Law Commons^™

Addressing The Auditor Independence Puzzle: Regulatory Models And Proposal For Reform, Martin Gelter, Aurelio Gurrea-Martinez

Vanderbilt Journal of Transnational Law

Auditors play a major role in corporate governance and capital markets. Ex ante, auditors facilitate firms' access to finance by fostering trust among public investors. Ex post, auditors can prevent misbehavior and prevent financial fraud by corporate insiders. In order to fulfill these goals, however, in addition to having the adequate knowledge and expertise, auditors must perform their functions in an independent manner. Unfortunately, auditors are often subject to conflicts of interest, for example, resulting from the provision of nonaudit services but also because of the mere fact of being hired and paid by the audited company. Therefore, even if …

The Conundrum Of Common Ownership, Jennifer G. Hill

Vanderbilt Journal of Transnational Law

The common ownership debate has become one of the most contentious issues in corporate law today. This debate is a by-product of major changes to capital market ownership structure, which have triggered concerns about the rise of institutional investors, the growth of index investing, and the rapid concentration of ownership in major international financial markets. The common ownership theory focuses on concerns about the incentives of large financial institutions holding widely diversified portfolios of shares in competing companies within a particular economic sector. Proponents of the common ownership theory argue that, even where institutional investors have relatively small ownership stakes, …

The Law And Practice Of Shareholder Inspection Rights: A Comparative Analysis Of China And The United States, Robin H. Huang, Randall S. Thomas

Vanderbilt Journal of Transnational Law

Shareholder inspection rights allow a shareholder to access the relevant documents of the company in which they hold an interest, so as to address the problem of information asymmetry and reduce the agency costs inherent in the corporate structure. While Chinese corporate governance and American corporate governance face different sets of agency cost problems, this Article shows that shareholder inspection rights play an important role in both China and the United States. On the books, while shareholder inspection rights in both countries are broadly similar, there are some important differences on issues such as the proper purpose requirement. The empirical …

Singapore's Puzzling Embrace Of Shareholder Stewardship: A Successful Secret, Dan W. Puchniak, Samantha S. Tang

Vanderbilt Journal of Transnational Law

In the wake of the 2008 Global Financial Crisis (GFC), the United Kingdom created the first stewardship code, which was designed to transform its rationally passive institutional investors into actively engaged shareholders. In the UK corporate governance context, this idea made sense. Institutional investors collectively own a sizable majority of the shares in most of the United Kingdom's listed companies. In turn, if the UK stewardship code could incentivize them to effectively monitor management to act as "good shareholder stewards"--the managerial short-termism and excessive risk-taking, which were identified as contributors to the GFC, could be avoided.

The United Kingdom's idea …

Diversity Of Shareholder Stewardship In Asia: Faux Convergence, Gen Goto, Alan K. Koh, Dan W. Puchniak

Vanderbilt Journal of Transnational Law

Since the UK adopted the world's first stewardship code in 2010, stewardship codes have proliferated across Asia. Given the UK Code's prominence, it is tempting to assume that every other stewardship code performs the same function as the UK Code. This assumption belies the truth: all these codes--regardless of whether they have in fact drawn inspiration from the UK Code--have taken different trajectories due to each adopting its jurisdiction's distinctive institutional and legal context.

Using empirical evidence and in-depth case studies of stewardship in Japan and Singapore, this Article reveals how any reception of United Kingdom-style stewardship concepts is only …

Mixed Ownership Reform And Corporate Governance In China's State-Owned Enterprises, Jiangyu Wang, Tan Cheng-Han

Vanderbilt Journal of Transnational Law

This Article provides an early assessment of the impact on corporate governance of the most recent wave of reform of China's state-owned enterprises (SOEs) announced by the CCP in 2013, officially known as the mixed-ownership reform (MOR). It offers a comprehensive and detailed account of the background, policy and regulatory frameworks, and rationale of the MOR in light of the history of ownership reform in China. It also conducts empirical studies of the change in ownership and board composition in over 30 SOEs which have recently completed their MOR experiments, as well as several case studies. It observes that MOR's …

China's "Corporatization Without Privatization" And The Late Nineteenth Century Roots Of A Stubborn Path Dependency, Nicholas C. Howson

Vanderbilt Journal of Transnational Law

This Article analyzes the contemporary program of "corporatization without privatization" in the People's Republic of China (PRC) directed at China's traditional state-owned enterprises (SOEs) through a consideration of long ago precursor enterprise establishments--starting from the last Chinese imperial dynasty's creation of "government-promoted/supervised, merchant-financed/operated" (guandu shangban) firms in the latter part of the nineteenth century. While analysts are tempted to see the PRC corporations with listings on international exchanges that dominate the global economy and capital markets as expressions of "convergence," this Article argues that such firms in fact show deeply embedded aspects of path dependency unique to the Chinese context …

