Law Commons^™

The Long And Short Of It: Are We Asking The Right Questions? Modern Portfolio Theory And Time Horizons, Jim Hawley, Jon Lukomnik

Seattle University Law Review

The heavy shadow of modern portfolio theory (MPT) has had a massive impact on everything from market structure, investment philosophy, and investor behavior, to the research that examines those disciplines. Researchers believe that they are casting light onto investment issues (including, for this purpose, specifically investor time horizons), but generalized acceptance of MPT allows it to continue to darken what should be enlightened.

20/20 Vision In The Long & Short-Termism Debate, Anne Tucker

Seattle University Law Review

What is an optimal investment time horizon—for institutions, individual shareholders and corporations? This question can evoke emotional, ideological, and theoretical responses. The answers usually deeply entrenched debates over the fundamental roles of markets versus regulation and between the appropriate loci of corporate power: the board of directors versus the shareholders. Too long-term and it is myopia; too near-term and is it short-termism. Neither label is inconsequential, so the debates are not tepid, academic, or marginal.

Federalism Of Personal Finance: State & Federal Retirement Plans, William A. Birdthistle

Seattle University Law Review

In this Article, I consider possible approaches that attempt to improve the plans through which millions of Americans tend to their life savings. I begin by considering the inadequacies of our current system of defined contribution accounts and then address two possible alternatives: the first being a federal account universally available to Americans based largely on the model of the Thrift Savings Plan; the second being a system of statebased retirement accounts like those that have already been developed in a handful of states. Though I conclude that a single, federal plan would be superior, either alternative approach would be …

An Identity Theory Of The Short- And Long-Term Investor Debate, Claire A. Hill

Seattle University Law Review

Economics famously treats market actors as homogeneous. People are homo economicus, rational self-interested maximizers of their own utility. So far, so good, notwithstanding supposed behavioral “deviations” from rationality (more on those later). That people can view their own utility very differently from one another is recognized in theory, but not so much in practice. Also not sufficiently recognized is the extent to which people’s views of their own utility reflect their theories of who they are and how the world works, and that they hold such views and theories not just atomistically, but also collectively—that is, socially.

The Myth Of The Ideal Investor, Elisabeth De Fontenay

Seattle University Law Review

Critiques of specific investor behavior often assume an ideal investor against which all others should be compared. This ideal investor figures prominently in the heated debates over the impact of investor time horizons on firm value. In much of the commentary, the ideal is a longterm investor that actively monitors management, but the specifics are typically left vague. That is no coincidence. The various characteristics that we might wish for in such an investor cannot peacefully coexist in practice. If the ideal investor remains illusory, which of the real-world investor types should we champion instead? The answer, I argue, is …

Institutional Investors, Corporate Governance, And Firm Value, K.J. Martijn Cremers, Simone M. Sepe

Seattle University Law Review

In the corporate governance debate, the short-term versus longterm contention has grown into perhaps today’s most controversial topic. In this debate, descriptions of institutional investors tend to present a dichotomic nature. These investors are alternatively portrayed as homogenously short-termist or as consistent “forces for good,” focused on targeting underperforming companies. This Article moves beyond this dichotomy. It shows empirically that aggregate institutional investor behavior presents nuances that depend on a variety of factors, including individual firm characteristics, institutional ownership levels, and institutional propensity toward activism.

Specificity And Time Horizons, Frank Partnoy

Seattle University Law Review

This Essay argues that the short-termism debate would benefit from greater clarity and specificity regarding time horizons. I make four points. First, optimal time horizons vary in discernible ways. Second, the potential mismatch between actual and optimal time horizons should generate a range of responses. Third, investors and managers can discern and disclose estimates of actual and optimal time horizons (e.g., using categories such as preconscious, fast conscious, slow conscious, and discounting). Fourth, market participants, policy makers, and scholars should use such estimates to be more precise about time horizons. For example, critics of hedge fund activism could recognize that …

Good Activist/Bad Activist: The Rise Of International Stewardship Codes, Jennifer G. Hill

