2.1. Governmental Provenance

The establishment of governmental provenance is done in weaker and stronger ways. On the weaker side are claims that corporations have a ‘social license to operate’ (Gunningham et al. Reference Gunningham, Kagan and Thornton2004; Matten and Moon Reference Matten and Moon2008) or are governed by ‘integrated social contracts’ (Donaldson and Dunfee Reference Donaldson and Dunfee1994, Reference Donaldson and Dunfee1999) to operate, and therefore owe their existence to social consensuses, and their manifestation to public and governmental institutions. This means that a corporation is permitted by society ‘to undertake a trade or carry out a business activity, subject to regulation or supervision by the licensing authority’, in the same way that a bar is licensed to sell alcohol, or in the way a man on the corner is not licensed to sell heroin (Nielsen Reference Nielsen, Idowu, Capaldi and Das Gupta2013). Whatever the merits of this sort of claim, it is weak because it does not show that corporations require government to exist, but only to exist legally (which would seem to be true of all legal activity).

The stronger claim for governmental provenance is the claim that corporations are entities that cannot exist without the actions of government; without government action there would be no corporation to license in the first place. Drawing on ‘concession’ theories of the corporation, the claim is that incorporation is not a power that market actors possess inherently, but is conceded by government for public purposes (McMahon Reference McMahon2012: 14). This has been given greater specificity by Ciepley (Reference Ciepley2013a: 144–5), who argues compellingly that three important features of incorporation – limited liability (particularly against tort), entity shielding and asset lock-in – are things that cannot be generated by the normal rules of contract or property: individuals cannot normally contract to grant themselves limited liability for tort claims; contractual arrangements to create assets that perpetually cannot be withdrawn by their contributors have often been struck down by courts in cases of partnerships; and the shielding of corporate assets from the claims that creditors have on individual contributors' assets could not be contracted by the shareholders alone – this would have to be arranged between the shareholders and each of their creditors. In short, corporations require government to step in and create a corporate personality and assign property to it, which it now owns as a distinct entity, separate from its shareholders (Hansmann and Kraakman Reference Hansmann, Kraakman, Kraakman, Davies, Hansmann, Hertig, Hopt, Kanda and Rock2004). The corporation, then, is given existence not by individuals who contract with one another, but from a government that endows it with certain extra-contractual rights and powers. The result is that corporations are not ‘creatures of the private market but governmental colonizers of it’ (Ciepley Reference Ciepley2013a: 152). We ought not to see corporations as the spontaneous result of market interaction, but rather as ‘states writ-small’, franchise governments with state-granted charters that endow them with specific rights and responsibilities.

2.2. Distinctive Morality

Given the fact of governmental provenance, NGP claims that corporations are governed by a different set of normative criteria. McMahon (Reference McMahon2012: 16–20) distinguishes the private morality that governs interactions of private individuals pursuing their own ends (e.g. duties not to cause immense harm to others, duties of beneficence, etc.) and the public morality that governs people who occupy positions that require them to act in the interest of the public based on morally important social values. Whereas people in markets are generally governed by private morality, according to McMahon corporate executives, by virtue of occupying governing positions within institutions created by government for public ends, are governed by public morality as well, which requires a disinterested commitment to the common good. Others have made similar points within the debate on whether corporations ought to be considered part of the Rawlsian ‘basic structure’ of society (e.g. Rawls Reference Rawls1977; Doppelt Reference Doppelt1981; Blanc and Al-Amoudi Reference Blanc and Al-Amoudi2013; Neron Reference Neron2015; Singer Reference Singer2015; Martins Reference Martins2016; Welch and Ly Reference Welch and Ly2017; Reference SingerSinger 2018a).Footnote ¹ Blanc (Reference Blanc2016: 416–17), for instance, argues that because corporations and corporate law are borne of actions from the state, we ought to see them as distinct from the associational realm, and instead subject to the norms (i.e. Rawlsian egalitarianism) that would apply to the more public realm of the basic structure. Governmental provenance, then, has the normative ramification of holding the corporation and those within it to higher normative standards than those that would obtain in, say, the market.

