The Corporation as Sovereign
by Allison D. Garrett
Maine Law Review
Volume 60 Number 1 Article 4
January 2008
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[Jamie Raskin] We need to be supporting the lawyers and the people who are willing to take Trump to court, because we are winning. And that's going to be a really important part of filling that gap you talk about between what the rule of law says, and then what's actually happening. Because we're dealing with a band of incorrigible, lawless plutocrats who think that they can just control the whole U.S. government. And I keep thinking about what Steve Bannon said about Elon Musk. He said he's a truly evil individual. He knows that whole crowd, so he knows what he's talking about. And so that's quite a statement. But in the Silicon Valley network of right-wing, billionaire, libertarian-turned-authoritarians, they are very open about the fact that they think that democracy is obsolete, we're living in a post-Constitutional America, and the Constitution no longer fits. And they are trying to get everybody ready for a Techno-State Monarchy. And in their writings about it, they suggest that seizure of the control of technology, and computers, and financial payments, is the essence to moving from one form of government to another.
So we're really talking about people who would like to abolish American Constitutional institutions, and representative democracy, and the rights and freedom of the people.
Their guy, Curtis Yarvin, who's their big intellectual hero, has said people have got to overcome their fear of the word "Dictator." He says a Dictator is basically just like a corporate CEO, who are all Dictators in their businesses.
And so we need a Dictator that is the corporation, that's the United States of America. And obviously they have Elon Musk in mind, because he could never run for President, he wasn't born in the United States of America, and he's had citizenship in three different countries. He was actually an undocumented immigrant here for many months before he got work authorization, for all the right-wingers out there who want to kick all the undocumented people out of the country, although that might be an argument in their favor. I don't know. But in any event, these people are talking about supplanting our system of Constitutional democracy with a completely different kind of government controlled by Dictatorship.
-- Jamie Raskin Talks About Silicon Valleys' Techno-Libertarian Fascists, by Brian Tyler Cohen, Feb 15, 2025
The International Committee of Jurists, appointed by the Council of the League of Nations, took the view that statehood cannot co-exist with anarchy. Rather, a state does not exist until a situation “is of a definite and normal character.”Sovereignty does not exist in some situations, “either because the state is not yet fully formed or because it is undergoing transformation or dissolution [and in such cases], the situation is obscure and uncertain from a legal point of view, and will not become clear until the period of development is completed and a definite new situation, which is normal in respect to territorial sovereignty, has been established.” Once created, one attribute of the state becomes the protection of minorities, which is often codified in the states’ constitutions. In order to maintain security and stability, governments establish armies to protect themselves from other nations and police forces to keep order internally.
CONTENTS:
• INTRODUCTION
• THEORIES OF THE CORPORATION AND THE NATION-STATE
o Theories of the Corporation
o Theories of the Nation-State
• SIMILARITIES BETWEEN THE CORPORATION AND THE NATION-STATE
o Permanent Population & Defined Territory
o Economic Power
o Capacity to Engage in Foreign Relations
o Protection of Society
o Administration of Justice
o Monetary Policy
o Public Welfare
• CONCLUSION
I. INTRODUCTION
In the past two hundred years, sovereignty devolved from the monarch to the people in many countries; in our lifetimes, it has devolved in several significant ways from the people to the corporation. We are witnesses to the erosion of traditional Westphalian concepts of sovereignty,1 where the chess game of international politics is played out by nation-states, each governing a certain geographic area and group of people. Eulogies for the nation-state often cite globalization as the cause of death.2 The causa mortis is characterized by the increase in the power and normative influence of supranational organizations, such as the United Nations, World Bank, European Union, International Monetary Fund, and non-governmental organizations. Today, geography lacks the political significance it once had, as valuable commodities instantly pass over, through, and under geographic borders in the world’s most common language, binary code.3 Telecommunications, when combined with mobile capital and technology, “is viewed as obliterating spatial lines.”4 All of these changes have made the nation-state, as a geopolitical entity, far less significant than it has been in the past several decades.
Corporations have stepped into this power vacuum with a reach and economic influence so broad that some of the duties of sovereign nations have fallen under their aegis.5 The power and influence of the world’s major corporations continue to grow, and with this growth their similarities to sovereign states increase. As the nation-state is prematurely eulogized, scholars are writing about the privatization of governance and commerce.6 Many scholars tend to focus on international relations and the extent to which relationships among nations have been transcended or superseded by private actors. For example, the concept of nations acting as private entities has been recognized in the Foreign Sovereign Immunities Act,7 which provides that “a foreign state shall not be immune . . . in any case in which the action is based upon a commercial activity carried on in the United States by a foreign state.”8 This Article focuses, instead, on how the distinction between corporations and the state is blurring, not only internationally, but also domestically, as corporations act in ways that make them similar to nation-states.
