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Book Review
| Kent Greenfield, The Failure of Corporate Law: Fundamental Flaws and Progressive Possibilities, Chicago: University of Chicago Press, 2006. Pp. 288. $45.00 (ISBN 978-0-226-30693-3).
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| By their nature, progressive movements ironically must reference the past. It is impossible to move in a new direction without a starting point. The most thoughtful progressives, however, actually use history in two ways. In making the case for change, in addition to highlighting problems of the past, they draw on useful intellectual antecedents to bolster their positions. Such thoughtfulness is readily apparent in Boston College Law School Professor Kent Greenfield's recent, important contribution to progressive corporate law scholarship. |
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Greenfield immediately signals his intent with the title to his book, The Failure of Corporate Law: Fundamental Flaws and Progressive Possibilities. He seeks both to critique the current nature of corporate law and to suggest fundamental reformulation of some of that law's most basic tenets. In providing his alternative vision, he significantly draws on legal history to buttress his views. |
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Greenfield begins by cataloguing what he sees as corporate law's problems, using recent history to provide an initial, analytical framework for his work. He provocatively posits that "[c]orporate law made the tragedy of September 11 more possible, and thus made the war in Iraq more likely." He then proceeds to explore how market failures related to businesses and the way that those companies are run and are regulated may have contributed to the tragic events of that date. For instance, in a fascinating twist on labor history, he deconstructs why security screeners' wages might have been so low before September 11 when paying passengers presumably would want more security. From Greenfield's perspective, law at the time left those passengers as well as airlines, screening firms, and shareholders in an ineffective position to force improvement of airline security through the market. This in turn leads to basic questions about how companies are run and in whose interest. |
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Drawing Greenfield's attention is the doctrine of shareholder primacy, a doctrine that may justify corporations' search for profits as activity undertaken in the interest of shareholders, who own the company. He notes that some believe that over the decades the doctrine became so entrenched as to become incontrovertible, leaving them to claim that the United States simply has reached the "end of history" on this point of corporate law. Although he accepts that shareholder primacy currently is the overwhelmingly accepted view, he challenges the related premise that putting shareholders first ultimately benefits society as a whole. In contrast, he finds sympathy for a more labor centric system of corporate governance historically favored in other nations such as Germany. While noting that other scholars claim such a model lost normative power over time, Greenfield emphasizes that workers possess special incentives to see that their companies thrive, because their companies' successes fuel those workers' personal well being. |
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Greenfield's progressive view on the more effective role that labor might play in the corporate governance system seems imbued with the spirit of former worker movements. In addition to channeling such spirit, he also draws on intellectual history in other ways. He critiques corporate law's characterization as private law, thus rendering it somehow not properly subject to additional government regulation. In doing so, he aligns this limiting view of corporate law with the thinking behind Lochner v. New York, where in 1905 the Supreme Court famously struck down efforts to limit bakers' working hours. According to Greenfield, underlying Lochner was an incorrect "assumption that the common law and the laissez-faire marketplace are prepolitical, neutral, and insulated from government regulation." He identifies the New Deal as a rejection of that assumption, because it reflected the notion that since government helps create the market, it also properly may regulate private market relationships. This broader view of government's ability to intervene in markets, drawn from past progressives, critically animates his subsequent proposition of a new approach to corporate governance and regulation. |
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Many surely will disagree with Greenfield's conclusions about how to restructure corporate governance. But the book would be far less engrossing if he merely reiterated traditional views on corporate regulation rather than providing his progressive, alternative vision. It is not the purpose of this review to declare whether his proposed corporate governance rules are superior to present norms. But even if one believes in current norms, in light of recent corporate scandals, she should at least consider additional perspectives on corporate law. Regardless of whether all of the solutions for recent corporate troubles are found in his book, Greenfield exhibits great insight in effectively utilizing history to further a contemporary dialogue on corporate governance reform. |
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| Kenneth M. Rosen
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University of Alabama
School of Law |
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