Anglo-American corporate law scholars have traditionally never shown much regard for socio-political considerations, at least insofar as their academic subject matter is concerned. Whilst the typical English corporate (or “company”) lawyer has tended to earn their crust by dwelling on the internal doctrinal logic and minutiae of the law, the more modern school of US (or US-inspired) scholars have specialised in the application of economic rationality to provide some purportedly “external” normative order to their accounts of the law. Recent decades, however, have witnessed a gradually developing trend in the Anglo-American literature towards greater engagement with relevant social and political empirics. The seminal contribution in this regard was Mark Roe's ground-breaking work in the 1990s on institutional path dependency, exploring the diverse political contingencies that have shaped leading national corporate governance systems. More recent instalments of note include Brian Cheffins's illuminating work on the development of national corporate ownership structures (especially those of the UK) set within a historico-political context; the sophisticated “varieties of capitalism” literature on institutional complementarities; and Martin Gelter's superb recent research on the social-institutional factors supporting the rise of the modern shareholder value movement within corporate governance.
To this important and expanding body of literature, Christopher Bruner's outstanding work represents a highly innovative and influential contribution. Bruner's central thesis is at once both sophisticated and strikingly simple. First, he makes the somewhat counterintuitive descriptive claim that the prevailing degree of shareholder orientation to a national corporate governance system – as measured by both (1) the level of legal empowerment of shareholders (i.e. “power”); and (2) the extent to which shareholders' interests are encapsulated within the legally defined corporate objective (i.e. “purpose”) – varies directly with the extent to which the public-regulatory institutions of that country (most notably its social welfare system) afford external protection to non-shareholder interests, and above all to the welfare of workers.
Secondly, Bruner advances the normative assertion that state policy makers should refrain from seeking to increase shareholders' powers at law and/or reduce the scope or extent of public welfare provisions available to workers, without at least giving careful consideration to the adverse consequences that are liable to follow from upsetting the prevailing national equilibrium between these two heavily interlinked social domains. According to Bruner, the existence of a protective public welfare “safety net” – including the existence of comprehensive state-guaranteed health care and/or insurance coverage, and the availability of unemployment insurance – constitute the “political foundations” of a shareholder-oriented corporate governance (and, by implication, corporate law) system. Proceeding on the assumption that, in a democracy, collective citizen demands (where sufficiently powerful and articulated) will ultimately be reflected in prevailing laws and public policies, Bruner argues that the preservation of an exclusively (or, at least, near-exclusively) shareholder-oriented corporate governance system is structurally dependent on the capacity of a country's external public-regulatory institutions to satisfy the above needs of citizens. Otherwise, private sector bodies will be expected and inclined to step into the resulting institutional void, thereby assuming the function of providing these crucial social safeguards in place of the (absent) state. Notably, both prongs of Bruner's argument are expressly limited to the dispersed corporate ownership systems of the sort predominating in the common law world, as opposed to concentrated ownership systems where the principal policy concerns and associated regulatory approaches vis-à-vis shareholders are markedly different. However, this proviso in no way diminishes the forcefulness of Bruner's claims with respect to the specific environments that they are targeted at.
Of particular relevance to Bruner's argument is the customary (albeit decreasingly common) role of corporate employers in the US in providing private health insurance coverage to employees as part of their standard compensation packages, in addition to other important social benefits such as pension contributions. Bruner observes how, as a result of this acknowledged private “social contract” between corporations and their employees, US citizens are – in their worker capacity at least – acutely dependent on the corporate sector for sustenance of their essential social needs (and, in particular, their access to adequate or affordable health care). This gives rise to powerful civil society pressures for the recognition of non-shareholder interests (and especially worker welfare) within the norms and practices of US corporate governance, on the common but implicit understanding that – where external regulatory institutions are incapable of adequately protecting a corporation's broader stakeholder body – it follows that the corporate governance system must itself do the bulk of the socio-political “heavy lifting” in this regard.
Bruner claims that it is the above socio-political tendency, more than anything else, which explains the curious fact that US corporate law – at least in comparison with its main common law counterparts – is considerably less protective of shareholders' interests vis-à-vis the welfare of other corporate stakeholders, most pertinently in the controversial area of hostile takeover regulation. In Bruner's view, it correspondingly also explains why the corporate law systems of the UK – and, to a lesser extent, those of Australia and Canada – offer comparatively greater lexical primacy to the interests of shareholders vis-à-vis other stakeholders. This is because the social welfare requirements of UK (and, to a lesser extent, Australian and Canadian) citizens are – it is argued – satisfactorily fulfilled by public-regulatory institutions extraneous to corporate governance, thereby relieving these countries' respective corporate sectors from the expectation to satisfy basic civic needs privately in an employer capacity. In turn, the political demands on the corporate law systems of these three countries to provide for the direct protection of non-shareholder interests within corporate governance norms and practices are consequently muted, at least relative to the corresponding demands placed on the US corporate governance framework in this respect.
