Law Commons^™

Exiting The Disaster, Evading The Responsibility? Wadi Al-Qamar -- The Moon Valley, Suzan Nada

Perspectives

This essay explores a case that delivered no results for the complainants, where harm was not prevented, and where stakeholders who filed the complaint were not compensated. Investigated by the Compliance Advisor Ombudsman (CAO) of the International Finance Corporation (IFC), the Wadi al-Qamar case illustrates some of the limitations of accountability mechanisms in limiting the harms caused directly or indirectly by projects in which the International Financial Institutions (IFIs) invest.

Imf Human Rights Accountability: A Pragmatic Way To Break The Deadlock, Aldo Caliari

Perspectives

In the three decades since the 1993 establishment of the World Bank Inspection Panel, almost all development finance institutions (DFIs) have established analogous panels, ombudsperson offices or other independent accountability mechanisms (IAMs) to allow people who believe they have been harmed by the DFI’s activities to directly trigger processes of fact-finding, dispute resolution, and, if applicable, redress. The primary exception has been the International Monetary Fund.

An Increased Normalization Of Iams Faces Ground Realities: Lack Of Transparency Impedes Access To Iams, Hamid Sharif

Perspectives

The creation of the Inspection Panel at the World Bank has led to the emergence of a norm that international financial institutions (IFIs) must hold themselves accountable to project-affected people through independent accountability mechanisms (IAMs). AIIB as a 21^st century bank reflects this normalization of IAMs. As a new MDB, AIIB’s charter mandates creation of an oversight body that includes the independent accountability mechanism or the Project-affected People’s mechanism (PPM). The PPM is aligned with many features of IFI’s IAMs while incorporating some innovations.

The central question asked by civil society and board members across IFIs is why there …

Between Disruption And Legitimation Of Development: A Critical Perspective On The Inspection Panel And A Call For More Radical Thinking Within The Accountability Community, Dustin Schäfer

Perspectives

The essay explores the Inspection Panel’s (the Panel) conflicting role of providing accountability for negatively affected people while facing political limitations. The Panel has proven its potential to disrupt harmful development practices. However, by reproducing “dev-speak” it also continuously contributes to legitimizing the same assumptions of “how to do development”, and thus to the continuation of harmful development practices. This ambivalent effect is inherent to the Panel because of its politically inhibited and depoliticized (i.e. technocratic) environment. To overcome this long-lasting and structural condition will require critical examination of the concept of development and the role it plays in …

Puzzles In Controlling Shareholder Regimes And China: Shareholder Primacy And (Quasi) Monopoly, Sang Yop Kang

Sang Yop Kang

Professor Mark Roe explained that the shareholder wealth maximization norm (“the norm”) is not fit for a country with a (quasi) monopoly, because the norm encourages managers to maximize monopoly rents, to the detriment of the national economy. This Article provides new findings and counter-intuitive arguments as to the tension created by the norm and (quasi) monopoly by exploring three key corporate governance concepts that Roe did not examine—(1) “controlling minority structure” (CMS), where dominant shareholders hold a fractional ownership in their controlled-corporations, (2) “tunneling” (i.e., illicit transfer of corporate wealth to controlling shareholders), and (3) Chinese state-owned enterprises (SOEs). …

Conflicted Counselors: Retaliation Protections For Attorney-Whistleblowers In An Inconsistent Regulatory Regime, Jennifer M. Pacella

Jennifer M. Pacella, Esq.

Attorneys, especially in-house counsel, are subject to retaliation by employers in much the same way as traditional whistleblowers, often experiencing retaliation and loss of livelihood for reporting instances of wrongdoing about their clients. Although attorney-whistleblowing undoubtedly invokes ethical concerns, attorneys who “appear and practice” before the Securities and Exchange Commission (“SEC”) are required by federal law to act as internal whistleblowers under the Sarbanes-Oxley Act (“SOX”) and report evidence of material violations of the law within the organizations that they represent. An attorney’s failure to comply with these obligations will result in SEC-imposed civil penalties and disciplinary action. Recent federal …

An Approach To The Regulation Of Spanish Banking Foundations, Miguel Martínez

Miguel Martínez

The purpose of this paper is to analyze the legal framework governing banking foundations as they have been regulated by Spanish Act 26/2013, of December 27th, on savings banks and banking foundations. Title 2 of this regulation addresses a construct that is groundbreaking for the Spanish legal system, still of paramount importance for the entire financial system insofar as these foundations become the leading players behind certain banking institutions given the high interest that foundations hold in the share capital of such institutions.

