Professor Christopher M. Bruner, Associate Professor of Law and Ethan Allen Faculty Fellow, recently published his article, Corporate Governance Reform in a Time of Crisis in the University of Iowa’s Journal of Corporation Law.
In this article, Professor Bruner argues that crisis-driven corporate governance reform efforts in the United States and the United Kingdom that aim to empower shareholders are misguided and offers an explanation of why policymakers in each country have reacted to the financial crisis as they have. He first discusses the risk incentives of shareholders and managers in financial firms and examines how excessive leverage and risk-taking in pursuit of short-term returns for shareholders led to the crisis. Prof. Bruner then describes the far greater power and centrality that U.K. shareholders have historically possessed relative to their U.S. counterparts and explores historical and cultural factors explaining this distinction. These differences, he argues, loom large in the observed crisis responses. The U.K. initiatives reflect reinforcement of the more shareholder-centric status quo while the U.S. initiatives reflect a populist backlash against managers, fueled by middle class anger and fear in a far less stable social welfare environment. The article concludes with a discussion of corporate governance challenges facing U.S. and U.K. policymakers following the crisis.
Many congratulations to Prof. Bruner. The full text of his article may be found at his SSRN page.