Organizations Law Commons^™

Disproportionate Influence: Rethinking Control In American Corporate Governance, Dhruv Aggarwal, Ofer Eldar

Northwestern University Law Review

Corporate law has undergone a gradual transformation. Founding chief executive officers (“founder-CEOs”) and activist hedge funds increasingly dominate leading American corporations despite owning well short of a majority of shares. Founder-CEOs, through personal brands or dual-class voting structures, control firms despite having minority stakes; activist hedge funds, with single-digit holdings, press for major governance changes. We argue that these two types of shareholders, often treated as opposites, both dominate corporations through disproportionate influence rather than majority ownership. We describe these investors who dictate corporate policy through disproportionate influence as high-influence shareholders.

Delaware’s doctrinal response to high-influence shareholders has been inconsistent, …

Majority Rules, Andrew Verstein

Northwestern University Law Review

The “disinterested and independent majority” is one of the most important concepts in corporate law. Corporate actions are almost immune to legal challenge if a suitable majority of directors stands ready to approve it.

Scholars have extensively debated the proper meaning and effect of “disinterested and independent,” but no such literature analyzes “majority.” As a matter of arithmetic, how do we compute whether a given set of directors contains a suitable majority? While seemingly innocuous, the concept of a majority means different things to different courts. Indeed, there may be no majority rule for majority independence. The Article charts and …

A History Of Corporate Law Federalism In The Twentieth Century, William W. Bratton

Seattle University Law Review

This Article describes the emergence of corporate law federalism across a long twentieth century. The period begins with New Jersey’s successful initiation of charter competition in 1888 and ends with the enactment of the Sarbanes-Oxley Act in 2002. The federalism in question describes the interrelation of state and federal regulation of corporate internal affairs. This Article takes a positive approach, pursuing no normative bottom line. It makes six observations: (1) the federalism describes a division of subject matter, with internal affairs regulated by the states and securities issuance and trading regulated by the federal government; (2) the federalism is an …

The Structure Of Corporate Law Revolutions, William Savitt

Seattle University Law Review

Since, call it 1970, corporate law has operated under a dominant conception of governance that identifies profit-maximization for stockholder benefit as the purpose of the corporation. Milton Friedman’s essay The Social Responsibility of Business is to Increase Its Profits, published in September of that year, provides a handy, if admittedly imprecise, marker for the coronation of the shareholder-primacy paradigm. In the decades that followed, corporate law scholars pursued an ever-narrowing research agenda with the purpose and effect of confirming the shareholder-primacy paradigm. Corporate jurisprudence followed a similar path, slowly at first and later accelerating, to discover in the precedents and …

Speaking With Complete Candor: Shareholder Retification And The Elimination Of The Duty Of Loyalty, J. Robert Brown Jr.

Sturm College of Law: Faculty Scholarship

Few corporate law doctrines matter more than the duty of loyalty. Designed to protect the shareholders from the consequences of improper self-dealing, the duty applies to transactions with the corporation that benefit officers, directors, or other fiduciaries.

Despite the central importance of fairness to the duty of loyalty, however, the trend has been to eliminate any analysis of fairness, replacing substantive review with procedural safeguards. This has been particularly true with respect to ratification by disinterested shareholders. If done properly, disinterested ratification results in the application of the business judgment rule. In those circumstances, courts will not examine the fairness …

Disaggregating State Bankruptcy, Michael A. Francus

Journal Articles

States today face fiscal challenges that they cannot surmount. With trillions in debt and billions in deficits, states are rapidly reaching the point where they cannot satisfy their obligations to pensioners, employees, and residents. This deterioration of state finances has, in turn, revived the debate over whether Congress should expand the Bankruptcy Code to allow states to file for bankruptcy. The debate, though, overlooks how, as a practical matter, bankruptcy is already available to financially distressed states. Chapter 9 of the Bankruptcy Code permits a state’s political subdivisions, public agencies, and instrumentalities to file for bankruptcy if the state authorizes …

France's Organisme De Défense Et De Gestion: A Model For Farmer Collective Action Through Standard Development And Brand Management, Christopher J. Bardenhagen, Philip H. Howard, Marie-Odile Noziéres-Petit

Journal of Food Law & Policy

Quality-based food production, often with a regional dimension, can provide farmers with new, value added markets. It can also provide consumers with access to place based high-quality products, and may benefit local economies through increased commerce. French Organismes de Défense et de Gestion (ODGs) illustrate a mode of quality-based agri-food business organization. ODGs focus on the development of production standards, as well as management of the intellectual property related to those standards. This mode, which is commonly used in Europe, has not often been used in the United States, despite its potential for regional food system development. The ODG mode …

Management Succession In Korea: Tunneling, Semi-Tunneling, And The Reaction Of Corporate Law, Kyung-Hoon Chun

