A Critical Look at Corporate Governance

The internal law of corporations is built upon the problem of competition-not competition with the world outside the corporate entity, which, according to liberal economic theory, is essential to the increase of wealth and well-being in society, but competition among the various groups of individuals that animate the corporation. The problem is (to extend the implicit metaphor) as if a human being\u27s internal organs were constantly battling to capture all of the body\u27s energy, rather than working together to contribute to the well-being of the whole. Like the human body, the corporation\u27s energy (its assets) is, at any given point in time, limited so that successful competition by one group necessarily deprives others of a share of these resources. Of course without some form of check, such constant internal competition would destroy the corporation, much as it would destroy the human body. A large portion of the entity\u27s energy would be spent in the internal battle for control. Even if one group (or organ) were to emerge dominant, all are interdependent and cannot survive alone, so that the dominant group could not support the entity against the outside world, and all would succumb collectively to external pressures