Essay 2

Regular readers (I know you are out there) are surely thinking: "When is she going to post an excerpt from one of these papers? I always wanted to know more about the debate over whether legal origin or some other factor determines economic success." When I started my degree, I didn't know the difference between common law (found in UK, US, former British colonies) and civil law (derived from Roman law and the Napoleonic code). Now I know more than I ever desired. Below is an excerpt supporting my position that factors other than legal origin determine economic success. My Christmas gift to you, dear reader. I chose this excerpt because I mention the courts in Delaware, which I covered as a very confused 20-year-old when I was at the University of Delaware.

At the other extreme is the United States, where tools that are discouraged in Europe (for example, incentive compensation, hostile takeovers, and transparency) are used to align managers with shareholders (Roe, 2003). The U.S. largely escaped the devastation of the world wars and took a more adversarial approach toward labor than did the European corporatist model (Cioffi, 2011). The ascendance of the public firm in the U.S., in Roe’s view, reflected not its common law heritage but “the weakness of social democratic pressures on the American business firm” (Roe, 2003, p3). Even the Delaware Chancery Court, the zenith of common law expression in the American corporate model, is seen by Roe as a function of a political arrangement, whereby it arbitrates between managers and investors in a narrow band to keep issues out of the rough and tumble of federal politics. When public interest is sufficiently aroused, federal legislation such as Sarbanes-Oxley Act of 2002 results. “Law thus acts through external constraints on the firm, not through brakes inside it” (Roe, 2005, p2541), reflecting more the codification approach of civil law than the judicial approach of common law.
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