Law Commons^™

Mtic (Carousel) Fraud: Twelve Ways Forward; Two Ways 'Preferred' - Has The Technology-Based Administrative Solution Been Rejected?, Richard Thompson Ainsworth

Faculty Scholarship

In a May 31, 2006 Communication to the Council, the European Parliament, and the European Economic and Social Committee, the European Commission indicated a need to develop a co-ordinated strategy to improve the fight against fiscal fraud [COM(2006) 254 final]. Although the Communication considers fiscal fraud broadly (VAT, excise duties and direct taxes) the most pressing need seems to be for a VAT strategy that will effectively deal with MTIC (Missing Trader Intra-Community) or carousel fraud. To this end the Commission hosted a conference: Fiscal Fraud - Tackling VAT Fraud: Possible Ways Forward. The March 29, 2007 conference was constructed …

Corporate Governance, Enforcement, And Firm Value: Evidence From India, Dhammika Dharmapala, Vikramaditya Khanna

Law & Economics Working Papers Archive: 2003-2009

This paper analyzes the effects of corporate governance reforms and enforcement on stock market development and firm value, using a sequence of corporate governance reforms in India. Our results, taken together, present a strong case for a causal effect of the reforms on firm value, and also underscore the importance of enforcement. The reforms (referred to as Clause 49 of the listing agreement) were phased in over the period 2000-2003. A large number of firms were completely exempt from the new rules, and the complex criteria for the application of Clause 49 created considerable overlap in the characteristics of affected …

Individual Or Collective Liability For Corporate Directors?, Darian M. Ibrahim

Faculty Publications

Fiduciary duty is one of the most litigated areas in corporate law and the subject of much academic attention, yet one important question has been ignored: Should fiduciary liability be assessed individually, where directors are examined one-by-one for compliance, or collectively, where the board's compliance as a whole is all that matters? The choice between individual and collective assessment may be the difference between a director's liability and her exoneration, may affect how boards function, and informs the broader fiduciary duty literature in important ways. This Article is the first to explore the individual/collective question and suggest a systematic way …

Fiduciary Duties For Activist Shareholders, Iman Anabtawi, Lynn A. Stout

Cornell Law Faculty Publications

Corporate law and scholarship generally assume that professional managers control public corporations, while shareholders play only a weak and passive role. As a result, corporate officers and directors are understood to be subject to extensive fiduciary duties, while shareholders traditionally have been thought to have far more limited obligations. Outside the contexts of controlling shareholders and closely held firms, many experts argue shareholders have no duties at all.

The most important trend in corporate governance today, however, is the move toward "shareholder democracy." Changes in financial markets, in business practice, and in corporate law have given minority shareholders in public …

Summary Of Nevada Classified Sch. Emp. Ass’N V. Quaglia, 124 Nev. Adv. Op. No. 6, Emily Reed

Nevada Supreme Court Summaries

Appellant is Nevada Classified School Employees Association (NCSEA). NCSEA is a non profit corporation with multiple chapters whose members are Nevada public school district employees. NCSEA is governed by its articles of incorporation and bylaws. The articles of incorporation require each member have equal voting power. “[T]he bylaws state that ‘each Chapter shall be entitled to one (1) Delegate for every fifty (50) members or part thereof, with a maximum of seven (7) Delegates.’”2 In 2003, at the annual delegate conference, the NCSEA passed an amendment to article III, section 3 of the bylaws. Prior to the amendment, section three …

Zappers: Tax Fraud, Technology And Terrorist Funding, Richard Thompson Ainsworth

Faculty Scholarship

"Zappers," or automated sales suppression devices, have brought unheard of efficiencies and economies of scale to a very simple tax fraud - skimming cash sales at point of sale (POS) terminals (electronic cash registers). Until recently the largest tax fraud case in Connecticut, also the "largest computer driven tax-evasion case in the nation," was a zapper case. Stew Leonard's Dairy in Norwalk Connecticut skimmed $17 million in receipts and hid the cash in St. Martin (a Caribbean island). Talal Chahine and his wife, Elfat El Aouar, owners of the La Shish restaurant chain in Detroit Michigan have the dubious honor …

