Chapter 13 Summary

Chapter 13 deals with the problem of who should control the corporation, how the corporation should be controlled, and what is the source of legitimacy of those who control the corporation. Because corporations are now considered by many to be among the most powerful agents in world affairs (if not the most powerful), understanding the decision-making processes of those bodies is of particular urgency. And how will it be decided who makes those decisions? It is the old problem of “Who will guard the guardians?”

Ralph Nader, Mark Green, and Joel Seligman open the chapter with an argument for revamping the board of directors structure of corporations to increase their responsibility and accountability. They offer concrete guidelines for how boards ought to run, how they ought to be elected, and what specific roles directors ought to have.

Irving S. Shapiro argues that boards are in fact improving, and that they should continue to do so in a gradual process. The increasing importance of boards of directors is a consequence, Shapiro argues, of the growing size of corporations, the decline of owner management, and the rise of social expectation of corporations. Shapiro insists that boards of directors must have sufficient time to dedicate to the job and must be part of a good, well-organized structure.

Rebecca Reisner explores the issue of corporate governance and how, if it increases, it can drive away the best CEOs. Thomas W. Dunfee follows, making specific recommendations for changes in corporate governance.

John J. McCall offers a robust defense of employee participation rights in corporate governance. McCall gives a variety of arguments for his claim that employees should have a strong voice in directing the corporation, including appeals to dignity, fairness, self-respect, health, and democracy. He also considers objections to his argument based on efficiency and the autonomy of corporate directors and owners.

In the chapter’s final reading, Eric Jackson, a regular contributor to publications like Forbes, details recent corporate governance concerns about Chinese companies. He describes what may happen if such problems continue to worsen and what should be done to prevent that from happening.

The chapter closes with several cases illustrating the difficulties of corporate governance, including an especially fascinating study of the downfall of WorldCom Corporation.

By the close of Chapter 13, you should:

Understand the problems with the CEO seeing himself or herself as a monarch
Understand the various roles and moral tensions of a corporate board of directors
Understand how and why employees should be involved in the decision-making processes of corporations
Understand the moral dangers posed by insufficient oversight of corporate decision makers
Understand several cases illustrating how corporate power has gone morally awry

Chapter 13 Summary

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