Law and Economics Commons^™

Activist Directors: The Evolution Of Hedge Fund Activism In The S&P 500, Anna Christie

Connecticut Law Review

The prevailing rhetoric associated with hedge fund activism is almost universally negative. This Article provides new evidence of activist hedge fund behavior that contradicts this dominant narrative. The principal argument of the Article is that the conventional picture of hedge fund activism requires updating to account for the phenomenon of activist board representation.

This Article makes two general contributions to academic and policy debates on hedge fund activism. First, it analyzes original, hand-collected data on all activist hedge fund campaigns at S&P 500 companies from 2010 to 2019. Currently, there is continued reliance on empirical studies of hedge fund activism …

Democratization Of The Private Markets?, Colleen Baker, Christina M. Sautter

Faculty Journal Articles and Book Chapters

U.S. initial public offerings are declining and the amount of private market assets under management are exploding. Simultaneously, the number of retail investors opening taxable brokerage accounts is increasing. Private market assets are hot. Everyone–both institutional and retail investors–wants in on the action. Yet considerations such as financial resources and U.S. securities laws make such investment less accessible for many retail investors. In this short article, we explore this changing investment landscape and, specifically, one development within this craze: retail investments in private company shares via closed-end funds (or CEFs).

Recently, CEFs like ARK Venture Fund and Destiny Tech100, Inc. …

Texas, Delaware, And The New Controller Primacy, Christine Hurt

Faculty Journal Articles and Book Chapters

In January 2024, Elon Musk, CEO of Tesla, Inc., initiated the process of moving Tesla’s state of incorporation from Delaware to Texas, citing concerns over Delaware corporate law. The move sparked discussions about the dominance of Delaware corporate law and its recent rulings, with critics accusing Court of Chancery judges of favoring shareholder interests over controller innovation and managerial discretion.

The shift away from Delaware is set against a backdrop of increasing judicial scrutiny in the Delaware Court of Chancery, where plaintiffs have recently seen successes in litigation against controlling shareholders, corporate directors, and officers. Concerns over Delaware’s evolving legal …

On Blockchain As A Tool Against Corporate Corruption, Yannis Normand

Northwestern Journal of International Law & Business

Over the last decades domestic and international legal frameworks have successfully coalesced to limit corrupt behavior worldwide. However, despite their success, current regulatory tools are not sufficiently well-equipped to address corruption in modern economic settings. These mechanisms can often be too costly to implement, too cumbersome to induce compliance, politically manipulatable, and may disincentivize foreign investment and internal corporate monitoring efforts. To address such drawbacks, policymakers should consider the introduction of blockchain-based tools in developing future anti-corruption efforts.

Blockchain can serve as a foundation for structures that can make it more attractive, easier and cost-efficient to monitor economic transactions, to …

The Software Inducement Paradox, Dylan Niederland

American University Law Review

Induced patent infringement allows a third party to be held liable for another’s direct infringement of a patent. For many years, inducement liability has been a hotly contested doctrine of patent law, specifically its applications in the pharmaceutical industry. Not unsurprisingly, vast literature exists covering the intersection of inducement liability and pharmaceuticals.

This Note takes a new approach, analyzing inducement liability as it relates to the software industry. Specifically, this Note criticizes the Federal Circuit’s holding in GlaxoSmithKline LLC v. Teva Pharmaceuticals USA, Inc. that a simple statement of equivalence is sufficient to induce users to infringe method-of-use patents that …

Introducing Justice And Rights To Students Of Economics, Mark D. White

Publications and Research

Most economics instruction is focused on outcomes, whether evaluated in terms of individual or collective welfare or well-being. This is consistent with economics’ roots in classical utilitarianism, and no consideration is usually given to the process by which these results obtain, which is a deontological concern of right and wrong. This can seem odd to economics students, especially in the context of trade-offs in which one party is benefited at the expense of another, or aggregate welfare is maximized while some individuals are harmed, with no consideration in either of rights, desert, or justice. This chapter argues for the importance …

