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Esg As A Test Case For The Convergence Thesis In Corporate Law: Notes From India, Rudresh Mandal Jan 2024

Esg As A Test Case For The Convergence Thesis In Corporate Law: Notes From India, Rudresh Mandal

LL.M. Essays & Theses

This paper uses four concepts key to the ESG agenda – investor stewardship codes, corporate purpose, independent directors and ESG disclosures – to examine which way the corporate convergence pendulum is swinging in India. It finds that none of the aforesaid concepts are examples of perfect convergence or perfect divergence. Instead, they lie somewhere in the convergence-divergence matrix – India’s investor stewardship codes and framework on independent directors are examples of formal convergence but functional divergence, and her corporate law provisions on corporate purpose and ESG disclosure are functionally convergent, but formally divergent. The dichotomies in the analysis are explained …


Public Primacy In Corporate Law, Dorothy S. Lund Jan 2024

Public Primacy In Corporate Law, Dorothy S. Lund

Faculty Scholarship

This Article explores the malleability of agency theory by showing that it could be used to justify a “public primacy” standard for corporate law that would direct fiduciaries to promote the value of the corporation for the benefit of the public. Employing agency theory to describe the relationship between corporate management and the broader public sheds light on aspects of firm behavior, as well as the nature of state contracting with corporations. It also provides a lodestar for a possible future evolution of corporate law and governance: minimize the agency costs created by the divergence of interests between management and …


Transaction-Specific Tax Reform In Three Steps: The Case Of Constructive Ownership, Thomas J. Brennan, David M. Schizer Jan 2024

Transaction-Specific Tax Reform In Three Steps: The Case Of Constructive Ownership, Thomas J. Brennan, David M. Schizer

Faculty Scholarship

Similar investments are often taxed differently, rendering our system less efficient and fair. In principle, fundamental reforms could solve this problem, but they face familiar obstacles. So instead of major surgery, Congress usually responds with a Band-Aid, denying favorable treatment to some transactions, while preserving it for others. These loophole-plugging rules have become a staple of tax reform in recent years. But unfortunately, they often are ineffective or even counterproductive. How can Congress do better? As a case study, we analyze Section 1260, which targets a tax-advantaged way to invest in hedge funds. This analysis is especially timely because a …


Publicizing Corporate Secrets, Christopher J. Morten Jan 2023

Publicizing Corporate Secrets, Christopher J. Morten

Faculty Scholarship

Federal regulatory agencies in the United States hold a treasure trove of valuable information essential to a functional society. Yet little of this immense and nominally “public” resource is accessible to the public. That worrying phenomenon is particularly true for the valuable information that agencies hold on powerful private actors. Corporations regularly shield vast swaths of the information they share with federal regulatory agencies from public view, claiming that the information contains legally protected trade secrets (or other proprietary “confidential commercial information”). Federal agencies themselves have largely acceded to these claims and even fueled them, by construing restrictively various doctrines …


Systematic Stewardship: It's Up To The Shareholders – A Response To Profs. Kahan And Rock, Jeffrey N. Gordon Jan 2023

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, …


Contract Production In M&A Markets, Stephen J. Choi, Mitu Gulati, Matthew Jennejohn, Robert E. Scott Jan 2023

Contract Production In M&A Markets, Stephen J. Choi, Mitu Gulati, Matthew Jennejohn, Robert E. Scott

Faculty Scholarship

Contract scholarship has devoted considerable attention to how contract terms are designed to incentivize parties to fulfill their obligations. Less attention has been paid to the production of contracts and the tradeoffs between using boilerplate terms and designing bespoke provisions. In thick markets everyone uses the standard form despite the known drawbacks of boilerplate. But in thinner markets, such as the private deal M&A world, parties trade off costs and benefits of using standard provisions and customizing clauses. This Article reports on a case study of contract production in the M&A markets. We find evidence of an informal information network …


Lifting Labor’S Voice: A Principled Path Toward Greater Worker Voice And Power Within American Corporate Governance, Leo E. Strine Jr., Aneil Kovvali, Oluwatomi O. Williams Jan 2022

Lifting Labor’S Voice: A Principled Path Toward Greater Worker Voice And Power Within American Corporate Governance, Leo E. Strine Jr., Aneil Kovvali, Oluwatomi O. Williams

Ira M. Millstein Center for Global Markets and Corporate Ownership

The dramatic decline in corporate gainsharing with American workers over the last two generations has contributed to stagnating wages, soaring inequality, and economic insecurity. There are global causes of greater inequality and depressed pay that go beyond the decline in workers’ share. But many public policymakers and economists believe that the reduced share of corporate prof its that American workers receive has been a major factor in the much larger increase in inequality that has occurred in the United States, compared to its market economy allies in the Organization for Economic Co-operation and Development (OECD). To some, the explanation for …


Duty And Diversity, Chris Bummer, Leo E. Strine Jr. Jan 2022

Duty And Diversity, Chris Bummer, Leo E. Strine Jr.

