Is the contemporary corporation a legitimate entity? : a critical conceptual analysis towards the development of a Political Theory of the corporation

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Is the contemporary corporation a legitimate entity?

A critical conceptual analysis towards the development of a Political Theory of the corporation.

By

Thanasis Apostolakoudis

A dissertation submitted in partial fulfillment of the requirements for the degree of:

MASTER OF SCIENCE IN POLITICAL SCIENCE at the

UNIVERSITY OF AMSTERDAM Specialization inPolitical Theory Supervisor: Dr. P.A.(Paul) Raekstad Second Reader: dhr Dr .E.(Enzo) Rossi

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Acknowledgments

To my family that has supported me in every way possible and to those with whom we have dreamt the same dreams so far.

Special thanks are reserved for dr. Enzo Rossi and dr. Paul Raekstad, as well as the good friends from the track of Political Theory for their help, guidance and encouragement. My acknowledgment to Jorge Aguero Lafora for helping me with the bibliography.

“¿Que cosa fuera -corazon- que cosa fuera que cosa fuera la maza sin cantera?

un testaferro del traidor de los aplausos un servidor de pasado en copa nueva un eternizador de dioses del ocaso jubilo hervido con trapo y lentejuela..”

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In this paper, I am raising and answering the question of the legitimacy of the modern corporation in a realist framework. Utilizing a formula of conceptual analysis, I examine whether corporate entities raise up to the standards of legitimacy that my theoretical framework sets. I argue that they fail to do so in their current structure and I call for its reevaluation.

The question that I address is, whether corporations adhere to the critical standards and demands that a political analysis of them introduces. By that, I aspire to show that a political examination of the firm helps us inform our descriptive accounts about them and extract relevant normative conclusions. This view is highly controversial as it opposes two long standing notions: a) that politics and economics are and should remain distinct spheres with

separate rules and norms, b) that we cannot successfully utilize political tools for the analysis of "economic" entities. The significance of my research is that it sheds light on normative issues related to firms that an economic inspection and its tools would ignore. By this, I aspire therefore to contribute to the

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Definition of the contemporary corporation

To clear out the conceptual waters of what I examine, I am providing with a brief description of the modern corporation. I will spell out the characteristics of the entity that concerns my analysis. I do spot four of what I consider the most typical features of how contemporary corporate entities are described: The contemporary corporation that I will refer to is seen as :

a) Operating within the market and for-profit goals.

b) Owned by shareholders (public or private ones)(, meaning that its

ownership seems to be “broken down” to shares and being distributed either in the stock market to the “general public” or exchanged

privately.

c) Managed by directors and managers on behalf of the shareholders, meaning that there even in the rare cases where employees are the (share)owners they do not take to decide on all internal and external issues fully, but decision-making capacities are disproportionate. d) Generates significant external effects, i.e. effects that surpass a)

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multinational type of corporations.

I do not strictly define these terms on purpose, because I do not intend to limit the examination of the framework, or confuse the reader. I do make a general reference to some basic characteristics that are common in

understanding. I will define and analyze these terms in depth in the following parts.

Theoretical commitments

Beginning the analysis of the legitimacy of corporations, I set the theoretical framework within which I will work. My choice of theory is realism and more precisely a critical formula of assessing legitimacy.

The reason is that I regard realism and critical theory within it as satisfying two desiderata, that I consider crucial in political analysis, in agreement with Rossi and Prinz (2017, p.:340-341)

a) Evaluate facts and not morals per se. I call this the factual desideratum. This desideratum asks us to stay factual, connected to the real world and form a judgment based on the analysis and interpretation of empirical facts, not on "better" or "worse" morals, disconnected from them. The reason I regard this desideratum as important is that it is empirical facts that should (in)form our perception of normative evaluations and not the other way around.

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b) Stay critical, become a force of change and do not fall for the status quo. I call this the critical desideratum.

This desideratum asks us to keep our feet on the ground while having our eyes in the future. Having our feet on the ground is important to talk about and influence the here and now, instead of an ideal place and time in our minds (Valentini, 2012, p.660). But at the same time we cannot build the new only with the elements of the past, so we need to be normative, by seeking improvements and ameliorations. Therefore, operating within the real world should not mean recycling the same old ideas, in different versions and packages.

Having clarified what my theoretical commitments are, I will first clear some common misunderstandings of what realism is and is not.

A. THEORETICAL FRAMEWORK

A1. REALISM AND NORMATIVITY: IS REALISM REDUCED TO REALPOLITIK?

Realism as most of -isms is a widely used concept with an even larger and broader misunderstanding around its actual meaning. The main reasons of this misunderstanding should be attributed to errors and fallacies regarding the terminology of other terms and their relationship with realism: moralism,

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ideal theory, Realpolitik, etc.

First, I will clear out the first misperception that equates realism with the absence of any normativity, confusing realism with Realpolitik.

This clarification concerns a common mistake when theorizing about realism and is originated in the use of the very same term in International Relations. Power, its allocation, and justification are seen to be the central question in politics( Keohane,2005). In IR studies, however, realist analysis seems to focus on an obvious and direct use of might, violence, and coercion between

international actors. This is how states operate, end of the story; or so goes the narrative at least (Lake, 2010, p.2-9). The typical mistake then is to fall for the Thucydidean "the strong do what they can, and the weak suffer what they must" (Forde,1992). Realism then is seen as Realpolitik, defined by Sleat (2014):

”Realpolitik is understood as the reduction of politics to violence by making the de jure right to rule equivalent to the de facto ability to do so.” (Sleat, 2014; p314) In this sense, realism is seen as a categorization of the use or attribution of power and understood as not more as amoralism.

By amoralism, here, I mean the absence of any normative commitments from the examination of power in politics (Sleat/Hall, 2017; p282-283), a mere

"description" of human activity, seen as inevitable and "the way that human nature is."

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This understanding of realism faces one fundamental problem: It transforms realism into a conservative if not nihilist force, that recognizes no other role to a theorist than that of the accountant of raw domination. I share Sleat's (2014) concerns when he claims that this reduces politics to power, seen as the ability to rule simpliciter, as successful domination.

Moreover, realism in this type as Realpolitik shares a common point with moralism, in the sense that they both, in different ways each, retain the status quo. How Realpolitik does that has hopefully become apparent: "power is right in itself." I will soon sketch out the reasons why moralism also falls into this trap.

