Law Commons^™

The Love Song Of The Delaware Court Of Chancery, David K. Kessler

David K Kessler

Though corporate law can often seem dry and uninteresting, it is full of wonderful stories, complex characters, and powerful language. As such, the field of corporate law lends itself to the medium that has long best captured those elements: poetry. The attached document is an adaptation of T.S. Eliot’s The Love Song of J. Alfred Prufrock to the theme of corporate law. It has been enthusiastically received on the Harvard campus by former Law School Dean (and Corporations guru) Robert Clark and the Vice-Chancellor of the Delaware Court of Chancery, Leo Strine. I understand that this submission is far more …

The Pirates Will Party On!, William A. Drennan

William A Drennan

The government went off course when it attempted to stop outrageous CEO compensation schemes with new income tax rules on nonqualified deferred compensation. IRC Section 409A should be scuttled.

Federalizm Vs. State Law In The Regulation Of Corporations: A Conflicting Or Complimentary Shift In Corporate Jurisprudence? How Delaware Has Responded, Christine G. Ondimu

Christine G Ondimu Ms.

The essence of this paper is to analyze how federal corporate law has shaped Delaware State’s corporate law jurisprudence. I argue that recent federal engagement in corporate law should be welcomed and sustained by congress when state corporate law rules fall short in providing adequate protection for investors. Using a small number of case law, it will be acknowledged as we develop this paper that Delaware’s corporate law has had a fundamental shift in the wake of Enron and WorldCom and the advent of the Sarbanes- Oxley Act, 2002. At the same time we will also show how Delaware has …

The Effect Of Enhanced Disclosure On Open Market Stock Repurchases, Michael N. Simkovic

Michael N Simkovic

Publicly traded companies distribute cash to shareholders either through dividends or through anonymous repurchases of the companies’ own stock on the open market. Companies must announce a repurchase authorization, but do not actually have to repurchase any stock, and until recently did not have to disclose whether or not they were in fact repurchasing any stock. Scholars and regulators noticed that companies frequently announced repurchases but then appeared not to complete them. They feared that such announcements might be used by insiders to exploit public investors. To reduce opportunities for exploitive behavior, the SEC required that companies disclose their repurchase …

Should Securities Industry Self-Regulatory Organizations Be Considered Government Agencies?, Roberta S. Karmel

Roberta S. Karmel

Abstract for

“Should Securities Industry Self-Regulatory Organizations Be Considered Government Agencies?”

by Roberta S. Karmel, Centennial Professor, Brooklyn Law School

Securities industry self-regulatory organizations (“SROs”) began as private sector membership organizations of securities industry professionals. This article addresses the questions of whether, and to what extent, securities industry SROs have become government agencies, and whether, and to what extent, they should be subject to constitutional and statutory controls on government agencies. It focuses principally on the Financial Industry Regulatory Agency (“FINRA”), a new entity which combined the National Association of Securities Dealers, Inc. (“NASD”) and the member regulation functions of …

Shari'ah's Black Box: Civil Liability And Criminal Exposure Surrounding Shari'ah-Compliant Finance, David Yerushalmi

David Yerushalmi

This article examines the multitude of legal issues - both criminal and civil - that Shari'ah-compliant finance (SCF) presents to U.S. financial institutions and their professional advisers. In short, SCF is the practice of investing in conformity with Islamic law (Shari'ah). Such investment appears at first glance innocuous. With only a modicum of probing, however, SCF turns out to be a black box, where the financial industry and their legal professionals have hidden a doctrine at war with the West and have ignored the dangers and risks posed by Shari'ah authorities who determine the rules and principles of this industry. …

Provena Covenant Medical Center And Its Unresolved Tax-Exempt Status - It's Time For The Illinois Supreme Court To Revise The Methodist Old People's Home Test, Joseph J. Hylak-Reinholtz

Joseph J. Hylak-Reinholtz

Not-for-profit hospitals tax exemptions have been challenged by government officials for providing insufficient charity care to needy patients. In Illinois, not-for-profit tax exemptions are analyzed under a test developed by the state Supreme Court in Methodist Old Peoples Home v. Korzen. This comment argues, in light of the Provena litigation and subsequent appeal, that the court must revise its outdated test to reflect the realities of providing health care today in a not-for-profit system.

