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
Conse'quences  of  Independence  and  Accountability  (Sept.  8,  2000),
http://papers.ssrn.com/sol3/papers.cfm?cfid=221773&cftoken=19218905&abstract._id
=241402.
2 Ser. 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).

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