Law Commons^™

Bring On 'Da Noise: The Sec's Proposals Concerning Professional Conduct For Attorneys Under Sarbanes-Oxley, Marilyn Blumberg Cane, Sarah Smith Kelleher

Faculty Scholarship

In the wake of Enron's and numerous other corporate scandals, Congress enacted the Sarbanes-Oxley Act, which empowered the Securities and Exchange Commission (the Commission) to establish rules of professional conduct for attorneys who appear before it. In November 2002, the Commission released a proposal where attorneys would be required to report perceived violations of corporate governance and Commission rules up-the-ladder. Additionally, if the company failed to make an appropriate response, the attorney would be required to make a noisy withdrawal. After an onslaught of comments against the proposal, the Commission issued an alternative proposal for comment.

Under the alternative rule, …

Making Sense Of Successor Liability, Marie T. Reilly

Journal Articles

A firm that buys assets from another firm ordinarily does not acquire liability to the seller's creditors simply by buying its assets. This ordinary rule is subject to important exceptions. The buyer's consent triggers an exception. If a buyer agrees to assume the seller's liability to third parties, it is for that reason liable. This article considers a more controversial exception - successor liability. When a court decides that an asset acquirer should be treated as a "successor" to the transferor, it is liable for the transferor's debts as though it were the transferor.

After Enron: Remembering Loyalty Discourse In Corporate Law, Lyman P.Q. Johnson

Scholarly Articles

The demise of monetary damages as a remedy for breach of the corporate director duty of due care means that only a breach of the duty of loyalty or good faith affords the possibility of holding corporate directors personally liable for wrongdoing. The author argues that the fiduciary duty of loyalty contains both a widely appreciated, but rather minimal, "non-betrayal" aspect and a less appreciated, but more affirmative, "devotion" dimension. The affirmative. thrust of loyalty, grounded in widely-shared cultural norms and finding expression in myriad literary and religious stories, offers a doctrinal avenue for addressing a potentially broader range of …

A Flaw In The Sarbanes-Oxley Reform: Can Diversity In The Boardroom Quell Corporate Corruption?, Steven A. Ramirez

Faculty Publications & Other Works

No abstract provided.

The George A. Leet Business Law Symposium: The Role Of Lawyers In Strategic Alliances - Introduction, George W. Dent

Faculty Publications

Introducation to The George A. Leet Business Law Symposium: The Role of Lawyers in Strategic Alliances, Cleveland, Ohio.

Price Theory, Competition, And The Rule Of Reason, Alan J. Meese

Faculty Publications

Challenging traditional antitrust jurisprudence, Professor Alan J. Meese argues that the present structure of Rule of Reason analysis, applied pursuant to Standard Oil v. United States, has become outdated. The Rule of Reason as currently applied by the courts rests upon neoclassical price theory, an economic paradigm that assumes that legitimate competition consists of unbridled technological rivalry, unconstrained by nonstandard contracts. Recently, however, the Supreme Court has begun to apply a competing paradigm- Transaction Cost Economics-when determining whether a contract is unreasonable "per se" or instead deserving of Rule of Reason scrutiny. Professor Meese argues that Transaction Cost Economics more …

Should Directors Reduce Executive Pay?, Randall Thomas

Vanderbilt Law School Faculty Publications

This paper examines internal pay disparities in American public corporations and argues that wide gaps between the top and bottom of the pay scale can, in certain circumstances, directly and adversely affect firm value, that corporate boards should be informed about these effects, and that they should, in some cases, reduce internal pay differentials to address them. In support of this thesis, it analyzes numerous empirical studies that have shown that wide disparities in corporate pay scales can adversely affect firm value. These studies demonstrate that, at many types of organizations, as internal pay differentials grow, employees and lower level …

Locking In Capital: What Corporate Law Achieved For Business Organizers In The Nineteenth Century, Margaret M. Blair

Vanderbilt Law School Faculty Publications

This Article argues that corporate status became popular in the nineteenth century as a way to organize production because of the unique manner in which incorporation permitted organizers to lock in financial capital. Unlike participants in a partnership, shareholders in an incorporated enterprise could not extract capital from the firm without explicit approval of a board of directors charged with representing the interests of the incorporated entity, even when that interest might sometimes conflict with the interests of individual shareholders. While this ability to lock in capital has occasionally led to abuses, the ability to commit capital generally helped promote …

Corporate Policy And The Coherence Of Delaware Takeover Law, Richard E. Kihlstrom, Michael L. Wachter

All Faculty Scholarship

This Article presents a model that can be used to explain key elements of Delaware takeover law. By incorporating corporate policy as a key variable in the model, Delaware law’s management discretion rule can be shown to be best suited for maximizing the value of the corporation and the shareholders’ interest under a set of reasonable assumptions. By allowing for occasional market mispricing and the agency costs associated with managing to the market, we demonstrate that a shareholder choice regime would likely lead to suboptimal investment decisions. In our model, managers are assumed to have better information regarding alternative corporate …

Corporate Constitutionalism: Antitakeover Charter Provisions As Pre-Commitment, Marcel Kahan, Edward B. Rock

All Faculty Scholarship

Constitutions constitute a polity and create and entrench power. A corporate constitution - the governance choices incorporated in state law and the certificate of incorporation - resembles a political constitution. Delaware law allows parties to create corporations, to endow them with perpetual life, to assign rights and duties to "citizens" (directors and shareholders), to adopt a great variety of governance structures, and to entrench those choices. In this Article, we argue that the decision to endow directors with significant power over decisions whether and how to sell the company is a constitutional choice of governance structure. We then argue that …

Not Our Grandparents' Partnership Statute, Mark Anderson

Articles

No abstract provided.

