Lyman Johnson on corporate legal theory

At the Washington & Lee symposium honoring his work, Lyman Johnson offered a luncheon keynote reflecting on what he found when he entered the world of corporate law teaching thirty years ago. Corporate law was experiencing enormous upheaval, particularly via the hostile corporate takeover movement.  This movement received the support of the Chicago law-and-economics school, a reductionist interpretation that drained the corporate institution of its humanity and left it as a nexus of contracts.  This view did not account for real harms to employees, local communities, and others.  The Delaware judiciary, unlike federal actors, could not avoid weighing in, and the judges used traditional tools (including fiduciary duties) to stabilize the corporate landscape.  Lyman has spent much of his career explaining, teaching, and criticizing these materials.

His scholarship is premised on the belief that people everywhere crave meaningful work as a key element of human flourishing.  In his remarks, he highlighted ongoing themes of his scholarship, including corporate purpose and the relationship of religious faith to corporate law.  He believes that a pluralistic approach to corporate purpose is preferable to the economically reductionist view of shareholder wealth maximization.  He has helped point out that shareholder wealth maximization is not legally required.  Directors must enhance monetary goals for the purpose of benefiting shareholders, but that is not maximization. We should favor a diverse business ecosystem over a business monoculture.  This debate remains crucial, as reflected by a Wells Fargo employee's recent lament that the company's culture was "soul crushing."

Lyman wondered why criticism of corporations comes primarily from the left.  Conservatives (of which he is one) should care deeply about corporate culture and the elevation of profit over other considerations.  At the corporate theory level, people are regarded simplistically as individuals, not as fully formed persons who can behave sacrificially, not just selfishly.  There is a profound dissonance between what we expect of ourselves in life generally and what is demanded in business.  The belief in a shareholder wealth maximization norm has a prescriptive and pedagogical function, shaping corporate culture in powerful ways as rampant self-aggrandizement is rewarded.

The dominant corporate law paradigm does not pay much attention to the corporate body in favor of focusing only on shareholders and directors.  He believes we need to reclaim the corporation itself as a subject of study for corporate law.  Like other groups, corporations can have commitments that are not equivalent to the commitments of its individual members.  The corporation should be respected as a distinct person.  It would be helpful to have a rule requiring the corporation to state its purpose clearly, providing an understanding to all stakeholders of its corporate identity.

He closed by underscoring the value of collaboration in our work, praising the contributions of his friend and frequent coauthor, David Millon.