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
Date Written: July 30, 2009
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.
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