The clash between legal and business logic: business groups in the new Israeli corporate law

Planned institutional change presents an uncommon opportunity for institutional entrepreneurs to advance their innovations. The dispute of why the new Israeli corporate law, enacted at the end of 1990s, does not refer to business groups, which form a salient part of Israeli big business, opens a window through which the conflict between two different and competing types of logic may be viewed. The carriers of legal-professional logic were legal academics and state officials, who opposed the inclusion of a special chapter or any other reference to business groups within the new corporate law based on US legal ideas, and especially on the ‘Law and Economics’ perspective. In contrast, the carriers of business logic were interest groups and professional associations that sought to appropriate the legal and economic advantages resulting from organizing business in the form of business groups within the new law, without protecting the rights of minority shareholders and, more importantly, without enabling state agencies to intervene in the governance of their businesses.