Comment on Kostant: Tune in to hear stories of corporate governance, the adventures of the go-between and more exciting tales of corporate law.(in this issue, p. 203)

Mae Kuykendall [*]

Michigan State University-Detroit College of Law, 453 Law College Bldg., East Lansing, MI 48824-1300 USA

Peter Kostant's creative linking of Albert O. Hirschman's writing about exit and voice to the path-breaking work of Professors Blair and Stout enriches the scholarship of corporate governance along multiple dimensions. First, as Professor Stout has generously acknowledged, [1] Kostant's work brings a new dimension to her and Professor Blair's theory of "team for production" [2] as a model the board of directors. It does so by focusing attention on the role of corporate counsel as a broker of information and by emphasizing the independent role of corporate counsel as a true fiduciary with mediation duties that demand a broader perspective than that supplied by management's articulation of corporate interest. The demands of team production and the "voicing" of constituent interests force the role of corporate counsel to take a more complex form than a simple conception of lawyering to an entity with a persona capable of unidimensional articulation of interest through the voice of corporate management. Kostant brings our attention to the need for developing the institutional details of the team production model and thus re-animating an institutional approach to corporate law. [3]

Second, Kostant's work casts new light on the largely one-sided debate, dominated by advocates of reducing directors' financial exposure, over board liability as a mechanism of accountability. The work that many corporate lawyers have done in refining statutes to minimize board financial liability [4] is cast in a new light, albeit a faint one in the present state of development of public reasoning about board financial liability. Protests that might seem self-serving [5] or moss-backed when the board is conceptually surrounded by the concerns raised by the agency cost model and the expectation of rent-seeking by managerial entrepreneurs seem more nearly prudential when considered in the light of the mediation function of the contemporary corporate board. Standards of reviewability may well falter when the project at hand [6] cannot be summarized by a single goal, such as profit maximization or responsiveness to a single set of interests. Social complexity intervenes to blunt traditional tools for ferreting out actionable wrongs, conceived of as economic shortfalls attributable to board failures of commitment to the enterprise.

The factor of complexity and competing interests, internalized in the corporation's team, raises the counterintuitive possibility that the distaste for individual liability in the corporate enterprise may not have been a venial dislike for maintaining a corporate counterpart to structures of deterrence for socially negative conduct imposed in other venues. [7] Perhaps the evolution of boards into a mediation role, managing team production and responding to competing voice, explains the declining role of financial accountability better than a public choice view of managerial opportunism. Corporate lawyers who insist upon the obsolescence of board financial liability may be performing a proper institutional guardian role, identifying and dealing with a disjunction between the political demands of reconciling inconsonant demands among competing constituency groups and responding in tort [8] to claims of negligence or even insufficient loyalty to shareholder interests.

Advocacy for general board exoneration [9] may be in response to shifts in the socio-economics of corporate boards and indicative of something deeper than an accelerating insistence on an existing preference to avoid liability. The near complete excision of personal liability may be well …