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¹⁷ It is important to note that the picture of corporate governance being presented here is the mainstream view of economic and legal scholarship. It does not represent a consensus. An alternative view differs from mainstream in two respects. First, shareholders are not given primacy in corporate governance but are seen as but one group of patrons from which the corporation attempts to secure asset-specific investments. The governing body is not seen as representing a particular group’s interests, but is seen as attempting to secure the viability and sustainability of the corporate enterprise as a whole. Second, and as a result, this view differs from the mainstream view in that the key problem which corporate governance is meant to address is not a principal–agent problem, but a hold-up problem: preventing any one group from taking advantage of another patron group’s vulnerable situation which results from their making an asset-specific investment. The role of corporate executive institutions is not to represent the interests of some one group (which requires governance structures to provide confidence and security), but rather as a ‘mediating hierarchy’ that locks in capital and secures team production (see Boatright, JR, ‘From Hired Hands to Co-Owners: Compensation, Team Production, and the Role of the CEO’ (2009) 19(4) Business Ethics Quarterly 471;CrossRefGoogle Scholar Blair, MM and Stout, LA, ‘A Team Production Theory of Corporate Law’ (1999) 85(2) Virginia Law Review 247CrossRefGoogle Scholar). We start with the conventional view because it is the most influential and widespread justification of current practices. Because our enterprise is a reconstructive account of shareholder democracy, our sights are most appropriately set on the theory which informs the current regime of corporate governance.

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²⁹ Our reconstruction focuses on corporate governance as it is practised in the United States. We believe, however, that a similar argument can be made in regard to corporate law and corporate governance in other jurisdictions and contexts. Perhaps other systems of corporate governance, e.g. in Germany, China, or Japan, may entail different standards and therefore different analyses.

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