What Difference Does It Make WhetherCorporate Managers Have PublicResponsibilities

Alan Wolfe's thoughtful paper resonates with what I think we should call the Washington and Lee School of corporate jurisprudence.(1) It elaborates on that School's brilliant intellectual history of legal theorizing about the corporation and on its powerful critique of conservative arguments against managerial responsiveness to nonshareholder interests.It also shares, I fear, a tendency to overestimate the practical stakes of abstract concepts of the corporation and fiduciary duties. This tendency takes three forms: first, a historical picture that portrays recent developments as a promising departure rather than business-as-usual; second, an assumption that certain abstract conceptions of the corporation (for example, public or private) differ dramatically in their relative hospitality or hostility to nonshareholder interests; and third, optimism that fiduciary norms are an important avenue through which to undertake corporate reform. I want to express reservations about each of these points.I. PROMISING DEPARTURE OR BUSINESS-AS-USUAL?Wolfe and the Washington and Lee School sometimes give the impression that corporate managers were deemed beholden exclusively to shareholders until the 1980s takeover movement gave managers an incentive to invoke public responsibilities and forced everyone else to see the effects of corporate decisions on nonshareholder constituencies. I suspect, however, the opposite story would be more accurate. Throughout most of the century the idea that corporate managers have public responsibility has been a mainstream view.(2) The view was always subject to some controversy, but it did not receive its most politically and intellectually sustained challenge until the 1980s. On the practical level, the emergence of a new constituency of finance capitalists prompted this challenge. These capitalists were outsiders to the established managerial elite and discovered profit opportunities in corporate restructurings that damaged managerial satrapies.On the theoretical level, in the 1980s hostile takeovers and managerial conflicts of interest strained the plausibility of viewing managers as neutral fiduciaries. The pluralist proponents of public responsibility had tended to emphasize the convergence of interests of the various corporate constituencies. As conflicts of interest became harder to ignore, some felt more comfortable focusing managerial loyalty on a single group rather than charging managers with reconciling the conflicts.That the idea of managerial public responsibility has not been deviant is clear from historical works that describe a large contingent of elite managers who have ostentatiously embraced public duties throughout this century.(3) Why shouldn't they? As compared to the shareholder-agent view, the public responsibility view seems more likely to confer prestige, to curry public acceptance for corporate power, and to enhance managerial discretion within the corporation.The status of the public responsibility view has been less clear in legal doctrine only because the issue has rarely been addressed. But the paucity of authority itself suggests that the law has not been a major obstacle to managerial solicitude for nonshareholder interests. I am unaware of a single modern case in which a managerial decision has been held wrongful because it put public interests above shareholder ones.(4) Moreover, doctrine has long expressed general tolerance for a substantial range of public-regarding managerial decisions.(5)This revised historical picture makes the repudiation of the shareholder-agent view in the Time-Warner case(6) and the constituency statutes look more like a restoration than the harbinger of revolution that the Washington and Lee School would like it to be. Managers did not make very ambitious use of their public-regarding discretion before Time-Warner, and that case gives little reason to think they will do so now.II. THE RANGE OF PUBLIC AND PRIVATE INTERESTSMy second reservation concerns the assumption Wolfe and the Washington and Lee scholars make that changing from a private to a public view of the corporation dramatically alters the range of plausible corporate decisions. …