Business Organizations Law Commons^™

The Relation Between Firm-Level Corporate Governance And Market Value: A Study Of India, Bala Balasubramanian, Bernard S. Black, Vikramaditya Khanna

Law & Economics Working Papers

Relatively little is known about the corporate governance practice of firms in emerging markets. We provide a detailed overview of the practices of publicly traded firms in India, and identify areas where governance practices are relatively strong or weak, relative to developed countries. We also examine whether there is a cross-sectional relationship between measures of governance and measures of firm performance and find evidence of a positive relationship for an overall governance index and for an index covering shareholder rights. The association is stronger for more profitable firms and firms with stronger growth opportunities.

Confident Uncertainty, Excessive Compensation & The Obama Plan, Michael B. Dorff

Indiana Law Journal

Public outrage at the enormous bonuses TARP recipients paid to senior executives recently prompted the Obama administration to impose sweeping new curbs on executive compensation. Shortly thereafter, Senator Dodd added restrictions on executive bonuses to the stimulus bill President Obama subsequently signed. These are understandable political reactions, but will they achieve the twin goals of reducing executive compensation in recipients of federal assistance while spurring better corporate performance? To examine this question, I analyze excessive compensation as the product of "confident uncertainty, "the tendency of even the most sophisticated actors to place unwarranted confidence in their ability to predict the …

Voip Mtic — Vat Fraud In Voice Over Internet Protocol, Richard Thompson Ainsworth

Faculty Scholarship

In the beginning, the VAT fraud known as missing trader intra-community (MTIC) fraud appeared to be a UK problem concentrated in the cell phone and computer chip markets. MTIC has mutated (to other commodities) and migrated (to other Member States). This paper describes how this fraud operates in the VoIP market, and how in this mutation it is no longer confined to the EU, but can infiltrate any VAT/GST anywhere.

Canada, Botswana, Japan, Iceland and Jamaica (to mention a few jurisdictions) have consumption taxes that are just as vulnerable as is the EU VAT to VoIP missing trader fraud. It …

Virtual Intermediaries In The Lodging Industry: Consumption Tax Problems In The U.S. And Japan, Richard Thompson Ainsworth

Faculty Scholarship

Marketplace technology is (inadvertently) chipping away at the effectiveness of consumption taxes – the Japanese Consumption Tax (CT), the European value added tax (VAT), and the American sales tax (ST) are all affected. Frequently a technology-patch or a law change can repair the tax-damage, but sometimes even though a patch or a change is known the design of the levy (or the politics behind the design) impedes application. This paper assesses these consumption taxes by considering the impact that virtual travel agents have had on revenue yields. The paper draws specific conclusions for the Japanese CT, because this consumption tax …

Zappers - Retail Vat Fraud, Richard Thompson Ainsworth

Faculty Scholarship

Zappers skim cash sales at retail. Zappers are add-on programs used by merchants with electronic cash registers (ECRs) or point-of-sale (POS) systems. Zappers are smart and selective. They do not skim all sales, and they never skim credit card transactions.

Although they are present in every jurisdiction, Zappers appear to be most widely used in developed economies that combine high levels of cash sales with high rates of consumption tax. Sweden, for example, has a cash-intensive economy, one of the world’s highest VAT rates (25%), and also reports that 70% of the ECRs in the country are either “… constructed …

Co2 Mtic Fraud — Technologically Exploiting The Eu Vat (Again), Richard Thompson Ainsworth

Faculty Scholarship

On February 1, 2010 Algirdas Šemeta is expected to be confirmed as the next European commissioner for taxation, customs union, audit and anti-fraud. If his nomination passes a confirmation hearing at the European Parliament he will succeed László Kovács. At the top of Mr. Šemeta’s list of things requiring attention should be MTIC fraud in tradable CO2 permits. Political and fiscal realities make CO2 MTIC fraud a top priority.

CO2 MTIC is a technology-driven fraud that takes advantage of the same weaknesses in the EU VAT that have become well known in the cell phone and computer chip trade. The …

Quebec's Sales Recording Module (Srm): Fighting The Zapper, Phantomware, And Tax Fraud With Technology, Richard Thompson Ainsworth

Faculty Scholarship

No abstract provided.

