War and the business corporation.

• Author: Orts, Eric W.

ABSTRACT

This Article addresses the relationship between modern warfare and business corporations. The Article begins by considering the nature of war, emphasizing the effects of globalization and the changing importance of national boundaries. The Article reviews leading theories of war and focuses on how the growth of multinational corporations in economic and political power has begun to rival the power of nation-states. Next, the Article addresses the nature of the business corporation in the context of modern war by surveying standard legal, ethical, and economic understandings of corporate governance. The Article concludes by arguing that the recognition of the moral and political issues of war and peace and their connection to corporate governance requires a qualification of the shareholders-only law-and-economics view of the corporation. Far from an "end of history," contemplating the interactions between business corporations and modern warfare suggests that much work remains to be done to construct the institutions needed to achieve the elusive goal of global peace as well as economic prosperity.

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If looks could kill, they probably will, In games without frontiers--war without tears.

Peter Gabriel (1)

This Article addresses the topic of war, which is not ordinarily considered germane to academic studies of corporate law. (2) A few cases from the Vietnam era are sometimes included in contemporary corporation law casebooks. (3) In an academic milieu dominated by considerations of economic costs and benefits, however, mainstream corporate law teachers tend recently to avoid thinking seriously about issues of business ethics and social responsibility. Two of our most prominent professors of corporate law, for example, have gone so far as to claim that "the recent dominance of a shareholder-centered ideology of corporate law among the business, government, and legal elites in key commercial jurisdictions" has resulted in a world in which "[t]here is no longer any serious competitor" to this view of the corporation. (4) "The triumph of the shareholder-oriented model of the corporation over its principal competitors," these two authors conclude, "is now assured, even if it was problematic as recently as twenty-five years ago." (5) They therefore declare "the end of history in corporate law" and predict that "the ideological and competitive attractions of the standard model will become indisputable" with "convergence in most aspects of the law and practice of corporate governance ... sure to follow." (6)

The triumphalist view of shareholders uber alles in business corporations should be one of the first casualties of a serious consideration of the nature of war in our modern, increasingly global society. (7) The modern nature of war so forcefully brought home in the terrorist attacks on the United States on September 11, as well as the ensuing Allied military action in Afghanistan and elsewhere, should remind scholars that corporations do not exist separately from the problems of human society. We must consider the role that business corporations play in the great games of international war and peace, as well as less deadly economic competition.

This Article proceeds as follows. Part I considers the nature of war, with an emphasis on the effects of globalization and the changing importance of national boundaries. It reviews some leading theories of war and how they relate to the business corporation. In particular, it focuses on the fast, recent growth of large multinational corporations and their ascent to economic and political power to rival many nation-states in comparative size and influence. Economic globalization and the multinational corporations that support it have significant implications for theories of modern war.

Part II reconsiders the perennially important topic of the nature and purposes of the business corporation in the context of modern war. It reviews the standard understanding of corporate governance involving not only economic obligations, but also legal constraints and ethical considerations. Accepted restatements of the fundamental principles of corporate law are not, as some academic commentators might prefer, encomia to the single-minded pursuit of economic values. Instead, they recognize the importance of law and ethics as components to the development of corporate purposes. In this context, the legal and ethical obligations of business corporations with respect to issues of war and peace are considered.

Part III draws some conclusions from this consideration of the nature of war and business corporations. Briefly, it argues that a serious consideration of the moral and political importance of issues of war and peace in modern society requires a major qualification to the standard law-and-economics, shareholders-only view of the corporation. An understanding of the important interconnections between modern war and the business corporation reveals that theories of the social nature and purposes of business corporations have not yet reached an historical end. The Article concludes with some suggestions about future directions for interdisciplinary research at the social intersections of war and business corporations.

To expand on Peter Gabriel's lyrics quoted at the outset, economic globalization has meant that businesses increasingly play in "games without frontiers." (8) Enhanced technological capabilities, as well as a hardening of hearts arguably made possible by evolution of modern forms of social organization, have also made possible "war without tears." (9) This Article argues that human society should strive against the economic, moral, and political outcome of perpetual global war, and building the institutions necessary for peace should include attention to the social structure of modern business corporations.

1. ON THE NATURE OF MODERN WAR

   One basic principle that has not changed is that "war [is] not healthy for children and other living things." (10) A recent documentary estimates that two million children have been killed in wars in the last ten years. (11) Tragically, as seen in Afghanistan, Africa, and elsewhere, the use of children as soldiers is "more and more common." (12) Surely, "the love of children, with their need for attention and care, is a moral bond that should transcend every local and national barrier." (13) Leo Tolstoy's view remains true today: "War is not polite recreation, but the vilest thing in life, and we ought to understand that and not play at war. We ought to accept it sternly and solemnly as a fearful necessity." (14)

   Carl von Clausewitz probably remains the leading social theorist of war, at least since the ancient Chinese writer, Sun Tzu, and the ubiquitous European political theorist, Machiavelli. (15) "War," according to Clausewitz, "is an instrument of policy." (16) It is, in fact, "policy itself, which takes up the sword in place of the pen." (17) For Clausewitz, writing in the early nineteenth century, war is simply extreme politics. War is a "political instrument, a continuation of political commerce, a carrying out of the same by other means." (18)

   The theories of war advanced by Clausewitz, as well as Sun Tzu and Machiavelli, remain popular today as they are applied in the field of business strategy. (19) Presciently, Clausewitz described war "as a kind of business competition on a great scale." (20) In his original theory of war, Clausewitz subsumes private interests of business under the larger rubric of "the interests generally of the whole community," though he recognizes that "policy may take a false direction" and "promote unfairly the ambitious ends" of"private interests." (21)

   Business firms--to the extent that they were just beginning to develop independent social identities in the nineteenth century--were properly considered instruments of the nation-states in which they were based. (22) In the time of Clausewitz, the size and influence of business corporations independent of the nation-states that chartered them were for the most part negligible. (23) For much of the twentieth century as well, this view of the subordinate relationship of business corporations under the nation-states that were seen to create them may have been generally accurate, though even relatively early in the twentieth century concerns began to arise about the possibility of corporate "war merchants" influencing national politics in a belligerent direction. (24) Historical evidence also suggests that wars have sometimes been fought for "a minority of financial and industrial interests" that may reap "great profit" as a result, even though overall national interests are rarely advanced by aggressive war. (25) In general terms, the problem of war in the days of Clausewitz, and perhaps through most of the twentieth century, could be conceived adequately as a problem of "the state system" of international politics. (26)

   Today, however, business corporations can no longer be so easily compartmentalized, and neither can the problem of modern war. Increasingly, business corporations act internationally and transnationally, citizens of the world rather than any particular nation-state. (27) In about twenty years, from 1969 to 1990, the number of multinational firms more than tripled, from seven thousand to twenty-four thousand. (28) By 2000, the number of multinational firms had more than doubled again to sixty thousand, with 800,000 foreign subsidiaries. (29) Multinational business now accounts for approximately one-quarter of world economic output. (30) Sales of multinational-affiliated corporations are twice the value of global exports of all goods and services. (31) Although the number of cross-border mergers and acquisitions fell by about fifty percent in 2001, especially after the events of September 11, the slowdown followed a three-year surge in international combinations, and the trend toward global companies is likely to...