Introduction

Although corporate law has long relied upon and benefited from agency theory, this special issue highlights the value of incorporating wider institutional theorising into the analysis of the nature and operations of the company. Institutional theory – which is broadly speaking concerned with how shared (social) norms and rules influence behaviours, outcomes, and their evaluations – provides a fertile resource for a deeper understanding of the complexities corporate law is trying to address. For example, the modern version of real entity theory that has recently emerged in the literature relies on institutional theory to argue that companies are designed to support autonomous organisational action. The articles included in this special issue, some of which were first presented at the LSE Systemic Risk Centre conference on the Institutional Theory of the Firm organised by the editors in June 2022¹, are available on the Journal's website. This print edition features five of them.

Elise Bant and Rebecca Faugno discuss the inadequacy of traditional corporate liability mechanisms in addressing corporate misconduct. They explore two models for corporate attribution reform: the Australian ‘Corporate Culture’ model and their model of ‘Systems Intentionality’. The analysis sheds light on the comparative nature, strengths, and limitations of failure to prevent offenses. The Rolls Royce Deferred Prosecution Agreement proceedings are used as a case study to highlight the relevance of Corporate Culture and Systems Intentionality in the regulatory toolkit for modern corporate defendants.

Simon Deakin shows that corporate management has been shaped by legal interventions since the emergence of modern industry. Relying on a genealogical case study of mine safety legislation, he reveals how corporate law and practice have coevolved over time to highlight the importance of law as a normative grounding for the economy and validate a neo-realist conception of corporate law. In this perspective, law is part of the social reality it constructs. This helps clarify the issues at stake in notions of corporate responsibility both historically and under current conditions.

Jonathan Hardman argues that UK ostensible minority protection mechanisms, namely the derivative claim and the unfair prejudice remedy, are not effective in protecting minority shareholders. Relying on institutional analysis and exploring the rules from the company’s perspective, the article shows that what at first glance appear to be weaknesses in the regime are actually advantages for the company. The remedies act as a ‘lightning rod‘ for all complaints by disgruntled shareholders, which protects the institutional arrangement of the company and, in turn, that part of the institutional environment which is company law.

Eric Orts writes that the traditional view of the ‘business purpose’ as being profit maximisation should be redefined to include a plurality of different normative purposes. These include not only profit-making but also following the law, taking account of ethical duties, and addressing larger social, political, and environmental issues. This approach, the article argues, should inform future policy debates in law, public policy, and management through a reflective and iterative process of normative reconstruction.

Konstantinos Sergakis proposes to replace the prevailing market-driven conceptualisation of stewardship with the notion that stewardship obligations are social norms that operate outside of the law. He proposes the term ‘stewardship sociality’ to explain the dynamics between different stewards and how stewardship is malleable and expansive. The paper explores the social interactions within and between stewardship groups, demonstrating that their autonomous action requires a minimally coercive response from law, and invites policy-makers to embrace a more holistic approach to stewardship.

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Additional information

Notes on contributors

Eva Micheler

Eva Micheler is a Professor of Law at the London School of Economics, studied law at the University of Vienna and Oxford. She specialises in corporate law, securities law, and technology. He is also on the management committee of the Systemic Risk Centre at LSE. Her research delves into the legal personality of companies, emphasising their autonomous decision–making processes. Her book ‘Company Law: A Real Entity Theory’ explores how company law facilitates organisational action by recognising entities as more than the sum of their parts. Additionally, she contributes to the field of property law, particularly in analysing securities, their transfer and holding systems, and the effect of technological innovation on the field.

David Gindis

David Gindis is an Associate Professor at Warwick Law School. His research into the nexus between legal and socioeconomic features of business firms and similar organisations lies at the intersections of company law, law and economics, and institutional theory. He is particularly interested in the corporate personality controversy and is exploring extensions of Ostromian institutionalism to corporations and other organisational forms. He edits the Corporate Law section of PhilPapers and is a co–founder of the World Interdisciplinary Network for Institutional Research (WINIR).

Notes

1 The support of the Economic and Social Research Council (ESRC) in funding the Systemic Risk Centre is gratefully acknowledged (grant numbers ES/K002309/1 and ES/R009724/1).