Business Organizations Law Commons^™

Keynote Address: The Role Of Lawyers In The Global Financial Crisis, Steven L. Schwarcz

Faculty Scholarship

In recent articles, the author has argued that the global financial crisis can be attributed in large part to three causes — conflicts, complacency and complexity — as well as to a type of tragedy of the commons. This article, which comprised the keynote address for the 2010 Corporate Law Teachers Association Conference, will focus on the failure of market observers, including corporate lawyers, to foresee or act on critical correlations that might have prevented, or at least mitigated, the crisis. Although conflicts, complacency, complexity and the tragedy of the commons can help to explain this failure, the goal will …

The Cult Of Efficiency In Corporate Law, Stephen E. Ellis, Grant M. Hayden

Faculty Journal Articles and Book Chapters

This paper challenges a fundamental assumption of corporate law scholarship. Corporate law is heavily influenced by economics, and by normative economics in particular. Economic efficiency, for example, is seen as the primary goal of good corporate governance. But this dependence on standard notions of economic efficiency is unfortunate, as those notions are highly problematic. In economic theory, efficiency is spelled out in terms of individual preference satisfaction, which is an inadequate foundation for any sort of normative analysis. We argue that on any account of the good, people will sometimes prefer things that aren’t good for them on that account. …

Corporate War Crimes: Prosecuting Pillage Of Natural Resources, James G. Stewart

All Faculty Publications

Pillage means theft during war. Although the prohibition against pillage dates to antiquity, pillaging is a modern war crime that can be enforced before international and domestic criminal courts. Following World War II, several businessmen were convicted for the pillage of natural resources. And yet modern commercial actors are seldom held accountable for their role in the illegal exploitation of natural resources from modern conflict zones, even though pillage is prosecuted as a matter of course in other contexts. This book offers a doctrinal road-map of the law governing pillage as applied to the illegal exploitation of natural resources by …

Power Without Property, Still: Unger, Berle, And The Derivatives Revolution, Cristie Ford, Carol Liao

All Faculty Publications

This paper was produced for “In Berle’s Footsteps,” a symposium marking the launch of the Adolf A. Berle, Jr. Center on Corporations, Law and Society at the University of Seattle School of Law. It considers the light that the “derivatives revolution” sheds on the theoretical perspectives of Roberto Unger and Adolf Berle. While an unlikely pair, both Unger and Berle focused, in different ways, on the same issues: property, the power associated with property, and the impact of “smashing the atom” of traditional property rights. For Unger, breaking down consolidated property holding at the societal level was a pro-democratic move. …

In Defence Of The Sphere Of Influence: Why The Wgsr Should Not Follow Professor Ruggie's Advice On Defining The Scope Of Social Responsibility, Stepan Wood

All Faculty Publications

The Working Group on Social Responsibility (WGSR) of the International Organization for Standardization (ISO) will meet in Copenhagen from May 17 to 21, 2010 for what is likely to be its last meeting to work on ISO 26000, an international guide on social responsibility. One of the central challenges for the WGSR is to define the scope of an organization’s responsibility for human rights abuses committed by third parties. ISO 26000, approved by a large majority in a recent "Draft International Standard" ballot, answers this question largely in terms of an organization’s degree of control or influence over others’ conduct. …

Renegotiation Of Cash Flow Rights In The Sale Of Vc-Backed Firms, Brian Broughman, Jesse Fried

Articles by Maurer Faculty

Incomplete contracting theory suggests that VC cash flow rights - including liquidation preferences - may be subject to renegotiation. Using a hand-collected dataset of sales of Silicon Valley firms, we find common shareholders do sometimes receive payment before VCs' liquidation preferences are satisfied. However, such deviations tend to be small. We also find that renegotiation is more likely when governance arrangements, including the firm's choice of corporate law, give common shareholders power to impede the sale. Our study provides support for incomplete contracting theory, improves understanding of VC exits, and suggests that choice of corporate law matters in private firms.

Accountable Care Organizations: A New New Thing With Some Old Problems, Thomas L. Greaney

All Faculty Scholarship

When pressed for evidence that the proposed health reform legislation will control costs, proponents invariably cite the numerous pilot programs and other innovations in Medicare payment policy contained in the bill. At first blush, the ACO model seems well designed to foster competition among providers. Not unlike health maintenance organizations and other integrated delivery forms, ACOs assume responsibility for coordinating care and thus have strong incentives to provide cost effective care and to do so in a manner that is transparent and hospitable to comparative shoppers. But at the same time, the path of ACO development could prove profoundly anti-competitive. …

The Role Of Independent Directors In Startup Firms, Brian Broughman

Articles by Maurer Faculty

This Article develops a new theory to explain the widespread use of independent directors in the governance of startup firms. Privately held startups often assign a tie-breaking board seat to a third-party independent director. This practice cannot be explained by the existing corporate governance literature, which relies on diffuse ownership and passive investment-features unique to the publicly traded firm. To develop an alternative theory, I model a financing contract between an entrepreneur and a venture capital investor. I show that allocating a tie- breaking vote to an unbiased thirdparty can prevent opportunistic behavior that would occur ifthe firm were controlled …

Personal Jurisdiction Over Foreign Directors In Cross-Border Securities Litigation, Hannah L. Buxbaum

Articles by Maurer Faculty

No abstract provided.

