centre’, ‘an instrument of power and authority’.40 As such, one can ask it other questions than those raised by economists, questions of governance. ‘Who really controls a company? What power does it exercise? To whom should the power-wielders be accountable, and how? Is the company a “self-perpetuating oligarchy,” as some have charged, or is it a type of republic?’41
The difficulty, Eells pointed out, is that the private government of business ‘is decidedly not a democracy, and yet, it is no longer possible for a really big business to be an autocracy’.42 The path of corporate constitutionalism is narrow: what political space does it still have, on the basis of this dual diagnosis, between an autocracy that it considers untenable on the one hand and, on the other, a democracy it rejects? Actually, not much.
But we need to be careful, warned a 1958 report from the Rockefeller Foundation, for if we accept this, ‘the same sort of question that can be asked of other governments can also be asked of these private governments’, and if ‘the democratic ideals by which the state is properly judged may also be applied to the ways in which the lives of men are governed in the private sector’,43 then we will soon face a major problem: ‘Very simply, the corporation is an authoritarian form of industrial government in a purportedly democratic society’.44 Or, if you apply the standards of political legitimacy to it, there will necessarily be a contradiction ‘between the democratic tradition of government by consent and the inevitably hierarchical and authoritarian procedures of business’.45
There was even, some thought, a great danger in this. If you shout from the rooftops that ‘management has the worker’s best interests at heart’, warned Peter Drucker in 1950, then ‘management can be legitimate if only it tries’. But how far can it go? It is very unwise to make this kind of promise, as is ‘proven by the one experience that is strictly comparable to modern industrial paternalism: modern colonial paternalism’.46 By mistakenly adopting a rhetoric of ‘government for the people’, the colonialist discourse has placed itself at odds with its ‘obligation to manage the colony in the economic, political or strategic interest of the home country’.47 This kind of language was catastrophic because rather than achieving ‘the one thing that mattered: acceptance by the natives as a legitimate government […] it made the colonial peoples conscious of the split between the ideals of colonial government and its responsibility toward the economic interests of the home country’.48 And this, says Drucker, is a constant in history: ‘All Enlightened Despotisms have ended in revolution’.49 And if people persist, ‘Enlightened Managerial Despotism’ will be no exception to the rule.
This was also what the neoliberals of the time feared. Milton Friedman pulled the emergency cord very early on. In March 1958, at a seminar held under the gilded mouldings with their griffon decorations in San Francisco’s Drake Hotel, the Chicago economist adopted a solemn tone: ‘If anything is certain to destroy our free society, to undermine its very foundations, it would be a wide-spread acceptance by management of social responsibilities in some sense other than to make as much money as possible. This is a fundamentally subversive doctrine’.50 By dint of repeating everywhere that managers are ‘civil servants rather than the employees of their stockholders then in a democracy they will, sooner or later, be chosen by the public techniques of election and appointment’.51
In the name of what, after all, are business leaders appointed by shareholders via the board of directors? There is, he replies, no justification for this state of affairs, except that the former are agents in the service of the latter, and if this postulate falls, everything collapses with it. If you accept that the business leader is a kind of private agent of the public, you will inevitably conclude that ‘it is inadmissible that such public officials […] be named as they are now. If they really serve the public, they must be elected via a political process’.52 By admitting that they exercise governmental functions, managers are unwittingly exposed to criticism, and soon to much worse. For, under the deceptive charms of ethics, Friedman senses the tracks of a Soviet tank: ‘the doctrine of “social responsibility” involves the acceptance of the socialist view that political mechanisms, not market mechanisms, are the appropriate way to determine the allocation of scarce resources to alternative uses’.53
Considered as a form of government, what does big business look like? It looks bad. It looks like a regime where a caste of unelected leaders exercises undivided power. As one British anarchist concluded in the early 1960s:
The political system we find in industry is, on the contrary, one in which the government (the management) is permanently in office, is self-recruiting, and is not accountable to anyone, except formally to the shareholders […]. At the same time, the vast majority of those who are required to obey this permanent government have not citizenship status at all, no right to vote for the leaders who form the government. The only rights that the masses have in this system are the right to form pressure groups (trade unions) seeking to influence the government and the right to withhold their co-operation (the right to strike). Such a political system […] no more deserves to be called democracy […], than does the oligarchical political system of 18th century Britain.54
Big business employees are not only deprived of political rights, but also of certain freedoms otherwise recognized as imprescriptible: ‘For nearly two centuries’, wrote a professor from Harvard Business School, ‘Americans have enjoyed freedom of press, speech, and assembly, due process of law, privacy, freedom of conscience, […]. But Americans have not enjoyed these civil liberties in most companies, […]. Once a U.S. citizen steps through the plant or office door at 9 a.m., he or she is nearly rightless until 5 p.m., Monday through Friday. The employee continues to have political freedoms, of course, but these are not the significant ones now’.55
The fundamental problem, the major ideological aporia, is that liberal democratic theory provides no consistent justification for this asymmetry of treatment. ‘Capitalism’, said the economist of self-management Jaroslav Vanek, ‘is based on property rights, and democracy on personal rights. […] One of the main reasons why the western world is so schizophrenic is that we have political democracy and economic autocracy’.56
In the 1960s and 1970s, in response to the workers’ revolts, philosophers and economists of a critical turn of mind developed theories of economic democracy. The form of authority still prevalent in business – the one that Marx described as being that of a ‘private legislator’ with ‘autocracy over his workpeople’57 – appears to them as a remnant of archaic power relations, a bastion of tyranny that escaped the democratic revolutions.58
In Spheres of Justice, Michael Walzer takes the example of Pullman, an American village founded in the late nineteenth century by a wealthy industrialist, George Pullman, who, because he was owner of the city walls and the soil on which it was built, claimed to have the right to ‘govern’ the inhabitants in the ‘same way a man governs his house, his store, or his workshop’.59 In his city, Pullman was a private autocrat. No elections, no civil liberties, no proper justice, let alone any right of assembly or right to demonstrate. Believing that the ownership of a city was incompatible with the theory and spirit of its institutions, the Illinois Supreme Court put an end to this state of affairs. Walzer’s question: this kind of power, applied to the inhabitants of a city, is considered incompatible with the principles of liberal democracy, but was the power that Pullman exercised over the workers in his company really different? No, he answers. ‘If this sort of thing is wrong for towns, then it is wrong for companies and factories’.60 In both cases, the same standard of self-determination must prevail: ‘with regard to political power democratic distributions can’t stop at the factory gates. The deep principles are the same for both sorts of institution. This identity is the moral basis of the labor movement […] of every demand for progress toward industrial democracy’.61
The ideas propounded by Berle and Means had thrown the traditional discourse of legitimization of the