Bonding Limited Liability, Robert J. Rhee

Faculty Scholarship

Limited liability is considered a “birthright” of corporations. The concept is entrenched in legal theory, and it is a fixed reality of the political economy. But it remains controversial. Scholarly debate has been engaged in absolute terms of defending the rule or advocating its abrogation. Though compelling, these polar positions, often expressed in abstract arguments, are associated with disquieting effects. Without limited liability, efficiency may be severely compromised. With it, involuntary tort creditors bear some of the cost of an enterprise. Most other proposals for reforming limited liability have been incremental, such as modifying veil piercing. However, neither absolutism nor …

Trusts Versus Corporations: An Empirical Analysis Of Competing Organizational Forms, A. Joseph Warburton

College of Law - Faculty Scholarship

This paper studies the effects of organizational form on managerial behavior and firm performance, from an empirical perspective. Managers of trusts are subject to stricter fiduciary responsibilities than managers of corporations. This paper examines the ramifications empirically, by exploiting data generated by a change in British regulations in the 1990s that allowed mutual funds to organize as either a trust or a corporation. I find evidence that trust law is effective in curtailing opportunistic behavior, as trust managers charge significantly lower fees than their observationally equivalent corporate counterparts. Trust managers also incur lower risk. However, evidence suggests that trust managers …

Managerial Entrenchment And Shareholder Wealth Revisited: Theory And Evidence From A Recessionary Market, Jay B. Kesten

Scholarly Publications

Does managerial entrenchment create or destroy shareholder value? This Article presents both theory and evidence that the answer to this question is not monolithic, but rather depends on factors that vary greatly with the macroeconomic climate, such as firm profitability, takeover frequency, and valuation of takeover premiums. The mainstream view, both of academics and market participants, is that entrenchment reduces accountability to shareholders and amplifies agency costs, thus decreasing shareholder wealth. Two influential studies (Bebchuk, Cohen & Ferrell (2009) and Gompers, Ishii & Metrick (2003)) present empirical evidence consistent with this conclusion, finding statistically significant negative correlations between entrenchment and …

The Attack On Nonprofit Status: A Charitable Assessment, James R. Hines Jr., Jill R. Horwitz, Austin Nichols

Articles

American nonprofit organizations receive favorable tax treatment, including tax exemptions and tax-deductibility of contributions, in return for their devotion to charitable purposes and restrictions not to distribute profits. Recent efforts to extend some or all of these tax benefits to for-profit companies making social investments, including the creation of the new hybrid nonprofit/for-profit company form known as the Low-Profit Limited Liability Company, threaten to undermine the vitality of the nonprofit sector and the integrity of the tax system. Reform advocates maintain that the ability to compensate executives based on performance and to distribute profits when attractive investment opportunities are scarce …

Excuse Doctrine: The Eisenberg Uncertainty Principle, Victor P. Goldberg

Faculty Scholarship

The world is in a bit of a mess. Oil prices soared to more than $140 per barrel and within months plummeted to below $40. The pound fell from $2 to less than $1.40. Housing and stock prices crashed. Foreclosures, bankruptcies, and bailouts became newspaper staples. When things go awry like this, inevitably many people and firms regret having entered into contracts under more favorable circumstances. Many of them will be looking for ways to limit, or better yet, avoid the consequences. A preeminent contracts scholar, Melvin Eisenberg (2009), has provided them with considerable ammunition in a recent paper, arguing …

Keynote Address: The Conflicted Trustee Dilemma, Steven L. Schwarcz

NYLS Law Review

No abstract provided.

A Board’S Duty To Monitor, Eric J. Pan

NYLS Law Review

No abstract provided.

Tax Fraud In The Sales Tax: Zappers — What Are They? How Can Puerto Rico Block Them?, Richard Thompson Ainsworth

Faculty Scholarship

The Sales and Use Tax is an essential part of Puerto Rico’s revenue profile. Effective only recently (November 15, 2006) the Impuesto a las Ventas y Uso (IVU) was expected to raise between $2.3 and $1.05 billion annually, and has already become the Commonwealth’s fourth largest revenue source. Actual revenue results for 2007-2008 came in at $1.1 billion, which admittedly is closer to the low end than the high end of what is possible, but now that the tax is in place the next pressing question is how can its performance be improved?

