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Articles 1 - 30 of 33
Full-Text Articles in Law
The Effects Of Shareholder Primacy, Publicness, And "Privateness" On Corporate Cultures, Donald C. Langevoort
The Effects Of Shareholder Primacy, Publicness, And "Privateness" On Corporate Cultures, Donald C. Langevoort
Seattle University Law Review
My conundrum question is this: suppose managerialism triumphed in the governance wars so as to regain its desired level of autonomy from shareholder pressures for boards and managers—would we then expect to see a cultural shift inside corporations toward greater honesty and civil engagement, and if so, why? A helpful diagnostic question is to ask how managers currently construe shareholder and market primacy. Have they internalized it as a value or do they instead resent the demands? My argument here leans more toward resentment, though my contribution is more about how to develop a credible hypothesis than how to prove …
In The Name Of Shareholder Value: Origin Myths Of Corporations And Their Ongoing Implications, Karen Ho
In The Name Of Shareholder Value: Origin Myths Of Corporations And Their Ongoing Implications, Karen Ho
Seattle University Law Review
Part I of this Article analyzes some of the contemporary critiques of, and debates around, shareholder value in order to illustrate why many of these contestations demonstrate underlying gaps or problematic assertions in the history and politics of shareholder value, especially if they are delimited by the narrow legal frames and neoliberal assumptions of corporations. It also provides the context necessary to explicate and ground why shareholder primacy and ownership assumptions are historically and legally flawed, and how financial values and assumptions continue to be championed (and financial power elided), despite the recent implosions of shareholder value. Part II expands …
On The Origins Of The Modern Corporation And Private Property, Bernard C. Beaudreau
On The Origins Of The Modern Corporation And Private Property, Bernard C. Beaudreau
Seattle University Law Review
The Modern Corporation and Private Property (MCPP) by Adolf A. Berle Jr. and Gardiner Means, published in 1932, is undisputedly the most influential work ever written in the field of corporate governance. In a nutshell, Berle and Means argued that corporate control had been usurped by a new class of managers, the result of which included (1) shareholder loss of control (a basic property right), (2) questionable corporate objectives and behavior, and (3) the potential breakdown of the market mechanism. In this paper, I examine the origins of MCPP, paying particular attention to the authors’ underlying motives. I argue that …
The Modern Corporation And Private Property Revisited: Gardiner Means And The Administered Price, William W. Bratton
The Modern Corporation And Private Property Revisited: Gardiner Means And The Administered Price, William W. Bratton
Seattle University Law Review
This essay casts additional light on The Modern Corporation’s corporatist precincts, shifting attention to the book’s junior coauthor, Gardiner C. Means. Means is accurately remembered as the generator of Book I’s statistical showings—the description of deepening corporate concentration and widening separation of ownership and control. He is otherwise more notable for his absence than his presence in today’s discussions of The Modern Corporation. This essay fills this gap, describing the junior coauthor’s central concern—a theory of administered prices set out in a Ph.D. dissertation Means submitted to the Harvard economics department after the book’s publication.
Collected Lectures And Talks On Corporate Law, Legal Theory, History, Finance, And Governance, William W. Bratton
Collected Lectures And Talks On Corporate Law, Legal Theory, History, Finance, And Governance, William W. Bratton
Seattle University Law Review
A collection of eighteen speeches and lectures, from 2003 to 2018, discussing and expanding on the writings and theories of Adolf Berle and Gardiner Means.
