Law Commons^™

Wealth Inequality And Family Businesses, Benjamin Means

Faculty Publications

Wealth inequality endangers democratic values and calls for a public response. This Article contends that family businesses merit special scrutiny because they control vast amounts of private wealth and combine two of society's most important economic institutions: family and business. Accordingly, family businesses implicate concerns regarding both inherited wealth and the concentration of economic power made possible by the corporate form.

Despite their economic significance, little has been done to investigate whether family businesses contribute to wealth inequality. This Article offers the first legal, and one of the only academic, treatments of the topic and shows that family businesses play …

Regulating The U.S. Treasury Market, Jerry W. Markham

Faculty Publications

The market for U.S. Treasury securities is critical to our monetary policy and government funding. It also serves as a benchmark for pricing other investments and has provided a haven for investors seeking safety and stability. However, concern has recently arisen that “primary dealers” in that market might have manipulated prices. In addition, an unusual market volatility event that occurred in October 2014, and the growth of high-frequency trading have raised further questions over the adequacy of regulation in that market. This article addresses those concerns. It first describes the U.S. Treasury market and identifies efforts by traders over the …

Creating A Stakeholder Democracy Under Existing Corporate Law, Justin Blount

Faculty Publications

Much of the current debate in corporate governance is framed in terms of stakeholder versus shareholder forms of corporate governance. While one would find little debate that stakeholders’ interests are important to any business, there is substantial debate regarding whether any stakeholder besides shareholders should have a formal role in corporate governance. What has been largely ignored in this debate is the issue of private ordering: since corporate law is largely enabling rather than mandatory, can stakeholder governance structures be voluntarily created within the current shareholder-centric default corporate law structure? This article argues that this is clearly the case, sets …

Delaware's Familiarity, Brian J. Broughman, Darian M. Ibrahim

Faculty Publications

No abstract provided.

Stock-Market Law And The Accuracy Of Public Companies’ Stock Prices, Kevin S. Haeberle

Faculty Publications

The social benefits of more accurate stock prices—that is, stock-market prices that more accurately reflect the future cash flows that companies are likely to produce—are well established. But it is also thought that market forces alone will lead to only a sub-optimal level of stock-price accuracy—a level that fails to obtain the maximum net social benefits, or wealth, that would result from a higher level. One of the principal aims of federal securities law has therefore been to increase the extent to which the stock prices of the most important companies in our economy (public companies) contain information about firms’ …

Delaware Law As Lingua Franca: Theory And Evidence, Brian Broughman, Jesse M. Fried, Darian Ibrahim

Faculty Publications

Why would a firm incorporate in Delaware rather than in its home state? Prior explanations have focused on the inherent features of Delaware corporate law and on the positive network externalities created by so many other firms domiciling in Delaware. We offer an additional explanation: a firm may choose Delaware simply because its law is nationally known and thus can serve as a lingua franca for in-state and out-of-state investors. Analyzing the incorporation decisions of 1,850 venture-capitalist-backed start-ups, we find evidence consistent with this lingua franca explanation. Indeed, the lingua franca effect appears to be more important than other factors …

Gender Diversity On Corporate Boards: How Racial Politics Impedes Progress In The United States, Cheryl L. Wade

Faculty Publications

The excellent conference organized by Darren Rosenblum comparing global approaches to board diversity inspired me to think about how progress in this context has unfolded in the United States. Even though the issue of diversity on corporate boards has become a global issue, few U.S. boards have moved beyond mere tokenism when it comes to female directors. One reason for the lack of diversity among corporate directors is that board selection has been based on membership in a particular network. This essay, however, focuses on the persisting problem of discrimination—a more invidious explanation for the fact that very few corporate …

The Contractual Foundation Of Family-Business Law, Benjamin Means

Faculty Publications

Most U.S. businesses are family owned, and yet the law governing business organizations does not account adequately for family relationships. Nor have legal scholars paid sufficient attention to family businesses. Instead, legal scholars operate within a contractarian model of business organization law, which holds that a firm is comprised of a nexus of contracts among economically rational actors. Intimate relationships appear irrelevant except insofar as they affect contractual choices. Indeed, strictly speaking, there is no such thing as family-business law.

