Business Organizations Law Commons^™

The Uncorporation And The Unraveling Of 'Nexus Of Contracts' Theory, Grant M. Hayden, Matthew T. Bodie

Michigan Law Review

A corporation is not a contract. It is a state-created entity. It has legal personhood with the right to form contracts, suffer liability for torts, and (as the Supreme Court recently decided) make campaign contributions. However, many corporate law scholars have remained wedded to the conception-metaphor, model, paradigm, what have you-of the corporation as a contract or "nexus" of contracts. The nexus of contracts theory is meant to point up the voluntary, market-oriented nature of the firm and to dismiss the notion that the corporation owes anything to the state. It is also used as a justification for preserving the …

At The Intersection Of Corporate Governance And Environmental Sustainability, Jayne W. Barnard

William & Mary Business Law Review

Most boards of public companies have learned to live comfortably with audit committees, nominating committees, and compensation committees. An increasing number of companies are now also creating risk-management committees. This Essay explores the early stages of development of yet another board-level committee: the sustainability committee. The Essay posits several advantages to having a board-level sustainability committee and identifies possible sources of pressure for the creation of more such committees. It also suggests some of the disadvantages of sustainability committees and cautions against cosmetic governance reform. By examining what we know today (and can imagine tomorrow) about sustainability committees, this Essay …

Naming, Identity, And Trademark Law, Laura A. Heymann

Faculty Publications

As the process of creation in the age of digital media becomes more fluid, one pervasive theme has been the desire for attribution: from the creator’s perspective, to receive credit for what one does (and to have credit not falsely attributed) and from the audience’s perspective, to understand the source of material with which one engages. But our norms of attribution reflect some inconsistencies in defining the relationship among name, identity, and authenticity. A blog post by a writer identified only by a pseudonym may prove to be very influential in the court of public opinion, while the use of …

A Test Case In International Bankruptcy Protocols: The Lehman Brothers Insolvency, Jamie Altman

San Diego International Law Journal

Part II of this Article, explains the competing theories underlying bankruptcy systems: universalism and territorialism. Part III details various statutory solutions to international bankruptcy problems. Next, Part IV analyzes the provisions of the Lehman Protocol in depth. Part V then examines the precedent upon which the Lehman Protocol relies. Part VI assesses potential threats to the Protocol?s success. This leads to Part VII, which contains suggestions for future protocols. Finally, Part VIII concludes.

Virginia Is For Lovers And Directors: Important Differences Between Fiduciary Duties In Virginia And Delaware, Laurence V. Parker Jr.

William & Mary Business Law Review

Virginia and Delaware have different approaches to a director’s fiduciary duties. The Virginia Stock Corporation Act imposes a deferential subjective standard of conduct that allows the more-frequent application of its business judgment rule. Virginia courts have followed the Virginia Stock Corporation Act and have shown even more deference to the decisions of directors than the Virginia Stock Corporation Act may require. In addition, Virginia courts have been reluctant to hold that additional constituencies, beyond the corporation and shareholders as a class, are owed fiduciary duties. Finally, Virginia courts have not imposed “enhanced scrutiny” on the decisions of directors involving hostile …

Enduring Equity In The Close Corporation, Lyman P.Q. Johnson

Scholarly Articles

This Article develops the theme of change/sameness in corporate law. Written to commemorate the thirty-fifth anniversary of Wilkes v. Springside Nursing Home, Inc., the Article argues that the equitable fiduciary duties so central to Wilkes endure today in the close corporation precisely because equity, by its nature, is so exquisitely adaptive – under constantly changing circumstances − to the ongoing pursuit of a just ordering within the corporation. Unlike fixed legal rules – which are categorical, static, and do not take sufficient account of changes wrought by time or human arationality – equity is malleable and timely as it reckons …

Citizens United And The Corporate Form, Reuven S. Avi-Yonah

Articles

In Citizens United vs. FEC, the Supreme Court struck down a Federal statute banning 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. This article argues that by viewing Citizens United through the prism of theories about the corporate form, it is possible to see that the majority and the dissent departed from previous Supreme Court jurisprudence on the First Amendment rights of corporations. It is also possible to then …

Is Social Enterprise The New Corporate Social Responsibility?, Antony Page, Robert A. Katz

Faculty Publications

Since at least the famous Berle-Dodds debate, corporate social responsibility (CSR) and later its more muscular and structural iteration, progressive corporate law, have been discussed without much progress. The authors consider whether the social enterprise movement, which envisions a new sector of businesses created both to generate profits and pursue social goals, advances this debate. They conclude that it does. Proponents of social enterprise believe that such businesses can combine the dynamism of for-profit firms with the mission-driven zeal more typical of nonprofit organizations. Social enterprise and CSR have much in common: both want businesses to take the interests of …