Berle And Means’S The Modern Corporation And Private Property: The Military Roots Of A Stakeholder Model Of Corporate Governance, Andrew Smith, Kevin D. Tennent, Jason Russell
Berle And Means’S The Modern Corporation And Private Property: The Military Roots Of A Stakeholder Model Of Corporate Governance, Andrew Smith, Kevin D. Tennent, Jason Russell
Seattle University Law Review
The Modern Corporation and Private Property by Adolf Berle and Gardiner Means (1932) remains one of the most cited works in management studies. Our paper shows that Berle and Means espoused a stakeholder theory of corporate governance that challenged the then-hegemonic idea that the sole purpose of a corporation is to create value for the shareholders. We argue that Berle and Means’s support for stakeholder theory can be associated with their earlier service in the U.S. military, an organization which then inculcated an ethos of public service in its members. Our paper, which is based on archival research in the …
Brain Perspectives On Investor Behavior And Decision-Making Errors, Owen D. Jones
Brain Perspectives On Investor Behavior And Decision-Making Errors, Owen D. Jones
Seattle University Law Review
I want to start off with what I consider to be the statement of the problem. As I understand it, you’re concerned that the time horizons for maximizing the value of an investment vary among individuals in surprisingly wide, imperfectly predictable, and often seemingly irrational ways. And, if I understand your target here, the idea is that a deeper understanding of the causes of this variation might aid in the planning and design of legal and corporate policies. To jump into this, I’m going to give a little bit of an introduction about behavioral biases, and something that I’ve called …
An Identity Theory Of The Short- And Long-Term Investor Debate, Claire A. Hill
An Identity Theory Of The Short- And Long-Term Investor Debate, Claire A. Hill
Seattle University Law Review
Economics famously treats market actors as homogeneous. People are homo economicus, rational self-interested maximizers of their own utility. So far, so good, notwithstanding supposed behavioral “deviations” from rationality (more on those later). That people can view their own utility very differently from one another is recognized in theory, but not so much in practice. Also not sufficiently recognized is the extent to which people’s views of their own utility reflect their theories of who they are and how the world works, and that they hold such views and theories not just atomistically, but also collectively—that is, socially.
Federalism Of Personal Finance: State & Federal Retirement Plans, William A. Birdthistle
Federalism Of Personal Finance: State & Federal Retirement Plans, William A. Birdthistle
Seattle University Law Review
In this Article, I consider possible approaches that attempt to improve the plans through which millions of Americans tend to their life savings. I begin by considering the inadequacies of our current system of defined contribution accounts and then address two possible alternatives: the first being a federal account universally available to Americans based largely on the model of the Thrift Savings Plan; the second being a system of statebased retirement accounts like those that have already been developed in a handful of states. Though I conclude that a single, federal plan would be superior, either alternative approach would be …
Wrong-Termism, Right-Termism, And The Liability Structure Of Investor Time Horizons, Andrew Verstein
Wrong-Termism, Right-Termism, And The Liability Structure Of Investor Time Horizons, Andrew Verstein
Seattle University Law Review
Do investor time horizons lead to inefficient business conduct in the real economy? An extensive finance literature analyzes whether particular practices (e.g., high frequency trading and stock buybacks) lead firms to operate with inefficiently myopic investment horizons, and an extensive legal literature considers the appropriateness of policy interventions. This Article joins those debates by charting the space of possibilities: what might be the causes of problematic time horizons? What solutions are available? One implication of this analysis is that there may be unexplored market-based solutions located on the liability side of investors’ balance sheets. This Article also argues that we …
Corporate Governance As Privately-Ordered Public Policy: A Proposal, Lynn Stout, Sergio Gramitto
Corporate Governance As Privately-Ordered Public Policy: A Proposal, Lynn Stout, Sergio Gramitto
Seattle University Law Review
In this Article, we show how our society can use corporate governance shifts to address, if not entirely resolve, a number of currently pressing social and economic problems. These problems include: rising income inequality; demographic disparities in wealth and equity ownership; increasing poverty and income insecurity; a need for greater innovation and investment in solving problems like disease and climate change; the “externalization” of many costs of corporate activity onto third parties such as customers, employees, creditors, and the broader society; the corrosive influence of corporate money in politics; and discontent and loss of trust in the capitalist system among …
20/20 Vision In The Long & Short-Termism Debate, Anne Tucker
20/20 Vision In The Long & Short-Termism Debate, Anne Tucker
Seattle University Law Review
What is an optimal investment time horizon—for institutions, individual shareholders and corporations? This question can evoke emotional, ideological, and theoretical responses. The answers usually deeply entrenched debates over the fundamental roles of markets versus regulation and between the appropriate loci of corporate power: the board of directors versus the shareholders. Too long-term and it is myopia; too near-term and is it short-termism. Neither label is inconsequential, so the debates are not tepid, academic, or marginal.