This Article lays the foundation for a law of family business by expanding the contractarian model: a firm includes not …

The Year Of Magical Thinking: Fraud, Loss, And Grief, Jayne W. Barnard

Faculty Publications

In The Year of Magical Thinking, her wrenching memoir of the year following the death of her husband John Gregory Dunne, Joan Didion describes the episodes of magical thinking that forestalled her acceptance of Dunne's sudden absence from her life. In the hours after his death, she charged his cell phone. Weeks later, she gave his clothes to charity but kept his shoes because, she thought, "He would need shoes if he were to return."

Modern grief theory tells us that episodes like these are common during the months following a loved one's death, particularly when the death, like …

Corporate Governance Without Shareholders: A Cautionary Lesson From Non-Profit Organizations, George W. Dent

Faculty Publications

A debate about corporate governance has long raged over the allocation of power between shareholders and directors. Proponents of “shareholder primacy” believe that the corporate board should be chosen by and accountable to the stockholders rather than dominated by the CEO, as they believe is common now. Advocates of “director primacy” want to limit shareholder power because they believe that shareholders have conflicting objectives, are uninformed, and pressure the directors to sacrifice the long-term health of the company to short-term share price.

The governance of non-profit organizations (“NPOs”) offers an example that illuminates the corporate governance debate. Directors of NPOs …

Toward A Critical Corporate Law Pedagogy And Scholarship, André Ddouglas Pond Cummings, Steven A. Ramirez, Cheryl L. Wade

Faculty Publications

(Excerpt)

In recent years, the publicly held corporation has assumed a central position in both the economic and political spheres of American life. Economically, the public corporation has long acted as the key institution within American capitalism. Politically, the public corporation now can use its economic might to sway electoral outcomes as never before. Indeed, individuals who control public firms wield more economic power and political power today than ever before. These truths profoundly shape American society. The power, control, and role of the public corporation under law and regulation, therefore, hold more importance than ever before.

Even though corporate …

The Law And Economics Of Corporate Social Responsibility And Greenwashing, Miriam A. Cherry

Faculty Publications

In this symposium article, I explore the link between corporate social responsibility (CSR) and the threat of greenwashing. In the first part of the article, I start with first principles, examining the origins of greenwashing, structuring its definitions, and identifying the economic incentives that lead firms into the practice. The second part of this article examines the legal structure that allows greenwashing to occur, and with it, explores the pervasiveness and extent of greenwashing. The third part of this article articulates the harms of greenwashing. Intuitively, greenwashing involves deception, falsity, and hypocrisy that reflexively seem problematic. Identifying the actual harm …

Shirking, Opportunism, Self-Delusion And More: The Agency Problem Today, Jayne W. Barnard

Faculty Publications

No abstract provided.

Should Angel-Backed Start-Ups Reject Venture Capital?, Darian M. Ibrahim

Faculty Publications

The conventional wisdom is that entrepreneurs seek financing for their high-growth, high-risk start-up companies in a particular order. They begin with friends, family, and "bootstrapping" (e.g., credit card debt). Next they turn to angel investors, or accredited investors (and usually ex-entrepreneurs) who invest their own money in multiple, early-stage start-ups. Finally, after angel funds run dry, entrepreneurs seek funding from venture capitalists (VCs), whose deep pockets and connections lead the startup to an initial public offering (IPO) or sale to a larger company in the same industry (trade sale).

That conventional wisdom may have been the model for start-up success …

New Corporate Forms And Green Business, Antony Page

Faculty Publications

You want to start a business: not just an ordinary business, producing ordinary social benefit, but a dual-mission business that will both make a profit and benefit the environment. This green business, you expect, will sometimes face trade-offs between the missions, in the sense that sometimes owners' wealth and profit will have to be sacrificed to pursue environmental benefits. You're optimistic, in that you hope the business will find outside investors and will scale up easily. Moreover, you don't want to lie or even dissemble about your motives or about the business's actions. You want to be both authentic and …

