Business Law, Public Responsibility, and Ethics Commons^™

Deterrence Theory: Key Findings And Challenges, Alex Raskolnikov

Faculty Scholarship

This chapter reviews the key findings of the optimal deterrence theory and discusses the remaining challenges. Some of these challenges reflect current modeling choices and limitations. These include the treatment of the offender’s gains in the social welfare function; the design of the damages multiplier in a realistic, multi-period framework; the effects of different types of uncertainty on behavior; and the study of optional, imperfectly enforced, threshold-based regimes – that is, regimes that reflect the most common real-world regulatory setting. Other challenges arise because several key regulatory features and enforcement outcomes are inconsistent with the deterrence theory’s predictions and prescriptions. …

Choice Of Law And The Preponderantly Multistate Rule: The Example Of Successor Corporation Products Liability, Diana Sclar

Dickinson Law Review (2017-Present)

Most state rules of substantive law, whether legislative or judicial, ordinarily adjust rights and obligations among local parties with respect to local events. Conventional choice of law methodologies for adjudicating disputes with multistate connections all start from an explicit or implicit assumption of a choice between such locally oriented substantive rules. This article reveals, for the first time, that some state rules of substantive law ordinarily adjust rights and obligations with respect to parties and events connected to more than one state and only occasionally apply to wholly local matters. For these rules I use the term “nominally domestic rules …

Corporate Law For Good People, Yuval Feldman, Adi Libson, Gideon Parchomovsky

All Faculty Scholarship

This article offers a novel analysis of the field of corporate governance by viewing it through the lens of behavioral ethics. It calls for both shifting the focus of corporate governance to a new set of loci of potential corporate wrongdoing and adding new tools to the corporate governance arsenal. The behavioral ethics scholarship emphasizes the large share of wrongdoing generated by "good people" whose intention is to act ethically. Their wrongdoing stems from "bounded ethicality" -- various cognitive and motivational processes that lead to biased decisions that seem legitimate. In the legal domain, corporate law provides the most fertile …

The History And Revival Of The Corporate Purpose Clause, Elizabeth Pollman

All Faculty Scholarship

The corporate purpose debate is experiencing a renaissance. The contours of the modern debate are relatively well developed and typically focus on whether corporations should pursue shareholder value maximization or broader social aims. A related subject that has received much less scholarly attention, however, is the formal legal mechanism by which a corporation expresses its purpose—the purpose clause of the corporate charter. This Article examines corporate purpose through the evolution of corporate charters. Starting with historic examples ranging from the Dutch East India Company to early American corporations and their modern 21st century parallels, the discussion illuminates how corporate purpose …

Should Corporations Have A Purpose?, Jill E. Fisch, Steven Davidoff Solomon

All Faculty Scholarship

Corporate purpose is the hot topic in corporate governance. Critics are calling for corporations to shift their purpose away from shareholder value as a means of addressing climate change, equity and inclusion, and other social values. We argue that this debate has overlooked the critical predicate questions of whether a corporation should have a purpose at all and, if so, what role it serves.

We start by exploring and rejecting historical, doctrinal, and theoretical bases for corporate purpose. We challenge the premise that purpose can serve a useful function either as a legal constraint on managerial discretion or as a …

The Corporate Governance Machine, Dorothy S. Lund, Elizabeth Pollman

All Faculty Scholarship

The conventional view of corporate governance is that it is a neutral set of processes and practices that govern how a company is managed. We demonstrate that this view is profoundly mistaken: in the United States, corporate governance has become a “system” composed of an array of institutional players, with a powerful shareholderist orientation. Our original account of this “corporate governance machine” generates insights about the past, present, and future of corporate governance. As for the past, we show how the concept of corporate governance developed alongside the shareholder primacy movement. This relationship is reflected in the common refrain of …

Caremark And Esg, Perfect Together: A Practical Approach To Implementing An Integrated, Efficient, And Effective Caremark And Eesg Strategy, Leo E. Strine Jr., Kirby M. Smith, Reilly S. Steel

