Corporate Law and The Democratic State

Two prominent progressive senators, Bernie Sanders and Elizabeth Warren, have recently proposed that employees should be allowed to elect forty to forty-five percent of the directors of large corporations. If implemented, such a reform would bring U.S. corporate law substantially closer to European countries like Denmark, Germany, and Sweden, where worker codetermination has long been a central feature of corporate governance.

An extensive body of theoretical and empirical scholarship analyzes codetermination’s economic impact on corporations and their employees. This Article focuses on a different issue. It examines codetermination’s potential for protecting our democracy against the dangers inherent in the accumulation of extreme wealth and power by private corporations.

Concentrated corporate wealth creates the risk that corporations will use their resources to undermine democratic institutions. This Article argues that codetermination can mitigate this risk by splitting corporate voting rights between shareholders and employees, thereby playing a role that is broadly similar to that of the Constitutional separation of powers.

a.Ben H. and Kitty King Powell Chair in Business and Commercial Law, the University of Texas School of Law. For comments on earlier versions of this paper we are grateful to Oren Bracha, Luca En-riques, Joey Fishkin, Willie Forbath, John M. Golden, Jeffrey Gordon, Scott Hirst, Marcel Kahan, Wil-liam Moon, Susie Morse, Ed Rock, Elizabeth Pollman, Roberta Romano, Vasile Rotaru, Michael Sim-kovic, Holger Spamann, Andrew Tuch, Thom Wetzer, Mark Weinstein, Abe Wickelgren, Yishai Yafeh, Toshiyaki Yamanaka, Javier Paz Valbuena, Andrew Verstein, Kristin van Zwieten, as well as to participants at the University of Texas, Oxford University, and CLAWS workshops. For excellent research assistance, we are indebted to Stella Fillmore-Patrick, Lana Levien, and Emilie Pagano.

b.Horst Eidenmüller, Chair for Commercial Law, The University of Oxford, and Professorial Fellow, St. Hugh’s College, Oxford.

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