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A Team Production Theory Of Corporate Law, Margaret M. Blair, Lynn A. Stout
A Team Production Theory Of Corporate Law, Margaret M. Blair, Lynn A. Stout
Vanderbilt Law School Faculty Publications
Contemporary corporate scholarship generally assumes that the central economic problem addressed by corporation law is getting managers and directors to act as loyal agents for shareholders. We take issue with this approach and argue that the unique legal rules governing publicly-held corporations are instead designed primarily to address a different problem - the "team production" problem - that arises when a number of individuals must invest firm-specific resources to produce a nonseparable output. In such situations team members may find it difficult or impossible to draft explicit contracts distributing the output of their joint efforts, and, as an alternative, might …