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One Share, One Vote: The Plutocratic Evolution of the Corporation

Anthony Kammer

In response to my short primer on the corporation, Professor Colleen Dunlavy of the University of Wisconsin-Madison sent her interesting article, From Citizens to Plutocrats: Nineteenth-century  Shareholder Voting Rights and Theories of the Corporation.

Given the explosion in income inequality between America’s managerial class and its average employees, the article a useful corrective to the idea that such outcomes are a natural product of market forces. The historical account she provides goes a long way in contesting the “tendency to treat plutocratic governance as natural,” and it reveals how exceptional the United States has been in authorizing such uniquely in-egalitarian distributions of power within the corporation. 

In the article, Dunlavy describes how the corporation was transformed, over the course of several decades, from a relatively democratic institution built on a principle of “one shareholder, one vote” into the more plutocratic “one share, one vote” institution we currently associate with the corporate form. From the introduction:

[The] essentially timeless view of the distribution of power among shareholders … is simply wrong. Shareholder power was not always “plutocratic,” that is, directly proportional to the amount of investment. Through the early decades of the nineteenth century, corporate governance was much more “democratic” than it came to be by the end of the century. Early norms put relatively little weight on the amount a shareholder had invested, and instead they tended to treat shareholders more like citizens in a relatively egalitarian polity. It was only at mid-century that democratic norms began to be pushed aside in the United States (but not elsewhere) by the modern practice of apportioning power among shareholders on the basis of their investment. This essentially historical process was an indispensable prelude to the great concentration of control that marked American corporations in the era of financial capitalism at the end of the century. In overlooking it, historians have inadvertently naturalized a particular, twentieth-century, and distinctively American form of corporate governance.

What’s interesting is that during this period, most of these changes took place, not through shareholder votes, but via the legislative system. State legislatures (presumably at the behest of wealthy people with greater lobbying power) overturned common law rulings and rebuilt the corporate governance system on the plutocratic voting model.

This plutocratic transformation is also important for the effects it had on subsequent constitutional law. Dunlavy argues that the conventional picture of how corporations came to be seen as inherently “private,” rather than as creations of public law, misses the impact that corporate de-democratization has had on the law.

It’s not an esoteric point. Citizens United and the corporate speech cases, not to mention the Lochner Era corporate rights cases, all depend on the idea that corporations are “private” entities with rights against government interference. Constitutionalizing the corporation has been a recurrant theme among conservative jurists interested in placing managerial activities beyond democratic oversight. 

To the extent that the corporate leadership is free to violate the rights of employees, waste shareholder money, pay itself exorbitant sums, and shield itself from political accountability, denaturalizing the corporate form needs to become a more important project for the left.