The argument of the book is divided into three main parts, which complement and reinforce each other in a logical manner. The first part principally comprises (in Chapter 3) a comprehensive doctrinal and functional analysis of the key relevant aspects of UK, US, Australian and Canadian corporate law and governance. Undoubtedly, the core and unifying section of the book, though, is the second part, where the author comprehensively documents (in Chapter 5) the main features of each of the four studied countries' respective social welfare systems, recording their most noteworthy changes over the course of the twentieth century. Bruner further explores here the relationship between these developments and corresponding trends in national corporate governance norms. This chapter is remarkable for the rigour and comprehensiveness of its comparative historical and social-scientific analysis. The depth and scope of archival research conducted – especially in respect of the co-evolution of the Australian and Canadian social welfare and corporate governance systems – are truly staggering.
In the course of his examination, moreover, the author notably uncovers highly convincing explanations for a couple of the more seemingly idiosyncratic trends in Anglo-American corporate governance over the latter half of the twentieth century. This includes the curious fact – first highlighted by Cheffins – that the UK's widely held share ownership system largely developed during a period of time (namely the 1960s and 1970s) when the country's political culture was predominantly social-democratic in nature, which notably contradicts Roe's influential hypothesis that social-democratic political systems are inherently averse to the evolution of liquid and dispersed equity markets. Also explained in Chapter 5 is the similarly peculiar fact that the main anti-shareholder/pro-stakeholder aspects of US corporate law – including Delaware's Unocal/Time principles and other states' non-shareholder constituency statutes – were put in place during a period of predominantly market-liberal (and, correspondingly, anti-welfarist) Republican administration in the 1980s and early 1990s. In both of the above cases, the author attributes the developments in question to the purportedly mutually compensating nature of stakeholder (and especially worker) protections within and outside of corporate governance, with the presence of such protections in one domain rendering their absence in the other domain politically feasible and sustainable.
In the third and final part of the book, Bruner builds on the above insights by offering some tentative predictions concerning the future development of corporate governance in the common law world, taking account of some of the most notable current trends in the relevant countries' corporate and wider civil society environments. Bruner's core normative claim here is that the contemporaneous enhancement of, on the one hand, the shareholder orientation of US corporate law and, on the other, the extent of non-shareholder protections external to corporate governance in the US implies the likelihood of the current US shareholder protectionism agenda being politically sustainable, at least insofar as recent federal welfare measures (particularly with respect to health care) remain intact in future. Conversely, Bruner views recent corporate governance reforms in the UK geared to further enhancing the relative position of shareholders as sitting uneasily against the backdrop of diminished protections for UK citizens in a non-shareholder capacity via a significantly retrenched welfare state. On this basis, he questions the continuing political sustainability of the UK's shareholder-oriented corporate law and governance frameworks, at least insofar as current national trends in the domain of social welfare provision persist.
There is cause to quibble with some of the descriptive assumptions on which Bruner ultimately premises his normative propositions. For instance, his “black/white” depiction of the UK and US corporate law regimes as being – respectively – heavily shareholder-centric (in the case of the UK) and considerably more ambivalent about the relative weighting of shareholder versus non-shareholder interests (in the case of the US) is at the very least questionable. I suspect that few of us who have had to grapple with the finer points of UK company law in our teaching over recent years would necessarily agree with Bruner's characterisation of the former system, which still exhibits considerable grey areas in this regard. Not least amongst these is s. 172 of the Companies Act 2006, which – far from being the emphatic clarion call to unbridled shareholder primacy that Bruner depicts it as – was in fact motivated by the same social-distributional concerns that Bruner alleges to be largely absent from the UK's corporate governance landscape.
In the same vein, I suspect that few observers of the US corporate governance system would regard shareholders' interests – on the whole – to be as subjugated as Bruner seeks to imply. Bruner is undoubtedly correct to highlight the longstanding ambivalence of the Delaware courts with respect to the lexical priority of shareholder and stakeholder interests in informing the juridical corporate objective. However, the countervailing influence of powerful US capital norms – including equity-based executive compensation, mandatory quarterly reporting, and related managerial earnings management practices – must surely tip the governance balance significantly in the former constituency's favour (at least on a functional level)? A final criticism concerns the strength of the causative link that Bruner seeks to draw between corporate and broader political economy developments in the studied countries. For example, whilst the existence of a chain of cause and effect between US federal government initiatives on corporate governance and social welfare reforms respectively is plausible enough, the notion that Delaware's state courts are responsive (whether explicitly or implicitly, consciously, or subconsciously) to considerations of national health and social security policy is a much trickier descriptive claim to sustain.
Notwithstanding the above issues (which, in any event, provide fertile ground for future academic debate), this book is a work of monumental significance and scholarly craft. It is impeccably researched, beautifully written, and its claims are both forceful and highly persuasive. It is an absolute must for anyone seeking to form a holistic understanding of how corporate law and governance relate to their broader social-institutional context, as well as an excellent primer on the key comparative features of the world's principal common law systems. In writing this pioneering work, Bruner has undoubtedly earned the right to sit at the very top table of international corporate law scholarship. One can only hope that future research in the field will advance this fascinating line of enquiry yet further.
