Business Organizations Law Commons^™

Contracts As Organizations, D. Gordon Smith, Brayden G. King

Faculty Scholarship

Empirical studies of contracts have become more common over the past decade, but the range of questions addressed by these studies is narrow, inspired primarily by economic theories that focus on the role of contracts in mitigating ex post opportunism. We contend that these economic theories do not adequately explain many commonly observed features of contracts, and we offer four organizational theories to supplement-and in some instances, perhaps, challenge-the dominant economic accounts. The purpose of this Article is threefold: first, to describe how theoretical perspectives on contracting have motivated empirical work on contracts; second, to highlight the dominant role of …

Justifying Board Diversity, James A. Fanto, Lawrence M. Solan, John M. Darley

Faculty Scholarship

No abstract provided.

Will Cutting The Payroll Tax Increase Jobs In The U.S.? Empirical Evidence From The Eu Vat, Richard Thompson Ainsworth

Faculty Scholarship

Red Ink Rising, the Peterson–Pew Commission on Budget Reform’s report presents the country with a fiscal/employment dilemma – Congress must act immediately to stem the federal debt, but it must move carefully lest it harm employment in the fragile economy. In short, we must act fast and slow – we must decrease the debt and increase employment. This is a difficult task.

The Peterson-Pew dilemma (notably its jobs-creation aspect) was taken to heart by both of the reform commissions that issued reports soon thereafter (National Commission on Fiscal Responsibility and Reform, The Moment of Truth and The Debt Reduction Task …

Vat Fraud: The Tradable Services Problem, Richard Thompson Ainsworth

Faculty Scholarship

Tradable services – VoIP termination services, mobile minutes, software as a service (SaaS), or almost any service bought or sold in the “cloud” – are a distinct class of taxable supplies. These service-based supplies both resemble and differ fundamentally from goods. They also differ from services that are consumed-on-purchase (consumed services).

Tradable services are designed from the beginning for re-sale. They are hybrid supplies that behave commercially like goods, but have functional attributes that make them hard to distinguish from services generally. When determining the place of supply/ place of taxation for these kinds of supplies, their hybrid character presents …

Benefit Corporations -- A Sustainable Form Of Organization?, Dana Brakman Reiser

Faculty Scholarship

No abstract provided.

Recent Developments Concerning Preferred Stockholder Rights Under Delaware Law, Marilyn Blumberg Cane, Joong-Sik Choi, Scott B. Gitterman

Faculty Scholarship

This is a timely article focusing on the conflicting duties owed to preferred and common stockholders. Delaware is the leading corporate law jurisdiction in the United States. Preferred stock is a key component in angel and venture capital transactions. Historically the Delaware courts have accepted as a general principle the proposition that since the preferred rights are contractual in nature, they must be expressly defined in the preferred stock contract in order for the preferred to successfully assert those rights. Accordingly, the directors owe correlative duties to the preferred to the extent that the rights are articulated in the contract. …

The Rise Of The Corporation, The Birth Of Public Relations, And The Foundations Of Modern Political Economy, Donald J. Smythe

Faculty Scholarship

No abstract provided.

Introduction: For Love Or Money? Defining Relationships In Law And Life, Kimberly D. Krawiec, Marion Crain

Faculty Scholarship

No abstract provided.

Wilkes V. Springside Nursing Home, Inc.:The Backstory, Eric J. Gouvin

Faculty Scholarship

As it appears in most casebooks, the Wilkes v. Springside Nursing Home, Inc. case tells the story of a falling-out among the shareholders in a closely-held corporation and the resulting freeze-out of one of the owners, Mr. Stanley Wilkes. The opinion indicates that the heart of the dispute arose out of Mr. Wilkes’s refusal to allow the sale of a piece of corporate property (the “Annex” at 793 North Street) to one of the other shareholders, Dr. Quinn, at a discount. In real life, that transaction did indeed cause a significant rift in the shareholders’ relationship, but, as this article …

Contract, Uncertainty, And Innovation, Ronald J. Gilson, Charles F. Sabel, Robert E. Scott

Faculty Scholarship

Contract today increasingly links entrepreneurial innovations to the efforts and finance necessary to transform ideas into value. In this chapter, we describe the match between a form of contract that “braids”1 formal and informal contractual elements in novel ways and the process by which innovation is pursued.

