Twitter to Solve Corporate Governance Problems — Screenshots at 11

That’s according to former New York Governor,* Eliot Spitzer, writing in As emphasized in the Economics of the Firm course (Econ 450), the evolution of the ubiquitous “M-Form” corporate structure created a chasm between equity shareholders and company managers. The split presents the classic principal-agent problem (or simply “agency” problem) where the incentives of owners and managers might not be aligned. Although Williamson (1975) goes to great pains to show how the problem is resolved, Chandler (1977) flat out says that corporate managers are clearly not maximizing shareholder wealth.

However you come down on the issue, the Spitzer piece argues that new communications technologies that (allegedly) transformed political campaigns in 2008 can also be used for shareholders to reclaim ownership of their firms.

Whether that is a good thing or not, I suppose, is an open question. Some would argue that shareholders are more interested in short-turn returns than looking out for the long-run health of the country. Certainly, this question isn’t settled.