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Full-Text Articles in Law
Golden Parachutes And The Limits Of Shareholder Voting, Albert H. Choi, Andrew C.W. Lund, Robert Schonlau
Golden Parachutes And The Limits Of Shareholder Voting, Albert H. Choi, Andrew C.W. Lund, Robert Schonlau
Articles
With the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, Congress attempted to constrain change-in-control payments (also known as “golden parachutes”) by giving shareholders the right to approve or disapprove such payments on an advisory basis. This Essay is the first to empirically examine the experience with the Say-on-Golden-Parachute (“SOGP”) vote. We find that unlike shareholder votes on proposed mergers, there is a significant amount of variation with respect to votes on golden parachutes. Notwithstanding the variation, however, the SOGP voting regime is likely ineffective in controlling golden parachute (“GP”) compensation. First, proxy advisors seem …
The Institutional Appetite For Quack Corporate Governance, Alicia J. Davis
The Institutional Appetite For Quack Corporate Governance, Alicia J. Davis
Articles
This Article offers evidence that higher quality internal corporate governance is associated with higher levels of ownership by institutional investors. This finding is consistent with the idea that institutions have greater reason than individual investors to prefer well-governed firms, but surprising given the substantial empirical evidence that casts doubt on the efficacy of internal governance mechanisms. The study described in this Article also finds that higher quality external governance is associated with lower proportions of ownership by certain types of institutional investors, also a somewhat surprising result given available empirical evidence on the positive relationship between external governance and firm …
The Devil In The Details: Reflections On The Camp Draft, Reuven S. Avi-Yonah
The Devil In The Details: Reflections On The Camp Draft, Reuven S. Avi-Yonah
Articles
The discussion draft of the Tax Reform Act of 2014 (TRA 14) released by House Ways and Means Committee Chair Dave Camp, R-Mich., on February 26 represents a major effort for fundamental and far-reaching reform of U.S. tax law. Unfortunately, while many parts of the proposal seem sensible as an effort to bring back the spirit of 1986, the international tax reform proposals are deeply flawed and based on obsolete assumptions of the world that faces U.S. multinationals in 2014.
Back From The Dead: Reviving Transfer Pricing Enforcement, Reuven S. Avi-Yonah
Back From The Dead: Reviving Transfer Pricing Enforcement, Reuven S. Avi-Yonah
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The OECD has recently come to recognize that the transfer pricing system does not work as intended. In its report on base erosion and profit shifting 2013 WTD 140-17: Other Administrative Documents, the OECD recognizes that BEPS results in revenue losses that affect all states, especially poorer ones; that systematic tax avoidance by the richest and most powerful companies in the world undermines the general legitimacy of taxation; that it gives MNEs significant competitive advantages over purely domestic firms, resulting in inefficient allocations of investment and major distortions to economic activity; and that it skews the decisions of the MNEs …
Revisiting 'Truth In Securities Revisited': Abolishing Ipos And Harnessing Private Markets In The Public Good, Adam C. Pritchard
Revisiting 'Truth In Securities Revisited': Abolishing Ipos And Harnessing Private Markets In The Public Good, Adam C. Pritchard
Articles
My thesis is that the transition between private- and public-company status could be less bumpy if we unify the public-private dividing line under the Securities Act and Exchange Act. The insight builds on Cohen's thought experiment where Congress first enacted the Exchange Act. My proposed public-private standard would take the company-registration model to its logical conclusion. The customary path to public-company status is through an IPO, typically with simultaneous listing of the shares on an exchange. There is nothing about public offerings, however, that makes them inherently antecedent to public-company status. What if companies became public, with required periodic disclosures …
Corporate And International Tax Reform: Proposals For The Second Obama Administration (And Beyond), Reuven S. Avi-Yonah
Corporate And International Tax Reform: Proposals For The Second Obama Administration (And Beyond), Reuven S. Avi-Yonah
Articles
