In Search for the Existence of the 'Holy-Grail, One Size Fits All' Theory: An Examination of Corporate Governance from Robber-Barons to Unicorns

69 Pages Posted: 3 Oct 2019

See all articles by Chloe-Lynn Chartouni

Chloe-Lynn Chartouni

University of Pennsylvania Law School - Student/Alumni/Adjunct

Date Written: December 23, 2018


This paper aims to answer one question – whether a standard one-size fits all model, the “Holy-Grail,” of corporate governance exists? Through its analysis of the various corporate governance structures, mechanisms and theories over the last two centuries, this paper concludes that neither governance framework is superior or inferior to the other. That each corporate structure is imperfect and speaks directly to the needs of the market it served and is a product of its time. However, specific laudable elements of one governance framework shed light on the shortcomings of the others. More importantly, the shortcomings of each period, though served as antecedents for the development of new governance mechanisms, they each share a common failing that is best encapsulated by Oscar Wilde’s statement: “Be yourself. Everyone else is already taken.” Rather than looking to their contemporaries and mirroring their actions, firms should evaluate their own equilibrium of agency costs, economies of scale and the balance of power between shareholders, and managers as they design and implement a governance that articulates their values, takes prophylactic measures to prevent fraud and compliance issues, while simultaneously maximizing the firm’s potential value as both a nexus of contracts and a social institution.

The economy, free enterprise, and capital markets, serve as a backbone to our society, and, hence, make the corporations through which their businesses transact significantly important. Moreover, as corporations serve as the entity through which our society depends upon for everything from agricultural, pharmaceutical, and transportation needs to legal, sociocultural and financial products, it is unequivocally imperative “that the activities of corporations are under constant, vigorous and public scrutiny because those activities are crucial to the economic well-being of society.” Thus, examining and reevaluating the balance of power and the specific structure that constitutes a given corporation’s governance is of paramount interest as Adam Smith explains “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” Smith’s statement captures the essence of the problems that plagues corporations – the varied interests within the corporate web spanning from its shareholders, directors, managers and employees to its non-shareholder stakeholders, such as its consumer-base, the natural environment and the greater society.

These varied and differing interests create misalignment, inefficiencies, and impedes maximization of a given firm’s value. As a result, over the last two centuries, a series of state and federal laws and regulations, as well as judiciary case law, emerged as reactionary and responsive actions to give constructive meaning to firms as an entity, to limit directors’ and managers’ overarching and potential imperial-like over shareholders and to require fiduciary duties of loyalty and disclosure to safeguard firm owners through monitoring their agents’ actions. As markets and economies grew and collapsed, and as scholars examined firms and prescriptively critiqued their behavior, the corporate governance landscape evolved in the last two centuries, directly in response to the needs of their time. Though the driving forces propelling developments and evolutions, and deregulation and increased regulation varied in the last two hundred years and were, particularly, in response to the socioeconomic temperament of a given time period, an examination of corporate governance over the last two centuries is insightful in determining whether there exists a “Holy-Grail one size fits all” corporate governance structure that is best suited to effectively and efficiently maximize the value of any given firm irrespective of differences in industry.

This paper examines the corporate governance landscape and the various frameworks that developed from the late nineteenth century through the early twenty-first century. This inquiry is divided in three sections: (1) beginning in the late nineteenth century to the close of the twentieth century; (2) the ‘traditional firm’ of the twenty-first century; and (3) the large technology firms and their unicorn counterparts of the twenty-first century. The selection these consecutive periods is not designed to execute a survey. Instead, by examining these periods discretely with the specific firms and respective governance structures that emerged, an analysis can effectively be made by juxtaposing different types of firms – the robber barons of the nineteenth century, their managerial-era predecessors of the twentieth century, the turn of the twenty-first century’s age of data firms such as GAFA, and the rise of the unicorns in this current decade – each of which differ markedly. Hence, this selection begets the question of: whether the corporate governance of unicorns and big data companies are worth modeling over their predecessors? The first three sections – (I) Corporate Governance From its Early Roots to the Twentieth Century, (II) Governance in the Early 2000s: A Time of Transitions, and (III) The Next Chapter in the Corporate Governance Narrative: Startups and Unicorns – will each discuss and analyze that period’s corporate governance frameworks and their evolutions, as well as the critical scholarship, legislation, regulation and case law that supported such structures or responded to their deficiencies. Each section begins by setting the stage of that period’s dominant corporate governance paradigm as well as the major economic and legal shifts that marked a change in structure. This is followed by an analysis of the dominant paradigms, that then briefly concludes on their achievements and deficiencies.

Keywords: robber barons, unicorns, startups, shareholder primacy, theory of the firm, director primacy, founder primacy, corporate governance, corporate law, corporations, managerialism, theory of the firm

Suggested Citation

Chartouni, Chloe-Lynn, In Search for the Existence of the 'Holy-Grail, One Size Fits All' Theory: An Examination of Corporate Governance from Robber-Barons to Unicorns (December 23, 2018). Available at SSRN: or

Chloe-Lynn Chartouni (Contact Author)

University of Pennsylvania Law School - Student/Alumni/Adjunct ( email )

Philadelphia, PA
United States

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