In this regard, the discipline of NLERS plays the same role as the discipline of the legal system in enforcing contracts.
When the sanctions for breaching the NLERS are taken into account, the CEO is discouraged from pursuing the investment because she would be identified as a bad norms player.
The boundaries of NLERS governance must serve as a jurisdictional boundary to be effective.
This, however, does not mean that NLERS and law need to work in two entirely separate spheres.
In doing so, it is attentive to the firm's boundary as a jurisdictional boundary, within which NLERS governance predominates.
Having established an "incentive compatible" legal form that facilitates NLERS governance, the law must be careful not to undermine that governance by midstream interference.
The principal contexts in which the business judgment rule does not apply are situations in which NLERS governance breaks down, generally because of last period temptations to defect.
In Parts III and IV, we turn to corporate law and ask how corporate law helps solve the problems identified by the theories of the firm in Part I and how it facilitates the NLERS governance described in Part II.
Viewed from this perspective, corporate law emerges as a remarkably sophisticated mechanism for facilitating self-governance by NLERS.
Having established an "incentive compatible" legal form within which governance is primarily by NLERS, the law must be careful not to undermine NLERS governance by midstream interference.
NLERS are thus understood to impose obligations, but without legal enforcement.
Less trivially, the promotion of teamwork is an NLERS practiced in many firms.