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The Failure of Corporate LawFundamental Flaws and Progressive Possibilities$
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Kent Greenfield

Print publication date: 2007

Print ISBN-13: 9780226306933

Published to Chicago Scholarship Online: March 2013

DOI: 10.7208/chicago/9780226306988.001.0001

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Corporate Governance as Publicy Tool

Corporate Governance as Publicy Tool

(p.153) 7 Corporate Governance as Publicy Tool
The Failure of Corporate Law
University of Chicago Press

Corporate law can be a tool not only to help businesses govern their internal affairs but also to bring about needed changes in other areas of public policy. This chapter illustrates the potential power of corporate law by explaining how it can be used as a tool to address two serious public policy problems in the United States: stagnant real income for most workers and wide income inequality. It focuses on changes in corporate governance that can address the problems of stagnant income and income inequality: relaxing the profit maximization norm, extending management's fiduciary duty to include workers, and requiring some kind of worker representation on boards of directors. Such initiatives would have the effect of building a norm of fairness within the firm as well as facilitating a more equitable sharing of the corporate surplus. Two effects associated in studies with higher wages and lower income inequality are lowering of monitoring costs and creation of relational contracts.

Keywords:   corporate law, corporate governance, public policy, United States, stagnant income, income inequality, profit maximization, fiduciary duty, monitoring costs, relational contracts

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