The passage of the American Taxpayer Relief Act of 2012 (ATRA) offers an opportune moment to consider proposals for corporate and international tax reform. With the debate over individual tax rates for the income and estate tax settled for the present, the President and Congress are free to consider broader reforms. Few observers doubt that such reforms are sorely needed, for several reasons. First, the long-term budgetary outlook is unsustainable. Second, the U.S. corporate tax rate is the highest in the Organisation for Economic Co-Operation and Development (OECD). Third, the current system raises relatively little revenue and large amounts of …
Facebook, The Jobs Act, And Abolishing Ipos, Adam C. Pritchard
Facebook, The Jobs Act, And Abolishing Ipos, Adam C. Pritchard
Articles
Initial public offerings (IPOs)-the first sale of private firms' stock to the public-are a bellwether of investor sentiment. Investors must be bullish if they are putting their money into untested start-ups. IPOs are frequently cited in the business press as a key barometer of the health of financial markets. Politicians, too, see a steady flow of IPOs as an indicator that capital is fueling the entrepreneurial initiative that sustains the growth of new businesses. Growing businesses create jobs, so Republicans and Democrats can find common ground on the importance of promoting IPOs. That bipartisan consensus was on display this spring …
The Attack On Nonprofit Status: A Charitable Assessment, James R. Hines Jr., Jill R. Horwitz, Austin Nichols
The Attack On Nonprofit Status: A Charitable Assessment, James R. Hines Jr., Jill R. Horwitz, Austin Nichols
Articles
American nonprofit organizations receive favorable tax treatment, including tax exemptions and tax-deductibility of contributions, in return for their devotion to charitable purposes and restrictions not to distribute profits. Recent efforts to extend some or all of these tax benefits to for-profit companies making social investments, including the creation of the new hybrid nonprofit/for-profit company form known as the Low-Profit Limited Liability Company, threaten to undermine the vitality of the nonprofit sector and the integrity of the tax system. Reform advocates maintain that the ability to compensate executives based on performance and to distribute profits when attractive investment opportunities are scarce …
Monitoring Of Corporate Groups By Independent Directors, Adam C. Pritchard
Monitoring Of Corporate Groups By Independent Directors, Adam C. Pritchard
Articles
Both the United States and Korea have reformed their corporate governance in recent years to put increasing responsibilities on independent directors. Independent directors have been found to be an important force protecting the interests of shareholders when it comes time to make certain highly salient decisions, such as firing a CEO or selling the company. This article compares the role of independent directors in the US and Korean systems. I argue that the US may have placed regulatory burdens on independent directors that they are unlikely to be able to satisfy, given their part-time status. By contrast, in the chaebol …
When 'Good' Corporate Governance Makes 'Bad' (Financial) Firms: The Global Crisis And The Limits Of Private Law, Nicholas C. Howson
When 'Good' Corporate Governance Makes 'Bad' (Financial) Firms: The Global Crisis And The Limits Of Private Law, Nicholas C. Howson
Articles
In the aftermath of the global financial crisis of 2008–2009, investors, analysts, legislators, and pundits have spotlighted “good” or “improved” corporate governance as a remedy for all that presently ails us. It is one remedy in a long wish list that includes tougher requirements for risk capital, liquidity, and leverage; compensation and bonus reform; reimposition ofthe Glass-Steagall-like separation of bank “utility” and “casino” functions; the downsizing or breakup of institutions deemed “too big to fail;” enhanced consumer protection; securities law liability for secondary violators (like credit rating agencies); direct taxation of proprietary trading; “macroprudential” regulation; and new transparency requirements for …
Stoneridge Investment Partners V. Scientific-Atlanta: The Political Economy Of Securities Class Action Reform, Adam C. Pritchard
Stoneridge Investment Partners V. Scientific-Atlanta: The Political Economy Of Securities Class Action Reform, Adam C. Pritchard
Articles
I begin in Part II by explaining the wrong turn that the Court took in Basic. The Basic Court misunderstood the function of the reliance element and its relation to the question of damages. As a result, the securities class action regime established in Basic threatens draconian sanctions with limited deterrent benefit. Part III then summarizes the cases leading up to Stoneridge and analyzes the Court's reasoning in that case. In Stoneridge, like the decisions interpreting the reliance requirement of Rule 10b-5 that came before it, the Court emphasized policy implications. Sometimes policy implications are invoked to broaden the reach …
