Business Organizations Law Commons^™

Agency Theory As Prophecy: How Boards, Analysts, And Fund Managers Perform Their Roles, Jiwook Jung, Frank Dobbin

Seattle University Law Review

In 1976, Michael Jensen and William Meckling published a paper reintroducing agency theory that explained how the modern corporation is structured to serve dispersed shareholders. They purported to describe the world as it exists but, in fact, they described a utopia, and their piece was read as a blueprint for that utopia. We take a page from the sociology of knowledge to argue that, in the modern world, economic theories function as prescriptions for behavior as much as they function as descriptions. Economists and management theorists often act as prophets rather than scientists, describing the world not as it is, …

Tax And Corporate Governance: The Influence Of Tax On Managerial Agency Costs, David M. Schizer

Faculty Scholarship

This chapter examines the influence of tax on managerial agency costs, with particular emphasis on public companies in the United States. Focusing on “C-corporations,” this chapter first considers why tax is an imperfect vehicle for mitigating managerial agency costs. It then discusses how tax influences the compensation of managers, both in ways policy makers intended, and in ways they did not. The chapter also considers how tax affects management decisions about capital structure, hedging, and acquisitions. In addition, this chapter explores the tax system’s influence on the ability and incentives of shareholders to monitor management. This chapter then concludes with …

Pathway To Minority Shareholder Protection: Derivative Actions In The People's Republic Of China, Donald C. Clarke, Nicholas C. Howson

Book Chapters

Using a dataset of Chinese judicial opinions arising in over fifty cases, this paper analyses the development and current implementation of shareholder derivative actions in the courts of the People’s Republic of China (“PRC”), both before and after the derivative lawsuit was explicitly authorized in the PRC’s 2006 Company Law effective January 1, 2006. In addition, we describe the very unique ecology of enterprise organization and corporate governance in modern China, and critique the formal design of the derivative action and offer reform suggestions. We find the design of the Chinese derivative lawsuit to be, in some respects, innovative and …

Then And Now: Professor Berle And The Unpredictable Shareholder, Jennifer G. Hill

Seattle University Law Review

Shareholders, and the relationship between shareholders and management, lay at the heart of Professor Berle’s scholarship. The goal of this Article is to compare the image of shareholders emerging from The Modern Corporation and Private Property and the Berle/Dodd debate with a range of contemporary visions of the shareholder that underpin some international regulatory responses to recent financial debacles, from Enron to the current global financial crisis. As the Article dis- cusses, these recent developments in the era of financial crises have prompted a reevaluation of the traditional image of the shareholder—and the role of the shareholder in the modern …

Private Equity Transaction In India, Ved Prakash

VED PRAKASH

Private equity investors has realised that India is an ideal destination for private equity investments. Indian company and investor has benefited due to increased foreign equity participation and valuation of investment in recent past. This article covers some of the terms used in private equity transaction and the rights of the shareholders.

Should Shareholders Have A Greater Say Over Executive Pay??, Randall S. Thomas, Brian R. Cheffins

Vanderbilt Law School Faculty Publications

Executive pay arrangements in Britain's publicly quoted companies have been subjected to much criticism in recent years. Proposals that shareholders should have a greater direct say over managerial remuneration have been a by-product of the concerns expressed. Debate on this point, however, has been largely speculative. This is because there is little evidence available in the United Kingdom indicating how shareholders would exercise any new powers they might be given. This paper addresses the evidentiary gap by drawing upon the experience in the United States, where empirical work indicates that shareholder voting only operates as a potential check when pay …

Untenable Status Of Corporate Governance Listing Standards Under The Securities Exchange Act, Douglas C. Michael

Law Faculty Scholarly Articles

United States securities markets operate under a system of supervised self-regulation created by the Securities Exchange Act of 1934 (Exchange Act). That system includes substantive regulation of the traders and the issuers of securities traded in those markets through the use of listing standards.

These listing standards have a unique status. They are part of a self-regulatory system, but are not classic self-regulation. The markets do not govern the traders of which it consists; rather, it governs outsiders—the issuers. The markets and the Securities and Exchange Commissions have sought to control issuers in ways not clearly related to trading in …