Avenues To Foreign Investment In China’S Shipping Industry—Have Lease Financing Arrangements And The Free Trade Zones Opened Markets For Foreign Non-Bank Investment?, Rick Beaumont

Rick Beaumont

No abstract provided.

Avenues To Foreign Investment In China’S Shipping Industry—Have Lease Financing Arrangements And The Free Trade Zones Opened Markets For Foreign Non-Bank Investment?, Rick Beaumont

Rick Beaumont

No abstract provided.

The Moral Undercurrent Beneath The Regulatory Regime Of Investor Protection, Huhnkie Lee

Huhnkie Lee

No abstract provided.

Law, Fugitive Capital, And Karl Polanyi's The Great Transformation, Walter J. Kendall Lll

Walter J. Kendall lll

No abstract provided.

Optimized Theft: Why Some Controlling Shareholders “Generously” Expropriate From Minority Shareholders, Sang Yop Kang

Sang Yop Kang

Although controlling shareholder agency problems have been well studied so far, many questions still remain unanswered. In particular, an important puzzle in a bad-law jurisdiction is: why some controlling shareholders (“roving controllers”) loot the entire corporate assets at once, and why others (“stationary controllers”) siphon a part of corporate assets on a continuous basis. To solve this conundrum, this Article provides analytical frameworks exploring the behaviors and motivations of controlling shareholders. To begin with, I reinterpret Olson’s political theory of “banditry” in the context of corporate governance in developing countries. Based on a new taxonomy of controlling shareholders (“roving controllers” …

Re-Envisioning Investors’ Anti-Director Rights Index: Theory, Criticism, And Implications, Sang Yop Kang

Sang Yop Kang

‘Law and Finance’ theory – which offers analytical frameworks to measure the protection of public investors and the quality of corporate governance – has dominated the comparative corporate governance scholarship in the last decade. So far, many proponents and critics have had debates on the relevance of the theory and the implications of the theory’s empirical studies. Several important points in relation to shareholder protection, however, have been highly neglected in these debates. In particular, the significance of one-share-one-vote (OSOV) rule has been inappropriately underestimated. In response, this Article explores (1) why OSOV is an utmost critical component in corporate …

Legal And Institutional Remedies For Middle East States Wishing To Develop And Increase Foreign Direct Investment, Griffin Weaver

Griffin Weaver

The cost to overhaul a legal system is astronomical. For example, before and after the fall of the Soviet Union in the 1980’s several states received billions of dollars in loans to help change their “legal systems” and make them more western friendly. A couple of these states were West Germany and Japan, which received roughly 1.5 billion and 2.4 billion USD in loans. Considering most of this money was given in the 1950’s, the value today is probably three times or more those amounts. Without this aid both states would have been unable to make the changes to their …

Halliburton, Basic And Fraud On The Market: The Need For A New Paradigm, Charles W. Murdock

Charles W. Murdock

Summary: Halliburton, Basic and Fraud on the Market: The Need for a New Paradigm

If defrauded securities plaintiffs cannot bring a class-action lawsuit, there often will be no effective remedy since the amount at stake for individual plaintiffs is not sufficient to warrant the substantial costs of litigation. To surmount the problem of individualized reliance and establish commonality, federal courts for twenty-five years have been employing the Basic fraud-on-the-market theory which posits that, in an efficient market, investors rely on the integrity of the market price.

While class certification at one time was a matter of course, today it is …

Against Regulatory Displacement: An Institutional Analysis Of Financial Crises, Jonathan C. Lipson

Jonathan C. Lipson

This paper uses “institutional analysis”—the study of the relative capacities of markets, courts, and regulators—to make three claims about financial crises.

First, financial crises are increasingly a problem of “regulatory displacement.” Through the ad hoc rescues of 2008 and the Dodd-Frank reforms of 2010, regulators displace market and judicial processes that ordinarily prevent financial distress from becoming financial crises. Because regulators are vulnerable to capture by large financial services firms, however, they cannot address the pathologies that create crises: market concentration and complexity. Indeed, regulators may inadvertently aggravate these conditions through resolution tactics that consolidate firms, and the volume and …

Bank Resolution In The European Banking Union: A Transatlantic Perspective On What It Would Take, Jeffrey N. Gordon

Jeffrey N Gordon

The project of creating a European Banking Union is designed to overcome the fatal link between sovereigns and their banks in the Eurozone. As part of this project, political agreement for a common supervision framework and a common resolution scheme has been reached with difficulty. However, the resolution framework is weak, underfunded and exhibits some serious flaws. Further, Member States’ disagreements appear to rule out a federalized deposit insurance scheme, commonly regarded as the necessary third pillar of a successful Banking Union. This paper argues for an organizational and capital structure substitute for these two shortcomings that can minimize the …

Present At The Creation: Reflections On The Early Years Of The National Association Of Corporate Directors, Lawrence J. Trautman

Lawrence J. Trautman Sr.

