Law Commons^™

Going-Private Decisions And The Sarbanes-Oxley Act Of 2002: A Cross-Country Analysis, Ehud Kamar, Pinar Karaca-Mandic, Eric L. Talley

Faculty Scholarship

This article investigates whether the passage and the implementation of the Sarbanes-Oxley Act of 2002 (SOX) drove firms out of the public capital market. To control for other factors affecting exit decisions, we examine the post-SOX change in the propensity of public American targets to be bought by private acquirers rather than public ones with the corresponding change for foreign targets, which were outside the purview of SOX. Our findings are consistent with the hypothesis that SOX induced small firms to exit the public capital market during the year following its enactment. In contrast, SOX appears to have had little …

Can Lawyers Wear Blinders? Gatekeepers And Third-Party Opinions, John C. Coffee Jr.

Faculty Scholarship

The question in the title may seem to answer itself. But it does not; indeed, the question has been framed to explain my difficulty with Professor Schwarcz's position on third-party opinions. Frankly, Steven Schwarcz has taken a bold, tough position. Addressing what he sees as issues of "first impression," he asks "what it means for lawyers to issue legal opinions that create negative externalities," and "[i]f lawyers issuing legal opinions owe a duty to the public as well as to the opinion recipient." These are large, possibly even imponderable questions, but he answers them crisply and succinctly in the manner …

Serial Entrepreneurs And Small Business Bankruptcies, Douglas G. Baird, Edward R. Morrison

Faculty Scholarship

Chapter 11 is thought to preserve the going-concern surplus of a financially distressed business – the extra value that its assets possess in their current configuration. Financial distress leads to conflicts among creditors that can lead to inefficient liquidation of a business with going-concern surplus. Chapter 11 avoids this by providing the business with a way of fashioning a new capital structure. This account of Chapter 11 fails to capture what is happening in the typical case. The typical Chapter 11 debtor is a small corporation whose assets are not specialized and rarely worth enough to pay tax claims. There …

Private Litigation To Enforce Fiduciary Duties In Mutual Funds: Derivative Suits, Disinterested Directors And The Ideology Of Investor Sovereignty, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

This article focuses on independent directors and the processes of mutual fund corporate governance. To be clear, I believe (and research shows) that disinterested directors do add value as a form of shareholder protection, and this fact justifies the SEC's efforts to strengthen their role. But they are far from a panacea. While that point alone is almost trite, exploring some of the unique features of mutual fund governance shows why judges and policymakers should not even try to reason by analogy to governance in other kinds of corporations. Yet that is exactly what Burks and its progeny have done. …

Separation And The Function Of Corporation Law, Ronald J. Gilson

Faculty Scholarship

I am delighted to participate in taking up Professor William Klein's suggestion that we could learn something by attempting a functional typology of corporation law. As a starting point, any typology must be animated by an underlying theory whose terms dictate the lines the typology draws. I want to focus my contribution at the level of the theory that might animate the architecture of this grid. To see what I mean by this, think of the Sesame Street version of Edward Levi's classic, An Introduction to Legal Reasoning. The character points at a board on which there are pictures …

Some Reflections On Two-Sided Markets And Pricing, Victor P. Goldberg

Faculty Scholarship

We want to join Bob Pitofsky in thanking the participants in this symposium for their thoughtful contributions. The literature on two-sided markets, both analytical and policy oriented, has mushroomed and this timely set of essays represents a significant contribution. The first generation of this literature grew up around the credit card industry, largely as a result of the antitrust litigation that challenged a wide range of standard practices in that industry. However, the theoretical problems that were first uncovered in this context extend to many other activities as well. The full range of papers found in this symposium, which have …

Kentucky Corporate Fiduciary Duties, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

In this article I offer an interpretation of Kentucky's corporate fiduciary law. The article is positive, in that it attempts to explain our law by reference to certain principles. The article is also normative, however, in that it offers constructive criticism regarding parts of Kentucky fiduciary law and suggests changes, refinements, and clarifications intended to promote fairness and economic efficiency in Kentucky corporations.

