Business Organizations Law Commons^™

The Reform Of The Corporate Duty Of Care In China -- From The Introspection Of Delaware And Taiwan, Jui-Chien Cheng

Maurer Theses and Dissertations

The concept of fiduciary duty, derived from common law, was introduced to the Company Law of People’s Republic of China in 2005. The fiduciary duty plays an extremely important role in common law, particularly in U.S. corporate law. For this reason, one might have expected dramatic consequences from its introduction to Chinese law. In reality, however, few fiduciary lawsuits have been brought to the courts of China since 2005. There are three main reasons for the rarity of due care lawsuits.

First, Chinese fiduciary law has neither clear content nor a practical enforcement. This is especially true of the body …

Shareholders Do Not Have Standing To Bring An Individual Action Against Third Parties Who Have Damaged The Corporation: Adair V. Wozniak, Frank Carrino

Akron Law Review

Apart from the context of a derivative action, can a shareholder in a corporation sue individually for wrongful acts committed against the corporation by third parties?

The general rule of corporate law states that a shareholder cannot attain standing for such a suit. This rule is grounded on the theory that all shareholders should incur loss from third party wrongdoing in proportion to the amount of shares he or she holds, and likewise should proportionately benefit when the corporate entity wins an action. In addition, courts are fearful that if this rule were not in force, then there would be …

Does Corporate Law Matter? Legal Capital Restrictions On Stock Distributions, Craig A. Peterson, Norman W. Hawker

Akron Law Review

This paper consists of five sections, including this introduction. The background section of this article consists of several parts. First, we provide an historical overview of the legal capital doctrines restricting dividends. Second, we briefly summarize and illustrate six basic types of state statutory restrictions on dividends and other distributions to shareholders. Third, we examine the criticisms of legal capital that has led many states to abandon the use of concepts like stated capital and surplus to restrict financial distributions to shareholders. Fourth, a discussion of the generally accepted accounting principles ("GAAP") and mechanics of legal capital and stock distributions …

Competing With Delaware: Recent Amendments To Ohio's Corporate Statutes, David Porter

Akron Law Review

House Bill 301 is evolutionary, not revolutionary, in its content, but its changes are nonetheless significant for Ohio corporations and their lawyers. To place these changes in context, this article summarizes corporate statutory developments since 1997 that highlight Ohio’s previous initiatives to keep up with Delaware, America’s dominant state of incorporation, and then discusses at greater length the recent amendments contained in House Bill 301, concluding with a look ahead at some additional changes that may occur as early as this year.

The Myth Of The Unbiased Director, Regina F. Burch

Akron Law Review

This Article seeks to use social science research to better understand why these and other corporate governance problems persist. One reason may be that boards are biased as to how they respond to these issues. Social science research on risk perception informs us that individuals’ “preferences among different types of risk taking (or avoiding), correspond to cultural biases—that is, to worldviews or ideologies entailing deeply held values and beliefs defending different patterns of social relations.” Cultural theorists have identified four competing worldviews: communitarian, individualistic, hierarchical, and egalitarian. The communitarian and individualistic worldviews are at opposite ends of a spectrum measuring …

Executive Compensation In Controlled Companies, Kobi Kastiel

Indiana Law Journal

Conventional wisdom among corporate law theorists holds that the presence of a controlling shareholder should alleviate the problem of managerial opportunism because such a controller has both the power and incentives to curb excessive executive pay. This Article challenges that common understanding by proposing a different view based on an agency problem paradigm. Controlling shareholders, this Article suggests, may in fact overpay managers in order to maximize controllers’ consumption of private benefits, due to their close social and business ties with professional managers or for other reasons, such as being captured by professional managers. This tendency to overpay managers is …

Is The Quest For Corporate Responsibility A Wild Goose Chase? The Story Of Lovenheim V. Iroquois Brands, Ltd., D.A. Jeremy Telman

Akron Law Review

This Article is a Law Story. Law Stories have many purposes, but their main goal is to supplement and demystify the case method of legal pedagogy. The case method has been criticized for presenting students with the law more or less as a fait accompli. The case method assumes a pre-existing body of law that students passively learn rather than learning to think of the law as something that they will have a hand in shaping...In Part II, this Article explores the law of shareholder proposals and the reasons why the SEC and the courts permit proposals relating to social …

