Law Commons^™

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 …

John Paul Ii And Employee Participation In Corporate Governance, Michael Lp Lower

Michael LP Lower

Catholic Social Thought ("CST") has called for employees to be active participants in the governance of the enterprises for which they work. This article looks at what CST has to say about employee participation. It shows that John Paul II's distinctive contribution was to lay bare the theological and philosophical justifications for CST's approach to this issue.

The North Dakota Publicly Trade Corporations Act: A Branding Initiative Without A (North Dakota) Brand, Joshua P. Fershee

Joshua P Fershee

Any time a new market is entered and a new brand is created, whether it is the market for corporate governance laws or consumer electronics, it is essential to understand the market and have a clear vision of what the brand is supposed to be. When the North Dakota Publicly Traded Corporations Act (Act) became law on July 2, 2007, the state of North Dakota officially entered (or tried to enter) the corporate governance market. Rather than adding to the already significant debate about the value of increased shareholder rights or arguing that the Act was bad (or good) for …

Mexican Corporations Entering And Leaving U.S. Markets: An Impact Of The Sarbanes-Oxley Act Of 2002?, Eugenio J. Cárdenas

Eugenio J. Cárdenas

What has led to the dramatic decline of cross-listing in U.S. markets since 2002? A significant number of foreign issuers have delisted their American Depositary Receipts from the New York Stock Exchange, accompanied by an impressive plunge in the level of additions, among other shocking facts. It is notable that this trend followed the enactment of the Sarbanes-Oxley Act of 2002, considered to be an excessive and rushed political response by Congress to the 2001 Enron and Worldcom scandals, aimed at restoring confidence.

Taking into account that in the company delisting tendency, the Mexican case was the most pronounced, yielding …

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 …

Deconstructing Equity: Public Ownership, Agency Costs, And Complete Capital Markets, Ronald J. Gilson, Charles K. Whitehead

Charles K Whitehead

Who Cares About Director Independence? Presentation (Pdf Format), Paolo Santella, Carlo Drago, Giulia Paone

Paolo Santella

No abstract provided.

Who Cares About Director Independence? Presentation (Pdf Format), Paolo Santella, Carlo Drago, Giulia Paone

Carlo Drago

No abstract provided.

Guests At The Table?: Independent Directors In Family-Influenced Public Companies, Deborah A. Demott

Deborah A DeMott

By some measures, family-controlled companies account for about a third of public companies in the United States. Public companies that retain characteristics of family companies pose a series of intriguing questions about corporate governance that center in particular on the roles and duties of directors. These are surprisingly unexplored in legal scholarship. Although concentrated ownership is more extensive in many capital markets outside the United States, numerous recent examples raise questions about governance within publicly-held family companies. In such companies, shareholders who are members of the founding family often have perspectives and interests that diverge from those of non-family public …

Worldwide Corporate Governance Convergence Within A Pluralistic Business Legal Order---Company Law And Independent Director System In Contemporary China , Chi-Wei Huang

Chi-Wei Huang

Worldwide Corporate Governance Convergence within A Pluralistic Business Legal Order—Company Law and Independent Director System in Contemporary China

Chi-Wei Huang, S.J.D. University of Pennsylvania Law School March 29, 2007

Abstract:

A deeper tendency across developed market jurisdictions has been a convergence toward a single, standard corporate structure. The essential legal features of a shareholder-oriented ideology are well established among those developed market jurisdictions and noticeably dominate the development of worldwide corporate forms. Striving to increase long-term shareholder value has become the most competitive corporate governance theory among developed economies. A series of examinations of worldwide corporate governance and ownership have …

Stock Market, Corporations And Their Regulation: A Few Glimpses Into Reality, Palladam M. Vasudev

Palladam M Vasudev

The paper examines events in three public companies – Enron Corp., Sycamore Networks and Amazon.com, from the perspective of corporate law and securities law. The events are interpreted in terms of the applicable law, and explain how it influences them. In particular, the paper demonstrates how the prevailing loose legal regime for corporations and the stock market-centricity of corporate arrangements give rise to specific varieties of negative behaviour. The paper adopts a critical approach, and is an effort to describe the consequences of the minimalist philosophy underlying corporate and securities regulation.

