Business Organizations Law Commons^™

From Corporate Law To Corporate Governance, Ronald J. Gilson

Faculty Scholarship

In the 1960s and 1970s, corporate law and finance scholars gave up on their traditional approaches. Corporate law had become “towering skyscrapers of rusted girders, internally welded together and containing nothing but wind.” In finance, the theory of the firm was recognized as an “empty box.” This essay tracks how corporate law was reborn as corporate governance through three examples of how we have usefully complicated the inquiry into corporate behavior. Part I frames the first complication, defining governance broadly as the company’s operating system, a braided framework of legal and non-legal elements. Part II adds a second complication by …

Delaware's Retreat: Exploring Developing Fissures And Tectonic Shifts In Delaware Corporate Law, James D. Cox, Randall S. Thomas

Faculty Scholarship

No abstract provided.

Individual Autonomy In Corporate Law, Elisabeth De Fontenay

Faculty Scholarship

The field of corporate law is riven with competing visions of the corporation. This Article seeks to identify points of broad agreement by negative implication. It examines two developments in corporate law that have drawn widespread criticism from corporate law scholars: the Supreme Court's recognition of corporate religious rights in Burwell v. Hobby Lobby and the Nevada legislature's decision to eliminate mandatory fiduciary duties for corporate directors and officers. Despite their fundamental differences, both resulted in expanding individual rights or autonomy within the corporation-for shareholders and managers, respectively.

The visceral critiques aimed at these two developments suggest a broadly shared …

Will Delaware Be Different? An Empirical Study Of Tc Heartland And The Shift To Defendant Choice Of Venue, Ofer Eldar, Neel U. Sukhatme

Faculty Scholarship

Why do some venues evolve into litigation havens while others do not? Venues might compete for litigation for various reasons, such as enhancing their judges’ prestige and increasing revenues for the local bar. This competition is framed by the party that chooses the venue. Whether plaintiffs or defendants primarily choose venue is crucial because, we argue, the two scenarios are not symmetrical.

The Supreme Court’s recent decision in TC Heartland v. Kraft Foods illustrates this dynamic. There, the Court effectively shifted venue choice in many patent infringement cases from plaintiffs to corporate defendants. We use TC Heartland to empirically measure …

A Vatcoin Proposal Following On The 2017 Eu Vat Proposals - Mtic, Vatcoin, And Blockchain, Richard Thompson Ainsworth, Musaad Alwohaibi, Michael Cheetham, Camille Tirand

Faculty Scholarship

The following proposal for an EU VATCoin was presented at the Digital Tax Transformations Conference, December 18 & 19, 2017 in Vienna, Austria at WU Global Tax Policy Center (WU GTPC) at the Institute for Austrian and International Tax Law of Vienna University of Business and Economics.

The EU Commission has proposed “far-reaching reforms” to solve some of the fraud in the EU VAT. It hopes to capture €50 billion lost annually to MTIC fraud in goods. It hopes to do this without addressing tradable services, a MTIC mutation which by all accounts is running strong.

Fortunately, the Commission is …

The Technology Requirements Of The First Electronic Monitoring Agreement In U.S. For Zappers, Richard Thompson Ainsworth, Robert Chicoine

Faculty Scholarship

On August 30, 2017, a plea was entered in the case of case of State of Washington v. Wong, Wash. Super. Ct., No. 16-1-00179-0, and as a result the first electronic monitoring agreement of sales transactions in the US (the “Monitoring Agreement”) was legislatively imposed on a retail business.

The Monitoring Agreement was negotiated between the State of Washington Department of Revenue (the “WA DOR”) and the taxpayer over a period of several months and is comprised of two parts: the basic agreement, which covered the obligations and rights of the parties, and an appendix, which defines the scope of …

The First Real-Time Blockchain Vat - Gcc Solves Mtic Fraud, Richard Thompson Ainsworth, Musaad Alwohaibi

Faculty Scholarship

Following years of study the Gulf Cooperation Council (GCC) appears ready to adopt the recommendations of the International Monetary Fund (IMF) and put in place a tax system that will stabilize revenue. A value added tax (VAT) and corporate income tax (CIT) are considered. A VAT Framework Agreement, that functions like the VAT Directive in the EU, has been agreed.

Although new, the GCC VAT is very worthy of attention. From a tax policy perspective, it is making notable improvements to EU VAT design. The GCC VAT is (potentially) the world’s first real-time, blockchain-secured, multi-jurisdictional VAT. This is a remarkable …

Reconceptualizing The Whistleblower's Dilemma, Miriam Baer

Faculty Scholarship

No abstract provided.

Purposive Loyalty, Andrew S. Gold

Faculty Scholarship

No abstract provided.

Too Vast To Succeed, Miriam Baer

Faculty Scholarship

No abstract provided.

