Law Commons^™

Rethinking The Nature Of The Firm: The Corporation As A Governance Object, Peer Zumbansen

Peer Zumbansen

This Article attempts to bridge two discourses—corporate governance and contract governance. Regarding the latter, a group of scholars has recently set out to develop a more comprehensive research agenda to explore the governance dimensions of contractual relations, highlighting the potential of contract theory to develop a more encompassing theory of social and economic transactions. While a renewed interest in the contribution of economic theory for a concept of contract governance drives one dimension of this research, another part of this undertaking has been to move contract theory closer to theories of social organization. Here, these scholars emphasize the “social” or …

Financial Hospitals: Defending The Fed’S Role As A Market Maker Of Last Resort, José Gabilondo

José Gabilondo

During the last financial crisis, what should the Federal Reserve (the Fed) have done when lenders stopped making loans, even to borrowers with sterling credit and strong collateral? Because the central bank is the last resort for funding, the conventional answer had been to lend freely at a penalty rate against good collateral, as Walter Bagehot suggested in 1873 about the Bank of England. Acting thus as a lender of last resort, the central bank will keep solvent banks liquid but let insolvent banks go out of business, as they should. The Fed tried this, but when the conventional wisdom …

Salomon Redux: The Moralities Of Business, Allan C. Hutchinson, Ian Langlois

Allan C. Hutchinson

In this Essay, we revisit the Salomon case and its related litigation not only from a legal standpoint but also from a broader moral perspective. 4 In the second Part, we offer a detailed context for and account of the Salomon litigation. The third Part focuses on the historical roots of the corporation and the judicial arguments in Salomon. In the fourth Part, we explore the moral and legal consequences of the Salomon decision. Throughout the Essay, our ambition will be not only to give the Salomon case a more contextual and richer spin but also to tackle the relationship …

On The Rise Of Shareholder Primacy, Signs Of Its Fall, And The Return Of Managerialism (In The Closet), Lynn Stout

Lynn A. Stout

In their 1932 opus "The Modern Corporation and Public Property," Adolf Berle and Gardiner Means famously documented the evolution of a new economic entity—the public corporation. What made the public corporation “public,” of course, was that it had thousands or even hundreds of thousands of shareholders, none of whom owned more than a small fraction of outstanding shares. As a result, the public firm’s shareholders had little individual incentive to pay close attention to what was going on inside the firm, or even to vote. Dispersed shareholders were rationally apathetic. If they voted at all, they usually voted to approve …

The Citizen Shareholder: Modernizing The Agency Paradigm To Reflect How And Why A Majority Of Americans Invest In The Market, Anne Tucker

Anne Tucker

This Article examines corporate law from the perspective of personal investment and discusses the economic realities of modern investments in order to understand the role of shareholders within the agency paradigm. Corporate law, its scholars, and suggested reforms traditionally focus on the internal organization of the corporation. For example, agency principles inform corporate law by acknowledging a potential conflict of interest between the managers and shareholders of a corporation. Reforms such as increased shareholder voting rights and proxy access, which seek to give shareholders a more direct means to make their interests known to managers, illustrate corporate law’s focus on …

Limits Of Disclosure, Steven M. Davidoff, Claire A. Hill

Steven Davidoff Solomon

One big focus of attention, criticism, and proposals for reform in the aftermath of the 2008 financial crisis has been securities disclosure. Many commentators have emphasized the complexity of the securities being sold, arguing that no one could understand the disclosure. Some observers have noted that disclosures were sometimes false or incomplete. What follows these issues, to some commentators, is that, whatever other lessons we may learn from the crisis, we need to improve disclosure. How should it be improved? Commentators often lament the frailties of human understanding, notably including those of everyday retail investors—people who do not understand or …

Certification Drag: The Opinion Puzzle And Other Transactional Curiosities, Jonathan Barnett

Jonathan M Barnett

The law-and-economics literature typically depicts certification intermediaries, such as law firms, auditors, underwriters, investment banks and rating agencies, as socially valuable market participants who ameliorate informational asymmetries that would otherwise distort pricing or transaction structures. This standard view is incomplete. Using the example of the “closing opinion”, a third-party legal opinion commonly delivered at the consummation of a variety of business transactions, I argue that intermediaries, even when operating under substantially competitive conditions and in sophisticated market settings, may supply widely consumed certification products that fail to mitigate informational asymmetries while increasing transaction costs. Based on the highly qualified language …

Interfaces Between Csr, Corporate Law And The Problem Of Social Costs, Benedict Sheehy

Benedict Sheehy

Abstract: CSR is an increasingly seen as the preferred approach to addressing the social impacts of industrial production. These social impacts, however, come in the first instance from production and not the corporation. The legal corporation facilitates social costs secondarily. Much of the thinking about CSR fails to adequately take account of the systemic nature of social costs, the legal nature of the corporation and social costs and the so the systemic failure of law to deal with them. This article addresses the interface between the three concepts and related issues of CSR, social costs and corporate law.

