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Full-Text Articles in Business Law, Public Responsibility, and Ethics
Team Production In Venture Capital Investing, D. Gordon Smith
Team Production In Venture Capital Investing, D. Gordon Smith
Faculty Scholarship
Entrepreneurs and venture capitalists engage in team production. Inherent in team production is an incentive problem: team members have an incentive to shirk. The incentive to shirk derives from the inability to monitor team members perfectly and compensate them based on productivity. Economic models of team production teach that solutions to shirking must involve (1) a principal (2) with authority to break the budget by realigning the claims of team members through use of a penalty or a bonding arrangement (3) based only on observations of team output, not on monitoring of individual inputs. This paper analyzes the team production …
A Proposal To Eliminate Director Standards From The Model Business Corporations Act, D. Gordon Smith
A Proposal To Eliminate Director Standards From The Model Business Corporations Act, D. Gordon Smith
Faculty Scholarship
The Committee on Corporate Laws of the Business Section of the American Bar Association recently adopted amendments to the section of the Model Business Corporation Act (MBCA) enunciating standards of director performance. In place of the current section 8.30, which has been adopted by 42 states, the Committee has adopted two sections - one defining a standard of conduct and one defining a standard of liability for corporate directors. This paper argues that these new standards do not achieve the goals of bifurcation. Moreover, if adopted and used, the new standards will engender confusion and possibly inequitable results. This paper …