Both the positive and the normative aspects of this piece recognize the importance of the common law developments in Delaware (and other states) and the importance of the law and economics movement. I suggest, however, that Kentucky …

In The Shadow Of Delaware - The Rise Of Hostile Takeovers In Japan, Curtis J. Milhaupt

Faculty Scholarship

Despite longstanding predictions to the contrary, hostile takeovers have arrived in Japan. This Essay explains why and explores the implications of this phenomenon, not only for Japanese corporate governance, but also for our understanding of corporate law development around the world today. Delaware law figures prominently in the recent Japanese events. A highprofile battle for corporate control has just generated a judicial standard for takeover defenses that might be called a Unocal rule with Japanese characteristics. Meanwhile, ministy-endorsed takeover guidelines have been formulated that are heavily influenced by the familiar "threat" and "proportionality" tests under Delaware law, along with many …

Learning The Value Of Drugs - Is Rofecoxib A Regulatory Success Story?, Rebecca S. Eisenberg

Articles

Controversy over recent revelations concerning the adverse cardiovascular effects of selective cyclooxygenase- 2 (COX-2) inhibitors has generally been framed as a story of regulatory failure, in which the Food and Drug Administration (FDA) has failed in its mission to protect the public from unsafe products. But this simplistic understanding of the mission of the FDA seems to make failure all but inevitable, if the reliable observation of the risks and benefits of a drug requires rigorous long-term studies. Perhaps in an earlier era the goal of drug regulation was simply to protect the public from poisons. Today, drug regulation guides …

The Cyclical Transformations Of The Corporate Form: A Historical Perspective On Corporate Social Responsibility, Reuven S. Avi-Yonah

Articles

This article describes the transformations underwent by the corporate form from its Roman origins to the present. It shows that every time there was a shift in the role of the corporation, three theories of the corporation (the aggregate, artificial, and real entity theories) were brought forward in cyclical fashion. Every time, however, the real entity theory prevailed, and it was the dominant theory during periods ofstability in the relationship between the corporation, the shareholders, and the state. The article describes this evolution in detail, and then attempts to derive normative consequences for the legitimacy of corporate social responsibility (CSR). …

Teaching Enron, Milton C. Regan

Georgetown Law Faculty Publications and Other Works

What follows is a discussion of several transactions that the Examiner analyzed for the Enron bankruptcy court. These represent only a portion of the many transactions that the Examiner analyzed, but constitute a large number of the transactions with respect to which he focused on the conduct of attorneys. In most of these cases, the Examiner found that Enron's lawyers potentially could be liable to the company under various causes of action. In some instances, the Examiner did not find potential liability. These transactions are included in my discussion, however, because they can be used to explore certain ethical issues …

Welfare, Dialectic, And Mediation In Corporate Law, William W. Bratton

Georgetown Law Faculty Publications and Other Works

Bill Klein extends an idealistic and progressive invitation with the Criteria for Good Laws of Business Association (the Criteria). The structure of our debates, he says, prevents us from joining the issue. The discourse will move forward if we can isolate core components on which we agree and disagree. The invitation, thus directed, is well-constructed. To facilitate engagement, each criterion is set out as pari passu with each other. And there is a good reason for the inclusion of each listed criterion. Each has an established place in public and private law jurisprudence. Each has influenced results, coming forth as …

Direct Vs. Indirect Obligations Of Corporations Under International Law, Carlos Manuel Vázquez

Georgetown Law Faculty Publications and Other Works

International law today addresses the conduct of private corporations in a variety of areas. With very few exceptions, however, international law regulates corporate conduct indirectly--that is, by requiring states to enact and enforce regulations applicable to corporations and other non-state actors. Only a small number of international legal norms--primarily those relating to war crimes, crimes against humanity, and forced labor--apply directly to non-state actors. Scholars have argued forcefully that international law should move in the direction of directly imposing obligations on corporations. These arguments overlook important aspects of the problem. If international legal norms were extended to corporations and backed …

Choosing Among Antitrust Liability Standards Under Incomplete Information: Assessments Of And Aversions To The Risk Of Being Wrong, Barbara Ann White

All Faculty Scholarship

This essay analyzes the three papers presented on a panel I organized as chair of the AALS Antitrust Section entitled Evolving Antitrust Treatment of Dominant Firms for the 2005 Annual Meetings. Steve Salop’s and Doug Melamed’s papers recommend standards for government intervention while David McGowan argues why the government should not.

I create a framework within which to understand the three papers’ relationship to each other, by building on McGowan’s characterization of courts’ antitrust decisions. Since antitrust decisions are based on inherently incomplete real world information, they are subject to “error costs”: Courts are at risk of “false positives” (finding …

Executive Compensation: If There's A Problem, What's The Remedy? The Case For "Compensation Discussion And Analysis", Jeffrey N. Gordon

Faculty Scholarship

High levels of executive compensation have triggered an intense debate over whether compensation results primarily from competitive pressures in the market for managerial services or from managerial overreaching. Professors Lucian Bebchuk and Jesse Fried have advanced the debate with their recent book, Pay Without Performance: The Unfulfilled Promise of Executive Compensation, which forcefully argues that current compensation levels are best explained by managerial rent-seeking, not by arm's-length bargaining designed to create the optimum pay and performance nexus. This paper expresses three sorts of reservations with their analysis and advances its own proposals. First, enhancing shareholder welfare is not, as a …