Proportionate Liability Under The Cbca In The Context Of Recent Corporate Governance Reform: Canadian Auditors In The Wrong Place At The Wrong Time?, Poonam Puri, Stephanie Ben-Ishai

Articles & Book Chapters

In the recent Canada Business Corporations Act amendments implementing a proportionate liability scheme, auditors appear to be winners. This is consistent with the trend in the past several years as a result of which Canadian auditors have been successful in narrowing the scope of their liability both through legislation and through common law. Going forward, however, it is fair to say that auditors will be losers unless the accounting profession re-evaluates its role and responsibilities to its stakeholders. Given the accounting and corporate governance scandals North America has witnessed in the past few years, as well as the actual and …

When Clients Do Bad Things: The Lawyer's Response To Corporate Wrongdoing, Craig M. Bradley

Articles by Maurer Faculty

The high profile meltdowns of Enron, WorldCom, Tyco, Adelphia, Global Crossing and other well-known companies have focused attention on the responsibilities of corporate gatekeepers, including attorneys, to deter or expose fraudulent conduct by their clients and associated persons. Attorneys have been the subject of investigation and criticism by Congress' and federal regulators for failing to adequately respond to their clients' fraudulent (and, possibly, criminal) conduct. The lawyer who learns that his or her client or persons acting on its behalf are engaged in a course of fraudulent or criminal conduct which threatens economic losses to non-client third parties faces both …

A Jurisdictional Approach To Collapsing Corporate Distinctions, Peter B. Oh

Articles

This article challenges our persistent path dependence on defunct distinctions between corporations and certain limited unincorporated associations. Recent federal tax regulations have inspired proposals for consolidated treatment of all limited business organizations through uniformly based or universally applicable statutes. I contend these proposals are preoccupied with how hybrid organizations such as the limited liability company and the limited liability partnership amalgamate, and thus implicitly preserve, traditional dichotomies between corporations and partnership categorizations as well as entities and aggregate theories. The continued use of these schemes compromises the legal basis for such proposals.

By critically examining certain jurisdictional principles, this article …

Keeping The Wheels On The Wagon: Observations On Issues Of Legal Ethics For Lawyers Representing Business Organizations, Irma S. Russell

Faculty Works

No abstract provided.

Gprady, William K. Black

Faculty Works

No abstract provided.

Qualified Legal Compliance Committee: Using The Attorney Conduct Rules To Restructure The Board Of Directors, The Thirty-Third Annual Administrative Law Issue Agencies, Economic Justice, And Private Initiatives, Jill E. Fisch, Caroline M. Gentile

Faculty Scholarship

The Securities and Exchange Commission introduced a new corporate governance structure, the qualified legal compliance committee, as part of the professional standards of conduct for attorneys mandated by the Sarbanes-Oxley Act of 2002. QLCCs are consistent with the Commission's general approach to improving corporate governance through specialized committees of independent directors. This Article suggests, however, that assessing the benefits and costs of creating QLCCs may be more complex than is initially apparent. Importantly, QLCCs are unlikely to be effective in the absence of incentives for active director monitoring. This Article concludes by considering three ways of increasing these incentives.

Sorting Through The Soup: How Do Llcs, Llps And Lllps Fit Withing The Regulations And Legal Doctrines?, Daniel S. Kleinberger

Faculty Scholarship

In a children' book published in 1946, Ben Ross Berenberg described an imaginary amalgam called the churkendoose - "part chicken, turkey, duck and goose." In 1977, Wyoming invented a business law churkendoose: the limited liability company - part corporation, part general partnership, part limited partnership. That churkendoose has revolutionized the law of business organizations, becoming the vehicle of choice for tens of thousands of ventures every month and causing the IRS to radically overhaul its approach to taxing business entities. This article explores how preexisting regulatory and common law apply to LLCs and the related organizations known as limited liability …

Raising Rivals' Costs: Can The Agencies Do More Good Than Harm?, Alan J. Meese

Faculty Publications

No abstract provided.

The Role Of Lawyers In Strategic Alliances, George W. Dent

Faculty Publications

No abstract provided.

On The Proper Motives Of Corporate Directors (Or, Why You Don't Want To Invite Homo Economicus To Join Your Board), Lynn A. Stout

Cornell Law Faculty Publications

One of the most important questions in corporate governance is how directors of public corporations can be motivated to serve the interests of the firm. Directors frequently hold only small stakes in the companies they manage. Moreover, a variety of legal rules and contractual arrangements insulate them from liability for business failures. Why then should we expect them to do a good job?

