Law Commons^™

Pricing Corporate Governance, Albert Choi

Articles

Scholars and practitioners have long theorized that by penalizing firms with unattractive governance features, the stock market incentivizes firms to adopt the optimal governance structure at their initial public offerings (IPOs). This theory, however, does not seem to match with practice. Not only do many IPO firms offer putatively suboptimal governance arrangements, such as staggered boards and dual-class structures, but these arrangements have been gaining popularity among IPO firms. This Article argues that the IPO market is unlikely to provide the necessary discipline to incentivize companies to adopt the optimal governance package. In particular, when the optimal governance package differs …

Rethinking Acting In Concert: Activist Esg Stewardship Is Shareholder Democracy, Dan W. Puchniak, Umakanth Varottil

Research Collection Yong Pung How School Of Law

In May 2021, Engine No. 1, an investment fund, was lauded by the responsible investment community for successfully placing three dissident independent directors on ExxonMobil’s board. It achieved this by being a catalyst for institutional investors to become backers of environmental shareholder activism. The unprecedented success of Engine No. 1’s campaign has spurred calls for a new, more sustained, activist engagement model by institutional investors, now known as “activist stewardship”.However, there is a significant legal hurdle that has been almost entirely overlooked by those calling for this new approach for institutional investors to become activist stewards: acting in concert rules. …

Wireless Investors & Apathy Obsolescence, Sergio Alberto Gramitto Ricci, Christina M. Sautter

Faculty Works

This Article discusses how a subgenre of retail investors makes investors’ apathy obsolete. In prior work, we dub retail investors who rely on technology and online communications in their investing and corporate governance endeavors “wireless investors.” By applying game theory, this Article discusses how wireless investors’ global-scale online interactions allow them to circulate information and coordinate, obliterating collective action problems.

Initiation Payments, Scott Hirst

Faculty Scholarship

Many of the central discussions in corporate governance, including those regarding proxy contests, shareholder proposals, and other activism or stewardship, can be understood as a single question: Is there under-initiation of corporate changes that investors would collectively prefer?

This Article sheds light on this question in three ways. First, the Article proposes a theory of investor initiation, which explains the hypothesis that there is under-initiation of collectively-preferred corporate change by investors. Even though investors collectively prefer that certain corporate changes take place, the costs to any individual investor from initiating such changes through high-cost proxy contests, or even low-cost shareholder …

The Meme Stock Frenzy: Origins And Implications, Dhruv Aggarwal, Albert H. Choi, Yoon-Ho Alex Lee

Law & Economics Working Papers

In 2021, several publicly traded companies, such as GameStop and AMC, became “meme stocks,” experiencing a sharp rise in their stock prices through a dramatic influx of retail investors into their shareholder base. Analyses of the meme stock surge and its implications for corporate governance have focused on the idiosyncratic creation of online communities around particular stocks during the COVID-19 pandemic. In this Article, we argue that the emergence of meme stocks is part of longer-running digital transformations in trading, investing, and governance. On the trading front, the sudden abolition of commissions by major online brokerages in 2019 reduced entry …

Startup Biases, Jennifer S. Fan

Articles

This Article provides an original descriptive account of bias in the startup context and explains why litigation is eschewed and what happens when it is used as a mechanism to combat bias in the venture capital ecosystem. Further, this Article identifies two particular phenomena in the startup context that exacerbate gender and racial bias. First, homophily—the idea that like attracts like—abounds and has been part of the DNA of venture capital since its inception. The thick networks that developed as venture capital made its way from the East Coast to the West Coast were limited to an elite group that …

Activism By Any Other Name: Stakeholder Capitalism, Esg, And Political Pushback, Kameron St Clare

Emory Corporate Governance and Accountability Review Perspectives

In recent years, Stakeholder Capitalism and ESG have become widely used terms not only in corporate board rooms, but in media commentary more generally. As their use and influence in practice have both grown, so, too, has the pushback from opponents of these values-based norms for the way the world does business. Indeed, in recent months, numerous Republican-led states, like Texas, have taken more substantive actions designed to thwart the actions and aims of ESG- and stakeholder capitalism-oriented corporations and investment funds. But what, exactly, do these terms mean? And where do these terms come from? Moreover, what’s all the …

A Settlement In Crisis: How In Re Opioid Litigation Fails To Put People Before Corporations, Gabrielle Hunter

Emory Corporate Governance and Accountability Review Perspectives

Since 1999, 932,000 people in the United States have died from a drug overdose. In 2021 alone over 100,000 people died from a drug overdose. Seventy-eight percent of those overdoses involved opioids. As the opioid epidemic has torn families apart and decimated American communities, the natural response is to find someone to blame. State and local governments, Native-American tribes, labor unions, insurance companies, hospitals, and individuals have all pointed the finger at the same culprits: opioid manufacturers and distributors.

