Law Commons^™

"Because That's Where The Money Is": A Theory Of Corporate Legal Compliance, William Bradford

william bradford

Upon his capture in 1934, the legendary bank robber Willie Sutton was asked by FBI agents, Why do you rob banks, Willie? Sutton, who believed the question to be rhetorical, replied, dryly, Because that's where the money is. In other words, Sutton understood his interrogator to be inquiring as to why he robbed banks rather than, say, homes, or gas stations, or church offering plates. Had he understood the query as intended - i.e., what was it about Willie Sutton the impelled Willie Sutton to crime when many others, struggling to survive the Great Depression, were not? - Sutton could …

The Disaster At Bhopal: Lessons For Corporate Law?, Kent Greenfield

Kent Greenfield

Prepared for a conference at New England Law School marking the upcoming twenty-fifth anniversary of the disaster at Bhopal, this essay asks whether we have anything still to learn from what occurred in the early morning hours in Bhopal on December 3, 1984, and in the hours, days, and weeks that followed. Is there reason to believe, for example, that corporations have a tendency to create the context in which such disasters are more likely? More recent corporate behavior poses the same question, whether it pertains to environmental destruction, injuries to consumers, collusion with illegal governmental activities, or financial malfeasance. …

The Impact Of "Going Private" On Corporate Stakeholders, Kent Greenfield

Kent Greenfield

As capital markets in the United States increasingly "go private," it is unclear how the privatization of corporate finance will affect non-shareholder stakeholders of firms, most centrally employees, communities, and the environment. Some scholars and public policy experts believe that concern for such stakeholders should not hold any relevance in the discussion of corporate law in general, and thus may be presumed to believe the same about a conversation about privatization. In such a view, these concerns lie outside the realm of corporate governance law; they therefore should be of no great moment in the debate over whether public policy …

New Principles For Corporate Law, Kent Greenfield

Kent Greenfield

The fundamental assumptions of corporate law have changed little in decades. Accepted as truth are the notions that corporations are voluntary, private, contractual entities, that they have broad powers to make money in whatever ways and in whatever locations they see fit. The primary obligation of management is to shareholders, and shareholders alone. Corporations have broad powers but only a limited role: they exist to make money. Those who maintain these principles – a group that includes most of the legal scholars who teach and write in the area – have derived the narrow role of corporations in one of …

Democracy And The Dominance Of Delaware In Corporate Law, Kent Greenfield

Kent Greenfield

Among the grandest debates within corporate law is whether the dominance of Delaware is the result of a “race to the bottom” -- toward a legal regime that benefits managers at the expense of the shareholders -- or a “race to the top” -- toward an efficient, shareholder-centric governance framework. This paper argues that this debate is largely beside the point. Even if Delaware’s dominance is the result of a competition resulting in law that efficiently serves the interests of shareholders, it is nevertheless illegitimate. This is because the internal affairs doctrine, on which Delaware’s preeminence depends, in effect allows …

An Experimental Test Of Fairness Under Agency And Profit Constraints (With Notes On Implications For Corporate Governance), Kent Greenfield, Peter Kostant

Kent Greenfield

Building on the scholarship using ultimatum game experiments to explore the presence of fairness norms in bargaining exchanges, the authors test whether such norms are affected by agency relationships alone or agency relationships linked with a duty to maximize returns to the principal. The findings are dramatic. The study, the first of its kind, indicates a significant decrease in a concern for fairness (defined as a willingness to share a pot of money) when a participant in a bargaining transaction acts as an agent for another and owes a duty to maximize the return to the principal. We find no …

The Corporate Governance Of Iconic Executives, Tom C.W. Lin

UF Law Faculty Publications

This Essay explores the special corporate governance challenges posed by iconic executives. Iconic executives are complex, bittersweet figures in corporate governance narratives. They are alluring, larger-than-life corporate figures who often govern freely. Iconic executives frequently rule like monarchs over their firms, offering lofty promises to shareholders, directors, and managers under their reign. But like many stories of powerful and influential figures, the narratives of iconic executives also contain adversity and danger. Part of the acquiescence and enchantment with such figures is rooted in the virtuous promises embodied by their presence, promises of unity, accountability, and effectiveness in corporate governance. Unfortunately, …

The Economic Theory Of Derivative Actions, Diego G. Pardow

Diego G. Pardow

This paper offers a model to formalize the economic theory of derivative actions developed during the last 30 years. From this perspective, the derivative action presents two interrelated problems. The first is how to solve the collective action problem that prevents that minority shareholders file a suit. The second is how to control the risk of collusive settlements between the defendant manager and the plaintiff’s attorney. This model identifies the fundamental tradeoffs that are implicit in these problems, as well as an optimum that could be used as normative benchmark. In brief, it argues that if the goal of derivative …

Food, Globalism And Theory: Marxian And Institutionalist Insights Into The Global Food System, Charles R.P. Pouncy

University of Miami Inter-American Law Review

No abstract provided.

