My purpose here is to present a written version of my remarks at that conference. The paper will be posted in a short while.
The Drama of Corporate Law: Between Citizen and State From the South Sea Bubble to Financial Crisis of 2008
Larry Catá Backer
But I have been given a very specific task by Professor Kuykendall—was to focus on the narrative elements in David S. (Bert) Westbrook’s recent and excellent contribution, “Between Citizen and State: An Introduction to the Corporation” (Boulder, CO: Paradigm Press, 2007). Westbrook seeks to elegantly restate the foundational narrative of the American corporation, describing it the way a Vogue reporter might have sought to describe the latest couture collection from the House of Chanel. It is this narrative that provided me with the doorway to analysis. For though the narrative of the archetypical corporation is well understood within the American academy, the position of the narrator to this narrative is usually either taken for granted or hidden behind what is offered as the universality of the narrative proffered.
I should emphasize here, that in a manner similar to a now ancient speaker, I have come here to praise Westbrook, not to bury him! This assignment, however, provided me an opportunity to step outside the usual referent within a discourse—I come at this from the perspective of an insider outside. The focus of the paper is thus necessarily on the storyteller, the narrator, rather than the narration—the later having been well exposed by the other contributors to this conference. Though it is specifically an engagement with Westbrook as narrator of the universal-American corporate enterprise, it is also an inquiry into the role of American academics—those of us in this room, particularly—and our role in the production of narrative offered as something to be taken as the sum of the reality of the corporation. Thus, Professor Kuykendall Mae has offered me an opportunity to look hard at all of us, and our place within the enterprise of producing what we offer as a picture of reality, to study the nature of the relationship between the narrator and the narration—both subject and object of the production of knowledge. I am not sure I will paint us in the most pretty light, but it may be a truer light than that we tend to like to paint for ourselves.
To arrive at the narrator, we start with the mechanics of the production of knowledge. Frank Partnoy’s luncheon address, on the writing of chapter 9 of his book, The Match King, exposes the conscious management of story, pointed us in the appropriate analytical direction.
The production and control of knowledge is central to the organization of society. That production and organization can be most usefully divided into its four core aspects:
A. Substantive: what is counted (privileged) as knowledge.
B. Organizational (representational): how it is put together to produce a description or construction of the reality in which what is counted as knowledge plays a role.
C. Communicative: how is it conveyed to those expected to absorb (internalize) knowledge.
D. Managerial: especially important in this case of managerialism, how this is internalized knowledge is made manifest in behavior.
Knowledge production tends to move toward orthodoxy. Even the most unorthodox and anarchistic universe of knowledge moves toward a unified vision of the reality under which it operates. It also sharpens its definition against the opposition to orthodoxy. Thus the usual binaries that populate social science theory—order and anarchy, management and natural orders, rules conflict and free-for-alls, priesthoods and independent actors. And so on. Law is a critical site for the management and control of knowledge. This is true in two aspects of law—as object (the bundle of knowledge itself), and as subject (the structuring of knowledge). Control of the production of knowledge around law serves as a critical component for the organization of society, and especially the ordering of its system of reality. This is what we understand as knowledge-reality, the foundational framework that helps us organize, understand and communicate reality.
It is in this context that it is possible to situate the narrator. Power over the management of the knowledge-reality on which law is founded (and which founds law) is a central aspect of social control. But it is also the central element in the allocation of social power, prestige, and the ordering of human hierarchies. And thus one moves from knowledge-reality (at the heart of narrative) to the ordering element of the narrator—power-knowledge. And thus we come to an understanding of ourselves—our function within the academy. Westbrook provides am elegant example of that function—the manager of knowledge-reality to effect a certain social control through the control of the reality framework within which the world is understood to work.
