Securities Law Commons^™

Then And Now: Professor Berle And The Unpredictable Shareholder, Jennifer G. Hill

Seattle University Law Review

Shareholders, and the relationship between shareholders and management, lay at the heart of Professor Berle’s scholarship. The goal of this Article is to compare the image of shareholders emerging from The Modern Corporation and Private Property and the Berle/Dodd debate with a range of contemporary visions of the shareholder that underpin some international regulatory responses to recent financial debacles, from Enron to the current global financial crisis. As the Article dis- cusses, these recent developments in the era of financial crises have prompted a reevaluation of the traditional image of the shareholder—and the role of the shareholder in the modern …

Berle And The Entrepreneur, Charles R.T. O'Kelley

Seattle University Law Review

In the first and last four chapters (“the Five Chapters”) of The Modern Corporation and Private Property, Adolf Berle, Jr. describes in sweeping terms a fundamental transformation of the American economy. . . . Writing more than ten years before Berle, another seminal scholar, Frank Knight . . . developed a theory of the entrepreneur as part of his larger effort to more carefully explain the theoretical underpinnings of a free-market economy. . . . Given Knight’s prominence and the fact that Knight apparently reached dramatically different conclusions than did Berle concerning the consequences flowing from separation of ownership …

Berle’S Vision Beyond Shareholder Interests: Why Investment Bankers Should Have (Some) Personal Liability, Claire Hill, Richard Painter

Seattle University Law Review

This essay, published in a symposium on the work of Adolf Berle, approaches the Berle-Dodd debate from the perspective that corporate managers have responsibilities beyond pursuing the interests of shareholders. Stock based executive compensation, designed to align managers’ interests with those of shareholders, has, in the investment banking industry in particular, failed to avert, and may have caused, managers (in this case, bankers) to take excessive risks that in the present financial crisis inflicted great damage on creditors and on society as a whole. We describe here the broad outlines of a proposal that we will discuss in future publications …

The Birth Of Corporate Governance, Harwell Wells

Seattle University Law Review

Part I of this Article briefly examines the concept of “corporate governance” and argues for dating the concept’s origins to the debates of the 1920s. Part II then moves on to examine early scholarly and popular discussions of the separation of ownership and control. After surveying the historical developments that produced the recognizably modern corporate economy around the turn of the century, it examines early scholarly and popular discussions of the separation of ownership and control, focusing on three major thinkers, Louis D. Brandeis, Walter Lippmann, and Thorstein Veblen. It argues that, while each of these authors examined the separation …

To Disclose Or Not To Disclose? Csx Corp., Total Return Swaps, And Their Implications For Schedule 13d Filing Purposes, Daniel Bertaccini

Cardozo Law Review

No abstract provided.

Changing The Paradigm Of Stock Ownership From Concentrated Towards Dispersed Ownership? Evidence From Brazil And Consequences For Emerging Countries, Érica Gorga

Cornell Law Faculty Publications

This paper analyzes micro-level dynamics of changes in ownership structures. It investigates a unique event: changes in ownership patterns currently taking place in Brazil. It builds upon empirical evidence to advance the theoretical understanding of how and why concentrated ownership structures can change towards dispersed ownership.

Commentators argue that the Brazilian capital markets are finally taking off.

The number of listed companies and Initial Public Offerings (IPOs) in the São Paulo Stock Exchange (Bovespa) has greatly increased. Firms are migrating to Bovespa's special listing segments, which require higher standards of corporate governance. Companies have sold control in the market, and …

The Sec's 2006 Soft Dollar Guidance: Law And Economics, D. Bruce Johnsen

Cardozo Law Review

After some two years of deliberations, in July 2006 the SEC released its long-awaited Guidance on the scope of the "soft dollar safe harbor." Passed as part of the Securities Acts Amendments in May, 1975, the safe harbor has protected fund advisers and other money managers for over 30 years from criminal actions and civil suits for breach of fiduciary duty when they use client assets to pay more than the lowest available brokerage commissions in exchange for "brokerage and research services." During this time, the SEC has interpreted and reinterpreted the safe harbor's scope, largely owing to the public …

