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16 October 2012 at 13:40 BST

Bookshelf: The Failure of Corporate Law: Fundamental Flaws and Progressive Possibilities

Conventional wisdom has long held that public corporations are not public in true sense of the word. Their accountability lies not with the public, with society at large, or with its workers, but with its shareholders.

Nudging boardrooms in the direction of good

Nudging boardrooms in the direction of good

But Kent Greenfield challenges that notion in this book, in which he argues that once corporate law is correctly seen as public law, corporate interests can be nudged in the direction of the public good.
Mr Greenfield cites a long history of public corporations that valued the public’s well-being as essential to good business, a concept that has all but disappeared from today’s corporate environment, the author maintains. Like constitutional law or environmental law, the laws controlling corporations ought always to protect the public interest since the effects of a company’s decision-making reach far beyond their select shareholders.

Tyranny of the shareholder

Among the trends Mr Greenfield is particularly keen to see reformed, the tyranny of the shareholder’s interest ranks the highest. The pursuing of shareholder interests is taken as gospel in law schools, he argues, and in many public companies, executives ‘are prohibited by law from taking into account the interests of the public when making decisions, if in so doing those of the company’s shareholders are harmed’. That situation encourages more corporate scandals and less concern for a company’s own workers or the public interest.

Closing loopholes

Additionally, Mr Greenfield lambasts the loopholes in Delaware’s corporate law as a way of ‘bypass[ing] democratic pressures ... to export the costs of its legal structure to other states’, which sets a dangerous precedent for other states to follow.
The author sees corporate law optimistically, as a vehicle for realising the progressive dream of creating prosperity across economic classes and shrinking social stratification. With more prudent and publically-oriented corporate governance, wealth can be generated to benefit society at large, and not just for a small oligarchy of shareholders.

 

Published by: ReadHowYouWant
Author: Kent Greenfield
September 2012 P/B £24.99
ISBN: 1459606167

 
   
 
 
 

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