How AI has and could impact the content, application and processes of corporate law and corporate governance, and the interactions of corporate law actors, including boards, shareholders and regulators, are critically examined. The current and future impact of AI and related technologies on corporate law and corporate governance norms and practices are also analysed.

Part III applies the suggested analytical framework at the micro level by delving deep into China’s corporate and capital market development puzzle. It uses the explanatory power of law and political economy to bring more clarity to China’s evolving approach to corporate governance. The purpose is to better understand the role played by formal law in governing Chinese public firms and ultimately in China’s capital market growth and to unpack the political–economic determinants that drove its evolution. The chapters in this part of the book pay particular attention to the creation and efficacy of corporate governance institutions, both traditional and idiosyncratic, that operate in the Chinese market.

This part of the book finds that law and political economy dynamics have produced operational results. They have mobilized market participants (both economic and political) to design and deploy various growth-promoting mechanisms within firms and in the market at large. The analysis shows how such mechanisms at times triggered, supported, boosted, or replaced more conventional corporate governance institutions in ways that eventually marched the market forward.

Since their creation, corporations have proven to be vehicles for incredible aggregate wealth creation. It was, however, recognised at the outset that in creating a unique set of legal features that would make the company attractive for private investment, the state was not only creating a co-investor in public wealth but there was also the possibility that the company would pose a threat to the state itself. As such, since its inception, the corporation has been involved in a delicate dance with the state both to route its productive capacity towards socially desirable ends and to control the corporation’s power. Today, as technological development and the mobilisation of international financial capital allow the power of the corporation to transcend that of the state, the tools of the past that were used to constrain the corporation are increasingly relevant. Corporate law and antitrust were once used to maintain the balance between the power of the corporation and the power of the state. The now-separate conversations about corporate responsibility in the corporate governance sphere and about corporate power within competition policy circles have always, in fact, been fundamentally connected and targeted at the same set of risks.

Common ownership is the talk of the town in antitrust land. The competitive implications of rival firms being partially owned and controlled by a small set of overlapping owners are both fascinating and hotly contested. Could the source of potential harm be minority shareholder control in a setting of widely held companies? Critics question the extent and mechanisms of common owners’ influence driving any pro- or anticompetitive effects. This chapter aims to present a comprehensive account of partial ownership, capturing the incentives and effects of both individual and institutional investors and also cross- and common shareholding. It illustrates the early historical unity between corporate and competition laws in regulating shareholding acquisitions but also their progressive quiet disconnect. Triggered by the contemporary common ownership (hypo)thesis, it puts forward a taxonomy of shareholding types and their control characteristics from a competition law perspective, with emphasis on commonly thought passive and diversified investment holdings. The chapter concludes by urging competition and corporate governance and finance policymakers towards harmonic regulatory solutions to address common ownership. It also offers a quantum theory of the corporate property “atom”, drawing cautionary tales about the dynamic and ambiguous qualities of minority common shareholding for antitrust enforcers.

Recent literature on common ownership has employed econometric findings on the correlation between parallel holdings and prices on specific product markets to support policy claims directed to intervene in the investment strategies of the worlds largest investment corporations. Regardless of the validity of such econometric findings, direct intervention in the investment strategies of large investment management corporations may produce a series of unwanted negative repercussions on the positive externalities that are correlated to the presence of parallel holdings (e.g. enhanced pursuance of ESG objectives) without actually sorting out the expected pro-competitive effects – because of the presence of other co-causation factors that determine price increases. Sound policy interventions should also consider the larger picture (concentration on the product markets, concentration on the financial services market, status of governance practices and policies and finally also geopolitical variables) before embarking in any policy strategy in this field.

This chapter highlights the potential anti-competitive risks raised by interlocking directorates between competitors (companies having common board members). Although in the US, Section 8 of the Clayton Act specifically prohibits interlocks among competitors, there is no such prohibition in Europe. The main claim of this chapter is that there may be an enforcement gap around anti-competitive effects of interlocking directorates in Europe. A review of relevant provisions shows that interlocking directorates are likely to fall short of EU competition law. In addition, national corporate laws, as well as tools of corporate governance may be of limited use to remedy competitive concerns. This chapter concludes with a discussion of research avenues that would inform suggestions for reforms.