Are Investor Time Horizons Shortening?, Rachelle Sampson, Yuan Shi
Are Investor Time Horizons Shortening?, Rachelle Sampson, Yuan Shi
Seattle University Law Review
The rise in quarterly capitalism in corporate America—increased pressure to meet quarterly earnings predictions and cater to shareholder preferences for short-term returns—has gained significant coverage in the business world and popular press in recent years. Increasingly, popular opinion suggests that firms bow to shareholder pressures, taking steps to smooth earnings and boost share prices in the short-term; firms do so by cutting Research and Development (R&D) investment, engaging in extensive cost-cutting, or increasing dividends and share buybacks. Recent estimates at the industry level show that investor discount rates have increased in recent years, supporting the notion that shorttermism is on …
Flash Traders (Milliseconds) To Indexed Institutions (Centuries): The Challenges Of An Agency Theory Approach To Governance In The Era Of Diverse Investor Time Horizons, Harold Weston, Conrad Ciccotello
Flash Traders (Milliseconds) To Indexed Institutions (Centuries): The Challenges Of An Agency Theory Approach To Governance In The Era Of Diverse Investor Time Horizons, Harold Weston, Conrad Ciccotello
Seattle University Law Review
One aspect of the problem in trying to align a corporate investment horizon (the time period for return on investment) to that of its shareholders is the enormous range of investor time horizons, which can range from milliseconds to centuries. A second aspect of the problem is whether ownership of shares equates to ownership of the corporation. A third aspect of the problem is that, despite the theories and advocacy of shareholders being owners, based on the agency model of corporate finance first developed in the 1970s, the theory is contrary to corporate law. These three aspects will be developed …
Institutional Investors, Corporate Governance, And Firm Value, K.J. Martijn Cremers, Simone M. Sepe
Institutional Investors, Corporate Governance, And Firm Value, K.J. Martijn Cremers, Simone M. Sepe
Seattle University Law Review
In the corporate governance debate, the short-term versus longterm contention has grown into perhaps today’s most controversial topic. In this debate, descriptions of institutional investors tend to present a dichotomic nature. These investors are alternatively portrayed as homogenously short-termist or as consistent “forces for good,” focused on targeting underperforming companies. This Article moves beyond this dichotomy. It shows empirically that aggregate institutional investor behavior presents nuances that depend on a variety of factors, including individual firm characteristics, institutional ownership levels, and institutional propensity toward activism.
The Myth Of The Ideal Investor, Elisabeth De Fontenay
The Myth Of The Ideal Investor, Elisabeth De Fontenay
Seattle University Law Review
Critiques of specific investor behavior often assume an ideal investor against which all others should be compared. This ideal investor figures prominently in the heated debates over the impact of investor time horizons on firm value. In much of the commentary, the ideal is a longterm investor that actively monitors management, but the specifics are typically left vague. That is no coincidence. The various characteristics that we might wish for in such an investor cannot peacefully coexist in practice. If the ideal investor remains illusory, which of the real-world investor types should we champion instead? The answer, I argue, is …
The Long And Short Of It: Are We Asking The Right Questions? Modern Portfolio Theory And Time Horizons, Jim Hawley, Jon Lukomnik
The Long And Short Of It: Are We Asking The Right Questions? Modern Portfolio Theory And Time Horizons, Jim Hawley, Jon Lukomnik
Seattle University Law Review
The heavy shadow of modern portfolio theory (MPT) has had a massive impact on everything from market structure, investment philosophy, and investor behavior, to the research that examines those disciplines. Researchers believe that they are casting light onto investment issues (including, for this purpose, specifically investor time horizons), but generalized acceptance of MPT allows it to continue to darken what should be enlightened.
