Law Commons^™

O'Hagan, 10b5-2, Relationships And Duties, Thomas M. Madden

Thomas M. Madden

No abstract provided.

The Use Of Special Committees In Mergers And Acquisitions, Benjamin James, Jeffrey Chapman

Benjamin James

It is critical for boards of directors to address properly conflicts of interest in business combinations. Many boards have appointed special committees of independent directors to ensure that stockholders’ interests are protected in mergers and acquisitions and, in certain circumstances, to shift the burden from directors, who must establish the "entire fairness" of the transaction, to the stockholder-plaintiffs, who must establish unfairness. This paper addresses the fiduciary framework governing mergers and acquisitions and the requirements to appoint and conduct the activities of a special committee under Delaware law.

The Enduring Legacy Of Smith V. Van Gorkom, Bernard S. Sharfman

Bernard S Sharfman

It is hard to envision an introductory law school course in corporate law that does not devote at least one or two classes to the study of Smith v. Van Gorkom (Van Gorkom), possibly the most famous corporate law case decided by the Delaware Supreme Court. It has become such a foundation case for the beginning study of corporate law that one prominent corporate law commentator has likened the failure to teach Van Gorkom to the omission of Brown v. Board of Education in a first year constitutional law course.

The challenge for teachers of Van Gorkom is to explain …

O'Hagan 10b5-2, Relationships And Duties, Thomas M. Madden

Thomas M. Madden

In the past ten years, the principal events in the law concerning insider trading have been the Supreme Court’s adoption of the fraud on the source misappropriation theory in O’Hagan and the Commission’s promulgation of Rules 10b5-1 and 10b5-2. While this article provides a solid grounding in the O’Hagan decision and the case law informing it, its commentary addresses the role that Rule 10b5-2, speaking to relationships giving rise to duties of trust or confidence, together with O’Hagan, has had on recent securities litigation. Asking whether this post O’Hagan rulemaking and case law indicates a policy directive from the Commission …

Sovereigns As Shareholders, Paul Rose

Paul Rose

This Article considers the increasing impact of equity investments made by sovereign wealth funds. Observers have increasingly viewed sovereign investments with a high degree of suspicion due to the potential for the investments to be used as political tools rather than traditional investment vehicles. While this risk is considerable, much of the discussion surrounding sovereign investment ignores or minimizes the mitigating effect of a number of regulatory, economic, and political factors. This Article argues that continued vigilance, but not additional regulation, is necessary to ensure that U.S. interests are not jeopardized by sovereign investment in U.S. enterprises. While the United …

Employment As Transaction, Rachel S. Arnow-Richman

Rachel S. Arnow-Richman

This paper offers a fresh perspective on the upper-level employment law class based on the theme of employment as transaction. Like much of law school, employment law is often taught from a public advocacy perspective in which the primary role of the lawyer is to vindicate workers’ rights or defend managerial action. As a doctrinal matter, however, courts are showing increased attention to the role of private ordering in defining workplace rights and assessing liability. Courts routinely examine employers’ efforts to redress unlawful behavior under antidiscrimination law and consistently sanction the use of arbitration agreements waiving rights to a federal …

Christian Anthropology And The Theory Of The Firm, Michael Lp Lower

Michael LP Lower

Catholic social thought (CST), a branch of moral theology, reflects Christian anthropology (an understanding of human nature that draws on Revelation and natural law theory). CST's understanding of what communities (such as the corporation) are for and how they can best achieve their ends are coloured by its anthropological underpinnings. The same, it is argued, is true for economic theories such as the theories of the firm based on Coase. This paper compares Christian anthropology with the implicit anthropology underpinning some of the dominant economic theories of the firm. Differences at this level go a long way to explaining mismatches …

Signaling Through Board Diversity: Is Anyone Listening?, Kimberly D. Krawiec, Lissa Lamkin Broome

Kimberly D. Krawiec

The ethnic and gender make-up of corporate boards has been the subject of intense public and regulatory focus in many countries, including the United States, in recent years. Of particular interest has been quantitative research on the impact, if any, of board diversity on corporate performance. This body of work leaves substantial gaps in our understanding of the precise mechanisms by which board diversity may alter the corporate environment, if indeed it does. In this symposium, we discuss some preliminary findings from our first 35 of a series of confidential, semi-structured interviews of 45 to 90 minutes in length with …

No Good Deed Goes Unpunished: Is There A Need For A Safe Harbor For Aspirational Codes Of Conduct?, Elizabeth F. Brown

