The Effects of Shareholder Primacy, Publicness, and “Privateness” on Corporate Cultures

There is widespread belief in both scholarship and business practice that internal corporate cultures materially affect economic outcomes for firms. In turn, there is also a growing belief that corporate governance arrangements materially affect corporate cultures. If this is true, it suggests an intriguing three-link causal chain: governance choices influence corporate performance, at least in part via their effects on internal culture. This essay, written for the “Berle XI” symposium, explores that possibility. This subject is important to lawyers and legal scholars because of the symbiotic nature of law and governance, with an increasing risk of enhanced corporate criminal and civil liability when cultures are judged to be deficient. Finding the right place for culture in governance is a heavy lift. To this end, the first part of the essay introduces the battle over corporate cultures as part of a broader contestation about primacy in corporate governance, offering a perspective on the meaning of corporate culture, its place in political debates over corporate responsibility, and its usefulness to corporate law. The first part also tries to define with more clarity the differences between the cultural norms of shareholder primacy and publicness. The second part turns the reader’s attention to the overwhelmingly diverse scholarly perspectives on corporate culture and the place of corporate culture within the overarching canopy of social culture. The essay then moves on to ask about the work being done by corporate culture in terms of both law and governance, and the extent to which this can or should be thought of in functionalist terms. Then comes the main pay-off: an assessment of arguments in light of all the foregoing about the cultural causes and effects about shareholder primacy, publicness and “privateness.” Suppose managerialism triumphed in the governance wars so as to gain its desired level of autonomy from shareholder pressures for boards and managers. Would we then expect to see a cultural shift inside corporations toward greater honesty and civil engagement, and if so why? If not, what then? The essay concludes with a closer look at the politics surrounding the corporate culture wars