The nation-state is not dead, but it is evolving. A pivotal factor in this evolution is the power of the world’s largest corporations. Like the vassal whose power overshadows the king’s, these companies act similarly to traditional nation-states in some ways. They have tremendous economic power, establish security forces, engage in diplomatic, adjudicatory and “legislative” activities, and influence monetary policy.
However, it is important to recognize that corporations are not mini-nations, and nations are not overgrown corporations; it would be dangerous to conflate the two. Like any theory about the nature of corporations, this analogy between nations and corporations can be taken to an extreme. Although corporations seem to be amassing new powers and taking on new roles, there will always be limits placed on them by governments. Governments conduct investigations and inspections and pass laws and regulations to keep corporations in line. The court system can be used both by the government and by private actors to constrain the activities of corporations. The Fourth Estate also scrutinizes the actions of corporations. Indeed, the press can serve as a powerful check on corporate power, as the “name and shame” process can cause consumers to vote with their wallets, which in turn can affect the actions of the corporation and, ultimately, its survival.
This Article begins in Part II by examining the historical and theoretical advent of the corporation as a legal, social, and political entity, by exploring the various theories regarding the nature of the corporation. Furthermore, Part II surveys the theoretical underpinnings of the social construct known as the nation-state. Part III considers the similarities between modern multinational corporations and nation-states, including the characteristics of permanent population and defined territory, economic power, foreign relations, protection of society, administration of justice, monetary policy, and public welfare. This Article concludes by positing that a comparison between the often analogous social, political, and economic characteristics of nation-states and corporations can provide a new and useful way for scholars to analyze the activities and powers of modern-day corporations.
II. THEORIES ON THE CORPORATION AND THE NATION-STATE
A. Theories of the Corporation
Many of the earliest corporations were granted charters from the Crown that made them both corporations and political entities.9 The corporate form was not widely available and these charters were granted on an ad hoc basis, often in accord with the ebb and flow of political expediency. When Parliament passed the Joint Companies Act10 in 1844, Robert Lowe, then Vice President of Great Britain’s Board of Trade, referred to corporations as “little republics.”11 Specifically, Lowe noted that, “[h]aving given [corporations] a pattern the State leaves them to manage their own affairs and has no desire to force on these little republics any particular constitution.”12
Professor Daniel J.H. Greenwood has explored in detail the rights of early corporations, particularly those rights that are similar to the rights of the sovereign. Professor Greenwood notes that, “in the beginning, everyone understood that corporations were somewhat sovereign” and that “[ i]ndeed, the British East India Company claimed aspects of sovereignty—the right to have its contracts treated as international treaties and the right to make war.”13 These early corporations even minted money.14 Some of these companies governed expansive territories15 and maintained standing armies that, at times, engaged in military action.16 Today’s corporations may never gain the measure of power held by the earliest companies at their apogee, but they seem to be trying.
The advent of new European trading companies also stimulated industrial demand, especially for the cotton textiles – muslins, taffetas, brocades, batiks, ginghams – of Gujarat, Bengal, Golconda and the Tamil country. Founded respectively in 1600 and 1602, the East India Companies of London and the Netherlands had been intended to contest the Portuguese monopoly of the mainly Indonesian spice trade. They soon became equally interested in India’s manufactures. During the reign of Jahangir, Akbar’s immediate successor, both companies set up trading houses in Surat, which was by now the main port in Gujarat. They also began to tap into the ancient trade between India’s east coast ports and south-east Asia. Politically the companies were an irrelevance and would long remain so. But by 1640 they had ended Portugal’s monopoly of the eastern sea-routes; Europe’s domestic markets were discovering the joys of cheaper soft-furnishings and more washable cotton apparel; and sailings, whether regulated by the companies or unregulated, were boosting demand in India and, since payment was usually made in bullion, providing a welcome influx of silver....
Meanwhile in Delhi the succession crisis which followed Bahadur Shah’s death in 1712 was taking its course. Although orchestrated more by senior Mughal officials than by the four contesting sons of Bahadur Shah, it proved no less costly in blood and treasure and it resulted in the accession of a man not unfairly described by Khafi Khan as a frivolous and drunken imbecile. Luckily this Jahandah Shah lasted only eleven months, a short reign if a long debauch. ‘It was a time for minstrels and singers and all the tribes of dancers and actors … Worthy, talented and learned men were driven away, and bold impudent wits and tellers of facetious anecdotes gathered round.’ The anecdotes invariably concerned Lal Kunwar (or Kumari), the emperor’s outrageous mistress, on whose fun-loving relatives were showered jagirs,mansabs, elephants and jewels. So infectious was the mood that ‘it seemed kazis would turn toss-pots and muftis become tipplers.’14
The party ended, and decorum was temporarily restored, when in 1713 Farrukhsiyar, the son of one of Jahandah Shah’s unsuccessful brothers, approached from Bihar with a sizeable army. Jahandah Shah’s forces mostly melted away, and Farrukhsiyar, who had already declared himself emperor, began his six-year reign (1713–19). It was he who was responsible for the bloody repression of Banda Bahadur and his Sikhs, and it was he who would fatefully indulge the ambitions of the English East India Company....
