Corporate governance and countervailing power

The analysis of corporate governance has been a one-sided affair. The focus has been on “internal” accountability mechanisms, namely boards and shareholders. Each has become more effective since debates about corporate governance began in earnest in the 1970s but it is doubtful whether this process can continue. Correspondingly, it is an opportune time to expand the analysis of corporate governance. This article does so by focusing on three “external” accountability mechanisms that can operate as significant constraints on managerial discretion, namely governmental regulation of corporate activity, competitive pressure from rival firms and organized labor. A unifying feature is that each was an element of a theory of “countervailing power” economist John Kenneth Galbraith developed in the 1950s with respect to corporations, an era when external accountability mechanisms did more than their internal counterparts to keep management in check.Major Research Fellowship, Leverhulme Trus

History and Turning the Antitrust Page

Present-day advocates of antitrust reform referred to as “New Brandeisians” have invoked history in pressing the case for change. The New Brandeisians bemoan the upending of a mid-twentieth-century “golden age” of antitrust by an intellectual movement known as the Chicago School. In fact, mid-twentieth-century enforcement of antitrust was uneven and large corporations exercised substantial market power. The Chicago School also was not as decisive an agent of change as the New Brandeisians suggest. Doubts about the efficacy of government regulation and concerns about foreign competition did much to foster the late twentieth-century counterrevolution that antitrust experienced.</jats:p

Corporate Governance since the Managerial Capitalism Era

Executives of today's public companies face a considerably different set of opportunities and constraints than did their counterparts in the managerial capitalism era, which reached its apex in the 1950s and 1960s. The growing importance of corporate governance featured prominently as circumstances changed for those running public companies. This article explores these developments, taking into account high-profile corporate scandals occurring in the first half of the 1970s and the early 2000s, the 1980s “Deal Decade,” the “imperial” chief executive phenomenon, and changes to the roles played by directors and shareholders of public companies.This is the author accepted manuscript. The final version is available from CUP via http://dx.doi.org/10.1017/S000768051500069

Rumours of the Death of the American Public Company are Greatly Exaggerated

The public company has historically been a crucial element of the American economy. Various predictions have been made recently that the public company’s future is bleak. This essay maintains these gloomy conjectures are erroneous. Companies leave the stock market by way of public-to-private buyouts with some regularity but large firms are rarely affected. Prosperous start-up companies are delaying joining the stock market but nevertheless usually end up in the public domain. There are considerably fewer public companies now than there were twenty years ago. Based, however, on the ratio of aggregate market capitalization to gross domestic product, the public company is currently as important relative to the U.S. economy as it ever have been, if not more so.Major Research Fellowship, Leverhulme Trus

The Rise and Fall (?) of the Berle-Means Corporation

This paper forms part of the proceedings of the 10th Annual Berle Symposium (2018), which focused on Adolf Berle and the world he influenced. He and Gardiner Means documented in The Modern Corporation and Private Property (1932) what they said was a separation of ownership and control in major American business enterprises. Berle and Means became sufficiently closely associated with the separation of ownership and control pattern for the large American public firm to be christened subsequently “the Berle-Means corporation”. This paper focuses on the “rise” of the Berle-Means corporation, considering in so doing why ownership became divorced from control in most of America’s biggest companies. It also assesses whether developments concerning institutional investors and shareholder activism have precipitated the “fall” of the Berle-Means corporation, meaning U.S. corporate governance is no longer characterized by a separation of ownership and control.I carried out the research under the auspices of a Leverhulme Major Research Fellowship

Shareholder Protection Across Time

This Article offers the first systematic attempt to measure the development of shareholder protection in the United States across time. Using three indices developed to measure the relative strength of shareholder protection across nations, this Article evaluates numerically the protections corporate and securities law have offered shareholders from the beginning of the 20th century to the present day. It accomplishes this by tracking the rights accorded to shareholders across time under three important sources of corporate law: Delaware and Illinois and the Model Business Corporation Act. This Article's novel study yields novel results. First, we find that the protections afforded to shareholders by state corporation law have decreased since 1900 but only modestly so. This indicates that, contrary to the assumptions of many scholars, state competition in corporate law has not significantly eroded shareholder rights. Second, after adding in measures that count protections provided by federal as well as state law, we find that shareholder protection actually improved over time. This implies that federal intervention has played a crucial and perhaps underappreciated role in shaping U.S. corporate law. Beyond its specific findings, this Article illustrates how quantitative analysis of legal trends provides scholars with valuable insights regarding fundamental questions in corporate law

The corporate governance movement, banks, and the financial crisis

AbstractThis Article discusses why a “corporate governance movement” that commenced in the United States in the 1970s became an entrenched feature of American capitalism and describes how the chronology differed in a potentially crucial way for banks. The Article explains corporate governance’s emergence and staying power by reference to changing market conditions and a deregulation trend that provided executives with unprecedented managerial discretion as the twentieth century drew to a close. With banking the historical pattern paralleled general trends in large measure. Still, while the “imperial” CEO who achieved prominence in the 1980s became outmoded for the most part after corporate scandals at the start of the 2000s, this was not the case with large financial companies. The continued boldness of “star” CEOs in the financial services industry plausibly contributed to the market turmoil of 2008, but the financial crisis emphatically ended the corporate governance “free pass” banks had enjoyed.This is the author accepted manuscript. The final version is available from De Gruyter via http://dx.doi.org/10.1515/til-2015-00

The rise of corporate governance in the UK: When and why

While issues that prompt corporate governance responses are endemic to the corporate form, the term “corporate governance” only began to feature with any regularity in discussions of public companies in Britain as the 1990s got underway. It is well known that work done by the Committee on the Financial Aspects of Corporate Governance, known as the Cadbury Committee, played a major role in fostering the rise of corporate governance in the U.K. at that point. This paper explains why corporate governance did not move into the spotlight in Britain in the 1970s, a development that might have been anticipated given that corporate governance was arriving on the scene in the United States then. The paper also identifies trends that likely would have ensured that corporate governance would have risen to prominence in Britain in the early 1990s in the absence of the Cadbury Committee’s deliberations.This is the author accepted manuscript. The final version is available from Oxford University Press via http://dx.doi.org/10.1093/clp/cuv00

Governors and directors: Competing models of corporate governance

Why do we use the term ‘corporate governance’ rather than ‘corporate direction’? Early British joint stock companies were normally managed by a single ‘governor’. The ‘court of governors’ or ‘board of directors’ emerged slowly as the ruling body for companies. By the nineteenth century, however, companies were typically run by directors while not-for-profit entities such as hospitals, schools and charitable bodies had governors. The nineteenth century saw steady refinement of the roles of company directors, often in response to corporate scandals, with a gradual change from the notion of the director as a ‘representative shareholder’ to the directors being seen collectively as ‘representatives of the shareholders’. Governors in not-for-profit entities, however, were regarded as having broader responsibilities. The term ‘governance’ itself suggests that corporate boards should be studied as ‘political’ entities rather than merely through economic lenses such as agency theory