Corporate Power. A Problem for Liberal Legitimacy - Tully Rector SCRIPTS Working Paper No. 8
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Tully Rector
Corporate Power. A Problem for Liberal Legitimacy
SCRIPTS Working Paper No. 8
Contestations of the Liberal ScriptCLUSTER OF EXCELLENCE “CONTESTATIONS OF SCRIPTS WORKING PAPER SERIES THE LIBERAL SCRIPT ‒ SCRIPTS” SCRIPTS analyzes the contemporary controversies about The SCRIPTS Working Paper Series serves to disseminate liberal order from a historical, global, and comparative the research results of work in progress prior to publi- perspective. It connects academic expertise in the social cation to encourage the exchange of ideas, enrich the sciences and area studies, collaborates with research discussion and generate further feedback. All SCRIPTS institutions in all world regions, and maintains cooperative Working Papers are available on the SCRIPTS website at ties with major political, cultural, and social institutions. www.scripts-berlin.eu and can be ordered in print via email Operating since 2019 and funded by the German Research to office@scripts-berlin.eu. Foundation (DFG), the SCRIPTS Cluster of Excellence unites eight major Berlin-based research institutions: Freie Series-Editing and Production: Dr. Anke Draude, Universität Berlin, the Humboldt-Universität zu Berlin, the Dr. Gregor Walter-Drop, Cordula Hamschmidt, Berlin Social Science Center (WZB), as well as the Hertie Paul Geiling, and Carol Switzer School, the German Institute for Economic Research (DIW), the Berlin branch of the German Institute of Global and Please cite this issue as: Rector, Tully 2021: Corporate Power. Area Studies (GIGA), the Centre for East European and A Problem for Liberal Legitimacy, SCRIPTS Working Paper International Studies (ZOiS), and the Leibniz-Zentrum No. 8, Berlin: Cluster of Excellence 2055 “Contestations of Moderner Orient (ZMO). the Liberal Script – SCRIPTS”. Cluster of Excellence “Contestations of the Liberal Script – SCRIPTS” Freie Universität Berlin Edwin-Redslob-Straße 29 14195 Berlin Germany +49 30 838 58502 office@scripts-berlin.eu www.scripts-berlin.eu Twitter: @scriptsberlin Facebook: @scriptsberlin
TABLE OF CONTENTS Author Abstract 1 Introduction 3 2 Liberal Legitimation 4 3 Corporate Power in Theory 9 4 Corporate Power in Practice 14 5 Conclusion 19 References
SCRIPTS WORKING PAPER NO. 8 AUTHOR Tully Rector is a postdoctoral researcher in the philosophy department at Utrecht University. His work addresses normative problems of political economy, and his related interests include so- cial ontology, theories of practical reason, com- parative philosophy, and the history of politi- cal thought, especially the ideas of freedom and power in Kant, Hegel, and Marx. Tully received his PhD in philosophy from the Freie Universität Ber- lin in 2019. From 2019 to 2020, he was an IRC Post- doctoral Research Fellow at “Contestations of the Liberal Script – SCRIPTS”. t.f.rector@uu.nl 2
SCRIPTS WORKING PAPER NO. 8
Corporate Power
A Problem for Liberal Legitimacy
Tully Rector
ABSTRACT
This paper presents and defends an account of how joblessness and underemployment; environmen-
the political power of business corporations under- tal externalities; long-term stagnant growth; rent-
mines liberal forms of legitimacy. Corporations are cre- ier financialization; rising indebtedness; austerity;
ated and empowered by the authority of the liberal
precarity; surging inequality of wealth and income
state. Under capitalism, the logic of competitive ad-
– were it not for these facts, the liberal dispen-
vantage dictates that those powers be applied in ways
that violate, directly and indirectly, basic liberal norms sation would be much more stable. Arguments to
and values. That violation supplies reasons to contest that effect typically posit corporations as causally
the political order authorizing their occurrence. Cor- instrumental in, and culpable for, bringing about
porate power therefore represents a failure of the lib- the relevant harms. Liberal order is impaired by
eral order to satisfy its own conditions of legitimacy. the scope and effects of “corporate globalization”
(Fraser 2017: 40), “corporate wealth” (Brown 2019:
26), “corporate control” (Streeck 2014: 91), or “cor-
1 INTRODUCTION porate sovereignty” (Barkan 2013: passim).
The mature democracies are undergoing a po- My aim in this paper is to present a general con-
litical sea-change. Loyalty to established par- ceptual structure for these empirical claims to be
ties has fallen dramatically. Centrist programs fitted into. Assume the facts mentioned above,
seem exhausted. Confidence in liberal-demo- and others to which they are related, entail or
cratic government in general is waning. Move- follow from – or themselves constitute – unequal
ments and ideas that were once marginal, like relations of economic power. Rising unemploy-
ethno-nationalism, socialism, and radical climate ment means, for example, that persons with the
advocacy, have entered the political mainstream. power to fire other persons are using it more of-
Civil unrest is increasingly common.1 What ex- ten. Such relations of power affect people’s free-
plains these changes? Accounts vary, but most dom, well-being, and status, thereby supplying
give considerable weight to the same explanans: them with reasons to oppose or endorse – de-
deep and growing discontent with our globalized pending on the effect – the political order au-
economic order.2 Wage suppression; offshoring; thorizing those relations. This is hard to deny, as
tax avoidance; privatization of public services; stated. It is a perennial concern of political the-
ory: which sorts of economic relations give rise
to what reasons, for which people, under what
1 Occupations, strikes, demonstrations, riots, transport block-
conditions, and why? Here I focus on one mode
ades by enragés from the “invisible” social strata: according to
the International Labor Organization (ILO), these and other such of economic power – that of the business cor-
incidents have increased globally since 2009 (International Labor
poration; one form of political reasoning – legiti-
Organization 2020).
