Business & Corporate Law

The Legal Primacy Norm

Asaf Raz

Abstract Corporate law scholarship revolves around two polar conceptions, known as “shareholder primacy” and “corporate social responsibility.” This Article takes the literature in a new direction, arguing that the current dichotomy misses a crucial aspect of corporate law: its norm of legal primacy. Any pursuit of profit, by the corporation, is legally permitted only within […]

Supreme Risk

Benjamin P. Edwards

Abstract While many have discussed the social issues that might arise because of a majority-conservative Supreme Court, one critical consequence of the current Court has been overlooked: the role of the Court in generating or avoiding systemic risk. For some time, systemic financial risk has been regulated by a mix of self-regulatory organizations (SROs), such […]

The Writing on the [Fire]wall: “Mission Critical” Cybersecurity Derivative Litigation is on Delaware’s Horizon

E. Paige Williams

Abstract The impact of the information economy during the last quarter century has been dramatic. But for all its glory, the information economy also presents vulnerabilities: a cybersecurity breach can materially affect firm value. Although some security breaches may be inevitable in the modern world, courts are increasingly considering the question of whether the corporation’s […]

Tech Giant Exclusion

John B. Kirkwood

Abstract There is no topic in regulatory policy that is more pressing and more controversial than what to do about the tech giants—Google, Facebook, Amazon, and Apple. Critics claim that these powerful platforms crush competitors, distort the political process, and elude antitrust law because the law cares only about consumer prices. The only solution, critics […]

Domesticating Foreign Finance

Jeremy C. Kress

Abstract More than a decade after the 2008 financial crisis, U.S. policymakers still have not adequately addressed one of the primary causes of the crash: foreign banks. When foreign banks first entered the United States fifty years ago, they specialized in traditional banking products like loans and deposit accounts. Over time, however, many foreign banks […]

Codetermination in Theory and Practice

Grant M. Hayden & Matthew T. Bodie

Abstract Codetermination—a system of shared corporate governance between shareholders and workers—has been mostly ignored within the U.S. corporate governance literature. When it has made an appearance, it has largely served as a foil for shareholder primacy and as an example of corporate deviance. However, over the last fifteen years—and especially in the last five—empirical research […]

Drawing the Line: Refining the Baker Hughes Burden-Shifting Framework for Vertical Mergers

Matthew J. Ossorio

Abstract This Note both analyzes the problems that vertical mergers present in antitrust law and explores solutions to combat the difficulties enforcement agencies and merging entities face during injunctive relief proceedings. This Note was written to edify practitioners in both antitrust law and unrelated specialties. Although the goal of antitrust enforcement is the protection of […]

Advisors As Fiduciaries

Arthur B. Laby

Abstract This Article provides a sustained account of advice giving as a fiduciary activity, and it demonstrates that the dominant approach todefining fiduciary relationships is flawed. Leading academiccommentators assert that fiduciary relationships only arise when oneparty has discretion over the assets or affairs of another. Yet, manyadvisors—such as lawyers, doctors, and investment professionals—lackdiscretion over a […]

Disruptive Philanthropy: Chan-Zuckerberg, the Limited Liability Company, and the Millionaire Next Door

Written by: Dana Brakman Reiser

Abstract Facebook founder Mark Zuckerberg and his wife, Dr. Priscilla Chan, have pledged to give 99% of their net worth to—in their words—“advance[e] human potential and promot[e] equal opportunity.” To make good on this promise, however, they did not set up a traditional nonprofit, tax-exempt organization. Instead, they founded the Chan-Zuckerberg Initiative, a limited liability […]

Selective Disclosure and Insider Trading

Written by: Michael D. Guttentag

Abstract Determining when the selective disclosure of material nonpublic information should trigger insider trading liability is a deeply problematic aspect of insider trading doctrine. The current rule is that a selective disclosure can only trigger insider trading liability if “the insider [making the selective disclosure] personally will benefit, directly or indirectly, from his disclosure.” Dirks […]

Sandra K. Miller & Karie Davis-Nozemack, Toward Consistent Fiduciary Duties for Publicly Traded Entities

