This Article reflects on the various visions of corporate governance. Initially, the Article reviews the contractarian and communitarian theories of the corporation. The communitarian theory views the corporation as a separate entity, with social responsibilities not only to the shareholders but to the firm's other stakeholders and society at large. On the other hand, the contractarian approach considers the firm's shareholders as the primary constituency to whom management is accountable. Voluntary contracting and market forces align the interests of management and shareholders. The Article next analyzes salient features of corporate governance in the United States, Japan, and Germany. The United States provides an example of a country heavily rooted in a contractarian, shareholder-primacy approach, whereas Japan and Germany traditionally have appeared to be more aligned with communitarian ideals. Recent events suggest that these traditional distinctions are changing, with the resulting entities suggesting a convergence between the two models.
The Authors propose a model that examines business as a mediating institution--that is, as corporate communities that compete in a marketplace as well as support the moral dispositions of their employees and shareholders. The result of this model is an entity that provides the freedom and flexibility of a contractarian model while also being attentive to communitarian sentiments.
Timothy L. Fort and Cindy A. Schipani,
Corporate Governance in a Global Environment: The Search for the Best of All Worlds,
33 Vanderbilt Law Review
Available at: https://scholarship.law.vanderbilt.edu/vjtl/vol33/iss4/2