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Full-Text Articles in Law
A New Urban Front For Shareholder Primacy, Anne Choike
A New Urban Front For Shareholder Primacy, Anne Choike
Michigan Business & Entrepreneurial Law Review
The hundredth anniversary of Dodge v. Ford marks an occasion to reflect upon what, if anything, has changed about shareholder primacy in a century. Seizing this opportunity, in this Article I analyze new local laws and ordinances that promote stakeholder governance and engagement, which seek to protect the interests of non-shareholder constituencies such as workers, the environment, and the communities in which corporations operate, among others. In doing so, I argue that such local laws meaningfully differ from traditional stakeholder protections, most significantly in the way that they weaken managerial accountability to shareholders. The emergence of these city laws challenges …
Golden Parachutes And The Limits Of Shareholder Voting, Albert H. Choi, Andrew C.W. Lund, Robert Schonlau
Golden Parachutes And The Limits Of Shareholder Voting, Albert H. Choi, Andrew C.W. Lund, Robert Schonlau
Articles
With the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, Congress attempted to constrain change-in-control payments (also known as “golden parachutes”) by giving shareholders the right to approve or disapprove such payments on an advisory basis. This Essay is the first to empirically examine the experience with the Say-on-Golden-Parachute (“SOGP”) vote. We find that unlike shareholder votes on proposed mergers, there is a significant amount of variation with respect to votes on golden parachutes. Notwithstanding the variation, however, the SOGP voting regime is likely ineffective in controlling golden parachute (“GP”) compensation. First, proxy advisors seem …
The Games They Will Play: Tax Games, Roadblocks, And Glitches Under The 2017 Tax Legislation, David Kamin, David Gamage, Ari Glogower, Rebecca Kysar, Darien Shanske, Reuven S. Avi-Yonah, Lily Batchelder, J. Clifton Fleming, Daniel Hemel, Mitchell Kane, David Miller, Daniel Shaviro, Manoj Viswanathan
The Games They Will Play: Tax Games, Roadblocks, And Glitches Under The 2017 Tax Legislation, David Kamin, David Gamage, Ari Glogower, Rebecca Kysar, Darien Shanske, Reuven S. Avi-Yonah, Lily Batchelder, J. Clifton Fleming, Daniel Hemel, Mitchell Kane, David Miller, Daniel Shaviro, Manoj Viswanathan
Articles
The 2017 tax legislation brought sweeping changes to the rules for taxing individuals and business, the deductibility of state and local taxes, and the international tax regime. The complex legislation was drafted and passed through a rushed and secretive process intended to limit public comment on one of the most consequential pieces of domestic policy enacted in recent history. This Article is an effort to supply the analysis and deliberation that should have accompanied the bill’s consideration and passage, and describes key problem areas in the new legislation. Many of the new changes fundamentally undermine the integrity of the tax …
Private Enforcement Of Company Law And Securities Regulation In Korea, Hwa-Jin Kim
Private Enforcement Of Company Law And Securities Regulation In Korea, Hwa-Jin Kim
Book Chapters
This chapter offers a brief overview of the private enforcement of corporate law and securities regulation in Korea, with particular reference to the current legislative efforts in the Korean National Assembly and recent court cases. This chapter also talks about Korea’s ill-fated and misguided adoption of the fraud-on-the-market theory in securities fraud litigation.
