Partnership Governance of Large Firms

23 Pages Posted: 29 May 2009

See all articles by Larry E. Ribstein

Larry E. Ribstein

University of Illinois College of Law (deceased); PERC - Property and Environment Research Center

Date Written: March 3, 2009

Abstract

This Article examines private-equity firms as an example of “uncorporate” structures in the governance of large firms. Other examples include master limited partnerships, real estate investment trusts, hedge funds, and venture capital funds. These firms can be seen as an alternative to the corporate form in dealing with the central problem of aligning managers’ and owners’ interests. In the standard corporate form, shareholders monitor powerful managers by voting on directors and corporate transactions, suing for breach of fiduciary duty, and selling control. These mechanisms deal with managerial agency costs by relying on other agents, including auditors, class action lawyers, judges, independent directors, and shareholder intermediaries such as mutual and pension funds. Uncorporations substitute other devices for corporate-type monitoring, including more closely tying managers’ economic wellbeing to the firm’s fortunes and greater assurance of distributions to owners. This Article also explores the implications of this analysis for the corporate tax, the enforcement of firms’ contractual arrangements, and the future of publicly held firms.

JEL Classification: G3, G34, K0, K2, K20, L2, L20

Suggested Citation

Ribstein, Larry Edward, Partnership Governance of Large Firms (March 3, 2009). University of Chicago Law Review, Vol. 76, p. 289, 2009; Illinois Public Law Research Paper No. 08-37; U Illinois Law & Economics Research Paper No. LE09-015. Available at SSRN: https://ssrn.com/abstract=1410135

Larry Edward Ribstein (Contact Author)

University of Illinois College of Law (deceased)

PERC - Property and Environment Research Center

2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

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