The Embedded Firm: Corporate Governance, Labor, and Finance Capitalism

This paper constitutes the introduction to an edited collection, THE EMBEDDED FIRM: LABOR, CORPORATE GOVERNANCE AND FINANCE CAPITALISM (Cambridge University Press, 2011). This book brings together contributions from law, economics, sociology and politics in order to evaluate the effects of the shift to shareholder primacy in both the United States and the United Kingdom, in the context of an increasingly financialized economy. Contributors include Ruth Aguilera, William Allen, Harry Arthurs, Blanaid Clark, Mary Condon, Simon Deakin, Sandy Jacoby, William Lazonick, Sue Konzelmann, Dalia Tsuk Mitchell, Larry Mitchell, Frank Wilkinson, and the editors Cynthia Williams and Peer Zumbansen, among others. The book emphasizes empirical evidence, in conjunction with theory, in conscious rejection of the oft- stated view that “it takes a theory to beat a theory.” For in evaluating the empirical effects of these decades-long trends, in light of the on-going global financial and economic crises - crises propagated from the United States - the problems inherent in American-style corporate governance have become manifest. Such problems do not only concern corporate governance, since the shareholder wealth maximizing norm in the United States is embedded within economic and political institutions stripped of many social democratic norms and policies and with an increasing tendency towards deregulation. But the book demonstrates that the result of shareholder primacy, in conjunction with neo-liberal economic and political norms, has been increasing economic volatility and inequality, systemic fragility, and financial risk that is increasingly being transferred to individuals to manage, given the collapse of many collective bargaining agreements and collective arrangements for pensions. The congruence of theory and evidence suggesting weaknesses in shareholder driven corporate governance as expressed in the U.S. and U.K. give rise to questions of how policy and research can best be harnessed to develop more stable systems of corporate governance, and how these goals may best be aligned with government policy. Since it is naïve to think that continental European stakeholder systems, also under pressure, could be transplanted into the United States or the United Kingdom by legislative fiat, the book concludes with suggestions for research and policy development to address the instabilities shareholder corporate governance systems create, while still relying upon existing models within liberal market economies

The Embedded Firm: Corporate Governance, Labor, and Finance Capitalism

This paper constitutes the introduction to an edited collection, THE EMBEDDED FIRM: LABOR, CORPORATE GOVERNANCE AND FINANCE CAPITALISM (Cambridge University Press, 2011). This book brings together contributions from law, economics, sociology and politics in order to evaluate the effects of the shift to shareholder primacy in both the United States and the United Kingdom, in the context of an increasingly financialized economy. Contributors include Ruth Aguilera, William Allen, Harry Arthurs, Blanaid Clark, Mary Condon, Simon Deakin, Sandy Jacoby, William Lazonick, Sue Konzelmann, Dalia Tsuk Mitchell, Larry Mitchell, Frank Wilkinson, and the editors Cynthia Williams and Peer Zumbansen, among others. The book emphasizes empirical evidence, in conjunction with theory, in conscious rejection of the oft- stated view that “it takes a theory to beat a theory.” For in evaluating the empirical effects of these decades-long trends, in light of the on-going global financial and economic crises - crises propagated from the United States - the problems inherent in American-style corporate governance have become manifest. Such problems do not only concern corporate governance, since the shareholder wealth maximizing norm in the United States is embedded within economic and political institutions stripped of many social democratic norms and policies and with an increasing tendency towards deregulation. But the book demonstrates that the result of shareholder primacy, in conjunction with neo-liberal economic and political norms, has been increasing economic volatility and inequality, systemic fragility, and financial risk that is increasingly being transferred to individuals to manage, given the collapse of many collective bargaining agreements and collective arrangements for pensions. The congruence of theory and evidence suggesting weaknesses in shareholder driven corporate governance as expressed in the U.S. and U.K. give rise to questions of how policy and research can best be harnessed to develop more stable systems of corporate governance, and how these goals may best be aligned with government policy. Since it is naïve to think that continental European stakeholder systems, also under pressure, could be transplanted into the United States or the United Kingdom by legislative fiat, the book concludes with suggestions for research and policy development to address the instabilities shareholder corporate governance systems create, while still relying upon existing models within liberal market economies