Lessons From Institutional Shareholder Services: Governing Benefit Corporations' Third-Party Standard, Tammi S. Etheridge
Lessons From Institutional Shareholder Services: Governing Benefit Corporations' Third-Party Standard, Tammi S. Etheridge
Michigan Business & Entrepreneurial Law Review
Almost one hundred years ago, Henry Ford, as CEO of the Ford Motor Company, announced a plan to cease payment of special dividends to shareholders. Instead, the company would reinvest its profits to employ more workers and build more factories. Investing in new workers and factories would cut the cost of cars and make them affordable to more people. Ford publicly declared that his “ambition [was] to employ still more men, to spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their homes. To do this we are putting …
Enforceability Of Mandatory Arbitration Clauses For Shareholder-Corporation Disputes, Garry D. Hartlieb
Enforceability Of Mandatory Arbitration Clauses For Shareholder-Corporation Disputes, Garry D. Hartlieb
Michigan Business & Entrepreneurial Law Review
Investor litigation is an increasingly vexatious field of law. Nearly every time a significant change of control or corporate ownership occurs, plaintiffs’ attorneys file standardized complaints to set in motion class action suits. Ultimately, the settlements shareholders receive fail to achieve the practical effects that parties on both sides desire. Shareholders may receive pennies on the dollar of what they allege was lost by corporate wrongdoing, and, in some cases, shareholders may not receive monetary recovery as the settlement requires only that the corporation to make changes to its governing documents. These suits distract directors and management from the core …
A Very Quiet Revolution: A Primer On Securities Crowdfunding And Title Iii Of The Jobs Act, Thaya Brook Knight, Huiwen Leo, Adrian A. Ohmer
A Very Quiet Revolution: A Primer On Securities Crowdfunding And Title Iii Of The Jobs Act, Thaya Brook Knight, Huiwen Leo, Adrian A. Ohmer
Michigan Business & Entrepreneurial Law Review
This essay introduces the complex regulatory regime that governs the public sale of all securities, no matter how small the offeror. It is intended as a rudimentary roadmap for the start-up or its counsel and will, hopefully, help to illuminate the traps for the unwary while providing an overview of the regulatory universe in which securities crowdfunding will operate.
Populist Retribution And International Competition In Financial Services Regulation, Adam C. Pritchard
Populist Retribution And International Competition In Financial Services Regulation, Adam C. Pritchard
Articles
The pattern of regulatory reform in financial services regulation follows a predictable pattern in democratic states. A hyperactive market generates a bubble, the bubble deflates, and much financial pain ensues for those individuals who bought at the top of the market. The financial mess brings the scrutiny of politicians, who vow "Never again!" A political battle ensues, with representatives of the financial services industry fighting a rearguard action to preserve its prerogatives amidst cries for the bankers' scalps. Regulations, carefully crafted to win the last war, are promulgated. Memories fade of the foolish enthusiasm that fed the last bubble. Slowly, …
Securities Class Actions Move North: A Doctrinal And Empirical Analysis Of Securities Class Actions In Canada, Adam C. Pritchard, Janis P. Sarra
Securities Class Actions Move North: A Doctrinal And Empirical Analysis Of Securities Class Actions In Canada, Adam C. Pritchard, Janis P. Sarra
Articles
The article explores securities class actions involving Canadian issuers since the provinces added secondary market class action provisions to their securities legislation. It examines the development of civil liability provisions, and class proceedings legislation and their effect on one another. Through analyses of the substance and framework of the statutory provisions, the article presents an empirical and comparative examination of cases involving Canadian issuers in both Canada and the United States. In addition, it explores how both the availability and pricing of director and officer insurance have been affected by the potential for secondary market class action liability. The article …
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 …
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 …
Prevention Of Double Deductions Of A Single Loss: Solutions In Search Of A Problem, Douglas A. Kahn, Jeffrey H. Kahn
Prevention Of Double Deductions Of A Single Loss: Solutions In Search Of A Problem, Douglas A. Kahn, Jeffrey H. Kahn
Articles
In the current tax system, a corporation is treated as a separate taxable entity. This tax system is sometimes referred to as an entity tax or a double tax system. Since a corporation is a separate and distinct entity from its owners, the shareholders, the default rule is that transfers between them are treated as realization events. Without a specific Internal Revenue Code (Code) provision providing otherwise, such transactions will also require the parties to recognize the realized gain or loss. Congress has enacted several nonrecognition corporate provisions when forcing the recognition of income could prevent changes to the form …
The Sec At 70: Time For Retirement?, Adam C. Pritchard
The Sec At 70: Time For Retirement?, Adam C. Pritchard
Articles
The Article proceeds as follows. Part I explains the pathologies of the SEC and explores the relation between those pathologies and the SEC's status as an independent agency. Part II then outlines an alternative regulatory structure primarily situated within the executive branch. I also argue that such a relocation of authority would enhance regulatory effectiveness while simultaneously reducing the cost of excessive regulation. The Article concludes with some thoughts about the viability of my proposal.