Seattle University Law Review

Shareholder participation in corporate governance and investor activism are topics du jour in the United States and around the world. In the early part of the 20th century, Professors Berle and Means considered that shareholder participation was impossible in the transformed commercial world that they described in The Modern Corporation and Private Property. This was a world characterized by dispersed and vulnerable shareholders, in which owners do not manage, and managers do not own, the corporation. In such an environment, the goal of corporate law became one of protecting shareholder interests rather than providing shareholders with participation rights. The structure …

Brain Perspectives On Investor Behavior And Decision-Making Errors, Owen D. Jones

Seattle University Law Review

I want to start off with what I consider to be the statement of the problem. As I understand it, you’re concerned that the time horizons for maximizing the value of an investment vary among individuals in surprisingly wide, imperfectly predictable, and often seemingly irrational ways. And, if I understand your target here, the idea is that a deeper understanding of the causes of this variation might aid in the planning and design of legal and corporate policies. To jump into this, I’m going to give a little bit of an introduction about behavioral biases, and something that I’ve called …

Long-Term Executive Compensation As A Remedy For Corporate Short-Termism, Caroline Flammer

Seattle University Law Review

It is often argued that corporations are too focused on the short term (i.e., they are “short-termist”). For example, during the 2016 U.S. presidential campaign, candidate Hillary Clinton urged companies to escape the tyranny of short-termism. Similarly, in the recent policy debate in the United Kingdom on the need to reform corporate governance and executive compensation, Bank of England’s Chief Economist Andy Haldane stated that “[e]xecutive pay is a matter of profound and legitimate public interest. Pay practices can encourage short-term behaviour in ways which harm both firms and the economy.” In this context, a recent article by Flammer and …

Wrong-Termism, Right-Termism, And The Liability Structure Of Investor Time Horizons, Andrew Verstein

Seattle University Law Review

Do investor time horizons lead to inefficient business conduct in the real economy? An extensive finance literature analyzes whether particular practices (e.g., high frequency trading and stock buybacks) lead firms to operate with inefficiently myopic investment horizons, and an extensive legal literature considers the appropriateness of policy interventions. This Article joins those debates by charting the space of possibilities: what might be the causes of problematic time horizons? What solutions are available? One implication of this analysis is that there may be unexplored market-based solutions located on the liability side of investors’ balance sheets. This Article also argues that we …

Corporate Governance As Privately-Ordered Public Policy: A Proposal, Lynn Stout, Sergio Gramitto

Seattle University Law Review

In this Article, we show how our society can use corporate governance shifts to address, if not entirely resolve, a number of currently pressing social and economic problems. These problems include: rising income inequality; demographic disparities in wealth and equity ownership; increasing poverty and income insecurity; a need for greater innovation and investment in solving problems like disease and climate change; the “externalization” of many costs of corporate activity onto third parties such as customers, employees, creditors, and the broader society; the corrosive influence of corporate money in politics; and discontent and loss of trust in the capitalist system among …

Flash Traders (Milliseconds) To Indexed Institutions (Centuries): The Challenges Of An Agency Theory Approach To Governance In The Era Of Diverse Investor Time Horizons, Harold Weston, Conrad Ciccotello

Seattle University Law Review

One aspect of the problem in trying to align a corporate investment horizon (the time period for return on investment) to that of its shareholders is the enormous range of investor time horizons, which can range from milliseconds to centuries. A second aspect of the problem is whether ownership of shares equates to ownership of the corporation. A third aspect of the problem is that, despite the theories and advocacy of shareholders being owners, based on the agency model of corporate finance first developed in the 1970s, the theory is contrary to corporate law. These three aspects will be developed …

Postmodern Social Control: Dividuals And Surveillance, Ernest M. Oleksy

The Downtown Review

As a society's foundational philosophy changes, so, too, will its forms of social control. By using the works of thinkers like Deleuze and Foucault as pivot points, the dynamic nature of social interactions and the agents to mediate those actions shall be investigated. This article includes findings from archival analysis written in a journalistic prose for simplicity of consumption.

