The franchise view of the corporation: purpose, personality, public policy

The nature and purpose of a business corporation are among the most intensely debated issues in today’s corporate law. This chapter broadens the scope of the debate by taking a macro-systemic perspective on corporate personality and purpose. It argues that the modern business corporation is an inherently hybrid public-private entity, an institutional device for conditional outsourcing to private parties of certain essentially public powers and functions. In this view, the corporate form is best described as a “franchise” arrangement in which the public is franchisor and private parties collectively serve as franchisees. Accordingly, corporate purpose is properly analyzed not in terms of prioritizing certain firm-level constituencies but in terms of maintaining the system-level balance of public and private powers. Using the example of U.S. banks as explicitly “purposeful” corporations, the chapter explores these dynamics and discusses their implications for corporate law and policy.