Thinking of the world as a place where things just happen and we should simply keep track of them is not only cruel but also a wrong view in the sense that it disregards that the world -at least the social world- is not a "natural" occurring but a product of human construction. One, of course, could attempt to tackle this argument by attacking free will or the possibility of meaning per se, but then she would have to explain how this does not reduce the human mind to a set of particles, with predetermined moves. I observe this concern. However, I do not share it.

Following, I will draw the lines that separate realism from moralism. Having established that we should not view realism and normativity as opposing terms and that Realpolitik is not a force of progress, I will focus on the type of normativity that realism stands for, in opposition to moralism.

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A2. MORALISM AS APPLIED ETHICS AND REALISM AS NORMATIVITY FROM WITHIN POLITICS

Drawing from what I have described so far we can spot the common element of moralism and realism and that is normativity. Their understanding of

normativity, however, is very different.

First, I define moralism as the branch of philosophy that views normativity as (pre-political in their origin) ethics, and politics, grosso modo, as the

application of these ethical principles on human activities .

Moralism recognizes an independence of what is normatively right or wrong, useful or useless, good or bad, about politics. We can imagine -in this

perception- politics, and ethics as two distinct spheres. Ideals are shaped in the sphere of ethics in a "pure" and "independent form" and then are brought to the sphere of politics to be implemented.

Since what there is, is somewhere out there and is distanced from the political world, then all we have to do is to find it, understand it and apply it to social relationships. It does not spring out of them, but it already exists, before and above them (Rossi/Sleat, 2014):

“Ethical values are pre-political in two senses: they are taken to float free from the forces of politics, and they are assigned a foundational role insofar as they have antecedent authority over the political and determine or exhaust the appropriate ends and limits of politics.” (Rossi/Sleat, 2014, p.690)

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This distinction of normatively right and wrong that moralism refers to is a pre-political distinction “universal in its application, to all agents and in all historical situations” (Geuss,2008 p.7)

The critique to moralism is that it disregards that ethics in its abstract form is not more than “ beliefs of a victor in a past conflict reaching their extent out to the present and the future” (Geuss, 2010, p.422) and not some "eternal values." Ethics, therefore, can be seen as “crystallized power” that passes itself for morality (Rossi/Sleat p682) Following, this becomes apparent why moralism also fails to pass both the factual as well as the critical test. Moralism is

certainly not based on an examination of the factual validity of things, but on some general comparison of "better" and "worse" morals (that are already known to its advocates). Moreover, it keeps recycling the past beliefs of a status quo that mask themselves as "over and above" eternal truths.

On the other hand, realism does not base its normativity on ethics per se, as the distinction of what is normatively right or wrong is not viewed as static. In this sense, it cannot be applied without taking into account the specific

empirical and historical conditions within each framework of political action. By framework of political action, I mean a set of institutions in a certain time and place (Geuss,2008 p.7 )

The Geussian account asks us "not to take ideas, models of behavior or utopian conceptions at their face value." What he claims is that, instead of being

concerned with a timeless and detached "truth" or some "universal axioms" and how to apply them, we should rather look how they do act upon a society

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at a certain time. He makes the bitter, alas empirically correct observation that not every idea that looks noble succeeds and that we are not spared from the results of an erroneous or illusory one. History is full of relative examples. He asks us, therefore, to concentrate not only on the content of belief “in

abstracto” , but on the various consequences that any idea -independent of the abstract nature of its content- might have. ( Geuss, 2008, p.9-10)

Finally, Geuss raises the point that realism regards politics more as an art than as applied science. There is an inevitable interaction between the

environment, where ideas are applied, and the ideas themselves. This interaction shapes both, in ways that cannot be foretold. Using what

resembles the Heraclitean notion (for more see: Beris and Giacomin) of πάντα

ῥεῖ (panta rhei), everything flows, he asks us to consider that, in the face of

uncertainty and change we cannot utilize “a handbook” to shape the world (Geuss 2008, p 16).

So far, I have described how realism does not exclude normativity and how normativity is represented differently in realism and moralism. I have also explained the reasons why both Realpolitik and moralism fail to pass the factual and critical test.

What follows is a short explanation (and a reminder) of why realism should not be viewed as a full-scale non-ideal theory and an antithesis to a certain form of ideal theory: utopianism.

I claim that it is indeed useful to free realism from the burden of achieving "the possible."

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A3. REALISM AND IDEAL THEORY: THE REALISTIC DEMAND OF THE IMPOSSIBLE

In this part of the theoretical chapter of my thesis, I will clarify what I consider as another misunderstanding about realism. Often realism is seen as an

opposing approach to ideal theory in its understanding as "utopian or idealistic theory." Valentini (2012), theorizing about ideal and non-ideal theory has

provided with three different understandings of ideal theory. Her second distinction, which I will analyze further raises the following point:

‘“Ideal theory’ may be taken to mean ‘utopian or idealistic theory’, and ‘non- Ideal theory' may be understood as ‘realistic' theory. On this reading ideal and non-ideal theory focus on the question of whether feasibility considerations should constrain normative political theorizing and, if so, what sorts of feasibility constraints should matter." (Valentini, 2012, p654)

A typical mistake would be to think that realism is only concerned with feasibility constraints in its normative judgments, while idealism (seen as moralism) does not take them into account. This is not a correct view though. By asking us to take seriously into account the social context within which social actors operate, realism does not ask us to limit our actions within what theoretically seems possible with our current understanding. When Geuss reminds us the importance of taking into consideration: a) who does whom for whose benefit, b) issues of timing when it comes to implementation within a

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limited time-slot (Geuss, 2008, p.23-33), he is not asking us to treat these considerations as barriers to action. On the contrary, he rather asks us to take into account the “here and now” conditions of the world around us, to be more aware in our judgments about the effectiveness of our principles (Valentini, 2012, p.660)

This is a request to focus not only on the ideas in our mind but also on the conditions of the environment that politics do operate, to assess the real difficulty of the action. In short, it is a measurement of the difficulty to perform a set of actions, which makes one more aware when attempting them; it is not and should not view, however, as placing a barrier on the possibility of

actions. Measuring the chances of success and finding them e.g. very low hands us a warning of the real effort that task requires, but does not make the task impossible per se.

In this sense realism and utopianism can be seen not as opponents, but as allies, or to quote Rossi/Sleat (2014):

“Utopianism may even be better served by a realistic take on which values can be genuinely transformative and which ones are merely ideological (Geuss 2010; Owen 2010)”

The above explains how realism does not have to sacrifice its revitalizing force in the name of feasibility constraints and why this is compatible with staying factual and critical.

