Abstract

http://ssrn.com/abstract=2291065
 


 



Boards-R-Us: Reconceptualizing Corporate Boards


Stephen M. Bainbridge


University of California, Los Angeles (UCLA) - School of Law

M. Todd Henderson


University of Chicago - Law School

July 10, 2013

University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 646
UCLA School of Law, Law-Econ Research Paper No. 13-11

Abstract:     
State corporate law requires director services be provided by “natural persons.” This Article puts this obligation to scrutiny, and concludes that there are significant gains that could be realized by permitting firms (be they partnerships, corporations, or other business entities) to provide board services. We call these firms “board service providers” (BSPs). We argue that hiring a BSP to provide board services instead of a loose group of sole proprietorships will increase board accountability, both from markets and judicial supervision. The potential economies of scale and scope in the board services industry (including vertical integration of consultants and other board member support functions), as well as the benefits of risk pooling and talent allocation, mean that large professional director services firms may arise, and thereby create a market for corporate governance distinct from the market for corporate control. More transparency about board performance, including better pricing of governance by the market, as well as increased reputational assets at stake in board decisions, means improved corporate governance, all else being equal. But our goal in this Article is not necessarily to increase shareholder control over firms – we show how a firm providing board services could be used to increase managerial power as well. This shows the neutrality of our proposed reform, which can therefore be thought of as a reconceptualization of what a board is rather than a claim about the optimal locus of corporate power.

Number of Pages in PDF File: 74

Keywords: boards of directors, corporate governance, corporate law

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Date posted: July 10, 2013 ; Last revised: August 14, 2013

Suggested Citation

Bainbridge, Stephen M. and Henderson, M. Todd, Boards-R-Us: Reconceptualizing Corporate Boards (July 10, 2013). University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 646; UCLA School of Law, Law-Econ Research Paper No. 13-11. Available at SSRN: http://ssrn.com/abstract=2291065 or http://dx.doi.org/10.2139/ssrn.2291065

Contact Information

Stephen Mark Bainbridge
University of California, Los Angeles (UCLA) - School of Law ( email )
385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States
310-206-1599 (Phone)
310-825-6023 (Fax)
HOME PAGE: http://www.professorbainbridge.com
M. Todd Henderson (Contact Author)
University of Chicago - Law School ( email )
1111 E. 60th St.
Chicago, IL 60637
United States
773-834-4168 (Phone)
773-702-0730 (Fax)
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