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These are perilous times for American democracy. Among the threats, many point to the power of corporations. This article examines that threat by considering a series of dualisms characterizing the relationship between corporations and democracy. This begins with a look at the anti- as well as the pro-democratic impacts of the earliest corporations and the paradoxes with respect to democracy created during the evolution of corporate law. The article then looks at internal corporate governance (so-called “corporate” or “shareholder democracy”) to show how, on the one hand, it contains features addressing some of the greatest current threats to American democracy, while, on the other hand, it operates as a fundamentally undemocratic vote buying system. This dualism in internal corporate governance, in turn, reflects a clash in the purpose for corporate or shareholder democracy: Is the purpose economic efficiency, or is it democratic legitimacy for those controlling the often-vast power of the corporation?

Finally, this article addresses the dualism in the internal and external aspects of the relationship between corporations and democracy by situating the governance and impact of corporations within the broader democratic governance of society. Specifically, individuals in charge of corporations lack democratic consent and accountability for their decisions unless either internal corporate governance is consistent with democratic values; persons without a voice through internal corporate governance can avoid the impact of such decisions by not dealing with the corporation; or democratically elected federal, state, and local governments can intervene when externalities and market failures render refusal to deal unrealistic. This, in turn, suggests the need to limit excessive political influence by those in charge of corporations or to reform the anti-democratic aspects of internal corporate governance.

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Northeastern University Law Review





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