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Full-Text Articles in Law
Citizens United And The Threat To The Regulatory State, Tamara R. Piety
Citizens United And The Threat To The Regulatory State, Tamara R. Piety
Michigan Law Review First Impressions
Although Citizens United has been roundly criticized for its potential effect on elections and its display of judicial immodesty (or "activism"), the effect of the case which may be both most profound and perhaps most pernicious is its effect on the commercial speech doctrine. This is an aspect of the case which has been largely overlooked. Most people seem to be unaware of any connection between election law and the commercial speech doctrine-except, that is, those who have been working long and hard to accomplish the change it foreshadows. They are keenly aware of its implications.
The Attack On Nonprofit Status: A Charitable Assessment, James R. Hines Jr., Jill R. Horwitz, Austin Nichols
The Attack On Nonprofit Status: A Charitable Assessment, James R. Hines Jr., Jill R. Horwitz, Austin Nichols
Articles
American nonprofit organizations receive favorable tax treatment, including tax exemptions and tax-deductibility of contributions, in return for their devotion to charitable purposes and restrictions not to distribute profits. Recent efforts to extend some or all of these tax benefits to for-profit companies making social investments, including the creation of the new hybrid nonprofit/for-profit company form known as the Low-Profit Limited Liability Company, threaten to undermine the vitality of the nonprofit sector and the integrity of the tax system. Reform advocates maintain that the ability to compensate executives based on performance and to distribute profits when attractive investment opportunities are scarce …
The Development Of Modern Corporate Governance In China And India, Nicholas C. Howson, Vikramaditya S. Khanna
The Development Of Modern Corporate Governance In China And India, Nicholas C. Howson, Vikramaditya S. Khanna
Book Chapters
Corporate governance reform has become a topic of considerable debate both in the US and in many emerging markets. Indeed, the discussion is important because these reforms may have potentially long-standing effects upon the global allocation of capital, and in understanding the ways in which governance norms are communicated across markets and nations in an ever-globalizing world. In this chapter we examine the corporate governance reform efforts of the world's two biggest and fastest growing emerging markets, the People's Republic of China (PRC or China) and India. In the process we find that our understanding of how and why corporate …
Wasting The Corporate Waste Doctrine: How The Doctrine Can Provide A Viable Solution In Controlling Excessive Executive Compensation, Steven Clayton Caywood
Wasting The Corporate Waste Doctrine: How The Doctrine Can Provide A Viable Solution In Controlling Excessive Executive Compensation, Steven Clayton Caywood
Michigan Law Review
In the midst of the global recession of the late 2000s, there was an outcry against corporate executives and what the public deemed to be their excessive compensation. Although this anger is still featured in today's headlines, it is nothing new. In fact, excessive executive compensation complaints arose when the very concept of a corporation was still new. Most of the complaints that the public has leveled have had little effect on boards of directors' decisions. Occasionally, however the outcry is so great that the public compels a company's leadership to take action. This happened early in 2009 when American …
Has Corporate Law Failed? Addressing Proposals For Reform, Antony Page
Has Corporate Law Failed? Addressing Proposals For Reform, Antony Page
Michigan Law Review
Part I of this Review discusses the modem "nexus of contracts" approach to corporations and highlights how Greenfield's views differ. Part II examines corporate goals and purposes, suggesting that Greenfield overstates the impact of the shareholder-primacy norm and does not offer a preferable alternative. Part III critiques the means to the ends--Greenfield's proposals for changing the mechanics of corporate governance. Although several of his proposals are intriguing, they seem unlikely to achieve their pro-social aims. This Review remains skeptical, in part because-even given its problems-the U.S. "director-centric governance structure has created the most successful economy the world has ever seen." …
