|Rank||Name||School||Citations||Age in 2016|
|1||John Coffee, Jr.||Columbia University||1470||72|
|2||Lucian Bebchuk||Harvard University||1130||61|
|3||Stephen Bainbridge||University of California, Los Angeles||1010||58|
|4||Reinier Kraakman||Harvard University||820||67|
|5||Stephen Choi||New York University||780||50|
|6||Donald Langevoort||Georgetown University||770||65|
|7||Ronald Gilson||Columbia University||760||70|
|8||Lynn Stout||Cornell University||750||59|
|9||Roberta Romano||Yale University||730||64|
|10||Henry Hansmann||Yale University||720||71|
|11||Bernard Black||Northwestern University||630||63|
|12||James Cox||Duke University||620||73|
Since the Volkswagen story first broke in September 2015, most observers have just scratched their heads and muttered to themselves in amazement: “What were they thinking? How could you place ‘defeat devices’ in 11 million cars worldwide and expect that you were going to escape detection for long?” There is, however, an answer to this question—one that says much about what is wrong with current priorities and practices for the enforcement of white collar crime. This column begins with an assessment of the Volkswagen case and then turns to an analysis of white collar crime strategies. Finally, it proposes remedies … Read more
In Rule v. Massachusetts Mutual Life Insurance Company, our client challenged MassMutual’s 2014 Proxy Statement seeking to change its company bylaws. The Proxy told the over 1 million policyholder-owners that the proposed bylaw changes were consistent with the company’s current practices, would bring the bylaws in alignment with widely held corporate governance best practices, and would enable management to better serve the policyholders. However, the bylaw changes were a radical departure from its current bylaws and were the antithesis of best practices (as discussed below). Nonetheless, a Massachusetts Appeals Court sustained dismissal of the proxy challenge on grounds … Read more
On April 21, 2016, the National Credit Union Administration (the NCUA) issued a proposed rule regarding incentive-based compensation paid by certain financial institutions (the Proposed Rule) to implement Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Section 956).1 Section 956 requires various Federal agencies to issue regulations that limit certain incentive compensation practices at financial institutions. The Office of the Comptroller of the Currency (the OCC), the Federal Deposit Insurance Corporation (the FDIC) and the Federal Housing Finance Agency (the FHFA) released their respective versions of the proposed rule on April 26, 2016, and the … Read more
Corporate information that moves stock-market prices has long sat at the center of modern securities regulation in the United States. The Great Depression-era securities laws at the foundation of the field require much mandatory disclosure of this type of information. They also include a strict anti-fraud regime to ensure the credibility of those disclosures of that information. And for a half century now, that regime has been interpreted to prohibit insiders from trading on the same information. All of these laws have been motivated by both concerns for fairness and economic efficiency.
Today, a new body of securities law is … Read more
We recently published a paper on CEO compensation and value sharing between executives and shareholders. The paper is available here.
CEO compensation is a controversial subject that evokes considerable debate on whether public company CEOs are paid correctly relative to corporate performance. A recent survey by Heidrick & Struggles and the Rock Center for Corporate Governance highlights the extreme disconnect between public perception of CEO pay and the perception of directors responsible for designing pay packages at Fortune 500 companies. While 65 percent of directors believe that CEO pay is not a problem, a full 70 percent of the … Read more
A wide body of literature emphasizes that venture capitalists focus on young private companies, generally in high-tech industries. However, contrary to this notion, we find that 29% of the firms that were backed by VCs prior to the IPO received additional VC funding within the first five years after the IPO, in a sample of IPOs between 1988 and 2010.
We find that this post-IPO VC financing is focused on companies with high information asymmetry and substantial growth opportunities. These companies might otherwise find it difficult to raise capital at a viable price (see, e.g., Myers and Majluf, 1984). In … Read more
U.S. capital market has long been an attractive destination to foreign companies. Cross-listing by foreign firms on U.S. exchanges has been associated with major benefits such as increase in value, easier access to external finance, and lower cost of capital. A recent deregulation by SEC in 2007, Rule 12h-6, may have significant impact on the benefits of cross-listing and the attractiveness of U.S. capital market to foreign firms. Our study explores the long-term consequences of this deregulation and its implication for U.S. capital market.
The main drivers of the benefits enjoyed by cross-listed foreign firms is a subject of passionate … Read more
The rise of shareholder activism has become a global phenomenon. Shareholder activists are not only present–as they started–in the US, but also in European and Asian Markets. This situation has generated a vast literature about the desirability (or not) of shareholder activism.  In essence, there are two main positions: (i) those who argue that shareholder activists improve the corporate governance of the firm, and therefore they help increase the value of the firm; and (ii) those who claim that shareholder activists only improve the value of the firm in the short-term, and they encourage managers to cut … Read more
One down, three to go: SEC rulemaking is heating up.
Last month, the Securities and Exchange Commission (SEC) finalized business conduct standards for security-based swap dealers (SBSDs). The completion of this rule by the SEC is significant because few security-based swap (SBS) rules have been finalized as compared to the numerous rules completed by the Commodity Futures Trading Commission (CFTC) that govern other types of swaps. These business conduct standards represent the first of four rulemakings that must be finalized before SBSDs will have to register with the SEC.
