Business Organizations Law Commons^™

Drifting Down The Dnieper With Prince Potemkin: Some Skeptical Reflections About The Place Of Compliance Programs In Federal Criminal Sentencing (Symposium), Frank O. Bowman Iii

Faculty Publications

This Article explains how the federal organizational sentencing guidelines work and how they have created incentives for businesses to set up compliance programs. It then considers the paucity of evidence that compliance programs actually prevent the occurrence of corporate crime. It also questions whether investments in compliance programs make sense even for companies caught in a federal criminal investigation. There is little evidence that compliance programs have any significant effect on the likelihood that federal prosecutors will file criminal charges in the first instance. Even more surprisingly, examination of U.S. Sentencing Commission statistics reveals that the compliance program movement seems …

Solving The Everyday Problem Of Client Identity In The Context Of Closely Held Businesses, Darian M. Ibrahim

Faculty Publications

No abstract provided.

Rejecting The Marie Antoinette Paradigm Of Prejudgment Interest, Royce De R. Barondes

Faculty Publications

This paper examines principles for properly computing prejudgment interest by examining the impact on different corporate constituencies. This paper concludes that prejudgment interest at a promisor's cost of funds can undercompensate promisees, by shifting value from the promisee's equityholders to its creditors through a forced investment that decreases the risk of the promisee's portfolio of assets.

Using "Norms" To Change International Law: Un Human Rights Laws Sneaking In Through The Back Door, Troy A. Rule

Faculty Publications

For decades, multinational businesses have self-regulated their operations with respect to human rights, largely unfettered by international law. In recent years, however, human rights groups have advocated that the United Nations (“UN”) create clear legal obligations for multinationals respecting their human rights-related conduct. At least partly due to the substantial burden such obligations could place on international businesses, these efforts by human rights proponents have proven largely fruitless--until now.On August 13, 2003, the UN Sub-commission on the Promotion and Protection of Human Rights adopted the Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human …

Pour Encourager Les Autres? The Curious History And Distressing Implications Of The Criminal Provisions Of The Sarbanes-Oxley Act And The Sentencing Guidelines Amendments That Followed, Frank O. Bowman Iii

Faculty Publications

This Article presents a legislative history of the Sarbanes-Oxley Act and the subsequent amendments to the U.S. Sentencing Guidelines. It explains the surprising interaction between the civil and criminal provisions of Sarbanes-Oxley. The Article also provides a dramatic and detailed account of the interplay of political interests and agendas that ultimately led to large sentence increases for serious corporate criminals and blanket sentence increases for virtually all federal fraud defendants. The tale illuminates the substance of the new legislation and sentencing rules, but is more broadly instructive regarding the distribution of power over criminal sentencing between the three branches and …

The Many Faces Of Chapter 11: A Reply To Professor Baird, A. Mechele Dickerson

Faculty Publications

No abstract provided.

Worker Ownership In Enron's Wake - Revisiting A Community Development Tactic, Peter R. Pitegoff

Faculty Publications

Worker ownership of business enterprise has long been touted as a vehicle for community economic development. Employee stock ownership plans in leveraged buy-outs, ESOPs and broad-based stock options in going concerns, and worker cooperatives in selected sectors - the experience has varied widely in goals, method, and outcome.

This Article reflects on the continued utility of worker ownership as a component of community development and calls attention to contrasts with conventional corporate governance and goals. Rather than an end in itself or just another way of doing business, worker ownership can be a vital element of a broader job creation, …

Sec Debarment Of Officers And Directors After Sarbanes-Oxley, Jayne W. Barnard

Faculty Publications

No abstract provided.

Derivative Suits In Bankruptcy, Keith Sharfman

Faculty Publications

(Excerpt)

It is a fundamental tenet of corporate law that creditors, unlike shareholders, may not bring derivative suits on a firm's behalf—even if the firm is, or is nearly, insolvent. Corporate law affords creditors who are unhappy with a corporate debtor's management various remedies, such as the right (in limited circumstances) to put the firm into receivership or to sue the directors and officers directly for breaches of fiduciary duty. But the derivative suit is not among them.