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ANALYSIS

After providing with some necessary clarifications of the differences and similarities between realism, moralism and ideal/nonideal theory, I will now examine the theoretical formula I will be applying for the political examination and evaluation of corporations (see also: Introduction).

This formula will be used after that to assess the legitimacy of companies. I use legitimacy as the point of focus of my examination, embracing the relevant concerns about justice, utilized mostly in accounts of moralism and being strongly bound to the ethics-first approach, therefore failing to meet, as a tool of analysis, the factual and critical desiderata. (see Rossi, Sleat; 2014 p.674, see previous part on why this is a wrong approach),

Instead, I propose the use of a critical formula that, operating within realism, stays factual and critical, drawing normative assumptions after the empirical examination of the concepts of a legitimation story.

Going back to Geuss, a legitimation story, is a story that attempts to answer the question of why? and provides us with an explanation of the choice of a particular set of actions, over another, for the coordination of human activity. The question and its answers are seen as a reflective process of thinking and evaluating whether and how what we do, makes sense to us. At a point, we do realize that living in a society involves, to bigger or lesser extent for each one, politics and that politics refer to the coordination of human activity,

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through the use of power. Now, power in the Geussian account does not

necessarily involve the use of direct coercion through acts of violence, but can also be projected on through other means: convincing, deceiving, etc.

Legitimacy is not reserved solely for actions of violence though, but “for any organization of human activity”(2008, p. 34-35). Any form of human

organization necessitates a story that explains why things are organized the way they are and where this organization is based on.

What Geuss then argues, is that legitimacy refers to “a particular set of beliefs” that “make sense” to the ones that are involved in the organization of human activity, in a specific context and time:

“..in ad 80 the very idea of the man called “the pope” dispensing political legitimation would not have made much sense to anyone then alive.” (Geuss, 2008, p.36)

The attempted explanations, as he recognizes, come in many flavors. There is not only one story justification for an action on which everybody agrees, and this justification is not static, but changes with time. Moreover, these

explanations might be "contradictory”, “confusing” or “incomplete”. ( Geuss, 2008, p.33-37)

In my understanding, the above is a call for a critical reflection of the

conditions of our beliefs of what makes sense in the way that human activity is organized (by the use of coercion or otherwise). Legitimacy, therefore cannot be seen as achieved solely by the affirmation of an explanatory story of what (seems to) make sense. Acceptance and "overt consent" alone are not good

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enough terms. Legitimacy is something more than that. Would we establish the legitimacy, e.g., of an institution, if its acceptance was based on

misleading premises, that the majority has accepted considering them (wrongly) as correct?

Of course, the question here is what does exactly count as misleading and incorrect. Bernard Williams (2002) has made the most explicit reference to legitimacy as making sense of an individual order, in his critical theory test and raises the following point: "The acceptance of a certain order, system and legitimation story that seems to make sense to someone, should be judged on whether it has been a product of unobtrusive coercion, that, when revealed to the one that is coerced would be rejected -and here is the crucial point- because it violates his fundamental freedom." (Williams, 2002 p226-227, Rossi/Prinz 2017 p.340-342).

As Rossi and Prinz (2017) have pointed out, there is a crypto-moralist

assumption in the reasoning of Williams. (for relevant criticism see also Geuss 2014, p175-195)

The problem with the Williamsian view is that it bases the assessment of legitimacy on justified or unjustified forms of coercion and power, for the judgments of which it utilizes not empirical evaluations based on pre-political commitments. What is just or unjust coercion cannot be taken as a pre-given. It fails therefore to meet the factual and critical desiderata (Rossi, Prinz; 2017, p. 341.)

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back morality from the backdoor? How can we achieve “a radical

emancipation” and staying committed to their disillusioned view of the world of politics (Thaler, 2012, p.11-12). There is a strong criticism that the effort of achieving both have us facing an unavoidable tradeoff: either to “immerse oneself as much as possible into societies existing values or push for a truly detached point of view. (Thaler, 2012, p.19)

I suggest that it is possible to escape, if we utilize a critical formula to assess the legitimacy of concepts and the institutions that they support based not on the moral but epistemic flaws of the story. Geuss seems to imply and Rossi and Prinz explicitly suggest it, using Haslanger's (2012) conceptual analysis on uncovering ideology and providing with an account of legitimacy as a mixture of descriptive and normative theory (Rossi/Prinz 2017, p343).

I will attempt a summary of Haslanger’s theory and Rossi’s/ Prinz’

interpretation of it. The main idea is that concepts that are used in everyday life and with which we understand the world around us as making sense, are not (only) a product of our own inherent understanding of them, products of our own uninfluenced thought. They are very dependent on the social

environment they do operate within it and are based on a series of what we perceive to be facts. What does that mean though? I will use the everyday example of the object chair to elaborate my point.

Concepts are constructed by words and words are descriptions of our

understanding about the world around us. When I name an object "chair", you understand what I intend to mean because we have a common

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understanding of what makes an object a chair (piece of furniture, raised surface, supported legs, where we sit, etc.)

Now you might agree with me that this object has the above-mentioned qualities, so you might accept that what I describe as chair is indeed a chair, because this is how we call objects with these qualities in English. However, you might disagree or contest one of the qualities that I attribute to this object. Maybe the legs of what I call chair are so "weird," "short" or "different" from your understanding, that you would like to call it a pouffe or a stool. The main fact is that, if we agree on the qualities of the object of the chair, we call it chair because this is what we have learned and "agreed" to call an object with similar qualities in the English language. Let us think this example a bit differently. What if we both agree that the object shares indeed these qualities, however, your radical self-argues that the objects of these qualities should be called beds or ovens or what if you invent an entirely new word. Maybe for you, the word chair (not the object) itself means something entirely different for your own reasons. You might invent your new word or name chairs as ovens or beds and still mean absolutely the same thing as I do. If I use the socially accepted word and you do not there is a good chance, if not certainty, that the people around you will not understand what you mean, even if you mean the same thing as they do.

In short, we do understand concepts as being valid/true/legitimate/making sense because we agree that grosso modo they are made of the

sub-concepts that make them what they are. Now, of course, we might disagree on the qualities of the subconcepts too and so on. I will come back to this

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phenomenon later.

On a more formal tone, we can draw two conclusions from the above

regarding concepts (of which legitimation stories of making sense are in the end constructed). The first is that the concepts that we use are social

conventions that include assumptions about things that we accept as valid and genuine. Valid and true here means corresponding to real facts, things that are so because they are so (by nature, God, necessity, the mind, whatever one accepts as the source of reality.) And if calling a chair an oven and vice versa, is of little importance, things get complicated when it comes to concepts that are not so easy to grasp by just observing them, are

characterized by vast perplexity and might have very extended and intense outcomes like e.g. equality, freedom or happiness.