Ownership, Limited: Reconciling Traditional And Progressive Corporate Law Via An Aristotelian Understanding Of Ownership, Ronald J. Colombo

Ronald J Colombo

Concern over issues of corporate social responsibility and corporate governance persists, fueled, in large part, by recent (and ongoing) corporate scandals of one sort or another. The debate over the nature of the corporation – and, consequently, the proper role of directors, shareholders, and other stakeholders – plays an important role in the consideration of such concerns. If one conceptualizes the corporation as an entity owned by the shareholders, then one would probably be more likely to view directors as mere agents, tasked with maximizing the wealth of their principals (the shareholders). On the other hand, rejecting such a conceptualization …

Mutual Fund Investors: Divergent Profiles, Alan R. Palmiter, Ahmed E. Taha

Ahmed E Taha

Mutual funds are owned by almost half of all U.S. households, manage over $12 trillion dollars in assets, and have become a primary vehicle for retirement and investment savings in the United States. Who are mutual fund investors? The answer is critical to regulatory policy for the mutual fund industry. Fund investors, by selecting the funds in which they invest, play a central role in determining asset allocation and in controlling the fees and expenses that funds charge. Thus, the functioning of the mutual fund market turns on the knowledge and financial sophistication of fund investors.

This article examines the …

Opting Only In: Contractarians, Waiver Of Liability Provisions, And The Race To The Bottom, Sandeep Gopalan

Sandeep Gopalan

Corporate law scholarship is replete with those who favor an enabling approach to regulation, with companies having the right to opt in to particular requirements or regimes. Opting in (or out) permits private ordering and allows for efficient relationships that are a product of bargaining between owners and managers. This paper tests the core claim of scholars in the nexus of contracts tradition - that private ordering as a process of bargaining creates optimal rules. We do this by analyzing empirical evidence in the context of waiver of liability provisions. The article examines the history of these provisions, emphasizing that …

Takeover Regulation As A Wolf In Sheep’S Clothing: Taking U.K. Rules To Continental Europe, Marco Ventoruzzo

Marco Ventoruzzo

Aesop was an optimist. In his cautionary fable that inspired the famous admonition about wolves in sheep's clothing, the predator intentionally dons a sheep's fleece in order to sneak up on a lamb. His disguise, it turns out, is so effective that he ends up being mistaken for the real thing and killed by another wolf. According to Aesop, even the most effective fraud can turn against its perpetrator, and justice be done. The results are not always so salutary with other clandestine predators, including legal rules that appear aimed at protecting vulnerable groups, but instead provide valuable tools to …

Corporate Governance: The Oecd Principles, The Scope For A “Model Of The Successful Company”, And A New Challenge For The Company Law Agenda And The Broader Regulatory Agenda, Luca Cerioni

Luca Cerioni Dr.

The OECD Principles of Corporate Governance, and the Methodology for assessing their implementation, seem to support those academic contributions which overcome the classic distinction between the shareholders primacy and the stakeholders’ models of companies; they also appear to require a re-conceptualisation of the interests involved and not simply a model of company, but a model of the successful company. This paper proposes such a model, and asserts its validity from a property rights perspective and from a human rights perspective. It subsequently argues that shaping of a corporate governance framework based on this model would raise a key challenge for …

Approaching Comparative Company Law, David C. Donald

David C. Donald

This paper identifies some common errors that occur in comparative law, offers some guidelines to help avoid such errors, and provides a framework for entering into studies of the company laws of three major jurisdictions. The first section illustrates why a conscious approach to comparative company law is useful. Part I discusses some of the problems that can arise in comparative law and offers a few points of caution that can be useful for practical, theoretical and legislative comparative law. Part II discusses some relatively famous examples of comparative analysis gone astray in order to demonstrate the utility of heeding …

