Law Commons^™

Controlling Corporate Agency Costs: A United States-Israeli Comparative Law, Zohar Goshen

Faculty Scholarship

The "Corporation" assumes a central position in modem economic life. This is due mainly to the fact that major portions of our economic activities are performed by corporations. Numerous authors have pondered the essence of the corporate phenomenon, proposing various theories for the uniqueness of the corporation as opposed to other possible structures for operating a business. The main line of analysis focuses on the central characteristic of the modem corporation: the separation of ownership and control. Managing a business through the means of a corporation allows one to exploit the advantages of specialization. On one hand, shareholders benefit from …

Why Ownership Matters? Entrepreneurship And The Restructuring Of Enterprises In Central Europe, Roman Frydman, Marek P. Hessel, Andrzej Rapaczynski

Faculty Scholarship

This paper, based on a study of mid-sized firms in the Czech Republic, Hungary, and Poland, seeks to explain the reasons behind the marked impact of ownership on firm performance which has been observed in a number of studies in Eastern Europe and other parts of the world. Focusing in particular on the differential impact of ownership on revenue and cost performance, the paper argues that privatized firms controlled by outside investors are more entrepreneurial than those controlled by corporate insiders or the state. The paper provides evidence that all state and privatized firms in transition economies engage in similar …

Individual Responsibility For The Investment Of Retirement Savings: A Cautionary View, Jeffrey N. Gordon

Faculty Scholarship

These papers, including ones presented earlier this morning, raise questions about an adequate regime of consumer protection in an era in which responsibility for retirement savings and investment decisionmaking is being devolved, increasingly, to individuals. This shift to individual responsibility has also characterized many Social Security reform proposals, previously a bedrock system of publicly determined benefit levels. I find this devolution troubling; I think it is odd for individuals to have this responsibility. Individuals are not good risk bearers of market volatility, both in a financial sense and in a psychological sense. The consequence is that unless individuals are locked …

Deutsche Telekom, German Corporate Governance, And The Transition Costs Of Capitalism, Jeffrey N. Gordon

Faculty Scholarship

In November 1996, Deutsche Telekom AG, the government-owned German telephone company, sold common stock representing approximately 25 percent of the company in a global stock offering that raised approximately DM 20 billion ($13 billion), the largest equity offering ever in Europe. In selling off this equity stake, the German government (i.e., the Federal Republic) had a number of motives. First, the sale was an important step in converting a government-run telephone monopoly into a nimble competitor in the emerging European and world telecommunications market. In anticipation of a fully competitive European telecommunications regime in 1998, Deutsche Telekom ("DT") had been …

Turning Servile Opportunities To Gold: A Strategic Analysis Of The Corporate Opportunities Doctrine, Eric L. Talley

Faculty Scholarship

Perhaps no single motif permeates corporate law and governance literature like the problem of agency costs. Though modest in concept, the canonical principal-agent framework yields fundamental insights into virtually every economic relationship involving the firm. These insights, in turn, not only animate prevailing positive accounts of the modern corporation, but they also provide a normative basis for regulating the oft-lamented gulf between ownership and control.

Despite their pervasiveness, problems of agency costs are rarely more vexing than when an agent is also a potential competitor. A notable example of such a scenario occurs when a corporate manager acquires information about …

Reflections In A Distant Mirror: Japanese Corporate Governance Through American Eyes, Ronald J. Gilson

Faculty Scholarship

For the last ten years, Japanese corporate governance has served as a distant mirror in whose reflection American academics could better see the attributes of their own system. As scholars came to recognize that the institutional characteristics of the American and Japanese systems were politically and historically contingent, other countries' approaches became serious objects of study, rather than just way stations on the road to convergence. One learned about one's own system from the choices made by others.

As it came to be conceived, the Japanese corporation of the 1980s represented quite a different method of organizing production. Styled the …