In a Wake Forest Law Review article, FSU Law professor Kelli Alces provides a novel and intriguing recommendation to re-shape how corporations are governed in America. Her recommendation is to eliminate the board of directors as the ultimate decision-maker. From a legal realism perspective, which looks at human behavior as a driver of legal outcomes, it is worth rethinking the value and efficacy of the board as the supreme governing body in Corporate America. As professor Alces mentions:
“A firm’s investors and other influential constituents use their contract rights against the firm to influence management and monitor management more carefully than the board can to protect their interests and investments in the firm.”
Delaware corporate law and other statutes, however, require that corporations be governed by a board with some independent members. Investors and entrepreneurs who want to opt out of this structure may opt for the limited liability company, or LLC. LLCs, unlike corporations, do not require a board as the ultimate overseers of business decisions. Under LLC law, the owners may delegate or assign responsibility among themselves, or to managers.
Professor Alces’ paper is accessible on the Social Science Research Network (SSRN), here.