All Faculty Scholarship

With increased calls from investors, legislators, and academics for corporations to consider employee, environmental, social, and governance factors (“EESG”) when making decisions, boards and managers are struggling to situate EESG within their existing reporting and organizational structures. Building on an emerging literature connecting EESG with corporate compliance, this Essay argues that EESG is best understood as an extension of the board’s duty to implement and monitor a compliance program under Caremark. If a company decides to do more than the legal minimum, it will simultaneously satisfy legitimate demands for strong EESG programs and promote compliance with the law. Building …

Reversing The Fortunes Of Active Funds, Adi Libson, Gideon Parchomovsky

All Faculty Scholarship

In 2019, for the first time in the history of U.S. capital markets, passive funds surpassed active funds in terms of total assets under management. The continuous growth of passive funds at the expense of active funds is a genuine cause for concern. Active funds monitor the management and partake of decision-making in their portfolio companies. Furthermore, they improve price efficiency and managerial performance by engaging in informed trading. The buy/sell decisions of active funds provide other market participants reliable information about the quality of firms. The cost of active investing is significant and it is exclusively borne by active …

Stewardship 2021: The Centrality Of Institutional Investor Regulation To Restoring A Fair And Sustainable American Economy, Leo E. Strine Jr.

All Faculty Scholarship

In this essay, which formed the basis for the luncheon keynote speech at the Rethinking Stewardship online conference presented by the Ira M. Millstein Center for Global Markets and Corporate Ownership at Columbia Law School and ECGI, the European Corporate Governance Institute, the essential, but not sufficient, role of regulation to promote more effective stewardship by institutional investors is discussed. To frame specific policy recommendations that align the responsibilities of institutional investors with the best interests of their human investors in sustainable wealth creation, environmental responsibility, the respectful treatment of stakeholders, and, in particular, the fair pay and treatment of …

Law And Authors: A Legal Handbook For Writers (Introduction), Jacqueline D. Lipton

Book Chapters

Drawing on a wealth of experience in legal scholarship and publishing, Professor Jacqueline D. Lipton provides a useful legal guide for writers whatever their levels of expertise or categories of work (fiction, nonfiction, academic, journalism, freelance content development). This introductory chapter outlines the key legal and business issues authors are likely to face during the course of their careers, and emphasizes that most legal problems have solutions so law should never be an excuse to avoid writing something that an author feels strongly about creating. The larger work draws from case studies and hypothetical examples to address issues of copyright …

Implicit Communication And Enforcement Of Corporate Disclosure Regulation, Ashiq Ali, Michael T. Durney, Jill E. Fisch, Hoyoun Kyung

All Faculty Scholarship

This study examines the challenge of implicit communication -- qualitative statements, tone, and non-verbal cues -- to the effectiveness of enforcing corporate disclosure regulation. We use a Regulation Fair Disclosure (Reg FD) setting, given that the SEC adopted the regulation recognizing that managers can convey non-public information privately not just through explicit quantitative disclosures but also through implicit communication. In a high-profile enforcement action, however, the court focused on a literal examination of the manager’s language rather than his positive spin to conclude that the SEC had been “too demanding” in examining the manager’s statements and that its enforcement policy …

Racialized Tax Inequity: Wealth, Racism, And The U.S. System Of Taxation, Palma Joy Strand, Nicholas A. Mirkay

Northwestern Journal of Law & Social Policy

This Article describes the connection between wealth inequality and the increasing structural racism in the U.S. tax system since the 1980s. A long-term sociological view (the why) reveals the historical racialization of wealth and a shift in the tax system overall beginning around 1980 to protect and exacerbate wealth inequality, which has been fueled by racial animus and anxiety. A critical tax view (the how) highlights a shift over the same time period at both federal and state levels from taxes on wealth, to taxes on income, and then to taxes on consumption—from greater to less progressivity. Both of these …

Screened Out Of Housing: The Impact Of Misleading Tenant Screening Reports And The Potential For Criminal Expungement As A Model For Effectively Sealing Evictions, Katelyn Polk

