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University of Pennsylvania Carey Law School

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Full-Text Articles in Business

Antitrust Interoperability Remedies, Herbert J. Hovenkamp Jan 2023

Antitrust Interoperability Remedies, Herbert J. Hovenkamp

Faculty Scholarship at Penn Carey Law

Compelled interoperability can be a useful remedy for dominant firms, including large digital platforms, who violate the antitrust laws. They can address competition concerns without interfering unnecessarily with the structures that make digital platforms attractive and that have contributed so much to economic growth.

Given the wide variety of structures and business models for big tech, “interoperability” must be defined broadly. It can realistically include everything from “dynamic” interoperability that requires real time sharing of data and operations, to “static” interoperability which requires portability but not necessarily real time interactions. Also included are the compelled sharing of intellectual property or …


Insurance And Enterprise: Cyber Insurance For Ransomware, Tom Baker, Anja Shortland Dec 2022

Insurance And Enterprise: Cyber Insurance For Ransomware, Tom Baker, Anja Shortland

Faculty Scholarship at Penn Carey Law

Selling insurance gives insurers an incentive to manage insured risks. The “insurance as governance” literature demonstrates that insurers often make insurance conditional on ex ante risk reduction or mitigation. But insurance governs in support of enterprise, not security for its own sake. Tight underwriting inhibits enterprise – not only for insured businesses but also the business of insurance. This paper highlights ex post loss reduction as a form of insurance-based governance. Drawing on interviews with industry insiders, we explore how insurers addressed the evolving problems of moral hazard, uncertainty, and correlated losses since the 1990s. We find that cyber insurance …


The Government Behind Insurance Governance: Lessons For Ransomware, Tom Baker, Anja Shortland Nov 2022

The Government Behind Insurance Governance: Lessons For Ransomware, Tom Baker, Anja Shortland

Faculty Scholarship at Penn Carey Law

The insurance as governance literature focuses on the ability of private enterprises to collectively regulate, pool, and distribute risks. This paper analyzes how governments support insurance markets to maintain insurability and limit risks to society. We propose a new conceptual framework grouping government interventions into three dimensions: regulation of risky activity, public investment in risk reduction, and co-insurance. We apply this framework to six case studies, describing insurance markets’ reliance on public support in more analytically precise terms. We analyze how mature insurance markets overcame insurability challenges akin to those currently presented by extortive cybercrime. Private governance struggled when markets …


Purpose Proposals, Jill E. Fisch Sep 2022

Purpose Proposals, Jill E. Fisch

Faculty Scholarship at Penn Carey Law

Repurposing the corporation is the hot issue in corporate governance. Commentators, investors and increasingly issuers, maintain that corporations should shift their focus from maximizing profits for shareholders to generating value for a more expansive group of stakeholders. Corporations are also being called upon to address societal concerns – from climate change and voting rights to racial justice and wealth inequality.

The shareholder proposal rule, Rule 14a–8, offers one potential tool for repurposing the corporation. This Article describes the introduction of innovative proposals seeking to formalize corporate commitments to stakeholder governance. These “purpose proposals” reflect a new dynamic in the debate …


Are All Risks Created Equal? Rethinking The Distinction Between Legal And Business Risk In Corporate Law, Adi Libson, Gideon Parchomovsky Aug 2022

Are All Risks Created Equal? Rethinking The Distinction Between Legal And Business Risk In Corporate Law, Adi Libson, Gideon Parchomovsky

Faculty Scholarship at Penn Carey Law

Should corporate legal risk be treated similarly to corporate business risks? Currently, the law draws a clear-cut distinction between the two sources of risk, permitting the latter type of risk and banning the former. As a result, fiduciaries are shielded from personal liability in the case of business risk and are entirely exposed to civil and criminal liability that arises from legal risk-taking. As corporate law theorists have underscored, the differential treatment of business and legal risk is highly problematic from the perspective of firms and shareholders. To begin with, legal risk cannot be completely averted or eliminated. More importantly, …


Selling Antitrust, Herbert J. Hovenkamp Aug 2022

Selling Antitrust, Herbert J. Hovenkamp

Faculty Scholarship at Penn Carey Law

Antitrust enforcers and its other defenders have never done a good job of selling their field to the public. That is not entirely their fault. Antitrust is inherently technical, and a less engaging discipline to most people than, say, civil rights or criminal law. The more serious problem is that when the general press does talk about antitrust policy it naturally gravitates toward the fringes, both the far right and the far left. Extreme rhetoric makes for better press than the day-to-day operations of a technical enterprise. The extremes are often stated in overdramatized black-and-white terms that avoid the real …


President Biden's Executive Order On Promoting Competition: An Antitrust Analysis, Herbert J. Hovenkamp Jul 2022

President Biden's Executive Order On Promoting Competition: An Antitrust Analysis, Herbert J. Hovenkamp

