Bridging Troubled Waters : Linking Corporate Efficiency and Political Legitimacy Through a Discourse Theory of the Firm

As corporations increasingly dominate our economic, social, and political lives, and as shareholders vie for greater influence over business policies, can a new “discourse theory” of the firm guide the evolution of corporate law better than current theories primarily focused on shareholder wealth maximization? A series of related developments render the question of paramount importance to sustaining the basic efficacy of business decisions and the legitimacy of our polity as well. First, existing corporate law principles provide insufficient guidance regarding how managers should take into account the various shareholder and stakeholder interests expressed with increasing variety and intensity. Second, the impotence of corporate law to sustain minimal trust in the collection, reporting, and disclosure of social data threatens the viability of the $32 trillion market for corporate social responsibility. Third, the prevailing corporate law regime permitting corporate managers to ignore various shareholder and stakeholder interests becomes morally untenable as corporations aggressively dominate the political landscape. At the core of each of these three problems lies a fundamental failure to engage in effective discourse with the constituencies that corporations should ultimately serve. Unless legal doctrine evolves to embrace effective discourse as a guiding principle for assessing corporate decisions, the efficiency of corporate practices and the legitimacy of the polity hang in the balance. This Article represents the second major installment in a series that advances a new “discourse theory” of the firm. Discourse theory provides a set of robust political and organizational principles to guide the evolution of corporate law doctrine in a way that provides meaningful insights regarding the proper place of shareholders and other stakeholders in affecting corporate decisions. While the first work in the series provided a skeletal introduction regarding the amenability of corporate law to discourse theory, this Article puts substantial doctrinal meat on the bones by fleshing out in detail the legal standards and organizational mechanisms for implementing a new discourse theory of the firm. The Article concludes that implementing a new discourse theory of the firm would help solve the problems infecting current corporate law, promote greater efficiency in business decisions, and ensure basic legitimacy within the political realm