Outsourcing the Board

Stephen M. Bainbridge is the William D. Warren Distinguished Professor of Law at University of California, Los Angeles, School of Law, where he teaches courses in corporate law and governance. Bainbridge has written over a dozen books and a hundred law review articles. He is best known as the originator of the director primacy theory of corporate governance. In 2008, 2011, and 2012, he was named by the National Association of Corporate Directors as one of the 100 most influential people in the field of corporate governance. His blog, ProfessorBainbridge.com, has been named five times by ABA Journal as one of the Top 100 Law Blogs. M. Todd Henderson is the Michael J. Marks Professor of Law and Mark Claster Mamolen Research Scholar at the University of Chicago Law School. Henderson researches and teaches in a wide range of fields from corporate law to American Indian law. His work has appeared in leading law reviews and has been covered in The Wall Street Journal and The Economist, among other places. Henderson is a frequent commentator in the media and at conferences around the world on topics of corporate governance. He serves as a strategic advisor to several start-up companies.

• Introduction; 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; 9.4. Section 404 internal controls; 9.5. The compensation committee; 9.6. The nominating committee; Part IV. BSPs and 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.