The Corporate Governance Movement, Banks and the Financial Crisis

59 Pages Posted: 11 Dec 2013 Last revised: 1 Apr 2014

See all articles by Brian R. Cheffins

Brian R. Cheffins

University of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI)

Date Written: January 1, 2014

Abstract

This paper discusses why a “corporate governance movement” that commenced in the United States in the 1970s became an entrenched feature of American capitalism and describes how the chronology differed in a potentially crucial way for banks. The paper explains corporate governance’s emergence and staying power by reference to changing market conditions and a deregulation trend that provided executives with unprecedented managerial discretion as the 20th century drew to a close. With banking the historical pattern paralleled general trends in large measure. Still, while the “imperial” CEO who surged to prominence in the 1980s became outmoded for the most part after corporate scandals at the start of the 2000s, this was not the case with large financial companies. The continued boldness of “star” CEOs in the financial services industry plausibly contributed to the market turmoil of 2008 but the financial crisis emphatically ended this corporate governance “free pass” banks had enjoyed.

Keywords: corporate governance, banks, financial crisis, board of directors, agency costs, chief executive officers

JEL Classification: G30, G34, G38, K22, N22

Suggested Citation

Cheffins, Brian R., The Corporate Governance Movement, Banks and the Financial Crisis (January 1, 2014). European Corporate Governance Institute (ECGI) - Law Working Paper No. 232/2014; University of Cambridge Faculty of Law Research Paper No. 56/2013. Available at SSRN: https://ssrn.com/abstract=2365738 or http://dx.doi.org/10.2139/ssrn.2365738

Brian R. Cheffins (Contact Author)

University of Cambridge - Faculty of Law ( email )

10 West Road
Cambridge, CB3 9DZ
United Kingdom
+44 1223 330084 (Phone)
+44 1223 330055 (Fax)

European Corporate Governance Institute (ECGI)

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

Register to save articles to
your library

Register

Paper statistics

Downloads
1,135
Abstract Views
10,493
rank
17,619
PlumX Metrics