Law Commons^™

What Caused Enron? A Capsule Social And Economic History Of The 1990s, John C. Coffee Jr.

Faculty Scholarship

The sudden explosion of corporate accounting scandals and related financial irregularities that burst over the financial markets between late 2001 and the first half of 2002 – Enron, WorldCom, Tyco, Adelphia and others – raises an obvious question: Why now? What explains the concentration of financial scandals at this moment in time? Much commentary has rounded up the usual suspects and placed the blame on a decline in business morality, an increase in "infectious greed," or other similarly subjective trends that cannot be reliably measured. Although none of these possibilities can be dismissed out of hand, approaches that simply reason …

Should Congress Repeal Securities Class Action Reform?, Adam C. Pritchard

Other Publications

The Private Securities Litigation Reform Act of 1995 was designed to curtail class action lawsuits by the plaintiffs’ bar. In particular, the high-technology industry, accountants, and investment bankers thought that they had been unjustly victimized by class action lawsuits based on little more than declines in a company’s stock price. Prior to 1995, the plaintiffs’ bar had free rein to use the discovery process to troll for evidence to support its claims. Moreover, the high costs of litigation were a powerful weapon with which to coerce companies to settle claims. The plaintiffs’ bar and its allies in Congress have called …

Too Busy To Mind The Business? Monitoring By Directors With Multiple Board Appointments, Stephen P. Ferris, Murali Jagannathan, Adam C. Pritchard

Articles

We examine the number of external appointments held by corporate directors. Directors who serve larger firms and sit on larger boards are more likely to attract directorships. Consistent with Fama and Jensen (1983), we find that firm performance has a positive effect on the number of appointments held by a director. We find no evidence that multiple directors shirk their responsibilities to serve on board committees. We do not find that multiple directors are associated with a greater likelihood of securities fraud litigation. We conclude that the evidence does not support calls for limits on directorships held by an individual.

Seeking Sunlight In Santa Fe's Shadow: The Sec's Pursuit Of Managerial Accountability, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

My aim in this paper is not to justify at length an expansive "new corporation law" perspective, though I do believe in it. Nor do I want to try to resolve a controversial question that the new learning admittedly leaves open: which jurisdictional body should set the disclosure and antifraud standards insofar as they are designed to promote better corporate governance? To say that corporate and securities law are largely unitary does not necessarily mean that centralization of authority in the Securities and Exchange Commission (SEC or Commission) is the right choice. Perhaps the states, foreign countries, or stock exchanges …

Shareholder Derivative Litigation And Corporate Governance, Mark J. Loewenstein

Publications

In approving settlements of derivative actions that include fees for plaintiff's attorney, courts typically announce that attorney's fees are approved if a substantial benefit is obtained. In fact, courts, particularly Delaware courts, approve settlements in shareholder derivative actions that included substantial fees for plaintiff's attorney, despite the absence of a corresponding benefit to the corporation. Frequently, the "benefit" obtained is a reform in corporate governance, which is of dubious value to the corporation. To deter frivolous litigation, courts should resist the temptation to approve these settlements just to dispose of the litigation. The paper concludes that fees should not be …

Privatization And Corporate Governance: The Lessons From Securities Market Failure, John C. Coffee Jr.

Faculty Scholarship

Should privatization be "fast" or "slow"? Should policymakers adopt a "Damn the torpedoes, full speed ahead" approach that accepts the inevitability of some overreaching by controlling shareholders, but justifies this cost as necessary to realize and expedite the efficiency gains incident to privatization? Or should privatization proceed more cautiously because of the risks of market failure and political corruption that may result when control seekers are tempted to bribe and seduce the judicial and regulatory systems to achieve the private benefit of control? These tempting private benefits arise, of course, precisely to the extent that privatization preceded the creation of …

