Accountability is Not Corporate Law's Sole Value

Accountability must be balanced with authority

One of the things that bugs me the most about much of normative corporate law scholarship is the fixation on accountability. Virtually everything you read in the field follows a basic formula. Step 1: spot a problem. Step 2: advocate solving it with a new, bigger, better accountability mechanism. Usually that mechanism is some new legal rule; occasionally, it is some new extrajudicial mechanism.

We are told agency costs are pervasive. Reducing agency costs is therefore the central problem of corporate law. Accountability is therefore essential.

But what almost nobody stops to consider is the question: “at what cost”? Are there countervailing values that suggest letting some things fall through the cracks? Letting existing market forces deal with the problem?

This essay draws on my book The New Corporate Governance in Theory and Practice, which sets out at length my director primacy theory of corporate law.