The Use Of The Corporate Monitor In Sec Enforcement Actions, Jennifer O'Hare

Working Paper Series

This paper addresses the SEC’s recent use of the corporate monitor as ancillary relief in its enforcement actions. The corporate monitor represents the latest example of the SEC seeking to shift its enforcement responsibilities to the public companies it regulates. Focusing on the role played by the corporate monitor imposed by the SEC in its enforcement action brought against WorldCom, this paper considers some of the dangers posed by the use of the corporate monitor, such as the whether the appointment of a corporate monitor constitutes impermissible overreaching by the SEC. The paper recognizes that the corporate monitor can be …

What Explains Insider Trading Restrictions? International Evidence On The Political Economy Of Insider Trading Regulation, Laura N. Beny

Law & Economics Working Papers Archive: 2003-2009

This article investigates the determinants of insider trading regulation across countries. The article presents a political economy analysis of such regulation that takes into account both private (distributional) and public (economic efficiency) considerations. The model cannot be tested directly because the relevant private preferences and social costs are unobservable. However, existing theories of capital market development suggest that various observable social factors can explain the diversity of insider trading policies across countries. In turn, these social factors should reveal the underlying preferences and social costs motivating such regulation.

The main finding, based on data from a cross section of countries …

It-Apas - Vertical Harmonization Of Transfer - Pricing Standards, Richard Thompson Ainsworth

Faculty Scholarship

The World Customs Organization (WCO) and the Organization of Economic Cooperation and Development (OECD) have begun considering the harmonization of transfer pricing norms among income tax, customs and VAT regimes. Two conferences have been organized in May of 2006 and 2007.

These conferences have concluded so far: (a) that more analysis is needed; (b) that harmonization will require adjustments on all sides; and (c) that pilot projects (real world statutory and administrative efforts to harmonize) or case studies in harmonization (hypothetical fact patterns) are needed to facilitate consideration. This paper assesses the three basic paths being pursued at the present …

The Function Of "Dysfunctional" Boards, Franklin A. Gevurtz

McGeorge School of Law Scholarly Articles

No abstract provided.

Do Delaware Ceos Get Fired?, Murali Jagannathan, Adam C. Pritchard

Law & Economics Working Papers Archive: 2003-2009

Critics have charged that state competition in corporate law, which Delaware dominates, leads to a “race to the bottom” making management unaccountable. One metric of management accountability is forced CEO turnover, which we use to test the race to the bottom hypothesis. We compare California firms that choose to incorporate in California – the state with arguably the most restrictive corporate law rules – with those that incorporate in Delaware. We show that aspects of Delaware law attract firms that plan to grow through merger or acquisition and are vulnerable to shareholder lawsuits. We also document differences in corporate governance …

Talking Governance: Board-Shareowner Communications On Executive Compensation, Stephen Davis, Stephen Alogna

Ira M. Millstein Center for Global Markets and Corporate Ownership

Advantages stemming from board-shareowner communications on governance and executive pay outweigh the potential risks and costs of such dialogue. Regulation FD in the US should be seen as a caution rather than a barrier to such communication. Prompted by universal adoption of advisory ‘say on pay’ resolutions, UK companies have moved to integrate regular engagement with domestic investors into the annual process of framing corporate remuneration policies. Most US companies have not fully endeavored to engage their shareowners in the same manner, but some—motivated sometimes by crises—are experimenting with various models of dialogue. Companies can best manage effective engagement when …

Board Dysfunction: Dealing With The Threat Of Corporate Criminal Liability, Peter J. Henning

Law Faculty Research Publications

No abstract provided.

Corporate Ethics, Agency, And The Theory Of The Firm, Robert J. Rhee

Faculty Scholarship

This conference paper suggests that the problem of corporate ethics cannot be reduced to the autonomous person. Although the greatest influence on action and choice is one's moral constitution, it does not follow that the agent's behavior is the same within or without the firm. Ethics is a function of corporate form. The theory of agency cannot dismiss the firm as a fiction or metaphorical shorthand since that which does not exist should not be able to cause ethical breakdowns in corporate action. Thus, the theory of the firm, which emphasizes profit and wealth maximization, should incorporate a richer, more …

The Impact Of The Sarbanes-Oxley Act On Non-Shareholder Constituents: A Silver Lining, But Will It Endure?, Lisa M. Fairfax

Faculty Scholarship

No abstract provided.