Monitoring Of Corporate Groups By Independent Directors, Adam C. Pritchard
Monitoring Of Corporate Groups By Independent Directors, Adam C. Pritchard
Articles
Both the United States and Korea have reformed their corporate governance in recent years to put increasing responsibilities on independent directors. Independent directors have been found to be an important force protecting the interests of shareholders when it comes time to make certain highly salient decisions, such as firing a CEO or selling the company. This article compares the role of independent directors in the US and Korean systems. I argue that the US may have placed regulatory burdens on independent directors that they are unlikely to be able to satisfy, given their part-time status. By contrast, in the chaebol …
When 'Good' Corporate Governance Makes 'Bad' (Financial) Firms: The Global Crisis And The Limits Of Private Law, Nicholas C. Howson
When 'Good' Corporate Governance Makes 'Bad' (Financial) Firms: The Global Crisis And The Limits Of Private Law, Nicholas C. Howson
Articles
In the aftermath of the global financial crisis of 2008–2009, investors, analysts, legislators, and pundits have spotlighted “good” or “improved” corporate governance as a remedy for all that presently ails us. It is one remedy in a long wish list that includes tougher requirements for risk capital, liquidity, and leverage; compensation and bonus reform; reimposition ofthe Glass-Steagall-like separation of bank “utility” and “casino” functions; the downsizing or breakup of institutions deemed “too big to fail;” enhanced consumer protection; securities law liability for secondary violators (like credit rating agencies); direct taxation of proprietary trading; “macroprudential” regulation; and new transparency requirements for …
The Failing Company Defense After The Commentary: Let It Go, Oliver Zhong
The Failing Company Defense After The Commentary: Let It Go, Oliver Zhong
University of Michigan Journal of Law Reform
This Note proposes the abolishment of the failing company defense in merger control law. This call for reform is based on a comprehensive critique, which consists of a revisit of the doctrinal history, a survey of problems in current practice, and an inquiry into the normative merits of both the status quo and alternative plans. The reform advocated will purify the doctrine and improve the practice with minimum adjustments, in line with the ongoing movement to modernize merger review with the publication of the Commentary to the Merger Guidelines.
Gatekeeper Failures: Why Important, What To Do, Merritt B. Fox
Gatekeeper Failures: Why Important, What To Do, Merritt B. Fox
Michigan Law Review
The United States was hit by a wave of corporate scandals that crested between late 2001 and the end of 2002. Some were traditional scandals involving insiders looting company assets - the most prominent being Tyco, HealthSouth, and Adelphia. But most were what might be called "financial scandals": attempts by an issuer to maximize the market price of its securities by creating misimpressions as to what its future cash flows were likely to be. Enron and WorldCom were the most spectacular examples of these financial scandals. In scores of additional cases, the companies involved and their executives were sued by …
Stoneridge Investment Partners V. Scientific-Atlanta: The Political Economy Of Securities Class Action Reform, Adam C. Pritchard
Stoneridge Investment Partners V. Scientific-Atlanta: The Political Economy Of Securities Class Action Reform, Adam C. Pritchard
Articles
I begin in Part II by explaining the wrong turn that the Court took in Basic. The Basic Court misunderstood the function of the reliance element and its relation to the question of damages. As a result, the securities class action regime established in Basic threatens draconian sanctions with limited deterrent benefit. Part III then summarizes the cases leading up to Stoneridge and analyzes the Court's reasoning in that case. In Stoneridge, like the decisions interpreting the reliance requirement of Rule 10b-5 that came before it, the Court emphasized policy implications. Sometimes policy implications are invoked to broaden the reach …
All In The Family As A Single Shareholder Of An S Corporation, Douglas A. Kahn, Jeffrey H. Kahn, Terrence G. Perris
All In The Family As A Single Shareholder Of An S Corporation, Douglas A. Kahn, Jeffrey H. Kahn, Terrence G. Perris
Articles
