Andrew S. Gold


There is no necessary connection between academics’ theories of the firm and judicial theories of the firm. Economists and legal scholars may adopt one theory of the firm, and courts may adopt another. We might even predict this result. Judges are not economists, and as increasingly sophisticated theories of the firm emerge in the academic literature, judges are not well-positioned to keep pace with the evolving accounts. Indeed, judges may reasonably choose to adopt no theory at all. Given these premises, this Essay explores the relationship between academically developed theories of the firm and corporate legal doctrine. Legal scholars who focus on theories of the firm often develop an interpretation of corporate law that endorses a particular legal theory of the firm. On these accounts, courts are thought to have adopted a commentator’s preferred theory (consciously or otherwise), with legal doctrine seen as a means of facilitating the formation and governance of firms with the desired features. There is another interpretation of corporate law worth considering, however. This Essay hypothesizes that much of corporate legal doctrine can be explained differently—not as the legal adoption of a particular theory of the firm, but rather as a response to judicial uncertainty regarding the correct theory of the firm. Theories of the firm still matter on this account— they motivate judicial reasoning—but they are not specifically adopted by corporate law.