Written by: Sandra K. Miller & Karie Davis-Nozemack

Abstract After the 2008 recession, it is difficult to imagine that the public is investing billions of dollars in publicly traded entities with little regulation of board conflicts and no fiduciary duty protections. Yet, that is precisely the case for more than $284 billion of investments. Investors have flocked to publicly traded limited partnerships (LPs) […]

Harwell Wells, A Long View of Shareholder Power: From the Antebellum Corporation to the Twenty-First Century

For most of the twentieth century, the conventional wisdom held—probably correctly—that shareholders in America’s large, public corporations were passive and powerless and that managers wielded the real power. Beginning in the 1980s, however, shareholders in the form of institutional investors started to push for a greater say in corporate decision-making. In the twenty-first century, hedge […]

Paul Rose, Shareholder Proposals in the Market for Corporate Influence

The period from 2003 to 2013 shows a remarkable shift in the use and effectiveness of shareholder proposals. While shareholders pursued many different types of proposals over this period, this Article identifies eight types of proposals as most important to corporate governance. This Article then provides evidence of how shareholders used and voted on these […]

Bernard S. Sharfman, Shareholder Wealth Maximization and Its Implementation Under Corporate Law

This Article tackles the question of when courts should intervene in the decision-making of a corporation and review a corporate business decision for shareholder wealth maximization. This Article takes a very traditional approach to answering this question. It notes with approval that courts have historically been very hesitant to participate in the process of determining […]

Michelle M. Harner & Jamie Marincic Griffin, Facilitating Successful Failures

Approximately 80,000 businesses fail each year in the United States. This Article presents an original empirical study that surveys more than 400 business restructuring professionals. The study focuses on a critical factor that arguably contributes to these failures—the conduct of boards of directors and management. Anecdotal evidence suggests that management of distressed companies often bury […]

Miriam H. Baer, Confronting the Two Faces of Corporate Fraud

Some criminals engage in meticulous planning. Others commit crimes in the heat of the moment. Corporate fraud incorporates both planned and spur-of-the-moment misconduct. Although law and economics scholars have traditionally viewed corporate fraud as a manifestation of opportunism among the corporation’s agents, a new generation of scholars, influenced by findings in behavioral psychology, has focused […]

Lawrence A. Cunningham, Deferred Prosecutions and Corporate Governance: An Integrated Approach to Investigation and Reform

When evaluating how to proceed against a corporate investigative target, law enforcement authorities often ignore the target’s governance arrangements, while subsequently negotiating or imposing governance requirements, especially in deferred prosecution agreements. Ignoring governance structures and processes amid investigation can be hazardous, and implementing improvised reforms afterwards may have severe unintended consequences—particularly when prescribing standardized governance […]

Lee Harris, CEO Retention

Again and again, economists, corporate law scholars, and Congress have turned to reforms, such as executive compensation reforms, as a solution to executive misbehavior. The root of the evil, they muse, is skyhigh pay with only a flimsy connection to managerial performance. If CEO pay can only be rejiggered on the front end and tied to performance, the argument goes, […]

A Response to Professor Rose’s ‘Shareholder Proposals in the Market for Corporate Influence’

Robert J. Rhee

Abstract Response to Paul Rose, Shareholder Proposals in the Market for Corporate Influence Professor Paul Rose’s Shareholder Proposals in the Market for Corporate Influence makes a significant contribution to the literature on shareholder proposals. The empirical data on shareholder voting trends from 2003 to 2013 was informative, and the insights Professor Rose derives there from are plausible conclusions. […]

Dealing With Corporate Misconduct

Peter J. Henning

Abstract Response to Lawrence A. Cunningham, Deferred Prosecutions and Corporate Governance: An Integrated Approach to Investigation and Reform The standard method, these days, to resolve a criminal investigation of a corporation, particularly those with publicly traded shares, is a deferred or non-prosecution agreement. Under such agreements, the company generally pays a fine, some of which have been […]

Self-Control Engineering

Manuel A. Utset

Abstract Response to Miriam H. Baer, Confronting the Two Faces of Corporate Fraud Professor Miriam Baer’s article, Confronting the Two Faces of Corporate Fraud, is an important contribution to the growing literature on self-control problems and criminal misconduct. Professor Baer is concerned with both time-consistent (TC) and time-inconsistent (TI) misconduct. One of the important contributions of Professor […]

