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Corporate Governance after GameStop

Last week, ordinary citizens responded to systemic inequalities with a populist, market-based campaign to disrupt the mechanisms of elite accumulation – and sent a powerful message about the need for a new model of corporate governance. After decades of passivity, the time has come for directors to lead.

NEW YORK – Last week, a social-media-fueled populist rebellion gripped capital markets. Retail investors purchased huge amounts of stock in struggling companies like GameStop, AMC, and BlackBerry (among others). They wanted to make a buck. But, even more than that, they wanted to punish the financial elites, like hedge funds, that had been betting on the companies’ decline.

The punishment worked: on January 27, investors that had taken short positions on GameStop lost $14.3 billion. But the real story is not who lost (or made) money in a series of stock trades. It is that the prevailing model of modern corporate governance is on the brink of a seismic change.

In the current model, a firm’s board of directors exercises ultimate authority over the corporation. The board is responsible for hiring, evaluating, compensating, and, if necessary, firing the CEO and other top management, and its members must approve all other fundamental decisions.

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