Administrative Governance As Corporate Governance: A Partial Explanation For The Growth Of China's Stock Markets, David A. Caragliano

Michigan Journal of International Law

This Note argues that during the first decade of stock market development (roughly 1990-2000) Chinese institutions, which emphasized administrative direction and control, functioned in lieu of legal and financial institutions. Preexisting modes of administrative governance introduced incentives that mitigated information asymmetry problems inherent in initial public offerings (IPOs) and contributed to enhanced market valuation during the post-IPO phase. The author focuses on two sui generis Chinese institutions employed during this time period: the quota system for equity share issuance and the Special Treatment (ST) system for underperforming issuers. In short, the thesis is that administrative governance substituted for corporate governance.

London As Delaware?, Adam C. Pritchard

Articles

Jurisdictional competition in corporate law has long been a staple of academic-and sometimes, political-debate in the United States. State corporate law, by long-standing tradition in the United States, determines most questions of internal corporate governance-the role of boards of directors, the allocation of authority between directors, managers and shareholders, etc.-while federal law governs questions of disclosure to shareholders-annual reports, proxy statements, and periodic filings. Despite substantial incursions by Congress, most recently in the Sarbanes-Oxley Act of 2002, this dividing line between state and federal law persists, so state law arguably has the most immediate impact on corporate governance outcomes.

London As Delaware?, Adam C. Pritchard

Articles

In the United States, state corporate law determines most questions of internal corporate governance - the role of directors; the allocation of authority between directors, managers, and shareholders; etc. - while federal law governs questions of disclosure to shareholders - annual reports, proxy statements, and periodic filings. Despite substantial incursions by Congress, most recently with the Sarbanes-Oxley Act, this dividing line between state and federal law persists, so state law arguably has the most immediate effect on corporate governance outcomes.

Monitoring Of Corporate Groups By Independent Directors, Adam C. Pritchard

Articles

Both the United States and Korea have reformed their corporate governance in recent years to put increasing responsibilities on independent directors. Independent directors have been found to be an important force protecting the interests of shareholders when it comes time to make certain highly salient decisions, such as firing a CEO or selling the company. This article compares the role of independent directors in the US and Korean systems. I argue that the US may have placed regulatory burdens on independent directors that they are unlikely to be able to satisfy, given their part-time status. By contrast, in the chaebol …

Financial Services In The United States And United Kingdom: Comparative Approaches To Securities Regulation And Dispute Resolution, Cory Alpert

Brigham Young University International Law & Management Review

No abstract provided.

One Share, One Vote And The False Promise Of Shareholder Homogeneity, Grant M. Hayden, Matthew T. Bodie

Cardozo Law Review

No abstract provided.

Accountability And Competition In Securities Class Actions: Why "Exit" Works Better Than "Voice", John C. Coffee Jr.

Cardozo Law Review

No abstract provided.

Changing The Paradigm Of Stock Ownership From Concentrated Towards Dispersed Ownership? Evidence From Brazil And Consequences For Emerging Countries, Erica Gorga

Cornell Law Faculty Working Papers

This paper analyzes micro-level dynamics of changes in ownership structures. It investigates a unique event: changes in ownership patterns currently taking place in Brazil. It builds upon empirical evidence to advance theoretical understanding of how and why concentrated ownership structures can change towards dispersed ownership.

