Law Commons^™

Capital Requirements In United States Corporation Law, Richard A. Booth

Working Paper Series

This paper focuses on corporation law in the United States as it relates to capital contributions and capital maintenance. In other words, the paper addresses the provisions of corporation law relating to (1) the obligation of investors to contribute to the corporation a specified amount of capital and (2) the obligation of the corporation to maintain a specified amount of capital (and not to pay it back to the stockholders in the form of dividends or payments to repurchase or redeem shares). Traditionally, the amount of capital that must be contributed to and maintained by a corporation is called the …

Jurisdictional Competition In The European Community, Seth B. Chertok

ExpressO

The main purpose of this article is to analyze how four company law cases (Daily Mail, Centros, Uberseering, and Inspire Art) in the European Community have expanded the Freedom of Establishment to potentially open the door to corporate jurisdictional competition in the European Community, similar to the sort that exists in the United States through the Delaware effect. However, in Europe, this type of jurisdictional competition has traditionally been thought of as undesirable, particularly in certain Member States such as Germany that have co-determination and minimum capital requirements. These Member States have continued to adhere to the real seat and …

Preparing For Cafta-Dr: The Need Of Commercial Law Reform In Central America, Omar E. Garcia-Bolivar

ExpressO

This article explores the policies, laws and institutions that may prevent Central American States from exploiting the opportunities provided by the CAFTA-DR. In that sense, we examine several of the legal factors that appear to be important in determining economic growth as they apply to the commercial legal conditions of Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua.

Tracing, Peter B. Oh

ExpressO

Tracing is a method that appears within multiple fields of law. Distinct conceptions of tracing, however, have arisen independently within securities and remedial law. In the securities context plaintiffs must “trace” their securities to a specific offering to pursue certain relief under the Securities Act of 1933. In the remedial context victims who “trace” their misappropriated value into a wrongdoer’s hands can claim any derivative value, even if it has appreciated.

This article is the first to compare and then cross-apply tracing within these two contexts. Specifically, this article argues that securities law should adopt a version of the “rules-based …

Good Faith In The World Of Delaware Corporate Litigation: A Strategic Perspective On Recent Developments In Fiduciary Duty Law, Zachary S. Klughaupt

ExpressO

The Delaware Chancery’s new-found willingness to hold corporate directors accountable for breaching the duty of good faith has provoked widespread attention in both the business and legal communities. Legal practitioners and scholars recognize the novelty of Delaware’s recent good faith jurisprudence, as well as its potential to expose directors to gigantic personal damage awards, and in fact have published numerous articles that seek to delimit the boundaries of good faith conduct. But until now, most discussions of good faith as a fiduciary duty have approached the subject as an abstract measure of conduct, showing little regard for how a complaint …

How Do Corporations Play Politics?: The Fedex Story, Jill E. Fisch

Vanderbilt Law Review

Corporate political activity has been the subject of federal regulation since 1907, and the restrictions on corporate campaign contributions and other political expenditures continue to increase. Most recently, Congress banned soft money donations in the Bipartisan Campaign Reform Act of 2002 ("BCRA"), a ban upheld by the Supreme Court in McConnell v. FEC. Significantly, although the omnibus BCRA clearly was not directed exclusively at corporations, the Supreme Court began its lengthy opinion in McConnell by referencing and endorsing the efforts of Elihu Root, more than a century ago, to prohibit corporate political contributions. Repeatedly, within the broad context of campaign …

The Accuracy And Manipulability Of Lost Profits Damages Calculations: Should The Trier Of Fact Be "Reasonably Certain"?, Jonathan T. Tomlin, David Merrell

ExpressO

The accuracy and manipulability of calculations for lost profits damages are critical determinants of the ability of harmed parties to receive just compensation in a wide range of legal cases including antitrust, fraud, false advertising, intellectual property infringement, and breach of contract. They are also important determinants of the deterrent effects of the law. Using a sample of over 5,000 U.S. firms, we show that simple damages methods are capable of being substantially inaccurate. We also show that damages methods in general are highly susceptible to manipulation. In the absence of reasonable justifications for why particular data sets and methods …

Can Business Learn To Love The Environment? The Case For A U.S. Corporate Carbon Fund, Sophie E. Smyth

ExpressO

No abstract provided.

