Fiduciaries, Federalization, and Finance Capitalism: Berle’s Ambiguous Legacy and the Collapse of Countervailing Power

This Article engages problematic interpretations of Berle\u27s thinking, as well as their implications for understanding Berle’s legacy and its relevance to some of the most critically important contemporary dilemmas of American law, policy, and politics. . . . Characterizing the New Deal, let alone the political economic and regulatory regime that emerged as its lasting legacy, as corporatist is imprecise, prone to misunderstanding, and largely erroneous. The misuse of corporatism as a term not only misconceives neocorporatism as a theory of governance and political economic ordering, but also obscures its core institutional and juridical attributes along with the variety of its historical and existing forms across much of the industrialized world. Still worse, the increasingly common description of contemporary economic and regulatory policy as corporatist is polemical, rather than analytical. The imprecise use of the term corporatist does not merely distort our understanding of Berle and his times, it also, and more importantly, distracts our attention from the salient, enduring features of the American political economy and a regulatory and administrative state that appears increasingly inadequate for addressing the causes and consequences of our recent catastrophic financial crisis. . . . Berle’s thinking was not informed by corporatist theories, nor was it an adaptation of corporatist-type principles of institutional design and governance to the level of the corporation. Further, his advocacy of national economic planning through quasi-corporatist arrangements during the early New Deal reflected a contradictory and often vague conception of how such arrangements should be structured and function with respect to the role of the state, business interests, and formal rules. The ambiguities of Berle’s intellectual legacy can be clarified by viewing it in the context of the rise and fall of “countervailing power” in the American political economy. John Kenneth Galbraith identified countervailing power in 1952 as a pervasive structural feature of the postwar economic order that served as a crucial means of stabilization and legitimation. This concept referred to the largely spontaneous and market-driven emergence of increasingly organized opposing interests within the economy that were capable of bargaining with each other on roughly equal terms. The consequent balance of economic power effected by these countervailing organizational interests ameliorated threats to both the economic and political order posed by the massive concentration of unconstrained managerial power made possible by industrialization and the rise of the large publicly held corporation. Within the postwar economic regime of countervailing power, corporate management was situated within a comprehensive set of market relationships that limited managerial discretion and promoted the development of a form of corporate and sectoral organization, as well as an accompanying management style, that tamed the self-serving excesses of managerial and financial elites. . . . This Article also discusses the economic crisis of the 1970s and the takeover wave of the 1980s as pivotal in the collapse of countervailing power and the emergence of a new form of neoliberal finance capital. The Article concludes by showing how this political economic order has developed and imploded in ways that recapitulate many of Berle’s political and economic critiques of corporate power, unregulated markets, and the role of the state and law in ameliorating the excesses and crises of capitalism

Corporate Governance Reform, Regulatory Politics, and the Foundations of Finance Capitalism in the United States and Germany

Since 1990, both the U.S. and Germany have substantially reformed their corporate governance regimes as part of an emerging paradigm of international finance capitalism increasingly dependent on securities markets and private shareholding. Corporate governance reform and the emergence of finance capitalism, however, presents a double paradox. First, the development of financial markets and the increasing importance of market relations, often linked to the diminution of state power, have been accompanied by a substantial and ongoing expansion of law and regulatory capacity into the private sphere to boost shareholder protections. Second, center-left parties in both countries took advantage of economic crises to press for pro-shareholder reforms against center-right opposition allied with managerial elites. This article explains these developments by analyzing reform processes in United States and Germany over the past decade. It argues that changing economic conditions empowered reformist state actors, and that they have played a central and largely autonomous role in driving the substantial institutional change underway in contemporary capitalism. The analysis also suggests that political conflict over corporate governance is likely to intensify, on the right and the left, as it impinges on the basic allocation of power within corporations and thus the political economy

Fiduciaries, Federalization, and Finance Capitalism: Berle’s Ambiguous Legacy and the Collapse of Countervailing Power

