A. On corporate governance and scandal at P&O

In March 2022, P&O Ferries in the UK, part of the P&O shipping group originally chartered by a Londoner and a Shetlander in 1840, was scandalised in newspaper headlines across the country. The company had sacked all of its UK crews, comprising 786 employees. ^{Footnote 20} Without notice, the company (reportedly) used MS Teams, phone and text messages to communicate a message that employment for the unionised crew members was terminated ‘with immediate effect due to redundancy,’ a communication tactic that added to the scale of negative publicity, due to its apparent lack of respect for the dignity of employees. ^{Footnote 21} In the days after the mass redundancies, vital public transport services provided by P&O from England to Europe, Ireland and Scotland, were suspended, whilst the company located new crews and managed the scandal. Replacement staff were to be contracted from an agency supplier at lower wages (namely, non-UK based contractors to avoid domestic minimum wage and union laws), according to the firm’s own publicised strategies. Such a substitution of labour was proposed to be in the service of flexibility and cost-savings, or a ‘last resort’ response to losses suffered by the firm due to COVID-19 and deficits in the pension fund. ^{Footnote 22}

Significant public outrage followed the mass terminations, or (as UK labour lawyer Keith Ewing aptly names it) ‘fire and replace’ incident, much of which was focused on the company’s callous approach to the rule of law. ^{Footnote 23} Questions were raised by lawyers, trade unionists and politicians about the company’s failure to comply with UK and international employment standards. ^{Footnote 24} Specifically, the company had neglected to inform and consult workers’ representatives about their decision to dismiss workers for reasons of redundancy, or to notify the Secretary of State or relevant authority in the flag state as required by the Trade Union and Labour Relations (Consolidation) Act 1992. ^{Footnote 25} Wider questions arose about the liability of the company for unfair dismissal, breach of directors’ fiduciary duties, the prospect of directors’ disqualifications and shareholder actions for damages, ^{Footnote 26} the safety implications of sailing with inexperienced crew, ^{Footnote 27} the (uncertain) entitlement of agency workers to the UK National Minimum Wage (NMW), ^{Footnote 28} and breaches of international human rights law codes and standards by the company, but, also, the UK government for failure to ‘prevent, investigate, punish and redress’ abuses of rights taking place within its jurisdiction and territories. ^{Footnote 29}

By January 2023 (the time of writing), P&O Ferries was reported to be waiting to take delivery of two new cross-channel ferries, ‘its largest to date’, having largely weathered the scandal. ^{Footnote 30} Charges were not pursued by the UK government (after some months of consideration). ^{Footnote 31} Despite this quieting of the scandal, the present article continues to take interest in the events at P&O, where the actions and reflexivity of the company at the height of the crisis speak to essential features of the neoliberal corporation and social contract, and their (troubling) continuity into the present. The events severed, for instance, the public spirit and collaboration, which the country tried to experience during COVID. Renewed optimism about the need for systemic change in the economy, including imaginative talk about the ‘future of work’ and respect for essential workers, was stymied and overshadowed by the cynically planned and executed redundancies at P&O. The clear resumption of economic priorities, as is involved in ‘fire and replace’, aligned less with hopes for ‘a new social contract’ and more with a recent history of the neoliberal corporation that aims at reducing labour and production costs, whilst increasing the portion of private gains for shareholders. ^{Footnote 32} Private property dimensions to this company were also able to protect the business from any broader demand for public accountability or interventionism. What emerged, instead, was strategic development of the facilities of corporate autonomy in the private sphere, including space to create the cost-cutting scheme with lawyers skilled in ‘creative’ compliance, whilst relying on the facilities of corporate separate legal personality to justify (ie, rationalise) cuts within an otherwise profitable corporate group. ^{Footnote 33}

Members of the company board were questioned by the Government select committee in the days after the sackings were announced. Predictably but, also, meaningfully, P&O executives defended the actions taken in economic and competitive terms. Months of consultation with workers, although a legal requirement, would have ‘undermined the business, caused disruption, which would have led to customers leaving for competitors,’ said CEO Peter Hebblethwaite. ^{Footnote 34} Avoidance of consultation had, in fact, ‘safeguarded the long-term future of the company and the livelihoods of 2,200 employees.’ ^{Footnote 35} Employment law requirements, in such a view, were strategically treated by the management as a ‘business cost’ and ‘efficiently breached.’ Or (to translate the statement further) fiduciary duties, in the CEO’s interpretation of UK company law obligations to promote the ‘success of the company’ for the benefits of the members could, in challenging circumstances, perhaps even require some form of law-breaking to protect the company’s share price and long term viability. Similar thinking was applied by P&O Executives when explaining the company’s approach to redundancy monies for workers, which were paid (up front) but without compliance with the statutory consultation process. Company legal representatives assessed the monies paid as being ‘fair’ due to their being comparable to the level of statutory compensation that would have been due, if the legal requirements were followed. In this context, the board claims to have had ‘regard’ for the applicable legal requirements, just without offering due process at law. ^{Footnote 36}

Such deep commodification of labour law is not new or unheard of (of course). Since at least the 1990s, it has been common to observe calculative reflexivities, like this, about law, regulation and common standards among business actors, tasked with maximising profit and dividends for investors on the global stage. A ‘race to the bottom,’ which mixes the dynamics of markets and competition and skills of regulatory arbitrage (ie, whereby firms capitalise on loopholes in regulatory systems in order to circumvent unfavourable regulations) has been widely problematised by anti-corporate activists, as chief among the exports of economic globalisation. ^{Footnote 37} Each is now widely rooted in the global corporate and financial sphere.

The P&O Ferries’ example is still distinct and interesting despite not being new, though, and not just because it carries to the UK what has been exported elsewhere, namely a market-bound mentality ready to act among (deplete) rights and duties for corporate ‘success’ (although it does this too). The events further cause shock because they force an awkward confrontation with a highly developed regulatory imagination, which for the last thirty years has encouraged companies to self-determine or ‘regard’ risks to themselves, and others, as a proxy for respecting law in the economic sphere. Such an extension of corporate rule, delivered at a ‘best efforts’ standard and on a competitive basis, has been widely presented as among the benefits of corporate social responsibility (CSR), for instance. ^{Footnote 38} Justification for this approach is extended where the rule of law is weak and companies offer an opportunity to use their organisational habits and reflexive constitution to improve standards internationally, often where governments are unwilling or unable to legislate. ^{Footnote 39} Relatable habits arise at P&O, where the CEO defends the company’s breaches in terms of the extra ‘insight’ or pragmatism that he and his board can bring to the table (not consulting when the company already knows the outcome, for instance), and compares this by implication to the inefficiencies of UK state and judicial forums (when agreeing compensation without a court), which are being disinvested after the same imaginaries. ^{Footnote 40} Volatility is evident as the bet (of conscience or good judgement) does not pay off (in this case); rather, without effective action (ie, enforcement), the risk of volatility passes down the line to other workers. ^{Footnote 41}

Significantly, many of the scholarly proposals for improving corporate self-governance and reflexivity in fora like CSR do still imagine the company in a social contract, and law and government as backing the market-led organisation of interests (and so demur conceptually from a moment of self-constitutionalisation). ^{Footnote 42} However, the deferential approach of the Conservative Government, as well as the recent UK report about governments ‘sharing’ in company purposes (in the introduction), allow us to glimpse an increasingly disembedded (as Karl Polanyi might have had it) approach to the rule and authority of companies, festering in the move to give companies law-creating powers. ^{Footnote 43} The P&O Ferries case, as such, says something about the social contract dimensions to the systems of corporate government, developed and exported within advanced capitalist systems under conditions of neoliberalism. A social contract conflict erupts, at P&O, where one reading puts democratic law and government as the source of the company’s licence and legitimacy, which then meets another that makes companies’ economic functions (creating wealth, innovation, jobs) self-standing or prior. The latter is justified at P&O as the best (or only?) means for society to pursue collective creation, even where this involves standing down legal rights and facilities, if not the rule of law itself.

Such examples and prospects give the author occasion to find out more about the corporation and social contract. There is more to understand about how this economic and functional priority historically arises and reconfigures the social contract with business, including law’s normative discovery and development, public supervision and enforcement, the realisation of common objectives, democratic input and deliberation, etc. Such things interest the author as applied aspects of the social contract with business and the contemporary institution or delivery of corporate regulation, formed in its midst.