This paper generally proposes that Puerto Rico …

The Cult Of Efficiency In Corporate Law, Stephen E. Ellis, Grant M. Hayden

Faculty Journal Articles and Book Chapters

This paper challenges a fundamental assumption of corporate law scholarship. Corporate law is heavily influenced by economics, and by normative economics in particular. Economic efficiency, for example, is seen as the primary goal of good corporate governance. But this dependence on standard notions of economic efficiency is unfortunate, as those notions are highly problematic. In economic theory, efficiency is spelled out in terms of individual preference satisfaction, which is an inadequate foundation for any sort of normative analysis. We argue that on any account of the good, people will sometimes prefer things that aren’t good for them on that account. …

Congress, Corporate Boards, And Oversight: A Public Law/Private Law Comparison, Paul S. Miller

University of Richmond Law Review

No abstract provided.

A Standard Clause Analysis Of The Frustration Doctrine And The Material Adverse Change Clause, Andrew A. Schwartz

Publications

In the darkest depths of a corporate merger agreement lies the MAC clause, a term that permits the acquirer to walk away from a transaction if, between signing and closing, the target company experiences a "Material Adverse Change." Multibillion-dollar deals rise or fall based on the anticipated interpretation of a MAC clause, and invocation of the clause in a sensitive transaction could trigger the collapse of the global financial system. In short, the MAC clause is the most important contract term of our time. And yet--due to an almost total lack of case law--no one knows what it means.

In …

Virtual Intermediaries Ii - Canadian Solutions (Drop Shipments) Compared With Us, Japanese & Eu Approaches, Richard Thompson Ainsworth

Faculty Scholarship

Virtual travel agents are opportunistic internet-based travel agents. They are intermediary businesses that create mutually beneficial three-party transactions that secure accommodations for a traveler that: (a) meet the basic needs of the traveler (at a discount), (b) fills vacant room for accommodation retailers with guests that pay below market, but above standard costs, and (c) profit from the extra cash, the margin in the transaction.

The virtual intermediary’s eye is always on the discount and the cash flow. One of the things that catches their attention are the accommodation taxes which they collect from the traveler in advance and remit …

Legal Origins And The Tasks Of Corporate Law In Economic Development: A Preliminary Exploration, John Ohnesorge

BYU Law Review

No abstract provided.

Competition Policy And Comparative Corporate Governance Of State-Owned Enterprises, D. Daniel Sokol

BYU Law Review

No abstract provided.

Corporate And Business Law, Laurence V. Parker

University of Richmond Law Review

No abstract provided.

Mtic Fraud Infects Tradable Carbon Permits, Richard Thompson Ainsworth

Faculty Scholarship

Missing trader intra-community (MTIC) fraud has been slowly morphing from cell phones and computer chips to other commodities. In the last few months however MTIC made a dramatic appearance in tradable CO2 permits. It closed exchanges and prompted France and the Netherlands to unilaterally change their tax treatment of CO2 trades. The UK has followed the French treatment in large measure. On Monday June 8, 2009 rumors of MTIC fraud in carbon emission permits closed the main European exchange for spot trading of European Union carbon emissions permits and Kyoto offsets. When BlueNext began trading permits again on Wednesday, June …

Massachusetts Zappers - Collecting The Sales Tax That Has Already Been Paid, Richard Thompson Ainsworth

Faculty Scholarship

No other New England state is as vulnerable to Zappers as is the State of Massachusetts. Zappers and related software programming, Phantom-ware, facilitate an old tax fraud – skimming cash receipts. In this instance skimming is performed with modern electronic cash registers (ECRs).