Theorising Global Governance Inside Out: A Response to Professor Ladeur

Professor Ladeur argues that administrative law’s postmodernism (and by extension Global Administrative Law) necessitates that we move beyond relying on ideas of delegation, account- ability and legitimacy. Global Governance, particularly Global Administrative Law and Global Constitutionalism, should try to adapt and experiment with the changing nature of the postmod- ern legality and support the creation of norms that will adapt to the complexities of globalisation. Ladeur’s contestation, similar to GAL’s propositions, can be challenged. By taking the International Criminal Tribunal for Rwanda, a significant contributor to the field of international criminal law, as an example, it is suggested that the creation of networks that Ladeur makes visible may not account for ‘regulatory capture’. This paper will argue that from the outside, the proliferation of networks may suggest that spontaneous accountability is possible. A closer look, however, drawing on anthropological insights from the ICTR, reveals that international institutions are suscepti- ble to capture by special interests. Furthermore, there are two central themes that animate the response to Professor Ladeur: the political nature of international institutions and the history of international law, and the role of institutions in this history

The Conundrum of Order: The Concept of Governance from an Interdisciplinary Perspective

The term governance has made an impressive career in a number of disciplines concerned with regulation, order and law. This chapter draws on insights from legal studies, sociology, political science, anthropology, history and geography to paint a multifaceted picture of existing, competing and complementing approaches to the concept of governance. For reasons of space, the chapter can but point to the different variations on a theme, as governance occupies an ambivalent place in past and present discourses on political (or, legal or economic) order and society. It is argued that beyond pointing to crucial phases of methodological and theoretical transformation within different disciplines such as the often perceived transition ‘from government to governance’, governance is itself a deeply interdisciplinary concept

Varieties of Capitalism and the Learning Firm: Contemporary Developments in EU and German Company Law - A Comment on the Strine-Bainbridge Debate About Shared Values of Corporate Management and Labor

Research in corporate governance and in labour law has been characterized by a disjuncture in the way that scholars in each field are addressing organizational questions related to the business enterprise. While labour has eventually begun to shift perspectives from aspirations to direct employee involvement in firm management, as has been the case in Germany, to a combination of \u27exit\u27 and \u27voice\u27 strategies involving pension fund management and securities litigation, it remains to be seen whether this new stream will unfold as a viable challenge to an otherwise exclusionary shareholder value paradigm. At the same time, recent suggestions made by Delaware Chancery Court Vice Chancellor Strine, to dare think about potentially shared commitments between management and labor - and UCLA\u27s Stephen Bainbridge\u27s response - underline the viability - and, the contestedness - of attempts at moving the corporate governance debate beyond the confines of corporate law proper. While such a wider view had already famously been encouraged by Dean Clarke in his 1986 treatise on Corporate Law (p. 32), mainstream corporate law does not seem to have endorsed this perspective. This paper takes the questionable divide between management and labor within the framework of a limiting corporate governance concept as starting point to explore the institutional dynamics of the corporation, hereby building on the theory of the innovative enterprise, as developed by management theorists Mary O\u27Sullivan and William Lazonick. Largely due to the sustained distance between corporate and labour law scholars, neither group has effectively addressed their common blind spot: a better understanding of the business enterprise itself. In midst of an unceasing flow of affirmations of the finance paradigm of the corporation on the one hand and \u27voice\u27 strategies by labour on the other, it seems to fall to management theorists to draw lessons from the continuing co-existence of different forms of market organization, in which companies appear to thrive. Exploring the conundrum of \u27risky\u27 business decisions within the firm, management theorists have been arguing for the need to adopt a more sophisticated organizational perspective on companies operating on locally, regionally and transnationally shaped, often highly volatile market segments. Research by comparative political economists has revealed a high degree of connectivity between corporate governance and economic performance without, however, arriving at such favourable results only for shareholder value regimes. Such findings support the view that corporate governance regimes are embedded in differently shaped regulatory frameworks, characterized by distinct institutions, both formal and informal, and enforcement processes. As a result of these findings, arguments to disassociate issues of corporate governance from those of the firm\u27s (social) responsibility [CSR] have been losing ground. Instead, CSR can be taken to be an essential part of understanding a particular business enterprise. It is the merging of a comparative political economy perspective on the corporation with one on the organizational features, structures and processes of the corporation, which can help us better understand the distribution of power and knowledge within the \u27learning firm\u27