All In The Family As A Single Shareholder Of An S Corporation, Douglas A. Kahn, Jeffrey H. Kahn, Terrence G. Perris
All In The Family As A Single Shareholder Of An S Corporation, Douglas A. Kahn, Jeffrey H. Kahn, Terrence G. Perris
Articles
Subject to a few exceptions, a corporation that has elected to be taxed under subchapter S of chapter 1 of subtitle A of title 26 of the United States tax code is not taxed on its net income. Instead, the income, deductions, credits, and other tax items of an S corporation pass through to its shareholders on a pro rata basis. To qualify for subchapter S treatment, an electing corporation must satisfy the requirements that are set forth in section 1361, one of which is that the corporation can have no more than 100 shareholders. One aspect of that requirement …
Does Nonprofit Ownership Matter?, Jill R. Horwitz
Does Nonprofit Ownership Matter?, Jill R. Horwitz
Articles
In recent years, policymakers have increasingly questioned whether nonprofit institutions, particularly hospitals, merit tax exemption. They argue that nonprofit hospitals differ little from their for-profit counterparts in the provision of charity care and, therefore, should either lose their tax-exempt status or adhere to new, strict, and specific requirements to provide free services for the poor. In this Article, I present evidence that hospital ownership-whether it is for-profit, nonprofit, or government owned-has a significant effect on the mix of medical services it offers. Despite notoriously weak enforcement mechanisms, nonprofit hospitals act in the public interest by providing services that are unlikely …
The Irrational Auditor And Irrational Liability, Adam C. Pritchard
The Irrational Auditor And Irrational Liability, Adam C. Pritchard
Articles
This Article argues that less liability for auditors in certain areas might encourage more accurate and useful financial statements, or at least equally accurate statements at a lower cost. Audit quality is promoted by three incentives: reputation, regulation, and litigation. When we take reputation and regulation into account, exposing auditors to potentially massive liability may undermine the effectiveness of reputation and regulation, thereby diminishing integrity of audited financial statements. The relation of litigation to the other incentives that promote audit quality has become more important in light of the sea change that occurred in the regulation of the auditing profession …
Is The Report Of Lazarus's Death Premature? A Reply To Cameron And Postlewaite, Douglas A. Kahn
Is The Report Of Lazarus's Death Premature? A Reply To Cameron And Postlewaite, Douglas A. Kahn
Articles
Over a year ago, Ms. Faith Cuenin and I wrote an article in this Review (which I hereafter refer to as the "2004 Article") about the tax treatment of guaranteed payments under section 707(c) that are made in kind.' We concluded that a partnership does not recognize gain or loss on the making of a guaranteed payment with appreciated or depreciated property. We also concluded that the partner's basis in the property received will equal its fair market value at the time of payment, and that the payment does not affect the partner's outside basis in his partnership interest except …
The Silver Lining: The International Tax Provisions Of The American Jobs Creation Act - A Reconsideration, Reuven S. Avi-Yonah
The Silver Lining: The International Tax Provisions Of The American Jobs Creation Act - A Reconsideration, Reuven S. Avi-Yonah
Articles
The American Jobs Creation Act of 2004, passed by the US Congress on 12 October and signed into law by President Bush on 22 October 2004, has been greeted by general dismay by various critics. The Act has been described as overloaded with “pork” and giveaways to special interest groups like tobacco farmers. The critics contend that the only achievement of the Act, the repeal of the “extraterritorial income” (ETI) regime that was ruled by the WTO to be a prohibited export subsidy, is dwarfed by 633 pages of special interest legislation. Even the Bush Administration distanced itself from the …
Self-Regulation And Securities Markets, Adam C. Pritchard
Self-Regulation And Securities Markets, Adam C. Pritchard
Articles
Enron, Arthur Andersen, Tyco, ImClone, WorldCom, Adelphia - as American investors reel from accounting scandals and self-dealing by corporate insiders, the question of trust in the securities markets has taken on a new urgency. Securities markets cannot operate without trust. Markets known for fraud, insider trading, and manipulation risk a downward spiral as investors depart in search of safer investments. Today, many investors are rethinking the wisdom of entrusting their financial futures to the stock market. Absent trust in the integrity of the securities markets, individuals will hoard their money under the proverbial mattress.
