Purpose – This paper aims to analyse the governance structure of monasteries to gain new insights and apply them to solve agency problems of modern corporations. In an historic analysis of crises and closures it asks, if Benedictine monasteries were and are capable of solving agency problems. The analysis shows that monasteries established basic governance instruments very early and therefore were able to survive for centuries.Design/methodology/approach – The paper uses a dataset of all Benedictine abbeys that ever existed in Bavaria, Baden‐Wurttemberg, and German‐speaking Switzerland to determine their lifespan and the reasons for closures. The governance mechanisms are analyzed in detail. Finally, it draws conclusions relevant to the modern corporation. The theoretical foundations are based upon principal agency theory, psychological economics, as well as embeddedness theory.Findings – The monasteries that are examined show an average lifetime of almost 500 years and only a quarter of them dissolved as...
{"title":"The Corporate Governance of Benedictine Abbeys: What can Stock Corporations Learn from Monasteries?","authors":"K. Rost, Emil Inauen, M. Osterloh, B. Frey","doi":"10.2139/ssrn.1137090","DOIUrl":"https://doi.org/10.2139/ssrn.1137090","url":null,"abstract":"Purpose – This paper aims to analyse the governance structure of monasteries to gain new insights and apply them to solve agency problems of modern corporations. In an historic analysis of crises and closures it asks, if Benedictine monasteries were and are capable of solving agency problems. The analysis shows that monasteries established basic governance instruments very early and therefore were able to survive for centuries.Design/methodology/approach – The paper uses a dataset of all Benedictine abbeys that ever existed in Bavaria, Baden‐Wurttemberg, and German‐speaking Switzerland to determine their lifespan and the reasons for closures. The governance mechanisms are analyzed in detail. Finally, it draws conclusions relevant to the modern corporation. The theoretical foundations are based upon principal agency theory, psychological economics, as well as embeddedness theory.Findings – The monasteries that are examined show an average lifetime of almost 500 years and only a quarter of them dissolved as...","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"34 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122821368","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We expect competitors to act as each other's foes. Yet some companies own equity stakes in their competitors. The Article explores this phenomenon of companies owning about 5-15% of the competition and conjectures a few explanations for this investment strategy. The focus of the Article is on the 'barrier to team formation' motivation; investment in the competition that amounts to an anti-takeover mechanism. The Article suggests that companies invest in the competition to deter a third competitor from joining forces with the competition. This anti-takeover mechanism is unique, it is initiated and controlled by a person who is not a fiduciary of the company and who owes no duties to the company's shareholders, but rather is controlled by a competitor (who owns fiduciary duties to its own shareholders). While the managers enjoy the entrenchment provided by the anti-takeover mechanism, they do not control it. And unlike the customary anti-takeover mechanisms, the shareholders cannot bring a derivative suit to restrict it, there is no judicial review of the mechanism, and shareholder pressure cannot relieve it. Thus, the shareholders are vulnerable and are exposed to agency costs, while management is entrenched by this anti-takeover mechanism installed by the competitor. In order to prevent the anti-takeover effect of investing in the competition, the article proposes to amend the bidding rules and allow a special split bid that will level the playing field for potential bidders.
