Center-Left Politics and Corporate Governance: What Is the 'Progressive' Agenda?

Abstract

For as long as corporations have existed, debates have persisted among scholars, judges, and policymakers regarding how best to describe their form and function as a positive matter, and how best to organize relations among their various stakeholders as a normative matter. This is hardly surprising given the economic and political stakes involved with control over vast and growing resources, and it has become commonplace to speak of various approaches to law in decidedly political terms. In particular, on the fundamental normative issue of the aims to which decision-making ought to be directed, shareholder-centric conceptions of the corporation have long been described as politically right-leaning while stakeholder-oriented conceptions have conversely been described as politically left-leaning. When the frame of reference for this normative debate shifts away from state law, however, a curious reversal occurs. Notably, when the debate shifts to federal political and judicial contexts, one often finds actors associated with the political left championing expansion of shareholders' powers, and those associated with the political right advancing more stakeholder-centric conceptions of the corporation. The aim of this article is to explain this disconnect and explore its implications for the development of U.S. governance, with particular reference to the varied and evolving views of the political left - the side of the spectrum where, I argue, the more dramatic and illuminating shifts have occurred over recent decades, and where the state/federal divide is more difficult to explain. A widespread and fundamental reorientation of the Democratic Party toward decidedly centrist national politics fundamentally altered the role of and related issues in the project of assembling a competitive coalition capable of appealing to working- and middle-class voters. Grappling with the legal, regulatory, and institutional frameworks - as well as the economic and cultural trends - that conditioned and incentivized this shift will prove critical to understanding the state/federal divide regarding what the progressive agenda ought to be and how the situation might change as the Democratic Party formulates responses to the November 2016 election. I begin with a brief terminological discussion, examining how various labels associated with the political left tend to be employed in relevant contexts, as well as varying ways of defining the field of corporate governance itself. I then provide an overview of progressive thinking about in the context of state law, contrasting those views with the very different perspectives associated with center-left political actors at the federal level. Based on this descriptive account, I then examine various legal, regulatory, and institutional frameworks, as well as important economic and cultural trends, that have played consequential roles in prompting and/or exacerbating the state/federal divide. These include fundamental distinctions between state law and federal securities regulation; the differing postures of lawmakers in Delaware and Washington, DC; the rise of institutional investors; the evolution of organized labor interests; certain unintended consequences of extra-corporate regulation; and the Democratic Party's sharp rightward shift since the late 1980s. The article closes with a brief discussion of the prospects for state/federal convergence, concluding that the U.S. system will likely remain theoretically incoherent for the foreseeable future due to the extraordinary range of relevant actors and the fundamentally divergent forces at work in the very different legal and political settings they inhabit.