Are Institutional Investors Part Of The Problem Or Part Of The Solution?: Key Descriptive And Prescriptive Questions About Shareholders, Ben W. Heineman Jr., Stephen Davis

Ira M. Millstein Center for Global Markets and Corporate Ownership

Over the last twenty years, institutional investors have owned an increasing share of public equity markets — more than 70 percent of the largest 1,000 companies in the United States in 2009, for example. Over the past two years, in response to failures of some boards of directors and business leaders, shareholders, including institutional investors, have been given increased powers to participate in — or have disclosures about — discrete spheres of governance in publicly held corporations. Moreover, during this same period, and in multiple jurisdictions, there have been increasing calls from both the public and private sectors for institutional …

The Stakeholder Principle, Corporate Governance And Theory – Evidence From The Field And The Path Onward, P M Vasudev

Palladam M Vasudev

The article provides an overview of the development of the stakeholder idea, and presents the results from a survey of the American, British and Canadian corporations included in the Fortune 500 Global Corporations (2009) for their adoption of the stakeholder principle. The survey finds near-unanimous acceptance of the stakeholder vision. 97 percent of the US, UK, and Canadian companies included in the survey acknowledge the stakeholder principle in some form. The trend of adoption of the stakeholder model is unmistakable, and this has significant implications for corporate theory. The article also examines how the emerging ideas about stakeholders and the …

Corporate Leadership And The Unfinished Diversity Movement, Evan M. Roberts Mr.

Evan M Roberts Mr.

This comment explores topics relating to diversity in the board room. It begins by covering the benefits a diverse board brings to firm, focusing on the business case rationales of saving firms money, strengthening core business concepts and corporate governance and increasing shareholder value. Next, the comment explores why, despite the apparent value a divers e board brings to a firm, corporations remain largely homogenized at the highest levels. Current legal, social and economic principles such as tournament theory and labor market externalities appear to shed light on what specific problems diversity advocates must contend with if they hope to …

Towards A Nexus Of Virtue, Ronald J. Colombo

Ronald J Colombo

Corporate law, like all law, should be directed toward the common good. The common good requires that corporate activity be restrained, if not actively directed, by human virtue. An analysis of the corporate enterprise suggests that those corporate actors with the greatest stake in the exercise of virtue, and best positioned to influence corporate activity via the exercise of virtuous judgment, are the corporation’s officers. Thus, one of the primary objectives of corporate law should be the promotion of virtue among corporate officers.

Contrary to what some might assume, the promotion of virtue among corporate officers need not entail a …

Who Sits On Texas Corporate Boards? Texas Corporate Directors: Who They Are And What They Do, Lawrence J. Trautman

Lawrence J. Trautman Sr.

Corporate directors play an important role in governing American business, in the capital formation process, and are key to economic growth. Texas businesses play a disproportionately important role among the states in aggregate U.S. job creation, responsible for 37% of all net new American jobs since the recovery began. It is the job of the board of directors to govern the corporation. Director’s duties and responsibilities include: the duty of care; duty of loyalty; and duty of good faith. The recently published Trautman’s Guide™ to Texas Corporate Directors, provides biographical data for most of the approximately 20,000 for-profit corporate directors …

The Coevolution Of Transnational Corporations And Institutions, Sarianna M. Lundan

Indiana Journal of Global Legal Studies

While economic theories of the firm have traditionally focused on the ownership of assets, the increasing use of contractual partnerships is beginning to challenge our conception of the firm by emphasizing its coordinating role. In structuring their contracts, as well as in managing the relationships governed by the contracts, firms try to mitigate uncertainties that could destroy the value-adding potential of such transactions. These uncertainties may be specific to the transaction partner, but they might also arise from the institutional context of the contracting parties, particularly in the case of transactions that cross borders. The coevolutionary process whereby firms both …