I refer to this as ‘distinctive morality’, and not ‘public morality’ following McMahon, because other scholars are more nuanced on this count. Ciepley, for instance, argues that corporations are ‘between public and private’ because, despite the crucial role of government, they are financed privately. They therefore, more exactly, are not governed by the public morality of governments, but by distinctively corporate norms. This distinction seems correct. For our purposes here, however, we only need to note that although Ciepley (Reference Ciepley2013a: 152) does not refer to this as ‘public’ morality, his argument is still that the corporation's governmental provenance implies a set of norms distinct from those that govern market interactions. The important part is not how corporations are to be distinguished from governments (which Ciepley only gestures toward anyway) but how their relationship to government – their status as ‘franchise governments’ – normatively distinguishes them from those of the market.

2.3. Government Action

Finally, there is the claim that government has the permission, and even obligation, to interfere with the arrangements made under ordinary corporate law to ensure it discharges the public duties and responsibilities that come with a more public morality. This is a simple enough claim. Because corporations are creatures or extensions of government, and because they have specific moral responsibilities due to this fact, it is incumbent upon government to ensure that corporations live up to these responsibilities. However, a more powerful aspect of NGP is not simply that corporations can be interfered with by government, but that by being granted such special powers, corporate executives have a responsibility to discharge their duties in a certain public fashion, and to see the offices they hold as a quasi-public, governmental office. The result is a call for a variety of admirable and relatively progressive policy prescriptions that blur the distinction between the corporate and the public: for corporate law to be a part of public law (Greenfield Reference Greenfield2008); for the entrenchment of greater worker rights (Ciepley Reference Ciepley2013a); for corporations not to have rights against government, contra Supreme Court decisions like Citizens United or Hobby Lobby Reference Ciepley(Ciepley 2013b); for greater intra-corporate democracy (Matten and Crane Reference Matten and Crane2005); and so forth.

3.1. Extraordinary Governmental Action

Now most advocates of the NGP would not likely deny the dependency of modern markets on modern states. McMahon explicitly rejects a Lockean account of natural property rights, and (as noted above) Ciepley is quite aware that our conceptions of private and public are social and political conventions. Does the NGP require a view of markets as natural or pre-political in order to distinguish them from corporations? In fairness, I think not. The more compelling version of NGP, which most advocates likely have in mind, concedes that a market depends upon government, while still arguing that the corporation's special governmental status implies normative distinction.

Two claims can be made for such an argument. First, even if the rules of the game (property law, contract law, etc.) owe their existence to government, they are still rules that must be contravened in order to create a corporation. We can call this the ‘extraordinary action’ claim: corporations represent an exception to the normal procedures laid down by government, and have different normative standards because of this extraordinary form of government intervention. Second, even if markets require government for their existence, they are created in a manner that allows for individuals to pursue their private ends within the market, with the intended result being the achievement of some public good. Call this the ‘private ends’ claim: even if markets do have governmental provenance, individuals within the market are not required to think about the public good, whereas corporate executives are required to think about the good of an organization and therefore must think of the public good; this distinction in orientation creates different normative standards.

These claims are plausible enough. Anyway, let us assume for the sake of argument that both claims are sound: corporations are in fact an exceptional suspension of the normal market rules, and individuals within markets are distinct from those within corporations in pursuing decidedly private ends. Such claims seem to invite two important questions: why are the normal rules of the game suspended in favour of this extraordinary action, and what purpose were the rules of the game meant to serve in the first place? Put differently, what is the normative status of the ‘normal rules’ and what is the status of their suspension in the case of the corporation? This shifts the normative question from ‘why are public interventions into corporations pro tanto justified?’ (which the NGP answers by reference to extraordinary governmental action) to ‘what are the all-things-considered reasons for largely not interfering in the market in the first place?’

Note that this question directs our attention away from the ontological status of corporations and toward the instrumental logic of markets and, as a result, the instrumental logic for creating a non-market institution like the corporation. It is not enough to merely note the extraordinary status of the corporation in relationship to the market; by recognizing both institutions as the product of social convention and governmental actions, we need to reconstruct the normative rationale for why both of these things happen: why we create relatively free markets, and why we suspend this normal functioning to create corporations. The corporation's exceptional nature is therefore secondary to the reasons for granting this exception; the fact that non-incorporated individuals and corporate executives are oriented toward different sorts of goals is less important than what we are trying to accomplish by situating people in such a manner. In answering this sort of question, we invite the possibility that the norms and evaluative criteria we use to assess the market and market actors can be used to explain the extraordinary actions of government to create corporations and corporate actors. The fact that government intervenes to different degrees to secure different sorts of institutions does not necessitate different normative criteria for each.

