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Legal and Economic Theories of Corporate Governance: Past Approaches

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Organising the Firm

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Abstract

Theories of the firm and theories of corporate law or corporations provide the basis for the study of corporate governance. One can say that all such theories address at least some questions that are interesting in this context. The purpose of this chapter is to provide a critique of the existing theories. A new theory will be proposed in the next chapter.

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Notes

  1. 1.

    For an example of such an approach, see Keay A, Ascertaining The Corporate Objective: An Entity Maximisation and Sustainability Model, MLR 71(5) (2008) pp 663–698. Bainbridge S, The New Corporate Governance in Theory and Practice. OUP, Oxford (2008) studies this question and the question why there are boards.

  2. 2.

    See, for example, Kahan M, Kamar E, The Myth of State Competition in Corporate Law, Stanford L Rev 55 (2002) pp 679–749.

  3. 3.

    See, for example, Mäntysaari P, The Law of Corporate Finance. Volume I. Springer, Berlin Heidelberg (2010) pp 86–92.

  4. 4.

    See Aoki M, Jackson G, Understanding an emergent diversity of corporate governance and organizational architecture: an essentiality-based analysis, Ind Corp Change 17 (2008) pp 1–27 (studying equilibrium modes of linkage between assets held by basic stakeholders: managers’ human assets, workers’ human assets, and investor-supplied nonhuman (physical/financial) assets); Christensen JF, Corporate strategy and the management of innovation and technology, Ind Corp Change 11 (2002) pp 263–288 (studying the choice between the U-form and the M-form or various types of the M-form).

  5. 5.

    See, for example, La Porta R, López de Silanes F, Shleifer A, Vishny R, Investor Protection and Corporate Governance, J Fin Econ 58(1) (2000) pp 3–27; Daines R, Does Delaware Law Improve Firm Value? J Fin Econ 62 (2001) pp 525–558.

  6. 6.

    Kahan M, Kamar E, The Myth of State Competition in Corporate Law, Stanford L Rev 55 (2002) pp 679–749; Klausner MD, The Contractarian Theory of Corporate Law: A Generation Later, J Corp L 31 (2006) p 787.

  7. 7.

    For path dependency in general, see Bebchuk L, Roe MJ, A Theory of Path Dependence in Corporate Ownership and Governance, Stanford L Rev 52 (1999) pp 127–170.

  8. 8.

    Generally, see Freeman RE, Harrison JS, Wicks AC, Parmar BL, de Colle S, Stakeholder Theory. Cambridge U P, Cambridge (2010). Eisenberg assumed that the internal allocation of power and the interests furthered by company law should go hand in hand. He identified three mainstream approaches: “shareholder democracy” (also known as the shareholder primacy model, shareholders are given the right to decide); “client-group participation” (client-groups are given a formal role); and “managerialism” (management should run the company in the public interest). Eisenberg MA, The Structure of the Corporation. Beard Books, Washington, D.C. (1976) pp 28–29.

  9. 9.

    Berle AA, Means GC, op cit, Book Four, Chapter IV. See also Eisenberg MA, The Structure of the Corporation. Beard Books, Washington, D.C. (1976) p 25.

  10. 10.

    See also Eisenberg MA, op cit, p 25: “… the managerialists seem to greatly exaggerate the inclination and ability of management to serve as instruments of national policy.”

  11. 11.

    Baumol WJ, On the Theory of the Expansion of the firm, Am Econ Rev 52 (1962) pp 1078–1087; Cyert RM, March JG, A Behavioral Theory of the Firm. Prentice-Hall, Inc., Englewood Cliffs, NJ (1963). Cited in Bratton WW, The New Economic Theory of the Firm: Critical Perspectives from History, Stanford L Rev 41 (1989) pp 1494–1495.

  12. 12.

    Bainbridge S, Director Primacy: The Means and Ends of Corporate Governance, Northw U L Rev 97 (2003) pp 549 and 561–563.

  13. 13.

    Bratton WW, The New Economic Theory of the Firm: Critical Perspectives from History, Stanford L Rev 41 (1989) p 1494 (citing Means GC, The Corporate Revolution In America. The Crowell-Collier Press, New York (1962) pp 50–51) and pp 1508–1509.