This Article engages problematic interpretations of Berle\u27s thinking, as well as their implications for understanding Berle’s legacy and its relevance to some of the most critically important contemporary dilemmas of American law, policy, and politics. . . . Characterizing the New Deal, let alone the political economic and regulatory regime that emerged as its lasting legacy, as corporatist is imprecise, prone to misunderstanding, and largely erroneous. The misuse of corporatism as a term not only misconceives neocorporatism as a theory of governance and political economic ordering, but also obscures its core institutional and juridical attributes along with the variety of its historical and existing forms across much of the industrialized world. Still worse, the increasingly common description of contemporary economic and regulatory policy as corporatist is polemical, rather than analytical. The imprecise use of the term corporatist does not merely distort our understanding of Berle and his times, it also, and more importantly, distracts our attention from the salient, enduring features of the American political economy and a regulatory and administrative state that appears increasingly inadequate for addressing the causes and consequences of our recent catastrophic financial crisis. . . . Berle’s thinking was not informed by corporatist theories, nor was it an adaptation of corporatist-type principles of institutional design and governance to the level of the corporation. Further, his advocacy of national economic planning through quasi-corporatist arrangements during the early New Deal reflected a contradictory and often vague conception of how such arrangements should be structured and function with respect to the role of the state, business interests, and formal rules. The ambiguities of Berle’s intellectual legacy can be clarified by viewing it in the context of the rise and fall of “countervailing power” in the American political economy. John Kenneth Galbraith identified countervailing power in 1952 as a pervasive structural feature of the postwar economic order that served as a crucial means of stabilization and legitimation. This concept referred to the largely spontaneous and market-driven emergence of increasingly organized opposing interests within the economy that were capable of bargaining with each other on roughly equal terms. The consequent balance of economic power effected by these countervailing organizational interests ameliorated threats to both the economic and political order posed by the massive concentration of unconstrained managerial power made possible by industrialization and the rise of the large publicly held corporation. Within the postwar economic regime of countervailing power, corporate management was situated within a comprehensive set of market relationships that limited managerial discretion and promoted the development of a form of corporate and sectoral organization, as well as an accompanying management style, that tamed the self-serving excesses of managerial and financial elites. . . . This Article also discusses the economic crisis of the 1970s and the takeover wave of the 1980s as pivotal in the collapse of countervailing power and the emergence of a new form of neoliberal finance capital. The Article concludes by showing how this political economic order has developed and imploded in ways that recapitulate many of Berle’s political and economic critiques of corporate power, unregulated markets, and the role of the state and law in ameliorating the excesses and crises of capitalism

Irresistible Forces and Political Obstacles: Securities Litigation Reform and the Structural Regulation of Corporate Governance

Congress passed the Sarbanes-Oxley Act of 2002 in reaction to the enormous political pressures generated by the wave of corporate financial scandals during 2001-2002. The Act\u27s innovative reforms of corporate governance law were shaped by powerful political constraints on the use of private litigation and tensions over the use of structural regulation to alter the internal governance structures and procedures of publicly traded corporations. The conservative political realignment during 1990s precluded the development or expansion of litigious enforcement mechanisms (i.e., private causes of action) to curb corporate and managerial financial misconduct. Consequently, a number of the Sarbanes-Oxley Act\u27s core provisions took the form of structural regulation intended to function as non-litigious, self-executing mechanisms of regulation. Political constraints on the use of private litigation as an enforcement mechanism entailed a more direct intervention of state power within the corporation and blurred the established boundaries between the public and private spheres. However, the legislative reforms did not alter the core processes of corporate managerial power - the nomination and election of directors to the board. When the SEC attempted to do so, it threatened encroachment on the private sphere and the institutional bases of managerial power and autonomy and produced a backlash by business elites against further reforms and against the underlying logic of Sarbanes-Oxley itself

Achieving full diversity in multi-antenna two-way relay networks via symbol-based physical-layer network coding

