Public Corporation as Private Constitution

IUP Journal of Corporate and Securities Law, Vol. 6, Nos. 3 & 4, pp. 8-19, August & November 2009

15 Pages Posted: 30 Jul 2009 Last revised: 13 Jan 2011

See all articles by Alan R. Palmiter

Alan R. Palmiter

Wake Forest University - School of Law

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Date Written: July 30, 2009

Abstract

The large publicly-traded corporation in the US 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 principalagent 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 the US corporate governance inevitably compels an understanding and appreciation of the structures of the US political governance. Metaphorically, the public corporation is a private constitution.

Suggested Citation

Palmiter, Alan R., Public Corporation as Private Constitution (July 30, 2009). IUP Journal of Corporate and Securities Law, Vol. 6, Nos. 3 & 4, pp. 8-19, August & November 2009, Available at SSRN: https://ssrn.com/abstract=1441043

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Wake Forest University - School of Law ( email )

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