  14. 14.

    Manne HG, Mergers and the Market for Corporate Control, J Pol Econ 73 (1965) pp 110–120. See also Bratton WW, op cit, pp 1518–1521 on the acceptance of Manne’s theory and the market for corporate control that appeared after 1980.

  15. 15.

    See Eidenmüller H, Effizienz als Rechtsprinzip. 3. Auflage. Die Einheit der Gesellschaftswissenschaften. Band 90. Mohr Siebeck, Tübingen (2005); Farber DA, Economic Efficiency and The Ex Ante Perspective. In: Kraus JS, Walt SD (eds), op cit, pp 55–86; Kornhauser LA, Constrained optimization. Corporate law and the Maximization of Social Welfare. In: Kraus JS, Walt SD (eds), op cit, pp 87–117.

  16. 16.

    See Charreaux GJ, Corporate Governance Theories: From Micro Theories to National Systems Theories, Working Papers FARGO 1041202, December 2004, http://ideas.repec.org/p/dij/wpfarg/1041202.html.

  17. 17.

    Hansmann H, Kraakman R, The End of History for Corporate Law, Georgetown L J 89(2) (2001) pp 439–468.

  18. 18.

    Article 208 of Allgemeines Deutsches Handelsgesetzbuch: “Aktiengesellschaften können nur mit staatlicher Genehmigung errichtet werden …” Article 249: “Den Landesgesetzen bleibt vorbehalten, zu bestimmen, daß es der staatlichen Genehmigung zur Errichtung von Aktiengesellschaften im Allgemeinen oder von einzelnen Arten derselben nicht bedarf …”

  19. 19.

    See Flume W, Allgemeiner Teil des bürgerlichen Rechts, Band 1. Teil 2. Springer, Berlin Heidelberg (1983) § 2 IV.

  20. 20.

    Cosack K, Lehrbuch des Handelsrechts. Sechste Auflage. Verlag von Ferdinand Enke, Stuttgart (1903) § 122 I 1: “Die Gesellschaft mit beschränkter Haftung ist zum Teil von der Bevormundung befreit, der die gewöhnliche Aktiengesellschaft unterliegt: keine Kontrolle durch einen Aufsichtsrat oder gar durch Revisoren, Formlosigkeit der Generalversammlung und ihrer Beschlüsse, größere Freiheit bei Aufstellung der Bilanz, geringere Förmlichkeiten bei der Gesellschaftsgründung, Zulassung eines beweglichen, durch Nachschüsse der Gesellschafter gebildeten Geschäftskapitals neben dem starren Grundkapital.”

  21. 21.

    RGZ 107, 72, 202.

  22. 22.

    See, in particular, Marx K, Das Kapital (1872), Chapter 13.

  23. 23.

    The term Unternehmen an sich was coined by Fritz Hausmann. Hausmann F, Vom Aktienwesen und vom Aktienrecht, Mannheim 1928 (criticising Rathenau). See, for example, Flume W, op cit, § 2 III–IV; Riechers A, op cit, pp 8–9 and 16; Laux F, op cit; von Hein J, Die Rezeption US-amerikanischen Gesellschaftsrechts in Deutschland. Beiträge zum ausländischen und internationalen Privatrecht 87. Mohr Siebeck, Tübingen (2008) pp 138–140.

  24. 24.

    Rathenau W, Vom Aktienwesen. Eine geschäftliche Betrachtung. Berlin (1917) pp 38–39: [D]ie Großunternehmung ist heute überhaupt nicht mehr lediglich ein Gebilde privatrechtlichen Interessen, sie ist vielmehr, sowohl einzeln wie in ihrer Gesamtheit, ein nationalwirtschaftlicher, der Gesamtheit angehöriger Faktor, der zwar aus seiner Herkunft, zu Recht oder zu Unrecht, noch die privatrechtlichen Züge des reinen Erwerbsunternehmens trägt, während er längst und in steigendem Maße öffentlichen Interessen dienstbar geworden ist …

  25. 25.

    In particular: Henry Ford; Owen D. Young (General Electric Corporation); Robert S. Brookings; John D. Rockefeller; and Herbert Hoover. See Riechers A, op cit, pp 181–182; Brookings RS, Die Demokratisierung der amerikanischen Wirtschaft, Berlin (1925).