Ira M. Millstein Center for Global Markets and Corporate Ownership

In the wake of the brutal deaths of George Floyd and Breonna Taylor, lawmakers and corporate boards from Wall Street to the West Coast have introduced a slew of reforms aimed at increasing Diversity, Equity, and Inclusion (“DEI”) in corporations. Yet the reforms face difficulties ranging from possible constitutional challenges to critical limitations in their scale, scope, and degree of legal obligation and practical effects.

In this Article, we provide an old answer to the new questions facing DEI policy and offer the first close examination of how corporate law duties impel and facilitate corporate attention to diversity. Specifically, we …


Combatting Wage Theft In Global Supply Chains: A Proposal For Transnational Wage Lien Laws, Nabila N. Khan Jan 2022

Combatting Wage Theft In Global Supply Chains: A Proposal For Transnational Wage Lien Laws, Nabila N. Khan

LL.M. Essays & Theses

When the world went into lockdown due to the COVID-19 pandemic, major fashion brands attempted to protect their profits by refusing to pay overseas suppliers for over $16 billion USD of goods between April and June 2020. These decisions had a devastating impact on garment workers who toil at the bottom of the supply chain; thousands of garment workers and their families faced wage theft, dealing with months of unpaid wages, benefits and/or severance pay. In the absence of a regulatory framework to hold corporations responsible, workers, unions, and NGOs resorted to naming and shaming brands into taking action. However, …


Agents Of Inequality: Common Ownership And The Decline Of The American Worker, Zohar Goshen, Doron Levit Jan 2022

Agents Of Inequality: Common Ownership And The Decline Of The American Worker, Zohar Goshen, Doron Levit

Faculty Scholarship

The last forty years have seen two major economic trends: wages have stalled despite rising productivity, and institutional investors have replaced retail shareholders as the predominant owners of the U.S. equity markets. A few powerful institutional investors — dubbed common owners — now hold large stakes in most U.S. corporations. And in no coincidence, when U.S. workers acquired this new set of bosses, their wages stopped growing while shareholder returns increased. This Article explains how common owners shift wealth from labor to capital, thereby exacerbating income inequality.

Powerful institutional investors pushing public corporations en masse to adopt strong corporate governance …


Asset Managers As Regulators, Dorothy S. Lund Jan 2022

Asset Managers As Regulators, Dorothy S. Lund

Faculty Scholarship

The conventional view of regulation is that it exists to constrain corporate activity that harms the public. But amid perceptions of government failure, many now call on corporations to tackle social problems themselves. And in this moment of dissatisfaction with government, powerful asset managers have stepped in to serve as regulators of last resort, adopting rules that bind corporate America on issues of great social importance, including climate change and workplace diversity. This Article describes this dynamic — where shareholders have become regulators — which has been made possible by the rise of institutional shareholding (and index investing in particular) …


Contractual Evolution, Matthew Jennejohn, Julian Nyarko, Eric L. Talley Jan 2022

Contractual Evolution, Matthew Jennejohn, Julian Nyarko, Eric L. Talley

Faculty Scholarship

Conventional wisdom portrays contracts as static distillations of parties’ shared intent at some discrete point in time. In reality, however, contract terms evolve in response to their environments, including new laws, legal interpretations, and economic shocks. While several legal scholars have offered stylized accounts of this evolutionary process, we still lack a coherent, general theory that broadly captures the dynamics of real-world contracting practice. This paper advances such a theory, in which the evolution of contract terms is a byproduct of several key features, including efficiency concerns, information, and sequential learning by attorneys who negotiate several deals over time. Each …


Crime And The Corporation: Making The Punishment Fit The Corporation, John C. Coffee Jr. Jan 2022

Crime And The Corporation: Making The Punishment Fit The Corporation, John C. Coffee Jr.

