The Directorist Model of Corporate Governance

My last semester of law school, I took the opportunity to write the paper I had been wanting to write ever since taking Contracts and Business Associations courses.

In this paper, I explored Dr. Lynn Stout’s work on The Shareholder Value Myth (2012), outlining the problems of shareholder primacy, and then also suggesting what an alternative and better model of coporate governance could be.

I called this model the “Directorist” model because it empowers the directors of the public corporation to serve as the heart and mind of the corporation. Although the term is also a nod to the “managerialist” model, the directorist model is unique in that it creates a dual board structure, inspired partly by (but still distinct from) the German model of the Aktiengesellschaft.

After graduating from law school, I added to the paper and published it in the William & Mary Policy Review.

The paper is available from HeinOnline and also directly here.

This paper builds the case for a new approach to corporate governance, the “Directorist” model, which is a form of stakeholder theory.

1. Part I introduces the relevant concepts and issues facing corporate governance, and the reasons why corporate governance is critical to the health of public corporations.
2. Part II compares the American and German governance systems, and seeks to draw some relevant lessons.
3. Part III explains why the current dominant viewpoint of shareholder primacy is wrongheaded and should be shelved.
4. Part IV argues for the “Directorist” view by using an analogy that compares a public corporation to a school student, shareholders to the student’s parents, and managers to the student’s teachers.
5. Part V fully explains the Directorist model’s dual board structure, function, and advantages.
6. Finally, Part VI concludes by calling for nothing short of the re-humanization of the public corporation as a pivotal component and member of modern society.