Company Law Beyond Law and Economics
I am so happy to include this monograph in my Edward Elgar series’ Corporations, Globalisation and the Law. I was humbled when the author said that my work had been an encouragement. I was very happy about these kind words, but I wish I could have written so lucidly on this topic myself! This book is a fine of work of scholarship. It is erudite, challenging, and humorous. In a serious academic work the humour is perhaps surprising but very welcome. Javier Reyes has given us a thorough shake-up of corporate governance, interrogating its roots, the layers of myths, and dominant discourses around the topic. At the same time, he does not lecture or preach, rather he wants the reader to understand why so many fables have been perpetrated in this subject. The idea of the book is to open a free-ranging debate on the topic. It seems that the corporate governance debate has become a contest rather than a deliberation. As the author puts it in the Introduction: ‘With the gargantuan amount of power harnessed by corporations, paired with an unquestioned primacy of shareholder value – both in academia and policy – it is unsurprising that abuses committed through corporations only get more strident with time’. The book also argues that the power relationship between States and powerful corporations comes with a polarisation of discourse in this subject. It is time to reframe the topic with humour rather than vitriol; Reyes recognises many ironies in corporate governance, not least that both sides of this argument are becoming ‘theologically driven’, and the proponents have become adherents of a ‘true faith’. Harvey Cox has written on ‘the market as God’1 and the Pope has denounced ‘unbridled capitalism as the dung of the devil’,2 while Milton Freidman’s adherents are equally determined.
Taking three tenets to reframe the discussion, the author contends ‘first, that economics is political philosophy, at best, and not a science in the way that natural science proper is; second, that company law is about how to make good society and is thus political; and, third, that corporate governance without philosophical and historical inquiry is vacuous and deceitful’. To consider history, economics, law, morality and philosophy together is a more fruitful endeavour than pursuing sterile arguments.
To do this is an immense task but Reyes has managed to do it and has done it with irony and a light touch. Using Pogge’s ‘moral deflection devices’ Reyes unpacks much of the prevailing corporate governance doctrines through irony:
the modern corporation is the shared space where both the left and the right – economically speaking – coincide in order to equally contradict themselves, i.e. the true elephant’s graveyard of political coherence, both for ferocious free market advocates and convinced socialists. Blind to the irony of it all, the latter passionately protest corporations in the fanciest capitals of the West while enjoying the benefits they facilitate; while the former tenaciously defend economic freedom as embodied by a legal vehicle that enjoys the most blatant state subsidy, i.e. limited liability, the very definition of a hands-on, protectionist State. The irony!
Why is this book so important? The book shows the increasing power of corporations and specifically the encroaching democratic deficit; corporations have been ‘a tool for toying with democratic processes that are fundamental in the self-determination of entire communities, countries, and regions’. The author cites examples but we know now that this process is on-going and accelerating with the Facebook and Cambridge Analytic scandal. This book is therefore very pertinent and crucial for analysing the state of the world.
The book flows from the beginning, where the author debunks the myth of economics as a science and ‘the end of history’ discourse, showing rather the rich complexity of corporate governance, the historical and philosophical roots of the subject, fascinating insights of Roman limited liability, and a new perception of the agency problem, challenging the mainstream doctrine of agency theory rather interrogating the internal coherence of the discourse of ‘shareholders as owners’. Finally, the conclusion offers a tool box of mechanisms, processes and relationships in corporate governance which can be considered after the book has been absorbed. The author leaves the readers with a warning; you cannot use cognisance dissidence to build a corporate governance structure; having one’s cake and eating it is not an option!
The monograph is both satisfying and exciting, and will be vital in debunking many myths and stopping the polarised debate.
1 Harvey Cox, The Market as God (Harvard University Press 2016).
2 Reuters, ‘Unbridled Capitalism is the “Dung of the Devil”, Says Pope Francis’, The Guardian, July 9, 2015.