The Pitfalls Of International Integration: A Comment On The Bush Proposal And Its Aftermath, Reuven S. Avi-Yonah
The Pitfalls Of International Integration: A Comment On The Bush Proposal And Its Aftermath, Reuven S. Avi-Yonah
Articles
In January 2003, the Bush Administration proposed a new system for taxing corporate dividends, under which domestic shareholders in U.S. corporations would not be taxed on dividends they received, provided the corporation distributed these dividends out of after-tax earnings (the “Bush Proposal”). The Bush Proposal was introduced in Congress on February 27, 2003. Ultimately, however, Congress balked at enacting full-?edged dividend exemption. Instead, in the Jobs and Growth Tax Relief Reconciliation Act of 2003 (“JGTRRA”) as enacted on May 28, 2003, a lower rate of 15% was adopted for dividends paid by domestic and certain foreign corporations,1 and the capital …
The Sec At 70: Time For Retirement?, Adam C. Pritchard
The Sec At 70: Time For Retirement?, Adam C. Pritchard
Articles
As one grows older, birthdays gradually shift from being celebratory events to more reflective occasions. One's 40th birthday is commemorated rather differently from one's 2lst, which is, in turn, celebrated quite differently from one's first. After a certain point, the individual birthdays become less important and it is the milestone years to whch we pay particular attention. Sadly for entities like the Securities and Exchange Commission, it is only the milestone years (the ones ending in five or zero, for some reason), that draw any attention at all. No one held a conference to celebrate the SEC's 67th anniversary. Clearly …
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 …
Markets As Monitors: A Proposal To Replace Class Actions With Exchanges As Securities Fraud Enforcers, Adam C. Pritchard
Markets As Monitors: A Proposal To Replace Class Actions With Exchanges As Securities Fraud Enforcers, Adam C. Pritchard
Articles
Fraud in the securities markets has been a focus of legislative reform in recent years. Corporations-especially those in the high-technology industry-have complained that they are being unfairly targeted by plaintiffs' lawyers in class action securities fraud lawsuits. The corporations' complaints led to the Private Securities Litigation Reform Act of 1995 ("Reform Act"). The Reform Act attempted to reduce meritless litigation against corporate issuers by erecting a series of procedural barriers to the filing of securities class actions. Plaintiffs' attorneys warned that the Reform Act and the resulting decrease in securities class actions would leave corporate fraud unchecked and deprive defrauded …
The Securities Litigation Uniform Standards Act Of 1998: The Sun Sets On California's Blue Sky Laws, David M. Lavine, Adam C. Pritchard
The Securities Litigation Uniform Standards Act Of 1998: The Sun Sets On California's Blue Sky Laws, David M. Lavine, Adam C. Pritchard
Articles
It is often said that California sets the pace for changes in America's tastes. Trends established in California often find their way into the heartland, having a profound effect on our nation's cultural scene. Nouvelle cuisine, the dialect of the Valley Girl and rollerblading all have their genesis on the West Coast. The most recent trend to emerge from California, instead of catching on in the rest of the country, has been stopped dead in its tracks by a legislative rebuke from Washington, D.C. California's latest, albeit short-lived, contribution to the nation was a migration of securities fraud class actions …
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 …
Withdrawal And Expulsion In Germany: A Comparative Perspective On The "Close Corporation Problem", Hugh T. Scogin Jr.
Withdrawal And Expulsion In Germany: A Comparative Perspective On The "Close Corporation Problem", Hugh T. Scogin Jr.
