So, let’s get the first question out of the way: Is this book any good? The short answer is, it is excellent. The Form of the Firm is not an introductory text. One can assume that the intended audience is already familiar with some of the work’s central theories and concepts, for example, transaction-cost theory and John Rawls’ theory of justice. That said, the book has much to convey to a wide readership.

The book sets the broad goal of answering the following question: “What are the moral commitments implicit to our society, and does the corporation live up to them?” (21). In answering this question, the text aims to “articulate a normative theory of the corporation that synthesizes economic and political insights” (19). The purpose is a prescriptive ideal of corporate conduct that takes the social and economic realities of business seriously.

The book has three parts: “The Economic Theory of Corporate Efficiency and Justice,” “A Normative Account of Corporate Efficiency,” and “Towards a More Just Corporate Regime: Governance and Ethics.” The first part sets out the economic structure of the firm from various perspectives, such as the Chicago school, while the second part is an in-depth critique of said theories. The analysis here is exceptional. The third part then builds on this analysis to set forth Singer’s own normative contribution, which has much merit but also some difficulties. Let us take a closer look at these parts in turn.

The introduction starts out by articulating the twofold “moral commitments implicit to our society,” which are held to be “liberal democracy” and “markets.” Liberal democracy consists of individual liberty, formal equality, and democratic decision-making, while a commitment to markets is seen as a better institution for coordinating economic activities than its alternatives. That these are the moral commitments inherent in our society is not argued for at great length but is taken as somewhat self-evident, which is not unreasonable. These moral commitments are then used as a backdrop for a normative analysis of the corporation as we know it. Here, a tension in need of resolution is highlighted whereby the corporation seems to violate both “liberal democracy,” with its hierarchical structure, and the “market,” by organizing production internally apart from the market.

Part one is an insightful history of how the corporation has been conceptualized, stretching from Adam Smith, through to John Stuart Mill, Karl Marx, Friedrich Hayek, Ronald Coase, and culminating in the Chicago School. Broadly speaking, this is a progression from regarding the corporation’s existence as one based in hierarchical authority for directing resources to a neoliberal conception of the corporation as a nexus of contracts that are individually and freely contracted by the factors of production. The Chicago School, with Milton Friedman at its helm, is often regarded in business ethics circles as a counterpoint, but Singer points out the sophistication of Chicago’s emphasis on corporate efficiency for resource allocation and how it contributes to social welfare. Thus, going forward, a normative theory of the corporation must take the economic realities of the corporation seriously, both for its own functioning and its contribution to society.

Part two then embarks on a critique of the Chicago School, working from what Singer calls its “biggest problem”: “If firms are merely private markets, then why do they exist?” (117). Here, Coase provides the answer that “firms exist precisely because of the nonideal way that markets actually work.” However, the Coasian explanation is confined to showing that firms exist because they avoid certain transaction costs in the market by organizing activities in-house. Singer’s contribution here is that corporations exist, not just because they reduce transaction costs but also due to the norms and social rules that govern behavior within corporations. The creation of a firm allows the participants to switch normative scripts from market competition to team cooperation. Singer’s concept of “norm-governed productivity” (117) explains that firms produce goods that the market won’t do on its own because firms are better at cultivating cooperative norms than the adversarial relations found in the market.

The insight here is that the efficiency mandate of the firm not only allows but dictates a certain space for noninstrumental norms, as it is these that foster cooperation. This normative “space” is seen as lying between two “horizons”; norms cannot be so thin that they don’t aid cooperation better than the market’s pricing mechanism, and they cannot be so thick that they impose cooperation costs on members that exceed those in the market.

Part three then proceeds to fill this normative space by developing Singer’s normative theory of the corporation. For Singer, given that the corporation exists due to its contribution to economic efficiency, a normative theory of the corporation must aid with this purpose, or at least not hamper it in such a way that its raison d’être disappears. Singer suggests we regard the corporation as a “relational entity” comprised of the relationships of its various members or stakeholders. It is the structure and norms governing those relationships that in part explain the corporation’s existence, and it is those very norms that a normative theory of the corporation aims to align with the moral commitments inherent in our society.

The corporation may be regarded both as an extension of the state, enabled by the corporate legal form, and an extension of the individual, through the private contracting of corporate bylaws. A normative theory of the corporation can then range from regulative to more voluntary prescriptions. In order to home in on appropriate normative values for the corporation, the text starts off with the markets failure approach (MFA) (Heath, Reference Heath2004). This approach essentially regards business ethics as a field dealing with norms that compensate for market failures. Given that we, as a society, hope to benefit from the market’s economic efficiency, then market actors should act in a manner that contributes to that efficiency. This approach leads to prescriptions for corporations to not stifle competition, to act in the best interest of the corporation, and to follow the law as a matter of principle.

However, the MFA’s focus on efficiency norms is regarded as too thin for a normative theory of the corporation because not only do markets fail, governments fail, too. Simply respecting the law out of principle might not be sufficient depending on the content of the law. Here, Singer introduces his “justice failure approach” (JFA) for when we can no longer assume that the welfare-state is handling justice. In the same vein that corporations should not profit from market failures, corporations should also not profit from failures of justice. For example, corporations should not profit by exploiting labor even when the law allows it. In this way, corporations are held to have moral duties directed toward society. The overarching reason for this is that corporations are not just market actors but play a role within society’s wider scheme of social cooperation.

Although this approach has much merit, it also runs into some difficulties. The Form of the Firm is correctly aiming for a normative theory that takes the corporation’s social and economic realities seriously. But in articulating this account it seems like this realism escapes at the end. Is it realistic, as the MFA suggests, that corporations voluntarily abstain from profiting from market failures, when the core of corporate strategy theory is about avoiding “perfect competition?” Isn’t it management’s job to try to be better than the competition? Can a corporation remain competitive if it addresses justice failures when others do not? Furthermore, corporate duties to address justice failures are in part argued for on pragmatic grounds⸺that corporations are in a position of power to influence just outcomes. But if the state is not doing what it should be doing, isn’t that the primary problem that needs fixing? Is liberal democracy consistent with a reliance on private actors upholding our rights? And if states fail at justice, is there any reason to have faith that corporations, with their vested interests, will do a better job? The text lifts some of these concerns, but acknowledges that the JFA might be “deeply aspirational.”

The Form of the Firm is an outstanding analysis of the parameters that should frame a normative theory of the corporation, and the tall task of filling that frame deserves to be continued. Singer is absolutely right that “normative claims about corporations that are made without concern for efficiency miss something crucial about the institution they are addressing” (220). The Form of the Firm is a text that lays bare the economic foundations for business ethics scholars to build on, by keeping in mind that economic efficiency is both a condition for the corporation’s existence, as well as one of its primary contributions to society.