Business Administration, Management, and Operations Commons^™

Initiation Payments, Scott Hirst

Faculty Scholarship

Many of the central discussions in corporate governance, including those regarding proxy contests, shareholder proposals, and other activism or stewardship, can be understood as a single question: Is there under-initiation of corporate changes that investors would collectively prefer?

This Article sheds light on this question in three ways. First, the Article proposes a theory of investor initiation, which explains the hypothesis that there is under-initiation of collectively-preferred corporate change by investors. Even though investors collectively prefer that certain corporate changes take place, the costs to any individual investor from initiating such changes through high-cost proxy contests, or even low-cost shareholder …

Public Reporting Of Monitorship Outcomes, Veronica Root Martinez

Faculty Scholarship

When a corporation engages in misconduct that is widespread or pervasive, courts, regulators, or prosecutors often insist that the firm obtain assistance from an independent third party — a monitor — to oversee the firm’s remediation effort. The largest firms in the world — from Deutsche Bank, to Volkswagen, to Carnival Cruise Lines — have found themselves having to retain a monitor for corporate misconduct, despite attempts to avoid a monitorship entirely. Traditionally, monitors, or their special master forebearers, were utilized by courts to assist in overseeing compliance with court orders, and their work was both accessible and transparent. As …

A Difficult Conversation: Corporate Directors On Race And Gender, Kimberly D. Krawiec, John M. Conley, Lissa L. Broome

Faculty Scholarship

This symposium essay summarizes our ongoing ethnographic research on corporate board diversity, discussing the central tension in our respondents’ views – their overwhelmingly enthusiastic support of board diversity coupled with an inability to articulate coherent accounts of board diversity benefits that might rationalize that enthusiasm. As their reactions make clear, frank dialogue about race and gender – even a seemingly benign discussion of diversity’s benefits – can be a difficult conversation.

Controlling Controlling Shareholders, Ronald J. Gilson, Jeffrey N. Gordon

Faculty Scholarship

The rules governing controlling shareholders sit at the intersection of the two facets of the agency problem at the core of public corporations law. The first is the familiar principal-agency problem that arises from the separation of ownership and control. With only this facet in mind, a large shareholder may better police management than the standard panoply of market-oriented techniques. The second is the agency problem that arises between controlling and non-controlling shareholders, which produces the potential for private benefits of control. There is, however, a point of tangency between these facets. Because there are costs associated with holding a …

What Triggers Revlon?, Ronald J. Gilson, Reinier Kraakman

Faculty Scholarship

Delaware's new approach to takeover law is announced in three cases that address different aspects of management's role in the standard drama of defending against a hostile takeover. Unocal Corp. v. Mesa Petroleum Co. scripts a main act for the drama by prescribing a duty to compare the outsider's offer with the universe of other options and, if necessary, to resist the outsider within the guidelines fixed by the proportionality test. Moran v. Household International, Inc. writes a prologue by encouraging management to plan a vigorous defense that can thwart a coercive offer without damaging the company. Finally, Revlon …

Just Say No To Whom?, Ronald J. Gilson

Faculty Scholarship

"Just say no" is the current rallying cry of those seeking to give target management the unrestricted power to block hostile tender offers. Not surprisingly, the turn of phrase chosen by management leaves ambiguous the precise issue on which the debate should turn: To whom does management want the power to say no? As target management poses the issue, it wants to say no to a raider. The image is of stalwart management protecting shareholders against a marauding outsider. However, that image is seriously misleading. In fact, target management seeks the power to say no to its own shareholders.

The …