{"title":"Investing in the Competition","authors":"Mira Ganor","doi":"10.2139/SSRN.1135308","DOIUrl":"https://doi.org/10.2139/SSRN.1135308","url":null,"abstract":"We expect competitors to act as each other's foes. Yet some companies own equity stakes in their competitors. The Article explores this phenomenon of companies owning about 5-15% of the competition and conjectures a few explanations for this investment strategy. The focus of the Article is on the 'barrier to team formation' motivation; investment in the competition that amounts to an anti-takeover mechanism. The Article suggests that companies invest in the competition to deter a third competitor from joining forces with the competition. This anti-takeover mechanism is unique, it is initiated and controlled by a person who is not a fiduciary of the company and who owes no duties to the company's shareholders, but rather is controlled by a competitor (who owns fiduciary duties to its own shareholders). While the managers enjoy the entrenchment provided by the anti-takeover mechanism, they do not control it. And unlike the customary anti-takeover mechanisms, the shareholders cannot bring a derivative suit to restrict it, there is no judicial review of the mechanism, and shareholder pressure cannot relieve it. Thus, the shareholders are vulnerable and are exposed to agency costs, while management is entrenched by this anti-takeover mechanism installed by the competitor. In order to prevent the anti-takeover effect of investing in the competition, the article proposes to amend the bidding rules and allow a special split bid that will level the playing field for potential bidders.","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"45 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-05-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127211064","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We examine the effect of insider ownership on corporate value in India for the period of 2000-01 to 2003-04, using 1833 Bombay stock Exchange listed firms. In particular we have looked into the nature of relationship between insider's equity holding and firm value. While 'CONVERGENCE OF INTEREST' or 'MONITORING' HYPOTHESIS predicts a positive relationship, the 'ENTRENCHMENT' hypothesis predicts a negative one between insider shareholding and firm value. In India, most of the firm's have insiders/promoters as the dominant shareholder. The feature of family based governance system is so widely prevalent in Indian corporate sector that it closely matches to East Asian model. Nevertheless, this paper provides scientific evidence that the link between insider shareholding and firm value is non-linear in nature. We document a significant non-monotonic relationship. Tobin's Q first increases, then declines and finally moves up as ownership by insiders rises. The other finding of significance is that foreign promoter/collaborator shareholding is having a positive impact on firm value.
{"title":"Insider Ownership and Firm Value: Evidence from Indian Corporate Sector","authors":"Manoranjan Pattanayak","doi":"10.2139/ssrn.962307","DOIUrl":"https://doi.org/10.2139/ssrn.962307","url":null,"abstract":"We examine the effect of insider ownership on corporate value in India for the period of 2000-01 to 2003-04, using 1833 Bombay stock Exchange listed firms. In particular we have looked into the nature of relationship between insider's equity holding and firm value. While 'CONVERGENCE OF INTEREST' or 'MONITORING' HYPOTHESIS predicts a positive relationship, the 'ENTRENCHMENT' hypothesis predicts a negative one between insider shareholding and firm value. In India, most of the firm's have insiders/promoters as the dominant shareholder. The feature of family based governance system is so widely prevalent in Indian corporate sector that it closely matches to East Asian model. Nevertheless, this paper provides scientific evidence that the link between insider shareholding and firm value is non-linear in nature. We document a significant non-monotonic relationship. Tobin's Q first increases, then declines and finally moves up as ownership by insiders rises. The other finding of significance is that foreign promoter/collaborator shareholding is having a positive impact on firm value.","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"39 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115380435","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Japan has recovered from a ‘lost decade’ of economic stagnation over the 1990s. Anyway, it has been a ‘found decade’ for civil and criminal justice law reform, especially in corporate and securities law. Yet, have liberalisation and globalisation in those fields led to major changes in the ‘law in action’? Does this represent ‘Americanisation’ of Japan’s corporate governance system, focusing on shareholders rather than other key stakeholders such as ‘main banks’, core employees, and partners within diffuse corporate groups (keiretsu)? This version of our introductory chapter explains how our forthcoming book argues for a more complex ‘gradual transformation’. Such shifts are also found in many other post-industrial economies, but Japan appears to give greater emphasis given to certain modes of achieving change. The book brings together contributions from academics and practitioners from Japan, Australia, New Zealand, Canada and the United States. An early chapter introduces methodology for effective cross-country comparisons and for evaluating the burgeoning but divergent literature on Japanese corporate governance. The concluding chapter compares continuities and changes in Japan’s largest companies now and two decades ago. Other chapters cover ‘lifelong employment’, main banks, the untold story of closely-held companies, the limited uptake of the Committee-based governance form, and the procedural, substantive and FDI policy dimensions of takeovers law and practice.