4.1. ‘Social Paretianism’

There are obviously many different rationales offered for the market in a modern society. To fix ideas, let us establish a toy theory of normative political economy, which I call ‘Social Paretianism’ (SP). SP holds that economic institutions and activity ought to be structured in such a manner so as to increase wealth and efficiency insofar as doing so does not seriously undermine other social values we hold. It is a toy theory so I leave this intentionally vague and under-specified. While we all might disagree with the details, SP captures what I take to be widely held views about markets and morality: namely, that enabling mutually beneficial transactions is a good thing (hence the ‘Paretian’), but it is not the only thing (hence the ‘Social’) for our institutions to achieve. What priority the Paretian element ought to have amongst our various social values is a question that, for our purposes, SP does not need to answer now.

4.2. A Social Paretian Justification of Markets and Government Intervention

SP, then, would justify various aspects of markets in particular ways. First, SP holds that the market is left to operate according to its own logic for largely Paretian reasons: allowing the price mechanism to coordinate exchanges between competitive producers and consumers will tend to maximize the number of mutually beneficial exchanges, thereby moving us as close as possible to the Pareto frontier. Thus, both how government engages in markets, and the morality of individuals within this system, is determined by virtue of this Paretian rationale (see McMahon Reference McMahon1981; Heath Reference Heath2013). This is in contrast to a Lockean or Nozickian account, where market processes are defended in terms of some notion of natural right or liberty. Such a view is essentially ruled out if we start with the assumption that the market is not a natural phenomenon, but a socially constructed institution. As such, the rights that market actors have are not natural, or pre-governmental, but granted and established by government. While the operating of a market might very well serve to increase people's ability to freely do all sorts of things, this would still, ultimately, be the result of government action, not its absence.

Of course, the Paretian justification of markets is an idealization; while this idealization captures an important virtue of markets, we must note that very often markets do not conform to this picture. Market exchanges may very well not be Pareto-improving, absent various preconditions. To this end, SP also helps us reconstruct the reasons why markets are not in fact the autonomous institutions that some might think they are or ought to be. Governments act within markets in all sorts of ways other than the enforcement of property right or contract. There are two complementary rationales. First, governments help secure Pareto improvements by regulating industries encumbered by information asymmetries, correcting un-internalized externalities, solving collective action problems, and providing public goods that markets will under-produce; that is, governments can act in seemingly extraordinary ways to help solve market failures. The Pareto standard does double duty in terms of markets and efficiency: it explains why a market with freely trading agents will make possible various Pareto improvements, and it also explains how the state, with its unique ability to solve large collective action problems, can enable classes of Pareto improvements that free markets will fail to achieve.

But of course, governments do not only intervene in these ways. The second way that governments act within the market is to prevent or disincentivize various otherwise-Pareto-improving transactions because they violate other social values that we hold important. Thus, we have laws proscribing child labour, working in dangerous work environments, and so forth, which also affect how market actors ought to conceive of their moral duties (Norman Reference Norman2011; Moriarty Reference Moriarty2012). This is why we say it is ‘Social Paretianism’: the general rationale for a market economy is the capture of efficiency gains through the proliferation of mutually beneficial exchanges, but within the constraints of other social values like justice and equality (however understood). Thus, while markets are primarily mechanisms for efficiently coordinating activity, they are not domains of interaction quarantined from other values (Smith Reference Smith2017; Singer Reference Singer2018b). Significantly then, governments can assess and act within markets to further their efficiency (by correcting market failure), or constrain them in pursuit of equality, and still be rightfully exercising their authority. Similarly, we might normatively assess market actors according to such standards, even in the absence of such explicit extraordinary government action.

