Business Organizations Law Commons^™

The Citizen Shareholder: Modernizing The Agency Paradigm To Reflect How And Why A Majority Of Americans Invest In The Market Berle Iii: Theory Of The Firm: The Third Annual Symposium Of The Adolf A. Berle, Jr. Center On Corporations, Law & Society, Anne M. Tucker

Scholarly Works

This Article examines corporate law from the perspective of personal investment and discusses the economic realities of modern investments in order to understand the role of shareholders within the agency paradigm. Corporate law, its scholars, and suggested reforms traditionally focus on the internal organization of the corporation. For example, agency principles inform corporate law by acknowledging a potential conflict of interest between the managers and shareholders of a corporation. Reforms such as increased shareholder voting rights and proxy access, which seek to give shareholders a more direct means to make their interests known to managers, illustrate corporate law’s focus on …

Agency And The Ontology Of The Corporation, Christopher M. Bruner

Scholarly Works

No abstract provided.

Conflicted Gatekeepers: The Volcker Rule And Goldman Sachs, Andrew F. Tuch

Scholarship@WashULaw

In many areas of regulation, rules require one person to act with loyalty to another person, or at least constrain one person’s pursuit of self-interest by restricting the extent to which that person may act in conflict with the interests of another person. These rules are typically justified on the basis of reducing (economic) agency costs. However, recently-adopted provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act, which include the so-called Volcker Rule, impose such conflict of interest rules on underwriters selling securities to investors, including sophisticated investors - a context in which agency costs do not arise. …

Kigyo No Shakai-Teki Sekinin: Challenges For Corporate Social Responsibility In Japan, Janis P. Sarra, Masafumi Nakahigashi

All Faculty Publications

Globally, there is increasing discussion about corporate social responsibility (CSR). Many large multinational enterprises, particularly in mining and other resource sectors, have voluntarily adopted CSR programs, having concluded that social, economic, and environmental sustainability measures are good for the "bottom line" and fro the communities in which they operate. Companies in Japan have yet to move in that direction, although there are a few notable exceptions. In part, this lack of adaptation to the growing interest in CSR internationally is due to cultural and social norms in Japan that suggest that many aspects of CSR properly belong to the domain …

Prospects For Scalability: Relationships And Uncertainty In Responsive Regulation, Cristie Ford

All Faculty Publications

Ian Ayres’s and John Braithwaite’s book Responsive Regulation: Transcending the Regulatory Debate (1992) gave us many significant insights. The book has transcended its own time. At the same time, on the 20th anniversary of its publication, two things about Responsive Regulation are striking. The first is the direct, personal relationship on which the regulatory interaction is premised. The second is the boundedness and manageability of the regulatory project. At least in prudential regulation of global financial institutions in the wake of the recent financial crisis (though surely elsewhere too), neither of these features can be taken for granted. This brief …

The Future Of European Company Law, Peter Böckli, Paul L. Davies, Eilis Ferran, Guido Ferrarini, José M. Garrido Garcia, Klaus J. Hopt, Alain Pietrancosta, Katharina Pistor, Rolf Skog, Stanislaw Soltysinski, Jaap W. Winter, Eddy Wymeersch

Faculty Scholarship

This paper contains the views of the European Company Law Experts (ECLE) on the future of European company law. The paper accompanies the responses of the European Company Law Experts to the European Commission’s Consultation on the future of European Company Law of spring 2012. In the first part of the paper we set out our views on the objectives of European company law and in the following parts we discuss how the European Commission should proceed with rule making in the field of company law.

Corporate Control And Credible Commitment, Ronald J. Gilson, Alan Schwartz

Faculty Scholarship

The separation of control and ownership – the ability of a small group effectively to control a company though holding a minority of its cash flow rights – is common throughout the world, but also is commonly decried. The control group, it is thought, will use its position to consume excessive amounts of project returns, and this injures minority shareholders in two ways: there is less money and the controllers are not maximizing firm value. To the contrary, we argue here that there is an optimal share of the firm that compensates the control group for monitoring managers and otherwise …

The Naked Fiduciary, Michelle M. Harner, Jamie Marincic

Faculty Scholarship

Business law is grounded in the common law of fiduciary duty. Courts and policymakers have been loath to abandon that principle. Yet, particularly in the contractual context of limited liability companies (LLCs), the fiduciary label is illusory and may undercut sound governance practices for those entities. This Article presents an in-depth empirical study about governance provisions included in LLC operating agreements and examines the implications of the data in the context of various types of businesses that might choose to organize as LLCs. The Article uses the data and related case studies to offer a new approach to LLC governance …

Chevron, Greenwashing, And The Myth Of 'Green Oil Companies', Miriam A. Cherry, Judd F. Sneirson

All Faculty Scholarship

As green business practices grow in popularity, so does the temptation to “greenwash” one’s business to appear more environmentally and socially responsible than it actually is. We examined this phenomenon in an earlier paper, using BP and the Deepwater Horizon catastrophe as a case study and developing a framework for policing dubious claims of corporate social responsibility. This Article revisits these issues focusing on Chevron, an oil company that claims in its advertisements to care deeply about the environment and the communities in which it operates, even as it faces an $18 billion judgment for polluting the Ecuadorean Amazon and …

Fragmentation Nodes: A Study In Financial Innovation, Complexity, And Systemic Risk, Kathryn Judge

Faculty Scholarship

This Article resents a case study in how complexity arising from the evolution and proliferation of a financial innovation can increase systemic risk. The subject of the case study is the securitization of home loans, an innovation which played a critical and still not fully understood role in the 2007-2009 financial crisis. The Article introduces the term "fragmentation node" for these transaction structures, and it shows how specific sources of complexity inherent in fragmentation nodes limited transparency and flexibility in ways that undermined the stability of the financial system. In addition to shedding new light on the processes through which …

