Law Commons^™

Insider Trading: Easterbrook And Fischel And Easterbrook Vs. Fischel, Jonathan R. Macey

The University of Chicago Business Law Review

This Article examines the perspective on insider trading in Frank Easterbrook and Daniel Fischel’s classic work, The Economic Structure of Corporate Law, comparing it with the perspectives the authors have taken in other work on the topic in which the Book’s authors did not coauthor with each other. While Easterbrook and Fischel have similar conceptions about the meaning of “fairness” in securities regulation and corporate law, their differing assumptions about the efficacy of the contracting process within the corporation explain their disagreements about what insider trading law should look like.

Both Easterbrook and Fischel correctly view material inside information as …

The New Corporate Governance, Oliver Hart, Luigi Zingales

The University of Chicago Business Law Review

In the last few years, there has been a dramatic increase in shareholder engagement on environmental and social issues. In some cases shareholders are pushing companies to take actions that may reduce market value. It is hard to understand this behavior using the dominant corporate governance paradigm based on shareholder value maximization. We explain how jurisprudence has sustained this criterion in spite of its economic weaknesses. To overcome these weaknesses we propose the criterion of shareholder welfare maximization and argue that it can better explain observed behavior. Finally, we outline how shareholder welfare maximization can be implemented in practice.

Not-For-Profits, Esgs, And The Economic Structure Of Corporate Law, Saul Levmore

The University of Chicago Business Law Review

A compelling point in The Economic Structure of Corporate Law is that the single goal of maximizing shareholder value is efficient and generally desirable because it gives the managers one aim—while leaving room for law and private contracts to impose constraints on the firm in order to control negative externalities and other social concerns. Easterbrook and Fischel say that: “A manager told to serve two masters (a little for the equity holder, a little for the community) has been freed of both and is answerable to neither.” The point is an especially good one when the manager has more of …

Should There Be Corporate Governance Police?, M. Todd Henderson

The University of Chicago Business Law Review

If a company misbehaves, lawsuits are one way of providing a remedy and encouraging that company and others to behave in the future. If the misbehavior is securities fraud, there are two potential plaintiffs—traders allegedly injured by the fraud may bring a private suit, and the government (through the SEC or DOJ) may sue to enforce the public interest in truthful disclosures of corporate information. If the misbehavior is violations of corporate governance rules, however, only private suits are available. Despite the parallel rationales for marrying private and public attorneys general, the toolkit for protecting the public interest in corporate …

Pills In A World Of Activism And Esg, Caley Petrucci, Guhan Subramanian

The University of Chicago Business Law Review

Easterbrook and Fischel’s The Economic Structure of Corporate Law advances their now famous passivity thesis, which posits that managers should remain passive in the face of an unsolicited tender offer for the company’s shares. Consistent with the broader Chicago-school economic belief, Easterbrook and Fischel argue that markets are generally efficient, and therefore restrictions on the market (like poison pills) are bad. In doing so, Easterbrook and Fischel also consider and reject externalities that might cause the market for corporate control to not function well. Thirty years have passed since Easterbrook and Fischel’s seminal work and the world has changed in …

Just Say No? Shareholder Voting On Securities Class Actions, Albert H. Choi, Stephen J. Choi, A. C. Pritchard

The University of Chicago Business Law Review

The U.S. securities laws allow security-holders to bring a class action suit against a public company and its officers who make materially misleading statements to the market. The class action mechanism allows individual claimants to aggregate their claims. This procedure mitigates the collective action problem among claimants, and also creates potential economies of scale. Despite these efficiencies, the class action mechanism has been criticized for being driven by attorneys and also encouraging nuisance suits. Although various statutory and doctrinal “solutions” have been proposed and implemented over the years, the concerns over the agency problem and nuisance suits persist. This paper …

Who Can Tax Telecommuters?: A Case For An Economic Presence Regime, Garry Canepa

The University of Chicago Business Law Review

Should telecommuters who work across states be taxed by the state that they are physically working in? By the state their office is located in? By both? This issue was raised in New Hampshire v. Massachusetts. There, New Hampshire challenged the taxing authority of a Massachusetts rule that taxed New Hampshire residents who had worked within a Massachusetts office prior to COVID-19 related restrictions but were telecommuting from New Hampshire. New Hampshire argued that the Massachusetts rule violated both the Due Process Clause and Commerce Clause. Since the Supreme Court had denied certiorari for this case, the constitutionality of the …

The Win-Win That Wasn’T: Managing To The Stock Market’S Negative Effects On American Workers And Other Corporate Stakeholders, Aneil Kovvali, Leo E. Strine Jr.

