Law Commons^™

Sunshine, Stakeholders, And Executive Pay: A Regression-Discontinuity Approach, Brian D. Galle, David I. Walker

Faculty Scholarship

We evaluate the effect of highly salient disclosure of private college and university president compensation on subsequent donations using a quasi-experimental research design. Using a differences-in-discontinuities approach to compare institutions that are highlighted in the Chronicle of Higher Education’s annual "top 10" list of most highly-compensated presidents against similar others, we find that appearing on a top 10 list is associated with reduced average donations of approximately 4.5 million dollars in the first full fiscal year following disclosure, despite greater fundraising efforts at "top 10" schools. We also find some evidence that top 10 appearances slow the growth of compensation, …

Legal Diversification, Kelli A. Alces

Scholarly Publications

The greatest protection investors have from the risks associated with capital investment is diversification. This Essay introduces a new dimension of diversification for investors: legal diversification. Legal diversification of investment means building a portfolio of securities that are governed by a variety of legal rules. Legal diversification protects investors from the risk that a particular method of minimizing agency costs will prove ineffective and allows investors to own securities in a variety of firms, with each security governed by the most efficient set of legal rules given the circumstances of the investment. Diversification of investment by legal rules is possible …

Criminal (In)Justice And Democracy In America, Stephanos Bibas

All Faculty Scholarship

This essay responds to Nicola Lacey’s review of my recent book The Machinery of Criminal Justice (Oxford Univ. Press 2012). Lacey entirely overlooks the book’s fundamental distinction between making criminal justice policy wholesale and adjudicating deserved punishment at the retail level, in individual cases, which is quite consistent with keeping but tempering rules. She also undervalues America’s deep commitments to federalism, localism, and democratic self-government and overlooks the related problem of agency costs in criminal justice. Her top-down approach colors her desire to pursue equality judicially, to the exclusion of the political branches. Finally, Lacey denigrates the legitimate roles of …

The Agency Costs Of Agency Capitalism: Activist Investors And The Revaluation Of Governance Rights, Ronald J. Gilson, Jeffrey N. Gordon

Faculty Scholarship

Equity ownership in the United States no longer reflects the dispersed share ownership of the canonical Berle-Means firm. Instead, we observe the reconcentration of ownership in the hands of institutional investment intermediaries, which gives rise to "the agency costs of agency capitalism." This ownership change has occurred because of (i) political decisions to privatize the provision of retirement savings and to require funding of such provision and (ii) capital market developments that favor investment intermediaries offering low-cost diversified investment vehicles. A new set of agency costs arises because in addition to divergence between the interests of record owners and the …

A Private Ordering Solution To Blockholder Disclosure, Joshua Mitts

Faculty Scholarship

The recent debate over reforming the Securities Exchange Act section 13(d) ten-day filing window demonstrates the importance of balancing the costs and benefits of delayed blockholder disclosure. While hedge fund activism may create shareholder value, short-termism is a very real problem for firms today. Rather than a rigid mandatory rule, the duration of the blockholder disclosure window should be set through a shareholder amendment to the corporate bylaws that empowers shareholders to set an optimal maximum length for each firm. To internalize the economic and moral costs to society of permitting trading on asymmetric information, the SEC should impose a …

Copyright Infringement Markets, Shyamkrishna Balganesh

Faculty Scholarship

Should copyright infringement claims be treated as marketable assets? Copyright law has long emphasized the free and independent alienability of its exclusive rights. Yet, the right to sue for infringement – which copyright law grants authors in order to render its exclusive rights operational – has never been thought of as independently assignable, or indeed as the target of investments by third parties. As a result, discussions of copyright law and policy rarely consider the possibility of an acquisition or investment market emerging for actionable copyright claims and the advantages that such a market might hold for copyright’s goals, objectives, …

Adapting To The New Shareholder-Centric Reality, Edward B. Rock

All Faculty Scholarship

After more than eighty years of sustained attention, the master problem of U.S. corporate law—the separation of ownership and control—has mostly been brought under control. This resolution has occurred more through changes in market and corporate practices than through changes in the law. This Article explores how corporate law and practice are adapting to the new shareholder-centric reality that has emerged.

Because solving the shareholder–manager agency cost problem aggravates shareholder–creditor agency costs, I focus on implications for creditors. After considering how debt contracts, compensation arrangements, and governance structures can work together to limit shareholder–creditor agency costs, I turn to available …

Agency Capitalism: Further Implications Of Equity Intermediation, Ronald J. Gilson, Jeffrey N. Gordon

Faculty Scholarship

This chapter continues our examination of the corporate law and governance implications of the fundamental shift in ownership structure of U.S. public corporations from the Berle-Means pattern of widely distributed shareholders to one of Agency Capitalism – the reconcentration of ownership in intermediary institutional investors as record holders for their beneficial owners. A Berle-Means ownership distribution provided the foundation for the agency cost orientation of modern corporate law and governance – the goal was to bridge the gap between the interests of managers and shareholders that dispersed shareholders could not do for themselves. The equity intermediation of the last 30 …

Constraints On Private Benefits Of Control: Ex Ante Control Mechanisms Versus Ex Post Transaction Review, Ronald J. Gilson, Alan Schwartz

Faculty Scholarship

We ask how to regulate pecuniary private benefit consumption. These benefits can compensate controlling shareholders for monitoring managers and investing effort in implementing projects. Controlling shareholders may consume excessive benefits, however. We argue (a) ex post judicial review of controlled transactions dominates ex ante restrictions on the controlled structures: the latter eliminate efficiencies along with abuses of the controlled company form; (b) controlling shareholders should be permitted to contract with investors over private benefit levels. Both work with better courts. Hence, we recommend creating a European-level corporate court, whose jurisdiction parties can invoke by contract.