Business Organizations Law Commons^™

Bonding Limited Liability, Robert J. Rhee

William & Mary Law Review

Limited liability is considered a “birthright” of corporations. The concept is entrenched in legal theory, and it is a fixed reality of the political economy. But it remains controversial. Scholarly debate has been engaged in absolute terms of defending the rule or advocating its abrogation. Though compelling, these polar positions, often expressed in abstract arguments, are associated with disquieting effects. Without limited liability, efficiency may be severely compromised. With it, involuntary tort creditors bear some of the cost of an enterprise. Most other proposals for reforming limited liability have been incremental, such as modifying veil-piercing. However, neither absolutism nor marginalism …

Assessing The Chrysler Bankruptcy, Mark J. Roe, David Skeel

Michigan Law Review

Chrysler entered and exited bankruptcy in forty-two days, making it one of the fastest major industrial bankruptcies in memory. It entered as a company widely thought to be ripe for liquidation if left on its own, obtained massive funding from the United States Treasury, and exited via a pseudo-sale of its main assets to a new government-funded entity. The unevenness of the compensation to prior creditors raised concerns in capital markets, which we evaluate here. We conclude that the Chrysler bankruptcy cannot be understood as complying with good bankruptcy practice, that it resurrected discredited practices long thought interred in the …

Zappers - Retail Vat Fraud, Richard Thompson Ainsworth

Faculty Scholarship

Zappers skim cash sales at retail. Zappers are add-on programs used by merchants with electronic cash registers (ECRs) or point-of-sale (POS) systems. Zappers are smart and selective. They do not skim all sales, and they never skim credit card transactions.

Although they are present in every jurisdiction, Zappers appear to be most widely used in developed economies that combine high levels of cash sales with high rates of consumption tax. Sweden, for example, has a cash-intensive economy, one of the world’s highest VAT rates (25%), and also reports that 70% of the ECRs in the country are either “… constructed …

Should Firms Be Allowed To Indemnify Their Employees For Sanctions?, Wallace P. Mullin, Christopher M. Snyder

Dartmouth Scholarship

Policymakers have questioned whether firms should be allowed to indemnify their employees for personal sanctions for corporate crimes. This article provides the first formal analysis of this form of indemnification. Targeting employees with unindemnifiable sanctions carries the social cost of exposing employees of law-abiding firms to the risk of mistaken government prosecution. Deterrence is typically achieved more efficiently by sanctioning the firm alone. We find the circumstances under which the government shouldadditionally sanction employees to be quite limited and the circumstances under which the government should ban indemnification of these sanctions to be more limited still. One circumstance is when …

To Be Or Not To Be? Citizens United And The Corporate Form, Reuven S. Avi-Yonah

Law & Economics Working Papers

In Citizens United vs. FEC, the Supreme Court struck down a Federal ban on direct corporate expenditures on political campaigns. The decision has been widely criticized and praised as a matter of First Amendment law. But it is also interesting as another step in the evolution of our legal views of the corporation. The thesis of this Article is that by viewing Citizens United through the prism of theories about the corporate form, it is possible to understand why both the majority and the dissent departed from previous Supreme Court cases on the First Amendment rights of corporations, and to …

Re-Enchanting The Corporation, Lyman P.Q. Johnson

William & Mary Business Law Review

No abstract provided.

Beyond Shareholder Value: Normative Standards For Sustainable Corporate Governance, Robert Sprague

William & Mary Business Law Review

This Article explores whether the modern corporate governance model is sustainable. For many corporations, particularly large ones, there is a separation between ownership and management, with a management emphasis on short-term gains at the expense of long-term sustainability. This Article explores the role of corporate directors, particularly vis-a-vis shareholders, from an interdisciplinary perspective, analyzing legal case law as well as legal, management, and finance literature. This Article explores emerging trends in expanding notions of corporate governance that incorporate concerns beyond just shareholders, recognizing the interrelationship between business and society. It is suggested that in order to remain viable and competitive, …

Co2 Mtic Fraud — Technologically Exploiting The Eu Vat (Again), Richard Thompson Ainsworth

Faculty Scholarship

On February 1, 2010 Algirdas Šemeta is expected to be confirmed as the next European commissioner for taxation, customs union, audit and anti-fraud. If his nomination passes a confirmation hearing at the European Parliament he will succeed László Kovács. At the top of Mr. Šemeta’s list of things requiring attention should be MTIC fraud in tradable CO2 permits. Political and fiscal realities make CO2 MTIC fraud a top priority.

