New Steve Bainbridge in the Columbia Law Review Sidebar:
In a recent article, Strine and his coauthor Nicholas Walter argue that the U.S. Supreme Court’s controversial Citizens United v. FEC decision poses a significant challenge for “conservative corporate law theory.” They argue that conservative corporate law theory supports shareholder primacy on grounds that government regulation is a more superior constraint on the externalities caused by corporate conduct than social-responsibility norms. Because Citizens United purportedly has unleashed a torrent of corporate political campaign contributions intended to undermine regulations, they argue that the decision undermines the viability of conservative corporate law theory. As a result, they contend, Citizens United “logically supports the proposition that a corporation’s governing board must be free to think like any other citizen and put a value on things like the quality of the environment, the elimination of poverty, the alleviation of suffering among the ill, and other values that animate actual human beings.”
This Essay argues that Strine and Walter’s analysis is flawed in three major respects. Part I contends that “conservative corporate law theory” is a misnomer. Strine and Walter apply the term to such a wide range of thinkers as to make it virtually meaningless. More importantly, scholars who range across the political spectrum embrace shareholder primacy. Part II summarizes and critiques the key factual claims that underlie Strine and Walter’s principal normative claim. In particular, Part II argues that Strine and Walter likely overstate the extent to whichCitizens United will result in significant erosion of the regulatory environment that constrains corporate conduct. Finally, the role of government regulation in controlling corporate conduct is just one of many arguments in favor of shareholder primacy. Many of those arguments would be valid even in a night-watchman state in which corporate conduct is subject only to the constraints of property rights, contracts, and tort law. As such, even if Strine and Walter were right about the effect of Citizens United on the regulatory state, conservative corporate law theory would continue to favor shareholder primacy over corporate social responsibility.