Zappers are a global revenue problem, but to the best of this author’s knowledge they have not been uncovered in Massachusetts. A global perspective says: it is highly unlikely that Zappers are not in the Commonwealth – we just need to find them. In fact, using a Quebec template, tax losses from Zappers and related frauds in …

Vat Derogations In Germany, Austria, Denmark, And Estonia: Use And Enjoyment Rules, Richard Thompson Ainsworth

Faculty Scholarship

When the Czech Republic elected (effective January 1, 2009) to derogate from the standard rules for determining the place of supply for intangible services, pursuant to Article 58 of the Recast VAT Directive (RVD), it was following the lead of ten other Member States. This paper considers four of those other jurisdictions - Germany, Austria, Estonia, and Denmark - and compares their derogations with that of the Czech Republic.

In each instance a use and enjoyment standard determines the place of supply for certain intangible services. The affected transactions are (potentially) wide ranging. In each instance non-EU countries are on …

The (Misunderstood) Genius Of American Corporate Law, Robert B. Ahdieh

Faculty Scholarship

In this Reply, I respond to comments by Bill Bratton, Larry Cunningham, and Todd Henderson on my recent paper - Trapped in a Metaphor: The Limited Implications of Federalism for Corporate Governance. I begin by reiterating my basic thesis - that state competition should be understood to have little consequence for corporate governance, if (as charter competition's advocates assume) capital-market-driven managerial competition is also at work. I then consider some of the thoughtful critiques of this claim, before suggesting ways in which the comments highlight just the kind of comparative institutional analysis my paper counsels. Rather than a stark choice …

Has Corporate Law Failed? Addressing Proposals For Reform, Antony Page

Michigan Law Review

Part I of this Review discusses the modem "nexus of contracts" approach to corporations and highlights how Greenfield's views differ. Part II examines corporate goals and purposes, suggesting that Greenfield overstates the impact of the shareholder-primacy norm and does not offer a preferable alternative. Part III critiques the means to the ends--Greenfield's proposals for changing the mechanics of corporate governance. Although several of his proposals are intriguing, they seem unlikely to achieve their pro-social aims. This Review remains skeptical, in part because-even given its problems-the U.S. "director-centric governance structure has created the most successful economy the world has ever seen." …

Changes To The Czech Republic's Vat Act: The Use And Enjoyment Rules, Richard Thompson Ainsworth

Faculty Scholarship

On January 1, 2009 a minor change in the Czech Republic VAT became effective. A use and enjoyment standard was added to modify the sourcing of certain service transactions. Traditional proxy-based rules, derived from Articles 43 and 56(1) of the Recast VAT Directive (RVD), are set aside by this modification when the customer receiving the services has a permanent establishment (PE) in the Czech Republic. The modification is authorized by RVD 58.

This change is a limited adoption of RVD 58(b), and functions like a full force of attraction principle in direct taxation. If caught by these rules, transactions that …

Quebec's Module D'Enregistrement Des Ventes (Mev): Fighting The Zapper, Phantomware And Tax Fraud With Technology, Richard Thompson Ainsworth

Faculty Scholarship

On January 28, 2008 the Quebec Minister of Revenue, Jean-Marc Fournier, announced that by late 2009 the MRQ will begin testing a device, the module d'enregistrement des ventes (MEV) that is projected to substantially reduce tax fraud in the restaurant sector. By 2010 or 2011 MEVs will be mandatory in all Quebec restaurants, where they will assure accuracy and retention of business records within electronic cash registers (ECRs).

This paper moves beyond a discussion of the variety of sales suppression programs in use - zappers and phantom-ware. The concern here is on enforcement efforts, particularly the MEV. The intent is …

Trapped In A Metaphor: The Limited Implications Of Federalism For Corporate Governance, Robert B. Ahdieh

Faculty Scholarship

Trapped in a metaphor articulated at the founding of modern corporate law, the study of corporate governance has - for some thirty years - been asking the wrong questions. Rather than a singular race among states, whether to the bottom or the top, the synthesis of William Cary and Ralph Winter’s famous exchange is better understood as two competitions, each serving distinct normative ends. Managerial competition advances the project that has motivated corporate law since Adolf Berle and Gardiner Means - effective regulation of the separation of ownership and control. State competition, by contrast, does not promote a race to …