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The Limits of Corporate Law in Promoting Good Corporate Governance

6 Pages Posted: 17 Dec 2004  

Michael Klausner

Stanford Law School

Date Written: December 17, 2004


Discussions of corporate governance reform often combine prescriptions for legal reform with prescriptions for better governance practices. Both sets of prescriptions - for better law and for better practices - typically focus on the board of directors, and particularly "independent" directors. The assumption is that the law can affect the governance behavior of the board by establishing roles for outside directors and by motivating independent directors to do a good job. The extent to which law can promote good governance in the boardroom, however, is quite limited. This comment briefly outlines the limits of corporate law in promoting good corporate governance and in doing so helps clarify the gap that must be filled by nonlegal influences.

Keywords: governance, shareholder vote, shareholder suits, derivative suits

JEL Classification: G34

Suggested Citation

Klausner, Michael, The Limits of Corporate Law in Promoting Good Corporate Governance (December 17, 2004). Stanford Law and Economics Olin Working Paper No. 300. Available at SSRN: or

Michael D. Klausner (Contact Author)

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
650-723-6433 (Phone)
650-725-0253 (Fax)

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