Research Handbook on Shareholder Power
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Research Handbook on Shareholder Power

Edited by Jennifer G. Hill and Randall S. Thomas

Much of the history of corporate law has concerned itself not with shareholder power, but rather with its absence. Yet, as this Handbook shows, there have been major shifts in capital market structure that require a reassessment of the role and power of shareholders. This book provides a contemporary analysis of shareholder power and considers the regulatory consequences of changing ownership patterns around the world. Leading international scholars in corporate law, governance and financial economics address these central issues from a range of different perspectives including historical, contemporary, legal, economic, political and comparative.
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Chapter 12: Boards of directors and corporate performance under a team production model

Margaret M. Blair


For at least the last three decades, the standard framework in legal scholarship and finance for thinking about shareholder power and the role of corporate boards of directors has been the principal-agent model (Jensen and Meckling 1976; Fama 1980; Easterbrook and Fischel 1991). Under this model corporations are viewed as bundles of assets that belong to shareholders. In fact Grossman and Hart (1986) define a ‘firm’ as ‘those assets that it owns or over which it has control’. Boards of directors are viewed as agents of shareholders (Jensen and Meckling 1976; Easterbrook and Fischel 1991) whose job it is to oversee the work that corporate managers do, to make sure managers focus on maximizing the value of equity in the corporation (Baysinger and Butler 1985; Bainbridge 2003, 2006). Despite this widespread belief about what boards of directors are supposed to do, scholars of corporate governance do not much agree about what factors make boards of directors more effective. With few exceptions (which will be discussed in section I), the findings of empirical research on the relationship between board structure, composition, or practices, and corporate performance, have been consistently mixed and inconclusive, leading some scholars to complain that corporate boards of directors are generally ineffectual at monitoring corporate managers (Gevurtz 2003).

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