  26. 26.

    Berle AA, Means GC, op cit, Book Four, Chapter IV, citing Rathenau W, Von Kommenden Dingen, first published by D. Fischer, Berlin (1917). See also Nörr KW, Ein Gegenstand der Reflexion: Die Aktiengesellschaft in den Schriften Franz Kleins, Rudolf Hilferdings, Walther Rathenaus, ZHR 172 (2008) pp 133–143.

  27. 27.

    Berle AA, Corporate Powers as Powers in Trust, Harv L Rev 44 (1931) pp 1049–1074; Berle AA, For Whom are Corporate Managers Trustees? Harv L Rev 45 (1932) pp 1365–1372.

  28. 28.

    See Dodd EM, For Whom are Corporate Managers Trustees? Harv L Rev 45 (1932) pp 1145– 1163; Dodd EM, Is Effective Enforcement of the Fiduciary Duties of Corporate Managers Practicable? University of Chicago Law Review 2 (1935) pp 194–207. See also Riechers A, op cit, pp 182–183.

  29. 29.

    § 70(1) AktG 1937: “… wie das Wohl des Betriebs und seiner Gefolgschaft und der gemeine Nutzen von Volk und Reich es fordern”.

  30. 30.

    § 93(1) AktG. See, for example, Teubner G, Corporate Fiduciary Duties and Their Beneficiaries. In: Hopt K, Teubner G, Corporate Governance and Directors’ Liabilities. de Gruyter, Berlin (1994) pp 149–177; Mäntysaari P, Comparative Corporate Governance. Springer, Berlin Heidelberg (2005) p 340.

  31. 31.

    See Ballerstedt K, GmbH-Reform, Mitbestimmung, Unternehmensrecht, ZHR 135 (1971) pp 479–510; Raiser T, The Theory of Enterprise Law in the Federal Republic of Germany, Am J Comp L 36(1) (1988) pp 111–129; Klages P, Die Wiederentdeckung schlafender Alternative in der Rechtslehre, Berliner Debatte Initial 18 (2007) pp 75–82.

  32. 32.

    Zimmer D, Internationales Gesellschaftsrecht. Schriftenreihe Recht der Internationalen Wirtschaft. Band 50. Verlag Recht und Wirtschaft GmbH, Heidelberg (1996), Zweiter Teil A pp 131–136.

  33. 33.

    BGHZ 64, 325, 329 = NJW 1975, 1412 (Bayer); BVerfGE 50, 290 = NJW 1979, 833. See nevertheless the discussion about the KonTraG.

  34. 34.

    Section 4.1.1 of the German Corporate Governance Code: “The Management Board is responsible for independently managing the enterprise in the interest of the enterprise, thus taking into account the interests of the shareholders, its employees and other stakeholders, with the objective of sustainable creation of value.”

  35. 35.

    See Aglietta M, Rebérioux A, Corporate Governance Adrift. A Critique of Shareholder Value. Edward Elgar, Cheltenham (UK) Northampton (Mass.) (2005) pp 41–43.

  36. 36.

    Eisenberg MA, The Structure of the Corporation. Beard Books, Washington, D.C. (1976) pp 24–25. In the Nordic area, examples of studies that have adopted a similar approach include Tolonen JP, Der allgemeine Erklärungshintergrund der wirtschaftlichen Ordnung und seine Anwendung auf das Aktiengesellschaftsrecht. Rechtsvergleichende Untersuchung. Suomalainen Tiedeakatemia, Helsinki (1974) and Sjåfjell B, Towards a Sustainable European Company Law. A Normative Analysis of the Objectives of EU Law, with the Takeover Directive as a Test Case. European Company Law Series 3. Wolters Kluwer, Alphen Aan Den Rijn (2009).

  37. 37.

    The importance of human capital was pointed out in Rajan RG, Zingales L, The Governance of the New Enterprise. In: Vives X (ed), Corporate Governance, Theoretical & Empirical Perspectives. Cambridge U P, Cambridge (2000) pp 201–227: “… even if an agent sells her labor, she cannot sell it irrevocably for a long period. Thus the individual cannot pledge the residual control rights over her human capital to someone else for any significant length of time through contract. Control over valuable human capital would seem then to be a greater source of power than control over physical assets since almost all control rights over it are residual, i.e., not allocable through contract.”

