The Centre for International Studies
and Diplomacy (CISD) at the School of Oriental and African Studies (SOAS),
London (UK), invites proposals for single or joint papers on corporate
strategies and organisation in the global economy. Our particular focus
will be on the role of limited corporate liability, but we are interested
in contributions on a wide range of themes broadly relating to this particular
focus.
Papers from the conference will be considered for inclusion in a Special
Issue of the Cambridge Journal of Economics (edited by S. Blankenburg,
D. Plesch and F. Wilkinson), as well as for a separate edited volume of
conference proceedings.
Conference Theme and Objective
For some time now, the increase in corporate power under the auspices
of the global implementation of a neoliberal policy-agenda has been controversial.
The role of corporate neo-liberalism is one of the key issues of international
diplomacy as well as of the academic study of international economics.
After the fall of socialism and of the Berlin Wall, a rapid expansion
of neoliberal capitalism – often simply called ‘globalisation’ – followed
suite. Yet, the glorious promise of the early days of more freedom and
more prosperity is by now widely perceived to have failed the majority
of the citizens of the newly globalised world: What dominates the headlines
are tales of corruption, declining life expectancy and health in the population,
weak labour rights and social security, of war and terrorism, of increased
inequalities and social tension.
This conference is designed to make a specific and focused contribution
to the on-going debate about the future of globalisation by taking a critical
look at one of the central players –private corporations – and at an important
‘rule of the game’ that has become the preserve of these players in particular:
corporate limited liability.
Business centred liberal democracy, as we know it, rose to power on the
promise of equality before the law, equal opportunities for all, democratic
accountability of its major institutions, and a considered balance between
individuals’ right to freedom of choice and decision, with a duty to account
and be liable for the consequences. The much hailed ‘good governance agenda’
of leading international organisations, such as the World Bank, in many
ways restates these principles and makes aid to developing economies dependent
on their adherence to policies promoting free markets, democratic accountability,
the rule of the law and political transparency. Of course, reality and
principle have long been at loggerheads in many respects and many places.
However, the fundamental exception - fundamental, because of its entrenched,
largely un-refuted legal status and systematic application – is the exemption
of one group in society from liability for their actions and decisions:
The owner-shareholders of corporations operate under the legal rule of
corporate limited liability.
In our view, a thorough re-examination of the role of corporate limited
liability in today’s global economy is, therefore, of utmost importance,
and a central and useful conduit to a larger enquiry about the organisational
patterns and strategies of private corporations and their impact on and
relationship with the definition and organisation of public interests.
Further Background
Corporate limited liability (CLL) has been an important theme since the
inception of modern political economy. In The Wealth of Nations, Adam
Smith already remarks that "to establish a joint stock company, however,
for any undertaking, merely because such a company might be capable of
managing it successfully; or to exempt a particular set of dealers from
some of the general laws which take place with regard to all their neighbours,
merely because they might be capable of thriving if they had such an exemption,
would certainly not be reasonable." (Book V, ch. 1, pt iii, art i).
Throughout the 19th century, CLL continued to attract the attention of
economists, such as Marshall, and campaigners, such as Robert Peel, alike.
Ironically, the scientific and political debate surrounding CLL faded
into near oblivion exactly at the moment at which it became central to
the operation of large capitalist corporations, in the 1930s and 40s.
That the significance of CLL has remained obscured ever since, is at least
partly explained by the fact that socialism raised more fundamental objections
to capitalist property rights, and that, where capitalism was not superseded
by socialism, the dominant assumption was that it would operate within
the framework of a mixed economy.
With the advent of neo-liberalism and economic globalisation, however,
large corporations have risen to new heights of near-unfettered power,
buttressed by the efforts of international organisations, such as the
WTO and the OECD, to extend and entrench an agenda that favours the unencumbered
reign of Anglo-American business practice in the name of free markets.
Just as the collapse of Eastern European socialism prompted the triumphant
claim that capitalism constituted ‘the end of history’, so the idea that
corporate managers should act exclusively in the interest of owner-shareholders
has been declared ‘the end of history for corporate law’ (Hansmann and
Kraakman 2000).
