Business Organizations Law Commons^™

What Triggers Revlon?, Ronald J. Gilson, Reinier Kraakman

Faculty Scholarship

Delaware's new approach to takeover law is announced in three cases that address different aspects of management's role in the standard drama of defending against a hostile takeover. Unocal Corp. v. Mesa Petroleum Co. scripts a main act for the drama by prescribing a duty to compare the outsider's offer with the universe of other options and, if necessary, to resist the outsider within the guidelines fixed by the proportionality test. Moran v. Household International, Inc. writes a prologue by encouraging management to plan a vigorous defense that can thwart a coercive offer without damaging the company. Finally, Revlon …

Just Say No To Whom?, Ronald J. Gilson

Faculty Scholarship

"Just say no" is the current rallying cry of those seeking to give target management the unrestricted power to block hostile tender offers. Not surprisingly, the turn of phrase chosen by management leaves ambiguous the precise issue on which the debate should turn: To whom does management want the power to say no? As target management poses the issue, it wants to say no to a raider. The image is of stalwart management protecting shareholders against a marauding outsider. However, that image is seriously misleading. In fact, target management seeks the power to say no to its own shareholders.

The …

It Does The Crime But Not The Time: Corporate Criminal Liability In Federal Law, Michael E. Tigar

Faculty Scholarship

No abstract provided.

Corporate Risk Management And Risk Communication In The European Community And The United States, Michael S. Baram

Faculty Scholarship

The responsibility of private firms to communicate hazard and risk information to government officials and persons at risk has emerged as one of the central features of corporate risk management in the European Community ("E.C.") and the United States ("U.S."). This function is commonly described as "risk communication."' In both the E.C. and the U.S., new legal requirements and public attitudes now promote corporate disclosure of hazard and risk information on an unprecedented scale.

Corporate risk management is a vast, complex field of activity that is largely unaddressed by commentators and unknown to the general public in both industrial societies. …

Coming Of Age In A Corporate Law Firm: The Economics Of Associate Career Patterns, Ronald J. Gilson, Robert H. Mnookin

Faculty Scholarship

The traditional American corporate law firm, long an oasis of organizational stability, in recent years has been the subject of dramatic change. The manner in which firms divide profits, perhaps the most revealing aspect of law firm organization because it displays the balance the firm has selected between risk-sharing and incentives, has changed in a critical way. From a long standing reliance on seniority that emphasizes risk-sharing, profit division is shifting to a system based on the productivity of individual partners that emphasizes incentives. With what seems to be only a short time lag from the change in how profits …

Delaware's Intermediate Standard For Defensive Tactics: Is There Substance To Proportionality Review?, Ronald J. Gilson, Reinier Kraakman

Faculty Scholarship

The courts have long struggled with a standard for reviewing management's efforts to deter or defeat hostile takeovers. The usual standards of review in corporate law, the business judgment rule and the intrinsic fairness test, do not seem adequate when courts must evaluate defensive measures that implicate both management's business acumen and its loyalty to shareholder interests. Because evaluating a sale of the company is a complex business decision, management's response to a takeover bid resembles the normal business decisions that the business judgment rule largely insulates from judicial review.At the same time, however, a hostile takeover creates a potential …

The Mandatory/Enabling Balance In Corporate Law: An Essay On The Judicial Role, John C. Coffee Jr.

Faculty Scholarship

A half-filled glass of water can be described as either half full or half empty. The structure of American corporate law – partly enabling, partly mandatory in character – can be viewed in much the same way. Some commentators see American corporate law as primarily composed of mandatory rules that the shareholders themselves cannot waive or modify, In their view, this mandatory component compensates both for the absence of true bargaining among the parties and for the inevitable divergence of interests between the principals (the shareholders) and their agents (the managers and directors). Conversely, other commentators, to whom this Article …

Unstable Coalitions: Corporate Governance As A Multi-Player Game, John C. Coffee Jr.