Rehabilitating Corporations

Brandon L. Garrett

Abstract Response to Lawrence A. Cunningham, Deferred Prosecutions and Corporate Governance: An Integrated Approach to Investigation and Reform Blockbuster corporate fines grab headlines, but corporate criminal prosecutions have rapidly evolved far beyond using monetary penalties to punish complex organizations. A central goal of federal prosecutors is to rehabilitate corporations, and not simply to fine them. Indeed, […]

Brett McDonnell, Dampening Financial Regulatory Cycles

Financial regulation should be countercyclical, strengthening during speculative booms to contain excessive leverage and loosening following crises so as to not limit credit extension in hard times. And yet, financial regulation in fact tends to be procyclical, strengthening following crises and loosening during booms. This Article considers competing descriptive and normative analyses of that procyclical tendency. All of the models and […]

Todd J. Zywicki, The Economics and Regulation of Network Branded Prepaid Cards

One of the fastest growing sectors of the consumer payments marketplace is the general-purpose reloadable prepaid card sector. Their importance accelerated as a consequence of new regulations enacted in the wake of the 2008 financial crisis. This increased use of prepaid cards also increased angst among regulators, especially regarding the number and size of fees on prepaid cards. State and […]

Robert E. Wagner, Criminal Corporate Character

In the last few years, corporations have been accused of crimes ranging from environmental pollution on an unprecedented scale, to manslaughter, to election tampering, to large-scale antitrust violations. Many of these accused companies had previously committed similar acts or even the exact same offense. Unfortunately, the rules of evidence in the federal system and in virtually every state system prohibit […]

Jessica Erickson, The New Professional Plaintiffs in Shareholder Litigation

In 1995, Congress solved the problem of professional plaintiffs in shareholder litigation—or so it thought. The Private Securities Litigation Reform Act (PSLRA) was designed to end the influence of shareholder plaintiffs who had little or no connection to the underlying suit. Yet it may have failed to accomplish its goal. In the wake of the […]

Amanda M. Rose & Larry J. LeBlanc, Policing Public Companies: an Empirical Examination of the Enforcement Landscape and the Role Played by State Securities Regulators

Multiple different securities law enforcers can pursue U.S. public companies for the same misconduct. These enforcers include a variety of federal agencies, class action attorneys, and derivative litigation attorneys, as well as fifty separate state regulators. Scholars and policy makers have increasingly questioned whether the benefits of this multienforcer approach are worth the costs, or […]

Steven J. Cleveland, Resurrecting Deference to the Securities and Exchange Commission: Mark Cuban and Trading on Inside Information

By applying the Supreme Court‘s administrative law jurisprudence to the examination of the validity of Rule 10b5-2(b)(1)—a rule recently adopted by the Securities and Exchange Commission (Commission)—this Article fills a significant gap in the existing literature. To date, commentators have argued against the rule‘s validity by applying the Supreme Court‘s securities law jurisprudence without considering […]

George W. Dent, Jr., Corporate Governance: The Swedish Solution

The optimal allocation of authority among executives, directors, and shareholders of public companies has been debated as long as there have been public companies, and the issue now seems further from resolution than ever. In recent years Sweden has changed its corporate governance system by delegating the nomination of corporate directors (and thus, in effect, […]

Giselle Gutierrez, Hurd v. Espinoza: "Third Party Confidential Information" in Delaware Corporate Litigation

On June 24, 2010, celebrity attorney Gloria Allred sent a letter (the Allred Letter) to Mark Hurd, then the Chief Executive Officer of Hewlett-Packard Company (HP), claiming that Hurd sexually harassed her client Jodie Fisher, a former HP contractor. In addition to being marked “CONFIDENTIAL TO BE OPENED BY ADDRESSEE ONLY,” the letter included a […]

Andrew C.W. Lund, Compensation as Signaling

Why do scholars and activists pay such close attention to how executive compensation is structured? Appropriate pay structure has traditionally been seen as a mechanism for reducing agency costs imposed on public firms by managers. But as that view has lost explanatory power in recent years, the intense focus on executive pay structure has become […]

