Rotman, Leonard I. --- "Re-evaluating the Basis of Corporate Governance in the Post, Post-Enron Era" [2012] ELECD 387; in Vasudev, M. P.; Watson, Susan (eds), "Corporate Governance after the Financial Crisis" (Edward Elgar Publishing, 2012)

Book Title: Corporate Governance after the Financial Crisis

Editor(s): Vasudev, M. P.; Watson, Susan

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9780857931528

Section: Chapter 5

Section Title: Re-evaluating the Basis of Corporate Governance in the Post, Post-Enron Era

Author(s): Rotman, Leonard I.

Number of pages: 19

Extract:

5. Re-evaluating the basis of corporate
governance in the post, post-Enron
era
Leonard I. Rotman

INTRODUCTION

The Enron scandal of 2001 shook the foundation of modern corporate
governance in many ways. It resulted in the collapse of one of the giants of
corporate America, taking with it numerous jobs, investment dollars and
confidence in the securities marketplace. However, it also brought into
question the manner in which corporations were governed and how they
ought to be governed.
Curiously, Enron's collapse coincided with the publication of Henry
Hansmann and Reinier Kraakman's article `The End of History for
Corporate Law' (2001), which sought to end discussions of how modern cor-
porations were to be governed by asserting the triumph of the shareholder
primacy norm over competing progressive theories of the corporation.
Hansmann and Kraakman claimed that worldwide convergence in corpor-
ate theory had led toward a unitary vision of corporate purpose founded
on shareholder primacy. This in turn resulted in their claim of the `end of
history for corporate law,' in which the struggle for dominance between
the shareholder primacy and stakeholder theories of corporate governance
rooted in the famous Berle­Dodd debate of the 1930s had ended.
It will be argued that the reality of corporate governance in the
post, post-Enron era is entirely inconsistent with the vision articulated
by Hansmann and Kraakman. This chapter sets out Hansmann and
Kraakman's `end of history' thesis and assesses whether it can be justi-
fied on grounds traditionally ...