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Articles 241 - 270 of 414
Full-Text Articles in Business Organizations Law
The Long And Short Of It: Are We Asking The Right Questions? Modern Portfolio Theory And Time Horizons, Jim Hawley, Jon Lukomnik
The Long And Short Of It: Are We Asking The Right Questions? Modern Portfolio Theory And Time Horizons, Jim Hawley, Jon Lukomnik
Seattle University Law Review
The heavy shadow of modern portfolio theory (MPT) has had a massive impact on everything from market structure, investment philosophy, and investor behavior, to the research that examines those disciplines. Researchers believe that they are casting light onto investment issues (including, for this purpose, specifically investor time horizons), but generalized acceptance of MPT allows it to continue to darken what should be enlightened.
An Identity Theory Of The Short- And Long-Term Investor Debate, Claire A. Hill
An Identity Theory Of The Short- And Long-Term Investor Debate, Claire A. Hill
Seattle University Law Review
Economics famously treats market actors as homogeneous. People are homo economicus, rational self-interested maximizers of their own utility. So far, so good, notwithstanding supposed behavioral “deviations” from rationality (more on those later). That people can view their own utility very differently from one another is recognized in theory, but not so much in practice. Also not sufficiently recognized is the extent to which people’s views of their own utility reflect their theories of who they are and how the world works, and that they hold such views and theories not just atomistically, but also collectively—that is, socially.
Are Investor Time Horizons Shortening?, Rachelle Sampson, Yuan Shi
Are Investor Time Horizons Shortening?, Rachelle Sampson, Yuan Shi
Seattle University Law Review
The rise in quarterly capitalism in corporate America—increased pressure to meet quarterly earnings predictions and cater to shareholder preferences for short-term returns—has gained significant coverage in the business world and popular press in recent years. Increasingly, popular opinion suggests that firms bow to shareholder pressures, taking steps to smooth earnings and boost share prices in the short-term; firms do so by cutting Research and Development (R&D) investment, engaging in extensive cost-cutting, or increasing dividends and share buybacks. Recent estimates at the industry level show that investor discount rates have increased in recent years, supporting the notion that shorttermism is on …
Federalism Of Personal Finance: State & Federal Retirement Plans, William A. Birdthistle
Federalism Of Personal Finance: State & Federal Retirement Plans, William A. Birdthistle
Seattle University Law Review
In this Article, I consider possible approaches that attempt to improve the plans through which millions of Americans tend to their life savings. I begin by considering the inadequacies of our current system of defined contribution accounts and then address two possible alternatives: the first being a federal account universally available to Americans based largely on the model of the Thrift Savings Plan; the second being a system of statebased retirement accounts like those that have already been developed in a handful of states. Though I conclude that a single, federal plan would be superior, either alternative approach would be …
Brain Perspectives On Investor Behavior And Decision-Making Errors, Owen D. Jones
Brain Perspectives On Investor Behavior And Decision-Making Errors, Owen D. Jones
Seattle University Law Review
I want to start off with what I consider to be the statement of the problem. As I understand it, you’re concerned that the time horizons for maximizing the value of an investment vary among individuals in surprisingly wide, imperfectly predictable, and often seemingly irrational ways. And, if I understand your target here, the idea is that a deeper understanding of the causes of this variation might aid in the planning and design of legal and corporate policies. To jump into this, I’m going to give a little bit of an introduction about behavioral biases, and something that I’ve called …
Good Activist/Bad Activist: The Rise Of International Stewardship Codes, Jennifer G. Hill
Good Activist/Bad Activist: The Rise Of International Stewardship Codes, Jennifer G. Hill
Seattle University Law Review