Not surprisingly, this dominant ideology of shareholder primacy in corporate
affairs has met with opposition, in particular in the wake of spectacular
corporate scandals, such as Enron and World.com, but more broadly in response
to the increasingly apparent destructive impact of unfettered corporate
power on the growth prospects of many developing economies, on the natural
environment and on mass social welfare in advanced economies. So far,
the opponents of contemporary corporate power have focused on two main
strategies: The growth of local initiatives to strengthen networks of
non-corporate organisation and production, e.g. cooperatives (Hines 2000),
and the promotion of voluntary reforms directed at an enhanced ‘corporate
social responsibility’ (CSR) of large corporations (Kotler and Lee 2005,
Vogel 2005, www.csr.gov.uk). The latter movement has, in turn, suggested
two core approaches to the control of corporate power: The first calls
on corporate decision-makers to adopt a practice of ‘good corporate governance’
aimed at fairness, transparency and accountability. The second centres
on the idea of increasing the power of owner-shareholders.
Neither of these strategies have proven very successful. While in particular
the CSR movement remains popular, doubts about its effectiveness are fast
gaining a growing audience (e.g. Christian Aid (2004), Behind the Mask:
The real face of CSR). One reason is that the inherent vagueness of the
‘good corporate governance’ concept has made it easy for corporate business
to turn it from a rallying cry to curb its powers into a convenient marketing
tool. Another reason is that the call for increased powers for owner-shareholders,
presumably as a means to make large corporations more accountable for
the social consequences of their activities, completely ignores a central
device on which corporate power is built, namely CLL. CLL explicitly exempts
owner-shareholders from responsibility for the actions of the companies
in which they have a share. That is, CLL establishes a unique legal case
for the separation of ownership rights from obligations for a select special
interest group.
This suggests that, rather than ‘good corporate governance’ or CSR, it
is a critical take on CLL that is key to an effective strategy to reign
in unfettered corporate power. Two lines of reasoning underlie this argument:
First, the significance of CLL in contemporary capitalism must be seen
in conjunction with the well-known separation of ownership from control
in large corporations. Together, these two features of corporate organisation
ensure an almost total insulation of a small group of private decision-makers
from social control: The manager-directors in control of the use made
of assets are accountable only to a special interest group (the owner-shareholders)
that, by legal definition, is exempt from any responsibility for the social
consequences of the manager-directors’ decisions. Consequently, "the
connection of the shareholder with the business is no more intimate or
permanent than that which the holder of a ticket in the Derby Sweeps has
with the horses; and he certainly takes less interest in its activities.
[...]" (Sraffa, unpublished papers). In this sense, CLL is an essential
source of corporate power. Second, CLL constitutes a flagrant and arbitrary
violation of the most basic formal principle of legitimacy on which capitalist
societies pride themselves – equality of all before the law. It also makes
a mockery of the dominant opposition to regulatory intervention into free
markets: If regulation distorts free market outcomes and is, thus, harmful
to economic prosperity, on which grounds can CLL be exempted from this
logic? From this broader perspective of the self-legitimisation of capitalism,
CLL represents an unjustifiable exception from basic principles. It is
no exaggeration to note that owner-shareholders (and by extension manager-directors)
are beyond the law to an extent not (formally and explicitly) enjoyed
by the Central Committees of Communist Parties, and more akin to the status
of the aristocracy in the Ancien Regimes of the pre-enlightenment. After
all, even the OECD (2001: Behind the Corporate Veil: Using Corporate Entities
for Illicit Purposes) has pointed out that contemporary corporate power,
emanating from its systematic insulation from social control, is prone
to abuse and corruption.
From both these perspectives – i.e. the significance of CLL for the property
rights and control mechanisms underlying contemporary corporate power,
on the one hand, and its incompatibility with the ideas from which capitalism
derives its legitimacy, on the other– CLL is central to a critical engagement
with, and in particular to an effective internal critique of the role
of powerful private corporations in contemporary capitalism. This critique
would have to address the main argument advanced in support of CLL from
its beginnings, namely that CLL and shareholders’ privilege, rather than
protecting corruption, in fact safeguard those responsible for the creation
of wealth and prosperity. In this view, the special status granted to
private corporations and shareholders through CLL is (a) a source of continuous
public benefits in the form of the best possible and historically most
successful form of wealth creation, and (b) profoundly democratic since
anyone can become a shareholder (e.g. Micklewaith and Woolridge 2003).
