Business Organizations Law Commons^™

Turning Servile Opportunities To Gold: A Strategic Analysis Of The Corporate Opportunities Doctrine, Eric L. Talley

Faculty Scholarship

Perhaps no single motif permeates corporate law and governance literature like the problem of agency costs. Though modest in concept, the canonical principal-agent framework yields fundamental insights into virtually every economic relationship involving the firm. These insights, in turn, not only animate prevailing positive accounts of the modern corporation, but they also provide a normative basis for regulating the oft-lamented gulf between ownership and control.

Despite their pervasiveness, problems of agency costs are rarely more vexing than when an agent is also a potential competitor. A notable example of such a scenario occurs when a corporate manager acquires information about …

Why Ownership Matters? Entrepreneurship And The Restructuring Of Enterprises In Central Europe, Roman Frydman, Marek P. Hessel, Andrzej Rapaczynski

Faculty Scholarship

This paper, based on a study of mid-sized firms in the Czech Republic, Hungary, and Poland, seeks to explain the reasons behind the marked impact of ownership on firm performance which has been observed in a number of studies in Eastern Europe and other parts of the world. Focusing in particular on the differential impact of ownership on revenue and cost performance, the paper argues that privatized firms controlled by outside investors are more entrepreneurial than those controlled by corporate insiders or the state. The paper provides evidence that all state and privatized firms in transition economies engage in similar …

Individual Responsibility For The Investment Of Retirement Savings: A Cautionary View, Jeffrey N. Gordon

Faculty Scholarship

These papers, including ones presented earlier this morning, raise questions about an adequate regime of consumer protection in an era in which responsibility for retirement savings and investment decisionmaking is being devolved, increasingly, to individuals. This shift to individual responsibility has also characterized many Social Security reform proposals, previously a bedrock system of publicly determined benefit levels. I find this devolution troubling; I think it is odd for individuals to have this responsibility. Individuals are not good risk bearers of market volatility, both in a financial sense and in a psychological sense. The consequence is that unless individuals are locked …

Controlling Corporate Agency Costs: A United States-Israeli Comparative Law, Zohar Goshen

Faculty Scholarship

The "Corporation" assumes a central position in modem economic life. This is due mainly to the fact that major portions of our economic activities are performed by corporations. Numerous authors have pondered the essence of the corporate phenomenon, proposing various theories for the uniqueness of the corporation as opposed to other possible structures for operating a business. The main line of analysis focuses on the central characteristic of the modem corporation: the separation of ownership and control. Managing a business through the means of a corporation allows one to exploit the advantages of specialization. On one hand, shareholders benefit from …

Path Dependent Inefficiency In The Corporate Contract: The Uncertain Case With Less Certain Implications, Frederick Lambert

Faculty Scholarship

No abstract provided.

We're All Capitalist Now: The Importance, Nature, Provision And Regulation Of Investor Education, James A. Fanto

Faculty Scholarship

No abstract provided.

Deutsche Telekom, German Corporate Governance, And The Transition Costs Of Capitalism, Jeffrey N. Gordon

Faculty Scholarship

In November 1996, Deutsche Telekom AG, the government-owned German telephone company, sold common stock representing approximately 25 percent of the company in a global stock offering that raised approximately DM 20 billion ($13 billion), the largest equity offering ever in Europe. In selling off this equity stake, the German government (i.e., the Federal Republic) had a number of motives. First, the sale was an important step in converting a government-run telephone monopoly into a nimble competitor in the emerging European and world telecommunications market. In anticipation of a fully competitive European telecommunications regime in 1998, Deutsche Telekom ("DT") had been …

The Role Of Corporate Law In French Corporate Governance, James A. Fanto

Faculty Scholarship

No abstract provided.

Investor Education, Securities Disclosure, And The Creation And Enforcement Of Corporate Governance And Firm Norms, James A. Fanto

Faculty Scholarship

No abstract provided.

Reflections In A Distant Mirror: Japanese Corporate Governance Through American Eyes, Ronald J. Gilson

Faculty Scholarship

For the last ten years, Japanese corporate governance has served as a distant mirror in whose reflection American academics could better see the attributes of their own system. As scholars came to recognize that the institutional characteristics of the American and Japanese systems were politically and historically contingent, other countries' approaches became serious objects of study, rather than just way stations on the road to convergence. One learned about one's own system from the choices made by others.

As it came to be conceived, the Japanese corporation of the 1980s represented quite a different method of organizing production. Styled the …

A Report On The Attitudes Of Foreign Companies Regarding A U.S. Listing, James A. Fanto, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

The Folklore Of Investor Capitalism, John C. Coffee Jr.