2 For representative arguments, see Geiselberger (2017); Crouch
mation; and one kind of political order – liberal-
(2018); Eichengreen (2018); Kuttner (2018); Rodrik (2018). ism. The argument is this. Because the business
3SCRIPTS WORKING PAPER NO. 8
corporation is created and empowered by the au- in light of those instabilities. It is a small con-
thority of the liberal state, and its powers are ap- tribution to the debate over whether our politi-
plied in ways that violate, directly and indirectly, cal institutions and values should serve, balance,
basic liberal ideals and commitments, corporate or abolish private capital ownership. Contrary to
power weakens the legitimation of liberal order. Fukuyama-style hopes, that debate is likely to
Corporate power, in brief, represents an internal persist – if not intensify – as long as economic
failure of liberalism. Whether it can be resolved dynamics lead to significant inequalities of po-
under an authority that still knows itself as liber- litical and social power.
al is among the most important questions of our
historical moment.
2 LIBERAL LEGITIMATION
This paper is divided as follows. The second sec-
tion develops a version of liberal order’s legit- In this section, I reconstruct an outline or digest
imating conditions, in terms of independence, of liberalism’s legitimation conditions, and the
welfare, and shared group agency. The condi- place of economic life in those conditions. To be-
tions are supposed to ensure that law’s public gin at the beginning, as it were: persons have ca-
authority is used to promote the common good. pacities to shape states-of-affairs, affecting the
It is against that background that corporate pow- actions and preferences of others. They have
er’s relation to liberalism should be understood. powers. When they belong to a political order,
The third section discusses the emergence of the they are governed under rules whose function,
corporation from within those conditions, as an broadly, is to direct, develop, constrain, and en-
outcome of law being used in highly determinate hance the various powers they have, as individ-
ways. I review the significant properties of cor- uals and groups. When that order is a commu-
porate power; these reflect both the nature of nity, power is managed in the common interest.
capital and the particularities of the corporate Rules are made and enforced according to princi-
form. The fourth section demonstrates the spe- ples that everyone has sufficient reason to favor.
cific ways in which corporate power contravenes Resources are organized to create and sustain
values basic to liberalism’s normative authority. I facilities that benefit everyone: bridges, courts,
conclude with a recapitulation of the main points, curricula, healthy ecosystems, etc. As a result,
considering their implications for, and their fac- persons can formulate and realize aims valuable
tual standing as an explanation of, liberal order’s to them. They can meet their obligations. Their
more immediately present challenges. But let me entitlements are equally secure. Relations of mu-
head off a few misconceptions at the outset. I tual respect and concern are promoted and sta-
do not suppose that economic factors are more bilized. Exploitative and predatory relations are
significant for understanding our current politi- eliminated, wherever possible. Under these con-
cal tumult than those of race, ethnicity, gender, ditions, the political order generates reasons for
and so forth, with which they intersect. Nor do I loyalty – the conditions are those reasons. The
think business corporations have no social util- system of governance, and the people staffing
ity. I do not attribute to corporate power every it at any given time, are accepted as bearers of
socio-economic ill afflicting liberal societies. My rightful authority. Citizens experience themselves
purpose is narrow: to assess liberalism’s instabil- as belonging to an integrated social whole. Rea-
ities in light of production via the corporate form, sons of solidarity have a firm grip on their mo-
and, conversely, to assess the desirability of using tivations. Because they see their narrowly pri-
that form as our principal vehicle of production, vate projects as depending, in some appropriate
4SCRIPTS WORKING PAPER NO. 8
sense, on the common good, they are willing to amounts to just another resource, like land or
make significant personal sacrifices, when called jobs, that people compete for. Even if the incen-
upon, to promote the common good. tive structure were configured to correct for that
problem, a basic good is absent, that of the civ-
These are, in rough outline, the structural qual- ic relation itself, conceived as a structure of sol-
ities of a flourishing political order. When they idaristic concern. These three failed orders are
obtain, the governing apparatus can plan for and ideal types. Each reveals a specific way in which
respond effectively to exogenous problems – hur- the laws and norms that manage power can de-
ricanes, invasions, viral pandemics – and adapt prive people of goods that have a distinctly po-
smoothly as problems arise from within. There litical value, in addition to whatever other value
are at least three ways a political order can fail, they have. That deprivation impairs the political
however, to have these qualities, or to have them order’s legitimacy.
in sufficient degrees. First, it can it be essential-
ly dominative: some people, rulers, extract value Legitimacy’s impairment, weakening, and loss can
from others, the ruled, with little consideration or be immanent or external. An immanent loss in-
concern for their independent interests. No civic volves the ruling authority failing to satisfy the
relation of any substance binds them. Think of the terms of its own claims to power. An external loss
État indépendant du Congo, or the Spartans’ lord- involves the failure of those claims themselves,
ship over the helots. Violence must be applied by even when satisfied, to appropriately track the
the dominators, at high opportunity cost, to keep needs and interests of those over whom power is
their subjects in line, since they have no good exercised, and to whom the claims are, therefore,
in common. Second, a political order can define directed. Usually legitimacy is defined, in these
community as the negation of people’s person- senses, as an attribute or quality of states, gov-
al aims and projects. The good of some reified ernments, rulers, and the actions they take.4 It is
entity, like the Revolutionary State or the Volks- the authority to determine features of the nor-
gemeinschaft, is taken as the only proper aim of mative landscape – to make it the case that peo-
individual striving. This requires cognitive distor- ple should or should not do certain things – and,
tions that badly impair social learning, as well as as a corollary, to use force to get them to comply
significant applications of repressive force. Third, with those determinations. The liberal heritage
a political order can invert that problem, dena- contains a family of stories about its grounds. The
turing the common good by defining it in exhaus- most influential – the one I treat as being at the
tively private terms. The only political relations core of liberalism – combines Kantian and wel-
that matter, for any individual, lay within the hori- farist elements. The former emphasizes indepen-
zon of that individual’s personal life and proj- dence, the latter emphasizes those basic goods
ects. Public institutions, and the public realm in criterial for satisfying rational preferences. Let
general, are only valuable as instruments for ef- me explain. In the Kantian schema, everyone has
ficiently coordinating private attempts to maxi- an innate right to be their own master, free from
mize utility.3 The reasoning required to run such coercion by others. Governmental coercion is le-
institutions, however, conflicts with that of purely gitimate when and because it prevents that uni-
individualistic advantage-seeking. Public power lateral coercion. Government – the civil condition,
3 John Rawls (1999: 457) calls this a “private society”, one in
which “everyone prefers the most efficient scheme that gives 4 We will set aside descriptive accounts of legitimacy that focus
him the largest share of assets”. See also Hegel ([1821] 1991: strictly on the content of beliefs or de facto powers. C.f. Weber
§§182–188). (2002: Ch. 8).