Ever since the days of Akbar the European trading companies had been petitioning the Mughal emperors for farmans, imperial directives. These would theoretically regularise their status, privileges and trading terms throughout the empire and would, as it were, trump the variety of vexatious exactions and demands imposed by local Mughal officials in the ports and provincial capitals. To an organisation like the English East India Company, whose very existence depended on a national monopoly of Eastern trade as solemnly conferred by charter from the English sovereign, the need for some such reciprocal authorisation guaranteeing favourable access to its most important trading partner was self-evident.
Within a decade of the English Company receiving its first royal charter in 1600, a Captain William Hawkins had journeyed from Surat to Agra to petition Jahangir for just such a farman. Provided with more lavish gifts or more impressive accreditation, a procession of hopefuls followed in his wake, amongst them Sir Thomas Roe, the first official ambassador from the Court of St James and the man who was so impressed by Jahangir’s jewellery. With India as a whole Roe was less impressed, dismissing it in much the same terms as had Babur. Prickly to the point of apoplexy about his diplomatic status, Roe also pontificated to his countrymen in India and thus antagonised the Company’s merchants, or ‘factors’, whose interests he was supposed to be representing. ‘If he [Prince Khurram, the future Shah Jahan] should offer me ten [forts] I would not accept one,’ he told the factors, ‘… for without controversy it is an errour to affect garrisons and land warrs in India … Let this be received as a rule, that if you will profitt, seek it at sea and in quiett trade.’ Although Roe’s idea of ‘quiett trade’ included a gratuitous attack on Mughal shipping once every four years – as he explained, ‘we must chasten these people’ – the directors of the East India Company had agreed with him about avoiding garrisons and wars. As a guarantee of favourable trading conditions an imperial farman looked to provide the perfect, because inexpensive, alternative....
But the farman had not been forthcoming, and garrisons and wars had followed. Madras had been acquired from the local nayak in 1640 and its foreshore immediately graced with the four-square Fort St George. Bombay, as noted, had passed to Charles II in 1661 as part of the dowry of his Portuguese bride, Catherine of Braganza. After a disastrous attempt to install a royal garrison it had been leased to the Company, whose employees came to appreciate its greater security when Shivaji and his successors began their raids on Surat. The actual transfer from Crown to Company was by letters patent of 1668 which, presumably for reasons of bureaucratic convenience, described Bombay as being ‘in the Manor of East Greenwich in the County of Kent’; the rent of £10 was to be paid ‘in gold, on the 30th day of September, yearly, for ever’....
Calcutta had been founded twenty years later during the course of one of Aurangzeb’s lesser-known wars. In 1664 Shaista Khan, fresh from the Deccan and minus the thumb lost during that audacious Maratha raid on his Pune home, had been appointed governor of Bengal in succession to Mir Jumla, the conqueror of Assam. When Aurangzeb himself moved to the Deccan in 1682, Shaista Khan was still in Bengal, and in that year he welcomed to his capital of Dacca one William Hedges, a director of the English East India Company. Hedges sought to persuade Shaista Khan to cancel a new tax on the imported bullion with which the Company paid for its Indian exports and to petition Aurangzeb for the long-sought farman. As the brother of Mumtaz Mahal of the Taj, and so Aurangzeb’s uncle, Shaista Khan was believed to have considerable influence. At one point Hedges thought the farman was as good as signed. But in 1684 his diplomacy was undermined by a combination of the Company’s bitching Bengal factors and Sir Josiah Child, its bellicose governor in London. Shaista Khan drew the obvious conclusion: ‘the English are a company of base quarelling people and foul dealers.’ Negotiations were broken off; and a couple of years later – it taking that long for recriminations to reach London and retribution to reach India – two ships carrying exactly 308 Company soldiers sailed up to Hughli to press the Company’s suit and challenge an empire which had at the time at least 100,000 men in the field.20
The Company’s Mughal War, also sometimes known as ‘Child’s War’, figures no more prominently in histories of British India than it does in Mughal histories. It brought glory to no one. In Bengal, after a fracas in the Mughal port of Hughli, the English withdrew downriver, landed themselves at the spot which they later called Calcutta, then next year evacuated it. This performance was repeated in 1688–9 as the ‘war’ took a more serious turn elsewhere. In support of his Bengal brethren, the Company’s senior official in Surat (who was also called Child) had removed to the comparative safety of Bombay. Thence, in accordance with ambassador Roe’s long-remembered dictum, he began attacking Mughal shipping. Child in London applauded; within a year, he announced, ‘the subjects of the Mogoll [would be] starving and dying by thousands for want of our trade’. Meanwhile the Child in Bombay boasted that if Aurangzeb chose to send the admiral of his fleet against him he ‘would blow him off with the wind of his bum’.21 Aurangzeb did so choose, and ‘Child’s War’ – or perhaps ‘the Children’s War’ – thus spread from one extremity of the Mughal empire to the other. In early 1689 Sidi Yakub, the African who commanded a west coast fleet which served as the Mughal marine, took Bombay island completely by surprise. The English were besieged in Bombay Castle for most of the year and eventually capitulated.
