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University of Pennsylvania Carey Law School

Corporations

Corporate Finance

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Full-Text Articles in Law

Corporate Disobedience, Elizabeth Pollman Jan 2019

Corporate Disobedience, Elizabeth Pollman

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Corporate law has long taken a dim view of corporate lawbreaking. Corporations can be chartered only for lawful activity. Contemporary case law characterizes intentional violations of law as a breach of the fiduciary duties of good faith and loyalty. While recognizing that rule breaking raises significant social and moral concerns, this Article suggests that corporate law and academic debate have overlooked important aspects of corporate disobedience. This Article provides an overview of corporate disobedience and illuminates the role that it has played in entrepreneurship and legal change. Corporations violate laws for a variety of reasons, including as part of efforts …


The New Bond Workouts, William W. Bratton, Adam J. Levitin Jan 2018

The New Bond Workouts, William W. Bratton, Adam J. Levitin

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Bond workouts are a famously dysfunctional method of debt restructuring, ridden with opportunistic and coercive behavior by bondholders and bond issuers. Yet since 2008 bond workouts have quietly started to work. A cognizable portion of the restructuring market has shifted from bankruptcy court to out-of-court workouts by way of exchange offers made only to large institutional investors. The new workouts feature a battery of strong-arm tactics by bond issuers, and aggrieved bondholders have complained in court. The result has been a new, broad reading of the primary law governing workouts, section 316(b) of the Trust Indenture Act of 1939 (“TIA”), …


Amending Corporate Charters And Bylaws, Albert H. Choi, Geeyoung Min Aug 2017

Amending Corporate Charters And Bylaws, Albert H. Choi, Geeyoung Min

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Recently, courts have embraced the contractarian theory that corporate charters and bylaws constitute a “contract” between the shareholders and the corporation and have been more willing to uphold bylaws unilaterally adopted by the directors. This paper examines the contractarian theory by drawing a parallel between amending charters and bylaws, on the one hand, and amending contracts, on the other. In particular, the paper compares the right to unilaterally amend corporate bylaws with the right to unilaterally modify contract terms, and highlights how contract law imposes various limitations on the modifying party’s discretion. More generally, when the relationship of contracting parties …


Hedge Fund Activism, Poison Pills, And The Jurisprudence Of Threat, William W. Bratton Aug 2016

Hedge Fund Activism, Poison Pills, And The Jurisprudence Of Threat, William W. Bratton

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This chapter reviews the single high profile case in which twentieth century antitakeover law has come to bear on management defense against a twenty-first century activist challenge—the Delaware Court of Chancery’s decision to sustain a low-threshold poison pill deployed against an activist in Third Point LLC v. Ruprecht. The decision implicated an important policy question: whether a twentieth century doctrine keyed to hostile takeovers and control transfers appropriately can be brought to bear in a twenty-first century governance context in which the challenger eschews control transfer and instead makes aggressive use of the shareholder franchise. Resolution of the question …


The Mess At Morgan: Risk, Incentives And Shareholder Empowerment, Jill E. Fisch Jan 2015

The Mess At Morgan: Risk, Incentives And Shareholder Empowerment, Jill E. Fisch

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The financial crisis of 2008 focused increasing attention on corporate America and, in particular, the risk-taking behavior of large financial institutions. A growing appreciation of the “public” nature of the corporation resulted in a substantial number of high profile enforcement actions. In addition, demands for greater accountability led policymakers to attempt to harness the corporation’s internal decision-making structure, in the name of improved corporate governance, to further the interest of non-shareholder stakeholders. Dodd-Frank’s advisory vote on executive compensation is an example.

