Law Commons^™

A Tax Response To The Executive Pay Problem, David I. Walker

Faculty Scholarship

Many observers believe that that the public company executive labor market is deficient and results in systematically excessive compensation. This Article accepts that premise and considers potential regulatory responses. Specifically, this Article proposes and analyzes a two-pronged tax response to the problem of excessive executive pay – the imposition of a surtax on executive pay in excess of a threshold combined with investor tax relief. These two prongs respond to the chief concerns raised by excessive executive pay. The imposition of a surtax would reduce the after-tax income of executives, which would directly address the unfairness of excessive pay and …

An Industry-Specific Vat In Michigan - Objective Valuation In The Retail Gasoline Trade, Richard Thompson Ainsworth

Faculty Scholarship

New York adopted an industry-specific value added tax (VAT) to solve problems with virtual intermediaries (room remarketers) under its hotel accommodations tax. The New York VAT resembles the VAT used in the European Union (EU). It is a credit-invoice VAT that subjectively values supplies.

Michigan has also adopted an industry-specific credit-invoice VAT, however the targeted industry is the retail gasoline trade. The valuation method is objective, rather than subjective. In valuing supplies objectively rather than subjectively, the Michigan VAT resembles the exception provisions that are found in most VATs around the globe. Objective valuations are used in VATs when dealing …

An Orderly Liquidation Authority Is Not The Solution To Too-Big-To-Fail, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

Technology Solves Mtic - Vln, Rtvat, D-Vat Certification, Richard Thompson Ainsworth

Faculty Scholarship

Technology solves missing trader intra-community (MTIC) fraud. This should come as no surprise. MTIC is technology-intensive fraud – its solution should also be technology-intensive.

MTIC is getting to be an out-dated term. Now that missing trader fraud has move into services it is no longer confined to intra-community trade, and the older acronym should be adjusted to MTIC/MTEC fraud (with MTEC standing for missing trader extra-community).

MTIC/MTEC fraud is fully digitized (the supply, the movement of the supply, and the funding). The consequences should be clear. MTIC/MTEC must be prevented (before the fact), not pursued (after the fact). In the …

Transfer Pricing & Business Restructurings: Intangibles, Synergies, And Shelters, Richard Thompson Ainsworth, Andrew Shact

Faculty Scholarship

Transfer pricing in business restructuring is attracting global attention. In the past two years two key policy-making groups have released three substantive documents on this topic. The Organization of Economic Cooperation and Development (OECD) issued two position statements while the Joint Committee on Taxation (JCT) issued one. While restructurings are a very common commercial practice, until recently it has been uncommon to apply transfer pricing criteria when examining them in detail.

Essentially, the OECD has overlooked that a unique and valuable intangible is created during the restructuring process. By not acknowledging that this intangible in the mix, the OECD fails …

New York Adopts A Vat, Richard Thompson Ainsworth

Faculty Scholarship

On August 13, 2010 the New York State Department of Taxation and Finance, Office of Tax Policy Analysis, Taxpayer Guidance Division released Amendments Affecting the Application of Sales Tax to Rent Received for Hotel Occupancy by Room Remarketers. The legislative revision it considers (Chapter 57 of the Laws of 2010) was effective September 1, 2010. The changes brought in by this Chapter effectively converted New York’s Hotel Room Occupancy Tax from a single-stage retail sales tax to multi-stage European-style VAT. This paper considers the New York VAT in hotel accommodations in three sections. The first defines a European-style credit-invoice VAT …

Brown Shoe Versus The Horizontal Merger Guidelines, Keith N. Hylton

Faculty Scholarship

The new Horizontal Merger Guidelines, if treated by courts as a source of law, would reduce the discretion traditionally exercised by courts in defining relevant markets and market power in merger cases. This is an undesirable shift in the balance of power because courts have used the market power inquiry stage of merger analysis as a general checkpoint or weigh station for evaluating factors relevant to the welfare effects of a merger.

Contracts As Organizations, D. Gordon Smith, Brayden G. King

Faculty Scholarship

Empirical studies of contracts have become more common over the past decade, but the range of questions addressed by these studies is narrow, inspired primarily by economic theories that focus on the role of contracts in mitigating ex post opportunism. We contend that these economic theories do not adequately explain many commonly observed features of contracts, and we offer four organizational theories to supplement-and in some instances, perhaps, challenge-the dominant economic accounts. The purpose of this Article is threefold: first, to describe how theoretical perspectives on contracting have motivated empirical work on contracts; second, to highlight the dominant role of …

Justifying Board Diversity, James A. Fanto, Lawrence M. Solan, John M. Darley

Faculty Scholarship

No abstract provided.

