The Trouble with Boards

doi:10.1017/CBO9780511763076.003

1 - The Trouble with Boards

Published online by Cambridge University Press: 04 August 2010

Lawrence E. Mitchell

Edited by

F. Scott Kieff and

Troy A. Paredes

Show author details

F. Scott Kieff: Affiliation:
George Washington University, Washington DC
Troy A. Paredes: Affiliation:
Washington University, St Louis

Book contents

Get access

Summary

On Tuesday afternoon, December 2, 1913, Thomas W. Lamont and Louis D. Brandeis met for a three-hour luncheon at the University Club in New York. The famous Pujo Committee hearings had reached their controversial end, convincing many Americans that the accusations of Brandeis and others as to the existence of a Money Trust were right. The Money Tust appeared as a small group of mostly New York bankers centered on the House of Morgan. It allegedly controlled corporate America and its access to capital by placing its members on the boards of many of the nation's largest corporations.

Lamont was a relatively new partner of J. P. Morgan and Co. Like his partners, he served as a director of a number of corporations in which interlocking bank directorates had been exposed by the Pujo investigations. Within just a few years, he would take effective leadership of the Morgan firm and become perhaps the most prominent financier of his generation.

The conversation was polite, as befitted both the setting and the character of the two men. Needless to say, they disagreed about much. The most interesting turn in the conversation came during Brandeis's remarks about the potential conflicts of interest created by the fact that many of the same men sat on the boards of competing corporations. Passing the point in complete disagreement with Lamont's response, Brandeis took a different tack, questioning Lamont as to the sheer physical ability of Morgan's men to do their work as directors:

ldb: Take your own house alone.[…]

Information

Type: Chapter
Information: Perspectives on Corporate Governance , pp. 17 - 61

DOI: https://doi.org/10.1017/CBO9780511763076.003 [Opens in a new window]

Publisher: Cambridge University Press

Print publication year: 2010

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Book purchase

Temporarily unavailable

References

Abrahams, Paul P., Brandeis and Lamont on Finance Capitalism, 47 Bus. Hist. Rev.72, 82–83 (1973)CrossRef Google Scholar

Hamilton, Robert, Corporate Governance in America, 1950–2000: Major Changes but Uncertain Benefits, 25 J. Corp. L.349, 363 (2000)Google Scholar

Dallas, Lynne L., The Multiple Roles of Boards of Directors, 40 San Diego L. Rev.781 (2003)Google Scholar

Fisch, Jill E., Taking Boards Seriously, 19 Cardozo L. Rev.265 (1997)Google Scholar

Langevoort, Donald C., The Human Nature of Corporate Boards: Law, Norms, and the Unintended Consequences of Independence and Accountability, 89 Geo. L.J.797 (2001)Google Scholar

Jr, James W. Walker., Comments on the ALI Corporate Governance Project, 9 Del. J. Corp. L.580 (1984)Google Scholar

Fischel, Daniel R., The Corporate Governance Movement, 35 Vand. L. Rev.1259, 1284 (1982)Google Scholar

Karmel, Roberta S., The Independent Corporate Board: A Means to What End? 52 Geo. Wash. L. Rev.534, 553 (1984)Google Scholar

Eisenberg, Melvin A., The Modernization of Corporate Law: An Essay for Bill Cary, 37 U. Miami L. Rev.187, 205 (1983)Google Scholar

Mitchell, Lawrence E., Structural Holes, CEOs, and Informational Monopolies: The Missing Link in Corporate Governance, 70 Brook. L. Rev.1313 (2005)Google Scholar

Brudney, Victor, The Independent Director: Heavenly City or Potemkin Village? 95 Harv. L. Rev.597, 632 (1982)CrossRef Google Scholar

Mofsky, James S. & Rubin, Robert D., Introduction: A Symposium on the ALI Corporate Governance Project, 37 U. Miami L. Rev.169, 179 (1983)Google Scholar

Scott, Kenneth E., Corporation Law and the American Law Institute Corporate Governance Project, 35 Stan. L. Rev.927, 934 (1983)CrossRef Google Scholar

Andrews, Kenneth R., Rigid Rules Will Not Make Good Boards, Harv. Bus. Rev. Nov–Dec. 1982Google Scholar

Gevurtz, Franklin A., The Historical and Political Origins of the Corporate Board of Directors, 33 Hofstra L. Rev.89 (2004)Google Scholar

