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Full-Text Articles in Law
Executives And Hedging: The Fragile Legal Foundation Of Incentive Compatibility, David M. Schizer
Executives And Hedging: The Fragile Legal Foundation Of Incentive Compatibility, David M. Schizer
Faculty Scholarship
Options are granted to executives to inspire better performance by tying pay to the employer's stock price. Yet this incentive rationale no longer holds if executives can use the derivatives market to simulate a sale of their options, a practice known as hedging. This Article evaluates the effectiveness of existing legal constraints on hedging by executives, including limits derived from contract, securities and tax law. Although investment bankers have been searching for ways around these constraints, the bottom line is that, at least for now, executives are unable to hedge option grants: While contractual limits are rare, the securities law …
Corporate Governance Lessons From Russian Enterprise Fiascoes, Merritt B. Fox, Michael A. Heller
Corporate Governance Lessons From Russian Enterprise Fiascoes, Merritt B. Fox, Michael A. Heller
Faculty Scholarship
This Article draws on a rich array of deviant behavior in Russian enterprises to craft lessons for corporate governance theory. First, Professors Fox and Heller define corporate governance by looking to the economic functions of the firm. Based on this definition, they develop a typology that comprehensively shows all the channels through which bad corporate governance can inflict damage on a country's real economy. Second, they explain the causes of Russian enterprise fiascoes by looking to the particular initial conditions prevailing at privatization – untenable firm boundaries and insider allocation of firm shares – and the bargaining dynamics that have …