Business Commons^™

Dynamic Disclosure: An Exposé On The Mythical Divide Between Voluntary And Mandatory Esg Disclosure, Lisa Fairfax

All Faculty Scholarship

In March 2022, for the first time in its history, the Securities and Exchange Commission (the “SEC”) proposed rules mandating disclosure related to climate change. The proposed rules are remarkable because heretofore many in the business community, including the SEC, vehemently resisted climate-related disclosure, based primarily on the argument that such disclosure is not material to investors. This resistance is exemplified by the current lack of any SEC disclosure mandates for climate change. The proposed rules have sparked considerable pushback including allegations that the rules violate the First Amendment, would be too costly, and focus on “social” or “political” issues …

Purpose Proposals, Jill E. Fisch

All Faculty Scholarship

Repurposing the corporation is the hot issue in corporate governance. Commentators, investors and increasingly issuers, maintain that corporations should shift their focus from maximizing profits for shareholders to generating value for a more expansive group of stakeholders. Corporations are also being called upon to address societal concerns – from climate change and voting rights to racial justice and wealth inequality.

The shareholder proposal rule, Rule 14a–8, offers one potential tool for repurposing the corporation. This Article describes the introduction of innovative proposals seeking to formalize corporate commitments to stakeholder governance. These “purpose proposals” reflect a new dynamic in the debate …

Board Committee Charters And Esg Accountability, Lisa Fairfax

All Faculty Scholarship

We are currently witnessing a sharp increase in corporate attention on environmental, sustainability, and governance (“ESG”). The steep rise in corporate focus on ESG has prompted considerable criticism, not only from those concerned about how best to ensure that corporations are held accountable for their ESG commitments, but also from those who strenuously insist that corporate commitment to ESG is merely rhetorical or otherwise merely a passing fad. In an effort to shed light on the concerns around ESG accountability, and gain perspective about the potential illusory or short-term nature of ESG, I conducted my own survey of the committee …

Are All Risks Created Equal? Rethinking The Distinction Between Legal And Business Risk In Corporate Law, Adi Libson, Gideon Parchomovsky

All Faculty Scholarship

Should corporate legal risk be treated similarly to corporate business risks? Currently, the law draws a clear-cut distinction between the two sources of risk, permitting the latter type of risk and banning the former. As a result, fiduciaries are shielded from personal liability in the case of business risk and are entirely exposed to civil and criminal liability that arises from legal risk-taking. As corporate law theorists have underscored, the differential treatment of business and legal risk is highly problematic from the perspective of firms and shareholders. To begin with, legal risk cannot be completely averted or eliminated. More importantly, …

Selling Antitrust, Herbert J. Hovenkamp

All Faculty Scholarship

Antitrust enforcers and its other defenders have never done a good job of selling their field to the public. That is not entirely their fault. Antitrust is inherently technical, and a less engaging discipline to most people than, say, civil rights or criminal law. The more serious problem is that when the general press does talk about antitrust policy it naturally gravitates toward the fringes, both the far right and the far left. Extreme rhetoric makes for better press than the day-to-day operations of a technical enterprise. The extremes are often stated in overdramatized black-and-white terms that avoid the real …

President Biden's Executive Order On Competition: An Antitrust Analysis, Herbert J. Hovenkamp

All Faculty Scholarship

In July, 2021, President Biden signed a far ranging Executive Order directed to promoting competition in the American economy. This paper analyzes issues covered by the Order that are most likely to affect the scope and enforcement of antitrust law. The only passage that the Executive Order quoted from a Supreme Court antitrust decision captures its antitrust ideology well – that the Sherman Act:

rests on the premise that the unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest prices, the highest quality and the greatest material progress, while at the same time …

Antitrust Liability For False Advertising: A Response To Carrier & Tushnet, Susannah Gagnon, Herbert J. Hovenkamp

All Faculty Scholarship

This reply briefly considers when false advertising can give rise to antitrust liability. The biggest difference between tort and antitrust liability is that the latter requires harm to the market, which is critically dependent on actual consumer response. As a result, the biggest hurdle a private plaintiff faces in turning an act of false advertising into an antitrust offense is proof of causation – to what extent can a decline in purchase volume or other market rejection be specifically attributed to the defendant’s false claims? That requirement dooms the great majority of false advertising claims attacked as violations of the …

A Lesson From Startups: Contracting Out Of Shareholder Appraisal, Jill E. Fisch

All Faculty Scholarship

Appraisal is a controversial topic. Policymakers have debated the goals served by the appraisal remedy, and legislatures have repeatedly revised appraisal statutes in an effort to meet those goals while minimizing the cost and potential abuse associated with appraisal litigation. Courts have struggled to determine the most appropriate valuation methodology and the extent to which that methodology should depend on case-specific factors. These difficulties are exacerbated by variation in the procedures by which mergers are negotiated and the potential for conflict-of-interest transactions.