Shareholder participation in corporate governance and investor activism are topics du jour in the United States and around the world. In the early part of the 20th century, Professors Berle and Means considered that shareholder participation was impossible in the transformed commercial world that they described in The Modern Corporation and Private Property. This was a world characterized by dispersed and vulnerable shareholders, in which owners do not manage, and managers do not own, the corporation. In such an environment, the goal of corporate law became one of protecting shareholder interests rather than providing shareholders with participation rights. The structure …
Wrong-Termism, Right-Termism, And The Liability Structure Of Investor Time Horizons, Andrew Verstein
Wrong-Termism, Right-Termism, And The Liability Structure Of Investor Time Horizons, Andrew Verstein
Seattle University Law Review
Do investor time horizons lead to inefficient business conduct in the real economy? An extensive finance literature analyzes whether particular practices (e.g., high frequency trading and stock buybacks) lead firms to operate with inefficiently myopic investment horizons, and an extensive legal literature considers the appropriateness of policy interventions. This Article joins those debates by charting the space of possibilities: what might be the causes of problematic time horizons? What solutions are available? One implication of this analysis is that there may be unexplored market-based solutions located on the liability side of investors’ balance sheets. This Article also argues that we …
Specificity And Time Horizons, Frank Partnoy
Specificity And Time Horizons, Frank Partnoy
Seattle University Law Review
This Essay argues that the short-termism debate would benefit from greater clarity and specificity regarding time horizons. I make four points. First, optimal time horizons vary in discernible ways. Second, the potential mismatch between actual and optimal time horizons should generate a range of responses. Third, investors and managers can discern and disclose estimates of actual and optimal time horizons (e.g., using categories such as preconscious, fast conscious, slow conscious, and discounting). Fourth, market participants, policy makers, and scholars should use such estimates to be more precise about time horizons. For example, critics of hedge fund activism could recognize that …
The Myth Of The Ideal Investor, Elisabeth De Fontenay
The Myth Of The Ideal Investor, Elisabeth De Fontenay
Seattle University Law Review
Critiques of specific investor behavior often assume an ideal investor against which all others should be compared. This ideal investor figures prominently in the heated debates over the impact of investor time horizons on firm value. In much of the commentary, the ideal is a longterm investor that actively monitors management, but the specifics are typically left vague. That is no coincidence. The various characteristics that we might wish for in such an investor cannot peacefully coexist in practice. If the ideal investor remains illusory, which of the real-world investor types should we champion instead? The answer, I argue, is …
Long-Term Executive Compensation As A Remedy For Corporate Short-Termism, Caroline Flammer
Long-Term Executive Compensation As A Remedy For Corporate Short-Termism, Caroline Flammer
Seattle University Law Review
It is often argued that corporations are too focused on the short term (i.e., they are “short-termist”). For example, during the 2016 U.S. presidential campaign, candidate Hillary Clinton urged companies to escape the tyranny of short-termism. Similarly, in the recent policy debate in the United Kingdom on the need to reform corporate governance and executive compensation, Bank of England’s Chief Economist Andy Haldane stated that “[e]xecutive pay is a matter of profound and legitimate public interest. Pay practices can encourage short-term behaviour in ways which harm both firms and the economy.” In this context, a recent article by Flammer and …
Institutional Investors, Corporate Governance, And Firm Value, K.J. Martijn Cremers, Simone M. Sepe
Institutional Investors, Corporate Governance, And Firm Value, K.J. Martijn Cremers, Simone M. Sepe
Seattle University Law Review
In the corporate governance debate, the short-term versus longterm contention has grown into perhaps today’s most controversial topic. In this debate, descriptions of institutional investors tend to present a dichotomic nature. These investors are alternatively portrayed as homogenously short-termist or as consistent “forces for good,” focused on targeting underperforming companies. This Article moves beyond this dichotomy. It shows empirically that aggregate institutional investor behavior presents nuances that depend on a variety of factors, including individual firm characteristics, institutional ownership levels, and institutional propensity toward activism.
