Business Organizations Law Commons^™

The Next Stage Of Csr For Canada: Transformational Corporate Governance, Hybrid Legal Structures, And The Growth Of Social Enterprise, Carol Liao

All Faculty Publications

The period when corporate social responsibility (CSR) only referred to corporate philanthropic donations has passed. Present day CSR is intimately intertwined with sustainable development, and its growth in the last several decades has been evident in Canada. The recent appearance of “hybrid” corporate legal structures on the international stage marks a growing trend toward enabling the dual pursuit of economic and social mandates for businesses. It suggests that the next significant stage in the CSR movement will be in the reformation and creation of corporate legal models that not only enable, but require, CSR concepts to be embodied within corporate …

Carrots And Sticks: How Vcs Induce Entrepreneurial Teams To Sell Startups, Brian J. Broughman, Jesse M. Fried

Articles by Maurer Faculty

Venture capitalists (VCs) usually exit their investments in a startup via a trade sale. But the entrepreneurial team – the startup’s founder, other executives, and common shareholders – may resist a trade sale. Such resistance is likely to be particularly intense when the sale price is low relative to VCs’ liquidation preferences. Using a hand-collected dataset of Silicon Valley firms, we investigate how VCs overcome such resistance. We find, in our sample, that VCs give bribes (carrots) to the entrepreneurial team in 45% of trade sales; in these sales, carrots total an average of 9% of deal value. The overt …

On The Rise Of Shareholder Primacy, Signs Of Its Fall, And The Return Of Managerialism (In The Closet), Lynn A. Stout

Cornell Law Faculty Publications

No abstract provided.

The Outside Investor: Citizen Shareholders & Corporate Alienation, Anne M. Tucker

Scholarly Works

This Article explores the creation and conundrum of citizen shareholders-investors who enter the securities market primarily through employer- sponsored defined-contribution plans, invest in mutual or index funds, and are saving for long-term goals like retirement. Citizen shareholders are a consequence of a retirement revolution, and are the fastest growing group of investors. Citizen shareholders are distinguishable from other shareholders on the grounds of choice, exit, and the number of intermediaries inserted into the investment chain in defined-contribution plans. They are largely missing from corporate policy and scholarship debates; few discussions have incorporated the growing reality that shareholder status has changed …

Teaching Citizens United V. Fec In The Introductory Business Associations Course, Michael D. Guttentag

Journal of Business & Technology Law

No abstract provided.

Fiduciary Duties And Fiduciary Outs, Julian Velasco

Journal Articles

Fiduciary outs are virtually ubiquitous in acquisition agreements, but almost unheard of in other contexts. This is because the fiduciary out is an inherently problematic device. Although it is not intended to do so, it almost necessarily transforms an agreement into an option in the hands of one party. Nevertheless, fiduciary outs make sense in the context of acquisition agreements. This is because fiduciary outs are essentially contractual proxies for fiduciary duties. As such, they have the same purpose: to protect shareholders from abuse at the hands of directors. Fiduciary outs do this in the context of acquisition agreements by …

The Lessons From Libor For Detection And Deterrence Of Cartel Wrongdoing, Rosa M. Abrantes-Metz, D. Daniel Sokol

UF Law Faculty Publications

In late June 2012, Barclays entered into a $453 million settlement with UK and U.S. regulators due to its manipulation of Libor between 2005 and 2009. Among the agencies that investigated Barclays is the Department of Justice Antitrust Division (as well as other antitrust authorities and regulatory agencies from around the world). Participation in a price fixing conduct, by its very nature, requires the involvement of more than one firm.