Apart from a critical analysis of the supposed ‘democratic nature’ of
shareholder organisation, this will require a thorough discussion of the
history of CLL: After all, the industrial revolution was well under way
before CLL became the norm at the start of the 20th century (initially
mostly for Anglo-American capitalism). In addition, approaches to liability
other than CLL, have not only remained important throughout the 20th century
(the Californian pro-rata liability system until the 1930s, Lloyd’s of
London, the professions) but have been associated with successful economic
performance.
The centrality of CLL to a critical debate on corporate power is increasingly
being recognised by influential political actors (leading NGOs, UK and
French MPs, etc.) who have begun to shift from a focus on CSR to the problematic
of CLL. Yet, within academia, the analysis of the contemporary significance
of CLL has remained more or less confined to the relatively narrow confines
of specialised legal debates (Arlen and Kraakman 1997, Geraghty 2002,
Gobert 1994).
The objective of the conference is to take an intellectual lead in the
emerging public debate on CLL that takes on board, but goes beyond the
mentioned legal discourse.
Papers from the conference will be considered for inclusion in a Special
Issue of the Cambridge Journal of Economics on Corporate Limited Liability
(edited by S. Blankenburg, D. Plesch and F. Wilkinson), as well as for
a separate edited volume on conference proceedings. The conference is
part of an ongoing CISD research programme.
Themes for Papers
We are open to suggestions and contributions that address this broad concern.
Examples of specific topic of interest that would be welcomed include
• The historical origins and development of corporate limited liability
(CLL) and the role of joint stock companies in the history of capitalism
(US, UK, Western Europe, the role of CLL in European colonies, in contemporary
developing and transition economies).
• The analysis of corporate limited liability and joint stock companies
in the work of leading economists
• The significance of corporate limited liability in the operations of
today’s national and trans-national private corporations, its effects
on international prosperity and peace:
# The role of corporate limited liability for international
capital mobility
# Can international corporations function without corporate
limited liability?
# The role of corporate limited liability for economic
development
• The contemporary legal debate on corporate limited liability and its
ramifications for the socio-economic dynamics of global capitalism
# The legal shape of corporate limited liability in different
countries
# Corporate limited liability and corruption
# States sovereign immunity and corporate sovereign immunity
• The role of CLL in specific socio-economic areas:
# Health and Safety
# CLL and Intellectual Property Rights (e-commerce, new technologies)
# CLL in the professions
# CLL and environmental externalities
# The differing role of limited liability in the provision
of private and public
goods; CLL and public-private partnerships
# Trade Union positions on CLL
• Strategies for the reform of corporate limited liability:
# Restoring accountability in law - Abolish CLL and introduce
insurance?
# A balance of special interest privileges (mixed economy)?
# Corporate social responsibility, stake-holding and self-regulation?
# From the legal accountability of Heads of State to the legal
accountability of owners?
Deadline for submissions:
Proposals for single or joint papers: Please send an abstract of not more
than 500 words by email to Stephanie Blankenburg (sb123@soas.ac.uk)
and/or Dan Plesch (dp27@soas.ac.uk)
NO LATER THAN 15 APRIL 2007.
Text, HTML, Word and PDF format attachments are acceptable. If you do
not have access to the internet/e-mail, please send three copies of your
abstract to:
Stephanie Blankenburg
Department of Economics
Faculty of Law & Social Sciences
SOAS
Russell Square, Thornhaugh Street
London WC1H 0XG
UK
Proposals for sessions and streams: Feel free to suggest themes for workshops,
complete sessions or streams. In this case, please indicate exactly what
you are proposing, giving the names and email addresses of the proposed
speakers, and attaching the abstracts (of not more than 500 words each)
for their papers. Send by email to Stephanie Blankenburg and/or Dan Plesch,
as above.
For more detailed information (including background information) on this
conference see
http://www.cisd.soas.ac.uk/index.asp-Q-Page-E-corporate-accountability-limited-liability-and-the-future-of-globalisation--2692813
or
go to http://www.cisd.soas.ac.uk/