The SEC’s rule will impact how SBSDs communicate … Read more
Corporate directors inevitably must make real-time decisions on complex and nuanced matters that impact not only the company, but also the company’s various stakeholders—e.g., shareholders, creditors, and employees. The pressure cooker that often is the corporate boardroom is not for the faint of heart. The directors’ job becomes even more challenging when the company experiences a financial or operational setback. The divergence in interests among the company’ stakeholders intensifies, and there rarely is one clear path forward.
In theory, state law fiduciary duties should guide directors’ decisions in these difficult situations and protect the company’s and its shareholders’ interests. In … Read more
On Monday, LendingClub Corp., a leader in the growing online lending space, announced the surprise resignation of its founder and CEO, Renaud Laplanche. Laplanche resigned in response to a board investigation that revealed a number of internal control failures, including the sale of more than $20 million in loans that failed to conform to the requirements imposed by the acquiring investors and the doctoring of dates on loan applications to cover up noncompliance with respect to $3 million in loans sold. These developments triggered a massive decline in LendingClub’s stock price, but also contribute to a growing cacophony of questions … Read more
General partnerships are a puzzling form of business in the modern world. A well-established business form with a deep history and sophisticated uniform laws, the general partnership finds itself in a strange position today: Virtually nobody would be well advised to create one.
As a result, general partnerships come about mainly by accident. Indeed, probably the most often litigated question in general partnership law is simply whether one exists in the first place, with the putative organizers trying to claim that they didn’t in fact create one.
General partnerships are the only multi-person business organization that can arise accidentally … Read more
The corporate board is commonly seen as a crucial governance device that operates to both monitor corporate management and provide strategic advice. Recent corporate governance research has discovered a broad range of evidence of internal board monitoring and advisory activities; but relatively little on the impact of the board’s interactions and connections with different external agents on firm value and corporate decisions. Yet, board members are typically experienced and powerful businessmen, and well embedded in the center of important business and social networks. Does it matter?
Yes, substantially. In our recent paper “Directors as Connectors: The Impact of the External … Read more
The Supreme Court decided to consider the meaning of the personal benefit requirement in an insider trading case based on a tipping violation. It accepted review of the Ninth Circuit’s decision in United States v. Salman, which reached substantially different conclusions about the meaning of the personal benefit requirement than the Second Circuit did in United States v. Newman.
The personal benefit requirement is an essential element of a tipping violation. For tipping to occur, an insider must breach a duty of trust and confidence by disclosing material nonpublic information to another person, and the test … Read more
Recently, there has been concern among investors, preparers, regulators, and standard setters that corporate disclosure (in particular the annual report, Form 10-K) is becoming increasingly lengthy, redundant, complex, and onerous. In December 2013, the SEC began a comprehensive review of current disclosure regulation with the intent of identifying the extent of excessive, unduly complex, and redundant disclosure. Similarly, the FASB has an ongoing agenda project, the Disclosure Framework, evaluating the effectiveness of firm disclosure. A variety of explanations have been offered for the apparent increase in the quantity and complexity of disclosure including the effects of litigation, increases in business … Read more
Limited liability companies, or LLCs, have quickly become the form of choice for new businesses. Companies ranging from the well known, like Chrysler, to the more experimental, such as French fry vending machine makers, to local flooring installers all organize as LLCs. One attraction is LLCs’ ability to replicate S-corporations’ robust limited liability protection and potential for single taxation of company profits. Another attraction is the wide contractual freedom permitted among owners and managers to divide up ownership and management rights and responsibilities. Most states impose few mandatory rules on this relationship. For instance, Delaware, the leader in out of … Read more
In 2009, the U.S. Securities and Exchange Commission (SEC) mandated all registrants to file their 10-K and 10-Q in an interactive format using the eXtensible Business Reporting Language (XBRL). The SEC adopted a phase-in implementation policy: the first phase started in 2009 and required companies with a worldwide public equity float of at least $5 billion to implement XBRL-based financial reporting; the second phase for all other large domestic filers with a public equity float of more than $700 million took effect in 2010; and the last phase took effect in 2011 with smaller reporting firms required to report financial … Read more
They say that one should not look a gift horse in the mouth. We decided to go against this proverb and look carefully in the mouth of one such gift horse. After all, we still remember from high school reading that in addition to the shirt of Nessus, the Trojan horse as being not such a tantalizing gift. In this blog, we examine corporate executives’ gifts of common stocks to see they resemble the shirt of Nessus or the Trojan horse.
We find that corporate executives’ gifts of stock while not quite poisonous, do have a dark side. We find … Read more
Plaintiffs sometimes have significant financial interests in their opponents, interests that extend beyond the boundaries of the lawsuits themselves. In some situations, plaintiffs maintain a “long” financial position. For instance, in securities litigation or direct or derivative litigation alleging a breach of fiduciary duties under state corporate law, the plaintiffs are typically a subset of the firm’s current shareholders. When the defendant-firm loses at trial and pays damages—or, more commonly, avoids trial by retaining defense counsel and/or making a settlement payment to plaintiffs and their counsel—while the plaintiff-shareholders may receive a direct monetary benefit, they also suffer an indirect loss … Read more