Agreement In Principle: A Compromise For Activist Shareholders From The Uk Stewardship Code, David W. Roberts

Vanderbilt Journal of Transnational Law

Equity ownership in the United States and Europe is now highly concentrated in the hands of institutional investors, which gives rise to new problems of agency and corporate governance. These large investment intermediaries, such as mutual funds, specialize in maximizing beneficial owner value based on short-term performance benchmarks but lack the expertise and incentive to actively engage corporate boards on business strategy and governance matters. Instead, institutional investors are "rationally reticent," meaning that they are willing to respond to governance proposals but not to propose them. Activist shareholders may offer an endogenous solution to address "latent activism" in institutional intermediaries …

Toward A Public Enforcement Model For Directors' Duty Of Oversight, Renee M. Jones, Michelle Welsh

Vanderbilt Journal of Transnational Law

This Article proposes a public enforcement model for the fiduciary duties of corporate directors. Under the dominant model of corporate governance, the principal function of the board of directors is to oversee the conduct of senior corporate officials. When directors fail to provide proper oversight, the consequences can be severe for shareholders, creditors, employees, and society at large. Despite general agreement on the importance of director oversight, courts have yet to develop a coherent doctrine governing director liability for the breach of oversight duties. In Delaware, the dominant state for U.S. corporate law, the courts tout the importance of board …

Dutch Treat: Netherlands Judiciary Only Goes Halfway Towards Adopting Delaware Trilogy In Takeover Context, Danielle Quinn

Vanderbilt Journal of Transnational Law

This Note examines Dutch takeover law in light of the current inter-EU competition to attract entities to individual Member States. The recent hostile takeover of the Dutch bank, ABN AMRO, provides an excellent example of the Netherlands' opportunity to use its judiciary to solidify its reputation as a competitive, business-friendly jurisdiction. The Dutch Enterprise Chamber can aid the Netherlands in becoming the preeminent EU country--a similar status to Delaware's Chancery Court in the United States. Although the Enterprise Chamber attempted to introduce Delaware law in ABN AMRO, it unfortunately misapplied the law. As a result, the Dutch Supreme Court had …

Nationbuilding 101: Reductionism In Property, Liberty, And Corporate Governance, O. L. Reed

Vanderbilt Journal of Transnational Law

In this Article, Professor Reed re-examines the importance of property as a formal legal institution. He continues by arguing that central to creating property is the right to exclude others from resources acquired without force, theft, or fraud. In countries where this right has been firmly established, per capita income far exceeds that of countries lacking a strong right to exclude. Professor Reed then asserts the importance to nation builders of appreciating the virtual semantic equivalence of the terms "property" and "liberty." Finally, he argues that both the specific and broad senses of corporate governance can be reduced to property …

Corporate Governance And Sustainable Peace: An Insider's View, Marina N. Whitman

Vanderbilt Journal of Transnational Law

The Author brings her 30 years of experience as a member of numerous corporate boards of directors to bear on the relationship between corporate governance and sustainable peace. In the Author's experience, over the last three decades corporate boards have become more diverse not only in terms of race and gender, but also through a greater focus on international participation. This diversity has led to concern for a broader set of stakeholders and, in many cases, these boards are presently conducting the affairs of their corporations in a more socially-responsible fashion. Despite these gains, however, the Author concedes that recent …

Adapting Corporate Governance For Sustainable Peace, Timothy L. Fort, Cindy A. Schipani

Vanderbilt Journal of Transnational Law

Acts of violence toward multinational corporations have important consequences for the way these companies will need to structure their approach to international business. This Article proposes four contributions that corporations can make to sustainable peace. By incorporating sustainable peace as a business objective, multinational corporations may be able to blend extant corporate governance principles with a goal that can significantly contribute to the reduction of violence in society.

Corporate Governance And Sustainable Peace, Timothy L. Fort, Cindy A. Schipani

Vanderbilt Journal of Transnational Law

The Articles and Commentary in this Symposium are another step in a series of conferences exploring dimensions of business influence on sustainable peace. As is often the case with new intellectual initiatives, each step seems to open new doors of insight and new sets of questions. Other presentations delivered at this conference included discussions of how one could design architectural plans in keeping with company goals, while others focused on the development of compassion, forgiveness, and voice. Still others connected the topic to notions of ethical compliance models, dispute resolution, corporate citizenship, and economic development.