Organizational Form As Status And Signal, Kimberly D. Krawiec

ExpressO

In this Article, the author analyzes the reactions of 147 New York City law firms to the 1994 enactment of the New York Limited Liability Partnership statute, which provided New York law firm partners with the first convenient mechanism to limit their personal liability for partnership debts. Using both quantitative and qualitative evidence, she evaluates whether the behavior of New York law firms supports the signaling theory of organizational form—that is, the theory that firms use the partnership form to signal to the marketplace that they provide high quality legal services, due to either superior monitoring or to profit sharing. …

Casenote: Killing Life Partners: Why Viatical Settlements Constitute Securities – In Light Of The Sec V. Mutual Benefits Corporation And Other Recent Cases Explicitly Rejecting Life Partners, Brian Levin

ExpressO

No abstract provided.

Are Shareholders Entitled To The Residual? , Daniel J.H. Greenwood

ExpressO

Everyone knows that shareholders are entitled to the residual returns of a public corporation. Everyone is wrong.

Using the familiar economic model of the firm, I show that shareholders have no special claim on a corporation’s economic returns. No one has an entitlement to economic rents in a capitalist system. Shareholders, the purely fungible providers of a purely fungible commodity, are particularly unlikely to be able to command a share of economic profits. Indeed, since the contribution of shareholders to the firm is a sunk cost, in a competitive market shareholders are unlikely to earn any return at all. Accordingly, …

Breaking The Bank: Revisiting Central Bank Of Denver After Enron And Sarbanes-Oxley, Celia Taylor

ExpressO

No abstract provided.

Scrooge—The Reluctant Stakeholder, Benedict C. Sheehy

Benedict Sheehy

Abstract: Corporations law around the world is moving in the direction of the shareholder primacy model, common in the USA and other common law countries. Lawyers, academics and public policy analysts are divided as to the merits of the model and its main competitor, the stakeholder model. The gist of arguments usually hinge on economics. This article examines the claims for and against the two models on their own terms, and suggests that law has a unique contribution to make to the development of the corporation and society.

Is The Dutch Auction Ipo A Good Idea?, Anita I. Anand

ExpressO

The Google IPO raised the question of whether Dutch auctions are preferable to the traditional bookbuilding method of financing. Some argue that Dutch auctions make public offerings more efficient in terms of price discovery by leaving less money on the table. They further argue that Dutch auctions are more fair, since underwriters do not allocate securities to preferred clients, thereby allowing for a more equitable allocation among institutional and retail investors. I suggest that the Dutch auction is not necessarily more fair and may in fact lead to less efficient capital markets. I argue that reform of the current system …

Controlling Conflicts Of Interest: A Tale Of Two Industries, Ahmed E. Taha

ExpressO

Large corporate conglomerates are being formed in many industries. Although a conglomerate may be able to use its multiple businesses to offer better products or services or lower prices, conglomeration can also create conflicts of interest within a corporation, harming consumers. Other researchers and observers have long been aware of these conflicts of interest, however, this Article’s empirical analyses identify what specific characteristics of a conglomerate cause conflicts of interest to actually result in harm to consumers. In doing so, the Article also guides policymakers regarding how to regulate conflicts of interest.

