Law Commons^™

Team Production Revisited, William W. Bratton

Vanderbilt Law Review

This Article reconsiders Margaret Blair and Lynn Stout’s team production model of corporate law, offering a favorable evaluation. The model explains both the legal corporate entity and corporate governance institutions in microeconomic terms as the means to the end of encouraging investment, situating corporations within markets and subject to market constraints but simultaneously insisting that productive success requires that corporations remain independent of markets. The model also integrates the inherited framework of corporate law into an economically derived model of production, constructing a microeconomic description of large enterprises firmly rooted in corporate doctrine but neither focused on nor limited by …

Addressing The Auditor Independence Puzzle: Regulatory Models And Proposal For Reform, Martin Gelter, Aurelio Gurrea-Martinez

Vanderbilt Journal of Transnational Law

Auditors play a major role in corporate governance and capital markets. Ex ante, auditors facilitate firms' access to finance by fostering trust among public investors. Ex post, auditors can prevent misbehavior and prevent financial fraud by corporate insiders. In order to fulfill these goals, however, in addition to having the adequate knowledge and expertise, auditors must perform their functions in an independent manner. Unfortunately, auditors are often subject to conflicts of interest, for example, resulting from the provision of nonaudit services but also because of the mere fact of being hired and paid by the audited company. Therefore, even if …

The Conundrum Of Common Ownership, Jennifer G. Hill

Vanderbilt Journal of Transnational Law

The common ownership debate has become one of the most contentious issues in corporate law today. This debate is a by-product of major changes to capital market ownership structure, which have triggered concerns about the rise of institutional investors, the growth of index investing, and the rapid concentration of ownership in major international financial markets. The common ownership theory focuses on concerns about the incentives of large financial institutions holding widely diversified portfolios of shares in competing companies within a particular economic sector. Proponents of the common ownership theory argue that, even where institutional investors have relatively small ownership stakes, …

The Law And Practice Of Shareholder Inspection Rights: A Comparative Analysis Of China And The United States, Robin H. Huang, Randall S. Thomas

Vanderbilt Journal of Transnational Law

Shareholder inspection rights allow a shareholder to access the relevant documents of the company in which they hold an interest, so as to address the problem of information asymmetry and reduce the agency costs inherent in the corporate structure. While Chinese corporate governance and American corporate governance face different sets of agency cost problems, this Article shows that shareholder inspection rights play an important role in both China and the United States. On the books, while shareholder inspection rights in both countries are broadly similar, there are some important differences on issues such as the proper purpose requirement. The empirical …

Singapore's Puzzling Embrace Of Shareholder Stewardship: A Successful Secret, Dan W. Puchniak, Samantha S. Tang

Vanderbilt Journal of Transnational Law

In the wake of the 2008 Global Financial Crisis (GFC), the United Kingdom created the first stewardship code, which was designed to transform its rationally passive institutional investors into actively engaged shareholders. In the UK corporate governance context, this idea made sense. Institutional investors collectively own a sizable majority of the shares in most of the United Kingdom's listed companies. In turn, if the UK stewardship code could incentivize them to effectively monitor management to act as "good shareholder stewards"--the managerial short-termism and excessive risk-taking, which were identified as contributors to the GFC, could be avoided.

The United Kingdom's idea …

Diversity Of Shareholder Stewardship In Asia: Faux Convergence, Gen Goto, Alan K. Koh, Dan W. Puchniak

Vanderbilt Journal of Transnational Law

Since the UK adopted the world's first stewardship code in 2010, stewardship codes have proliferated across Asia. Given the UK Code's prominence, it is tempting to assume that every other stewardship code performs the same function as the UK Code. This assumption belies the truth: all these codes--regardless of whether they have in fact drawn inspiration from the UK Code--have taken different trajectories due to each adopting its jurisdiction's distinctive institutional and legal context.

