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Towards a Constitutional Theory of Corporate Governance

  • Matthias Benz
  • Bruno S. Frey

The idea that there is a uniformly “optimal” governance structure for corporations features prominently in current debates and policy proposals. In this paper, we propose a different, constitutional theory of corporate governance: the criterion for a good corporate governance structure is whether it is freely chosen by the shareholders. We illustrate our approach by comparing the constitutional rights of shareholders under US corporate law and Swiss corporate law. Moreover, we discuss the mandatory provisions that shareholders would likely include in corporate law at a constitutional stage, behind the veil of ignorance.

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Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 304.

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Date of creation: Sep 2006
Date of revision:
Handle: RePEc:zur:iewwpx:304
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  1. Roberts, John & Van den Steen, Eric, 2000. "Shareholder Interests, Human Capital Investment and Corporate Governance," Research Papers 1631, Stanford University, Graduate School of Business.
  2. Djankov, Simeon & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2008. "The law and economics of self-dealing," Journal of Financial Economics, Elsevier, vol. 88(3), pages 430-465, June.
  3. Matthias Benz & Alois Stutzer:, . "Are Voters Better Informed When They Have a Larger Say in Politics? Evidence for the European Union and Switzerland," IEW - Working Papers 119, Institute for Empirical Research in Economics - University of Zurich.
  4. Daryl Koehn & Joe Ueng, 2005. "Evaluating the Evaluators: Should Investors Trust Corporate Governance Metrics Ratings?," Journal of Management and Governance, Springer, vol. 9(2), pages 111-128, 06.
  5. Benjamin E. Hermalin & Michael S. Weisbach, 2006. "A Framework for Assessing Corporate Governance Reform," NBER Working Papers 12050, National Bureau of Economic Research, Inc.
  6. Dostie, Benoit, 2005. "Job Turnover and the Returns to Seniority," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 192-199, April.
  7. Paul A. Gompers & Joy L. Ishii & Andrew Metrick, 2001. "Corporate Governance and Equity Prices," NBER Working Papers 8449, National Bureau of Economic Research, Inc.
  8. John G. Matsusaka, 2005. "Direct Democracy Works," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 185-206, Spring.
  9. Ichino, A. & Flabbi, L., 1998. "Productivity, Seniority and Wages. New Evidence form Personnel Data," Economics Working Papers eco98/11, European University Institute.
  10. Susan E.K. Christoffersen & Christopher C. Geczy & David K. Musto & Adam V. Reed, 2007. "Vote Trading and Information Aggregation," Journal of Finance, American Finance Association, vol. 62(6), pages 2897-2929, December.
  11. Lucian Bebchuk & Alma Cohen & Allen Ferrell, 2009. "What Matters in Corporate Governance?," Review of Financial Studies, Society for Financial Studies, vol. 22(2), pages 783-827, February.
  12. Edward P. Lazear, 2003. "Firm-Specific Human Capital: A Skill-Weights Approach," NBER Working Papers 9679, National Bureau of Economic Research, Inc.
  13. Anthony M. Marino & John G. Matsusaka, 2005. "Decision Processes, Agency Problems, and Information: An Economic Analysis of Capital Budgeting Procedures," Review of Financial Studies, Society for Financial Studies, vol. 18(1), pages 301-325.
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