Will Cutting The Payroll Tax Increase Jobs? (Empirical Evidence From The Eu Vat), Richard Thompson Ainsworth

Faculty Scholarship

Red Ink Rising, the Peterson–Pew Commission on Budget Reform’s report presents the country with a fiscal/employment dilemma – Congress must act immediately to stem the federal debt, but it must move carefully lest it harm employment in the fragile economy. In short, we must act fast and slow – we must decrease the debt and increase employment. This is a difficult task.

The Peterson-Pew dilemma (notably its jobs-creation aspect) was taken to heart by both of the reform commissions that issued reports soon thereafter (National Commission on Fiscal Responsibility and Reform, The Moment of Truth and The Debt Reduction Task …

Vat Fraud: Mtic & Mtec - The Tradable Services Problem, Richard Thompson Ainsworth

Faculty Scholarship

Tradable services – VoIP termination services, mobile minutes, software as a service (SaaS), or almost any service bought or sold in the “cloud” – are a distinct class of taxable supplies. These service-based supplies both resemble and differ fundamentally from goods. They also differ from services that are consumed-on-purchase (consumed services).

Tradable services are designed from the beginning for re-sale. They are hybrid supplies that behave commercially like goods, but have functional attributes that make them hard to distinguish from services generally. When determining the place of supply/ place of taxation for these kinds of supplies, their hybrid character presents …

Deconstructing Corporate Governance: Absolute Director Primacy, René Reich-Graefe

Faculty Scholarship

Microtheoretical models of the corporation which focus on corporate governance attempt to answer two deceptively simple, but fundamentally elusive questions: ‘Who are in control of the corporation?’ and ‘Whose interests ultimately control those in control of the corporation?’ Both questions remain partially unanswered within the models developed to date by corporate theoreticians. This Article proposes a radically new model: 'absolute director primacy.’ Existing microtheoretical models conceive that we only need to—and, indeed, can—determine the controlling interests guiding corporate decisionmaking in order to prove the existence of control over the decisionmaking latitude of corporate boards. The absolute director primacy …

Interdisciplinary Transactional Courses, Eric J. Gouvin, Robert Statchen, Anthony J. Luppino, William Kell

Faculty Scholarship

This Article represents a panel presentation on interdisciplinary work in law school transactional courses. The Authors’ focus is on the Small Business Clinic at Western New England University School of Law. Topics covered are: interdisciplinary work and the classroom, professional liability and competency issues in rendering services through a clinic, culture class issues, ethical dilemmas, delivering professional products to the client, and co-curricular opportunities.

Symposium: Fiduciary Duties In The Closely Held Business 35 Years After Wilkes V. Springside Nursing Home: Foreword, René Reich-Graefe

Faculty Scholarship

On October 15, 2010—exactly fifty-nine years to the day after the opening of the original nursing home operation in 1951 which formed the core business asset of the closely held Springside Nursing Home, Inc. corporation—the Western New England University School of Law and School of Business jointly hosted their 2010 Academic Conference on “Fiduciary Duties in the Closely Held Business 35 Years after Wilkes v. Springside Nursing Home.” As with installments from prior years, the Conference was sponsored by the Western New England University Law and Business Center for Advancing Entrepreneurship. This Article examines the case of Wilkes v. Springside …

Clinicians, Practitioners, And Scribes: Drafting Client Work Product In A Small Business Clinic, Robert Statchen

Faculty Scholarship

The recent and rapid growth of transactional clinics, and more specifically small business clinics (SBCs), mandates that time and attention be given to pedagogical methods within this specialized clinical structure. This Article focuses on the drafting component of an SBC. It is often asserted that legal education does not effectively provide students with business-oriented, practical skills training. At the heart of an SBC, is the necessity to prepare appropriate written client work product. SBCs also provide an excellent opportunity for students to acquire interviewing, researching, drafting, counseling, problem-solving, and other areas of expertise. This Article attempts to provide a process …

Restoring Transparency To Automated Authority, Frank Pasquale

Faculty Scholarship

No abstract provided.

