Securities Law Commons^™

Merrick Dodd And The Great Depression: A Few Historical Corrections, Charles R. T. O'Kelley

Seattle University Law Review

Merrick Dodd is remembered primarily for his role as coprotagonist, with Adolf Berle, in the famous Berle–Dodd debate. Dodd’s contribution to that debate—For Whom are Corporate Managers Trustees?—has generally been interpreted as the inspiration for modern stakeholder theory. Berle’s contribution has generally been viewed as the foundation on which shareholder primacy rests. Both of these views have been clarified by the nuanced work of Bratton and Wachter. Oddly, while scholars have devoted a great deal of attention to Berle’s actual life story, there is almost no scholarship that sheds light on Merrick Dodd, the historical person.

Texas Gulf Sulphur And The Genesis Of Corporate Liability Under Rule 10b-5, Adam C. Pritchard, Robert B. Thompson

Articles

This Essay explores the seminal role played by SEC v. Texas Gulf Sulphur Co. in establishing Rule 10b-5’s use to create a remedy against corporations for misstatements made by their officers. The question of the corporation’s liability for private damages loomed large for the Second Circuit judges in Texas Gulf Sulphur, even though that question was not directly at issue in an SEC action for injunctive relief. The judges considered both, construing narrowly “in connection with the purchase or sale of any security,” and the requisite state of mind required for violating Rule 10b-5. We explore the choices of the …

Remembering George Michaely, Lawrence J. Trautman, Stanley Sporkin, John A. Dudley

Lawrence J. Trautman Sr.

This short essay is a memorial tribute about George P. Michaely, Jr. (1926 to 2014). After graduating from both the University of Notre Dame and its law school, he began his legal career, serving for approximately seven years as attorney in the Office of General Counsel. He was then appointed Chief Counsel of the Commission’s Division of Corporation Finance, where he served for approximately the next four years and was responsible for advising the Commission and the public concerning the interpretation of the statutory provisions and rules relating to the registration provisions of the Securities Act of 1933 and the …

Present At The Creation: Reflections On The Early Years Of The National Association Of Corporate Directors, Lawrence J. Trautman

Lawrence J. Trautman Sr.

Effective corporate governance is critical to the productive operation of the global economy and preservation of our way of life. Excellent governance execution is also required to achieve economic growth and robust job creation in any country. In the United States, the premier director membership organization is the National Association of Corporate Directors (NACD). Now over 36 years old, NACD plays a major role in fostering excellence in corporate governance in the United States and beyond. Over the past thirty-six years NACD has grown from a mere realization of the importance of corporate governance to become the only national membership …

Tracking Berle's Footsteps: The Trail Of The Modern Corporation's Law Chapter, William W. Bratton, Michael L. Wachter

All Faculty Scholarship

No abstract provided.

Foreword: In Berle’S Footsteps, Charles R.T. O'Kelley

Seattle University Law Review

On the weekend of November 6–8, 2009, scholars from around the world gathered in Seattle for a symposium—In Berle’s Footsteps—celebrating the launch of the Adolf A. Berle, Jr. Center on Corporations, Law and Society. As founding director of the Berle Center, I described our undertaking: “It is with a profound sense of obligation to the legacy that has been entrusted to my care, that I announce the launching of the Adolf A. Berle, Jr. Center on Corporations, Law and Society. It is a privilege to follow in Berle’s footsteps.”

Opening Remarks, Chancellor William B. Chandler Iii

Seattle University Law Review

Law is, in many ways, a backwards-looking field. We litigate over facts that have already occurred, challenge deals that have already been signed, and apply rules of decision based on previously-established precedent or statutes already enacted. To the extent that this Center and the symposium reflect on Berle’s work, they too are an exercise in looking back. Indeed, some might say the establishment of a Center named in Berle’s honor is a monument to the past.

