Law and Economics Commons^™

Community Economic Development, Legal Clinic Program

Course Descriptions and Information

This clinic emphasizes transactional practice skills. This clinic provides short term counseling in a broad range of small business matters such as corporations, limited liability companies, partnerships, intellectual property, copyright, trademark, privacy law, nonprofit organizations, art groups as well as the legal requirements for starting a small business. Students provide direct legal assistance, counseling, representation, community legal education, and informational materials to new and mature for-profit and non-profit organizations, individuals and community groups seeking to better the economic, social, equitable and cultural well-being of low income communities.

Community Economic Development Clinic, Legal Clinic Program

Clinical Programs Brochures

The Community Economic Development Clinic is an in-house small business transactional clinic designed to provide students with a broad study of the growing area of community economic development law. Services include legal business, policy and regulatory considerations that underlie efforts to enhance the economic viability of low-income communities through the development of entrepreneurship and affordable housing.

Assistance may be provided to groups that promote community and economic development in the following areas: community preservation, development and empowerment; drug prevention; homelessness; literacy; micro-enterprise development; social welfare; youth and teen development entrepreneurship; and creating and maintaining low-income and affordable housing.

Economic Ideology And The Rise Of The Firm As Criminal Enterprise, June Carbone, William K. Black

Faculty Works

No abstract provided.

Shareholder Political Primacy, Jay B. Kesten

Scholarly Publications

Corporate political activity raises an important and difficult question of corporate law: who decides when the corporation should speak and what it should say? In several cases, the Supreme Court has provided a clear answer: shareholders, acting through the procedures of corporate democracy. While this holding has attracted substantial academic and public criticism, there has been no sustained evaluation (beyond identifying the potential agency costs of corporate political activity) of the possibility that the Supreme Court's appeal to the fraught concept of "corporate democracy," though woefully under-theorized, might be the best allocation of power in the limited context of corporate …

The Wolf At The Door: The Impact Of Hedge Fund Activism On Corporate Governance, John C. Coffee Jr., Darius Palia

Faculty Scholarship

Hedge fund activism has recently spiked, almost hyperbolically. No one disputes this, and most view it as a significant change. But, their reasons differ. Some see activist hedge funds as the natural champions of dispersed and diversified shareholders, who are less capable of collective action in their own interest. A key fact about activist hedge funds is that they are undiversified and typically hold significant stakes in the companies that comprise their portfolios. Given their larger stakes and focused holdings, they are less subject to the “rational apathy” that characterizes more diversified and even indexed investors, such as pension and …

Preserving The Corporate Superego In A Time Of Activism: An Essay On Ethics And Economics, John C. Coffee Jr.

Faculty Scholarship

This essay focuses on the impact of recent changes in corporate governance on ethical behavior within the public corporation. It argues that a style of corporate behavior – one characterized by a risk tolerant, even reckless, pursuit of short-term profits and a disregard for the interests of non-shareholder constituencies – is attributable in significant part to recent changes in corporate governance, including the rise of hedge fund activism, greater use of incentive compensation, and the appearance of blockholder directors. It then surveys feasible responses intended to strengthen the role of the boards as the corporation’s conscience and superego. Given the …

Appraising The "Merger Price" Appraisal Rule, Albert H. Choi, Eric L. Talley

Faculty Scholarship

This paper develops an auction design framework to study how best to measure “fair value” in post-merger appraisal proceedings. Our inquiry spotlights an approach recently embraced by some courts benchmarking fair value against the merger price itself. We show that merger price deference effectively nullifies the role that appraisal can potentially play in establishing a de facto reserve price for company auctions, thereby depressing both acquisition prices and target shareholders’ expected welfare relative to both the optimal appraisal policy and a variety of other valuation measures. We also examine conditions under which deference to the merger price can be optimal. …

Cuba Conundrum: Corporate Governance And Compliance Challenges For U.S. Publicly-Traded Companies, Marcia Narine

Articles

No abstract provided.

