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149 U. Pa. L. Rev. 2151 (2000-2001)
Do Norms Matter--A Cross-Country Evaluation

handle is hein.journals/pnlr149 and id is 2163 raw text is: DO NORMS MATTER? A CROSS-COUNTRY EVALUATION JOHN C. COFFEE, JR.' INTRODUCTION That corporate behavior may be more shaped and determined by social norms than by legal rules seems to be an idea whose time has come.' Respected academics have placed the relative efficacy of social norms as compared with legal rules at the center of the debate over the judicial role in corporate law, and some have suggested that there are areas of internal corporate behavior and decisionmaking that courts should monitor less rigorously because social norms adequately govern behavior.` Although the relevance of norms cannot be denied, the problem with this debate is that it has an ineffable and subjective character. Of course, individuals internalize norms, seek to maximize their reputational capital, and function in teams that operate based on informal systems of consensus and cooperation. They do so within both corporations and all other forms of social organization. But once this is said, can any testable propositions be framed? In particular, can a corporation's perceived compliance with norms that are not legally enforced be shown to affect the market value of its securities? t Adolf A. Berle Professor of Law, Columbia University Law School See Robert Cooter & Melvin A. Eisenberg, Fairness, Character, and Efficiency in Firms, 149 U. PA. L. REv. 1717 (2001) (arguing that firm-specific fairness norms promote efficiency, especially when supported by reputation effects); Melvin A. Eisenberg, Corporate Law and Social Norms, 99 CoLUM. L. REv. 1253 (1999) (discussing the role of social norms in several key areas of corporate law, including fiduciary duties, corporate governance, and takeovers); Edward B. Rock & Michael L. Wachter, Islands of Conscious Power: Law, Norms, and the Self-Governing Corporation, 149 U. PA. L. REv. 1619 (2001) (arguing that corporate law is a sophisticated mechanism for facilitating self-governance by nonlegally enforceable rules and standards); Donald Langevoort, The Human Nature of Corporate Boards: Law, Norms and the Unintended Consequences of Independence and Accountability (Sept. 8, 2000), http://papers.ssrn.com/sol3/papers.cfin?cfid=221773&cftoken=19218905&abstract_id =241402. - See. e.g., Rock & Wachter, supra note 1. But see Paul Mahoney & Chris Sanchirico, Competing Norms and Social Evolution: Is the Fittest Norm Efficient?, 149 U. PA. L. REV. 2027, 2045-46 (2001) (arguing that the corporate norm that evolves within the organization may not necessarily be efficient). (2151)

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