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

Corporate Ownership Structure and the Evolution of Bankruptcy Law in the US and UK

The past decade has seen intense academic debates over possible explanations for the different systems of corporate ownership and control that exist in developed economies. Yet the role of bankruptcy as a mechanism of corporate governance has received relatively little attention. Furthermore, many theories have failed to account successfully for events occurring in the UK, notwithstanding its similarity to the US. In response, this paper offers an account of the complementarities between bankruptcy law and ownership structure, which it is argued can explain developments in both the UK and the US. By identifying the effects of concentration or dispersion in firms' capital structure (across both equity and debt), and by analysing implications of these capital structure choices for bankruptcy, the paper develops a richer account of the corporate governance patterns we see in different nations.Bankruptcy, Law and Finance, Ownership Structure, Debt Concentration

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

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

Dark Side of Shareholder Influence: Managerial Autonomy and Stakeholder Orientation in Comparative Corporate Governance

This article proposes a new, functional explanation of the different roles of non-shareholder groups (particularly labor) in different corporate governance systems. The argument depends on the analysis of a factor that has so far received relatively little attention in corporate governance research: the level of shareholder influence on managerial decision making. Pro-employee laws mitigate holdup problems- opportunism from which shareholders benefit ex post, but which will deter firm-specific investment in human capital ex ante. Since holdup takes place within what is considered legitimate managerial business judgment and all shareholders (both majority and minority) are its financial beneficiaries, the degree of managerial autonomy from shareholders is an important factor. In the United States, proponents of a stakeholder view of corporate law have argued that the insulation that U.S. boards of directors have from shareholders mitigates the risk of holdup of non shareholder constituencies by shareholders, thus encouraging firm-specific investment such as investment in human capital. However, the large degree of autonomy of U.S. boards is unusual. This autonomy is eliminated, for example, by concentrated ownership, which prevails in Continental Europe. This article therefore suggests that, given their costs, laws aiming at the protection of stakeholders-such as codetermination and restrictive employment laws-may be normatively more desirable in the presence of stronger shareholder influence, particularly under concentrated ownership. The theory is corroborated by the observation that such laws tend to be more strongly developed in corporate governance systems with stronger shareholder influence. The United Kingdom, which has both stronger shareholder influence and stronger employment law than the United States, is classified as an intermediate case

The Rise of the Small Investor in the US and the UK, 1895 to 1970

The role of the small shareholder has been largely ignored in the literature, which has tended to concentrate on controlling shareholders and family ownership. And yet, focus on the importance of small shareholders can capture significant aspects of financial development, since the more 'confident' the minority shareholders, the easier will capital flow to firms. Pre 1970, debates and policy conflicts linked to stock exchange development concentrated on shareholder democracy and diffusion as key indicators. The number of shareholders relative to the population was seen as a critical factor in explaining not only structures in corporate finance but also political and economic preferences, market developments and overall economic development. This paper explores the so-called democratisation of investment and the factors behind it through the lens of trends in estimates of the UK and US shareholding populations between 1895 and 1970. It covers three key periods: before World War I, before and after the stock market crash of 1929, and post-World War II. It identifies three periods in the US when shareholder numbers were paramount: in the boom years of the 1920s, as part of the inquest into the 1929 Crash, and post-World War II in an attempt to boost stock market activity. In the UK, although some concern was expressed during the 1920s and 1930s at the passive nature of small investors, who held diversified portfolios with small amounts in each holding, it was the fear of nationalisation after World War II which led to more in-depth shareholder estimates