Law Commons^™

Paying For Risk: Bankers, Compensation, And Competition, Simone M. Sepe, Charles K. Whitehead

Cornell Law Faculty Working Papers

Efforts to control bank risk address the wrong problem in the wrong way. They presume that the financial crisis was caused by CEOs who failed to super­vise risk-taking employees. The responses focus on exe­cutive pay, believing that exe­cu­tives will bring non-execu­tives into line—using incen­­­­tives to manage risk-taking—once their own pay is regu­lated. What they over­look is the effect on non-executive pay of the com­pe­­ti­­tion for talent. Even if exe­­cu­tive pay is regu­lated, and exe­cu­tives act in the bank’s best interests, they will still be trapped into providing incentives that encourage risk-taking by non-executives due to the negative exter­nality that arises …

Were "It" To Happen: Contract Continuity Under Euro Regime Change, Robert C. Hockett

Cornell Law Faculty Working Papers

One way or another, the European Monetary Union (EMU) is apt to endure. The prospect of continuation under the precise contours of the regime as we presently find it, however, is anything but certain. Hence many investors and other actual or prospective contract parties are likely to remain skittish until matters grow clearer. This skittishness, importantly, can itself hamper the prospect of expeditious European recovery. Addressing particular sources of ongoing uncertainty about EMU prospects can itself therefore aid in the project of recovery.

This Essay accordingly aims to impose structure upon one particular, and indeed particularly complex, source of uncertainty …

Placeholders: Engaging The Hayekian Critique Of Financial Regulation, Annelise Riles

Cornell Law Faculty Working Papers

Since Friedrich Hayek, debates about the proper relationship between the state and the market, and about the optimal design of regulatory institutions, often turn on assumptions about the workings of legal expertise — and in particular about the difference between public expertise (bureaucratic knowledge) and private expertise (private law). Hayek’s central argument, adopted uncritically by a wide array of policy-makers and academics across the political spectrum, is a temporal one: bureaucratic reasoning is inherently one step behind the market, and hence effective market planning is impossible. In contrast, Hayek argues, private ordering is superior because it is of the moment, …

Changing The Paradigm Of Stock Ownership From Concentrated Towards Dispersed Ownership? Evidence From Brazil And Consequences For Emerging Countries, Erica Gorga

Cornell Law Faculty Working Papers

This paper analyzes micro-level dynamics of changes in ownership structures. It investigates a unique event: changes in ownership patterns currently taking place in Brazil. It builds upon empirical evidence to advance theoretical understanding of how and why concentrated ownership structures can change towards dispersed ownership.

Commentators argue that the Brazilian capital markets are finally taking off. The number of listed companies and IPOs in the Sao Paulo Stock Exchange (Bovespa) has greatly increased. Firms are migrating to Bovespa’s special listing segments, which require higher standards of corporate governance. Companies have sold control in the market, and the stock market has …

Taking Distribution Seriously, Robert C. Hockett

Cornell Law Faculty Working Papers

It is common for legal theorists and policy analysts to think and communicate mainly in maximizing terms. What is less common is for them to notice that each time we speak explicitly of socially maximizing one thing, we speak implicitly of distributing another thing and equalizing yet another thing. We also, moreover, effectively define ourselves and our fellow citizens by reference to that which we equalize; for it is in virtue of the latter that our social welfare formulations treat us as “counting” for purposes of socially aggregating and maximizing.

To attend systematically to the inter-translatability of maximization language on …

Minding The Gaps: Fairness, Welfare, And The Constitutive Structure Of Distributive Assessment, Robert C. Hockett

Cornell Law Faculty Working Papers

Despite over a century’s disputation and attendant opportunity for clarification, the field of inquiry now loosely labeled “welfare economics” (WE) remains surprisingly prone to foundational confusions. The same holds of work done by many practitioners of WE’s influential offshoot, normative “law and economics” (LE).

A conspicuous contemporary case of confusion turns up in recent discussion concerning “fairness versus welfare.” The very naming of this putative dispute signals a crude category error. “Welfare” denotes a proposed object of distribution. “Fairness” describes and appropriate pattern of distribution. Welfare itself is distributed fairly or unfairly. “Fairness versus welfare” is analytically on all fours …