The Trouble with Boards

63 Pages Posted: 13 Sep 2005

See all articles by Ezra Wasserman Mitchell

Ezra Wasserman Mitchell

Shanghai University of Finance and Economics - School of Law

Date Written: September 9, 2005

Abstract

The Delaware Chancery Court's recent decision in the Disney case raises the question of how we've come to accept an institution with such minimal duties as the board of directors as the principal legitimating device of modern corporate governance. In this article I examine the history of the development of the monitoring model of the board of directors, the model clearly dominant today and affirmed in Disney. My conclusion is that the monitoring board was developed by academics as a sincere reform effort. However, in practice it was corrupted, to be used not for governance purposes but as a liability shield. The article lays out and analyzes this history.

The story has significance for corporate governance reform. Most reform suggestions begin with the monitoring model as the accepted starting point. To begin with a model that quickly developed in order not to work is to ensure that reform will fail. Moreover, reform efforts continue to disregard the real seat of corporate power, the CEO and senior management. In order to succeed, reformers either must completely reconceptualize the board or acknowledge and account for the power of the CEO in their governance models.

Keywords: Disney, boards, monitoring, outside, independent, history, ALI, function, governance, corporations, directors

Suggested Citation

Wasserman Mitchell, Ezra, The Trouble with Boards (September 9, 2005). ; GWU Legal Studies Research Paper No. 159. Available at SSRN: https://ssrn.com/abstract=801308 or http://dx.doi.org/10.2139/ssrn.801308

Ezra Wasserman Mitchell (Contact Author)

Shanghai University of Finance and Economics - School of Law ( email )

777 Guoding Road
Shanghai, 200433
China

Register to save articles to
your library

Register

Paper statistics

Downloads
704
rank
33,460
Abstract Views
3,163
PlumX Metrics