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93 Nw. U. L. Rev. 641 (1998-1999)
Future As History: The Prospects for Global Convergence in Corporate Governance and Its Implications

handle is hein.journals/illlr93 and id is 651 raw text is: Copyright 1999 by John C. Coffee, Jr. Printed in U.S.A. Northwe ten Univerity Law Review Vol. 93, No. 3 Articles THE FUTURE AS HISTORY: THE PROSPECTS FOR GLOBAL CONVERGENCE IN CORPORATE GOVERNANCE AND ITS IMPLICATIONS John C. Coffee, Jr.* What forces explain corporate structure and shareholder behavior? For decades this question has gone unasked, as both corporate law scholars and practitioners tacitly accepted the answer given in 1932 by Adolf Berle and Gardiner Means that the separation of ownership and control stemming from ownership fragmentation explained and assured shareholder passiv- ity.' Over this decade, however, corporate law scholars have recognized that this standard answer begs an essential prior question: if ownership fragmentation explains shareholder passivity, what explains ownership fragmentation? Although the Berle and Means model assumed that large- scale enterprises could raise sufficient capital to conduct their operations only by attracting a large number of equity investors, contemporary empiri- cal evidence finds that, even at the level of the largest firms, dispersed share ownership is a localized phenomenon, largely limited to the United States and Great Britain. Not only does the latest comparative research demon- strate that concentrated, not dispersed, ownership is the dominant world- wide pattern,2 but in-depth studies of individual countries show that share- * Adolf A. Berle Professor of Law at Columbia University Law School. The author wishes to ac- knowledge helpful comments and assistance from his colleagues Melvin A. Eisenberg, Ronald Gilson, Victor Goldberg and Jeffrey Gordon, and also from Merritt Fox, as well as from participants at law and economics seminars at the Universities of Kansas and Michigan. This Article is intended as a first in- stallment of the lectures that the author will deliver in early 2000 as part of the Julius Rosenthal Foun- dation Lecture Series at Northwestern University School of Law. I See ADOLF A. BERLE & GARDINER C. MEANS, JR., THE MODERN CORPORATION AND PRIVATE PROPERTY (1932). For the first reconsiderations of this thesis, see Bernard S. Black, Shareholder Pas- sivity Reexamined, 89 MICH. L. REv. 520 (1990); Alfred F. Conard, Beyond Managerialism: Investor Capitalism?, 22 U. MICH. J.L. REFORM 117 (1988). 2 For the fullest discussion of this point and detailed evidence from the 27 principal corporate law jurisdictions, see Rafael La Porta et al., Corporate Ownership Around the World (June 1998) (visited March 3, 1999) <http://nberws.nber.org/papers/W6625> (unpublished manuscript, available on the Web). This study examines the ownership structure of the largest firms in 27 different countries, those with the 26 largest Gross National Products and Mexico. Compiling data on the 10 largest publicly traded nonfinancial companies in each country, the authors found that (i) slightly less than 40% qualified as widely held, (ii) 30% were family controlled, (iii) 18% were state controlled, and (iv) the balance fell into different categories not involving dispersed ownership. See id It should be underscored that this

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