Deconstructing Corporate Governance: Director Primacy Without Principle?, René Reich-Graefe

Faculty Scholarship

If profit-maximizing is not enforced by corporate law, why does it nonetheless happen as a matter of almost overwhelming routine in today’s corporate reality? If indeed, director primacy is absolute and our theoretical models are all reliant on protolegal variables to explain general investor confidence ex-ante-investment despite the lack of director accountability ex-post-investment, then how can director primacy be understood and explained as a principled and, thus, just cor-porate governance structure in the first place? Or is director primacy not only absolute, but also without principle?

This Article provides a roadmap for purposes of answering this inquiry. Part II …

Wilkes V. Springside Nursing Home, Inc.:The Backstory, Eric J. Gouvin

Faculty Scholarship

As it appears in most casebooks, the Wilkes v. Springside Nursing Home, Inc. case tells the story of a falling-out among the shareholders in a closely-held corporation and the resulting freeze-out of one of the owners, Mr. Stanley Wilkes. The opinion indicates that the heart of the dispute arose out of Mr. Wilkes’s refusal to allow the sale of a piece of corporate property (the “Annex” at 793 North Street) to one of the other shareholders, Dr. Quinn, at a discount. In real life, that transaction did indeed cause a significant rift in the shareholders’ relationship, but, as this article …

Recent Developments Concerning Preferred Stockholder Rights Under Delaware Law, Marilyn Blumberg Cane, Joong-Sik Choi, Scott B. Gitterman

Faculty Scholarship

This is a timely article focusing on the conflicting duties owed to preferred and common stockholders. Delaware is the leading corporate law jurisdiction in the United States. Preferred stock is a key component in angel and venture capital transactions. Historically the Delaware courts have accepted as a general principle the proposition that since the preferred rights are contractual in nature, they must be expressly defined in the preferred stock contract in order for the preferred to successfully assert those rights. Accordingly, the directors owe correlative duties to the preferred to the extent that the rights are articulated in the contract. …

The Search For An Unbiased Fiduciary In Corporate Reorganizations, Michelle M. Harner

Faculty Scholarship

When a company experiences financial distress, a control contest often follows. Management fights to remain in control of the company, and shareholders, creditors and others try to influence management’s exercise of that control—or wrest it away. This is not a new phenomenon. The degree of influence now exerted by corporate stakeholders in the distressed context, however, is strikingly different than in the past. Recent headlines highlight that stakeholder control issues are at the forefront of financially-distressed situations large and small. The U.S. government, as creditor, dictated the terms of Chrysler’s and General Motors’ bankruptcies. It also demanded and received preferred …

Mitigating Financial Risk For Small Business Entrepreneurs, Michelle M. Harner

Faculty Scholarship

Financial distress by definition threatens a company’s viability. Entrepreneurial and start-up entities are particularly vulnerable to this threat. Yet, much of the discussion following the recent recession focuses almost exclusively on financial institutions and “too-big-to-fail” entities. This essay re-examines lessons gleaned from the recession in the context of smaller, entrepreneurial entities. Specifically, it analyzes how small business entrepreneurs might invoke principles of enterprise risk management to mitigate the long-term impact of financial distress on their business models. It also considers related refinements to extant small business regulations, including the U.S. bankruptcy laws. The essay’s primary objective is to help policymakers, …

Donahue's Fils Aîné: Reflections On Wilkes And The Legitimate Rights Of Selfish Ownership, Daniel S. Kleinberger

Faculty Scholarship

This Article asserts that Wilkes v. Springside Nursing Home, Inc. should be at least as memorable as Donahue v. Rodd Electrotype Co., and is, in a practical sense, substantially more important. The assertion rests on two propositions: first, that Donahue announces admirable sentiments but provides little practical guidance; second, that Wilkes provides the best practical rule for adjudicating “oppression” claims when the alleged victim is also a miscreant or for some other reason the dispute is grey rather than black and white. In particular, this Article asserts that Wilkes’s multistep, burden-shifting rule is a nuanced and effective method for accommodating …

Governance In The Public Corporation Of The Future: The Battle For Control Of Corporate Governance, Z. Jill Barclift

Faculty Scholarship

Eight years after passage of the Sarbanes-Oxley Act, Congress has again passed sweeping legislation in response to a corporate crisis. In addition to changes in the regulatory environment for Wall Street financial firms and banks, the Dodd-Frank Act (D-F Act) also proposes reforms to corporate governance.