The Public Control Of Corporate Power: Revisiting The 1909 U.S. Corporate Tax From A Comparative Perspective, Ajay K. Mehrotra

Articles by Maurer Faculty

The origins of U.S. corporate taxation are often associated with the 1909 corporate excise tax. Scholars who have investigated the beginnings of this levy have mainly focused on the legislative history of the 1909 corporate tax to argue that it was either an expression of the Progressive Era impulse to regulate large-scale corporations or an attempt to use corporations as remittance devices to collect taxes aimed at wealthy shareholders. This Article broadens the conventional historical accounts of the emergence of American corporate taxation by revisiting the 1909 U.S. corporate tax from a comparative perspective. The aim is to look both …

Locating Innovation: The Endogeneity Of Technology, Organizational Structure, And Financial Contracting, Ronald J. Gilson

Faculty Scholarship

There is much we do not understand about the "location" of innovation: the confluence, for a particular innovation, of the technology associated with the innovation; the innovating firm's size and organizational structure; and the financial contracting that supports the innovation. This Essay suggests that these three indicia are determined simultaneously and discusses the interaction among them through four examples of innovative activity whose location is characterized by tradeoffs between pursuing the activity in an established company, in a smaller, earlier-stage company, or some combination of the two. It first considers the dilemma faced by an established company in deciding whether …

Flawed Assumptions: A Corporate Law Analysis Of Free Speech And Corporate Personhood In Citizens United, Anne M. Tucker

Scholarly Works

No abstract provided.

Excuse Doctrine: The Eisenberg Uncertainty Principle, Victor P. Goldberg

Faculty Scholarship

The world is in a bit of a mess. Oil prices soared to more than $140 per barrel and within months plummeted to below $40. The pound fell from $2 to less than $1.40. Housing and stock prices crashed. Foreclosures, bankruptcies, and bailouts became newspaper staples. When things go awry like this, inevitably many people and firms regret having entered into contracts under more favorable circumstances. Many of them will be looking for ways to limit, or better yet, avoid the consequences. A preeminent contracts scholar, Melvin Eisenberg (2009), has provided them with considerable ammunition in a recent paper, arguing …

Corporate Political Speech: Who Decides, Lucian A. Bebchuk, Robert J. Jackson Jr.

Faculty Scholarship

The Supreme Court spoke clearly this Term on the issue of corporate political speech, concluding in Citizens United v. FEC' that the First Amendment protects corporations' freedom to spend corporate funds on indirect support of political candidates. 2 Constitutional law scholars will long debate the wisdom of that holding, as do the authors of the two other Comments in this issue.3 In contrast, this Comment accepts as given that corporations may not be limited from spending money on politics should they decide to speak. We focus instead on an important question left unanswered by Citizens United: who should have the …

Ignoring The Writing On The Wall: The Role Of Enterprise Risk Management In The Economic Crisis, Michelle M. Harner

Faculty Scholarship

Enterprise risk management (ERM) targets overall corporate strategy and, when implemented correctly, can manage a corporation’s risk appetite and exposure. When ignored or underutilized, it can contribute to a corporation’s demise. In fact, many commentators point to ERM failures as contributing to the severity of the 2008 economic crisis. This essay examines the different approaches to ERM adopted by financial institutions affected by the 2008 economic crisis and how ERM contributed to the survival or failure of those firms. It then considers ERM in the broader context of corporate governance generally. This discussion reflects on ERM techniques for corporate boards …

Corporate Control And The Need For Meaningful Board Accountability, Michelle M. Harner

Faculty Scholarship

Corporations are vulnerable to the greed, self-dealing and conflicts of those in control of the corporation. Courts historically have regulated this potential abuse by designating the board of directors and senior management as fiduciaries. In some instances, however, shareholders, creditors or others outside of corporate management may influence corporate decisions and, in the process, extract corporate value. Courts generally address this type of corporate damage in one of two ways: they designate controlling shareholders as corporate fiduciaries and they characterize creditors, customers and others as contract parties with no fiduciary duties. The traditional roles of corporate shareholders and creditors may …

Barriers To Effective Risk Management, Michelle M. Harner

Faculty Scholarship

“As long as the music is playing, you’ve got to get up and dance. We’re still dancing.”**

This now infamous quote by Charles Prince, Citigroup’s former Chief Executive Officer, captures the high-risk, high-reward mentality and overconfidence that permeates much of corporate America. These attributes in turn helped to facilitate a global recession and some of the largest economic losses ever experienced in the financial sector. They also represent certain cognitive biases and cultural norms in corporate boardrooms and management suites that make implementing a meaningful risk culture and thereby mitigating the impact of future economic downturns a challenging proposition.

The …