Business Organizations Law Commons^™

Working Through A Workout: A Practitioner's Guide From The Perspective Of Private Equity Sponsors, Venture Capital Funds And Other Significant Equity Investors, Christopher W. Kirkham, Jennifer M. Taylor

UC Law Business Journal

These troubled economic times present numerous concerns to the ongoing business. However, the dreaded "workout" scenario that arises when a corporation breaches its debt covenants should not be so feared. This Practitioner's Guide will address the workout scenario and provide insight on how to negotiate with a lender and how to address the most common negotiating points in a workout with particular focus on the perspective of sponsors and other significant investors. Part I will discuss how a workout scenario arises and the positions and goals of the respective parties involved-the borrower, the lender and the sponsor. Part II lays …

Beware Of Risk Everywhere: An Important Lesson From The Current Credit Crisis, Michael C. Macchiarola

UC Law Business Journal

Our current credit crisis is a result of the misunderstanding and mismanagement of risk. Exploring the tradeoff between risk and reward has been at the heart of the modem financial theories that have come to dominate our markets. As the capital markets introduced more and more complexity and innovation, most expected that the study of risk management and risk allocation was keeping pace, ensuring our ability to control and limit risk while maximizing reward.

In this Article, the author addresses some of the fundamental misunderstandings of risk that have become deeply ingrained in our markets and have brought about the …

The Political Economy Of The Rule Of Law In China, George Steven Swan

UC Law Business Journal

The following Article studies China as a possible test case for a country that has attempted to win economically developed nation status without an advanced rule of law. While China has managed to grow rapidly over the past thirty years, the author warns of the risk to an economy that rests on an unstable rule of law. In Part I, the author presents an introduction and then proceeds in Part II to explain the concept of "political economy" as a field informing the study of institutions, and of norms, which constitute the background to economic development. Part III chronicles the …

Should Courts Hang On Every Word Of Congress's Hanging Paragraph - A Solution To Judicial Controversy Over Chapter 13 Surrendered Vehicles, Netta Grutman

UC Law Business Journal

As part of the Bankruptcy Abuse Prevention Consumer Protection Act of 2005, Congress added a paragraph to the Bankruptcy Code governing the confirmation of Chapter 13 plans. The paragraph was added in an effort to eliminate "cram down." Prior to 2005, cram down allowed the debtor to retain his/her vehicle as part of a bankruptcy plan and only repay the secured debt on the vehicle. After Congress's amendment, a debt on a vehicle retained as part of a Chapter 13 plan can no longer be bifurcated. Thus, a debtor must repay both the secured and unsecured debt in order to …

Bringing It All Back Home: Boulware And The Unfortunate Demise Of The Miller Rule, Gurpreet Bal

UC Law Business Journal

In this Note, the author addresses the underlying tension between criminal intent and the complexity of the tax code in criminal tax prosecution in light of the recent Supreme Court opinion in U.S. v. Boulware. The author takes a look at the facts and circumstances of Boulware, the body of precedent supporting the Ninth Circuit's opinion, and the reasoning of the Supreme Court in its subsequent reversal of that opinion. He revisits the oft cited opinion of Judge Learned Hand in Helvering v Gregory, and asks whether the courts have taken Judge Hand's famous approval of tax planning so far …

Pragmatic Selective Waiver: Re-Aligning Corporate Executives' Personal Interests With Those Of The Corporation Amidst Government Investigations, Erin M. Carter

Vanderbilt Law Review

In the corporate setting, government investigators increasingly ask corporations to waive the attorney-client privilege as part of the "cooperation" necessary to receive incentives. In practice, however, these cooperation incentives have led to what has become known as a "culture of waiver," where waiver of the privilege in the face of investigation has become virtually essential. One way courts have sought to diminish the negative externalities of waiver is through the doctrine of selective waiver. Selective waiver allows the corporation to waive the attorney-client privilege, but only to the government agency during the course of the investigation, while still retaining the …

An Empirical Analysis Of Lateral Lawyer Trends From 2000 To 2007: The Emerging Equilibrium For Corporate Law Firms, William D. Henderson, Leonard Bierman

Articles by Maurer Faculty

No abstract provided.

