The literature on the celebrated chief executive has been overwhelmingly American, and overwhelmingly focused on mature issuers. In a new article, I approach it from two angles that are neither: a cross-border listing panel, and a comparative look at how European law has reached, by a different route, the same end point—a founder whose control survives the market’s loss of faith in him. Its broader claim, that an apparatus measuring power in votes and pay misprices power held in charters, is sketched at the end; the post concerns the narrower claim on which it rests.
The theoretical claim is that corporate law has treated as one thing two kinds of executive power that behave quite differently. Charismatic power is belief-based: conferred by others, written down nowhere, withdrawable without anyone’s consent. Structural power is right-based: founder identity, the combined chair role, supervoting stock—written down, enforceable, and not withdrawable except by its holder. The prevailing legal account holds that superstar power is limited in duration because belief evaporates when the market loses faith. That is right about the first type of power. It is not right about executives who hold both, because the two decay at radically different rates. Belief collapses in a quarter; a charter does not decay at all. The article states this as a model of two stocks with different decay rates; the persistence result below follows from it.
If that is so, the moment to look at is not maturity but formation—the initial public offering, where the founder’s narrative is what makes the offering saleable and the charter is what allocates control, and where the underwriter prices the first and drafts the second.
The cross-border evidence. I assembled a panel of 536 foreign private issuers that listed in the United States between January 2010 and July 2024, coding from prospectus biographies the presence at listing of a founder chief executive, chair-CEO duality, and independent directors, and tracking 1,310 subsequent board appointments.
The analysis produced three results. First, at the IPO, founder chief executives hold the chair role significantly more often than professional managers, and independent directors are a smaller share of their board roles at listing (7.4 against 13.0 per cent). Control and constraint are jointly determined in the listing documents.
Second, and more consequential for regulators, there is no convergence toward the board independence that domestic standards would require. In a Cox model of the time to the first independent appointment, the dominant predictor is the independence already present at listing: issuers that arrive with independent directors add more, at over twice the hazard; issuers that arrive without them stay that way. Where no legal clock compels the addition—because home-country practice or the controlled-company exemption displaces the independence requirements—the shortfall at listing is the shortfall that persists.
Third, an honest null that I did not expect: founder-led issuers do not professionalise more slowly. If anything their first independent director arrives sooner, and the difference is indistinguishable from zero. The prior that founders visibly retard the arrival of monitors is not supported.
The European mirror. The panel shows that insulation is inherited from the listing; Europe shows that the same insulation can come from a rule aimed at something else. Europe has run the US experiment in reverse, weighting the franchise by patience rather than identity, through loyalty shares. But the arithmetic converges. At three votes per share, legal control requires just over a quarter of the capital; at ten, just over nine per cent. The design intention is committed capital; the design effect, where the committed holder is the founder, is hard to distinguish from the superstar’s armour. Whatever produced the insulation, it is set early and outlasts the belief that justified it: a jurisdiction that rejects dual-class stock on principle and adopts multiple-voting loyalty shares has reached the same problem by a longer road.
Policy implications. The argument does not assume that governance should aim at ever more independent boards; independent directors are the observable proxy, not the goal. The objective is that the constraint on a controlling founder track the justification for insulating him, which is strong at the listing and weak once the belief has lapsed and the charter has not noticed. Two implications follow for listing venues on either side of the Atlantic.
The exemptions that suspend the compliance clock were justified by comity and contractual freedom. The panel supplies a cost that neither anticipated: the exemption does not defer constraint, it fixes its absence, because an issuer that lists without independent directors does not acquire them later. Three refinements: itemise the displaced requirements in tagged, machine-readable form rather than narrative disclosure that no one aggregates; treat a few provisions as a floor that home-country practice cannot displace, the independent-director requirement first; and sunset the accommodation itself.
On sunsets generally, the standard objection to calendar-based terms—that they expire arbitrarily, without reference to whether the founder’s vision is still being exercised—is a good objection. It is an argument for event-based sunsets, keyed to economic disengagement, transfer of high-vote shares, death or departure, or dilution below a stated threshold. It is not an argument against sunsets. The founder at the IPO, still merely visionary and not yet consecrated, is the one party capable of binding his future and incontestable self.
Conclusion. The article’s broader claim is that an accountability apparatus measuring power in votes and in pay will keep mispricing power measured in followers and held in charters; its prediction that the issuers excluded by the index rule would re-enter the compensation database has since been tested, and held. Its narrower claim is the one above: in cross-border listings, the terms present on day one are not a starting point but, in many issuers, the terminal state—and a regulator who wishes to impose constraint has one reliable opportunity, which is before the bell rings.
The author’s article is available here.
Maria Lucia Passador is Assistant Professor of Law at Bocconi University.
Share:
With the support of
