Protecting Markets from Society: Non-Pecuniary Claims in American Corporate Democracy

The state incentivizes investors to entrust capital to public corporations by granting shareholders enforceable rights over managers. However, these rights create legal “access points” through which social movements can make nonpecuniary claims on the corporation. I use original historical research on the Securities and Exchange Commission’s administration of federal securities law to show that concern over nonpecuniary claims motivates the state to enact the role of “market protector.” In this role, the commission insulates managers of corporations from shareholders’ claims that it deems illegitimate because they are insufficiently profit-oriented. Thus the inverse of Polanyi’s observation that society protects itself from markets is also true: the state creates market boundaries so that “always embedded” markets function more like autonomous, profit-oriented markets. Accordingly, the extent to which corporate democracy represents general, social interests or narrow, profit-oriented interests is largely a function of political contestation and state policy.