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The Separation of Corporate Law and Social Welfare

31 Pages Posted: 4 Mar 2017 Last revised: 13 Jun 2017

William W. Bratton

University of Pennsylvania Law School; European Corporate Governance Institute (ECGI)

Date Written: June 2017


A half century ago, corporate legal theory pursued an institutional vision in which corporations and the law that creates them protect people from the ravages of volatile free markets. That vision was challenged on the ground during the 1980s, when corporate legal institutions and market forces came to blows over questions concerning hostile takeovers. By 1990, it seemed like the institutions had won. But a different picture has emerged as the years have gone by. It is now clear that the market side really won the battle of the 1980s, succeeding in entering a wedge between corporate law and social welfare. The distance between the welfarist enterprise of a half century ago and the concerns that motivate today’s corporate legal theory has been widening ever since. This Essay examines the widening gulf. It compares the vision of the corporation and of the role it plays in society that prevailed during the immediate post-war era, before the fulcrum years of the 1980s, with the very different vision we have today, and traces the path we took from there to here. It will close with a brief prediction regarding corporate law’s future.

Keywords: Corporate governance, corporation law, corporate legal theory, shareholder value, agency costs, shareholder empowerment, wealth maximization, law and economics, social responsibility, legal history, welfare economics

JEL Classification: A13, D60, G30, K22

Suggested Citation

Bratton, William W., The Separation of Corporate Law and Social Welfare (June 2017). Washington and Lee Law Review, Forthcoming; U of Penn, Inst for Law & Econ Research Paper No. 17-10; European Corporate Governance Institute (ECGI) - Law Working Paper No. 357/2017. Available at SSRN:

William Wilson Bratton (Contact Author)

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States

European Corporate Governance Institute (ECGI) ( email )



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