The Death of the Firm

66 Pages Posted: 17 Nov 2016 Last revised: 8 Mar 2017

See all articles by June Carbone

June Carbone

University of Minnesota - Twin Cities - School of Law

Nancy Levit

University of Missouri at Kansas City - School of Law

Date Written: November 15, 2016

Abstract

This Article maintains that the decision in Burwell v. Hobby Lobby, which referred to the corporation as a legal fiction designed to serve the interests of the people behind it, signals the “death of the firm” as a unit of legal analysis in which business entities are treated as more than the sum of their parts and appropriate partners to advance not just commercial, but public ends. The Hobby Lobby reference to the firm as a fiction is a product of a decades-long shift in the treatment of corporations. This shift reflects both an ideological embrace of the free-market-oriented “agency-cost” school of corporate analysis and a material change from the brick-and-mortar corporations of the industrial era to the network-like operations of the technological age. As “the firm,” that is, the corporate form used to structure most business organizations, becomes less dependent on fixed supply chains and hard-to-assemble labor forces, the networks that determine employee motivation, security, and career mobility also change. These shifts fundamentally alter the relationship of people to companies, as owners, executives, shareholders, and employees all become more mobile. This Article is the first to link the Supreme Court’s revised conception of the firm to the role of the state. If Hobby Lobby owners have the First Amendment right to choose for their employees what publicly subsidized health care benefits to make available, the corollary should be that individuals should not be dependent on employers for access to basic public benefits. The new networked era should encourage individual as well as corporate flexibility.

Keywords: Corporations, Business Entities, Burwell v. Hobby Lobby, Agency-Cost, Business Organization, Employers, Employees, Corporate Structures, John Kenneth Galbraith, Ronald Coase, Corporate Power, Executive Compensation

JEL Classification: D21, D23, D24, L20, L21, L22, L23

Suggested Citation

Carbone, June and Levit, Nancy, The Death of the Firm (November 15, 2016). Minnesota Law Review, Forthcoming; Minnesota Legal Studies Research Paper No. 17-07. Available at SSRN: https://ssrn.com/abstract=2870076

June Carbone

University of Minnesota - Twin Cities - School of Law ( email )

229-19th Avenue South
Minneapolis, MN 55455
United States

Nancy Levit (Contact Author)

University of Missouri at Kansas City - School of Law ( email )

5100 Rockhill Road
Kansas City, MO 64110-2499
United States

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