Sustainable Business, Robert A. Katz, Antony Page

Faculty Publications

In recent years lawyers have become increasingly active in the field of for-profit social enterprise and sustainable business. This is nowhere more evident than in the design of new organizational forms such as the low-profit limited liability company (L3C), the flexible purpose corporation, and the benefit corporation. In this emerging field, sustainability is perhaps the most prized quality as well as its most versatile construct. This Essay contributes to the debate over new legal forms by analyzing the multiple meanings of sustainability in this context. The analysis demonstrates the importance of distinguishing between the social enterprise as a dual mission …

How Do Start-Ups Obtain Their Legal Services?, Darian M. Ibrahim

Faculty Publications

This Essay is the first to examine, using responses to online surveys, the use of in-house versus outside counsel by rapid-growth start-up companies. It also explores, from the vantage point of the start-up’s entrepreneur, some reasons for that choice. The Essay tests several hypotheses derived from the economic and entrepreneurship literatures about the benefits of in-house versus outside counsel in the unique context of start-up firms.

Connecting Law And Creativity: The Role Of Lawyers In Supporting Creative And Innovative Economic Development, Amanda M. Spratley

Faculty Publications

This article explores multiple ways in which lawyers and the legal community can connect with arts-oriented and other creative businesses to both invigorate the experience of the lawyers offering assistance and highlight ways for the legal community to position itself as relevant and helpful in the new creative economy.

This article's discussion is directed to lawyers who wish to know more about the creative economy and their position within it, but may also be informative to artists and professionals in creative enterprises by highlighting some of the legal considerations that may affect them and examining ways that seeking legal assistance …

How Predatory Mortgage Lending Changed African American Communities And Families, Cheryl L. Wade

Faculty Publications

(Excerpt)

This symposium focuses on efforts to reform the secondary mortgage market in the aftermath of the most potent economic downturn in U.S. history since The Great Depression. One question posed at the symposium in several forms was whether low-income Americans should be encouraged to own a home. Implicit in this question is the idea that low­-income homebuyers were responsible for the losses that investors in mortgage-backed securities incurred. This question is part of a familiar narrative: investors in mortgage-backed securities suffered, and the economy suffered, because low-income homebuyers defaulted. My essay, however, looks beyond the alleged irresponsibility of homebuyers …

Corporate Governance: The Swedish Solution, George W. Dent

Faculty Publications

Sweden has changed its corporate governance system by delegating the nomination of corporate directors (and thus, in effect, ultimate control) to committees typically comprising representatives of each company’s largest shareholders. This system gives shareholders a degree of power “that only the most daring corporate governance initiatives in the rest of the world could even imagine.” By all accounts the change has been successful; no one is complaining about it.

In the United States investors have long been kept weak in corporate governance for fear that giving them a major role would damage corporations in numerous ways. The Swedish experience seems …

Terrorism Financing Indicators For Financial Institutions In The United States, Richard K. Gordon

Faculty Publications

At least since the Financial Action Task Force (FATF) first published its Forty Recommendations, financial institutions in FATF-compliant jurisdictions have been required to implement preventive measures that require FIs to identify customers, establish client profiles, monitor for unusual transactions, review those transactions to see if there was suspicion that they involved the proceeds of crime and, if so, report the transaction to the authorities in the form of a suspicious transaction report (STR). When these requirements were first established, neither financial institutions nor their supervisors/regulators had much experience as to what in a client's profile and the client's patterns of …

The New Exit In Venture Capital, Darian M. Ibrahim

Faculty Publications

No abstract provided.

Naming, Identity, And Trademark Law, Laura A. Heymann

Faculty Publications

As the process of creation in the age of digital media becomes more fluid, one pervasive theme has been the desire for attribution: from the creator’s perspective, to receive credit for what one does (and to have credit not falsely attributed) and from the audience’s perspective, to understand the source of material with which one engages. But our norms of attribution reflect some inconsistencies in defining the relationship among name, identity, and authenticity. A blog post by a writer identified only by a pseudonym may prove to be very influential in the court of public opinion, while the use of …

U.S. Business: Tort Liability For The Transnational Republisher Of Leaked Corporate Secrets, Richard J. Peltz-Steele

