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Abstract

In their seminal article A Team Production Theory of Corporate Law, Margaret Blair and Lynn Stout hold that the modern corporation is best understood in terms of team production. Challenging the principal–agent model, Blair and Stout offer an analysis that considers the various stakeholders of the corporation as members of a team. Accordingly, they suggest, the purpose of corporate law is to provide a response to the problems created by collective production processes, in particular those pertaining to the distribution of profits stemming from the cooperation. According to Blair and Stout, the solution to this problem is to be found in handing over control of the firm to the board of directors whose responsibility is to balance the competing interests of team members. While Blair and Stout’s move away from the shareholder primacy model and towards an inclusive, multistakeholder conception of the firm is important and desirable, it is insufficient. Its principal weakness is that the team production model does not deal with questions of fairness in the allocation of goods within the corporation. In this Article, I propose to complement Blair and Stout’s model with John Rawls’s principles of justice in order to ensure not only efficient decisionmaking procedures, but also fair distribution among team members. The Article begins by examining the advantages and shortcomings of Blair and Stout’s team production model. It then clarifies the possibility of applying Rawlsian principles of justice to the corporation. It addresses the main difficulty of such a move--that the Rawlsian principles of justice are not meant to apply to private organizations such as corporations but only to those “public” social institutions that have to do with the background conditions for justice. In response to this, and possibly in contrast to Rawls’s own opinion, I propose that corporations be viewed as part of the basic structure of society. By showing that corporations are major social institutions, which construct power relations, shape the public sphere, and allocate significant goods (surely wealth, but also self-esteem and social position), this Article argues that corporations meet Rawls’s criteria for the basic structure of society and ought to be considered as a subject of the principles of justice. After establishing that corporations should be considered as part of the basic structure of society, this Article demonstrates how Rawl’s principles of justice might be applied to the decisionmaking process of the corporate board.

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