The Changing Face Of Transnational Business Governance: Private Corporate Law Liability And Accountability Of Transnational Groups In A Post-Financial Crisis World, Peter Muchlinski

Indiana Journal of Global Legal Studies

This article seeks to critically assess the recently dominant financialized model of corporate law and governance and its contribution to the creation of the "asocial corporation" geared only to the enhancement of shareholder value. This article places corporate law in a wider context of national and international legal developments that, together, create a framework for the financialization of transnational corporate activity. This article shows that a new approach to transnational corporate governance is emerging from a number of sources. These predate the crisis but have been given impetus by it. In particular, three important phenomena are examined: the rise of …

Transnational Corporations, Global Competition Policy, And The Shortcomings Of Private International Law, Gralf-Peter Calliess, Jens Mertens

Indiana Journal of Global Legal Studies

In this article we criticize the so-called more economic approach to European competition law for disregarding the importance of a functional system of private law. Based on the availability of market governance as an alternative mode for organizing transactions, it is presumed that vertical integration, which is the central organizational structure of transnational corporations, is economically efficient. Since the enforcement of cross-border contracts by state-organized systems of private law, however, is insufficient, "make-or-buy" decisions in international commerce are prejudiced against arms' length transactions in markets. Consequently, international transactions are integrated vertically into firms' structures to a higher degree than comparable …

Private Actors And Public Governance Beyond The State: The Multinational Corporation, The Financial Stability Board, And The Global Governance Order, Larry Cata Backer

Indiana Journal of Global Legal Studies

Transnational corporations are at the center of extraordinary and complex governance systems that are developing outside the state and international public organizations and beyond the conventionally legitimating framework of the forms of domestic or international hard law. Though these systems are sometimes recognized as autonomous and authoritative among its members, they are neither isolated from each other nor from the states with which they come into contact. Together these systems may begin to suggest a new template for networked governance beyond the state, but one in which public and private actors are integrated stakeholders. This provides the source of the …

Midwest Corporate Law Scholars Conference Presentation: Mitigating The Harmful Effects Of Proxy Access (Sec Rule 14a-11), Bernard S. Sharfman

Bernard S Sharfman

Presentation given at the Midwest Corporate Law Scholars Conference (June 15, 2011)

The Shareholders' Role To Foster Corporate Governance In Bangladesh : A Suggestive Review, Dr. Zahid Rafique Zr

Dr. Zahid Rafique ZR

Abstract This paper unveils the issues on shareholders’ activism to secure the desirable corporate governance in Bangladesh .The focal point is the motive and the nature of shareholders in company dealings. Factually, the prime agenda as observed of the shareholders to get profit affects the activities of a company and in Bangladesh, corruption has a curious link with shareholders some of whom thinks of dividend only irrespective of transparency and accountability. The dominating and controlling thought obsesses some shareholders who fear the disclosure and the losing of control over company they have set up. This creates rational apathy into the …

Women On Corporate Boards Of Directors - A Global Snapshot, Douglas M. Branson

douglas m branson

This paper builds on earlier books by the author (No Seat at the Table - How Governance and Law Keep Women Out of the Boardroom (2007) and The Last Male Bastion - Gender and the CEO Suite at America's Public Companies (2010)). The article identifies, describes, and critiques six movements or programs from various parts of the globe, all intended and designed to place additonal women directors on corporate baords of directors and in senior corporate management.

Who Should Talk? What Counts As Employee Voice And Who Stands To Gain, Aditi Bagchi

Faculty Scholarship at Penn Carey Law

This symposium piece responds to an article by Kenneth G. Dau-Schmidt titled "Promoting Employee Voice in the American Economy: A Call for Comprehensive Reform." Professor Schmidt argues in favor of increasing employee voice in corporate governance. In this reply, Professor Bagchi distinguishes between "hard voice," "soft voice" and information rights as three variants of employee voice. She casts doubt on the material benefits from Professor Dau-Schmidt's proposals, which focus on hard and soft voice, to either employees or corporate stakeholders more broadly. The present focus of corporate governance on the relationship between shareholders and managers, to the exclusion of employees, …

Why Not A Ceo Term Limit?, Charles K. Whitehead

Cornell Law Faculty Publications

In this Essay, I ask: Why not require a mandatory CEO term limit? My purpose is not to propose a term limit, but rather to ask why CEO term limits are out-of-bounds – not addressed within the corporate governance scholarship – when they have long been advocated for directors and, more recently, public company auditors.

