Corporate Resiliency and Relevancy in the Private Ordering Era

Abstract

Firm-specific private ordering has flourished in the twenty-first century. Public companies are seeing more and more governance contracting in traditional venues such as the bylaws and charter, as well as in less conventional places like shareholder agreements and dual-class-like contracts. Decisions legitimizing private ordering in the corporate setting contain strong contractarian language and rely heavily on contract – and not corporate – principles to justify their holdings. In addition, recent statutory amendments have chipped away at traditionally mandatory features of the corporation, thereby reinforcing the contractual view of the corporate form and fueling the private ordering movement. All told, the current trajectory of corporate law appears to privilege freedom of contract and the contractarian theory above other principles and theories of the firm.

Noticeably absent from recent corporate jurisprudence, however, is any meaningful discussion of the rationale for, and consequences of, intertwining contract and corporate law in such an intimate way. Engaging in this discussion is critical, as the expansion of corporate contractual freedom and the corresponding judicial embrace of contractarian principals have important implications for corporate law and the role of the corporation in the business entity ecosystem. This Article discusses some of the impacts to the corporate form, corporate theory, and the corporation’s role in society resulting from the prioritization of contractual freedom.

Keywords: contract, corporate governance, corporations, private ordering, unincorporated business, corporate contracting, contract metaphor, enabling statute, corporate opportunity, shareholder agreements, ESG, corporate social responsibility, social purpose, proxy access, dual-class stock

JEL Classification: K22, K12