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The Public Spirit of the Corporation
Published online by Cambridge University Press: 17 February 2009
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Imagine yourself sitting in the Berlin Philharmonic Hall, listening to a concert given by the Berlin Philharmonic Orchestra. On the stage-bill is the Second Piano Concerto by Johannes Brahms. I especially like this concerto because it comes as a nice double pack: Hidden in the third movement is a wonderful cello concert. Therefore, you can be sure that this important cello-solo will be played by Dr. Faust, the first solo-cellist of the Berlin Philharmonic, on an original Stradivari from 1798. Dr. Faust discovered this extraordinary instrument on one of the many tours of the Orchestra. His enthusiasm, however, was immediately dampened as he realized that neither he personally, nor the Orchestra, nor the Association of the Friends of the Orchestra, could afford to buy it. But then, Dr. Faust recalled a recent conversation with Hilmar Kopper, at that time CEO of Deutsche Bank AG. The Deutsche Bank, a public stock corporation, showed public spirit and financed the cello.
- Type
- Research Article
- Information
- European Business Organization Law Review (EBOR) , Volume 2 , Issue 3-4 , September 2001 , pp. 795 - 815
- Copyright
- Copyright © T.M.C. Asser Press and the Authors 2001
References
1 I am grateful to Dr. Georg Faust for personal communications in this matter.
2 The problems of contributions to political parties and campaign funding will not be discussed in this paper.
3 Ch. 359, 90 LJ. Ch.Div. 294 (1921) after Lattin, , The Law of Corporations, 2nd ed. (Mineola, NY: Foundation 1971) p. 210.Google Scholar
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14 A.P. Smith Mfg. Co. v. Barlow, supra n. 4.
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19 A similar line of argument provides Macey, ibid., at pp. 36-39: shareholders as residual claimants face severe contracting problems with respect to defining the nature and the extent of obligations owed to them by officers and directors of the corporation whereas other constituencies, at least theoretically, have less contracting problems. They are further protected through gap-filling by courts in context with pre-existing contracts. The local communities should resort to the political process.
20 Eisenberg, Melvin A., “The Conception that the corporation is a Nexus of Contracts, and the Dual Nature of the Firm”, 24 J.Corp.L. (1999) 819, 822 et seq.Google Scholar
21 The above-mentioned construction of employment contracts as “employment at will” (i.e. a series of discrete transactions) or long-term, relational and incomplete contracts gives a taste of such differences.
22 Windbichler, , Vor § 15 in: Groβikommentar zum AktG (Hopt, and Wiedemann, [eds.]), 4th ed. (Berlin: de Gruyter 1999) note 19Google Scholar; Cheffins, supra n. 18, pp. 31 et seq.
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24 Clark, supra n. 17, p. 60; see also Melvin A. Eisenberg, supra n. 20, 819.
25 Eisenberg, supra n. 20, criticizes that the nexus-of-contract theory fails to explain where the “nexus” begins and where ordinary contractual relationships with the corporations start.
26 The concept of organizational contracts is known in the common law tradition as well as in the code law traditions; the extent to which it is emphasized and analyzed varies, however. Law and economics scholars seem to have an inclination for exchange-type contracts and only gradually engage in organizational perspectives.
27 Ronald, Coase, “The Nature of the Firm”, 4 Economica (1937) 386Google Scholar, reprinted in: Putterman, and Kroszner, [eds.], The Economic Nature of the Firm, 2nd ed. (Cambridge: Cambridge University Press 1997) p. 89Google Scholar; Williamson, , The Economic Institutions of Capitalism: Firms, Markets, and Relational Contracting (New York: The Free Press 1985).Google Scholar
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29 See, e.g., Stone, supra n. 15; Blair, Margaret M. and Lynn, Stout, “A Team Production Theory of Corporate Law”, 85 Virginia L.Rev. (1999) 101.CrossRefGoogle Scholar
30 See e.g. the collection Clarkson [ed.], supra n. 6.
31 Blair/Stout, supra n. 29; Sadowski/Junkes/Lindenthal, supra n. 16, p. 146.
32 Lattin, supra n. 3, p. 239.
33 Cf. Talley, Eric. L., “Fiduciary Duties and Industrial Developments”, U.C. Davis L.Rev. (2001) (forthcoming).Google Scholar
34 Cox/Hazen/O'Neal, supra n. 4, pp. 69 et seq.; O'Kelley/Thompson, supra n. 4, p. 266; cf. also Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., Del. Supr., 506 A.2d 173 (1986).