4.3. Social Paretianism and the Justification of Corporations

We can see how SP provides a normative reconstruction of why governments create relatively autonomous markets, and why they intervene in them in various ways. Can this rationale be used to explain the extraordinary action that creates corporations and the norms that would apply to those incorporated actors? In recognizing the exceptional nature of the corporation's governmental provenance, SP suggests two points as important: (1) there is a Paretian rationale for engaging in such practices, and (2) those practices can be constrained by concerns for other normative values.

What is the Paretian rationale? It is that which is offered by transaction cost economics: we supersede the price mechanisms by using hierarchy and administered transactions in order to secure various mutually beneficial gains that would otherwise be under-produced in an open market (Williamson Reference Williamson1985). While the archetypical example of this is the employer-employee relationship characteristic of firms generally, administered transactions are also used to secure financing for asset-specific goods that would otherwise be underinvested in using the price mechanism. Where assets are easily redeployed, debt will be the more efficient form of financing; when they are not so easily redeployed (when investments are ‘asset specific’), equity will often be more efficient because it gives more control to those doing the financing and, therefore, further incentivizes investment (Williamson Reference Williamson1988: 581). The extraordinary features of the corporation discussed by Ciepley are precisely the mechanisms through which investment is induced for such enterprises. Governments involve themselves in the market in these extraordinary ways in order to correct a market failure: the failure of the market to produce investment vehicles that are needed to establish enterprises for which there is demand.

The Social Paretian rationale thus captures the idea that corporations ought to be oriented toward the public good, which the NGP argues for, but does so in an indirect way. Corporations are oriented toward the public good not because corporate actors act in a completely public-minded way, but through their contribution to competitive markets and by solving collective action problems through the introduction of hierarchy in employment and financing (Boatright Reference Boatright2013: 479). Of course, the fact that incorporation represents an in principle efficiency-gain for various businesses does not mean that incorporation always in fact practically leads to such improvements: small firms, once incorporated, often encounter bureaucratic, decision-making and agency costs that can outweigh the increased stores of capital that they have access to; large corporations, in their pursuit of profit, often seek to externalize costs or avoid regulation in a manner that is offensive to the Paretian rationale of both markets and corporations. This must be protected against.

Furthermore, once admitted that there is a Paretian rationale for the government provision and regulation of corporations, SP would then suggest that not all ways of organizing the corporation are proper for us as a society to engage in: it is not enough that corporations represent a potential gain in efficiency, since certain gains in efficiency might be in violation of other important social values such as non-domination, equality, democracy, anti-exploitation and so forth. So, while we allow corporations to suspend normal rules of contract and property to create entity shields and asset-lock in, we don't allow (or should not allow) corporations to suspend individuals’ constitutional rights or labour law standards in order to secure longer-term work arrangements, even if that could possibly create a gain in efficiency. This may very likely also require further regulation and protection of workplace rights and claims to worker governance, even if such values might not be evidently efficient. The governmental creation and regulation of corporations is tractable by SP for both ‘social’ and ‘Paretian’ reasons.

4.4. Social Paretianism and a Hypothetical Nexus of Contracts

What, then, does the extraordinary governmental provenance do to alter the normative standards we apply to the corporation, or our understanding of the rightful exercise of governmental intervention in the corporation's affairs? The answer, I think, is not much. The SP rationale can be offered for both.

To get at this, let us imagine a fictional world where the nexus-of-contracts view of the corporation was correct, and that corporations could actually be constituted solely by the normal rules of contract, property and tort. So, in this world we have standard market contracts, and we have corporations, which are simply understood as catallactic arrangements arising from individuals freely contracting with one another. Assume that we accept that contracts depend on governmental action for their existence, and that therefore there would be no a priori reason why government could not interfere with market contracting arrangements; the relative sacrosanctity of the contract, and the relative autonomy that people have to engage in such relations, would be seen as a convention adopted by society for various prudential or consequential reasons, not out of a respect for some inviolable principle. Voluntary contracts could be outlawed because of their perverse effects, or could come with stipulations that parties did not agree to, because of the beneficial effects such stipulations carry. In this hypothetical world, there would be no reason that corporations could not be evaluated according to, or affected in order to achieve, some social value despite its contractual provenance.