Companies And Corporations: Their Transition From Status To Contract And Its Political Economy, Palladam M. Vasudev

Palladam M Vasudev

This article traces the state of corporate law in the English-speaking world since 1720, identifies the political economy of the changes that occurred since mid-nineteenth century, and the consequences for corporate law. During this period, there was a transition from the position that incorporation was a status to be conferred by the law to the position that they were the products of private contracts. In addition, they came to be treated as the property of their shareholders. These conceptual changes have had far-reaching consequences for the growth of corporations and were used to largely abandon the public regulation of corporations. …

Who Cares About Director Independence? Presentation (Pdf Format), Paolo Santella, Carlo Drago, Giulia Paone

Paolo Santella

No abstract provided.

Who Cares About Director Independence? Presentation (Pdf Format), Paolo Santella, Carlo Drago, Giulia Paone

Carlo Drago

No abstract provided.

Who Cares About Director Independence? Presentation (Pdf Format), Paolo Santella, Carlo Drago, Giulia Paone

Paolo Santella

No abstract provided.

Who Cares About Director Independence? Presentation (Pdf Format), Paolo Santella, Carlo Drago, Giulia Paone

Carlo Drago

No abstract provided.

The Fetishization Of Independence, Usha Rodrigues

Usha Rodrigues

According to conventional wisdom, a supermajority independent board of directors is the ideal corporate governance structure. Debate nevertheless continues: empirical evidence suggests that independent boards do not improve firm performance. Independence proponents respond that past studies reflect a flawed definition of independence. Remarkably, neither side in the independence debate has looked to Delaware, the preeminent state source for corporate law. Comparing Delaware’s notions of independence with those of Sarbanes-Oxley and its attendant reforms reveals two fundamentally different conceptions of independence. Sarbanes-Oxley equates independence with outsider status: an independent director is one who lacks financial ties to the corporation and is …

New Governance, Compliance, And Principles-Based Securities Regulation, Cristie L. Ford

Cristie L. Ford

The UK securities regulator, the Financial Services Authority, claims that its "principles-based" approach to securities regulation is simply "better" than what it characterizes as the prescriptive, rules-based American approach. The striking shift in financial sector business from New York to London over the last two years has brought the question of the wisdom of principles-based regulation into sharp relief. In fact, an FSA-style regulatory approach may also be taking hold in Canada, through the agency of the province of British Columbia. This paper examines BC's innovative proposals for a principles-based securities regime through the lens of New Governance theory. I …

Corporate Governance, Director Liability, And Good Faith, Elizabeth Nowicki

Elizabeth Nowicki

Corporate directors are obligated to act “in good faith,” and directors face personal monetary liability to their shareholders for acts “not in good faith.” Yet no modern court has imposed liability accordingly. Every time the issue of a director’s good faith comes up in court, the court forces the complaining shareholder to prove that her directors acted affirmatively in bad faith as opposed to merely in the absence of good faith. The judiciary completely misses the point that acts lacking good faith are not always the same as acts affirmatively taken in bad faith. A director can act in the …

Developing Governance And Regulation For Emerging Capital And Securities Markets, Ali Adnan Ibrahim

Ali A Ibrahim

This paper discusses various legal and regulatory issues for developing strong capital and securities markets in the transition economies. Toward this end, the paper analyses the available literature, and emphasizes that: (i) the development of corporate governance should be gradual and must take into consideration the customary laws that impact on the ownership structures and related preferences for doing business in the emerging markets; and (ii) the foreign investment policies should be consistent with the development of corporate governance and vice versa.

What Hedge Funds Can Teach Corporate America: A Roadmap For Achieving Institutional Investor Oversight, Robert C. Illig

Robert C Illig

Hedge funds and other private equity funds are aggressive monitors of corporate America. Their investment strategies are designed to squeeze agency costs and other inefficiencies out of underperforming companies. Mutual funds and public pension funds, by contrast, have remained relentlessly passive despite their many resources. Rather than seek to improve the performance of their portfolio companies, they generally prefer to exit any investments that turn sour. Why the difference? In this Article, Professor Illig compares the business environments and regulatory regimes affecting different types of institutional investors. He concludes that the primary reason that most institutional investors do not better …

Being Informed Does Matter: Fine Tuning Gross Negligence Twenty Plus Years After Van Gorkom, Bernard S. Sharfman