Jeffrey Manns, Building Better Bailouts: The Case for a Long-Term Investment Approach

63 Fla. L. Rev. 1349 (2011)| | | | The Article seeks to fill a crucial gap in the Dodd-Frank Wall Street Reform and Consumer Protection Act: the failure to create a framework for dealing with future financial bailouts. It argues that the federal government’s ad hoc, “break even” approach to the recent bailouts not […]

Richard A. Epstein, Dunwody Distinguished Lecture in Law: The Constitutional Paradox of the Durbin Amendment: How Monopolies are Offered Constitutional Protections Denied to Competitive Firms

63 Fla. L. Rev. 1307 (2011)| | | | The Durbin Amendment is the first of the major provisions of the Dodd-Frank Act to have been implemented-but only after it withstood a constitutional challenge on the basis of the Takings Clause in the U.S. Court of Appeals for the Eighth Circuit. Now that the Amendment […]

Kimon Korres, Bankrupting Bankruptcy: Circumventing Chapter 11 Protections Through Manipulation of the Business Justification Standard in § 363 Asset Sales, and a Refined Standard to Safeguard Against Abuse

63 Fla. L. Rev. 959 (2011)|  | | NOTE :: Of the twenty largest public company bankruptcy filings from 1980 to the present, seventeen have taken place since 2001, and ten of those seventeen were filed between March of 2007 and August of 2009. One such example is In re Chrysler LLC, in which Chrysler, on […]

Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?

63 Fla. L. Rev. 163 (2011) | | | | ABSTRACT :: State Consumer Protection Acts (CPAs) were designed to supplement the Federal Trade Commission’s (FTC) mission of protecting consumers and are often referred to as “Little-FTC Acts.” There is growing concern that enforcement under these acts is not only qualitatively different than FTC enforcement […]

George D. Brown, Accountability, Liability and the War on Terror—Constitutional Tort Suits as Truth and Reconciliation Vehicles

63 Fla. L. Rev. 193 (2011)| | | | ABSTRACT :: This Article examines the role of civil suits in providing accountability for the Bush administration’s conduct of the “war on terror.” There have been calls for a “Truth and Reconciliation Commission” to perform this function, almost like a retroactive impeachment of President Bush. For […]

Melanie B. Leslie, The Wisdom of Crowds? Groupthink and Nonprofit Governance

62 Fla. L. Rev. 1179 (2010)| | | | ABSTRACT :: Scandals involving nonprofit boards and conflicts of interest continue to receive considerable public attention. Earlier this year, for example, musician Wyclef Jean’s Yele Haiti charity became the target of intense criticism after the charity disclosed that it had regularly transacted business with Jean and […]

Andrew S. Brown, Breaking Up and Making Out (Rich): Recommendations for Revision of the Bankruptcy Code Provisions Governing Break-Up Fees Used by Stalking Horse Bidders in § 363 Bankruptcy Asset Sales

62 Fla. L. Rev. 1463 (2010) | | | | INTRODUCTION :: Since December 2007, the United States has suffered through a “Great Recession.” The stock market had plummeted more than 40% from its peak as investors pulled their money from investments seeking safety under their mattresses. Companies and individuals have struggled as bankruptcy filings […]

Usha Rodrigues, From Loyalty to Conflict: Addressing Fiduciary Duty at the Officer Level

61 Fla. L. Rev. 1 (2009) | | | | ABSTRACT :: Conflicts of interest are the quintessential agency cost-the constant, lurking danger that agents may seek their own personal gain, rather than the good of the corporation. Yet many corporate employees lack knowledge as to exactly what constitutes a conflict of interest. This ignorance […]

Christopher H. Hanna, The Real Value of Tax Deferral

61 Fla. L. Rev. 203 (2009) | | | | ABSTRACT :: A leading law professor wrote a quarter-century ago that deferral of gain “is not as serious as outright exemption, but it is the next best thing.” Few tax law academics would disagree. But how important is tax deferral in the real world, particularly […]

Ann Morales Olazábal & Patricia Sanchez Abril, In Honor Of Walter O. Weyrauch: The Ubiquity of Greed: A Contextual Model for Analysis of Scienter?