Using empirical evidence and in-depth case studies of stewardship in Japan and Singapore, this Article reveals how any reception of United Kingdom-style stewardship concepts is only …

Mixed Ownership Reform And Corporate Governance In China's State-Owned Enterprises, Jiangyu Wang, Tan Cheng-Han

Vanderbilt Journal of Transnational Law

This Article provides an early assessment of the impact on corporate governance of the most recent wave of reform of China's state-owned enterprises (SOEs) announced by the CCP in 2013, officially known as the mixed-ownership reform (MOR). It offers a comprehensive and detailed account of the background, policy and regulatory frameworks, and rationale of the MOR in light of the history of ownership reform in China. It also conducts empirical studies of the change in ownership and board composition in over 30 SOEs which have recently completed their MOR experiments, as well as several case studies. It observes that MOR's …

The Crisis In Corporate Governance: 2002 Style, Robert W. Hamilton

Maine Law Review

The period from November 1, 2001 to October 1, 2002 has been an astonishing period for corporate governance in many respects. It began with the completely unexpected collapse of Enron Corporation on November 1, 2001, followed almost immediately thereafter by widely publicized downward profit restatements and bankruptcy filings by a significant number of telecommunication companies. Since November 1, 2001, there have been numerous public reports of fraud, misconduct, and scandals by directors of other well-known corporations such as Lucent Technologies, Kmart, Merck & Co., and Rite Aid Corporation. There also have been disclosures of many instances in which corporate officers …

China's "Corporatization Without Privatization" And The Late Nineteenth Century Roots Of A Stubborn Path Dependency, Nicholas C. Howson

Vanderbilt Journal of Transnational Law

This Article analyzes the contemporary program of "corporatization without privatization" in the People's Republic of China (PRC) directed at China's traditional state-owned enterprises (SOEs) through a consideration of long ago precursor enterprise establishments--starting from the last Chinese imperial dynasty's creation of "government-promoted/supervised, merchant-financed/operated" (guandu shangban) firms in the latter part of the nineteenth century. While analysts are tempted to see the PRC corporations with listings on international exchanges that dominate the global economy and capital markets as expressions of "convergence," this Article argues that such firms in fact show deeply embedded aspects of path dependency unique to the Chinese context …

Commitment And Entrenchment In Corporate Governance, K.J. Martijn Cremers, Saura Masconale, Simone M. Sepe

Northwestern University Law Review

Over the past twenty years, a growing number of empirical studies have provided evidence that governance arrangements protecting incumbents from removal promote managerial entrenchment, reducing firm value. As a result of these studies, “good” corporate governance is widely understood today as being about stronger shareholder rights.

This Article rebuts this view, presenting new empirical evidence that challenges the results of prior studies and developing a novel theoretical account of what really matters in corporate governance. Employing a unique dataset that spans from 1978 to 2008, we document that protective arrangements that require shareholder approval—such as staggered boards and supermajority requirements …

Open Sesame: The Myth Of Alibaba's Extreme Corporate Governance And Control, Yu-Hsin Lin, Thomas Mehaffy

Brooklyn Journal of Corporate, Financial & Commercial Law

In September 2014, Alibaba Group Holding Limited (Alibaba) successfully launched a $25 billion initial public offering (IPO), the largest IPO ever, on New York Stock Exchange. Alibaba’s IPO success witnessed a wave among Chinese Internet companies to raise capital in U.S capital markets. A significant number of these companies have employed a novel, but poorly understood corporate ownership and control mechanism—the variable interest entity (VIE) structure and/or the disproportional control structure. The VIE structure was created in response to the Chinese restriction on foreign investments; however, it carries the risk of being declared illegal under Chinese law. The disproportional control …

Balance And Team Production, Kelli A. Alces

Seattle University Law Review

For decades, those holding the shareholder primacy view that the purpose of a corporation is to earn a profit for its shareholders have been debating with those who believe that corporations exist to serve broader societal interests. Adolph Berle and Merrick Dodd began the conversation over eighty years ago, and it continues today, with voices at various places along a spectrum of possible corporate purposes participating. Unfortunately, over time, the various sides of the debate have begun to talk past each other rather than engage with each other and have lost sight of whatever common ground they may be able …

The Long Road To Reformulating The Understanding Of Directors' Duties: Legalizing Team Production Theory?, Thomas Clarke

Seattle University Law Review

In this Article, the historical evolution of corporate governance is considered, highlighting the different eras of governance, the dominant theoretical and practical paradigms, and the reformulation of paradigms and counter paradigms. Two alternative and sharply contrasting theorizations, one collective and collaborative (the work of Berle and Means), the other individualistic and contractual (agency theory and shareholder value) are focused upon. The explanatory potential of Blair and Stout’s team production theory is elaborated, along with its conception of the complexity of business enterprise, with a mediating hierarch (the board of directors) securing a balance between the interests of different stakeholders. The …

Agreement In Principle: A Compromise For Activist Shareholders From The Uk Stewardship Code, David W. Roberts

Vanderbilt Journal of Transnational Law

Equity ownership in the United States and Europe is now highly concentrated in the hands of institutional investors, which gives rise to new problems of agency and corporate governance. These large investment intermediaries, such as mutual funds, specialize in maximizing beneficial owner value based on short-term performance benchmarks but lack the expertise and incentive to actively engage corporate boards on business strategy and governance matters. Instead, institutional investors are "rationally reticent," meaning that they are willing to respond to governance proposals but not to propose them. Activist shareholders may offer an endogenous solution to address "latent activism" in institutional intermediaries …

A Comparative Study Of Monitoring Of Management In German And U.S. Corporations After Sarbanes-Oxley: Where Are The German Enrons, Worldcoms, And Tycos?, Florian Stamm

Georgia Journal of International & Comparative Law

No abstract provided.