Private ordering offers a market-based alternative to continued legislative or judicial efforts to refine the appraisal remedy. Through …

The Uncertain Stewardship Potential Of Index Funds, Jill E. Fisch

All Faculty Scholarship

Regulators and commentators around the world are increasingly demanding that institutional investors engage in stewardship with respect to their portfolio companies. Further, the demand for stewardship has broadened from an expectation that investors engage to reduce agency costs and promote economic value to a call for investors to demand that companies serve a broader range of societal interests and objectives. This chapter considers calls for stewardship in the context of the U.S. capital markets specifically as applied to index funds. It argues that, irrespective of the merits of institutional stewardship generally, the structure of index funds and the business environment …

Leases As Forms, David A. Hoffman, Anton Strezhnev

All Faculty Scholarship

We offer the first large scale descriptive study of residential leases, based on a dataset of ~170,000 residential leases filed in support of over ~200,000 Philadelphia eviction proceedings from 2005 through 2019. These leases are highly likely to contain unenforceable terms, and their pro-landlord tilt has increased sharply over time. Matching leases with individual tenant characteristics, we show that unlawful terms are surprisingly likely to be associated with more expensive leaseholds in richer, whiter parts of the city. This result is linked to landlords' growing adoption of shared forms, originally created by non-profit landlord associations, and more recently available online …

Third Party Moral Hazard And The Problem Of Insurance Externalities, Gideon Parchomovsky, Peter Siegelman

All Faculty Scholarship

Insurance can lead to loss or claim-creation not just by insureds themselves, but also by uninsured third parties. These externalities—which we term “third party moral hazard”—arise because insurance creates opportunities both to extract rents and to recover for otherwise unrecoverable losses. Using examples from health, automobile, kidnap, and liability insurance, we demonstrate that the phenomenon is widespread and important, and that the downsides of insurance are greater than previously believed. We explain the economic, social and psychological reasons for this phenomenon, and propose policy responses. Contract-based methods that are traditionally used to control first-party moral hazard can be welfare-reducing in …

Delaware's Frontier, Matthew Jennejohn, D. Gordon Smith

University of Pennsylvania Journal of Business Law

No abstract provided.

Power, Primacy, And The Corporate Law Pivot, Grant M. Hayden, Matthew T. Bodie

University of Pennsylvania Journal of Business Law

No abstract provided.

Stakeholderism, Corporate Purpose, And Credible Commitment, Lisa Fairfax

All Faculty Scholarship

One of the most significant recent phenomena in corporate governance is the embrace, by some of the most influential actors in the corporate community, of the view that corporations should be focused on furthering the interests of all corporate stakeholders as well as the broader society. This stakeholder vision of corporate purpose is not new. Instead, it has emerged in cycles throughout corporate law history. However, for much of that history—including recent history—the consensus has been that stakeholderism has not achieved dominance or otherwise significantly influenced corporate behavior. That honor is reserved for the corporate purpose theory that focuses on …

Event-Driven Securities Litigation, Gideon Mark

University of Pennsylvania Journal of Business Law

No abstract provided.

Special Purpose Acquisition Companies (Spacs) And The Sec, Neal F. Newman, Lawrence J. Trautman

University of Pennsylvania Journal of Business Law

No abstract provided.

Copycat Compliance And The Ironies Of "Best Practice", William R. Heaston

University of Pennsylvania Journal of Business Law

No abstract provided.

Delaware Independent Directors: A Judicial Contextual Evolution, Randy J. Holland

University of Pennsylvania Journal of Business Law

No abstract provided.

Soft Law, Risk Cultures, And Law Abidingness: The Caremark Connection, Donald C. Langevoort

University of Pennsylvania Journal of Business Law

No abstract provided.

Doctor Leo And Justice Strine, Brett Mcdonnell

University of Pennsylvania Journal of Business Law

No abstract provided.

#Metoobots And The Ai Workplace, Leora Eisenstadt

University of Pennsylvania Journal of Business Law

No abstract provided.

The Faithless Franchisor: Rethinking Good Faith In Franchising, Robert W. Emerson

University of Pennsylvania Journal of Business Law

No abstract provided.

The Local Nature Of Equity Crowdfunding, David Nows

University of Pennsylvania Journal of Business Law

No abstract provided.

Shareholder Wealth Maximization: Variations On A Theme, Dalia T. Mitchell

University of Pennsylvania Journal of Business Law

No abstract provided.

Freezeouts In Delaware And Around The World, Guhan Subramanian

University of Pennsylvania Journal of Business Law

No abstract provided.

Toward A Fair And Sustainable Corporate Governance System: Reflections On Leo E. Strine, Jr.'S Writing On Institutional Investors, Dorothy S. Lund

University of Pennsylvania Journal of Business Law

No abstract provided.

The Humanities Strike Back: (E)Esg And Justice Strine Challenge Gamer Shareholder Primacy, David H. Webber

University of Pennsylvania Journal of Business Law

No abstract provided.

Esg & Anti-Black Racism, Alicia E. Plerhoples

University of Pennsylvania Journal of Business Law

No abstract provided.

Stealth Governance: Shareholder Agreements And Private Ordering, Jill E. Fisch

All Faculty Scholarship

Corporate law has embraced private ordering -- tailoring a firm’s corporate governance to meet its individual needs. Firms are increasingly adopting firm-specific governance through dual-class voting structures, forum selection provisions and tailored limitations on the duty of loyalty. Courts have accepted these provisions as consistent with the contractual theory of the firm, and statutes, in many cases, explicitly endorse their use. Commentators too support private ordering for its capacity to facilitate innovation and enhance efficiency.

Private ordering typically occurs through firm-specific charter and bylaw provisions. VC-funded startups, however, frequently use an alternative tool – shareholder agreements. These agreements, which have …

Duty And Diversity, Chris Brummer, Leo E. Strine Jr.

All Faculty Scholarship

In the wake of the brutal deaths of George Floyd and Breonna Taylor, a slew of reforms from Wall Street to the West Coast have been introduced, all aimed at increasing Diversity, Equity, and Inclusion (“DEI”) in corporations. Yet the reforms face difficulties ranging from possible constitutional challenges to critical limitations in their scale, scope and degree of legal obligation and practical effects. In this Article, we provide an old answer to the new questions facing DEI policy, and offer the first close examination of how corporate law duties impel and facilitate corporate attention to diversity. Specifically, we show that …