In complex concepts that include various sub-concepts, it is tough to discuss the qualities of every sub-concept in great detail, at least all time, in everyday life. It is even harder to convince them, especially when not having the ability to do so.

We take them, most of the times and for a long period usually as they are. It might very well be though that a story includes concepts and sub-concepts that are not true, simpliciter (unless we deny the existence of any objective reality, independent of what we call this reality to be).

This might be easier, I argue, to understand when it comes to feelings. If the reader has ever felt genuinely sad by a situation, then calling this case happiness and meaning by it something positive, good, liberating and

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pleasant is simply not true, at least within the certain context of experience. The whole world might call your situation that causes you sadness as

happiness, and you might end up calling it too. That does not make it less of sadness deep down, in the way you feel it. Does this make your feelings the general Truth? Not necessarily. It is your truth on your subjective level is given a certain context; one can argue that it is an indicator for a possible

discordance between what one quality is called and is supposed to mean, on the social level, and how this quality is perceived on the personal level. I will return, adding to this point, in the assessment phase of the critical formula. So, the first way to proceed, I argue is by examining whether what is

appearing to correspond to a particular set of qualities, does correspond to this set of conditions. Whether, what Haslanger refers to as the manifest meaning of a concept, the meaning in its “ordinary”, “common-sensical” understanding (Haslanger, 1995, p.95-125) corresponds to what she calls as the operative meaning of the concept. This meaning is formed by and informed from an empirical and historical analysis (Haslanger, 2005, p.17).

In our examination of the legitimation stories of corporations, I suggest that legal definitions do offer a good starting basis to understand what is

considered to be an ordinary/manifest understanding of concepts (I use the terms manifest and ordinary interchangeably)

The operative concept then is the most “hidden” or “implicit” concept that is revealed after the examination of how it plays out (Rossi/Prinz, 2017, p.343-344). This revelation can only be conducted, therefore, following an empirical and historically-informed analysis of the words that construct the concepts

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that, in our context, construct a legitimation story. After having revealed how the concept operates in real life, we can directly compare whether the

qualities that the manifest concept is seemingly linked to are indeed the qualities that are linked to or not.

Based on the above I am developing a proposal of a critical formula that I will then apply for the assessment of the corporate legitimacy.

The critical formula is the following: Critical phase

Spot the incontestable/common sense/manifest concept. The starting basis here is long-lasting legal or constitutional concepts as well as “orthodox” sophisticated and widely unchallenged economic theories. (identification phase)

Highlight the language as well as other techniques used to make the concept appear as incontestable (decomposition phase.)

Provide empirical evidence that the manifest concept is ignoring and highlight aspects of the current evidence that are presented differently or omitted. Reveal different understandings of the purposes of the concept in the social order, i.e. the operative concept.

Now, this part of the formula satisfies the critical desideratum. We spot a concept that seems to correspond to certain qualities, we "unfold" it and we

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examine the nature of these qualities, to see if they correspond to what the concept claims. The part of the real correspondence here is not based on moral, commitments as we do not evaluate the qualities by pre-political ethical standards, but by their factual validity. We measure on an empirical basis whether the qualities that we all (or most) seemingly agree that a concept has are there.

Returning to the previous criticism by Thaler (2012) that this kind of

assessments can either stay attached to existing values or be normative, I argue that this is not necessarily the case and that a combination is possible. For this, I argue that it is possible to extract normative conclusions, after or while conducting a not-detached critical analysis, using a subtractive method. Assessment phase

I treat the subtractive method as a process of discovering, that commences from the examination of empirical reality to discover whether the meanings we attribute to things do correspond to them, without presupposing the knowledge of an Absolute. I will use Roda's/Corcoran's references to Badiou to elaborate my point:

"To say that philosophy has to 'subtract Truth from the labyrinth of meaning,' means that it must insist on the distinction between the truth and meaning, truth and sense, truth and opinion and, first and foremost, between truth and

knowledge. If there are truths, they are irreducible to knowledge; this first daim is a subtractive daim and it necessitates that philosophy ceases to identify truth

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with any of the above categories. Were it not to do so; truth would be posited as objectively knowable and thus would not stand in a consequential relation to an unforeseeable event.."

“But what does it mean for philosophy that truth is subtracted from knowledge? First of aIl, that what holds for truths holds equally for subtraction: as truths are procedures, so subtraction has also to be immanently related to practice..”” (Corcoran/Roda. 2015, p.330)

Based on this, I claim that the more empirical evidence we discover about a certain concept, the more we come to realize the differences between the ordinary/manifest meaning of the concept and the operative one. And it looks like the more we seek, the more we find. It is then these new findings that should inform and correct our perception about the concepts.

In less formality, to paraphrase a common proverb, without affecting its

meaning: We might think of pudding as tasty or not, but the proof of the taste of the pudding is its eating.

I call this last part, the assessment part and with this, I invite you to taste with me a piece of the corporate pudding.

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CORPORATIONS- ISSUES OF EXTERNAL AND

INTERNAL LEGITIMACY.

So far I have presented a realist account of legitimacy as a tool for making sense of the political world around us, without falling into the trap of moralism or Realpolitik and their status-quo biases.

The following part B is an application of the developed formula on

corporations. I will, therefore, examine concepts that are used and provide legitimacy to the corporation externally, as well as internally. Before doing so, I claim that, although these concepts end up playing a pivotal role in the way that we perceive the social world, not so much ink has been used for their understanding and analysis, so far and I try to search for potential

explanations.

B1. Why should we care?

For many political theorists, legitimacy is a concept that has been closely related to the state and public decision making. The vast majority of literature is dedicated to it. Despite the state holding powers that other non-state entities do not such as the control over armed forces (monopoly of

violence/hard power) and the right to make laws or cater for justice through the courts, corporations have been under-researched from political scientists. They have been left to economists or at best to administration researchers.

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The powerful (political) tool of legitimacy has not been used in their examination, at least broadly.