The Crisis In Corporate Governance: 2002 Style, Robert W. Hamilton

Maine Law Review

The period from November 1, 2001 to October 1, 2002 has been an astonishing period for corporate governance in many respects. It began with the completely unexpected collapse of Enron Corporation on November 1, 2001, followed almost immediately thereafter by widely publicized downward profit restatements and bankruptcy filings by a significant number of telecommunication companies. Since November 1, 2001, there have been numerous public reports of fraud, misconduct, and scandals by directors of other well-known corporations such as Lucent Technologies, Kmart, Merck & Co., and Rite Aid Corporation. There also have been disclosures of many instances in which corporate officers …

When Is It Necessary For Corporations To Be Essentially At Home?: An Exploration Of Exceptional Cases, Priscilla Heinz

University of Richmond Law Review

No abstract provided.

Corporations And Human Life, Frank Partnoy

Seattle University Law Review

In Part I, I address decision-making. How should risk to human life be included in the jurisprudence of corporate decision-making? In terms of finance, how should corporations make net present value decisions when risk to human life is a factor? In terms of law, is there a case for exceptions to the business judgment rule based on risk to human life? Second, in Part II, I address oversight. How should risk to human life be included in the jurisprudence of oversight? In terms of finance, how should corporations approach risk management when human life is a factor? In terms of …

Redefining Corporate Purpose: An International Perspective, Afra Afsharipour

Seattle University Law Review

This comparative analysis of India’s move toward redefining corporate purpose proceeds as follow. Part I presents an overview of global debates over corporate purpose, drawing principally from the move toward the ESV model in the U.K. and benefit corporations in the U.S. This section briefly recounts the debates in both jurisdictions about whether the changes they have experienced will engender more socially responsible corporations. Part II then provides a condensed history of corporate law reforms in India and an overview of the legislative changes undertaken in the past decade. In Part II, this Article takes a broad approach toward analyzing …

Situating The Corporation Within The Vulnerability Paradigm: What Impact Does Corporate Personhood Have On Vulnerability, Dependency, And Resilience, Heather Kolinsky

American University Journal of Gender, Social Policy & the Law

No abstract provided.

Corporate And Business Law, Laurence V. Parker Jr.

University of Richmond Law Review

Over the past three years, there have been a number of legislative changes to Virginia's business entity statutes. In Part I,this article highlights the changes to the Virginia Stock Corporation Act ("VSCA") and the Virginia Nonstock Corporation Act ('"VNSCA"). Part II highlights changes to the Limited Liability Company Act ("LLC Act"). Part III summarizes Virginia's new intrastate crowdfunding law. The Supreme Court of Virginia has also addressed several significant issues over the last three years, including the applicability of appraisal rights in a stepped transaction. Part IV reviews several of the significant cases during this period.

Who Speaks The Culture Of The Corporation?, Gwendolyn Gordon

Michigan Business & Entrepreneurial Law Review

Recent cases – Burwell v Hobby Lobby Stores and Citizens United chief among them – evince a new understanding of the nature of the corporation and its place in society. Whether a corporation has rights – such as those of religious exercise – is not, however, just a question of legal interpretation. To answer this question requires a theory of group or cultural identity, that is, a theory of how a group may have “culture” separate and apart from those of the individuals that comprise it. And such a theory must address how to understand the meaning of culture when …

Out On A Limb: Support For A Limited Version Of Collective Scienter, Matt Mccabe

St. John's Law Review

(Excerpt)

This Note argues that the correct approach to imputing scienter to a corporation by means of the collective scienter theory is through the absurdity analysis taken by the United States Court of Appeals for the Seventh Circuit.

What Remains Of Vicarious Jurisdiction For Establishing General Jurisdiction Over Corporate Defendants After Daimler Ag V. Bauman?, Keri Martin

Seton Hall Circuit Review

No abstract provided.

