The Complexity And Legitimacy Of Corporate Law

The nature of man is intricate; the objects of society are of the greatest possible complexity; and therefore no simple disposition or direction of power can be suitable, either to man's nature, or the quality of his affairs.(1)I like complexity and contradiction....I speak of a complex and contradictory architecture based on the richness and ambiguity of modern experience....... By embracing contradiction as well as complexity, I aim for vitality as well as validity.(2)A central question when considering "new directions in corporate law" is the degree to which the study of corporate law continues to take account of the complexity of its subject. Certain contemporary academic trends are, on the contrary, leading to a simplification of vision and understanding when movement in precisely the opposite direction is needed. In particular, the influence of economic theories of the firm, and translations of these theories into a slogan that defines "the corporation" as merely "a nexus of contracts," threaten to extend a reductionist mode of thinking to areas of corporate law where such models are often not only unhelpful, but destructive. Instead, building a "nonreductionist" model that allows for the complexity of corporate law is essential.(3)In this Article, I suggest in Part I that recent attempts to define or formulate a unified theory of "the corporation" fail to account for the complexity of corporate law. Following H.L.A. Hart, I argue that it is a mistake to begin theoretical thinking about corporate law with the question, "What is a corporation?" This approach is fraught with analytical difficulty and leads easily to error because of the temptation to impose an initial theory or definition of "the corporation" on a multifaceted corpus of law.Part II considers positive corporate law in terms of its technical complexity. It attempts to answer the large but manageable question, "What is corporate law about?" In Part II, I review descriptive theories of mandatory, suppletory, and enabling rules in corporate law and provide an overview of some of the basic substantive law. I conclude that corporate law is primarily about the structuring of economic power of businesses that "incorporate" (that is, register under state corporate codes) to secure such advantages as convenience, financial flexibility, and limited liability. I conclude also that the legal meaning and scope of the term "corporation" depends inextricably on the kind of question being asked, and different legal questions yield different answers in different contexts.Part III then considers the normative complexity implicit in corporate law. I argue that one cannot reduce the subject of corporate law to one normative value, such as an economic objective. Instead, other values inaccessible to a purely economic measure, such as following the law and ethical behavior, remain important. Moreover, the economic objective of corporate law is not unidimensional, but divided within itself. Corporate law involves the simultaneous pursuit and coexistence of a number of ends or purposes, with the mix and predominance of different values depending on particular legal contexts.Finally, Part IV offers a theory of corporate law to combat simplistic models that have become influential. This theory provides a realistic and workable alternative that takes account of the complexity in corporate law. By "complexity," I do not mean the theory itself is complicated or corporate law is too complicated to understand.(4) Instead, I argue that corporate law is complex because it embodies a set of conflicting normative principles. I argue further that the normative complexity of corporate law explains, at least in part, its technical complexity. This view supplies a strong theoretical underpinning for corporate law as long as its rules and principles, and their application, meet basic conditions of legal and political legitimacy. And the legitimacy of corporate law, I argue finally, does not require choosing between either an exclusively "economic" or an exclusively "political" model. …