Business Commons^™

Toward Fair And Sustainable Capitalism: A Comprehensive Proposal To Help American Workers, Restore Fair Gainsharing Between Employees And Shareholders, And Increase American Competitiveness By Reorienting Our Corporate Governance System Toward Sustainable Long-Term Growth And Encouraging Investments In America’S Future, Leo E. Strine Jr.

All Faculty Scholarship

To promote fair and sustainable capitalism and help business and labor work together to build an American economy that works for all, this paper presents a comprehensive proposal to reform the American corporate governance system by aligning the incentives of those who control large U.S. corporations with the interests of working Americans who must put their hard-earned savings in mutual funds in their 401(k) and 529 plans. The proposal would achieve this through a series of measured, coherent changes to current laws and regulations, including: requiring not just operating companies, but institutional investors, to give appropriate consideration to and make …

The Reverse Agency Problem In The Age Of Compliance, Asaf Eckstein, Gideon Parchomovsky

All Faculty Scholarship

The agency problem, the idea that corporate directors and officers are motivated to prioritize their self-interest over the interest of their corporation, has had long-lasting impact on corporate law theory and practice. In recent years, however, as federal agencies have stepped up enforcement efforts against corporations, a new problem that is the mirror image of the agency problem has surfaced—the reverse agency problem. The surge in criminal investigations against corporations, combined with the rising popularity of settlement mechanisms including Pretrial Diversion Agreements (PDAs), and corporate plea agreements, has led corporations to sacrifice directors and officers in order to reach settlements …

Making Sustainability Disclosure Sustainable, Jill E. Fisch

All Faculty Scholarship

Sustainability is receiving increasing attention from issuers, investors and regulators. The desire to understand issuer sustainability practices and their relationship to economic performance has resulted in a proliferation of sustainability disclosure regimes and standards. The range of approaches to disclosure, however, limit the comparability and reliability of the information disclosed. The Securities & Exchange Commission (SEC) has solicited comment on whether to require expanded sustainability disclosures in issuer’s periodic financial reporting, and investors have communicated broad-based support for such expanded disclosures, but, to date, the SEC has not required general sustainability disclosure.

This Article argues that claims about the relationship …

Social Activism Through Shareholder Activism, Lisa Fairfax

All Faculty Scholarship

In 1952, the SEC altered the shareholder proposal rule to exclude proposals made “primarily for the purpose of promoting general economic, political, racial, religious, social or similar causes.” The SEC did not reference civil rights activist James Peck or otherwise acknowledge that its actions were prompted by Peck’s 1951 shareholder proposal to Greyhound for desegregating seating. Instead, the SEC indicated that its change simply reflected a codification of a position the SEC staff had taken in 1945.

Today, the shareholder proposal rule has evolved, giving way to several amendments that now enable shareholders to submit proposals on the proxy statement …

From Apathy To Activism: The Emergence, Impact, And Future Of Shareholder Activism As The New Corporate Governance Norm, Lisa M. Fairfax

All Faculty Scholarship

The conventional and long-held view that public company shareholders are, and should be, rationally apathetic is waning. Today, public company shareholders are active. Such shareholders have actively sought to increase their voting power and influence over director elections and other important corporate matters. These shareholders not only have been voting, but they also have been voting against management preferences. Moreover, public company shareholders increasingly have begun to request, and in some instances demand, that corporate officers and directors engage with them around a range of issues. The shift away from shareholder apathy reflects a radical departure from the traditional corporate …

Toward A Horizontal Fiduciary Duty In Corporate Law, Asaf Eckstein, Gideon Parchomovsky

All Faculty Scholarship

Fiduciary duty is arguably the single most important aspect of our corporate law system. It consists of two distinct sub-duties—a duty of care and a duty of loyalty—and it applies to all directors and corporate officers. Yet, under extant law, the duty only applies vertically, in the relationship between directors and corporate officers and the firm. At present, there exists no horizontal fiduciary duty: directors and corporate officers owe no fiduciary duty to each other. Consequently, if one of them fails her peers, they cannot seek direct legal recourse against her even when they stand to suffer significant reputational and …

Capturing Regulatory Agendas?: An Empirical Study Of Industry Use Of Rulemaking Petitions, Daniel Walters

All Faculty Scholarship

A great deal of skepticism toward administrative agencies stems from the widespread perception that they excessively or even exclusively cater to business interests. From the political right comes the accusation that business interests use regulation to erect barriers to entry that protect profits and stifle competition. From the political left comes the claim that business interests use secretive interactions with agencies to erode and negate beneficial regulatory programs. Regulatory “capture” theory elevates many of these claims to the status of economic law. Despite growing skepticism about capture theory in academic circles, empirical studies of business influence and capture return ambiguous …

Coin-Operated Capitalism, Shaanan Cohney, David A. Hoffman, Jeremy Sklaroff, David A. Wishnick

All Faculty Scholarship

This Article presents the legal literature’s first detailed analysis of the inner workings of Initial Coin Offerings. We characterize the ICO as an example of financial innovation, placing it in kinship with venture capital contracting, asset securitization, and (obviously) the IPO. We also take the form seriously as an example of technological innovation, where promoters are beginning to effectuate their promises to investors through computer code, rather than traditional contract. To understand the dynamics of this shift, we first collect contracts, “white papers,” and other contract-like documents for the fifty top-grossing ICOs of 2017. We then analyze how such projects’ …

Corporate Oversight And Disobedience, Elizabeth Pollman

All Faculty Scholarship

Over a decade has passed since landmark Delaware corporate law decisions on oversight responsibility, and only a small handful of cases have survived a motion to dismiss. Scholars have puzzled over what it means to have the potential for corporate accountability lodged within the duty of good faith, but almost never brought to fruition in terms of trial liability.

This article explores the public-regarding purpose of the obedience and oversight duties in corporate law and provides a descriptive account of how they are applied in practice. The Article argues that the fidelity to external law required by the duty of …