| This paper explores the interrelationships among corporate culture, capital structure, firm performance, and fiduciary duties. Chaos theory, nonlinear dynamics, complex systems theory, and socio-cultural studies of firms' organizational ecosystems, and enabling infrastructure suggest that the BCE rule is: (i) a superior fiduciary principle to shareholder primacy; and (ii) more likely to enhance firm value in proportion to the importance of intangible assets in its production process. The existence of "epistatic costs" rooted in the non-linear negative feedback effects of perverse agency theory-driven cost cutting is hypothesized. A theoretical model is developed to empirically test for the existence of epistatic costs and optimal levels of organizational tension or "slack." Broader implications of the model for fiduciary rules, financing decisions, and the current posture of Canadian securities regulation in the takeover context are explored. |
