In the field of comparative corporate governance, a thesis that is currently influential is that the 'law matters'. The thinking is that laws which allow investors to feel confident about owning a tiny percentage of shares in a firm constitute the crucial 'bedrock' that underpins a US-style economy where widely held public companies dominate. The paper outlines the normative implications which the 'law matters' thesis has for countries where diffuse share ownership is not the norm. It also draws upon the historical experience in the US and the UK to cast doubt on whether law is as pivotal as the thesis implies. Finally, the paper considers the dynamics that are likely to affect the pace of legislative change when reforms designed to foster the confidence of minority shareholders are on the agenda. After South Korea's stock market plunged by eight per cent during the fall of 2000, a senior securities regulator made an urgent phone call to the chairman of the capital markets committee of Seoul's American Chamber of Commerce. The Korean official, surmising that the decline in share prices was a product of investor scepticism concerning Korean companies, wanted to know what should be done. The American Chamber of Commerce's representative responded that full enforcement of the laws governing publicly traded companies was crucial. This was because the credibility of the country's stock market would be judged on the basis of how well the rules were applied.1