In this article, the author examines the latest governance mandates under the D-F Act. In particular, this article focuses on the disclosure requirements on the CEO and chairman positions, and argues that disclosures of whether the CEO is also the chairman benefit shareholders' governance rights under state law. The new provisions under D-F Act …

Economic Crisis And Share Price Unpredictability: Reasons And Implications, Edward G. Fox, Merritt B. Fox, Ronald J. Gilson

Faculty Scholarship

The volatility of share returns for individual companies increased sharply during the recent financial crisis. The larger part of this increase was due to a dramatic rise – five fold as measured by variance – in idiosyncratic risk. We find that this pattern repeats itself during each major economic reversal going back 85 years. Because idiosyncratic risk is what is involved, this increase cannot be explained by changes in predictions concerning the future course of the economy as a whole.

Our first goal is to explain why difficult economic times, which are defined in terms of market wide phenomena, make …

Corporations, Corruption, And Complexity: Campaign Finance After Citizens United, Richard Briffault

Faculty Scholarship

Few campaign finance cases have drawn more public attention than the Supreme Court's decision in Citizens United v. FEC. The Court's invalidation of a sixty-year-old federal law – and comparable laws in two dozen states – banning corporations from engaging in independent spending in support of or opposition to candidates strongly affirms the right of corporations to engage in electoral advocacy. Critics – and most, albeit not all, of both the popular and academic commentary on the decision has been critical – have condemned the idea that corporations enjoy the same rights to spend on elections as natural persons. …

Activist Distressed Debtholders: The New Barbarians At The Gate?, Michelle M. Harner

Faculty Scholarship

The term “corporate raiders” previously struck fear in the hearts of corporate boards and management teams. It generally refers to investors who target undervalued, cash-flush or mismanaged companies and initiate a hostile takeover of the company. Corporate raiders earned their name in part because of their focus on value extraction, which could entail dismantling a company and selling off its crown jewels. Today, the term often conjures up images of Michael Milken, Henry Kravis or the movie character Gordon Gekko, but the alleged threat posed to companies by corporate raiders is less prevalent—at least with respect to the traditional use …

The Milieu Of The Boardroom And The Precinct Of Employment, Deborah A. Demott

Faculty Scholarship

This Commentary explores differences between employer-employee relationships and service on a board of directors. Against this backdrop, this Commentary argues that the research findings surveyed by Brooke and Tyler (Jennifer K. Brooke & Tom R. Tyler, Diversity and Corporate Performance: A Review of the Psychological Literature, 89 N.C. L. REV. 715 (2011)), although specific to the employment context, may be salient in assessing the impact of diversity among members of a board of directors.

Upper-Level Courses: Three Examplars, Mark Fagan, Tamar Frankel, Eric J. Gouvin, Kathy Z. Heller

Faculty Scholarship

I'm Mark Fagan, and I co-teach a course on securitization with Tamar Frankel at Boston University School of Law. We have come together to teach several interdisciplinary courses that combine law, business and public policy. Our course on securitization is a wonderful exemplar because it touches so many aspects of law as well as business and public policy.

We spent quite a bit of time wrestling with how to teach it. Do you teach it in a process fashion? Do you teach it by legal topic? Do you take examples and examine them? After much debate and discussion, we actually …

Strategic Liability In The Corporate Group , Richard Squire

Faculty Scholarship

The typical large corporation divides itself into numerous subsidiaries but then overrides the liability barriers between them by having the subsidiaries and the parent company cross-guarantee each other's major debts. Previous scholarly theories of the corporate group cannot explain why. The leading theory posits that the subsidiaries make it easier for creditors to evaluate risk because they enable each creditor to lend against a discrete asset pool within the broader enterprise. But any such efficiency would be undercut by the guarantees, which transmit credit risk across subsidiary boundaries. This Article argues that the combination of subsidiaries and intragroup guarantees reflects …

Dangerous Categories: Narratives Of Corporate Board Diversity, Lissa Lamkin Broome, John M. Conley, Kimberly D. Krawiec

Faculty Scholarship

In this article, we report the results of a series of interviews with corporate directors about racial, ethnic, and gender diversity on corporate boards. On the one hand, our respondents were clear and nearly uniform in their statements that board diversity was an important goal worth pursuing. Yet when asked to provide examples or anecdotes illustrating why board diversity matters, many subjects acknowledged difficulty in illustrating theory with reference to practice.

This expressed reluctance to come to specific terms with general claims about the value of director diversity inspired our title phrase: dangerous categories. That is, while "diversity" evokes universal …