How Irrational Actors in the CEO Suite Affect Corporate Governance

Recent news of sexual harassment and other legal controversies at Uber and throughout Silicon Valley serves as a vivid reminder that irresponsible and unethical conduct continues across the corporate landscape. Revelations of serious transgressions by senior corporate leaders belies a central assumption underlying contemporary corporate law theory. Much of corporate law is premised on rational actor theory – the idea that the law should be designed to leverage each person’s propensity to act in his rational self-interest. Corporate theorists have invoked this idea to promote a legal regime that relies on a system of incentives to cajole, but not command, … Read more