Commentators argue that the Brazilian capital markets are finally taking off. The number of listed companies and IPOs in the Sao Paulo Stock Exchange (Bovespa) has greatly increased. Firms are migrating to Bovespa’s special listing segments, which require higher standards of corporate governance. Companies have sold control in the market, and the stock market has …

The Us Subprime Mbs Crisis: New Legislative Agenda And Potential Ramifications For Foreign Jurisdictions, Yuliya Guseva

Cornell Law School Inter-University Graduate Student Conference Papers

The recent US liquidity crisis, triggered by the failure of mortgage-related securities, produced long-lasting ramifications inside and outside of the US. International financial indicators and the housing markets demonstrate that the mortgage-related liquidity problems keep reverberating throughout the US and the global economy. In the US, even such giants as Freddie Mac and Fannie Mae, which were expected to inject market liquidity, have declared considerable losses from subprime MBS. The ongoing crisis provided a fertile ground for a number of publications and research. However, a range of fundamental issues regarding legislative responses to the US MBS crisis and its international …

Securitization And Its Discontents: The Dynamics Of Financial Product Development, Kenneth C. Kettering

Cardozo Law Review

This paper takes as its point of departure the financing technique referred to as "securitization," a close cousin of secured lending that has grown to enormous size since its origin more than two decades ago. The paper pursues two themes. One is a critique of the legal foundations of securitization, which includes a perspective on aspects of fraudulent transfer law that are well established historically but have been neglected in recent decades. The other is exploration of the implications of this product growing so vast despite its dubious legal foundations. In that regard, the paper explores two points of legal …

A Forensic Study Of Daewoo's Corporate Governance: Does Responsibility For The Meltdown Solely Lie With The Chaebol And Korea?, Joongi Kim

Northwestern Journal of International Law & Business

At the end of 1999, one of the largest conglomerates in the world, the Daewoo Group, collapsed in a spectacular fashion. During its peak, Daewoo was a sprawling enterprise with over 320,000 employees with 590 subsidiaries overseas that operated in over 110 countries. Its management received widespread praise and academic recognition for its success. Yet, when the Asian financial crisis hit in 1997, it managed to commit a deception worth 22.9 trillion won ($15.3 billion) that was termed the "biggest accounting fraud in history, surpassing WorldCom and Enron . . . ." Years later, inner-workings of the conglomerate are finally …

Do Investors In Controlled Firms Value Insider Trading Laws? International Evidence, Laura Nyantung Beny

Articles

This article characterizes insider trading as an agency problem in firms that have a controlling shareholder. Using a standard agency model of corporate value diversion through insider trading by the controlling shareholder, I derive testable hypotheses about the relationship between corporate value and insider trading laws among such firms. The article tests these hypotheses using firm-level cross-sectional data from twenty-seven developed countries. The results show that stringent insider trading laws and enforcement are associated with greater corporate valuation among the sample firms in common law countries, a result that is consistent with the claim that insider trading laws mitigate agency …

Takeover Regulation As A Wolf In Sheep's Clothing: Taking U.K Rules To Continental Europe, Marco Ventoruzzo

Faculty Scholarship

Aesop was an optimist. In his cautionary fable that inspired the famous admonition about wolves in sheep's clothing, the predator intentionally dons a sheep's fleece in order to sneak up on a lamb. His disguise, it turns out, is so effective that he ends up being mistaken for the real thing and killed by another wolf. According to Aesop, even the most effective fraud can turn against its perpetrator, and justice be done. The results are not always so salutary with other clandestine predators, including legal rules that appear aimed at protecting vulnerable groups, but instead provide valuable tools to …

Insider Trading Laws And Stock Markets Around The World: An Empirical Contribution To The Theoretical Law And Economics Debate, Laura Nyantung Beny

Articles

The primary goal of this Article is to bring empirical evidence to bear on the heretofore largely theoretical law and economics debate about insider trading. The Article first summarizes various agency, market, and contractual (or "Coasian") theories of insider trading propounded over the course of this longstanding debate. The Article then proposes three testable hypotheses regarding the relationship between insider trading laws and several measures of stock market performance. Exploiting the natural variation of international data, the Article finds that more stringent insider trading laws are generally associated with more dispersed equity ownership, greater stock price accuracy and greater stock …

Insider Trading Rules Can Affect Attractiveness Of Country's Stock Markets, Laura Nyantung Beny