We are cautious to draw overly broad conclusions until more facts come out in the public domain. What we note at this time, based on public information, is that the …

Reforming Executive Compensation: What Do We Know And Where Do We Go?, Priyanka Rajagopalan

The Journal of Business, Entrepreneurship & the Law

In this Article, I study a fascinating problem - what are the legal, political and economic implications of regulating executive bonuses? While the Administration's recent consideration of proposals to tax bonuses of AIG executives has sparked a great deal of media speculation and attention, there has been little legal scholarship discussing the various possible consequences of this and other methods of regulating executive compensation. Especially given the growing interest in executive compensation and the possible benefits and costs of regulation in this arena, I believe this paper will make a significant scholarly contribution to the existing literature on corporate governance …

Ending The Silence: Shareholder Derivative Suits And Amending The Dodd-Frank Act So "Say On Pay" Votes May Be Heard In The Boardroom, William Alan Nelson Ii

University of Miami Business Law Review

No abstract provided.

Dodd-Frank's Say On Pay: Will It Lead To A Greater Role For Shareholders In Corporate Governance?, Randall S. Thomas, Alan R. Palmiter, James F. Cotter

Vanderbilt Law School Faculty Publications

"Say on pay" gives shareholders an advisory vote on a company's pay practices for its top executives. Beginning in 2011, Dodd-Frank mandated such votes at public companies. The first year of "say on pay" under the new legislation may have changed the dialogue and give-and-take in the shareholder-management relationship at some companies, particularly on the question of executive pay.

We study the evolution of shareholder voting on "say on pay" - beginning in 2006 as a fledgling shareholder movement to get "say on pay" on the corporate ballot, evolving as a handful of companies and later the financial firms receiving …

We Talk, You Listen: Should Shareholders' Voices Be Heard Or Stifled When Nominating Directors? How The Proposed Shareholder Director Nomination Rule Will Contribute To Restoring Proper Corporate Governance, Rose A. Zukin

Pepperdine Law Review

No abstract provided.

Eliminating The Executive Overcompensation Problem: How The Sec And Congress Have Failed And Why The Shareholders Can Prevail, Blake H. Crawford

The Journal of Business, Entrepreneurship & the Law

No abstract provided.

Theoretical And Methodological Perspectives, Joan Macleod Heminway

Book Chapters

No abstract provided.

The Politicization Of Corporate Governance: Bureaucratic Discretion, The Sec, And Shareholder Ratification Of Auditors, J. Robert Brown Jr.

Sturm College of Law: Faculty Scholarship

The role of the Securities and Exchange Commission in the corporate governance process has shifted dramatically in recent years. The Commission has increasingly supplanted state law in determining substantive standards of corporate governance. The replacement of states with the Commission will have significant consequences.

Venture Capital Investments In China: The Use Of Offshore Financing Structures And Corporate Relocations, Jing Li

Michigan Business & Entrepreneurial Law Review

Based on an analysis of the relevant Chinese laws and regulations governing the corporate governance structure of venture capital (“VC”)-invested firms, as well as a discussion on the feasibility of employing different alternatives to make direct and indirect VC investments in Chinese portfolio firms, this article studies a hand-collected sample consisting of the twenty-nine VCbacked Chinese portfolio firms that have been financed and listed from 1990 to 2005 in order to empirically show how these investments were actually made in practice. The findings show that twenty-three out of the twentynine firms received their VC investments in various offshore holding entities, …

Pathway To Minority Shareholder Protection: Derivative Actions In The People's Republic Of China, Donald C. Clarke, Nicholas C. Howson

Book Chapters

Using a dataset of Chinese judicial opinions arising in over fifty cases, this paper analyses the development and current implementation of shareholder derivative actions in the courts of the People’s Republic of China (“PRC”), both before and after the derivative lawsuit was explicitly authorized in the PRC’s 2006 Company Law effective January 1, 2006. In addition, we describe the very unique ecology of enterprise organization and corporate governance in modern China, and critique the formal design of the derivative action and offer reform suggestions. We find the design of the Chinese derivative lawsuit to be, in some respects, innovative and …

Corporate Governance: The Swedish Solution, George W. Dent

Faculty Publications

Sweden has changed its corporate governance system by delegating the nomination of corporate directors (and thus, in effect, ultimate control) to committees typically comprising representatives of each company’s largest shareholders. This system gives shareholders a degree of power “that only the most daring corporate governance initiatives in the rest of the world could even imagine.” By all accounts the change has been successful; no one is complaining about it.

