Corporate Finance Commons^™

Proxy Access And Optimal Standardization In Corporate Governance: An Empirical Analysis, Reilly S. Steel

Fordham Journal of Corporate & Financial Law

According to the conventional wisdom, “one size does not fit all” in corporate governance. Firms are heterogeneous with respect to their governance needs, implying that the optimal corporate governance structure must also vary from firm to firm. This one-size-does-not-fit-all axiom has featured prominently in arguments against numerous corporate law regulatory initiatives, including the SEC’s failed Rule 14a-11—an attempt to impose mandatory, uniform “proxy access” on all public companies—which the D.C. Circuit struck down for inadequate cost–benefit analysis.

This Article presents an alternative theory as to the role of standardization in corporate governance—in which investors prefer standardized terms—and empirical …

The Seventeenth Annual Albert A. Destefano Lecture On Corporate, Securities & Financial Law At The Fordham Corporate Law Center, Caroline M. Gentile, The Honorable Karen L. Valihura

Fordham Journal of Corporate & Financial Law

No abstract provided.

Protecting The Viability Of The Small Donor In Modern Elections, Ben Miller

Arkansas Law Review

Campaign finance reform stands as one of the most important issues in today’s modern elections. From national to municipal contests, the influx of large donations places wealthy individuals—and interests—at odds with the average voter. Over the years, volumes of academic and legislative reforms have been proposed that encompass a wide range of electoral subject matter. From Citizens United to Federal Elections Commission (FEC) control mechanisms, solutions on how to change our campaign finance regulatory regime cover a large and diverse area of law and policy. However, the central theme throughout these reforms is maximizing transparency and curbing the undue influence …

Cross Border Public Offering Of Securities In Fostering An Integrated Asean Securities Market: The Experiences Of Singapore, Malaysia And Thailand, Wai Yee Wan

Research Collection Yong Pung How School Of Law

In 2015, the Association of South-East Asian Nations (ASEAN) Economic Community was formally established and its aim was to achieve, among other things, an integrated securities market within ASEAN.

Before the formal establishment of the ASEAN Economic Community, in 2009, with a view towards achieving the objective of securities integration, Singapore, Malaysia and Thailand adopted the ASEAN Disclosure Standards, a set of harmonized disclosure standards for issuers making cross-border initial public offerings (IPOs). These participating Member States also entered into a framework for the expedited review for cross-listings. However, more than 5 years later, there is no documented use of …

Bitcoin And The Blockchain As Possible Corporate Governance Tools: Strengths And Weaknesses, Fiammetta S. Piazza

Penn State Journal of Law & International Affairs (2012 - Present)

No abstract provided.

Public Company Health Insurers And Medical Loss Ratios: An Event Study Of Dates Associated With The Affordable Care Act, Rachelle Quinn

Doctor of Business Administration (DBA)

The Affordable Care Act (ACA) has proved to be a contentious regulatory and political topic. Although key features were established within the law the complexity of the new provisions and political opposition resulted in a series of federal and state governmental process changes, rule clarifications, and legal challenges. One component of the ACA is the introduction of a federal Medical Loss Ratio (MLR), which requires insurers to spend specified percentages of their premium revenue dollars on medical services and quality improvement actions. If thresholds are not met, insurers must refund premiums to their members, potentially removing millions of dollars from …

Rethinking Corporate Governance For A Bondholder Financed, Systemically Risky World, Steven L. Schwarcz

William & Mary Law Review

This Article makes two arguments that, combined, demonstrate an important synergy: first, including bondholders in corporate governance could help to reduce systemic risk because bondholders are more risk averse than shareholders; second, corporate governance should include bondholders because bonds now dwarf equity as a source of corporate financing and bond prices are increasingly tied to firm performance.

You Can’T Stop What You Can’T See: Complementary Risk Mitigation Through Compensation Disclosure, Matt Reeder

William & Mary Business Law Review

Section 956 of the Dodd-Frank Act requires regulators to help prevent the next financial crisis by monitoring executive compensation arrangements to prevent them from becoming excessive or leading to “material financial loss.” A now-pending rule seeks to do just this. This Article argues that the rule is well-conceived inasmuch as it limits the total portion of compensation that can be based on risk-inducing incentives, ties incentive-based compensation to longer-term performance, places a ceiling on potential incentivebased earnings, provides for downward adjustment and clawbacks, prohibits many hedging behaviors, and institutionalizes governance mechanisms and oversight policies. But, by placing a number of …