Faculty Scholarship

This is an article written in honor of Professor Donald Schwartz, a leading figure in academic corporate law for over two decades, but also a man nearly unique in his willingness to move beyond corporate law to the general study of corporate behavior. In this light, this article will not explore the latest wrinkle in the law – the most recent case, latest SEC ruling, or newest takeover defense tactic – but will instead ask if there are new ways in which we should try to talk about corporate law and corporate behavior. These were questions that Don Schwartz repeatedly …

The Mandatory Structure Of Corporate Law, Jeffrey N. Gordon

Faculty Scholarship

It has become standard in the law and economics literature to refer to the corporation as a "nexus of contracts." On this view, the corporate entity is nothing more than a gathering point for a series of contracts, express and implied, among assorted actors: shareholders, bondholders, managers, employees, suppliers and customers, for example. This view rankles some sensibilities, because the economists' conception of a "contract" as an arrangement between two or more actors supported by reciprocal expectations and behavior is far broader than the lawyer's conception, which focuses on the existence of judicially cognizable duties and obligations. Thus the lawyer, …

Changing Perceptions Into Reality: Fiduciary Standards To Match The American Directors’ Monitoring Function, James D. Cox

Faculty Scholarship

This paper describes the historical fiduciary obligations of the American outside director and contrasts those obligations with prevailing obligations in today’s environment of the monitoring director. Special attention is devoted to the role of outside directors when their firm is the target of a takeover. In no other context are the demands on the outside director greater and more strain placed on the monitoring model than in the context of a corporate takeover. The final section of this paper examines the relief modern statutory provisions provide to the director and the monitoring function

Risk Communication Law And Implementation Issues In The United States And European Community, Michael S. Baram

Faculty Scholarship

Risk communication has become an important element of public policy in the United States and the European Community (E.C.) for reducing technological risks to workers, product users and community residents. The risk communication process involves disclosure by an industrial firm (or other party) of information about the hazardous attributes of its activity or product to a regulatory agency or to persons who may be at risk, thereby facilitating a shared understanding of the risk and enabling interpretation of various risk prevention and response measures.

There are two general patterns of risk communication. One involves industrial disclosure to a government agency, …

Duty To The Target: Is An Attorney's Duty To The Corporation A Paradigm For Directors?, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

Corporate Takeovers: Who Wins; Who Loses; Who Should Regulate, John C. Coffee Jr., Joseph A. Grundfest, Roberta Romano, Murray L. Weidenbaum

Faculty Scholarship

On December 3, 1987, during its 11th Annual Policy Conference in Washington, DC, the American Enterprise Institute convened a panel discussion on "Corporate Takeovers and Insider Trading: Who Should Regulate?" The panelists were John C. Coffee, Jr., professor of law at Columbia University; Joseph A. Grundfest, commissioner at the Securities and Exchange Commission; Roberta Romano, professor of law at Yale Law School; and Murray L. Weidenbaum, Mallinckrodt Distinguished University Professor and director of the Center for the Study of American Business at Washington University. The panel was moderated by Christopher C. DeMuth, president of AEI. The following discussion is drawn …

The Role Of The Market Model In Corporate Law Analysis: A Comment On Weiss And White, Merritt B. Fox

Faculty Scholarship

In a recent article, Elliott Weiss and Lawrence J. White sought to establish that seven decisions of the Delaware courts concerning corporation law had little value in predicting the future conduct of courts and corporations under the Delaware Corporations Law. Weiss and White relied, in part, on a statistical analysis of changes in the prices of publicly traded shares in Delaware corporations to show that the seven studied decisions had no statistically significant market impact.

In this Comment, Professor Fox takes issue with the explanation Weiss and White give for their data. Although the absence of an observed market impact …

The Corporation As Client: Problems, Perspectives, And Partial Solutions, James R. Mccall

Faculty Scholarship

No abstract provided.

