Book Review: The Comparative Anatomy of Corporate Law

Abstract

The Anatomy of Corporate law (REINIER KRAAKMAN ET AL., THE ANATOMY OF CORPORATE LAW. A COMPARATIVE AND FUNCTIONAL APPROACH (Oxford University Press 2004)) provides first global and comprehensive comparative and functional analysis of law. The book makes four main claims: (1) Business corporations are characterized by an underlying commonality of structures that transcends national boundaries: they display everywhere five key features (legal personality, limited liability, transferable shares, delegated management with a board structure, and investor ownership). (2) The problems that law must universally address stem from web of agency relationships underlying form (shareholders-managers; majority-minority shareholders; shareholders-other stakeholders, mainly creditors and employees); in addressing them, the law turns repeatedly to a basic set of legal strategies. (3) More analytically, laws in major jurisdictions invariably resort to one or more of ten legal strategies to address such agency problems, as shown by book's illustration of laws relating to basic governance, creditor protection, related-party transactions, significant actions, control transactions, and issuers and investor protection. (4) Finally, [major] jurisdictions pick from among same handful of legal strategies ... when addressing a specific agency issue or regulating a particular transaction, corporate law ha[ving] converged significantly across [them]. After describing claims (1) and (2) and putting them in context of recent studies in law and economics of corporations, this review concentrates on claims (3) and (4), first with a criticism of book's conceptual framework for failing to consider enforcement issues and interaction between legal strategies and enforcement techniques. This failure reduces analytical strength of book's comparative analysis of laws in major jurisdictions. Finally, review focuses on strongest and most controversial claim, fourth one, first analyzing authors' explanations for persisting divergences among major jurisdictions and then questioning its very substance.