System and Evolution in Corporate Governance

27 Pages Posted: 7 Apr 2010  

Simon Deakin

University of Cambridge - Centre for Business Research (CBR); European Corporate Governance Institute (ECGI); University of Cambridge - Faculty of Law

Fabio Carvalho

Alvarez & Marcel Latin America

Date Written: April 2, 2010

Abstract

We explore the relevance of systems theory for an understanding of legal evolution, with specific reference to the law and practice of corporate governance. The legal system can be understood as a cognitive resource which, by stabilising normative expectations, reduces transaction costs and enhances contractual cooperation. However, the cognitive capacity of the legal system is not simply a function of its adaptability to external economic conditions. Because of the need to ensure legal continuity and certainty, there is a trade-off between innovation and stabilisation in the production of legal rules. Legal change is discontinuous, asynchronic, and imperfectly matched with developments in the economy. We discuss the relevance of this model for understanding and evaluating corporate governance default rules.

Keywords: Corporate governance, legal evolution, systems theory, autopoeisis, memetics, default rules, fiduciary duties

JEL Classification: G38, K22

Suggested Citation

Deakin, Simon and Carvalho, Fabio, System and Evolution in Corporate Governance (April 2, 2010). ECGI - Law Working Paper No. 150/2010. Available at SSRN: https://ssrn.com/abstract=1581746 or http://dx.doi.org/10.2139/ssrn.1581746

Simon F. Deakin (Contact Author)

University of Cambridge - Centre for Business Research (CBR) ( email )

Top Floor, Judge Business School Building
Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+ 44 1223 335243 (Phone)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

University of Cambridge - Faculty of Law ( email )

10 West Road
Cambridge, CB3 9DZ
United Kingdom

Fabio Carvalho

Alvarez & Marcel Latin America ( email )

São Paulo
Brazil

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