized/determined but 

never fully 

never fully 

(‘radical imagination’)

(‘radical imagination’)

      - “Central significations” give meaning to everything (systemic logic)

      - “Central significations” give meaning to everything (systemic logic)

      - Societies are self-instituting and self-instituted

      - Societies are self-instituting and self-instituted

      - “Instituted” vs “Instituting” Society: Social autonomy

      - “Instituted” vs “Instituting” Society: Social autonomy

Capitalism’s Deeper Origins are in the Human Psyche

Capitalism’s Deeper Origins are in the Human Psyche

      - Fear of finite existence and “Pseudo-mastery” as 

      - Fear of finite existence and “Pseudo-mastery” as 

omnipotence

omnipotence

      - 

      - 

Perpetual accumulation (of capital)

Perpetual accumulation (of capital)

Breaking the Loop of Economic Determinism?

Breaking the Loop of Economic Determinism?

“Modern pseudo-rationality is one of the historical forms of the imaginary; it is arbitrary in

“Modern pseudo-rationality is one of the historical forms of the imaginary; it is arbitrary in

its ultimate ends to the extent that these ends themselves stem from no reason, and it is

its ultimate ends to the extent that these ends themselves stem from no reason, and it is

arbitrary when it posits itself as an end, intending nothing but a formal and empty

arbitrary when it posits itself as an end, intending nothing but a formal and empty

‘rationalization’.” (Castoriadis, 1987)

‘rationalization’.” (Castoriadis, 1987)

“Capitalism in not merely religiously conditioned as Weber thought, but rather is an

“Capitalism in not merely religiously conditioned as Weber thought, but rather is an

essentially religious phenomenon.”  (Walter Benjamin, “

essentially religious phenomenon.”  (Walter Benjamin, “

Capitalism as Religion”

Capitalism as Religion”

, 1922 )

, 1922 )

Breaking the Loop of Economic Determinism?

Breaking the Loop of Economic Determinism?

Imagery of economic dogma

Imagery of economic dogma

- Market as the naturally original state of affairs

- Market as the naturally original state of affairs

- Homo Oeconomicus: an 

- Homo Oeconomicus: an 

a-social

a-social

, 

, 

a-historical

a-historical

 being

 being

- Economic rationalisation is transcendental (Social Heteronomy)

- Economic rationalisation is transcendental (Social Heteronomy)

- Corporation reconstituted in accordance with the signification of “pseudo-mastery”

- Corporation reconstituted in accordance with the signification of “pseudo-mastery”

Marxist economic determinism not very helpful either

Marxist economic determinism not very helpful either

6. It is not about ascertaining wealth accumulation and fair distribution, but about why this

6. It is not about ascertaining wealth accumulation and fair distribution, but about why this

option instead of others (Piketty asked the wrong question)

option instead of others (Piketty asked the wrong question)

Breaking the Loop of Economic Determinism?

Breaking the Loop of Economic Determinism?

The Preconditions

The Preconditions

1. Accept the corporation is always conceived within the social-historical, so

1. Accept the corporation is always conceived within the social-historical, so

subject to constant transformation

subject to constant transformation

2. Avoid quasi-religious corporate law debates by accepting the open-

2. Avoid quasi-religious corporate law debates by accepting the open-

endedness of the corporation’s social objective(s)

endedness of the corporation’s social objective(s)

3. Deal with how corporate objectives should be determined and modified so

3. Deal with how corporate objectives should be determined and modified so

as to ensure (2) above – 

as to ensure (2) above – 

Can we retain bureaucratic elements

Can we retain bureaucratic elements

?

?

Breaking the Loop of Economic Determinism with Corporate Law?

Breaking the Loop of Economic Determinism with Corporate Law?

The Possibilities

The Possibilities

1. Continue as it is and hope for the best?

1. Continue as it is and hope for the best?

2. Mitigate distributional problem (e.g. progressive approach)?

2. Mitigate distributional problem (e.g. progressive approach)?

3. (Re-)politicize and democratize? (democracy vs bureaucracy)

3. (Re-)politicize and democratize? (democracy vs bureaucracy)

4. Silent death via 

4. Silent death via 

anti-bureaucratic/post-capitalist

anti-bureaucratic/post-capitalist

 alternatives?

 alternatives?

Breaking the Loop of Economic Determinism with Corporate Law?

Breaking the Loop of Economic Determinism with Corporate Law?

Thank you

Thank you