To illustrate, let us assume, for the sake of argument, that one of the social values that we as a society can agree upon is that extremely authoritarian or dangerous workplace arrangements are offensive to our core values; preventing such arrangements, in our estimation, would constitute a sound rationale for foregoing gains in efficiency. Given the conventional status of contracts, we believe our social institutions can prohibit, veto, or in some way disincentivize, contracts that establish such relationships. A corporation understood as a nexus-of-contracts would be just as subject to such strictures as a non-corporate contract. It would therefore be within the rightful exercise of government authority to interfere with the arrangements of corporations, regardless of their status: if they are of special governmental provenance, then government has prerogative to structure the institutions it creates according to values it wishes, ceteris paribus; if they are of contractual provenance, then government still would have the prerogative to structure it, since government's deference to contractual arrangements in the market is a conventional position adopted for, and presuming the obtaining of, a variety of social values, the failing of which can warrant further government action.

What the toy theory of SP shows is that the normative standards and rationale for government intervention can be the same for the market or the corporation, regardless of how we understand the nature of the corporation. Indeed, the only justification for market contracting that would seem to yield a different outcome would be one based on a conception of natural property or contracting rights that government protects but does not establish or create. If this natural rights view is what NGP theorists have in mind (which I doubt) then they cannot simply help themselves to these rights; they must explain whence these rights come, and how such a view can be justified in a society marked by a diversity of metaphysical and moral worldviews. If, however, we recognize private property, markets and contracts as political and social conventions that we adopt because of their consequences, then we must recognize a pro tanto justification for government to structure our ability to contract in light of these consequences. This pro tanto justification can then be worked up into a justification for those standards to apply to corporations. Different forms of government intervention do not require different overarching norms; a common set of norms can explain the variety of institutions that government establishes in various ways.Footnote ⁴

5.1. The Relevant Normative Features: Governance, Not ‘The Government’

In arguing against the relevance of governmental provenance, I do not mean to claim that theorists are mistaken in thinking that corporations are distinct in some way, or that they require particular normative scrutiny. It is just that this distinction cannot be derived from their governmental provenance. However, if this is the case, then where does the corporation's normative specificity come from?

The relevant feature of the corporation that distinguishes it from a standard market interaction is that it functions through ‘administered transactions’ (Shipman Reference Shipman1999: 187–188). Whereas markets are largely characterized by individuals pursuing their own ends, and cooperating with one another accidentally by responding to price signals, the cooperation within the corporation is achieved not through the ‘invisible hand’ of the market, but the ‘visible hand’ of corporate hierarchy (Chandler Reference Chandler1977). The difference in this form of cooperation leads to various normative considerations that need to be accounted for. Given the nature of how markets achieve efficient allocations, various forms of behaviour like strategic and opportunistic actions, competition and adversarial behaviour are all necessary and required. In contrast, within the corporation people don't cooperate accidentally through market competition, but consciously according to the rules of the corporation, the dictate of those in charge, and the norms of the workplace (Jackall Reference Jackall1988). We require different norms according to which we can assess intrapersonal relationships within the corporation, and different legal standards for when and how government action is necessary to intervene in such arrangements (Martin Reference Martin2013).

Put differently, it is not its being constituted by the government that makes the corporation special, but its use of governance. Whereas the price mechanism gets people to cooperate through the pursuit of their self-interest, corporations use hierarchy, organizational culture, and extant social norms surrounding authority and teamwork to induce cooperation, which introduces normative concerns that are less salient in market transactions. Thus, while both markets and corporations have Paretian rationales, the mechanism through which they effect efficiency gains is different; markets induce efficiency by allowing Pareto-improving transactions, while corporations (like governments) induce efficiency by correcting market failure through hierarchy, norms and cultural expectation (see Singer Reference Singer2018b). It is this difference in mechanism, and not the provenance of the institution in question, that requires different norms to understand how our Paretian achievements ought to be constrained by other social values. Hierarchy and authority can be wielded in unfair exploitative ways, organizational culture can create unjustified power imbalances, and the use of extant norms can perpetuate and amplify extant social injustices: we require criteria according to which we can navigate these distinctive moral problems.