Clawbacks: Prospective Contract Measures In An Era Of Excessive Executive Compensation And Ponzi Schemes, Jarrod Wong, Miriam A. Cherry

McGeorge School of Law Scholarly Articles

No abstract provided.

A Fair Price And A Fair Deal: On The Future Of 'Entire Fairness' In Freezeouts, Faith Stevelman

Articles & Chapters

Controlling shareholders can compel the sale of minorities’ shares in freezeouts, potentially to their financial detriment. To limit controllers’ opportunism and support the value of minorities’ investments, the Delaware supreme court has endorsed strong minority shareholder protections under the rubric of 'Entire Fairness' – the governing standard for cash-out mergers. However, the court of chancery has refused to apply Entire Fairness to tender offer freezeouts, and is advocating unifying freezeout doctrine around a looser, deferential standard of review. The influence of popular and Congressional concern over excess plaintiff lawyers’ fees and discovery costs is likely making itself felt, although the …

Corporate Voting, Paul H. Edelman, Robert B. Thompson

Vanderbilt Law School Faculty Publications

Discussion of shareholder voting frequently begins against a background of the democratic expectations and justifications present in decision-making in the public sphere. Directors are assumed to be agents of the shareholders in much the same way that public officers are representatives of citizens. Recent debates about majority voting and shareholder nomination of directors illustrate this pattern. Yet the corporate process differs in significant ways, partly because the market for shares permits a form of intensity voting and lets markets mediate the outcome in a way that would be foreign to the public setting and partly because the shareholders' role is …

The Diverging Meaning Of Good Faith, Mark J. Loewenstein

Publications

This article explores the meaning of "good faith" in the context of corporations and unincorporated entities. The courts, particularly in Delaware, have developed two different approaches. In the corporate arena, the courts are fashioning a notion of good faith that seems to require an examination of director motivations. In the unincorporated arena, good faith has a meaning grounded in contract law. These are two different concepts and reflect the fundamental differences between corporations and unincorporated entities, with the former based on fiduciary duties and the latter on contract. There are, however, indications that this "divergence" is starting to disappear, and …

Corporate Tax Reform: Listening To Corporate America, Christopher H. Hanna

Faculty Journal Articles and Book Chapters

In the last few years, academics, practitioners and government officials have engaged in serious discussions in reforming the U.S. corporate income tax system. Some, if not much of the discussion, has focused on maintaining the competitiveness of U.S. corporations in a global economy. As a result, some have argued that the U.S. needs to reduce its top corporate tax rate from 35 percent, which is currently among the highest of the 30 OECD countries, to a rate around 30 percent or even lower. Others have maintained that the U.S. needs to enact specific or targeted tax incentives, such as expensing …

Arrow's Theorem And The Exclusive Shareholder Franchise, Grant M. Hayden, Matthew T. Bodie

Faculty Journal Articles and Book Chapters

In this essay, we contest one of the main arguments for restricting corporate board voting to shareholders. In justifying the limitation of the franchise to shareholders, scholars have repeatedly turned to social choice theory—specifically, Arrow’s theorem—to justify the exclusive shareholder franchise. Citing to the theorem, corporate law commentators have argued that lumping different groups of stakeholders together into the electorate would result in a lack of consensus and, ultimately, the lack of coherence that attends intransitive social choices, perhaps even leading the corporation to self-destruct. We contend that this argument is misguided. First, we argue that scholars have greatly overestimated …

From Loyalty To Conflict: Addressing Fiduciary Duty At The Officer Level, Usha Rodrigues

Scholarly Works

Conflicts of interest are the quintessential agency cost-the constant, lurking danger that agents may seek their own personal gain, rather than the good of the corporation. Yet many corporate employees lack knowledge as to exactly what constitutes a conflict of interest. This ignorance facilitated the kind of fraud seen in Enron, WorldCom, and the options backdating scandals, and may help explain the out-sized payouts that many high-level corporate officers received even as the financial institutions they headed verged on self-destruction. Each case required not only affirmative fraudulent behavior on the part of a few, but also the tacit acceptance of …

Weber V. U.S. Sterling Securities, Inc.: Contracting The Liability Shield For Members Of Delaware Limited Liability Companies, Marios J. Monopolis

Journal of Business & Technology Law

No abstract provided.