B. How economic rationalities came to dominate the governance of ‘wider interests’

It is common for business law scholars to use the 1930s as a point of departure for studying modern corporate social institutions, including the relationship between the company and society, or CSR. ^{Footnote 44} This entry point to the modern company (the 1930s) reflects the era’s ability to mix turbulence and transformation, as capitalist economies navigated the fall-out from World War I and the depression that developed after the 1929 stock market crash in America. ^{Footnote 45} The era gives scholarly carriage, too, to The Modern Corporation and Private Property (1932), by Adolf Berle and Gardiner Means, a seminal text for theorising the ‘modern’ corporation. The book transformed thinking about business by relating a new concentration in industrial power at companies to the ‘social question’ and to new features of business and investment, most notably ‘the separation of ownership and control’. ^{Footnote 46} Along with the involvement of Berle in the debates with Merrick Dodd in 1931 and 1932 about stakeholder versus shareholder governance, the book introduced new ways of interrogating the company’s nature and purpose and relating corporate governance to societal issues. ^{Footnote 47} Berle, a lawyer and academic, was also a speech writer for Theodor Roosevelt at the time of the book’s writing (ie, on the eve of Roosevelt’s election and the New Deal), a relationship that hints at the wider engagements of the book and authors in shaping the social contract with business during the interwar era. ^{Footnote 48}

Berle and Means were, in many respects, writing a book for corporate lawyers about shifts in the balance of economic policy and decision-making, which were created by the emergence of large enterprises and new dispersed modes of stock ownership. ^{Footnote 49} However, they were also keenly aware of how corporate governance had to adapt, for legitimacy and in the context of war and depression, to the visible capacity of powerful firms to malign as well as benefit public interests (companies could, they said, ‘harm or benefit a multitude of individuals, affect whole districts, shift the current of trade, bring ruin to one community and prosperity to another).’ ^{Footnote 50} For the authors, countering this societal impact and depression meant transforming corporate power and authority by subjecting it to ‘tests of public benefit’: ‘In time of depression, demands are constantly put forward that the men controlling the great economic organisms be made to accept responsibility for the well-being of those who are subject to the organisation, whether workers, investors, or consumers.’ ^{Footnote 51} Yet, the authors were also keen for political reasons, including the necessity of maintaining the ‘confidence of business,’ not to restrict business freedoms; they wanted, rather, to reform corporate power and social authority. ^{Footnote 52} In this context, Berle and Means used logic and social optimism to reshape important parts of the social contract with business, envisaging a partnership with government, but also a reformulation of corporate autonomy as ‘state-like’ or ‘quasi-public’. Citing the work of Walter Rathenau in Germany, they constructed a sense of companies being on the brink (after the separation of ownership and control) of gaining (earning) a new capacity to ‘govern’ in the general interest. ^{Footnote 53}

In the last pages, in a chapter titled ‘The New Concept of the Corporation’, Berle and Means used this insight to form a governance perspective on the modern enterprise (‘The institution here envisaged calls for analysis not in terms of business enterprise but in terms of social organisation’). ^{Footnote 54} New independence within the corporate entity from shareholder claims increased, in their view, the potential for enlightened governance at companies, as management should evolve into a ‘neutral technocracy,’ capable of balancing ‘a variety of claims by various groups.’ ^{Footnote 55} The book identifies potential changes in the character of the corporate profit stream, as related to this capacity for public governance. Profits earned could no longer be classified as purely private property; ‘Claims on it must be adjusted by some other test, other than that of property right,’ where shareholders, surrendering control, ‘surrendered the right that the corporation should be operated in their sole interest.’ ^{Footnote 56} Berle and Means reference community claims ‘put forward with clarity and force’, which might move the company towards more responsive forms of production and action in this context. ^{Footnote 57} They also explain their ‘temporary’ preference for maintaining shareholder loyalty, insofar as ‘a convincing system of community obligations’ was not yet (in 1932) in place (they talk about a need for obligations to be ‘worked out’ and communities generally ‘accepting such a scheme’). ^{Footnote 58} Wider expectations that business practitioners would increasingly ‘assume the aspect of economic statesmanship’ and that corporate law might form a basis in ‘constitutional law for the new economic state’ are expressed, though somewhat ambiguously (ie, as advancing, but not necessarily being dependent on the enlarged respect for community interest). ^{Footnote 59}

Such was the force and (perhaps) ambiguity of this description of the company as expanding in the means of self-government that Berle and Means were able to prophesy their own origins moment: ‘How will this demand [for responsible power] be made effective? To answer this question would be to foresee the history of the next century.’ ^{Footnote 60} After World War II, social and labour movements would advance further on the governance prospects elaborated by the authors and on the company’s quasi-public orientation, as the corporatist collaboration for growth and jobs was instituted. ^{Footnote 61} By the 1960s, John Galbraith, in The New Industrial State, was able to narrate the company’s ‘socialised’ and ‘bureaucratic’ transformation. The book highlighted new forms of motivation among directors suited to advancing the public interest and the long-term success of corporate organisations engaged thus, which Galbraith termed ‘enlightened administration.’ ^{Footnote 62} Importantly, these capacities in governance grew during a period of constancy in corporate legal frameworks (ie, no new duties were introduced for companies or directors in the law) but, also, strong public government and collectivism (social legislation, regulated finance) and collective bargaining. In the terms used by Berle and Means in 1932, this wider instrumentalism granted ‘clarity and force’ to many of the era’s normative expectations of business. ^{Footnote 63} In support of this view, when writing for Roosevelt, Berle had earlier talked about companies sacrificing ‘this or that private advantage’ and seeking ‘general advantage.’ Such enlightenment involved not voluntarism, the writing clarifies, but a prospect that should companies ‘use its collective power contrary to public welfare, the government must be swift to enter and protect the public interest.’ ^{Footnote 64}

A different deployment of corporate autonomy and corporate socialisation, which again speaks to the ambiguities of how the modern company was theorised in the 1930s, was to emerge after the mid 1970s. Corporate law scholars talk about the sudden disappearance (‘overnight’) of the motivational ethos and collaborative underpinning of the ‘Galbraithian corporation.’ ^{Footnote 65} A powerful rewriting of the post-war social contract was going on against the backdrop of rising social and economic conflicts – an oil crisis, inflation, and industrial and competition from manufacturing economies in the Global South. ^{Footnote 66} Intellectuals like Milton Friedman (discussed by Bartl, this issue) and Fredriech Hayek, who had been writing against the post-war social contract and corporatism since the 1940s, waded into the turbulence, this time. The new ideas and theories sought to relate rising conflict around the economy and industrial participation to the dangers of instrumental law and government (‘the road to serfdom’), ^{Footnote 67} and a government’s ill-adaption to the ‘knowledge’ or ‘discovery’ demands of a decentralised market society (others talked about the ‘overloaded state’). ^{Footnote 68} Such ideological interventions proposed adaptations in the social contract, to make law and government more minimal (the enforcer of contracts and property rights). On the other hand, however, governments were also expected to extend their involvement in creating, steering and facilitating exchange and markets, as a means of advancing the core idea that social institutions, planning, and fixed structures were all ineffective, and (through the efforts at improvement that this catalysed) always on the road to becoming more repressive.

By the 1980s, elected politicians began to institute transformations in the social contract with business that expressed these new beliefs or theories, through anti-union legislation and wider policies that aimed at reducing state control over the economy (privatisation, capital liberalisation, deregulation). ^{Footnote 69} This programme aimed at growing the role of markets, as allocative devices, and reducing ‘red tape’, the ideologically loaded tag for public regulation and standards. ^{Footnote 70} New governance rationales for companies were developed by ‘law and economics scholars’, interested in growing the discipline of markets over the company’s decision-making process, which involved reviving the purposes of shareholder value maximisation (such had receded in the 1950s and 60s). ^{Footnote 71} Where modern law scholars had emphasised the quasi-public components to corporate governance, the new scholars were keen to amplify neoclassicist ideas about the stark separation of the economic and political spheres (minimising the chance of interventionism). They sought to simplify corporate social interactions as a bulwark against (so-called) shirking, agency costs and discretion at corporate institutions, which the theories discredited as a form of unlawful ‘plundering’ against the interests of members. ^{Footnote 72} Like the political programme, such theories also offered potential for organising life around individual preferences (the good life) and for (crude) economic resolution of social and labour conflicts, which had become a source of creative difficulty for companies and for the under-fire governments of the 1970s.

Importantly, and in a part of the story that is less commonly addressed, the emphasis on deficiencies of government planning and collectivism also filtered into legal scholarship. New kinds of pessimism about law and government grew among the 1980s trend for ‘new public management’ (NPM), which brought the language of economic rationalism to the public sector, and ‘better regulation’, which met the concern about ‘red tape’ and sought to simplify the regulatory environment. ^{Footnote 73} Related but, also, distinct movements arose around the globalised activities of companies that became more ungovernable, as they sought to maximise competitive opportunities in different jurisdictions and markets, made possible by a more liberalised corporate and financial regime (offshoring production, new chances to lower labour and production costs, etc.). New social movements met this problem (of ungovernability) by theorising the concentrated power held by multinational companies (moving beyond Berle’s theories of the modern company) and starting campaigns of direct action (against Nike, Shell, etc.). ^{Footnote 74} Legal scholars, keen to avoid traditional (or stereotyped) regulatory responses and admitting their own generalised scepticism towards constructivist models of law, sought new regulatory mobilisations that built on this notion of direct action (and theories of global corporate power that supported it). ^{Footnote 75} They built visions for enacting more governance in the private sphere, pressing on the incentive to profit and property and decentralising the activities of norm production and discipline. ^{Footnote 76} Such transformations could, scholars reasoned, extend the responsiveness of law over complex, globally distributed, corporate action. Regulation could be re-conceptualised to mean broad kinds of ‘influence’ over others and, thereby, inclusive of sources beyond formalised law and/or state. ^{Footnote 77} Such legal theories were also designed to address long running problems of defective compliance at companies (tick box, avoidant), inspiring new forms of creativity at individual or entrepreneurial units about the social question, itself, thus overcoming law’s more ‘repressive’ qualities. ^{Footnote 78}

