Rethinking Corporate Governance ─ The Law and Economics of Control Powers

How does corporate law matter for corporate governance and its efficiency, both in the positive sense of the impact of legal rules on corporate governance and in the normative dimension? Adopting a law and economics perspective, Pacces (law and finance, Erasmus U. Rotterdam, the Netherlands) seeks to answer this question in relation to the impact of the private benefits of control on the joint welfare of corporate controllers and non-controlling shareholders in both managerial control and shareholder control systems. With respect to the legal distribution of corporate powers, the legal discipline of conflicted interest transactions, and the regulation of corporate control transactions, he tests the hypotheses that law matters: as a means of supporting protection of non-controlling shareholders against diversionary private benefits that may be extracted by the corporate controller out of shareholder investments, for protecting the corporate controllers idiosyncratic private benefits in relation to control rents, and for promoting the allocation of corporate control in a manner that supports the exercise of power by the controller while also constraining its abuse. These hypotheses are tested against the case studies of Italy, the US, the UK, Sweden, and the Netherlands. Annotation c2013 Book News, Inc., Portland, OR (booknews.com)

Alessio M. Pacces is Professor of Law and Finance at the Erasmus School of Law, Erasmus University Rotterdam and since 2009 he has been a Research Associate of the European Corporate Governance Institute (ECGI). Before joining academia, Professor Pacces was a senior researcher in the Law and Economics Research Department of the Bank of Italy, a financial economist at the Italian Securities Authority (Consob), and he served as junior officer in the Italian Financial Police. His research is mainly concerned with the economic analysis of corporate law and of financial regulation.