Law & Capitalism: What Corporate Crises Reveal about Legal Systems and Economic Development around the World

281 Pages·2008·0.98 MB·English

by  Curtis J. Milhaupt

Law and Capitalism

Law and Capitalism
What Corporate Crises Reveal about Legal
Systems and Economic Development
around the World
CURTIS J. MILHAUPT
KATHARINA PISTOR
TheUniversityofChicagoPress
ChicagoandLondon
CurtisJ.MilhauptistheFuyoProfessorofLawanddirectoroftheCenterforJapaneseLegalStudies
atColumbiaLawSchool.AleadingauthorityontheJapaneselegalsystemandafrequent
contributortocomparativecorporategovernancedebates,Milhaupt’sresearchandpublications
spanawiderangeofsubjectsattheintersectionoflegalinstitutionsandeconomicorganizations
anddevelopment.Recentbooks(withcoauthors)includeEconomicOrganizationsandCorporate
GovernanceinJapan(OxfordUniversityPress,2004)andTransformingCorporateGovernanceinEast
Asia(forthcoming,Routledge,2008).
KatharinaPistorisprofessoroflawatColumbiaLawSchool.Shespecializesincomparativelegal
systemsandcorporategovernanceinemergingmarkets.Pistorhaspublishedwidelyon
privatization,corporategovernance,andlawinRussiaandEasternEuropeandhascontributedto
thedebateontherelationbetweenandlawandeconomicdevelopmentandlegaltransplantsin
suchjournalsastheAmericanJournalofComparativeLaw,theAmericanReviewofLawandEconomics,
TheJournalofComparativeEconomics,andtheEuropeanEconomicReview.SheiscoauthorofTheRoleof
LawandLegalInstitutionsinAsianEconomicDevelopment(OxfordUniversityPress,1999).
TheUniversityofChicagoPress,Chicago60637
TheUniversityofChicagoPress,Ltd.,London
©2008byTheUniversityofChicago
Allrightsreserved.Published2008
PrintedintheUnitedStatesofAmerica
17 16 15 14 13 12 11 10 09 08 1 2 3 4 5
ISBN-13:978–0-226-52527–3(cloth)
ISBN-10:0–226-52527–9(cloth)
LibraryofCongressCataloging-in-PublicationData
Milhaupt,CurtisJ.,1962–
Lawandcapitalism:whatcorporatecrisesrevealaboutlegalsystemsandeconomicdevelopment
aroundtheword/CurtisJ.Milhaupt,KatharinaPistor.
p. cm.
Includesbibliographicalreferencesandindex.
ISBN-13:978-0-226-52527-3(cloth:alk.paper)
ISBN-10:0-226-52527-9(cloth:alk.paper) 1.Lawandeconomics. 2.Corporate
governance—Lawandlegislation. 3.Industriallawsandlegislation. 4.Law—Political
aspects. 5.Capitalism—Moralandethicalaspects. 6.Industrialorganization(Economic
theory) I.Pistor,Katharina. II.Title.
K487.E3M55 2008
340(cid:1).11—dc22 2007035753
(cid:3)∞ThepaperusedinthispublicationmeetstheminimumrequirementsoftheAmericanNational
StandardforInformationSciences—PermanenceofPaperforPrintedLibraryMaterials,ANSI
Z39.48–1992.
Formydad
C.J.M.
Formyparents
K.P.

CONTENTS
Preface/ix
Introduction/1
PART I: FROM WEBER TO THE WORLD BANK, AND BEYOND
ONE /ThePrevailingView:Impact,Assumptions,andProblems/17
TWO /RethinkingtheRelationbetweenLegaland
EconomicDevelopment/27
PART II: INSTITUTIONAL AUTOPSIES
THREE /TheEnronScandal:LegalReformandInvestor
ProtectionintheUnitedStates/47
FOUR /TheMannesmannExecutiveCompensationTrialinGermany/69
FIVE /TheLivedoorBidandHostileTakeoversinJapan:PostwarLawand
CapitalismattheCrossroads/87
SIX /Law,Growth,andReforminKorea:TheSKEpisode/109
SEVEN /TheChinaAviationOilEpisode:LawandDevelopmentinChina
andSingapore/125
EIGHT /“Renationalizing”Yukos:LawandControloverNatural
ResourcesintheRussianEconomy/149
PART III: IMPLICATIONS AND EXTENSIONS
NINE /UnderstandingLegalSystems/173
TEN /LegalChange/197
ELEVEN /Conclusion/219
Notes/225
References/249
Index/263
PREFACE
Severalyearsago,aseriesofconversationsaboutourmutualinterestinthe
roleoflawineconomicdevelopmentandoursharedfrustrationwiththe
current state of the literature about the topic led to a decision to teach a
seminarinwhichwewouldexploretherelationbetweenlegalinstitutions
andmarket-orientedeconomicinstitutions.Earlyon,wedecidedthatthe
bestwaytoexplorethisrelationwastocombinethereadingoftheoretical
and empirical studies about the topic with in-depth analyses of contem-
porary events in countries in different stages of economic development.
Wealsodecidedthatcorporategovernance,anotherofoursharedresearch
interests,providedanexcellentfocalpointthroughwhichtoexaminethis
topic,forreasonsthatweexplainintheintroduction.Wecalledthesemi-
nar“LawandCapitalism:AComparativeApproach,”andwehavetaught
ittwiceatColumbiaLawSchool.Thisbookisadirectoutgrowthofthose
seminars.
Draftsofmanychapterswerepresentedatconferencesandworkshops
around the world. The locations include Boalt Hall School of Law at the
University of California at Berkeley, Columbia Law School, Hong Kong
UniversityLawSchool,theLatinAmericanLawandEconomicsAssociation,
the Research Institute of Economy, Trade, and Industry in Tokyo, Seoul
NationalUniversity,andtheTsinghuaUniversityEconomicsDepartment
inBeijing.Weareindebtedtoparticipantsinthoseeventsforclarifyingand
challengingourarguments.Manypeoplegavegenerouslyoftheirtimeto
read all or portions of early versions of the manuscript. Others provided
helpful feedback on our initial idea for this project, read all or parts of
the manuscript, or discussed the major ideas of the book with us. Their
criticisms and suggestions pushed us to make the book you are reading
better than the one we would have produced if left to our own devices.