Repurposing the company has consistently been central to the operationalisation of the legal theories and imagination of new governance. In a landmark article on the subject of corporate fiduciary duties, written in 1985, regulatory scholar Gunther Teubner returned to the suggestion (by Berle and Means, in 1932) that ‘the development of social pressure’ over companies might be a basis for socialising economic behaviour. ^{Footnote 79} Notably, Teubner’s assessment of corporate autonomy, in this context, develops the separation of ownership and control to observe the content or construction of the ‘enterprise interest’, or ‘Unternehmensinteresse’ – a term that Teubner also draws from Rathenau (1917) and his notion of ‘enterprise as such’ [Unternehmen an sich]. Specifically, Teubner undertakes to address the ambiguity about the ‘balance’ between shareholder and community interests (temporarily resolved in favour of shareholders in 1932) by re-developing corporate ‘autonomy’ and the ‘enterprise interest’, as ‘functional’ alternatives for carrying out regulatory functions abandoned by governments within the private sphere. Companies are uniquely placed and incentivised, in this analysis, to operationalise ‘knowledge’ and ‘discovery’ mechanisms of the market, including discoveries about social norms and value preferences. Teubner foresaw a possibility, as private power rose under globalisation, that companies could combine their role as economic actors with social functions, which reached beyond the territorial and planning (or knowledge) limits of states. Companies might, that is, be encouraged to maintain a focus on the negotiation of economic interests (ie, maximising the enterprise interest) whilst also increasing their responsiveness to social pressures, expressed with ‘clarity and force’ in the market or (in his terminology) in the company’s ‘environment’ (Teubner writes the article from a systems theory perspective).

The law and principle of the social contract shifts, in this theory, from setting standards and rights-based negotiation to instituting markets and reflexive processes, which promote ‘externally stimulated internal reflection’ about the pressures, conflicts, and concerns mounting in the company’s environment. ^{Footnote 80} Law is ‘indirect,’ rather than interventionist; it guides or steers a process of market-led reflection and accommodation, extending the gaze of the company and the calculative ‘regard’ of corporate decision-makers to the sources of conflict or ‘irritation’ (this regard is embodied for Teubner in the fiduciary duties). ^{Footnote 81} Such a means to social reflexivity was proposed, by Teubner, to overcome the limitations of legal instrumentalism and of law’s ‘ineffectiveness,’ caused in Teubner’s analysis by a lack of translatability that exists between the operational logic of different functional subsystems (not least, regulators that do not understand or cope with complexity). It was designed, too, to reduce discretion at company boards, ie, balancing the needs of different social groups, moving the governance modus that he developed beyond the stasis of the shareholder versus stakeholder debate. ^{Footnote 82} Organising social ‘integration’ more directly within the market sphere proposed a more effective (responsive) mode of learning about and resolving conflicts, which uses the guarantee of the price mechanism (rather than discretion or thought). It opened itself up in ‘functional’ terms to bettering the guarantee of future needs (than a planner could). ^{Footnote 83} Companies could in this view be encouraged to accommodate stakeholder and social causes, wherever such can be demonstrated to have a bearing on corporate self-interest, conceptualised nominally as ‘gain’ (and usually also the shareholder interest). So, it was possible to observe, in Teubner, the reconfiguration of public government and, also, the stakeholder versus shareholder dichotomy (the double is important) by economically instrumental rationalities, which assume certain creative ‘functions’ (ie, enabling companies to sort through the claims that might attain meaning or presence in markets, using the calculation of ‘enterprise’ interest). ^{Footnote 84}

This controversial (private, market-integrative) regulatory structure currently underlies most of the mainstream legal frameworks, expressive of the company’s social role in the UK and EU, including CSR, corporate sustainability and (to a more mixed extent) business and human rights (BHR). It aims at the internalisation, by companies, of externalities (human rights violations, modern slavery, missing tax receipts, preventable carbon, environmental pollution, waste) within the sphere of the enterprise interest. Corporate law frameworks institute the regulatory technique in duties of ‘process’, by which companies and directors are expected to follow and to acquire social ‘reflexivity’ (as regulatory theorists develop the idea of consciousness, built between systems). ^{Footnote 85} The mandates concern the development of corporate regard, reporting, and diligence (RRD) about stated risks (human rights, workers expectations, the environment, etc.), with companies encouraged to consider the short and long term costs to the company of protecting (or not protecting) affected constituents. ^{Footnote 86} It is open to governments and other authorities to add to the list of factors that companies may need to RRD, and, thus, to stretch the systems to new and emerging concerns (to carbon, net zero goals, suppliers’ impacts, modern slavery, etc). ^{Footnote 87} Mitigation is expected or required in the sense of being actionable by the members, acting in the company interest, to the extent that this is consistent with (directors’ assessments of) the company’s ‘success’ (the calculative aspect). ^{Footnote 88}

C. Corporate responsibility and regulatory governance: ‘they see no masses’

The present author has written in previous work about the instability of this regulatory model in terms of its ability to create adequate responsibilisation among economic actors for hazards affecting people and planet.Footnote ⁸⁹ Three sets of (related) problems are worth recounting.

First, where the deployment of economic institutions and incentives smooths the resolution of social conflicts, making it easier ‘to get things done,’ it also transforms the burden of engagement and understanding. Companies (and governments) are released in new governance from substantive forms of consensus building, as such work falls to the enterprise interest; companies adapt to ‘learning pressure’ whilst remaining formally accountable only to shareholders; the price mechanism sorts through claims. Such market accountability is commonly criticised for the weak position that this accords to stakeholders, consulted or listened to, but, also, ignored when contradictions to corporate pricing strategy and/or profit are identified. More subtle is a change in the burdens of creating understanding and responsiveness to the conflicts generated by business, where regulatory governance shifts these important aspects of ‘governing’ towards communities affected or bearing risk. This point sounds counter-intuitive and can be hard to spot, where it is companies that are, in law, expected to conduct RDD and to engage with the process of improving reflexivity. However, if such engagements are to be more than superficial, it is (in practical terms) consumers, civil society, communities and constituents that bear the heavier responsibility of ‘enlightening companies’ in post-state regulatory theory, which maximises (celebrates) individuated mechanisms and the self-reliance of participants.Footnote ⁹⁰ The claimed ‘freedom’ of the market is reframed, as communities and stakeholders must undertake actions to regulate economic actors by ‘resurrecting interest’, and generating internal reflexion at companies, which ‘cannot be voluntary’ and ‘needs to be stimulated by powerful external forces’ (as otherwise it invites unlawful amounts of discretion from directors, or planners).Footnote ⁹¹

This is difficult, extensive and sometimes dangerous work.Footnote ⁹² Participants commonly relate the time-consuming effort involved in securing influence and remedy. Heightening learning pressure to the point of bearing on corporate self-interest, and before harms are executed or materially visible (publicised), can be a high and sometimes impossible barrier.Footnote ⁹³ Progress is hampered by the complexity of corporate structures and the circumstances of production, which can make knowledge partial (insofar as consumers and others are removed from certain times and places of production). It is often unwound by companies as societal pressure recedes.Footnote ⁹⁴ More practically, the effort to engage the resilience and courage of individuals in a world that is already tipped in power balances to the autonomy of transnational companies, like PO (Shell, Amazon, etc), is disconnected from the way that this imbalance already makes everyday exchanges more difficult for people (from contesting a gas bill to refusing unsafe work), never mind more ambitious forms of civic regulation.

A second (related, entangled) problem with the market-led modus of corporate responsibility concerns the growing transfer of public ‘authority’ to the private sphere. The observation starts (again) from the potential exposure of individuals and communities in corporate legal orders (as interests to be productively employed but, also, resurrected), and how this exposure is intended to be balanced and mitigated by collaboration across that sphere - with companies, but, also, with other (comparably associated) actors and institutions, including civil society organisations, trade unions, technical experts, etc. This collaborative dimension is important to the institutional imaginary of regulatory governance and its cultivation of normative resources or expertise within the ‘environment’ of the company. It operates as a means of collecting values, community interests and claims together, improving ‘clarity and force’ (the link between Berle and Means and societal constitutionalism, discussed also in this issue by Jean Robé).Footnote ⁹⁵ Such is designed to develop the ‘functional differentiation’ of worldviews, and to pluralise forms of authority, which is relevant to rigour of regulatory governance and its claim to be nurturing of law and democracy.Footnote ⁹⁶

A major problem here, however, is the insistence of regulatory governance that differentiation of this order does not ‘weigh’ against competing considerations. Collaborators do not just raise problems with companies, or generate more ‘thought’ about their concerns. They need to find a place within bigger projects of market building (abstraction and commodification), which can ensure that their claims can undergo individuation and translation into the logic specific to the focal system (‘the enterprise interest’). This ‘enterprise interest’ operates within regulatory governance as a mechanism for making claims ‘compatible,’ ensuring closure and decisiveness through the price mechanism.Footnote ⁹⁷ Such decisiveness and self-organising (spontaneous coordination) is needed according to Teubner’s analysis, in 1985, to reduce the operation of discretion and/or ‘the risk of abandoning the definition of corporate responsibilities to the mercy of the constantly changing result of shifts in the balance of power between social interest groups.’Footnote ⁹⁸

