Corporate Governance in an Era of Geoeconomics

Abstract

The "End of History" for corporate law and governance has come to a messy conclusion, marked by U.S.-China rivalry, economic sanctions, export controls, supply chain vulnerability, and resulting efforts by multinational enterprises and their governments to "derisk" in a global environment that has upended many assumptions on which the post-Cold War economic order operated. This new environment has ushered in an era of geoeconomics--the pursuit of power politics using economic means. The paper explores the potential implications of geoeconomics for corporate governance of U.S. firms. It first sketches the trajectory from globalization to weaponized interdependence that characterizes the past decade, with a focus on the "geopolitical chain reaction" underlying U.S.-China de-coupling, and documents the heightened perception of material risks to U.S. business the current era has engendered. It then examines how geoeconomics will affect the legal/policy environment for corporate governance, as well as the implications of geoeconomics for firm-level governance, focusing on (1) board and senior executive expertise, (2) governance of geopolitical risk, (3) compliance, (4) supply chain management, (5) litigation risk, and (6) investor/public and government relations.

Keywords: Corporate Governance, Geoeconomics

JEL Classification: F02, F23, F50, F60, N40