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Full-Text Articles in Law
Incentivizing Credit Rating Agencies Under The Issuer Pay Model Through A Mandatory Compensation Competition, Robert J. Rhee
Incentivizing Credit Rating Agencies Under The Issuer Pay Model Through A Mandatory Compensation Competition, Robert J. Rhee
Robert Rhee
Credit rating agencies are important institutions of the global capital markets. If they had performed properly, the financial crisis of 2008-2009 would not have occurred. This article offers the simplest fix proposed thus far, and it is contrarian. This Article accepts the central role of rating agencies in the regulation of bond investments, the realities of a duopoly, and the issuer-pay model of compensation. The status quo is the baseline. The role of regulation should be to create the conditions necessary to induce competition. This article proposes that a small, recurring portion of revenue earned by the largest rating agencies …
The Terrorism Risk Insurance Act: Time To End The Corporate Welfare, Robert J. Rhee
The Terrorism Risk Insurance Act: Time To End The Corporate Welfare, Robert J. Rhee
Robert Rhee
The terrorist attacks of September 11, 2001, inflicted enormous losses on the insurance industry and businesses. In the wake of the disruptions occurring in the insurance market at the time, the government enacted the Terrorism Risk Insurance Act of 2002 to create a “temporary” federal backstop against catastrophic losses. This program subsidized private risk with public funds through a cost-sharing program for which the government does not receive any compensation. The compelling need for the program was unclear even in the smoldering aftermath of 9/11. Yet in response to effective lobbying by the insurance industry and business interests, Congress has …
The Tort Foundation Of Duty Of Care And Business Judgment, Robert J. Rhee
The Tort Foundation Of Duty Of Care And Business Judgment, Robert J. Rhee
Robert Rhee
This Article corrects a misconception in corporation law – the belief that principles of tort law do not apply to the liability scheme of fiduciary duty. A board’s duty of care implies exposure to liability, but the business judgment rule precludes it. Tort law finds fault; corporation law excuses it. The conventional wisdom says that the tort analogy fails. This dismissal of tort prinicples is wrong. Although shareholder derivative suits and ordinary tort cases properly yield systemically antipodal outcomes, they are bound by a common analytical framework. The principles of board liability are rooted in tort doctrines governing duty, customs, …
The Decline Of Investment Banking: Preliminary Thoughts On The Evolution Of The Industry 1996-2008, Robert J. Rhee
The Decline Of Investment Banking: Preliminary Thoughts On The Evolution Of The Industry 1996-2008, Robert J. Rhee
Robert Rhee
In this paper, I provide a basic, preliminary financial analysis of several prominent, independent investment banks: Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers, and Bear Stearns. I provide the following data: (1) segmentation of net revenue by products and services, (2) return on average equity, (3) leverage ratio, and (4) debt to equity ratio. Although the data analysis here is very basic, it still tells an interesting narrative of the evolution of the investment banking industry. The investment banking industry has undergone significant change in the twelve-year period 1996 to 2008. In the mid-1990s, banks had a balance mix …
Reflections On The Financial Crisis, Robert J. Rhee
Fiduciary Exemption For Public Necessity: Shareholder Profit, Public Good, And The Hobson's Choice During A National Crisis, Robert J. Rhee
Fiduciary Exemption For Public Necessity: Shareholder Profit, Public Good, And The Hobson's Choice During A National Crisis, Robert J. Rhee
Robert Rhee
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 …
Crisis, Rescue And Corporate Social Responsibility Under American Corporate Law, Robert Rhee
Crisis, Rescue And Corporate Social Responsibility Under American Corporate Law, Robert Rhee
Robert Rhee
This chapter discusses the legal issues of rescue and corporate social responsibility during times of public crisis. It analyzes a corporate board’s fiduciary duty related to the management of a public crisis and the provision of aid to government and the public. The thesis is that American corporate law adequately provides corporate boards authority to assume broad principles of corporate social responsibility, and that during a public crisis this authority is specially recognized in the enabling statutes of corporate law and should be broadened even further to pursue the public good in exigent circumstances.
The Madoff Scandal, Market Regulatory Failure And The Business Education Of Lawyers, Robert Rhee
The Madoff Scandal, Market Regulatory Failure And The Business Education Of Lawyers, Robert Rhee
Robert Rhee
This essay suggests that a deficiency in legal education is a contributing cause of the regulatory failure. The most scandalous malfeasance of this new era, the Madoff Ponzi scheme, evinces the failure of improperly trained lawyers and regulators. It also calls into question whether the prevailing regulatory philosophy of disclosure of disclosure is sufficient in a complex market. This essay answers an important question underlying these considerations: What can legal education do to better train business lawyers and regulators for a market that is becoming more complex? One answer, it suggests, is a simple one: law schools should teach a …
Bonding Limited Liability, Robert J. Rhee
Bonding Limited Liability, Robert J. Rhee
Robert Rhee
Limited liability is considered a “birthright” of corporations. The concept is entrenched in legal theory, and it is a fixed reality of the political economy. But it remains controversial. Scholarly debate has been engaged in absolute terms of defending the rule or advocating its abrogation. Though compelling, these polar positions, often expressed in abstract arguments, are associated with disquieting effects. Without limited liability, efficiency may be severely compromised. With it, involuntary tort creditors bear some of the cost of an enterprise. Most other proposals for reforming limited liability have been incremental, such as modifying veil piercing. However, neither absolutism nor …
The Madoff Scandal, Market Regulatory Failure And The Business Education Of Lawyers, Robert J. Rhee
The Madoff Scandal, Market Regulatory Failure And The Business Education Of Lawyers, Robert J. Rhee
Robert Rhee
This essay suggests that a deficiency in legal education is a contributing cause of the regulatory failure. The most scandalous malfeasance of this new era, the Madoff Ponzi scheme, evinces the failure of improperly trained lawyers and regulators. It also calls into question whether the prevailing regulatory philosophy of disclosure of disclosure is sufficient in a complex market. This essay answers an important question underlying these considerations: What can legal education do to better train business lawyers and regulators for a market that is becoming more complex? One answer, it suggests, is a simple one: law schools should teach a …
Corporate Ethics, Agency, And The Theory Of The Firm, Robert J. Rhee
Corporate Ethics, Agency, And The Theory Of The Firm, Robert J. Rhee
Robert Rhee
This conference paper suggests that the problem of corporate ethics cannot be reduced to the autonomous person. Although the greatest influence on action and choice is one's moral constitution, it does not follow that the agent's behavior is the same within or without the firm. Ethics is a function of corporate form. The theory of agency cannot dismiss the firm as a fiction or metaphorical shorthand since that which does not exist should not be able to cause ethical breakdowns in corporate action. Thus, the theory of the firm, which emphasizes profit and wealth maximization, should incorporate a richer, more …
Bonding Limited Liability, Robert J. Rhee
Bonding Limited Liability, Robert J. Rhee
Robert Rhee
Limited liability is considered a “birthright” of corporations. The concept is entrenched in legal theory, and it is a fixed reality of the political economy. But it remains controversial. Scholarly debate has been engaged in absolute terms of defending the rule or advocating its abrogation. Though compelling, these polar positions, often expressed in abstract arguments, are associated with disquieting effects. Without limited liability, efficiency may be severely compromised. With it, involuntary tort creditors bear some of the cost of an enterprise. Most other proposals for reforming limited liability have been incremental, such as modifying veil piercing. However, neither absolutism nor …