This Article examines two industries – financial services …

The Same Side Of Two Coins: The Peculiar Phenomenon Of Bet-Hedging In Campaign Finance, Jason Cohen

ExpressO

The paper addresses the propensity of large donors to give to competing candidates or competing party organizations during the same election cycle – for example, giving money to both Bush and Kerry during the 2004 presidential race – a practice here termed 'bet-hedging.' Bet-hedging is analyzed in strategic and game-theoretic terms. The paper explores the prevalence of bet-hedging, the possible motivations behind the practice, and the informational concerns surrounding it. The paper argues that bet-hedging, out of all donation practices, carries with it a uniquely strong implication of ex post favor-seeking: if a donor prefers one side over the other, …

Excessive Compensation In Publicly Held Corporations: Is The Doctrine Of Waste Still Applicable?, John Murrey

ExpressO

No abstract provided.

The Semi-Sovereign Corporation, Daniel J.H. Greenwood

ExpressO

For at least a generation, corporate law scholars have worked within a paradigm of the corporation as a nexus of contracts, using metaphors drawn from contract, property, agency and trust to describe the relationships between shareholders and the firm as something like those of strangers in a market.

But historically, corporations were understood to be political organizations much like a miniature state or sovereign. The political view emphasizes that the participants in a firm include more than the public shareholders, that they have relationships with each other that extend beyond the momentary contact of strangers in a spot-market, and most …

Is Forum-Shopping Corrupting America's Bankruptcy Courts? Review Of Lynn M. Lopucki, "Courting Failure: How Competition For Big Cases Is Corrupting The Bankruptcy Courts", Todd J. Zywicki

George Mason University School of Law Working Papers Series

In his new book, Courting Failure: How Competition for Big Cases is Corrupting the Bankruptcy Courts, Professor Lynn LoPucki’s book argues that that current bankruptcy venue rules have spawned an improper “competition for big cases” that has “corrupted” America’s bankruptcy courts. LoPucki argues that this competition has harmed the bankruptcy system and the economy, transferring wealth from creditors and employees to incumbent management and bankruptcy professionals. He also argues that the competition that has corrupted the American bankruptcy system is being replicated internationally, resulting in a similar competition and similar harm on the global stage.

This essay reviews LoPucki’s book …

Accountability Of Transnational Corporations Under International Standards, Lea Hanakova

LLM Theses and Essays

Due to the process of globalization and rapid economic evolution in the last several years, transnational corporations have become extremely powerful. There is an evident disproportion between the numerous rights enjoyed by transnational corporations and the scarce obligations undertaken by them. Given their transnational nature, transnational corporations have been successfully avoiding national regulations of both their home and host states, and they are seeking to operate in countries with the lowest standards so as to increase their profits. This has resulted in the violation of basic human rights. Therefore, there is an increasing need for the creation of international instruments …

Slides: A Fine Line Between Success And Failure In Partnerships, Greg Neudecker

Community-Owned Forests: Possibilities, Experiences, and Lessons Learned (June 16-19)

Presenter: Greg Neudecker, U.S. Fish and Wildlife Service, Great Falls, MT

48 slides

Good Faith In The World Of Delaware Corporate Litigation: A Strategic Perspective On Recent Developments In Fiduciary Duty Law, Zachary S. Klughaupt

ExpressO

The Delaware Chancery’s new-found willingness to hold corporate directors accountable for breaching the duty of good faith has provoked widespread attention in both the business and legal communities. Legal practitioners and scholars recognize the novelty of Delaware’s recent good faith jurisprudence, as well as its potential to expose directors to gigantic personal damage awards, and in fact have published numerous articles that seek to delimit the boundaries of good faith conduct. But until now, most discussions of good faith as a fiduciary duty have approached the subject as an abstract measure of conduct, showing little regard for how a complaint …

The Regulation Of Insider Trading As An Agency Problem, Alexandre Padilla

ExpressO

This paper attempts to shed a new light on the insider trading issue by studying the unintended effects of insider trading laws. It shows that government regulation of insider trading can actually make the problems it intends to resolve worse. More particularly, this paper shows that insider trading laws instead of mitigating the agency problems that have been associated with insider trading actually can aggravate them by hindering the effectiveness of governance mechanisms existing within and outside the corporation.