  38. 38.

    See Shareholders v stakeholders. A new idolatry, The Economist, April 2010; Martin R, The Age of Customer Capitalism, HBR 1/2010.

  39. 39.

    Tirole J, Corporate Governance, Econometrica 69 (2001) p 4.

  40. 40.

    Freeman RE, Harrison JS, Wicks AC, Parmar BL, de Colle S, Stakeholder Theory. Cambridge U P, Cambridge (2010) pp 63–64.

  41. 41.

    Fama EF, Agency Problems and the Theory of the Firm, J Pol Econ 88(2) (1980) pp 288–307; Fama EF, Jensen MC, Separation of Ownership and Control, J Law Econ 26 (1983) pp 301–325.

  42. 42.

    Hansmann H, Kraakman R, The end of history for corporate law. In: Jeffrey N. Gordon, Mark J. Roe, Convergence and Persistence in Corporate Governance. Cambridge U P, Cambridge (2004) p 33: “There are, broadly speaking, three ways in which a model of corporate governance can come to be recognized as superior: by force of logic, by force of example, and by force of competition … There is no longer any serious competitor to the view that corporate law should principally strive to increase long-term shareholder value.”

  43. 43.

    Bainbridge S, Director Primacy: The Means and Ends of Corporate Governance, Northw U L Rev 97 (2003) p 563.

  44. 44.

    Shleifer A, Vishny RW, A Survey of Corporate Governance, J Fin 52(2) (1997) p 737.

  45. 45.

    La Porta R, Lopez-de-Silanes F, Shleifer A, Vishny RW, Investor protection and corporate governance, J Fin Econ 58 (2000) p 4.

  46. 46.

    See Williamson OE, The Economic Institutions of Capitalism. Free Press, New York (1985) pp 298–300.

  47. 47.

    Ibid, p 102.

  48. 48.

    Ibid, p 102: “Specific Stakeholder Strategy. Maximize benefits to one or a small set of stakeholders.”

  49. 49.

    Ibid, p 102: “Stockholder Strategy. Maximize benefits to stockholders. Maximize benefits to ‘financial stakeholders’”.

  50. 50.

    Ibid, pp 102–105: “Utilitarian Strategy: Maximize benefits to all stakeholders (greatest good for greatest number). Maximize average welfare level of all stakeholders. Maximize benefits to society.”

  51. 51.

    Keay A, Moving Towards Stakeholderism? Constituency Statutes, Enlightened Shareholder Value, and More: Much Ado About Little? EBLR 2011 pp 6–7.

  52. 52.

    See already Alchian AA, Uncertainty, Evolution, and Economic Theory, J Pol Econ 58 (1950) p 213.

  53. 53.

    Tirole J, Corporate Governance, Econometrica 69 (2001) pp 25–26.

  54. 54.

    Bratton WW, The New Economic Theory of the Firm: Critical Perspectives from History, Stanford L Rev 41 (1989) p 1486 (on American railroad companies that were financed by outside equity investors).

  55. 55.

    Ibid, pp 1520–1521.

  56. 56.

    An example of non-pecuniary private benefits that are unreasonable (and bad) is when a foreign country buys a block of shares in a company in order to force the company to further the country’s foreign policy interests. An example of non-pecuniary private benefits that are reasonable (and good) is when a wealthy investor supports a loss-making book publisher or football club for the pleasure of it.

  57. 57.

    See, for example, Section 1 of Chapter 29 of the Swedish Company Act; Section 8 of Chapter 1 and Section 1 of Chapter 22 of the Finnish Company Act; § 93(1) of the German Aktiengesetz; Salomon v A Salomon & Co Limited [1897] AC 22 (House of Lords) (separate corporate personality, a company is not identified with its shareholders); Re Smith & Fawcett Ltd [1942] Ch 304, [1942] 1 All ER 1032 (directors must exercise their powers “bona fide in the interests of the company” and “not for any collateral purpose”). The business judgment rule applied in the US and many other countries means that a court “will not substitute its own notions of what is or is not sound business judgment” [Aronson v. Lewis, 473 A.2d 805, 812 (Delaware Supreme Court 1984)] if “the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company” [Sinclair Oil Corp. v. Levien, 280 A.2d 717, 720 (Delaware Supreme Court 1971)].