Volume 48 Masthead, Seattle University Law Review

Seattle University Law Review

Volume 48 Masthead

Table Of Contents, Seattle University Law Review

Seattle University Law Review

Table of Contents

Corporate Scenarios: Drawing Lessons From History, Madison Condon

Seattle University Law Review

As corporations are increasingly pressed to reveal information about their exposure to climate-related risks, they are often asked to undertake and disclose the outcome of “scenario analysis.” In this exercise, corporations, including financial institutions, examine how their business would fare under different pathways the future may take. One oft-used scenario, for example, is the International Energy Agency’s “Net-Zero by 2050: A Roadmap for the Energy Sector.” This Essay presents a history of the use of scenarios as a corporate planning tool, particularly in the oil industry, arguing that it is key for understanding our present moment and the role of …

Shareholder Expression In A Time Of Heightened Political Tension, Aaron A. Dhir

Seattle University Law Review

In this article, I provide context for my forthcoming research project on shareholder proposals and racial equity audits. Since the murder of George Floyd in May of 2020, progressive shareholder actors have increasingly used the proposal mechanism to advance diversity, equity, inclusion, and justice-related goals. These proposals have frequently gone beyond requesting the usual corporate fare of diversity trainings, intersectionality workshops, affinity groups, etc. Instead, a more ambitious type of proposal asks corporate America to conduct racial equity audits, defined as “an independent, objective and holistic analysis of a company’s policies, practices, products, services and efforts to combat systemic racism …

Corporate Governance Speech, Sarah C. Haan

Seattle University Law Review

The State has always regulated the intra-firm communications that make corporate governance possible, most commonly by mandating disclosures of information by a corporation to its shareholders. Some such laws are labeled “securities regulation,” but securities regulation is a broad category that extends to speech by actors who are outside the corporate enterprise as well. Also, the conventional securities regulation category does not capture all such laws; other examples, including informationforcing mandates, can be found in state corporate law. This Article uses the term “corporate governance speech” to describe the communications among shareholders, directors, and officers through which corporate governance is …

Dark Accounting Matter, Colleen Honigsberg

Seattle University Law Review

Physicists calculate that approximately 85% of the matter in the universe is composed of “dark matter” that “does not absorb, reflect, or emit electromagnetic radiation and is therefore difficult to detect.” The S&P 500 currently trades at a price-to-book value of 4.2, suggesting that book value accounts for less than 20% of the S&P 500’s market value. The remaining 80% appears nowhere in these firms’ balance sheets—it is invisible to contemporary accounting techniques and constitutes “dark accounting matter.”

Some “dark accounting matter” is composed of factors commonly described as components of “ESG.” Human capital, for example, is an intangible asset …

The Employees’ Dilemma: Balancing Internal Reporting, Whistleblowing, And Insider Trading Risks, Geeyoung Min

Seattle University Law Review

The Essay examines how recent developments in insider trading regulations and whistleblower reward programs can lead to unintended and counterproductive results of discouraging employees from using internal reporting channels within corporate compliance programs. While the presence of a robust and well-functioning corporate compliance program is a critical factor both in mitigating the level of public enforcement actions against companies and in protecting corporate managers from liability in private litigation, these programs often provide little incentive for employees to report potential misconduct internally.

Corporate compliance programs are designed to promote the upward information flow within the company, which is essential for …

How The Antidiscrimination Law Of Commercial Transactions Really Works, Helen Norton

Seattle University Law Review

A variety of businesses now cite 303 Creative when seeking First Amendment protection for their refusal to serve certain customers based on those customers’ protected class status. How this litigation will play out remains to be seen. But future courts need not, and should not, repeat the 303 Creative Court’s misunderstanding of how the antidiscrimination law of commercial transactions actually works.

Part I of this Essay explains the Court’s longstanding understanding of the antidiscrimination law of commercial transactions, and then describes the Court’s failure to engage with this precedent in 303 Creative. Part II then identifies the 303 Creative decision’s …

Understanding The Big Three’S Wavering Support Of Environmental And Social Shareholder Proposals, Jeff Schwartz, Jefferson Jensen

Seattle University Law Review

Because of their substantial equity portfolios, BlackRock, Vanguard, and State Street (the Big 3) are central players in corporate governance. It is, therefore, critical to understand how they vote. One puzzle is that their support for shareholder proposals on environmental and social matters appears to waiver. In 2020, for instance, BlackRock supported 11.1% of environmental proposals at S&P 500 firms. In 2021, it seemingly reversed course, supporting 55.2%. It then flipped again, supporting 32.1% in 2022. Such statistics suggest that the Big 3 are constantly changing their views on these topics. This Article seeks to better understand whether this is …

