Digital Commons Network^™

Entrenched Managers & Corporate Social Responsibility, Shane M. Shelley

ExpressO

A growing number of academics have suggested U.S. corporate governance laws bestow too much power on managers. Much of the research focuses on the relationship between corporate governance arrangements, which supply a means to managerial power, and the financial performance of corporations. This exclusive focus on financial performance may be misguided. Although profits serve as a proxy for the benefits corporations provide society, they do not always adequately reflect the costs of the activities that generated them. In this sense, financial performance may not give an accurate, or at least complete, picture of the real value of corporations. Whether managers …

Overvalued Equity And The Case For An Asymmetric Insider Trading Regime, Thomas A. Lambert

ExpressO

The forty-year debate over whether insider trading should be regulated has generally proceeded in all-or-nothing terms: Either all insider trading should be permitted (subject only to private restrictions imposed by issuers themselves), or none should. This Article argues for an asymmetric insider trading policy under which insider trading that decreases the price of an overvalued stock is generally permitted, but insider trading that increases the price of an undervalued stock is generally prohibited. Concluding that the net investor benefits of price-decreasing insider trading exceed those of price-enhancing insider trading, the Article argues that an asymmetric insider trading regime likely represents …

Measuring And Representing The Knowledge Economy: Accounting For Economic Reality Under The Intangibles Paradigm, Olufunmilayo B. Arewa

ExpressO

Enron has become a symbol: a symbol of excess, an illustration of how a company can base its business on fraudulent, deceptive or even largely non-existent business transactions. The collapse of Enron had a significant impact on the adoption of legislation such as the Sarbanes-Oxley Act, which was intended to prevent the types of fraudulent behavior that occurred at Enron. However, Sarbanes-Oxley and other responses to the business practices of many companies during the late 1990s do not fully address some of the underlying factors that permitted and in fact encouraged the Enrons of the world to represent their companies …

The Marginal Incentive Of Insider Trading: An Economic Reinterpretation Of The Case Law, Kristoffel R. Grechenig

ExpressO

Commentators on insider trading are divided into two camps, one in favor of regulation, the other in favor of deregulation. The arguments for the two positions are manifold but not irreconcilable. I show that important gains to social welfare come with insider trading on negative information (sales), whereas losses often result from the use of positive information (purchases). Thus, I look at a regulation that allows insiders to use negative but not positive non-public information. Because positive information will be disclosed much sooner than negative information, the marginal incentive (and marginal gain to social welfare, respectively) of insider trading as …

Attorneys As Gatekeepers: Sec Actions Against Lawyers In The Age Of Sarbanes-Oxley, Lewis D. Lowenfels, Alan R. Bromberg, Michael J. Sullivan

ExpressO

Following the enactment of the Sarbanes-Oxley Act on July 30, 2002, the Securities and Exchange Commission has substantially increased the number of actions it has initiated against lawyers. And a substantial number of these recent SEC actions against counsel to public companies (both internal and external) have highlighted the SEC’s resolve to hold lawyers accountable for not performing adequately their SEC-conceived role as “gatekeepers” to prevent fraud and other violations of the federal securities laws. This “gatekeeper” concept has been and is being implemented through SEC actions addressing a wide variety of alleged transgressions in a wide diversity of factual …

The Different Tax Treatment Of Investment Advisory Fees And Brokerage Fees; The Lower The Fiduciary Duty The Better The Tax Consequences, Barry W. Rickert

ExpressO

The current tax laws favor brokerage fees as compared to investment advisory fees, even though investment advisors are held to a higher standard of fiduciary duty. My article examines the different tax treatment of investment advisory fees and brokerage fees, analyzes the policy considerations of such treatment and proposes alternatives to the current system. Considering the large number of American investing in the securities markets, it is important that our tax laws be written in a way that encourages taxpayers to seek investment professionals who are held to higher standards of conduct. The policy implications of brokerage fees receiving preferable …

The End Of The Securities Fraud Class Action As We Know It, Richard A. Booth

ExpressO

In this article, I argue that securities fraud class actions (SFCAs) should not be treated as class actions but rather should be treated as derivative actions. In addition, I argue that such actions should be dismissed unless it appears that insiders (including the company itself) have enjoyed gains from trading during the fraud period. Both of these conclusions are based on the fundamental argument that (1) securities law seeks to protect the interests of reasonable investors, (2) reasonable investors diversify, and (3) diversified investors are effectively protected against the supposed financial harms of securities fraud by virtue of being diversified, …

Equal Treatment Of Foreign Shareholders In Transnational Securities Class Action Against A Foreign Issuer—A Chinese Example, Clark Yao

ExpressO

As the world economy and financial markets become increasingly more integrated, cross-boarder securities transaction becomes a daily event. Because Unite States has the world’s largest and arguably most liquid capital markets, it has attracted a significant number of foreign companies to cross-list their stocks in a U.S. stock exchange. Unavoidably, such transactions will not only bring out fortune, but also disputes between transacting parties. Relying on the powerful federal securities law , U.S. investors who have bought or sold such stocks have routinely sued foreign stock issuers through class action when the stock prices went down, alleging their loss is …

Legislation And Legitimation: Congress And Insider Trading In The 1980s, Thomas W. Joo

ExpressO

Legislation and Legitimation:

Congress and Insider Trading in the 1980s

Abstract

Orthodox corporate law-and-economics holds that American corporate and securities regulation has evolved inexorably toward economic efficiency. That position is difficult to square with the fact that regulation is the product of government actors and institutions. Indeed, the rational behavior assumptions of law-and-economics suggest that those actors and institutions would tend to place their own self-interest ahead of economic efficiency. This article provides anecdotal evidence of such self-interest at work. Based on an analysis of legislative history—primarily Congressional hearings—this article argues that Congress had little interest in the economic policy …

Comparative Corporate Governance: Irish, American, And European Responses To Corporate Scandals, Manish Gupta

ExpressO

A comparative review of legislative reactions to corporate scandals such as Enron and WorldCom. This paper examines American, Irish, and European Union legislation meant to deal with regulating corporations.