Corporate Groups and Network Structure

Abstract

Abstract A starting point for many of the chapters of this volume is the ‘contract’ model of the enterprise, and the associated idea of the ‘nexus of contracts’ in corporate affairs. According to this viewpoint, relations between executive managers and the financial institutions which hold the company shares and which provide loans can be interpreted in contractual terms. Corporate entities can, on this basis, be seen as comprising complex networks of interests. Such a viewpoint does not go far enough. Several of the chapters in this section show that when a business operates through two or more companies, lawyers have considerable difficulty in recognizing a ‘group’ of companies as a legal entity. For this reason, an approach which reduces all business relations to contractual relations among individuals has a great appeal. But this is to side-step the problem, rather than to solve it. Our theories of how businesses operate must recognize the reality of corporate groups and a whole range of inter-corporate relations. It was the great French sociologist Emile Durkheim who criticized social contract and utilitarian theories for their neglect of what he called ‘the non-contractual element in contract’ (Durkheim 1893). By this he meant the framework of non-juridical norms and practices which structure legal relations. A sociological perspective on business affairs, then, must highlight the influence of such factors on corporate control and business decision-making.