Law Commons^™

The Spac Market, Usha Rodrigues, Michael Stegemoller

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Special purpose acquisition companies (SPACs) exploded in popularity in the past few years, to such a degree that they made up 60% of IPOs in 2020, 66.3% in 2021, and 69.4% in 2022. Celebrities from Colin Kaepernick to Jay-Z have launched SPACs, but perhaps the most feverish attention came in October 2021, when a SPAC called Digital World Acquisition Corp (DWAC) announced plans to acquire Trump Media & Technology Group (TMTG), a social media company headed by former president Donald Trump.

The SPAC frenzy has now abated, a casualty of some combination of higher interest rates, regulatory crackdown, and oversupply. …

Business Associations, Scott Lowry

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This Article surveys a selection of noteworthy cases involving business associations that Georgia courts decided between June 1, 2022 and May 31, 2023. This Article also briefly highlights the 2023 update to the Georgia Nonprofit Corporation Code, sections 14-3-101–1703 of the Official Code of Georgia Annotated, which was signed by Governor Kemp on May 2, 2023, and took effect on July 1, 2023.

Corporate Governance Reform And The Sustainability Imperative, Christopher Bruner

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Recent years have witnessed a significant upsurge of interest in alternatives to shareholder-centric corporate governance, driven by a growing sustainability imperative—widespread recognition that business as usual, despite the short-term returns generated, could undermine social and economic stability and even threaten our long-term survival if we fail to grapple with associated costs. We remain poorly positioned to assess corporate governance reform options, however, because prevailing theoretical lenses effectively cabin the terms of the debate in ways that obscure many of the most consequential possibilities. According to prevailing frameworks, our options essentially amount to board-versus-shareholder power, and shareholder-versus stakeholder purpose. This narrow …

Artificially Intelligent Boards And The Future Of Delaware Corporate Law, Christopher Bruner

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The prospects for Artificial Intelligence (AI) to impact the development of Delaware corporate law are at once over- and under-stated. As a general matter, claims to the effect that AI systems might ultimately displace human directors not only exaggerate the foreseeable technological potential of these systems, but also tend to ignore doctrinal and institutional impediments intrinsic to Delaware's competitive model – notably, heavy reliance on nuanced and context-specific applications of the fiduciary duty of loyalty by a true court of equity. At the same time, however, there are specific applications of AI systems that might not merely be accommodated by …

The Implications Of Corporate Political Donations, Benjamin P. Edwards

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No abstract provided.

Panel Three: How Should Spacs Be Treated Going Forward (Ipos, Mergers, Or Distinctly Different?), Usha Rodrigues, Gregg A. Noel, Rick Flemming, Michael Stegemoller

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From the Symposium: Here to Stay: Wrestling with the Future of the Quickly Maturing SPAC Market

Panel addressing and examining the policy concerns around special purpose acquisition companies (SPACs).

Artificially Intelligent Boards And The Future Of Delaware Corporate Law, Christopher Bruner

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This article argues that the prospects for Artificial Intelligence (AI) to impact corporate law are at once over- and under-stated, focusing on the law of Delaware – the predominant jurisdiction of incorporation for US public companies. Claims that AI systems might displace human directors not only exaggerate AI’s foreseeable technological potential, but ignore doctrinal and institutional impediments intrinsic to Delaware’s competitive model – notably, heavy reliance on nuanced applications of the fiduciary duty of loyalty by a true court of equity. At the same time, however, there are discrete AI applications that might not merely be accommodated by Delaware corporate …

Challenging Gender Discrimination In Closely Held Firms: The Hope And Hazards Of Corporate Oppression Doctrine, Meredith R. Miller

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The #MeToo Movement has ushered sexual harassment out of the shadows and thrown a spotlight on the gender pay gap in the workplace. Harassment and unfair treatment have, however, been difficult to extinguish. This has been true for all workers, including partners – those women who are owners in their firms and claim that they have suffered harassment or unfair treatment based on gender. That is because a partner’s lawsuit for discrimination often will suffer an insurmountable hurdle: plaintiff’s status as a partner in the firm means that they may not be considered an “employee” under the relevant employment discrimination …

Does Tax Matter? Evidence On Executive Compensation After 162(M)'S Repeal, Gregg Polsky, Brian Galle, Andrew Lund

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As part of the most sweeping federal tax reform in a generation, the Tax Cuts and Jobs Act (“TCJA”) radically altered the tax treatment of compensation paid to senior executives of public companies. Prior to the TCJA, payment of such compensation in excess of one million dollars was non-deductible except to the extent the compensation was performance-based. The TCJA eliminated the exception so that all senior executive compensation above one million dollars is now non-deductible regardless of whether it is performance-based or not.

