Law Commons^™

The Core Corporate Governance Puzzle: Contextualizing The Link To Performance, Merritt B. Fox, Ronald J. Gilson, Darius Palia

Faculty Scholarship

There is a puzzle at the core of corporate governance theory. Prior scholarship reports a strong relationship between firms best at creating shareholder value and those rated highly by the established corporate governance indices. Little work explores why, however. We hypothesize that the link between governance and performance depends centrally on context. We illustrate the importance of context by exploring circumstances when a firm's governance structure can operate as a signal of the quality of its management. The idea is that better managers are on average more likely to choose a highly rated governance structure than are bad managers because …

Conflicted Mutual Fund Voting In Corporate Law, Sean J. Griffith, Dorothy S. Lund

Faculty Scholarship

Recent Delaware jurisprudence establishes a disinterested vote of shareholders as the pathway out of heightened judicial scrutiny. The stated rationale for this policy is that shareholders, the real party at interest, are better protected by the ballot box than by the courtroom. As long as informed, disinterested shareholders with an economic stake in the outcome of the vote can effectively express their preferences through voting — the court need not scrutinize the underlying transaction. Rather, it can defer to the outcome under the business judgment rule.

But shareholder voting is not always as direct as this reasoning implies. Instead, voting …