The Place of Corporate Lawmaking in American Society
hTe P lace of Corporate Lawmaking in American Society
Fenner Stewart Jr. 0 1
0 Fenner Stewart Jr. Th e Place of Corporate Lawmaking in American Society , 23 Loy. Consumer L. Rev. 147 (2010). Available at:
1 Adj. Prof. , York University, Osgoode Hall Law School
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FennerStewart, Jr.*
I. Introduction
can be traced to Karl
T hPeolacnoynic'sepTt heofGr"eeamtTberdadnesdfonremssa"tion.' The book is a history
of the commoditization of English society from the eighteenth
century forward, recounting how markets became unstitched
from the fabric of society. As markets became more distinct from
everyday life, society began to change in order to meet trending
economic needs. One example of this transformation was the
enclosure of English farmlands and the end of the ancient system
of farming on land that was considered free for the use of all.
This created a radical disruption in social function. Without
farmland, thousands were forced to move to sites of industrial
production, generating a radical shift in society from traditional
agrarian life to one that was dominated by factory work. In other
words, Polanyi's book explains how markets became
disembedded from society and then how these disembedded
markets altered social activities as they became re-embedded into
market function.2
Polanyi never believed that society could become
completely embedded within the market function, concluding
that society's members would never tolerate a market function
which completely overwhelmed their social needs. This resistance
* B.A., University of Prince Edward Island; LL.B. & LL.M., University of
British Columbia; Ph.D. Candidate & Adjunct Professor, York University
Osgoode Hall Law School; Academic Director 2009-2010, CLPE Comparative
Research in Law & Political Economy Network
(www.comparativeresearch.net). I am grateful to Peer Zumbansen and
Cynthia Williams for their comments on this paper, and also to Stephen
Bainbridge and Mark Roe for their comments on an earlier version.
'KARL POLANYI, THE GREAT TRANSFORMATION (2d ed. 2001).
2 Mark Granovetter, Economic Action and Social Structure: The Problem
of Embeddedness, 91 AM. J. Soc. 481, 482 (1985).
to market pressures is what Polanyi called the "double
movement." 3 Simon Deakin has elaborated on Polanyi's idea of
the double movement, explaining how it also operates in reverse.
In other words, market actors will resist projects for greater
equality when these social demands compromise market
functionality. The balance between favoring the needs of markets
with the needs of society has fluctuated throughout the twentieth
century.s According to Deakin, the pendulum is swinging toward
the modern economy's increased need for markets as societal
governance has become ever more closely tied to the expectations
of investors.' Today, certainly, the pendulum appears to be
swinging in a different yet still unknown direction.'
In his seminal article of 1985, Mark Granovetter
elaborated upon Polanyi's disembedded market theory and
expanded it into a more complete (and complex) sociological
theory of how embedded social behavior affects economic
institutions. Granovetter argued that to adequately study
economic institutions, like corporations, one must take into
consideration how the behavior of such institutions is
"constrained by ongoing social relations." 9 Granovetter's
central contention was that when economic reasoning ignores an
institution's social embeddedness, such reasoning is blinded to
the actual social relationships within it and, accordingly, it is
unlikely one will be able to understand how a particular
institution functions (or fails to function).10
Granovetter's call to scrutinize the social relationships
that affect an organization's function has been seen as a
sociological plea explaining why institutions behave as they do.
He criticized the assumptions of New Institutional Economics by
highlighting how actual social networks inside and outside of the
corporation operate in ways that handcuff economic thought.
For a detailed commentary on the double movement, see Fred Block,
Introduction to POLANYI, supranote 1, at xxiii-xxvii.
4 Simon Deakin, The. Rise of Finance: What Is It, What Is Driving It,
What Might Stop It? A Comment on "Financeand Labor: Perspectives on
Risk, Inequality and Democracy " by Sanford Jacoby, 30 COmP. LAB. L. &
POL'Y 67, 67-69 (2008).
s Block, supranote 3, at xxvii - xxvix.
6 See Deakin, supranote 4, at 67-68.
See Lawrence Mitchell, Financialism:A Lecture Delivered at Creighton
University School of Law, 43 CREIGHTON L. REv. 323 (2009).
' Granovetter, supra note 2.
9Id. at 482.
10Id. at 481-82.
Specifically, Granovetter took issue with Oliver Williamson's
theory of transaction costs, arguing that while there was a certain
analytical value to Williamson's eventually highly influential
market/hiera (...truncated)