This essay argues that the effort to employ shareholders as agents of public values and, thereby, to inculcate corporate …


Team Production Theory And Private Company Boards, Elizabeth Pollman Jan 2015

Team Production Theory And Private Company Boards, Elizabeth Pollman

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In their path-breaking article, A Team Production Theory of Corporate Law, Margaret Blair and Lynn Stout provided a new theory of the board of directors in a corporation. Drawing on the economic theory of team production, Blair and Stout argued that the board of directors serves as a mediating hierarchy for the firm as a whole, encouraging firm-specific investments from team members and reducing shirking and opportunistic behavior. While Blair and Stout provided a dramatically different view of the corporation from the conventional principal-agent account, they also delineated limitations to their proposed theory. Most importantly, they suggested that the mediating …


The Marginalist Revolution In Corporate Finance: 1880-1965, Herbert J. Hovenkamp Jul 2011

The Marginalist Revolution In Corporate Finance: 1880-1965, Herbert J. Hovenkamp

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During the late nineteenth and early twentieth centuries fundamental changes in economic thought revolutionized the theory of corporate finance, leading to changes in its legal regulation. The changes were massive, and this branch of financial analysis and law became virtually unrecognizable to those who had practiced it earlier. The source of this revision was the marginalist, or neoclassical, revolution in economic thought. The classical theory had seen corporate finance as an historical, relatively self-executing inquiry based on the classical theory of value and administered by common law courts. By contrast, neoclassical value theory was forward looking and as a result …


A Preface To Neoclassical Legal Thought, Herbert J. Hovenkamp Jun 2011

A Preface To Neoclassical Legal Thought, Herbert J. Hovenkamp

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Most legal historians speak of the period following classical legal thought as “progressive legal thought.” That term creates an unwarranted bias in characterization, however, creating the impression that conservatives clung to an obsolete “classical” ideology, when in fact they were in many ways just as revisionist as the progressives legal thinkers whom they critiqued. The Progressives and New Deal thinkers whom we identify with progressive legal thought were nearly all neoclassical, or marginalist, in their economics, but it is hardly true that all marginalists were progressives. For example, the lawyers and policy makers in the corporate finance battles of the …


Securities Intermediaries And The Separation Of Ownership From Control, Jill E. Fisch Jul 2010

Securities Intermediaries And The Separation Of Ownership From Control, Jill E. Fisch

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The Modern Corporation and Private Property highlighted the evolving separation of ownership and control in the public corporation and the effects of that separation on the allocation of power within the corporation. This essay explores the implications of intermediation for those themes. The article observes that intermediation, by decoupling economic ownership and decision-making authority within the shareholder, creates a second layer of agency issues beyond those identified by Berle and Means. These agency issues are an important consideration in the current debate over shareholder empowerment. The article concludes by considering the hypothetical shareholder construct implicit in the Berle and Means …


The Overstated Promise Of Corporate Governance, Jill E. Fisch Jan 2010

The Overstated Promise Of Corporate Governance, Jill E. Fisch

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Review of Jonathan Macey, Corporate Governance: Promises Kept, Promises Broken (Princeton, 2008)


A Comprehensive Theory Of Deal Structure: Understanding How Transactional Structure Creates Value, Michael S. Knoll, Daniel M. G. Raff Jan 2010

A Comprehensive Theory Of Deal Structure: Understanding How Transactional Structure Creates Value, Michael S. Knoll, Daniel M. G. Raff

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No abstract provided.


Confronting The Circularity Problem In Private Securities Litigation, Jill E. Fisch Jan 2009

Confronting The Circularity Problem In Private Securities Litigation, Jill E. Fisch

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Many critics argue that private securities litigation fails effectively either to deter corporate misconduct or to compensate defrauded investors. In particular, commentators reason that damages reflect socially inefficient transfer payments—the so-called circularity problem. Fox and Mitchell address the circularity problem by identifying new reasons why private litigation is an effective deterrent, focusing on the role of disclosure in improving corporate governance. The corporate governance rationale for securities regulation is more powerful than the authors recognize. By collecting and using corporate information in their trading decisions, informed investors play a critical role in enhancing market efficiency. This efficiency, in turn, allows …


Competing Narratives In Corporate Bankruptcy: Debtor In Control Vs. No Time To Spare, David A. Skeel Jr. Jan 2009

Competing Narratives In Corporate Bankruptcy: Debtor In Control Vs. No Time To Spare, David A. Skeel Jr.