Subject to a few exceptions, a corporation that has elected to be taxed under subchapter S of chapter 1 of subtitle A of title 26 of the United States tax code is not taxed on its net income. Instead, the income, deductions, credits, and other tax items of an S corporation pass through to its shareholders on a pro rata basis. To qualify for subchapter S treatment, an electing corporation must satisfy the requirements that are set forth in section 1361, one of which is that the corporation can have no more than 100 shareholders. One aspect of that requirement …
Does Nonprofit Ownership Matter?, Jill R. Horwitz
Does Nonprofit Ownership Matter?, Jill R. Horwitz
Articles
In recent years, policymakers have increasingly questioned whether nonprofit institutions, particularly hospitals, merit tax exemption. They argue that nonprofit hospitals differ little from their for-profit counterparts in the provision of charity care and, therefore, should either lose their tax-exempt status or adhere to new, strict, and specific requirements to provide free services for the poor. In this Article, I present evidence that hospital ownership-whether it is for-profit, nonprofit, or government owned-has a significant effect on the mix of medical services it offers. Despite notoriously weak enforcement mechanisms, nonprofit hospitals act in the public interest by providing services that are unlikely …
Is The Report Of Lazarus's Death Premature? A Reply To Cameron And Postlewaite, Douglas A. Kahn
Is The Report Of Lazarus's Death Premature? A Reply To Cameron And Postlewaite, Douglas A. Kahn
Articles
Over a year ago, Ms. Faith Cuenin and I wrote an article in this Review (which I hereafter refer to as the "2004 Article") about the tax treatment of guaranteed payments under section 707(c) that are made in kind.' We concluded that a partnership does not recognize gain or loss on the making of a guaranteed payment with appreciated or depreciated property. We also concluded that the partner's basis in the property received will equal its fair market value at the time of payment, and that the payment does not affect the partner's outside basis in his partnership interest except …
The Irrational Auditor And Irrational Liability, Adam C. Pritchard
The Irrational Auditor And Irrational Liability, Adam C. Pritchard
Articles
This Article argues that less liability for auditors in certain areas might encourage more accurate and useful financial statements, or at least equally accurate statements at a lower cost. Audit quality is promoted by three incentives: reputation, regulation, and litigation. When we take reputation and regulation into account, exposing auditors to potentially massive liability may undermine the effectiveness of reputation and regulation, thereby diminishing integrity of audited financial statements. The relation of litigation to the other incentives that promote audit quality has become more important in light of the sea change that occurred in the regulation of the auditing profession …
The Silver Lining: The International Tax Provisions Of The American Jobs Creation Act - A Reconsideration, Reuven S. Avi-Yonah
The Silver Lining: The International Tax Provisions Of The American Jobs Creation Act - A Reconsideration, Reuven S. Avi-Yonah
Articles
The American Jobs Creation Act of 2004, passed by the US Congress on 12 October and signed into law by President Bush on 22 October 2004, has been greeted by general dismay by various critics. The Act has been described as overloaded with “pork” and giveaways to special interest groups like tobacco farmers. The critics contend that the only achievement of the Act, the repeal of the “extraterritorial income” (ETI) regime that was ruled by the WTO to be a prohibited export subsidy, is dwarfed by 633 pages of special interest legislation. Even the Bush Administration distanced itself from the …
Self-Regulation And Securities Markets, Adam C. Pritchard
Self-Regulation And Securities Markets, Adam C. Pritchard
Articles
Enron, Arthur Andersen, Tyco, ImClone, WorldCom, Adelphia - as American investors reel from accounting scandals and self-dealing by corporate insiders, the question of trust in the securities markets has taken on a new urgency. Securities markets cannot operate without trust. Markets known for fraud, insider trading, and manipulation risk a downward spiral as investors depart in search of safer investments. Today, many investors are rethinking the wisdom of entrusting their financial futures to the stock market. Absent trust in the integrity of the securities markets, individuals will hoard their money under the proverbial mattress.