5SCRIPTS WORKING PAPER NO. 8
political order – exists, and must be created or and liabilities – those governed under that pow-
entered into as a matter of right, in order to guard er have to share an identity with whoever holds
your basic entitlement to use your holdings and it, where “sharing an identity” means, roughly,
abilities to set and pursue the ends you think are being equal members of the same group agent.
worthwhile, consistent with others’ exercise of That follows from independence. Liberal elec-
that very right.5 The welfarist view is somewhat tions are justified as mechanisms for ensuring
different. If it makes sense for anyone to have this: from among a common group of equally
preferences at all, then there are states-of-af- entitled citizens, a subset is chosen to carry out
fairs that it would make sense for anyone to pre- the tasks governing power exists to discharge –
fer: governing power is legitimate when it makes that the same group does the selecting, and that
accessible the goods required to bring about this group is numerically identical with the group
those states-of-affairs. Basic physical safety, nu- that is governed, are criterial for legitimacy. Let
trition, health, knowledge, etc. – we need them if us model it this way. B is legitimately governed
our lives are to go well, on any intelligible con- by A when four conditions are met: (1) A’s powers
struction of what it means for a life to go well, so secure the independence and welfare of B; (2) A
their provision is required independent of sub- and B belong equally to the same group agent;
stantive moral, ethical, or religious commitments, (3) no B could reasonably reject the principles by
of the sort that formerly underwrote legitimation which A acquires power; (4) no B could reasonably
claims. Liberalism braids the welfarist and Kan- reject what is taken to count as securing its inde-
tian strands together in a contractual synthesis. pendence and welfare.7 The important thing here
The terms of political association are binding is that A’s governing power simply is the pow-
when nobody they would bind could reasonably er to bring about social facts, and construct and
reject them. Power to force compliance with these maintain systems of coordination, that change
terms – the power of government – is justified B’s material circumstances and conventional or
when warranted by doctrines to which there is institutional status.8 What happens when these
no reasonable objection. When this acceptance changes fail to promote welfare and protect inde-
is not itself an effect of some governing appara- pendence? Or, rather, who decides that they do,
tus applying its coercive power, the claim to le- and how is that decided? Answer: the same pro-
gitimacy is sound.6 If nobody could reasonably cedural arrangements responsible for relating A
object to free and fair elections, which result in to B – in a word, government. Liberal legitimacy
people holding certain offices, and nobody could requires, again, that the principles embodied in
reasonably object to those people using their of- these arrangements be such that nobody affect-
ficial powers to compel us to follow the rules we ed could reasonably reject them. Principles justi-
have every reason to follow, then we are made in- fy uses of power; uses affect persons; the effects
dependent, and our welfare is delivered, by those give rise to reasons; reasons support principles.
rules. These are our reasons to follow them. That is supposed to be the virtuous cycle of lib-
eral stability.
For legitimacy to be a normative power – the
power to institute enforceable duties, privileges, How does economic power fit into this picture?
In two ways: people (bosses, managers) are
5 See the discussion of Kant’s “innate right of humanity” in Rip-
stein (2009). The ur-text is Kant’s Rechtslehre of 1797 (1996). 7 Here I adapt the theory of legitimacy put forward by Applbaum
6 Bernard Williams (2005: 6) calls this the “Critical Theory Prin- (2020).
ciple”. 8 C.f. Applbaum (2020: 47–8).
6SCRIPTS WORKING PAPER NO. 8
authorized to give orders to other people (work- beliefs and interests of people to diverge, they
ers) in the productive workplace; and their prod- are realigned harmoniously through the process
uct is distributed in the provision of welfare. So, of political participation. Civil society does not
legitimacy’s core conditions are at issue. Liber- degenerate into a private society, we are told, be-
alism, unlike communism, locates production in cause our natural moral psychologies have been
the private contractual sphere of civil society. The educated to treat politics as the site of the com-
state’s task is to secure the institutional condi- mon good. That good belongs to an independent
tions required for that civil domain to realize our group agent, composed of formally equal, inde-
essence as free and dignified moral equals. Inde- pendent members. The power private members
pendent, provisioned individuals can go around of the group have to affect the independence and
meeting their needs and satisfying their inter- welfare of others, as a function of their access to
ests, acting in response both to legal facts and economic resources, is entailed by the very ex-
the actions of other independent, provisioned istence of those resources. It is just one of the
individuals, each attempting to meet their own private powers that public power exists to man-
needs and interests. The stable strategies of in- age on terms nobody could reject, on a par with
teraction that emerge are said to comport nat- the natural or circumstantial power some peo-
urally with those same persons’ lives as public, ple have to bop others on the head with sticks,
political actors, responsible for creating, execut- or say unkind things.
