ABSTRACT
The central issues of corporate law, which will occupy US citizens into the next century, will be based upon the role of share capital in the modern corporation. Share capital legitimizes the existing corporate governance structure in at least three ways. First, share capital makes it possible to argue that the corporation is private property owned by natural persons, thus reducing the force of arguments in favor of governmental interference with management control. Second, managerial control is justified by management’s supposed accountability to shareholders. Third, although Adam Smith was not talking about the modem corporation, his image of an invisible hand benefiting society when owners operate their property in their own self-interest serves to support shareholders’ supposed delegation of control to management on grounds of efficiency. The power coalition theory provides a theoretical basis for the stakeholder model because it supports departures from existing governance structures without raising market model fears of declining social welfare.
