System and Evolution in Corporate Governance

Simon Deakin and Fabio Carvalho

Working Papers from Centre for Business Research, University of Cambridge

Abstract: We explore the relevance of systems theory for an understanding of legal evolution, with specific reference to the law and practice of corporate governance. The legal system can be understood as a cognitive resource which, by stabilising normative expectations, reduces transaction costs and enhances contractual cooperation. However, the cognitive capacity of the legal system is not simply a function of its adaptability to external economic conditions. Because of the need to ensure legal continuity and certainty, there is a trade-off between innovation and stabilisation in the production of legal rules. Legal change is discontinuous, asynchronic, and imperfectly matched with developments in the economy. We discuss the relevance of this model for understanding and evaluating corporate governance default rules.

Keywords: corporate governance; legal evolution; systems theory; autopoeisis; memetics; default rules; fiduciary duties. (search for similar items in EconPapers)
JEL-codes: G38 K22 (search for similar items in EconPapers)
Date: 2009-09
Note: PRO-2
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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