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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.
We believe the answer is no, which explains our adoption of a definition (NLERS) that makes that point clearly.
This, however, does not mean that NLERS and law need to work in two entirely separate spheres.
Since the corporation is largely governed by NLERS, corporate law can also be described as a remarkably sophisticated mechanism for facilitating governance by NLERS.
At one point, the authors state their view that "NLERS are ...
From our perspective, corporate law can be understood as a remarkably sophisticated mechanism for facilitating governance by NLERS. Centralized management is used to determine the assets over which the corporation must have residual rights of control and to develop a governance structure for protecting the match-investments of insiders in these assets.
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 Part II, we provide a bridge between the theory of the firm and the "norms" literature by arguing that the firm thus understood is a context in which governance will primarily be through "norms," by which we mean nonlegally enforceable rules and standards ("NLERS").
(10) Here are a few suggestions, some of which are already employed to denote specific subcategories of norms: tastes, ethics, habits, practices, ideologies, belief systems, social obligations, and NLERS (nonlegally enforceable rules and standards).
at 1645, 1649 (discussing how "competitive forces" and reputational concerns contribute to NLERS).
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