The Company’s ‘envoys’, who in 1690 journeyed up to the imperial encampment to plead for pardon, did so with their hands tied in more ways than one. As a further indignity they were made to prostrate themselves before the emperor. But Aurangzeb was not unaware of the value of their trade nor of the danger of their making common cause with the Marathas. For a massive indemnity and promises of better conduct in future, he graciously agreed to the restoration of their trading privileges and the withdrawal of his troops. In the same spirit of forgive and forget, the Company’s Bengal establishment was allowed to return to the Hughli river where in 1690 it made a permanent settlement at Calcutta and began the fortifications of its ‘Fort William’. With the first Anglo–Indian war having been so decisively won by the Mughal empire, there was no mention of the farman....
Of more immediate concern to the directors of the Company were the activities of its employees in a personal capacity. English fortunes were notoriously made in India not by loyal service in the purchase and despatch of the Company’s piece-goods but by private investment in a variety of financial opportunities. Some were concerned with trade. Only over the ‘out and back’ traffic between England and the East was the Company able to enforce its monopoly. Within the East and within India itself, Company men took advantage of the decline in Indian-operated shipping which had begun during Portugal’s sixteenth-century Estado da India to invest heavily in the Indian Ocean trade. They owned or leased ships, freighted cargoes, sold insurance, and above all took advantage of the security and protection of their employer’s flag. Thus from Madras, as employees of the Company, the American-born Yale brothers amassed considerable fortunes in trade with Siam (Thailand) and Canton in China; part of Elihu Yale’s earnings would endow the college, and later university, in Connecticut which bears his name. Some Company men also invested in, and often defected to, shipping interests which did not recognise even the Company’s ‘out and back’ monopoly. These might be other European East India Companies like those of the Dutch or the French. They might be the ‘illegal’ English syndicates usually known as ‘interlopers’. Or they might be a bit of both -– English interlopers sailing under a flag of convenience. Up the Hughli river in search of Bengal produce there sailed in the early eighteenth century vessels which, though largely financed by Englishmen, flew the colours of the Ostend Company, the Swedish Company, the Prussian Company, the Royal Polish Company and the Royal Danish Company.
Thomas Pitt, once an interloper, then a Member of Parliament, had already made and spent one Indian fortune when in 1699 he returned to Madras as governor of its Fort St George. He stayed there for twelve years, amassing a second fortune which included the Pitt diamond (bought for £45,000 and sold to the Regent of France for £135,000); it would comfortably sustain the political careers of his prime ministerial grandson (Chatham) and great-grandson (William Pitt the Younger). Governor Pitt also jealously protected the Company’s interests during the uncertain times before and after Aurangzeb’s death. In 1701 another English ambassador, the first since Roe, had toiled up to the emperor’s peripatetic court in the Deccan with a lavish presentation of cannons, horses and cartloads of glassware and crockery. But Aurangzeb would only entertain the idea of a farman if the English would undertake the expensive task of policing the Indian Ocean and suppressing the piratical activities of mainly European interlopers and renegades. No such undertaking was forthcoming, and nor was the farman. The embassy proved to be the expensive disaster which Pitt had predicted.
Aurangzeb’s death in 1707 and the subsequent succession struggle opened new possibilities. On behalf of Prince Muazzam, an imperial intermediary asked for English assistance in cutting off the retreat of one of the prince’s rivals; in return, Pitt was invited to draw up the terms of a farman. Although the prince’s rival never reached Madras, Muazzam duly ascended the throne as Bahadur Shah and the Company began assembling the elephants, horses, clocks and musical boxes deemed suitable to accompany another mission to the imperial court. When Pitt left India in 1709 he was still sanguine of its prospects, and in 1710 overtures from the same intermediary, who had now been posted to Bengal, were renewed. The clocks and elephants were duly shipped to Calcutta and by 1712 the mission to the Mughal was ready to start. Then news came from Delhi that Bahadur Shah had died.
