Brian Cheffins

Corporate Governance and Countervailing Power

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The analysis of corporate governance has been a strikingly one-sided affair.  The focus has been almost exclusively on “internal” checks and balances, namely scrutiny of executives by the board of directors and by shareholders.  In contrast, mechanisms that can operate as significant “external” checks on managerial discretion have been largely ignored. My recent paper, “Corporate Governance and Countervailing Power,” functions as a corrective to the prevailing trend.  The paper focuses on three historically important examples of external constraints on managerial discretion, namely state regulation of corporate activity, competitive pressure from rival firms, and organized labor.  A unifying feature … Read more

Rumors of the Death of U.S. Public Companies Are Greatly Exaggerated

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As of 2017, 172 of America’s 200 largest companies, ranked by revenue, were publicly traded.  Public company dominance of the corporate economy of the United States has existed for decades.  There has been much speculation recently that this era may be ending, reinforced by a marked decline in the number of public companies since 2000.  My forthcoming article, “Rumours of the Death of the American Public Company are Greatly Exaggerated,” argues that this pessimistic take on the public company misses the mark in important respects.

Why might the American public company be in peril?  Exit and entry to … Read more

Stock Market Prices and the Market for Corporate Control

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Stock market prices and the market for corporate control are both crucial elements of the corporate governance matrix within which public companies operate. Share prices constitute highly visible signals of investor perceptions of corporate performance that provide cues for governance responses by directors, managers and shareholders. If not neutered by defensive tactics, the market for corporate control can be a potent corrective mechanism in circumstances where the incumbent management team is failing to create shareholder value, with potential acquirers seeking to obtain control on the assumption they can improve matters. Share prices in turn play an important role in the … Read more

Corporate Governance Since the Managerial Capitalism Era

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The term “corporate governance”, while now ubiquitous, was largely unknown in the U.S. until the 1970s and the rest of world until the 1990s. There has been little research done on why corporate governance rose to prominence when it did. Conceivably the lack of analysis could be because nothing more was going on than the adoption of a handy catch phrase encompassing already familiar topics and themes. In fact, the new terminology was accompanied by a reconfiguration of governance arrangements in U.S. public companies. These important changes coincided with and were related to the demise of a “managerial capitalism” … Read more

Shareholder Protection Across Time

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It has long been assumed that shareholders’ rights in the United States diminished considerably through the 20th century as a result of a competition among states to attract and retain corporations. More recently, various commentators have disputed the significance of this “race to the bottom,” (or “to the top,” depending upon one’s view of the efficiency of the rules that were displaced during such a race). They say the traditional focus on developments in state corporate law is misleading because it overlooks the substantial growth in federal influence over corporate law since the 1930s and particularly since the early … Read more