Historically, corporate governance arrangements arose out of the interactions of the various constituencies that form around corporations. American corporate law evolved to facilitate the bargaining and innovation that made up this governance market. Pursuant to the modern theory that corporate law is supposed to promote efficiency, rather than market activities, changes to the governance regime imposed a one-size-fits-all set of practices from outside the traditional governance market. The result has been a decline in the number of companies interested in joining America’s public markets, and the adoption, by those companies that do go public, of extreme governance structures designed to resist the influence of the governance industry.

Corporate law, like all law, has a context; indeed, it has many contexts. To understand corporate law today, we need to appreciate the forces—social, political, economic, global and local—which shape that law. Modern corporations and contemporary Australian corporate law should be understood as a product of, and a compromise between, various social, economic and legal ideas and philosophies. This is the focus of the first two chapters of this book.