His ‘imbecilic’ successor barely lasted long enough for an exchange of letters, but with the accession of Farrukhsiyar the Company’s hopes soared again. The new emperor had been brought up in Bengal, where his father had been governor after Shaista Khan. He was known to some of the English in Calcutta, and the Company had supplied his nursery with toys. Evidently the toys had been appreciated, for news that some forty tons of more adult exotica now awaited the emperor’s orders brought an interim confirmation of the Company’s existing privileges plus a request that the mission proceed to Delhi forthwith. In 1715, headed by the unexciting John Surman and guarded by some six hundred troops, a caravan consisting of 160 bullock carts, twelve hundred porters, and a choice assortment of carriages, cannons and camels headed west across the Gangetic plain.
‘Considering the great pomp and state of the kings of Hindustan, we was very well received,’ wrote Surman on arrival in Delhi. He relished the impressive ceremonial and was soon dispensing lavish bribes. Meanwhile the mission’s doctor successfully treated some swellings in the imperial groin. He was handsomely rewarded, but as to the farman Farrukhsiyar remained infuriatingly indifferent. Only when threatened with the withdrawal of the Company from Surat and its other establishments in Gujarat did he relent. Losing the Company’s bullion and trade for the price of a piece of paper was unthinkable. On New Year’s Eve 1716, more than a century since Captain William Hawkins had first applied for it, the farman received the imperial signature.
Explicit as to the territorial and commercial rights enjoyed by the Company throughout India, the farman did indeed ‘indicate such favour as has never before been granted to any European nation’. In Calcutta, Madras and Bombay celebrations were held, toasts were drunk, and salutes fired as the document was paraded through the streets and proclaimed at the cities’ gates. ‘Our dear bought farman’ became ‘the Magna Carta of the Company in India’. It provided imperial confirmation of a host of privileges, some of which had hitherto been more assumed than assured. It inducted the Company into the political hierarchy of Mughal India through a direct relationship with the emperor which bore comparison with that enjoyed by imperial office-holders. And in that it legitimised action against anyone supposedly infringing its terms, it offered great scope for future intervention. Thirty years later it would be on the strength of Farrukhsiyar’s farman that Robert Clive would justify his advance to Plassey and the overthrow of Bengal’s nawab....
The dynamic of the Mughal political economy was as much about troops as money. Military leaders financed their activities by engaging in entrepreneurial ventures, and entrepreneurs secured their investments by supporting military ventures. Thus, even before war broke out with the French in the 1740s, the English Company, through its employees, was already indirectly involved in the hire and maintenance of troops by neighbouring zamindars and revenue collectors. Encouraged by the farman’s confirmation of certain local revenue rights, the Company had also significantly increased the number of troops deemed necessary to defend its own establishments. The Madras garrison, for instance, increased from 360 in 1717 to some twelve hundred in 1742. Most were recruited locally, many being from the Indo-Portuguese community. But Indian troops, known as ‘peons’ or ‘sepoys’ (sipahis, soldiers), were also hired, there being a ready pool of professional soldiers -– Marathas, Deccanis, Afghans, rajputs, Baksaris (from Awadh) –- which Mughal rule had left stranded, and often unpaid, throughout the subcontinent. The existence of this market in troops, like that of the market in offices and revenue farms, positively invited European participation.
But if the farman could be used to provide a legal basis for British interference, and if the lively market in commercial, fiscal and military opportunities encouraged such intervention, it was the Anglo–French wars which precipitated it. They furnished the pretext, demonstrated the method and inspired the confidence for the first British moves towards an Indian dominion....
With French troops under de Bussy now assisting the new nizam against other rivals like the Marathas and so penetrating deep into the Deccan, the British too were not averse to opening a new front. Robert Clive, returning from England after a hero’s reception, reached Bombay in 1755 whence he expected to lead an Anglo-Maratha assault on de Bussy in the Deccan. This was called off. Instead, he joined a Royal Navy squadron under Admiral Charles Watson for an epic assault on what the British called the ‘pirate stronghold of Gheriah’. The ‘pirate’ was Kanhoji Angria’s successor as admiral of the Maratha fleet and ‘Gheriah’ was otherwise Vijayadurg, still today a spectacularly fortified promontory near Ratnagiri to the south of Bombay. Taken and pillaged, Vijayadurg’s fall brought to an end both Maratha sea-power and those premature ‘Indian Wars’ which had so embarrassed Bombay. Clive then sailed on to Madras with Watson. Barely four months later, in July 1756, news reached Madras that Siraj-ud-daula, the Nawab of Bengal, had stormed Calcutta and ejected the British. With Watson, his squadron, a regiment of royal troops, and a thousand sepoys Clive sailed for Bengal.
