January 6, 2011
Hayden and Bodie on the Unraveling of 'Nexus of Contracts' Theory
Grant Hayden and Matthew Bodie have posted a paper forthcoming in the Michigan Law Review entitled "The Uncorporation and the Unraveling of 'Nexus of Contracts' Theory." Here's the abstract:
This is a review of The Rise of the Uncorporation, by Larry E. Ribstein (Oxford University Press 2010). The Rise of the Uncorporation gives a compelling account of the increasing reliance on business forms other than the corporation. These new organizational forms - such as limited liability companies, limited liability partnerships, partnerships, and the like - give businesses greater freedom to structure themselves in ways that best facilitate their particular needs. And this, according to Ribstein, is an unqualified good, for it allows firms to operate more efficiently than if they were forced to assume an intensely regulated form.
Like most stories, though, this one has a heavy, and here it is the corporation. The corporate form, which dominated the landscape for much of the twentieth century, is contrasted with the uncorporation and presented as the product of forced, not free, choice. This is, perhaps, the most surprising (and welcome) aspect of the book, for the corporation has long been theorized as a product of contractual freedom and championed for its resulting efficiency. Now that we (with Ribstein’s help) have dispensed with the myth that the corporation is merely a nexus of contracts, we can focus our attention on the significant role that government plays in all forms of organizational form, corporate and otherwise.