Too Big To Fool: Moral Hazard, Bailouts, And Corporate Responsibility, Steven L. Schwarcz

Faculty Scholarship

Domestic and international regulatory efforts to prevent another financial crisis have been converging on the idea of trying to end the problem of “too big to fail”—that systemically important financial firms take excessive risks because they profit from success and are (or at least, expect to be) bailed out by government money to avoid failure. The legal solutions being advanced to control this morally hazardous behavior tend, however, to be inefficient, ineffective, or even dangerous—such as breaking up firms and limiting their size, which can reduce economies of scale and scope; or restricting central bank authority to bail out failing …

Controlling Systemic Risk Through Corporate Governance, Steven L. Schwarcz

Faculty Scholarship

Most of the regulatory measures to control excessive risk taking by systemically important firms are designed to reduce moral hazard and to align the interests of managers and investors. These measures may be flawed because they are based on questionable assumptions. Excessive corporate risk taking is, at its core, a corporate governance problem. Shareholder primacy requires managers to view the consequences of their firm’s risk taking only from the standpoint of the firm and its shareholders, ignoring harm to the public. In governing, managers of systemically important firms should also consider public harm. This proposal engages the long-standing debate whether …

Market Information And The Elite Law Firm, Elisabeth De Fontenay

Faculty Scholarship

As a subcategory of contract negotiations, corporate transactions present information problems that have not been fully analyzed. In particular, the literature does not address the possibility that parties may simply be unaware of value-increasing transaction terms or their outside option. Such unawareness can arise even for transactions that attract many competing parties, if the bargaining process is such that (1) the price terms are negotiated and fixed prior to the non-price terms, contrary to the standard assumption; and (2) some of the non-price terms remain private for some period of time.

A simple bargaining model shows that, when such unawareness …

The Role Of Social Enterprise And Hybrid Organizations, Ofer Eldar

Faculty Scholarship

Recent years have brought remarkable growth in hybrid organizations that combine profit-seeking and social missions. Despite popular enthusiasm for such organizations, legal reforms to facilitate their formation and growth—particularly, legal forms for hybrid firms—have largely been ineffective. This shortcoming stems in large part from the lack of a theory that identifies the structural and functional elements that make some types of hybrid organizations more effective than others. In pursuit of such a theory, this Article focuses on a large class of hybrid organizations that has been effective in addressing development problems, such as increasing access to capital and improving employment …

In Pursuit Of Good & Gold: Data Observations Of Employee Ownership & Impact Investment, Christopher Geczy, Jessica S. Jeffers, David K. Musto, Anne M. Tucker

Faculty Publications By Year

A startup's path to self-sustaining profitability is risky and hard, and most do not make it. Venture capital (VC) investors try to improve these odds with contractual terms that focus and sharpen employees' incentives to pursue gold. If the employees and investors expect the startup to balance the goal of profitability with another goal - the goal of good - the risks are likely to both grow and multiply. They grow to the extent that profits are threatened, and they multiply to the extent that balancing competing goals adds a dimension to the incentive problem. In this Article, we explore …

Regulating A Revolution: From Regulatory Sandboxes To Smart Regulation, Dirk A. Zetzsche, Ross P. Buckley, Janos N. Barberis, Douglas W. Arner

Fordham Journal of Corporate & Financial Law

Prior to the global financial crisis, financial innovation was viewed very positively, resulting in a laissez-faire, deregulatory approach to financial regulation. Since the crisis the regulatory pendulum has swung to the other extreme. Post-crisis regulation, plus rapid technological change, have spurred the development of financial technology (FinTech). FinTech firms and data-driven financial service providers profoundly challenge the current regulatory paradigm. Financial regulators increasingly seek to balance the traditional regulatory objectives of financial stability and consumer protection with promoting growth and innovation. The resulting regulatory innovations include RegTech, regulatory sandboxes, and special charters. This Article analyzes possible new regulatory approaches, ranging …

The Big Patent Short: Hedge Fund Challenges To Pharmaceutical Patents And The Need For Financial Regulation, Ariel D. Multak

Fordham Journal of Corporate & Financial Law

The enactment of the America Invents Act (AIA) in 2011 ushered in a new system for post-grant patent review. In the interest of enhancing the efficiency of the patent regime by invalidating “bad” patents, certain requirements were relaxed. For example, the AIA created an examination process called inter partes review, which allows a party without legal standing to challenge the validity of a patent in front of the Patent Trial and Appeal Board. In the pharmaceutical patent context, it was expected that inter partes review would be utilized mostly by generic drug makers seeking to invalidate patents without incurring the …