{"title":"Japan's Gradual Transformation in Corporate Governance","authors":"L. Nottage, L. Wolff, K. Anderson","doi":"10.2139/ssrn.1121510","DOIUrl":"https://doi.org/10.2139/ssrn.1121510","url":null,"abstract":"Japan has recovered from a ‘lost decade’ of economic stagnation over the 1990s. Anyway, it \u0000has been a ‘found decade’ for civil and criminal justice law reform, especially in corporate and \u0000securities law. Yet, have liberalisation and globalisation in those fields led to major changes in the ‘law \u0000in action’? Does this represent ‘Americanisation’ of Japan’s corporate governance system, focusing on \u0000shareholders rather than other key stakeholders such as ‘main banks’, core employees, and partners \u0000within diffuse corporate groups (keiretsu)? This version of our introductory chapter explains how our \u0000forthcoming book argues for a more complex ‘gradual transformation’. Such shifts are also found in \u0000many other post-industrial economies, but Japan appears to give greater emphasis given to certain \u0000modes of achieving change. The book brings together contributions from academics and practitioners \u0000from Japan, Australia, New Zealand, Canada and the United States. An early chapter introduces \u0000methodology for effective cross-country comparisons and for evaluating the burgeoning but divergent \u0000literature on Japanese corporate governance. The concluding chapter compares continuities and \u0000changes in Japan’s largest companies now and two decades ago. Other chapters cover ‘lifelong \u0000employment’, main banks, the untold story of closely-held companies, the limited uptake of the \u0000Committee-based governance form, and the procedural, substantive and FDI policy dimensions of \u0000takeovers law and practice.","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"93 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122070595","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the UK's system for public oversight of financial and corporate governance disclosures by issuers and of auditors, taking account of the framework of European law and institutional arrangements within which that system operates. The paper examines the role of the public bodies that are responsible for oversight and how they relate to the Financial Services Authority (FSA). By presenting a detailed picture of this part of the UK's supervisory infrastructure, the paper demonstrates that there is a more complex allocation of institutional power than the impression that may be created by the emphasis on the FSA as the UK's single financial regulator. The paper also considers strategies that the various bodies employ to promote compliance so as to explain why analysis based exclusively on formal enforcement data is liable to be misleadingly incomplete. By seeking to improve the quality of the basic data about the UK and drawing out features of the system that may not be easy to capture in objective measurements, the paper contributes to the task of addressing the crucial question: what substitutes for the very heavy reliance on public enforcement in the form of penalties and other punitive measures that is associated with the United States in other credible and effective systems of regulation and supervision?
{"title":"Non-Enforcement Led Public Oversight of Financial and Corporate Governance Disclosures and of Auditors","authors":"K. Cearns, Eilís Ferran","doi":"10.2139/ssrn.1111779","DOIUrl":"https://doi.org/10.2139/ssrn.1111779","url":null,"abstract":"This paper examines the UK's system for public oversight of financial and corporate governance disclosures by issuers and of auditors, taking account of the framework of European law and institutional arrangements within which that system operates. The paper examines the role of the public bodies that are responsible for oversight and how they relate to the Financial Services Authority (FSA). By presenting a detailed picture of this part of the UK's supervisory infrastructure, the paper demonstrates that there is a more complex allocation of institutional power than the impression that may be created by the emphasis on the FSA as the UK's single financial regulator. The paper also considers strategies that the various bodies employ to promote compliance so as to explain why analysis based exclusively on formal enforcement data is liable to be misleadingly incomplete. By seeking to improve the quality of the basic data about the UK and drawing out features of the system that may not be easy to capture in objective measurements, the paper contributes to the task of addressing the crucial question: what substitutes for the very heavy reliance on public enforcement in the form of penalties and other punitive measures that is associated with the United States in other credible and effective systems of regulation and supervision?","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131859067","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We complement recent research (Ball et al. 2003) which suggests that country-level incentives (i.e. legal origin and the level of capital market development) are the main determinants of the quality of financial reporting. Using a newly developed Brazilian Corporate Governance Index (BCGI) we perform an experiment in the poor quality accounting and governance Brazilian environment. We find that superior governance practices at the firm-level and cross-listing have a first-order effect on the informativeness of accounting reports. The earnings quality of Brazilian firms with good governance is similar to the quality previously reported for firms based in common law developed countries.
