A Balancing Approach to Corporate Rights and Duties

Understanding the Company: Corporate Governance and Theory, (Cambridge University Press), Forthcoming

19 Pages Posted: 27 Apr 2016

See all articles by Martin Petrin

Martin Petrin

University College London - Faculty of Laws; Western University

Date Written: April 2016


Despite its age, the longstanding debate surrounding corporate rights and duties remains unresolved. Until today, the type and scope of corporate rights and duties, as well as the manner by which they are assigned, are both contested and evolving. The questions at stake are manifold. For instance, should we view corporations as aggregates of individuals, which would suggest that the corporate entity should be given the rights that their shareholders or other controlling individuals possess? Should corporations be criminally liable, and if so, does it matter whether misconduct can be attributed to individuals at a certain hierarchical level? Or, are corporations capable of bearing social or ‘moral’ responsibility for societal issues, namely in the form of corporate social responsibility?

In order to elucidate these and similar issues, this chapter surveys traditional and modern theories that explain the nature of legal entities and demonstrates how traditional and modern corporate theories influence the law and academic discussion on the rights and duties of corporate entities, highlighting also how this has led to various problems. In its final part, the chapter outlines an alternative approach to conceptualizing corporations, which aims to provide a more useful and transparent method by which to ascertain corporate rights and duties. In short, the chapter will argue that instead of relying on the theories of the firm that are currently used – old and new – a better way going forward is to engage in a balancing approach, which seeks to assign rights and duties by reference to corporations’ social and economic function, purpose, and effects.

Keywords: Theory of the Firm, Legal Entity, Corporate Law, Corporate Governance, Nexus of Contracts, First Amendment, Corporate Rights, Hobby Lobby, Citizens United

JEL Classification: K00, K13, K14, K22

Suggested Citation

Petrin, Martin, A Balancing Approach to Corporate Rights and Duties (April 2016). Understanding the Company: Corporate Governance and Theory, (Cambridge University Press), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2770762

Martin Petrin (Contact Author)

University College London - Faculty of Laws ( email )

Western University ( email )

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