In some countries, of course, the power-knowledge construct is reified through other frameworks. Power-knowledge, in effect, privileges other classes of narrator for the task of ordering reality. In China, for example, power-knowledge is reified through politics. Were this conference held within the Chinese narrative stream, the discourse of this conference might be occurring at the Central Part School [Party School of the Central Committee of the Communist Party of China (中共中央党校)] in Beijing. In Rome, power-knowledge might be reified through theological systems. Were this conference held at the Vatican, the discourse, now grounded in a distinct representational universe, would be occurring in a wholly different venue. And yet again, were this conference held within the confines of extra legal collectives—the mafia, the Yakuza or similar organizations—the discourse would proceed from yet another set of substantive knowledge-reality. And so on.
But we are in the United States, and among legal academics. Within that extraordinarily parochial universe, the ordering of knowledge-reality, and the organization of its internalization and reification through law, take on its own unique cast—its signature power-knowledge. Within that universe exists another, a sub-universe that focuses on the knowledge ordering of economic activity. And within that sub-universe, law plays a key role in seeking to expound and protect an orthodoxy that both supports and advances the fundamental knowledge ordering framework of the communal order that the narrator serves (if he means to be rewarded).
Lawyers, judges, and academics play a key role in the substantive, organizational (representational), communicative and managerial ordering of the corporate aspects of power-knowledge. That is what is nicely reflected in Westbrook’s narrative—the well-organized story of the corporate reality within the legal universe of the United States. Of course, these actors are not the only actors within this narrative universe. Larry Ripstein earlier spoke to the cultural production of power-knowledge of capitalists among those producing movies. Benedict XVI has sought to move the Roman Catholic Church into the forefront of corporate power-knowledge. But, within their own narrow space, bench, bar—and especially academics—assume an especially privileged place, through the control of knowledge, to elaborate, naturalize and protect the knowledge order on which their power-status rests.
Narrative, in this context, provides a vessel: (1) for the packaging of bundles of privileged and organized knowledge, (2) its internalization among those expected to order their lives in accordance therewith, (3) and its conveyance in a form that is easy to convey. Narrative effectively embodies the four critical aspects of knowledge production. It is a catechism suitable for the objects of the production of knowledge for both the legal laity, and law’s acolytes. For the legal laity, narrative serves to discipline behavior, conceptualizations of law and governance, and their role as voters upholding systems grounded in this power-knowledge. Narrative, in this sense, serves as means of controlling the electorate by controlling the framework of the reality within which they may serve their purpose within the democratic order. For acolytes—law students, members of the ancillary servers of law (courts, police and the like), it serves as the basis for socialization. Especially among those of the privileged acolyte class charged with the maintenance of power-knowledge—law faculty, for example, those among us here—narrative serves as the measure of our fidelity to the power-knowledge that sustains our privilege and the functioning of the social (legal) order. It serves as the measure of deviance as well, and the basis for disciplining those of us who deviate overmuch from core norms, whether by challenging the narrative center, or by ignoring its privileged place. That discipline either moves the dissenter farther from the center of power or from a judgment among his peers that he is engaging with knowledge. But conformity is as important for the protection of the status and privilege of those charged with its development and conveyance.
It is in this sense that I think one can understand the conference thematic notion that “narratives both reflect and influence society, from the broadest popular cultural viewpoints down to the private communications between individuals.” (Business Law and Narrative Symposium, About the Symposium, September 11, 2009). Narrative is as much a reflection of the narrator, and his position within the social apparatus dedicated to the production of knowledge-reality, as it is about the knowledge-reality itself. As Nietzsche suggested, just as a priestly orthodoxy casts a strong light on the construction of priestly power, so does the construction of the corporate narrative shed a light on the intimate connection between narrative and narrator, between knowledge-reality (the constructed universe of facts producing a plausible understanding of the world) and power-knowledge (the control of the orthodoxy of knowledge-reality).
