Business Organizations Law Commons^™

A Tisket, A Tasket: Basketing And Corporate Tax Shelters, Leandra Lederman

Articles by Maurer Faculty

In an income tax system that comported with the economic, or Haig-Simons, definition of income, deductible expenses would not face source-based limitations. A true Haig-Simons income tax system therefore would not take the schedular approach of sorting different types of expenses and losses into distinct conceptual “baskets” containing corresponding types of income. Practical realities often require departing from the Haig-Simons norm, however. The U.S. federal income tax system does require individuals to basket a number of types of expenses and losses. For example, individuals’ passive activity losses can only be deducted from passive income gains. By contrast, most corporations taxed …

Business Interest Cases – October 2009 Term, Leon D. Lazer, Leon Friedman

Scholarly Works

No abstract provided.

Strategic Spillovers, Daniel B. Kelly

Journal Articles

The conventional problem with externalities is well known: Parties often generate harm as an unintended byproduct of using their property. This Article examines situations in which parties may generate harm purposely, in order to extract payments in exchange for desisting. Such “strategic spillovers” have received relatively little attention, but the problem is a perennial one. From the “livery stable scam” in Chicago to “pollution entrepreneurs” in China, parties may engage in externality-generating activities they otherwise would not have undertaken, or increase the level of harm given that they are engaging in such activities, to profit through bargaining or subsidies. This …

Deconstructing Corporate Governance: Absolute Director Primacy, René Reich-Graefe

Faculty Scholarship

Microtheoretical models of the corporation which focus on corporate governance attempt to answer two deceptively simple, but fundamentally elusive questions: ‘Who are in control of the corporation?’ and ‘Whose interests ultimately control those in control of the corporation?’ Both questions remain partially unanswered within the models developed to date by corporate theoreticians. This Article proposes a radically new model: 'absolute director primacy.’ Existing microtheoretical models conceive that we only need to—and, indeed, can—determine the controlling interests guiding corporate decisionmaking in order to prove the existence of control over the decisionmaking latitude of corporate boards. The absolute director primacy …

Allen V. Dackman: Doing Away With Limited Liability In Maryland, Jeffrey S. Quinn

Maryland Law Review

No abstract provided.

The “Non-Cumulation Clause”: An “Other Insurance” Clause By Another Name, Chris French

Faculty Scholarship

How long-tail liability claims such as asbestos bodily injury claims and environmental property damage claims are allocated among multiple triggered policy years can result in the shifting of tens or hundreds of millions of dollars from one party to another. In recent years, insurers have argued that clauses commonly titled, “Prior Insurance and Non-Cumulation of Liability” (referred to herein as “Non-Cumulation Clauses”), which are found in commercial liability policies, should be applied to reduce or eliminate their coverage responsibilities for long-tail liability claims by shifting their coverage responsibilities to insurers that issued policies in earlier policy years. The insurers’ argument …

Teaching Gender As A Core Value In Business Organizations Class, Cheryl L. Wade

Faculty Publications

(Excerpt)

I teach a business organizations course that is typically a large class with up to ninety students. At some point in the first week of each semester, I talk about public companies and the men who lead them. I point out to my students that while it is appropriate in most contexts to use gender-neutral language, it would be inaccurate to do so when talking about big business. Only fifteen percent of the board seats at Fortune 500 companies are held by women, and only sixteen percent of Fortune 500 corporate officers are women. I let my students know …

Fiduciary Duty And The Public Interest, Cheryl L. Wade

Faculty Publications

(Excerpt)

Professor Tamar Frankel’s excellent book, Fiduciary Law, is a thorough and comprehensive look at the fiduciary-law forest. My contribution to the Symposium on The Role of Fiduciary Law and Trust in the Twenty-First Century is one leaf on one branch of one tree in the forest that Professor Frankel so expertly navigates. In this Essay, I explore the fiduciary relationship between corporate directors and officers and the shareholders they serve. I examine how the breach of fiduciary duties owed to shareholders has the power to dramatically impact non-shareholder groups.

Professor Frankel accurately observes that “[f]iduciary duties are anchored …

Beyond Profit: Rethinking Corporate Social Responsibility And Greenwashing After The Bp Oil Disaster, Miriam A. Cherry, Judd F. Sneirson

Faculty Publications

The explosion of the BP-leased Deepwater Horizon and subsequent oil spill stand as an indictment not just of our national energy priorities and environmental law enforcement; they equally represent a failure of Anglo-American corporate law and what passes for corporate social responsibility in business today. Using BP and the disaster as a compelling case study, this Article examines green marketing and corporate governance and identifies elements of each that encourage firms to engage only superficially in corporate social responsibility yet trumpet those efforts to eager consumers and investors. This Article then proposes reforms and protections designed to increase corporate social …

Ethical Issues In Business And The Lawyer's Role, Carol Morgan, Robert Rhee, Tamar Frankel, Mark Fagan

Scholarly Works

This is a transcript of a panel discussion on teaching Business Ethics.

Economic Crisis And Share Price Unpredictability: Reasons And Implications, Edward G. Fox, Merritt B. Fox, Ronald J. Gilson

Faculty Scholarship

The volatility of share returns for individual companies increased sharply during the recent financial crisis. The larger part of this increase was due to a dramatic rise – five fold as measured by variance – in idiosyncratic risk. We find that this pattern repeats itself during each major economic reversal going back 85 years. Because idiosyncratic risk is what is involved, this increase cannot be explained by changes in predictions concerning the future course of the economy as a whole.

