Law Commons^™

Piling On? An Empirical Study Of Parallel Derivative Suits, Stephen J. Choi, Jessica Erickson, Adam C. Pritchard

Articles

Using a sample of all companies named as defendants in securities class actions between July 1, 2005 and December 31, 2008, we study parallel suits relying on state corporate law arising out of the same allegations as the securities class actions. We test several ways that parallel suits may add value to a securities class action. Most parallel suits target cases involving obvious indicia of wrongdoing. Moreover, we find that although a modest percentage of parallel suits are filed first, over 80 percent are filed after a securities class action (termed “follow-on” parallel suits). We find that parallel suits and, …

China's 'Corporatization Without Privatization' And The Late 19th Century Roots Of A Stubborn Path Dependency, Nicholas Howson

Articles

This Article analyzes the contemporary program of “corporatization without privatization” in the People's Republic of China (PRC) directed at China's traditional state-owned enterprises (SOEs) through a consideration of long ago precursor enterprise establishments--starting from the last Chinese imperial dynasty's creation of “government-promoted/-supervised, merchant-financed/-operated” (guandu shangban) firms in the latter part of the nineteenth century. While analysts are tempted to see the PRC corporations with listings on international exchanges that dominate the global economy and capital markets as expressions of “convergence,” this Article argues that such firms in fact show deeply embedded aspects of path dependency unique to the Chinese context …

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.

Independent Directors In Singapore: Puzzling Compliance Requiring Explanation, Dan W. Puchniak, Luh Luh Lan

Research Collection Yong Pung How School Of Law

At first blush, the rise of independent directors in Singapore provides a straightforward example of a successful legal transplant from the West to Asia. In 2001, Singapore implemented a U.K.-inspired Code of Corporate Governance, which required the adoption of American-style independent directors on a "comply or explain" basis. Shortly thereafter, an overwhelming 98% of Singapore-listed companies reported full compliance. This, combined with Singapore's world-leading economic success, ostensibly confirmed the Anglo-American-cum- global conventional wisdom that American-style independent directors are required for good corporate governance.Using hand-collected data from 245 codes of corporate governance from eighty-seven jurisdictions, this Article reveals, however, that Singapore's …

Who Bleeds When The Wolves Bite? A Flesh-And-Blood Perspective On Hedge Fund Activism And Our Strange Corporate Governance System, Leo E. Strine Jr.

All Faculty Scholarship

This paper examines the effects of hedge fund activism and so-called wolf pack activity on the ordinary human beings—the human investors—who fund our capital markets but who, as indirect of owners of corporate equity, have only limited direct power to ensure that the capital they contribute is deployed to serve their welfare and in turn the broader social good.

Most human investors in fact depend much more on their labor than on their equity for their wealth and therefore care deeply about whether our corporate governance system creates incentives for corporations to create and sustain jobs for them. And because …

Fiduciary Duties Of Corporate Directors In Uncertain Times, Ellen J. Odoner, Stephen A. Radin, Lyuba A. Goltser, Andrew E. Blumberg

Ira M. Millstein Center for Global Markets and Corporate Ownership

Directors addressing new political uncertainties, a host of heightened challenges and asserted “best practices” from many sources may understandably ask whether their fiduciary duties have changed as well. This paper synthesizes the latest decisions of the Delaware courts on the standards of conduct for directors and the standards by which their conduct is reviewed. While directors should expect uncertainty to be a fact of corporate life for the foreseeable future, this paper emphasizes that neither the fiduciary duties of directors nor the protections afforded them have changed. Disinterested and independent directors acting in good faith continue to have broad protections …

Board Excellence And Fiduciary Duties Of Corporate Directors, E. Norman Veasey, Ira M. Millstein

Ira M. Millstein Center for Global Markets and Corporate Ownership

This article is intended for corporate directors and explores the key issues that directors should understand with respect to their fiduciary duties. An accompanying paper authored by Ellen Odoner, Stephen Radin, Lyuba Goltser, and Andrew Blumberg of Weil, Gotshal & Manges LLP provides a detailed analysis of the concepts discussed in this article and is recommended to general counsel, as they advise their corporate boards with respect to their fiduciary duties, as well as directors who wish to have a better understanding of their own fiduciary duties.