The wording here is striking where it seems to render exceptional routine aspects of management, attributing ‘creativity’ to the onward resolution of markets and price-based coordination. This fatalism is (again) derivative of functional autonomies of the ‘new governance’ system, ie, the effort to avoid burdening companies with unfamiliar value-systems or rationalities. It lends itself awkwardly to many aspects of corporate responsibility, however, including historic, diffuse and recurrent harms, and to communities that struggle to correspond through the price mechanism and align their own interests with corporate reputation or prove a competitive interest (non-humans, the environment, the poor and precariat, the far away). This imprecision to generating learning pressure is often cited as an advantage (the flexibility and focus that can be brought to regulation through individuation and economic force), but it can create long-standing normative and cognitive problems for companies and society about the real extent of corporate impactfulness; many of the learning exchanges between companies and constituents are fragmented, incomplete and unsuited to the nature of the impacts under scrutiny.Footnote ⁹⁹ It, also, entrenches companies’ overall power, as social coordinators, economic functionaries and wealth generators, to manage the whole process of social learning and responsiveness in the present and future. This includes the power to announce the overall adequacy of conflict resolution, and ‘respect’ for rights or codes, as fits the enterprise interest.Footnote ¹⁰⁰

To these claims, the paper wishes to add a third (related) aspect. It concerns the rising (over time) tendency towards ‘scandalisation’ that has embedded itself in regulatory governance. This is where individuals and social groups seeking to ‘control’ or ‘moderate’ companies in regulatory governance, and in the private sphere, might transform or even shorten normative debate in the effort to improve the public’s chances of impacting the company’s reputation, and influencing behaviour. Participants are forced by the regulatory modus to extend the amount of civic and/or normative expression that can be carried in the market’s (simplistic) communicative exchanges, through the formation of buycotts, boycotts, making threats to reputation (corporate, individual), publicising protests around exit or voice, etc.Footnote ¹⁰¹ Communities are drafted in as stakeholders and encouraged to generate pressure on their own initiative, but are confined by opportunities to create or remove market rewards (as a balance to the open-invitation). Such a narrowing of communication is designed to deliver shocks in attention but can, also, be distortive of normative practices, generalising a boycott mentality and creating different levels of (justified and unjustified) melodrama (due to forced simplification), which is ineffective in terms of stabilising economic systems and/or protecting a general interest (ie, banker bashing). Alternatively, scandal, in distinction to law and duty, loses its grip on the world and energy quickly, meaning that calculation is never far behind in corporate (or peer) responsiveness, even when market-organised discipline and collaboration over corporate targets are successful.

A mandate for normative simplification is a logical extension of the reliance on functional equivalents to law and government, and of the wider refrain that systems theorists have established around thought and the ‘clash of rationalities’ that is expected to occur when one rationality or subsystem tries to influence the other. It is the effort to avoid extended clashes that produces such a high estimation among governance scholars of corporate self-governance and economic functionalism (as a means of improving the social effectiveness of economic action). But governance through economic functionalism also carries the notable frailty of not (always) being generalisable, through not having entered into constitutionally diverse forms of communicative deliberation and exchange, ie, of having justified itself across different subsystems.Footnote ¹⁰² Regulatory force in the economic sphere, instead, commonly exhibits (one or more of) market rise and fall, structural ignorance wherever the profit lines inscribe, particularity in responsiveness and ‘therapeutic’ change among private sector actors put under high amounts of commercial pressure (or scandalisation). Implicit too is a dramatic change in the force and function of ‘law’, which is confined to process and to revealing subjects that might be pushed over the line of market integration (ie, command the enterprise interest). Codes, non-binding instruments, guidance and taxonomies do not properly establish subjects of duty and deliberation (when commanding corporate responsiveness), in other words. They establish, rather, fixed points in reality or (in simpler terms) descriptions, which possess few rights, powers and opportunities to actually renegotiate the substantive terms of accommodation (of counting).Footnote ¹⁰³ Scandal appropriately names the activity and frustration of participants annotated and responsibilised thus (for their own counting) and, also, separated, in kind, from longer civic histories of metaphysical inquiry and norm creation, solidarity and collectivism, etc.

Inequalities in outcome easily form among the forces for accommodation and the responses of companies, which emanate from the tactic of enlightenment, but tend not to attract the tag of discretion or arbitrariness, as the criterion of profit persistently holds. This unevenness is widely evident wherever governments step back from supervision and civic regulators cannot keep up. It is maintained in the call to try and make sure corporate actions and impacts are rendered, through reporting, ‘comparable’, even as the outcomes are inconsistent or (in some cases) even not fully true (ie, materially relatable to experiences of the affected). But the role of law and government remains less to insist on external or substantive control of corporate conduct (eg, less carbon), and more about facilitating the development of market structures within which responsibility (ie, less carbon) might arise as a rational economic opportunity for the company (in its ‘external mobilisation of internal self-control resources’). The difficulty for the civic regulators is in trying to fit (always) more into this idea that change is economic, rather than justified and/or duty-bound, and how this makes some ways of thinking about the world and justice less possible. Such characteristics eventually burden (rather than inspire) a public exhausted by carrying out the function of regulation, unconvinced by the ‘liberties’ of supervising multinational corporations registered off-grid for tax-purposes,Footnote ¹⁰⁴ and amidst the larger ‘socialisation of risks, privatisation of rewards’ schema that the corporate economy expounds.Footnote ¹⁰⁵

D. The corporation and regulatory governance: the social contract implications

The post-1980s theorisation of the company by (both) law and economics and regulatory governance scholars as a calculative (rather than legal or social) institution is essential to understanding the mandate that companies presently have to safeguard public interests. Often this mandate is underestimated or misunderstood as a more open-ended form of socialisation or enlightenment. Yet, new governance offers to improve on government and collectivist efforts at resolving conflicts by using the company as a decisive economic mechanism (not managerial organ), which can integrate diverse claims and interests (ie, make them compatible). Such a strategy deliberately deters and supersedes efforts to weigh different interests and/or equalise bargaining power between companies and their constituents - a ‘conservative strategy’, according to Teubner’s writing in 1985 (and yet at threat in the UK again from conservative anti-strike laws and the inexhaustible march of consultation). ^{Footnote 106} Corporate power is accepted and reconfigured, in this market-led model of governance, as a site of responsiveness, innovation and learning (‘power is not seen as a source of inequality and injustice but as a social instrument for the effective transfer of decisions’). ^{Footnote 107} Governments, for their part, are expected to ‘regulate internal processes in systems indirectly’, so as to ‘drastically decrease the requirements of cognitive capacities of law and politics, since they no longer attempt to directly influence economic action’. ^{Footnote 108} The state assumes the role of ‘mediator, facilitator, enabler,’ in the post-state regulatory complex, and, because of the commitment made on its behalf to improving the overall compatibility of different rationalities, the ‘skills of diplomats rather than bureaucrats,’ as Julia Black puts things by 2001. ^{Footnote 109}

It has been common to read these post-regulatory transformations in the social contract, and the displacement of the state by the ‘global and mezzo’, as pluralist, additive (resourcing law and government with more than state) and progressive for the last 30 years. Yet, recent events, including post-pandemic inequality, profiteering, and climate change create more visibility and suspicion around what has also been depleted or even given away by regulatory governance, amidst its association with the trends of neoliberalism. These wider trends have been recognised (in the words of Bourdieu) as affecting the rigour of ‘collective institutions capable of counteracting the effects of the infernal machine, primarily those of the state, repository of all of the universal values associated with the idea of the public realm.’ They concern, also, the imposition of ‘a sort of moral Darwinism that, with the cult of the winner, schooled in higher mathematics and bungee jumping, institutes the struggle of all against all and cynicism as the norm of all action and behaviour’ (emphasis in original). ^{Footnote 110} The commitment of new governance scholars to ‘decreasing the cognitive requirements’ of law and politics and to ‘no longer attempt to directly influence economic action’ sits awkwardly within this bigger schema of collectivist destruction. This remains the case, despite the strong insistence of some governance scholars that regulatory capitalism ‘has nothing to do with neoliberalism.’ ^{Footnote 111}

A social contract perspective is helpful, in this context, to help regulatory theorists to observe more about how, discouraged from ‘providing, distributing, and regulating’, growing corporate power and injustices might be accompanied by government that ‘atrophies’ or fails to develop. ^{Footnote 112} This is where a post-regulatory state becomes increasingly disconnected from outcomes, managed and known about (mainly) in the private sphere. ^{Footnote 113} Such developments aptly characterise recent political economic disorder in the UK, which (of course) cannot be divorced from the ideological investment that some governments make in this direction (ie, resolved to be indifferent to market outcomes; over-investing in commerce and markets as the best means to collective creation). Yet the point that the author is making here is about the separate responsibility that falls to lawyers and policy makers to recognise the justice failures that arise beyond the preference-based authority of market actors, and to radically multiply the means of justification and redress. For this recognition and capacity for attenuation stand to be weakened (rather than strengthened) by a regulatory commitment to ‘reduce the cognitive requirements of law and government.’ Low cognition makes institutions vulnerable to remoteness, structural ignorance, and corruption. It increases the number of situations where regulators depend on the actors and/or systems that they govern for information, deepening conflicts of interest. Deeper, too, is the bureaucracy that attends to the transformation of the regulatory professions into ‘diplomats’, as public practitioners are removed from substantive experience of the economic system’s infractions and pressure points. ^{Footnote 114} They are less trusted as public functionaries – ie, capable of acting on collectivist insight and evidence – as regulatory tasks are always neutralised and excessively fragmented (decentered, individuated), if not undercut by a basic ‘clash’ of interests (individuating harms, undermining understanding of shared or recurrent aspects). ^{Footnote 115}