In the United States investors have long been kept weak in corporate governance for fear that giving them a major role would damage corporations in numerous ways. The Swedish experience seems …

Corporate Control And Credible Commitment, Ronald J. Gilson, Alan Schwartz

Faculty Scholarship

The separation of control and ownership – the ability of a small group effectively to control a company though holding a minority of its cash flow rights – is common throughout the world, but also is commonly decried. The control group, it is thought, will use its position to consume excessive amounts of project returns, and this injures minority shareholders in two ways: there is less money and the controllers are not maximizing firm value. To the contrary, we argue here that there is an optimal share of the firm that compensates the control group for monitoring managers and otherwise …

Executive Trade Secrets, Tom C.W. Lin

UF Law Faculty Publications

The law discriminates among a corporation’s secrets. In the eyes of the law, commercial secrets of corporations are legitimate secrets that deserve legal protection and nondisclosure, but personal secrets of executives are not as deserving of legal protection and nondisclosure. This divergent treatment of secrets has resulted in a legal landscape of perplexing, paradoxical paths for corporations and executives concerning executive disclosures — a precarious landscape that has left corporations and investors dangerously susceptible to revelations of private facts that shock market valuation and institutional stability.

This Article explores this divergent treatment of secrets in the context of public corporations …

Improving The Benefit Corporation: How Traditional Governance Mechanisms Can Enhance The Innovative New Business Form, Steven Munch

Northwestern Journal of Law & Social Policy

In recent years, a number of states have offered innovative new business forms to accommodate social enterprises, organizations that pursue both profit and social purpose. These hybrid forms are designed to free socially conscious entrepreneurs from the strict pursuit of shareholder value maximization that often controls in business practice and law, allowing them instead to serve the interests of other company stakeholders or even society. One form, the benefit corporation, has been adopted by seven states and is now under consideration in several more. This Note details the development, provisions, and advantages of the benefit corporation. It also identifies and …

New Thinking On "Shareholder Primacy", Lynn A. Stout

Cornell Law Faculty Publications

By the beginning of the twenty-first century, many observers had come to believe that U.S. corporate law should, and does, embrace a "shareholder primacy" rule that requires corporate directors to maximize shareholder wealth as measured by share price. This Essay argues that such a view is mistaken.

As a positive matter, U.S. corporate law and practice does not require directors to maximize "shareholder value" but instead grants them a wide range of discretion, constrained only at the margin by market forces, to sacrifice shareholder wealth in order to benefit other constituencies and the firm itself. Although recent "reforms" designed to …

The Bizarre Law & Economics Of 'Business Roundtable V. Sec', Grant M. Hayden, Matthew T. Bodie

All Faculty Scholarship

Corporations are legal entities designed to foster certain kinds of collective economic activity. The decisionmaking power within a corporation ultimately rests with a board of directors elected by shareholders. Shareholders, however, do not use anything like a conventional ballot in these elections; instead, they fill out a “proxy ballot,” delivered to them by the incumbent board. This proxy ballot lists only the incumbent board’s chosen nominees, very often the board members themselves. If a shareholder wants to run for director or propose another nominee for the board, she needs to provide all other shareholders with a separate proxy ballot — …

Do Vcs Use Inside Rounds To Dilute Founders? Some Evidence From Silicon Valley, Brian Broughman, Jesse Fried

Articles by Maurer Faculty

In the bank-borrower setting, a firm's existing lender may exploit its positional advantage to extract rents from the firm in subsequent financings. Analogously, a startup's existing venture capital investors (VCs) may dilute the founder through a follow-on financing from these same VCs (an “inside” round) at an artificially low valuation. Using a hand-collected dataset of Silicon Valley startup firms, we find little evidence that VCs use inside rounds to dilute founders. Instead, our findings suggest that inside rounds are generally used as “backstop financing” for startups that cannot attract new money, and these rounds are conducted at relatively high valuations …