Securities Intermediaries And The Separation Of Ownership From Control, Jill E. Fisch

Seattle University Law Review

The Modern Corporation & Private Property is a paradigm-shifting analysis of the modern corporation. The book is perhaps best known for the insights of Berle and Means about the separation of ownership from control and the consequences of that separation for the allocation of power within the corporation. The Berle and Means story focuses on the shareholder as the owner of the corporation. Berle and Means saw the mechanism of centralized management—in which the shareholder retains the economic interest but not the control rights associated with ownership—as threatening the conception of shareholder interests in terms of property rights. In particular, …

Rethinking The Separation Of Ownership From Management In American History, Kenneth Lipartito, Yumiko Morii

Seattle University Law Review

In <em>The Modern Corporation and Private Property</em>, Adolf Berle and Gardiner Means would use AT&T as a prime example of what they saw as a dangerous new trend, the replacement of ownership-based capitalism with giant corporations controlled by a small group of propertyless managers. Indeed, AT&T became Berle and Means’ favorite example. . . . As we shall see, however, the claim that AT&T was a leading example of the separation of ownership from management is incomplete. More importantly, the common interpretation of Berle and Means’ work is mistaken, placing the emphasis incorrectly on the number of shareholders and reading …

The Modern Corporation As Social Construction, Mark S. Mizruchi, Daniel Hirschman

Seattle University Law Review

Classic works, Mark Mizruchi and Lisa Fein argued, share a particular fate. Authors often cite classic works without reading them—or without reading them carefully. . . . Yet perhaps no single work fits the above description better than one of the most important books on the large corporation ever published: Adolf Berle and Gardiner Means’s The Modern Corporation and Private Property. One can speculate that few works in the social sciences have been as often cited and as little read. As a consequence, we would expect The Modern Corporation to be a good candidate for either selective interpretation or …

Berle And The Entrepreneur, Charles R.T. O'Kelley

Seattle University Law Review

In the first and last four chapters (“the Five Chapters”) of The Modern Corporation and Private Property, Adolf Berle, Jr. describes in sweeping terms a fundamental transformation of the American economy. . . . Writing more than ten years before Berle, another seminal scholar, Frank Knight . . . developed a theory of the entrepreneur as part of his larger effort to more carefully explain the theoretical underpinnings of a free-market economy. . . . Given Knight’s prominence and the fact that Knight apparently reached dramatically different conclusions than did Berle concerning the consequences flowing from separation of ownership …

Revisiting Berle And Rethinking The Corporate Structure, Kelli A. Alces

Seattle University Law Review

Adolf Berle and Gardiner Means painted what remains a defining portrait of corporate law. The separation of ownership and control they described and the agency costs it causes are still a central concern of the law of corporate governance. For that reason, Berle’s work is relevant nearly eighty years after its publication. Seemingly forgotten, however, is that Berle’s enduring description of the corporate structure was published before most of today’s corporate law was in place. His work preceded the Securities Act of 1933 and the Securities Exchange Act of 1934 and even preceded the dominance of Delaware common law in …

Monitoring To Reduce Agency Costs: Examining The Behavior Of Independent And Non-Independent Boards, Anita Anand, Frank Milne, Lynnette Purda

Seattle University Law Review

Berle and Means’s analysis of the corporation—in particular, their view that those in control are not the owners of the corporation—raises questions about actions that corporations take to counter concerns regarding management’s influence. What mechanisms, if any, do corporations implement to balance the distribution of power in the corporation? To address this question, we analyze boards of directors’ propensity to voluntarily adopt recommended corporate governance practices. Because board independence is one way to enhance shareholders’ ability to monitor management, we probe whether firms with independent boards of directors (which we define as boards with either an independent chair or a …

Power Without Property, Still: Unger, Berle, And The Derivatives Revolution, Cristie Ford, Carol Liao

Seattle University Law Review

We are in a time when the notion of property is in flux. The derivatives revolution has shattered the “atom of property” well beyond what was originally imagined in 1932 by Adolf Berle and Gardiner Means. This disaggregation has had fascinating, and often adverse, effects on corporate law and securities regulation. Moreover, the phenomenon has had the unexpected effect of permitting some parties that already possess considerable social, economic, and political power to accumulate even more.