Faculty Scholarship

Ideally, Thurman Arnold should review this book. In his The Folklore of American Capitalism, Arnold dissected the ideology and rationalizations by which the business community of an earlier day defended its legitimacy and perquisites. Michael Useem, a sociologist at the Wharton School, also has an interest in the ideology of the business community: how corporate managers view the new institutional investors, how they justify resistance, and the tensions and inconsistencies between their critiques of money managers and their own behavior. This is an underutilized perspective (which law and economics inherently tends to overlook), and Useem is at his best …

The Role Of Secured Credit In Small-Business Lending, Ronald J. Mann

Faculty Scholarship

The traditional perspective holds that large firms in our economy use unsecured credit and small firms use secured credit. Existing scholarship, however, has provided little explanation of that pattern. In a recent article, I attributed the use of unsecured credit by large firms to the limited capacity of secured credit to lower the lending costs of creditworthy companies. This article uses data from a dozen interviews with small-business bankers to explain the small-business half of that lending pattern. To the extent smallbusiness lenders require secured credit, they do so largely for one significant benefit: secured credit allows small-business lenders to …

Rethinking Disclosure Liability In The Modern Era, Merritt B. Fox

Faculty Scholarship

The state of issuer disclosure in 1997 is like the proverbial half-filled glass. On one hand, as Dean Seligman has amply demonstrated in his contribution to this symposium, the glass is half empty in the sense that the legal incentives for established issuers to engage in high quality disclosure at the time that they sell new securities have decreased in recent decades. Due to the more liberal exemptions available under Regulation S, Rule 144A, Regulation D and Regulation A, a much smaller portion of such sales is even subject to the formal disclosure oriented registration process under Section 5 of …

Brave New World?: The Impact(S) Of The Internet On Modern Securities Regulation, John C. Coffee Jr.

Faculty Scholarship

It is now a trite commonplace that the advent of the Internet will in time revolutionize securities regulation. Merely the facts that the Internet has somewhere between thirty and sixty million users worldwide today (with an estimated ten to thirty million in the United States) and that some 800,000 U.S. investors already have online brokerage accounts establish that there is a potential global market that can be accessed at very low cost. But the magnitude of the market says little about what will be the character and effect of this approaching revolution.

Technological change is not a new phenomenon for …

"Magnificent Circularity" And The Churkendoose: Llc Members And Federal Employment Law, Daniel S. Kleinberger

Faculty Scholarship

This article seeks to explain under what circumstances federal employment statutes should apply to LLC members. Part I recounts the advent of LLCs and describes the essential characteristics of LLCs and their members. Part II explores how federal employment case law handles the employee vel non question and explains the problems in using that case law to determine whether LLC members are "employees" for federal employment law purposes. Part Ill attempts to make sense of that case law and proposes a rule for determining when a business owner can provide services to the business without becoming an "employee." Part IV …

Shareholder Enforced Market Discipline: How Much Is Too Much?, Eric J. Gouvin

Faculty Scholarship

This Article considers the federal banking regulation regime implemented in response to the widespread bank failures of the 1980s and early 1990s. The first section of the Article examines the moral hazard problem created by the presence of the deposit insurance scheme and the market discipline debate that has attempted to correct the moral hazard problem. The Author argues that the law has evolved to make bank holding companies the primary enforcers of market discipline. The Article’s second section examines the specific regulatory changes that have been designed to create an incentive for bank holding companies to impose discipline on …

Towards A More Balanced Treatment Of Bidder And Target Shareholders, Miriam Baer

Faculty Scholarship

No abstract provided.

"Just Say Never?" Poison Pills, Deadhand Pills, And Shareholder-Adopted Bylaws: An Essay For Warren Buffett, Jeffrey N. Gordon

Faculty Scholarship

My topic is Buffett on mergers and acquisitions and how his sage advice on the importance of shareholder choice should be taken to heart by the Delaware Supreme Court, which will soon face far-reaching questions on the distribution of power between shareholders and the board of directors. Recent judicial decisions in other jurisdictions: (i) have declared that a board can maintain a poison pill in the face of a premium hostile bid, the power to "just say no;" (ii) have validated the board's adoption of a so-called "deadhand pill," a poison pill that can be redeemed only by continuing directors; …

The Shaping Force Of Corporate Law In The New Economic Order, Jeffrey N. Gordon

Faculty Scholarship

My topic for this Allen Chair lecture is the shaping force of corporate governance in the new economic order. It is easy to think of corporate law as an arcane field with mysterious terms and peculiar rules, ultimately of interest only to those who are prepared to bill at least 2000 hours a year to unravel its complexities. This is the view that there is a pointless mystery about shareholders, directors, common stocks, debentures, and the bizarre creature my class encountered recently, a convertible exchangeable cumulative preferred stock; and that ultimately corporate law and practice consists of the expert manipulation …

Controlling Strategic Voting: Property Rule Or Liability Rule, Zohar Goshen

Faculty Scholarship

Strategic voting – situations where voters place their votes according to their assessment of how other voters will behave rather than according to their actual preference – results in distorted decisionmaking. Strategic voting can cause the company to lose desired transactions and can also be used to coerce voters into accepting alternatives they would have otherwise rejected. An analysis of the various types of strategic voting situations which arise in corporate law demonstrates the author's argument that strategic voting is inherent in the voting mechanism, regardless of the type of group involved or of the decision being made. Maintaining a …