Now, to say that corporations effect efficiency gains through governance is not the same as saying that the corporation is analogous to government and is therefore subject to the same type of norms as governments, which Ciepley correctly notes (cf. Dahl Reference Dahl1985; Landemore & Ferreras Reference Landemore and Ferreras2016). The fact that the corporation exists within a market, and operates for an express purpose, makes this analogy ill-fitting (see Malleson Reference Malleson2013). However, its hierarchically organized administered transactions do make certain forms of concerns more relevant here than would be the case in the open market. If, for example, we are concerned with interpersonal domination, subservient relationships that potentially stunt human potential, or the reproduction of wider social injustices, such dynamics are more likely and predictably to be found in institutions where hierarchy formally exists than in a market where it does not.

The reason why it is important to distinguish the governance mechanism of an institution from its government provenance as the source of normative specificity is that it enables a wider scope of application. If the relevant normative feature is governance as opposed to government, then these standards would not apply to corporations specifically but to firms more generally. A non-incorporated firm still uses administered transactions to coordinate its activity, and therefore should still be the subject of governance-centred norms. Corporate governance is only the most conspicuous and complex example of the more general phenomenon of firm governance. A normative account of the corporation that centres on its governance, as opposed to its government provenance, is therefore better able to track what distinguishes it morally from the market, while also speaking to a wider set of institutions.

Note how this dovetails with recent work in the political theory of workplaces and firms. On Anderson's (Reference Anderson2017) account, for example, governments are not co-extensive with statutory institutions; instead, governments exist simply where we find some with the sanction-backed authority to give commands to others. On this view, then, all workplaces (corporate and unincorporated alike) are instances of government. The normative payoff is not derived from the workplace's relationship to the state, but rather from our normative intuitions about how and for whom governments ought to be organized. Contemporary capitalist workplaces are forms of private government not because of their distance from the state, but because they are ruled solely in the interests of those who own them; this, she argues, runs afoul of our commitment to, for instance, non-domination. For this reason, Anderson contends that we must strengthen various forms of workplace protection, collective bargaining and worker governance, to render workplace government more in line with our intuitions regarding the proper relationship between freedom and legitimate government. Similarly, Ferreras (Reference Ferreras2017) has made the argument that we too quickly confuse corporations for the firms they are connected to, which leads to confusion about the normative concerns at stake. On Ferreras's account, firms are not merely defined by their (government-assisted) corporate investments, but also by the investments of labour made by workers. This account is then leveraged into a normative argument for ‘economic bicameralism’, the inclusion of labour representatives into the governance of firms.

While I find their arguments congenial, I don't mean to endorse Anderson or Ferraras's conclusions entirely. Indeed, they don't wholly agree with one another: Anderson's conclusions rest largely on a concern with freedom, and Ferraras's rest more on an account of political ‘expressive’ rationality already being present within the firm. The bigger point is how both Anderson's and Ferreras's arguments allow for normative criticism of contemporary corporations based on social/political values, without requiring a normative argument drawn from the corporation's relationship to the state. Instead, in fitting with something like SP, both Anderson and Ferreras argue that all workplaces ought to be re-organized on behalf of the values that we demand from our commercial and economic institutions generally, not simply those associated with the state. By securing efficiency gains through governance, corporate firms qua firms ought to be subject to greater normative scrutiny, due to the moral concerns we have with such forms of power.

5.2. Proximity and Practicality

The normative theory of the corporation, on this account, should lead us to the more general normative theory of the firm. Insofar as this allows us to speak to more topics while assuming less, this is a virtue of the argument. Yet, a worry remains that what this account gains in theoretical parsimony, it loses in real-world tractability; aside from forfeiting the rhetorical quality of the NGP, this theory might also lose sight of the social fact that specifically corporate power is in fact a salient and worrisome phenomenon in our world. While unincorporated firms can be the sources of problematic power, and therefore should be the subject of the norms we apply to corporations, we cannot ignore that corporations are often the institutions that are in fact motivating our concern. Is there a way we can normatively distinguish corporations from firms more generally, in order to account for the specific political problems they pose, but without appealing to their governmental provenance?