CO2 MTIC is a technology-driven fraud that takes advantage of the same weaknesses in the EU VAT that have become well known in the cell phone and computer chip trade. The …

Populist Retribution And International Competition In Financial Services Regulation, Adam C. Pritchard

Law & Economics Working Papers

This essay compares the current effort to reform financial services regulation with the regulatory initiatives that come out of the Great Depression. Unlike the 1930s, policymakers today must account for the impact of regulatory competition in crafting responses to the financial crisis. The available evidence suggests that jurisdictional competition is no match for the forces of populist retribution in modern democratic states.

Quebec's Sales Recording Module (Srm): Fighting The Zapper, Phantomware, And Tax Fraud With Technology, Richard Thompson Ainsworth

Faculty Scholarship

No abstract provided.

Corporate Law In The Shanghai People's Courts, 1992-2008: Judicial Autonomy In A Contemporary Authoritarian State, Nicholas C. Howson

Law & Economics Working Papers

In late 2005 China adopted a largely rewritten Company Law that radically increased the role of courts. This study, based on a review of more than 1000 Company Law-related disputes reported between 1992 and 2008 and extensive interactions with PRC officials and sitting judges, evaluates how the Shanghai People’s Court system has fared over 15 years in corporate law adjudication. Although the Shanghai People’s Courts show generally increasing technical competence and even intimations of political independence, their path toward institutional autonomy is inconsistent. Through 2006, the Shanghai Court system demonstrated significantly increased autonomy. After 2006 and enactment of the new …

The Role Of Corporate Law In Preventing A Financial Crisis: Reflections On In Re Citigroup Inc. Shareholder Derivative Litigation, Franklin A. Gevurtz

Global Business & Development Law Journal

No abstract provided.

Bonding Limited Liability, Robert J. Rhee

Faculty Scholarship

Limited liability is considered a “birthright” of corporations. The concept is entrenched in legal theory, and it is a fixed reality of the political economy. But it remains controversial. Scholarly debate has been engaged in absolute terms of defending the rule or advocating its abrogation. Though compelling, these polar positions, often expressed in abstract arguments, are associated with disquieting effects. Without limited liability, efficiency may be severely compromised. With it, involuntary tort creditors bear some of the cost of an enterprise. Most other proposals for reforming limited liability have been incremental, such as modifying veil piercing. However, neither absolutism nor …

The Madoff Scandal, Market Regulatory Failure And The Business Education Of Lawyers, Robert J. Rhee

Faculty Scholarship

This essay suggests that a deficiency in legal education is a contributing cause of the regulatory failure. The most scandalous malfeasance of this new era, the Madoff Ponzi scheme, evinces the failure of improperly trained lawyers and regulators. It also calls into question whether the prevailing regulatory philosophy of disclosure of disclosure is sufficient in a complex market. This essay answers an important question underlying these considerations: What can legal education do to better train business lawyers and regulators for a market that is becoming more complex? One answer, it suggests, is a simple one: law schools should teach a …

Crisis, Rescue And Corporate Social Responsibility Under American Corporate Law, Robert J. Rhee

Faculty Scholarship

This chapter discusses the legal issues of rescue and corporate social responsibility during times of public crisis. It analyzes a corporate board’s fiduciary duty related to the management of a public crisis and the provision of aid to government and the public. The thesis is that American corporate law adequately provides corporate boards authority to assume broad principles of corporate social responsibility, and that during a public crisis this authority is specially recognized in the enabling statutes of corporate law and should be broadened even further to pursue the public good in exigent circumstances.