The formal rationale for denying derivative standing to creditors is that a derivative suit is an assertion of ownership rights, and (in …

"We Are An Equal Opportunity Employer": Diversity Doublespeak, Cheryl L. Wade

Faculty Publications

There are too few discussions about race and race relations among corporate managers and directors. The rhetoric used in these infrequent discussions revolves around the idea of diversity in the workplace. In recent years, when speaking about employees and race issues, corporate actors have become curiously silent about discrimination and racism. This Article provides several examples of the rhetorical devices used by corporate spokespersons that ignore persisting problems with discrimination and racism by focusing solely on diversity efforts. Diversity rhetoric allows corporate managers to avoid responsibility for enduring discrimination in the workplace. Diversity efforts, without antidiscrimination efforts, increase the likelihood …

Editor's Observations: The Sarbanes-Oxley Act And What Came After, Frank O. Bowman Iii

Faculty Publications

On December 2, 2001, the Enron Corporation filed the largest bankruptcy petition in U.S. history. Losses to investors, creditors, employees, and pensioners were in the billions. Criminal investigations are ongoing. On May 1, 2003, the U.S. Sentencing Commission passed a set of amendments to the U.S. Sentencing Guidelines that will, among other things, prevent a federal district judge from awarding a sentence of straight probation to a defendant convicted at trial of an $11,000 mail fraud. This Issue of FSR tells the story of how the first of these apparently unrelated events led to the second. Put another way, this …

A Challenge To The Rationale For General Economic Crime Sentence Increases Following Sarbanes-Oxley, Frank O. Bowman Iii

Faculty Publications

I am writing in response to the Commission's request for comment published in the Federal Register on January 17, 2003. I will address the question of whether the base offense level and/or the loss table of U.S.S.G. § 2B1.1 should be further modified to provide across-the-board sentence increases for economic crime offenders at virtually all loss levels. In my view, no case for doing so has yet been made.

So, You Want To Be A Partner At Sidley & Austin?, Rafael Gely, Leonard Bierman

Faculty Publications

One of the effects of the “industrialization” of professional organizations has been a shift in the business forms that these organizations adopt. Some organizations have shifted from partnership associations into professional corporations. Other organizations have remained partnerships in form, but have significantly restructured the roles of partners.

The Role Of Lawyers In Strategic Alliances, George W. Dent

Faculty Publications

No abstract provided.

Valuation Averaging: A New Procedure For Resolving Valuation Disputes, Keith Sharfman

Faculty Publications

(Excerpt)

This Article follows in the spirit of Karl Llewellyn and his fellow drafters of the Uniform Commercial Code who sought to transform merchant norms into law. The merchant norms discussed here are the procedures that sophisticated firms contract for to resolve anticipated valuation disputes. The law proposed is a new procedure for resolving valuation disputes based on commercial valuation norms. More specifically, this Article proposes a new default valuation procedure, modeled on the algorithmic valuation clauses commonly used in the contracts of sophisticated firms, that would encourage parties to valuation disputes to introduce more plausible valuations into evidence and …

The George A. Leet Business Law Symposium: The Role Of Lawyers In Strategic Alliances - Introduction, George W. Dent

Faculty Publications

Introducation to The George A. Leet Business Law Symposium: The Role of Lawyers in Strategic Alliances, Cleveland, Ohio.

Did The Private Securities Litigation Reform Act Work?, Michael A. Perino

Faculty Publications

In 1995 Congress passed the Private Securities Litigation Reform Act (the PSLRA or the Act) to address abuses in securities fraud class actions. In the wake of Enron, WorldCom, Adelphia, and other high profile securities frauds, critics suggest that the law made it too easy to escape liability for securities fraud and thus created a climate in which frauds are more likely to occur. Others claim that the Act has largely failed because it did little to deter plaintiffs' lawyers from filing nonmeritorious cases. This article employs a database of the 1449 class actions filed from 1996 through 2001 to …

Raising Rivals' Costs: Can The Agencies Do More Good Than Harm?, Alan J. Meese

Faculty Publications

No abstract provided.

Price Theory, Competition, And The Rule Of Reason, Alan J. Meese

Faculty Publications

Challenging traditional antitrust jurisprudence, Professor Alan J. Meese argues that the present structure of Rule of Reason analysis, applied pursuant to Standard Oil v. United States, has become outdated. The Rule of Reason as currently applied by the courts rests upon neoclassical price theory, an economic paradigm that assumes that legitimate competition consists of unbridled technological rivalry, unconstrained by nonstandard contracts. Recently, however, the Supreme Court has begun to apply a competing paradigm- Transaction Cost Economics-when determining whether a contract is unreasonable "per se" or instead deserving of Rule of Reason scrutiny. Professor Meese argues that Transaction Cost Economics more …

Lawyers And Trust In Business Alliances, George W. Dent

Faculty Publications

This Article attempts a first step in filling the gap in the legal literature about lawyers and strategic business alliances. Part I describes the distinctive nature of strategic alliances. Part II discusses why strategic alliances pose unique problems for lawyers. Part III considers how lawyers' negotiation tactics can enhance rather than erode trust between the parties in alliances. Part IV suggests how lawyers can draft substantive contract terms that foster trust and cooperation in alliances. Part V explores how law schools and continuing legal education can train lawyers to perform better not only in strategic business alliances but in all …