Harmonizing Business Laws In Africa: Ohada Calls The Tune, Claire M. Dickerson

ExpressO

OHADA (in English, “Organization for Harmonization in Africa of Business Laws”) is a system of business laws and implementing institutions. Sixteen West African nations adopted this regime in order to increase their attractiveness to foreign investment. Because most of the member-states are former French colonies, the OHADA laws are based on the French legal system. Despite certain economists’ recent, well-publicized assertions that any French-based legal system is incompatible with development, other studies challenge those claims and in doing so outline characteristics that a pro-development system of business laws should possess. A review of selected provisions from OHADA’s corporate law and …

Markets & Democracy: The Illegitimacy Of Corporate Law, Daniel J.H. Greenwood

ExpressO

Corporate law does not conform to ordinary democratic norms. Unlike human citizens, corporations may decide which law will govern their most fundamental acts of self-governance. The corporate law corporation choose in turn influences the corporate goals and decision-making processes that determine what the corporation looks for in corporate law in a reflexive system independent of ordinary political processes.

This system seems on its face to violate the most fundamental principle of popular sovereignty–all non-Delaware citizens of the United States are excluded from even formal participation in the process of determining American corporate law, and even Delaware citizens are reduced to …

What Makes Asset Securitization "Inefficient"?, Kenji Yamazaki

ExpressO

Despite the damage caused by the recent Enron scandal , the asset securitization market has been vibrant and has become a popular financing alternative . A number of academics emphasize its merits and suggest that it is a more favorable way of financing, and Congress’s proposal to make sales of asset in securitization immune from characterization as secured transactions under the Bankruptcy Reform Act of 2001 (the “Reform Act”) almost materialized when the Enron scandal hit the scene. Conversely, there have been accusations that securitization is not a legitimate way of financing because, for example, it fosters fraudulent transactions.

Why …

Is U.S. Ceo Compensation Inefficient Pay Without Performance?, John E. Core, Wayne R. Guay, Randall S. Thompson

Michigan Law Review

In Pay Without Performance, Professors Lucian Bebchuk and Jesse Fried develop and summarize the leading critiques of current executive compensation practices in the United States. This book, and their highly influential earlier article, Managerial Power and Rent Extraction in the Design of Executive Compensation, with David Walker offer a negative, if mainstream, assessment of the state of U.S. executive compensation: U.S. executive compensation practices are failing in a widespread manner, and much systemic reform is needed. The purpose of our Review is to summarize the book and to offer some counterarguments to try to balance what is becoming …

European Law On Capital Markets – Quo Vadis?, Daniela Huemer

Cornell Law School Inter-University Graduate Student Conference Papers

The occurrence of more than a dozen accounting scandals in the United States over the past few years have deeply shaken the capital market and have led some to believe that “corporate and legal culture has lost all sense of right and wrong.” Scandals at companies such as Enron and Worldcom have cost thousands of employees their jobs and caused thousands of investors to lose their investments completely. Similar scandals have happened in Europe as well, such as at Parmalat and Lernout & Hauspie, which has caused an increasing reluctance among investors to trust companies with their dollars.

These circumstances …

The One And The Many: Individual Rights, Corporate Rights And The Diversity Of Groups, Bruce P. Frohnen

West Virginia Law Review

No abstract provided.

A Primer On The Theory, Practice, And Pedagogy Underpinning A School Of Thought On Law And Business, James E. Holloway

University of Michigan Journal of Law Reform

Recent policyless and lawless business decisions have prompted the judiciary and legislature to erode managerial discretion and judgment. This Article is a primer on the theoretical, practical, and pedagogical requirements for a legal-managerial school of thought to measure the business losses created by these judicial and legislative responses. A legal-managerial school must provide a theoretical evaluation of law and public policy, a practical integration of legal analysis and business methodology, and a pedagogical expansion of legal thinking to include business information. This Article initiates the debate on how a legal-managerial school of thought can further the study, practice, and teaching …