  58. 58.

    See also Bratton WW, op cit, p 1499: “Since no cognizable corporate collectivity appears amidst the nexus of contracts, no tension arises between collective and individual interests.”

  59. 59.

    Keay A, Ascertaining The Corporate Objective: An Entity Maximisation and Sustainability Model, MLR 71(5) (2008) p 679, citing Suojanen W, Accounting Theory and the Large Corporation, Acc Rev 29 (1954) pp 391, 393.

  60. 60.

    See Mäntysaari P, The Law of Corporate Finance. Volume I. Springer, Berlin Heidelberg (2010) p 86.

  61. 61.

    Williamson OE, The Economic Institutions of Capitalism. Free Press, New York (1985) p 44: “Three levels of rationality are usefully distinguished. The strong for contemplates maximizing. Bounded rationality is the semistrong form. The weak form is organic rationality.”

  62. 62.

    See already Alchian AA, Uncertainty, Evolution, and Economic Theory, J Pol Econ 58 (1950) p 213.

  63. 63.

    See, for example, Bruner CM, The Enduring Ambivalence of Corporate Law, Alabama L Rev 59 (2008) pp 1400, 1402–1403, 1407, 1420, and 1425.

  64. 64.

    See nevertheless Keay A, Ascertaining the Corporate Objective: An Entity Maximisation and Sustainability Model, MLR 71(5) (2008) p 687.

  65. 65.

    Freeman RE, Strategic Management. A Stakeholder Approach. Cambridge U P, Cambridge (originally published in 1984) p 107.

  66. 66.

    Weber M, Wirtschaft und Gesellschaft. Grundriss der verstehenden Soziologie (1922), Erster Teil, Kapitel II, § 31: “Nur der Okzident kennt rationale kapitalistische Betriebe … Also: die kapitalistische Form der formal rein voluntaristischen Organisation der Arbeit als typische und herrschende Form der Bedarfsdeckung breiter Massen …” See Marx K, Das Kapital (1872).

  67. 67.

    Coase RH, The Nature of the Firm, Economica, New Series 4(16) (1937) pp 388–389.

  68. 68.

    Williamson OE, The Economic Institutions of Capitalism. Free Press, New York (1985).

  69. 69.

    Simon HA, Organizations and Markets, J Econ Persp 5(2) (1972) p 30. For an application in company law, see Eisenberg MA, The Structure of the Corporation. Beard Books, Washington, D.C. (1976) pp 30–31.

  70. 70.

    Alchian AA, Demsetz H, Production, Information Costs, and Economic Organization, Am Econ Rev 62 (1972) pp 777–795; Jensen MC, Meckling WH, Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure, J Fin Econ 3 (1976) pp 305–360.

  71. 71.

    Alchian AA, Uncertainty, Evolution, and Economic Theory, J Pol Econ 58 (1950) pp 211–221. The survival of organisations is also studied in organisational theory. See its classics Barnard CI, The Functions of the Executive. Harv U P, Cambridge, Mass. (1938) pp 60–61; Thompson JD, Organizations in Action: Social Science Bases of Administration. McGraw-Hill, New York (1967) p 13 (the central problem of complex organisations is one of coping with uncertainty).

  72. 72.

    For the struggle for existence, see Darwin C, The Origin of Species (1859).

  73. 73.

    See Mäntysaari P, The Law of Corporate Finance. Volume I. Springer, Berlin Heidelberg (2010), Chapter 8.

  74. 74.

    Compare Dooley MP, Two Models of Corporate Governance, Bus Law 47 (1991–1992) p 463 distinguishing between the “Authority Model” and the “Responsibility Model”. At p 463, Dooley mentions the survival of the firm as an objective: “It should be readily apparent that neither Model exists in pristine form in the real world. Standing alone, neither Model could provide a sensible guide to the governance of firm-organized economic activity because each seeks to achieve a distinct and separate value that is essential to the survival of any firm. Accordingly, any feasible governance system must and does contain elements of both Models, and it is only one’s assessment of which value seems to predominate in a given system that justifies categorizing the system as primarily concerned with Authority or Responsibility.” At p 466, Dooley nevertheless argues that “decisions are to be made to the benefit the interests of the residual claimants”.

