In this piece, I argue that the recent proliferation of forms of business organizations in addition to the traditional partnership and corporation may have arisen from the implicit recognition that various organizations may serve needs of business people in different types of businesses, and that traditional theory of the firm explanations are too narrowly focused on market failure explanations for firm formation. I identify at least five different factors that may motivate people to form a business organization and discuss how these different factors may militate in favor of one business form rather than another. I conclude that the collections of rules that have evolved to govern different business organizations may be internally coordinated with each other in subtle ways that matter given the distinct uses to which each form has traditionally been put. Further, I argue that it is important to maintain standard form firms even though the parties may be almost totally free to contract around the standard terms, because default rules matter most when in disputes for which the parties have not planned, and because standard form firms may assist the parties in reaching agreement in a multilateral negotiation.
{"title":"Form and Function in Business Organizations","authors":"R. Booth","doi":"10.2139/SSRN.378740","DOIUrl":"https://doi.org/10.2139/SSRN.378740","url":null,"abstract":"In this piece, I argue that the recent proliferation of forms of business organizations in addition to the traditional partnership and corporation may have arisen from the implicit recognition that various organizations may serve needs of business people in different types of businesses, and that traditional theory of the firm explanations are too narrowly focused on market failure explanations for firm formation. I identify at least five different factors that may motivate people to form a business organization and discuss how these different factors may militate in favor of one business form rather than another. I conclude that the collections of rules that have evolved to govern different business organizations may be internally coordinated with each other in subtle ways that matter given the distinct uses to which each form has traditionally been put. Further, I argue that it is important to maintain standard form firms even though the parties may be almost totally free to contract around the standard terms, because default rules matter most when in disputes for which the parties have not planned, and because standard form firms may assist the parties in reaching agreement in a multilateral negotiation.","PeriodicalId":35814,"journal":{"name":"Business Lawyer","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2002-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89846746","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In a merger, a stockholder often has a statutory right of dissent and appraisal under which the stockholder may demand to be paid fair value exclusive of any gain or loss that may arise from the merger itself. Most courts and commentators agree that a dissenting stockholder should ordinarily receive a pro rata share of the fair value of the corporation without any discount simply because minority shares lack control. In several recent cases, the courts have indicated that a minority stockholder is thus entitled to a share of the control value of the corporation even though the merger does not constitute a sale of control (as in a going private transaction) and even though control of the subject corporation is not contestable (as where a single stockholder owns a outright majority of shares). In a similar vein, several courts have ruled that reliance on market prices for purposes of appraisal results in an inherent minority discount, thus requiring that a premium for control be added. In short, the emerging rule appears to be that fair value is the price at which a controlling stockholder could sell control, because failure to do so amounts to imposition of a minority discount. It is the thesis here that the routine addition of a control premium - even though the transaction does not involve a cognizable transfer of control - is inconsistent with settled corporation law and good policy. First, it is based at least in part on the unwarranted assumption that the source of a control premium must be a minority discount. Second, it is inconsistent with the well settled rule that the circumstances of a transaction should be considered. Third, it is inconsistent with the idea that a controlling stockholder may sell control at a premium as long as the sale of control is not to the detriment of the minority. Fourth, it is contrary to public policy in that it encourages dissent by holding out the prospect of a control premium even in cases in which a majority of the minority has approved the deal. Fifth, and perhaps most important, the addition of a control premium (whether routine or not) may amount to double-counting. The Capital Asset Pricing Model (CAPM), which is the generally preferred method of valuation, implicitly adjusts for any minority discount by measuring the value of the subject company (based on its riskiness) relative to the market as a whole. Indeed, CAPM may actually add on an implicit premium in that it values a stock as if it is part of a well diversified portfolio, ignoring firm specific risk. Even if fair value is determined by reference to the prices of comparable companies, the routine addition of a premium presumes that market prices are inherently discounted. And if fair value is based on premiums in comparable transactions, the premium may arise from the fact that other target companies were trading at a discount prior to the comparable transaction. To be sure, the courts should adjust for a minority discount if one is found. But
{"title":"Minority Discounts and Control Premiums in Appraisal Proceedings","authors":"R. Booth","doi":"10.2139/SSRN.285649","DOIUrl":"https://doi.org/10.2139/SSRN.285649","url":null,"abstract":"In a merger, a stockholder often has a statutory right of dissent and appraisal under which the stockholder may demand to be paid fair value exclusive of any gain or loss that may arise from the merger itself. Most courts and commentators agree that a dissenting stockholder should ordinarily receive a pro rata share of the fair value of the corporation without any discount simply because minority shares lack control. In several recent cases, the courts have indicated that a minority stockholder is thus entitled to a share of the control value of the corporation even though the merger does not constitute a sale of control (as in a going private transaction) and even though control of the subject corporation is not contestable (as where a single stockholder owns a outright majority of shares). In a similar vein, several courts have ruled that reliance on market prices for purposes of appraisal results in an inherent minority discount, thus requiring that a premium for control be added. In short, the emerging rule appears to be that fair value is the price at which a controlling stockholder could sell control, because failure to do so amounts to imposition of a minority discount. It is the thesis here that the routine addition of a control premium - even though the transaction does not involve a cognizable transfer of control - is inconsistent with settled corporation law and good policy. First, it is based at least in part on the unwarranted assumption that the source of a control