From the Harvard Governance Blog:
The Law School’s Program on Corporate Governance has recently issued a discussion paper by Vice Chancellor Leo Strine, Toward Common Sense and Common Ground? Reflections on the Shared Interests of Managers and Labor in a More Rational System of Corporate Governance. The paper presents the Vice Chancellor’s recent remarks at the Spring Banquet for the Journal of Corporation Law at the University of Iowa College of Law. The Abstract is as follows:
In this essay, Vice Chancellor Strine reflects on the common interests of those who manage and those who labor for American corporations. The first part of the essay examines aspects of the current corporate governance and economic environment that are putting management and labor under pressure. The concluding section of the essay identifies possible corporate governance initiatives that might--by better focusing stockholder activism in particular and corporate governance more generally on long-term, rather than short-term, corporate performance--generate a more rational system of accountability, that focuses on the durable creation by corporations of wealth through fundamentally sound, long-term business plans.
The full essay is available for download here. The essay will be appearing in the Journal of Corporation Law with responses by a number of prominent commentators. In a subsequent post, Guest Contributor Hillary Sale will offer some background on that issue of the Journal and the responses to the Vice Chancellor’s remarks.
I guess I count as a "prominent" commentator, because I was asked to provide comments for the Journal. My contribution is up on SSRN as The Shared Interests of Managers and Labor in Corporate Governance: A Comment on Strine:
Abstract: In his essay, Toward Common Sense and Common Ground?, Delaware Vice Chancellor Leo Strine seeks to identify common concerns of corporate management, labor, and shareholders. In so doing, Strine endorses a vision of the corporation as "a social institution that, albeit having the ultimate goal of producing profits for stockholders, also durably serves and exemplifies other societal values." Accordingly, he directs our attention to the prospects of creating "a corporate governance structure that better fosters [the corporation's stakeholders'] mutual interest in sustainable economic growth."
There is much that is admirable in Strine's analysis of what ails corporate governance and his proposals for reform, as well as much that is debatable. In this brief comment, I identify three aspects of Strine's analysis that strike me as underdeveloped. First, what do we mean when we call the corporation "a social institution"? Second, do managers and laborers really have common interests threatened by shareholders? Finally, even if Strine's search for common ground is a worthwhile project, is corporate law and governance the appropriate arena in which to find it? Taken together, these issues raise serious questions about the viability of Strine's project.
Keywords: corporation, corporate governance, management, labor, shareholders
JEL Classifications: K22