  75. 75.

    § 76(1) AktG: “Der Vorstand hat unter eigener Verantwortung die Gesellschaft zu leiten.” § 93(2) AktG: “Vorstandsmitglieder, die ihre Pflichten verletzen, sind der Gesellschaft zum Ersatz des daraus entstehenden Schadens als Gesamtschuldner verpflichtet …”

  76. 76.

    Kuhner C, Unternehmensinteresse vs. Shareholder Value als Leitmaxime kapitalmarktorienterter Aktiengesellschaften, ZGR 2/2004 pp 249–250, citing Raiser T, Unternehmensrecht als Gegenstand juristischer Grundlagenforschung, Festschrift Potthoff. Nomos, Baden-Baden (1989) pp 31–45.

  77. 77.

    See § 147 AktG and § 112 AktG.

  78. 78.

    See, for example, Flume W, Allgemeiner Teil des Bürgerlichen Rechts, Erster Band. Zweiter Teil, Springer, Berlin Heidelberg (1983) § 2 IV.

  79. 79.

    § 93(1) AktG. See, for example, Teubner G, Corporate Fiduciary Duties and Their Beneficiaries. In: Hopt K, Teubner G, Corporate Governance and Directors’ Liabilities. de Gruyter, Berlin (1994) pp 149–177; Kuhner C, Unternehmensinteresse vs. Shareholder Value als Leitmaxime kapitalmarktorienterter Aktiengesellschaften, ZGR 2/2004 pp 245–248; Mäntysaari P, Comparative Corporate Governance. Springer, Berlin Heidelberg (2005) p 340.

  80. 80.

    Art 14(2) GG: “Eigentum verpflichtet. Sein Gebrauch soll zugleich dem Wohle der Allgemeinheit dienen.”

  81. 81.

    See Riechers A, op cit, pp 53–55.

  82. 82.

    Kuhner C, Unternehmensinteresse vs. Shareholder Value als Leitmaxime kapitalmarktorienterter Aktiengesellschaften, ZGR 2/2004 p 247: Hegenialism or idealistic tendencies in German legal culture, the early introduction of worker co-determination in the Weimar republic, the secondary role of shareholders’ capital as a source of funding, the national socialist ideology, and corporative tendencies.

  83. 83.

    Salomon v A Salomon & Co Limited [1897] AC 22 (House of Lords).

  84. 84.

    Re Smith & Fawcett Ltd [1942] Ch 304, [1942] 1 All ER 1032. There are similar rules in Nordic company laws. See, for example, § 1 of Chapter 29 of the Swedish Company Act: “En stiftare, styrelseledamot eller verkställande direktör som när han eller hon fullgör sitt uppdrag uppsåtligen eller av oaktsamhet skadar bolaget skall ersätta skadan …” For Finnish law, see § 8 of Chapter 1 of the Finnish Company Act: “Bolagets ledning skall omsorgsfullt främja bolagets intressen.” § 1 of Chapter 22: “En styrelseledamot, en förvaltningsrådsledamot och verkställande direktören skall ersätta skada som de i sitt uppdrag, i strid med den omsorgsplikt som föreskrivs i 1 kap. 8 §, uppsåtligen eller av oaktsamhet har orsakat bolaget …”

  85. 85.

    See, for example, § 1 of Chapter 29 of the Swedish Company Act: “En stiftare, styrelseledamot eller verkställande direktör som när han eller hon fullgör sitt uppdrag uppsåtligen eller av oaktsamhet skadar bolaget skall ersätta skadan …” For Finnish law, see § 8 of Chapter 1 of the Finnish Company Act: “Bolagets ledning skall omsorgsfullt främja bolagets intressen.” § 1 of Chapter 22: “En styrelseledamot, en förvaltningsrådsledamot och verkställande direktören skall ersätta skada som de i sitt uppdrag, i strid med den omsorgsplikt som föreskrivs i 1 kap. 8 §, uppsåtligen eller av oaktsamhet har orsakat bolaget …”

  86. 86.

