Pacces, Alessio M. --- "Comment – Corporate Governance and the Coase’s Legacy: A Reply to Henry Manne" [2010] ELECD 403; in Pacces, M. Alessio (ed), "The Law and Economics of Corporate Governance" (Edward Elgar Publishing, 2010)

Book Title: The Law and Economics of Corporate Governance

Editor(s): Pacces, M. Alessio

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848448971

Section Title: Comment – Corporate Governance and the Coase’s Legacy: A Reply to Henry Manne

Author(s): Pacces, Alessio M.

Number of pages: 11

Extract:

Comment ­ Corporate governance and
Coase's legacy: a reply to Henry Manne
Alessio M. Pacces

Professor Manne makes a fundamental statement, which he articulates
in the domain of three major items of corporate governance. The state-
ment is that `there is no aspect of corporate governance that is not better
left to private contracting and the play of market forces' (p. 190 of this
volume).1 This is applied to boards of directors, the market for corporate
control, and insider trading. I do not think that Professor Manne would
maintain his fundamental statement even in those circumstances that most
evidently call for regulatory intervention. That he admits, implicitly, when
he supports the `need for courts to deal with real acts of misbehavior by
directors' (p. 197 of this volume). By speculating on the limits of contract-
ing and the meaning of misbehavior, I will try to illustrate why ­ maybe
unfortunately ­ there is more need for regulation in corporate governance
than Professor Manne suggests. Incidentally, my considerations are based
on a framework not very different from his. While I am honored to be
cited by the very pioneer of corporate law and economics, I am afraid I
do not fully share his trust in the unfettered functioning of markets and
private contracting for efficient corporate governance.

1. It is in the tradition of law and economics that regulation must be jus-
tified by market or contracting failures. This goes back to Ronald Coase
(1960), whose views ­ as he also made clear ...