VOLUME 166, ISSUE 3 February 2018

Despite the dominant role corporations play in our economy, culture, and politics, the nature and purpose of corporations remain hotly contested. This conflict was brought to the fore in the recent Supreme Court opinions in Citizens United and Hobby Lobby. The prevailing narrative for the past quarter century has been that corporations “belong” to shareholders and should pursue “shareholder value,” but support for that approach, which has long been justified as essential for managerial accountability, is eroding. Its proponents have retreated to the position that corporations should seek “long‐term” shareholder value. Yet, as this Article shows, when shareholder value is interpreted to mean “long‐term” shareholder value, it no longer offers the sought‐after managerial accountability.

What can? This Article argues that systems theory offers an answer. Systems theory is a well‐developed design and performance measuring methodology routinely applied in fields such as engineering, biology, computer science, and environmental science. It provides an approach to understanding the nature and purpose of corporate entities that is not only consistent with elements of the many otherwise‐conflicting visions of the corporation that have been developed, but also with important and otherwise difficult‐to‐explain features of corporate law and practice. It recognizes, and explains, the possibility and desirability of corporations pursuing multiple goals. It also offers proven methods for measuring and improving corporate performance—methods that highlight the critical role of corporate sustainability, and specific strategies to promote it. Finally, it cautions that, by ignoring the lessons of systems theory, shareholder value thinking may have encouraged regulatory and policy interventions into corporate governance that are not only ineffective, but destructive.

Courts and legal observers have long been concerned by the scope of authority delegated to administrative agencies. The dominant explanation of delegated authority is that it is necessary to take advantage of administrative agencies’ expertise and expansive rulemaking capacity. Though this explanation makes sense in many settings, it falters in many areas and has given rise to a number of longstanding puzzles, such as why Congress does not invest in its own institutional capacity.

Unrecognized in this debate over the puzzles of delegation is that Congress may delegate to take advantage of another distinctive attribute of administrative decisionmaking: the credible rationality and transparency afforded by administrative procedures. Drawing on positive political theory, this Article shows that Congress may delegate, not for expertise, but for public trust, which the legislature itself (appropriately) lacks due to concerns over the influence of special interest lucre, among other reasons. The procedural constraints that bind administrative agencies, as made credible by judicial review, encourage fairness and rationality and discourage the most egregious abuses of lawmaking authority. In delegating, Congress takes advantage of these credible constraints, which the institution cannot easily develop internally; and in relieving Members of Congress from public suspicion, it also advances their parochial electoral objectives.

This vision of the administrative state accounts for a number of features of our legal and political system. It explains, for instance, why Congress has generally not invested in greater internal capacity—because trust, not capacity is the binding constraint; why, as a positive matter, fairness and transparency are essential to administrative procedures; and why, if those administrative procedures undergo erosion, as some suggest has occurred, anxiety about administrative lawmaking might arise. The Article concludes with a discussion of normative and doctrinal implications of this trust‐based conception of administration, including a call for reorienting administrative procedures to more fully promote credible rationality.