Corporate Governance after the Financial Crisis
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Corporate Governance after the Financial Crisis

Edited by P. M. Vasudev and Susan Watson

The financial crisis of 2008–09 raises questions about the assumptions that underpin corporate governance. Shareholder value and private ordering may not in fact be the best means of promoting efficiency and corporate responsibility and the mechanisms used to ensure management accountability may not be effective. In this fascinating study, experts from around the world draw on the experience of the financial crisis to explore topical issues ranging from shareholder primacy and the corporate objective to the stakeholder principle, business ethics, and globalization of corporate governance principles. The chapters are provocative, acknowledging that our understanding of fundamental questions of corporate governance is still developing and demonstrating that the corporate governance debate is far from over.
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Chapter 5: Re-evaluating the Basis of Corporate Governance in the Post, Post-Enron Era

Leonard I. Rotman


Leonard I. Rotman INTRODUCTION The Enron scandal of 2001 shook the foundation of modern corporate governance in many ways. It resulted in the collapse of one of the giants of corporate America, taking with it numerous jobs, investment dollars and confidence in the securities marketplace. However, it also brought into question the manner in which corporations were governed and how they ought to be governed. Curiously, Enron’s collapse coincided with the publication of Henry Hansmann and Reinier Kraakman’s article ‘The End of History for Corporate Law’ (2001), which sought to end discussions of how modern corporations were to be governed by asserting the triumph of the shareholder primacy norm over competing progressive theories of the corporation. Hansmann and Kraakman claimed that worldwide convergence in corporate theory had led toward a unitary vision of corporate purpose founded on shareholder primacy. This in turn resulted in their claim of the ‘end of history for corporate law,’ in which the struggle for dominance between the shareholder primacy and stakeholder theories of corporate governance rooted in the famous Berle–Dodd debate of the 1930s had ended. It will be argued that the reality of corporate governance in the post, post-Enron era is entirely inconsistent with the vision articulated by Hansmann and Kraakman. This chapter sets out Hansmann and Kraakman’s ‘end of history’ thesis and assesses whether it can be justified on grounds traditionally used to corroborate their vision of corporate governance. The chapter considers the strength of Hansmann and Kraakman’s claim by examining...

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