A Defense Of The Corporate Law Duty Of Care, Julian Velasco

Journal Articles

Most people would acknowledge the importance of the duty of loyalty, but the same is not true of the duty of care. Historically, the corporate law duty of care has been underenforced at best, and arguably unenforced entirely. Some scholars do not consider the duty of care to be a fiduciary duty at all, and there are those who would do away with it entirely. In this paper, I intend to provide a comprehensive defense of the corporate law fiduciary duty of care. I hope to show that the duty of care is not simply an ill-fitting appendage to the …

Voter Primacy, Sarah C. Haan

Fordham Law Review

    This Article argues that Citizens United v. FEC expanded the audience for campaign finance disclosure to include a group that had never before been held relevant to campaign finance disclosure—corporate shareholders—and explores the constitutional, policy, and political consequences of this change. In part IV of Citizens United, the U.S. Supreme Court departed from more than thirty years of campaign finance disclosure analysis to treat corporate shareholders as a target audience for corporate electoral spending disclosure, holding that the governmental interest advanced by campaign finance disclosure laws includes an interest in helping corporate shareholders “determine whether their corporation’s political speech advances …

Of Bitcoins, Independently Wealthy Software, And The Zero-Member Llc, Shawn Bayern

Northwestern University Law Review

No abstract provided.

Convergence And Persistence In Corporate Law And Governance, Jeffrey N. Gordon

Faculty Scholarship

This chapter discusses the question of “convergence or persistence” in corporate law and governance. It first considers efforts to measure convergence directly by focusing on the evolution of law-on-the-books governance provisions before analyzing capital market evidence on convergence, with particular emphasis on capital market indicators such as the decline in “cross-listings” onto US stock exchanges by firms from jurisdictions with weaker investor protection and the increase in initial public offerings (IPOs) on emerging market stock markets. The chapter proceeds by reviewing evidence of divergence, especially “divergence within convergence,” and the failure of the European Union to produce more convergent corporate …

Tax And Corporate Governance: The Influence Of Tax On Managerial Agency Costs, David M. Schizer

Faculty Scholarship

This chapter examines the influence of tax on managerial agency costs, with particular emphasis on public companies in the United States. Focusing on “C-corporations,” this chapter first considers why tax is an imperfect vehicle for mitigating managerial agency costs. It then discusses how tax influences the compensation of managers, both in ways policy makers intended, and in ways they did not. The chapter also considers how tax affects management decisions about capital structure, hedging, and acquisitions. In addition, this chapter explores the tax system’s influence on the ability and incentives of shareholders to monitor management. This chapter then concludes with …

Expanding The Array Of Accountable Actors: Human Rights And Corporate Social Responsibility, Erika George

Faculty Scholarship

Additional actors are being asked to assume responsibility for protecting human rights and preventing violations. I argue that it is appropriate and important to expand the human rights paradigm into other arenas, including corporate social responsibility. Expanding the array of actors understood to have a responsibility to respect human rights could serve to aid an under-resourced and overburdened human rights system to advance the rights protections that it was created to promote. While human rights activists have traditionally turned to intergovernmental institutions and state governments to protect rights and to remedy violations, the recent trend is to expand our understanding …

Institutional Investing When Shareholders Are Not Supreme, Christopher Greczy, Jessica S. Jeffers, David K. Musto, Anne M. Tucker

Scholarly Works

Institutional investors, with trillions of dollars in assets under management, hold increasingly important stakes in public companies and fund individual retirement for many Americans, making institutional investors' behaviors and preferences paramount determinants of capital allocation. In this paper, we examine high fiduciary duty institutions' (HFDIs') response to decreased profit maximization pressure as measured by the effect of constituency statutes on HFDI investment. We ask this question, in part, to anticipate HFDIs' response to alternative purpose firms, like benefit corporations. Only with access to institutional investors' capital can alternative purpose firms gain economic significance to rival the purely for-profit corporation. In …

Locked In: The Competitive Disadvantage Of Citizen Shareholders, Anne M. Tucker

Scholarly Works

Indirect investors—especially mutual fund investors—are often low-dollar, low-incentive, rationally apathetic investors facing enormous information asymmetries and collective action problems. These traits raise difficult corporate governance questions about how indirect investors exercise or should exercise their right to vote in fund elections, obtain fund-related information, and pursue litigation against the fund. These questions are all the more important in light of how many indirect investors own mutual funds through employer-sponsored defined contribution retirement plans.