Vilhelm Lundstedt’s ‘Legal Machinery’ and the Demise of Juristic Practice

This article aims to contribute to the academic debate on the general crisis faced by law schools and the legal professions by discussing why juristic practice is a matter of experience rather than knowledge. Through a critical contextualisation of Vilhelm Lundstedt’s thought under processes of globalisation and transnationalism, it is argued that the demise of the jurist’s function is related to law’s scientification as brought about by the metaphysical construction of reality. The suggested roadmap will in turn reveal that the current voiding of juristic practice and its teaching is part of the crisis regarding what makes us human

The Law of Society: Governance Through Contract

This paper focuses on contract law as a central field in contemporary regulatory practice. In recent years, governance by contract has emerged as the central concept in the context of domestic privatization, domestic and transnational commercial relations and law-and-development projects. Meanwhile, as a result of the neo-formalist attack on contract law, governance of contract through contract adjudication, consumer protection law and judicial intervention into private law relations has come under severe pressure. Building on early historical critique of the formalist foundations of an allegedly private law of the market, the paper assesses the current justifications for contractual governance and posits that only an expanded legal realist perspective can adequately explain the complex nature of contractual agreements in contemporary practice. The paper argues for an understanding of contracts as complex societal arrangements that visibilize and negotiate conflicting rationalities and interests. Institutionally, contractual governance has been unfolding in a complex, historically grown and ideologically continually contested regulatory field. Governance through contract, then, denotes a wide field of conflicting concepts, ideas and symbols, that are themselves deeply entrenched in theories of society, market and the state. From this perspective, we are well advised to study contracts in their socio-economic, historical and cultural context. A careful reading of scholars such as Henry Sumner Maine, Morris Cohen, Robert Hale, Karl Llewellyn, Stewart Macaulay and Ian Macneil offers a deeper understanding of the institutional and normative dimensions of contractual governance. Their analysis is particularly helpful in assessing currently ongoing shifts away from a welfare state based regulation (governance) of contractual relations. Such shifts are occurring on two levels. First, they take place against the backdrop of a neo-liberal critique of government interference into allegedly private relations. Secondly, the increasingly influential return to formalism in contract law, which privileges a functionalist, purportedly technical and autonomous design and execution of contractual agreements over the view of regulated contracts, is linked to a particular concept of sovereignty. The ensuing revival of freedom of contract occurs in remarkable neglect of the experiences of welfare state adjudication of private law adjudication and a continuing contestation of the political in private relationships. The paper takes up the Legal Realists\u27 search for the \u27basis of contract\u27, but seeks to redirect the focus from the traditional perspective on state vs. market to a disembedded understanding of contractual governance as delineating multipolar and multirational regulatory regimes. Where Globalization has led to a fragmentation, disembeddedness and transnationalization of contexts and, thus, has been challenging traditional understanding of embeddedness, the task should no longer be to try applying a largely nation-state oriented Legal Realist perspective and critique to the sphere of contemporary contractual governance, but - rather - to translate its aims into a more reflexive set of instruments of legal critique. Even if Globalization has led to a dramatic denationalization of many regulatory fields and functions, it is still not clear, whether and how Globalization replaces, complements or aggravates transformations of societal governance, with and through contract