Towards the start of the twentieth century, big businesses were primarily created through mergers engineered by Wall Street financiers. The federal government enacted antitrust statutes to check the power of trusts that put numerous competitors under the control of one entity to stifle competition. Corporate bigness has never been precisely defined, and for a period was judged by a variety of metrics such as a corporation’s assets or the number of its employees. A century later, the size of a corporation is now mainly measured by its market valuation. Even a company with billions of dollars in assets will have a low market value if it does not persuade investors that it will continue to generate profits. Without the ability to access capital, a corporation will not have the economic power that characterizes a big business. Because it regulates the disclosure of information that is the basis for a company’s stock price, federal securities law is now an essential part of the legal framework governing the conduct of big business.

There is renewed interest in checking the power of big business.  Antitrust law is the main arena in which ongoing debates about corporate power occur. Populist reformers have challenged the assumption that antitrust should be limited to the narrow goal of consumer protection. In contrast, securities regulation has not been conventionally viewed as a way of regulating the power of large corporations. Many corporate reformers view investor disclosure mandates as ineffectual in affecting corporate behavior and instead focus on developing substantive reforms to corporate governance.

For Louis Brandeis, who made important contributions to both antitrust and securities law, disclosure was an important mechanism for regulating the problem of big business. Brandeis thought that trusts were only possible because financiers duped investors into funding their formation. He believed that with sufficient disclosure, the inefficiency of the trusts would be revealed. The argument that disclosure would regulate corporate power was not only advanced by social reformers. Economists such as William Ripley and John Bates Clark made similar arguments as Brandeis prior to the passage of the federal securities laws. While the belief that large companies are inherently inefficient is outdated, it is worth noting that one of the original goals of securities regulation was to prevent unchecked growth of corporate power.

This Article situates securities law within a regulatory framework that is meant to limit the power of big business. It begins by arguing that the amorphous concept of corporate economic power can be understood as reflecting three types of power. Market power permits a corporation to charge prices sufficient to generate profits that justify a high market valuation. Managerial power is necessary to ensure expert decision-making within a large organization and to sustain market power and profits. Allocative power reflects the ability of companies to allocate societal resources by raising capital and is typically reflected by the company’s stock market value. These three types of power are necessary for a corporation to exercise significant economic power. A separate regulatory framework governs each category of power. Antitrust law addresses abuse of market power, corporate law circumscribes managerial power, and securities law ensures that allocative power is deserved.

Federal securities law primarily seeks to ensure that only companies with sufficient prospects of market power and competent managers are trusted to allocate substantial amounts of public investor funds. This is a goal with broad support because it can be understood as not only regulating corporate power but ensuring the efficient allocation of resources. By the 1970s, securities law had shifted from its corporate power roots to mainly supporting efficient markets by protecting investors from fraudulently inflated stock prices.

Over time, securities law has circled back towards regulating big businesses. Efforts to ensure that markets accurately value the economic prospects of public companies, such as the Sarbanes-Oxley Act of 2002, have resulted in a regulatory regime that effectively presumes that public companies are large. Only sizeable companies can easily afford the regulatory burdens of securities law. As public companies have grown larger and more powerful, arguments that social responsibility concerns are relevant in allocating investor capital to such corporate giants have gained traction. Ironically, regulation responsive to such concerns could further encourage bigness in public companies.

An interesting implication of a corporate power approach is that uniform securities disclosure requirements may not always be appropriate. The federal securities laws generally treat most public companies the same without making substantial distinctions based on corporate size. Instead, this Article contends that the largest public companies should be subject to more stringent disclosure requirements than the typical public company. Federal securities regulation should require public companies with market valuations of $100 billion or more to comply with heightened Environmental, Social, and Governance (ESG) disclosure. In doing so, securities law will help ensure that investors can monitor whether the most powerful public companies are using their power to allocate capital ethically.

In analyzing the problem of economic corporate power, this Article develops a law and political economy reading of the federal securities laws. Allocative efficiency is the primary rationale for mandatory disclosure regulation, but disclosure can also serve to check the allocative power of the very largest public companies. Viewing securities law through the lens of corporate power reveals new possibilities for approaching the regulation of public companies.