Vanderbilt Journal of Transnational Law

Recently in Korea, certain issues of corporate law became the subjects of fierce political debates unlike many other jurisdictions where corporate law issues generally remain in the exclusive realm of professionals and academics. This Article begins with the question of why corporate law issues attracted so much political attention in Korea and whether such political attention actually helped improve the corporate law. In pursuing the answers to such questions, this Article identifies a recurring pattern: (i) existence of strict rules against seeking private benefits; (ii) various clever measures to circumvent such rules; (iii) failure of the courts to regulate such …

Uncharted Waters? Legal Ethics And The Benefit Corporation, Joseph Pileri

St. Mary's Journal on Legal Malpractice & Ethics

Corporate law norms are reflected in lawyers’ ethical duties. The enactment of benefit corporation legislation across the country signals a legislative acknowledgment that corporate law can serve as a public, rather than a merely private, ordering mechanism. Benefit corporations expressly adopt a public benefit as a legal purpose of the enterprise. While many have written about this important development with respect to corporate fiduciary law, this essay is the first to explore the professional and ethical responsibility of lawyers representing benefit corporations. In the last century, as scholars and courts drove an understanding of corporate law that elevated the interests …

Shareholder Proposals And The Limits Of Encrypted Interpretations, J. Robert Brown Jr.

Sturm College of Law: Faculty Scholarship

Shareholders have the right under Rule 14a-81 to include proposals in a company’s proxy statement. Almost always precatory, proposals advise rather than command.4 The provision provides a mechanism for obtaining the collective views of shareholders.5 Typically opposed by management, proposals generally engender discussions on matters that companies would prefer to avoid.6 Moreover, although advisory, propos- als can impose meaningful constraints on managerial discretion.

Unintended Agency Problems: How International Bureaucracies Are Built And Empowered, Anu Bradford, Stavros Gadinis, Katerina Linos

Faculty Scholarship

The ground underneath the entire liberal international order is rapidly shifting. Institutions as diverse as the European Union, International Monetary Fund, United Nations, and World Trade Organization are under major threat. These institutions reflect decades of political investments in a world order where institutionalized cooperation was considered an essential cornerstone for peace and prosperity. Going beyond the politics of the day, this Article argues that the seeds of today’s discontent with the international order were in fact sown back when these institutions were first created. We show how states initially design international institutions with features that later haunt them in …

The Proxy Rules And Restrictions On Sharegolder Voting Rights, J. Robert Brown Jr.

Sturm College of Law: Faculty Scholarship

Shareholders in public companies vote not by attending the meeting but by exercising their rights under the federal proxy rules. Recognizing this, the Securities and Exchange Commission has at times described the proxy rules as neutral in effect, designed only to provide shareholders with the same rights accorded under state law. In fact, this has often not been the case. Over their eighty-year development, the rules have often reduced rather than complemented the rights otherwise available to shareholders at these meetings.

This can be seen with particular clarity in connection with the erosion of shareholder voting rights. Under the proxy …

Shifting Back The Focus: Fee Shifting Bylaws And A Need To Return To Legislative Intent, J. Robert Brown Jr.

Sturm College of Law: Faculty Scholarship

In ATP, the Delaware Supreme Court upheld as facially valid a bylaw that required owners in a non-stock corporation to pay all legal fees in any action against the entity, its members or owners, unless owners obtained substantially all the relief sought in the complaint. While the Supreme Court has not yet expressly applied the analysis to public companies, the expansive breadth of its reasoning provided boards of “for profit” businesses with an immediate weapon that could be, and has been, used to prevent shareholders and investors from filing actions seeking to expose malfeasance by corporations and their directors. Unsurprisingly, …

Answering To A Higher Authority: Sovereign-Mandated Oversight In The Board Room And The C-Suite, Thomas F. O’Neil Iii, T. Brendan Kennedy

Fordham Journal of Corporate & Financial Law

The relationship between business organizations and the sovereign agencies that regulate them is being redefined domestically and abroad. In the context of corporate enforcement proceedings, a critical challenge is how to achieve, most effectively, the timehonored public sector objectives of punishment, deterrence, financial restitution and rehabilitation. At issue are important policy considerations and at stake are the integrity and security of the commercial marketplace. The public sector increasingly must balance the pressures of limited resources against the need to ensure that corporate citizens behave not only lawfully, but ethically and responsibly. One solution that has been adopted is the imposition …

The Irrelevance Of State Corporate Law In The Governance Of Public Companies, J. Robert Brown Jr.

Sturm College of Law: Faculty Scholarship

Weak state regulation of corporate governance process and the race to the bottom resulted in federal intervention in the 1930s and the adoption of the securities laws. The laws largely ousted the states from the corporate disclosure and proxy process. The duties of directors, however, remained subject to state regulation.

The race to the bottom, therefore, continued. One example was the adoption of waiver of liability provisions. It took less than two decades after Delaware adopted the first such provision in the aftermath of Van Gorkom for all 50 states to have something similar in place. Likewise, fiduciary obligations gradually …

The Irrelevance Of State Corporate Law In Governance Of Public Companies, J. Robert Brown Jr.

University of Richmond Law Review

No abstract provided.

Regulatory Intervention In The Market For Corporate Control, J. Robert Brown Jr.

Sturm College of Law: Faculty Scholarship

No abstract provided.