Law Commons^™

Looking Back With A Legend: Ira Millstein Reflects On The Impact Of Milton Friedman's Views On Corporate Governance, Eric L. Talley, Ira M. Millstein, Leo E. Strine Jr.

Faculty Scholarship

In this discussion, corporate governance legend and frequent The Business Lawyer contributor Ira M. Millstein reflects on the impact of Milton Friedman and his adherents on our corporate governance system and economy generally, as well as the path forward to an economy that functions better for the many. Millstein takes an historical perspective in conversation with former Chief Justice and Chancellor of Delaware, Leo E. Strine, Jr., moderated by Professor Eric Talley of Columbia Law School. Millstein situates the evolution of our corporate governance system, including the effect of Friedman and the Chicago school on it, within the political dynamics …

Asking The Right Question: The Statutory Right Of Appraisal And Efficient Markets, Jonathan Macey, Joshua Mitts

Faculty Scholarship

In this article, we make several contributions to the literature on appraisal rights and cases in which courts assign values to a company's shares in the litigation context. First, we applaud the recent trend in Delaware cases to consider the market prices of the stock of the company being valued if that stock trades in an efficient market, and we defend this market-oriented methodology against claims that recent discoveries in behavioral finance indicate that share prices are unreliable due to various cognitive biases. Next, we propose that the framework and methodology for utilizing market prices be clarified. We maintain that …

Board 3.0: An Introduction, Ronald J. Gilson, Jeffrey N. Gordon

Faculty Scholarship

This essay sketches out the case for a new model for public company boards: Board 3.0. The now-dominant public board model is an organizational experiment begun approximately 40 years ago, which replaced a prior organizational form that had fallen short. The current model, the “monitoring board,” is dominated by part-time independent directors who are dependent on company management for information and are otherwise heavily influenced by stock market prices as the measure of managerial performance. We have seen a recurrent pattern of monitoring boards composed of talented people that fail to effectively monitor. Nevertheless, when companies fall short in business …

Understanding Enron: "It's About Gatekeepers, Stupid", John C. Coffee Jr.

Faculty Scholarship

What do we know after Enron's implosion that we did not know before it? The conventional wisdom is that the Enron debacle reveals basic weaknesses in our contemporary system of corporate governance. Perhaps, this is so, but where is the weakness located? Under what circumstances will critical systems fail? Major debacles of historical dimensions – and Enron is surely that – tend to produce an excess of explanations. In Enron's case, the firm's strange failure is becoming a virtual Rorschach test in which each commentator can see evidence confirming what he or she already believed.

Brave New World?: The Impact(S) Of The Internet On Modern Securities Regulation, John C. Coffee Jr.

Faculty Scholarship

It is now a trite commonplace that the advent of the Internet will in time revolutionize securities regulation. Merely the facts that the Internet has somewhere between thirty and sixty million users worldwide today (with an estimated ten to thirty million in the United States) and that some 800,000 U.S. investors already have online brokerage accounts establish that there is a potential global market that can be accessed at very low cost. But the magnitude of the market says little about what will be the character and effect of this approaching revolution.

Technological change is not a new phenomenon for …

Competition Versus Consolidation: The Significance Of Organizational Structure In Financial And Securities Regulation, John C. Coffee Jr.

Faculty Scholarship

It's as predictable as the swallows' return to Capistrano. At the outset of each new Administration, a Presidential Task Force proposes a restructuring of the federal administrative agencies. New developments in rapidly evolving markets, it is argued, require a consolidation of agencies to generate a broader perspective, to create a "level playing field," and to end the possibility of a "race to the bottom" (to the extent that market participants can opt for one regulatory system over another). The proposal draws little overt criticism, but turf-conscious agencies quietly mobilize their constituencies to oppose the reform. The first sign of trouble …

New Myths And Old Realities: The American Law Institute Faces The Derivative Action, John C. Coffee Jr.

Faculty Scholarship

Nothing in The American Law Institute's (ALI) Principles of Corporate Governance: Analysis and Recommendations (Principles) proved more controversial than the effort to develop fair and balanced standards for the derivative action. Only the topic of corporate takeovers seems to evoke an equally intense level of emotion among corporate lawyers. Not surprisingly then, Part VII (Remedies) of the Principles attracted the same attention from critics that a lightning rod does in a thunderstorm.

Unlike other ALI Restatements, however, the Principles also encountered a professional opposition, which lobbied against its adoption, both inside and outside the ALI, on behalf of various outside …

Delaware's Intermediate Standard For Defensive Tactics: Is There Substance To Proportionality Review?, Ronald J. Gilson, Reinier Kraakman

Faculty Scholarship

The courts have long struggled with a standard for reviewing management's efforts to deter or defeat hostile takeovers. The usual standards of review in corporate law, the business judgment rule and the intrinsic fairness test, do not seem adequate when courts must evaluate defensive measures that implicate both management's business acumen and its loyalty to shareholder interests. Because evaluating a sale of the company is a complex business decision, management's response to a takeover bid resembles the normal business decisions that the business judgment rule largely insulates from judicial review.At the same time, however, a hostile takeover creates a potential …