Our first goal is to explain why difficult economic times, which are defined in terms of market wide phenomena, make …

Outsourcing Modularity, And The Theory Of The Firm, Margaret M. Blair, Erin O'Hara O'Connor, Gregg Kirchhoefer

Vanderbilt Law School Faculty Publications

Firms have increasingly moved productive activities from within to outside the firm through outsourcing arrangements. According to some estimates, the value of outsourcing contracts has been nearly 100 billion dollars per year since 2004. Firm outsourcing happens for a number of reasons, including to save labor costs, capture the benefits of regulatory arbitrage, and take advantage of economies of scale in the provision of firm needs. We review a number of outsourcing contracts for evidence that contract techniques are used to help modularize the relationship between the firm and its service provider. Consistent with what modularity theory might predict, some …

Veil Piercing To Non-Owners: A Practical And Theoretical Inquiry, Mark J. Loewenstein

Publications

In the typical veil piercing case, the plaintiff seeks to hold the owners of an entity liable for the entity’s obligations. Recently, however, plaintiffs have sought to hold managers of an entity liable for the entity’s obligations even if the manager is not an owner. This article considers this phenomenon in light of the underlying theory of veil piercing and in the context of both corporate law and the law of limited liability companies. In brief, the theory of veil piercing in its traditional application – to shareholders of a corporation – is weak, and it is weaker still when …

Confronting The Certainty Imperative In Corporate Finance Jurisprudence, Diane Lourdes Dick

Faculty Articles

This Article argues that the methodological constraints of the Imperative have abandoned its underlying goals of certainty and stability in financial markets. Therefore, a new paradigm is needed that will enable courts to allocate rights and remedies in accordance with the economic substance of arrangements, and thus better enhance market stability.

This Article proceeds as follows: Part II articulates the jurisprudential underpinnings of the Imperative. Part III examines the economic theory and assumptions reflected in Imperative-driven decisions, as well as the interpretive methodology that has evolved across a range of judicial decisions and legislative enactments. Part IV introduces a recent …

Rational Coercion: Citizens United And A Modern Day Prisoner's Dilemma, Anne M. Tucker

Scholarly Works

No abstract provided.

Entity And Identity, Usha Rodrigues

Scholarly Works

The function, indeed the very existence, of nonprofit corporations is undertheorized. Recent literature suggests that only preferential tax treatment adequately accounts for the persistence of the nonprofit form. This explanation is incomplete. Drawing on psychology’s social identity theory, this Article posits that the nonprofit form can create a special “warm-glow” identity that cannot be replicated by the for-profit form. For example, a local nonprofit food cooperative sells more than the free-range eggs or organic strawberries that Whole Foods and other for-profits market so effectively. The co-op offers community participation and an investment in local farms, a distinctive ethos that is …

Corporate Governance In An Age Of Separation Of Ownership From Ownership, Usha Rodrigues

Scholarly Works

The shareholder empowerment provisions enacted as part of the recent bailout legislation are internally incoherent because they fail to address the short-termist realities of shareholder ownership today. Ownership has separated from ownership in modern corporate America: individual investors now largely hold stock through mutual funds, pension funds, and hedge funds. The incentives of these short-term financial intermediaries only imperfectly reflect the interests of their long-term holders - an imbalance only exacerbated by the bailout’s corporate governance legislation. The bailout’s focus on shareholder empowerment tactics - such as proxy access, say-on-pay, and increased disclosure - makes little sense if shareholders are …

“Say On Pay”: The Movement To Reform Executive Compensation In The United States And European Union, Marisa Anne Pagnattaro, Stephanie Greene

Northwestern Journal of International Law & Business

In the aftermath of an array of economic failures, there is a growing movement to reform executive compensation. Concerned that executive compensation structures reward inappropriate risk taking and create a short-term perspective, the United States and the European Union are taking steps to reform the ways executives are compensated. Part I analyzes governmental and regulatory action in the United States, including SEC disclosure rules and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Part II details new initiatives in the European Union that recommend changes to remuneration for directors of listed companies and remuneration in the financial services sector, …

Four Varieties Of Social Responsibility: Making Sense Of The 'Sphere Of Influence' And 'Leverage' Debate Via The Case Of Iso 26000, Stepan Wood

All Faculty Publications

One of the key controversies in social responsibility discourse is whether an organization’s responsibility should be based on its capacity to influence other parties or only on its actual contribution to social and environmental outcomes. On one side of the debate are those who argue that the limits of an organization’s responsibility should be defined in terms of its “sphere of influence” (SOI): the greater the influence, the greater the responsibility to act. On the other side are those who reject the SOI approach as ambiguous, misleading, normatively undesirable and prone to strategic manipulation. Foremost among the critics is the …

We Are The (National) Champions: Understanding The Mechanisms Of State Capitalism In China, Li-Wen Lin, Curtis J. Milhaupt

All Faculty Publications

While China appears to present a new variety of capitalism, frequently labeled "state capitalism," the features of this system - particularly the organizational structure surrounding China’s most important state-owned enterprises (the national champions) - remains a black box. Corporate governance scholarship on China has focused on listed firms, but listed SOEs in China are nested in vertically integrated corporate groups, and the groups are strategically linked to other business groups, as well as to the Communist Party and to governmental organs. While the parent company of the listed firms has a governmental controlling shareholder in the form of an agency …