We analyze whether non-shareholder constituencies are better protected with internal corporate law reform or with external regulation. We reply to Professor Aneil Kovvali’s article, Stark Choices for Corporate Reform, that criticizes some of our previous output, in which we warned that a stakeholderist corporate law reform would stymie efforts to achieve effective stakeholder protections with external regulation. In his article, Kovvali...
Corporate Governance
For decades, corporate law scholars insisted on a simple division of responsibilities. Corporations were told to focus exclusively on maximizing financial returns to shareholders while the government tended to all other concerns by adopting new regulations. As reformers challenged this orthodoxy by urging corporations to take action on pressing social problems, defenders of the status quo have responded by suggesting that these efforts could be...
The conventional view of corporate governance is that it is a neutral set of processes and practices that govern how a company is managed. We demonstrate that this view is profoundly mistaken: For public companies in the United States, corporate governance has become a “system” composed of an array of institutional players, with a powerful shareholderist orientation. Our original account of this “corporate governance machine” generates...
Companies with a dual-class structure have increasingly been involved in high-profile battles over the reallocation of control rights. Google, for instance, sought to entrench its founders’ control by recapitalizing from a dual-class into a triple-class structure. The CBS board, in contrast, attempted to dilute its controlling shareholder by distributing a voting stock dividend that would empower minority shareholders to block a merger it perceived...
The following Piece reflects the revised and extended remarks given by Barbara Novick at the Harvard Roundtable on Corporate Governance, November 6, 2019. Thank you to Lucian Bebchuk for inviting me to share some thoughts on investment stewardship to kick off the 2019 Corporate Governance Roundtable. I. Academic Theories on Investment Stewardship Corporate governance and […]
In 2018, the Delaware courts confronted an extraordinary crisis of corporate governance: an open conflict between a corporation’s board of directors and its controlling shareholder. The board of CBS Corporation, a large media firm, voted to issue a dividend that would have diluted the shares of its controlling shareholder, National Amusements, Inc. (NAI). The dividend would have severed NAI’s control, leaving the board in sole command of CBS’s...
Index funds own an increasingly large proportion of American public companies. The stewardship decisions of index fund managers—how they monitor, vote, and engage with their portfolio companies—can be expected to have a profound impact on the governance and performance of public companies and the economy. Understanding index fund stewardship, and how policymaking can improve it, is thus critical for corporate law scholarship. In this Article...
Introduction In the years since Citizens United v. FEC, corporate-political-spending disclosure has become an increasingly heated public policy issue. The portion of the Court’s opinion that championed shareholder rights to make decisions about corporate political speech generated a substantial, interdisciplinary literature, and shareholders responded by demanding political-spending disclosure through a bevy of shareholder proposals. However, […]
The problem of managerial agency costs dominates debates in corporate law. Many leading scholars advocate reforms that would reduce agency costs by forcing firms to allocate more control to shareholders. Such proposals disregard the costs that shareholders avoid by delegating control to managers and voluntarily restricting their own control rights. This Essay introduces principal-cost theory, which posits...