The next seven months, or ‘the Famous Two Hundred Days’, would witness the British conquest of the richest and possibly the largest of the Mughal provinces. Bengal duly became the ‘bridgehead’, ‘springboard’ and ‘foundation’ of British rule in India. It was not the new front against the French which Clive had expected, but the French presence at Chandernagore did provide a handy pretext for continuing his advance after Calcutta had been recaptured and all rights as per the farman restored. Chandernagore itself would be stormed by Watson’s ships in what was much the most ferocious engagement of the campaign. Thereafter it was the nawab’s supposed intrigues with the French which justified a further advance to Plassey. In the battle which followed, the nawab would be toppled by intrigue and, following Arcot practice, the first of several puppet nawabs installed.
Nine years later rule by proxy in Bengal would become rule by diwani. In a decidedly tacky ceremony the Emperor Shah Alam II, Muhammad Shah’s successor, formally inducted the Company, in the person of Clive, into the Mughal hierarchy. As diwan, or chancellor, for Bengal, the Company received a title which was now tantamount to sovereignty over a province that enjoyed virtual autonomy....
The royal proclamation of 1858 announced a decision of the British Parliament that all rights previously enjoyed by the East India Company in India were being resumed by the British Crown. Victoria thereby became Queen of India as well as of the United Kingdom, and India’s governor-general became her viceroy as well as the British government’s chief executive in India. The fiction of Company rule thus finally ended. Long as irrelevant as the Mughal, the Company now shared his fate as a casualty of the Rebellion. Instead of pining away in Rangoon, it would linger on for a few more years in a London office ‘unhonoured and unsung, but maybe not altogether unwept’.
So India had a new sovereign; and just as in Britain the monarch’s position was buttressed by a hierarchy of hereditary nobles and by the award of honours, so in India similar structures were created. The Star of India, a royal order of Indian knights, was introduced in 1861, and the first tour by a member of the British royal family took place in 1869. Meanwhile India’s aristocracy of ‘feudatory’ princes, chiefs, rajas, nawabs and so on was being further stratified and grouped to conform to British ideas of hierarchy. The grading of gun salutes and other minutiae of protocol provided a ready reckoner of status, status itself being assessed on the basis of historical and territorial credentials, good governance, charitable activities and, of course, demonstrations of loyalty.
Only when this structuring was complete was the keystone installed. In 1876, on the advice of Disraeli, the Queen announced to the British Parliament that, satisfied that her Indian subjects were ‘happy under My rule and loyal to My throne’, she deemed the moment appropriate for her to assume a new ‘Royal Style and Titles’. The style, it was later revealed, was to be imperial and the titles, in English, ‘Empress of India’ and, for the benefit of her Indian subjects, the rather unfortunate ‘Kaiser-i-Hind’.
In January 1877, in a vast tented city around the Ridge whence British forces had recaptured Delhi twenty years earlier, the new imperium was solemnised at an Imperial Assemblage. The official attendance of eighty-four thousand included nearly all of India’s ‘sixty-three ruling princes’ and ‘three hundred titular chiefs and native gentlemen’. Lord Lytton, the presiding viceroy whose arrangements would provide a blueprint for all future imperial durbars, took some delight in listing those present. Here were the princes of Arcot and Tanjore from the deep south, the principal ‘Talukdars of Oudh’, ‘Alor Chiefs of Sindh’, Sikh Sardars, rajputs and Marathas, ‘the semi-independent Chief of Amb’, ‘Arabs from Peshawar’, ‘Biluch Tommduis from Dera Ghazi Khan’, and envoys from Chitral and Yassin in the high Hindu Kush ‘who attended in the train of the Maharajah of Cashmere and Jammu’. Also included in Lytton’s litany were quite a few ex-princes like the grandson of Tipu Sultan, the son of the last Nawab of Awadh and ‘members of the ex-Royal family of Delhi’.
The presence of these descendants of the former great ruling houses of India imparted some of the flavour of a Roman triumph to the assemblage. The British conception of Indian history thereby was realised as a kind of ‘living museum’, with the descendants of both the allies and the enemies of the English displaying the period of the conquest of India.29
Conservation was now the order of the day. The riot of privilege and particularism, once seen as an indictment of British rule, was to be preserved as imperial pageantry. And with the British apparently disclaiming plans for the rapid transformation of Indian society, the initiative now slowly passed from these hereditary representatives of the old dynastic order to a new elite, English-educated and city-based.