The Bizarre Law & Economics Of 'Business Roundtable V. Sec', Grant M. Hayden, Matthew T. Bodie

Faculty Journal Articles and Book Chapters

Corporations are legal entities designed to foster certain kinds of collective economic activity. The decisionmaking power within a corporation ultimately rests with a board of directors elected by shareholders. Shareholders, however, do not use anything like a conventional ballot in these elections; instead, they fill out a “proxy ballot,” delivered to them by the incumbent board. This proxy ballot lists only the incumbent board’s chosen nominees, very often the board members themselves. If a shareholder wants to run for director or propose another nominee for the board, she needs to provide all other shareholders with a separate proxy ballot — …

Agency And The Ontology Of The Corporation, Christopher M. Bruner

Scholarly Works

No abstract provided.

Equity Swaps And Implications In Company Law: An Examination Of Singapore Law, Chao-Hung Christopher Chen

Research Collection Yong Pung How School Of Law

This article explores issues from the use of equity swaps by corporate stakeholders under Singapore law. The article accepts that non-disclosure of economic interests might have an impact on market efficiency and corporate governance. To address potential problems, Singapore should consider revising the Takeover Code, while it requires further regulatory impact analysis to decide whether amendments to the Securities and Futures Act and the Companies Act are needed. As an alternative, companies can use their articles of association to impose a duty of disclosure before statutory intervention. In addition, the trading of equity swaps by directors raises issues about fiduciary …

Behavioral Approaches To Corporate Law, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

This chapter reviews the challenges associated with developing a plausible theory of why psychological "heuristics and biases" might persist in high-stakes business settings. Specific attention is given to issues of loyalty on corporate boards, behavioral finance, and corporate cultures.

The Corporate Governance Of Iconic Executives, Tom C.W. Lin

UF Law Faculty Publications

This Essay explores the special corporate governance challenges posed by iconic executives. Iconic executives are complex, bittersweet figures in corporate governance narratives. They are alluring, larger-than-life corporate figures who often govern freely. Iconic executives frequently rule like monarchs over their firms, offering lofty promises to shareholders, directors, and managers under their reign. But like many stories of powerful and influential figures, the narratives of iconic executives also contain adversity and danger. Part of the acquiescence and enchantment with such figures is rooted in the virtuous promises embodied by their presence, promises of unity, accountability, and effectiveness in corporate governance. Unfortunately, …

Dodd-Frank, Compensation Ratios, And The Expanding Role Of Shareholders In The Governance Process, J. Robert Brown Jr.

Sturm College of Law: Faculty Scholarship

The Dodd-Frank Act included a number of provisions designed to reform the executive compensation process. One of the provisions, Section 953(b), requires disclosure of a ratio that compares CEO compensation with the median income of employees. Although hardly noticed at the time of adoption, the provision has since generated opposition, with many of the concerns involving the logistics associated with implementation. Efforts to repeal Section 953(b) have surfaced in Congress.

Are Institutional Investors Part Of The Problem Or Part Of The Solution?: Key Descriptive And Prescriptive Questions About Shareholders, Ben W. Heineman Jr., Stephen Davis

Ira M. Millstein Center for Global Markets and Corporate Ownership

Over the last twenty years, institutional investors have owned an increasing share of public equity markets — more than 70 percent of the largest 1,000 companies in the United States in 2009, for example. Over the past two years, in response to failures of some boards of directors and business leaders, shareholders, including institutional investors, have been given increased powers to participate in — or have disclosures about — discrete spheres of governance in publicly held corporations. Moreover, during this same period, and in multiple jurisdictions, there have been increasing calls from both the public and private sectors for institutional …