This is a common conclusion of the major theorists that attempt to close this gap with Neron (2010, p333) accepting that there is a “call for a conception of corporations as political actors” and “ need for better understanding" of such a nature. Ciepley (2013, 140) points out the need to clear the “obfuscation of the real underpinnings of the corporate form by the dominant (neo)liberal social imaginary." Deetz (1994) proclaims that "few authors have looked closely at how decisions made in corporate organizations have substituted for collective judgments in the public sphere" calling this omission untenable and having us wondering how such internal decisions with external effects are legitimized first place. Chandler and Mazlish argue that back in 2000, “there were only two hits for the word corporation on the website that did post more than a thousand abstracts of the American Political Science Association meeting.”

(Chandler/Mazlish, 2001, p.10)

I am suggesting that the reason behind this omission was partly due to -what I call- false dichotomies, the details of which I will examine in the following parts of this paper. These false dichotomies, concerning the nature of the corporation e.g. public/private, economic/political,

contractarian/communitarian primarily, have been shielding the firm from a thorough political examination, pre-defining the limits of the concept and restricting its fair analysis to a legal-economic sphere only.

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that have prevailed have hindered for years a fruitful debate, or at least the external critics from being taken seriously (Bell, 1960). In short, the

corporation and its function have been considered to a great extent a taken-for-granted concept or a "technical matter," at least in a pre-2008 world and have been left with some exceptions to economists and academics in the Business Schools to theorize. Wanting to (critically) theorize about

corporations and asking to be taken seriously -or worse survive in the academic arena- has been a difficult task, especially when outside the premises of the Business school.

Martin Parker, professor of organization and culture at the University of Leicester and a prominent researcher in the critical management studies highlights this issue:

“The lack of opportunities for sociologists and other social scientists during the 1980s, combined with a massive expansion in business and

management teaching, resulted in many students with postgraduate training in sociology and related disciplines being forced to find work outside sociology departments. Many of the ideas which now shape CMS can be traced back to the consequent importation of Marxism , critical theory, post-structuralism and so on into the business -school from the 1980s onwards." (Parker M., 2002, p123)

Furthermore, even those taking the critical path within the Business school have faced the difficulty of staying critical while being asked from external customers to validate existing practice or invigorate it with thrilling new

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language, facing the “Faustian bargain of being productive in a place that encourages and rewards certain forms of production” (Parker M., 2002, p129). To sum it up, a critical, political analysis of the corporation has not been

conducted to the extent that their growing importance (have been described as dominant institutions of the world (Rohtkopf, 2012)- has called for. I have briefly shared the reasons why I believe this has been the case. The post-2008 landscape has allowed more space and sparked an effort to finally examine the nature of corporations using political tools. I aspire to contribute my two cents in this debate.

Next, I will demarcate the field between extra-firm and intra-firm legitimation stories in order to clarify what we are going to look for in both cases.

Following, I will delve into the “fleshing out” of the legitimacy-supportive concepts.

B2. Extra-firm and intra-firm legitimacy: What we examine.

We can look at the legitimacy of the corporation from two angles. The first angle is the one of the corporation as an entity operating within a polity, or more accurately, polities, that is competing, cooperating or both with other business and non-business entities (e.g. partnerships, NGO’s and public entities).

What concerns us, from this point of view, is the basis of legitimacy of the corporation in regards to its external references. In other words which concepts seemingly render the corporation legitimate within the broader

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societal framework; how corporations make sense to the rest of society. To make the distinction clearer, we can think external references to be any non-employees or non-workers in corporations (at least the type of

corporation I am examining, and I have described in the introduction of the thesis.)

For that, we have to examine for whom does the corporate activity cater, on which basis, how does this basis considered to be acceptable and whether this justification is historically and empirically informed.

To answer this question it is crucial to examine and reexamine the concepts of contractual, corporate formation, asset ownership, risk-taking and reward of the corporation. I will explain these concepts in the following part of my thesis in full detail.

The above angle is the angle of extra-firm legitimacy. I devote the first section of the second part of this paper for its examination, applying the critical

formula described in the theoretical one.

After concluding the analysis of the contemporary concepts that seem to support external legitimacy and explain why and how they are grounded on misleading premises, I will examine the main concept that is used to fortify its internal legitimacy, that of managerial authority.

What I will examine here is how this story makes sense to those that are involved internally in the corporation, i.e. the employees/workers.

I will also examine if and in which way the internal structure affects the external legitimacy.

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To recapitulate the process of examination: I will first identify and present the dominant contemporary stories of legitimation on the external level. After that, by performing empirical and historical analysis, I will reveal their operative concepts and assess the extent of their differences. Concluding that the operative meaning of these concepts does not to correspond to the manifest one, I will argue that the external legitimacy of the corporation is built on false premises.

Finally, I will examine the internal aspect of legitimacy and show that is it also based on factually wrong premises.

This will have us wondering whether a change in the internal structure of the corporation will affect positively, not only its internal legitimacy but also its external one.

B3. Extra-firm legitimacy: Shareholders' primacy and corporate social "responsibility."

The stories and the supporting concepts

There are two main legitimation stories related to the justification of the operations of the corporation: shareholders' primacy and corporate social responsibility. One can view them in a chronological and historical order since the second is newer and developed to supposedly “respond to the concerns and the criticism” that the first has gathered.

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be a mistake to treat them separately or buy into the notion that only one of them influences minds, hearts, and perceptions. I argue that they both work in a parallel way and are used interchangeably to fortify corporations from

critique.

I show how shareholders' primacy is influencing legal scholars (lawmakers, judges, bureaucrats) and business graduates, while corporate social

responsibility is a story used when addressing the public in a broader sense. To begin with, it is safe to argue that the Friedman doctrine(1970) of

shareholders’ primacy is far from over, although the post-Lehman era has raised a serious call for reconsideration of the main principals of the world’s economic architecture (for the importance of the doctrine see: Naomi Klein, 2007, p.59-89 and for how the doctrine continues to live on: Persky,2010)

I will first spot how legislation and economic theories promoted and continue to promote the justificatory basis of the corporation as a maximizer of

shareholders' wealth (value); after that I will pinpoint the manifest concepts that support this story, providing details on how they are perceived in their ordinary/manifest meaning and commonsensical understanding. Following, I will examine the validity of these concepts from a socio-historical, empirically informed perspective, demonstrating their operative function.

The very first articulation of the shareholders’ primacy has been the well-known US court decision in the case of Dodge vs. Ford Motor Company,170 NW 668 (Mich 1919). The court in its ruling has declared that:

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"A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of trustees is to be exercised in the choice of means to attain that end, and does not extend to a change, in the end, itself, to the reduction of profits, or to the non-distribution of profits among stockholders to devote them to other purposes." (Chief Justice Ostrander, 1919)

What the court has ruled in this case is that the board of a company is obliged to use the corporate property (assets and funds) for the benefit of those that the court perceived as the real owners of the corporate property, the

shareholders. Ford’s plans to invest the company surplus in increasing salaries, expanding production and cutting car prices (stockholder benefit) has been characterized as “continuing the company as a semi-eleemosynary institution” in the grounds of refusing to use company profit to increase or at least maintain the payment of special dividends to the shareholders

(increasing the value of shares and shareholders’ returns).