Regulation Of Pharmacy Benefit Managers: An Economic Analysis Of Regulation And Litigation As Agents Of Health Care Change, Kevin C. Green

Kevin C Green

Pharmacy benefit managers or “PBMs” have come under intense legal and regulatory scrutiny in recent years. Each of the major PBMs has been targeted by public and private litigation including a major ongoing task force comprised of U.S. Attorneys and Attorneys General from twenty states. Moreover, more than 30 bills to regulate PBMs have been introduced in state legislatures since 2002. This paper provides an economic analysis of PBM regulation. I analyze the economic arguments put forward on both sides of the regulation debate and evaluate the existing empirical evidence on PBM conduct in the context of these arguments. I …

O'Hagan, 10b5-2, Relationships And Duties, Thomas M. Madden

Thomas M. Madden

No abstract provided.

The Use Of Special Committees In Mergers And Acquisitions, Benjamin James, Jeffrey Chapman

Benjamin James

It is critical for boards of directors to address properly conflicts of interest in business combinations. Many boards have appointed special committees of independent directors to ensure that stockholders’ interests are protected in mergers and acquisitions and, in certain circumstances, to shift the burden from directors, who must establish the "entire fairness" of the transaction, to the stockholder-plaintiffs, who must establish unfairness. This paper addresses the fiduciary framework governing mergers and acquisitions and the requirements to appoint and conduct the activities of a special committee under Delaware law.

The Enduring Legacy Of Smith V. Van Gorkom, Bernard S. Sharfman

Bernard S Sharfman

It is hard to envision an introductory law school course in corporate law that does not devote at least one or two classes to the study of Smith v. Van Gorkom (Van Gorkom), possibly the most famous corporate law case decided by the Delaware Supreme Court. It has become such a foundation case for the beginning study of corporate law that one prominent corporate law commentator has likened the failure to teach Van Gorkom to the omission of Brown v. Board of Education in a first year constitutional law course.

The challenge for teachers of Van Gorkom is to explain …

O'Hagan 10b5-2, Relationships And Duties, Thomas M. Madden

Thomas M. Madden

In the past ten years, the principal events in the law concerning insider trading have been the Supreme Court’s adoption of the fraud on the source misappropriation theory in O’Hagan and the Commission’s promulgation of Rules 10b5-1 and 10b5-2. While this article provides a solid grounding in the O’Hagan decision and the case law informing it, its commentary addresses the role that Rule 10b5-2, speaking to relationships giving rise to duties of trust or confidence, together with O’Hagan, has had on recent securities litigation. Asking whether this post O’Hagan rulemaking and case law indicates a policy directive from the Commission …

Sovereigns As Shareholders, Paul Rose

Paul Rose

This Article considers the increasing impact of equity investments made by sovereign wealth funds. Observers have increasingly viewed sovereign investments with a high degree of suspicion due to the potential for the investments to be used as political tools rather than traditional investment vehicles. While this risk is considerable, much of the discussion surrounding sovereign investment ignores or minimizes the mitigating effect of a number of regulatory, economic, and political factors. This Article argues that continued vigilance, but not additional regulation, is necessary to ensure that U.S. interests are not jeopardized by sovereign investment in U.S. enterprises. While the United …

Employment As Transaction, Rachel S. Arnow-Richman

Rachel S. Arnow-Richman

This paper offers a fresh perspective on the upper-level employment law class based on the theme of employment as transaction. Like much of law school, employment law is often taught from a public advocacy perspective in which the primary role of the lawyer is to vindicate workers’ rights or defend managerial action. As a doctrinal matter, however, courts are showing increased attention to the role of private ordering in defining workplace rights and assessing liability. Courts routinely examine employers’ efforts to redress unlawful behavior under antidiscrimination law and consistently sanction the use of arbitration agreements waiving rights to a federal …

