Embrace the Coming Changes in Corporate Governance: Lessons from Developments in Corporate Law – A Comparative View

Abstract

The worldwide financial crisis that was unleashed in 2007-2008 occurred at a time of many challenges in the transformation of the economic and social system. As this protean crisis showed, new reflection in the field of corporate governance is necessary. This paper aims to explore a new conception of corporate governance based on the existing legal literature and case law. Shareholder primacy and the focus on shareholders alone in the traditional view of companies’ corporate governance lead to a difficult situation. In order to identify an innovative way to design corporate governance, the paper studies current positions on the conception of the latter. Then it considers in detail the consequences of corporate law and its definition of the company. In this regard, a strong trend in the regulatory approach is clearly pro-shareholder, but the paper relies heavily on writings and cases that address the matter with originality to change the dominant point of view. Since a capitalist model centred on a free-market perspective that gives law only a residual role to play is unable to ensure social development, it is relevant to raise awareness of traditional and more recent writings and cases from the legal traditions of different countries. These sources of law demonstrate that the economic system could better take into account the ethical ideals of the future that human communities demand we respect. In its research, the paper suggests that an alternative conception of corporate governance could be chosen as a positive reaction to the crisis. This is a political choice with a strong basis in part of “forgotten” corporate law. The findings point out the possibility that corporate governance can be designed in more than one way. The paper offers insights based on legal landscapes. The findings also inform public policy literature. Moreover the paper contributes to corporate governance literature by describing another way of analyzing companies.

Keywords: Crisis, international position, corporate governance, corporate law, comparison, agency theory, shareholder primacy, critics, solution

JEL Classification: K22, G30