35 O'Kelley/Thompson, supra n. 4, p. 267; for a comparative view of the older German discussion of a multi-constituency representing board see Vagts, , “Reforming the ‘Modern’ Corporation: Perspectives from the German”, 80 Harv.L.Rev. (1966) 23CrossRefGoogle Scholar, partly reprinted in Jennings/Buxbaum, supra n. 4, p. 164.
36 Laux, , Die Lehre vom Unternehmen an sich. Walther Rathenau und die aktienrechtliche Diskussion in der Weimarer Republik, (Berlin: Duncker & Humblot 1998) pp. 59Google Scholar et seq., Riechers, , Das >Unternehmen an sich<. Die Entwicklung eines Begriffes in der Aktienrechtsdiskussion des 20. Jahrhunderts (Tübingen: Mohr Siebeck 1990)Google Scholar; Wiedemann, , Gesellschaftsrecht, Band I: Grundlagen, (München: Beck 1980) pp. 301Google Scholar et seq. – The notion of the large corporation as an institution of public interest moves corporation law away from private law and closer to public law, an approach now taken by some “progressive” American scholars; see, e.g., Kent, Greenfield, “Using Behavioral Economics to Show the Power and Efficiency of Corporate Law as Regulatory Tool”, U.C. Davis L.Rev. (2001)Google Scholar (forthcoming). Again, the definitions of public law and private law may vary considerably between legal systems. In civil law jurisdictions, public law refers to the involvement of government in relation to the citizen; private law may very well be shaped according to public policy as, for instance, forced by EU Directives on consumer contracts.
37 For instance, it is said that the new law incorporated the « Führer-principle » by giving the chairman of the managing board a tie-breaking vote. Compared with other stock corporation laws, this rule seems only mildly hierarchical. The position of the president-directeur-général (PDG) in French law has always been much stronger. Until 1965 in Germany and, with slight changes, until now in Austria, the 1937 statute was/is in force and does not present exceptional governance problems.
38 Hueck, , Gesellschaftsrecht, 19th ed. (München: Beck 1991) § 23, VIIGoogle Scholar; Hüffer, , Aktiengesetz, 4th ed. (München: Beck 1999) § 76 note 12.Google Scholar
39 A prominent advocate of the mandatory pluralist approach – based on Art. 14 of the German constitution – is Schmidt-Leithoff, , Die Verantwortung der Unternehmensleitung (Tübingen: Mohr Siebeck 1989) pp. 155Google Scholar et seq., pp. 214 et seq; for a discussion why marginal or symbolic rights are not meaningless cf. Sadowski/Junkes/Lindenthal, supra n. 16.
40 As the term Betriebsverfassung (constitution) suggests, this body of law was considered at the outset as public law. The discussion about its legal character has been settled much later (1970s); now, Betriebsverfassung is firmly grounded in private law. Cf. Reichold, , Betriebsverfassung als Sozialprivatrecht. Historisch-dogmatische Grundlagen von 1848 bis zur Gegenwart (München: Beck 1995).Google Scholar
41 Reichold, supra n. 40, pp. 185 et seq.
42 Mertens, , in: Zöllner, [ed.], Kölner Kommentar zum Aktiengesetz, Vol. 2, 2nd. ed. (Köln: Heymanns 1996)Google Scholar Anh. § 117 C MontanMitbestG note 2.
