A reliable system of corporate governance is an important requirement for the long-term success of public companies. After decades of research and policy advocacy, there is a growing sense that many public corporations are finally nearing the promised land: their boards seem more diverse, large investors seem more engaged, and directors seem more accountable than ever. But is this perception accurate?

In a new paper, forthcoming in the Yale Law Journal, we explore this question by providing a comprehensive empirical account of the differences in the governance arrangements and shareholder engagements between large- and small-cap corporations. We compiled a rich and detailed historical dataset from a diverse array of sources, some of it hand-collected and coded, for both S&P 1500 and the bottom 200 companies of the Russell 3000 companies, which sheds new light on the corporate governance of mid- and small-cap companies.

As the paper reveals, while many large, high-profile companies are more attentive to shareholder demands and tend to serve as models of desirable governance practices, the picture is considerably different in the far corners of corporate America, away from the limelight of the S&P 500. In these smaller, less-scrutinized corporations, the adoption of governance arrangements is less organized or systematic and often significantly departs from the norms set by larger companies. This results in what this paper calls the “Corporate Governance Gap.”

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