It follows that narrative becomes a more important site where conflicts over the context or control of power-knowledge arise. In the usual case, what passes for challenge is little more than the appearance of disputes among the narrator class over the details of the narrative—should labor be represented on boards of directors, should shareholders have a greater role in the election of directors, what precisely is the shape of fiduciary duty in any one of an infinite number of minutely distinct situations, etc. These disputes help to center the foundational assumptions of a particular approach to knowledge and its relation to the social hierarchy. Such disputes are always welcome as a site in which the authority of the narrator can be demonstrated and exercised, and through which the ritual of knowledge production can be undertaken. It is in the constant repetition of the narrative, of the repetition of ritual, that both reinforces the social arrangements inherent in power-knowledge and provides a principal function of narrative, at least in its disciplinary role.
And so it is today. The American academic priesthood is being deployed in defense of the power-knowledge framework of economic organizations. Still, in the face of challenges to the narrative orthodoxy of the corporation—from universalist corporate counter-narratives, to the internal failures of the systems at the foundations of the core narrative, and the efforts of other communities of narrators to take a privileged role as the framers of corporate narrative—the narrator is called on to protect both his narrative and position. That activity requires the reinforcement of the naturalness of the consequences that flow from a tightly controlled narrative and its underlying assumptions, privileging and vectors of knowledge. Competing narratives, and the power-knowledge hierarchies they represent pose the greatest threat to the status quo of any narrative system grounded in power-knowledge. These narratives suggest the possibility of realities outside of the totalizing narrative guarded by the acolytes of a dominant narrative.
Sometimes, the response to threats to a narrative apparatus is to meet the challenge head on. That is certainly ought to be the case where the threat to the dominant narrative comes in the form of an attack on its position as the singular universal framework for containing the reality of its subject. The narrative of the corporation requires a singular vision of its nature. Distinct species of corporate “animals” are hard to square within the policy and legal framework of a polity. But that is precisely the difficulty that alternative universal discourses of the corporate nature would create. And consequently, their existence poses a threat to the dominant power-knowledge narrative. The principal alternative narratives include those that are grounded in the idea that the corporate nature is beyond the control of states, though states may, within the reach of their power, provide these entities certain rights and recognize at least a set of variants on that form. Others include those that consider corporations as a species of collective body, like states; and like states, such bodies are subject to a set of overarching universal framing norms that include many of the obligations (like respecting human rights) that are applicable to states and similarly sources. Others see states and economic collectives as related species, but insist that both be grounded in the organizational framework derived form universal religious principles.
In the case of the American power-knowledge apparatus, the response has been to shut those narratives out. For that purpose, a narrative of business law continues to prove irresistible. It is even more so in a contemporary regulatory context in which the separation between politics and economics, law and governance, political and economic actors becomes fuzzier. Within this dynamic context, spinning a narrative of economic collectives can serve as an important source of the constitution of social institutions, like corporations. And thus we come to David S. (Bert) Westbrook’s recent contribution to this endeavor, “Between Citizen and State: An Introduction to the Corporation (Boulder, CO: Paradigm Press, 2007). It suggests the power inherent in exercises in the consolidation, simplification and refinement of the dominant narrative, as well as its important in the preservation of power-knowledge. More important still, the erection of knowledge-reality barriers that suggest that nothing legitimate exists beyond the boundaries described by the narrative.
Westbrook’s narrative is a particularly powerful example of this, perhaps necessary, approach. Westbrook seeks to situate the corporation between property and institution, and then again between social and political institutions inside the framework of American law and policy. That American framework, for Westbrook, is fundamentally ambiguous, melding elements suggesting corporations as autonomous social organs that have unsettled relationships with both individuals who have legally recognized stakes in them and with the organs of the political state which simultaneously assert legally recognized regulatory stakes. Westbrook views this as a “weakness of our political thought” producing a ”deeply traditional” academic corporate law by an essentially conforming and conservative community of legal academics seeking to theorize away this dramatic ambiguity. (Id., 163).
This review essay examines this deeply conservative and tightly focused narrative world within the larger narrative of unconventional corporate entities and markets—the Mafia, the Yakuza and the South Sea Bubble scandal of the early 18th century. With this intensification, Westbrook’s call for a “dramatic understanding of law” (Id., 59) in the American narrative context becomes a promising analytic method that reveals not so much the weakness of political thought as a play within a play without a script. Westbrook’s narrative offers elaborate tales of domestication and privatization of that portion of the economic sector that is capable of governance, of property that is animated, like the Frankenstein creature (id., at 40), and of entities that are better understood as beyond citizen and state—a small section of the thousand and one nights of the corporation.