Faculty Scholarship

The debate over corporate criminal liability has long involved a fight between proponents who argue that corporate liability is necessary for effective deterrence and opponents who claim that it “punishes the innocent.” This Article agrees and disagrees with both sides. Corporate criminal liability could play a critical role in establishing an effective deterrent to organizational misconduct, but today it largely fails. Currently, we have a system that combines Deferred Prosecution Agreements, Non-Prosecution Agreements, and extraordinarily generous sentencing credits for compliance plans that have failed, and the result is a system that is more carrots than sticks. The evidence seems clear …


Barbarians Inside The Gates: Raiders, Activists, And The Risk Of Mistargeting, Zohar Goshen, Reilly S. Steel Jan 2022

Barbarians Inside The Gates: Raiders, Activists, And The Risk Of Mistargeting, Zohar Goshen, Reilly S. Steel

Faculty Scholarship

This Article argues that the conventional wisdom about corporate raiders and activist hedge funds — raiders break things and activists fix them — is wrong. Because activists have a higher risk of mistargeting — mistakenly shaking things up at firms that only appear to be underperforming — they are much more likely than raiders to destroy value and, ultimately, social wealth.

As corporate outsiders who challenge the incompetence or disloyalty of incumbent management, raiders and activists play similar roles in reducing “agency costs” at target firms. The difference between them comes down to a simple observation about their business models: …


Twitter V. Musk: The "Trial Of The Century" That Wasn't, Ann M. Lipton, Eric L. Talley Jan 2022

Twitter V. Musk: The "Trial Of The Century" That Wasn't, Ann M. Lipton, Eric L. Talley

Faculty Scholarship

The months-long saga over Elon Musk's on-again, off-again acquisition of Twitter provided considerable entertainment for lawyers and laypeople alike. But for those of us who teach business law, it also provided a unique (and in certain ways, vexing) opportunity to show real-time examples of the legal principles that are the grist for courses in contracts, corporations, corporate finance, and mergers and acquisitions.

Both of us found ourselves incorporating the saga into our classroom discussions, which in turn informed our own thinking about how the dynamic played out. Although we were both relatively active on social media (indeed on Twitter itself) …


The Future Of Board Time And Priorities, Janet Foutty, Eric L. Talley, Carey Oven, Erica Mitnick Klein, Maureen Bujno, Katherine Waldock, Molly Calkins, Lyssa Bantleon Little, Caroline Schoenecker Jan 2022

The Future Of Board Time And Priorities, Janet Foutty, Eric L. Talley, Carey Oven, Erica Mitnick Klein, Maureen Bujno, Katherine Waldock, Molly Calkins, Lyssa Bantleon Little, Caroline Schoenecker

Faculty Scholarship

“Houston, we’ve had a problem.”

Popularized by the 1995 film Apollo 13, this one line signals a dramatic turning point in the story of the 1970 mission to land three people on the surface of the moon.

It recounts the pivotal moment when carefully laid plans for a 33-hour stay on the moon are about to go awry. The very purpose of the mission — two space walks, a series of geological surveys, and the placement of scientific instruments that would send data back to Earth for long after — is in jeopardy.

It is the moment when the playbook …


Toward A Fair And Sustainable Corporate Governance System: Reflections On Leo Strine, Jr.'S Writing On Institutional Investors, Dorothy S. Lund Jan 2022

Toward A Fair And Sustainable Corporate Governance System: Reflections On Leo Strine, Jr.'S Writing On Institutional Investors, Dorothy S. Lund

Faculty Scholarship

It is a privilege to contribute to this Festschrift for my friend, mentor, and co-author, Leo Strine, Jr. It is also a pleasure to revisit his vast body of work and to re-experience the breadth and depth of his scholarship, as well as reflect on his unparalleled influence on the development of corporate law that he brought about while presiding over its most influential courts for twenty-one years.

In thinking about this essay, I recalled a conversation that I had with “CJS” when I was serving as his law clerk. In this conversation, he decried (with James Taylor blasting in …


The Rejected Threat Of Corporate Vote Suppression: The Rise And Fall Of The Anti-Activist Pill, Jeffrey N. Gordon Jan 2022

The Rejected Threat Of Corporate Vote Suppression: The Rise And Fall Of The Anti-Activist Pill, Jeffrey N. Gordon

Faculty Scholarship

As disciplinary takeovers are replaced by activist shareholder campaigns, managements may well want to turn to the “anti-activist pill” as shelter from the storm. The economic shock from the widespread shutdown to combat the Covid-19 pandemic produced dozens of so-called “crisis pills.” The defense of these pills as avoiding “disruption” and “distraction” of managements can be seen as a test run for broader use of poison pills to fend off shareholder activism. The Delaware courts, first Chancery and then the Supreme Court, rejected this managerial defense tactic in a way that clarifies the role of the poison pill in corporate …