The New Financial Assets: Separating Ownership From Control, Tamar Frankel

Seattle University Law Review

In The Modern Corporation and Private Property, Adolf A. Berle and Gardiner Means wrote about the separation of ownership from control in corporations. They noted that the interests of the controlling directors and managers can diverge from those of the shareholder owners of the firm. . . . There are those who consider such a decoupling beneficial. Others express the same concern that Berle and Means have expressed. And depending on what one focuses on in viewing the pluses and minuses of these separations, one could reach different conclusions. I reach a number of conclusions. First, the separation of …

Neo-Brandeisianism And The New Deal: Adolf A. Berle, Jr., William O. Douglas, And The Problem Of Corporate Finance In The 1930s, Jessica Wang

Seattle University Law Review

This essay revisits Adolf A. Berle, Jr. and The Modern Corporation and Private Property by focusing on the triangle of Berle, Louis D. Brandeis, and William O. Douglas in order to examine some of the underlying assumptions about law, economics, and the nature of modern society behind securities regulation and corporate finance in the 1930s. I explore Douglas and Berle’s academic and political relationship, the conceptual underpinnings of Brandeis, Berle, and Douglas’s critiques of modern finance, and the ways in which the two younger men—Berle and Douglas—ultimately departed from their role model, Brandeis.

Enumerating Old Themes? Berle’S Concept Of Ownership And The Historical Development Of English Company Law In Context, Lorraine E. Talbot

Seattle University Law Review

This paper offers some tentative suggestions as to why Berle’s work has been read and interpreted so selectively in the United Kingdom. I suggest that this must be partly attributable to the historical developments in English company law that entrenched the notion of shareholder ownership claims. Specifically, unincorporated associations’ normative values—that members are owners and there is no distinction between small organizations with no share dispersal and large organizations with wide share dispersal—have a continuing influence on this entrenched notion of shareholder ownership claims. First, I provide an overview of the origins of English company law. Next, I address how …

Berle’S Vision Beyond Shareholder Interests: Why Investment Bankers Should Have (Some) Personal Liability, Claire Hill, Richard Painter

Seattle University Law Review

This essay, published in a symposium on the work of Adolf Berle, approaches the Berle-Dodd debate from the perspective that corporate managers have responsibilities beyond pursuing the interests of shareholders. Stock based executive compensation, designed to align managers’ interests with those of shareholders, has, in the investment banking industry in particular, failed to avert, and may have caused, managers (in this case, bankers) to take excessive risks that in the present financial crisis inflicted great damage on creditors and on society as a whole. We describe here the broad outlines of a proposal that we will discuss in future publications …

The Birth Of Corporate Governance, Harwell Wells

Seattle University Law Review

Part I of this Article briefly examines the concept of “corporate governance” and argues for dating the concept’s origins to the debates of the 1920s. Part II then moves on to examine early scholarly and popular discussions of the separation of ownership and control. After surveying the historical developments that produced the recognizably modern corporate economy around the turn of the century, it examines early scholarly and popular discussions of the separation of ownership and control, focusing on three major thinkers, Louis D. Brandeis, Walter Lippmann, and Thorstein Veblen. It argues that, while each of these authors examined the separation …

Tracking Berle’S Footsteps: The Trail Of The Modern Corporation’S Last Chapter, William W. Bratton, Michael L. Wachter

Seattle University Law Review

Readers game enough to work through all three hundred pages of The Modern Corporation and Private Property looking for insights on corporate law today encounter two, apparently contradictory, lines of thought. One line, set out in Books II and III, resonates comfortably with today’s shareholder-centered corporate legal theory. Here the book teaches that even as ownership and control have separated, managers should function as trustees for the shareholders and so should exercise their wide-ranging powers for the shareholders’ benefit. The other line of thought emerges in Books I and IV, where The Modern Corporation encases this shareholder trust model in …