Volume 48 Masthead, Seattle University Law Review

Seattle University Law Review

Volume 48 Masthead

Urgensi Optimalisasi Regulasi Ico Dan Regulatory Sandbox Di Indonesia: Studi Komparatif Malaysia, Singapura, Dan Uea, Arfan Yanayir Akbar Sabillilah

Jurnal Hukum & Pembangunan

Regulasi aset kripto di Indonesia sedang mengalami transisi mendasar menyusul diberlakukannya Undang-Undang Pengembangan dan Penguatan Sektor Keuangan (UU P2SK), yang mengalihkan pengawasan dari Bappebti ke Otoritas Jasa Keuangan (OJK) dan Bank Indonesia. Meskipun demikian, kerangka kerja saat ini masih menyisakan celah yang signifikan, khususnya terkait mekanisme penggalangan dana publik seperti Initial Coin Offering (ICO), Initial Exchange Offering (IEO), dan Security Token Offering (STO), serta tidak adanya Regulatory Sandbox khusus untuk inovasi berbasis kripto. Celah-celah ini menciptakan ketidakpastian hukum, meningkatkan risiko penipuan, dan melemahkan perlindungan investor. Studi ini menggunakan metode yuridis-normatif dengan pendekatan hukum komparatif, menganalisis model regulasi di Malaysia, Singapura, …

Altering Rules: The New Frontier For Corporate Governance, Gabriel Rauterberg, Sarath Sanga

Articles

Corporate law has taken a contractarian turn. Shareholders are increasingly contracting around its foundational rules—statutory rights, the fiduciary duty of loyalty, even the central role of the board—and Delaware courts are increasingly enforcing these contracts. In the one case where they did not, the legislature swiftly overruled the decision and adopted a new statutory provision permitting boards to completely cede their powers to a shareholder by contract. These developments have sparked a polarized debate, with some calling for a return to mandatory rules, while others push for total contractual freedom.

We argue, however, that the best approach lies neither in …

Unequal Ownership, Ofer Eldar, Rory Van Loo

Faculty Scholarship

Market concentration and weak competition do not just lead to lower efficiency but also result in corporate profits flowing primarily to wealthy households that own a disproportionate share of public corporations. We demonstrate that this is a growing distributional problem not only due to familiar reasons in the literature, most notably shifts in market power, but also due to changes in the socio-economic makeup of ownership. Over the past twenty years, households in the bottom 90 percent of wealth have seen their share of stock ownership decline by half. That is, the ownership of corporations has become increasingly concentrated among …

Copyright Law And Property Law, Keith N. Hylton

Faculty Scholarship

Property is at the core of state law since it is the exclusive power of the individual state governments to define and protect property rights within their jurisdiction. In this paper I will discuss the general connection between copyright and property generally. I will argue that property law sheds important light on copyright law and can help us cut through modern controversies in copyright law. If I am correct in this view, any judge sufficiently familiar with property law doctrines could do better than the Supreme Court of the United States in resolving a new copyright controversy. Specifically, property law …

A Democratic Participation Model For Corporate Governance, Grant M. Hayden, Matthew T. Bodie

Faculty Journal Articles and Book Chapters

Corporate law is in the grip of a fundamental conundrum: whether corporations should seek only to serve shareholders or instead attend to the interests of all stakeholders. The doctrine of shareholder primacy, which focuses the corporation’s attention on the goal of maximizing shareholder wealth, has been startingly successful, capturing the theory and practice of corporate governance for roughly fifty years. But recently the costs of this monomaniacal focus on the financial interests of one set of corporate participants have become clearer. At a time when the original reasons for restricting the corporate franchise to shareholders have been shown to rest …

Fairness In Contract Law: An Impossibility Theorem?, Francesco Parisi, Brian H. Bix

Articles

Scholars have long debated whether contract law should prioritize maximizing efficiency and social welfare or, instead, prioritize justice, fairness and other deontological values. The debate is partly prescriptive (what should we try to do with contract law rules) and partly conceptual (how should we understand contract law). This article surveys central positions in this debate, distinguishing between the corrective and redistributive functions of contract law and between doing justice between the parties and more systemic effects. It highlights an impossibility theorem that underscores the self-defeating nature of redistributive policies in price-based contractual relationships, using a numerical example and two policy …