ing, and submitting to the laws.9 Market exchange
reveals the content and intensity of their needs Here we move from a consideration of legitima-
and desires, and the most efficient procedures cy confined to liberal governmental structure, to
for satisfying them; the state’s job is not to im- one that bears on that structure’s relation to oth-
pair the functioning of markets. Markets require er spheres of associated life. The reasons peo-
the division of labor, and the jobs allocated to ple have to believe they are sufficiently indepen-
people in that division determine their level of dent, that their welfare is a public priority, and
welfare. As bourgeois vocations – modern ver- so on, are necessarily given by their experience
sion of the spiritual “calling” – they shape their of life in those other spheres. When their expe-
practical identities, influencing the social recog- riences differ radically – with respect to vulnera-
nition they receive. Just as their labor tasks inter- bility and status recognition – their reasons will
lock in the smooth functionality of the market, so conflict. When these differences are created and
their practical identities syncretize in civil soci- entrenched by the operations of the economy, it
ety. Interacting as clients, customers, colleagues, will be very hard to defend the idea that market
and counterparties, they recognize one another relations are, in any substantive sense, private.10
as interdependent social subjects, whose needs If the laws are responsible for the powers agents
and desires are mutually satisfiable via the mar- have within the economy, the relations among
ket’s coordinating apparatus. Such recognition those agents are politically mediated. They are
makes the market, in this story, a sphere of so- sensitive to legitimacy challenges. Experiences of
cial freedom. Associations formed on the basis
on shared commitments and concerns, includ- 10 Karl Marx (1992: 224) puts it this way: “Where the political
ing business corporations, express and regulate state has attained its true development, man leads – and not only
in thought, in consciousness, but also in reality, in life – a double
that freedom. When market dynamics cause the life, a heavenly one and an earthly one, a life in the political
community, in which he counts as a communal being, and a life in
civil society, in which he acts as a private individual, views others
9 According to the Smithian and Hegelian strands in liberalism. as means, debases himself to the status of a means, and becomes
See Herzog (2013). the plaything of alien forces.”
7SCRIPTS WORKING PAPER NO. 8
domination and deprivation furnish people with institutions that reinforce legitimacy when they
reasons to reject the laws that make them possi- cultivate and express an autonomously willed
ble. Experiences of routine failure in attempting consent to governing power. When their arrange-
to change those laws furnish people with reasons ment has come about in order to disguise the
to reject the political structure more generally. reasons to withhold consent, or to neutralize the
To the degree that society’s constituent domains purchase those reasons would otherwise have,
need to be ordered towards the maintenance of if considered impartially, on peoples’ judgments
the whole ensemble over time, those reasons and choices, they maintain a political order via
must meet with some kind of response, otherwise unfree or pseudo-consent. It is no secret that
group agency collapses. Let us pause to consider power courses through such institutions, impos-
this, since it makes sense of mobilization against ing a form on the ideas and values out of which
“elites”. Group agency requires that group-lev- people develop their opinions, attitudes, desires
el routines of decision-making yield outputs, in and dispositions. Experiences of domination and
the form of instructions that guide the actions deprivation can be politically neutralized; their
of members. These instructions are tethered to subjects can misdescribe them as natural, inevi-
shared purposes and goals. When these goals are table, or necessary. People do not always already
shared, agents are more than merely “mutually have all the cognitive and evaluative resources
responsive” to one another’s actions: they have needed to fully account for their circumstances.
a freely-formed “intention that favors” the goal,
and are independently disposed to aid or sup- How have theorists accounted for political crises
port one another in the fulfillment of their re- arising from economic circumstances? Habermas,
spective roles in the activities of its pursuit (Brat- to take one example, located our shared eval-
man 1992: 335).11 The labor contract, for example, uative resources into a language-mediated do-
is supposed to prove the cooperative nature of main, the lifeworld, that was distinct from a so-
the wage relation – that workers, managers, and ciety’s political and economic systems. The state,
owners have pooled their wills. Free group agency on his schema, was supposed to steer produc-
only obtains when agents have pooled their wills tion, so if it could not repair what economists
with those of other agents. But if it is the case would recognize as standard system-failures –
that some agents have only succeeded in sub- high inflation, unemployment, negative growth
ordinating, breaking, and overriding the wills of – discursive unrest in the lifeworld would begin
those other agents, there is no group agent in the to precipitate a legitimation crisis.12 This frame-
appropriate sense. A does not rule B legitimate- work is a useful starting point to assess the re-
ly, when B has reason to reject a claim of equal lation between corporate power and liberal le-
group-agent membership with A. Anti-elite poli- gitimacy. But it involves some assumptions we
tics expresses that rejection. should complicate, if not reject. First, the politi-
cal apparatus does not have a simple one-direc-
Liberal legitimacy depends on how the deci- tional economic “steering function”. While this
sion-making apparatus detects and processes may have been accurate in managerial, welfarist
reasons arising from domination and deprivation. capitalism’s postwar period, our historical con-
Those experiences can be moderated or eliminat- juncture is different. Law’s relation to the mar-
ed, or they can be denied and concealed. Civil so- ket conditions it creates and sustains does not
