Individual Autonomy in Corporate Law

48 Pages Posted: 17 Apr 2019

Date Written: March 28, 2018

Abstract

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

de Fontenay, Elisabeth, Individual Autonomy in Corporate Law (March 28, 2018). Harvard Business Law Review, Vol. 8, 2018; Duke Law School Public Law & Legal Theory Series No. 2019-28. Available at SSRN: https://ssrn.com/abstract=3361776

Elisabeth De Fontenay (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

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