To put the same point another way, in situations of pressing public knowledge (eg, about the contours of a just transition, modern day slavery, pandemics, mass redundancies, etc), it is becoming increasingly strange to watch governments and law makers defer and sometimes (even) protect their ignorance about the general public interest. Citations of complexity (as a justification for governance) look disingenuous after sight of some of the functional equivalents for steering business, which include the recent trend for using public science to develop hugely complex taxonomies and schemas, which corporate and financial actors, then, need to be pressured to adopt. ^{Footnote 116} Similarly, where the tactic of ‘enlightening’ corporate decision-makers has not proved to be that effective in terms of changing company behaviour, after fifteen plus years, low cognition would appear to be misguided in the sense of constantly degrading the potential for recognising and interrupting a word (and affect) sludge. ^{Footnote 117} Of course, such a deferral of public power and government (collectivism) references a hope that, somewhere, more dynamic, knowledgeable and motivated actors take an interest in theconsequences, and that exchanges in the private sphere can still qualify as such a place (despite the limits imposed by knowledge of circumstance, scandalisation and individuation). But long-term deference in this direction puts into decline (rather than grows) law’s creative spirit, distorting the normative and political dimensions (exchanges, visibilities) of building a world that is just. ^{Footnote 118} Over time, it also undermines institutions and respect for democratic government and the rule of law (as was evident at P&O). Such weakens the authority of institutions where suspicion of collectivism and bureaucracy prevents rational organisation, as well as the accumulation of experience among governments and regulators, increasing the risk of their failure.

Such prospects for the status of government and the function of law attract the legal scholar’s attention, as a group of equally serious (if not more?) issues to the problem of ‘law’s effectiveness’, which motivated the transformations in regulatory theory in the 1980s. They suggest ongoing difficulties with contextualising companies in their social and regulatory aspects among markets, and a possible breach in some essential elements of the social contract with business when granting a monopoly of public authority to corporate actors whilst squandering legitimate government (and regulatory) power.

A. Walter Rathenau and the corporation: the making of the modern company

When German industrialist, scholar and early Weimar politician Walter Rathenau (1867–1922) wrote about the modern industrial corporation it was 1917. ^{Footnote 123} Rathenau had recently been involved in the German war effort as head of Germany’s Raw Materials department where he was involved in wartime planning, including the national distribution of economic supplies. ^{Footnote 124} He was recruited to this role for his experience as an executive and industrialist at the family company Allgemeine Elektricitäts-Gesellschaft AG (AEG), where he had been a board member since 1899 (he also held positions at many other companies). ^{Footnote 125} After the war, Rathenau wrote about his belief that public benefits were among the significant outputs of industrialisation but, also, of the corporations that were at the helm of European economies from the end of the 19^th-century. The scale at which large companies were able to touch public interests in the age of ‘mechanisation’, ^{Footnote 126} combined with the ‘de-personalisation of ownership’, ^{Footnote 127} was creating new centres of public governance and autonomy at the entity level (‘the enterprise as such’). ^{Footnote 128} Rathenau related this new autonomy, at the corporation, to a retreat in shareholder interventionism and to the capacity within the corporate institution for ‘creation’ (the ‘faculty of envisioning what does not exist’), ‘responsibility (‘we encounter an official idealism identical with that which prevails in the state service. .. the executive instruments labour for the benefit of times when. .. they will long have ceased to be associated with the enterprise’) and ‘technocratic management’ (‘the undertaking itself, now grown into an objective personality, maintains itself, creates its own means just as much as it creates its own tasks’). ^{Footnote 129}

Throughout his writings about the economy, Rathenau is careful to distinguish the public or ‘community’ interest at companies from (purely) private property and the (command of the) shareholder interest, which was understood, by him, as erratic, ill-informed and too remote from an understanding of the company’s day to day operations to be informative (ie, incompetent). ^{Footnote 130} Rathenau steered at the same time away from economic liberalism, wherever he worried about the ‘global idolatry of the market,’ the spiritual worth of purely material achievement, and the propensity of material processes or abstractions like efficiency to degrade consciousness and the world (including nature). Rathenau concerned himself, too, with the growing inequity of the modern economic system and suggested that ‘if we have availed ourselves of mechanisation for the sake of its integrating powers, we have now to call it to account, concerning its secret tendencies to promote disintegration.’ ^{Footnote 131} ‘Too long,’ Rathenau observed, has ‘the rationalist notion of individual rights and liberties’ proved ‘tardy and mutinous in yielding to collective needs and requirements, which require regulation.’ ^{Footnote 132} Rathenau highlighted the possibility that societies could usefully increase state regulation and supervision over companies for their ‘material strength and equalising energy’ (emphasis added) as the latter’s industrial capacities and influence (autonomy) grew. ^{Footnote 133} Indeed, contrary to the classic mid 19^th- century characterisation of the laws for incorporation, which sought to liberate companies from government charter, and catalyse the private sphere, Rathenau viewed consumption and production ‘not as private affairs but as matters of public interest,’ rooted on some level in the ‘state’ or common institutions, which the individual ‘did not create.’ ^{Footnote 134}

Rathenau was assassinated by the far right in Germany, in 1922, whilst occupying the post of a minister in the Weimar Government (foreign minister). He would not live to see the new social and economic order that he thought was emerging. ^{Footnote 135}

The collapse of Weimar and subsequent ascendancy of the Nazi party in Germany saw Rathenau’s books burned by the Deutsche Studentenschaft (Dsf) as ‘un-German’ (Rathenau was Jewish) in 1933. ^{Footnote 136} His ideas about the corporation and community interest, however, were still entered into discourse about company law and regulation in Germany, via the work of scholars interested in corporate institutional theories. ^{Footnote 137} Nazi-era law reforms sought to gain more control of the economy, linking ‘company interest’ (which in some quarters of legal scholarship grew out of Rathenau’s conception of the ‘enterprise as such’) and national interest, eroding shareholder rights – moves that created lasting suspicion about state involvement in private enterprise. ^{Footnote 138} Yet, around the same time, other scholars, including John Maynard Keynes in England and Berle in the US, would also take an interest in Rathenau’s contemplation of autonomy at large companies and make it an ally of the ‘new industrial state.’ ^{Footnote 139} ‘A point arrives in the growth of a big institution – particularly a big railway or big public utility enterprise, but also a big bank or a big insurance company,’ said Keynes in 1926, ‘at which the owners of the capital, ie, its shareholders, are almost entirely dissociated from the management, with the result that the direct personal interest of the latter in the making of great profit becomes quite secondary.’ ^{Footnote 140} Berle, as Part 1 illustrated, developed Rathenau’s notion of depersonalisation in the ownership of companies to observe the separation of ownership and control, and the company interest as a faculty that might encompass responsibilities to communities or stakeholders. Such theories have often been taken as the origins point for the later fascination with corporate self-government and autonomy, which later regulatory theorists pick up and redevelop (as responsive companies, reflexivity – see Part 1).

Yet, Rathenau’s reflections on corporate autonomy come chronologically before Berle and Means, and perhaps offer a different historical axis for thinking about the future of the social contract and corporation (sending us somewhere different from where we are). Writing about the company at the end of World War I, and being praised for his work as a government economic planner, Rathenau did not anticipate anything like the generalisation of corporate governance questions, or the domination of markets as a means to societal integration. In fact, his text shows few inklings towards corporate self-governance, or for ‘pressuring’ business in the economic sphere as a means to bettering regulatory outcomes. Rathenau shared the interest of the Americans in ‘enlightened administration’ and wrote at some length about his interest in rational organisation. He highlighted the satisfaction that business managers experience when addressing, with technologies of the machine age, public interest (the ‘joys’ of industrial creation). ^{Footnote 141} Yet, his work never sways substantively towards corporate law as ‘constitutional law for the new economic state’, or studies the implications of privatising the social contract and instilling government at corporate bureaucracies and/or among their constituents (ie, he does not stride into the shareholder versus stakeholder debate).

Instructive in this context is the era that Rathenau was living and writing within. Despite there being only 15 years between Berle and Rathenau’s writing, different worlds and generations collide in the recanting of Rathenau’s corporate law theories and reflections in the Anglo-American context (from the 1930s and beyond). Rathenau, more specifically, was born in 1867, Berle and Means 1895 and 1896. Keynes, for reference, stood between the two sets of contributors and was born in 1883. Berle, between 1930 and 1932, was writing about company law and individualism at the end of the roaring twenties after the Great Crash, and ex post to an extended period of speculation (where there was ‘only the pursued, the pursuing, the busy and the tired’, F Scott Fitzgerald). ^{Footnote 142} Berle and Means were also only born a few years before the English judgement of Salomon v A. Salomon and Co Ltd in 1897, ^{Footnote 143} and lived wholly within the era of general incorporation laws that took the company private during the second part of the 19^th-century. ^{Footnote 144} The Rathenaus, by contrast, would have been among the first business owners in Germany seeking to avail themselves of the limited liability business form (AEG was incorporated in 1882 by Rathenau’s father, Emil Rathenau). Yet, as a family, they (the Rathenaus) also lived and worked much closer to the pre-existing system of state-chartered companies (Emil was born in 1838 and had various ventures before AEG), considered ‘public’ to the extent that they received their licence and accountability from government.