Overlapping Financial Investor Ownership, Market Power, And Antitrust Enforcement: My Qualified Agreement With Professor Elhauge, Jonathan Baker

Scholarly Articles in Law Reviews & Journals

As is well known among financial economists but not previously recognized within the antitrust community, large and diversified institutional investors such as BlackRock, Fidelity, State Street, and Vanguard collectively own roughly two-thirds of the shares of publicly traded U.S. firms overall, up from about one-third in 1980. Recent economic research involving airlines and banking raises the possibility that overlapping ownership of horizontal rivals by diversified financial institutions facilitates anticompetitive conduct throughout the economy, and that the problem has been growing for decades, unnoticed until now. This response to an article by Professor Einer Elhauge, explains why it may be more …

Corporate Control And Idiosyncratic Vision, Zohar Goshen, Assaf Hamdani

Faculty Scholarship

This Article offers a novel theory of corporate control. It does so by shedding new light on corporate-ownership structures and challenging the prevailing model of controlling shareholders as essentially opportunistic actors who seek to reap private benefits at the expense of minority shareholders. Our core claim is that entrepreneurs value corporate control because it allows them to pursue their vision (i.e., any business strategy that the entrepreneur genuinely believes will produce an above-market rate of return) in the manner they see fit. We call the subjective value an entrepreneur attaches to her vision the entrepreneur’s idiosyncratic vision. Our framework identifies …

The Corporation’S Place In Society, Gabriel Rauterberg

Michigan Law Review

The vast majority of economic activity is now organized through corporations. The public corporation is usurping the state’s role as the most important institution of wealthy capitalist societies. Across the developed world, there is increasing convergence on the shareholder-owned corporation as the primary vehicle for creating wealth. Yet nothing like this degree of convergence has occurred in answering the fundamental questions of corporate capitalism: What role do corporations serve? What is the goal of corporate law? What should corporate managers do? Discussion of these questions is as old as the institutions involved.

Between Scylla And Charybdis: Taxing Corporations Or Shareholders (Or Both), David M. Schizer

Faculty Scholarship

The United States taxes both corporations and shareholders on corporate profits. In principle, the United States could rely on only one of these taxes, as many commentators have suggested. Although choosing to tax the corporation or its owners may seem like taking money from one pocket or the other, this Essay emphasizes a key difference: These taxes prompt different planning. Relying on one or the other mitigates some distortions and leaks, while exacerbating others. As a result, choosing which to impose is like navigating between Scylla and Charybdis.

In response, this Essay recommends using both taxes for three reasons. First, …

Designing Corporate Bailouts, Antonio E. Bernardo, Eric L. Talley, Ivo Welch

Faculty Scholarship

Although common economic wisdom suggests that government bailouts are inefficient because they reduce incentives to avoid failure and induce excessive entry by marginal firms, in practice bailouts are difficult to avoid for systemically significant enterprises. Recent experience suggests that bailouts also induce litigation from shareholders and managers complaining about expropriation and wrongful termination by the government. Our model shows how governments can design tax-financed corporate bailouts to reduce these distortions and points to the causes of inefficiencies in real-world implementations such as the Troubled Asset Relief Program. Bailouts with minimal distortion depend critically on the government’s ability to expropriate shareholders …

Bringing International Tax Policy Into The 21st Century, Michael J. Graetz

Faculty Scholarship

Michael J. Graetz delivered the following remarks at the Tax Policy Center's "A Corporate Tax for the 21st Century" conference on July 14 in Washington. These remarks are substantially taken from his April 2015 Ross Parsons Lecture at the University of Sydney Law School.

Follow The Money: Essays On International Taxation – Introduction, Michael J. Graetz

Faculty Scholarship

Publicity about tax avoidance techniques of multinational corporations and wealthy individuals has moved discussion of international income taxation from the backrooms of law and accounting firms to the front pages of news organizations around the world. In the words of a top Australian tax official, international tax law has now become a topic of barbeque conversations. Public anger has, in turn, brought previously arcane issues of international taxation onto the agenda of heads of government around the world.

