Governance in the Ruins

48 Pages Posted: 30 Oct 2008 Last revised: 26 Jan 2009

See all articles by David A. Skeel

David A. Skeel

University of Pennsylvania Carey Law School; European Corporate Governance Institute (ECGI)

Date Written: December 2008

Abstract

What gets an economy up and running after a catastrophic war or a period of oppressive rule? While there are nearly as many answers to these questions as experts, one of the most prominent for the past century has been law. Nearly every page of Law and Capitalism, a remarkable new book by Curtis Milhaupt and Katharina Pistor, stands in implicit or explicit dissent from the prevailing view.

Milhaupt and Pistor's countermodel begins a matrix consisting of two axes. The first contrasts a purely protective regime on one end, with a pervasively "coordinative" approach on the other. The second axis ranges from decentralized governance at one end to centralized governance at the other. Using the matrix as an organizing framework, the authors then conduct detailed case studies of six high profile corporate crises in a total of seven countries (the U.S., Germany, Japan, South Korea, China, Singapore and Russia), each from the opening years of the new century. In each of the case studies, which they call "institutional autopsies," Milhaupt and Pistor find evidence both of transition and of retrenchment - and of the rolling relations between markets and law.

The first two parts of this Review describe and critique Milhaupt and Pistor's matrix-and-autopsy approach in more detail.The final three parts offer institutional autopsies of three crises that do not appear in the book. The first two are the two most obvious omissions from the period covered by Law and Capitalism, the collapses of WorldCom in the United States and Parmalat in Italy. Under the prodding of the Securities and Exchange Commission, both companies sought to remake themselves as paragons of corporate governance as they emerged from their insolvency proceedings. The final autopsy explores the more recent failure of Bear Stearns in early 2007. The autopsy considers the possibility that bankruptcy might have been a better solution to Bear's financial distress than the government-supported sale to J.P.Morgan, and argues that the government intervention delayed and may even have diminished the likelihood of thoroughgoing financial services reform.

Keywords: Contract rights, property rights, centralized governance, decentralized governance, corporate autopsies, insolvency, endowment perspective, economic crisis, corporate governance, Parmalat, Bear Stearns, financial intermediation, financial services, regulation, regulatory reform

JEL Classification: G33, G34, K20, K22, K23, N80

Suggested Citation

Skeel, David A., Governance in the Ruins (December 2008). Harvard Law Review, Vol. 122, p. 696, 2008, U of Penn, Inst for Law & Econ Research Paper No. 08-26, Available at SSRN: https://ssrn.com/abstract=1291262

David A. Skeel (Contact Author)

University of Pennsylvania Carey Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-573-9859 (Phone)
215-573-2025 (Fax)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
541
Abstract Views
3,512
Rank
103,301
PlumX Metrics