Rathenau’s writing about political economy shows affinity with this earlier historical view of the company, and, perhaps through his experience as a political planner, with the legitimacy of a constructive regulatory principle, which he wanted to adapt in his contemplation of the company for a ‘new society.’ ^{Footnote 145} In pessimistically prophetic paragraphs on the resource impacts of fossil fuels for instance (‘coal, the noblest raw material on our planet’, ‘torn out from the hidden recesses by the men of our generation, and is devoted by them to the ignoble service of thoughtless and wasteful burning’), Rathenau is explicit about the necessity of using legislation to protect the environment and public interest, and to ‘act against the squandering of energy by the employment of imperfect mechanical appliances, by false parsimony, and by the wasteful use of labour power.’ ^{Footnote 146} He observes a constructive role for the state as ‘guardian and administrator’ and also in providing ‘enormous means’ for public investment ‘at the disposal of all productive occupations, whilst making it a condition that those to whom such means are ceded shall’ abide by obligations; he observes that companies ‘pay the normal rate of wages.’ ^{Footnote 147} At the governance level, Rathenau describes the potential for ‘agencies of consultation’ to advise on the formation of corporate objects, and as bodies that could be consulted by directors concerning strategic or controversial decisions. ^{Footnote 148} Indeed, he also promotes such institutions and pluralism in perspective more widely, as a means of balancing the advance of capitalism, identifying scope for ‘the artist, the thinker, the man of learning’, to grow ‘independent of the decrees of a market’ where ‘we see a continuous intermingling.’ ^{Footnote 149}

Beyond the different generational understandings of industrial companies and the social contract that governed business, Rathenau carried wider fragmentations of sense and rebellion from the historical period in which he was writing from the 1890s to 1922, also known as the second industrial revolution or the ‘machine’ age. ^{Footnote 150}

Historians describe the 1890s in Europe, when Rathenau was in his 20s and 30s, as a period of intellectual transformation and rebellion. Social thinkers were gaining a new perspective on ideas of the 18^th century, sensing with some melancholy the ‘demise of an old society’ and of ‘old practices no longer conforming to social realities.’ ^{Footnote 151} A revolt was forming against positivism and mechanistic thinking, particularly in the context of the intellectual achievements of Charles Darwin (On The Origin of Species was published in 1859, The Descent of Man in 1871). ^{Footnote 152} Rathenau wrote in a way that wanted to problematise ‘false objectivities’, associated with mechanistic thinking about science, human fate and the economy. This included a deterministic government of society by markets (government by laissez-faire), where ‘Knowledge is power, we say, and time is money; thus knowledge passes unrecognised and time is wasted joylessly.’ ^{Footnote 153} Rathenau was a contemporary of Max Weber (b. 1864). ^{Footnote 154} He shared the sociologist’s interest in organisation and the fate of humanity under conditions of modernity. Each (in a different way) contested the focus of a positivist enlightenment on material progress over concern with the wider public science of action, organisation and state. ^{Footnote 155} New theories were being centred around consciousness and subjectivity in perspective (Sigmund Freud, b. 1856, was another contemporary). People wanted to understand the circumstances and conditioning that limited freedom (ie, the vision of man as a self-consciously rational being), as well as to look underneath, at consciousness and ‘communication from within.’ ^{Footnote 156}

Such ideas caught Rathenau’s interest, as a means of contemplating the potential for disenchantment after industry and mechanisation (the loss of individuality, dehumanisation). Rathenau was active in the cultural circles of his day, as he wrote and spoke about and studied such themes. ^{Footnote 157} He was an acquaintance of Berlin-resident and expressionist painter, Edvard Munch (b. 1863), and once considered becoming a painter himself (before entering industry through business, engineering, chemicals and power). ^{Footnote 158} Indeed, Rathenau was an early benefactor and supporter of the pioneering rebel of consciousness, Munch: Rathenau bought his first painting from Munch in 1893, the year after Munch’s 1892 Berlin exhibition was dramatically cancelled after one week, due to the controversies – perhaps, the inner turmoils and anxieties of modern life – depicted. ^{Footnote 159} Rathenau was painted by Munch in 1907 [Figure 1]. ^{Footnote 160}

Figure 1. ‘Walter Rathenau’ painted by Edvard Munch (1907), Wikimedia Commons.

The period in which Rathenau lived is interesting, to the present article, where it creates a ‘different dramatic abbreviation’ around the corporation and social contract, making a new archetype more proximate and debatable. ^{Footnote 161} The next subsection will seek more evidence in support of this goal, as it looks at two texts that Rathenau wrote in 1898, under a nom de plume (W. Hartenau) . ^{Footnote 162} The aim is to collect evidence of Rathenau’s intuition about the collective responsibility to regulate commercial outcomes that impact people and planet. Such a project has not always been recognised as central to Rathenau’s work on the corporation. Contemporary corporate law and enterprise scholars tend to focus on governance aspects of the ‘enterprise as such’ and corporate creation, which meet this era’s own expectations and sensibilities (after neoliberalism and systems theory). Social contract matters and collectivism are more readily associated with later scholars in the 1920s and 1930s (including Keynes), as concern about war and economic depression deeply set in. ^{Footnote 163} Yet, Rathenau writes about these themes earlier and, by doing so, experiences a different kind of thought revolution at the end of the 1890s, where he lived among (experiences) ruptures in more than one kind of fatalism (evolution, God, laissez-faire) and, also, opening up in the private sphere.

Rathenau’s 1898 writings address the ‘knowledge controversies’ that the ‘machine age’ was causing, rather than the legal ramifications of corporate personality (limited liablity, directors duties) or economic planning policies. They grasp from within the industrial sphere how a resolution of such controversies was fundamental to the ‘working out’ of the social contract and the private/public distinction. A uniquely cross-disciplinary existence (business man, planner, inventor, philosopher and even worker) made Rathenau highly appreciative of the different subsystems and occupations involved in these transformations; this seemed to increase his intent about balancing collectivist intuition and the emancipation of the individual. ^{Footnote 164} Such observations inform the author’s intention to salvage more from Rathenau’s younger years and earlier texts as a means to recontextualise the polarisations and the economic fatalisms embedded within the corporation and the social contract of the present.

B. One year after Salomon: the 1898 texts

The first 1898 text studied, written by Rathenau (but under his nom de plume ‘W. Hartenau’), is a contribution to the ‘Ignorabimusstreit’ debate in Germany. The debate concerned the ‘hard problem of consciousness’ and ‘knowledge’, a major intellectual concern of the late 19^th century. ^{Footnote 165} Rathenau was responding to physician and physiologist Emil Du Bois-Reymond, who presented a lecture 25 years earlier (in 1872) about Darwin and his theories of evolution and man’s origins (Darwin’s ‘The Descent of Man’ was published for reference in 1871). The lecture heralded the high level of achievement of the natural sciences and of Darwin’s new thinking about ‘man’s evolution’, but also insisted upon the ‘problem of consciousnesses’ as marking a continuing limit for scientific knowledge. ‘We are ‘ignorabimus!’ Du Bois had ended his 1872 lecture, suggesting that we do not and cannot know of consciousness or mind, as God could (the speech was thought to be religiously motivated), and in contrast to the new emerging sciences of nature and matter. ^{Footnote 166}

Du Bois’ proposition generated considerable controversy in the 1870s and 1880s among philosophers and social thinkers, about scientific dogmatism (which distorts and scandalises other forms of knowledge) and the extent to which du Bois’ thesis postulates a ‘mythical’ domain unavailable to knowledge. ^{Footnote 167} At a time 25 years after the lecture, the debate gave Rathenau cause to outline his standpoint in Die Zukunft (The Future) in a new cultural climate (the late 1890s). Rathenau moves, in this writing, to vindicate the link between rational inquiry and the wider enterprise of metaphysics, as ‘the right to think about ultimate values’ and ‘what the individual wants to get out of life.’ ^{Footnote 168} He criticises Du Bois not for stating limits to natural science and discovery (Rathenau agrees that they exist), but for falling into a trap of mechanistic thinking – ie, banishing other forms of thought and knowledge about the human condition and inner self. Rathenau’s contribution seeks, in this context, to expose myth as well as empiricism. He encourages his readers to look beyond (both) scientific and economic forms of fatalism, to the moral, political and cultural aspects of society, which enable (in his view) a creative, inquiring and synthesising treatment of knowledge. ^{Footnote 169} Rathenau’s article protests ‘Ignorabimus!,’ and its entanglement with only fatalistic thinking, with a counter-call to ‘Creabimus!’ – cultivating an art of creativity and of daring to think that passes through human agency and the generations.