我们补充了最近的研究(Ball et al. 2003)，该研究表明，国家层面的激励(即法律来源和资本市场发展水平)是财务报告质量的主要决定因素。利用新开发的巴西公司治理指数(BCGI)，我们在巴西质量较差的会计和治理环境中进行了实验。我们发现，公司层面的卓越治理实践和交叉上市对会计报告的信息量具有一阶效应。治理良好的巴西公司的盈余质量与以前报道的普通法发达国家公司的盈余质量相似。
{"title":"Firm-Level Incentives and the Informativeness of Accounting Reports: An Experiment in Brazil","authors":"Alexsandro Broedel Lopes, M. Walker","doi":"10.2139/ssrn.1095781","DOIUrl":"https://doi.org/10.2139/ssrn.1095781","url":null,"abstract":"We complement recent research (Ball et al. 2003) which suggests that country-level incentives (i.e. legal origin and the level of capital market development) are the main determinants of the quality of financial reporting. Using a newly developed Brazilian Corporate Governance Index (BCGI) we perform an experiment in the poor quality accounting and governance Brazilian environment. We find that superior governance practices at the firm-level and cross-listing have a first-order effect on the informativeness of accounting reports. The earnings quality of Brazilian firms with good governance is similar to the quality previously reported for firms based in common law developed countries.","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"29 13","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114050209","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A model of corporate governance must explain (i) why governance matters; (ii) variation in governance across firms (i.e., be responsive to the Demsetz and Lehn, 1985, critique); and (iii) the positive correlations found empirically between quality of corporate governance and corporate performance. The model presented here satisfies these three criteria. Moreover, the model explains the correlation between firm size and executive compensation and why empirical estimates of managerial incentives seem too low, among other phenomena.
{"title":"Firm Value and Corporate Governance: Does the Former Determine the Latter?","authors":"Benjamin E. Hermalin","doi":"10.2139/ssrn.1080090","DOIUrl":"https://doi.org/10.2139/ssrn.1080090","url":null,"abstract":"A model of corporate governance must explain (i) why governance matters; (ii) variation in governance across firms (i.e., be responsive to the Demsetz and Lehn, 1985, critique); and (iii) the positive correlations found empirically between quality of corporate governance and corporate performance. The model presented here satisfies these three criteria. Moreover, the model explains the correlation between firm size and executive compensation and why empirical estimates of managerial incentives seem too low, among other phenomena.","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"393 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-01-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121500423","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
E. Hotchkiss, Kose John, K. Thorburn, Robert M. Mooradian
This paper reviews empirical research on the use of private and court-supervised mechanisms for resolving default and reorganizing companies in financial distress. Starting with a simple framework for financial distress and a quick overview of the theoretical research in this area, we proceed to summarize and synthesize the empirical research in the areas of financial distress, asset and debt restructuring, and features of the formal bankruptcy procedures in the US and around the world. Studies of out-of-court restructurings (workouts and exchange offers), corporate governance issues relating to distressed restructurings, and the magnitude of the costs and the efficiency of bankruptcy reorganizations are among the topics covered.
{"title":"Bankruptcy and the Resolution of Financial Distress","authors":"E. Hotchkiss, Kose John, K. Thorburn, Robert M. Mooradian","doi":"10.2139/ssrn.1086942","DOIUrl":"https://doi.org/10.2139/ssrn.1086942","url":null,"abstract":"This paper reviews empirical research on the use of private and court-supervised mechanisms for resolving default and reorganizing companies in financial distress. Starting with a simple framework for financial distress and a quick overview of the theoretical research in this area, we proceed to summarize and synthesize the empirical research in the areas of financial distress, asset and debt restructuring, and features of the formal bankruptcy procedures in the US and around the world. Studies of out-of-court restructurings (workouts and exchange offers), corporate governance issues relating to distressed restructurings, and the magnitude of the costs and the efficiency of bankruptcy reorganizations are among the topics covered.","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133846143","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We survey the empirical literature on disproportional ownership, i.e. the use of mechanisms that separate voting rights from cash flow rights in corporations. Our focus is mostly on explicit mechanisms that allow some shareholders to acquire control with less than proportional economic interest in the firm (dual-class equity structures, stock pyramids, cross-ownership, etc.), but we also briefly discuss other mechanisms, such as takeover defenses and fiduciary voting. We provide a broad overview of different areas in this literature and highlight problems of interpretation that may arise because of empirical difficulties. We outline potentially promising areas for future research.