43 Hueck, supra n. 38, § 24, II, 1 c); Hüffer, supra n. 38, § 116 notes 2, 7; Kraft, /Kreutz, , Gesellschaftsrecht, 11th ed. (Neuwied: Luchterhand 2000)Google Scholar. Practically, however, the institutional setting ensures the inclusion of employees' interests in the decision-making process.
44 Christine, Windbichler and Gregor, Bachmann, “Corporate Governance und Mitbestimmung als ‘wirtschaftsrechtlicher ordre public’”, in: Festschrift für Gerold Bezzenberger, (Westermann, / Mock, [eds.]) (Berlin: de Gruyter 2000), p. 797Google Scholar. For an overview over theoretical frameworks regarding human resources management see Schuler/Turnheim/Jackson, supra n. 16, p. 181 at pp. 199–205. Empirical research stayed rather inconclusive, cf. Gerum, , Mitbestimmung und Corporate Governance (Gütersloh: Bertelsmann Stiftung 1998)Google Scholar with further references.
45 This is the course of the German Governments commission on Corporate Governance; a summary of its report is available on <http://www.bundesregierung.de/dokumente/Artikel/ix_48101_1400.htm> [last visited 31 August 2001].
46 See e.g. Theodor, Siegel, Peter, Bareis and Dieter, Rückle, “Stille Reserven und aktienrechtliche Informationspflichten”, ZIP (1999) 2077.Google Scholar
47 Supra n. 13, Section III. The role of stakeholders in corporate governance: The corporate governance framework should recognise the rights of stakeholders as established by law and encourage active co-operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.
48 Supra n. 13.
49 Supra n. 13.
50 “Modern Company Law for a Competitive Economy” <http://www.dti.gov.uk/cld/finalreport> [last visited 31 August 2001].
51 Eisenberg, supra n. 16, especially pp. 5 et seq. for the “ethical-conduct principle”.
52 A major argument against the empowerment of management to include non-shareholder interests in the business perspective is that, by this empowerment, management is protected against control. There will always be a respectable interest management can claim to have protected when a decision is challenged by shareholders. Vice versa, if substantive claims could be made as to other constituencies' interests, they would be hopelessly tangled with conflicting but equally valuable interests. Remedies are sought in disclosure and more subtle reputational sanctions; see, e.g., Cynthia, Williams, “Corporate Social Responsibility in an Era of Economic Globalization”, U.C. Davis L.Rev. (2001) (forthcoming).Google Scholar
53 Cf. supra n. 46; there are voices, however, that advocate management induced forms of workers' participation, e.g. Sadowski/Junkes/Lindenthal, supra n. 16; Schuler/Turnheim/Jackson, supra n. 16, at p. 207 (there is no “one-best-way approach”); see also Biagi, “Forms of Employee Representational Participation”, in: (Blanpain/Engels [eds.]), Comparative Labour Law and Industrial Relations in Industrial Market Economies, supra n. 16, 341, at pp. 379–381.
54 The works council (Betriebsrat) enters into collective agreements with the employer, i.e. the corporation represented by management. This collective contract can, therefore, not be a constituting element of the corporation that is a party to the contract. If not the corporation but the “firm” is considered as the phenomenon constituted by a nexus of contracts, we leave legal analysis and find ourselves in the realm of economics or sociology where the term “contract” obviously does not have the same meaning as in law. Cf. Eisenberg, supra n. 20. Internal governance is called upon when management is obliged by law to inform the Betriebsrat and discuss decisions in advance. For this kind of co-determination, procedural in its nature, only procedural remedies are available whereas in the field of substantive mandatory co-determination (§ 87 Betriebsverfassungsgesetz) a tie-breaking arbitration process is provided (Einigungsstelle).
55 See especially § 80 I 1 Betriebsverfassungsgesetz
56 Mertens, supra n. 10, p. 158.
57 Lattin, supra n. 3, pp. 211 et seq.
58 Eisenberg, supra n. 16, p. 14.