The Importance Of The Business Judgment Rule, Bernard S. Sharfman

Faculty Scholarship

No abstract provided.

A Private Ordering Defense Of A Company's Right To Use Dual Class Share Structures In Ipos, Bernard S. Sharfman

Faculty Scholarship

No abstract provided.

Market Information And The Elite Law Firm, Elisabeth De Fontenay

Faculty Scholarship

As a subcategory of contract negotiations, corporate transactions present information problems that have not been fully analyzed. In particular, the literature does not address the possibility that parties may simply be unaware of value-increasing transaction terms or their outside option. Such unawareness can arise even for transactions that attract many competing parties, if the bargaining process is such that (1) the price terms are negotiated and fixed prior to the non-price terms, contrary to the standard assumption; and (2) some of the non-price terms remain private for some period of time.

A simple bargaining model shows that, when such unawareness …

The Role Of Social Enterprise And Hybrid Organizations, Ofer Eldar

Faculty Scholarship

Recent years have brought remarkable growth in hybrid organizations that combine profit-seeking and social missions. Despite popular enthusiasm for such organizations, legal reforms to facilitate their formation and growth—particularly, legal forms for hybrid firms—have largely been ineffective. This shortcoming stems in large part from the lack of a theory that identifies the structural and functional elements that make some types of hybrid organizations more effective than others. In pursuit of such a theory, this Article focuses on a large class of hybrid organizations that has been effective in addressing development problems, such as increasing access to capital and improving employment …

Financing The Benefit Corporation, Steven A. Dean, Dana Brakman Reiser

Faculty Scholarship

No abstract provided.

Probabilistic Compliance, Alex Raskolnikov

Faculty Scholarship

Uncertain legal standards are pervasive but understudied. The key theoretical result showing an ambiguous relationship between legal uncertainty and optimal deterrence remains largely undeveloped, and no alternative conceptual approaches to the economic analysis of legal uncertainty have emerged. This Article offers such an alternative by shifting from the well-established and familiar optimal deterrence theory to the new and unfamiliar probabilistic compliance framework. This shift brings the analysis closer to the world of legal practice and yields new theoretical insights. Most importantly, lower uncertainty tends to lead to more compliant positions and greater private gains. In contrast, the market for legal …

Law And Corporate Governance, Robert P. Bartlett, Eric L. Talley

Faculty Scholarship

Pragmatic and effective research on corporate governance often turns critically on appreciating the legal institutions surrounding corporate entities – yet such nuances are often unfamiliar or poorly specified to economists and other social scientists without legal training. This chapter organizes and discusses key legal concepts of corporate governance, including statutes, regulations, and jurisprudential doctrines that “govern governance” in private and public companies, with concentration on the for-profit corporation. We review the literature concerning the nature and purpose of the corporation, the objects of fiduciary obligations, the means for decision making within the firm, as well as the overlay of state …

The Agency Costs Of Activism: Information Leakage, Thwarted Majorities, And The Public Morality, John C. Coffee Jr.

Faculty Scholarship

Few doubt that hedge fund activism has radically changed corporate governance in the United States – for better or for worse. Proponents see activists as desirable agents of change who intentionally invest in underperforming companies to organize more passive shareholders to support their proposals to change the target’s business model and/or management. So viewed, the process is fundamentally democratic, with institutional shareholders determining whether or not to support the activist’s proposals.

Skeptics respond that things do not work this simply. Actual proxy contests are few, and most activist engagements are resolved through private settlement negotiations between the activists, who rarely …

Market Power And Inequality: The Antitrust Counterrevolution And Its Discontents, Lina M. Khan, Sandeep Vaheesan

Faculty Scholarship

In recent years, economic inequality has become a central topic of public debate in the United States and much of the developed world. The popularity of Thomas Piketty’s nearly 700-page tome, Capital in the Twenty-First Century, is a testament to this newfound focus on economic disparity. As top intellectuals, politicians, and public figures have come to recognize inequality as a major problem that must be addressed, they have offered a range of potential solutions. Frequently mentioned proposals include reforming the tax system, strengthening organized labor, revising international trade and investment agreements, and reducing the size of the financial sector.

One …

Amazon's Antitrust Paradox, Lina M. Khan

Faculty Scholarship

Amazon is the titan of twenty-first century commerce. In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space. Although Amazon has clocked staggering growth, it generates meager profits, choosing to price below-cost and expand widely instead. Through this strategy, the company has positioned itself at the center of e-commerce and now serves as essential infrastructure for a host of other …

Don’T Dabble In Delaware, Daniel S. Kleinberger

Faculty Scholarship

When a litigator argues for a particular choice of law, the litigator seeks retrospectively the law most favorable to a particular claim or claims. When a business lawyer chooses a state of formation for a business entity, the lawyer seeks prospectively the governing law whose characteristics most favor the client’s interests.

