What Is a Corporation? Liberal, Confucian, and Socialist Theories of Enterprise Organization (and State, Family, and Personhood)

• Publication year: 2013

SEATTLE UNIVERSITY LAW REVIEWVolume 37, No. 2, Winter 2014

What Is a Corporation? Liberal, Confucian, and Socialist Theories of Enterprise Organization (and State, Family, and Personhood)

Teemu Ruskola(fn*)

[I]t is a serious oversimplification to categorize modern Western legal systems as ideological reflections of capitalism. Much modern law is more feudal in character than capitalist. Much defies any characterization in socioeconomic terms. A more complex system of categorization and characterization is needed, which will draw not only on types of economic and political formation but also on philosophical, religious, and other kinds of criteria.(fn1)

- Harold J. Berman

Contract, that greediest of legal categories, which once wanted to devour the state, resents being told that it cannot painlessly digest even a joint-stock company.(fn2)

- Frederick W. Maitland

I. INTRODUCTION

What is a corporation? An easy, but not very informative, answer is that it is a person-a legal person, that is. More substantive answers suggest that it is a moral person, a person/thing, a production team, a nexus of private agreements, a city, a semi-sovereign, a (secular) God, or a penguin (kind of).(fn3) Surprisingly, despite the economic, political, and social importance of the corporate form, we do not have a generally accepted legal theory of what a corporation is, apart from the law's questionable assertion that it is a "person." Insofar as legal scholars theorize corporation law, they draw predominantly on economic theories of "the firm"-economists' umbrella term for business enterprise.(fn4)

In this speculative essay, I hope to place the idea, and law, of the corporation in a comparative context and to suggest, following the English legal historian Frederic Maitland, that corporation law is a "theme from the borderland where ethical speculation marches with jurispru-dence."(fn5) I do so not to question the utility of economic theories of the corporation as such but to suggest that by thinking in terms of broader concepts-such as organization of economic enterprise more generally- and by considering those concepts in the context of the larger political economy in which economic enterprise is necessarily embedded, we will be able to see better the utility and limits of any particular theory.(fn6)

Below, I outline theories of enterprise organization in three ideal-typical worlds that I call liberal, Confucian, and socialist. My template for liberalism in this sense is the United States while the main source of my idealized notions of Confucian and socialist polities are late imperial China and the People's Republic of China before the inception of economic reforms in 1978, respectively. Exemplifying distinctive political and moral economies, they help us see more clearly some of the assumptions we make about (U.S.) corporation law. At the outset, I want to state that my aim here is not to advocate or defend any one of the three theories I outline below. To the contrary, I argue that each of them has distinctive conceptual difficulties in justifying the organization of economic enterprise in the form of corporate entities.(fn7) None of the theories is self-evidently superior to the others. Collectively, they offer a range of different possibilities with distinctive social, political, and moral visions. Rather, what a comparative analysis of different theories of enterprise organization can do is to bring to focus the cultural specificity of each. What economists ordinarily call the theory of the firm is in fact best thought as a liberal theory of the firm, which assumes in turn a particular division of labor among the institutions of the market, the state, and the family. Stated in the parlance of economics, not only institutions of the material kind but even our theories about them can become path-dependent, losing sight of the historical contingency of the phenomena they seek to analyze.

In Part II, I briefly sketch the broad ideological contours of liberalism, Confucianism, and Chinese state socialism, while Part III examines the theoretical status and place of economic enterprise in each. Part IV analyzes some of the ways in which all three theories of enterprise organization resort to distinctive ideological fictions to maintain their internal coherence: fabrications of corporate personhood, invented kinship, and aspirational unity in a socialist ideal of "the people," respectively. Part V considers the practical implications of the preceding analysis in the context of the reform of Chinese state-owned enterprises. Part VI concludes.

II. IDEOLOGIES AND POLITICAL ECONOMIES

What are some key assumptions about the relationship among the state, the market, and the family that inform U.S.-style liberal capitalism, political theories of Chinese Confucianism, and pre-1978 Chinese state socialism? Needless to say, there are many kinds of liberalism, Confucianism, and socialism. What I try to do below is to set out key terms of one particular type of liberalism (U.S. liberal capitalism), one type of Confucianism (ideology of the late imperial Chinese state), and one type of socialism (state socialism of the PRC before the current era of economic reforms). I have chosen them, not because they are especially worthy examples of the ideologies they represent, but because they represent historically significant instances of each.

It is also important to note that insofar as the accounts below pertain to ideologies, they must not be confused with descriptions of how any of the societies to which they refer have been organized in fact.(fn8) Moreover, as ideal-typical constructions, they are not fully accurate historical descriptions even of the ideologies of their respective societies. Rather, they focus on certain salient aspects of each for the purpose of facilitating a comparative analysis.

A. Liberalism: State, Market, and Family

It is a key premise of the modern liberal state that the appropriate means of regulating a social interaction depends on the nature of the interaction to be regulated.(fn9) As that state is imagined in the United States, all of social life is divisible into autonomous spheres that operate, or ought to operate, relatively independently of each other with a unique rationality-a governing logic-that is proper to it. At the highest level of generalization, there are three distinct spheres: the political sphere of the state, the economic sphere of the market, and a residual sphere of relations of interpersonal intimacy.(fn10) Tellingly, this last sphere is the least well-defined, and even the political and economic vocabulary for describing it is not as developed as it is for the other two spheres. Although it includes a broad range of associations with intimates, with kith and kin, for present purposes I will call it the sphere of the family for short.(fn11)

Each of these spheres in turn has a unique governing logic that is proper to it. The political sphere of the state is organized predominantly as a structure of authority. Backed by its monopoly on legitimate violence, the state is empowered to extract resources from society and redistribute them on the basis of politically made determinations. It has the power to order an unwilling tax-payer to pay his due, displace a person from her home by the power of eminent domain, and even take a person's freedom or life. In the economic sphere of the market, in contrast, the allocation of resources among private actors takes place on the basis of consensual exchange. The principal governing logic of the market is contract. Ideally, the sphere of the family should be regulated only minimally, in order not to disturb the relations of intimacy that undergird it. When economic transfers take place among loved ones (say, unpaid domestic household labor performed by a stay-at-home spouse), such transactions are ideally at least attributed to altruistic motives (labor in return for love). We might thus say that the intimate sphere relies on the logic of sharing and interpersonal trust, rather than self-interested exchange.

The three principal logics of authority, contract, and trust ought to operate independently of one another. For instance, the exercise of authority has its necessary and proper place in the political sphere of the state, yet direct governmental authority becomes suspect when applied to the market, and even more so when the object of regulation is familial or other intimate relationships, except insofar as regulation is vital for policing the boundaries among the different spheres and for preserving the integrity of the system as a whole. Likewise, the economic logic of the marketplace is inappropriate both in the political and intimate spheres: neither votes nor babies should be sold. Finally, the logic of the intimate sphere, or more precisely the lack of a rational logic, and reliance on love and trust is also best kept where it belongs-in the family and among friends. One trusts a politician at one's own risk, and in the marketplace too bargains are ordinarily struck at arm's length.

The above schema can be summarized as follows:

	Political Sphere	Economic Sphere	Intimate Sphere
INSTITUTIONAL STRUCTURE	State	Market	Family
GOVERNING LOGIC	Authority	Contract	Trust

It is important to...