Northwestern Journal of Law & Social Policy

Having an eviction record “blacklists” tenants from finding future housing. Even renters with mere eviction filings—not eviction orders—on their records face the harsh collateral consequences of eviction. This Note argues that eviction records should be sealed at filing and only released into the public record if a landlord prevails in court. Juvenile record expungement mechanisms in Illinois serve as a model for one way to protect people with eviction records. Recent updates to the Illinois juvenile expungement process provided for the automatic expungement of certain records and strengthened the confidentiality protections of juvenile records. Illinois protects juvenile records because it …

Defined Contribution Plans And The Challenge Of Financial Illiteracy, Jill E. Fisch, Annamaria Lusardi, Andrea Hasler

All Faculty Scholarship

Retirement investing in the United States has changed dramatically. The classic defined-benefit (DB) plan has largely been replaced by the defined contribution (DC) plan. With the latter, individual employees’ decisions about how much to save for retirement and how to invest those savings determine the benefits available upon retirement.

We analyze data from the 2015 National Financial Capability Study to show that people whose only exposure to investment decisions is by virtue of their participation in an employer-sponsored 401(k) plan are poorly equipped to make sound investment decisions. Specifically, they suffer from higher levels of financial illiteracy than other investors. …

Debt In Just Societies: A General Framework For Regulating Credit, John Linarelli

Scholarly Works

Debt presents a dilemma to societies: successful societies benefit from a substantial infrastructure of consumer, commercial, corporate, and sovereign debt but debt can cause substantial private and social harm. Pre- and post-crisis solutions have seesawed between subsidizing and restricting debt, between leveraging and deleveraging. A consensus exists among governments and international financial institutions that financial stability is the fundamental normative principle underlying financial regulation. Financial stability, however, is insensitive to equality concerns and can produce morally impermissible aggregations in which the least advantaged in a society are made worse off. Solutions based only on financial stability can restrict debt without …

Management-Based Regulation, Cary Coglianese, Shana M. Starobin

All Faculty Scholarship

Environmental regulators have embraced management-based regulation as a flexible instrument for addressing a range of important problems often poorly addressed by other types of regulations. Under management-based regulation, regulated firms must engage in management-related activities oriented toward addressing targeted problems—such as planning and analysis to mitigate risk and the implementation of internal management systems geared towards continuous improvement. In contrast with more restrictive forms of regulation which can impose one-size-fits-all solutions, management-based regulation offers firms greater operational choice about how to solve regulatory problems, leveraging firms’ internal informational advantage to innovate and search for alternative measures to achieve the intended …

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 …

The Oppressive Pressures Of Globalization And Neoliberalism On Mexican Maquiladora Garment Workers, Jenna Demeter

Pursuit - The Journal of Undergraduate Research at The University of Tennessee

The international economic trends of globalization and neoliberalism have exposed and enabled the exploitation of Mexican workers, especially women in the maquiladora garment industry. During the 1950s, globalization gave rise to the new international division of labor and transnational corporations (TNCs) that have offshored labor-intensive phases of production to developing countries, many of which have pursued export-led industrialization. Export processing in Mexico was encouraged in the 1960s by Item 807 of the U.S. Tariff Code and Mexico’s Border Industrialization Program. Especially following the Latin American debt crisis of the 1980s, advanced capitalist countries and International Financial Institutions foisted neoliberal structural …

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 …

Given Today's New Wave Of Protectionsim, Is Antitrust Law The Last Hope For Preserving A Free Global Economy Or Another Nail In Free Trade's Coffin?, Allison Murray

Loyola of Los Angeles International and Comparative Law Review

No abstract provided.

Curb Your Enthusiasm: The Rise Of Hedge Fund Activist Shareholders And The Duty Of Loyalty, Soo Young Hong

Fordham Journal of Corporate & Financial Law

Shareholder activism has been a growing problem in the corporate world, creating numerous dilemmas for the board of directors of companies. Activist shareholders can unsettle a company, pressuring the directors to make decisions according to the course of business the activists would prefer, and thus interfering with the traditional role of directors as the decision-makers of a company. With this new development in the business world, legal scholars have been debating if this activism needs to be controlled and, if so, what measures can be taken to reach a balance. This Note examines the traditional corporate principles such as the …

