¹ Eugene Rostow, “To whom and for what ends is corporate management responsible?” in Edward S. Mason, ed., The Corporation in Modern Society (New York: Atheneum, 1975).

² Rostow, p. 63. According to Judge Richard Posner, the fiduciary principle is the “principal measure for directly assuring that the corporate managers serve as loyal agents of the shareholders.” Economic Analysis of Law (Boston: Little Brown, 1977), p. 389.

³ W. Michael Hoffman, “Business and environmental ethics,” Business Ethics Quarterly, vol. 1 (1991), p. 182.

⁴ William M. Evan and R. Edward Freeman, “A stakeholder theory of the modern corporation: Kantian capitalism,” in Tom L. Beauchamp and Norman E. Bowie, Ethical Theory and Business, 3rd ed. (Englewood Cliffs: Prentice Hall, 1988), p. 97.

⁵ Robert A. Dahl, A Preface to Economic Democracy (Berkeley: University of California Press, 1985).

⁶ Norman E. Bowie, “The firm as a moral community,” Discussion paper #41, Strategic Management Research Center, University of Minnesota, July 1990.

⁷ Dahl, p. 123.

⁸ Abram Chayes, “The modern corporation and the rule of law,” in Mason, p. 40.

⁹ Bowie, p. 15.

¹⁰ Patricia Werhane, Persons, Rights & Corporations (New York: Prentice Hall, 1985), pp. 86–87. See also Evan & Freeman, p. 100.

¹¹ Dahl, p. 123.

¹² R. Edward Freeman, Strategic Management: A Stakeholder Approach (Boston: Pitman, 1984), p. 249. For the view that managers have a “more basic fiduciary relationship to the members of society at large” see Kenneth Goodpaster and John B. Matthews, Jr., “Can a corporation have a conscience?” Harvard Business Review, vol. 60 (1982).

¹³ David Vogel, Business Ethics Quarterly, vol. 1 (1991), pp. 116–17.

¹⁴ The instances are too numerous to cite here. See, for example, Dahl and Michael McPherson, “Efficiency and liberty in the productive enterprise: Recent work in the economics of work organization,” Philosophy and Public Affairs, vol. 12 (1983).

¹⁵ John P. Kavanagh, “Ethical issues in plant relocation,” in Beauchamp and Bowie, pp. 106–12.

¹⁶ Christopher D. Stone, Where the Law Ends (New York: Harper & Row, 1975).

¹⁷ Werhane.

¹⁸ Keith Davis, “Five propositions for social responsibility,” Business Horizons, vol. 28 (1975), pp. 19–24.

¹⁹ Thomas Donaldson, Corporations and Morality (Englewood Cliffs: Prentice Hall, 1982).

²⁰ The idea of “public directors” and representation on the board for stakeholder groups has a long list of supporters.

²¹ Kaysen, p. 99.

²² Michael C. Jensen & William H. Meckling, “Theory of the firm: Managerial behavior, agency costs and ownership structure,” Journal of Financial Economics, vol. 3 (1976). The view of the corporation as a convenient fiction is older than agency theory. In 1900, F. W. Maitland said that to call a group of people who engage in a particular type of contractual relationship with one another a “corporation” is a “mere labour-saving device, like stenography or the mathematician’s symbols.” Cited by Robert Hessen in “Corporate legitimacy and social responsibility,” International Institute for Economic Research Reprint Paper 13 (March 1980), p. 12.

²³ Eugene F. Fama & Michael C. Jensen, “Separation of ownership and control,” Journal of Law and Economics, vol. 26 (1983), p. 277.

²⁴ Fama & Jensen, p. 290. Interestingly, stakeholder theorists say that stockholders are entitled to some positive return. So while they would oust stakeholders from their privileged position, they would also limit their risk exposure. Thus, their argument has at least the virtue of consistency. What is not made clear is who—other stakeholders?—is to indemnify stockholders in the event that the corporation sustains a loss. See R. Edward Freeman and Daniel Gilbert, Jr., Corporate Strategy and the Search for Ethics (Englewood Cliffs: Prentice Hall, 1988), p. 46.

²⁵ Posner, p. 383.

²⁶ A. A. Berle, Jr. and Gardner C. Means, The Modern Corporation and Private Property (New York: Macmillan, 1932).

²⁷ Posner, p. 384.

²⁸ The term is Henry Manne’s. See “The higher criticism of the corporation,” Columbia Law Review, vol. 62 (1962).

²⁹ Posner defines the corporation as a “standard contract,” p. 369. He says, “Corporation law reduces transaction costs by implying in every corporation charter the normal rights that a shareholder could be expected to insist upon,” p. 384. For a critique of this view see Robert C. Clark, “Agency costs versus fiduciary duties,” in John W. Pratt & Richard J. Zeckhauser, Principals and Agents: The Structure of Business (Boston: Harvard Business School Press, 1985).

³⁰ Armen A. Alchian and Harold Demsetz, “Production, information costs, and economic organization,” American Economic Review, vol. 62 (1972), p. 777.

³¹ Ian Maitland, “Rights in the workplace: A Nozickian argument,” Journal of Business Ethics, vol. 8 (1989).

³² For a view of entrepreneurship as a process of discovery see Israel Kirzner, Discovery and the Capitalist Process (Chicago: University of Chicago Press, 1985). What is distinctive about entrepreneurial activities is that they reflect “the decision maker’s belief that he has discovered possibilities that both he and his competitors had hitherto not seen” (p. 7).

³³ In certain contexts other forms of enterprise may be more efficient. See Henry Hansmann, Journal of Law, Economics and Organization, vol. 4 (1988), pp. 267–304.

³⁴ Fama & Jensen.

³⁵ Fama & Jensen, p. 278.

³⁶ Paul H. Rubin, Managing Business Transactions (New York: The Free Press, 1990), p. 90.

³⁷ Posner.

³⁸ Rubin, p. 90.

³⁹ Fama & Jensen, 1983; see also Rubin, p. 80.

⁴⁰ Oliver E. Williamson, “The organization of work,” Journal of Economic Behavior and Organization, vol. 1 (1980).

⁴¹ Oliver E. Williamson, The Economic Institutions of Capitalism (New York: Free Press, 1985), p. 265.

⁴² Samuel Bowles & Herbert Gintis, Schooling in Capitalist America (New York: Basic Books, 1976), p. 62.

⁴³ Dahl, p. 141.

⁴⁴ See Hansmann.

⁴⁵ Rubin, pp. 89–90.

⁴⁶ Peter Drucker, The Unseen Revolution: How Pension Fund Socialism Came to America (New York: Harper & Row, 1976).

⁴⁷ “Rights and production functions: An application to labor-managed firms and codetermination,” Journal of Business; vol. 52 (1979), p. 473. Given the choice, industrial workers have typically preferred more cash to more control over the workplace. See e.g., Michael Mann, Consciousness and Action among the Western Working Class (London: Macmillan, 1973), pp. 21–22. Michael Novak has suggested that one reason this may be the case is that “participatory democracy requires too many meetings.” The Spirit of Democratic Capitalism, 2nd ed. (New York: Madison Books, 1991), p. 209.