Despite all the attention, however, issues of international income taxation are often not well understood. This Introduction outlines a collection of essays, …

The Corporation's Place In Society, Gabriel Rauterberg

Faculty Scholarship

The vast majority of economic activity is now organized through corporations. The public corporation is usurping the state’s role as the most important institution of wealthy capitalist societies. Across the developed world, there is increasing convergence on the shareholder-owned corporation as the primary vehicle for creating wealth. Yet nothing like this degree of convergence has occurred in answering the fundamental questions of corporate capitalism: What role do corporations serve? What is the goal of corporate law? What should corporate managers do? Discussion of these questions is as old as the institutions involved.

Short-Termism And Long-Termism, Michal Barzuza, Eric L. Talley

Faculty Scholarship

A significant debate in corporate law and finance concerns the role of activist investors (especially hedge funds) in corporate governance. Activists, it is often alleged, imprudently privilege short term earnings over superior (but less liquid) long term investments. Activists counter that they target managers who unjustifiably cling to questionable strategies. While this debate is hardly new, it has grown increasingly fractious of late. We analyze the activism debate within a theoretical securities-market setting. In our framework – which draws from an emerging literature in empirical and experimental finance – managers are differentially overconfident (causing them to favor long-term projects), while …

A Model Company Act And A Model Company Court, Ronald J. Gilson

Faculty Scholarship

This paper is a contribution to a symposium on the European Model Company Act ("EMCA ") in which I argue that a model company court powerfully complements the EMCA. A particular characteristic of company law complicates the intermediating role of a model act in a federal system. Because complex corporate transactions inevitably are associated with significant uncertainty, especially when they present conflicts of interest, transaction designers and legislative drafters tend to frame applicable contractual and legal rules as standards, such as fairness and equal treatment, rather than as rules. In turn, the effectiveness of a standard in the face of …

Corporate Governance Changes As A Signal: Contextualizing The Performance Link, Merritt B. Fox, Ronald J. Gilson, Darius Palia

Faculty Scholarship

Promoting “good” corporate governance has become an important concern. One result has been the creation of indexes that purport to measure the quality of a firm’s corporate governance structure. Prior scholarship reports a positive relationship between firms with good corporate governance index ratings and stock-price-based measures of a firm’s ability to create share value, such as Tobin’s Q. Little work, however, explores why we observe this relationship.

We hypothesize one reason for the relationship is that a rating-altering change in corporate governance structure can be a signal concerning the quality of a firm’s management. Changes in governance structures that result …

The New Business Rule And Compensation For Lost Profits, Victor P. Goldberg

Faculty Scholarship

For many years most American jurisdictions applied the “new business” rule, denying recovery of lost profits for new businesses. The majority position today rejects the per se rule, treating the issue as a rule of evidence — lost profits must be proved with “reasonable certainty.” This paper argues that the new business rule ought not be viewed as merely a matter of whether the evidence is sufficient to surmount the “reasonable certainty” hurdle. The confusion arises because courts have lumped together a number of different problems. By breaking these out, a more nuanced picture emerges. For one category, in particular, …

Impact Investing As A Form Of Lobbying And Its Corporate-Governance Effects, Andrzej Rapaczynski

Faculty Scholarship

Impact investment is attractive to many because it seems to combine support for progressive causes with an apparent commitment to the principles of a market economy. In fact, however, a rational impact investor is not simply creating demand for certain types of corporate actions; he/she is attempting to use corporate governance mechanisms to influence fiduciary decisions of the management. The cost of this tactic for the health of the capitalist economy is potentially very considerable. The American capitalist system relies heavily on a relatively fragile corporate governance arrangement in which the agency problems of a modern corporation are minimized by …

Political Uncertainty And The Market For Ipos, Jay B. Kesten, Murat C. Mungan

Faculty Scholarship

This Article presents a simple theory and model of the effects of political uncertainty on the market for IPOs. Our model generates four central predictions: (i) increased political uncertainty reduces the frequency of IPOs; (ii) firms that choose to conduct an IPO during periods of political uncertainty are, on average, of higher quality and generate greater return on investment in the secondary market; (iii) political uncertainty increases the cost of capital for IPO firms; but (iv) underpricing is less pronounced during periods of heightened political uncertainty. We demonstrate that each of these predictions is consistent with available empirical evidence.

