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^6. For Frey and Osterloh, the application of team production analysis to the CEO and other managers is a feature which they add to the Blair and Stout team production model and which distinguishes their common pool approach from this model. Frey and Osterloh, “Yes, Managers Should Be Paid Like Bureaucrats,” 100.

^7. Englander and Kaufman, “The End of Managerial Ideology,” 409–11.

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^10. Ibid., 410.

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^21. The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the Internal Revenue Code, which removed the tax deductibility for corporations of salary compensation over $1 million. For its effect, see Rose, Nancy L. and Wolfram, Catherine, “Has the ‘Million Dollar Cap’ Affected CEO Pay?” American Economic Review 90(2) (2000): 197–202;Google Scholar and Hall, Brian J. and Liebman, Jeffrey B., “The Taxation of Executive Compensation,” in Tax Policy and the Economy, vol. 14, ed. Poterba, James (Cambridge, Mass.: NBER & MIT Press, 2000).Google Scholar

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^27. Of course, corporate boards may be mistaken about the cost and effectiveness of stock options as incentives. See Hall, Brian J. and Murphy, Kevin J., “The Trouble with Stock Options,” Journal of Economic Perspectives 17 (2003): 49–70.CrossRefGoogle Scholar Many scholars who accept that CEOs ought to be compensated in ways that provide incentives to increase shareholder wealth nevertheless argue that current compensation practices fail to do this. See Bebchuk, Lucian and Fried, Jesse, Pay Without Performance: The Unfulfilled Promise of Executive Compensation (Cambridge, Mass.: Harvard University Press, 2004).Google Scholar

^28. Englander and Kaufman, “The End of Managerial Ideology,” 438.

^29. Ibid., 438. Although Englander and Kaufman claim that in the older role, CEOs had a fiduciary duty to non-shareholder constituencies because of a fiduciary duty to the corporation, this fiduciary duty to non-shareholder constituencies is of fairly recent origin and has been held in only a few very narrow instances. However, the general lack of any legal fiduciary duty to non-shareholder constituencies does not mean that executives and directors have no moral and legal non-fiduciary duties to non-shareholder constituencies. See Marens, Richard and Wicks, Andrew, “Getting Real: Stakeholder Theory, Managerial Practice, and the General Irrelevance of Fiduciary Duties Owed to Shareholders,” Business Ethics Quarterly 9 (1999): 273–93.CrossRefGoogle Scholar

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^31. Englander and Kaufman observe that the changes that caused managers to be a special class “fostered a tournament for the CEO title and bestowed on the winner the right to a proprietary fortune” (Englander and Kaufman, “The End of Managerial Ideology,” 432). For discussions of the economics of tournaments in CEO compensation, see Lazear, Edward and Rosen, Sherwin, “Rank-Order Tournaments as Optimum Labor Contracts,” Journal of Political Economy 89 (1981): 841–64;CrossRefGoogle ScholarRosen, Sherwin, “Prizes and Incentives in Elimination Tournaments,” American Economic Review 76 (1986): 701–15;Google Scholar and Charles, A. O'Reilly III, Main, Brian G., and Crystal, Graef S., “CEO Compensation as Tournament and Social Comparison: A Tale of Two Theories,” Administrative Science Quarterly 33 (1988): 257–74.Google Scholar

^32. Friedman, Milton, Capitalism and Freedom (Chicago: University of Chicago Press, 1962), 133.Google Scholar Although Englander and Kaufman probably overstate the demise of corporate social responsibility, its acceptance in corporate America has undergone a significant change in which socially responsible activities are undertaken on the grounds that they benefit shareholders. For discussions of the so-called “business case” for CSR, see Vogel, David, The Market for Virtue: The Potential and Limits of Corporate Social Responsibility (Washington, D.C.: The Brookings Institution, 2005);Google Scholar and Smith, Craig N., “Corporate Social Responsibility: Whether or How?” California Management Review 45 (2003): 52–76.CrossRefGoogle Scholar

^33. Englander and Kaufman, “The End of Managerial Ideology,” 415. See also Kaufman and Englander, “A Team Production Model of Corporate Governance,” in which the authors argue that the present-day role of the boards, like the present-day role of the CEO, is inefficient and ought to be redesigned in accord with a team production model of the firm.