-- India A History: From the Earliest Civilisations to the Boom of the Twenty-First Century, by John Keay
The ontology of the corporation encompasses a number of theories regarding the nature of corporations. Corporations have been described as a person,17 private property of the shareholders,18 a nexus of contracts,19 an agent for the owners,20 a representative democracy,21 and even a religious entity.22
Currently, corporations are viewed as legal persons, and have been regarded as such for almost 200 years.23 As legal persons, corporations are entitled to some constitutional protections.24 They have the right to hold property,25 to contract,26 and to sue and be sued as a juridical entity distinct from their shareholders, directors and employees.27 Corporate law theorists have more recently come to view the corporation as a special type of legal entity that has been and should be regulated28 and accommodated in unique ways.29
Delaware Chancellor William T. Allen has described the two general schools of thought about the nature of corporations as the “property conception” and the “social entity conception.”30 Under the property conception, the corporation is viewed as the private property of its shareholders, with the ultimate goal of profit maximization on behalf of the shareholders.31 Under the social entity conception, the corporation’s purpose “includ[es] advancement of the general welfare.”32
The view of the corporation as a profit maximization vehicle for the corporation’s shareholders is closely related to two other concepts: agency theory and shareholder primacy. The corporation was first analyzed using agency theory in the 1930s. The bifurcation of ownership and management was identified by Adolph Berle and Gardiner Means33 and then expanded by Ronald Coase.34 The agency theory of the corporation has become one of the most-widely accepted theories of the firm.35 The theory holds that markets and contracts limit the discretion that can be exercised by corporate managers.36 These agents, who are linked by contracts to the firm, influence its actions. A central feature of the agency theory is that agents of corporations, as rational economic actors, will take steps to minimize agency costs.37 However, this view has been criticized.38 Professors Jensen and Meckling argued that “there is good reason to believe that the agent will not always act in the best interests of the principal” and that, consequently, there is an agency loss because a corporation will not be managed as well by an agent for the owners as it would be if the owners themselves managed the corporation.39 For this reason, compensation schemes often attempt to align more closely the interests of executives with those of shareholders.40
More recently, the idea that corporations exist solely to maximize the wealth of their shareholders and the agency theory have evolved into the “shareholder primacy theory” of the corporation, which holds that corporations operate in the interest of the shareholders and that directors owe to them a fiduciary duty.41 Furthermore, the theory stresses that corporations are subject to shareholder control “by electing directors, approving fundamental transactions, and bringing derivative suits.”42 In contrast, some have espoused the “director primacy” theory, articulated by Professor Stephen Bainbridge,43 which assumes that the board of directors wields the power within a corporation.44
The social entity theory posits that successful corporations have a moral imperative, not only to make money for their shareholders, but also to improve the general welfare of society in some significant way.45 Arguably, it is a corporation’s ability to enhance society’s welfare that makes it so successful, whether it is providing lower cost goods to families with limited disposable incomes or creating ways for communities with similar interests to communicate with each other. The social entity theory is compatible with the legal entity approach because, under this view, the corporation is “capable of bearing legal and moral obligations.”46
Additionally, many modern courts and corporate law theorists have come to view the corporation as a nexus of contracts.47 Under this theory, the corporation is really just “an agreement, or a series of agreements, among private parties.”48 The nexus of contracts theory provides a basis for the director primacy theory and the shareholder primacy theory, both of which explain the balance of power within the corporation, rather than the role of corporations as participants in broader governance processes such as foreign relations, adjudication, and law making. A further variation on the contractarian approach abandons the idea that the corporation itself is the nexus.49 The “connected contracts” metaphor “emphasizes the complex interactions among all of the participants in an economic venture.”50 Under this approach, although the term “contract” is used, it is used simply as a way to describe the rights and obligations of these participants, whether they are legally enforceable or not.51
Some commentators have gone so far as to analogize the corporation to a religious entity. Professor Douglas Litowitz argued in a recent article that the corporation is “fundamentally a religious and mythological entity” and “a secular god.”52 He argues that we worship business leaders53 and that the Model Business Corporation Act’s definition of a corporation, which uses the term “corporation,” is not unlike God’s statement to Moses, “I am who I am.”54 Further, he argues, a mythology has developed concerning corporations that can assist in resolving issues of corporate law.55 Professor Litowitz states:
The pressing issues of corporate law [such as] whether a corporation should resemble a functioning democracy, whether it has duties to a community, whether it should be allowed to move offshore, whether it has a race or gender, whether it has rights to free speech, [and] whether it must favor shareholders over employees . . . [are] questions about the meaning of the modern corporation.56
One way to answer these fundamental questions, Litowitz argues, is to view the corporation as a “modern deity.”57
