Law Commons^™

An Approach To The Regulation Of Spanish Banking Foundations, Miguel Martínez

Miguel Martínez

The purpose of this paper is to analyze the legal framework governing banking foundations as they have been regulated by Spanish Act 26/2013, of December 27th, on savings banks and banking foundations. Title 2 of this regulation addresses a construct that is groundbreaking for the Spanish legal system, still of paramount importance for the entire financial system insofar as these foundations become the leading players behind certain banking institutions given the high interest that foundations hold in the share capital of such institutions.

Optimized Theft: Why Some Controlling Shareholders “Generously” Expropriate From Minority Shareholders, Sang Yop Kang

Sang Yop Kang

Although controlling shareholder agency problems have been well studied so far, many questions still remain unanswered. In particular, an important puzzle in a bad-law jurisdiction is: why some controlling shareholders (“roving controllers”) loot the entire corporate assets at once, and why others (“stationary controllers”) siphon a part of corporate assets on a continuous basis. To solve this conundrum, this Article provides analytical frameworks exploring the behaviors and motivations of controlling shareholders. To begin with, I reinterpret Olson’s political theory of “banditry” in the context of corporate governance in developing countries. Based on a new taxonomy of controlling shareholders (“roving controllers” …

Re-Envisioning Investors’ Anti-Director Rights Index: Theory, Criticism, And Implications, Sang Yop Kang

Sang Yop Kang

‘Law and Finance’ theory – which offers analytical frameworks to measure the protection of public investors and the quality of corporate governance – has dominated the comparative corporate governance scholarship in the last decade. So far, many proponents and critics have had debates on the relevance of the theory and the implications of the theory’s empirical studies. Several important points in relation to shareholder protection, however, have been highly neglected in these debates. In particular, the significance of one-share-one-vote (OSOV) rule has been inappropriately underestimated. In response, this Article explores (1) why OSOV is an utmost critical component in corporate …

Halliburton, Basic And Fraud On The Market: The Need For A New Paradigm, Charles W. Murdock

Charles W. Murdock

Summary: Halliburton, Basic and Fraud on the Market: The Need for a New Paradigm

If defrauded securities plaintiffs cannot bring a class-action lawsuit, there often will be no effective remedy since the amount at stake for individual plaintiffs is not sufficient to warrant the substantial costs of litigation. To surmount the problem of individualized reliance and establish commonality, federal courts for twenty-five years have been employing the Basic fraud-on-the-market theory which posits that, in an efficient market, investors rely on the integrity of the market price.

While class certification at one time was a matter of course, today it is …

Present At The Creation: Reflections On The Early Years Of The National Association Of Corporate Directors, Lawrence J. Trautman

Lawrence J. Trautman Sr.

Effective corporate governance is critical to the productive operation of the global economy and preservation of our way of life. Excellent governance execution is also required to achieve economic growth and robust job creation in any country. In the United States, the premier director membership organization is the National Association of Corporate Directors (NACD). Since 1978, NACD plays a major role in fostering excellence in corporate governance in the United States and beyond. The NACD has grown from a mere realization of the importance of corporate governance to become the only national membership organization created by and for corporate directors. …

Remembering George Michaely, Lawrence J. Trautman, Stanley Sporkin, John A. Dudley

Lawrence J. Trautman Sr.

This short essay is a memorial tribute about George P. Michaely, Jr. (1926 to 2014). After graduating from both the University of Notre Dame and its law school, he began his legal career, serving for approximately seven years as attorney in the Office of General Counsel. He was then appointed Chief Counsel of the Commission’s Division of Corporation Finance, where he served for approximately the next four years and was responsible for advising the Commission and the public concerning the interpretation of the statutory provisions and rules relating to the registration provisions of the Securities Act of 1933 and the …

Financial Institution Executive Compensation: The Problem Of Financially Motivated Excessive Risk-Taking, The Regulatory Response, And Common Sense Solutions, Jesse D. Gossett

Jesse D Gossett

This article addresses the issue of executive compensation at financial institutions as it relates to encouraging excessive risk-taking at these firms. First, I examine the economics of compensation and its relationship to risk-taking at financial firms. Next, I take a critical look at compensation provisions of Dodd-Frank (and to a lesser extent, Sarbanes-Oxley) and describe not only what Dodd-Frank does, but more importantly what it does not do. I then make specific recommendations for rules regulators should adopt under Dodd-Frank for the purpose of using compensation plans as a way of reducing excessive risk at financial institutions. I make these …

Controlling Shareholders: Benevolent “King” Or Ruthless “Pirate”, Sang Yop Kang

Sang Yop Kang

Unfair self-dealing and expropriation of minority shareholders by a controlling shareholder are common business practices in developing countries (“bad-law countries”). Although controlling shareholder agency problems have been well studied so far, there are many questions unanswered in relation to behaviors and motivations of controlling shareholders. For example, a puzzle is that some controlling shareholders in bad-law countries voluntarily extract minority shareholders less than other controlling shareholders. Applying Mancur Olson’s framework of political theory of “banditry” to the context of corporate governance, this Article proposes that there are at least two categories of controlling shareholders. “Roving controllers” are dominant shareholders with …

Crossing The Fault Line In Corporate Criminal Law, Amy Sepinwall

Amy J. Sepinwall

Why is it that so few bankers have been prosecuted and punished in the wake of the financial meltdown? Pundits are quick to point to inadequate funding for addressing financial crime or, more cynically, the revolving door between government regulatory agencies and Wall Street. But the ultimate answer may be at once more banal and more dispiriting, lying as it does at the very foundations of our criminal law.

The conception of responsibility underpinning much of our criminal law contemplates the individual in isolation from others. As a result, our criminal law has tremendous difficulty tracking culpability in organizational contexts. …

E-Commerce And Electronic Payment System Risks: Lessons From Paypal, Lawrence J. Trautman

Lawrence J. Trautman Sr.

