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What's Law Got to Do with It?: An Essay About the Balance of Power in Corporate Governance Between Officers, Directors, and Shareholders

14 Pages Posted: 15 May 2016 Last revised: 17 May 2016

Eric J. Gouvin

Western New England University School of Law

Date Written: 2016

Abstract

Professor Robert Thompson recently wrote a compelling article visualizing corporate governance as a shared three-way balancing act between management, directors, and shareholders. While most corporate disputes play out between shareholders and directors, the interests of operating managers may also conflict with the agenda of the board of directors. In the end, however, legal disputes between management and the board are not significant because the board has the power to remove management. Because the legal regime is so clear and so clearly in favor of the directors, Prof. Thompson theorizes that management will utilize extra-legal or non-judicial channels to address concerns about director actions. This Article explores that theory in the context of the celebrated 2014 showdown of the Market Basket supermarket company’s management team against the company’s shareholders and board of directors in a dispute over who should serve as chief executive officer. In the end, the management team used the power of corporate culture and brand management to create a poison pill which allowed them to retain operating control despite a legal regime that should have given control to the board and directors and the majority shareholders.

Keywords: corporate law, corporate governance, William Allen, Market Basket

Suggested Citation

Gouvin, Eric J., What's Law Got to Do with It?: An Essay About the Balance of Power in Corporate Governance Between Officers, Directors, and Shareholders (2016). New England Law Review, On Remand, Forthcoming; Western New England University School of Law Legal Studies Research Paper No. 16-4. Available at SSRN: https://ssrn.com/abstract=2778741

Eric Joseph Gouvin (Contact Author)

Western New England University School of Law ( email )

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