Michigan Journal of International Law
This article will examine the German legal system's experience with fashioning remedies for the "close corporation problem" and the underlying concepts that have shaped these remedies. Part I will trace the growth of the doctrines of withdrawal and expulsion in the context of Germany's troubled history. Part II will compare German and U.S. approaches on both practical and conceptual levels. On one level, the focus of the article is narrow. It deals with specific, technical solutions to only the most extreme examples of the close corporation problem. Such cases are not frequently litigated. Their doctrines do, however, constitute default rules …
A Rule Unvanquished: The New Value Exception To The Absolute Priority Rule, Clifford S. Harris
A Rule Unvanquished: The New Value Exception To The Absolute Priority Rule, Clifford S. Harris
Michigan Law Review
This Note examines whether the new value exception remains part of the revised Bankruptcy Code. Part I discusses the background of the new value exception. Part II traces the development of the conflict concerning the survival of the new value exception subsequent to the adoption of the Code. It then discusses the Supreme Court's opinions in Mid/antic National Bank v. New Jersey Department of Environmental Protection and its progeny, which established the methodology for determining the impact of the revised Bankruptcy Code on preexisting bankruptcy law. Based on an analysis of the Midlantic doctrine, Part II concludes that Congress did …
Absolute Priority And New Value, James J. White
Absolute Priority And New Value, James J. White
Articles
This paper is based on a lecture given on December 6, 1990 ast the Second Annual Robert E. Krinock Lecture. The absolute priority rule is a specific application of the broader doctrine that reorganization plans must be "fair and equitable." Both have their origins in the railroad reorganization cases of the early 20th century. The general doctrine is now codified in section 1129(b)(2) of the Bankruptcy Code and the rule is codified in subsection 1129(b)(2)(B)(ii) which provides that the debtor must pay a nonconsenting class of unsecured creditors in full or "the holder of any claim or interest that is …
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 …
Missing The Point About State Takeover Statutes, Lyman Johnson, David Millon
Missing The Point About State Takeover Statutes, Lyman Johnson, David Millon
Michigan Law Review
In a recent article in this journal, Professor Richard Booth offers an extended appraisal of state legislation regulating hostile corporate takeovers. We think Booth's article requires comment for two reasons. The first reason is perhaps more obvious, though less interesting from our point of view. To be blunt, "unfairness" to shareholders due to coercion arising out of two-tier or partial offers simply does not occur with enough frequency to warrant a sixty-seven-page article in a major law review. According to recent congressional testimony by SEC Commissioner Cox, from 1982 to 1986 the number of two-tier offers declined from 18% of …
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 …
The Bildisco Case And The Congressional Response, James J. White
The Bildisco Case And The Congressional Response, James J. White
Articles
Section 365 of the Bankruptcy Reform Act authorizes one in bankruptcy to "assume or reject any executory contract ...of the debtor." The most frequent use of the section arises when a lessee goes into Chapter 11 and decides either to reject its real estate lease with its lessor or, if the lease is at a favorable rental rate, to assume it and assign it to another. A less frequent but more controversial use of section 365 is to reject one's collective bargaining agreement with his employees.
Corporations-Class Actions Under Section 16(B) Of The Securities Exchange Act Of 1934-Federal Rule 23, Richard. J. Archer
Corporations-Class Actions Under Section 16(B) Of The Securities Exchange Act Of 1934-Federal Rule 23, Richard. J. Archer
Michigan Law Review
Pursuant to section 16 (b) of the Securities Exchange Act of 1934 an action was commenced by a shareholder to recover for the corporation profits realized by another shareholder through "short swing" transactions in securities of the corporation, the estimated profits being $50,770. Plaintiff's attorney filed an affidavit stating the reasons why recovery of the full amount was doubtful and made application for , leave to settle and compromise for $5,000. The corporation's attorney agreed to this proposal. Held, the merits of the compromise cannot be considered until in conformance with Rule 23 ( c), actual notice of the …
A Comparative Study Of The Laws Of The Philippine Islands And Of The United States Of America Applicable To Private Corporations, Emilio M. Javier
A Comparative Study Of The Laws Of The Philippine Islands And Of The United States Of America Applicable To Private Corporations, Emilio M. Javier
SJD Dissertations
The main objective of the present treatise is to expound the similarities and dissimilarities of the laws of the Philippine Islands and of the United States of America applicable to private corporations. Act 1459, otherwise known as the Philippine Corporation Law, as amended and as radically modified recently, in many or its important provisions, by Act 3518, is made the basis of discussion from the Philippine view point. All the decisions of the Supreme Court of the Islands interpreting the provisions of the law, and which the author considers pertinent, are also discussed herein. Due to the fact that each …
Stock Dividends As Income, Robert E. More
Stock Dividends As Income, Robert E. More
Michigan Law Review
In the case of Towne v. Eisner, the United States Supreme Court has recently held that under the Income Tax Law of 1913, the stock dividends received by a shareholder during the year 1914 could not be taxed upon their full par value, where the corporate surplus thus distributed all accrued prior to January I, 1913. The Treasury Department subsequently announced that the decision is not applicable to the Income Tax Law of 1916.1 It is the purpose of this article to review the case of Towvne v. Eisner,2 and then to discuss the soundness of the position taken by …