ABSTRACT
The chapter develops an authority-based conception of the firm. It begins by examining the function of authority as a solution to collective action problems, and exploring the major challenge of authority, namely its alleged incompatibility with autonomy. Departing from the accounts that relate authority with a passive submission of subordinates, it defines authority as a non-coercive form of power and focusses on the reasons why workers obey. Building on Joseph Raz’s “service conception of authority”, it argues that workers accept authority because they see it as facilitating mutually beneficial cooperation between people with divergent interests. Managerial authority is justified in that it embodies the social and productive interdependence that characterises collective productive ventures. However, the function performed by authority does not make it legitimate, nor does ownership of productive assets legitimate its exercise. The chapter then addresses the question: “what conditions must managerial authority meet for workers to have a duty to subject their will to those of authority?”. The answer is that if managerial authority is to be legitimate, it must (also) serve the workers’ interests. This calls for a democratic type of firm governance, with workers participating in decision-making instances.