Beyond these notions, of course, …

The Role Of The Corporation In Fostering Sustainable Peace, Timothy L. Fort, Cindy A. Schipani

Vanderbilt Journal of Transnational Law

This Article demonstrates that there is a plausible, conceptual relationship among corporate governance, business ethics, and sustainable peace. First, the Authors begin by outlining the benefits of and protests against globalization and the reciprocal benefits between geopolitical entities and economic activity. The Article then details specific historical events that foreshadow patterns in the relationship between business and sustainable peace. In looking more closely at those patterns, the Authors argue that through economic progress and mitigation of rivalries in the workplace, multinational corporations can contribute to sustainable peace. Thus, if this argument is correct, the stakes increase dramatically for corporations to …

Persuasion And Resistance: The Use Of Psychology By Anglo-American Corporate Governance Advocates In France, James A. Fanto

Vanderbilt Journal of Transnational Law

The Author argues that in the 1990s Anglo-American corporate governance became the dominant model for large, public firms in the international business world, and that corporate governance professionals relentlessly promoted and exported Anglo-American corporate governance throughout the developed and developing world. Contending that it is an appropriate time--if only because the U.S. recession and international hostilities have tempered the "irrational exuberance" of capital market proponents--to examine critically the advocacy of Anglo-American corporate governance, the Author proposes that an important part of the critical assessment is to explain the momentum of the dominant model: to understand why Anglo-American corporate governance appeared …

Corporate Governance And The Global Social Void, Lee A. Tavis

Vanderbilt Journal of Transnational Law

This Article argues that the components of globalization--economic integration, democratization, and global governance networks--are changing the nature of corporate governance and the prospects for peace. Multinational enterprises are the instruments of economic integration. As such, multinationals as a group deserve credit for the positive productivity-related wealth effects of the process. As the implementing institutions, these enterprises are also inextricably related to the inequality--the social void--resulting from globalization that threatens peace.

Hyper competition in the global product markets and the demands of the financial markets determine, to a large extent, the activities of the multinational. Alternatively, there is an evolving opportunity …

Terrorism And Globalization: An International Perspective, Linda Lim

Vanderbilt Journal of Transnational Law

Terrorism has little or nothing to do with globalization, just as it has little or nothing to do with Islam. Most of the many varieties of terrorism that afflict and have long afflicted the world are responses not to global phenomena, but to intensely local ones. Examples include particularly ethnic, nationalist, and religious fault lines such as violence by Catholics and Protestants in Ireland; Basques in Spain; the Hindu Tamil Tigers in Sri Lanka; Kashmiris, Sikhs, and Hindu nationalists in India; the Aum cult in Japan; and Uighurs in Xinjiang, China.

The terrorists who attacked the World Trade Center on …

Corporate Governance In The Cause Of Peace: An Environmental Perspective, Donald O. Mayer

Vanderbilt Journal of Transnational Law

This Article examines the role of multinational corporations in creating global peace. Part I discusses the role of multinational corporations in the global economy, emphasizing the relationship between multinational corporations, governments, and the environment. Part II explores whether corporations have a moral duty to oppose ill-conceived laws and policy proposals and to support well-conceived laws that encourage efficiency and sustainability, but may hinder short-term profitability. Part III expands and further explores the argument set forth in Part II by examining the continuing dependency of the United States and other industrialized democracies on oil from the Middle East. Part IV concludes …

Interview: The Business Of Peace, Madeleine Albright, Former Secretary Of State, B. Joseph White

Vanderbilt Journal of Transnational Law

I think the thing that we have really seen, Joe, recently, is the fact that we have global companies that are situated everywhere and are very much a part of the societies in which they operate. The way that they can contribute is by really embedding themselves in the local communities and by providing economic support within those communities to help mitigate some of the aspects of poverty within that particular milieu where they are operating. They can contribute by basically making it clear to people that we are all part of the same story. Just because you may be …

Corporate Governance In A Global Environment: The Search For The Best Of All Worlds, Timothy L. Fort, Cindy A. Schipani

Vanderbilt Journal of Transnational Law

This Article reflects on the various visions of corporate governance. Initially, the Article reviews the contractarian and communitarian theories of the corporation. The communitarian theory views the corporation as a separate entity, with social responsibilities not only to the shareholders but to the firm's other stakeholders and society at large. On the other hand, the contractarian approach considers the firm's shareholders as the primary constituency to whom management is accountable. Voluntary contracting and market forces align the interests of management and shareholders. The Article next analyzes salient features of corporate governance in the United States, Japan, and Germany. The United …