The University of Chicago Business Law Review

Easterbrook and Fischel’s work suggests that society as a whole would achieve the best results if corporate leaders focused only on raising stock prices, leaving other institutions to tend to all other interests. But the idea that making societally important corporations govern to the whims of the stock market would be a win-win for investors, other corporate stakeholders, and our society as a whole has proven incorrect. At bottom, Easterbrook and Fischel failed to contend with the real- world realities that allow investors to profit by shifting distributions and political power to themselves, while shifting costs and risks to workers, …

Purpose Proposals, Jill E. Fisch

The University of Chicago Business Law Review

Repurposing the corporation is the hot issue in corporate governance. Commentators, investors, and increasingly issuers, maintain that corporations should shift their focus from maximizing profits for shareholders to generating value for a more expansive group of stakeholders. Corporations are also being called upon to address societal concerns—from climate change and voting rights to racial justice and wealth inequality.

The shareholder proposal rule, Rule 14a–8, offers one potential tool for repurposing the corporation. This Article describes the introduction of innovative proposals seeking to formalize corporate commitments to stakeholder governance. These “purpose proposals” reflect a new dynamic in the debate over stakeholder …

Rereading The “One Share, One Vote” Principle: Is It Also A Matter Of Competition?, Federico Ghezzi, Chiara Mosca, Maria ‎‏‏‎ Lucia‎ Passador ‎‏‏‎ ‎‏‏‎

The University of Chicago Business Law Review

Despite being a cumbersome principle of corporate governance, the “one share, one vote” principle à la Easterbrook and Fischel is constantly challenged by several attempts to circumvent the original structure of capitalism democracy, based on the provision (often a default provision) that no more and no less than one vote is attributed to each share.

The possibility of adopting categories of shares with multiple voting rights and that of resorting to mechanisms that multiply voting rights upon the occurrence of specific conditions (oftentimes linked to a loyalty bonus for long-term shareholders), depends on the articles of association’s autonomy granted to …

Easterbrook And Fischel On Corporate Purpose, Edward B. Rock

The University of Chicago Business Law Review

Frank Easterbrook and Daniel Fischel’s comments on corporate purpose are as fresh today as they were when they were first published in the 1980s. Starting from the “contractarian” perspective, they asked a key question about questions such as “what is the goal of the corporation?”, namely, “Who cares?”

In this contribution to the symposium volume in their honor, I examine the current corporate purpose debate through the lens of their rather brief comments that first appeared in their 1989 article, “The Corporate Contract.” In doing so, I focus on a variety of issues raised by their analysis: What are the …

The Ftc And The Cpra’S Regulation Of Dark Patterns In Cookie Consent Notices, Danyang Li

The University of Chicago Business Law Review

Dark patterns are designed to confuse and manipulate users to select the option preferred by website owners. Dark patterns are especially prevalent in cookie consent notices, which are notices that websites display to inquire users regarding their cookie preferences. Cookies are often used by websites to track and store user information for functional and marketing purposes. Dark patterns exploit various psychological biases, and the interaction among the biases will likely exacerbate their effects. This Article examines 100 cookie consent notices from the most popular ecommerce websites in the United States and offers a set of empirical data on the current …

Domestic Corporations And The Alien Tort Statute, Joseph Downey

The University of Chicago Business Law Review

This Comment analyzes the history, jurisprudence, and contemporary status of the Alien Tort Statute, which allows foreign citizens to bring suit in US courts for violations of international law. It attempts to answer two unresolved questions relating to the Alien Tort Statute. First, can domestic corporations be sued under the statue? Based on an analysis of the statute’s text, its history, and lower court decisions, this Comment argues that they rightly should be. This Comment will also define what sort of conduct suffices for an Alien Tort Statute lawsuit to be brought against a domestic corporation and concludes that a …

Tyson And Leviathan: Usda Rulemaking And The Psa Harm To Competition Requirement, Spencer James Parts

The University of Chicago Business Law Review

Facing concentration in meatpacking, farmers and ranchers are making increasingly urgent calls for protection from practices they claim make it difficult for them to earn a living. Among the statutes they have turned to for recourse is the Packers and Stockyards Act, a 1921 law that prohibits meatpackers from engaging in unfair, deceptive, or unjustly discriminatory practices. Courts, however, have made PSA cases more difficult to win by requiring that plaintiffs prove “harm to competition” to bring a successful case. Recently, the USDA has intervened in this debate, alternately supporting each side of the harm to competition question in controversial …