Quasi-Appraisal: Appraising Breach Of Duty Of Disclosure Claims Following "Cash-Out" Mergers In Delaware, Zachary A. Paiva

Fordham Journal of Corporate & Financial Law

In recent years, Delaware has served as the hot bed for the dramatic increase in merger appraisal litigation and the proliferation of “appraisal arbitrage” whereby opportunistic shareholders buy into companies following merger announcements and challenge announced deal prices as an investment strategy. While this has not always proved profitable, it has increased scrutiny over the Delaware appraisal regime and the ability for shareholders to avail themselves of the opportunity for a judicial valuation of their shares. Furthermore, it has highlighted information asymmetries in which controlling shareholders, particularly those seeking to cash out their minority shareholders, are incentivized to underpay or …

Proxy Access And Optimal Standardization In Corporate Governance: An Empirical Analysis, Reilly S. Steel

Faculty Scholarship

According to the conventional wisdom, “one size does not fit all” in corporate governance. Firms are heterogeneous with respect to their governance needs, implying that the optimal corporate governance structure must also vary from firm to firm. This one-size-does-not-fit-all axiom has featured prominently in arguments against numerous corporate law regulatory initiatives, including the SEC’s failed Rule 14a-11 — an attempt to impose mandatory, uniform “proxy access” on all public companies — which the D.C. Circuit struck down for inadequate cost-benefit analysis.

This Article presents an alternative theory as to the role of standardization in corporate governance — in which investors …

Rethinking Corporate Governance For A Bondholder Financed, Systemically Risky World, Steven L. Schwarcz

Faculty Scholarship

This Article makes two arguments that, combined, demonstrate an important synergy: first, including bondholders in corporate governance could help to reduce systemic risk because bondholders are more risk averse than shareholders; second, corporate governance should include bondholders because bonds now dwarf equity as a source of corporate financing and bond prices are increasingly tied to firm performance.

Regulatory Competition And The Market For Corporate Law, Ofer Eldar, Lorenzo Magnolfi

Faculty Scholarship

This article develops an empirical model of firms’ choice of corporate laws under inertia. Delaware dominates the incorporation market, though recently Nevada, a state whose laws are highly protective of managers, has acquired a sizable market share. Using a novel database of incorporation decisions from 1995- 2013, we show that most firms dislike protectionist laws, such as anti-takeover statutes and liability protections for officers, and that Nevada’s rise is due to the preferences of small firms.Our estimates indicate that despite inertia, Delaware would lose significant market share and revenues if it adopted protectionist laws. Our findings support the hypothesis that …

The Deregulation Of Private Capital And The Decline Of The Public Company, Elisabeth De Fontenay

Faculty Scholarship

From its inception, the federal securities law regime created and enforced a major divide between public and private capital raising. Firms that chose to “go public” took on substantial disclosure burdens, but in exchange were given the exclusive right to raise capital from the general public. Over time, however, the disclosure quid pro quo has been subverted: Public companies are still asked to disclose, yet capital is flooding into private companies with regulators’ blessing.

This Article provides a critique of the new public-private divide centered on its information effects. While regulators may have hoped for both the private and public …

Is Corporate Integration A Good Idea?, Reuven S. Avi-Yonah, David Burton, Curtis Dubay, David S. Miller, Steven T. Miller, Stuart L. Rosow, Eric Toder, Alan D. Viard, Richard A. Westin

Other Publications

In general, I believe that integration is advisable as a way of addressing the biases of the classical system against using the corporate form, in favor of retaining earnings, and in favor of debt financing.

In terms of the bias against the corporate form, dividend deduction is as good as dividend exemption or imputation. In all three cases, there is only one level of tax imposed, at the shareholder level for dividend deduction or imputation, and at the corporate level for dividend exemption. If the top shareholder tax rate is higher than the corporate tax rate, both imputation and dividend …

Protecting Reasonable Expectations: Mapping The Trajectory Of The Law, Edward J. Waitzer, Douglas Sarro

Articles & Book Chapters

The doctrine of reasonable expectations has evolved into a powerful tool for judicial and regulatory activism and, as a result, a bellwether for the trajectory of the law. The concept has broadened — both in scope and in the range of potential claimants. Yet it has been used to achieve goals that are remarkably consistent across different areas of law: first, to require powerful actors to treat stakeholders fairly, which entails treating them with honesty and avoiding actions that would impose unnecessary or disproportionate costs on them; second, to uphold the integrity of legal or regulatory regimes by remedying actions …