Conflicts And Financial Collapse: The Problem Of Secondary-Management Agency Costs, Steven L. Schwarcz

Faculty Scholarship

Corporate governance scholarship has long focused on conflicts of interest between firms and their top executive officers. This Essay contends that increasing leverage and financial complexity make it important for scholars to also focus on conflicts of interest between firms and their secondary managers.

Leveraged Liquidity: Bear Raids And Junk Loans In The New Credit Market, Jose M. Gabilondo

Faculty Publications

No abstract provided.

Unconscious Bias And The Limits Of Director Independence, Antony Page

Faculty Publications

Corporate directors make difficult decisions: How much should we pay our CEO? Should we permit a lawsuit against a fellow director? Should we sell the company? Directors are legally obligated to decide in good faith based on the business merits of the issue rather than extraneous considerations and influences. Naturally, some directors may have preferences, or even biases: Our CEO, my colleague and friend, deserves a lot; The company should not sue my fellow board member; We should not sell, because after all, I would like to remain a board member. But the courts presume that independent directors either do …

Politics Of Knowledge Dissemination: Corporate Reporting, Shareholder Voice, And Human Rights, Aaron A. Dhir

Osgoode Hall Law Journal

This article considers the relationship between social disclosure and corporate accountability in Canada. It focuses on the potential benefits social disclosure can provide in terms of the overall human rights project. I explore this issue with reference to the broader theoretical frameworks of new governance and reflexive law. White I ground my analysis in these analytical approaches. I distance myself slightly from particular arguments in the literature to date: specifically, the argument that the disclosure process will result in self-correcting behaviour on the part of corporate decision makers. Rather, I argue that the value of social disclosure may lie more …

Voting Integrity: Practices For Investors And The Global Proxy Advisory Industry, Meagan Thompson-Mann

Ira M. Millstein Center for Global Markets and Corporate Ownership

Accountability of corporate boards to shareowners rests in large part on the integrity of the system by which investors vote their proxy ballots. Shareowners rely on the vote to affect the governance of a company; corporate directors see the vote as a barometer of investor confidence in board stewardship. Outcomes determine the fate of director tenure, mergers, acquisitions, capital raising, remuneration plans and other critical decisions with sometimes profound consequences for stakeholders and the marketplace.

However, this briefing finds that the proxy voting system in the US and other markets is chronically subject to criticism that it is short on …

Navigating The Turbulent Waters Connecting The World Trade Organization And Corporate Social Responsibility, Gustavo Ferreira Ribeiro

Indiana Journal of Global Legal Studies

This paper uses the metaphor of a fisherman's journey into the World Trade Organization (WTO) and Corporate Social Responsibility (CSR) "seas" to explore the relationship between them. It is intended to provide the reader with a basic understanding of this relationship. An argument can be made that the WTO and CSR waters are not connected at all: the WTO is an intergovernmental organization regulating rights and duties of its members (mainly states), while CSR concerns primarily non-governmental initiatives dealing with corporate behavior, such as voluntary codes of conduct and certification processes involving social and environmental standards. However, this paper explores …

The Foreign Corrupt Practices Act, Sec Disgorgement Of Profits, And The Evolving International Bribery Regime: Weighing Proportionality, Retribution, And Deterrence, David C. Weiss

Michigan Journal of International Law

This Note uses examples such as Titan Corp. to support the argument that there are reasons to question the United States' increasing reliance on disgorgement to enforce the FCPA. Despite obvious deterrence benefits, the SEC's quest for disgorgement of ill-gotten gains raises significant questions regarding extraterritoriality, proportionality, and evidentiary uncertainty. This Note looks to the history of the FCPA and both international anti-bribery agreements and foreign statutes implementing those agreements in arguing that U.S. and foreign regulators need to create a more certain, predictable enforcement climate as the number of foreign bribery enforcement actions continue to explode.

Corporate Liability Under The Alien Tort Statute: Federal Common Law As The Standard For Third Party Liability, Alexandra Bradley

Human Rights Brief

No abstract provided.