{"title":"One Share, One Vote: The Empirical Evidence","authors":"Renée B. Adams, Daniel Ferreira","doi":"10.2139/ssrn.987488","DOIUrl":"https://doi.org/10.2139/ssrn.987488","url":null,"abstract":"We survey the empirical literature on disproportional ownership, i.e. the use of mechanisms that separate voting rights from cash flow rights in corporations. Our focus is mostly on explicit mechanisms that allow some shareholders to acquire control with less than proportional economic interest in the firm (dual-class equity structures, stock pyramids, cross-ownership, etc.), but we also briefly discuss other mechanisms, such as takeover defenses and fiduciary voting. We provide a broad overview of different areas in this literature and highlight problems of interpretation that may arise because of empirical difficulties. We outline potentially promising areas for future research.","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"36 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115299390","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Many corporate law discussants think of themselves as picking up where Adolf Berle and E. Merrick Dodd left off in a famous, precedent-setting debate in the 1930s. The generally accepted historical picture puts Berle in the position of the original ancestor of today's shareholder primacy position while Dodd is cast as the original ancestor of today's corporate social responsibility (CSR). This Article shows that both categorizations amount to mistaken readings of old material outside of its original context. The Article corrects the mistakes, offering new readings of some of corporate law's fundamental texts, texts that recently reached their 75th anniversaries and include Berle's famous book with Gardiner C. Means, The Modern Corporation and Private Property. Seventy-five years ago the normative issue of the day was the appropriate policy response to the crisis of the Great Depression. Both Berle and Dodd addressed the issue from a corporatist perspective which views the corporation as an entity that operates as an organ of the state and assumes social responsibilities. In so doing Berle took on the fundamental question "for whom is the corporation managed" at a time when the answer had crucial implications for social welfare. In answering the question, Berle articulated a political economy that integrated a theory of corporate law within a theory of social welfare maximization. It was a great accomplishment, but it was in a context very different from today's debates about corporate management and responsibility. Accordingly, Berle was not advocating shareholder primacy as we understand it today. Nor is there a strong claim that Berle was a CSR advocate; he never did make the final jump of advocating reorganization of the legal firm as a social welfare maximizer. His unqualified statements on the subject all presupposed a strong regulatory state and a public consensus against a corporate profit maximand. Dodd does not present a clear picture either. Dodd's Depression-era writing, once contextualized, offers only indirect support to today's CSR advocates. He is most plausibly read as a managerialist, and social responsibility within management's discretion is not what CSR tends to be about. The biggest lesson from this analysis is that the shareholder primacy school impairs its own position by making a claim on Berle.
{"title":"Shareholder Primacy's Corporatist Origins: Adolf Berle and 'The Modern Corporation'","authors":"W. Bratton, M. Wachter","doi":"10.2139/ssrn.1021273","DOIUrl":"https://doi.org/10.2139/ssrn.1021273","url":null,"abstract":"Many corporate law discussants think of themselves as picking up where Adolf Berle and E. Merrick Dodd left off in a famous, precedent-setting debate in the 1930s. The generally accepted historical picture puts Berle in the position of the original ancestor of today's shareholder primacy position while Dodd is cast as the original ancestor of today's corporate social responsibility (CSR). This Article shows that both categorizations amount to mistaken readings of old material outside of its original context. The Article corrects the mistakes, offering new readings of some of corporate law's fundamental texts, texts that recently reached their 75th anniversaries and include Berle's famous book with Gardiner C. Means, The Modern Corporation and Private Property. Seventy-five years ago the normative issue of the day was the appropriate policy response to the crisis of the Great Depression. Both Berle and Dodd addressed the issue from a corporatist perspective which views the corporation as an entity that operates as an organ of the state and assumes social responsibilities. In so doing Berle took on the fundamental question \"for whom is the corporation managed\" at a time when the answer had crucial implications for social welfare. In answering the question, Berle articulated a political economy that integrated a theory of corporate law within a theory of social welfare maximization. It was a great accomplishment, but it was in a context very different from today's debates about corporate management and responsibility. Accordingly, Berle was not advocating shareholder primacy as we understand it today. Nor is there a strong claim that Berle was a CSR advocate; he never did make the final jump of advocating reorganization of the legal firm as a social welfare maximizer. His unqualified statements on the subject all presupposed a strong regulatory state and a public consensus against a corporate profit maximand. Dodd does not present a clear picture either. Dodd's Depression-era writing, once contextualized, offers only indirect support to today's CSR advocates. He is most plausibly read as a managerialist, and social responsibility within management's discretion is not what CSR tends to be about. The biggest lesson from this analysis is that the shareholder primacy school impairs its own position by making a claim on Berle.","PeriodicalId":423843,"journal":{"name":"Corporate Law: Corporate Governance Law","volume":"246 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-10-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124244938","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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