^34. The nirvana fallacy is generally attributed to Demsetz, Harold, “Information and Efficiency: Another Viewpoint,” Journal of Law and Economics 12 (1969): 1–22.CrossRefGoogle Scholar

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^38. Bebchuk and Fried, Pay Without Performance.

^39. Frey and Osterloh, “Yes, Managers Should Be Paid Like Bureaucrats,” 99.

^40. As Frey and Osterloh note, in addition to the underinvestment of firm-specific assets, the problems in team production to be solved also include free-riding by team members and information asymmetry. Ibid., 99.

^41. Ibid., 100.

^42. Frey and Osterloh's common pool approach incorporates the team production model but adds the element of prosocial intrinsic motivation to solve the problem of how a CEO can have firm-specific investments and still be a mediating hierarch. Although this added element may strengthen the team production model by solving an alleged problem with it, prosocial intrinsic motivation need not be considered in this article's examination of the team production model. For present purposes, it is the soundness of the team production model—on whose main elements all holders agree—and not of Frey and Osterloh's expanded version that is critical to evaluating the criticism of England and Kaufman and of Frey and Osterloh of the changed CEO role. Thus, in this article, the team production model and the common pool approach are considered as one, and the merits of Frey and Osterloh's account of prosocial intrinsic motivation need not be further considered.

^43. Frey and Osterloh cite Shane A. Johnson, Harley E. Ryan, and Yisong S. Tian, “Executive Compensation and Corporate Fraud,” unpublished manuscript (2005).

^44. Kaufman and Englander, “A Team Production Model of Corporate Governance,” 9.

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^48. Ibid., 405. See also Kaufman, Allen, Zacharias, Lawrence, and Karson, Marvin, Managers vs. Owners: The Struggle for Corporate Control in American Democracy (New York: Oxford University Press, 1995).Google Scholar

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^50. Some articles that find a link between compensation and fraud are Harris, Jared and Bromiley, Philip, “Incentives to Cheat: The Influence of Executive Compensation and Firm Performance on Financial Misrepresentation,” Organization Science 18 (2007): 350–67;CrossRefGoogle Scholar and Burns, Natasha and Kedia, Simi, “The Impact of Performance-Based Compensation on Misreporting,” Journal of Financial Economics 79 (2006): 35–67.CrossRefGoogle Scholar Mixed results are reported in O'Connor, Joseph P. Jr.,, Priem, Richard L., Joseph, Coombs E., and Matthew Gilley, K., “Do CEO Stock Options Prevent or Promote Fraudulent Financial Reporting,” Academy of Management Journal 49 (2006): 483–500.CrossRefGoogle Scholar Other researchers find no link between compensation and fraud. See Ericson, Merle, Hanlon, Michelle, and Maydew, Edward, “Is There a Link between Executive Equity Incentives and Accounting Fraud?” Journal of Accounting Research 44 (2006): 113–43.CrossRefGoogle Scholar

^51. In addition to Blair and Stout, “A Team Production Theory of Corporate Law,” see also Blair, Margaret M. and Stout, Lynn A., “Corporate Accountability: Director Accountability and the Mediating Role of the Board,” Washington University Law Quarterly 79 (2001): 403–48;Google ScholarBlair, Margaret M. and Stout, Lynn A., “Trust, Trustworthiness, and the Behavioral Norms of Corporate Law,” University of Pennsylvania Law Review 149 (2001): 1735–1810;CrossRefGoogle Scholar and Blair, Margaret M. and Stout, Lynn A., “Team Production in Business Organizations: An Introduction,” Journal of Corporation Law 24 (1999): 743–50.Google Scholar

^52. The economic analysis of team production is due primarily to Alchian and Demsetz, “Production, Information Costs, and Economic Organization.” For other contributions, see Holmstrom, Bengt, “Moral Hazard in Teams,” Bell Journal of Economics and Management 13 (1982): 324–40;CrossRefGoogle ScholarAoki, Masahiko, “The Contingent Governance of Teams: Analysis of Institutional Complementarity,” International Economic Review 35 (1994): 657–76;Google Scholar and Rajan, Raghuram G. and Zingales, Luigi, “Power in the Theory of the Firm,” Quarterly Journal of Economics 113 (1998): 387–432.CrossRefGoogle Scholar

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^55. Ibid., 782–83.