Donahue's Fils Aîné: Reflections On Wilkes And The Legitimate Rights Of Selfish Ownership, Daniel S. Kleinberger

Faculty Scholarship

This Article asserts that Wilkes v. Springside Nursing Home, Inc. should be at least as memorable as Donahue v. Rodd Electrotype Co., and is, in a practical sense, substantially more important. The assertion rests on two propositions: first, that Donahue announces admirable sentiments but provides little practical guidance; second, that Wilkes provides the best practical rule for adjudicating “oppression” claims when the alleged victim is also a miscreant or for some other reason the dispute is grey rather than black and white. In particular, this Article asserts that Wilkes’s multistep, burden-shifting rule is a nuanced and effective method for accommodating …

Clinicians, Practitioners, And Scribes: Drafting Client Work Product In A Small Business Clinic, Robert Statchen

Faculty Scholarship

The recent and rapid growth of transactional clinics, and more specifically small business clinics (SBCs), mandates that time and attention be given to pedagogical methods within this specialized clinical structure. This Article focuses on the drafting component of an SBC. It is often asserted that legal education does not effectively provide students with business-oriented, practical skills training. At the heart of an SBC, is the necessity to prepare appropriate written client work product. SBCs also provide an excellent opportunity for students to acquire interviewing, researching, drafting, counseling, problem-solving, and other areas of expertise. This Article attempts to provide a process …

Upper-Level Courses: Three Examplars, Mark Fagan, Tamar Frankel, Eric J. Gouvin, Kathy Z. Heller

Faculty Scholarship

I'm Mark Fagan, and I co-teach a course on securitization with Tamar Frankel at Boston University School of Law. We have come together to teach several interdisciplinary courses that combine law, business and public policy. Our course on securitization is a wonderful exemplar because it touches so many aspects of law as well as business and public policy.

We spent quite a bit of time wrestling with how to teach it. Do you teach it in a process fashion? Do you teach it by legal topic? Do you take examples and examine them? After much debate and discussion, we actually …

Committee Capture? An Empirical Analysis Of The Role Of Creditors' Committees In Business Reorganizations, Michelle M. Harner, Jamie Marincic

Faculty Scholarship

The number of businesses experiencing financial distress increased significantly during the past several years. The number of Chapter 11 reorganization cases likewise rose. And many of these business failures were spectacular, leaving little value for creditors and even less for shareholders. Consequently, how the business debtor’s limited asset pie is divided and who gets to allocate the pieces are very relevant and important questions.

The U.S. Bankruptcy Code generally contemplates the appointment of a committee of the debtors’ unsecured creditors to serve as a fiduciary for all general unsecured creditors and as a statutory watchdog over the debtor and its …

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

Faculty Scholarship

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 …

On The Evolution Of The United Nations’ 'Protect-Respect-Remedy' Project: The State, The Corporation And Human Rights In A Global Governance Context, Larry Cata Backer

Faculty Scholarship

The advent of contemporary economic globalization has substantially altered the regulatory environment in which economic enterprises operate. Once assumed to be creatures of the states that recognized and regulated their existence, economic enterprises today are increasingly capable of arranging their activities beyond the regulatory scope of any state or groups of states. That gap between operational and regulatory capacity has produced a sustained reaction at the national and international levels. States have sought to extend their power over corporations beyond their borders. International organizations have sought to develop supra national legal governance frameworks. This paper examines one of the more …

The Perils Of Shareholder Voting On Executive Compensation, Minor Myers

Faculty Scholarship

No abstract provided.

