Symbolic Corporate Governance Politics
New York University School of Law; European Corporate Governance Institute
Edward B. Rock
University of Pennsylvania Law School
Boston University Law Review, Vol. 94, Pg. 1997, 2014
U of Penn, Inst for Law & Econ Research Paper No. 14-6
NYU Law and Economics Research Paper No. 14-07
How are we to understand the persistent gap between rhetoric and reality that characterizes so much of corporate governance politics? In this Article, we show that the rhetoric around a variety of high profile corporate governance controversies (including shareholder proposals asking boards to redeem poison pills, proxy access, majority voting in director elections, and shareholder proposals to remove supermajority voting requirements) cannot be justified by the material interests at stake. At the same time, shareholder activists are oddly reluctant to pursue issues that may have a more material impact, such as anti-pill charter provisions or mandatory bylaw amendments. We consider a variety of explanations for this phenomenon including “public interest” analyses, “public choice” analyses, and the possibility that corporate governance politics has a substantial “symbolic” or “folkloristic” element. Elaborating on arguments made in Thurman Arnold’s The Folklore of Capitalism, we suggest that there is an analogous “Folklore of Corporate Governance” that serves to reconcile the gap between our idealized view of corporations as controlled by real-life shareholders and the inevitable reality that effective control largely resides in managements and in disembodied institutions. We consider some implications of the explanations we put forward.
Number of Pages in PDF File: 48
Keywords: Corporations, politics, corporate governance controversies, public interest or public choice explanations, corporate control, symbols, myths, Thurman Arnold, legal realism, interdisciplinary scholarship, capitalism, gap between rhetoric and reality, folklore
JEL Classification: G34, K22, P12
Date posted: March 5, 2014 ; Last revised: December 3, 2014
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