Formulary Apportionment: Myths And Prospects - Promoting Better International Policy And Utilizing The Misunderstood And Under-Theorized Formulary Alternative, Reuven S. Avi-Yonah, Ilan Benshalom

Articles

This article seeks to re-examine the formulary alternative to transfer pricing by inquiring whether partial integration of formulary concepts into current practices would offer a reasonable alternative to transfer pricing rules. We believe that the key to achieving an equitable and efficient allocation of MNE income is to solve the problem of the residual, i.e., how to allocate income generated from mobile assets and activities whose risks are borne collectively by the entire MNE group. These assets and activities generate most of the current transfer pricing compliance and administrative costs, as well as tax avoidance opportunities. A limited formulary tax …

The “Non-Cumulation Clause”: An “Other Insurance” Clause By Another Name, Chris French

Faculty Scholarship

How long-tail liability claims such as asbestos bodily injury claims and environmental property damage claims are allocated among multiple triggered policy years can result in the shifting of tens or hundreds of millions of dollars from one party to another. In recent years, insurers have argued that clauses commonly titled, “Prior Insurance and Non-Cumulation of Liability” (referred to herein as “Non-Cumulation Clauses”), which are found in commercial liability policies, should be applied to reduce or eliminate their coverage responsibilities for long-tail liability claims by shifting their coverage responsibilities to insurers that issued policies in earlier policy years. The insurers’ argument …

The Corporation As Imperfect Society, Brian Mccall

Faculty Articles

Corporations are ubiquitous in modern society. They pervade every aspect of our life, consumer, professional, investment activity. Probably, people have more contact with corporations on a daily basis than any other institution, including government. From the South Sea Bubble to the Stock market Crash of 1929 to Enron to General Motors and Countrywide Mortgage, corporate scandals and controversies invite fundamental questions about corporate law. This article attempts to bring a fresh perspective to the question: “what is a corporation and how should the law treat it?” The article articulates a corporate metaphysics rooted in political philosophy. The dominant models of …

Déjà Vu All Over Again? Reflections On Auerbach's 'Modern Corporate Tax', Reuven S. Avi-Yonah

Law & Economics Working Papers

This paper comments on Alan Auerbach's "A Modern Corporate Tax" (Hamilton Project/CAP, December 2010) and argues that it is not a significant improvement over previous proposals to replace the corporate tax with a cash flow tax.

On The Role And Regulation Of Proxy Advisors, Paul Rose

Michigan Law Review First Impressions

In anticipation of proxy season-the springtime ritual where companies prepare and deliver proxy statements in preparation for annual shareholder meetings-U.S. public companies typically reexamine their corporate governance structures and policies. Many corporate governance structures that were acceptable ten years ago are now considered outmoded or even evidence of managerial entrenchment. For example, consider the classified board of directors. In recent years, many companies have shifted from a classified board of directors to an annually elected board. A company might adopt an annually-elected board structure for a number of reasons. A classified board can serve as an entrenchment device, for instance, …

Using - And Not Losing - Tax Losses, Part 2 (Slides), Steven M. Friedman

William & Mary Annual Tax Conference

No abstract provided.

Using - And Not Losing - Tax Losses, Part 1: Protecting Tax Losses From A Section 382 Ownership Change (Slides), Mark C. Van Deusen

William & Mary Annual Tax Conference

No abstract provided.

Agenda: 2010 World Energy Justice Conference: Emerging Solutions For The Energy Poor: Technological, Entrepreneurial And Institutional Challenges, University Of Colorado Boulder. Center For Energy & Environmental Security, Colorado Journal Of International Environmental Law And Policy

2010 World Energy Justice Conference (November 5)

This conference is a sequel to the 2009 World Energy Justice Conference (WEJC 2009) which began examining ways of mainstreaming safe, clean, and efficient energy for the world's Energy Poor (EP). The EP number two and a half billion people living on less than $1-2 a day who have no access to modern energy services. WEJC 2010 more fully develops these themes. WEJC 2010 will explore how the next round of global warming meetings in Cancun could design new flexibility mechanisms that give credits, for example, for the reduction of black carbon by the adoption of cookstoves, and embrace small …

Are Investors’ Gains And Losses From Securities Fraud Equal Over Time? Theory And Evidence, Alicia J. Davis