Professors Margaret Blair and Lynn Stout have proposed a “team production” theory of the corporation.58 They examine the agency theory, but note that common law agency should be supplemented with the team production theory drawn from economic literature.59 The team production theory posits that in certain situations, “productive activity requires the combined investment and coordinated effort of two or more individuals or groups.”60
Other scholars have discussed whether corporations are moral persons,61 with many rejecting the notion.62 The moral imperative for corporations is to make money.63 Under this view of the raison d’être for corporations, choosing socially responsible action over profit maximizing action is immoral.64
B. Theories of the Nation-State
Philosophers and political theorists have offered many definitions of the nation. French historian Ernest Renan argued that the nation is a fusion of the various populations that compose them, but rejected strict definitions based on ethnography, language, geography, commerce, or interests.65 Conversely, Joseph Stalin opined that a “nation is a historically evolved, stable community of language, territory, economic life, and psychological make-up manifested in a community of culture.”66 The Italian jurist Pasquale Mancini similarly argued that nations were comprised of groups of people united by several factors, such as language, history and territory.67 John Stuart Mill defined sovereignty more esoterically as the “supreme controlling power.”68 Political theorist Max Weber viewed a nation as “a relation of men dominating men,” a relation supported by means of “legitimate use of physical force within a given territory.”69 According to Rousseau, sovereignty rests in a united people rationally considering and deciding its own fate.70 Still others view ethnicity as the key determinant for the existence of a nation-state.71
The United Nations Charter recognizes self-determination as a primary test for nationhood.72 Kofi Annan, in his annual speech to the United Nations General Assembly in 1999, said:
State sovereignty, in its most basic sense, is being redefined by the forces of globalization and international cooperation. The State is now widely understood to be the servant of its people, and not vice versa. At the same time, individual sovereignty—and by this I mean the human rights and fundamental freedoms of each and every individual as enshrined in our Charter—has been enhanced by a renewed consciousness of the right of every individual to control his or her own destiny. . . . Nothing in the Charter precludes recognition that there are rights beyond borders.73
Today, a generally accepted view of what constitutes a state is found in the 1933 Montevideo Convention on the Rights and Duties of States.74 That document provides that “[t]he State as a person of international law should possess the following qualifications: (a) a permanent population; (b) a defined territory; (c) government; and (d) capacity to enter into relations with other States.”75
In The Wealth of Nations Adam Smith defined a state by its obligations to society, and specifically identified three such obligations of the sovereign.76 These obligations are “protecting the society from the violence and invasion of other independent societies,”77 the “administration of justice,”78 and the duty of “erecting and maintaining those public institutions and public works, which though they may be in the highest degree advantageous to a great society, are, however, of such a nature, that the profit could never repay the expense to any individual or small number of individuals.”79 Later scholars have built on these duties identified by Smith. Ellen Grigsby, for example, noted that[/size][/u][/b]
[a] state is an organization that has a number of political functions and tasks, including providing security, extracting revenues, and forming rules for resolving disputes and allocating resources within the boundaries of the territory in which it exercises jurisdiction. That is, states consist of government offices, which have the tasks of providing the ultimate, or primary, security, extraction processes, and rule making within a territory.80
Steven Spiegel describes the nation-state as “[a] state structure in which a nation resides and exists (ideally) to protect and promote the interests of that nation.”81
Some scholars have noted a technical difference in the terms “state” and “nation.”82 These scholars contend that a state is a legal person capable of passing laws and entering into treaties.83 A nation, on the other hand, can be more broadly defined as a community bound by common factors such as culture, ethnicity, religion, and history.84 Although all of these distinctions may be useful to international law scholars, I do not draw such fine distinctions in this Article. Rather, I look to a variety of characteristics that philosophers, economists, and international law scholars have ascribed to the nation-state. Whether these are immutable characteristics of statehood and whether they still apply with the same force today are important questions, but this Article is limited to reviewing the strong parallels between the state and modern multinational corporations.
The nature of the corporation and its relationship to the state has been explored in literature, as well as in legal and economic scholarship. Aldous Huxley’s Brave New World seemed to anticipate this evolution of the corporation: the “T” for the Model T car replaced the cross as a religious symbol, the “Ford” was worshipped and dates were expressed as “A.F.” meaning “after Ford.” 85 Similarly, Kurt Vonnegut’s Player Piano depicts a dystopia controlled by technology and corporations.86 Edward Bellamy pictured the state as a national corporation in his book Looking Backward, published in 1888, about a young man who falls asleep only to awaken in the year 2000.87
Each metaphor or theory regarding the nature of corporations has some merit, and multiple views can and do coexist. Professor Litowitz, in setting forth his view of the modern corporation as a “modern deity,” wrote that “[h]opefully others will view the corporation through the lens of cultural studies, history, literary criticism, [and] sociology” as a means of “balanc[ing] out the economic approach that so dominates corporate scholarship.”88 In this Article I respond, in part, to that call, and add the following theory: that multinational corporations increasingly operate in many ways like sovereign nations.