Securities Disclosure As Soundbite: The Case Of Ceo Pay Ratios, Steven A. Bank, George S. Georgiev

Faculty Articles

This Article analyzes the history, design, and effectiveness of the highly controversial CEO pay ratio disclosure rule, which went into effect in 2018. Based on a regulatory mandate contained in the Dodd-Frank Act of 2010, the rule requires public companies to disclose the ratio between CEO pay and median worker pay as part of their annual filings with the Securities and Exchange Commission (SEC). The seven-year rulemaking process was politically contentious and generated a level of public engagement that was virtually unprecedented in the long history of the SEC disclosure regime. The SEC sought to minimize compliance costs by providing …

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 …

Pobreza Multidimensional En El Pacífico Colombiano 2010 - 2016, Lizeth Dayana Manzano Murillo, Laura Antonia Maturana Cifuentes

Economía

La pobreza es un fenómeno presente en muchos países de mundo, y un problema prioritario en las políticas de desarrollo económico y social, por lo que se hace pertinente estudiarla de manera rigurosa, analizando sus determinantes, y sus vínculos con los diferentes factores socioeconómicos de la población. Como bien se sabe, el Pacífico Colombiano es la región más pobre del país; cuenta con el menor ingreso per cápita, y elevadas tasas de pobreza monetaria y multidimensional. El objetivo de esta monografía de grado es analizar la pobreza en el Pacífico Colombiano, considerando la aproximación multidimensional, implementando de manera detallada la …

Asarco Llc V. Atlantic Richfield Company, Ryan L. Hickey

Public Land & Resources Law Review

The Comprehensive Environmental Response, Compensation, and Liabiltiy Act, commonly known as CERCLA, facilitates cleanup of hazardous waste sites and those contaminated by other harmful substances by empowering the Environmental Protection Agency to identify responsible parties and require them to undertake or fund remediation. Because pollution sometimes occurrs over long periods of time by multiple parties, CERCLA also enables polluters to seek financial contribution from other contaminators of a particular site. The Ninth Circuit clarified the particuar circumstances under which contribution actions may arise in Asarco LLC v. Atlantic Richfield Co., holding non-CERCLA settlements may give rise to CERCLA contribution …

Big Data In Finance: Highlights From The Big Data In Finance Conference Hosted At The University Of Michigan October 27-28, 2016, Michael S. Barr, Brian Koziara, Mark D. Flood, Alfred Hero, H. V. Jagadish

Law & Economics Working Papers

How can financial data be made more accessible and more secure, as well as more useful to regulators, market participants, and the public? As new data sets are created, opportunities emerge. Vast quantities of financial data may help identify emerging risks, enable market participants and regulators to see and better understand financial networks and interconnections, enhance financial stability, bolster consumer protection, and increase access to the underserved. Data can also increase transparency in the financial system for market participants, regulators and the public. These data sets, however, can raise significant questions about security and privacy; ensuring data quality; protecting against …

Regulating Robo Advice Across The Financial Services Industry, Tom Baker, Benedict G. C. Dellaert

All Faculty Scholarship

Automated financial product advisors – “robo advisors” – are emerging across the financial services industry, helping consumers choose investments, banking products, and insurance policies. Robo advisors have the potential to lower the cost and increase the quality and transparency of financial advice for consumers. But they also pose significant new challenges for regulators who are accustomed to assessing human intermediaries. A well-designed robo advisor will be honest and competent, and it will recommend only suitable products. Because humans design and implement robo advisors, however, honesty, competence, and suitability cannot simply be assumed. Moreover, robo advisors pose new scale risks that …

The Rule Of Reason, Herbert J. Hovenkamp

All Faculty Scholarship

Antitrust’s rule of reason was born out of a thirty-year (1897-1927) division among Supreme Court Justices about the proper way to assess multi-firm restraints on competition. By the late 1920s the basic contours of the rule for restraints among competitors was roughly established. Antitrust policy toward vertical restraints remained much more unstable, however, largely because their effects were so poorly understood.

This article provides a litigation field guide for antitrust claims under the rule of reason – or more precisely, for situations when application of the rule of reason is likely. At the time pleadings are drafted and even up …