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When a company like Chrysler or United Airlines files for bankruptcy, it offers narrative explaining the way out of its predicament. In support of its claim that the business is worth saving, the company may argue that it simply needs time to renegotiate its obligations with its creditors. Alternatively, it may say that asset values are deteriorating rapidly and it is imperative that the bankruptcy court immediately approve a sale of the company, or some other rapid disposition. These two possibilities correspond to the principal resolution narratives in current Chapter 11 bankruptcy practice, which I refer to as Debtor in …


How To Prevent Hard Cases From Making Bad Law: Bear Stearns, Delaware And The Strategic Use Of Comity, Marcel Kahan, Edward B. Rock Jan 2009

How To Prevent Hard Cases From Making Bad Law: Bear Stearns, Delaware And The Strategic Use Of Comity, Marcel Kahan, Edward B. Rock

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The Bear Stearns/JP Morgan Chase merger placed Delaware between a rock and a hard place. On the one hand, the deal’s unprecedented deal protection measures – especially the 39.5% share exchange agreement – were probably invalid under current Delaware doctrine because they rendered the Bear Stearns shareholders’ approval rights entirely illusory. On the other hand, if a Delaware court were to enjoin a deal pushed by the Federal Reserve and the Treasury and arguably necessary to prevent a collapse of the international financial system, it would invite just the sort of federal intervention that would undermine Delaware’s role as the …


Neoclassicism And The Separation Of Ownership And Control, Herbert J. Hovenkamp Jan 2009

Neoclassicism And The Separation Of Ownership And Control, Herbert J. Hovenkamp

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"Separation of ownership and control" is a phrase whose history will forever be associated with Adolf A. Berle and Gardiner C. Means' The Modern Corporation and Private Property (1932), as well as with Institutionalist economics, Legal Realism, and the New Deal. Within that milieu the large publicly held business corporation became identified with excessive managerial power at the expense of stockholders, social irresponsibility, and internal inefficiency. Neoclassical economists both then and ever since have generally been critical, both of the historical facts that Berle and Means purported to describe and of the conclusions that they drew. In fact, however, within …


Cause For Concern: Causation And Federal Securities Fraud, Jill E. Fisch Jan 2009

Cause For Concern: Causation And Federal Securities Fraud, Jill E. Fisch

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The Supreme Court’s decision in Dura Pharmaceuticals dramatically changed federal securities fraud litigation. The Dura decision itself said little, but counseled lower courts to fashion new requirements of causation and harm modeled upon common law tort principles. These instructions have led lower courts to craft a series of confusing and inconsistent decisions that incorporate little of the reasoning upon which the common law principles are based. This Article accepts the Dura challenge and examines both common law causation principles and their applicability to federal securities fraud. In so doing, the Article identifies the failure of the federal courts properly to …


Shareholder Primacy's Corporatist Origins: Adolf Berle And The Modern Corporation, William W. Bratton, Michael L. Wachter Jan 2008

Shareholder Primacy's Corporatist Origins: Adolf Berle And The Modern Corporation, William W. Bratton, Michael L. Wachter

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No abstract provided.


Private Equity's Three Lessons For Agency Theory, William W. Bratton Jan 2008

Private Equity's Three Lessons For Agency Theory, William W. Bratton

All Faculty Scholarship

No abstract provided.