At the time that Rathenau wrote the text, he had had first-hand experience of a ‘Creabimus’ in the industrial context, as a fin de siecle pioneer in industrial development of public infrastructure and new technologies of mass  i electrification, power and transport. ^{Footnote 170} Culturally, the friendship with Munch might also have informed (echoed, shared, catalysed, sparked) Rathenau’s thinking. In 1898, Munch was working on paintings for The Frieze of Life Exhibition: Eighteen Pictures from the Modern Life of the Soul. ^{Footnote 171} In the exhibition, Munch sought to bring publicity to the human experience of mechanisation, mathematical thought and technical progress, revealing their inner side but, also, their common aspects (not twisting the visage into the resilience or courage of the individual). ^{Footnote 172}

Corroboration and extra insight into Rathenau’s views on knowledge, experience, spirit, and industrialism are provided by a second 1898-piece, a (weird) story, called Die Resurrection Co. ^{Footnote 173}

In this story, Rathenau uses his family’s experience of modern telecoms and electrification to tell a tall tale about remorseless mechanisation and disenchantment in the machine age. ^{Footnote 174} Writing again as Hartenau, Rathenau uses comedic events and narrative devices to tell the story of a burial yard that contracts a newly listed telecommunications company to network (via phone and bell) the recently dead and buried; the service is installed after someone was buried alive by the over-efficient methods of the modernist burial companies (an incident of scandal). ^{Footnote 175} The story parodies efficiency and mechanisation, as well as the freedom and fictions of the joint stock company in an atmosphere of economic turbulence and speculation. It links the ‘problem’ of corporate organisation and governance to late 19^th-century concerns with consciousness and the (construction of the) visible. Yard occupants presumed to be dead shock administrators, in the story, by using the new comms systems to demand connection to other (dead) members of the network. They communicate defects in drainage, gravel and doors that they need repaired, and make disruptive protests at disliked or disloyal visitors. Dilemmas of corporate responsiveness and reflexivity about the ‘social’ (absurdist, comedic, non-compliant) pressures on the service are reported to a Director, lost for what to do, in a parody of the legal, reputational and financial dynamics that attend efficiency in the machine age.

The story was published one year after the English decision of Salomon v A. Salomon and Co Ltd (1897), which crystalised the concept of limited liability as a core aspect of modern company law. ^{Footnote 176} It is not clear from Rathenau’s writings if he was familiar with the Court decision. However, the themes, combined with Rathenau’s status and position in the business world, fit the possibility that he was commenting on this revolution, ie, on the new abstractions that could be entered into (as investors and speculators, industrialists, directors) in 1898. The author has identified three other points of interest in Rathenau’s 1898 works, which pertain to the current study.

The first point concerns Rathenau’s entwinement with cultural debates about consciousness, and how these apply to corporate actors and management (compared to reflexivity, to use the mechanised adaptation of the facility by systems theorists) at the end of the century. Rathenau was an early (first) proponent of enlightened corporate administration (including co-determination and democratisation). However, social obligation at companies, for Rathenau, was never only the product of constituent interactions (ie, communities or workers, as stakeholders in the company’s purposes). Public interest (and knowledge) is something that forms, for him, beyond the bounds of the company and the market sphere. Such a conviction is readily expressed in the Die Resurrection Co. story, where the enterprise interest comically fails to accommodate the claims and existence of an underground network, which is made no less real by this failure (ie, at translation). Trying to resolve problems at the graveyard involves a mix of trade, investor, religious and political authorities, who each differently respond to the scandal of dead people, communicating and complaining (about each other). Such a view of the social contract makes a transformative point, in the context of neoliberalism, which tends to re-characterise everything as part of the economic domain, ie, as reflective of the economic bargains reached between private parties (including law). Rathenau’s work contests such a reduction of the social contract to the economic domain or to ‘the clash of interests’; ‘clash’ and ‘interest’ are both elusive in the 1898 story, as all of the complainants are still in a state of being dead, whenever their claims are investigated. ^{Footnote 177} Rathenau insists, thus, on the breadth of normative and metaphysical reflection that is necessary for people to live together in a (market) society, including his insistence on what appears to elude (human, living, visible) ‘interest.’ ^{Footnote 178}

The second point concerns Rathenau’s characterisation of political authority and the regulation principle, across the different sources of his (known and obscure) work. In contrast to governance scholars’ concern with ‘law’s effectiveness,’ Rathenau’s conceptions of law and regulation were informed by a new generation of writers and artists working in the late 1890s, worried about socially conservative ideologies, which made egregious use of self-interest and competition as an explanation for the natural reign of the powerful. Rathenau stood against such ideas in his turn towards the consciousness of society, but also in his interest in institutions and common protections, which related to the solidaristic aspects of human life – ie, to institutions and capabilities which individuals (in isolation) ‘did not create.’ ^{Footnote 179}

Rathenau observes, in this common aspect, a constructivist assertion of public powers; ‘the very air which he breathes is not free; it is protected and purified [by common institutions] from exhalations and vapours, from disease germs and poisons.’ ^{Footnote 180} Critical to this regulatory modus, in Rathenau, is that the advance of law is not evocative of state superiority (over enterprise) ^{Footnote 181} or myth (ignorant of law’s ineffectiveness). It is, instead, aimed at the beneficial attenuation of competition and market ordering in the general interest. ^{Footnote 182} ‘No mechanical management of the property of the world. .. can bring about a moral or just regulation of the property system,’ he says; ‘the community must ask itself what claims it is entitled to put forward in the name of a higher law.’ ^{Footnote 183} Rathenau in this context locates the problem of law’s effectiveness not as concerning perturbations to the ‘functional autonomy’ of a sub-system (economy, law, etc), but to its opposite – ie, shrinking back from the negotiations, duties and compromises that inform the stability of common existence. ‘In days to come’ he says, ‘people will find it difficult to understand. .. that any individual was justified in any practice however absurd and however harmful to the community, provided he always remained able to pay his way’ – an understanding compromised in the present, for instance, after P&O. ^{Footnote 184} Rathenau would observe closely in later post-war writings the difficulties that economic fatalism, released from this constitutional work, could cause in terms of neglecting regulatory oversight of the outcome of consumptive practices (for ‘private gratification’), including his concerns about unmet waste, pollution and the unequal allocation of scarce resources. ^{Footnote 185}

This leads to the article’s third and perhaps more subtle interest in ‘W. Hartenau’ and ‘W. Rathenau,’ as two doppelgängers that develop formative concepts for industrial modernism and corporate law during a crisis in modern consciousness. ^{Footnote 186} Rathenau uses the events of Die Resurrection Co. (and as cultural critic Louis Kaplan says of the story) to ‘mock the mystery of the whole’ at a time of rising disenchantment and, also, anti-semitism. ^{Footnote 187} He counters a seeming revival of soul/geist, and of religion in the context of accelerating mechanisation, with evidence of how ‘resurrection’ and new communications media might operate in sync, transfiguring death and knowledge through the ‘alchemical and occult’ of the machine. ^{Footnote 188} Communicative technologies are the symbols of higher tolerance and flawed progress, as the underground residents refuse to moderate demands (they each fully enjoy non-compliance; the reader fully recognises them as the kind of people that we all know or even are in real life). ^{Footnote 189} But, the spirits also unsettle ‘mechanisation’ and the immediacy of the presence that guarantees the ‘truth’ of the system (ie, of calculation, of myth and prejudice). With this, Rathenau uses subterranean or unworldly demands to push the ‘clash of interests’ towards something else – ie, towards understanding, made possible by the technological revolutions of the second industrial revolution (which courses through complexity at rapid speed). This understanding is though, also, always sceptical of existing progress (efficiency buries the not dead), and, as such, proposes eternal discovery and justification processes, as the means to accommodating business, about whether the protestors are living or dead, of the short circuits and earth currents that the telephonic wires carry, above and below ground, concerning relations, business and social affairs, etc.

Such discoveries about disenchantment and technology had an influence on Rathenau in his engagement with universal values, and the sentiments that this gave him about the chances (flawed progress) of interventionism and ‘Creabimus.’ ^{Footnote 190} Rathenau’s revelation that some of the critical experience of companies lies among underground spirits relates to Part 1’s findings, concerning the losses involved in fatalistic approaches to organisation and the need for scepticism about the whole (integration). Rathenau uses expressions about strange and complicated human needs (‘our deepest longings’, ‘what we need to know most’), in the 1898 story, not to pressure or embarass the burial or bell companies (scandalisation), but to insist on the need for always redoubling exchange in the ethical licence of technology and profit (‘only after prolonged tensions can they arrive at judgements’). ^{Footnote 191} The story, as such, replaces pessimism about normative and political commonality (the basis of laissez faire, the law’s problems of effectiveness) with a revolution in law and government’s constructivist efforts. ^{Footnote 192} The law is not purposed by its effectiveness in this exchange – disenchantment and failure are always present, even unending (flawed progress) – but by its material energy, the demand for justification, and equalising power.

So, the yard administrator is cynical and exhausted by the end of the story, as the burial company expands to new markets, generating waves of speculation in the service of needs, themselves, contestable. However, the victory for Rathenau is not in upping the melodrama (ie, developing social pressure, driving scandal). It is rather in improving the social institution of corporate autonomy, after law, metaphysics and commonalities. The aim is to render more visible the consequences of industrialism and to collectivise experience, so that we might learn as much as possible about what such terms as (corporate) success, efficiency and sustainability really mean.