John Morley and Quinn Curtis’s 2010 article, Taking Exit Rights Seriously, offers a clear answer to this problem. They assert that the best solution for all mutual …

Income Inequality And Corporate Structure, Matthew T. Bodie

All Faculty Scholarship

Efforts to address income inequality generally focus on wealth redistribution through taxation and government benefits. But these efforts do not attack the core problem -- the unfair distribution of wealth at the firm level. This essay, a contribution to the "Inequality, Opportunity, and the Law of the Workplace" symposium, argues that workers need power within their firms to stake their claims to larger slices of the corporate pie. Even though the current law of the workplace does provide regulatory support for workers, it fails to change internal firm governance. Policymakers who want to take on income inequality as a structural …

Delaware's Familiarity, Brian J. Broughman, Darian M. Ibrahim

Articles by Maurer Faculty

Why do corporations choose to incorporate in Delaware over other states? The existing literature primarily falls into two camps — the “race-to-the-top” and the “race-to-the-bottom” — both of which credit Delaware’s success to the quality of its corporate law and the expertise of its judges. We consider an alternative explanation for Delaware’s continued success: familiarity. After decades of dominance, business parties have become increasingly familiar with Delaware law. Using data from a sample of startups financed by venture capital, we find that firms domicile in Delaware as much for familiarity reasons as for its substantive features. The Article finishes by …

A Failure Of Substance And A Failure Of Process: The Circular Odyssey Of Oklahoma's Corporate Law Amendments In 2010, 2012, And 2013, Steven J. Cleveland

Oklahoma Law Review

No abstract provided.

The Short Road Home To Delaware: Boilermakers Local 154 Retirement Fund V. Chevron, Anne M. Tucker

The Journal of Business, Entrepreneurship & the Law

One of the biggest Delaware Supreme Court cases of 2013 wasn’t. The Delaware Court of Chancery opinion in Boilermakers Local 154 Retirement Fund v. Chevron Corp., upheld the enforceability of Delaware forum selection clause bylaws unilaterally adopted by corporate boards of directors. It was widely expected that the Delaware Supreme Court would uphold the Court of Chancery’s opinion. However, Plaintiffs dismissed their appeal and moved to dismiss their remaining claims in the Court of Chancery, leaving intact Chancellor Strine’s strong support of forum selection clauses. National Industries Group (Holding) v. Carlyle Investment Managements L.L.C. and TC Group, L.L.C., a 2013 …

Unanimous Shareholder Agreements, Nicolas William Juzda

PhD Dissertations

The unanimous shareholder agreement is a feature of most Canadian corporate statutes that allows the shareholders to, by creating an agreement meeting the necessary criteria, restrict the powers of the directors to manage the business and affairs of the corporation. One possible justification for this is the "nexus of contracts" theory that all corporations are notionally reducible to voluntary agreements. Three key areas of ambiguity surrounding unanimous shareholder agreements are examined in this dissertation, with specific reference to existing judgments. The requirements for their formation are reviewed, including the exact meaning and strictness of the unanimity criterion and the necessity …

Comment On The Proposed Definition Of “Eligible Organization” For Purposes Of Coverage Of Certain Preventative Services Under The Affordable Care Act, Lyman P.Q. Johnson, David K. Millon, Stephen M. Bainbridge, Ronald J. Colombo, Brett Mcdonnell, Alan J. Meese, Nathan B. Oman

Scholarly Articles

In late August 2014, after suffering a defeat in the Supreme Court Hobby Lobby decision when the Court held that business corporations are “persons” that can “exercise religion,” the Department of Health and Human Services (“HHS”) proposed new rules defining “eligible organizations.” Purportedly designed to accommodate the Hobby Lobby ruling, the proposed rules do not comport with the reasoning of that important decision and they unjustifiably seek to permit only a small group of business corporations to be exempt from providing contraceptive coverage on religious grounds. This comment letter to the HHS about its proposed rules makes several theoretical and …

Shareholder Voting In An Age Of Intermediary Capitalism, Paul H. Edelman, Randall S. Thomas, Robert B. Thompson

Vanderbilt Law School Faculty Publications

Shareholder voting is a key part of contemporary American corporate governance. As numerous contemporary battles between corporate management and shareholders illustrate, voting has never been more important. Yet, traditional theory about shareholder voting, rooted in concepts of residual ownership and a principal/agent relationship, does not reflect recent fundamental changes as to who shareholders are and their incentives to vote (or not vote). In the first section of the article, we address this deficiency directly by developing a new theory of corporate voting that offers three strong and complementary reasons for shareholder voting. In the middle section, we apply our theory …

Secret Arbitration Or Civil Litigation?: An Analysis Of The Delaware Arbitration Program, Jores Kharatian

The Journal of Business, Entrepreneurship & the Law

No abstract provided.

