Business Organizations Law Commons^™

Cancer's Ip, Jacob S. Sherkow

Articles & Chapters

The state of publicly funded science is in peril. Instead, new biomedical research efforts — in particular, the recent funding of a “Cancer Moonshot” — have focused on employing public-private partnerships, joint ventures between private industry and public agencies, as being more politically palatable. Yet, public-private partnerships like the Cancer Moonshot center on the production of public goods: scientific information. Using private incentives in this context presents numerous puzzles for both intellectual property law and information policy. This Article examines whether—and to what extent — intellectual property and information policy can be appropriately tailored to the goals of public-private partnerships. …

The Up-C Revolution, Gregg D. Polsky, Adam H. Rosenzweig

Scholarly Works

Over the past few years, a revolutionary new tax structure, known as the Up-C, has become increasingly popular, particularly in instances where an LLC is being taken public. In such an Up-C IPO, a newly formed C corporation is placed on top of the existing LLC, which continues to operate the business. Shares of the C corporation are sold to new investors, and the proceeds are used by the C corporation to buy an interest in the LLC. Meanwhile, the legacy owners of the LLC (typically, founders and private investment funds) retain their interests in the LLC, while receiving exchange …

The Fiduciary Principle Of Insider Trading Needs Revision, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

The (Un)Changing Derivative Suit, Jessica M. Erickson

Law Faculty Publications

The past 25 years brought great upheaval in shareholder litigation. The Private Securities Litigation Reform Act of 1995 (“PSLRA”) upended securities class actions. As a result of this legislation, institutional investors now play a far more prominent role in these cases (Choi, et al. 2005), but also face procedural hurdles nearly unprecedented in our legal system (Erickson 2016). More recently, the number of merger class actions skyrocketed, as shareholders began to challenge nearly every significant merger or acquisition, often in multiple jurisdictions across the country (Sinha 2016). To curb these suits, courts announced increased scrutiny of settlements and invited companies …

The Long And The Short: Portfolio Turnover Ratios & Mutual Fund Investment Time Horizons, Anne M. Tucker

Scholarly Works

Mutual fund portfolio turnover ratios (PTR) are at the center of the short-termism debate, which criticizes corporate maneuvers taken to prop up near-term earnings at the expense of long-term, value focused investments and policies. Scholars and policymakers often rely on portfolio turnover ratios to argue that mutual fund short-termism, as measured by the PTR, is increasing and infecting operating company time horizons. This article answers two main questions central to discerning mutual funds' role in the short-termism debate. The first is, how long, on average do U.S. registered mutual funds hold onto their assets? The second is, how good of …

Submission To The Open Call For Input Regarding The Working Group’S Report On The Gender Lens To The Un Guiding Principles On Business And Human Rights, Sara Seck, Penelope Simons

Articles, Book Chapters, & Popular Press

In October 2017, we co-hosted a conference and policy meeting on the subject of extractive industries and the human rights of women and girls, at the Human Rights Resource Education Centre in Ottawa. This submission will reflect on some of the insights that emerged from the conference and policy meeting, as well as our own subsequent research. A selection of conference papers are forthcoming in a special issue of the Canadian Journal of Women and the Law. We have inserted our submissions in response to some of the specific questions raised by the Working Group.

Shareholder Voting And The Symbolic Politics Of Corporation As Contract, Grant M. Hayden, Matthew T. Bodie

Faculty Journal Articles and Book Chapters

American corporations are structured in such a way that shareholders, and shareholders alone, have the right to vote in all significant corporate decisions. Over the years, this exclusive shareholder franchise has been supported by an ongoing procession of justifications. But as those arguments have fallen by the wayside, shareholder primacists have circled back and latched upon a final argument for the special voting status of shareholders, arguing that this fundamental feature of corporate governance is the product of the set of freely-bargained-for agreements among all corporate constituents. Because this set of agreements reflects the preferences of all parties to the …

Democracy And Dysfunction: Rural Electric Cooperatives And The Surprising Persistence Of The Separation Of Ownership And Control, Randall S. Thomas, Debra C. Jeter, Harwell Wells

Vanderbilt Law School Faculty Publications

Since the 1930s, corporate law scholarship has focused narrowly on the public corporation and the problem of the separation of ownership and control-a problem many now believe has been mitigated or even solved. With rare exceptions, scholars have paid far less heed to other business forms that still play important roles in the American economy. In this Article, we examine a significant and almost completely overlooked business form, the Rural Electric Cooperative (REC). RECs were founded in a moment of optimism during the New Deal. As with other cooperatives, their organizational rules differed sharply from those of for-profit corporations. They …

Re-Examining The Law And Economics Of The Business Judgment Rule: Notes For Its Implementation In Non-Us Jurisdictions, Aurelio Gurrea-Martinez

Research Collection Yong Pung How School Of Law

The business judgment rule, as it has been traditionally understood, seems to be based on three underlying assumptions that make this rule economically desirable. First, directors are subject to a credible threat of being sued for a breach of the duty of care. Second, the primary role of the corporation is to maximise shareholder value. Third, shareholders want the directors to pursue those investment projects with the highest net present value regardless of their volatility. This article challenges these assumptions and argues that the business judgment rule might not be desirable in some jurisdictions outside the United States and even …

The Evolution Of Entrepreneurial Finance: A New Typology, J. Brad Bernthal

Publications

There has been an explosion in new types of startup finance instruments. Whereas twenty years ago preferred stock dominated the field, startup companies and investors now use at least eight different instruments—six of which have only become widely used in the last decade. Legal scholars have yet to reflect upon the proliferation of instrument types in the aggregate. Notably missing is a way to organize instruments into a common framework that highlights their similarities and differences.