ciety, as described above, constitutes a nexus of
12 On legitimation crises, see Habermas (1976). The life-
11 See also List and Pettit (2011). world-system distinction is presented in Habermas (1987).
8SCRIPTS WORKING PAPER NO. 8
shield it from capture by market winners – this through cooperative, shared endeavor, and in any
is, in fact, increasingly how agents become mar- complex social arrangement, the choices of how
ket winners. Second, discursive reason-giving and to do so are uncountably vast. It is easier and
justification are not, in the final analysis, external less wasteful for us to let these choices be made
to the money-mediated relations of the econo- according to the independent reasoning of peo-
my and the command-mediated relations of the ple who control their own assets. Price signals
political system. We often need to use such divi- tell them what is needed and how best to pro-
sions; I have done so here. But their real interan- vide it. But unless they have something to lose
imation should always be kept in mind. by not detecting a signal, they will not be mo-
tivated to reliably detect it. Profit is an instru-
This is especially important in discussions of mental necessity. And unless they can join with
the business corporation, whose power in so- others in open-ended collaboration, where ev-
ciety is multiform and pervasive, but often ob- ery exchange between producers inside the en-
scure. Before considering it in detail, I will brief- terprise does not have to be renegotiated anew,
ly set out its justificatory basis in liberal Kantian they will not be able to produce efficiently. So,
and welfarist terms. It is important to see how the enterprise should not itself be structured as
these terms are interpreted in support of a dis- a market. It would not exist unless property-own-
tinctly liberal economic outlook, predicated on a ers risked their assets in creating it, which gives
basic entitlement to property. That persons de- them the authority to direct its operations. When
serve private property is entailed by their inde- the labor-owners with whom they freely contract
pendence, their right to set and pursue their own follow the orders they are given, the enterprise
ends. To will an end involves, by necessity, will- as a whole is better off, and rewards flow to ev-
ing its means. Freedom, in this case, requires the eryone. What could go wrong? It is to this ques-
means of its realization: usable things that are tion that I now turn. The next section theorizes
at your disposal, to use as you will, for the ends corporate power as a distinct phenomenon. That
you have freely chosen. One of those ends might will be the basis on which, in the fourth section,
be to join with other like-minded property own- the conclusions drawn here about liberal legiti-
ers to pool your resources, in order to make and macy will be put to work in the evaluation of cor-
sell things for profit, things that others can use porate power’s practical reality.
in pursuit of their ends. Your gaggle of would-be
producers gets together and clarifies your recip-
rocal claims and liabilities with a contract. The 3 CORPORATE POWER IN THEORY
contract must perforce refer to your shared en-
terprise. That enterprise is more efficiently prac- The previous discussion concerned liberalism’s
ticable if it can be treated as a stand-in for the legitimation conditions. Where does corporate
nexus of contracts among its members (Easter- power stand in relation to them? Let corporate
brook/Fischel 1991). Those members have rights, power refer, broadly, to the ability of corporations
so their aggregated association – the enterprise to unilaterally shape the reasons, circumstanc-
– has them by proxy. Moreover, apart from what- es, preferences, choices, and actions of other
ever individuals ought to be free to do with the agents, and the relations that obtain on account
assets they are free to control, things go best for of their having such abilities. I will examine the
everyone when such enterprises are allowed to corporate form as a site, instrument, and struc-
flourish. We all need to live off of products and ture of political power, where the modifier “po-
services that must be created and distributed litical”, on this construal, picks out aspects of
9SCRIPTS WORKING PAPER NO. 8
a given power, or its effects, or the relations it to make and distribute goods and services for
brings about, to which considerations of justice profit, via the coordinating mechanisms of mar-
apply, as a ground for the involvement of public ket exchange.16 Corporations are pivotal to this
authority. I will sketch the social position and ra- structure. Nearly all our material and nonmaterial
tionale of the business corporation’s legal form, means of life – food, clothing, medicine, convey-
as well as the key features of its agency-struc- ances, phones, computers, media content, etc.,
ture. I will then investigate the modes of power as well as the loans we rely on to buy a house,
that form makes possible, and how these are ap- go to school, or start a business – are produced
plied. The guiding question throughout will be: or made available by corporations, either direct-
how do these varieties of power impair the le- ly or indirectly. We can only access those goods
gitimacy of liberal order, on account of their ef- and services in exchange for the money we get by
fect on independence and welfare? Corporations selling our labor, and most of us sell it to a cor-
are rarely focused on in political theory, and in- poration, or to a smaller firm contracting with,
corporation, as a legal procedure, is rarely dis- and dependent on, incorporated businesses. In-
cussed as an instrument of political power.13 Rea- corporation is a legal attribute. Businesses hav-
sons to celebrate and promote corporate power ing that attribute, and because they have it, can
have, of course, been advanced by its defenders, accumulate and direct capital in potentially un-
but their thorough review is outside the scope of limited volumes. Their centrality to production
this paper.14 Let us simply stipulate that peoples’ is not just an economic fact, but a political one.
lives are positively enriched by the products and They can determine the independence and wel-
services the corporate production system makes fare of persons and communities, the actions of
available. Let us also stipulate that, just as a slave governments, and the social states-of-affairs to
can be exquisitely well-treated by his master, and which concepts of justice apply. They are politi-
a wife in a patriarchal society can be fawned over cal actors, and incorporation, as a procedural act,
and indulged by her husband (think of Nora and should be conceived accordingly.
Thorvald in Ibsen’s play A Doll’s House), material
benefits can obtain inside an unjust, dominative Normally our default approach to business is
power structure.15 economic, in the narrow, restricted sense of mar-
ket equilibria, exchange relations, efficient pric-
Let us move, at this stage, from the conceptual ing, and so on. The authority possessed by corpo-
empyrean into real history. After the fall of the rations over workers, and their structural power
Soviet Union and its satellite dependencies, and over communities, tends to escape demands for
the ascent of China as a market society, near- political justification. Whether they can satisfy
ly everyone in the world is subject to, and in- those demands requires us to inquire first into
tegrated within, a common economic structure, the nature of incorporation as a legal-ontologi-
operating on a single set of principles. Private- cal phenomenon. For example, Princeton, Green-
ly owned capital employs legally free workers peace, and Bayer are all incorporated juridical
persons, entitled to make and enforce rules with-
in a distinct sphere of authority, and subordinate
13 For exceptions see Mikler (2019) and Pistor (2019).
in that sphere to state law (their rules cannot
14 As exemplified by Cowan (2019).
15 “Nora: Our home has never been anything other than a
play-house. I’ve been your doll-wife here, just as at home I was
Daddy’s doll-child” (Ibsen 2016: 80). See also Philip Pettit’s (2002: 16 Branko Milanovic (2019) describes the scope of these. For a
60) discussion of this example in the context of a Republican discussion of how they emerged and prevailed historically over
theory of freedom. other productive modes, see Wood (1999).
