Generalized legal dumping, monstrous property rights: largely escaping the law, companies have been able to divert it to their own advantage, explains the lawyer J.-P. Robé, who advocates for the legal regulation of these new forms of private power. But does globalization allow it?
If the company has no legal existence, it has been able to divert the rights of individuals to its own advantage and it constitutes in itself an autonomous legal system. These three theses form the heart of a collection of articles in French and English by the lawyer and professor at the School of Law of Science Po Jean-Philippe Robé.
Despite the repetitions inherent in any collection of articles, this book is a major contribution to the understanding of the company, its legal dimensions and its relationship with the State. It usefully extends an important work published in 1999, from which it takes large extracts.
Legal Ghost
While the company has become a central institution in our societies, it has no legal substance, explains J.-P. Robé. What exists for lawyers is a series of contracts that allow for the provision of premises, the hiring of employees, the renting or purchase of machines, the borrowing of money, the selling of products to distributors, etc. The “company” has a legal existence, but this is not the case for the “enterprise”. The distinction is important.
The State, of course, is not unaware of this new institution, and many rights have emerged in reaction to the company, either to allow it to function properly (commercial company law, distribution law, stock market law, etc.), or to limit its damage (labor law, consumer law, environmental law, etc.). In a sense, J.-P. Robé strongly maintains, the bureaucratization of the state is a response to the bureaucratization of business.
While legislators fought for a while to try to legally regulate commercial companies, the battle quickly saw states with little fiscal scrutiny (Delaware or New Jersey in the United States, Luxembourg or Ireland in Europe, and tax havens all over the world) serve as home ports for multinationals. Large companies take full advantage of this generalized legal dumping to choose their legal environment; and States find themselves lined up on a supermarket shelf, forced to pursue liberal policies under penalty of being shunned, anxiously waiting to be chosen by companies primarily concerned with profit margins. States are thus bending over backwards to allow companies to develop on their territory and internationally – a “real ‘privatization’ of the State” (p. 117), denounces J.-P. Robé, which takes the form of subsidies, aid for the establishment of factories, preferential financing and presidential trips for commercial purposes under the aegis of diplomatic services converted into VRP international.
As the author explains, the European Union and the World Trade Organization were created largely to harmonize the rules that apply to transnational companies. However, today, States appear to be much more constrained by law than multinationals.
A misuse of the law
J.-P. Robé forcefully shows that companies divert to their own ends the rights that should guarantee the autonomy of the individual vis-à-vis the State. To put it crudely, the legal system inherited from the Enlightenment, which was initially supposed to force the State to serve the individual, today forces it to serve the company. By defining rights and freedoms that the State cannot touch (property rights, freedom of movement, freedom of trade, freedom to contract, etc.), such a system drastically limits its intervention.
In France, while the Le Chapelier law was supposed to dissolve the orders oppressing individuals, the 19the century saw the recreation of orders of a new type. As J.-P. Robé observes, if associations (including unions) are “prohibited by the law resulting from the Revolution”, 41 articles of the Civil Code (i.e. an entire article) deal with the partnership contract (p. 145). Such a contract is, fundamentally, only an agreement of wills between partners. But it has the particularity of conferring “moral personality” on the company in question, which becomes a new subject of law, independent and autonomous.
In Europe and North America, the privilege of legal personality was long granted only to public utility companies, such as canal or railway companies. In the middle of the 19th century,e century, with the help of industrialization and the internationalization of companies, legal systems were put into competition and corporate law was gradually liberalized. This is how companies were granted the same legal advantages as individuals, but on a disproportionate scale. Breaking with the original dispersion of property rights (redistributed by deaths, business life, bankruptcies, etc.), this new legal order allowed the commercial company to accumulate colossal property rights and to exercise extensive powers over the entire social body. Individual rights, enacted to enable them to be free and autonomous, have been largely turned against them by corporations and to their benefit.The right to property, which was originally intended to ensure the freedom of citizens, has become a means of subjugating them.
Corporate social irresponsibility
J.-P. Robé develops a pluralist conception of legal ordering. According to this perspective, the State does not have a monopoly on law and civil society can generate autonomous legal systems, particularly in the form of companies. For about thirty years, these rights governing companies internally have been interpreted largely for the benefit of their shareholders.
J.-P. Robé has very harsh words against agency theorywhich assumes that shareholders own the company and can dispose of it as they wish. According to this biased view, which is now widely dominant, companies serve the interests of shareholders and it is up to the State to take care of other interests affected by their actions. Companies are evaluated on the basis of their financial profits, not their social utility, and too bad if these profits come at the cost of disastrous externalities for employees, the public and the environment. While property rights and contractual freedom are normally limited by the principle of personal responsibility (citizens do what they want with their property, but they are fully responsible for their actions), shareholders intend to enjoy the privileges of ownership without being responsible for the damage caused by the company.
To say that shareholders own the company is as absurd as saying that taxpayers own the state. In reality, says J.-P. Robé,
the company not being an object of law, it is not likely to be the property of anyone.
Shareholders do not own the assets of the company; they “only own the actionswhich is very different” (p. 109, my emphasis), because it gives them no say in the conduct of the company. And if they wish to behave as owners of the assets and influence the way in which these assets are used, then their responsibility can no longer be limited to their financial contribution.
In order to impose legal responsibility for the decisions of shareholders and managers, J.-P. Robé advocates “the constitutionalization of private power”; in other words, because “real law is, for the most part, a private production” (p. 388), it must be brought back into the fold of public legislators – “as we have succeeded in making the State a State by law » (p. 395). An immense task, singularly complicated by globalization, which we hope to see detailed in the author’s future writings.
This victory of shareholders does not mean, however, that companies are completely subject to financial logic. Discussing the company as an autonomous legal order, J.-P. Robé points out that employees are often the first victims of the financialization of companies – the case of Airbus, which plans to eliminate more than 1,000 jobs while the company is profitable and its order books are “full to bursting”, is edifying in this regard. J.-P. Robé could have added that, faced with the profit logic of shareholders and creditors, employees and managers have long defended a logic of production and service. And until the end of the 1970s, they generally succeeded in making their views prevail. Henry Ford himself admitted: “we believed that companies existed for profit. That is false. Companies exist to provide service”. If legislators have a duty to remind shareholders of this primary truth, it is also the duty of employees.