Contemporary legal framework has been reshaped towards what prima facie looks like a less radical approach, but in a similar vein, with the so-called enlightened shareholder value approach in the UK (section 172, companies act 2006) and in the USA, where Delaware corporate law that directs managers’ fiduciary duties not to the shareholders alone but to “the corporation and the shareholders” (Millon, 2014, p.1045). This reshaping towards a shareholders+ (shareholders plus) theory, appears to be even stronger in Europe. Does that mean however a shift towards radically new and different theories?

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Hardly so. Millon reminds us the shareholder primacy idea is broadly

embraced within the legal academy, especially among leading law schools. One of the most efficient ways to construct a belief system is undoubtedly through education (Bruner/Gergen 2003, p169-173.) What commences from the business or law school classroom is soon enough proliferated and

legitimized through other legal, bureaucratic and economic channels.

In the literature, the notion of shareholders' primacy has first found support in the work of Berle and Means (1932), as Sundaram and Ipken (2004) argue. Berle and Means have explicitly argued that managing on behalf of the shareholders is a necessity because shareholders are the real corporate property owners. From this, it is obvious that, according to this doctrine, the treatment of the corporation is what Ciepley(2013) critically describes as "a purely private entity, a kind of glorified partnership’’.

In the same vein, the primary, if not sole purpose of this private entity is described by Milton Friedman:

..there is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud… (Friedman, 1970, p6)

Moreover, the most influential defender and promoter of this (neo )liberal doctrine describes the function of a corporation as purely economic

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(therefore not political) and argues that the ones in control should constrain their efforts in the maximization of shareholders ‘value. In other words

business is business, and any social spending (even "philanthropy" in this version) is managers ‘politics. Organizations are and should remain "apolitical" entities:

“What does it mean to say that the corporate executive has a "social responsibility" in his capacity as businessman? If this statement is not pure rhetoric, it must mean that he is to act in some way that is not in the interest of his employers. In each of these cases, the corporate executive would be

spending someone else's money for a general social interest. Insofar as his actions in accord with his "social responsibility" reduce returns to stockholders, he is spending their money.” (Friedman, 1970, p1)

From what I have described so far, we can extract the supporting manifest meaning concept of the shareholders’ primacy legitimation story:

“Corporations are private economic entities that follow strictly

business/economic purposes in their operation and therefore their

(sole/main) responsibility is to maximize the value for their shareholders. The first concept I am going to deal with is that of a) corporations as purely private, business entities (and the private/public dichotomy). This perception provides support for the legitimation of corporations as shareholders' territory where their rights are the only or at least top priority, while non-shareholders (i.e. employees, "consumers," society) is "legitimately" excluded.

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After revealing the operative meaning of corporations as "private" entities, I examine an altered legitimation story that, adapting to criticism, recognizes an extra legitimation basis for the corporation: social "responsibility"/ citizenship (CSR). This amended legitimation story claims that the companies are entities with "dual responsibilities”, social and economic and base their legitimacy on a “socially responsible way of conducting business." For reasons of coherence, I will provide the details of this story and its concept, after I conclude the debunking of the first one.

Allow me, therefore, to begin by examining the (not so) private nature of corporations.

B3a. Shareholders primacy: The ordinary and operative meaning of "private."

Corporations as private entities- The public/private divide (a historical throwback)

It is not possible to grasp the contemporary manifest concept of corporations as private entities without a historical throwback of the private/public division that influences the political, legal and economic spheres; attempting to keep each other apart, one would add.

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emphasis in the United States, but with its influence extending far beyond-. In this, he demonstrates the cyclical nature of this distinction and how, through the time, the gap has either been broadened or shortened, adapting to

historical changes that resulted in changes of political and legal thinking. Horwitz pinpoints the beginning of this division in the way we understand the

law and politics in the 19th_{century and the emergence of the market as a}

central legitimating institution (p1424). It is the time that contracts begin to be viewed as: "an entirely private institution between consenting individuals in which the state should have no interest” and "private law as a neutral system for facilitating voluntary market transactions and vindicating injuries to private rights." (Horwitz, 1982, p. 1425).

This view has been legally endorsed to "liberate" business entities (i.e., corporations) from public control, that was the norm during that period. Corporations have been placed on the private side of this divide viewed as a nexus of voluntary contracts. (Jensen/Meckling, 1976 p 311)

However, this perception has been fiercely challenged, in the years of the Great Depression, by the Legal Realist Movement of the 20s and 30s that came so far as to claim that awards of contract damages are indeed state-imposed sanctions based on policy choices (Fuller/Perdue, 1936). Public and private interests in the interwar period were seen and examined from a

progressive viewpoint as hardly separated, if at all.

WW2 and the after the period has been the catalyst that altered this

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American intellectuals of the time, by Nazi Germany, fascist Italy and Stalinist USSR and the direct or indirect pressure from the likes of Nixon and

McCarthy, has forced liberalism and its advocates to take a turn from being “a vigorous defender of planning for the public interest to defending a new kind of liberalism—a pluralistic liberalism of contending interest groups” (Ball on Ciepley, 2006, p.398).

New Deal policies, even the ones that have produced explicit and visible positive outcomes have started to be seen as a highway to totalitarianism, and liberal thought was filled with remorse, succumbing to an almost full endorsement of radical emancipation from state power. This gave birth to -or more accurately brought back to life- the contemporary prevalent view of a sharp private-public divide and the corporation as a creature falling entirely into the first category.

Corporations as private entities-The decomposition of the manifest meaning To analyze the manifest concept of the corporation as a private entity, we have to decompose the concept and break it down to its sub-concepts. In short, we have to focus on those elements that are thought to be private in the nature and function of this entity.

In the contemporary legal and economic thought corporations are very often seen and treated as:

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agreements with no external, public intervention. We can spot two variations of this sub-concept.:

The first, dominant one is grounded on methodological individualism and regards the corporation as a nexus of contracts simpliciter, an aggregation of wills of individuals, the sum of its human constituents and nothing more (Coase, 1937).