Report From The General Counsel Summit On Short-Termism And Public Trust, Ira M. Millstein Center For Global Markets And Corporate Ownership

Ira M. Millstein Center for Global Markets and Corporate Ownership

This summary report was prepared for participants in the General Counsel Corporate Governance Summit and presents some of the key discussion topics and views of participants at the summit. It is not intended to provide a complete summary or represent a unanimous consensus of the summit’s proceedings.

Adapting Global Standards To A Changing World, Serdar Çelik, Mats Isaksson

Ira M. Millstein Center for Global Markets and Corporate Ownership

In 1996, Ira Millstein received a phone call from Paris. It came from the Organization for Economic Co-operation and Development (OECD) asking him to head a small international group of distinguished businesspeople, including Sir Adrian Cadbury. Their assignment would be to provide economists and policy makers with advice for future work in the area of corporate governance. At the time, the topic was little understood among policy makers and its wider economic implications were rarely discussed. But OECD, already well known for its analysis of both macroeconomics and structural policies, wanted to change that. They looked at corporate governance as …

The Role Of Social Enterprise And Hybrid Organizations, Ofer Eldar

Faculty Scholarship

Recent years have brought remarkable growth in hybrid organizations that combine profit-seeking and social missions. Despite popular enthusiasm for such organizations, legal reforms to facilitate their formation and growth—particularly, legal forms for hybrid firms—have largely been ineffective. This shortcoming stems in large part from the lack of a theory that identifies the structural and functional elements that make some types of hybrid organizations more effective than others. In pursuit of such a theory, this Article focuses on a large class of hybrid organizations that has been effective in addressing development problems, such as increasing access to capital and improving employment …

Corporate Officers As Agents, Deborah A. Demott

Faculty Scholarship

Although officers are crucial to corporate operations, scholarly and theoretical accounts tend to slight officers and amalgamate them with directors into a single category, "managers." This essay anchors officers within the common law of agency-as does black-letter law-which crisply differentiates officers from directors. Understanding that agency is central of the legal account of officers' positions and responsibilities is crucial to seeing why, like directors, officers are fiduciaries, but distinctively so, not as instances of generic "corporate fiduciaries." Officers, like directors, owe duties of loyalty, but also particularized duties of care, competence, and diligence. Additionally, officers' duties of performance encompass two …

Corporate Power Is Corporate Purpose Ii: An Encouragement For Future Consideration From Professors Johnson And Millon, Leo E. Strine Jr.

All Faculty Scholarship

This paper is the second in a series considering the argument that corporate laws that give only rights to stockholders somehow implicitly empower directors to regard other constituencies as equal ends in governance. This piece was written as part of a symposium honoring the outstanding work of Professors Lyman Johnson and David Millon, and it seeks to encourage Professors Johnson and Millon, as proponents of the view that corporations have no duty to make stockholder welfare the end of corporate law, to focus on the reality that corporate power translates into corporate purpose.

Drawing on examples of controlled companies that …

To Thine Own Ceo Be True: Tailoring Ceo Compensation To Individual Personality And Circumstances, William O. Fisher

Law Faculty Publications

Eight-figure compensation. Cash. Restricted stock. Options. Performance shares. And more. Companies shower their CEOs with pay in large amounts, delivered in multiple ways, and dependent on complex and intricate formulae. It is all intended to motivate the top officers to make decisions that will best benefit their companies. Common sense tells us that the value of a complicated, multifaceted pay package- and hence its ability to motivate- will depend on the psychological characteristics and financial circumstances of the particular executive being paid. Economic theory and empirical studies confirm this intuition. Yet, companies generally ignore these vital factors. Substantive and disclosure …

Short-Termism, Douglas Chia

Ira M. Millstein Center for Global Markets and Corporate Ownership

Perhaps no topic in corporate governance has garnered more and stronger reactions than the debate over whether shorttermism is an issue for public corporations, the public markets, or the economy.

From the explosion in recent years of buybacks and dividends, to the declines in investment in research and development and capital expenditures, and unprecedented corporate profits and cash holdings, some argue that capitalism has focused in on the wrong outcomes, or worse, been coopted by the few at the expense of the many.