The Search For An Unbiased Fiduciary In Corporate Reorganizations, Michelle M. Harner

Faculty Scholarship

When a company experiences financial distress, a control contest often follows. Management fights to remain in control of the company, and shareholders, creditors and others try to influence management’s exercise of that control—or wrest it away. This is not a new phenomenon. The degree of influence now exerted by corporate stakeholders in the distressed context, however, is strikingly different than in the past. Recent headlines highlight that stakeholder control issues are at the forefront of financially-distressed situations large and small. The U.S. government, as creditor, dictated the terms of Chrysler’s and General Motors’ bankruptcies. It also demanded and received preferred …

Governance In The Public Corporation Of The Future: The Battle For Control Of Corporate Governance, Z. Jill Barclift

Faculty Scholarship

Eight years after passage of the Sarbanes-Oxley Act, Congress has again passed sweeping legislation in response to a corporate crisis. In addition to changes in the regulatory environment for Wall Street financial firms and banks, the Dodd-Frank Act (D-F Act) also proposes reforms to corporate governance.

In this article, the author examines the latest governance mandates under the D-F Act. In particular, this article focuses on the disclosure requirements on the CEO and chairman positions, and argues that disclosures of whether the CEO is also the chairman benefit shareholders' governance rights under state law. The new provisions under D-F Act …

Deconstructing Corporate Governance: Director Primacy Without Principle?, René Reich-Graefe

Faculty Scholarship

If profit-maximizing is not enforced by corporate law, why does it nonetheless happen as a matter of almost overwhelming routine in today’s corporate reality? If indeed, director primacy is absolute and our theoretical models are all reliant on protolegal variables to explain general investor confidence ex-ante-investment despite the lack of director accountability ex-post-investment, then how can director primacy be understood and explained as a principled and, thus, just cor-porate governance structure in the first place? Or is director primacy not only absolute, but also without principle?

This Article provides a roadmap for purposes of answering this inquiry. Part II …

Interdisciplinary Transactional Courses, Eric J. Gouvin, Robert Statchen, Anthony J. Luppino, William Kell

Faculty Scholarship

This Article represents a panel presentation on interdisciplinary work in law school transactional courses. The Authors’ focus is on the Small Business Clinic at Western New England University School of Law. Topics covered are: interdisciplinary work and the classroom, professional liability and competency issues in rendering services through a clinic, culture class issues, ethical dilemmas, delivering professional products to the client, and co-curricular opportunities.

Symposium: Fiduciary Duties In The Closely Held Business 35 Years After Wilkes V. Springside Nursing Home: Foreword, René Reich-Graefe

Faculty Scholarship

On October 15, 2010—exactly fifty-nine years to the day after the opening of the original nursing home operation in 1951 which formed the core business asset of the closely held Springside Nursing Home, Inc. corporation—the Western New England University School of Law and School of Business jointly hosted their 2010 Academic Conference on “Fiduciary Duties in the Closely Held Business 35 Years after Wilkes v. Springside Nursing Home.” As with installments from prior years, the Conference was sponsored by the Western New England University Law and Business Center for Advancing Entrepreneurship. This Article examines the case of Wilkes v. Springside …

Restoring Transparency To Automated Authority, Frank Pasquale

Faculty Scholarship

No abstract provided.

Kiobel And Corporate Immunity Under The Alien Tort Statute: The Struggle For Clarity Post-Sosa, Dorothy S. Lund

Faculty Scholarship

In September 2010, a two-judge Second Circuit majority ruled that corporations are immune from liability under the Alien Tort Statute (“ATS”). This statute, which grants aliens access to federal district courts, has emerged as a controversial tool for international norm enforcement in the last thirty years. The unexpected decision to foreclose corporate liability has generated a wave of criticism from human rights activists and international law scholars who claim that the decision is grounded in a fundamental misunderstanding of international law.