Should Congress Repeal Securities Class Action Reform?, Adam C. Pritchard
Should Congress Repeal Securities Class Action Reform?, Adam C. Pritchard
Other Publications
The Private Securities Litigation Reform Act of 1995 was designed to curtail class action lawsuits by the plaintiffs’ bar. In particular, the high-technology industry, accountants, and investment bankers thought that they had been unjustly victimized by class action lawsuits based on little more than declines in a company’s stock price. Prior to 1995, the plaintiffs’ bar had free rein to use the discovery process to troll for evidence to support its claims. Moreover, the high costs of litigation were a powerful weapon with which to coerce companies to settle claims. The plaintiffs’ bar and its allies in Congress have called …
A Control-Based Approach To Shareholder Liability For Corporate Torts, Nina A. Mendelson
A Control-Based Approach To Shareholder Liability For Corporate Torts, Nina A. Mendelson
Articles
Some commentators defend limited shareholder liability for torts and statutory violations as efficient, even though it encourages corporations to overinvest in and to externalize the costs of risky activity. Others propose pro rata unlimited shareholder liability for corporate torts. Both approaches, however, fail to account fully for qualitative differences among shareholders. Controlling shareholders, in particular, may have lower information costs, greater influence over managerial decisionmaking, and greater ability to benefit from corporate activity. This Article develops a control-based approach to shareholder liability. It first explores several differences among shareholders. For example, a controlling shareholder can more easily curb managerial risk …
Reforming The State-Enterprise Property Relationship In The People's Republic Of China: The Corporatization Of State-Owned Enterprises, Deborah Kay Johns
Reforming The State-Enterprise Property Relationship In The People's Republic Of China: The Corporatization Of State-Owned Enterprises, Deborah Kay Johns
Michigan Journal of International Law
Part I of this Note first describes the problems that have prodded China to restructure its SOEs and then explains the root of those problems - the state-enterprise property relationship. This part concludes with a description of the unsuccessful attempts to date to reform that relationship. To understand why these efforts have met with little success, Part II explores the way in which most transition economies have attempted to address the ambiguity in the state-enterprise property relationship, by abolishing it through privatization. Although privatization is neither economically nor ideologically suited to China, experience with privatization does hold one lesson for …
Section 338 And Its Foolish Consistency Rules - The Hobgoblin Of Little Minds, Douglas A. Kahn
Section 338 And Its Foolish Consistency Rules - The Hobgoblin Of Little Minds, Douglas A. Kahn
Articles
The purposes of this Article are to examine whether there is any longer a reason for concern because a target corporation can choose selected assets for nonrecognition and to what extent the 1994 regulations properly deal with potentially abusive circumventions of tax goals. Before examining the current status of the consistency requirements, the historical background that led to the adoption of Section 338 and the operation of the section is discussed. The historical background includes: the judicially created Kimbell-Diamond rule, the codification and modification of that rule by the old version of Section 334(b)(2), the operation of the old version …
Limiting The Role Of Patents In Technology Transfer, Rebecca S. Eisenberg
Limiting The Role Of Patents In Technology Transfer, Rebecca S. Eisenberg
Articles
Federal policy since 1980 has reflected an increasingly confident presumption that patenting discoveries made in the course of government-sponsored research is the most effective way to promote technology transfer and commercial development of those discoveries in the private sector. Whereas policymakers in the past may have thought that the best way to achieve widespread use of government-sponsored research was to make the results freely available to the public, the new propatent policy stresses the need for exclusive rights as an incentive for industry to undertake the further investment to bring new products to market. Although this propatent policy may make …
Limiting The Role Of Patents In Technology Transfer, Rebecca Sue Eisenberg
Limiting The Role Of Patents In Technology Transfer, Rebecca Sue Eisenberg
Articles
Federal policy since 1980 has reflected an increasingly confident presumption that patenting discoveries made in the course of government-sponsored research is the most effective way to promote technology transfer and commercial development of those discoveries in the private sector. Whereas policymakers in the past may have thought that the best way to achieve widespread use of government-sponsored research was to make the results freely available to the public, the new propatent policy stresses the need for exclusive rights as an incentive for industry to undertake the further investment to bring new products to market. Although this propatent policy may make …
Misreading The Williams Act, Lyman Johnson, David Millon
Misreading The Williams Act, Lyman Johnson, David Millon
Michigan Law Review
This Article examines the emerging controversy over preemption of the most potent of recent antitakeover laws, the so-called business combination statutes recently passed by Delaware, New York, and other states, and Pennsylvania's director-approval statute. After examining the strategy employed by the states to shield these statutes from constitutional attack, we consider the issues raised by the preemption claim and the arguments currently being advanced by the SEC and others in favor of preemption. Resolving the preemption controversy requires inquiry into the original meaning and objectives of the Williams Act. We argue that this should involve attention not only to the …
Federal Chartering Revisited, Donald E. Schwartz
Federal Chartering Revisited, Donald E. Schwartz
University of Michigan Journal of Law Reform
The protections that corporation law provided to shareholders and to our economic community against the excesses and complacency of corporate directors and managers have undergone a general weakening. Although it is uncertain whether the ALI can accomplish effective and meaningful reforms, this effort may be the most important attempt by the corporate community to reform itself.