Private Standards, Public Governance: A New Look At The Financial Accounting Standards Board, William W. Bratton Jan 2007

Private Standards, Public Governance: A New Look At The Financial Accounting Standards Board, William W. Bratton

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The Financial Accounting Standards Board (the “FASB”) presents a puzzle: How has this private standard setter managed simultaneously (1) to remain independent, (2) to achieve institutional stability and legitimacy, and (3) to operate in a politicized context in the teeth of op-position from its own constituents? This Article looks to governance design to account for this institutional success. The FASB’s founders made a strategic choice to create a regulatory agency that sought independence rather than political responsiveness. The FASB also set out a coherent theory of accounting, the “Conceptual Framework,” to contain and direct its decisions. The Conceptual Framework contributed …


Hedge Funds And Governance Targets, William W. Bratton Jan 2007

Hedge Funds And Governance Targets, William W. Bratton

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Corporate governance interventions by hedge fund shareholders are triggering debates between advocates of management empowerment and advocates of aggressive monitoring by actors in the capital markets. This Article intervenes with an empirical question: What, based on the record so far, have the hedge funds actually done to their targets? Information has been collected on 130 domestic firms identified in the business press since 2002 as targets of activist hedge funds, including the funds’ demands, their tactics, and the results of their interventions for the targets’ governance and finance. The survey results show that the hedge funds have an enviable record …


The Equilibrium Content Of Corporate Federalism, William W. Bratton, Joseph A. Mccahery Jan 2006

The Equilibrium Content Of Corporate Federalism, William W. Bratton, Joseph A. Mccahery

All Faculty Scholarship

No abstract provided.


The Academic Tournament Over Executive Compensation, William W. Bratton Jan 2005

The Academic Tournament Over Executive Compensation, William W. Bratton

All Faculty Scholarship

No abstract provided.


The New Dividend Puzzle, William W. Bratton Jan 2005

The New Dividend Puzzle, William W. Bratton

All Faculty Scholarship

No abstract provided.


Gaming Delaware, William W. Bratton Jan 2004

Gaming Delaware, William W. Bratton

All Faculty Scholarship

No abstract provided.


Shareholder Value And Auditor Independence, William W. Bratton Jan 2003

Shareholder Value And Auditor Independence, William W. Bratton

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This Article questions the practice of framing problems concerning auditors’ professional responsibility inside a principal-agent paradigm. If professional independence is to be achieved, auditors cannot be enmeshed in agency relationships with the shareholders of their audit clients. As agents, the auditors by definition become subject to the principal’s control and cannot act independently. For the same reason, auditors’ duties should be neither articulated in the framework of corporate law fiduciary duty, nor conceived relationally at all. These assertions follow from an inquiry into the operative notion of the shareholder-beneficiary. The Article unpacks the notion of the shareholder and tells a …


The Case For Repealing The Corporate Alternative Minimum Tax, Terrence R. Chorvat, Michael S. Knoll Jan 2003

The Case For Repealing The Corporate Alternative Minimum Tax, Terrence R. Chorvat, Michael S. Knoll

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No abstract provided.


Berle And Means Reconsidered At The Century's Turn, William W. Bratton Apr 2001

Berle And Means Reconsidered At The Century's Turn, William W. Bratton

All Faculty Scholarship

No abstract provided.


Delaware Law As Applied Public Choice Theory: Bill Cary And The Basic Course After Twenty-Five Years, William W. Bratton Jan 2000

Delaware Law As Applied Public Choice Theory: Bill Cary And The Basic Course After Twenty-Five Years, William W. Bratton

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No abstract provided.


Corporate Finance, Corporate Law And Finance Theory, Peter H. Huang, Michael S. Knoll Jan 2000

Corporate Finance, Corporate Law And Finance Theory, Peter H. Huang, Michael S. Knoll

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No abstract provided.


Comparative Corporate Governance And The Theory Of The Firm: The Case Against Global Cross Reference, William W. Bratton, Joseph A. Mccahery Jan 1999

Comparative Corporate Governance And The Theory Of The Firm: The Case Against Global Cross Reference, William W. Bratton, Joseph A. Mccahery

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Professors Bratton and McCahery take up the main questions addressed by the literature on comparative corporate governance: whether national governance systems can be expected to converge in the near future, and whether the focal point of that convergence will be a new, hybrid governance system comprised of the best practices drawn from different systems. This Article advances the view that neither global convergence that eliminates systemic differences nor the emergence of a hybrid best practice safely can be projected because each national governance system is a system to a significant extent. Each system, rather than consisting of a loose collection …