This notion has achieved such a broad currency that Bratton(1988) describes its reception as "an ontological discovery with immediate and significant

implications for corporate law discourse.”

Consequently, this notion has equipped the advocates of shareholders' primacy with their probably most important tool of argumentation: The corporation is not an entity by itself, but an aggregation of the wills of its owners, the shareholders; their interests, therefore, are the only ones that are to be protected. This way of viewing the corporation has a strong normative implication to the treatment of managers as absolute fiduciaries of the shareholders-''owners''.

The second variation, which is earlier chronologically, has recognized the corporation as a separate entity, constructed by individuals but acquiring a life finally in its own, becoming a living organism and a real person, with the body and members and a will of its own. (Gierke, 1900). Despite their

differences, both of them leave the private construction of the corporation unchallenged and “locate control within the board of directors, and neither requires a shift from shareholder wealth maximization to stakeholder

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(Padfield, 2015).

b) Private in ownership, meaning that the shareholders, are almost naturally viewed as owners of that part of the company (assets) that is equivalent to the percentage of shares they do own (Pettet, 2005 p151). Although not a legal norm, as the above one, this is such a widespread (economic) belief that as John Kay (2015) writes “I have lost count of the number of times I have been told is the law too”.

Moreover, even the entry of the word corporation in Wikipedia makes an explicit reference to the shareholders as owners. Both instances serve as excellent indicators of the everyday manifest meaning of this sub-concept.

c) Private in risk taking, rewards, and losses, meaning that the corporation is seen as an innovative, risk-taking entity that uses and risks a sum of private funds to produce new technology, improve the quality of services, etc. It is then this private risk factor that serves as a justification for the distribution of (the vast majority of) rewards or losses to those that appear to have taken this risk, i.e. the shareholders and particularly those with enough leverage to decisively influence corporate decisions and to their fiduciaries, the managers. Risk compensation in the form of high premium in returns is consequently promoted by most economic models (Vereshchagina/ Hopenhayn, 2009).

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manifest concept of corporations as private entities (in contrast to the public ones), the first pillar of the shareholders' primacy legitimation story. I have described the “common-sensical” meaning of those concepts and how this derives through the support widespread economic and legal notions.

Now I move on with the examination of the validity (historical and empirical) of these sub-concepts and the unmasking of their operative meaning.

Corporations as private entities-The unmasking of the operative meaning. a) Private in construction- The neglect of the public ontology of the

corporation.

In the description of their manifest meaning of corporations as "privately

constructed entities," I have referred to the two variations of this sub-concept. Moreover, I have mentioned how they both leave unchallenged the

assumption that the corporation is a privately made entity, locating their battleground on whether it has a life of its own too, or not.

I claim that both of them miss a very crucial point with great normative implications, the public (governmental) involvement in the very construction of the entity called the corporation. For this, I draw from the work of David Ciepley(2013) and his effort to reveal the inaccurate perception of the corporate nature.

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I will start with the examination of the most recent and dominant sub-concept, that of the corporation as a nexus of contracts. This notion views corporations as not more than slightly larger partnerships and is grounded on a methodological individualism approach that has been introduced by Max Weber (1922) and has been embraced greatly by the Austrian School of Economics.

Weber developed his theory that

"..when discussing social phenomena, we often talk about various "social collectivities, such as states, associations, business corporations, foundations, as if they were individual persons… in sociological work, these collectivities must be treated as solely the resultants and modes of organization of the particular acts of individual persons." (Weber, 1922) It is clear therefore that, following this approach, we regard the contractual establishment of the corporation, simply through bilateral agreements as possible. This is not the case, however.

To better clarify this, let us have a look at another business entity, the

partnership. The partnership is formed by a contractual agreement between individuals that decide to unite, normally by pooling funds and resources to pursue a common goal, either to diminish risk or due to a legal obligation (e.g. in poorer nations, where foreign entities are obliged to collaborate with local ones to invest).

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The partnership, although it enjoys certain privileges too, like lower taxation in some cases, it could indeed be constructed without any State intervention. Its reliance on the State would be then for the enforcement of the agreements in the event of non-compliance. In the case of the partnership the funds and assets are commonly owned, and the "usual" (i.e. usual in perception, not normatively) property rules apply. The partners are liable for the actions of the partnership and vice-versa. The partnership consequently does not enjoy any ability to form agreements on its own or own assets and funds. Moreover, the partners can -in most cases- just withdraw their assets anytime, dissolving the company or forcing a buyout. Therefore, they do not have to find a

replacement as is the case with shareholders. Finally and most importantly the private creditors of the partners have the right to seize (and liquify) the partnership's assets simply.

The corporation on the other hand, as Ciepley(2013) describes it, in contrast to the partnership enjoys three special privileges that are given to it by law and with State intervention: 1) asset lock in 2) limited liability and 3) entity shielding.

It worths examining whether these privileges could be conclusively established through contractual agreements that do not require legal intervention from the State. Asset lock in restricts the shareholder from withdrawing the -theoretically- corresponding to her/his shares part of the corporate assets. They remain a corporate property, and the shareholder has to find a buyer for the shares in any case.

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This, as Ciepley (2013 p.144) shows, could be contractually established, by “having each one of the shareholders agreeing to keep their part of assets locked, at least for a certain period, as in many partnerships." The

establishment of limited liability protects the shareholders from the debts of the company. That means that the creditors of the company cannot extend their demands to the shareholders who remain liable only to the extent of their participation in the corporation.

This again is not the case in the partnership. Limited liability can be established only to a certain extent (Ciepley, 2013, p.144), as “there is no

contractual way to limit the liability of shareholders for tort claims against the corporation as third parties are often outside of the contractual sphere of the corporation” (Ciepley, 2013, p.145)

The shareholder cannot be sued for the wrongdoing of the corporation, which is not the case in a partnership. It is easy to understand that this is a State legal intervention in favor of the shareholders and consists a legal privilege that facilitates investing in a company and economic activity.

Finally, the most important legal privilege that cannot be established contractually under almost any circumstances is that of entity shielding. Entity shielding means that the corporate assets are protected from the personal creditors of the owners. Shares can be therefore seized by shareholders' creditors, but the net assets of the corporation cannot be

liquefied; they remain protected. That means that if a personal creditor has a demand, she can be compensated with the equivalent amount of shares but not by liquefying assets. This is a significant limitation of the standard

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And it raises an important point: the corporation is neither simply a nexus of contracts, nor has a life of its own. On the contrary, the corporation can be viewed as an entity, for the construction of which the State has interfered and established a series of privileges. In this sense, the business is distanced from the notion of its private creation. The corporation is an artifice with privileges given by the government. It cannot fully be constructed without its

intervention, and it does not acquire its existence by itself, as the real entity theory claims; its existence is on the contrary granted with special

permissions by a legal authority.

