Public Corporation as Private Constitution
Alan R. Palmiter
Wake Forest University - School of Law
March 17, 2008
Wake Forest Univ. Legal Studies Paper No. 1111773
The large publicly-traded corporation in the United States derives its essential structure and metaphoric language from the republican form of government laid out in the US Constitution. Public shareholders elect a decision-making body that formulates and supervises an executive bureaucracy, subject to review by a judiciary (typically, in Delaware) that balances shareholder interests and management prerogatives. The analogy to the republican government structure found in the federal Constitution and replicated in all 50 states is unavoidable. Both "specialized hierarchies" create a principal-agent model of separated powers that contains similar sets of voting rights, nearly identical standards of judicial review, and generally parallel recognition of exit opportunities. Thus, an understanding of US corporate governance inevitably compels an understanding and appreciation of the structures of US political governance. Metaphorically, the public corporation is private constitution.
Number of Pages in PDF File: 14
Keywords: public corporation, organization theory, judicial review, voting rights, exit rights
JEL Classification: B29, G30, K22, L20,
Date posted: March 24, 2008
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