Fiduciary Duty, Contract, And Waiver In Partnerships And Limited Liability Companies, Richard A. Booth Marbury Research Professor Of Law

Faculty Scholarship

Among the controversies swirling around the promulgations of new uniform statutes governing partnerships and LLCs is the question whether and to what extend fiduciary duties should be made mandatory or waivable. Although courts and commentators have not traditionally focused on the costs of fiduciary duties, the costs are significant in that such duties may preclude agents from engaging in other legitimate ventures. Indeed, fiduciary duty may be used by those to whom it is owed to prevent competition or extort side benefits form participants. Mandatory duties effectively require participants who may identify multiple business opportunities to overinvest their human capital …

The Role Of Criminal Law In Policing Corporate Misconduct, Gerard E. Lynch

Faculty Scholarship

In the early 1990s, I spent a couple of years as Chief of the Criminal Division in the Office of the U.S. Attorney for the Southern District of New York. One of my principal responsibilities was to hear "appeals" from defense lawyers, usually, although not exclusively, in white collar crime cases. These lawyers felt that their clients should not be indicted, or that the plea offer they had received from the prosecutor in charge of the case was unduly severe. Sometimes their arguments were essentially factual contentions that the government had the wrong take on the evidence – that the …

The Future Of Corporate Governance In The United States, Ronald J. Gilson

Faculty Scholarship

This article is an interview of Professor Ronald J. Gilson, Charles J. Meyers Professor of Law and Business, Columbia University Law School. The interviewer is Cheryl L. Conner, a third year law student at the University of Richmond School of Law and the Managing Editor of the Richmond Journal of Law and Technology.

The Limited Liability Company And The Search For A Bright Line Between Corporations And Partnerships, Richard A. Booth Marbury Research Professor Of Law

Faculty Scholarship

Despite the potential loss in tax revenue, the Internal Revenue Service (IRS) is making it easier and easier to avoid corporate taxes. Witness the advent of limited liability companies and the proposed "check-the-box" regulations. This article takes a look at the real distinctions between -- and policy supporting -- pass-through and entity level taxation and draws the conclusion that entity level taxation will probably become limited to publicly traded entities only.

Private Ownership And Corporate Performance: Some Lessons From Transition Economies, Roman Frydman, Cheryl W. Gray, Marek P. Hessel, Andrzej Rapaczynski

Faculty Scholarship

Data on mid-sized firms in three transition economies provide strong evidence that private ownership – for worker ownership – improves corporate performance. And the privatized firms' superior ability to generate revenues allows those firms to sustain or expand employment.

Using a large sample of data on mid-sized firms in the Czech Republic, Hungary, and Poland, Frydman, Gray, Hessel, and Rapacynski compare the performance of privatized and state firms in the environment of the postcommunist transition.

They find strong evidence that private ownership – for worker ownership – improves corporate performance. They find no evidence of the privatization shock that was …

The Net Profits Puzzle, Victor P. Goldberg

Faculty Scholarship

The use of "net profits" clauses in the movie business poses a problem. The standard perception is that Hollywood accounting results in successful films showing no net profits. If that is indeed so, then why have they survived for over four decades? This Essay argues that a successful movie will fail to yield net profits only if a "gross participant" (a major star whose compensation is in part a function of the film's gross receipts) becomes associated with the film. Since the net profits participants typically are associated with a project first, the question becomes: Why would they be willing …

The Bylaw Battlefield: Can Institutions Change The Outcome Of Corporate Control Contests?, John C. Coffee Jr.

Faculty Scholarship

What, if anything, can institutional investors do to influence the course and outcome of corporate control contests? The traditional answer was relatively little. To be sure, institutions could tender their shares in a tender offer or vote in a proxy contest to oust the incumbent board, but such a role was essentially reactive and contingent. It required that an offer actually be made before institutions could respond on an after-the-fact basis. Similarly, institutions have occasionally conducted precatory proxy campaigns calling upon the board to redeem its poison pill, but management was free to ignore these requests (and has done so).

Searching For Negotiability In Payment And Credit Systems, Ronald J. Mann

Faculty Scholarship

The casual observer of the legal academy would assume that negotiability is a legal principle of foundational importance to our nation's payment and credit systems. All of the obvious indicators support that assumption. Among other things, the 1980s witnessed a major effort by the American Law Institute and the National Conference of Commissioners on Uniform State Laws to update and revise the relevant provisions of the Uniform Commercial Code. Similarly, negotiability continues to occupy a safe position in law school curricula, as prominent academics at our most elite schools continue to write casebooks focusing on negotiability. Most recently, for example, …

Firm Capabilities And Managerial Decision-Making: A Theory Of Innovation Biases, Janet E. L. Bercovitz, John M. De Figueiredo, David J. Teece

Faculty Scholarship

No abstract provided.