Christian Anthropology And The Theory Of The Firm, Michael Lp Lower

Michael LP Lower

Catholic social thought (CST), a branch of moral theology, reflects Christian anthropology (an understanding of human nature that draws on Revelation and natural law theory). CST's understanding of what communities (such as the corporation) are for and how they can best achieve their ends are coloured by its anthropological underpinnings. The same, it is argued, is true for economic theories such as the theories of the firm based on Coase. This paper compares Christian anthropology with the implicit anthropology underpinning some of the dominant economic theories of the firm. Differences at this level go a long way to explaining mismatches …

Signaling Through Board Diversity: Is Anyone Listening?, Kimberly D. Krawiec, Lissa Lamkin Broome

Kimberly D. Krawiec

The ethnic and gender make-up of corporate boards has been the subject of intense public and regulatory focus in many countries, including the United States, in recent years. Of particular interest has been quantitative research on the impact, if any, of board diversity on corporate performance. This body of work leaves substantial gaps in our understanding of the precise mechanisms by which board diversity may alter the corporate environment, if indeed it does. In this symposium, we discuss some preliminary findings from our first 35 of a series of confidential, semi-structured interviews of 45 to 90 minutes in length with …

No Good Deed Goes Unpunished: Is There A Need For A Safe Harbor For Aspirational Codes Of Conduct?, Elizabeth F. Brown

Elizabeth F Brown

Over the years, Congress and some state legislatures have enacted laws to encourage corporations to engage in self-policing by providing them with incentives to adopt codes of conduct and compliance programs. In the case of the Federal Organizational Sentencing Guidelines, Congress offered corporations lower penalties if they were found in violation of a federal law but had adopted codes of conduct and compliance programs to try to comply with the law. In the case of the Sarbanes-Oxley Act, Congress require public corporations to disclose if they had a code of ethic and if not, why not. Congress assumed that the …

The (Not So) Puzzling Behavior Of Angel Investors, Darian M. Ibrahim

Darian M Ibrahim

Angel investors fund start-ups in their earliest stages, which creates a contracting environment rife with uncertainty, information asymmetry, and agency costs in the form of potential opportunism by entrepreneurs. Venture capitalists also encounter these problems in slightly later-stage funding, and use a combination of staged financing, preferred stock, board seats, negative covenants, and specific exit rights to respond to them. Curiously, however, traditional angel investment contracts employ none of these measures, which appears inconsistent with what financial contracting theory would predict. This Article explains this (not so) puzzling behavior on the part of angel investors, and also explains the recent …

Individual Or Collective Liability For Corporate Directors?, Darian M. Ibrahim

Darian M Ibrahim

Fiduciary duty is one of the most litigated areas in corporate law and the subject of much academic attention, yet one important question has been ignored: Should fiduciary liability be assessed individually, where directors are examined one-by-one for compliance, or collectively, where the board’s compliance as a whole is all that matters? The choice between individual and collective assessment may be the difference between a director’s liability and her exoneration, may affect how boards function, and informs the broader fiduciary duty literature in important ways. This Article is the first to explore the individual/collective question and suggest a systematic way …

Rating Sell-Side Analysts: A Shift From Subjectivity To Empirically Verifiable Facts, Andrew M. Labreche

Andrew M LaBreche

Throughout the early 1990’s, the stock market experienced seemingly limitless growth, with retail investors realizing healthy returns based on positive recommendations from sell-side analysts. However, as the 1990’s progressed, the technology bubble burst and millions of retail investors lost billions of dollars relying on fraudulent analyst recommendations. This article will detail the self-reinforcing relationship between investment banks, institutional investors and sell-side analysts that systematically disadvantaged retail investors throughout the 1990’s. It will then examine the attempted legislative, judicial and administrative remedies that have resulted from this situation. Specifically, this article will focus on the failures of those remedial measures and …