Corporations And The 99%: Team Production Revisited, Shlomitt Azgad-Tromer

Fordham Journal of Corporate & Financial Law

This Article explores the legal manifestation of the interaction between the general public and the public corporation. Revisiting team production analysis, this Article redefines the corporate team and argues that while several constituencies indeed form part of the corporate team, others are exogenous to the corporate enterprise. Employees, suppliers and financiers contribute together to the common corporate enterprise, enjoying a long-term relational contract with the corporation, while retail consumers contract with the corporation at arm’s length, and other people living alongside the corporation do not contract with it at all. Under this organizational model, the general public may participate in …

Dissecting Hobby Lobby'S Corporate Person: A Procedural Proposal For Aligning Corporate Rights And Responsibilities, Andrew J. Fleming

Brooklyn Law Review

Over the years, the U.S. Supreme Court’s corporate personhood decisions have allowed for the corporation to become increasingly more “person-like” by recognizing corporate constitutional rights that were previously reserved for flesh-and-blood human beings. Yet in cases where the rights of corporations are evaluated, the Court’s analysis flows from an axiomatic conceptualization of the corporation as a static, theoretical being, as if plucked straight from a business organizations law school textbook. The result is a gulf between corporate rights as “persons” and corporate legal responsibilities. Nowhere is that gulf more evident than in the Court’s personal jurisdiction jurisprudence. In particular, this …

Recent Development: A Guy Named Moe, Llc V. Chipotle Mexican Grill Of Colo., Llc: A Foreign Limited Liability Company Lacking Compliance With State Registration Requirements May Maintain Suit After Infirmity Is Cured; The Company Must Also Meet The "Person Aggrieved" Requirement Of Standing., Alicia M. Kuhns

University of Baltimore Law Forum

The Court of Appeals of Maryland held that a foreign limited liability company, though unregistered at the time of filing, could resolve its lack of compliance and maintain its action for judicial review. A Guy Named Moe, LLC v. Chipotle Mexican Grill of Colo., LLC, 447 Md. 425, 447, 135 A.3d 492, 505 (2016). The court further held that one does not have standing as a “person aggrieved” based solely on the desire to eliminate business competition. Id. at 453, 135 A.3d at 508.

Another Bite At The Apple For Trade Secret Protection: Why Stronger Federal Laws Are Needed To Protect A Corporation's Most Valuable Property, Alissa Cardillo

Brooklyn Journal of Corporate, Financial & Commercial Law

Trade secrets are one of a corporation’s most valuable assets. However, they lack adequate protection under federal law, leaving them vulnerable to theft and misappropriation. As technology advances, it becomes easier and less time consuming for individuals and entities to access and steal trade secrets to a corporation’s detriment. Most often these thefts involve stealing trade secrets in an intangible form. Current legislation fails to adequately protect intangible trade secrets, leaving them vulnerable to theft. An amendment to the National Stolen Property Act that encompasses intangible trade secrets would close a loophole that currently exists relating to intangible assets, allowing …

Better Late Than Never: Incorporating Llcs Into Section 4943, Elaine Waterhouse Wilson

Akron Law Review

Part I of this Article traces the historical development of Code Section 4943 and the business entanglement issues that the Code Section was designed to combat. It then discusses developments in the law that occurred after the passage of Section 4943 that have implications for its structure, most importantly the introduction of the LLC. Part II describes the current statutory scheme of Section 4943, and the ambiguity in the manner in which it applies, and the practical problems and abuses that potentially arise from this ambiguity. In Part III, the Article reviews various options for clarifying the treatment of Section …

Incorporation Of Professionals In Ohio: Past, Present, And Future, M. Thomas Arnold

Akron Law Review

In 1961 the Ohio General Assembly enacted Chapter 1785 of the Ohio Revised Code authorizing the creation of professional associations. This legislation was deficient when enacted. Yet, despite criticism of the act and adequate opportunity, the Ohio Legislature has failed to reform this chapter of the Revised Code. This article will look at some of the background out of which the Ohio professional association legislation arose and at the substance and deficiencies of that legislation. Comments will be made on how the proposed Ohio Professional Corporation Act, promulgated in 1979 by the Corporation Law Committee of the Ohio Bar Association, …

Achieving The Purpose Of Federal Diversity Jurisdiction: Why Courts Should Abandon The Current Treatment Of Llcs Under Section 1332, Kristen Curley

Touro Law Review

No abstract provided.