Systemic Stewardship, Jeffrey N. Gordon Jan 2022

Systemic Stewardship, Jeffrey N. Gordon

Faculty Scholarship

This Article frames a normative theory of stewardship engagement by large institutional investors and asset managers that is congruent with their theory of investment management — “Modern Portfolio Theory” — which describes investors as attentive to both systematic risk as well as expected returns. Because investors want to maximize risk-adjusted returns, it will serve their interests for asset managers to support and sometimes advance shareholder initiatives that will reduce systematic risk. “Systematic stewardship” provides an approach to “ESG” matters that serves both investor welfare and social welfare and fits the business model of large, diversified funds, especially index funds. The …


Credit, Crises And Infrastructure: The Differing Fates Of Large And Small Businesses, Todd Baker, Kathryn Judge, Aaron Klein Jan 2022

Credit, Crises And Infrastructure: The Differing Fates Of Large And Small Businesses, Todd Baker, Kathryn Judge, Aaron Klein

Faculty Scholarship

This Essay sheds new light on the importance of credit creation infrastructure in determining who actually receives government support during periods of distress, and who continues to benefit after the acute phase of a crisis and the government’s formal support programs come to an end. The pandemic revealed, and the government’s response accentuated, meaningful asymmetries in the capacities of small and large businesses to access needed funding.

At first glance, it would seem that small businesses benefitted more than large ones from the government’s pandemic-support programs, as more government funds flowed into small businesses. Yet closer inspection of the range …


Shifting Influences On Corporate Governance: Capital Market Completeness And Policy Channeling, Ronald J. Gilson, Curtis J. Milhaupt Jan 2022

Shifting Influences On Corporate Governance: Capital Market Completeness And Policy Channeling, Ronald J. Gilson, Curtis J. Milhaupt

Faculty Scholarship

Corporate governance scholarship is typically portrayed as driven by single factor models, for example, shareholder value maximization, director primacy or team production. These governance models are Copernican; one factor is or should be the center of the corporate governance solar system. In this essay, we argue that, as with binary stars, the shape of the governance system is at any time the result of the interaction of two central influences, which we refer to as capital market completeness and policy channeling. In contrast to single factor models, which reflect a stable normative statement of what should drive corporate governance, in …


In Search Of Good Corporate Governance, Dorothy S. Lund Jan 2022

In Search Of Good Corporate Governance, Dorothy S. Lund

Faculty Scholarship

In this Forum Response, Dorothy Lund considers whether the “corporate governance gap” between large and small public companies is the product of harmful or beneficial forces, and in so doing, rejects the idea that there is a single governance framework that is optimal for all public companies.


Caremark And Esg, Perfect Together: A Practical Approach To Implementing An Integrated, Efficient, And Effective Caremark And Eesg Strategy, Leo E. Strine Jr., Kirby M. Smith, Reilly S. Steel Jan 2021

Caremark And Esg, Perfect Together: A Practical Approach To Implementing An Integrated, Efficient, And Effective Caremark And Eesg Strategy, Leo E. Strine Jr., Kirby M. Smith, Reilly S. Steel

Ira M. Millstein Center for Global Markets and Corporate Ownership

With increased calls from investors, legislators, and academics for corporations to consider employee, environmental, social, and governance factors (“EESG”) when making decisions, boards and managers are struggling to situate EESG within their existing reporting and organizational structures. Building on an emerging literature connecting EESG with corporate compliance, this Essay argues that EESG is best understood as an extension of the board’s duty to implement and monitor a compliance program under Caremark. If a company decides to do more than the legal minimum, it will simultaneously satisfy legitimate demands for strong EESG programs and promote compliance with the law. Building on …


Should Human Rights Practice Be Rights-Based?, Sarah Knuckey, Margaret Satterthwaite Jan 2021

Should Human Rights Practice Be Rights-Based?, Sarah Knuckey, Margaret Satterthwaite

Faculty Scholarship

Human rights scholars and organizations often call on governments to adopt ‘human rights-based approaches’ (HRBAs) to many policy areas, from climate change to health policy. HRBAs identify rights and obligations, and advance the principles of participation, accountability, equality, and non-discrimination. This chapter argues that HRBAs have been exported to many fields without ever being sufficiently integrated within human rights advocacy. We find that NGOs often fail to adhere to foundational human rights principles in their own work, reproducing unjust power hierarchies, objectifying victims, and disempowering rights-holders. Were HRBAs adopted by more human rights organizations, the face of human rights advocacy …


