Who Speaks for the Corporation? A Hobbesian Theory of Managerial Authority and Shareholder Responsibility

From where does management acquire its authority to act in the name of the corporation? The orthodoxy that shareholders alone authorise management is frequently criticised for treating the corporation as the property of shareholders, rather than as a distinct legal person in its own right (Ciepley, 2013; Deakin, 2012; Robé, 2011; Stout, 2012). However, Hobbes’s theory of incorporation in Leviathan shows this influential critique of shareholder primacy to rest on a non sequitur. It does not follow from the (correct) observation that the corporation is a legal person to the conclusion that its interests are distinct from those of shareholders. Just as individuals become citizens of a state when they authorise a sovereign, shareholders are incorporated when they authorise a representative assembly to act in their interests. Shareholders thereby form a single corporate person and are ultimately responsible for whatever is done in their corporate name.