Faculty Scholarship at Penn Carey Law

In July, 2021, President Biden signed a far ranging Executive Order directed to promoting competition in the American economy. This paper analyzes issues covered by the Order that are most likely to affect the scope and enforcement of antitrust law. The only passage that the Executive Order quoted from a Supreme Court antitrust decision captures its antitrust ideology well – that the Sherman Act:

rests on the premise that the unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest prices, the highest quality and the greatest material progress, while at the same time …


Antitrust Liability For False Advertising: A Response To Carrier & Tushnet, Susannah Gagnon, Herbert J. Hovenkamp Jun 2022

Antitrust Liability For False Advertising: A Response To Carrier & Tushnet, Susannah Gagnon, Herbert J. Hovenkamp

Faculty Scholarship at Penn Carey Law

This reply briefly considers when false advertising can give rise to antitrust liability. The biggest difference between tort and antitrust liability is that the latter requires harm to the market, which is critically dependent on actual consumer response. As a result, the biggest hurdle a private plaintiff faces in turning an act of false advertising into an antitrust offense is proof of causation – to what extent can a decline in purchase volume or other market rejection be specifically attributed to the defendant’s false claims? That requirement dooms the great majority of false advertising claims attacked as violations of the …


A Lesson From Startups: Contracting Out Of Shareholder Appraisal, Jill E. Fisch Jun 2022

A Lesson From Startups: Contracting Out Of Shareholder Appraisal, Jill E. Fisch

Faculty Scholarship at Penn Carey Law

Appraisal is a controversial topic. Policymakers have debated the goals served by the appraisal remedy, and legislatures have repeatedly revised appraisal statutes in an effort to meet those goals while minimizing the cost and potential abuse associated with appraisal litigation. Courts have struggled to determine the most appropriate valuation methodology and the extent to which that methodology should depend on case-specific factors. These difficulties are exacerbated by variation in the procedures by which mergers are negotiated and the potential for conflict-of-interest transactions.

Private ordering offers a market-based alternative to continued legislative or judicial efforts to refine the appraisal remedy. Through …


Leases As Forms, David A. Hoffman, Anton Strezhnev Jan 2022

Leases As Forms, David A. Hoffman, Anton Strezhnev

Faculty Scholarship at Penn Carey Law

We offer the first large scale descriptive study of residential leases, based on a dataset of ~170,000 residential leases filed in support of over ~200,000 Philadelphia eviction proceedings from 2005 through 2019. These leases are highly likely to contain unenforceable terms, and their pro-landlord tilt has increased sharply over time. Matching leases with individual tenant characteristics, we show that unlawful terms are surprisingly likely to be associated with more expensive leaseholds in richer, whiter parts of the city. This result is linked to landlords' growing adoption of shared forms, originally created by non-profit landlord associations, and more recently available online …


Third Party Moral Hazard And The Problem Of Insurance Externalities, Gideon Parchomovsky, Peter Siegelman Jan 2022

Third Party Moral Hazard And The Problem Of Insurance Externalities, Gideon Parchomovsky, Peter Siegelman

Faculty Scholarship at Penn Carey Law

Insurance can lead to loss or claim-creation not just by insureds themselves, but also by uninsured third parties. These externalities—which we term “third party moral hazard”—arise because insurance creates opportunities both to extract rents and to recover for otherwise unrecoverable losses. Using examples from health, automobile, kidnap, and liability insurance, we demonstrate that the phenomenon is widespread and important, and that the downsides of insurance are greater than previously believed. We explain the economic, social and psychological reasons for this phenomenon, and propose policy responses. Contract-based methods that are traditionally used to control first-party moral hazard can be welfare-reducing in …


Stealth Governance: Shareholder Agreements And Private Ordering, Jill E. Fisch Jan 2022

Stealth Governance: Shareholder Agreements And Private Ordering, Jill E. Fisch

Faculty Scholarship at Penn Carey Law

Corporate law has embraced private ordering -- tailoring a firm’s corporate governance to meet its individual needs. Firms are increasingly adopting firm-specific governance through dual-class voting structures, forum selection provisions and tailored limitations on the duty of loyalty. Courts have accepted these provisions as consistent with the contractual theory of the firm, and statutes, in many cases, explicitly endorse their use. Commentators too support private ordering for its capacity to facilitate innovation and enhance efficiency.

Private ordering typically occurs through firm-specific charter and bylaw provisions. VC-funded startups, however, frequently use an alternative tool – shareholder agreements. These agreements, which have …


Doctor Leo And Justice Strine, Brett Mcdonnell Jan 2022

Doctor Leo And Justice Strine, Brett Mcdonnell

University of Pennsylvania Journal of Business Law

No abstract provided.


The Faithless Franchisor: Rethinking Good Faith In Franchising, Robert W. Emerson Jan 2022

The Faithless Franchisor: Rethinking Good Faith In Franchising, Robert W. Emerson

University of Pennsylvania Journal of Business Law

No abstract provided.


Copycat Compliance And The Ironies Of "Best Practice", William R. Heaston Jan 2022

Copycat Compliance And The Ironies Of "Best Practice", William R. Heaston

University of Pennsylvania Journal of Business Law

No abstract provided.


