This paper aims at evaluating the mechanisms of corporate governance currently at work in the United States. Section 1 turns its focus to the reasons accounting for the still relative scarceness of large shareholders in American publicly held companies. The analysis thereafter concentrates on assessing the efficacy of each of the pillars purportedly buttressing the American system of corporate control. The paper argues that the evidence provided by the existing corporate governance literature supports the following propositions: 1) the legal and regulatory framework actually restrains the scope for expropriating minority shareholders, though at the cost of inhibiting institutional investor activism; 2) as a rule, the board of directors do not comply with their mandatory duty of overseeing management, although some progress has recently been made, with directors in several companies becoming less submissive to chief executive officers; 3) the market for corporate control encounters a great number of difficulties (ranging from legal hurdles to high transaction costs and to serious free-riding problems), which are sufficient to cast a cloud on its reliability as a means of repressing managerial inefficiencies and rent-seeking; 4) competition in the product and capital markets is likely to produce effects only in the long-run.
corporate governance; United States; board of directors; proxy contests; hostile takeovers; the market for corporate control; tender offers; incomplete contracts