The Delaware Arbitration Experiment: Not Just A “Secret Court”, Jessica Tyndall

The Journal of Business, Entrepreneurship & the Law

No abstract provided.

Delaware's Closed Door Arbitration: What The Future Holds For Large Business Disputes And How It Will Affect M&A Deals, Myron T. Steele, Thomas J. Stipanowich, Robert Anderson, James R. Griffin, Katherine Blair, Monica Shilling

The Journal of Business, Entrepreneurship & the Law

No abstract provided.

In Quest Of The Arbitration Trifecta, Or Closed Door Litigation?: The Delaware Arbitration Program , Thomas J. Stipanowich

The Journal of Business, Entrepreneurship & the Law

The Delaware Arbitration Program established a procedure by which businesses can agree to have their disputes heard in an arbitration proceeding before a sitting judge of the state’s highly regarded Chancery Court. The Program arguably offers a veritable trifecta of procedural advantages for commercial parties, including expert adjudication, efficient case management and short cycle time and, above all, a proceeding cloaked in secrecy. It also may enhance the reputation of Delaware as the forum of choice for businesses. But the Program’s ambitious intermingling of public and private forums brings into play the longstanding tug-of-war between the traditional view of court …

A Court For The One Percent: How The Supreme Court Contributes To Economic Inequality, Michele E. Gilman

All Faculty Scholarship

This Article explores the United States Supreme Court’s role in furthering economic inequality. The Occupy Wall Street movement in 2011 not only highlighted growing income and wealth inequality in the United States, but also pointed the blame at governmental policies that favor business interests and the wealthy due to their outsized influence on politicians. Numerous economists and political scientists agree with this thesis. However, in focusing ire on the political branches and big business, these critiques have largely overlooked the role of the judiciary in fostering economic inequality. The Court’s doctrine touches each of the major causes of economic inequality, …

A Canadian Model Of Corporate Governance: Where Do Shareholders Really Stand?, Carol Liao

All Faculty Publications

This feature article in the Director Journal summarizes the findings from the report, "A Canadian Model of Corporate Governance: Insights from Canada's Leading Legal Practitioners," produced for the Canadian Foundation for Governance Research and the Institute of Corporate Directors (also available on SSRN).

In the report, interviews were conducted with 32 leading senior legal practitioners across Canada to opine on the fundamental principles that are driving the development of Canadian corporate governance. The report found that Canadian common law has made the process of considering stakeholders in the "best interests of the corporation" more overt, well beyond what is assumed …

A Canadian Model Of Corporate Governance, Carol Liao

All Faculty Publications

What is Canada’s actual legal model to govern its corporations? Recent landmark judicial decisions indicate Canada is shifting away from an Anglo-American definition of shareholder primacy. Yet the Canadian securities commissions have become increasingly influential in the governance sphere, and by nature are shareholder-focused. Shareholders’ rights have increased well beyond what was ever contemplated by Canadian corporate laws, and the issue of greater shareholder vs. board control has now become the topic of live debate. The future of Canada's overall model seems to rest on what will be more compelling: the constancy of the corporate statutes and trajectory of the …

Inequities In Corporate And Securities Law: Disabling The Exploitative Chinese Corporation And Charting A Path To International Commercial Accountability, Jonathan P. Schmidt

San Diego International Law Journal

This article seeks to illuminate these issues and provide a roadmap for the U.S. federal and state legislatures to come together to protect the U.S. investor from the type of accounting fraud and stock misinformation that was the impetus behind enacting the Sarbanes-Oxley Act of 2002. First, this article will discuss the legal backdrop and legislative policy behind U.S. laws such as SOX and its enforcement mechanisms, and the ability for shareholders to bring securities class action derivative actions for financial fraud. This article will also discuss trade secrets laws, criminal extradition treaties, international enforcement of judgments, and elucidate the …