These details might resemble mere technicalities, but are not, as we can earn a valuable conclusion for the nature of the corporation, to reveal its operative meaning as a State-related entity.

This conclusion urges us to take into consideration the political character of the firm.

The fact that contracts are used for the establishment of the corporation does not mean that these contractual relations would have been able to be formed without a deliberate special legal formation, that indeed is a political decision and goes against to the "usual" contractual procedures.

Contrary to this view, Hessen (1979, p.29-30) has claimed that the

establishment of corporations would have been possible even without the intervention of the State. To defend his opinion he presents the example of what he perceived to be a contractual establishment of a series of quasi-corporate partnerships back in the 19th century.

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These entities were not given the privileges granted to corporations by State charters at that time (these were given only to a limited number of

corporations), but -according to him- managed such an establishment with the help of trustees.

In response, even if we accept that the establishment of a relatively small quasi-corporate partnership bearing some of the abovementioned

characteristics was possible back in the time, this does not win the argument for the absence of State intervention.

The modern corporation is a complex entity where in cases millions of shareholders buy shares and of whose funds the corporate assets are generated. The fact that their "investment" remains locked and it cannot be liquefied under no circumstances is what makes the shares tradable and allows the corporation to attract more funds and grow.

Shareholders would have an enormous benefit to use the (corresponding) corporate assets as a security to the demands of their creditors. Due to the deliberate state intervention and alteration of the rules and the special privileges given to companies they cannot. Were they to attempt such an outcome, with the use of contracts only, they would have to monitor the transactions of millions of others shareholders that would have a benefit not to shield their assets (moral hazard theory).

Of course such a monitoring -even if it was possible for smaller entities back in the 19th century- is practically impossible in a globalized world of millions of transactions and would render shares untradeable (Hansmann, Kraakman, Squire, 2005; Ciepley 2013)

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However, it is important to examine the conditions under which this particular political decision has been taken. The first established corporations have been given these particular privileges by a State charter. The rationale behind this ruling, however, was very specific. Corporations have been given these privileges that have facilitated and strengthened their activity because they were seen as risk-takers that would use them to develop economic activity in fields where the state was not able to do so. Or in other words, to "undertake activities that would advance the commonwealth’’ (Ciepley, 2013, p.139), facing a threat to have their charter revoked (and did so) "if they failed to act by the public good" (Banerjee, 2008, p53)

This has all changed when corporations “emancipated” from state charters and stricter regulation and were able to acquire this legal status simply through registration, subjected to a significantly lower amount of control. These special and deliberately designed rules for the first chartered

corporations have not been altered; they were just extended.

What has been altered was the degree of regulation and accountability. The lift on restrictions “was not a mistake, inadvertence, a happenstance in history, but a well-designed plan devised by particular interests who needed a ruling that would allow for a particular form of organization" (Perrow, 2002, p41.) The construction of corporations, therefore, has not been private in its very core and this is why the corporate entities have been tied to different goals. When the goals became privately orientated these privileges have not been taken away; otherwise, the very existence of the corporation as we know it

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would have been impossible.

Instead, they have been tied to new theories, that ignored this element. As I have shown, neither the nexus of contracts theory nor the real (private) person one takes into account the historical elements that tie the corporations and their construction to the intervention and special legal care that the State has provided them with.

The operative meaning of the concept, therefore, is revealed to be the following:

Corporations are entities that are constructed with the use of private contracts, the rules of which have been however specifically and deliberately designed and facilitated by governmental intervention first place. These contracts could not, therefore, be constructed with the expression of mere private will(s) and they do not correspond to the qualities of “private” formation that “usually” apply.

I will now examine the second sub-concept, the one of the private ownership of corporations. The careful reader should already have some hints about how the operative concept might be formed.

b) Private in ownership: The peculiar nature of corporate property and the assets-shares divide.

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shareholders in a firm from partners in a partnership. This is the same (misinformed) pattern of thought as in the formation of the corporation. Shareholders are described as real owners of the assets of the corporations exactly like partners are considered real owners of the assets of the

partnership.

Ciepley (2013) provides a clear explanation of the reasons why shareholders cannot be viewed as the owners of the assets of the corporation. I will briefly state his point, and then I will develop further the view on what shareholders own.

The case with shareholders and corporate assets brings to mind the lyrics of the Eagles song Hotel California: “you can check out any time you want, but you can never leave”:

Shareholders can, therefore "check out" anytime (given they have found a replacement) but the assets acquired with their contribution are not managed or used (in any sense of the word) by them (they can never leave).

"What the shareholder owns is a piece of stock, representing their financial interests… Normally owners have certain rights over their property: they can use it, exclude others from use, lend it to others, borrow on it, alienate it and profit from use or sale. Shareholders have none of these. Even in bankruptcy the assets do not come to their possession" (Ciepley, 2013,p146)

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seems to be a form of "socialized property on the corporation level that makes our economy neither public nor a private one, but a government-fostered corporate property one with the means of production socialized on the corporate level." (Ciepley, 2013, p147).

What is described here is a very different type of ownership? The

shareholders do not own, in the very meaning of the word the corporate assets. The corporate entities own the assets by themselves. Avoiding any -almost metaphysical- temptations to depict the corporations as having flesh and bones, I do not mean to claim that the company is an independent entity with an autonomous will. My point is that when it comes to the corporation, we observe a very particular divide, that of share-ownership/ asset

ownership and control.

The (neo)liberal confusion that serves as a supporting basis for the

shareholders ’primacy is that shareholders through the ownership of shares end up having direct ownership rights on the company in a quid-pro-quo relationship (shares-assets). The directors of a corporation are then seen as mere representatives that exercise their control in the name of the

shareholders, facilitating their interests.

This is not true, however. The legal reality recognizes a clear divide between the control and ownership of the assets and the ownership of shares. The control of the assets is given to the Board of directors that manages the

property that the corporation owns; the shareholders have a right to elect and hold accountable the board but not a direct say in the way that the assets are

Is the contemporary corporation a legitimate entity? : a critical conceptual analysis towards the development of a Political Theory of the corporation

TABLE OF CONTENTS

A. THEORETICAL FRAMEWORK

CORPORATIONS- ISSUES OF EXTERNAL AND

INTERNAL LEGITIMACY.