Inside the Corporate Governance Complex

Editor’s Note: Suzanne Stevens is a senior editor at The Deal. This post relates to a recent article by Ms. Stevens in The Deal, which is available here.

In an article titled What Berle and Means have wrought in the May 17 issue of The Deal magazine and available on, my colleague Michael Rudnick and I map the well-funded, sprawling and interlocking set of institutions that have grown up around corporate governance over the past 30 years or so. This governance complex, with major outposts across the country at research universities, law firms, the federal government, institutions, activist hedge funds and even blogs like this one, generates considerable intellectual and financial firepower. We lay out some of its fissures, schism and alliances, and talk to movers and shakers including legal icons Ira Millstein and Martin Lipton, Harvard’s Lucian Bebchuk, Stanford’s Joe Grundfest, Relational Investors’ Ralph Whitworth, Calpers’ Anne Simpson and The Corporate Library’s Nell Minow.

Why now? The financial crisis has propelled the issue of the role of boards and balance sheet transparency high onto regulatory and legislative agendas. Congress is threatening to reach deep into corporate boardrooms on executive pay, and the Obama-era SEC is taking a more activist approach to governance than at any time since the Enron Corp. and WorldCom Inc. scandals of the early 2000s.

The truth is, governance has never been as neat and simple as many of its proponents, and most politicians, suggest. And the framework in which widespread corporate ownership (shareholders) and relatively narrow control (boards and management) should co-exist has been vigorously debated since Adolph Berle and Gardiner Means first considered it in their 1932 classic “The Modern Corporation and Private Property.” The authors might not be thrilled by the results their seminal insights have had, and they would surely sense that they were cited more often than read. But they would certainly be impressed by how big and complicated the industry they all but started has become.

The full article is available here.

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