Conventional corporate scholarship has great difficulty wrestling with this question, in large part because conventional scholarship usually adopts the economist's assumption that directors are rational actors motivated purely by self-interest. This homo economicus model of behavior may …

Summary Of Nittinger V. Holman, Cami Perkins

Nevada Supreme Court Summaries

Respondents, Dedric Holman and Christina Edwards, were gambling at the Gold Coast Hotel when a physical confrontation arose between John Nittinger, a security guard, and Holman. When Holman tried to run, security officers pursued him and held him to the ground. According to Holman’s testimony, the guards made racial slurs, punched, kicked and beat him. The security shift supervisor was present during part of the incident. The district court instructed the jury that it could find the Gold Coast liable for punitive damages if a “managerial agent” authorized or ratified the guards’ conduct. The jury awarded respondents $198,000 in compensatory …

Improving Charitable Accountability, James J. Fishman

Elisabeth Haub School of Law Faculty Publications

This Article focuses upon a persistent problem of the nonprofit sector--its lack of accountability to the public. Director, officer, and organizational responsibilities will be analyzed. Past and current approaches to secure accountability of charitable assets will be discussed, and a proposal for improving charitable accountability will be suggested through the creation of public-private charity commissions at the state level under the aegis of the attorney general.

Risk Management And Organizational Governance: The Case Of Enron, Robert Eli Rosen

Articles

No abstract provided.

Enron - When All Systems Fail: Creative Destruction Or Roadmap To Corporate Governance Reform?, Douglas M. Branson

Articles

This article raises the unthinkable proposition (for academics at least) that Enron may have been an aberration. The Enron debacle may have been the rare case in which nine, ten or more sets of monitors and gatekeepers failed. Alternatively, as with Tyco, WorldCom, Adelphia, Rite Aid or other celebrated corporate "busts," Enron may be the handiwork of one or two well placed wrongdoers, in this case, CFO Andrew Fastow. Enron then may not be the pathway to meaningful reform at all.

The article next proceeds to a critical review of Sarbanes-Oxley's principal provisions. The conclusion reached is that by and …

Shareholder Value And Auditor Independence, William W. Bratton

All Faculty Scholarship

This Article questions the practice of framing problems concerning auditors’ professional responsibility inside a principal-agent paradigm. If professional independence is to be achieved, auditors cannot be enmeshed in agency relationships with the shareholders of their audit clients. As agents, the auditors by definition become subject to the principal’s control and cannot act independently. For the same reason, auditors’ duties should be neither articulated in the framework of corporate law fiduciary duty, nor conceived relationally at all. These assertions follow from an inquiry into the operative notion of the shareholder-beneficiary. The Article unpacks the notion of the shareholder and tells a …

Avoiding Moral Bankruptcy, David A. Skeel Jr.

All Faculty Scholarship

Faced with hundreds of clergy sexual misconduct cases last year, the Archdiocese of Boston hinted that it was considering filing for bankruptcy. Although it is hard to imagine an archdiocese or church filing for bankruptcy, bankruptcy has become an important forum for many social issues that cannot be easily resolved elsewhere. This Article explores the implications of a religious organization bankruptcy filing by focusing on four problems with the bankruptcy alternative: the possibility of dismissal for being filed in bad faith; the question of what church assets are subject to the process; the fact that the church might be subject …

Is There A Role For Lawyers In Preventing Future Enrons?, Jill E. Fisch, Kenneth M. Rosen

All Faculty Scholarship

Following the collapse of the Enron Corporation, the ethical obligations of corporate attorneys have received increased scrutiny. The Sarbanes-Oxley Act of 2002, enacted in response to calls for corporate reform, specifically requires the Securities and Exchange Commission to address the lawyer’s role by requiring covered attorneys to “report up” evidence of corporate wrongdoing to key corporate officers, and, in some circumstances, to the board of directors. Failure to “report up” subjects a lawyer to liability under federal law.

This Article argues that the reporting up requirement reflects a second-best approach to corporate governance reform. Rather than focusing on the actors …

The Qualified Legal Compliance Committee: Using The Attorney Conduct Rules To Restructure The Board Of Directors, Jill E. Fisch, Caroline M. Gentile

All Faculty Scholarship

The Securities and Exchange Commission introduced a new corporate governance structure, the qualified legal compliance committee, as part of the professional standards of conduct for attorneys mandated by the Sarbanes-Oxley Act of 2002. QLCCs are consistent with the Commission’s general approach to improving corporate governance through specialized committees of independent directors. This Article suggests, however, that assessing the benefits and costs of creating QLCCs may be more complex than is initially apparent. Importantly, QLCCs are unlikely to be effective in the absence of incentives for active director monitoring. This Article concludes by considering three ways of increasing these incentives.

How To Fix Wall Street: A Voucher Financing Proposal For Securities Intermediaries, Stephen Choi, Jill E. Fisch

All Faculty Scholarship

No abstract provided.