Effective corporate governance is critical to the productive operation of the global economy and preservation of our way of life. Excellent governance execution is also required to achieve economic growth and robust job creation in any country. In the United States, the premier director membership organization is the National Association of Corporate Directors (NACD). Since 1978, NACD plays a major role in fostering excellence in corporate governance in the United States and beyond. The NACD has grown from a mere realization of the importance of corporate governance to become the only national membership organization created by and for corporate directors. …

Remembering George Michaely, Lawrence J. Trautman, Stanley Sporkin, John A. Dudley

Lawrence J. Trautman Sr.

This short essay is a memorial tribute about George P. Michaely, Jr. (1926 to 2014). After graduating from both the University of Notre Dame and its law school, he began his legal career, serving for approximately seven years as attorney in the Office of General Counsel. He was then appointed Chief Counsel of the Commission’s Division of Corporation Finance, where he served for approximately the next four years and was responsible for advising the Commission and the public concerning the interpretation of the statutory provisions and rules relating to the registration provisions of the Securities Act of 1933 and the …

Bounties For Bad Behavior: Rewarding Culpable Whistleblowers Under The Dodd-Frank Act And Internal Revenue Code, Jennifer M. Pacella

Jennifer M. Pacella, Esq.

In 2012, Bradley Birkenfeld received a $104 million reward or “bounty” from the Internal Revenue Service (“IRS”) for blowing the whistle on his employer, UBS, which facilitated a major offshore tax fraud scheme by assisting thousands of U.S. taxpayers to hide their assets in Switzerland. Birkenfeld does not fit the mold of the public’s common perception of a whistleblower. He was himself complicit in this crime and even served time in prison for his involvement. Despite his conviction, Birkenfeld was still eligible for a sizable whistleblower bounty under the IRS Whistleblower Program, which allows rewards for whistleblowers who are convicted …

Subjective Falsity Under Section 11 Of The Securities Act: Protecting Statements Of Opinion, Daniel H. Smith

Daniel H Smith

SUBJECTIVE FALSITY UNDER SECTION 11 OF THE SECURITIES ACT: PROTECTING STATEMENTS OF OPINION Daniel Hooper Smith Abstract Subjective Falsity Under Section 11 of the Securities Act: Protecting Statements of Opinion discusses the Sixth Circuit’s strict liability decision in Indiana State District Council of Laborers & Hod Carriers Pension & Welfare Fund v. Omnicare, Inc. for statements of opinion contained in registration statements, and its express departure from both the Second and Ninth Circuits. Consistent with the Second, Third, and Ninth Circuits, this Article proposes that both objective and subjective falsity should be the requisite pleading standard for section 11 opinion …

Financial Institution Executive Compensation: The Problem Of Financially Motivated Excessive Risk-Taking, The Regulatory Response, And Common Sense Solutions, Jesse D. Gossett

Jesse D Gossett

This article addresses the issue of executive compensation at financial institutions as it relates to encouraging excessive risk-taking at these firms. First, I examine the economics of compensation and its relationship to risk-taking at financial firms. Next, I take a critical look at compensation provisions of Dodd-Frank (and to a lesser extent, Sarbanes-Oxley) and describe not only what Dodd-Frank does, but more importantly what it does not do. I then make specific recommendations for rules regulators should adopt under Dodd-Frank for the purpose of using compensation plans as a way of reducing excessive risk at financial institutions. I make these …

Admission Of Guilt: Sinking Teeth Into The Sec's Sweetheart Deals, Larissa Lee

Larissa Lee

Throughout its existence, the Securities and Exchange Commission (SEC) has allowed defendants to settle cases without admitting to the allegations of wrongdoing. This “neither admit nor deny” policy has received heavy criticism by judges, Congress, and the public, especially in the wake of the 2008 financial crisis. On June 18, 2013, SEC Chairman Mary Jo White announced the agency’s intention to require admissions of guilt in certain cases. While Chairman White did not articulate a clear standard of when admissions would be required, she did say that the agency would focus on the egregiousness of the defendant’s conduct and the …