Corporate Misconduct And The Perfect Storm Of Shareholder Litigation, Jessica M. Erickson

Law Faculty Publications

When it comes to combating corporate misconduct, is more litigation necessarily better? The conventional wisdom is that we should deploy every weapon in the law's arsenal to combat corporate misconduct. This wisdom, however, reflects legal scholarship that is confined to analyzing securities class actions and derivative suits in isolation, with little inquiry into the interplay between them. By Jailing to take a broader view of shareholder litigation, legal scholars have missed an opportunity to provide courts with the conceptual tools necessary to meet the complex challenges of complex corporate litigation. In courtrooms and boardrooms across the country, a debate is …

A Fresh Look At Director "Independence": Mutual Fund Fee Litigation And Gartenberg At Twenty-Five, Lyman P.Q. Johnson

Scholarly Articles

This article contrasts how a robust conception of director independence plays a central role in the corporate law world while, in the mutual fund industry, independence is a shrunken conception playing only a marginal role. Over the last twenty-five years, director independence in corporate law has gained wide acceptance as being desirable and it has become a critical component of fiduciary duty analysis. Within the mutual fund industry, however, independence remains fiercely contested. The more obvious battle over independence has occurred in response to the Securities and Exchange Commission's ("SEC's") rulemaking effort to alter the standard for granting certain regulatory …

Enterprise-Wide Risk Management And Corporate Governance., Steven A. Ramirez

Faculty Publications & Other Works

No abstract provided.

Sentencing High-Loss Corporate Insider Frauds After Booker, Frank O. Bowman Iii

Faculty Publications

The Federal Sentencing Guidelines have for some years prescribed substantial sentences for high-level corporate officials convicted of large frauds. Guidelines sentences for offenders of this type moved higher in 2001 with the passage of the Economic Crime Package amendments to the Guidelines, and higher still in the wake of the Sarbanes-Oxley Act of 2002. Today, any corporate insider convicted of even a moderately high-loss fraud is facing a guideline range measured in decades, or perhaps even mandatory life imprisonment. Successful sentencing advocacy on behalf of such defendants requires convincing the court to impose a sentence outside (in many cases, far …

Understanding The ‘Corporate’ In Corporate Social Responsibility, Barak D. Richman, Aaron K. Chatterji

Faculty Scholarship

No abstract provided.

Irrevocable Proxies, Deborah A. Demott

Faculty Scholarship

This short article explores the circumstances under which the power to vote shares owned by another may be made irrevocable. Irrevocable proxies often serve as integral ingredients within corporate governance arrangements because they serve as mechanisms that enable alliances among shareowners or enhance the holder’s voting power in disproportion to the holder’s residual economic interest in the corporation. The rights and duties of holders of irrevocable proxies are best understood against a background of common-law agency relationships, in which agent and principal always have the power–albeit having contracted otherwise–to terminate their relationship and the agent’s actual authority. Courts in the …

Academics In Wonderland: The Team Production And Director Primacy Models Of Corporate Governance, George W. Dent

Faculty Publications

This paper examines the Team Production and Director Primacy Models of corporate governance, finds them wanting, and explains why corporate governance is moving toward shareholder primacy and why this will benefit not only investors but the whole American economy.

The director primacy model posits that shareholders are so ill-informed and so divided in their interests that they would self-destruct if they controlled the firm. Accordingly they tie their own hands by ceding control to a board of independent directors. Advocates of the team production theory often agree with the foregoing but stress the importance to the firm of other constituencies, …

Confusion And Unpredictability In Shareholder Derivative Litigation: The Delaware Courts' Response To Recent Corporate Scandals, Ann M. Scarlett

All Faculty Scholarship

The Delaware courts responded to the recent wave of corporate scandals, exemplified by Enron and WorldCom, by changing their approach to shareholder derivative litigation. This Article analyzes the Delaware courts' response to these scandals and concludes that the courts have created doctrinal confusion and introduced unpredictability into derivative litigation. This Article also analyzes the future negative consequences for shareholders, corporations, directors, investors, and other litigants. Finally, this Article proposes improvements for derivative litigation that may alleviate the confusion and unpredictability created by the Delaware courts' response to the recent scandals.