Elizabeth F Brown

Over the years, Congress and some state legislatures have enacted laws to encourage corporations to engage in self-policing by providing them with incentives to adopt codes of conduct and compliance programs. In the case of the Federal Organizational Sentencing Guidelines, Congress offered corporations lower penalties if they were found in violation of a federal law but had adopted codes of conduct and compliance programs to try to comply with the law. In the case of the Sarbanes-Oxley Act, Congress require public corporations to disclose if they had a code of ethic and if not, why not. Congress assumed that the …

The (Not So) Puzzling Behavior Of Angel Investors, Darian M. Ibrahim

Darian M Ibrahim

Angel investors fund start-ups in their earliest stages, which creates a contracting environment rife with uncertainty, information asymmetry, and agency costs in the form of potential opportunism by entrepreneurs. Venture capitalists also encounter these problems in slightly later-stage funding, and use a combination of staged financing, preferred stock, board seats, negative covenants, and specific exit rights to respond to them. Curiously, however, traditional angel investment contracts employ none of these measures, which appears inconsistent with what financial contracting theory would predict. This Article explains this (not so) puzzling behavior on the part of angel investors, and also explains the recent …

Individual Or Collective Liability For Corporate Directors?, Darian M. Ibrahim

Darian M Ibrahim

Fiduciary duty is one of the most litigated areas in corporate law and the subject of much academic attention, yet one important question has been ignored: Should fiduciary liability be assessed individually, where directors are examined one-by-one for compliance, or collectively, where the board’s compliance as a whole is all that matters? The choice between individual and collective assessment may be the difference between a director’s liability and her exoneration, may affect how boards function, and informs the broader fiduciary duty literature in important ways. This Article is the first to explore the individual/collective question and suggest a systematic way …

Rating Sell-Side Analysts: A Shift From Subjectivity To Empirically Verifiable Facts, Andrew M. Labreche

Andrew M LaBreche

Throughout the early 1990’s, the stock market experienced seemingly limitless growth, with retail investors realizing healthy returns based on positive recommendations from sell-side analysts. However, as the 1990’s progressed, the technology bubble burst and millions of retail investors lost billions of dollars relying on fraudulent analyst recommendations. This article will detail the self-reinforcing relationship between investment banks, institutional investors and sell-side analysts that systematically disadvantaged retail investors throughout the 1990’s. It will then examine the attempted legislative, judicial and administrative remedies that have resulted from this situation. Specifically, this article will focus on the failures of those remedial measures and …

A Forensic Study Of Daewoo’S Corporate Governance: Does Responsibility For Its Meltdown Lie Solely With The Chaebol And Korea?, Joongi Kim

Joongi Kim

In 1999, the Daewoo Group, one of the biggest transnational conglomerates, collapsed, committing a staggering $15.3 billion in accounting fraud in the process, the largest in world history. In 2006, its chairman was sentenced to eight years in prison and a disgorgement penalty of $22.7 billion. Daewoo’s problems, however, did not remain a case isolated to Korea and their mighty, family-controlled conglomerates called “chaebol.” Daewoo’s demise foreshadowed corporate scandals that more recently ravaged confidence in financial markets around the world. Leading financial institutions, investment banks, securities analysts, accounting firms and credit agencies from around the world failed to address its …

Entrepreneurs On Horseback: Reflections On The Organization Of Law, Darian M. Ibrahim

Darian M Ibrahim

“Law and entrepreneurship” is an emerging field of study. Skeptics might wonder whether law and entrepreneurship is a variant of that old canard, the Law of the Horse. In this Essay, we defend law and entrepreneurship against that charge and urge legal scholars to become even more engaged in the wide-ranging scholarly discourse regarding entrepreneurship. In making our case, we argue that research at the intersection of entrepreneurship and law is distinctive. In some instances, legal rules and practices are tailored to the entrepreneurial context, and in other instances, general rules of law find novel expression in the entrepreneurial context. …

The Trouble With Stockjobbers: The South Sea Bubble, The Press And The Legislative Regulation Of The Markets, Benedict Sheehy

Benedict Sheehy

Abstract: The South Sea Bubble Act of 1721 is often taken as the first securities legislation. Further it is understood to be a response to a stock market scandal. In fact, the Act was enacted prior to the scandal and indeed the likely cause of the collapse of the stock bubble itself. This article reviews the historical context, including the finance of government of the era, the development of the South Sea Company and its bubble, the legislation, burst and subsequent effects. It places securities legislation in its historical context as part of a broader movement in corporate law, shifting …