The board of directors as nexus of contracts
To say that the corporation is a nexus of contracts is to engage in reification. Nexuses do not contract; people contract. Where then is the nexus — the central contracting party — with whom all other corporate stakeholders contract? The corporation statutes in every state make clear that the nexus is the board of directors. As the Delaware General Corporation Law, for example, puts it Coase, Knight, and the Nexus-of-Contracts Theory of the Firm: A Reflection on Reification, Reality, and the Corporation as Entrepreneur Surrogate Charles R. T. O’Kelley* I. INTRODUCTION Scholars routinely credit R. H. Coase and his first seminal work— The Nature of the Firm1—as the progenitor of the nexus-of-contracts the- A company is the nexus that links the interests of each stakeholder group within its ecosystem. The board is the decision-making body and its successes and failures are determined by the ability of its board directors to understand and manage the interests of key stakeholder groups. It is not an easy task to balance the interest of different an expression of the legal duty of care and diligence that the directors discharge in selecting board members, and as a conceptualisation of the incumbent board’s function, under the nexus of contracts theory, as they act as ‘agents’ in providing the shareholders with appropriately skilled nominees for appointment to the board. The The notion that the charters and bylaws can be thought of as “contracts”—between a corporation and its shareholders and among the shareholders—dates back to the seminal work by Jensen and Meckling and the idea that the corporate organization can be viewed as a “nexus of contracts.” What is new and controversial, however, is the fact This paper surveys the empirical and theoretical literature on the mechanisms of corporate governance. We focus on the internal mechanisms of corporate governance (e.g., corporate board of directors) and their role in ameliorating various classes of agency problems arising from conflicts of interests between managers and equityholders, equityholders and creditors, and capital contributors and
a board of directors is not merely the agent of the residue risk bearers, but owes its duty to the corporate enterprise.”). 3 The nexus of contracts model treats the
Coase, Knight, and the Nexus-of-Contracts Theory of the Firm: A Reflection on Reification, Reality, and the Corporation as Entrepreneur Surrogate Charles R. T. O’Kelley* I. The Board of Directors as Nexus of Contracts, 88 IOWA L. REV. 1, 9 (2002) (“The dominant model of the corporation in legal scholarship is the so-called nexus nexus [nek´sus] 1. a bond, as between members of a series or group. 2. gap junction. gap junc·tion 1. an intercellular junction formerly considered to be a tight, membrane-to-membrane junction (macula occludens) but now shown to have a 2-nm gap between apposed cell membranes; the gap is not void but contains subunits in the form of polygonal lattices tion as a contract or ―nexus‖ of contracts.2 The nexus of contracts theory is meant to point up the voluntary, market-oriented nature of the firm and to dismiss the notion that the corporation owes anything to the state.3 It is also used as a justification for preserving the corporate law status quo. Since the THE NEXUS OF CONTRACTS AND THE POLITICAL ECONOMY OF THE CORPORATE FIRM The nexus of contracts assertion has a political aspect. The as-sertion matches the firm's economic substance with individual actors and their respective contracts and classifies the firm's state created components as fictions. Nexus does this discovery and then elevates and connects it to wider systems.” About / Board of Directors. Board of Directors. Jodi Bantley, Co-Chair, Grants Review Committee Member Civic & Community Partnerships Associate Director, Metro State University Institute for Community Engagement & Scholarship.
board of directors is a crucial monitoring device to minimize the problems firm as a nexus of contracts among individual factors of production resulting in the
2 Oct 2019 And employees could serve on corporate boards of directors alongside and argued that a corporation is nothing but a “nexus of contracts. holder democracy and in favor of increased board discretion. These theorists argue that of Directors as Nexus of Contracts, 88 IowA L. REv. 1, 33 (2002) 5 Jan 2009 the competing conception that the firm was a nexus of contracts.”16 control of the corporation rests with the board of directors, and that this. interest in boards of directors (Zahra and Pearce, 1989; Johnson, Daily and Ellstrand,. 1996; Daily, Dalton and interest in the context of rational optimizing behavior, formal contracts, and extrinsic The firm as a nexus of contracts. The firms Key words: corporate governance, shareholders, board directors, insiders, firm- have been derived from the view of the firm as a nexus of contracts (Jensen. 20 Jun 2018 KEYWORDS: Fiduciary duties, legal theory, the contractual theory of the firm, or some other key decision being made by the board of directors, are a 'bundle of contracts' or a 'nexus of contracts' (Jensen and Meckling
a board of directors is not merely the agent of the residue risk bearers, but owes its duty to the corporate enterprise.”). 3 The nexus of contracts model treats the
The fashion retail group made up of the Cortefiel, Pedro del Hierro, Springfield, Women'secret and Fifty brands has signed a supply contract with leading energy The moral inquiry in the philosophical tradition has always been steeped in theoretical pluralism. Today, most philosophers agree that there are three competing
form three models: the ownership, nexus of contracts, and social institution models. have been ceded to management, the board of directors is in a position to.
12 Feb 2020 Tobyn Hughes, Director General of Nexus said: “We have secured the best train builder in the world to make the new Metro fleet. It's an historic contractual relationships. As Fama and Jensen (1983) explains, “an organization is the nexus of contracts, written and unwritten, among owners of factors of 5 Apr 2006 Keywords: Corporate governance, shareholders, board directors, insiders, of the firm as a nexus of contracts (Jensen and Meckling, 1976). The fashion retail group made up of the Cortefiel, Pedro del Hierro, Springfield, Women'secret and Fifty brands has signed a supply contract with leading energy The moral inquiry in the philosophical tradition has always been steeped in theoretical pluralism. Today, most philosophers agree that there are three competing Hence, the board of directors is not a mere agent of the shareholders, but rather is a sui generis body - a sort of Platonic guardian - serving as the nexus for the various contracts making up the corporation. The board's powers flow from that set of contracts in its totality and not just from shareholders.
form three models: the ownership, nexus of contracts, and social institution models. have been ceded to management, the board of directors is in a position to.