Corporate Crime And Punishment: An Empirical Study, Dorothy S. Lund, Natasha Sarin Jan 2021

Corporate Crime And Punishment: An Empirical Study, Dorothy S. Lund, Natasha Sarin

Faculty Scholarship

For many years, law and economics scholars, as well as politicians and regulators, have debated whether corporate punishment chills beneficial corporate activity or, in the alternative, lets corporate criminals off too easily. A crucial and yet understudied aspect of this debate is empirical evidence. Unlike most other types of crime, the government does not measure corporate crime rates; therefore, the government and researchers alike cannot easily determine whether disputed policies are effectively deterring future incidents of corporate misconduct. In this Article, we take important first steps in addressing these questions. Specifically, we use three novel sources as proxies for corporate …


Discharging The Discharge-For-Value Defense, Eric L. Talley Jan 2021

Discharging The Discharge-For-Value Defense, Eric L. Talley

Faculty Scholarship

Despite its massive size, the corporate debt market is often considered a sleepy refuge for the risk-averse. Yet, corporate debt contracts are often mind-numbingly detailed. That complexity – when coupled with the financial stakes in play – can be a recipe for calamity. And in late 2020, calamity struck in the form of an accidental $1 billion payoff sent to Revlon Inc.’s distressed creditors – not by Revlon itself but rather by Citibank, the administrative agent for the loan. When several lenders refused to return the cash, Citibank commenced what many reckoned would be a successful (if embarrassing) lawsuit to …


Cleaning Corporate Governance, Jens Frankenreiter, Cathy Hwang, Yaron Nili, Eric L. Talley Jan 2021

Cleaning Corporate Governance, Jens Frankenreiter, Cathy Hwang, Yaron Nili, Eric L. Talley

Faculty Scholarship

Although empirical scholarship dominates the field of law and finance, much of it shares a common vulnerability: an abiding faith in the accuracy and integrity of a small, specialized collection of corporate governance data. In this paper, we unveil a novel collection of three decades’ worth of corporate charters for thousands of public companies, which shows that this faith is misplaced.

We make three principal contributions to the literature. First, we label our corpus for a variety of firm- and state-level governance features. Doing so reveals significant infirmities within the most well-known corporate governance datasets, including an error rate exceeding …


Corporate Finance For Social Good, Dorothy S. Lund Jan 2021

Corporate Finance For Social Good, Dorothy S. Lund

Faculty Scholarship

Corporations are under pressure to use their outsized power to benefit society, but this advocacy is unlikely to result in meaningful change because corporate law’s incentive structure rewards fiduciaries who maximize shareholder wealth. Therefore, this Essay proposes a way forward that works within the wealth-maximization framework and yet could result in dramatic social change. The idea is simple: Use private debt markets to provide incentives for public-interested corporate action. Specifically, individuals who value prosocial corporate decisions could finance them by contributing to corporate social responsibility (CSR) bonds that would offset the corporation’s implementation costs. To provide an incentive to depart …


The Corporate Governance Machine, Dorothy S. Lund, Elizabeth Pollman Jan 2021

The Corporate Governance Machine, Dorothy S. Lund, Elizabeth Pollman

Faculty Scholarship

The conventional view of corporate governance is that it is a neutral set of processes and practices that govern how a company is managed. We demonstrate that this view is profoundly mistaken: For public companies in the United States, corporate governance has become a “system” composed of an array of institutional players, with a powerful shareholderist orientation. Our original account of this “corporate governance machine” generates insights about the past, present, and future of corporate governance. As for the past, we show how the concept of corporate governance developed alongside the shareholder primacy movement. This relationship is reflected in the …


Common Ownership: Do Managers Really Compete Less?, Merritt B. Fox, Manesh S. Patel Jan 2021

Common Ownership: Do Managers Really Compete Less?, Merritt B. Fox, Manesh S. Patel

Faculty Scholarship

This Article addresses an important question in modern antitrust: when large investment funds have holdings across an industry, is competition depressed?

The question of the impact of common ownership on competition has gained much attention as the role of institutional shareholding has grown, with the funds of the three largest management companies holding in aggregate approximately 21% of the shares of a typical S&P 500 firm. It is a source of acute disagreement among scholars and policymakers, with some who believe common ownership does depress competition seeking antitrust law reforms that would significantly constrain how investment funds operate. Neglected in …