No Exit?: Opting Out, The Contractual Theory Of The Corporation, And The Special Case Of Remedies, John C. Coffee Jr.

Faculty Scholarship

Aloof and insular as corporate law often seems, it cannot remain uninfluenced for very long by developments in the mainstream of American civil law. In that mainstream, there is today flowing a strong, swift current called "tort reform." As currents go, this one is remarkably broad and perhaps a little shallow, but on it floats a number of diverse legislative proposals – ceilings on liability, restrictions on attorneys' fees, greater reliance on alternative methods of dispute resolution, restrictions on joint and several liability and contribution, and the curtailment of punitive damages. All of these proposals flow from the same wellspring: …

Drafting An Effective Greenmail Prohibition, Ronald J. Gilson

Faculty Scholarship

Hostile tender offers have become a recurrent political issue. In recent years Congress has held seemingly endless hearings on the subject, and by now the testimony has settled into a familiar dialogue. Potential acquirers cast themselves as the embodiment of Adam Smith's invisible hand – their activities energize the market for corporate control with the desirable result of improving the efficiency of corporate management. Management of potential targets, in turn, claim the role of Albert Chandler's visible hand – efficient managers who internalize a function previously carried out by an inefficient market. Their argument is that because the market for …

The Uncertain Case For Takeover Reform: An Essay On Stockholders, Stakeholders And Bust-Ups, John C. Coffee Jr.

Faculty Scholarship

In this Article, Professor John Coffee considers under what circumstances there could be a legitimate role for state regulation of tender offers. Professor Coffee suggests that state anti-takeover laws could (but do not) function to protect other stakeholders, including corporate management, in the target corporation where the implicit contract between the corporation and these stakeholders has broken down. He advances a model of corporate directors as mediators between shareholders and stakeholders in order to protect the expectations embodied in a web of implicit and explicit contracts.

Professor Coffee suggests that takeovers would be more palatable if the interests of stakeholders …

Securities Law Fifth Circuit Symposium, Steve Thel

Faculty Scholarship

The Fifth Circuit decided some important securities cases during the survey period and issued some interesting opinions. Although the court consistently claimed a conservative reliance on precedent and seldom acknowledged making new law, it interpreted some well-established doctrine in surprising ways. The past year's opinions in fraud cases provide guidance in the related areas of reliance, damages, and plaintiff's due diligence. The year also witnessed important developments in the law governing the relationship between brokerage firms and their clients. The most spectacular development in this area during the survey year was the October collapse in security prices. In light of …

Qualitative Standards For Qualified Securities: Sec Regulation Of Voting Rights, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

The Independent Corporate Board: A Means To What End?, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

The Election Of Directors And Chapter 11--The Second Circuit Tells Stockholders To Walk Softly And Carry A Big Lever, Michael A. Gerber

Faculty Scholarship

No abstract provided.

The Future Of Corporate Federalism: State Competition And The New Trend Toward De Facto Federal Minimum Standards, John C. Coffee Jr.

Faculty Scholarship

What sensible compromise can be struck between Bill Cary's and Ralph Winter's views of the competition among states for corporate charters? This is the relevant question to ask in response to Professor Romano's stimulating paper, because if one ends in an intermediate position between Cary and Winter (as she does and as I do), then one needs to focus on the protections shareholders should be accorded both to protect them from exploitation at the hands of a state pursuing tax revenues and from excessive regulation by a state whose regulatory efforts are intended in fact to realize ulterior objectives unrelated …

The Nuclear Regulatory Commission's Regulation Of Radiation Hazards In The Workplace: Present Problems And New Approaches To Reproductive Health, Neal Smith, Michael S. Baram

Faculty Scholarship

On December 20, 1985, the Nuclear Regulatory Commission (NRC) proposed revisions to its Standards for Protection Against Radiation [hereinafter Standards].¹ If adopted, the new Standards will provide additional protection for millions of workers and their unborn children. The effects of the Standards will extend, however, far beyond the health of those exposed to radiation. Specifically, the NRC's proposal may provide a new paradigm for regulating health hazards that have no safe threshold level of exposure. It will also focus debate on whether or not women should be precluded from working in fetotoxic environments

Evaluating Dual Class Common Stock: The Relevance Of Substitutes, Ronald J. Gilson

Faculty Scholarship

The proposal of the New York Stock Exchange to end its prohibition on listing the securities of companies with dual classes of common stock has focused public policy debate over this evolution in capital structure both too broadly and too narrowly.

