There is no free market in corporate governance

Posted by Bogdan Dabrowski on April 21, 2015
Blog Post

board_mediumThe development of different forms of governance systems was petrified in the mid 19th century into just two systems. These are: Anglo-Saxon one board system (Board of Directors) and Continental two-board system (Supervisory Board and Management Board). Since the time these two mechanisms found its place in legal codes the competition from other forms of governance became impossible and basically illegal. So, there is no free market in corporate governance.

Below some characteristics of how the competitive systems might look like:

  • No protection of minority shareholders;
  • Insider trading fully legal;
  • Joint-stock companies with full liability of its shareholders;
  • No contractual liability of Management Board (except tort);
  • Or some Board members with full liability and some with limited;
  • No boards at all, just owners;
  • Or several Boards in one company;
  • Board members with different levels of legal accountabilities (market of accountabilities);
  • Full freedom for owners to shape their companies in whatever way they wish.

Unfortunately these systems have no possibility for legal testing. Fortunately, they exist under the radar in hidden reality.

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