Individual Autonomy in Corporate Law
48 Pages Posted: 17 Apr 2019
Date Written: March 28, 2018
The field of corporate law is riven with competing visions of the corporation. This Article seeks to identify points of broad agreement by negative implication. It examines two developments in corporate law that have drawn widespread criticism from corporate law scholars: the Supreme Court’s recognition of corporate religious rights in Burwell v. Hobby Lobby and the Nevada legislature’s decision to eliminate mandatory fiduciary duties for corporate directors and officers. Despite their fundamental differences, both resulted in expanding individual rights or autonomy within the corporation — for shareholders and managers, respectively.
The visceral critiques aimed at these two developments suggest a broadly shared view that the corporation is a device that should be optimized for collective action of a particular type — namely large-scale economic activity. As such, once one has opted into the corporate form, little room remains for the exercise of individual rights and autonomy ex post. Corporate law permits shareholders and managers to act only in limited and highly formalized ways. In this view, the strong assertion of shareholder and managerial autonomy in Hobby Lobby and Nevada’s corporate law is problematic for three reasons. First, it conflicts with longstanding principles underlying the corporate form. Second, it is arguably inefficient, even where it comports with the parties’ private ordering. Third, despite its liberalizing aims, it is likely to foster even greater regulatory complexity or involvement in the long run.
While there are no easy answers to how one should weigh individual rights against economic efficiency, advancing personal autonomy by altering the corporate form may ultimately provide little autonomy bang for one’s buck. From both a rights and an efficiency perspective, there are better means to champion the individual over the group.
Keywords: corporate law, efficiency, fiduciary duties
JEL Classification: K22
Suggested Citation: Suggested Citation