Required Disclosure And Corporate Governance, Merritt B. Fox

Faculty Scholarship

One of the most distinctive features of U.S. business law is the stringent requirements of ongoing disclosure imposed on issuers of publicly traded securities. This scheme usually has been justified as necessary to protect investors from making poor trading decisions as a result of being uninformed. Little scholarly attention, however, has been paid to the corporate governance effects of such required disclosure. In analyzing these effects, this article concludes that required disclosure can improve corporate governance in important ways. Indeed, improving corporate governance, not investor protection, provides the most persuasive justification for imposing on issuers the obligation to provide ongoing …

The Shaping Force Of Corporate Law In The New Economic Order, Jeffrey N. Gordon

Faculty Scholarship

My topic for this Allen Chair lecture is the shaping force of corporate governance in the new economic order. It is easy to think of corporate law as an arcane field with mysterious terms and peculiar rules, ultimately of interest only to those who are prepared to bill at least 2000 hours a year to unravel its complexities. This is the view that there is a pointless mystery about shareholders, directors, common stocks, debentures, and the bizarre creature my class encountered recently, a convertible exchangeable cumulative preferred stock; and that ultimately corporate law and practice consists of the expert manipulation …

Reflections On Executive Compensation And A Modest Proposal For (Further) Reform, Mark J. Loewenstein

Publications

No abstract provided.

The Sec And The Future Of Corporate Governance, Mark J. Loewenstein

Publications

No abstract provided.

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 …

Corporate Takeovers: Who Wins; Who Loses; Who Should Regulate, John C. Coffee Jr., Joseph A. Grundfest, Roberta Romano, Murray L. Weidenbaum

Faculty Scholarship

On December 3, 1987, during its 11th Annual Policy Conference in Washington, DC, the American Enterprise Institute convened a panel discussion on "Corporate Takeovers and Insider Trading: Who Should Regulate?" The panelists were John C. Coffee, Jr., professor of law at Columbia University; Joseph A. Grundfest, commissioner at the Securities and Exchange Commission; Roberta Romano, professor of law at Yale Law School; and Murray L. Weidenbaum, Mallinckrodt Distinguished University Professor and director of the Center for the Study of American Business at Washington University. The panel was moderated by Christopher C. DeMuth, president of AEI. The following discussion is drawn …

The Role Of The Market Model In Corporate Law Analysis: A Comment On Weiss And White, Merritt B. Fox

Faculty Scholarship

In a recent article, Elliott Weiss and Lawrence J. White sought to establish that seven decisions of the Delaware courts concerning corporation law had little value in predicting the future conduct of courts and corporations under the Delaware Corporations Law. Weiss and White relied, in part, on a statistical analysis of changes in the prices of publicly traded shares in Delaware corporations to show that the seven studied decisions had no statistically significant market impact.

In this Comment, Professor Fox takes issue with the explanation Weiss and White give for their data. Although the absence of an observed market impact …

The Survival Of The Derivative Suit: An Evaluation And A Proposal For Legislative Reform, John C. Coffee Jr., Donald E. Schwartz

Faculty Scholarship

The shareholder derivative suit today faces extinction. Long considered the "chief regulator of corporate management," and a recognized form of litigation in American courts at least since 1855, it now confronts the second great challenge of its history. Thirty-odd years ago, commentators foresaw the derivative suit's demise when state legislatures began adopting security-for-expenses statutes to curb the abuses of "strike suit" litigation. These reports of its death proved exaggerated, however, as plaintiffs discovered various tactics by which to outflank these statutes. As a result, by the late 1960's, the crisis was past, and a revival in the action's popularity was …

Right Of Joint Adventurers Holding All The Stock Of A Corporation To A Dissolution And Accounting In Equity, Horace Lafayette Wilgus

Articles

The case of Jackson v. Hooper, in the New Jersey Court of Errors and Appeals, decided February 28, 1910, by Judge DILL, (42 N. Y. Law Journal, March 8, 1910), overruling Vice Chancellor HOWELL, of the Court of Chancery (74 AtL. 130) presents interesting and unusual points in corporation and partnership law, and the jurisdiction of courts of equity over corporate affairs.