Law Commons^™

Duty And Diversity, Chris Bummer, Leo E. Strine Jr.

Ira M. Millstein Center for Global Markets and Corporate Ownership

In the wake of the brutal deaths of George Floyd and Breonna Taylor, lawmakers and corporate boards from Wall Street to the West Coast have introduced a slew of reforms aimed at increasing Diversity, Equity, and Inclusion (“DEI”) in corporations. Yet the reforms face difficulties ranging from possible constitutional challenges to critical limitations in their scale, scope, and degree of legal obligation and practical effects.

In this Article, we provide an old answer to the new questions facing DEI policy and offer the first close examination of how corporate law duties impel and facilitate corporate attention to diversity. Specifically, we …

Toward A Fair And Sustainable Corporate Governance System: Reflections On Leo Strine, Jr.'S Writing On Institutional Investors, Dorothy S. Lund

Faculty Scholarship

It is a privilege to contribute to this Festschrift for my friend, mentor, and co-author, Leo Strine, Jr. It is also a pleasure to revisit his vast body of work and to re-experience the breadth and depth of his scholarship, as well as reflect on his unparalleled influence on the development of corporate law that he brought about while presiding over its most influential courts for twenty-one years.

In thinking about this essay, I recalled a conversation that I had with “CJS” when I was serving as his law clerk. In this conversation, he decried (with James Taylor blasting in …

The Core Corporate Governance Puzzle: Contextualizing The Link To Performance, Merritt B. Fox, Ronald J. Gilson, Darius Palia

Faculty Scholarship

There is a puzzle at the core of corporate governance theory. Prior scholarship reports a strong relationship between firms best at creating shareholder value and those rated highly by the established corporate governance indices. Little work explores why, however. We hypothesize that the link between governance and performance depends centrally on context. We illustrate the importance of context by exploring circumstances when a firm's governance structure can operate as a signal of the quality of its management. The idea is that better managers are on average more likely to choose a highly rated governance structure than are bad managers because …

Is Corporate Governance A First Order Cause Of The Current Malaise?, Jeffrey N. Gordon

Faculty Scholarship

The US has evolved a regime of high-powered corporate governance in which managerial performance is disciplined through shareholder value metrics. This paper argues against over-stating the importance of this regime in creating problems of inequality, greater economic insecurity, and slower economic growth. Corporate governance acts principally as the transmission mechanism to the behaviour of the particular firm of changes in the global and domestic competitive environment. The critical problem is a risk-shift from shareholders, who now have access to robust diversification against firm-specific risks, and towards employees, whose concentrated firm-specific investments are hard to protect or diversify. The paper argues …

Sexual Harassment And Corporate Law, Daniel Hemel, Dorothy S. Lund

Faculty Scholarship

The #MeToo movement has shaken corporate America in recent months, leading to the departures of several high-profile executives as well as sharp stock price declines at a number of firms. Investors have taken notice and taken action: Shareholders at more than a half dozen publicly traded companies have filed lawsuits since the start of 2017 alleging that corporate fiduciaries breached state law duties or violated federal securities laws in connection with sexual harassment scandals. Additional suits are likely in the coming months.

This Article examines the role of corporate and securities law in regulating and remedying workplace sexual misconduct. We …

Convergence And Persistence In Corporate Law And Governance, Jeffrey N. Gordon

Faculty Scholarship

This chapter discusses the question of “convergence or persistence” in corporate law and governance. It first considers efforts to measure convergence directly by focusing on the evolution of law-on-the-books governance provisions before analyzing capital market evidence on convergence, with particular emphasis on capital market indicators such as the decline in “cross-listings” onto US stock exchanges by firms from jurisdictions with weaker investor protection and the increase in initial public offerings (IPOs) on emerging market stock markets. The chapter proceeds by reviewing evidence of divergence, especially “divergence within convergence,” and the failure of the European Union to produce more convergent corporate …

Toward A Constitutional Review Of The Poison Pill, Lucian A. Bebchuk, Robert J. Jackson Jr.

Ira M. Millstein Center for Global Markets and Corporate Ownership

We argue that the state-law rules governing poison pills are vulnerable to challenges based on preemption by the Williams Act. Such challenges, we show, could well have a major impact on the corporate law landscape.

The Williams Act established a federal regime regulating unsolicited tender offers, but states subsequently developed a body of state antitakeover laws that impose additional impediments to such offers. In a series of well-known cases during the 1970s and 1980s, the federal courts, including the Supreme Court, held some of these state antitakeover laws preempted by the Williams Act. To date, however, federal courts and commentators …

The Rise Of Independent Directors In The United States, 1950-2005: Of Shareholder Value And Stock Market Prices, Jeffrey N. Gordon

Faculty Scholarship

Between 1950 and 2005, the composition of large public company boards dramatically shifted towards independent directors, from approximately 20% independents to 75% independents. The standards for independence also became increasingly rigorous over the period. The available empirical evidence provides no convincing explanation for this change. This Article explains the trend in terms of two interrelated developments in U.S. political economy: first, the shift to shareholder value as the primary corporate objective; second, the greater informativeness of stock market prices. The overriding effect is to commit the firm to a shareholder wealth maximizing strategy as best measured by stock price performance. …