Although in particular situations one characteristic may dominate, in general the business lawyer should look for governing law that is clear, comprehensive, coherent, accessible, and stable (or at least predictable). With these five metrics in mind, this column explains why lawyers forming limited liability companies should not dabble in …

Delineating The Implied Covenant And Providing For “Good Faith”, Daniel S. Kleinberger

Faculty Scholarship

This column considers whether an operating or partnership agreement can delineate the implied contractual obligation, comparing ULLCA and the Delaware Act, and then warns of the dangers of carelessly imposing by contract an express requirement of "good faith."

Like Great Britain, A Limited Liability Company May Have An Unwritten Constitution, Daniel S. Kleinberger

Faculty Scholarship

No abstract provided.

The Yates Memo: Looking For "Individual Accountability" In All The Wrong Places, Katrice Bridges Copeland

Faculty Scholarship

The Department of Justice has received a great deal of criticism for its failure to prosecute both corporations and individuals involved in corporate fraud. In an effort to quiet some of that criticism, on September 9, 2015, then Deputy Attorney General Sally Q. Yates issued a policy entitled, "Individual Accountability for Corporate Wrongdoing," or the "Yates Memo," as it has been called. The main thrust of the Yates Memo is that in order for a corporation to receive any credit for cooperating with the government and obtain leniency in the form of a deferred prosecution agreement, the corporation must not …

Border Adjustments And The Conservation Of Tax Planning, David M. Schizer

Faculty Scholarship

This article is based on Schizer’s keynote address at the 17th annual NYU-KPMG Tax Symposium on March 10.

In this article, Schizer argues that U.S. corporate and shareholder taxes need to be reformed, and the corporate rate should be much lower. In reforming this dysfunctional regime, according to Schizer, Congress should keep both of these taxes as a form of built-in redundancy; if one tax is avoided, the other can still be collected. More generally, Congress should be wary of Utopian solutions. Tax reform is more likely to change tax planning than to eliminate it entirely, Schizer concludes. For instance, …

Harmful, Harmless, And Beneficial Uncertainty In Law, Scott Baker, Alex Raskolnikov

Faculty Scholarship

This article examines the impact of four types of law-related uncertainty on the utility of risk-neutral agents. We find that greater legal or factual uncertainty makes agents worse off if enforcement is targeted (meaning that greater deviations from what the law demands lead to a greater probability of enforcement), or if sanctions are graduated (meaning that greater deviations from what the law demands result in higher sanctions). In contrast, agents are indifferent to changes in detection uncertainty induced by variation in enforcement resources or to changes in sanction uncertainty arising from legally irrelevant factors. Finally, risk-neutral agents benefit from greater …

Evaluating Stock-Trading Practices And Their Regulation, Merritt B. Fox, Kevin S. Haeberle

Faculty Scholarship

High-frequency trading, dark pools, and the practices associated with them have come under tremendous scrutiny lately, giving rise to much hot rhetoric. Missing from the discussion, however, is a principled, comprehensive standard for evaluating such practices and the law that governs them. This Article fills that gap by providing a general framework for making serious normative judgments about stock-trading behavior and its regulation. In particular, we argue that such practices and laws should be evaluated with an eye to the secondary trading market’s impact on four main aspects of our economy: the use of existing productive capacity, the allocation of …

Investor-Driven Financial Innovation, Kathryn Judge

Faculty Scholarship

Financial regulations often encourage or require market participants to hold particular types of financial assets. One unintended consequence of this form of regulation is that it can spur innovation to increase the effective supply of favored assets. This Article examines when and how changes in the law prompt the spread of “investor-driven financial innovations.” Weaving together theory, recent empirical findings, and illustrations, this Article provides an overview of why investors prefer certain types of financial assets to others, how markets respond, and how the spread of investor-driven innovations can transform the structure of the financial system. This examination suggests that …

The Known Unknowns Of The Business Tax Reforms Proposed In The House Republican Blueprint, Michael J. Graetz

Faculty Scholarship

In 2002, referring to Iraq and its relationship to terrorism, Donald Rumsfeld declared "that there are known knowns, there are things we know we know. We also know that there are known-unknowns, that is to say we know there are some things that we do not know, but there are also unknown-unknowns – the ones that we don't know we don't know."

The Black Hole Problem In Commercial Boilerplate, Stephen J. Choi, G. Mitu Gulati, Robert E. Scott

Faculty Scholarship

Rote use of a standard form contract term can erode its meaning, a phenomenon made worse when the process of encrustation introduces various formulations of the term. The foregoing process, when it occurs, weakens the communicative properties of boilerplate terms, leading some terms to lose much, if not all, meaning. In theory, if a clause is completely emptied of meaning through this process it can create a contractual “black hole.” The more frequent and thus potentially more pervasive problem arises when, as the term loses meaning, random variations in language appear and persist, resulting in what we term a “grey …