Research Handbooks in Law and Economics series
Edited by Claire A. Hill and Brett H. McDonnell
Chapter 7: The Role of the Public Interest in Corporate Law
Ian B. Lee The concept of the ‘public interest’ has little, if any, direct doctrinal presence in corporate law and, for the majority of corporate law scholars, this is as it should be. In addition, the concept of the public interest does not play a prominent role in most normative corporate law scholarship. Although few scholars would deny that corporate law should ultimately serve the public interest (that it should maximize social welfare, in one manner of expressing this idea), it is largely taken for granted that the way in which corporate law advances the public interest is by facilitating transactions in which individuals pursue their private interest. As a result, when evaluating actual or proposed corporate law provisions, analysts do not typically return to the basic question whether the provision is in the public interest; rather, the question asked is whether the provision serves the interests of the participants in corporations, especially shareholders, in particular by minimizing their costs of transacting with one another. A challenge to the dominant view comes from a ‘progressive’ school of thought (Mitchell 1995) according to which the public interest should play a greater role within corporate law doctrine and corporate law should constrain, in the name of the public interest, the pursuit by corporate actors of their private interest. Progressive policy prescriptions include, depending on the author, reforms to the mandate and manner of selection of the board of directors and the facilitation of socially-motivated shareholder engagement. In this chapter, I shall describe...
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