Flash Traders (Milliseconds) To Indexed Institutions (Centuries): The Challenges Of An Agency Theory Approach To Governance In The Era Of Diverse Investor Time Horizons, Harold Weston, Conrad Ciccotello
Flash Traders (Milliseconds) To Indexed Institutions (Centuries): The Challenges Of An Agency Theory Approach To Governance In The Era Of Diverse Investor Time Horizons, Harold Weston, Conrad Ciccotello
Seattle University Law Review
One aspect of the problem in trying to align a corporate investment horizon (the time period for return on investment) to that of its shareholders is the enormous range of investor time horizons, which can range from milliseconds to centuries. A second aspect of the problem is whether ownership of shares equates to ownership of the corporation. A third aspect of the problem is that, despite the theories and advocacy of shareholders being owners, based on the agency model of corporate finance first developed in the 1970s, the theory is contrary to corporate law. These three aspects will be developed …
Corporations And Human Life, Frank Partnoy
Corporations And Human Life, Frank Partnoy
Seattle University Law Review
In Part I, I address decision-making. How should risk to human life be included in the jurisprudence of corporate decision-making? In terms of finance, how should corporations make net present value decisions when risk to human life is a factor? In terms of law, is there a case for exceptions to the business judgment rule based on risk to human life? Second, in Part II, I address oversight. How should risk to human life be included in the jurisprudence of oversight? In terms of finance, how should corporations approach risk management when human life is a factor? In terms of …
Social Enterprise And Investment Professionals: Sacrificing Financial Interests?, J. Haskell Murray
Social Enterprise And Investment Professionals: Sacrificing Financial Interests?, J. Haskell Murray
Seattle University Law Review
Over the past decade, more than three dozen jurisdictions in the United States passed some form of social enterprise legislation. Social enterprise statutes allow for the formation of for-profit entities that expressly require directors to consider the interests of corporate constituents beyond merely shareholders. Proponents of these social enterprise statutes argue that such statutes are needed because traditional corporate law prevents sacrificing the financial interests of shareholders in the interest of a broader social good, or in the interest of other stakeholders. Recently, social enterprises have started exploring public markets and showing up on the radar of investment professionals, including …
Berle Viii: Benefit Corporations And The Firm Commitment Universe, Bart Houlahan, Andrew Kassoy, Jay Coen Gilbert
Berle Viii: Benefit Corporations And The Firm Commitment Universe, Bart Houlahan, Andrew Kassoy, Jay Coen Gilbert
Seattle University Law Review
Benefit corporation law is a critical tool to allow private capital to be invested in a manner that creates shared and durable value for everyone. But a tool is only as good as the person who uses it. As highlighted in Rick Alexander’s essay, shareholders must understand the value of firm commitment, and, more importantly, the ultimate source of wealth for universal investors, which is thriving financial markets and a healthy, peaceful, and prosperous planet. These goals can only be attained and maintained for the long term if private capital is allocated and invested in a manner that creates value …
Saving Investors From Themselves: How Stockholder Primacy Harms Everyone, Frederick H. Alexander
Saving Investors From Themselves: How Stockholder Primacy Harms Everyone, Frederick H. Alexander
Seattle University Law Review
We face many tough issues including poverty, climate change, social and economic inequality, the cost and quality of education and healthcare, stagnant wages, financial market instability, disease, and food security. Despite the existential threat that these concerns may raise, there is no consensus on whether or how to address them through regulation, taxation, or other government policy tools. Private enterprise, however, has tremendous potential to address these issues through technology, wages, supply chain maintenance, green operations, efficient delivery of goods and services, and a myriad of other outputs and outcomes. In the U.S., the potential of the private sector to …
The Rights And Wrongs Of Shareholder Rights, Will Hutton, Colin Mayer, Philippe Schneider
The Rights And Wrongs Of Shareholder Rights, Will Hutton, Colin Mayer, Philippe Schneider
Seattle University Law Review
The company is a legal structure designed to bring together the different parties of a firm—its employees, investors, customers, and suppliers—in the delivery of its corporate purpose. Corporations were established as institutions with autonomous lives—self-standing, legal entities independent of those who worked, financed, and managed them. They were devices to ensure long-term commitment to shared goals and risks, with reciprocal obligations on those engaged in them. A company had to declare its purpose before earning a licence to trade. For example, the East India Company, England’s earliest public company, to issue shares to the public as permanent capital, was given …
A Necessary Social Evil: The Indispensability Of The Shareholder Value Corporation, Marc T. Moore