60 Fla. L. Rev. 401 (2008) | | | | ABSTRACT :: Some securities fraud plaintiffs contend that greed-in the form of perpetuating a prestigious executive position, ensuring a gainful bonus, or maintaining the appearance of corporate profitability-is a bona fide motive evidencing scienter. But currently, no single judicial standard or analytical rubric guides the […]

Ann M. Scarlett, Confusion and Unpredictability in Shareholder Derivative Litigation: The Delaware Courts' Response to Recent Corporate Scandals

60 Fla. L. Rev. 589 (2008) | | | | ABSTRACT :: The Delaware courts responded to the recent wave of corporate scandals, exemplified by Enron and WorldCom, by changing their approach to shareholder derivative litigation. This Article analyzes the Delaware courts’ response to these scandals and concludes that the courts have created doctrinal confusion […]

Bradley T. Borden, The Like-Kind Exchange Equity Conundrum

60 Fla. L. Rev. 643 (2008) | | | | ABSTRACT :: The tax-free treatment of like-kind exchanges presents one of tax law’s most compelling equity conundrums. Tax law generally does not tax property holders on the property’s appreciation but does tax gain or loss recognized by property sellers and exchangers of non-like-kind property. In […]

David S. Levine, Secrecy and Unaccountability: Trade Secrets in our Public Infrastructure

59 Fla. L. Rev. 135 (2007) | | | | ABSTRACT :: Trade secrecy-the intellectual property doctrine that allows businesses to keep commercially valuable information secret for a potentially unlimited amount of time- is increasingly intruding in the operation of our public infrastructure, including voting machines, the Internet, and telecommunications. A growing amount of public […]

Christopher R. Leslie, The Significance of Silence: Collective Action Problems and Class Action Settlements

59 Fla. L. Rev. 71 (2007) | | | | INTRODUCTION :: When the Federal Rules of Civil Procedure first provided for a class action vehicle, hopes were high that individuals would be able to act collectively to hold corporations liable for small injuries imposed upon large numbers of victims. But after almost forty years […]

Simon A. Rodell, Plumbing in the Boardroom: Plugging Boardroom Leaks through a Good Faith Duty of Confidentiality

59 Fla. L. Rev. 631 (2007) | | | | INTRODUCTION :: On January 24, 2005, the Wall Street Journal published a front-page article detailing confidential boardroom discussions at Hewlett-Packard’s (H-P) annual board meeting. The article described, in explicit detail, discussions about granting three named senior executives more authority over day-to-day operations of the company […]

Lisa M. Fairfax, Easier Said than Done? A Corporate Law Theory for Actualizing Social Responsibility Rhetoric

59 Fla. L. Rev. 771 (2007) | | | | ABSTRACT :: Post Enron has witnessed renewed concern regarding corporations’ failure to behave responsibly, both in terms of their ethical responsibility and in terms of their responsibilities to advance issues beyond financial matters, such as those that impact employees, customers, and the broader community. Many […]

Brandon Faulkner, Hacking into Data Breach Notification Laws

59 Fla. L. Rev. 1097 (2007) | | | | INTRODUCTION :: On March 23, 2007, a news agency announced that the police department in Gainesville, Florida, arrested six individuals on charges that they had stolen credit card data from a corporation’s database and purchased more than $ 8 million in gift cards and electronics […]

James Fanto, Paternalistic Regulation of Public Company Management: Lessons from Bank Regulation

58 Fla. L. Rev. 859 (2006) | | | INTRODUCTION :: By all accounts, the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) represented a significant intrusion by the federal government into the substantive regulation of corporate governance of U.S. public companies, an area long considered to be the province of state corporate law. Among other things, Sarbanes-Oxley […]

John D. Colombo, In Search of Private Benefit

58 Fla. L. Rev. 1063 (2006) | | | | INTRODUCTION :: For at least the past two decades, the Internal Revenue Service (IRS) has relied heavily on the private benefit doctrine to police economic transactions between tax- exempt charities and for-profit entities. The doctrine has been used to regulate the size of the charitable […]