Agency Costs In Law-Firm Selection: Are Companies Under-Spending On Counsel?, Elisabeth De Fontenay

Faculty Scholarship

A growing body of literature examines whether corporate clients derive sufficient value from the law firms that they engage. Yet little attention has been paid to whether clients optimally select among law firms in the first place. One entry-point is to identify discrepancies in the quality of counsel selected by different corporate clients for the very same work. Using a large sample of loans, this Article finds that major U.S. public companies select lower-ranked law firms for their financing transactions than do private equity-owned companies, controlling for various deal characteristics. While some of this discrepancy can be attributed to value-maximizing …

Corporations And The 99%: Team Production Revisited, Shlomitt Azgad-Tromer

Fordham Journal of Corporate & Financial Law

This Article explores the legal manifestation of the interaction between the general public and the public corporation. Revisiting team production analysis, this Article redefines the corporate team and argues that while several constituencies indeed form part of the corporate team, others are exogenous to the corporate enterprise. Employees, suppliers and financiers contribute together to the common corporate enterprise, enjoying a long-term relational contract with the corporation, while retail consumers contract with the corporation at arm’s length, and other people living alongside the corporation do not contract with it at all. Under this organizational model, the general public may participate in …

Corporate Reorganisation Of China’S Listed Companies: Winners And Losers, Zinian Zhang

Research Collection Yong Pung How School Of Law

This article is the first empirical study investigating the corporate reorganisation of Chinese domestically-listed companies. Through examining these cases, it challenges the assertion made by most of these corporate reorganisation plans and by Chinese state-run media reports that creditors and general public shareholders were the major beneficiaries. Through an analysis of the data generated from all forth-three such cases, this articles reveals that: First, unsecured creditors could have, on average, received 61.37% more of their claims if the fundamental value distribution principle, the absolute priority norm, could have been complied with in these reorganisations; Second, if the general-public-shareholder-protection scheme issued …

The "Director Preference" In Stockholder Litigation, Megan Wischmeier Shaner

Faculty Articles

Stockholders are widely viewed as the owners of and residual claimants to the assets of a corporation. Management of a corporation, by contrast, is entrusted to paid managers – the board of directors and executive officers. To prevent both directors and officers from managing the corporation for their personal benefit without regard to the interests of stockholders, stockholders have the ability to sue for such behavior as a breach of fiduciary duty. But in practice, directors are the primary focus of this type of stockholder litigation while officers are largely ignored – a phenomenon this paper labels the “director preference.” …

Keynote Address, Regulating Corporate Governance In The Public Interest: The Case Of Systemic Risk, Steven L. Schwarcz

Faculty Scholarship

There’s long been a debate whether corporate governance law should require some duty to the public. The accepted wisdom is not to require such a duty—that corporate profit maximization provides jobs and other public benefits that exceed any harm. This is especially true, the argument goes, because imposing specific regulatory requirements and making certain actions illegal or tortious can mitigate the harm without unduly impairing corporate wealth production. Whether that is true in other contexts, this paper—delivered as the keynote address at the June 2016 National Business Law Scholars Conference at The University of Chicago Law School—questions if it’s true …

The Fate Of $15, John S. Spina

Capstones

The Fight for $15 is reinvigorating the labor moment in ways people never thought possible. In just over three years it spanned the nation and won increased minimum wages in major cites across the country. Governor Cuomo now prepares to pass the nation's first state wide $15 minimum wage in New York, but not without strong opposition.

Locked In: The Competitive Disadvantage Of Citizen Shareholders, Anne M. Tucker

Faculty Publications By Year

In this Essay, I challenge the conventional corporate law wisdom that unhappy mutual fund investors paying high fees don’t need litigation or regulation to protect their interests because they should simply exit a fund and reinvest elsewhere. The exit solution, advanced by Professors John Morley and Quinn Curtis in Taking Exit Rights Seriously provided an elegantly simply solution to the problem of unhappy indirect investors (e.g., mutual fund investors) given that they are often low-dollar, low-incentive, rationally-apathetic investors facing enormous information asymmetries and collective action problems. According to their view, competition produced by exit, or the threat of exit, is …

For-Profit Schools: A History Of Abuse And The Need For Reform, Stephanie N. Morse

Brigham Young University Education and Law Journal

No abstract provided.