Our …

Table Of Contents, Georgia Journal Of International And Comparative Law

Georgia Journal of International & Comparative Law

No abstract provided.

Vulnerability And "Control Fraud" Economics, William K. Black

Faculty Works

"Control fraud" refers to frauds in which the person who controls a seemingly legitimate entity uses it as a "weapon" to defraud. Control frauds cause greater financial losses than all other forms of property crime - combined. We are now living in the era of recurrent epidemics of control fraud. The LIBOR and foreign exchange cartels, for example, are the largest cartels in history- by roughly three orders of magnitude. VW has just admitted that it committed over 11 million fraudulent sales. Our largest financial institutions have been revealed to be criminal enterprises - and recidivists.

This paper brings the …

Paying For Risk: Bankers, Compensation, And Competition, Simone M. Sepe, Charles K. Whitehead

Cornell Law Review

Efforts to control bank risk address the wrong problem in the wrong way. They presume that the financial crisis was caused by CEOs who failed to super­vise risk-taking employees. The responses focus on exe­cutive pay, believing that exe­cu­tives will bring non-execu­tives into line—using incen­­­­tives to manage risk-taking—once their own pay is regu­lated. What they over­look is the effect on non-executive pay of the com­pe­­ti­­tion for talent. Even if exe­­cu­tive pay is regu­lated, and exe­cu­tives act in the bank’s best interests, they will still be trapped into providing incentives that encourage risk-taking by non-executives due to the negative exter­nality that arises …

Adjudicating Corporate Auctions, Jay B. Kesten

Scholarly Publications

In light of recent developments in auction theory, this Article re-examines Delaware corporate law governing directors' actions when structuring the sale of a corporation. A foundational doctrine of Delaware law is that when the board of directors resolves to sell a corporation, it must obtain the highest price reasonably available. Auction theory posits that, in certain circumstances germane to corporate takeovers, revenues can be maximized through the use of ex ante precommitments to the rules of the auction. Delaware law, however, does not fully endorse directors' ability to make such precommitments, primarily out of the concern that the board will …

Political Uncertainty And The Market For Ipos, Jay B. Kesten, Murat C. Mungan

Scholarly Publications

No abstract provided.

The Macroprudential Turn: From Institutional 'Safety And Soundness' To Systematic 'Financial Stability' In Financial Supervision, Robert C. Hockett

Cornell Law Faculty Publications

Since the global financial dramas of 2008-09, authorities on financial regulation have come increasingly to counsel the inclusion of macroprudential policy instruments in the standard ‘toolkit’ of finance-regulatory measures employed by financial supervisors. The hallmark of this perspective is its focus not simply on the safety and soundness of individual financial institutions, as is characteristic of the traditional ‘microprudential’ perspective, but also on certain structural features of financial systems that can imperil such systems as wholes. Systemic ‘financial stability’ thus comes to supplement, though not to supplant, institutional ‘safety and soundness’ as a regulatory desideratum.

The move from primarily micro- …

Comments On The Oecd's "Due Diligence Guidance For Meaningful Stakeholder Engagement In The Extractives Sector", Lisa J. Laplante, Erika George

Faculty Scholarship

Professor Lisa Laplante of New England Law | Boston’s Center for International Law and Policy (CILP) and Professor Erika George of the University of Utah S.J. Quinney College of Law’s Center for Global Justice respectfully submitted this collaborative commentary in response to the OECD’s Draft Due Diligence Guidance for Meaningful Stakeholder Engagement in the Extractives Sector which build off of the OECD Guidelines for Multinational Enterprises which offer comprehensive recommendations to promote responsible business conduct. The 2011 revisions to the OECD MNE Guidelines introduced an important new provision on stakeholder engagement. Pursuant to the provision, multinational enterprises should: “engage with …

Liquidity, Systemic Risk, And The Bankruptcy Treatment Of Financial Contracts, Rizwaan J. Mokal

Brooklyn Journal of Corporate, Financial & Commercial Law

No abstract provided.