Stewardship In The Interests Of Systemic Stakeholders: Re-Conceptualizing The Means And Ends Of Anglo-American Corporate Governance In The Wake Of The Global Financial Crisis, Zhong Xing Tan

Journal of Business & Technology Law

No abstract provided.

Shareholder Voting As Veto, Michael S. Kang

Indiana Law Journal

No abstract provided.

Toward A Public Enforcement Model For Directors' Duty Of Oversight, Renee M. Jones, Michelle Welsh

Vanderbilt Journal of Transnational Law

This Article proposes a public enforcement model for the fiduciary duties of corporate directors. Under the dominant model of corporate governance, the principal function of the board of directors is to oversee the conduct of senior corporate officials. When directors fail to provide proper oversight, the consequences can be severe for shareholders, creditors, employees, and society at large. Despite general agreement on the importance of director oversight, courts have yet to develop a coherent doctrine governing director liability for the breach of oversight duties. In Delaware, the dominant state for U.S. corporate law, the courts tout the importance of board …

Private Actors And Public Governance Beyond The State: The Multinational Corporation, The Financial Stability Board, And The Global Governance Order, Larry Cata Backer

Indiana Journal of Global Legal Studies

Transnational corporations are at the center of extraordinary and complex governance systems that are developing outside the state and international public organizations and beyond the conventionally legitimating framework of the forms of domestic or international hard law. Though these systems are sometimes recognized as autonomous and authoritative among its members, they are neither isolated from each other nor from the states with which they come into contact. Together these systems may begin to suggest a new template for networked governance beyond the state, but one in which public and private actors are integrated stakeholders. This provides the source of the …

The Changing Face Of Transnational Business Governance: Private Corporate Law Liability And Accountability Of Transnational Groups In A Post-Financial Crisis World, Peter Muchlinski

Indiana Journal of Global Legal Studies

This article seeks to critically assess the recently dominant financialized model of corporate law and governance and its contribution to the creation of the "asocial corporation" geared only to the enhancement of shareholder value. This article places corporate law in a wider context of national and international legal developments that, together, create a framework for the financialization of transnational corporate activity. This article shows that a new approach to transnational corporate governance is emerging from a number of sources. These predate the crisis but have been given impetus by it. In particular, three important phenomena are examined: the rise of …

Foreword: In Berle’S Footsteps, Charles R.T. O'Kelley

Seattle University Law Review

On the weekend of November 6–8, 2009, scholars from around the world gathered in Seattle for a symposium—In Berle’s Footsteps—celebrating the launch of the Adolf A. Berle, Jr. Center on Corporations, Law and Society. As founding director of the Berle Center, I described our undertaking: “It is with a profound sense of obligation to the legacy that has been entrusted to my care, that I announce the launching of the Adolf A. Berle, Jr. Center on Corporations, Law and Society. It is a privilege to follow in Berle’s footsteps.”

Opening Remarks, Chancellor William B. Chandler Iii

Seattle University Law Review

Law is, in many ways, a backwards-looking field. We litigate over facts that have already occurred, challenge deals that have already been signed, and apply rules of decision based on previously-established precedent or statutes already enacted. To the extent that this Center and the symposium reflect on Berle’s work, they too are an exercise in looking back. Indeed, some might say the establishment of a Center named in Berle’s honor is a monument to the past.