Envisioning Enforcement Of Freedom Of Association Standards In Corporate Codes: A Journey For Sinbad Or Sisyphus?, James J. Brudney

Faculty Scholarship

Since the 1970’s, multinational corporations (MNCs) in large numbers have adopted codes of conduct declaring their commitment to workers’ rights. These codes, however, do not require adherence to specific labor regulations or standards in a global setting. The MNC record on voluntary compliance has been discouraging, especially in labor-intensive industries like apparel, shoes, and toys, where a global supply chain of contractors effectively controls labor conditions. The persistent gap between aspiration and achievement regarding corporate codes has led to disagreement over their meaning and value. MNCs hope to be judged on the basis of the self-regulatory systems they have established. …

The Bizarre Law & Economics Of 'Business Roundtable V. Sec', Grant M. Hayden, Matthew T. Bodie

Faculty Journal Articles and Book Chapters

Corporations are legal entities designed to foster certain kinds of collective economic activity. The decisionmaking power within a corporation ultimately rests with a board of directors elected by shareholders. Shareholders, however, do not use anything like a conventional ballot in these elections; instead, they fill out a “proxy ballot,” delivered to them by the incumbent board. This proxy ballot lists only the incumbent board’s chosen nominees, very often the board members themselves. If a shareholder wants to run for director or propose another nominee for the board, she needs to provide all other shareholders with a separate proxy ballot — …

Costing Financial Regulation, Caroline Bradley

Articles

No abstract provided.

Dichotomy No Longer? The Role Of The Private Business Sector In Educating The Future Russian Legal Professions, Philip Genty

Faculty Scholarship

In his 1916 work The Law: Business or Profession?, Julius Henry Cohen describes an American legal system in which uniform standards for regulating, disciplining, and educating the profession are just beginning to be developed, albeit unevenly. In discussing the differences between a business and a profession, he argues that a profession requires a uniform set of standards to guide it in matters of ethics, as well as a system of rigorous legal education that includes a firm grounding in these ethical principles.

Perhaps most surprising for a book written in the early twentieth century – long before the …

Independent Financial Advisers’ Opinions For Public Takeovers And Related Party Transactions In Singapore, Wai Yee Wan

Research Collection Yong Pung How School Of Law

This article examines the role and utility of opinions (IFA opinions) rendered by independent financial advisers (IFAs), who are required to be appointed in connection with takeovers of, and related party transactions entered into by, companies which are listed in Singapore. Three main problems are identified: (1) data from 122 IFA opinions issued between 2008 and 2010 in connection with takeover offers of Singapore-listed companies show that there are a significant number of IFAs who do not use the standard of “fair and reasonable” in assessing offers and instead use tests that are more equivocal, rendering the opinions less helpful; …

Equity Swaps And Implications In Company Law: An Examination Of Singapore Law, Chao-Hung Christopher Chen

Research Collection Yong Pung How School Of Law

This article explores issues from the use of equity swaps by corporate stakeholders under Singapore law. The article accepts that non-disclosure of economic interests might have an impact on market efficiency and corporate governance. To address potential problems, Singapore should consider revising the Takeover Code, while it requires further regulatory impact analysis to decide whether amendments to the Securities and Futures Act and the Companies Act are needed. As an alternative, companies can use their articles of association to impose a duty of disclosure before statutory intervention. In addition, the trading of equity swaps by directors raises issues about fiduciary …

Behavioral Approaches To Corporate Law, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

This chapter reviews the challenges associated with developing a plausible theory of why psychological "heuristics and biases" might persist in high-stakes business settings. Specific attention is given to issues of loyalty on corporate boards, behavioral finance, and corporate cultures.

The Stages Of Scandal And The Roles Of General Counsel, Deborah A. Demott

Faculty Scholarship

This Essay examines the roles of a general counsel, as the corporation’s chief legal officer, in responding to scandals when they happen and in developing and enforcing internal preventive practices prior to the occurrence of any particular scandal. The Essay differentiates between scandals and crises more generally, emphasizing the integral connection between scandal and jeopardy to reputation and tracing the interrelationships between a corporation’s reputation and that of its general counsel. The Essay argues that risks associated with scandal may strengthen general counsel’s power within the senior management team, in particular in general counsel’s relationship with the corporation’s CEO. Although …

How Collective Settlements Camouflage The Costs Of Shareholder Lawsuits, Richard Squire

Faculty Scholarship

Corporations insure against liability in shareholder lawsuits by buying tiered coverage from multiple insurers who each cover a distinct segment of the potential damages range. Rather than negotiating to settle individually with the plaintiff, the insurers seek to reach a single, collectively binding settlement agreement. This combination of segmented coverage and collective settlements produces a conflict of interests: the corporation’s managers and some insurers are better off if the case settles pre-trial for the expected damages, while other insurers are better off going to trial. To force reluctant insurers to settle, courts have created a duty that can require an …

What Were They Thinking? Insider Trading And The Scienter Requirement, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

On its face, the connection between insider trading regulation and the state of mind of the trader or tipper seems intuitive. Insider trading is a form of market abuse: taking advantage of a secret to which one is not entitled, generally in breach of some kind of fiduciary-like duty. This chapter examines both the legal doctrine and the psychology associated with this pursuit. There is much conceptual confusion in how we define unlawful insider trading—the quixotic effort to build a coherent theory of insider trading by reference to the law of fraud, rather than a more expansive market abuse standard—which …