ABSTRACT
The social costs of hostile takeovers highlighted a problem lurking within corporate law’s traditional commitment to shareholder primacy. There are three elements to the communitarian critique of the contractarians’ view of corporate law. The first challenges key assumptions about the feasibility of nonshareholder self-protection through bargain. The second is more fundamental. Third, communitarians have offered a positive vision of corporate relationships that differs from that of the contractarians and has correspondingly different normative implications. Communitarians assess the social costs of shareholder wealth maximization more broadly than do contractarians. In the corporate law context, a structure of entitlement rules defines the respective rights of shareholders and the various nonshareholder corporate constituencies. Corporate law contractarians talk about the corporation as a product of consent by the various corporate constituencies to the terms of their contracts with each other. Contractarians have emphasized repeatedly that the well-being of corporate shareholders depends on the extent to which corporate law is contractual as opposed to regulatory.