See No Evil? Revisiting Early Visions Of The Social Responsibility Of Business: Adolf A. Berle’S Contribution To Contemporary Conversations, Erika George

Seattle University Law Review

Much corporate legal scholarship considers such fact patterns as beyond the scope of the discipline’s core concerns. Yet, increasingly, questions are asked concerning the scale and scope of modern corporate power. This Article will challenge the conventional understanding of what the core discipline of corporate law should encompass and argues that the failure to focus on precisely these sorts of factual scenarios involving allegations of corporate complicity in human rights violations and environmental degradation is misguided and short-sighted.

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 …

Corporate Power In The Public Eye: Reassessing The Implications Of Berle’S Public Consensus Theory, Marc T. Moore, Antoine Rebérioux

Seattle University Law Review

We analyze Berle’s overall corporate governance project in accordance with what we see as its four core sub-themes: (A) the limitations of external market forces as a constraint on managerial decision-making power; (B) the desirability of internal (corporate) over external (market) actors in allocating corporate capital; (C) civil society and the public consensus as a continuous informal check on managerial decision-making power; and (D) shareholder democracy (as opposed to shareholder primacy or shareholder wealth maximization) as a socially instrumental institution. We seek to debunk the popular misconception that Berle’s early work was a defense of the orthodox shareholder primacy paradigm …

Neoclassicism And The Separation Of Ownership And Control, Herbert J. Hovenkamp

All Faculty Scholarship

"Separation of ownership and control" is a phrase whose history will forever be associated with Adolf A. Berle and Gardiner C. Means' The Modern Corporation and Private Property (1932), as well as with Institutionalist economics, Legal Realism, and the New Deal. Within that milieu the large publicly held business corporation became identified with excessive managerial power at the expense of stockholders, social irresponsibility, and internal inefficiency. Neoclassical economists both then and ever since have generally been critical, both of the historical facts that Berle and Means purported to describe and of the conclusions that they drew. In fact, however, within …

Five Decades Of Corporation Law - From Conglomeration To Equity Compensation, Richard A. Booth

Working Paper Series

This brief essay recounts developments in corporation law over the last fifty years. It begins with the rise of finance capitalism and the conglomerate corporation which was followed by the emergence of hostile takeovers in the late 1970s and 1980s. One of the key events in this saga was the February 1, 1983 decision by the Delaware Supreme Court in Weinberger v. UOP, Inc. that effectively permitted the at-will elimination of minority stockholders through cashout mergers. Takeovers were also facilitated by two major financial developments: (1) the growth of institutional investors coupled with the growing taste of diversified investors for …

A Perspective On Federal Corporation Law, Mark J. Loewenstein

Publications

No abstract provided.

A Complete Property Right Amendment, John H. Ryskamp

ExpressO

The trend of the eminent domain reform and "Kelo plus" initiatives is toward a comprehensive Constitutional property right incorporating the elements of level of review, nature of government action, and extent of compensation. This article contains a draft amendment which reflects these concerns.

Bond Repudiation, Tax Codes, The Appropriations Process And Restitution Post-Eminent Domain Reform, John H. Ryskamp

ExpressO

This brief comment suggests where the anti-eminent domain movement might be heading next.

Legislation And Legitimation: Congress And Insider Trading In The 1980s, Thomas W. Joo

ExpressO

Legislation and Legitimation:

Congress and Insider Trading in the 1980s

Abstract

Orthodox corporate law-and-economics holds that American corporate and securities regulation has evolved inexorably toward economic efficiency. That position is difficult to square with the fact that regulation is the product of government actors and institutions. Indeed, the rational behavior assumptions of law-and-economics suggest that those actors and institutions would tend to place their own self-interest ahead of economic efficiency. This article provides anecdotal evidence of such self-interest at work. Based on an analysis of legislative history—primarily Congressional hearings—this article argues that Congress had little interest in the economic policy …

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

ExpressO

No abstract provided.