The modern corporation and the threat to shareholder rights

While the work of new essentialists like Penner is motivated primarily by conceptual concerns and tends only implicitly to support the property status quo, the work of other new essentialists, working mainly from within the law- and- economics tradition, is much more explicitly motivated by politics and ideology. The primary goal of much of this work is to offer a defence of the property status quo and of private property, irrespective of context or of the resources involved. This is the case with one of the most influential new essentialist theories to have emerged in recent decades, the so- called ‘information- cost’ theory of property, developed in a stream of articles by Thomas Merrill and Henry Smith. To understand the ideological underpinnings and motivations of this theory, however, we need first to explore the historical and political backdrop to the emergence of, and role played by, the law- and- economics movement in developing new justifications and legitimations for the property status quo, particularly in relation to corporations and shareholder rights – and, therefore, in relation to key productive resources and the fruits of productive activity.

As Robé observes, the eighteenth- and nineteenth- century architects of the modern liberal order of private property were operating in an economic order characterised by individual (predominantly flesh- and- blood) property owners, large numbers of producers and dispersed power, not an economic order dominated by large, powerful corporations and multi- national enterprises. By the end of the nineteenth century, however, production had become a much less individual and much more social affair, as various commentators noted. As we have seen, for example, the increasingly social nature of production, and its growing dependence on the collective technological knowledge of communities, was a major theme in Veblen's writings. The increasingly social nature of production was most obviously manifested in its growing concentration in large corporations and in the ever growing division of labour. With the rise of corporate economies, developed capitalist economies gradually came to be characterised as much by oligopoly, monopoly and planning (both by corporations and the state), as by competitive free markets. Moreover, these corporations were increasingly populated not by active shareholder-members but by inactive rentiers.