What are the major risks perceived by those engaged in e-commerce and electronic payment systems? What development risks, if they become reality, may cause substantial increases in operating costs or threaten the very survival of the enterprise? This article utilizes the relevant annual report disclosures from eBay (parent of PayPal), along with other eBay and PayPal documents, as a potentially powerful teaching device. Most of the descriptive language to follow is excerpted directly from eBay’s regulatory filings. My additions include weaving these materials into a logical presentation and providing supplemental sources for those who desire a deeper look (usually in …

Financial Armageddon Routs Law Again, Nicholas L. Georgakopoulos

Nicholas L Georgakopoulos

This essay, after highlighting the unique aspects of financial markets, offers a mostly rational account for financial crises, centering on the 2008 crisis as an example. The thesis is that market participants overestimate the duration of high productivity growth due to new technologies and produce occasional—and likely unavoidable—bubbles. Considering potential changes in the regulation of financial markets, the conclusion is grim. Regulators appear to have exhausted the effective legal levers against overestimations of continued high growth. The legislative responses to the last few crises were likely unproductive. The sole (but still unrealistic) effective protection would be the constitutional development of …

Present At The Creation: Reflections On The Early Years Of The National Association Of Corporate Directors, Lawrence J. Trautman

Lawrence J. Trautman Sr.

Effective corporate governance is critical to the productive operation of the global economy and preservation of our way of life. Excellent governance execution is also required to achieve economic growth and robust job creation in any country. In the United States, the premier director membership organization is the National Association of Corporate Directors (NACD). Now over 36 years old, NACD plays a major role in fostering excellence in corporate governance in the United States and beyond. Over the past thirty-six years NACD has grown from a mere realization of the importance of corporate governance to become the only national membership …

Will Law Firms Go Public?, Roberta S. Karmel

Roberta S. Karmel

Law in the United States is a big business and big law firms are a global business. Currently, under rules of the American Bar Association (ABA) and most states law, firms are not allowed either to include non-lawyers as partners or accept equity investments from non-lawyers. This Article will argue that (even if law firms retain the form of partnerships) they eventually will accept investments from third parties, and possibly even go public, but this development could lead to a loss of professionalism, as it has with other industries, and could also lead to the end of self-regulation. Among the …

Rise Of The Intercontinentalexchange And Implications Of Its Merger With Nyse Euronext, Latoya C. Brown

Latoya C. Brown, Esq.

This paper examines the impending merger between the IntercontinentalExchange (ICE) and NYSE Euronext against the backdrop of the current structure of the global financial services industry. The paper concludes that the merger embodies what the financial services industry is becoming and captures the model that will allow exchanges to remain competitive in today’s marketplace: mega-exchanges with broader asset classes and electronic platforms. As technology and globalization threaten their vitality, exchanges will need to continue reinventing and adapting. Increasingly over the last decade they have done so by merging and by moving, at least a part of, their operations on screen. …

Threats Escalate: Corporate Information Technology Governance Under Fire, Lawrence J. Trautman

Lawrence J. Trautman Sr.

In a previous publication The Board’s Responsibility for Information Technology Governance, (with Kara Altenbaumer-Price) we examined: The IT Governance Institute’s Executive Summary and Framework for Control Objectives for Information and Related Technology 4.1 (COBIT®); reviewed the Weill and Ross Corporate and Key Asset Governance Framework; and observed “that in a survey of audit executives and board members, 58 percent believed that their corporate employees had little to no understanding of how to assess risk.” We further described the new SEC rules on risk management; Congressional action on cyber security; legal basis for director’s duties and responsibilities relative to IT governance; …

Regulation Not Prohibition: The Comparative Case Against The Insurable Interest Doctrine, Sharo Michael Atmeh

Sharo M Atmeh

American law requires an insurable interest—a pecuniary or affective stake in the subject of an insurance policy—as a predi-cate to properly obtaining insurance. In theory, the rule prevents both wagering on individual lives and moral hazard. In practice, the doctrine is avoided by complex insurance transaction structuring to effectuate both origination and transfers of insurance by individuals without an insurable interest. This paper argues that it is time to ab-andon the insurable interest doctrine. As both the English and Aus-tralian experiences indicate, elimination of the insurable interest doctrine will have little detrimental pecuniary effect on the insurance industry, while freeing …

Learning From Our History: Evaluating The Modern Housing Finance Market In Light Of Ancient Principles Of Justice, Brian M. Mccall

Brian M McCall

Since I first accepted an invitation to join this symposium, the subprime mortgage crisis has exploded into a systemic financial crisis. Analysis and pundits alike seem on a quest to outdo each other in using dramatic phrases to describe its historic proportions. The causes of a crisis so large must have a multiplicity of causes lying in the realms of bank regulation and supervision, the operation and regulation of the securitization market and the derivatives and insurance markets. Yet, the root and spark of the various financial reverberations initiated in the home mortgage finance market. My presentation will focus on …

It's Just Secured Credit: The Natural Law Case In Defense Of Some Forms Of Secured Credit, Brian M. Mccall

Brian M McCall

For decades scholars have been debating whether of not the institution of security can be explained and justified. After much discussion from varying points of view and hermeneutics, although some insights have been gained, the answer to the original question remains unresolved. This article attempts to bring new life to this debate by building on Professors Mooney and Harris’ idea of security interest as property right while taking account of the valid concerns of scholars such as Elizabeth Warren and Lyn Lopucki that certain results produced by the current system seem unjust. This reconciliation of these two strands of secured …

A Political Economy Of The Business Judgment Rule In Banking: Implications For Corporate Law

Patricia A. McCoy

No abstract provided.