Controlling Shareholders: Benevolent “King” Or Ruthless “Pirate”, Sang Yop Kang

Sang Yop Kang

Unfair self-dealing and expropriation of minority shareholders by a controlling shareholder are common business practices in developing countries (“bad-law countries”). Although controlling shareholder agency problems have been well studied so far, there are many questions unanswered in relation to behaviors and motivations of controlling shareholders. For example, a puzzle is that some controlling shareholders in bad-law countries voluntarily extract minority shareholders less than other controlling shareholders. Applying Mancur Olson’s framework of political theory of “banditry” to the context of corporate governance, this Article proposes that there are at least two categories of controlling shareholders. “Roving controllers” are dominant shareholders with …

Crossing The Fault Line In Corporate Criminal Law, Amy Sepinwall

Amy J. Sepinwall

Why is it that so few bankers have been prosecuted and punished in the wake of the financial meltdown? Pundits are quick to point to inadequate funding for addressing financial crime or, more cynically, the revolving door between government regulatory agencies and Wall Street. But the ultimate answer may be at once more banal and more dispiriting, lying as it does at the very foundations of our criminal law.

The conception of responsibility underpinning much of our criminal law contemplates the individual in isolation from others. As a result, our criminal law has tremendous difficulty tracking culpability in organizational contexts. …

E-Commerce And Electronic Payment System Risks: Lessons From Paypal, Lawrence J. Trautman

Lawrence J. Trautman Sr.

What are the major risks perceived by those engaged in e-commerce and electronic payment systems? What development risks, if they become reality, may cause substantial increases in operating costs or threaten the very survival of the enterprise? This article utilizes the relevant annual report disclosures from eBay (parent of PayPal), along with other eBay and PayPal documents, as a potentially powerful teaching device. Most of the descriptive language to follow is excerpted directly from eBay’s regulatory filings. My additions include weaving these materials into a logical presentation and providing supplemental sources for those who desire a deeper look (usually in …

Systemic Harms And Shareholder Value, Jeffrey N. Gordon

Jeffrey N Gordon

The financial crisis has demonstrated serious flaws in the corporate governance of systemically important financial firms. In particular, the Shareholder Value norm, which has guided corporate governance reform for a generation, proves to be a faulty guide for managerial action in systemically important firms. This is not only because the failure of such firms will have spillovers that defy the cost-internalization of the tort system but also because these spillovers will harm their own majoritarian shareholders. The interests of diversified shareholders fundamentally diverge from the interests of managers and other controllers because the failure of a systemically important financial firm …

Financial Armageddon Routs Law Again, Nicholas L. Georgakopoulos

Nicholas L Georgakopoulos

This essay, after highlighting the unique aspects of financial markets, offers a mostly rational account for financial crises, centering on the 2008 crisis as an example. The thesis is that market participants overestimate the duration of high productivity growth due to new technologies and produce occasional—and likely unavoidable—bubbles. Considering potential changes in the regulation of financial markets, the conclusion is grim. Regulators appear to have exhausted the effective legal levers against overestimations of continued high growth. The legislative responses to the last few crises were likely unproductive. The sole (but still unrealistic) effective protection would be the constitutional development of …

Present At The Creation: Reflections On The Early Years Of The National Association Of Corporate Directors, Lawrence J. Trautman

Lawrence J. Trautman Sr.

Effective corporate governance is critical to the productive operation of the global economy and preservation of our way of life. Excellent governance execution is also required to achieve economic growth and robust job creation in any country. In the United States, the premier director membership organization is the National Association of Corporate Directors (NACD). Now over 36 years old, NACD plays a major role in fostering excellence in corporate governance in the United States and beyond. Over the past thirty-six years NACD has grown from a mere realization of the importance of corporate governance to become the only national membership …

Will Law Firms Go Public?, Roberta S. Karmel

Roberta S. Karmel

Law in the United States is a big business and big law firms are a global business. Currently, under rules of the American Bar Association (ABA) and most states law, firms are not allowed either to include non-lawyers as partners or accept equity investments from non-lawyers. This Article will argue that (even if law firms retain the form of partnerships) they eventually will accept investments from third parties, and possibly even go public, but this development could lead to a loss of professionalism, as it has with other industries, and could also lead to the end of self-regulation. Among the …