Trusts Versus Corporations: An Empirical Analysis Of Competing Organizational Forms, A. Joseph Warburton

College of Law - Faculty Scholarship

This paper studies the effects of organizational form on managerial behavior and firm performance, from an empirical perspective. Managers of trusts are subject to stricter fiduciary responsibilities than managers of corporations. This paper examines the ramifications empirically, by exploiting data generated by a change in British regulations in the 1990s that allowed mutual funds to organize as either a trust or a corporation. I find evidence that trust law is effective in curtailing opportunistic behavior, as trust managers charge significantly lower fees than their observationally equivalent corporate counterparts. Trust managers also incur lower risk. However, evidence suggests that trust managers …

The U.S. As Reluctant Shareholder: Government, Business And The Law, Barbara Black

Faculty Articles and Other Publications

Despite the likelihood of future bailouts, the government articulated a consistent policy to deal with private enterprise failure, and there is no rule book for how the government should act This is not surprising; the philosophy of free market capitalism, so deeply engrained in the U.S. economic system, is difficult to reconcile with government's rescue of businesses that fail in that system. Unlike some other countries, the U.S. government does not invest surplus funds or engage in entrepreneurial activities for economic gain. The phrase "nationalizing private business" conveys serious negative connotations.

Accordingly, how the government behaves when it is a …

What Can We Learn From The 2010 Bp Oil Spill: Five Important Corporate Law And Life Lessons, Joseph Karl Grant

McGeorge Law Review

No abstract provided.

Iss Recommendations And Mutual Fund Voting On Proxy Proposals, James Cotter, Alan Palmiter, Randall Thomas

Villanova Law Review (1956 - )

No abstract provided.

Freezing Out Ben & Jerry: Corporate Law And The Sale Of A Social Enterprise Icon, Antony Page, Robert A. Katz

Faculty Publications

Companies with social missions are frequently bought by larger, more conventional profit-seeking firms and just as frequently accused of “selling out.” Ben & Jerry’s Homemade Inc. is perhaps the leading example: its takeover by international conglomerate Unilever is an oft-repeated cautionary tale of the negative proclivities of the publicly-traded corporate form and profit-maximizing corporate law. Contrary to conventional wisdom, however, corporate law did not compel the sale, or sell-out, of Ben & Jerry’s. This familiar account omits a critical part of the narrative -- the company and its founders had established impressive anti-takeover defenses that, when pressed, the board declined …

Managerial Entrenchment And Shareholder Wealth Revisited: Theory And Evidence From A Recessionary Market, Jay B. Kesten

Scholarly Publications

Does managerial entrenchment create or destroy shareholder value? This Article presents both theory and evidence that the answer to this question is not monolithic, but rather depends on factors that vary greatly with the macroeconomic climate, such as firm profitability, takeover frequency, and valuation of takeover premiums. The mainstream view, both of academics and market participants, is that entrenchment reduces accountability to shareholders and amplifies agency costs, thus decreasing shareholder wealth. Two influential studies (Bebchuk, Cohen & Ferrell (2009) and Gompers, Ishii & Metrick (2003)) present empirical evidence consistent with this conclusion, finding statistically significant negative correlations between entrenchment and …

Re-Enchanting The Corporation, Lyman P.Q. Johnson

Scholarly Articles

This Essay begins with Max Weber’s observation that the condition of the modern world is “disenchanted” and goes on to argue that contesting the notion of disenchantment offers a promising framework for rethinking baseline issues in corporate law and corporate life more generally. After elaborating what disenchantment meant to Weber, this Essay offers two counter-observations. First, the world may not be better off as a result of disenchantment. Second, as an empirical matter the world may not really be “disenchanted” given the substantial number of people who both hold religious beliefs and consistently report that those beliefs influence how they …

See No Evil? Revisiting Early Visions Of The Social Responsibility Of Business: Adolf A. Berle’S Contribution To Contemporary Conversations, Erika George

Seattle University Law Review

Much corporate legal scholarship considers such fact patterns as beyond the scope of the discipline’s core concerns. Yet, increasingly, questions are asked concerning the scale and scope of modern corporate power. This Article will challenge the conventional understanding of what the core discipline of corporate law should encompass and argues that the failure to focus on precisely these sorts of factual scenarios involving allegations of corporate complicity in human rights violations and environmental degradation is misguided and short-sighted.