Articles

The academic debate about the desirability of prohibiting insider trading is longstanding and as yet unresolved. Until Henry Manne’s 1966 book, Insider Trading and the Stock Market, the debate centered on whether insider trading is unfair to public investors who are not privy to private corporate information. However, the fairness approach is malleable and indeterminate and thus does not lend itself to clear-cut policy prescriptions. Since Manne’s book, the focus of the debate has been on the effect of insider trading on economic efficiency. Manne argued that, contrary to the prevailing legal and moral opinion of the time, insider trading …

Law And The Market: The Impact Of Enforcement, John C. Coffee Jr.

Faculty Scholarship

Are the U.S. capital markets losing their competitiveness? A fascinating question, but what does it mean and how can it be intelligently assessed? This Article will explore the newly popular thesis that draconian enforcement and overregulation are injuring the United States and will offer a sharply contrasting interpretation: higher enforcement intensity gives the U.S. economy a lower cost of capital and higher securities valuations. This higher intensity attracts some foreign listings, but deters others.

This Article will proceed by first mapping the marked variation in the intensity of enforcement efforts by securities regulators in selected nations and then relating these …

Cost-Based And Rules-Based Regulatory Competition: Markets For Corporate Charters In The U.S. And The E.U., Marco Ventoruzzo

Faculty Scholarship

Regulatory competition in corporate law is increasing in Europe and, not differently from what happens in the US, a market for corporate charters is developing in Europe. This article examines the differences between the US corporate law market, and the European one - to the extent that one exists. The basic idea is that, in Europe, there is a stronger competition for the (first) incorporation of rather small, closely-held corporations; while in the US a small closely-held corporation usually incorporates locally, where its shareholders and directors are located, and reincorporates - often in Delaware - when it is growing and, …

Barbarians At The Ballot Box: The Use Of Hedging To Acquire Low Cost Corporate Influence And Its Effect On Shareholder Apathy, Jonathan J. Katz

Cardozo Law Review

No abstract provided.

A Complete Property Right Amendment, John H. Ryskamp

ExpressO

The trend of the eminent domain reform and "Kelo plus" initiatives is toward a comprehensive Constitutional property right incorporating the elements of level of review, nature of government action, and extent of compensation. This article contains a draft amendment which reflects these concerns.

The Judicial Application Of The Causation Test Of The False Statement Doctrine In Securities Litigation In China, Ling Dai

Washington International Law Journal

As part of the reform of China’s centrally planned economy, one of the primary purposes in establishing a stock market was to help state-owned enterprises raise sufficient capital from the public. The protection of investors’ interests was not essential in the initial contemplation of securities laws, though the listed companies have a duty of disclosure under the 1998 Securities Law. After the Supreme People’s Court promulgated its judicial interpretation of the false statement doctrine in civil securities cases in 2002, the lower courts started to interpret and apply the elements of the false statement doctrine in securities cases brought by …

The Equivalence Approach To Securities Regulation, Tzung-Bor Wei

ExpressO

Abstract

In the past, academics and regulators debated two competing approaches to international securities regulation, namely “harmonization” and “regulatory competition.” More recently, a third approach to securities regulation has emerged – the “equivalence” approach. Under this model, a host country exempts foreign firms from certain host country rules when the firms’ home country rules are sufficiently similar, or “equivalent.” Many regulators have come to embrace equivalence, which is rapidly becoming a key principle in international finance.

This paper studies the concept of equivalence. It begins by defining “equivalence,” highlighting that different regulators manipulate the term to give it contrasting meanings. …

Bond Repudiation, Tax Codes, The Appropriations Process And Restitution Post-Eminent Domain Reform, John H. Ryskamp

ExpressO

This brief comment suggests where the anti-eminent domain movement might be heading next.

Monitoring A Game Of Winks, Nods, And Risk: Derivatives Regulation In The E.U. And Poland, Robert F. Schwartz

Brigham Young University International Law & Management Review

No abstract provided.