If a firm is a nexus of contracts, then it is just the sum of its counterparties. It follows that when a firm monopolizes a particular market and exploits its power to impose unfavourable terms on a counterparty, the firm necessarily exploits one counterparty for the benefit of another, because the additional profits the firm generates from the unfavourable terms must be paid out eventually to some other counterparty of the firm. One alternative to attacking monopoly power through breakup of large firms or limits on anticompetitive conduct in the marketplace is therefore to prevent any one counterparty of the firm from so dominating firm governance as to be able to induce the firm to oppress other counterparties for its benefit. Creating a balance of power in firm governance, by giving each class of counterparties (i.e., workers, suppliers, investors, and consumers) an equal say over the choice of board members, would eliminate the internal forces that induce firms to exercise monopoly power. But it would not prevent firms from engaging in productive, pie-expanding, behaviour, because such behaviour tends to expand the business that the firm does with all of its counterparties—or at least enables the firm to use a share of the gains to compensate those counterparties that lose out—and therefore benefits them all.

This chapter articulates the central argument (why a new legal form for social enterprises in India, Malaysia, Hong Kong, and Singapore is needed and what it should entail); explains why the four Asian jurisdictions are selected as case studies; and examines the purposes of social enterprises and their two main business models. The chapter then provides an overview of social enterprises in the four Asian jurisdictions including: their operating domains, the drivers of the development of social enterprises, the challenges faced by them, the three main conflicts of interests afflicting them, and the legal forms used by social enterprises. Importantly, the chapter shows that the legal forms available to or used by social enterprises in the four Asian jurisdictions are unable to properly address the conflicts of interests, and thus, a new legal form is required.

The company form of business structure is one of the most common in the world today. As discussed in the previous chapter, there are a variety of benefits that make the corporate form the most appealing for many business operators, and also for investors and other stakeholders. This chapter examines this dominant business structure in detail, and explains the regulations in place around it. It identifies the legislation and other regulatory tools that enable the formation of companies in Australia, the process of incorporation and its legal consequences, what it means to be a member of a company, how companies are managed and the duties that are owed by the persons in control, companies financial reporting obligations, and the processes involved when a company becomes insolvent or otherwise needs to be wound up. You will follow a practical example across the course of this chapter, identifying how the company business structure would affect this startup business, and the impact that the legal regulation in this area will have on the individuals within and associated with this business.

Proponents of stakeholder capitalism claim that it can be implemented simply by modifying the fiduciary duties of directors so that they can take into account the interests of stakeholders rather than being legally limited to considering shareholder value maximization. Such claims fundamentally misunderstand how deeply embedded shareholder value maximization is in corporate law. Only shareholders get to vote, which means directors get to keep their jobs only if they please shareholders. A web of director and officer fiduciary duties inclines them to shareholder value maximization, as does the law of executive compensation.

One of the key claims of advocates of stakeholder capitalism, especially those in the legal academy, is that the foundational case – Dodge v. Ford Motor Co. – was not good law when it was first written, the key part of the decision, is mere dicta, and subsequent legal developments have undercut whatever validity the decision may have had at one time. All of these claims are demonstrably false. As Chief Justice Leo Strine put it, those who claim that shareholder value maximization is not the law are pretending.

Shareholder value maximization is the law. It ought to be the law. This is, in part, because the chief alternative available in liberal democratic societies – stakeholder capitalism – is fundamentally flawed. If executives such as those who signed the Business Roundtable’s 2019 statement on corporate purpose really tried to run their companies according to the altruistic principles laid out therein, they would find it an impossible task. Developing the set of objective and quantifiable metrics necessary to operationalize stakeholder capitalism will prove an intractable problem. Even if the requisite set of metrics could be designed, boundedly rational managers cannot reasonably be expected to balance the huge number of competing factors necessary to account for the varied interests of the firm’s many constituencies.

AP Smith Mfg. Co. v. Barlow is the seminal case on the fiduciary duties of corporate directors with respect to profit maximization and corporate philanthropy. The chapter provides the factual context of the case and analyzes the law. The chapter situates the case in the famous debate between Adolf Berle and E. Merrick Dodd over shareholder value maximization. It provides context for the business communitys approach to shareholder capitalism.

There are very few cases holding directors liable for failing to maximize shareholder value. The reason is the business judgment rule, a corporate law doctrine that precludes judges from reviewing the merits of director decisions absent some evidence of fraud, illegality, self-dealing, failure to make an informed decision, or waste of corporate assets. Shlensky v. Wrigley is the classic case of the business judgment rules application to cases in which the directors are alleged to have failed to maximize profit.