Dwight, Frederick, Liability of Corporate Directors, 17 Yale L.J.34 (1907)CrossRef Google Scholar

Cushing, H. A., The Inactive Corporate Director, 8 Colum. L. Rev.21 (1908)CrossRef Google Scholar

Lynch, M. C., Diligence of Directors in the Management of Corporations, 3 Cal. L. Rev.21 (1914)CrossRef Google Scholar

Tsuk, Dalia, From Pluralism to Individualism: Berle and Means and 20th Century American Legal Thought, 30 Law & Soc. Inquiry179 (2005)CrossRef Google Scholar

Berle, A.A.., Corporate Powers as Powers in Trust, 44 Harv. L. Rev.1049 (1931)CrossRef Google Scholar

Berle, A.A.., For Whom Are Corporate Managers Trustees? A Note, 45 Harv. L. Rev.1365 (1932)CrossRef Google Scholar

Dodd, E. Merrick, For Whom Are Corporate Managers Trustees? 45 Harv. L. Rev.1145 (1932)CrossRef Google Scholar

Greenfield, Kent, The Place of Workers in Corporate Law, 39 B.C. L. Rev.293 (1998)Google Scholar

Douglas, William O., Directors Who Do Not Direct, 47 Harv. L. Rev.1305 (1934)CrossRef Google Scholar

Spellman, Howard Hilton, A Treatise on the Principles of the Law Governing Corporate Directors, 80 U. Pa. L. Rev.145 (1931–32)Google Scholar

Caplin, Mortimer M., Proxies, Annual Meetings, and Corporate Democracy: The Lawyer's Role, 37 Va. L. Rev.653 (1951)CrossRef Google Scholar

Caplin, Mortimer M., Shareholder Nominations of Directors: A Program for Fair Corporate Suffrage, 39 Va. L. Rev.141 (1953)CrossRef Google Scholar

Fahr, Samuel M., What Every Corporation Director Should Know, by Percival E. Jackson, 35 Iowa L. Rev.150 (1949)Google Scholar

Hornstein, George D., Stockholders' Agreements in the Closely Held Corporation, 59 Yale L.J.1040 (1950)CrossRef Google Scholar

Steadman, Charles W., Maintaining Control of Close Corporations, 14 Bus. Law.1077 (1959)Google Scholar

Ballantine, Arthur A., Directors and Their Functions, by John C. Baker, 59 Harv. L. Rev.151 (1945)CrossRef Google Scholar

Timberg, Sigmund, Corporate Fictions: Logical, Social and International Implications, 46 Colum. L. Rev.533, 564–66 (1948)CrossRef Google Scholar

Baker, John C., Directors and Their Functions (1945)

Drucker, Peter, The Practice of Management 178 (1954)

Koontz, Harold, The Board of Directors and Effective Management 21 (1967)

Mace, Myles, Directors: Myth and Reality 73, 76–77, 80 (1971)

Karmel, Roberta S., The Independent Corporate Board: A Means to What End? 52 Geo. Wash. L. Rev.534, 539 (1984)Google Scholar

Smith, Bryan F., Corporate Governance: A Director's View, 37 U. Miami L. Rev.273, 276 (1983)Google Scholar

Small, Marshall L., The Evolving Role of the Director in Corporate Governance, 30 Hastings L.J.1353 (1979)Google Scholar

Eisenberg, Melvin A., The Modernization of Corporate Law: An Essay for Bill Cary, 37 U. Miami L. Rev.187, 209–10 (1983)Google Scholar

Farrell, Richard J. & Murphy, Robert W., Comments on the Theme: “Why Should Anyone Want to Be a Director?” 27 Bus. Law.7 (1972)Google Scholar

Patrick, J. Vernon., The Securities Class Action for Damages Comes of Age (1966–1974), 29 Bus. Law.159 (1974)Google Scholar

Leech, Noyes E. & Mundheim, Robert H., The Outside Director of the Publicly Held Corporation, 31 Bus. Law.1799 (1976)Google Scholar

Moscow, Cyril, The Independent Director, 28 Bus. Law.9 (1972)Google Scholar

Eisenberg, based the book on an earlier set of law review articles, including Legal Models of Management Structure in the Modern Corporation: Officers, Directors, and Accountants, 63 Calif. L. Rev.375 (1975)CrossRef Google Scholar