The debate has been too broad because it has encompassed one situation – an initial public offering by a company with a capital structure containing dual class common stock – that should not be controversial at all. Whatever may have originally prompted the New York Stock Exchange's longstanding prohibition against listing non-voting common stock or common stock with voting …

Chemical Industry Accidents, Liability, And Community Right To Know, Michael S. Baram

Faculty Scholarship

The Bhopal, India tragedy and other industrial accidents (e.g., Seveso, Flixborough, Mexico City, Institute, WV) have frightened the citizens of developed and undeveloped countries. These accidents, along with numerous hazardous waste problems, have led to a dramatic loss of public confidence in chemical industry management and their safety experts. The occurrence of such accidents also provides vivid evidence of the serious gap between government legislative promises and government performance in the actual control of industrial hazards.'

As a result, persons who believe they have been injured or put at risk by industry are now using tort law to secure private …

Takeover Defense Tactics: A Comment On Two Models, Jeffrey N. Gordon, Lewis A. Kornhauser

Faculty Scholarship

One of the most important debates of current corporate law practice and scholarship is about the appropriate role of target management confronted with a takeover bid. The controversy turns on the identification of a criterion for evaluating takeovers and target management defensive tactics. An influential body of opinion contends that maximization of shareholder wealth is the appropriate criterion because, first, traditional notions of fiduciary duty generally require managers to act in the shareholders' interest, and, second, shareholder wealth maximization is seen as the best available proxy for social wealth maximization. On this view, takeovers are desirable because they can increase …

Introduction To The Edwin S. Cohen Tax Symposium: An Overview Of Business Taxation, Michael J. Graetz

Faculty Scholarship

It is an honor and pleasure for me to be here today to launch this symposium on current tax reform topics in honor of Edwin S. Cohen on the occasion of his retirement from the University of Virginia as Professor of Law. This is the second occasion I have been asked to speak honoring Ed Cohen on his retirement and, knowing him well, I look forward to many more of his retirements in years ahead.

My assignment today is to provide a brief overview of issues in business taxation. I was tempted simply to repeat the program for this symposium, …

The Interpretation Of Means Expressions During Prosecution, R. Carl Moy

Faculty Scholarship

This article briefly explains how the scope of a claim including a means expression is determined both under the PTO view and a strict application of the statutory language. The lack of consensus and current state of the law in the area are illustrated through an analysis of several recent decisions of the Federal Circuit. The policies underlying the PTO and statutory methods of interpreting means expressions during prosecution are examined in an effort to demonstrate that the statutory method more effectively furthers the policies underlying the patent system.

Shareholders Versus Managers: The Strain In The Corporate Web, John C. Coffee Jr.

Faculty Scholarship

"We have entered the era of the two-tier, front-end loaded, bootstrap, bust-up, junk-bond takeover." —Martin Lipton

Until recently, takeovers typically involved larger firms digesting smaller firms, a process that most theorists have assumed was driven by the pursuit of synergistic gains. Lately, however, this dynamic has dramatically reversed itself. To a considerable extent, the large conglomerate is now the target, and such prototypical conglomerate firms as General Foods, Richardson-Vicks, Beatrice, Revlon, SCM, CBS,USX, and Anderson, Clayton and Co. have either been acquired or forced to restructure themselves within the last three years alone. The new bidder in turn tends to …