Power, Democracy, and Legitimacy in Corporate Governance
Corporations exercise extraordinary powers in modern society. More specifically, specific corporate actors – shareholders, directors, and managers – exercise these tremendous powers, which has led corporate law concern itself with analyzing the distribution of powers between these actors. However, lurking behind this issue is the fundamental question of how the distribution of powers between corporate actors is legitimated. Legitimacy is important because it justifies the authority of corporate actors to make decisions that affect other people inside and outside the firm. The legitimacy of corporate powers takes on increased importance as corporations increasingly project their power beyond the economic realm and into political and social controversies. The legitimacy of which corporate actors hold these powers demands increased scrutiny. This Article begins that scrutiny by arguing that corporate law does not have a stable or coherent conception of legitimacy to justify the current powers held by corporate managers. It begins by detailing the history of theories of managerial legitimacy. Historically, the dominant theory of managerial legitimacy in the modern period has shifted among three different theories: the derivative, public welfare, and shareholder democracy theories. Each shift in the prevailing theory of corporate legitimacy has resulted in large-scale, systemic changes in distributions of powers between managers, other corporate actors, and society. Currently, the shareholder democracy theory that became dominant in the middle of the 20th Century is unstable because Delaware courts have undermined their own version of shareholder democracy in multiple legal areas that concern the distribution of power among shareholders, managers, and directors. This confusion in legitimating the relational powers in the firm has led to important shifts in the powers of corporate actors and destabilized Delaware corporate law. Scholarly and judicial proposals to improve the legitimacy of managerial powers are intriguing, but ultimately unsatisfactory. This being said, recent discussions regarding ESG and stakeholderism in corporate law provide helpful schema to generate a framework for the legitimation of corporate powers
Year of publication: |
2023
|
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Authors: | Havasy, Christopher |
Publisher: |
[S.l.] : SSRN |
Subject: | Corporate Governance | Corporate governance | Demokratie | Democracy | Legitimität | Legitimacy | Macht | Power |
Saved in:
freely available
Extent: | 1 Online-Ressource (54 p) |
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Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 1, 2022 erstellt |
Other identifiers: | 10.2139/ssrn.4097803 [DOI] |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10014265204
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