An Historical Perspective To The CorporateBar Provisions Of The SecuritiesEnforcement Remedies And Penny StockReform Act Of 1990

The primary demand of a Madisonian system of limited government to maintain a proper balance between the two opposing principles of power and private freedom. (1) The principle of public power is self-government, which entitles the majority of society to control the minority for the public good. (2) The principle of private freedom is that, nonetheless, there are certain areas in which the minority must be free of majority control. (3) The continual reconciliation of public power and private freedom poses the "Madisonian dilemma." (4) The dilemma is that for government to function appropriately and to remain viable, neither the freedom of society to govern nor the freedom of the individual not to be governed should emerge a completely dominant. (5)Madisonian democratic theory insists on a divided world in which the public interests of the state are in continual tension with the private interests of the individual. (6) By displaying traits of both public power and private freedom, the corporation fits uncomfortably into a well-demarcated Madisonian society. (7) In one capacity the public power of society determines the existence of a corporation's private interests (8) Yet, in another capacity, the private rights of the corporation are impervious to societal control. (9) The "corporate dilemma" is that for the corporation to operate both successfully and legitimately within the broader societal framework, neither the public's ability to control the corporation nor the corporation's private freedom from public control should be subordinated permanently. (10) For centuries both English and American societies continually struggled to preserve the interdependent relationship between a corporation's counterpoised attributes of public control and private freedom. (11)The historically anomalous (12) nineteenth-century division of corporations into distinct categories of so-called "public" and "private" corporations largely diffused questions concerning the appropriate relation between the public's ability to control the corporation and the corporation's right to be free of such control. (13) By assimilating public, corporations to the role of the state in society subject to popular control (14) and private corporations to the role of the individual in society free from public control (15) nineteenth century doctrine apparently resolved the dilemma posed by the enigmatic corporation.Although the dichotomy between public and private corporations continues to structure conventional thinking about corporations, the massive amount of recent scholarly commentary on corporations seems to indicate a widespread dissatisfaction with the present, bifurcated conception of the corporation. (16) Most of this commentary suggests the need to reshape corporate practice in a manner that would mandate private corporations to be mindful of their social responsibilities. (17) From another perspective, the social responsibility movement seeks to restore a degree of public control over the private corporation.The recently enacted corporate bar provisions of the Securities Enforcement Remedies and Penny Stock Reform Act of 1990 (Remedies Act) (19) may reflect a heightened sensitivity by Congress -- representative of society at large -- to the notion that even traditionally private corporations should be subject to a degree of social control. (20) By authorizing courts to intervene on behalf of the public in a corporation's internal affairs, the corporate bar is difficult to square with the conventional, almost canonical, idea of the private corporation as an institution considered largely autonomous from social control. (21) When viewed from an historical perspective, however, neither the underlying objective of (22) nor the method employed by (23) the corporate bar is without precedent. If the purpose of the corporate bar is to protect the public from today's manipulative corporate trading practices, the corporate bar parallels the spirit of earlier legislative attempts to safeguard societal welfare from similarly disruptive market practices. …