Corporate Governance of Non‐listed Companies by Joseph A. McCahery and Erik P. M. Vermeulen
| Author | Wanjiru Njoya |
| Date | 01 May 2009 |
| Published date | 01 May 2009 |
| DOI | http://doi.org/10.1111/j.1468-2230.2009.00755.x |
REVIEWS
Joseph A. McCahery and Erik P. M. Vermeulen, Corporate Governance of Non-
listed Companies
,Oxford: Oxford University Press, 2008, 280 pp, hb d65.00.
It is not surprising that corporate governance discussions predominantly relate to
large, publicly held ¢rms. The keycharacteristic of the large publicly held ¢rm is
that ownership andcontrol are separate, andit is this separationwhich makes cor-
porate governance signi¢cant. Berle and Means, in arguing that‘the logic of pri-
vate property’ ceases to apply when owners are no longer in control, were
necessarily directing their attention to the dispersed-ownership ¢rm in which
there is an almostcomplete divorce between the roles played by the shareholder-
owners on the one hand, and the ¢rm’s managers on the other.Thus the regula-
tory responsesthat haveemerged fromthis starting point would not be applicable
to a ¢rm in which the owners remain in control. For such ¢rms, the logic of pri-
vate property, as Berle and Means called it, would continue to apply and nobody
outside the ¢rm would be entitled to tell the shareholder-owners how to deal
with their property. This perspective has informed the moderncorporate govern-
ance debates, bothdirectly in the debate over who, if anybody, owns the ¢rm (and
whether it is accurate to describe shareholders as ‘owners’), and also indirectly
through the normative and legal framework of a capitalist system founded on
the sanctity of private property. In this context, there are no clear grounds for
regulatory intervention in the governance of owner-managed ¢rms.
In CorporateGovernanceofNon-listedCompanies, McCahery and Vermeulen
extend the corporate governance debates to small, private, closely held ¢rms such
as family-owned ¢rms and joint ventures, investigating the extent to which the
governance recommendations madefor publicly-held ¢rms mightbe appropriate
for closely held ¢rms. This approach is not unproblematic. First, categorising
¢rms by reference to listing status does not, by itself, give an indication of the
kinds of governance problems likely to be faced by the respective ¢rms. A num-
ber of other factorsplay a more directrole in determining the optimalgovernance
structureof a ¢rm, most importantlyits size and the degree of shareholder disper-
sion:‘corporate governanceprocesses will be a function ofagency costs,that is, the
costs whicharise from the separationof ownership and controlwithin companies.
Agencycosts, in turn,are determined by factors which include the size ofcompa-
nies and the degreeof concentrationof shareholdings’ (S. Deakin and A. Hughes,
Directors’ Duties: Empirical Find ings, Report to the Law Commission and the
Scottish Law Commission, August 1999).This is a matter of ownership structure
rather than tradeability. Hence the subject matter of this book, being concerned
as it is with governance questions, is more usually discussed by reference to
‘closely held’ ¢rmsrather than‘non-listed’ ¢rms.While it is certainlytrue that clo-
sely held ¢rms tend also to be non-listed, it is possible for a ¢rmwith dispersed
r2009 The Authors. Journal Compilation r2009 The Modern LawReview Limited.
Published by BlackwellPublishing, 9600 Garsington Road,Oxford OX4 2DQ,UK and 350 Main Street, Malden, MA 02148, USA
(2009) 72(3) 507^518
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