A Necessary Social Evil: The Indispensability Of The Shareholder Value Corporation, Marc T. Moore
Seattle University Law Review
This symposium article critically evaluates the developing Post-Shareholder-Value (PSV) paradigm in corporate governance scholarship and practice with particular reference to Professor Colin Mayer’s influential theory of the corporation as a unique, long-term “commitment device.” The article’s positive claim is that, while evolving PSV institutional mechanisms such as benefit corporations and dual-class share structures are generally encouraging from a social perspective, there is cause for skepticism about their capacity to become anything more than a niche or peripheral feature of the U.S. public corporations landscape. This is because such measures, despite their apparent reformist potential, are still ultimately quasi-contractual and thus …
Repricing Limited Liability And Separate Entity Status, William H. Clark Jr., D. Alicia Hickok
Repricing Limited Liability And Separate Entity Status, William H. Clark Jr., D. Alicia Hickok
Seattle University Law Review
In this Article we discuss how U.S. entity law has evolved in recent decades so that (i) limited liability has become available to the owners of any form of business organization, and (ii) all forms of business organizations are now seen as having the status of entities separate from their owners. Those changes have occurred without significant consideration of their consequences or what they mean for the public policies underlying entity law. At the same time, there is an increasing awareness by businesses that promotion of social benefits and/or reduction of externalities is in the firm’s best interests. There has …
Assessing The Assessment: B Lab’S Effort To Measure Companies’ Benevolence, Michael B. Dorff
Assessing The Assessment: B Lab’S Effort To Measure Companies’ Benevolence, Michael B. Dorff
Seattle University Law Review
For benefit corporations to persuade their various audiences that they are as beneficial for society as they claim, they need reliable assessments of their social performance. Even if assessments were not required by most states’ benefit corporation statutes, it is difficult to imagine the benefit corporation form could gain credibility without them. Creating measurement tools for these assessments poses the twin challenges of balancing simplicity against validity and weighing vision against inclusiveness. This article examines how B Lab’s popular assessment tool engages these challenges.
Corporate Purpose And Litigation Risk In Publicly Held U.S. Benefit Corporations, Joan Macleod Heminway
Corporate Purpose And Litigation Risk In Publicly Held U.S. Benefit Corporations, Joan Macleod Heminway
Seattle University Law Review
With the likely prospect of publicly held U.S. benefit corporations in mind, this Article engages in a thought experiment. Specifically, the Article views the publicly held U.S. benefit corporation from the perspective of litigation risk. It first situates, in Part I, the U.S. benefit corporation in its structural and governance context as an incorporated business association. Corporate purpose and the attendant managerial authority, responsibilities, and fiduciary duties are the key points of reference. Then, in Part II, the Article seeks to identify and describe the salient, unique litigation risks that may be associated with publicly held corporations with the structural …
A Critical Canadian Perspective On The Benefit Corporation, Carol Liao
A Critical Canadian Perspective On The Benefit Corporation, Carol Liao
Seattle University Law Review
Part I of this Article provides a brief background and description of the American benefit corporation. Part II then delineates the Canadian model of corporate law and governance as it currently stands in the statutes, common law, and in practice. Part III applies the information gathered from the previous two sections to explain why the legal features in the American benefit corporation model are largely redundant to existing Canadian corporate laws. It also addresses how the implementation of the benefit corporation in Canada would conflate incorrect assumptions on Canada’s model of governance and potentially impede the progressive development of Canada’s …
Benefit Corporations And Public Markets: First Experiments And Next Steps, Brett H. Mcdonnell
Benefit Corporations And Public Markets: First Experiments And Next Steps, Brett H. Mcdonnell
Seattle University Law Review
Part I begins by considering the leading benefits and costs for a benefit corporation that chooses to go public. It starts there both to begin gaining an understanding of the challenges public companies will face and also to consider whether going public is likely to actually be an attractive option at all for some set of social enterprises. Some of the benefits and costs of going public are the same for benefit corporations as for ordinary corporations—access to new sources of capital and new accountability mechanisms are benefits, but legal compliance and pressures from shareholders to show quick results are …
Financing The Benefit Corporation, Dana Brakman Reiser, Steven A. Dean
Financing The Benefit Corporation, Dana Brakman Reiser, Steven A. Dean
Seattle University Law Review
