Organic Corporate Governance

A publicly-held corporation maintains a system of governance through separation of ownership and control of the firm. Under this framework, corporations attract capital and repatriate profits to their shareholders under the authority vested in the board of directors. However, significant evidence exists that Chief Executive Officers (“CEOs”) are commonly driven by self-interest, boards often indulge CEOs, and shareholders find it difficult to monitor management. Many recent reforms have sought to improve corporate governance through regulatory interventions that empower shareholders. This Article identifies the limitations of this approach and advances a new model that looks within the “black box” of the firm. Integrating legal analysis with insights from organizational management and finance scholarship, this Article argues that corporations can overcome weak governance practices through forces that are driven by self-interested behavior of internal corporate actors. Three distinct, yet interrelated, internal forces generate what this Article calls organic corporate governance: (1) compliance systems that establish and enforce internal rules of conduct, (2) firm-specific human capital that binds actors to the firm, and (3) mutual monitoring by superiors and subordinates that constrains the self-interested behavior that erodes firm value. This Article applies this model to the responsibilities of the Chief Legal Officer (“CLO”), also known as the firm’s general counsel, who is an indispensable generator of organic corporate governance

Toward a Systems Architecture in Corporate Governance

A new and powerful systems architecture is driving corporate governance. This architecture will improve board of directors’ decision making, strengthen compliance and risk management protocols, empower gatekeepers such as lawyers and accountants to better monitor, and enhance the social contract between business and society. The purpose of this article is to promote a systems approach to decision-making in matters of corporate governance, highlight the importance given to systems by recent Delaware courts, and present recommendations for boards of directors to optimally situate themselves within an effective organization-wide system of governance