Taking Corporations Seriously: Some Considerations for Corporate Regulation

AuthorStephen Bottomley
DOI10.1177/0067205X9001900302
Published date01 September 1990
Date01 September 1990
Subject MatterArticle
1990]
Taking
Corporations Seriously
TAKING
CORPORATIONS
SERIOUSLY:
SOME
CONSIDERATIONS
FOR
CORPORA
TE
REGULATION
STEPHEN
BOTIOMLEY*
203
1INTRODUCTION
Corporate regulation is front-page news in Australia. In recent years
we
have
witnessed the unedifying debate between the Federal and State governments about
how the responsibility for,
and
benefits
of
regulating companies and securities
law
should be allocated. Federal Parliamentary committees have conducted
inquiries into
the
law
relating to directors' duties,l insider trading,2 and
(currently)
minority
shareholders'
rights.3
The
chairman
of
the National
Companies
and
Securities
Commission
and
the
Australian
Securities
Commission,
Mr
Tony Hartnell, has gained frequent publicity and support for
his concern to "deal with the excesses
of
the past".4
As this brief survey indicates, the renewed concern about corporate regulation
has tended to focus
on
the task
of
defining and controlling the conduct
of
some
company personnel (directors, managers, and their advisers) in order to protect
the interests
of
other corporate players (particularly shareholders and creditors).
This focus is not surprising,
but
where does it leave the corporation?
The concept
of
the corporation is often referred to in this debate. However, the
references tend either
to
debunk it as amere mask for the corporate malpractice
of
individuals, or they appeal
to
amore purified and vaguely defined concept
of
the
corporation as avehicle for the furtherance
of
legitimate individual and social
interests. This
paper
is prompted
by
the feeling that present concerns about
corporate
regulation,
whilst
appropriate,
may
be
under-emphasising the
significance
of
corporations
as
social
and
political entities -as objects
of
regulationS in their own right. CertainIy, it seems to
be
an opportune time to re-
examine the corporate theories which underpin current debates.
Calls for greater attention to issues
of
theory in the area
of
company law are
not new.6Yet astriking feature
of
the majority
of
contemporary corporate law
*
2
3
4
S
6
BA LLB (Hons) (Macq), LLM (NSW), Lecturer-in-Law, Australian National
University. Earlier versions
of
this paper were presented to astaff seminar at the
Law School, ANU, and at the Australasian Law Teachers' Association Conference on
'PubliclPrivate, Federal/State Divisions in Australasian Law', September 1990.
My
thanks to participants for their comments. Particular thanks go to Professor Paul
Finn, Professor Roderick AMacdonald, and Dr Stephen Parker.
Senate Standing Committee on Legal and Constitutional Affairs, Report on Company
Directors' Duties (November 1989).
House
of
Representatives Standing Committee on Legal and Constitutional Mfairs,
Report on Fair Shares for All: Insider Trading in Australia (October 1989).
This inquiry is currently being conducted by the House
of
Representatives Standing
Committee on Legal and Constitutional Affairs.
"Company law bans loans to directors", Australian Financial Review,
12
September
1990, 1is arecent example.
The expression is taken from GLowe, "Corporations as Objects
of
Regulation"
(1987) 5Law in Context 35.
The heyday
of
the debate in the Anglo-Australian literature appears to have been
during the first half of this century; eg FPollock, "Has the Common Law Received
204
Federal
LawReview
[VOLUME
19
literature in Australia continues to be the lack
of
attention given
to
issues
of
corporate theory.7Indeed, perhaps the most telling indication
of
the state
of
corporate law writing is that calls for theoretical inquiry seem
to
require some
justification and defence.
The broad and basic purpose
of
examining corporate theory is to develop a
framework within which we can assess the values and assumptions that either
unite or divide the plethora
of
cases, reform proposals, legislative amendments,
and practices that constitute modern corporate law. This law has not sprung up
overnight. We need some way
of
disentangling the differing philosophical and
political perspectives from which
it
has been constructed. Indeed, the great
benefit
of
theoretical inquiry is to reveal the existence
of
these differences in the
frrst place. In turn, this can help us to determine many more specific questions,
such as whether terms like "the corporation" or "the company" are adequate to
capture the diversity
of
corporate life.
Of
course the term "corporate theory" is
vague, and implies different things in different contexts.8In this paper the term
refers to attempts to provide acoherent conceptual framework within which the
existence
of
corporations9
as
social, economic, and political phenomena can
be
explained, and the consequent implications for their external regulation can
be
asserted.
10
As
already indicated, though under-emphasised at present, corporate theory does
have along history. Part 2
of
the paper looks at the three main paradigms which
have been advanced to explain the nature
of
the corporation. Iwill argue that
they are each anchored, although in different ways, in aliberal view
of
the world,
one that has decreasing relevance. Part 3
of
the paper examines an alternative
argument that has been suggested, based on corporatist theory. The paper goes
on to argue that although this alternative is not appropriate, it does indicate a
more appropriate direction for corporate theory. This is adirection which
recognises the emergence
of
acorporate species
of
liberalism. Within this, I
argue, corporations can, and ought to be analysed as important and specific sites
at which the boundaries between the state and civil society are being redefined.
7
8
9
10
the Fiction Theory
of
Corporations?" (1911) 21 LQR 219; MWolff. "On the Nature
of
Legal Persons" (1938) 54 LQR 494. For asurvey
of
more recent literature see R
Tomasic et al. Corporation UJw: Principles, Policy and Process (1990)
1.
Perhaps the major contemporary exception
to
this claim is the body
of
work that
draws on economic theories
of
law. But by comparison with overseas there is still
comparatively little
of
this work in the Australian literature.
10hn CCoates refers to usages
of
the teon in connection with issues
of
corporate
governance. corporate beha