Faculty Publications

Wikileaks, the web enterprise responsible for the unprecedented publication of hundreds of thousands of classified government records, is reshaping fundamental notions of the freedom of information. Meanwhile more than half of records held by Wikileaks are from the private sector, and the organization has promised blockbuster revelations about major commercial players such as big banks and oil companies. This paper examines the potential liability under U.S. business-tort law for Wikileaks as a transnational republisher of leaked corporate secrets. The paper examines the paradigm for criminal liability under the Espionage Act to imagine a construct of civil liability for tortious interference …

Beyond The Berle And Means Paradigm: Private Equity And The New Capitalist Order, Stephen F. Diamond

Faculty Publications

The chapter will proceed in five parts. First, I will attempt to describe the world as managers of private equity funds as well as some of their critics see it. Second, I will summarize the structure and mechanics of PE funds, including the importance of leverage to their success. Third, I will discuss what I have referred to here as the separation of ownership and control problem, including its modern formulation as an "agency" problem, first clearly formulated by Berle and Means. Fourth, I will critically assess the "counter-attack" on PE funds from labor and the left, which I believe …

Is Social Enterprise The New Corporate Social Responsibility?, Antony Page, Robert A. Katz

Faculty Publications

Since at least the famous Berle-Dodds debate, corporate social responsibility (CSR) and later its more muscular and structural iteration, progressive corporate law, have been discussed without much progress. The authors consider whether the social enterprise movement, which envisions a new sector of businesses created both to generate profits and pursue social goals, advances this debate. They conclude that it does. Proponents of social enterprise believe that such businesses can combine the dynamism of for-profit firms with the mission-driven zeal more typical of nonprofit organizations. Social enterprise and CSR have much in common: both want businesses to take the interests of …

Discourse Norms As Default Rules: Structuring Corporate Speech To Multiple Stakeholders, David Yosifon

Faculty Publications

This Article analyzes corporate speech problems through the framework of corporate law. The focus here is on the "discourse norms" that regulate corporate speech to various corporate stakehold-ers, including shareholders, workers, and consumers. I argue that these "discourse norms" should be understood as default terms in the "nexus-of-contracts" that comprises the corporation. Having reviewed the failure of corporate law as it bears on the interests of non-shareholding stakeholders such as workers and consumers, I urge the adoption of prescriptive discourse norms as an approach to reforming corporate governance in a socially useful manner.

Fiduciary Duty And The Public Interest, Cheryl L. Wade

Faculty Publications

(Excerpt)

Professor Tamar Frankel’s excellent book, Fiduciary Law, is a thorough and comprehensive look at the fiduciary-law forest. My contribution to the Symposium on The Role of Fiduciary Law and Trust in the Twenty-First Century is one leaf on one branch of one tree in the forest that Professor Frankel so expertly navigates. In this Essay, I explore the fiduciary relationship between corporate directors and officers and the shareholders they serve. I examine how the breach of fiduciary duties owed to shareholders has the power to dramatically impact non-shareholder groups.

Professor Frankel accurately observes that “[f]iduciary duties are anchored …

Beyond Profit: Rethinking Corporate Social Responsibility And Greenwashing After The Bp Oil Disaster, Miriam A. Cherry, Judd F. Sneirson

Faculty Publications

The explosion of the BP-leased Deepwater Horizon and subsequent oil spill stand as an indictment not just of our national energy priorities and environmental law enforcement; they equally represent a failure of Anglo-American corporate law and what passes for corporate social responsibility in business today. Using BP and the disaster as a compelling case study, this Article examines green marketing and corporate governance and identifies elements of each that encourage firms to engage only superficially in corporate social responsibility yet trumpet those efforts to eager consumers and investors. This Article then proposes reforms and protections designed to increase corporate social …

Organizational Management Of Conflicting Professional Identities, Cassandra Burke Robertson

Faculty Publications

Professionals in the military have suffered criticism for their failure to counter military excess in the so-called "War on Terror" - especially in the area of torture and maltreatment of detainees. Much of the criticism leveled against such professionals has assumed that they were bad actors who were making a conscious choice to avoid the strictures of their code of ethics. This Article counters that narrative by applying identity theory to offer a more situations explanation. It argues that some of these professional failures arise from the cognitive incentives faced by individuals in an organization that rewards organizational deference over …