Measuring the Domain of Mediating Hierarchy: How Contestable are US Public Corporations?
John C. Coates, IV
Harvard Law School
Journal of Corporation Law, 1999
Recent scholarship by Blair & Stout has suggested that a "mediating hierarchy" version of a team production model can explain enduring features of corporate law that cannot easily be explained by agency theory. This article argues and reviews data demonstrating that "mediating hierarchy" (1) clearly does not describe a significant number of public companies, which are either manager-dominated or controlled by a single shareholder; (2) probably does not describe companies subject to the market for corporate control, which remains vigorous (notwithstanding the "poison pill"); but (3) may describe those public companies with both active "outsider" boards and a set of governance terms that delay takeovers sufficiently to dampen the effect of the market for corporate control, as well as close corporations that credibly commit to becoming such public companies. The article concludes with a review of significant, unanswered empirical questions bearing on the domain of mediating heirarchy in corporate law and on corporate governance more generally.
Date posted: September 1, 1999
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