10SCRIPTS WORKING PAPER NO. 8
contravene the law). But they differ considerably The advancement of capital owners’ private pe-
in their organization, aims, and capacity to accu- cuniary interest was the end for which incorpo-
mulate and direct various of forms of power. After ration was a means. Corporate rights multiplied
acquiring Monsanto, for example, Bayer now con- under new legal doctrines. Today, incorporation
trols, along with two other corporations, a major- allows for the following advantages. Capital can
ity of the global food system’s basic inputs: seed be concentrated within the frame of a single legal
and agro-chemicals (Mooney 2018). The ability to personality and directed by managerial officers
concentrate under its direction sufficient capi- with broad authority over their labor force; the
tal to supply a third of the world’s crop seeds legal person can sustain its identity indefinitely
enables Bayer to shape the regulatory agenda over time, lock assets into its domain of control
of every country in which it operates, such that (preventing their alienation by individual share-
laws concerning patents, trade, subsidies, work- holders and managers), and shield those assets
ing conditions, land use, infrastructure, sanita- against claims made by anyone to whom a corpo-
tion, and related phenomena are largely made in rate shareholder or director is indebted; limited
conformity with its interests (Schanbacher 2010). liability indemnifies shareholders, directors, and
Crucially, the laws of incorporation themselves, managers against responsibility for debts accrued
which make this degree of influence possible, by the corporation, or for harms and wrongs com-
do not require that a corporation’s interests be mitted by the corporation, whatever “committed
aligned in any specific way with those of the com- by” turns out to mean.18
munity in whose names the laws are passed.
These attributes make the corporate form unique.
Only an official act of government can turn a dis- Other enterprise types, like the partnership and
aggregated set of assets and relationships into the proprietorship, do not rely on state fiat to ex-
a corporation.17 Variants of the procedure have ist and are indissolubly bound to the natural per-
a long history, dating back at least to the Ro- sons who own them. Corporations are creatures
man societas publicoranum, which allowed for of legal writ, and though their market exchanges
wealth to be pooled inside a legal configura- are regulated on a par with other kinds of busi-
tion that could, in turn, own assets and enter in- nesses, they are capitalized in a manner specif-
to commercial contracts. It was the English ju- ic to their contractual individuality.19 By virtue of
rist William Blackstone who, in 1758, revised the being locked in and shielded against a range of
corporate form into a recognizably modern en- external claims, corporate assets have fewer op-
tity, declaring that businesses like the East In- portunities, as it were, to lose value. Investment
dia Company were rights-bearing artificial per- capital is drawn by necessity into that fortifica-
sons with an identity separate from that of its tion. Corporate assets can be deployed in more
shareholders and directors, whose commercial specialized ways at lower costs, creating powerful
privileges depended, however, on their serving economies of scale. Limited liability makes capi-
an identifiable public good (Winkler 2018: Ch. 2). tal even cheaper to acquire by reducing the risks
That model prevailed largely until industrializa- of investment, which radically expands the scope
tion came to dominate 19th-century economies. of potential investors. Because no shareholders
17 Most legal systems today do not require direct state approval
for the creation of a business firm, but all stipulate that incorpo- 18 For a survey of these features, see Stout (2017).
ration only carries its defining advantages when businesses are 19 That corporations derive their existence, abilities, and enti-
registered as corporations in a specific jurisdiction, in compliance tlements from governments is known as the concession theory
with that jurisdiction’s statutory provisions. See Pistor (2019: 55). (McMahon 2012).
11SCRIPTS WORKING PAPER NO. 8
are on the hook for corporate debt – and vice ver- other jurisdictions (Pistor 2019: 69). As a result,
sa – share value is independent of shareholders’ well-capitalized firms can now effectively shop
other financial vulnerabilities, making it easy to for the legal environment that grants them the
price and sell shares. This keeps investor’s shares most freedom with respect to asset partitioning
“liquid”. They can withdraw their value in the form and shielding, financial disclosure, tax liability, la-
of a commodity and sell it to some buyer, instead bor and environmental standards, and so on. The
of having to dissolve the firm, as in a partnership third point concerns capital itself – what it is that
(Ciepley 2013). This portability of the share, which corporations control. We should understand it in
is a residual property-claim on capital income, is two ways. First, it is a legal feature or quality that
the precondition for dynamic, high-volume capi- is affixed to assets, endowing them with the ca-
tal markets. The behavior of those markets – es- pacity to generate money income (Levy 2017). That
pecially the secondary market in financial assets legal quiddity is itself a result of political authori-
– is decisive for outcomes in the “real” economy.20 ty being applied in a certain way. The state’s pow-
ers of legislation and enforcement, and nothing
These features have enabled corporations to ac- else, are the causal instruments that turn phys-
cumulate unprecedented magnitudes of capi- ical things like land, buildings, and machines –
tal. In 1913, the total value of global GDP was ap- not to mention more metaphysically exotic enti-
proximately $2.5 trillion; at the end of the 2019, ties, like stocks, bonds, songs, glyphs, signatures,
the total capitalization of global stock markets brand names, browsing data, pharmaceutical in-
was estimated to be $90 trillion.21 The market gredients, mortgage debt, and DNA – into claims
value of each of the world’s top 50 corporations on money derived from these entities being used
is greater than the annual GDP of 160 countries in certain ways. Under capitalism these claims are
(PWC Global 2020). Three points are especially held by private persons, including corporations.
important to consider here. First, corporate law
prescribes that managers are under a supreme The laws of property, contract, trust, collater-
fiduciary duty to promote the welfare of share- al, bankruptcy, and incorporation create and as-
holders, where the content of that welfare is pre- sign capital, and the power corporations have to
sumed, absent explicit contractual terms to the shape those laws in conformity with their inter-
contrary, as maximizing share value.22 This is the ests is a political power. This alerts us to the sec-
famous “shareholder value” principle. It makes ond thing we should remember about capital.
profitability the weightiest consideration in man- Take the scope of markets as a universe of cau-
agerial choice. Second, legal and technological sality; within that universe, the most efficacious
changes have made capital globally mobile. Con- ability, the ability that proves most decisive in
flict-of-law rules have adopted the “incorpora- determining which states-of-affairs come to pass
tion theory”, allowing businesses to select their and which do not, is the ability to reassign, at will,
place of incorporation without that choice affect- property rights to a quantity of money. In other
ing their recognition as a rights-bearing entity in words: the power to pay someone to do some-
thing. Consider the most trivial micro-transaction.
