Ex-Ante Corporate Governance

Who should make decisions for a corporation? And how should decisions about who makes decisions be made? These fundamental governance questions motivate much of corporate law, as lawmakers seek to strike a sensible balance of power between managers, shareholders, creditors, suppliers, and other players in the corporate system. Historically, much of the governance interplay has been retrospective. Shareholders expelled directors or sued their firms when something went wrong, not in anticipation that something bad might occur. Directors defended against (or, more likely, settled) questionable lawsuits as the cases arose; they did not enact structural incentives to discourage specious filings. Yet this is now changing: corporate governance tactics are increasingly shifting from the ex-post to the ex-ante. My new article, Ex-Ante Corporate Governance, explores this trend and illustrates how both shareholders and directors are turning to strategies that might shape the future balance of power instead of just reacting to historical concerns.