Law Commons^™

The Net Profits Puzzle, Victor P. Goldberg

Faculty Scholarship

The use of "net profits" clauses in the movie business poses a problem. The standard perception is that Hollywood accounting results in successful films showing no net profits. If that is indeed so, then why have they survived for over four decades? This Essay argues that a successful movie will fail to yield net profits only if a "gross participant" (a major star whose compensation is in part a function of the film's gross receipts) becomes associated with the film. Since the net profits participants typically are associated with a project first, the question becomes: Why would they be willing …

The Role Of Secured Credit In Small-Business Lending, Ronald J. Mann

Faculty Scholarship

The traditional perspective holds that large firms in our economy use unsecured credit and small firms use secured credit. Existing scholarship, however, has provided little explanation of that pattern. In a recent article, I attributed the use of unsecured credit by large firms to the limited capacity of secured credit to lower the lending costs of creditworthy companies. This article uses data from a dozen interviews with small-business bankers to explain the small-business half of that lending pattern. To the extent smallbusiness lenders require secured credit, they do so largely for one significant benefit: secured credit allows small-business lenders to …

Brave New World?: The Impact(S) Of The Internet On Modern Securities Regulation, John C. Coffee Jr.

Faculty Scholarship

It is now a trite commonplace that the advent of the Internet will in time revolutionize securities regulation. Merely the facts that the Internet has somewhere between thirty and sixty million users worldwide today (with an estimated ten to thirty million in the United States) and that some 800,000 U.S. investors already have online brokerage accounts establish that there is a potential global market that can be accessed at very low cost. But the magnitude of the market says little about what will be the character and effect of this approaching revolution.

Technological change is not a new phenomenon for …

The Role Of Criminal Law In Policing Corporate Misconduct, Gerard E. Lynch

Faculty Scholarship

In the early 1990s, I spent a couple of years as Chief of the Criminal Division in the Office of the U.S. Attorney for the Southern District of New York. One of my principal responsibilities was to hear "appeals" from defense lawyers, usually, although not exclusively, in white collar crime cases. These lawyers felt that their clients should not be indicted, or that the plea offer they had received from the prosecutor in charge of the case was unduly severe. Sometimes their arguments were essentially factual contentions that the government had the wrong take on the evidence – that the …

"Just Say Never?" Poison Pills, Deadhand Pills, And Shareholder-Adopted Bylaws: An Essay For Warren Buffett, Jeffrey N. Gordon

Faculty Scholarship

My topic is Buffett on mergers and acquisitions and how his sage advice on the importance of shareholder choice should be taken to heart by the Delaware Supreme Court, which will soon face far-reaching questions on the distribution of power between shareholders and the board of directors. Recent judicial decisions in other jurisdictions: (i) have declared that a board can maintain a poison pill in the face of a premium hostile bid, the power to "just say no;" (ii) have validated the board's adoption of a so-called "deadhand pill," a poison pill that can be redeemed only by continuing directors; …

Rethinking Disclosure Liability In The Modern Era, Merritt B. Fox

Faculty Scholarship

The state of issuer disclosure in 1997 is like the proverbial half-filled glass. On one hand, as Dean Seligman has amply demonstrated in his contribution to this symposium, the glass is half empty in the sense that the legal incentives for established issuers to engage in high quality disclosure at the time that they sell new securities have decreased in recent decades. Due to the more liberal exemptions available under Regulation S, Rule 144A, Regulation D and Regulation A, a much smaller portion of such sales is even subject to the formal disclosure oriented registration process under Section 5 of …

The Future Of Corporate Governance In The United States, Ronald J. Gilson

Faculty Scholarship

This article is an interview of Professor Ronald J. Gilson, Charles J. Meyers Professor of Law and Business, Columbia University Law School. The interviewer is Cheryl L. Conner, a third year law student at the University of Richmond School of Law and the Managing Editor of the Richmond Journal of Law and Technology.

Controlling Strategic Voting: Property Rule Or Liability Rule, Zohar Goshen

Faculty Scholarship

Strategic voting – situations where voters place their votes according to their assessment of how other voters will behave rather than according to their actual preference – results in distorted decisionmaking. Strategic voting can cause the company to lose desired transactions and can also be used to coerce voters into accepting alternatives they would have otherwise rejected. An analysis of the various types of strategic voting situations which arise in corporate law demonstrates the author's argument that strategic voting is inherent in the voting mechanism, regardless of the type of group involved or of the decision being made. Maintaining a …

Searching For Negotiability In Payment And Credit Systems, Ronald J. Mann

Faculty Scholarship

The casual observer of the legal academy would assume that negotiability is a legal principle of foundational importance to our nation's payment and credit systems. All of the obvious indicators support that assumption. Among other things, the 1980s witnessed a major effort by the American Law Institute and the National Conference of Commissioners on Uniform State Laws to update and revise the relevant provisions of the Uniform Commercial Code. Similarly, negotiability continues to occupy a safe position in law school curricula, as prominent academics at our most elite schools continue to write casebooks focusing on negotiability. Most recently, for example, …

The Shaping Force Of Corporate Law In The New Economic Order, Jeffrey N. Gordon

Faculty Scholarship

My topic for this Allen Chair lecture is the shaping force of corporate governance in the new economic order. It is easy to think of corporate law as an arcane field with mysterious terms and peculiar rules, ultimately of interest only to those who are prepared to bill at least 2000 hours a year to unravel its complexities. This is the view that there is a pointless mystery about shareholders, directors, common stocks, debentures, and the bizarre creature my class encountered recently, a convertible exchangeable cumulative preferred stock; and that ultimately corporate law and practice consists of the expert manipulation …

Private Ownership And Corporate Performance: Some Lessons From Transition Economies, Roman Frydman, Cheryl W. Gray, Marek P. Hessel, Andrzej Rapaczynski

Faculty Scholarship

Data on mid-sized firms in three transition economies provide strong evidence that private ownership – for worker ownership – improves corporate performance. And the privatized firms' superior ability to generate revenues allows those firms to sustain or expand employment.

Using a large sample of data on mid-sized firms in the Czech Republic, Hungary, and Poland, Frydman, Gray, Hessel, and Rapacynski compare the performance of privatized and state firms in the environment of the postcommunist transition.

They find strong evidence that private ownership – for worker ownership – improves corporate performance. They find no evidence of the privatization shock that was …

The Bylaw Battlefield: Can Institutions Change The Outcome Of Corporate Control Contests?, John C. Coffee Jr.

Faculty Scholarship

What, if anything, can institutional investors do to influence the course and outcome of corporate control contests? The traditional answer was relatively little. To be sure, institutions could tender their shares in a tender offer or vote in a proxy contest to oust the incumbent board, but such a role was essentially reactive and contingent. It required that an offer actually be made before institutions could respond on an after-the-fact basis. Similarly, institutions have occasionally conducted precatory proxy campaigns calling upon the board to redeem its poison pill, but management was free to ignore these requests (and has done so).

The Folklore Of Investor Capitalism, John C. Coffee Jr.

Faculty Scholarship

Ideally, Thurman Arnold should review this book. In his The Folklore of American Capitalism, Arnold dissected the ideology and rationalizations by which the business community of an earlier day defended its legitimacy and perquisites. Michael Useem, a sociologist at the Wharton School, also has an interest in the ideology of the business community: how corporate managers view the new institutional investors, how they justify resistance, and the tensions and inconsistencies between their critiques of money managers and their own behavior. This is an underutilized perspective (which law and economics inherently tends to overlook), and Useem is at his best …