The Corporation as a Nexus of Conflicts: Anomie of the People

Abstract Chapter 6 reviews the familiar ‘nexus of contracts’ approach to the corporation that emerged from economic agency theory, an approach that both rejects the characterization of shareholders as ‘owners’ yet supports a shareholder wealth-maximization norm. The chapter then goes on to analyse other key corporate characteristics, including ‘capital lock-in’ and limited liability, arguing that, as an important mechanism for integrating resources and mediating competing interests among its various stakeholders, the corporation may thus be considered not only as a ‘nexus of contracts’ but also as an order-enhancing ‘nexus of conflicts’. However, although the corporation may well be an ingenious device for balancing or mediating competing interests and focusing productive activity in order to thrive in a competitive marketplace, it is also important to consider the impact of a competitive system on those who gain few or none of its material awards. In an economic system that depends so mightily upon competition—lavishly rewarding success and indifferent to the consequences of failure—what may happen if a critical mass of people come to feel—and not without reasons—that they will never be able to triumph and win more than a meagre share of society’s ‘prizes’ under the current terms of competition? Here the chapter draws on the insight of twentieth-century sociologist Robert K Merton, and in particular his analysis of the potential dangers of ‘anomie’ for individuals and potentially for society as a whole.