Neo-Brandeisianism And The New Deal: Adolf A. Berle, Jr., William O. Douglas, And The Problem Of Corporate Finance In The 1930s, Jessica Wang

Seattle University Law Review

This essay revisits Adolf A. Berle, Jr. and The Modern Corporation and Private Property by focusing on the triangle of Berle, Louis D. Brandeis, and William O. Douglas in order to examine some of the underlying assumptions about law, economics, and the nature of modern society behind securities regulation and corporate finance in the 1930s. I explore Douglas and Berle’s academic and political relationship, the conceptual underpinnings of Brandeis, Berle, and Douglas’s critiques of modern finance, and the ways in which the two younger men—Berle and Douglas—ultimately departed from their role model, Brandeis.

The Role Of Independent Directors In Startup Firms, Brian Broughman

Articles by Maurer Faculty

This Article develops a new theory to explain the widespread use of independent directors in the governance of startup firms. Privately held startups often assign a tie-breaking board seat to a third-party independent director. This practice cannot be explained by the existing corporate governance literature, which relies on diffuse ownership and passive investment-features unique to the publicly traded firm. To develop an alternative theory, I model a financing contract between an entrepreneur and a venture capital investor. I show that allocating a tie- breaking vote to an unbiased thirdparty can prevent opportunistic behavior that would occur ifthe firm were controlled …

The Public Control Of Corporate Power: Revisiting The 1909 U.S. Corporate Tax From A Comparative Perspective, Ajay K. Mehrotra

Articles by Maurer Faculty

The origins of U.S. corporate taxation are often associated with the 1909 corporate excise tax. Scholars who have investigated the beginnings of this levy have mainly focused on the legislative history of the 1909 corporate tax to argue that it was either an expression of the Progressive Era impulse to regulate large-scale corporations or an attempt to use corporations as remittance devices to collect taxes aimed at wealthy shareholders. This Article broadens the conventional historical accounts of the emergence of American corporate taxation by revisiting the 1909 U.S. corporate tax from a comparative perspective. The aim is to look both …

Litigation And Recoupment Of Executive Compensation, Stephanie L. Soondar, Allen Major, Candace Hines

UC Law Business Journal

Merrill Lynch suffered fourth quarter losses of $9.8 billion dollars in 2008. Simultaneous to its $50 billion federally aided acquisition by Bank of America, Merrill was given the green light by Bank of America to pay as much as $5.6 billion dollars in incentive compensation. The legal fallout regarding the losses and the bonuses has been dramatic by any standard. As a separate drama, Troubled Asset Relief Program Special Master Kenneth Feinberg has been a constant presence in the media throughout 2009, ruling on compensation proposals at companies that received federal financing. Contemporaneously, the legal and business communities are curiously …

How To Avoid The Constraints Of Rule 10b-5(B): A First Circuit Guide For Underwriters, 43 J. Marshall L. Rev. 931 (2010), Eric H. Franklin

UIC Law Review

No abstract provided.

Running From The United States Treasury: The Need To Reform The Taxation Of Multinational Corporations, 43 J. Marshall L. Rev. 1041 (2010), Jennifer Barton

UIC Law Review

No abstract provided.

The Price Of Admission: How Inconsistent Enforcement Of Antitrust Laws In America's Live Entertainment Sector Hurts The Average Consumer, 44 J. Marshall L. Rev. 261 (2010), Nathan B. Grzegorek

UIC Law Review

No abstract provided.