The traditional answer has been that CEOs are agents of the corporation, subject to control by the board, which holds primary responsibility for the firm’s business and affairs. Senior officers are largely shielded from outside interference, permitting them to execute consistent, long-term business strategies under …

Private Ordering With Shareholder Bylaws, Gordon Smith, Matthew Wright, Marcus Hintze

Faculty Scholarship

In this Article, we propose legal reforms to empower shareholders in public corporations. Most shareholders participate in corporate governance in three ways: they vote, they sell, and they sue. We would expand the menu for shareholders in public corporations by enabling them to contract using shareholder bylaws. We contend that private ordering will improve shareholder monitoring of managers and create laboratories of corporate governance that benefit the entire corporate governance system.

Private Ordering With Shareholder Bylaws, Gordon Smith, Matthew Wright, Marcus Hintze

D. Gordon Smith

Finding Shelter In A Time Of Crisis: A Process-Oriented Approach To Risk Management, Kristin Johnson

Kristin N Johnson

Success in financial markets rests on the effectiveness of a business’s risk management strategy: manage risks well and profits follow; fail to manage risks and a crisis ensues. It has long been evident that inadequate enterprise risk management policies, or internal risk-reducing strategies, create perilous consequences for a business. The recent financial crisis illustrates that the often disparate regulatory guidance and multiplicity of regulators who influence enterprise risk management policies were ill-suited to address conflicts and weaknesses in risk management accountability and enforcement mechanisms. During the crisis, a chorus of commentators demanded a federal solution to address the devastating economic …

Beyond The Board Of Directors, Kelli A. Alces

Kelli A. Alces

The law of corporate governance places the board of directors at the top of the corporate decisionmaking structure. So, accountability for corporate decisions rests primarily on the shoulders of part-time employees who lack the time and thorough knowledge of the firm necessary to perform the board’s duties effectively. Corporate governance scholarship is similarly preoccupied with the board of directors. Scholars have debated whether to enhance or diminish the board’s authority within the firm, but all accept that a board of directors should preside over corporate decisionmaking. This Article argues that scholars on both sides of the debate have missed the …

Overseeing Controlling Shareholders: Do Independent Directors Constrain Tunneling In Taiwan?, Yu-Hsin Lin

San Diego International Law Journal

This Article intends to explore the extent to which independent directors constrain tunneling by controlling shareholders in Taiwan. Taiwan serves as an appropriate jurisdiction for research since the private benefits agency problem is prevalent among Taiwanese public companies. A further twist in Taiwan?s case is that independent directors were newly introduced to Taiwan?s corporate boards, which follow dual-board system where the traditional monitoring function is served by statutory supervisors, instead of board committees, which adds to the complexity in analyzing the effectiveness of independent directors in constraining tunneling activities. Part II reviews relevant literature and lays the foundation for this …

Board Diversity Revisited: New Rationale, Same Old Story, Lisa Fairfax

Faculty Scholarship at Penn Carey Law

Recently, board diversity advocates have relied on market- or economic-based rationales to convince corporate America to increase the number of women and people of color in the boardroom, in lieu of moral or social justifications. This shift away from moral or social justifications has been deliberate, and it stems from a belief that corporate America would better respond to justifications that centered on the corporate bottom line. However, recent empirical data reveals that despite the increased reliance on, and apparent acceptance of, market- or economic-based rationales for board diversity, there has been little change in actual board diversity. This Article …

Economics, Politics, And The International Principles For Sound Compensation Practices: An Analysis Of Executive Pay At European Banks, Guido Ferrarini, Maria C. Ungureanu

Vanderbilt Law Review

In this Article, we submit that the compensation structures at banks before the financial crisis were not necessarily flawed and that recent reforms in this area largely reflect already existing best practices. In Part I we review recent empirical studies on corporate governance and executive pay at banks and suggest that there is no strong support for regulating bankers' compensation structures. We also argue that detailed regulation of incentives would subtract essential decisionmaking powers from boards of directors and make compensation structures too rigid.

In Part II we note that political support for regulating bankers' pay has been strong and …