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Locking In Capital: What Corporate Law Achieved For Business Organizers In The Nineteenth Century, Margaret M. Blair
Locking In Capital: What Corporate Law Achieved For Business Organizers In The Nineteenth Century, Margaret M. Blair
Vanderbilt Law School Faculty Publications
This Article argues that corporate status became popular in the nineteenth century as a way to organize production because of the unique manner in which incorporation permitted organizers to lock in financial capital. Unlike participants in a partnership, shareholders in an incorporated enterprise could not extract capital from the firm without explicit approval of a board of directors charged with representing the interests of the incorporated entity, even when that interest might sometimes conflict with the interests of individual shareholders. While this ability to lock in capital has occasionally led to abuses, the ability to commit capital generally helped promote …
Should Directors Reduce Executive Pay?, Randall Thomas
Should Directors Reduce Executive Pay?, Randall Thomas
Vanderbilt Law School Faculty Publications
This paper examines internal pay disparities in American public corporations and argues that wide gaps between the top and bottom of the pay scale can, in certain circumstances, directly and adversely affect firm value, that corporate boards should be informed about these effects, and that they should, in some cases, reduce internal pay differentials to address them. In support of this thesis, it analyzes numerous empirical studies that have shown that wide disparities in corporate pay scales can adversely affect firm value. These studies demonstrate that, at many types of organizations, as internal pay differentials grow, employees and lower level …