The Birth Of Corporate Governance, Harwell Wells

Seattle University Law Review

Part I of this Article briefly examines the concept of “corporate governance” and argues for dating the concept’s origins to the debates of the 1920s. Part II then moves on to examine early scholarly and popular discussions of the separation of ownership and control. After surveying the historical developments that produced the recognizably modern corporate economy around the turn of the century, it examines early scholarly and popular discussions of the separation of ownership and control, focusing on three major thinkers, Louis D. Brandeis, Walter Lippmann, and Thorstein Veblen. It argues that, while each of these authors examined the separation …

Corporate Power In The Public Eye: Reassessing The Implications Of Berle’S Public Consensus Theory, Marc T. Moore, Antoine Rebérioux

Seattle University Law Review

We analyze Berle’s overall corporate governance project in accordance with what we see as its four core sub-themes: (A) the limitations of external market forces as a constraint on managerial decision-making power; (B) the desirability of internal (corporate) over external (market) actors in allocating corporate capital; (C) civil society and the public consensus as a continuous informal check on managerial decision-making power; and (D) shareholder democracy (as opposed to shareholder primacy or shareholder wealth maximization) as a socially instrumental institution. We seek to debunk the popular misconception that Berle’s early work was a defense of the orthodox shareholder primacy paradigm …

Dutch Treat: Netherlands Judiciary Only Goes Halfway Towards Adopting Delaware Trilogy In Takeover Context, Danielle Quinn

Vanderbilt Journal of Transnational Law

This Note examines Dutch takeover law in light of the current inter-EU competition to attract entities to individual Member States. The recent hostile takeover of the Dutch bank, ABN AMRO, provides an excellent example of the Netherlands' opportunity to use its judiciary to solidify its reputation as a competitive, business-friendly jurisdiction. The Dutch Enterprise Chamber can aid the Netherlands in becoming the preeminent EU country--a similar status to Delaware's Chancery Court in the United States. Although the Enterprise Chamber attempted to introduce Delaware law in ABN AMRO, it unfortunately misapplied the law. As a result, the Dutch Supreme Court had …

Corporate Governance Changes In The Two Largest Economies: What's Happening In The U.S. And Japan?, Makoto Toda, William Mccarty

Syracuse Journal of International Law and Commerce

Lawmakers in the world's two largest economies, the United States and Japan, have enacted legislation to require firms to at least consider altering their governance structure. In the United States, the 2002 Sarbanes-Oxley Act (SOX) and Securities and Exchange Commission (SEC) rules have led to revised governance structures at the 30 Dow Jones (DJ) companies. The governance changes affect the composition, size and functions of the board of directors and its relations with the chief executive officer (CEO). A 2003 change in the Japanese Commercial Code provided firms with three governance options, including a "Company with Committees" system similar to …

Nationbuilding 101: Reductionism In Property, Liberty, And Corporate Governance, O. L. Reed

Vanderbilt Journal of Transnational Law

In this Article, Professor Reed re-examines the importance of property as a formal legal institution. He continues by arguing that central to creating property is the right to exclude others from resources acquired without force, theft, or fraud. In countries where this right has been firmly established, per capita income far exceeds that of countries lacking a strong right to exclude. Professor Reed then asserts the importance to nation builders of appreciating the virtual semantic equivalence of the terms "property" and "liberty." Finally, he argues that both the specific and broad senses of corporate governance can be reduced to property …

Corporate Governance And Sustainable Peace: An Insider's View, Marina N. Whitman

Vanderbilt Journal of Transnational Law

The Author brings her 30 years of experience as a member of numerous corporate boards of directors to bear on the relationship between corporate governance and sustainable peace. In the Author's experience, over the last three decades corporate boards have become more diverse not only in terms of race and gender, but also through a greater focus on international participation. This diversity has led to concern for a broader set of stakeholders and, in many cases, these boards are presently conducting the affairs of their corporations in a more socially-responsible fashion. Despite these gains, however, the Author concedes that recent …

Adapting Corporate Governance For Sustainable Peace, Timothy L. Fort, Cindy A. Schipani

Vanderbilt Journal of Transnational Law

Acts of violence toward multinational corporations have important consequences for the way these companies will need to structure their approach to international business. This Article proposes four contributions that corporations can make to sustainable peace. By incorporating sustainable peace as a business objective, multinational corporations may be able to blend extant corporate governance principles with a goal that can significantly contribute to the reduction of violence in society.

Corporate Governance And Sustainable Peace, Timothy L. Fort, Cindy A. Schipani

Vanderbilt Journal of Transnational Law

The Articles and Commentary in this Symposium are another step in a series of conferences exploring dimensions of business influence on sustainable peace. As is often the case with new intellectual initiatives, each step seems to open new doors of insight and new sets of questions. Other presentations delivered at this conference included discussions of how one could design architectural plans in keeping with company goals, while others focused on the development of compassion, forgiveness, and voice. Still others connected the topic to notions of ethical compliance models, dispute resolution, corporate citizenship, and economic development.

Beyond these notions, of course, …