Chapter

Corporate Governance as Publicy Tool

in The Failure of Corporate Law

Published by University of Chicago Press

Published in print February 2007 | ISBN: 9780226306933
Published online March 2013 | e-ISBN: 9780226306988 | DOI: http://dx.doi.org/10.7208/chicago/9780226306988.003.0008
Corporate Governance as Publicy Tool

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Corporate law can be a tool not only to help businesses govern their internal affairs but also to bring about needed changes in other areas of public policy. This chapter illustrates the potential power of corporate law by explaining how it can be used as a tool to address two serious public policy problems in the United States: stagnant real income for most workers and wide income inequality. It focuses on changes in corporate governance that can address the problems of stagnant income and income inequality: relaxing the profit maximization norm, extending management's fiduciary duty to include workers, and requiring some kind of worker representation on boards of directors. Such initiatives would have the effect of building a norm of fairness within the firm as well as facilitating a more equitable sharing of the corporate surplus. Two effects associated in studies with higher wages and lower income inequality are lowering of monitoring costs and creation of relational contracts.

Keywords: corporate law; corporate governance; public policy; United States; stagnant income; income inequality; profit maximization; fiduciary duty; monitoring costs; relational contracts

Chapter.  13387 words. 

Subjects: Company and Commercial Law

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