Law & Economics Working Papers

Most leading securities regulation scholars argue that compensating securities fraud victims is inefficient. They maintain that because diversified investors that trade frequently are as likely to gain from trading in fraud-tainted stocks as they are to suffer harm from doing so, these investors should have no expected net losses from fraud over the long term. This assertion, which analogizes trading in fraud-tainted stocks to participating in a coin toss game in which players win $1 on heads and lose $1 on tails, is problematic for a number of reasons. First, even if we accept this analogy, probability theory holds that …

Citizens United And The Threat To The Regulatory State, Tamara R. Piety

Michigan Law Review First Impressions

Although Citizens United has been roundly criticized for its potential effect on elections and its display of judicial immodesty (or "activism"), the effect of the case which may be both most profound and perhaps most pernicious is its effect on the commercial speech doctrine. This is an aspect of the case which has been largely overlooked. Most people seem to be unaware of any connection between election law and the commercial speech doctrine-except, that is, those who have been working long and hard to accomplish the change it foreshadows. They are keenly aware of its implications.

The Redemption Puzzle, Reuven S. Avi-Yonah

Law & Economics Working Papers

Following the adoption of partial integration in 2003, there was only a modest increase in dividends during the period 2004-7, from about 300 to about 500 (if 1987 levels are set at 100). Redemptions, however, showed a remarkable increase, jumping from about the same as dividends (300) to 1,800. This, therefore, leads to a new puzzle: Why the sudden sharp increase in redemptions following 2003?

Like the dividend puzzle, the redemption puzzle is susceptible to several explanations. For example, Bratton and Wachter note that managers who hold stock options tend to favor redemptions over dividends. But in this case, I …

Turning A Short-Term Fling Into A Long-Term Commitment: Board Duties In A New Era, Nadelle Grossman

University of Michigan Journal of Law Reform

Corporate boards face significant pressure to make decisions that maximize profits in the short run. That pressure comes in part from executives who are financially rewarded for short-term profits despite the long-term risks associated with those profit-making activities. The current financial crisis, where executives at AIG and numerous other institutions ignored the long-term risks associated with their mortgage backed securities investments, arose largely because those executives were compensated for the short-term profits generated by those investments despite their longer-term risks. Pressure on boards for short-term profits also comes from activist investors who seek to make quick money off of trading …

The New Financial Assets: Separating Ownership From Control, Tamar Frankel

Faculty Scholarship

This Article is organized in three parts. Part One examines the nature of financial assets and their transition by market transactions from contracts to property. The discussion highlights the gray areas which financial assets occupy in decoupling, falling within both contract and property law.

Part Two describes four types of decoupled financial assets. The first type separates into two financial assets: ownership benefits and ownership risks. The presumed reduction of owners' risks prompted some academics to justify reducing the owners' protection. I suggest that attempts to protect owners from ownership risk have failed. Therefore, the suggestion was ill-conceived. The second …

Predation Analysis And The Ftc’S Case Against Intel, Daniel A. Crane

Law & Economics Working Papers

The Federal Trade Commission's pending antitrust case against Intel challenges a number of Intel's discounting and rebating practices. The Commission appears poised to apply a cost-price test to the challenged practices, but proposes to include "fixed sunk costs" in the appropriate measure of cost. This paper explains the importance of using cost-price screens to assess unilaterally imposed prices and analyzes the futility of including sunk costs in the relevant cost measure.

The Effect Of Economic Integration With China On The Future Of American Corporate Law, Joseph Vining

Law & Economics Working Papers

China's development into a world economic power and its continuing integration with the United States economy raise the question whether China's own history and the socialist context of its domestic corporate law may affect the meaning of business terms in use both internationally and in American domestic corporate law. Of particular interest is the question whether China's entry and impact may blunt the late-twentieth century effort in the United States to change the legal sense of the purpose of an American business corporation.

The Relation Between Firm-Level Corporate Governance And Market Value: A Study Of India, Bala Balasubramanian, Bernard S. Black, Vikramaditya Khanna

Law & Economics Working Papers

Relatively little is known about the corporate governance practice of firms in emerging markets. We provide a detailed overview of the practices of publicly traded firms in India, and identify areas where governance practices are relatively strong or weak, relative to developed countries. We also examine whether there is a cross-sectional relationship between measures of governance and measures of firm performance and find evidence of a positive relationship for an overall governance index and for an index covering shareholder rights. The association is stronger for more profitable firms and firms with stronger growth opportunities.

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 …

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.

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 …

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 …

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.