Law Commons^™

Corporate Law For Good People, Yuval Feldman, Adi Libson, Gideon Parchomovsky

All Faculty Scholarship

This article offers a novel analysis of the field of corporate governance by viewing it through the lens of behavioral ethics. It calls for both shifting the focus of corporate governance to a new set of loci of potential corporate wrongdoing and adding new tools to the corporate governance arsenal. The behavioral ethics scholarship emphasizes the large share of wrongdoing generated by "good people" whose intention is to act ethically. Their wrongdoing stems from "bounded ethicality" -- various cognitive and motivational processes that lead to biased decisions that seem legitimate. In the legal domain, corporate law provides the most fertile …

Corporate Law And The Myth Of Efficient Market Control, William W. Bratton, Simone Sepe

All Faculty Scholarship

In recent times, there has been an unprecedented shift in power from managers to shareholders, a shift that realizes the long-held theoretical aspiration of market control of the corporation. This Article subjects the market control paradigm to comprehensive economic examination and finds it wanting.

The market control paradigm relies on a narrow economic model that focuses on one problem only, management agency costs. With the rise of shareholder power, we need a wider lens that also takes in market prices, investor incentives, and information asymmetries. General equilibrium theory (GE) provides that lens. Several lessons follow from reference to this higher-order …

Governance By Contract: The Implications For Corporate Bylaws, Jill E. Fisch

All Faculty Scholarship

Boards and shareholders are increasing using charter and bylaw provisions to customize their corporate governance. Recent examples include forum selection bylaws, majority voting bylaws and advance notice bylaws. Relying on the contractual conception of the corporation, Delaware courts have accorded substantial deference to board-adopted bylaw provisions, even those that limit shareholder rights.

This Article challenges the rationale for deference under the contractual approach. With respect to corporate bylaws, the Article demonstrates that shareholder power to adopt and amend the bylaws is, under Delaware law, more limited than the board’s power to do so. As a result, shareholders cannot effectively constrain …

Rediscovering Corporate Governance In Bankruptcy, David A. Skeel Jr.

All Faculty Scholarship

In this Essay on Lynn LoPucki and Bill Whitford’s corporate reorganization project, written for a symposium honoring Bill Whitford, I begin by very briefly describing its historical antecedents. The project draws on the insights and perspectives of two closely intertwined traditions: the legal realism of 1930s, whose exemplars included William Douglas and other participants in the SEC study; and the law in action movement at the University of Wisconsin. In Section II, I briefly survey the key contributions of the corporate governance project, which punctured the then-conventional wisdom about the treatment of shareholders in bankruptcy, managers’ principal allegiance, and many …