From Metaphor to Reality in Corporate Law

Abstract

This essay is in response to a commentary by Professor David Millon, who ably argues in the same journal that a dependence on metaphor drives much of the debate within corporate law jurisprudence and corporate law scholarship. This essay joins Millon in his criticism. For decades, scholars have used metaphors ? corporation as person, corporation as creature of the state, corporation as property, corporation as contract, corporation as community, to name the most prominent ? as justifications for the imposition of, or freedom from, legal and ethical requirements. The metaphors are often taken as self-evident. The legal and ethical arguments then flow quite naturally. Currently, the dominant metaphors in corporate law spring from the rights-based common law of contract and property. Arguments that corporations have obligations to stakeholders other than shareholders are deemed inconsistent with property or contract norms. It is no coincidence that those who oppose more socially responsible corporate governance regimes choose metaphors from the common law. Common law rights have long had significant rhetorical power. Much of this persuasiveness is based on the fact that they are seen as neutral, pre-political, and pre-legal. Corporate law is private law, defined by common law principles, and therefore neutral. To change it is impermissible. These rights-based metaphors used to explain corporate law harken back to Lochner v. New York, and are subject to some of the same criticisms. Even the so-called laissez-faire marketplace is shot through with government, and even the most basic common law entitlements are functions of legal rules. Contract and property law are no more neutral, private, or pre-legal than statutory law. One cannot justify the present make-up of corporate law as non-political or pre-legal because it is based on common law principles any more than Lochner could justify common law itself as non-political or pre-legal. This essay suggests that our thinking about corporate law would be improved if we jettisoned the metaphors of private law and instead considered corporate law as regulation. That is, corporate law should be subject to the same analysis as environmental law, labor law, tax law, communications law, and the like. At a high level of generality, the analysis with regard to corporate law rules should be the same as the analysis for other kinds of statutes and regulations. One should ask what we want our society to look like and then seek to craft a bundle of legal rules and regulatory programs that are likely to move us in that direction.