A New Discourse Theory of the Firm After Citizens United

Could a new “discourse theory” of the firm provide a better way than existing corporate law principles to understand the evolving nature of the firm and the role shareholders should play in corporate governance? Two recent developments provide a special urgency for considering the question. First, the Supreme Court’s decision in Citizens United v. FEC, which grants to corporations essentially the same political speech rights as individuals, will affect democracy at its core by allowing corporations to dominate the political agenda and public opinion. Second, the Securities and Exchange Commission’s adoption of a new Rule 14a-11, which grants to certain shareholders the right to nominate directors using the corporation’s own proxy, could effectively serve as a check on creeping corporate influence in all realms of society. Those two developments combine to signal a potentially tectonic shift in the nature of the corporation and to beckon for a more descriptively accurate theory of the corporation capable of accommodating such a change. But why is a new discourse theory necessary to answer effectively questions about the nature of the firm and expansion of shareholder rights? Quite simply, the corporation has evolved from a simple investment vehicle for generating wealth. Accordingly, the underlying theories governing corporate behavior should evolve as well. The decisions affecting some of the most important aspects of our individual and communal lives now get made inside the boardroom rather than in the public eye. And, in the wake of Citizens United, corporate actors may likely dominate the political agenda and public opinion on any matters that remain open for discussion in the public realm. In some real sense, the ability to direct corporate decisions represents the ability to control political life. Not only does a new discourse theory of the firm accurately attend to the evolving nature of the corporation, but it provides rather clear guidance on whether the SEC should promote enhanced shareholder suffrage through director nomination rights. Within a new discourse theory of the firm, providing shareholders the right to nominate directors represents a clear first step in enhancing a continual engagement between corporate managers and the shareholders they serve. Moreover, enhanced discourse necessarily promotes a more efficient level of shareholder suffrage than current corporate law provides