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89 Geo. L.J. 797 (2000-2001)
The Human Nature of Corporate Boards: Law, Norms, and the Unintended Consequences of Independence and Accountability

handle is hein.journals/glj89 and id is 819 raw text is: ARTICLES The Human Nature of Corporate Boards: Law, Norms, and the Unintended Consequences of Independence and Accountability DONALD C. LANGEVOORT* Studies of corporate boards of directors often observe team-like traits. Invita- tions to the board are based heavily on matters like compatibility and fit. The work of the board prizes consensus, not conflict.' Absent some sort of crisis, outside members see their value largely in terms of constructive advice, giving insiders the benefit of an expert external perspective on the company's uncertain world.2 This portrait of cooperation is subject to two interpretations. The dominant view in corporate governance theory today is that heavy emphasis on teamwork and conflict-avoidance marks a board that has been captured by its CEO, an illusion of a governing body that acts largely as an elite private club with a rubber stamp. Much of the work in corporate governance over the last twenty- five years in academic circles and in the lobbying efforts of shareholder activists has been to extinguish this kind of board.3 Their goal is to replace it with the new-style monitoring board,4 where independence, skepticism, and a rigorous * Professor of Law, Georgetown University Law Center. This project was supported by the George- town-Sloan Project on Business Institutions. I am very thankful to Bill Bratton, Steve Bainbridge, Margaret Blair, Ed Rock, Charles Elson, Mini Gulati, Randall Thomas, and participants at the University of Michigan's Olin Law and Economics Seminar and the University of Pennsylvania Symposium on Norms and Corporate Law for constructive comments. Suzanne Sylvester and Heather Hathaway provided helpful research assistance. 1. See Bayless Manning, The Business Judgment Rule and the Director's Duty of Attention: Time for Reality, 39 Bus. LAW. 1477, 1483 (1984). 2. See JAY W. LORSCH & ELIZABETH MCIVER, PAWNS OR POTENTATES: THE REALITY OF AMERICA'S CORPORATE BOARDS 17 (1989). See generally MYLES L. MACE, DIRECTrORS: MYTH AND REALITY (2d ed. 1986). 3. See ROBERT A.G. MONKS & NELL MINOW, CORPORATE GOVERNANCE 200-05 (1995); MICHAEL USEEM, EXECUTIVE DEFENSE: SHAREHOLDER POWER AND CORPORATE REORGANIZATION 203-06 (1993); Ronald J. Gilson & Reinier Kraakman, Reinventing the Outside Director: An Agenda for Institutional Investors, 43 STAN. L. REV. 863, 873 (1991); Ira M. Millstein & Paul W. MacAvoy, The Active Board of Directors and Performance of the Large Publicly Traded Corporation, 98 COLUM. L. REv. 1283, 1285 (1998); James M. Tobin, The Squeeze on Directors Inside Is Out, 49 Bus. LAW. 1707, 1719-20 (1994); Robert C. Pozen, Institutional Investors: The Reluctant Activists, HARV. Bus. REV., Jan.-Feb. 1994, at 140. 4. See MELVIN A. EISENBERG, THE STRUCTURE OF THE CORPORATION 140-48 (1976); Eugene F. Fama & Michael C. Jensen, Separation of Ownership and Control, 26 J.L. & ECON. 301, 313-15 (1983). This idea is now expressly embodied in the American Law Institute's Principles of Corporate Governance. AMERICAN LAW INSTITUTE, PRINCIPLES OF CORPORATE GOVERNANCE § 3.01 (1994).

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