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New Yale Scholarship: Corporate Anatomy Lessons
Posted by James Grimmelmann on Monday, August 09 @ 00:15:00 EDT Scholarship
David A. Skeel, Jr., Corporate Anatomy Lessons, 113 YALE L.J. 1519 (2004) (reviewing REINIER KRAAKMAN ET AL., THE ANATOMY OF CORPORATE LAW: A COMPARATIVE AND FUNCTIONAL APPROACH (2004)).

(Abstract prepared by James Grimmelmann)

Every ten years or so, a book is published that sets the terms of discussion in corporate law scholarship for the years that follow. The book that will lay the groundwork for the corporate law debates of the coming decade is The Anatomy of Corporate Law. Written by seven of the world’s leading corporate law scholars, it attempts to identify the underlying structure of corporate law and to provide a framework for understanding the wide range of approaches that different countries take to corporate regulation. It is hard to overstate the significance -- and, as we shall see, the success -- of this project.

The central issue for corporate law in every jurisdiction, they argue, is how to mediate three kinds of agency conflicts: between managers and shareholders, between majority and minority shareholders, and between the firm and third parties. To understand how different countries address these competing claims, the authors develop a typology of ten different strategies. The authors divide these strategies across two vectors: first by operational criteria, categorizing each strategy broadly as either a “regulatory” or a “governance” approach; then by temporal criteria, separating strategies that operate ex ante from others that come into play ex post. Having developed their schema, the authors then apply it to related party transactions, control transactions, investor protection, and a variety of other key corporate law issues.

To say so much in so brief a compass, the authors obviously had to exercise ruthless editorial judgment on what to include and what to omit. After describing their typology and exploring several of their applications, I spend much of this Review focusing on issues and perspectives that the authors left out. At a general level, the book’s most important limitation is that it does not take its functionalist approach far enough. The Review also argues that the book leaves out several crucial facets of corporate law. The most important omission is the bankruptcy or insolvency regime. The authors also omit any sustained discussion of corporate groups—that is, the parent-subsidiary arrangements that characterize nearly every large corporation. Finally, the authors do not fully consider the distinctive challenges of corporate governance in emerging countries. These additions are all it would take to make the anatomy complete.

 
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