Bernard S Sharfman

This article first establishes that there are still a number of reasons why being informed does matter, despite the ability to incorporate an exculpation clause into a Delaware corporation’s certificate of incorporation. This is followed by an explanation of how Delaware’s business judgment rule became transformed from a doctrine of abstention to a standard of review in the context of procedural due care. Throughout this article, it is understood that the business judgment rule exits within a framework of corporate authority and accountability and that it serves as a significant tool for the protection of corporate board authority. The article …

Business Strategists And Election Commissioners: How The Meaning Of Loyalty Varies With The Board’S Distinct Fiduciary Roles, Ethan G. Stone

Ethan G. Stone

For twenty years, Delaware courts have been developing special standards to review board decisions that interfere with hostile bids for control or the exercise of the shareholder franchise. These “Unocal” and “Blasius” doctrines seem to fit uneasily with theories of the board’s role in corporate governance, constraining board discretion too little for shareholder primacy theories and too much for board autonomy theories. Nor have the Delaware courts succeeded in fitting Unocal and Blasius comfortably with their treatment of board decisions in other contexts. In this article, I propose that these special doctrines reflect the difference between two separate functions of …

Understanding Maryland's Business Judgment Rule, Bernard S. Sharfman

Bernard S Sharfman

No abstract provided.

Natural Law And Agency Theory, Michael Lp Lower

Michael LP Lower

Corporate governance scholarship is awash with theories of the firm: these are "stories" or metaphors that try to shed light on the nature and purpose of the firm as an institution and on one or more of the following questions:

(i) how the institution of the firm "evolved" (or its economic or social purpose); (ii) whether "the firm" is a reality or a rhetorical device; and (iii) the relationship between "the firm" and stakeholders, political society and so on.

Theories of the firm are used both to explain and to help develop law and policy. If the theory is misconceived, …

The Dangers And Drawbacks Of The Disclosure Antidote: Toward A More Substantive Approach To Securities Regulation, Susanna K. Ripken

Susanna K. Ripken

This article analyzes and critiques the federal securities laws' reliance on disclosure as the primary method of protecting investors and regulating the securities markets. Since the inception of the federal securities law seventy years ago, the policy has always been that, as long as corporations disclose all material information about their operations and their stock, public investors can make their own informed investment decisions. The unprecedented number of corporate frauds, scandals, and bankruptcies in recent years has revealed weaknesses in the traditional disclosure strategy of regulation. Disclosure rules did not protect American investors from the damages they suffered when large …

Sarbanes-Oxley's Structural Model To Encourage Corporate Whistleblowers, Richard E. Moberly

Richard E. Moberly

Recent corporate scandals demonstrate that rank-and-file employees often remain silent in the face of significant fraud. This silence is unfortunate because corporate employees have inside knowledge of misconduct that gives them an information advantage over more traditional corporate monitors, such as independent directors and government regulators. To address this problem, the Sarbanes-Oxley Act utilized a new approach that encourages employee whistleblowers to disclose information about corporate wrongdoing. This approach, which Professor Richard Moberly labels the “Structural Model,” requires that corporations provide a standardized channel for employees to report organizational misconduct to official monitors within the corporation. This Article offers an …

Putting The S Back In Corporate Social Responsibility: A Multi-Level Theory Of Social Change In Organizations, Ruth V. Aguilera, Cynthia A. Williams, Deborah Rupp, Jyoti Ganapathi

Cynthia A. Williams

Race, Corporate Law, And Shareholder Value, Thomas W. Joo

Thomas W Joo

Racial justice is becoming a taboo subject, which often has to be explained and justified in nominally “race-neutral” terms. The rhetorical strategy of linking diversity to the bottom line is potentially powerful in the current political and cultural climate. But the strategy also has limitations and costs. It is not clear that diversity and improved corporate performance always go hand in hand. Furthermore, as a matter of corporate law doctrine, even strong evidence of a correlation between the two would not necessarily constitute a basis to compel corporations to take any action to further racial justice. Finally, there is a …

The Aba Task Force On Corporate Responsibility And The 2003 Changes To The Model Rules Of Professional Conduct, Lawrence Hamermesh

Lawrence A. Hamermesh

No abstract provided.