Good Activist/Bad Activist: The Rise Of International Stewardship Codes, Jennifer G. Hill
Good Activist/Bad Activist: The Rise Of International Stewardship Codes, Jennifer G. Hill
Seattle University Law Review
Shareholder participation in corporate governance and investor activism are topics du jour in the United States and around the world. In the early part of the 20th century, Professors Berle and Means considered that shareholder participation was impossible in the transformed commercial world that they described in The Modern Corporation and Private Property. This was a world characterized by dispersed and vulnerable shareholders, in which owners do not manage, and managers do not own, the corporation. In such an environment, the goal of corporate law became one of protecting shareholder interests rather than providing shareholders with participation rights. The structure …
Specificity And Time Horizons, Frank Partnoy
Specificity And Time Horizons, Frank Partnoy
Seattle University Law Review
This Essay argues that the short-termism debate would benefit from greater clarity and specificity regarding time horizons. I make four points. First, optimal time horizons vary in discernible ways. Second, the potential mismatch between actual and optimal time horizons should generate a range of responses. Third, investors and managers can discern and disclose estimates of actual and optimal time horizons (e.g., using categories such as preconscious, fast conscious, slow conscious, and discounting). Fourth, market participants, policy makers, and scholars should use such estimates to be more precise about time horizons. For example, critics of hedge fund activism could recognize that …
Long-Term Executive Compensation As A Remedy For Corporate Short-Termism, Caroline Flammer
Long-Term Executive Compensation As A Remedy For Corporate Short-Termism, Caroline Flammer
Seattle University Law Review
It is often argued that corporations are too focused on the short term (i.e., they are “short-termist”). For example, during the 2016 U.S. presidential campaign, candidate Hillary Clinton urged companies to escape the tyranny of short-termism. Similarly, in the recent policy debate in the United Kingdom on the need to reform corporate governance and executive compensation, Bank of England’s Chief Economist Andy Haldane stated that “[e]xecutive pay is a matter of profound and legitimate public interest. Pay practices can encourage short-term behaviour in ways which harm both firms and the economy.” In this context, a recent article by Flammer and …
A Necessary Social Evil: The Indispensability Of The Shareholder Value Corporation, Marc T. Moore
A Necessary Social Evil: The Indispensability Of The Shareholder Value Corporation, Marc T. Moore
Seattle University Law Review
This symposium article critically evaluates the developing Post-Shareholder-Value (PSV) paradigm in corporate governance scholarship and practice with particular reference to Professor Colin Mayer’s influential theory of the corporation as a unique, long-term “commitment device.” The article’s positive claim is that, while evolving PSV institutional mechanisms such as benefit corporations and dual-class share structures are generally encouraging from a social perspective, there is cause for skepticism about their capacity to become anything more than a niche or peripheral feature of the U.S. public corporations landscape. This is because such measures, despite their apparent reformist potential, are still ultimately quasi-contractual and thus …
Benefit Corporations And Public Markets: First Experiments And Next Steps, Brett H. Mcdonnell
Benefit Corporations And Public Markets: First Experiments And Next Steps, Brett H. Mcdonnell
Seattle University Law Review
Part I begins by considering the leading benefits and costs for a benefit corporation that chooses to go public. It starts there both to begin gaining an understanding of the challenges public companies will face and also to consider whether going public is likely to actually be an attractive option at all for some set of social enterprises. Some of the benefits and costs of going public are the same for benefit corporations as for ordinary corporations—access to new sources of capital and new accountability mechanisms are benefits, but legal compliance and pressures from shareholders to show quick results are …
Redefining Corporate Purpose: An International Perspective, Afra Afsharipour
Redefining Corporate Purpose: An International Perspective, Afra Afsharipour
Seattle University Law Review
This comparative analysis of India’s move toward redefining corporate purpose proceeds as follow. Part I presents an overview of global debates over corporate purpose, drawing principally from the move toward the ESV model in the U.K. and benefit corporations in the U.S. This section briefly recounts the debates in both jurisdictions about whether the changes they have experienced will engender more socially responsible corporations. Part II then provides a condensed history of corporate law reforms in India and an overview of the legislative changes undertaken in the past decade. In Part II, this Article takes a broad approach toward analyzing …
Balance And Team Production, Kelli A. Alces
Balance And Team Production, Kelli A. Alces
Seattle University Law Review