This essay will lay out the data and arguments over short-termism and what structural changes may be …

Coordinating Compliance Incentives, Veronica Root

Faculty Scholarship

In today’s regulatory environment, a corporation engaged in wrongdoing can be sure of one thing: regulators will point to an ineffective compliance program as a key cause of institutional misconduct. The explosion in the importance of compliance is unsurprising given the emphasis that governmental actors — from the Department of Justice, to the Securities and Exchange Commission, to even the Commerce Department — place on the need for institutions to adopt “effective compliance programs.” The governmental actors that demand effective compliance programs, however, have narrow scopes of authority. DOJ Fraud handles violations of the Foreign Corrupt Practices Act, while the …

Regulatory Competition And The Market For Corporate Law, Ofer Eldar, Lorenzo Magnolfi

Faculty Scholarship

This article develops an empirical model of firms’ choice of corporate laws under inertia. Delaware dominates the incorporation market, though recently Nevada, a state whose laws are highly protective of managers, has acquired a sizable market share. Using a novel database of incorporation decisions from 1995- 2013, we show that most firms dislike protectionist laws, such as anti-takeover statutes and liability protections for officers, and that Nevada’s rise is due to the preferences of small firms.Our estimates indicate that despite inertia, Delaware would lose significant market share and revenues if it adopted protectionist laws. Our findings support the hypothesis that …

The Responsibility Gap In Corporate Crime, Samuel W. Buell

Faculty Scholarship

In many cases of criminality within large corporations, senior management does not commit the operative offense — or conspire or assist in it — but nonetheless bears serious responsibility for the crime. That responsibility can derive from, among other things, management’s role in cultivating corporate culture, in failing to police effectively within the firm, and in accepting lavish compensation for taking the firm’s reins. Criminal law does not include any doctrinal means for transposing that form of responsibility into punishment. Arguments for expanding doctrine — including broadening of the presently narrow “responsible corporate officer” doctrine — so as to authorize …

Rethinking Corporate Governance For A Bondholder Financed, Systemically Risky World, Steven L. Schwarcz

Faculty Scholarship

This Article makes two arguments that, combined, demonstrate an important synergy: first, including bondholders in corporate governance could help to reduce systemic risk because bondholders are more risk averse than shareholders; second, corporate governance should include bondholders because bonds now dwarf equity as a source of corporate financing and bond prices are increasingly tied to firm performance.

Corporate Power Is Corporate Purpose I: Evidence From My Hometown, Leo E. Strine Jr.

All Faculty Scholarship

This paper is the first in a series considering a rather tired argument in corporate governance circles, that corporate laws that give only rights to stockholders somehow implicitly empower directors to regard other constituencies as equal ends in governance. By continuing to suggest that corporate boards themselves are empowered to treat the best interests of other corporate constituencies as ends in themselves, no less important than stockholders, scholars and commentators obscure the need for legal protections for other constituencies and for other legal reforms that give these constituencies the means to more effectively protect themselves.

Using recent events in the …

The Separation Of Corporate Law And Social Welfare, William W. Bratton

All Faculty Scholarship

A half century ago, corporate legal theory pursued an institutional vision in which corporations and the law that creates them protect people from the ravages of volatile free markets. That vision was challenged on the ground during the 1980s, when corporate legal institutions and market forces came to blows over questions concerning hostile takeovers. By 1990, it seemed like the institutions had won. But a different picture has emerged as the years have gone by. It is now clear that the market side really won the battle of the 1980s, succeeding in entering a wedge between corporate law and social …

Law And Corporate Governance, Robert P. Bartlett, Eric L. Talley

Faculty Scholarship

Pragmatic and effective research on corporate governance often turns critically on appreciating the legal institutions surrounding corporate entities – yet such nuances are often unfamiliar or poorly specified to economists and other social scientists without legal training. This chapter organizes and discusses key legal concepts of corporate governance, including statutes, regulations, and jurisprudential doctrines that “govern governance” in private and public companies, with concentration on the for-profit corporation. We review the literature concerning the nature and purpose of the corporation, the objects of fiduciary obligations, the means for decision making within the firm, as well as the overlay of state …

Ceo Side Payments In Mergers And Acquisitions, Brian J. Broughman

Articles by Maurer Faculty

In addition to golden parachutes, CEOs often negotiate for personal side-payments in connection with the sale of their firm. Side-payments differ from golden parachutes in that they are negotiated ex post in connection with a specific acquisition proposal, whereas golden parachutes are part of the executive’s employment agreement negotiated when she is hired. While side-payments may benefit shareholders by countering managerial resistance to an efficient sale, they can also be used to redistribute merger proceeds to management. The current article highlights an overlooked distinction between pre-merger golden parachutes and merger side-payments. Similar to a legislative rider attached to a popular …