    Aronson v. Lewis, 473 A.2d 805, 812 (Delaware Supreme Court 1984).

  87. 87.

    Sinclair Oil Corp. v. Levien, 280 A.2d 717, 720 (Delaware Supreme Court 1971).

  88. 88.

    § 93(1) AktG: “Die Vorstandsmitglieder haben bei ihrer Geschäftsführung die Sorgfalt eines ordentlichen und gewissenhaften Geschäftsleiters anzuwenden. Eine Pflichtverletzung liegt nicht vor, wenn das Vorstandsmitglied bei einer unternehmerischen Entscheidung vernünftigerweise annehmen durfte, auf der Grundlage angemessener Information zum Wohle der Gesellschaft zu handeln …”

  89. 89.

    Spindler G, Unternehmensinteresse als Leitlinie des Vorstandshandelns – Berücksichtigung von Arbeitnehmerinteressen und Shareholder Value. Gutachten im Auftrag der Hans-Böckler-Stiftung. Hans-Böckler-Stiftung, Düsseldorf (2008): “Einigkeit besteht darüber, dass auf jeden Fall der Bestand des Unternehmens zu sichern und für eine dauerhafte Rentabilität zu sorgen ist, was zum Teil auch als ‘angemessene’ Gewinnerzielung konkretisiert wird.” See also section 4.1.1 of the German Corporate Governance Code.

  90. 90.

    For example, Williamson is no exception. See Williamson OE, The Economic Institutions of Capitalism. Free Press, New York (1985) pp 274, 298 and 304–305. Neither is Bainbridge. Bainbridge S, Director Primacy: The Means and Ends of Corporate Governance, Northw U L Rev 97 (2003) p 550: “… director primacy claims that shareholders are the appropriate beneficiaries of director fiduciary duties.”

  91. 91.

    See already Berle AA, Means GC, op cit, Book Four, Chapter I.

  92. 92.

    Fama EF, Agency Problems and the Theory of the Firm, J Pol Econ 88(2) (1980) p 290.

  93. 93.

    See, for example, Salomon v A Salomon & Co Ltd [1897] AC 22.

  94. 94.

    This was pointed out already by Berle A, Property, Production and Revolution. A Preface to the Revised Edition. In: Berle AA, Means GC, op cit: “The purchaser of stock does not contribute savings to an enterprise, thus enabling it to increase its plant or operations.”

  95. 95.

    See, for example, Ireland P, Company Law and the Myth of Shareholder Ownership, MLR 62(1) (1999) pp 54–55.

  96. 96.

    Such as those used by Berle. Berle AA, Property, Production and Revolution. A Preface to the Revised Edition. In: Berle AA, Means GC, op cit: “Why have stockholders? … Wealth unquestionably does add to an individual’s capacity and range in pursuit of happiness and self-development … Privilege to have income and a fragment of wealth without a corresponding duty to work for it cannot be justified except on the ground that the community is better off – and not unless most members of the community share it.” Generally, see also Ireland P, op cit, pp 32–57.

  97. 97.

    § 246 HGB 1897.

  98. 98.

    Eisenberg M, The Structure of the Corporation. Beard Books, Washington, D.C. (1976) p 170; Fama EF, Jensen MC, Separation of Ownership and Control, J Law Econ 26 (1983) pp 301–325.

  99. 99.

    §§ 6 and 52 GmbHG; Article 28 of the draft SPE Regulation.

  100. 100.

    Williamson OE, The Economic Institutions of Capitalism. Free Press, New York (1985) p 298.

  101. 101.

    Ibid, p 305. For an application of this theory, see Bainbridge S, Director Primacy: The Means and Ends of Corporate Governance, Northw U L Rev 97 (2003) p 550.

  102. 102.

    Ireland P, Company Law and the Myth of Shareholder Ownership, MLR 62(1) (1999) p 53.

  103. 103.

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  1. Department of Accounting and Commercial Law, Hanken School of Economics, Handelsesplanaden 2, 65100, Vaasa, Finland

    Prof. Dr. Petri Mäntysaari

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Mäntysaari, P. (2012). Legal and Economic Theories of Corporate Governance: Past Approaches. In: Organising the Firm. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-22197-2_6

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