This commentary examines the Kiobel decision against other recent interpretations of the ATS, especially those following the Supreme Court’s …

Deconstructing Corporate Governance: Absolute Director Primacy, René Reich-Graefe

Faculty Scholarship

Microtheoretical models of the corporation which focus on corporate governance attempt to answer two deceptively simple, but fundamentally elusive questions: ‘Who are in control of the corporation?’ and ‘Whose interests ultimately control those in control of the corporation?’ Both questions remain partially unanswered within the models developed to date by corporate theoreticians. This Article proposes a radically new model: 'absolute director primacy.’ Existing microtheoretical models conceive that we only need to—and, indeed, can—determine the controlling interests guiding corporate decisionmaking in order to prove the existence of control over the decisionmaking latitude of corporate boards. The absolute director primacy …

The “Non-Cumulation Clause”: An “Other Insurance” Clause By Another Name, Chris French

Faculty Scholarship

How long-tail liability claims such as asbestos bodily injury claims and environmental property damage claims are allocated among multiple triggered policy years can result in the shifting of tens or hundreds of millions of dollars from one party to another. In recent years, insurers have argued that clauses commonly titled, “Prior Insurance and Non-Cumulation of Liability” (referred to herein as “Non-Cumulation Clauses”), which are found in commercial liability policies, should be applied to reduce or eliminate their coverage responsibilities for long-tail liability claims by shifting their coverage responsibilities to insurers that issued policies in earlier policy years. The insurers’ argument …

Economic Crisis And Share Price Unpredictability: Reasons And Implications, Edward G. Fox, Merritt B. Fox, Ronald J. Gilson

Faculty Scholarship

The volatility of share returns for individual companies increased sharply during the recent financial crisis. The larger part of this increase was due to a dramatic rise – five fold as measured by variance – in idiosyncratic risk. We find that this pattern repeats itself during each major economic reversal going back 85 years. Because idiosyncratic risk is what is involved, this increase cannot be explained by changes in predictions concerning the future course of the economy as a whole.

Our first goal is to explain why difficult economic times, which are defined in terms of market wide phenomena, make …

Activist Distressed Debtholders: The New Barbarians At The Gate?, Michelle M. Harner

Faculty Scholarship

The term “corporate raiders” previously struck fear in the hearts of corporate boards and management teams. It generally refers to investors who target undervalued, cash-flush or mismanaged companies and initiate a hostile takeover of the company. Corporate raiders earned their name in part because of their focus on value extraction, which could entail dismantling a company and selling off its crown jewels. Today, the term often conjures up images of Michael Milken, Henry Kravis or the movie character Gordon Gekko, but the alleged threat posed to companies by corporate raiders is less prevalent—at least with respect to the traditional use …

Mitigating Financial Risk For Small Business Entrepreneurs, Michelle M. Harner

Faculty Scholarship

Financial distress by definition threatens a company’s viability. Entrepreneurial and start-up entities are particularly vulnerable to this threat. Yet, much of the discussion following the recent recession focuses almost exclusively on financial institutions and “too-big-to-fail” entities. This essay re-examines lessons gleaned from the recession in the context of smaller, entrepreneurial entities. Specifically, it analyzes how small business entrepreneurs might invoke principles of enterprise risk management to mitigate the long-term impact of financial distress on their business models. It also considers related refinements to extant small business regulations, including the U.S. bankruptcy laws. The essay’s primary objective is to help policymakers, …

Dangerous Categories: Narratives Of Corporate Board Diversity, Lissa Lamkin Broome, John M. Conley, Kimberly D. Krawiec

Faculty Scholarship

In this article, we report the results of a series of interviews with corporate directors about racial, ethnic, and gender diversity on corporate boards. On the one hand, our respondents were clear and nearly uniform in their statements that board diversity was an important goal worth pursuing. Yet when asked to provide examples or anecdotes illustrating why board diversity matters, many subjects acknowledged difficulty in illustrating theory with reference to practice.

This expressed reluctance to come to specific terms with general claims about the value of director diversity inspired our title phrase: dangerous categories. That is, while "diversity" evokes universal …