C. Rathenau and Keynes: Creabimus! and the agenda of government

Rathenau’s ideas about the social contract were abstract, concerning the need for individualist economics to maintain a relation with ‘higher law’ (normative expectation), but also specific, in their focus on the framework within which enterprise takes place (corporate, tax, employment law) and accountability (legislating to counter pollution, over-consumption and waste). As a modern industrialist, Rathenau was naturally familiar with property and competition-based incentives to learn about new needs, and to be inventive (he himself held patents). However, his engagement with the arts made him also insistent about the tendency of ‘Creabimus’ to reach across the public and private spheres. He was sceptical in fact about the (laissez-faire) argument that interference was methodologically ineffective or inexpedient, insisting on the constant and legitimate public power to ‘recognise what is amiss.’ ^{Footnote 193} Rathenau, in this context, echoes the positive sentiments and approach of Keynes, about ‘the human eye’ having potential for ‘the demonstration of design, miraculously contriving all things for the best.’ ^{Footnote 194} Where problems with industrial development and regulatory effectiveness emerge, the intelligent instinct for Keynes and Rathenau, was not pessimism and collectivist retreat (of government), but to ‘furnish us with better knowledge than we have now for taking the next step.’ ^{Footnote 195}

Rathenau’s work, in this context, is also interesting because it lends to the reader a deeper understanding of what Keynes’ constructive approach to government and political-economy developed out of, and aimed at. The call to ‘Ignorabimus’ (‘we will forever be ignorant’) that Rathenau contested, in 1898, was what Keynes also found problematic about the ideology and thought-pathways of laissez-faire. Keynes’ 1926 essay describes the draw of laissez faire to political philosophers and economists, who blended individualism and (duties of) equality (‘bringing I and others to a parity’) to insist on a ‘divine harmony’ between private and public good. ^{Footnote 196} Keynes was critical of the imagined reconciliation: ‘The beauty and the simplicity of such a theory are so great,’ he said, ‘that it is easy to forget that it follows not from the actual facts.’ ^{Footnote 197} Principally, however, Keynes (in this 1926 essay) really regretted the pessimism that the new economic dogma embodied, whereby limits on government and legislative interventionism were enforced ‘sadly rather than triumphantly; not as admirers of the social order at present resulting from “natural liberty”, but as convinced that it is at least preferable to any artificial order that government might be able to substitute for it’ (citing English economist, Henry Sidgwick, emphasis added). ^{Footnote 198}

Notably, the works of the two men show few signs of associating creativity with the absence of bureaucracy (‘red tape’), perhaps because they worked closely with artists, authors, and philosophers, who worked cooperatively, loved to make things (through craft), and believed in human consciousness, non-conformity, adaptability, skill and design (for their own sake). ^{Footnote 199} Keynes specifically talked about government as concerning ‘coordinated acts of intelligent judgement’, and as operating in the domain of the ‘technically social’, under the ‘Agenda’ (as he puts it) of government. ^{Footnote 200} He draws the terms from Jeremy Bentham’s Manual of Political Economy in 1843, as naming ‘functions which fall outside the sphere of the individual, to those decisions which are made by no one if the State does not make them.. . The important thing for the government is not to do things which individuals are already doing, and to do them a little better or a little worse; but to do those things which at present are not done at all’ (emphasis all added). ^{Footnote 201} Keynes lists the control of currency and credit, savings and investment, and immigration policy as falling into the ‘Agenda’ and ‘technically social,’ in 1926, as matters that should not ‘be left entirely to the chances of private judgement and private profits, as they are at present.’ ^{Footnote 202} However, he also makes it clear that the important thing is having an agenda (rather than a non-agenda) for government and collective interventions, and that he means the category (the ‘Agenda’ of government) to be open, and adaptable to (expressive of) the general needs of the present. ^{Footnote 203}

Importantly, the spirit of creation or ‘Creabimus!’ that Rathenau and Keynes imagined at law and government did not scandalise the company (categorically). They sought to inform and condition (regulate) commercial behaviour at scale, but, also, to nurture the company’s own creative powers and collectivism. ^{Footnote 204}

Rathenau talked about instituting the company as society’s organ for ‘adventuring into the unknown’ and ‘pushing back the bounds of what is known.’ ^{Footnote 205} Detached ‘from the individual life’, the modern company is a ‘monument of an outwardly-working existence’ and ‘analogy with the idea creation of a work of art.’ ^{Footnote 206} Degeneracy of the creative instinct, in this view, concerns not state bureaucracy or competitive restraints (through regulation or otherwise), but the transformation of companies into a ‘support for functionless shareholders’ and its ‘cultivation of privileged castes.’ ^{Footnote 207} Rathenau’s emphasis was not, as such, on the superiority of government (again), but about instituting a balance, ie, looking at the institutional proportion of obligations needed to ensure that public and normative expectation is understood, coordinated, and met at companies (rather than assumed to mechanically coordinate through preferences). This fits together with the historical view of companies noted here. It also collides with the view of industrial modernism that Rathenau held as a planner of large-scale public infrastructure, which would not have been possible without corporations or ‘coordinated acts of intelligent judgement’, not to mention public investment. This is not to say that such partnership is, by itself, obvious or virtuous. Contrary examples persist powerfully in the historical imagination of colonialism, genocide and slavery organised precisely, thus. ^{Footnote 208} It is, rather, to say that the measure of the ‘social contract with business’ is not the blind choice between interventionism or steering, planning or catallaxy, but about ‘recognising what is amiss’ (knowing more about that over which we need power) and developing an ‘Agenda’ that fits the contemporary force of the social question (ie, the ruins, the masses, the full potential of individuals, humans and non-humans).

As an end to Part 2, a corroborating intuition and perspective is presented by William Roy in his intricate monograph (1997) on US corporate-government cooperation during the early to mid-19th century, the era of construction for mass transport infrastructure (rail, canal, road). ^{Footnote 209} Governments, in the beginning of this era (the 1800s to 1830s), observes Roy, chartered ‘companies to do things rational business men would not do because they were too risky, too expensive, too unprofitable, or too public, that is to perform tasks that would not have gotten done if left to the efficient operation of markets.’ ^{Footnote 210} Significant use was made of state power to ‘define what the corporation was and the particular rights, entitlements and responsibilities that owners, managers, workers, consumers and citizens could legally exercise,’ as well as for capitalising infrastructure, including through facilitating the private development of public finance. ^{Footnote 211} However, as the decades wore on, significant pressures around the projects, including rising public debt, corruption, impactfulness, and whether the boards were meeting the demands of technology transformations (ie, the passing of the canal era), fed into growing disputes about the status of corporations. The involvement of government attracted particular controversy, as new ideas about the distinction of the political and economic sphere started to reshape the definition of state powers (ie, the terms of the social contract), and newfound utilitarian concerns around ‘efficiency’ and ‘maximising production’ were able to establish themselves (as part of the ideas genesis for ‘laissez faire’). Roy’s historical analysis distinguishes this utility logic from the responsibility and anti-privilege (or public) ethic that preceded it, and occupied some protestors, before the general incorporation laws started to take shape (from 1844), as the dominant response to the controversies arising.

Roy specifically observes the non-necessity of privatising the company as a response to the political pressures, seeing scope instead for developing the responsibility ethic against corporate corruption (ie, concerning the need for better ‘public’ accountability): ‘Considering all the rights, entitlements, and responsibilities of property,’ he says, ‘it is curious that states [in the general incorporation laws] defined the members as owners. States could have created commissions with citizens who served as directors. Such organisations could have raised capital through financial instruments like bonds or through the powers of taxation, like municipal corporations. ^{Footnote 212} Roy observes, too, the enduring public benefits and democratisation, which accompanied corporate-government cooperation in the 1800s, despite the pessimism about government involvement and ineffectiveness, and where, debt and calamity from the market perspective aside, the collaborations of the era sought to fulfil ‘widespread democratic demand for equal access’ (emphasis added) in public infrastructure like canal and the rail. It produced, in other words, ‘transportation for a generation of merchants and farmers in a relatively egalitarian fashion’. ^{Footnote 213}

In the sustainability era, such prospects are powerfully redoubled. The democratic benefits and collectivist energies embodied within 19th century mass transport systems and public infrastructure arguably did nothing to counter (or degenerate) economic development over time, but, in fact, carried within them a level of foresight inaccessible to many capitalists and financiers of the age, as a means to long-term collective creation. ^{Footnote 214} Roy’s follow-on point, that ‘efficiency theory is problematic not only because it neglects the dynamics of power, but also because it attends only to short-term change’, reflects the writer’s Part 1 findings, about structural ignorance (built into mechanistic thinking) and the unbalanced command or priority of the ‘enterprise interest’. ^{Footnote 215} It raises the issue of the inventions and/or accountability facilities that the world might (now) be missing out on, due to the privity of contracts and capital interests, when ‘instead of a responsibility ethic, which legitimised corporations on the basis of what they did for the public and criticised them when they served private interests, an efficiency ethic legitimises corporations for how effectively they could serve private interests, whilst criticising public corporations for how ineffectively they serve the public.’ ^{Footnote 216}