<i>Centros</i>, California’s “Women on Boards” Statute and the Scope of Regulatory Competition
Author(s)Fisch, Jill E.
Davidoff Solomon, Steven
European company law
EU & US regulatory competition
internal affairs doctrine
shareholder primacy norm
California “Women on Boards” Statute
Business Administration, Management, and Operations
Business Law, Public Responsibility, and Ethics
Business Organizations Law
Comparative and Foreign Law
Law and Economics
Law and Society
Policy Design, Analysis, and Evaluation
Public Affairs, Public Policy and Public Administration
Social and Behavioral Sciences
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AbstractWe examine the Centros decision through the lens of SB 826 – the California statute mandating a minimum number of women on boards. SB 826, like the Centros decision, raises questions about the scope of the internal affairs doctrine and its role in encouraging regulatory competition. Despite the claim that US corporate law is characterized by regulatory competition, in the US, the internal affairs doctrine has led to less variation in corporate law than in Europe. We theorize that this is due to the shareholder primacy norm in US corporate law which results in the internal affairs doctrine focusing on matters of shareholder interest and, primarily, shareholder economic interest. We argue that the internal affairs doctrine should be understood within the context of the shareholder primacy norm and therefore directed to rules oriented to enhancing firm economic value. In contrast, EU corporate law has traditionally had broader stakeholder orientation. We posit that the limited impact of the Centros decision, an impact which differed significantly from its predicted revolutionary effect, can be attributed to the greater focus of EU corporate law on social ordering and extra-shareholder interests. This difference leads to a new understanding of SB 826 as reflecting a move toward more EU-style governance focused on social ordering. Ironically, California’s adoption of SB 826 may portend a movement of the United States towards Centros-style governance. Under this analysis, we argue that SB 826 should not be viewed as inconsistent with the internal affairs doctrine since it involves social ordering rather than purely shareholder interests.
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