This reform provides a natural experiment to study the role of tax law in influencing managerial pay …

From Property Rights To Liberty Rights: We The Corporations, A Review Essay, Laura Phillips-Sawyer

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A long-standing, and deeply controversial, question in constitutional law is whether or not the Constitution's protections for “persons” and “people” extend to corporations. Law professor Adam Winkler's We the Corporations chronicles the most important legal battles launched by corporations to “win their constitutional rights,” by which he means both civil rights against discriminatory state action and civil liberties enshrined in the Bill of Rights and the Constitution (p. xvii). Today, we think of the former as the right to be free from unequal treatment, often protected by statutory laws, and the latter as liberties that affect the ability to live …

Dual Class Stock In Comparative Context, Christopher Bruner

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Review of the article by Marc T. Moore, Designing Dual Class Sunsets: The Case for a Transfer-Centered Approach, University College London Faculty of Laws Working Paper No. 9/2019, available at SSRN.

Asset Partitioning And Financial Innovation, Christopher Bruner

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Review of the article by Ofer Eldar and Andrew Verstein titled “The Enduring Distinction between Business Entities and Security Interests”, 92 Southern California Law Review, no. 2 (2019).

Cybersecurity Oversight Liability, Benjamin P. Edwards

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A changing cybersecurity environment now poses a significant corporate-governance challenge. Although some cybersecurity data breaches may be inevitable, courts now increasingly consider when a corporation's officers and directors may be held liable on theories that they acted in bad faith and failed to adequately oversee the corporation's affairs. This short essay reviews recent derivative decisions and encourages corporate boards to recognize that in an environment filled with increasing threats, a reasonable response will require devoting real resources and attention to cybersecurity issues.

There's A Problem With Buybacks, But It's Not What Senators Think, Daniel J. Hemel, Gregg D. Polsky

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In a deeply divided Washington, one of the few issues on which leading lawmakers on both sides of the aisle appear to agree is that corporations should be discouraged from buying back their stock from shareholders. This short article argues that, while this anti-buyback sentiment is misguided, there nevertheless are good tax policy arguments for reforming the tax treatment of buybacks. The article recommends adoption of a 1969 proposal made by Professor Marvin Chirelstein that would recharacterize (for tax purposes) buybacks as a pro rata cash dividend, followed by sales of shares from the shareholders who participate in the buyback …

Do Conflicts Of Interest Require Outside Boards? Yes. Bsps? Maybe., Usha Rodrigues

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From the Symposium: Outsourcing the Board: How Board Service Providers Can Improve Corporate Governance

Boards of directors are curious creatures. The law generally requires corporations to have them—indeed, they are the focus of the corporate law we teach in Business Associations in U.S. law schools. The corporation is managed by directors or under their direction; directors hire and fire officers; directors are necessary for fundamental transactions.

But the reason why corporations have directors is not entirely clear. In the prototypical privately held corporation, the family firm, the same individuals serve both as directors and officers. The CEO (better known as …

Corporate Governance Reform In Post-Crisis Financial Firms: Two Fundamental Tensions, Christopher Bruner

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The manner in which financial firms are governed directly impacts the stability and sustainability of both the financial sector and the "real" economy, as the financial crisis and associated regulatory reform efforts have tragically demonstrated. However, two fundamental tensions continue to complicate efforts to reform corporate governance in post-crisis financial firms. The first relates to reliance on increased equity capital as a buffer against shocks and a means of limiting leverage. The tension here arises from the fact that no corporate constituency desires risk more than equity does, and that risk preference only tends to be stronger in banks, and …

Learning To Be More Than A Lawyer, Carol Morgan

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No abstract provided.

Book Review: Global Lawmakers: International Organizations In The Crafting Of World Markets By Susan Block-Lieb And Terence C. Halliday, Melissa J. Durkee

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Susan Block-Lieb and Terence Halliday gradually build up an empirically grounded, meticulously realized argument that individual lawmakers matter. When one allows facts to inform theory rather than the other way around, the authors show, what becomes clear is that individual lawmakers are not just governmental delegates, but a whole variety of professionals, industry association representatives, and others with some stake in the lawmaking process. These actors work not just through formal processes, but also through an array of informal ones. Most importantly, their presence matters to the content of the legal norms that take hold around the world. The book …

Corporations And Sustainability, Beate Sjåfjell, Christopher Bruner

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This chapter introduces the Handbook, providing an overview of its aims and structure, as well as the core research questions that the contributions to it collectively address. It discusses sustainability-related problems associated with the legal form of the corporation, and provides background on state-of-the-art research in natural sciences and other relevant fields that inform our understanding of sustainability. It concludes with specific research questions and a presentation of the Handbook’s structure.

Explaining Choice-Of-Entity Decisions By Silicon Valley Start-Ups, Gregg Polsky

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Perhaps the most fundamental role of a business tax advisor is to recommend the optimal entity choice for nascent business enterprises. Nevertheless, even in 2018, the choice-of-entity analysis remains highly muddled. Most tax practitioners across the United States consistently recommend flow-through entities, such as LLCs and S corporations, to their clients. In contrast, a discrete group of highly sophisticated tax professionals, those who advise start-ups in Silicon Valley and other hotbeds of start-up activity, prefer C corporations.

