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Scylla or Charybdis? Historical Reflections on Two Basic Problems of Corporate Governance

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  • Lamoreaux, Naomi R.

Abstract

Shareholders in corporations face two very different types of governance problems: expropriation by controlling shareholders or managers; and expropriation by greedy rulers or, more generally, by the state. The problem is that the more successful investors are in protecting their capital from the grabbing hand of the state, the less they are able to call upon the state to protect it from the grabbing hand of corporate insiders. Conversely, the more investors are able to call upon government to restrain insiders, the more they are vulnerable to expropriation by the state. Although the terms of this tradeoff have changed over time as modern democratic polities replaced absolutist monarchies, both types of threats are still very much with us.

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  • Lamoreaux, Naomi R., 2009. "Scylla or Charybdis? Historical Reflections on Two Basic Problems of Corporate Governance," Business History Review, Cambridge University Press, vol. 83(1), pages 9-34, April.
    • Handle: RePEc:cup:buhirw:v:83:y:2009:i:01:p:9-34_00
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    Cited by:

    1. Eric Hilt, 2014. "History of American Corporate Governance: Law, Institutions, and Politics," Annual Review of Financial Economics, Annual Reviews, vol. 6(1), pages 1-21, December.
    2. Toms, Steven, 2015. "Fraud and Financial Scandals: A Historical Analysis of Opportunity and Impediment," MPRA Paper 68255, University Library of Munich, Germany.
    3. Eric Hilt, 2014. "Corporate Governance and the Development of Manufacturing Enterprises in Nineteenth-Century Massachusetts," NBER Chapters, in: Enterprising America: Businesses, Banks, and Credit Markets in Historical Perspective, pages 73-102, National Bureau of Economic Research, Inc.

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