A Control-Based Approach To Shareholder Liability For Corporate Torts, Nina A. Mendelson
A Control-Based Approach To Shareholder Liability For Corporate Torts, Nina A. Mendelson
Articles
Some commentators defend limited shareholder liability for torts and statutory violations as efficient, even though it encourages corporations to overinvest in and to externalize the costs of risky activity. Others propose pro rata unlimited shareholder liability for corporate torts. Both approaches, however, fail to account fully for qualitative differences among shareholders. Controlling shareholders, in particular, may have lower information costs, greater influence over managerial decisionmaking, and greater ability to benefit from corporate activity. This Article develops a control-based approach to shareholder liability. It first explores several differences among shareholders. For example, a controlling shareholder can more easily curb managerial risk …
Section 338 And Its Foolish Consistency Rules - The Hobgoblin Of Little Minds, Douglas A. Kahn
Section 338 And Its Foolish Consistency Rules - The Hobgoblin Of Little Minds, Douglas A. Kahn
Articles
The purposes of this Article are to examine whether there is any longer a reason for concern because a target corporation can choose selected assets for nonrecognition and to what extent the 1994 regulations properly deal with potentially abusive circumventions of tax goals. Before examining the current status of the consistency requirements, the historical background that led to the adoption of Section 338 and the operation of the section is discussed. The historical background includes: the judicially created Kimbell-Diamond rule, the codification and modification of that rule by the old version of Section 334(b)(2), the operation of the old version …
Limiting The Role Of Patents In Technology Transfer, Rebecca S. Eisenberg
Limiting The Role Of Patents In Technology Transfer, Rebecca S. Eisenberg
Articles
Federal policy since 1980 has reflected an increasingly confident presumption that patenting discoveries made in the course of government-sponsored research is the most effective way to promote technology transfer and commercial development of those discoveries in the private sector. Whereas policymakers in the past may have thought that the best way to achieve widespread use of government-sponsored research was to make the results freely available to the public, the new propatent policy stresses the need for exclusive rights as an incentive for industry to undertake the further investment to bring new products to market. Although this propatent policy may make …
Limiting The Role Of Patents In Technology Transfer, Rebecca Sue Eisenberg
Limiting The Role Of Patents In Technology Transfer, Rebecca Sue Eisenberg
Articles
Federal policy since 1980 has reflected an increasingly confident presumption that patenting discoveries made in the course of government-sponsored research is the most effective way to promote technology transfer and commercial development of those discoveries in the private sector. Whereas policymakers in the past may have thought that the best way to achieve widespread use of government-sponsored research was to make the results freely available to the public, the new propatent policy stresses the need for exclusive rights as an incentive for industry to undertake the further investment to bring new products to market. Although this propatent policy may make …
Should General Utilities Be Reinstated To Provide Partial Integration Of Corporate And Personal Income—Is Half A Loaf Better Than None?, Douglas A. Kahn
Should General Utilities Be Reinstated To Provide Partial Integration Of Corporate And Personal Income—Is Half A Loaf Better Than None?, Douglas A. Kahn
Articles
The General Utilities doctrine is the name given to the now largely defunct tax rule that a corporation does not recognize a gain or a loss on making a liquidating or nonliquidating distribution of an appreciated or depreciated asset to its shareholders. The roots of the doctrine, can be traced to a regulation promulgated in 1919 that denied realization of gain or loss to a corporation when making a liquidating distribution of an asset in kind. No regulatory provision existed which specified the extent to which realization would or would not be triggered by a nonliquidating distribution such as a …
The Constitutionality Of The Federal Corporation Tax, Ralph W. Aigler
The Constitutionality Of The Federal Corporation Tax, Ralph W. Aigler
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During the special session of Congress held the past summer there was enacted as an amendment to the new Tariff Law what is generally known as the Federal Corporation Tax.1 At the time of its consideration in Congress and since its enactment there has been considerable discussion regarding the constitutionality of the measure, and no little doubt has been expressed as to its validity.
Federal License Or National Incorporation, Horace Lafayette Wilgus
Federal License Or National Incorporation, Horace Lafayette Wilgus
Articles
The message of President Roosevelt and the Report of Mr. Garfield as Commissioner of Corporations, if we are not mistaken, have done, or will do, more than all the discussion of the past several years to clear the vision of the people as to what is necessary and possible to do in the way of meeting and overcoming our industrial and commercial corporation difficulties.
Need Of A National Incorporation Law, Horace Lafayette Wilgus
Need Of A National Incorporation Law, Horace Lafayette Wilgus
Articles
When the report of the Committee on Uniformity of legislation was submitted to the last American Bar Association, and consideration of the legal problems growing out of modem commercial combinations, was urged as a matter proper for discussion and action by that association, it was gravely argued by distinguished lawyers present that there was no legal problem to be solved. The Committee on Commercial Law, however, thought otherwise and said:- "The American people look to the American Bar for leadership on this question. Some one must lead. If not the lawyer, then it will be the demagogue."
A Proposed National Incorporation Law, Horace Lafayette Wilgus
A Proposed National Incorporation Law, Horace Lafayette Wilgus
Articles
In an article in the February number of this magazine1 the writer discussed the need of a national incorporation law. The following is proposed as such; its object is to set forth what, perhaps, may be possible under such a law; what some will think necessary or desirable; what some will think unnecessary and undesirable; and what others will undoubtedly think is all wrong, if not vicious. Whatever view is taken the writer's purpose will be accomplished if consideration and discussion of the proper details of such a law, are provoked. There are two classes who desire a national incorporation …