Law Commons^™

Barriers To Effective Risk Management, Michelle M. Harner

Faculty Scholarship

“As long as the music is playing, you’ve got to get up and dance. We’re still dancing.”**

This now infamous quote by Charles Prince, Citigroup’s former Chief Executive Officer, captures the high-risk, high-reward mentality and overconfidence that permeates much of corporate America. These attributes in turn helped to facilitate a global recession and some of the largest economic losses ever experienced in the financial sector. They also represent certain cognitive biases and cultural norms in corporate boardrooms and management suites that make implementing a meaningful risk culture and thereby mitigating the impact of future economic downturns a challenging proposition.

The …

Fiduciary Exemption For Public Necessity: Shareholder Profit, Public Good, And The Hobson's Choice During A National Crisis, Robert J. Rhee

Faculty Scholarship

This Article is written as two discrete, independently accessible topical sections. The first topical section, presented in Part I of this Article, is a case study of Bank of America’s acquisition of Merrill Lynch and the impact of a flawed merger execution on the board’s subsequent decisions. The second topical section, presented Parts II-IV of this Article, advances a theoretical basis for fiduciary exemption during a public crisis. The financial crisis of 2008 was the worst economic disaster since the Great Depression. It nearly resulted in a collapse of the global capital markets. A key event in the history of …

Ignoring The Writing On The Wall: The Role Of Enterprise Risk Management In The Economic Crisis, Michelle M. Harner

Faculty Scholarship

Enterprise risk management (ERM) targets overall corporate strategy and, when implemented correctly, can manage a corporation’s risk appetite and exposure. When ignored or underutilized, it can contribute to a corporation’s demise. In fact, many commentators point to ERM failures as contributing to the severity of the 2008 economic crisis. This essay examines the different approaches to ERM adopted by financial institutions affected by the 2008 economic crisis and how ERM contributed to the survival or failure of those firms. It then considers ERM in the broader context of corporate governance generally. This discussion reflects on ERM techniques for corporate boards …

Corporate Control And The Need For Meaningful Board Accountability, Michelle M. Harner

Faculty Scholarship

Corporations are vulnerable to the greed, self-dealing and conflicts of those in control of the corporation. Courts historically have regulated this potential abuse by designating the board of directors and senior management as fiduciaries. In some instances, however, shareholders, creditors or others outside of corporate management may influence corporate decisions and, in the process, extract corporate value. Courts generally address this type of corporate damage in one of two ways: they designate controlling shareholders as corporate fiduciaries and they characterize creditors, customers and others as contract parties with no fiduciary duties. The traditional roles of corporate shareholders and creditors may …