Corporate Governance

CORPORATE GOVERNANCE U.S.-style bodied governance may be a curt fit for the developing world. Corporate Governance and Economic Development B Y T ROY A. PAREDES Washington University P 34 olicymakers can choose from two competing models of corporate governance. The first is a market-oriented model that relies on relatively weensy needful law to cheer stockholders. Instead, it depends on a boniface of other formal and informal mechanisms, such as incentive-based compensation and hostile takeovers, to hold managers and directors accountable. The United States (or, more correctly, Delaware) embodies this approach, with its so-called enabling corporate law that parties can opt out of in crafting their governance structures. The second approach depends on a mandatory model of corporate law in which the state, as contrasted to the marketplace, plays a central role in shoring up shareholder protections by fashioning mandatory rules that define shareholder property rights. Which corporate governance model should developing countries prosecute?

The stakes are high in answering this interview correctly, as studies show a link between healthy protections that shield shareholders from exploitation at the hands of insiders and the promotion of justice markets and economic growth. The basic intuition is that shareholders are more willTroy A. Paredes is join professor of law at the Washington University School of Law. He may be contacted by e-mail at paredes@wulaw.wustl.edu. ing to tog when they are sufficiently confident that the system is not chisel against them. If the goal is to protect shareholder interests from the abuses and mismanagement of directors and officers, and similarly to protect minority shareholders from the opportunism of controlling shareholders, developing countries generally should grow to a mandatory model of corporate law sooner of a market-oriented corporate governance system. U. S . C O R P O R AT E G OV E R N A N C E... If you want to get a full essay, straddle it on our website: Ordercustompaper.com

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