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Vol 25 No 2 Feb/March 2020

Book of the Month

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Kerr & Hunter on Receivers and Administrators

Edited by: Thomas Robinson, Peter Walton
Price: £315.00

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Outsourcing the Board: How Board Service Providers Can Improve Corporate Governance

ISBN13: 9781316645123
Published: April 2018
Publisher: Cambridge University Press
Country of Publication: UK
Format: Paperback
Price: £21.99

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In this groundbreaking work, Stephen M. Bainbridge and M. Todd Henderson change the conversation about corporate governance by examining the origins, roles, and performance of boards with a simple question in mind: why does the law require governance to be delivered through individual board members?

While tracing the development of boards from quasi-political bodies through the current 'monitoring' role, the authors find the reasons for this requirement to be wanting. Instead, they propose that corporations be permitted to hire other business associations - known as 'Board Service Providers' or BSPs - to provide governance services.

Just as corporations hire law firms, accounting firms, and consulting firms, so too should they be permitted to hire governance firms, a small change that will dramatically increase board accountability and enable governance to be delivered more efficiently.

Outsourcing the Board should be read by academics, policymakers, and those within the corporations that will benefit from this change.

Company Law
Part I. Corporate Boards:
1. A brief history of the board
1.1. The political origins of corporate boards
1.2. The privatization of the corporation and the changing role of the board
1.3. The board's evolving modern role
1.4. Summary
2. What do Boards do?
2.1. The roles played by the modern corporate board
2.2. Management
2.3. Service
2.4. Monitoring
2.5. Diversity
2.6. Overlapping roles and the crudeness of categories
2.7. Role conflicts
2.8. Evolution over time
3. Grading boards
3.1. Public perceptions
3.2. Even graded on a curve, boards fail
3.3. Boards fail even at grading themselves
3.4. Showing improvement
3.5. But there's still room for improvement
4. Why boards fail
4.1. Introduction
4.2. Time constraints
4.3. Information asymmetries
4.4. Too many generalists
4.5. Bad incentives
4.6. Boards refuse to lead
4.7. Boards lack cohesiveness
4.8. SOX locked boards into a one size fits all model
Part II. The Board Service Provider:
5. Board service providers: the basic idea
5.1. Introduction
5.2. The board service provider
5.3. Appointment and elections
5.4. Composition and function
5.5. Compensation
5.6. Liability
5.7. Summary
6. How BSPs address the pathologies of modern corporate governance
6.1. Managerial hegemony theory
6.2. Class hegemony theory
6.3. Resource dependence theory
6.4. Stakeholder theory
6.5. Stewardship theory
6.6. Agency theory
6.7. Summary
7. Incentivizing the BSP
7.1. Compensation incentives
7.2. Liability-based incentives
7.3. Reputational incentives
7.4. Exposure to market forces
7.5. Measurability
Part III. Legal Issues:
8. BSPs and the law
8.1. Legal obstacles to BSPs under US Federal and state law
8.2. The law in other countries
8.3. The case for changing the law
9. BSPs and the emerging Federal Law of corporations
9.1. Director independence
9.2. BSPs and the CEO/Chair duality issue
9.3. The audit committee
Section 404 internal controls
9.5. The compensation committee
9.6. The nominating committee
Part IV. BSPs & the Frontiers of Corporate Governance:
10. BSPs and proxy access
10.1. A brief overview of proxy access
10.2. Proxy access and BSPs
11. The BSP as an alternative to quinquennial board elections
11.1. Introduction
11.2. The quinquennial election proposal
11.3. The quinquennial election and the BSP
11.4. Quinquennial elections and mandatory rotation of the BSP
11.5. Summary
12. The BSP in a post-monitoring board world
12.1. The thickly informed board
12.2. The BSP as thickly informed board
12.3. The private equity analog
12.4. Summary
Part V. Concluding Thoughts:
13. Anticipating objections
13.1. Overcoming the status quo bias
13.2. Reduced accountability
13.3. Loss of personal service
13.4. Loss of advantages of group decision making
13.5. BSPs will be captured by management
13.6. BSP incentives inadequately aligned to shareholder interests
13.7. Isn't this just one more costly intermediary?
13.8. Conflicts of interest
14. Conclusion.