^56. Ibid., 781.

^57. Ibid., 781–83.

^58. Blair and Stout, “A Team Production Theory of Corporate Law,” 276–78.

^59. Ibid., 264, 270.

^60. Ibid., 253.

^61. Ibid., 250–51, 254.

^62. Ibid., 275.

^63. Kaufman and Englander, “A Team Production Model of Corporate Governance,” 13.

^64. Frey and Osterloh, “Yes, Managers Should Be Paid Like Bureaucrats,” 99.

^65. Kostant, Peter C., “Team Production and the Progressive Corporate Law Agenda,” University of California at Davis Law Review 35 (2001–2002): 667–704.Google Scholar See also Mitchell, Lawrence E., ed., Progressive Corporate Law (Boulder, Colo.: Westview Press, 1995);Google Scholar and Greenfield, Kent, The Failure of Corporate Law: Fundamental Flaws and Progressive Possibilities (Chicago: University of Chicago Press, 2006).Google Scholar

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^70. Meese, “The Team Production Theory of Corporate Law,” 1669.

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^72. Blair and Stout, “A Team Production Theory of Corporate Law,” 282.

^73. Ibid., 283.

^74. Millon, “New Game Plan or Business as Usual?” 1031.

^75. Ibid., 1038.

^76. Ibid.

^77. Charney, David, “Workers and Corporate Governance: The Role of Political Culture,” 117;Google Scholar and Rock, Edward B. and Wachter, Michael L., “Tailored Claims and Governance: The Fit between Employees and Shareholder,”127; both in Employees and Corporate Governance, ed. Blair, Margaret M. and Roe, Mark (Washington, D.C.: Brookings Institution Press, 1999).Google Scholar

^78. Blair and Stout argue at length that the use of legal and market incentives to prevent opportunistic behavior is inadequate and that internalized norms of trust and trustworthiness play an important role in facilitating cooperation in business firms. Blair and Stout, “Trust, Trustworthiness, and the Behavioral Foundations of Corporate Law.”

^79. Lee, “Efficiency and Ethics in the Debate about Shareholder Primacy,” 549–50.

^80. Ibid., 545.

^81. Blair and Stout, “A Team Production Theory of Corporate Law,” 251.

^82. Lee, “Efficiency and Ethics in the Debate about Shareholder Primacy,” 546.

^83. Stout, “The Shareholder as Ulysses,” 688.

^84. Ibid., 689.

^85. Ibid., 671.

^86. Kostant, “Team Production and the Progressive Corporate Law Agenda,” 675.

^87. Ibid., 669. For discussions of how corporate laws develops norms of behavior, see Eisenberg, Melvin A., “Corporate Law and Social Norms,” Columbia Law Review 99 (1999): 1253–92;CrossRefGoogle Scholar and Rock, Edward B., “Saints and Sinners: How Does Delaware Corporate Law Work?” UCLA Law Review 44 (1997): 1009–1107.Google Scholar

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^90. A critical assessment of the power of corporate governance to affect distributive justice is offered in Maitland, Ian, “Distributive Justice in Firms: Do the Rules of Corporate Governance Matter?” Business Ethics Quarterly 11 (2001): 129–43.CrossRefGoogle Scholar For responses to this article, see Beck, John H., “Distributive Justice and the Rules of the Corporation: Partial versus General Equilibrium Analysis,” Business Ethics Quarterly 15 (2005): 355–62;CrossRefGoogle Scholar and Witztum, Amos, “Corporate Rules, Distributive Justice, and Efficiency,” Business Ethics Quarterly 18 (2008): 85–116.CrossRefGoogle Scholar

^91. Millon, “New Game Plan or Business as Usual?” and Meese, “The Team Production Theory of Corporate Law.”