Beyond Managerialism: Investor Capitalism?, Alfred F. Conard
Beyond Managerialism: Investor Capitalism?, Alfred F. Conard
University of Michigan Journal of Law Reform
Capitalism, in most large public corporations, has been subtly transformed from a system of dominance by the suppliers of capital to a system of dominance by the managers, dubbed "managerialism." In many respects, managerialism is beneficial to investors and other enterprise constituencies, since managers' rewards typically grow with the profitability of the enterprise. But managerialism permits drastic wastes of resources when managers hang on to their jobs after they have become inefficient or spend lavishly to defend themselves against takeover bids. Derivative suits, shareholder proposals, independent directors, and other prescriptions have failed to stifle managerial abuses. This is the message …
Two Models Of Corporate Governance: Beyond Berle And Means, Lynne L. Dallas
Two Models Of Corporate Governance: Beyond Berle And Means, Lynne L. Dallas
University of Michigan Journal of Law Reform
This Article introduces a new model of corporate governance, which challenges, as did Berle and Means, the conclusions drawn from the traditional ownership model. Rather than focusing upon the inefficiencies of the large complex firm resulting from the separation of share ownership and control, however, this new model, which I call the power model, focuses upon the political nature of decision making in the large corporation, which exists regardless of the identity of the entrepreneur.
Introduction, Joel Seligman
Introduction, Joel Seligman
University of Michigan Journal of Law Reform
Introduction for the 1988 Journal of Law Reform Symposium: Issues in Corporate Governance.
The Promise Of State Takeover Statutes, Richard A. Booth
The Promise Of State Takeover Statutes, Richard A. Booth
Michigan Law Review
The purpose of this article is, first, to describe the problems associated with two-tier tender offers and the closely related, and perhaps still more coercive, partial tender offer. Second, the article will address the natural question why such offers have not already been banned, suggesting a better view of what coercion means in the context of a tender offer. Third, the article will offer a management-oriented view of coercion, explaining the legitimate interests of managers (and other groups) in resisting takeovers, as well as how greenmail and poison pills, though subject to abuse, can be used quite properly to combat …
Should General Utilities Be Reinstated To Provide Partial Integration Of Corporate And Personal Income—Is Half A Loaf Better Than None?, Douglas A. Kahn
Should General Utilities Be Reinstated To Provide Partial Integration Of Corporate And Personal Income—Is Half A Loaf Better Than None?, Douglas A. Kahn
Articles
The General Utilities doctrine is the name given to the now largely defunct tax rule that a corporation does not recognize a gain or a loss on making a liquidating or nonliquidating distribution of an appreciated or depreciated asset to its shareholders. The roots of the doctrine, can be traced to a regulation promulgated in 1919 that denied realization of gain or loss to a corporation when making a liquidating distribution of an asset in kind. No regulatory provision existed which specified the extent to which realization would or would not be triggered by a nonliquidating distribution such as a …
Japanese-Style Worker Participation And United States Labor Law, William S. Rutchow
Japanese-Style Worker Participation And United States Labor Law, William S. Rutchow
Michigan Journal of International Law
This note will evaluate the current legal status of Japanese-style worker participation programs under the NLRA. First, it analyzes relevant sections of the NLRA and their interpretation by the Board and the courts. Second, the note describes various types of Japanese worker participation programs, and suggests how these programs can be legally implemented under current American labor law. Third, the note considers standards the Supreme Court may adopt to test the legality of worker participation programs in the future. Finally, this note recommends that the Supreme Court uphold those participation programs which are freely chosen by employees.