The hybrid organizational forms designed with social enterprises in mind have proven to be hothouse flowers. Flourishing in state legislatures, even those with the most distinguished pedigrees—such as Delaware’s public benefit corporation—have so far failed to thrive in the marketplace. Fortunately, hybrid financial instruments offer a source of strength and stability that can help social enterprise to take root. This Article examines the valuable role that financial instruments can play in providing social enterprises with the capital they need to grow. Debt with equity features and equity with debt characteristics constitute the lion’s share of such financial tools. More exotic …
Redefining Corporate Purpose: An International Perspective, Afra Afsharipour
Redefining Corporate Purpose: An International Perspective, Afra Afsharipour
Seattle University Law Review
This comparative analysis of India’s move toward redefining corporate purpose proceeds as follow. Part I presents an overview of global debates over corporate purpose, drawing principally from the move toward the ESV model in the U.K. and benefit corporations in the U.S. This section briefly recounts the debates in both jurisdictions about whether the changes they have experienced will engender more socially responsible corporations. Part II then provides a condensed history of corporate law reforms in India and an overview of the legislative changes undertaken in the past decade. In Part II, this Article takes a broad approach toward analyzing …
A Conversation With B Lab, Larry Hamermesh, Bart Houlahan, Rick Alexander, Dan Osusky
A Conversation With B Lab, Larry Hamermesh, Bart Houlahan, Rick Alexander, Dan Osusky
Seattle University Law Review
This is the panel of people who have been associated with B Lab for various lengths of time, but who really can put practical vision and facts before us in a way that the papers we’ve heard so far, while all really interesting, can’t quite do. All of these papers converge on this subject: what actually happens and what’s happened so far. So what I’m going to do is try to lead us through what could be an oral history, if it’s appropriately recorded, of B Lab. And thanks in large part to Rick Alexander, who knows the inside story …
In Pursuit Of Good & Gold: Data Observations Of Employee Ownership & Impact Investment, Christopher Geczy, Jessica S. Jeffers, David K. Musto, Anne M. Tucker
In Pursuit Of Good & Gold: Data Observations Of Employee Ownership & Impact Investment, Christopher Geczy, Jessica S. Jeffers, David K. Musto, Anne M. Tucker
Seattle University Law Review
A startup’s path to self-sustaining profitability is risky and hard, and most do not make it. Venture capital (VC) investors try to improve these odds with contractual terms that focus and sharpen employees’ incentives to pursue gold. If the employees and investors expect the startup to balance the goal of profitability with another goal—the goal of good—the risks are likely to both grow and multiply. They grow to the extent that profits are threatened, and they multiply to the extent that balancing competing goals adds a dimension to the incentive problem. In this Article, we explore contracting terms specific to …
Balancing The Governance Of Financial Institutions, David Min
Balancing The Governance Of Financial Institutions, David Min
Seattle University Law Review
Part I briefly describes the traditional agency–cost approach to corporate governance and the rationale that is offered for elevating the agency–cost concerns of shareholders over those of other stakeholders (especially creditors). But as Part I goes on to argue, even if this justification for shareholder primacy is convincing in corporate governance generally (and there are many who do not find it so), several unique characteristics of banks obviate the reasoning behind shareholder primacy. Banks are highly leveraged, which exacerbates creditor–shareholder agency conflicts and places greater importance on the interests of creditors. Banks enjoy government guarantees, and thus their corporate governance …
Getting A Handle On Growler Laws, Adam Star
Getting A Handle On Growler Laws, Adam Star
Seattle University Law Review
This Note will begin with a brief general history of growlers in the United States and the benefits they provide to consumers, retailers, and small craft brewers. Part II will provide an overview of national alcohol distribution regulation and how the present growler law exists within this larger framework. To complete the necessary background information, Part III will provide context to the competitive landscape by way of an examination of the craft beer industry’s explosive growth. The substantive portion of the Note will follow in Part IV, beginning with an outline of the various key types of growler restrictions such …
Berle Vii: The Modern Corporation And A Theory Of Fields, Charles R. T. O'Kelley
Berle Vii: The Modern Corporation And A Theory Of Fields, Charles R. T. O'Kelley
Seattle University Law Review
On May 26-27, 2015, scholars disparately trained in law, anthropology, economics, political science, history and sociology gathered in Seattle for the seventh annual Berle Symposium. As with prior symposia, a principal aim of Berle VII was to shed light on the nature of the modern corporation. As with prior symposia, the voices participating represented numerous disciplines. What sets Berle VII apart from its forerunners, however, was the decision to make social scientists the dominant voices, and to select a theory propounded by sociologists—field theory—as the focal point and backdrop for the symposium. This choice reflected a second principal aim of …