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. …

Csr And Law As Alternative Regulatory Systems, Benedict Sheehy

Benedict Sheehy

Abstract: CSR (Corporate Social Responsibility) is an increasingly important area of corporate and legal concern. In addition to problems defining the meaning of the term and understanding the implications for, there is a lack of understanding how it can, does and should interact with law. This paper answers this gap using a method used in the sociology of law, systems theory. The paper argues that CSR can be understood as a response to social costs and law’s apparent failure to curb those costs. It focuses the examination on social costs generated by large industrial organisations and how they are regulated …

The Law Of Corporate Purpose, David Yosifon

David G. Yosifon

Delaware corporate law requires corporate directors to manage firms for the benefit of shareholders, and not for any other constituency. Delaware jurists have been clear about this in their case law, and they are not coy about it in extra-judicial settings, such as speeches directed at law students and practicing members of the corporate bar. Nevertheless, the reader of leading corporate law scholarship is continually exposed to the scholarly assertion that the law is ambiguous or ambivalent on this point, or even that case law affirmatively empowers directors to pursue non-shareholder interests. It is shocking, and troubling, for corporate law …

Crime, War & Romanticism: Arthur Andersen And The Nature Of Entity Guilt, David N. Cassuto

David N Cassuto

In 2002, Arthur Andersen, LLP stood trial for obstruction of justice. The prosecution offered several theories as to who at the firm had committed the crime but no one theory satisfied all twelve jurors. In an attempt to break its deadlock, the jury asked whether it could convict i f some jurors thought Person A at Andersen had done it and some thought it was Person B. Following argument, the judge ruled that it could convict. This article argues that the court's response to the jury's query was wrong as a matter of law and policy. The ruling misconstrues the …

Corporate Law And The Rhetoric Of Choice, Kent Greenfield

Kent Greenfield

Rhetorically, the notion of choice has always been a powerful one in politics and law. This essay is intended to offer a note of caution about its use. Despite its progressive hue of individual freedom, the rhetoric of choice increasingly tends to be a notion used to defend and uphold existing matrices of economic and social power. This is because the rhetoric of choice is an excellent way to support exiting power relationships. The assertion that people acting within such power relationships are simply choosing their current situation undermines efforts to change those relationships. The powerful stay powerful; the weak …

The Misuse Of Tax Incentives To Align Management-Shareholder Interests, James R. Repetti

James R. Repetti

The U.S. tax system contains many provisions which are intended to align management of large publicly traded companies more closely to stockholders. This article shows that many of the tax provisions that have been adopted are of questionable effectiveness because they fail to address the complexities of stockholder-management relations in attempting to motivate management to act in the best interests of stockholders. The article proposes that rather than Congress attempting to identify the best way that it can use the tax system to motivate management, Congress should eliminate tax provisions which subsidize management's inefficiencies in order to encourage stockholders, themselves, …

The Practical Soul Of Business Ethics: The Corporate Manager's Dilemma And The Social Teaching Of The Catholic Church, Leo L. Clarke, Bruce P. Frohnen, Edward C. Lyons

Edward C. Lyons

This Article focuses on and attempts to dispel an overly narrow view of the moral responsibilities of corporations and their managers. Many businessmen and lawyers, relying on prevailing approaches to business ethics, labor under the misperception that the moral ladder in the business world has only one rung: "Be honest." Americans, however, should, can and do expect more from the managers of our large corporations, and virtually every Fortune 100 company publicly espouses a "social responsibility" far exceeding mere honesty. Further, as is demonstrated, American jurisprudence is consistent with those expectations. This Article's thesis is that Catholic Social Teaching provides …

Legal Mechanization Of Corporate Social Responsibility Through Alien Tort Statute Litigation: A Response To Professor Branson With Some Supplemental Thoughts, Donald J. Kochan

Donald J. Kochan

This Response argues that as ATS jurisprudence “matures” or becomes more sophisticated, the legitimate limits of the law regress. The further expansion within the corporate defendant pool – attempting to pin liability on parent, great grandparent corporations and up to the top – raises the stakes and complexity of ATS litigation. The corporate social responsibility discussion raises three principal issues about how a moral corporation lives its life: how a corporation chooses its self-interest versus the interests of others, when and how it should help others if control decisions may harm the shareholder owners, and how far the corporation must …

The Corporation As Imperfect Society, Brian M. Mccall

Brian M McCall

Corporations are ubiquitous in modern society. They pervade every aspect of our life, consumer, professional, investment activity. Probably, people have more contact with corporations on a daily basis than any other institution, including government. From the South Sea Bubble to the Stock market Crash of 1929 to Enron to General Motors and Countrywide Mortgage, corporate scandals and controversies invite fundamental questions about corporate law. This article attempts to bring a fresh perspective to the question: “what is a corporation and how should the law treat it?” The article articulates a corporate metaphysics rooted in political philosophy. The dominant models of …

Instituições, Trabalho E Pessoas, Paulo Ferreira Da Cunha

Paulo Ferreira da Cunha

Os especialistas em doenças terminais sabem que ninguém tem saudades, quando abandona a vida, do trabalho que não fez. Tem saudades sim do tempo que não passou com familiares e amigos. A sociedade contemporânea, e algumas instituições "totais" estão a potenciar até ao expoente demencial a exploração e a despersonalização dos trabalhadores, designadamente proletarizando técnicos superiores e técnicos pensantes que, sem ócio criativo, deixarão de criar. É uma crise civilizacional, nada menos.

Scrooge—The Reluctant Stakeholder, Benedict C. Sheehy

Benedict Sheehy

Abstract: Corporations law around the world is moving in the direction of the shareholder primacy model, common in the USA and other common law countries. Lawyers, academics and public policy analysts are divided as to the merits of the model and its main competitor, the stakeholder model. The gist of arguments usually hinge on economics. This article examines the claims for and against the two models on their own terms, and suggests that law has a unique contribution to make to the development of the corporation and society.