Legal Models of Management Structure in the Modern Corporation: Officers, Directors, and Accountantst

Contrary to the legal norm, the functions of managing the business of a corporation and making business policy generally vest in the executives rather than the board. After examining the reasons why this condition prevails, Professor Eisenberg analyzes past proposals for reform, which typically have sought ways to reinvest these functions in the directors. Finding fault with the premise of these proposed reforms—that directors can successfully either manage or make business policy in modern, complex corporations—he then assesses the remaining functions of the board. His conclusion is that one such function, monitoring the performance of the chief executive’s office, is both critical to the corporation and uniquely suited to the board. He therefore proposes changes in the law of corporations and corporate accounting to ensure that the board will have adequate independence and sufficient data to perform this monitoring function effectively.