20 See also Bond et al. (2011). The notional value of the deriva- When you get a haircut at the barber shop for €20,
tives market is calculated to be in the hundreds of trillions of US
dollars, many times the value of the global real economy. you reassign your property rights over that €20 to
21 The first figure is in 1990 adjusted international dollars (Allen the barber, on condition that they do something
2011); the second figure is a Deutsche Bank estimate (Pound 2019). – in this case, cut your hair. You have changed
22 See Easterbrook and Fischel (1991: 37). That the so-called
“Business Judgement Rule” breaks the link between fiduciary duty
several states-of-affairs here: the barber’s bodily
and profit is argued by Stout (2008) and Singer (2019: Ch. 5). movements and mental states, your hair length,
12SCRIPTS WORKING PAPER NO. 8
the condition of the scissors, the electric pow- is possessed; using enticements, seductions, or
er and water flow in that location (the razor and other techniques that block rational autonomy;
blow-drier, the pre-cut wash), the barber’s per- controlling processes by which choices or states-
sonal ability to get other people to do things (his of-affairs are evaluated, proposed, categorized
stock of money), and much else besides. In com- as feasible or unfeasible, etc. (Haugaard 2002).
mercial societies, most organized human activity These capacities are all forms of power-to. For
takes place squarely within, or for the aim of be- each form we can posit advantaged and disad-
ing able to act more effectively within, the market. vantaged parties whose relation is mediated by
Basically all societies are now commercial societ- that form. These are typically relations of com-
ies, whose markets are integrated with one anoth- mand, authority, compliance, and subjection:
er. That means the universe or domain of circum- forms of power-over.23 They reveal another mo-
stance, in which the power to unilaterally direct dality. Relational structures – like the social sys-
money income – i.e., the rights of capital owner- tem of gender norms, for example – can secure,
ship – represents the greatest ability to determine and reproduce over time, the statuses, privileges,
what does and does not occur, is global in scope. burdens, and types of power-to that individuals
That, in turn, means that asymmetries in capital and groups come to possess (Young 2011: 30–33).
control are asymmetries in the power that is most What the advantaged possess, and what the dis-
generally efficacious, given the scope of markets. advantaged lack, as a result of the pattern exhib-
The corporate form, in this rough sketch, is a so- ited by these relations is structural power. Struc-
cial technology whose sole function is to facilitate tural power is not necessarily dyadic. There need
the accumulation of the most generally effective not be an isolated or specific agent who directly
power at the highest possible scale, to be direct- benefits from a disadvantaged party’s being dis-
ed entirely by a unilateral private will, for private advantaged, or who is directly culpable for caus-
ends. That technology only works, however, as an ing that disadvantage; it need only be that, for
application of the state’s laws, i.e., as an exercise any agents related in this way, the vulnerable will
of the public’s omnilateral will. Liberalism holds be observably disadvantaged in comparison with
that state power is constrained by nature to be some other agent located “inside” the structure
exercised only for public ends. The power asym- that relates them. Corporate power is structural
metry that simply is corporate capital accumula- in two senses: vis-à-vis other social actors, with-
tion, therefore, must itself be in the public inter- in our kind of economic formation – capitalism;
est. Is it? A closer look at that power may direct and with respect to the relation between share-
us toward an answer. holders, managers, and workers inside the cor-
porate form.
Any definition of power is contentious. Normally
we regard it as the capacity to determine, unilat- Power, of course, need not be malign. When its ex-
erally, the actions of others, or their beliefs, opin- ercise assists people in acting for their own good
ions, desires, dispositions, etc. It is normatively reasons, it is valuable. Legitimate power does ex-
salient by virtue of its method or manner (how is actly that. Sometimes we are unable to access
it exercised?), object (over what or whom is it ex-
ercised?), and consequences. Methods include: 23 That all power is best understood as power-over is a
main Foucauldian tenet. See the interview with Foucault
being able to grant or withhold valuable resourc- in the afterword to Dreyfus/Rabinow (1983). The difference
es (as in the discussion above); threatening or (or non-difference) between power-to and power-over is
an enduring problem in social theory. Here I assume they
using force, especially physical violence; sim- can be distinguished for the purposes of practical analy-
ply communicating that the ability to use force sis.
13SCRIPTS WORKING PAPER NO. 8
those reasons without the power in question’s liberal societies. Let us distinguish between the
help. As Joseph Raz (1986: 53) puts it, power is le- kinds of agency exposed to that power: individ-
gitimated when “the alleged subject is likely to ual and group agency. The first is subject to sub-
better comply with the reasons which apply to him ordination, the second to decoherence. Workers
(other than the alleged authoritative directive) if inside the corporate structure are unfreely gov-
he accepts the directives of the alleged author- erned, while individuals interacting with the cor-
ity as authoritatively binding and tries to follow poration in the market have their agency usurped
them, rather than by trying to follow the reasons and undermined in other ways. The group agency
which apply to him directly”. Power can free the of polities is made less coherent by the applica-
subject’s will by enabling that will to be guided tion of corporate power to the political process.
by the good reasons it already has, when it is ex- Collective choice procedures are either distorted
ercised in line with, and because of, those rea- or negated – i.e., corporations do the choosing.