Goldschmid, Harvey J., The Greening of the Board Room: Reflections on Corporate Responsibility, 10 Colum. J. L. & Soc. Probs.15, 24–25 (1973)Google Scholar

Dent, George W.., The Revolution in Corporate Governance, The Monitoring Board, and the Director's Duty of Care, 61 B.U. L. Rev.623 (1981)Google Scholar

Jensen, Michael C. & Meckling, William H., Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure, 3 J. Fin. Econ.305 (1976)CrossRef Google Scholar

Fama, Eugene, Agency Problems and the Theory of the Firm, 88 J. Pol. Econ.288 (1980)CrossRef Google Scholar

Mitchell, Lawrence E., Trust, Contract, Process, in Progressive Corporate Law (Mitchell, Lawrence E. ed., 1995)

,Statement of the Business Roundtable, The Role and Composition of the Board of Directors of the Large Publicly Owned Corporation, 33 Bus. Law.2083 (1978)Google Scholar

Solomon, Lewis D., Restructuring the Corporate Board of Directors: Fond Hope – Faint Promise? 76 Mich. L. Rev.581 (1978)CrossRef Google Scholar

Ruder, David, Panel Discussion, 37 U. Miami L. Rev.319, 337 (1983)Google Scholar

Smith, Bryan F., Corporate Governance: A Director's View, 37 U. Miami L. Rev.273, 277–79 (1983)Google Scholar

,American Bar Association Committee on Corporate Laws, Corporate Director's Guidebook: 1994 Edition, 49 Bus. Law.1243, 1247 (1994)Google Scholar

Bacon, Jeremy & Brown, James K., Corporate Directorship Practices: Role, Selection, and Legal Status of the Board 1 (1975)

Leech, Noyes E. & Mundheim, Robert H., The Outside Director of the Public Corporation 3 (Korn-Ferry International 1976)

Weiss, Elliott, Economic Analysis, Corporate Governance Law, and the ALI Corporate Governance Project, 70 Cornell L. Rev.1, 14 n.61 (1984)Google Scholar

Shakman, Michael L., The ALl Principles of Corporate Governance: A Tainted Process and a Flawed Product, 49 Bus. Law.1761 (1994)Google Scholar

Goldstein, Elliot, CORPRO: A Committee That Became an Institution, 48 Bus. Law.1333 (1993)Google Scholar

Smith, Richard B., An Underview of the Principles of Corporate Governance, 48 Bus. Law.1297 (1993)Google Scholar

Smith, Bryan F., Corporate Governance: A Director's View, 37 U. Miami L. Rev.273 (1983)Google Scholar

Levin, Doron P., Shakeup at GM; Stempel Quits Job as Top G.M. Officer in Rift with Board, N.Y. Times, Oct. 27, 1992, at AlGoogle Scholar

Roe, Mark J., Clearing Boardrooms Like G.M.'s, Wall St. J., Oct. 27, 1992, at A16Google Scholar

Fich, Eliezer M. & White, Lawrence J., CEO Compensation and Turnover: The Effects of Mutually Interlocked Boards, 38 Wake Forest L. Rev.935, 936 (2003)Google Scholar

Johnson, Lyman P.Q. & Millon, David, Recalling Why Corporate Officers Are Fiduciaries, 46 Wm. & Mary L. Rev.1597 (2005)Google Scholar

Johnson, Lyman P.Q., Corporate Officers and the Business Judgment Rule, 60 Bus. Law.439 (2005)Google Scholar

Holdcroft, James P. & Macey, Jonathan R., Corporate Governance: Flexibility in Determining the Role of the Board of Directors in the Age of Information, 19 Cardozo L. Rev.291, 294–95 (1997)Google Scholar

Dent, George W., The Revolution in Corporate Governance, the Monitoring Board, and the Director's Duty of Care, 61 B.U. L. Rev.623, 661–80 (1981)Google Scholar

Coffee, John C.., Beyond the Shut-Eyed Sentry: Toward a Theoretical View of Corporate Misconduct and an Effective Legal Response, 63 Va. L. Rev.1099 (1977)CrossRef Google Scholar

Dallas, Lynne L., The Multiple Roles of Boards of Directors, 40 San Diego L. Rev.781 (2003)Google Scholar

Accessibility standard: Unknown

Accessibility compliance for the PDF of this book is currently unknown and may be updated in the future.