Corporate Governance Convergence: Lessons From The Indian Experience, Afra Afsharipour

Northwestern Journal of International Law & Business

Over the past two decades, corporate governance reforms have emerged as a central focus of corporate law in countries across the development spectrum. Various legal scholars studying these reform efforts have engaged in a vigorous debate about whether globalization will lead to convergence of corporate governance laws toward one model of governance: namely the Anglo-American, dispersed shareholder model, or whether existing national characteristics will thwart convergence. Despite rapid economic growth and reforms in developing countries such as India, the legal literature discussing this debate primarily focuses on developed economies. This Article examines recent corporate governance reforms in India as a …

Can Corporate Monitorships Improve Corporate Compliance?, Cristie Ford, David Hess

All Faculty Publications

Over the last few years, prosecutors and SEC enforcement attorneys have increasingly relied on settlement agreements (such as deferred prosecution agreements) to combat securities violations and other corporate criminal acts. Many of these agreements require the use of corporate monitors to oversee the corporation's compliance with the settlement and its implementation of a compliance program to prevent future violations of the law. Although these agreements have received significant attention from legislators and scholars, there has been no investigation into the critically important question of whether or not the use of corporate monitors achieves its intended goals. Based primarily on interviews …

Chairing The Board: The Case For Independent Leadership In Corporate North America, Millstein Center For Corporate Governance And Performance

Ira M. Millstein Center for Global Markets and Corporate Ownership

The number of non-executive chairmen at companies in North America has been increasing year by year. Recent figures, according to the 2008 Spencer Stuart Board Index, indicate that the last decade has seen a growing trend in separating the roles of the Chief Executive Officer (ceo) and the chairman of the board. In 1998, 16% of the s&p 500 featured distinct chairmen. Data shows that in 2008 as many as 39% appoint someone other than the ceo to chair the board. Traditionally, even in companies that split the role, the chairman was not completely independent, but rather commonly the ex-ceo …

Pay, Risk And Stewardship: Private Sector Architecture For Future Capital Markets, Mariana Pargendler

Ira M. Millstein Center for Global Markets and Corporate Ownership

The recent financial crisis revealed a massive failure of institutions that populate the world’s capital markets. Banks, investors, ratings agencies, regulators and numerous other players demonstrated that confidence in market responses was misplaced. The loss of faith in capital market institutions has represented a significant hurdle to recovery as financial institutions continue to be wary of one another, and the public is wary of all of them.

Restoring trust in the system requires two distinct pillars of reform. The first pillar, reform of the financial regulatory system, both nationally and globally, has received most of the attention so far. Many …

Agenda For Private Sector Reform: Omnibus Policy Recommendations For A Post-Crisis Market, Millstein Center For Corporate Governance And Performance

Ira M. Millstein Center for Global Markets and Corporate Ownership

The global financial crisis has exposed a raft of market weaknesses and failures The Center has concentrated on probing urgent, corporate governance-related issues where it identified apparent gaps in knowledge, insight and infrastructure. Policy Briefings have addressed the advisory vote on executive compensation; board-shareowner communications; proxy voting reform; independent board leadership; risk oversight; pay for performance; and shareowner stewardship. Using global perspectives, they address key concerns within the relevant subject areas and attempt to gather and present practical recommendations and ideas.

This report compiles summaries of the Center’s recommendations on these seven key areas from 2007 through mid-2009. The objective …

The Corporate Lawyer's Role In A Contemporary Democracy, Colin Marks, Nancy B. Rapoport

Scholarly Works

This paper reviews the traditional arguments for corporate social responsibility and asks the question of what corporate lawyers should do to help their clients do the right thing ethically. It also sets out a test - the technically test -- that highlights when something is usually on the wrong side of the ethical line. (If you have to give legal advice starting with "Well, technically...," you're on the wrong side of the line.)

Civil Liability And Mandatory Disclosure, Merritt B. Fox

Faculty Scholarship

This Article explores the efficient design of civil liability for mandatory securities disclosure violations by established issuers. An issuer not publicly offering securities at the time of a violation should have no liability. Its annual filings should be signed by an external certifier – an investment bank or other well-capitalized entity with financial expertise. If the filing contains a material misstatement and the certifier fails to do due diligence, the certifier should face measured liability. Officers and directors should face similar liability, capped relative to their compensation but with no indemnification or insurance allowed. Damages should be payable to the …