Mandatory Financial Disclosures As Total Regulatory Takings, Jay Khurana

The University of Chicago Business Law Review

In the aftermath of the GameStop phenomenon in early 2021, there have been increasing calls for expanded mandatory financial disclosures particularly regarding hedge funds and short selling. Efforts to increase disclosure requirements on hedge funds may implicate the Takings Clause of the Fifth Amendment. This comment argues that mandatory disclosure of a firm’s total portfolio—its long, short, and derivative positions—constitutes an uncompensated taking of its trade secrets. This comment explores the application of current takings jurisprudence to trade secrets and financial disclosures. It concludes that the per se rule established in Lucas v. S.C. Coastal Council should apply to public …

The Law And Economics Of Animus, Andrew T. Hayashi

University of Chicago Law Review

People sometimes want to harm other people. This truism points to a blind spot in law and economics scholarship, which generally assumes that people are indifferent to the effects of their actions on other people. Diverse areas of the law, such as hate-crime legislation and constitutional equal protection doctrine, reside in this blind spot because they are premised on the existence of animus. I argue that the assumption of indifference unnecessarily limits law and economics analysis and that it is both possible and fruitful to incorporate animus into law and economics. I show that doing so leads to new insights …

Neither Here Nor There: Wire Fraud And The False Binary Of Territoriality Under Morrison, Jason Petty

University of Chicago Law Review

No abstract provided.

Experimental Jurisprudence, Kevin Tobia

University of Chicago Law Review

“Experimental jurisprudence” draws on empirical methods to inform questions typically associated with jurisprudence and legal theory. Scholars in this flourishing movement conduct empirical studies about a variety of legal language and concepts. Despite the movement’s growth, its justification is still opaque. Jurisprudence is the study of deep and longstanding theoretical questions about law’s nature, but “experimental jurisprudence,” it might seem, simply surveys laypeople. This Article elaborates on and defends experimental jurisprudence. Experimental jurisprudence, appropriately understood, is not only consistent with traditional jurisprudence; it is an essential branch of it.

Regulation And Redistribution With Lives In The Balance, Daniel Hemel

University of Chicago Law Review

A central question in law and economics is whether nontax legal rules should be designed solely to maximize efficiency or whether they also should account for concerns about the distribution of income. This question takes on particular importance in the context of cost-benefit analysis. Federal agencies apply cost-benefit analysis when writing regulations that generate multibillion-dollar impacts on the U.S. economy and profound effects on millions of Americans’ lives. In the past, agencies’ cost-benefit analyses typically have ignored the income-distributive consequences of those regulations. That may soon change: on his first day in office, President Joe Biden instructed his Office of …

Identifying And Measuring Excessive And Discriminatory Policing, Alex Chohlas-Wood,, Marissa Gerchick, Sharad Goel, Aziz Z. Huq, Amy Shoemaker, Ravi Shroff, Keniel Yao

University of Chicago Law Review

We describe and apply three empirical approaches to identify superfluous police activity, unjustified racially disparate impacts, and limits to regulatory interventions. First, using cost-benefit analysis, we show that traffic and pedestrian stops in Nashville and New York City disproportionately impacted communities of color without achieving their stated public-safety goals. Second, we address a long-standing problem in discrimination research by presenting an empirical approach for identifying “similarly situated” individuals and, in so doing, quantify potentially unjustified disparities in stop policies in New York City and Chicago. Finally, taking a holistic view of police contact in Chicago and Philadelphia, we show that …

The Enduring Neighborhood Effect, Everyday Urban Mobility, And Violence In Chicago, Robert J. Sampson, Brian L. Levy

University of Chicago Law Review

A longstanding tradition of research linking neighborhood disadvantage to higher rates of violence is based on the characteristics of where people reside. This Essay argues that we need to look beyond residential neighborhoods to consider flows of movement throughout the wider metropolis. Our basic premise is that a neighborhood’s well-being depends not only on its own socioeconomic conditions but also on the conditions of neighborhoods that its residents visit and are visited by—connections that form through networks of everyday urban mobility. Based on the analysis of large-scale urban-mobility data, we find that while residents of both advantaged and disadvantaged neighborhoods …

Neighborhood Inequality And Violence In Chicago, 1965–2020, Patrick Sharkey, Alisabeth Marsteller

University of Chicago Law Review

This Essay analyzes trends in violence from a spatial perspective, focusing on how changes in the murder rate are experienced by communities and groups of residents within the city of Chicago. The Essay argues that a spatial perspective is essential to understanding the causes and consequences of violence in the United States and begins by describing the social policies and theoretical mechanisms that explain the connection between concentrated disadvantage and violent crime.

