The Multinational Challenge to Corporation Law: The Search for a New Corporate Personality.

• Author: Hovenkamp, Herbert

By Phillip I. Blumberg. New York: Oxford University Press. 1993. Pp. xx, 316. $45.

Phillip I. Blumberg(1) is a distinguished treatise scholar of corporate law.(2) In The Multinational Challenge to Corporation Law he makes a normative argument for at least modest revision in the law of corporations mainly to base liability on the enterprise as a whole, rather than to divide the corporation into its distinct legal entities, such as parent and subsidiary.

Blumberg distinguishes between "entity" conceptions and "enterprise" conceptions of corporate law (pp. 21-45). Entity conceptions formalize corporations as legal institutions, emphasizing that they are legal "persons" and that the legal form defines the nature of the entity. Under the entity conception, for example, the law of limited shareholder liability remains sacrosanct, even if the corporation is a subsidiary and its only shareholder -- the parent -- is also a corporation. Blumberg sees little policy justification for preserving such a principle, and great potential for harm (pp. 52-61). It permits a parent corporation to shield itself from liability for its own wrongs, even when the general principle justifying limited liability -- concern for the protection of inactive shareholders -- does not apply.

By contrast, enterprise conceptions of the corporation view the corporation as a functional profit-maximizing entity, more or less economically defined. Incorporation of subsidiaries is no more than a technical fact, done mainly for purposes of regulatory compliance, as well as for tax and liability avoidance. With respect to liabilities against strangers such as creditors or tort victims, Blumberg believes such firms should be treated as a single enterprise (p. 253). Thus the parent should be held readily accountable for the injury-causing acts or omissions of its subsidiaries, notwithstanding separate legal personhood and a general doctrine of limited liability.

Blumberg's approach to the issue of entity versus enterprise conceptions of the corporation is traditional and, in fact, quite conservative. This book contains virtually no economic analysis of the business firm.(3) The omission of economic analysis is somewhat unfortunate because economic analysis of the nature of the firm could provide many insights into the kinds of questions that Blumberg considers, such as tort or debtor liability of parents for the acts of wholly owned subsidiaries (pp. 87, 92), the capacity of corporations related by ownership to be "conspiring entities" for the purposes of antitrust law (pp. 98-100), the extent to which a court may obtain...