The Sec's Suspension And Bar Powers In Perspective, Jayne W. Barnard

Faculty Publications

Enron has brought about demands from many quarters to grant the Securities and Exchange Commission (SEC) new powers. Among the powers the SEC now seeks is the power to bar or suspend securities law violators from serving as an oflicer or director of any public company. Currently, the law assigns this power only to federal district courts. In this Essay, Professor Barnard traces the history of the current law; examining why Congress has expressly withheld suspension and bar powers from the SEC. She then argues that the courts have exercised their suspension and bar powers wisely, and that recent developments …

Racial Discrimination And The Relationship Between The Directorial Duty Of Care And Corporate Disclosure, Cheryl L. Wade

Faculty Publications

(Excerpt)

Two corporate employers paid settlements of seismic proportions to minority employees alleging race discrimination in recent years. In 1996, Texaco settled a class action alleging race discrimination for $176 million, and in 2000, Coca-Cola settled race discrimination litigation for $192.5 million. The terms of both settlements required the insertion of outside auditors into typically internal and private corporate governance decisions, and the creation of governance processes designed to investigate and monitor compliance with laws prohibiting race discrimination. In this article I conclude that the settlements mandate managerial and directorial conduct that should have been undertaken when the charges of …

Comparisons Between Enron And Other Types Of Corporate Misconduct: Compliance With Law And Ethical Decision Making As The Best Form Of Public Relations, Cheryl L. Wade

Faculty Publications

(Excerpt)

One of the most important lessons that Enron offers is that sometimes managers lie and boards fail to do their jobs. Enron’s most valuable lessons relate to corporate governance, financial disclosure, accounting practices, and the management of pension funds. One of the most illuminating lessons that Enron offers, however, may be found in the reaction of jurists, legal scholars, the media, corporate professionals, elected officials, and the investing public to the Enron collapse. The general sense of public outrage is as large as the huge financial loss suffered by investors and employees.

There is a lesson to be derived …

Corporate Governance As Corporate Social Responsibility: Empathy And Race Discrimination, Cheryl L. Wade

Faculty Publications

This Essay is one of a series of articles I have written that examines persistent racial discrimination in large, publicly held corporations. In spite of legislation prohibiting discrimination, employees of color have alleged that they have been the victims of discriminatory employment practices and racial harassment in the workplaces governed by large companies. Antidiscrimination law has not remedied the racially toxic corporate cultures of many of these companies. Because Title VII of the 1964 Civil Rights Act has no “generalized code of workplace civility,” it does little to ameliorate workplace racial harassment. For this reason, a new approach is required …

Don't Disintegrate Microsoft (Yet), Alan J. Meese

Faculty Publications

No abstract provided.

Gap Fillers And Fiduciary Duties In Strategic Alliances, George W. Dent

Faculty Publications

This Article describes the evolution of strategic alliances and their dependence on trust between the allies. It then discusses the general theory of gap fillers and fiduciary duties and the inevitability of major gaps in strategic alliance contracts. Finally, it combines these elements to derive conclusions about the proper role of gap fillers and fiduciary duties in strategic alliances.

Chinese Privatization: Between Plan And Market, Lan Cao

Faculty Publications

No abstract provided.

Choice Of Small Business Tax Entity, John W. Lee

Faculty Publications

This article summarizes parts of Lee’s forthcoming article “A Populist Political Perspective of the Business Tax Entities Universe: Hey the Stars Might Lie But the Numbers Never Do,” 78 Texas L. Rev. 885 (2000). Conventional wisdom, says Lee, holds that the LLC, due to its limited liability and hassle-free single level of taxation, will supplant C and S corporations as the choice of entity for new businesses. In fact, in most jurisdictions corporate formations outnumber LLC formations 2:1 or more, and IRS Statistics of Income (SOI) projects that the S corporation will be the fastest growing tax entity for 2000 …

Freezing The Company Charter, Eric Kades

Faculty Publications

When legislatures alter corporate, partnership, and other business entity statutes, they simultaneously amend the governing document of all entities of that type formed within the jurisdiction. In many circumstances these business entities may wish to retain existing rules for internal governance. This Article offers a novel tool for firms wishing to so manage their own legal transitions: the "charter freeze." A freeze provision in the company charter declares that future (non-mandatory) changes in relevant statutes have no effect on the firm. Owners may affirmatively adopt the new rules, but choose to exercise complete control over their adoption vel non of …

A Populist Political Perspective Of The Business Tax Entities Universe: Hey The Stars Might Lie, But The Numbers Never Do, John W. Lee

Faculty Publications

No abstract provided.