Prior commentary has described and tried to explain this paradox without finding an adequate explanation. These commentators have noted a host of superficially …

The Up-C Revolution, Gregg D. Polsky, Adam H. Rosenzweig

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Over the past few years, a revolutionary new tax structure, known as the Up-C, has become increasingly popular, particularly in instances where an LLC is being taken public. In such an Up-C IPO, a newly formed C corporation is placed on top of the existing LLC, which continues to operate the business. Shares of the C corporation are sold to new investors, and the proceeds are used by the C corporation to buy an interest in the LLC. Meanwhile, the legacy owners of the LLC (typically, founders and private investment funds) retain their interests in the LLC, while receiving exchange …

Tournament Of Managers: Lessons From The Academic Leadership Market, Usha Rodrigues

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Why do firms usually make, not buy, their chief executive officers (CEOs)? Public corporations hire their CEOs from within the firm 78% of the time. They do so although earlier studies have found no clear evidence that internal hires perform better than external ones. So why do firms prefer them? Few scholars have focused on this simple question.

The reason why firms favor internal candidates matters not only in its own right, but also for an overlooked reason: it informs the controversial question of executive compensation. Currently board-compensation committees look to peer benchmarks to set executive pay. But, taking cues …

Distributed Ledgers, Traceable Shares, And The Division Of Power In Corporate Law, Christopher M. Bruner

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Review of Traceable Shares and Corporate Law, 113 Nw. U. L. Rev. __ by George S. Geis (forthcoming 2018)

Does Shareholder Voting Matter? Evidence From The Takeover Market, Paul Mason, Usha Rodrigues, Mike Stegemoller, Steven Utke

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Voting rights are a basic shareholder-protection mechanism. Outside of the core voting requirements state law imposes (election of directors and votes on fundamental changes), federal law grants shareholders additional voting rights. But these rights introduce concomitant costs into corporate governance. Each grant of a voting right thus invites the question: is the benefit achieved worth the cost the vote imposes?

The question is not merely a theoretical one. Recently the SEC, concerned about Nasdaq’s potential weakening of shareholder voting protections, has lamented that little evidence exists on the value of the shareholder vote. This Article provides that evidence. It examines …

Center-Left Politics And Corporate Governance: What Is The 'Progressive' Agenda?, Christopher Bruner

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For as long as corporations have existed, debates have persisted among scholars, judges, and policymakers regarding how best to describe their form and function as a positive matter, and how best to organize relations among their various stakeholders as a normative matter. This is hardly surprising given the economic and political stakes involved with control over vast and growing "corporate" resources, and it has become commonplace to speak of various approaches to corporate law in decidedly political terms. In particular, on the fundamental normative issue of the aims to which corporate decision-making ought to be directed, shareholder-centric conceptions of the …

Corporate Governance Reform In Post-Crisis Financial Firms: Two Fundamental Tensions, Christopher Bruner

Scholarly Works

The manner in which financial firms are governed directly impacts the stability and sustainability of both the financial sector and the "real" economy, as the financial crisis and associated regulatory reform efforts have tragically demonstrated. However, two fundamental tensions continue to complicate efforts to reform corporate governance in post-crisis financial firms. The first relates to reliance on increased equity capital as a buffer against shocks and a means of limiting leverage. The tension here arises from the fact that no corporate constituency desires risk more than equity does, and that risk preference only tends to be stronger in banks, and …

The Fiduciary Enterprise Of Corporate Law, Christopher Bruner

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No abstract provided.

Distributed Governance, Carla L. Reyes, Nizan Geslevich Packin, Benjamin P. Edwards

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Distributed ledger technology disrupts traditional business organizations by introducing new business entities without the directors and officers of traditional corporate entities. Although these emerging entities offer intriguing possibilities, distributed entities may suffer significant collective action problems and expose investors to catastrophic regulatory and governance risks. Our Article examines key considerations for stakeholders and argues that distributed entities must be carefully structured to function effectively.

This Article breaks new ground by critically examining distributed entities. We argue that a distributed model is most appropriate when distributed ledger technology solves a unique corporate governance problem. We caution against ignoring the lessons painstakingly …

Redefining Roles And Duties Of The Transactional Lawyer: A Narrative Approach, Lori D. Johnson

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Today’s transactional lawyers perform myriad tasks for their clients, including structuring, drafting, conceptualizing, negotiating, and executing the complex, risky, and often cutting-edge transactions their clients bring to the table. On the other side of that table, often sits another team of sophisticated transactional lawyers. These opposing counsel are armed for battle over every nuance, every word, every representation, every deliverable, and every obligation their client is poised to undertake or agree to. Therefore, modern transactional lawyers must behave as advocates and explore new modes of persuasion. As a response, scholars have begun to propose that transactional lawyers employ methods of …

A Rational Approach To Business Entity Choice, Eric H. Franklin

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This Article reinvigorates the entity rationalization movement and will ultimately argue that there are only three necessary entity options: corporations, partnerships, and nonprofit organizations. Part I defines the issue of entity proliferation and, along with the Appendix, presents a state-by-state analysis of the types of legal entities available, an endeavor that has not yet been conducted. The Appendix contains a chart that enumerates each legal entity available in each of the fifty states and the District of Columbia. Part II discusses the problems associated with entity proliferation from the perspective of the public, potential business owners, small business attorneys, and …