Are Good Managers Required for a Separation of Ownership and Control?

Logically, in a corporate governance system where big companies are widely held and control over corporate policymaking is delegated to a cohort of full?time executives, there needs to be “good” managers. In Britain, however, ownership separated from control in large business enterprises at a time when the country’s corporate executives were allegedly amateurish and complacent. The paper examines this British paradox and concludes that dynamics affecting institutional investors explain how ownership structures were reconfigured when doubts existed about managerial quality.managers, ownership

How corporate governance moved to the forefront of management

Vigilant boards and attentive stockholders are relatively new developments, argues Brian R. Cheffin

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

This Article 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 Article 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, in the sense that U.S. corporate governance is no longer characterized by a separation of ownership and control

Stop Blaming Milton Friedman!

A 1970 New York Times essay on corporate social responsibility by Milton Friedman is often said to have launched a shareholder-focused reorientation of managerial priorities in corporate America. The essay correspondingly is a primary target of a rapidly growing group of critics of the present shareholder-centric approach to corporate governance. This article argues that it is erroneous to blame (or credit) Milton Friedman for the rise of shareholder primacy in American corporations. In order for Friedman’s views to be as influential as has been assumed, his essay should have constituted a fundamental break from prevailing thinking that changed minds with some alacrity. In fact, what Friedman said on corporate purpose was largely familiar to readers in 1970 and his essay did little to change managerial priorities at that point in time. The shareholder-first mentality that would come to dominate in corporate America would only take hold in the mid-1980s. This occurred due to an unprecedented wave of hostile takeovers rather than anything Friedman said and was sustained by a dramatic shift in favor of incentive-laden executive pay. Correspondingly, the time has come to stop blaming him for America’s shareholder-oriented capitalism

The Globalization (Americanization?) of Executive Pay

In the United States, the remuneration packages of top executives are characterized by a strong emphasis on pay-for-performance and by a highly lucrative upside. There is much discussion of the possibility that executive pay practices will globalize in accordance with this pattern. This Article assesses whether such convergence is likely to occur. After surveying briefly the key components of managerial remuneration and after examining the essential elements of the U.S. pay paradigm, the Article considers market-oriented dynamics that could constitute a global compensation imperative. These include wider dispersion of share ownership, more cross-border hiring of executives, growing international merger and acquisition activity, and expansion of business activity by multinational enterprises. The Article will also take into account possible obstacles to the Americanization of executive pay. These could arise from various legal sources (such as corporate law, tax rules, and labor law) as well as soft law and culture. It must be recognized, however, that law could foster as well as hinder a move toward U.S.-style remuneration. For instance, the introduction of tougher disclosure rules seems particularly likely to have this effect. This Article does not assess in detail whether the Americanization of executive pay would be a good thing. It makes a normative contribution, however, by identifying obstacles policymakers should address if they want to promote convergence. It also draws attention to strategies regulators might adopt if they conclude that a move towards U.S.-style compensation arrangements would be a mistake

The Team Production Model as a Paradigm

Margaret Blair and Lynn Stout suggested a few years after the publication of their 1999 Virginia Law Review article, A Team Production Theory of Corporate Law, that their team production model was poised to emerge as part of a new corporate law “paradigm.” In so doing, they specifically invoked Thomas Kuhn’s well-known analysis of scientific revolutions. This Article revisits Blair and Stout’s team production theory by offering a critique of their claim that their model is destined to become a new corporate law paradigm in the Kuhnian sense. In so doing the Article draws upon key corporate law theories and trends to offer insights concerning the team production model.This is the author accepted manuscript. The final version is available from Seattle University in the Seattle University Law Review (2015) Vol. 38 Issue 2, pp. 397-432

The Trajectory of (Corporate Law) Scholarship

While considerable attention is devoted to legal scholarship, little has been written on the process by which academic writing on law evolves. This paper departs from the existing pattern and examines five potential trajectories for legal scholarship. One is based on the idea that knowledge “accumulates” as part of “progress” towards a better understanding of the matters under study. The second is the concept of the “paradigm”, derived from work done on the history and sociology of science. The third focuses on the idea that academic endeavor concerning law yields useful ideas since market forces are at work. The fourth is a “cyclical” thesis, based on the assumption that themes legal scholars write about arise on a reoccurring basis. Finally, legal scholarship can potentially be characterized in terms of fads and fashions. It appears that scholarly trends in law develop in a manner that is at least partially consistent with each of the five potential trajectories identified. At the same time, none captures fully the dynamics at work and indeed there is some conflict between the various paths available. The paper tests these conjectures by focusing on a particular topic, namely corporate law. The survey offered does not identify one of the five potential trajectories as being dominant. Still, each does help to explain how corporate law scholarship has developed. Correspondingly, for those who are interested in why some ideas prosper whereas other claims “burn out”, this paper offers a “test-driven” analytical framework that can be applied to discern how academic writing on law evolves over time