The analysis expands on a long tradition of research in Chicago, and it studies the distribution of violence in the city’s neighborhoods from 1965 to 2020. It additionally …

Capitalizing On Crisis: Chicago Policy Responses To Homicide Waves, 1920–2016, Robert Vargas, Chris Williams, Phillip O’Sullivan, Christina Cano

University of Chicago Law Review

This Essay investigates Chicago city-government policy responses to the four largest homicide waves in its history: 1920–1925, 1966–1970, 1987–1992, and 2016. Through spatial and historical methods, we discover that Chicago police and the mayor’s office misused data to advance agendas conceived prior to the start of the homicide waves. Specifically, in collaboration with mayors, the Chicago Police Department leveraged its monopoly over crime data to influence public narratives over homicide in ways that repeatedly (1) delegitimized Black social movements, (2) expanded policing, (3) framed homicide as an individual rather than systemic problem, and (4) exclusively credited police for homicide rate …

Prospects For Reform? The Collapse Of Community Policing In Chicago, Wesley G. Skogan

University of Chicago Law Review

In an era of renewed enthusiasm for police reform, it could be instructive to examine how reforms—even successful reforms—fail. In the 1990s and 2000s, Chicago’s community-policing initiative was widely recognized as one of the most impressive in the country. In short order, it then collapsed. Community policing’s accomplishments were numerous, but it fell victim to issues commonly facing reform: money—especially the impact of economic downturns; leadership turnover and policy preferences; changes in the social, political, and crime environments; and the emergence of new technologies for responding to community concerns.

Racially Territorial Policing In Black Neighborhoods, Elise C. Boddie

University of Chicago Law Review

This Essay explores police practices that marginalize Black people by limiting their freedom of movement across the spaces of Black neighborhoods. In an earlier article, I theorized “racial territoriality” as a form of discrimination that “excludes people of color from—or marginalizes them within—racialized White spaces that have a racially exclusive history, practice, and/or reputation.” In this Essay, I consider how my theory of racial territoriality could apply to policing. It offers an ac-count of how police not only criminalize Black people but also criminalize Black spaces, ostensibly justifying them—and the people who live in or frequent them—as “natural” targets for …

An Abolitionist Critique Of Violence, Allegra Mcleod

University of Chicago Law Review

The violence experienced by young people of color in the city is multidimensional—both interpersonal and structural. So many of the young have to swallow their rage as they are surveilled in stores and on the streets, as they are targeted by cops for endless stops and frisks, as they are denied jobs, as their schools are closed, and as they are locked in cages by the thousands. For some, the violations and the deprivation turn outward. The instrumental use of violence by some young people becomes a rational adaptive strategy in response to racial and economic oppression. For some of …

Cities, Preemption, And The Statutory Second Amendment, Joseph Blocher

University of Chicago Law Review

Although the Second Amendment tends to dominate the discussion about legal limits on gun regulation, nothing has done more to shape the state of urban gun law than state preemption laws, which fully or partially limit cities’ ability to regulate guns at the local level. The goals of this short Essay are to shed light on this “Statutory Second Amendment” and to provide a basic framework for evaluating it.

Symposium Introduction: This Violent City? Urban Violence In Chicago And Beyond, Aziz Z. Huq, John Rappaport

University of Chicago Law Review

To many, the city of Chicago conjures up a specter of unremitting urban violence. In 2014, the city was labeled the “murder capital” of the United States.¹ The following year, a video of the police shooting Laquan McDonald became a cynosure of public concern.² Commentators as disparate as Spike Lee and President Donald Trump agree: Chicago is uniquely bloody.³ Predictably, the empirical data about Chicago’s crime and policing trends belie the most dramatic of these claims.⁴ Yet if Chicago is not as violent as either Lee or Trump makes it out to be, the city’s experience …

Barbed Wire Fences: The Structural Violence Of Education Law, Latoya Baldwin Clark

University of Chicago Law Review

In this Essay, I argue that, in urban metros like Chicago, poor Black children are victims of not just gun violence but also the structural violence of systemic educational stratification. Structural violence occurs in the context of domination, where poor Black children are marginalized and isolated, vulnerable to lifelong sub-ordination across many domains. Specifically, I argue that U.S. education policy subjects poor Black children to the violence of intergenerational subordination by trapping children behind residential barbed wire fences, starving their schools of necessary resources, and abusively dangling powerless community control.

Toward Livelihood Insurance, Michael Abramowicz

University of Chicago Legal Forum

No abstract provided.