Distributed Governance

Distributed ledger technology enables disruption of traditional business organizations by introducing new business entities without the directors and officers of traditional corporate entities. Although these emerging entities offer intriguing possibilities, distributed entities may suffer significant collective action problems and expose investors to catastrophic regulatory and governance risks. Our essay examines key considerations for stakeholders and argues that distributed entities must be carefully structured to function effectively. This essay breaks new ground by critically examining distributed entities. We argue that a distributed model is most appropriate when DLT solves a unique corporate governance problem. We caution against ignoring the lessons painstakingly learned through past governance failures.