Temporary/Forever: The Fissured Economy, Obstacles To Employment, And Regulating The Future Of Exploitation In Temp Work, Kevin Herrera

Loyola University Chicago Law Journal

Among workers in United States, contingent and temporary work arrangements have grown to represent a substantial segment of available jobs, with spikes in their predominance corresponding to major economic shake ups like the Great Recession and the COVID-19 pandemic. These arrangements are part of a larger trend of the “fissuring” of United States employment, wherein applicants are hired by one company and then sent to do their job at another, obscuring who actually employs the worker. Jobs through temp staffing agencies are a particularly dominant form of fissuring among low-wage workers and create conditions under which accountability for workplace abuses …

Racing To The Top Instead Of The Bottom In Illinois Estate Law, Sarah E. Waldeck

Loyola University Chicago Law Journal

In the last two decades, competition for trust business has led states to abolish the Rule Against Perpetuities, authorize trust decanting, and permit self-settled asset protection trusts all in the hope that settlors will bring their trusts (and the fees they generate) within a state's jurisdiction. But this legislation is profoundly inequitable because it primarily benefits wealthy settlors and those lucky enough to be their beneficiaries, while shifting cost and risk to everyone else.

In the face of such competition, Illinois has fought to retain its trust business by passing legislation that allows settlors to opt out of the perpetuity …

In Memoriam: Robert D. Cooter, Francesco Parisi

Articles

The International Review of Law & Economics is publishing these notes in memory and celebration of Robert D. Cooter—its Editor from 1988 to 2004—offering brief reflections on him as teacher, scholar, and exemplar. A giant of law and economics, Robert D. Cooter combined breadth with creative insight: he helped build a systematic economic understanding of torts, contracts, and property, a novel approach to public law and Constitutional design, and opened new frontiers on the interaction between law and social norms and on the expressive power of law. His humanity and scholarly ethos—curiosity, humor, and intellectual honesty—left a lasting mark on …

No-Hire Rulings Forget Competition, Val Ricks

American University Law Review

Two recent and noted antitrust rulings on the legality of no-hire (or “no-poach”) agreements paid lip service to preserving and promoting competition for employees but in the end failed to apply competition as a standard. Instead—and this is seen only deep in the weeds of the decisions themselves, on careful reading—judges demanded that no-hire agreements be held illegal only when they constitute abuse of market power, more or less. These decisions impliedly distinguish horizontal agreements not to compete for employees from horizontal agreements not to compete for customers, or on price. The opinions tend to “require careful economic analysis” of …

Big Tech And Consumer Payments: The Good, The Bad, And The Unintended Consequences, Mark E. Budnitz

Loyola Consumer Law Review

No abstract provided.

The Generation Of Maladies: The U.S. Tech Giants, David Vladeck

Loyola Consumer Law Review

No abstract provided.

Green Dividends: A Case Study In Green Dividends And The Conditions For Private Ordering Solutions, Anne M. Tucker

Seattle University Law Review

This Essay introduces a novel private ordering solution to facilitate corporate investments in pro-social and environmental initiatives: Green dividends. Green dividends are an optional increase in shareholder dividends that are returned to the company to be reinvested in environmental initiatives or kept by a shareholder.

Green dividends pose an alternative to the current gridlocked debate that corporations can’t, won’t, shouldn’t, and shouldn’t even try to act in pro-social or environmental ways. Turning the common refrains on their head converts each narrative into an element for a successful private ordering solution: authority, accountability, shareholder buy-in, and government- backed enforcement. With Green …

Does Climate Disclosure Work To Reduce Greenhouse Gas Emissions? Emerging Evidence Suggests Cautious Optimism, Cynthia A. Williams

Seattle University Law Review

Significant regulatory resources have been spent developing global, voluntary climate and sustainability disclosure standards, such as the TCFD, TNRD, and ISSB’s Sustainability and Climate Disclosure standards, or domestically required disclosures, such as in the EU and in the U.S. Thus, it is important to evaluate whether this disclosure, particularly voluntary, qualitative disclosure, will have the power to shift the allocation of capital, will have a significant effect on the management of climate risk within firms, and ultimately will reduce climate change risk and biodiversity loss.

In this Article, several interrelated questions will be discussed. First, what does the empirical evidence …