Some Views on U.S. Corporate Governance

Abstract

The U.S. model has long been the European standard for assessing national corporate governance systems and for devising ways to reform them. Unfortunately, many features of the rather complex U.S. model are often neglected and "institutional genetics" is attempted which not only overlooks path-dependency but also builds on partly false premises. In attempting first to analyze and then to suggest reform of the Italian corporate governance system, one learns about some of those features. Pursuant to a USIA International Visiting Program, a series of interviews and meetings were arranged throughout the United States in the late summer of 1995 with persons involved in corporate governance litigation as board directors, officers, shareholders, representatives of institutional investors, judges, lawyers, officials of Federal Agencies or Departments, members of non-profit organizations and, of course, as academics.1 This article, partly drawing on this experience, raises some issues regarding U.S. corporate governance which should be considered when using it as a standard and notes where further research seems warranted. The issues are arranged under five headings: (1) efficiency, aequitas and judges' command of the working of fiduciary duties; (2) "concentration risk" and the role of the press in large investor activism; (3) monitoring failures and the role of unions in private pension funds; (4) does corporate governance matter? a spurious correlation; (5) populism and dynamic efficiency. For each issue, a brief account is first given of evidence or insights - if any -which arose from the above-mentioned interviews; some generalizations, comments and questions are then posed. In tackling these issues, this article broadly discusses the U.S. system of corporate governance and identifies missing links, but does not necessarily fill them in.