This paper considers physical-layer network coding (PNC) with M-ary phase-shift keying (MPSK) modulation in two-way relay channel (TWRC). A low complexity detection technique, termed symbol-based PNC (SPNC), is proposed for the relay. In particular, attributing to the outer product operation imposed on the superposed MPSK signals at the relay, SPNC obtains the network-coded symbol (NCS) straightforwardly without having to detect individual symbols separately. Unlike the optimal multi-user detector (MUD) which searches over the combinations of all users’ modulation constellations, SPNC searches over only one modulation constellation, thus simplifies the NCS detection. Despite the reduced complexity, SPNC achieves full diversity in multi-antenna relay as the optimal MUD does. Specifically, antenna selection based SPNC (AS-SPNC) scheme and signal combining based SPNC (SC-SPNC) scheme are proposed. Our analysis of these two schemes not only confirms their full diversity performance, but also implies when SPNC is applied in multi-antenna relay, TWRC can be viewed as an effective single-input multiple-output (SIMO) system, in which AS-PNC and SC-PNC are equivalent to the general AS scheme and the maximal-ratio combining (MRC) scheme. Moreover, an asymptotic analysis of symbol error rate (SER) is provided for SC-PNC considering the case that the number of relay antennas is sufficiently large

Legal Regimes and Political Particularism: An Assessment of the Legal Families Theory from the Perspectives of Comparative Law and Political Economy

The “legal families” theory of corporate law and ownership structures pioneered by Rafael La Porta, Florencio Lopez-deSilanes, Andrei Shleifer, and Robert Vishny provides one of the most influential accounts of why “law matters” in shaping economic organization and outcomes. However, the empirical bases and theoretical logic of the theory contain serious flaws and limitations. First, as has been pointed out by a number of critics engaged in this revision, the legal origins literature contains numerous problematic characterizations of substantive law that expose the serious problems of quantitative operationalization of legal rules as a mode of comparative legal analysis. Second, the econometrics analysis of broad, cross-national patterns of legal and financial system characteristics departs from the theoretical and practical concerns of law as an academic and professional discipline focused on intra-systemic behavior. Third, the legal families theory is essentially an underspecified, path-dependent account of political economic development that is, at the very least, in logical tension with observable changes in law and financial system structures of both the past and present. Fourth, the methodology does not adequately distinguish between countries in which the rule of law and functional political and legal institutions are well-established (generally the advanced industrial countries) and those in which they are not (generally less developed countries (LDCs), often with significant post-colonial legacies). Given these flaws in, and limitations of, the legal families theory, the intuitively appealing thesis that law matters must be resituated in a more empirically persuasive and historically sensitive account of the relationship between law and politics. I speculate that any meaningful correlation between legal origins and economic outcomes is the product of politics in the first instance rather than law, and that legal families likely function as a proxy for different forms of political economic organization

Legal Regimes and Political Particularism: An Assessment of the Legal Families Theory from the Perspectives of Comparative Law and Political Economy

The “legal families” theory of corporate law and ownership structures pioneered by Rafael La Porta, Florencio Lopez-deSilanes, Andrei Shleifer, and Robert Vishny provides one of the most influential accounts of why “law matters” in shaping economic organization and outcomes. However, the empirical bases and theoretical logic of the theory contain serious flaws and limitations. First, as has been pointed out by a number of critics engaged in this revision, the legal origins literature contains numerous problematic characterizations of substantive law that expose the serious problems of quantitative operationalization of legal rules as a mode of comparative legal analysis. Second, the econometrics analysis of broad, cross-national patterns of legal and financial system characteristics departs from the theoretical and practical concerns of law as an academic and professional discipline focused on intra-systemic behavior. Third, the legal families theory is essentially an underspecified, path-dependent account of political economic development that is, at the very least, in logical tension with observable changes in law and financial system structures of both the past and present. Fourth, the methodology does not adequately distinguish between countries in which the rule of law and functional political and legal institutions are well-established (generally the advanced industrial countries) and those in which they are not (generally less developed countries (LDCs), often with significant post-colonial legacies). Given these flaws in, and limitations of, the legal families theory, the intuitively appealing thesis that law matters must be resituated in a more empirically persuasive and historically sensitive account of the relationship between law and politics. I speculate that any meaningful correlation between legal origins and economic outcomes is the product of politics in the first instance rather than law, and that legal families likely function as a proxy for different forms of political economic organization