sons. Accordingly, power is malign when it does This application shapes the content, scope, and
the opposite, when it corrupts or usurps or com- enforcement of law, as well as the conditions of
mandeers the subject’s will. Someone is domi- public reason. Having one’s individual agency dis-
nated when their actions, attitudes, desires, etc. abled or usurped by another is a reason to reject
are determined not by themselves, via indepen- the political arrangements responsible for your
dent review of the values and reasons they have, domination. Being impeded in the formation of a
but by another’s power. A dominates B when B is coherent, self-governing group agent defeats le-
constrained by A’s power – not some value that gitimacy. Apart from domination’s being intrinsi-
would bind B independently, like a moral value – cally wrong, the aims that corporate power is used
to serve A’s interests and aims, to adopt them as to promote – maximal profit for shareholders –
B’s own. Domination is the illegitimate seizure, are often inconsistent with the welfare of those
direct or indirect, of another’s agency. So how, whom liberal states are obligated to protect. Le-
then, can corporate power dominate? gitimacy is weakened when the cost of enriching
corporations is the harm, insecurity, or under-re-
I will exclude cases in which corporations directly, sourcing of natural persons.
or via their influence over a government’s military
and police forces, use physical violence to ad-
vance their interests. These cases are now rare in 4 CORPORATE POWER IN PRACTICE
liberal states. They remain frequent in those plac-
es where primary commodities are extracted – Pa- In what ways does corporate power actually domi-
kistan, Chile, Indonesia, Cambodia, Nigeria, and nate and deprive? We will start at the group-agent
so on. Mining, timber, and oil companies violate level. There are at least four distinct applica-
the human rights of union leaders, indigenous tions of corporate power that weaken democrat-
rights activists, environmental protestors, and ic will-formation. These are lobbying, extortion,
dissident politicians.24 These violations are un- mendacity, and extralegality. Let lobbying include
just, but their relevance for the present legitima- direct cash payments to political campaigns, pay-
tion case will not be directly considered. My focus ing skilled influencers to brief lawmakers, mount-
instead is on corporate power’s operation inside ing public relations (PR) campaigns for or against
a regulatory change, inducing lawmakers to favor
corporate interests by offering non-cash rewards,
24 For examples see Arboleda (2020). Other examples, as well
as the effort to get multinationals to comply with human rights
paying think tanks to generate corporate-friendly
norms, are documented in Ruggie (2013). “research” that lawmakers or journalists can cite
14SCRIPTS WORKING PAPER NO. 8
in public debate, etc.25 These are the most ob- to government, even having staff seconded to
vious and well-known examples. There is noth- minister’s offices”. Governments have by now re-
ing inherently wrong with lawmakers consulting moved the long-established capital controls de-
experts to get hard data and sound interpreta- signed to keep investment cycling back into na-
tions about a sector of the economy. How else tional jurisdictions. Corporations can now easily
would they be able to understand the effects of invest in countries with undemanding regulatory
a regulatory decision? But registered lobbyists constraints, especially with regard to labor rights
are but one element in a complex, reciprocal gift and environmental protection. The state revenue
economy of influence that entrenches the dispro- promised by such investment rewards those gov-
portionate power of corporations to pursue their ernments that keep the rules corporate-friend-
own interests, as a function of their dispropor- ly. The relative weakness of transnational gover-
tionately larger capital holdings.26 When the ac- nance bodies, which lack the agential cohesion of
tions and preferences of public representatives corporations, puts the former at a disadvantage.
are ultimately determined by the unilateral will of Transnational corporations (TNCs) have compar-
the private corporation, they block the formation atively greater agility and bargaining power when
of a public omnilateral will. But let us say the leg- it comes to setting norms and criteria for trade
islator has good independent moral or prudential and investment. The single organization most re-
reasons to act in ways that benefit some corpora- sponsible for organizing, coordinating, and reg-
tion’s interests. The fact that the action resulted ulating global commerce – the WTO – differen-
from a causal chain of influence through which tially acts to benefit companies domiciled in the
corporate power was exercised – via indirect ex- liberal core, whose government negotiators seek
change for something of value (a job, a donation) the terms most favorable to corporate interests
– makes the action a response to corporate pow- (Risse/Wollner 2019: Ch. 8). As a consequence,
er, not those independent reasons. Most impor- business practices worldwide have been shaped
tantly, legislators have conclusive reasons not to to a considerable degree by corporations them-
respond to corporate power at all: the appear- selves. This both results from, and strengthens,
ance of corruption leads citizens to think they the ability of corporations to practice extortion:
do not share equal group membership with their threatening to withdraw, or not direct, valuable
legislators, and, as a result, are not themselves capital investment, unless the terms are set in
the sovereign sources of law. This incentivizes an- their favor. The governments of liberal states are
ti-cooperative behavior, such as law-breaking or routinely extorted into further tailoring local laws
disengagement from the political process. to suit the interests of private capital owners.
The lobbying described above is indirect, but as Public reason is distorted by corporate influence
Colin Crouch (2011: 131) puts it, businesses are on the provision of information and the open dis-
usually “right inside the room of political deci- cursive process. This is a problem of corporate
sion-making […] setting standards, establishing mendacity. Markets are dysfunctional when infor-
private regulatory systems, acting as consultants mation is absent or insufficiently shared. The role
of advertising and PR – its justification – is thus
to inform other market participants and stake-
25 Described by Hussain and Moriarty (2014: 430) as “old cor-
porate political activity”, in contrast to the newer forms, whereby holders; persuasion may not rightfully operate by
corporations take over what were formerly the prerogatives of the means of deception. It is plain to every adult, how-
democratic state.
26 Legal scholar Lawrence Lessig (2011: 107) uses the anthropo-
ever, that most advertising “overrides the auton-
logical conception of a “gift economy” in his analysis of lobbying. omy” of consumers, not through bold-faced lying,
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