Shareholder Wealth Maximization: Variations On A Theme, Dalia T. Mitchell Jan 2022

Shareholder Wealth Maximization: Variations On A Theme, Dalia T. Mitchell

University of Pennsylvania Journal of Business Law

No abstract provided.


Toward A Fair And Sustainable Corporate Governance System: Reflections On Leo E. Strine, Jr.'S Writing On Institutional Investors, Dorothy S. Lund Jan 2022

Toward A Fair And Sustainable Corporate Governance System: Reflections On Leo E. Strine, Jr.'S Writing On Institutional Investors, Dorothy S. Lund

University of Pennsylvania Journal of Business Law

No abstract provided.


Power, Primacy, And The Corporate Law Pivot, Grant M. Hayden, Matthew T. Bodie Jan 2022

Power, Primacy, And The Corporate Law Pivot, Grant M. Hayden, Matthew T. Bodie

University of Pennsylvania Journal of Business Law

No abstract provided.


Duty And Diversity, Chris Brummer, Leo E. Strine Jr. Jan 2022

Duty And Diversity, Chris Brummer, Leo E. Strine Jr.

Faculty Scholarship at Penn Carey Law

In the wake of the brutal deaths of George Floyd and Breonna Taylor, a slew of reforms from Wall Street to the West Coast have been introduced, all aimed at increasing Diversity, Equity, and Inclusion (“DEI”) in corporations. Yet the reforms face difficulties ranging from possible constitutional challenges to critical limitations in their scale, scope and degree of legal obligation and practical effects. In this Article, we provide an old answer to the new questions facing DEI policy, and offer the first close examination of how corporate law duties impel and facilitate corporate attention to diversity. Specifically, we show that …


Stakeholderism, Corporate Purpose, And Credible Commitment, Lisa Fairfax Jan 2022

Stakeholderism, Corporate Purpose, And Credible Commitment, Lisa Fairfax

Faculty Scholarship at Penn Carey Law

One of the most significant recent phenomena in corporate governance is the embrace, by some of the most influential actors in the corporate community, of the view that corporations should be focused on furthering the interests of all corporate stakeholders as well as the broader society. This stakeholder vision of corporate purpose is not new. Instead, it has emerged in cycles throughout corporate law history. However, for much of that history—including recent history—the consensus has been that stakeholderism has not achieved dominance or otherwise significantly influenced corporate behavior. That honor is reserved for the corporate purpose theory that focuses on …


#Metoobots And The Ai Workplace, Leora Eisenstadt Jan 2022

#Metoobots And The Ai Workplace, Leora Eisenstadt

University of Pennsylvania Journal of Business Law

No abstract provided.


The Local Nature Of Equity Crowdfunding, David Nows Jan 2022

The Local Nature Of Equity Crowdfunding, David Nows

University of Pennsylvania Journal of Business Law

No abstract provided.


Event-Driven Securities Litigation, Gideon Mark Jan 2022

Event-Driven Securities Litigation, Gideon Mark

University of Pennsylvania Journal of Business Law

No abstract provided.


Special Purpose Acquisition Companies (Spacs) And The Sec, Neal F. Newman, Lawrence J. Trautman Jan 2022

Special Purpose Acquisition Companies (Spacs) And The Sec, Neal F. Newman, Lawrence J. Trautman

University of Pennsylvania Journal of Business Law

No abstract provided.


Delaware Independent Directors: A Judicial Contextual Evolution, Randy J. Holland Jan 2022

Delaware Independent Directors: A Judicial Contextual Evolution, Randy J. Holland

University of Pennsylvania Journal of Business Law

No abstract provided.


Delaware's Frontier, Matthew Jennejohn, D. Gordon Smith Jan 2022

Delaware's Frontier, Matthew Jennejohn, D. Gordon Smith

University of Pennsylvania Journal of Business Law

No abstract provided.


Soft Law, Risk Cultures, And Law Abidingness: The Caremark Connection, Donald C. Langevoort Jan 2022

Soft Law, Risk Cultures, And Law Abidingness: The Caremark Connection, Donald C. Langevoort

University of Pennsylvania Journal of Business Law

No abstract provided.


Freezeouts In Delaware And Around The World, Guhan Subramanian Jan 2022

Freezeouts In Delaware And Around The World, Guhan Subramanian

University of Pennsylvania Journal of Business Law

No abstract provided.


Esg & Anti-Black Racism, Alicia E. Plerhoples Jan 2022

Esg & Anti-Black Racism, Alicia E. Plerhoples

University of Pennsylvania Journal of Business Law

No abstract provided.


The Humanities Strike Back: (E)Esg And Justice Strine Challenge Gamer Shareholder Primacy, David H. Webber Jan 2022

The Humanities Strike Back: (E)Esg And Justice Strine Challenge Gamer Shareholder Primacy, David H. Webber

University of Pennsylvania Journal of Business Law

No abstract provided.