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Tuesday, March 15, 2005

Bainbridge - Boards In the News

Steve Bainbridge is one of the most prolific scholars in the field of corporate law. He has done quite a bit to advance his view of what he calls "director primacy". , he writes:

In brief, the director primacy model views the corporation as a vehicle by which the board of directors hires various factors of production. The board of directors thus is not a mere agent of the shareholders, but rather is a sui generis body - a sort of Platonic guardian - serving as the nexus of the various contracts making up the corporation. Director primacy thus claims that fiat - centralized decisionmaking - is the essential attribute of efficient corporate governance.

He goes on to discuss how the recent dethroning of AIG CEO Maurice Greenberg and elevation of Robert Iger to the top spot at Disney demonstrates how boards are increasinglyasserting their power.

Click here forthe whole post.

Of course, since the board acts as the agents of shareholders, there still exists a potential agency problem there. I'll be posting more on that in future posts.

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