Director V. Shareholder Primacy in the Convergence Debate

22 Pages Posted: 17 Feb 2002

See all articles by Stephen M. Bainbridge

Stephen M. Bainbridge

University of California, Los Angeles (UCLA) - School of Law

Date Written: January 2002


Although the question of whether international corporate governance is converging on the U.S. model remains contested, there is general agreement as to the nature of that U.S. model. Specifically, virtually all participants in the convergence debate assume that U.S. corporate law is based on a norm of shareholder primacy. This assumption is wrong. U.S. corporate law is far more accurately described as a system of director primacy than one of shareholder primacy. In this essay, the author argues that the comparative corporate governance literature's erroneous understanding of the U.S. model distorts both the positive and normative aspects of the convergence debate. On the positive side, if we use the extent of shareholder primacy as our metric, we end up with a distorted estimate of the extent to which systems have converged. On the normative side, corporate governance is a potentially important instrument by which to increase the economy's efficiency. In recent years, elite U.S. corporate law scholars have played a significant role in "reforming" the corporate laws of transition economies. If the goal is to export the U.S. model, on the assumption of its superiority, we do those economies no good - and may do much harm - by exporting the wrong model. Hence, we are constrained to examine the normative question: Does it matter? Is director primacy superior to shareholder primacy? This essay acknowledges that investor participation in corporate governance has economic benefits, but argues that director primacy is preferable on balance.

JEL Classification: G30, K22, P30

Suggested Citation

Bainbridge, Stephen Mark, Director V. Shareholder Primacy in the Convergence Debate (January 2002). Available at SSRN: or

Stephen Mark Bainbridge (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States
310-206-1599 (Phone)
310-825-6023 (Fax)


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

Paper statistics

Abstract Views
PlumX Metrics