central claims. First, effective corporate law is context-specific, even if the problems it must address are universal. The law that works for a developed economy, when transplanted to an emerging economy, will not achieve a sensible balance among company managers need for flexibility to meet rapidly changing business conditions, companies' need for low-transaction cost access to capital markets, large investors' need to monitor what managers do with the investors'money, and small investors' need for protection against self-dealing by managers and large investors. The defects in the law will increase the cost of capital and reduce its availability In developed countries, corporate law combines with other legal, market, and cultural constraints on the actions of corporate managers and controlling shareholders to achieve a sensible balance among these sometimes competing needs. Corporate law plays a relatively small, even"trivial"role. In emerging economies, these other constraints are weak or absent, so corporate law is a much more central tool for motivating managers and large shareholders to create social value rather than simply transfer wealth to themselves from others. The market"cannot fill the regulatory gaps that an American-style"enabling"corporate law leaves behind Further, corporate law in developed countries evolved in tandem with supporting leg: institutions. For example, the United States relies on expert judges to assess the reasonableness of takeover defenses and the fairness of transactions in which managers have a conflict of interest. When necessary, these judges make decisions literally overnight to ensure that judicial delay does not kill a challenged transaction. A company law that depends on fast and reliable judicial decisions is simply out of the question in many emerging markets. In Russia, for example, courts function slowly if at all, some judges are corrupt, and many are Soviet-era holdovers who neither understand business nor care to learn. Better judges and courts will emerge only over several decades, as the old judges die or retire. In the meantime, Russian corporate law must rely on courts as little as possible More generally, every emerging economy has some legal and market institutions, some norms of behavior, some distribution of share ownership, and some financial institutions Corporate law must reflect these background facts. For example, if(as in Russia) employees often own large stakes in their companies, but are vulnerable to having their votes controlled by corporate managers, company law needs special rules that safeguard the rights ofemployee- shareholders. Company law must also limit the influence of dysfunctional background features such as widespread corruption See Bernard s. Black, Is Corporate Law Trivial?: A Political and Economic Analysis, 84 Nw. U. L. Rev 542(1990)[hereinafter Black, Is Corporate Law Trivial? see also Ronald J. Gilson, A Structural Approach to Corporations: The Case Against Defensive Tactics in Tender Offers, 33 Stan. L. Rev. 819, 839-44(1981) describing market mechanisms that complement legal controls on corporate managers); Mark J. Roe, Some Differences in Corporate Structure in Germany, Japan, and the United States, 102 Yale L.J. 1927, 1932(1993 [hereinafter Roe, Some Differences)(same)3 See Bernard S. Black, Is Corporate Law Trivial?: A Political and Economic Analysis, 84 Nw. U. L. Rev. 542 (1990) [hereinafter Black, Is Corporate Law Trivial?]; see also Ronald J. Gilson, A Structural Approach to Corporations: The Case Against Defensive Tactics in Tender Offers, 33 Stan. L. Rev. 819, 839- 44 (1981) (describing market mechanisms that complement legal controls on corporate managers); Mark J. Roe, Some Differences in Corporate Structure in Germany, Japan, and the United States, 102 Yale L.J. 1927, 1932 (1993) [hereinafter Roe, Some Differences] (same). 2 central claims. First, effective corporate law is context-specific, even if the problems it must address are universal. The law that works for a developed economy, when transplanted to an emerging economy, will not achieve a sensible balance among company managers' need for flexibility to meet rapidly changing business conditions, companies' need for low-transaction￾cost access to capital markets, large investors' need to monitor what managers do with the investors' money, and small investors' need for protection against self-dealing by managers and large investors. The defects in the law will increase the cost of capital and reduce its availability. In developed countries, corporate law combines with other legal, market, and cultural constraints on the actions of corporate managers and controlling shareholders to achieve a sensible balance among these sometimes competing needs. Corporate law plays a relatively small, even "trivial" role.3 In emerging economies, these other constraints are weak or absent, so corporate law is a much more central tool for motivating managers and large shareholders to create social value rather than simply transfer wealth to themselves from others. The "market" cannot fill the regulatory gaps that an American-style "enabling" corporate law leaves behind. Further, corporate law in developed countries evolved in tandem with supporting legal institutions. For example, the United States relies on expert judges to assess the reasonableness of takeover defenses and the fairness of transactions in which managers have a conflict of interest. When necessary, these judges make decisions literally overnight to ensure that judicial delay does not kill a challenged transaction. A company law that depends on fast and reliable judicial decisions is simply out of the question in many emerging markets. In Russia, for example, courts function slowly if at all, some judges are corrupt, and many are Soviet-era holdovers who neither understand business nor care to learn. Better judges and courts will emerge only over several decades, as the old judges die or retire. In the meantime, Russian corporate law must rely on courts as little as possible. More generally, every emerging economy has some legal and market institutions, some norms of behavior, some distribution of share ownership, and some financial institutions. Corporate law must reflect these background facts. For example, if (as in Russia) employees often own large stakes in their companies, but are vulnerable to having their votes controlled by corporate managers, company law needs special rules that safeguard the rights of employee￾shareholders. Company law must also limit the influence of dysfunctional background features, such as widespread corruption