The New Role For Assurance Services In Global Commerce, Margaret M. Blair

Vanderbilt Law School Faculty Publications

In this Article we examine the rapid emergence and expansion of a private-sector compliance and enforcement infrastructure that we believe increasingly may be providing a substitute for public and legal regulatory infrastructure in global commerce, especially in developing countries where rule of law is weak and court systems are absent or inadequate. This infrastructure is provided by a proliferation of performance codes and standards, and a rapidly growing global army of privately trained and authorized inspectors and certifiers that we call the "third party assurance industry. " The growth in the third party assurance business has been phenomenal in the …

Corporations And The Market For Law, Erin O'Hara O'Connor, Larry E. Ribstein

Scholarly Publications

The state competition for corporate law has long been studied as a distinct phenomenon. Under the traditional view, corporations are subject to a unique choice-of-law rule, the “internal affairs doctrine” (IAD). This rule is explained as a historical accident, or by the special logistics of the corporate contract. The resulting market for corporate law appears to have special characteristics, particularly including the dominance of the single state of Delaware. This article challenges the traditional view. It shows that the corporate law market is best understood as a special application of the general market for law. Parties to many types of …

Strategic Governance, Kelli A. Alces

Scholarly Publications

Creditors exercise significant power over financially distressed corporations, thereby pushing corporate managers further into the realm of unprofitable risk aversion. The heavy hand of creditor power and the threats creditors are able to make to managers’ professional stability and success misalign senior officers’ incentives by undermining their freedom to make wealth-maximizing decisions on behalf of the corporation. The importance of independent managerial decision making is paramount in the law of corporate governance and that independence has been inefficiently undermined by the exertion of oppressive creditor control. This Article resolves the problem by creating a mechanism to balance shareholder and creditor …

Back To The Future? The Potential Revival Of Territoriality, Reuven S. Avi-Yonah

Articles

Since 1994, the trend in the United States and other developed countries appears to be to reduce the scope of residence jurisdiction and increase the emphasis on source jurisdiction. If this trend continues, these countries are likely to move toward territoriality and decrease the emphasis on their CFC rules. In the author’s opinion, the reason for this trend is political and economic, not legal. It is part of tax competition, specifically the competition to be the headquarters jurisdiction for multinationals. The author also thinks, however, that it is not necessary to go down this road because the solution to the …

Do Investors In Controlled Firms Value Insider Trading Laws? International Evidence, Laura Nyantung Beny

Articles

This article characterizes insider trading as an agency problem in firms that have a controlling shareholder. Using a standard agency model of corporate value diversion through insider trading by the controlling shareholder, I derive testable hypotheses about the relationship between corporate value and insider trading laws among such firms. The article tests these hypotheses using firm-level cross-sectional data from twenty-seven developed countries. The results show that stringent insider trading laws and enforcement are associated with greater corporate valuation among the sample firms in common law countries, a result that is consistent with the claim that insider trading laws mitigate agency …

Civil Liabilities For False Or Misleading Statements Made By Listed Companies To The Securities Markets In Singapore, Wai Yee Wan

Research Collection Yong Pung How School Of Law

This article examines the scope and efficacy of the civil remedies available to investors against listed companies which have made false or misleading statements in the secondary securities market in Singapore, both at common law and the statutory compensation scheme under the Securities and Futures Act. It argues that there are a number of limitations faced by such investors in bringing claims founded in tort law against the listed companies. While the statutory compensation scheme attempts to improve the position of investors, there are a number of deficiencies in the scheme the most significant of which is the ceiling on …

Bankruptcy Noir, James J. White

Articles

In Bankruptcy Fire Sales, Professor LoPucki and Dr. Doherty do two things. First, they present provocative data about the relative payoff to be had in Chapter 11 by a full reorganization compared with the payoff from a section 363 sale without a full reorganization. Second, they give a yet more provocative explanation for their data. Taking a page from Professor LoPucki's recent book, they blame the meager return that they observe on 363 sales on the unprincipled behavior of the lawyers, managers, creditors, investment bankers, and even judges involved in the sales. Messrs. LoPucki and Doherty's data appear to …