Saving the World With Corporate Law?

Abstract:     
The current debate within corporate law is as fundamental as any time since the New Deal, when the great exchange between Merrick Dodd and A.A. Berle defined the issues for a generation of scholars. Today, the community of corporate law scholars in the United States is split between two groups. The first, heavily influenced by economic analysis of corporations, argues the merits of increasing shareholder power vis-a-vis directors. Another group, animated by concern for economic justice, challenges the traditional, shareholder-centric view of corporate law, arguing instead for a model of "stakeholder governance." The enclosed article is one half of a debate between two prominent scholars, one from each of the two major groups, on the audacious question, "Can Corporate Law Save the World?" Professor Greenfield, a leading proponent of "progressive corporate law," uses this paper to offer an provocative critique of the status quo using organizational and regulatory theory. Greenfield argues that U.S. corporate law should be modernized and expanded to take advantage of the distinctive abilities of the corporation to create wealth, while making it less likely that corporations will do so through breaches of the public trust or the imposition of costly externalities on stakeholders or communities. Corporate law could also channel the power of corporations to make them a progressive force in society, using them not only to create wealth but to spread it more equitably - addressing public policy problems that have been remarkably impervious to other public policy tools. The other half of the debate, by Professor Gordon Smith, appears separately on SSRN.

Keywords: progressive corporate law, corporate social responsibility, stakeholder governance

Working Paper Series