Shareholder Voting and the Symbolic Politics of Corporation as Contract

48 Pages Posted: 14 Oct 2018 Last revised: 3 Dec 2018

See all articles by Grant M. Hayden

Grant M. Hayden

Southern Methodist University - Dedman School of Law

Matthew T. Bodie

Saint Louis University School of Law

Date Written: September 21, 2018


American corporations are structured in such a way that shareholders, and shareholders alone, have the right to vote in all significant corporate decisions. Over the years, this exclusive shareholder franchise has been supported by an ongoing procession of justifications. But as those arguments have fallen by the wayside, shareholder primacists have circled back and latched upon a final argument for the special voting status of shareholders, arguing that this fundamental feature of corporate governance is the product of the set of freely-bargained-for agreements among all corporate constituents. Because this set of agreements reflects the preferences of all parties to the corporate contract, they contend, it should thus be viewed as the best way to structure the corporation.

The thesis of this Article is that the “nexus of contracts” theory is both descriptively wrong and normatively hollow, and, in particular, provides a poor foundation for the exclusive shareholder franchise. The corporation is neither a mere contract nor a set of contracts, literally or metaphorically. Indeed, the whole notion of the corporation as a nexus of contracts has been a theatrical production of dodges, feints, and posturing designed to rationalize and justify the existing order of things and create the kind of rhetorical space corporate law scholars need to advance their own particular policy positions. Once freed from the constraints of false theories, it is time to do the hard work of starting over and determining what the ideal structure or structures might be for organizations that bring together capital and labor in a process of joint production.

Keywords: shareholder primacy, nexus of contracts, corporate contract, theory of the firm

JEL Classification: K12, K22, G3, M5, R5

Suggested Citation

Hayden, Grant M. and Bodie, Matthew T., Shareholder Voting and the Symbolic Politics of Corporation as Contract (September 21, 2018). Wake Forest Law Review, Vol. 53, 2018; SMU Dedman School of Law Legal Studies Research Paper No. 407; Saint Louis U. Legal Studies Research Paper No. 2018-8. Available at SSRN:

Grant M. Hayden

Southern Methodist University - Dedman School of Law ( email )

P.O. Box 750116
Dallas, TX 75275
United States

Matthew T. Bodie (Contact Author)

Saint Louis University School of Law ( email )

100 N. Tucker Blvd.
St. Louis, MO 63101
United States

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