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The Modern Corporation and American Political Thought: Law, Power, and Ideology

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This is an ambitious work which investigates how ideas which justify particular interests are adopted into law and influence intellectual presumptions. Bowman wants to know how we got to the point where "increasingly, transnational corporate power, not state power, constitutes the formative agent of change in world development."

He begins by reviewing how the republican tradition, which emphasized the responsibilities of citizen and statesman in maintaining social balance, was gradually replaced by the rise of classic liberalism, which affirmed the rights of the individual and justified the rise of capitalism by conceiving of economics as a matter of contracts between individuals. Economic activity came to represent the realm of freedom and the pursuit of self-interest. The coercive powers of the state were limited to preserving the realm of freedom and social efficiency. The ideological precept of corporate autonomy grew out of legal doctrines which reified the corporation as a citizen, thus, serving both to legitimize and to disguise corporate power as an inviolable part of the natural order. Corporate liberalism rose as an alternative to laissez-faire liberalism and statist socialism.

Jurists moved from thinking of the corporation as an artificial construct of the sovereign to a regulated citizen. The rights of due process aided corporate power by providing constitutional rights that could be invoked against state attempts to regulate. With the rights of legal persons, came an expectation of corporate social responsibility, consistent with the ideological concept of citizenship. The western frontier and the "invisible hand" gave way to faith in technological advance and a pragmatic role for government support and regulation.

Bowman's historical journey leads through exponents of the Progressive Movement such as Herbert Croly, Walter Weyl, and Thorstan Veblin who argued that corporate hegemony constituted the central problem of modern society. In place of the automatic balance of the marketplace, a conscious social balance would have to be imposed. The rights of property would be reduced but freedom would be retained through the separation of political and economic realms. Our concept of democracy shifted from the belief that sovereignty resides in the people to a more instrumental approach, dependent on rule by experts and faith in technology.

At the beginning of the Progressive Movement most large corporations were controlled by the majority stockholder. With the publication of Berle and Means' The Modern Corporation and Private Property in 1932 that assumption changed and the economic/political dichotomy fell. Peter F. Drucker, Adolph A. Berle and John Kenneth Galbraith "viewed the corporation as an autonomous or self-sufficient entity capable of generating its own capital and therefore no longer dependent on the capital markets." The objective of managerial theory shifted from preserving democratic institutions by regulating enterprise, to limiting the regulatory powers of government in deference to the value of corporate autonomy.

Each wave of populism was marked by pushing regulation of corporations to a more abstract level. Bowman speculates on the future of the adoption of an international companies act or a supranational corporate charter. Behind the political decisions of corporations, Bowman sees the work of a dominant class. His is not the simple class warfare of Marx; the owners of the means of production pitted against the masses. Instead, for Bowman, control lies with the corporate executives and board members of the top 200 industrial and 50 financial corporations. Power based on relationships of control over the corporate bureaucracy superseded power based on property ownership, as the corporation developed into a political institution.

So where does Bowman look for salvation from a world dominated by a few hundred corporate executives? Clearly, he believes that large corporations must be held accountable for policies that affect society and that increasingly, corporate accountability will be defined in global terms. He rejects any movement to destroy the corporate form or rewrite their charters after the fashion of the 19th century. Instead, he seems to turn to public interest groups organized around environmental, health and consumer issues. According to Bowman, America's tradition of civic activism has "found its most potent voice when it has arrayed itself against corporate power or class privilege." Yet, even here Bowman appears pessimistic since he believes corporate social responsibility is unlikely to become a salient political issue except in cases of gross negligence or blatant disregard for the public welfare. In addition, through the media and political influence, corporations have taken the lead in redefining the parameters of corporate social responsibility.

However, the reforms public interest groups seek are dependent on government regulation. If, as Bowman argues, corporations are so dominant they control government, it seems that little would change. Perhaps Bowman is too quick to dismiss those who seek to reform the corporations themselves. He sees the dominant struggles for control in merger battles not in a resurgence of stockholder democracy. "Tender offers, an essential strategy of the merger movement, have supplanted proxy fights as the favored means of seizing control of large corporations."

While tender offers and diversified mergers have played a significant role in increasing asset concentration, there has also been a significant resurgence of shareholder democracy. As more money moves to the indexes and to institutional investors with large holdings, shareholder democracy becomes increasingly important; shareholders who cannot sell must become active in corporate governance if they wish to increase the value of their holdings. In 1992 the Securities and Exchange Commission changed the rules regarding shareholder communication. After this limited deregulation, the United Shareholders Association estimated the cost of a target mailing to a corporation's 1,000 largest shareholders was reduced from $1M to between $5,000 and $10,000.

Bowman does an excellent job of drawing from concepts in law, political thought and the social sciences in making a case for a revised form of class analysis to explain the character and evolution of corporate power. He is clearly right that civic activism reaches its peak when it focuses on "corporate power or class privilege." Each wave of reform in the past has been immediately preceded by public outrage. Upton Sinclair's portrait of the meatpacking industry, Ida Tarbell's condemnation of Standard Oil, Rachel Carson's cry for the environment and Ralph Nader's research into unsafe cars each stirred the middle class to action. Each crisis is answered with a new set of regulations for business.

Perhaps if shareholder democracy can take root, corporations will build democratic mechanisms into their own structures. Power would then shift from the dominant class of Bowman's concern to a more broadly based group of shareholders and employees. Arguably, such a shift would be consistent with both republican and liberal democratic traditions. Social balance would be restored, while preserving the realm of freedom and social efficiency, by relying less on the coercive powers of the state.

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