If anything makes the corporation especially subject to specific normative concern, it is that its relationship to government is more proximate than that of firms more generally. This is a practical and consequential argument, not an ontological one.Footnote ⁵ Because firms or partnerships that are not incorporated require no extraordinary action by government to come into being, but instead are built up from more-or-less standard market contracts, they do not have a more obvious point of entry for social or governmental scrutiny. Social control and regulation of such institutions must be done more indirectly or through more costly forms of monitoring. In contrast, because the corporate charter (to take one feature of the corporation) is something that must be granted by special government action or procedure, there is an easy point at which social institutions can put pressure on the structure of the corporation. At this point in the process of incorporation, we can ask incorporators to promise to organize themselves in particular ways, or at least try to incentivize such choices, that better accord with our social values.

Put another way, the extraordinary government action of the corporation is an additional and more direct policy lever for integrating normative values into commercial activity. This is important because the cost, inefficacy and otherwise blunt nature of governmental administration and bureaucracy would otherwise make integrating such norms into the economy difficult or undesirable. However, because government is already in the extraordinary business of incorporation, such costs are no great argument against using such extraordinary measures to alter incorporation in a manner that is more consistent with particular social values. Thus, insofar as corporations should come under special scrutiny, it is because practically they may be the easiest institutions to monitor and shape, not because they have special ontological status. We might wish to nudge corporate firms toward worker empowerment through the chartering process or regulation through the SEC in a way that is more difficult, or perhaps even prohibitively expensive, to do for unincorporated partnerships or sole proprietorships. While we might have every reason to try and affect the structure of such firms in order to protect particular social values, the extraordinary action necessary to institute a corporation means that we can use this power with less worry about government inefficiency in the particular case of corporate firms.

However, we must also resist being overly sanguine about our ability to use corporations as more proximate vehicles to effect social values in the economy. While practical concerns help us understand the corporation's normative specificity, this practicality cuts both ways. That there are principled reasons to try and affect the workings or structure of firms, and practical reasons to specifically target corporations, does not mean that any attempt to do so will be beneficial or prudent, even if there is a social value at stake. While efficiency is not the only value, or even necessarily the most important value, for our social institutions, it asserts itself practically when we're thinking about economic institutions like the corporation. This is because corporate policies created without a concern for efficiency will tend not to be terribly effective. Because corporations compete in markets, parties to a corporation always can defect from some imposed corporate arrangement, and instead privately contract into non-corporate arrangements (Singer Reference Singer2018c).

Or, simply put, people have the ability to contract around corporate regulations, and they will have the incentive to do so if a regulation is introduced that is particularly efficiency-reducing. For example, many have argued that the rate of incorporation has dropped in the wake of the 2002 Sarbanes-Oxley Act, with people opting to organize themselves in businesses other than public corporations to avoid the monitoring and governance costs imposed by the post-Enron act (see Kamar et al. Reference Kamar, Karaca-Mandic and Talley2009; Ribstein Reference Ribstein2010). Now, this is not necessarily an argument against Sarbanes-Oxley; if more responsible accounting requires imposing costs that reduces the number of corporations, then that is not necessarily a problem. However, as I have suggested, the whole point of attending to the corporate firm as especially deserving of normative scrutiny is because it offers a more practical way of injecting social values into the economy. If a policy of regulating corporations tends not to inject these social values, but rather serves to incentivize the avoidance of corporate arrangements in the first place, then it seems a misguided policy, not because it imposes efficiency losses, but because in doing so it also less effectively achieves the other social values it seeks to promote.

Attempts to make corporate relations more just must satisfy one of two requirements, purely from a practical perspective. First, they must ensure that such relations would still be preferable to private contracting – which is to say, that they still improve efficiency – otherwise they will fail to bring the non-efficiency values to bear. Alternatively, such policies can be more general, and target both corporate and non-corporate relationships; that is, instead of making sure that the imposed corporate arrangement is efficiency-enhancing, an economic policy can make sure that the private contracting option is not more attractive, that it comes with the same sorts of constraints as those being imposed upon the corporation. Of course, this gets back to the more general argument, that what is normatively interesting about the corporation is actually generic to many other types of firms, and therefore our prescriptive policies ought to apply to this larger universe of cases.