The result—over 3,000 state and local governments alongside Native American tribes joined In Re Opiate Litigation, a multidistrict litigation, alleging …

Is "Public Company" Still A Viable Regulatory Category?, George S. Georgiev

Faculty Articles

This Article suggests that the ubiquitous “public company” regulatory category, as currently constructed, has outlived its effectiveness in fulfilling core goals of the modern administrative state. An ever-expanding array of federal economic regulation hinges on public company status, but “public company” differs from most other regulatory categories in that it requires an affirmative opt-in by the subject entity. In practice, firms today become subject to public company regulation only if they need access to the public capital markets, which is much less of a business imperative than it once was due to the proliferation of private financing options. Paradoxically, then, …

The Educated Retail Investor: A Response To "Regulating Democratized Investing", Christina M. Sautter, Sergio Alberto Gramitto Ricci

Journal Articles

The diffusion of mobile-first investing apps, like Robinhood, has increased retail investor participation in financial markets, particularly from the Millennial and GenZ generations, and has increased the diversity of retail investors. However, mobile-first investing apps are not free from controversy. In Regulating Democratized Investing, Abraham Cable tackles the debate on regulating mobile-first investing apps and largely opposes paternalistic regulation, which would raise unsurmountable barriers at the entrance of the stock market for retail investors. But it concedes to a form of regulation that in Cable’s own words “serves ultra-retail investors a modest portion of what they really want.” We strongly …

Blockchain Games And A Disruptive Corporate Business Model, Xuan-Thao Nguyen

Articles

This Article is the first to identify and theorize on a new disruptive corporate business model unfolding in the gaming industry that is larger than both the movie and music sectors combined. Corporations in blockchain gaming reject the old paradigm of amassing profits by turning the public into spenders for and consumers of corporate products. The new corporate business model transforms members of the public into producers and true owners of new corporate property while earning income and garnering governance voting rights. Through a case study of Axie Infinity, a blockchain game launched in 2021, this Article explores how the …

Reframing The Dei Case, Veronica Root Martinez

Faculty Scholarship

Corporate firms have long expressed their support for the idea that their organizations should become more demographically diverse while creating a culture that is inclusive of all members of the firm. These firms have traditionally, however, not been successful at improving demographic diversity and true inclusion within the upper echelons of their organizations. The status quo seemed unlikely to move, but expectations for corporate firms were upended after the #MeToo Movement of 2017 and 2018, which was followed by corporate support of the #BlackLivesMatter Movement in 2020. These two social movements, while distinct in many ways, forced firms to rethink …

Systematic Stewardship: It's Up To The Shareholders – A Response To Profs. Kahan And Rock, Jeffrey N. Gordon

Faculty Scholarship

As the author of an article entitled “Systematic Stewardship,” I read Professors Kahan and Rock’s article “Systematic Stewardship with Tradeoffs” (K&R) with considerable interest. I acknowledge the limits on deep asset manager engagement with sources of systematic risk in light of present institutional arrangements and the politics of the moment. Yet I think the most important move in the K&R analysis — the privileging of a “single firm focus” in corporate law instead of a “portfolio firm focus” — simply doesn’t account for the evolution that has already occurred in law and practice.

Long before the development of index funds, …

Wireless Investors & Apathy Obsolescence, Sergio Alberto Gramitto Ricci, Christina M. Sautter

Faculty Journal Articles and Book Chapters

This Article discusses how a subgenre of retail investors makes investors’ apathy obsolete. In prior work, we dub this genre of retail investors “wireless investors” for their reliance on technology and online communications. By applying game theory, this Article discusses how wireless investors’ global-scale online communications allow them to circulate information and coordinate, obliterating collective action problems.

Who Are Quality Shareholders And Why You Should Care, Lawrence A. Cunningham

GW Law Faculty Publications & Other Works

Delaware may be the country's last best hope for maintaining balance and rationality in the country's system of corporate governance, as its policies advance the interests of quality shareholders, those with a deep and abiding interest in a particular corporation, rather than the agendas of assorted interest groups seeking to use the corporate form for parochial purposes. The text is based upon the 37th Annual Francis X. Pileggi Distinguished Lecture in Law which Professor Cunningham presented in February 2023 to the Delaware bench and bar and to the faculty and students of Delaware Law School.