Law Commons^™

Privatization In Eastern Europe: Impractical, But Not Impossible, Andrzej Rapaczynski

Faculty Scholarship

The most important thing that must be understood by anyone thinking about Eastern European privatization is that the word "privatization," although correct, is somewhat misleading. It is misleading because it brings to mind the operations performed in many other countries where state-owned companies have been sold to private individuals. It is very important to understand that the significance of privatization and the practicality of privatization in Eastern Europe are quite different. The most important thing is that the main task of privatization is not to transfer ownership from one party to another-like that successfully done in England-but rather to create …

Reinventing The Outside Director: An Agenda For Institutional Investors, Ronald J. Gilson, Reinier Kraakman

Faculty Scholarship

Managerialist rhetoric puts the institutional investor between a rock and a hard place. The institutional investor is depicted as a paper colossus, alternatively greedy and mindless, but in all events a less important corporate constituency than that other kind of investor, the "real" shareholder. The unspoken corollary is that, regardless of the institution's investment strategy, its interests may appropriately be ignored.

An institution that trades stock frequently is considered a short-term shareholder without a stake in the future of the corporation. According to the familiar argument, the short-term shareholder has no more legitimate claim on management's attention than does a …

Bondholder Coercion: The Problem Of Constrained Choice In Debt Tender Offers And Recapitalizations, John C. Coffee Jr., William A. Klein

Faculty Scholarship

The past decade saw the flourishing of risky, high-yield corporate debt, often called "junk" bonds. Too many companies took on too much debt, and the chickens are now coming home to roost as these bonds have begun to default with increasing frequency.The magnitude of the problem is potentially enormous; by one estimate, $318 billion of debt has either defaulted already or trades at yields indicating the market's skepticism that it will be repaid on maturity.

Facing the prospect of default, corporate issuers are seeking to restructure or recapitalize their financial structures at a correspondingly increased pace. The market force driving …

Shareholder Initiative: A Social Choice And Game Theoretic Approach To Corporate Law, Jeffrey N. Gordon

Faculty Scholarship

When it comes to specific business matters, it seems that an objecting shareholder can do no more than offer a "precatory" resolution that provides shareholder advice on the issue. Adoption of such a resolution obviously sends a strong signal to management, as do informal contacts by important shareholders, that a management seeking to avoid a control contest may be well-advised to heed. Nevertheless, management can ignore such expressions of shareholder. preference and, indeed, can pursue policies and extraordinary transactions that it knows shareholders would reject. Thus for the large public corporation the pattern of delegation gives management virtually unbounded decisionmaking …

How The Proxy Rules Discourage Constructive Engagement: Regulatory Barriers To Electing A Minority Of Directors, Ronald J. Gilson, Lilli A. Gordon, John Pound

Faculty Scholarship

During the 1980s, both sides of the hostile takeover controversy viewed proxy contests in terms that bordered on the mythical. Those made uneasy by the takeover phenomenon, especially management, held out proxy contests as an alternative, almost utopian mechanism through which a civilized debate about corporate strategy and structure could be held. As the Delaware Supreme Court put it, "[if the stockholders are displeased with the actions of their elected representatives [in blocking a hostile takeover], the powers of corporate democracy are at their disposal to turn the board out.” In contrast, those who believed that takeovers were necessary to …

Unlimited Liability And Law Firm Organization: Tax Factors And The Direction Of Causation, Ronald J. Gilson

Faculty Scholarship

In a recent issue of this Journal, Carr and Mathewson (1988) test a model of the impact of limited and unlimited liability regimes on the nature of firms by comparing the performance of law firms operated as partnerships and sole proprietorships (and therefore subject to unlimited liability) with that of law firms operated as corporations (and therefore subject to limited liability).

Liquidity Versus Control: The Institutional Investor As Corporate Monitor, John C. Coffee Jr.

Faculty Scholarship

Within academia, paradigm shifts occur regularly, some more important than others. As the takeover wave of the 1980s ebbs, a significant shift now appears to be in progress in the way the public corporation is understood. Above all, the new thinking emphasizes that political forces shaped the modern corporation. While the old paradigm saw the structure of the corporation as the product of a Darwinian competition in which the most efficient design emerged victorious, this new perspective sees political forces as constraining that evolutionary process and possibly foreclosing the adoption of a superior organizational form. Thus, my colleague Professor Mark …

Corporations, Markets, And Courts, Jeffrey N. Gordon

Faculty Scholarship

The times they are a changin'. Vanguard firms of the 1980s takeover boom have announced associate layoffs and salary freezes because business is down. Bankruptcy and corporate reorganization are the hot new specialties as reflected in law school class size and law firm entrepreneurialism. Acquisition activity has fallen dramatically from the halcyon days of the 1980s. The gargantuan headline-grabbing hostile bid is now rare. In particular, the "boot-strap, bust-up" highly leveraged transaction that so engaged the passions of corporate managers and raiders now seems part of the history of corporate finance rather than its future.

Many forces have played a …

Corporate Successors Under Strict Liability: A General Economic Theory And The Case Of Cercla, Merritt B. Fox

Faculty Scholarship

P undertakes an activity subject to strict liability that creates a risk of harm to others. The activity harms V. Before the harm becomes apparent, however, P sells its assets to S for cash and dissolves. Should V be entitled to compensation from S in P's stead? If the talk of corporate lawyers is to be believed, concern over this seemingly technical question is having a substantial impact on the salability of billions of dollars of productive assets.

With the growth of products liability litigation, state courts have given the issue of successor liability increasing attention over the last decade. …