Corporate Governance and Countervailing Power

89 Pages Posted: 6 Aug 2018 Last revised: 14 Apr 2019

See all articles by Brian R. Cheffins

Brian R. Cheffins

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

Date Written: August 3, 2018


The analysis of corporate governance has been a one-sided affair. The focus has been on “internal” accountability mechanisms, namely boards and shareholders. Each has become more effective since debates about corporate governance began in earnest in the 1970s but it is doubtful whether this process can continue. Correspondingly, it is an opportune time to expand the analysis of corporate governance. This article does so by focusing on three “external” accountability mechanisms that can operate as significant constraints on managerial discretion, namely governmental regulation of corporate activity, competitive pressure from rival firms and organized labor. A unifying feature is that each was an element of a theory of “countervailing power” economist John Kenneth Galbraith developed in the 1950s with respect to corporations, an era when external accountability mechanisms did more than their internal counterparts to keep management in check.

Keywords: corporate governance, boards of directors, shareholder activism, regulation, unions, competition, countervailing power

JEL Classification: G34, G38, J51; K22, L13; N22

Suggested Citation

Cheffins, Brian R., Corporate Governance and Countervailing Power (August 3, 2018). Business Lawyer, Forthcoming, University of Cambridge Faculty of Law Research Paper No. 54/2018, European Corporate Governance Institute (ECGI) - Law Working Paper No. 448/2019, Available at SSRN: or

Brian R. Cheffins (Contact Author)

University of Cambridge - Faculty of Law ( email )

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European Corporate Governance Institute (ECGI) ( email )

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