This Article makes four contributions. First, it catalogues the variety of startup investment forms. I describe novel instruments, such as revenue-based financing, which remain …

Corporations As Conduits: A Cautionary Note About Regulating Hypotheticals, Douglas M. Spencer

Publications

No abstract provided.

(At Least) Thirteen Ways Of Looking At Election Lies, Helen Norton

Publications

Lies take many forms. Because lies vary so greatly in their motivations and consequences (among many other qualities), philosophers have long sought to catalog them to help make sense of their diversity and complexity. Legal scholars too have classified lies in various ways to explain why we punish some and protect others. This symposium essay offers yet another taxonomy of lies, focusing specifically on election lies — that is, lies told during or about elections. We can divide and describe election lies in a wide variety of ways: by speaker, by motive, by subject matter, by audience, by means of …

Tournament Of Managers: Lessons From The Academic Leadership Market, Usha Rodrigues

Scholarly Works

Why do firms usually make, not buy, their chief executive officers (CEOs)? Public corporations hire their CEOs from within the firm 78% of the time. They do so although earlier studies have found no clear evidence that internal hires perform better than external ones. So why do firms prefer them? Few scholars have focused on this simple question.

The reason why firms favor internal candidates matters not only in its own right, but also for an overlooked reason: it informs the controversial question of executive compensation. Currently board-compensation committees look to peer benchmarks to set executive pay. But, taking cues …

Sexual Harassment And Corporate Law, Daniel Hemel, Dorothy S. Lund

Faculty Scholarship

The #MeToo movement has shaken corporate America in recent months, leading to the departures of several high-profile executives as well as sharp stock price declines at a number of firms. Investors have taken notice and taken action: Shareholders at more than a half dozen publicly traded companies have filed lawsuits since the start of 2017 alleging that corporate fiduciaries breached state law duties or violated federal securities laws in connection with sexual harassment scandals. Additional suits are likely in the coming months.

This Article examines the role of corporate and securities law in regulating and remedying workplace sexual misconduct. We …

Valuation Disputes In Corporate Bankruptcy, Kenneth M. Ayotte, Edward R. Morrison

Faculty Scholarship

Prior scholarship points to disagreements about valuation and judicial valuation error as key drivers of Chapter 11 outcomes. Avoiding valuation disputes and valuation errors is also the underlying driver of most proposed reforms, from Baird’s auctions to Bebchuk’s options. In this paper, we undertake a detailed examination of bankruptcy court opinions involving valuation disputes. Our paper has two goals. The first is to understand how parties and their expert witnesses justify their opposing views to the judge, and how judges decide between them. The second is to provide practical guidance to judges in resolving valuation disputes. We document surprisingly pervasive …

Will Swing Pricing Save Sedentary Shareholders?, Anne M. Tucker, Holly Van Den Toorn

Scholarly Works

This Article explains and explores new Securities Exchange Commission rules authorizing optional swing pricing for mutual funds. Swing pricing is an anti-dilution tool intended to protect sedentary investors who enter, and stay, in a fund. Workers setting aside money for retirement are often sedentary investors. Mutual funds are the mainstay vehicle for retirement investors, yet as sedentary shareholders they can experience significant asset dilution over their savings lifetime. Swing pricing—a mutual fund pricing mechanism that allocates transaction costs to the triggering shareholders—could save sedentary shareholders, collectively, billions of dollars. The mutual fund industry's operational complexities and competing regulatory obligations may …

20/20 Vision In The Long & Short-Termism Debate, Anne M. Tucker

Scholarly Works

What is an optimal investment time horizon—for institutions, individual shareholders and corporations? This question can evoke emotional, ideological, and theoretical responses. The answers usually deeply entrenched debates over the fundamental roles of markets versus regulation and between the appropriate loci of corporate power: the board of directors versus the shareholders. Too long-term and it is myopia; too near-term and is it short-termism. Neither label is inconsequential, so the debates are not tepid, academic, or marginal.

Corporate Governance Reform In Post-Crisis Financial Firms: Two Fundamental Tensions, Christopher Bruner

Scholarly Works

The manner in which financial firms are governed directly impacts the stability and sustainability of both the financial sector and the "real" economy, as the financial crisis and associated regulatory reform efforts have tragically demonstrated. However, two fundamental tensions continue to complicate efforts to reform corporate governance in post-crisis financial firms. The first relates to reliance on increased equity capital as a buffer against shocks and a means of limiting leverage. The tension here arises from the fact that no corporate constituency desires risk more than equity does, and that risk preference only tends to be stronger in banks, and …

Distributed Ledgers, Traceable Shares, And The Division Of Power In Corporate Law, Christopher M. Bruner

Scholarly Works

Review of Traceable Shares and Corporate Law, 113 Nw. U. L. Rev. __ by George S. Geis (forthcoming 2018)

Center-Left Politics And Corporate Governance: What Is The 'Progressive' Agenda?, Christopher Bruner

Scholarly Works

For as long as corporations have existed, debates have persisted among scholars, judges, and policymakers regarding how best to describe their form and function as a positive matter, and how best to organize relations among their various stakeholders as a normative matter. This is hardly surprising given the economic and political stakes involved with control over vast and growing "corporate" resources, and it has become commonplace to speak of various approaches to corporate law in decidedly political terms. In particular, on the fundamental normative issue of the aims to which corporate decision-making ought to be directed, shareholder-centric conceptions of the …