
Contents
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I Directors and the duty of care I Directors and the duty of care
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Monitoring Management Effort Monitoring Management Effort
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Monitoring the Quality of Decision-Making Monitoring the Quality of Decision-Making
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The Modern Law The Modern Law
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Business Judgement, Risk, and the Bounds of Negligence Liability Business Judgement, Risk, and the Bounds of Negligence Liability
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Enforcing Adequate Decision-Making Procedures Enforcing Adequate Decision-Making Procedures
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II The discipline of the Market II The discipline of the Market
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The Product Market The Product Market
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The Market for Managers The Market for Managers
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The Capital Market The Capital Market
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The Market for Corporate Control The Market for Corporate Control
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Imperfections in the Market for Control Imperfections in the Market for Control
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The Market for Control and Efficiency The Market for Control and Efficiency
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Other Effects of the Market for Control Other Effects of the Market for Control
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The Effects of Mergers The Effects of Mergers
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The Effects of the Threat of Take-over The Effects of the Threat of Take-over
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Market Discipline: Conclusion Market Discipline: Conclusion
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III The Role of Liability Rules III The Role of Liability Rules
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Problems of Enforcement Problems of Enforcement
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Cite
Abstract
This chapter assesses the legal response to shirking and managerial incompetence, the other problems that have been assumed to be exacerbated by the separation of ownership and control, by way of the duty to exercise diligence, care, and skill. The chapter concentrates on the influence of weak owner control on management efficiency. It also surveys the law of negligence as it applies to directors, and addresses whether the role of the courts as external monitors of management efficiency could usefully be increased. The claim that the separation of ownership and control does not lead to serious inefficiency is discussed. The view of some market theorists that the operation of market forces renders liability rules in this area superfluous is explained as well.
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