For decades, those holding the shareholder primacy view that the purpose of a corporation is to earn a profit for its shareholders have been debating with those who believe that corporations exist to serve broader societal interests. Adolph Berle and Merrick Dodd began the conversation over eighty years ago, and it continues today, with voices at various places along a spectrum of possible corporate purposes participating. Unfortunately, over time, the various sides of the debate have begun to talk past each other rather than engage with each other and have lost sight of whatever common ground they may be able …
The Boundaries Of "Team" Production Of Corporate Governance, Anthony J. Casey, M. Todd Henderson
The Boundaries Of "Team" Production Of Corporate Governance, Anthony J. Casey, M. Todd Henderson
Seattle University Law Review
We examine the cooperative production of corporate governance. We explain that this production does not occur exclusively within a “team” or “firm.” Rather, several aspects of corporate governance are quintessentially market products. Like Blair and Stout, we view the shareholder as but one of many stakeholders in a corporation. Where we depart from their analysis is in our view of the boundaries of a firm. We suggest that they overweight the intrafirm production of control. Focusing on the primacy of a board of directors, Blair and Stout posit a hierarchical team that governs the economic enterprise. We observe, however, that …
The Agency Cost Paradigm: The Good, The Bad, And The Ugly, Claire A. Hill, Brett H. Mcdonnell
The Agency Cost Paradigm: The Good, The Bad, And The Ugly, Claire A. Hill, Brett H. Mcdonnell
Seattle University Law Review
In the “managerialist” world that preceded our present shareholder value world, some corporate managers could, and did, help themselves when they should have been doing their jobs. The modern agency cost paradigm has focused attention on this problem, in part by conceptualizing the duty of corporate managers as maximizing shareholder value. This paradigm has had a variety of effects: some good, some bad, and some ugly. The agency cost paradigm has had a good effect by focusing on the problem of managerial enrichment and providing a simple, clear benchmark—shareholder value-- that may quickly indicate when managers are performing badly. However, …
The Corporation As Time Machine: Intergenerational Equity, Intergenerational Efficiency, And The Corporate Form, Lynn A. Stout
The Corporation As Time Machine: Intergenerational Equity, Intergenerational Efficiency, And The Corporate Form, Lynn A. Stout
Seattle University Law Review
This Symposium Article argues that the board-controlled corporation can be understood as a legal innovation that historically has functioned as a means of transferring wealth forward and sometimes backward through time, for the benefit of present and future generations. In this fashion the board-controlled corporation promotes both intergenerational equity and intergenerational efficiency. Logic and evidence each suggest, however, that the modern embrace of “shareholder value” as the only corporate objective and “shareholder democracy” as the ideal of corporate governance is damaging the corporate form’s ability to serve this economically and ethically important function.
A Theory Of The Just Corporation, Ronit Donyets-Kedar
A Theory Of The Just Corporation, Ronit Donyets-Kedar
Seattle University Law Review
In their seminal article A Team Production Theory of Corporate Law, Margaret Blair and Lynn Stout hold that the modern corporation is best understood in terms of team production. Challenging the principal–agent model, Blair and Stout offer an analysis that considers the various stakeholders of the corporation as members of a team. Accordingly, they suggest, the purpose of corporate law is to provide a response to the problems created by collective production processes, in particular those pertaining to the distribution of profits stemming from the cooperation. According to Blair and Stout, the solution to this problem is to be found …
Testing The Normative Desirability Of The Mediating Hierarch, Zachary J. Gubler
Testing The Normative Desirability Of The Mediating Hierarch, Zachary J. Gubler
Seattle University Law Review
In their influential article, A Team Production Theory of Corporate Law, Professors Margaret Blair and Lynn Stout explained how corporate law might be viewed as an attempt at solving what is known as the team production problem. At its core, this problem has to do with the opportunistic behavior that arises when multiple economic actors make investments—whether of labor, capital, or otherwise—in a business venture where these investments are said to be “firm specific” because they cannot be easily withdrawn and redeployed in other projects. The problem is how to construct a governance regime that will create incentives for the …
Team Production And Securities Laws, Urska Velikonja
Team Production And Securities Laws, Urska Velikonja
Seattle University Law Review
In the seminal paper that this symposium celebrates, A Team Production Theory of Corporate Law, Margaret Blair and Lynn Stout made two related points. First, that Delaware law does not require shareholder primacy in public corporations. Rather, the broad deference afforded to the decisions of predominantly independent corporate boards of directors is consistent with a contrary theory, that of team production, or, as they call it, “the mediating hierarch” theory. The fundamental role of the board of directors is to mediate between the interests of various stakeholders that contribute to the corporation’s output. As a result, Delaware courts have repeatedly …