The review takes the form of a journey through the narrative. That journey is meant to highlight both the critical form of the orthodox narrative of the corporation and its very definite border. Those borders will be exposed not from the inside, but from the outside, looking at the counter or meta-narrative of other corporations or economic enterprises. I have focused on two, and one description of pre modern markets. The first are feral corporations that operate, of necessity, beyond the law of any state. These include the Yakuza and the Mafia. The second is the transnational corporation that functions within many states. This suggests a transnational narrative. The unregulated market narrative—the feral market, is nicely expressed in the West through an old but now very modern saga—the South Sea Bubble of the 1720s. These suggest the key elements of the American master narrative that makes it both powerful and distinct—its focus on the domestication of the corporate form within a power hierarchy in which the state exists above the corporate collective, and that hierarchy is expressed through a totalizing legal framework.
The paper briefly works through the masterful rendition of the American master narrative of Westbrook’s “Introduction” using his corporation-as-drama framework. In more leisurely fashion in the paper, it explores the nature and extent of American corporate domestication in the context of corporate formation, the property aspects of corporate ownership, fiduciary duty, and the relationship with the state. From that the consequences are explored—the “natural” scope of regulation, and the converse, the scope of dependence on the state. It suggests that in the feral corporation and the transnational corporation, viable and powerful narratives are also possible. They suggest alternatives to corporate understanding. But these differences produce substantially different consequences for regulation and the relationship of the entity to the state. And those consequences have equally important consequences for the narrator class. The American narrative remains powerful, in part, because the American narrators wish to remain powerful as well. A reconstitution of the corporate narrative would reconstitute power relationships among those responsible for and rewarded by adherence to, those narratives. Power, status and relationship to governance makes the American academic both conservative and necessarily closely tied to the expressive forces of corporate narrative—the legislature, courts and working lawyers. But the same would be the same in the relationship among other narratives and their narrator classes.
There is genius here—and narrative cohesion. There is narrative at the core of the discipline of corporate regulation. There is drama, as Westbrook describes, among the actors in the play in which it substantive, representational, communicative and managerial elements are brought into stark relief. But it is the story of a domesticated entity within its well defined kennel. And it will not look beyond those kennel walls. But I have suggested that this American narrative is a play within a play. Its actors and the stage on which it occurs are actually part of a larger set, in which the American narrative has an important but by no means sole role. Indeed, within the larger drama, the American corporation plays a wholly different role. That role is beyond the scope of these remarks.
In the end, Westbrook does what he sets out to do—like the bards of pre literate ages he has “song aloud”, and by so singing preserved and deepened, a cultural-legal connection between the reality of the corporation of that narrative, and the policy and legal framework within which American corporations function. This functions well in its disciplinary role—easily socializing acolytes, and particularly law students and educated lay people, to a basic understanding of corporate orthodoxy. In so doing, he adds a layer of preservation to the narrative order it describes and the social order built up around it, to protect that reality, and its own status and privileges in that role. He acknowledges, if subtly, the difficulties and limits of that vision. But his task is not to upend the status quo but to protect it—and us as privileged narrators. This is, as he also acknowledges both a conservative exercise and one that must reconcile the dual role of the American corporate enterprise as both property and institution. But this is a problem faced by all narrative. Each serves a similar function to that well expressed by Westbrook in the American context. It appears that Fidel Castro was right after all—ideas matter. More importantly, the construction of stories that serve to transmit those ideas in concrete form, and that serve to provide a grounding for policy, and law, remains a critical function of academics and others seeking to control the foundations of social and cultural assumptions about what is “right” and “natural”. For all that, his Frankenstein monster (Id., at 40) of a construct is animated indeed!