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Shareholder As Ulysses: Some Empirical Evidence On Why Investors In Public Corporations Tolerate Board Governance, Lynn A. Stout Dec 2003

Shareholder As Ulysses: Some Empirical Evidence On Why Investors In Public Corporations Tolerate Board Governance, Lynn A. Stout

Cornell Law Faculty Publications

This Article evaluates two possible explanations for why shareholders of public corporations tolerate board control of corporate assets and outputs: the widely accepted monitoring hypothesis, which posits that shareholders rely on boards primarily to control the "agency costs" associated with turning day-to-day control over the firm over to self-interested corporate executives, and the mediating hypothesis, which posits that shareholders also seek to "tie their own hands" by ceding control to directors as a means of attracting the extracontractual, firm-specific investments of such stakeholder groups as executives, creditors, and rank-and- file employees.

Part I reviews each hypothesis and concludes that each ...


The Petrochina Syndrome: Regulating Capital Markets In The Anti-Globalization Era, Stephen F. Diamond Oct 2003

The Petrochina Syndrome: Regulating Capital Markets In The Anti-Globalization Era, Stephen F. Diamond

Cornell Law Faculty Publications

No abstract provided.


On The Proper Motives Of Corporate Directors (Or, Why You Don't Want To Invite Homo Economicus To Join Your Board), Lynn A. Stout Jan 2003

On The Proper Motives Of Corporate Directors (Or, Why You Don't Want To Invite Homo Economicus To Join Your Board), Lynn A. Stout

Cornell Law Faculty Publications

One of the most important questions in corporate governance is how directors of public corporations can be motivated to serve the interests of the firm. Directors frequently hold only small stakes in the companies they manage. Moreover, a variety of legal rules and contractual arrangements insulate them from liability for business failures. Why then should we expect them to do a good job?

Conventional corporate scholarship has great difficulty wrestling with this question, in large part because conventional scholarship usually adopts the economist's assumption that directors are rational actors motivated purely by self-interest. This homo economicus model of behavior ...