premium must be a minority discount. Second, it is inconsistent with the well settled rule that the circumstances of a transaction should be considered. Third, it is inconsistent with the idea that a controlling stockholder may sell control at a premium as long as the sale of control is not to the detriment of the minority. Fourth, it is contrary to public policy in that it encourages dissent by holding out the prospect of a control premium even in cases in which a majority of the minority has approved the deal. Fifth, and perhaps most important, the addition of a control premium (whether routine or not) may amount to double-counting. The Capital Asset Pricing Model (CAPM), which is the generally preferred method of valuation, implicitly adjusts for any minority discount by measuring the value of the subject company (based on its riskiness) relative to the market as a whole. Indeed, CAPM may actually add on an implicit premium in that it values a stock as if it is part of a well diversified portfolio, ignoring firm specific risk. Even if fair value is determined by reference to the prices of comparable companies, the routine addition of a premium presumes that market prices are inherently discounted. And if fair value is based on premiums in comparable transactions, the premium may arise from the fact that other target companies were trading at a discount prior to the comparable transaction. To be sure, the courts should adjust for a minority discount if one is found. But","PeriodicalId":35814,"journal":{"name":"Business Lawyer","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2001-10-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75226624","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We survey the evidence on the relationship between board composition and firm performance. Boards of directors of American public companies that have a majority of independent directors behave differently, in a number of ways, than boards without such a majority. Some of these differences appear to increase firm value; others may decrease firm value. Overall, within the range of board compositions present today in large public companies, there is no convincing evidence that greater board independence correlates with greater firm profitability or faster growth. In particular, there is no empirical support for current proposals that firms should have "supermajority-independent boards" with only one or two inside directors. To the contrary, there is some evidence that firms with supermajority-independent boards are less profitable than other firms. This suggests that it may be useful for firms to have a moderate number of inside directors (say three to five on an average-sized eleven member board). We offer some possible explanations for these results, based on board dynamics, the informational advantages possessed by inside (and, often, affiliated) directors, and the value of interaction between different types of directors who bring different strengths to the board.
{"title":"The Uncertain Relationship between Board Composition and Firm Performance","authors":"Sanjai Bhagat, Bernard Black","doi":"10.2139/SSRN.11417","DOIUrl":"https://doi.org/10.2139/SSRN.11417","url":null,"abstract":"We survey the evidence on the relationship between board composition and firm performance. Boards of directors of American public companies that have a majority of independent directors behave differently, in a number of ways, than boards without such a majority. Some of these differences appear to increase firm value; others may decrease firm value. Overall, within the range of board compositions present today in large public companies, there is no convincing evidence that greater board independence correlates with greater firm profitability or faster growth. In particular, there is no empirical support for current proposals that firms should have \"supermajority-independent boards\" with only one or two inside directors. To the contrary, there is some evidence that firms with supermajority-independent boards are less profitable than other firms. This suggests that it may be useful for firms to have a moderate number of inside directors (say three to five on an average-sized eleven member board). We offer some possible explanations for these results, based on board dynamics, the informational advantages possessed by inside (and, often, affiliated) directors, and the value of interaction between different types of directors who bring different strengths to the board.","PeriodicalId":35814,"journal":{"name":"Business Lawyer","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"1997-10-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86765105","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1992-01-01DOI: 10.35940/ijrte.d9527.118419
M. Dooley
The approaches to defining the concept of “corporate governance” by various authors have been considered, analyzed, and systemized in the present article. The world experience and corporate governance models used in various countries have been regarded, and the characteristics of these models have been analyzed. The main peculiarities and causes of the emergence of models in an economic system have been determined. It has been revealed that the English-American system is characterized by the dispersal of investors, i.e., there are many independent investors, both private and institutional. Due to the inconsiderable use of stock exchanges and external investments, the German system has provided commercial banks with the dominant share of the companies’ governance. The system is distinguished by a high concentration of equity. The Russian model is a hybrid transitional variant that had arisen because of “wild capitalism” at the dawn of the transition from the planned to the market economy.
{"title":"The Models of Corporate Governance","authors":"M. Dooley","doi":"10.35940/ijrte.d9527.118419","DOIUrl":"https://doi.org/10.35940/ijrte.d9527.118419","url":null,"abstract":"The approaches to defining the concept of “corporate governance” by various authors have been considered, analyzed, and systemized in the present article. The world experience and corporate governance models used in various countries have been regarded, and the characteristics of these models have been analyzed. The main peculiarities and causes of the emergence of models in an economic system have been determined. It has been revealed that the English-American system is characterized by the dispersal of investors, i.e., there are many independent investors, both private and institutional. Due to the inconsiderable use of stock exchanges and external investments, the German system has provided commercial banks with the dominant share of the companies’ governance. The system is distinguished by a high concentration of equity. The Russian model is a hybrid transitional variant that had arisen because of “wild capitalism” at the dawn of the transition from the planned to the market economy.","PeriodicalId":35814,"journal":{"name":"Business Lawyer","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"1992-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85130640","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
W. D. Warren, Homer Kripke, Francis A. Miskell, Paul R. Moo
Recently the Commissioners on Uniform State Laws adopted by unanimous vote the Consumer Credit Code as a uniform law. My objective is to give a brief survey of some of the major policy decisions made in shaping the Code. As you know, the Code covers credit sales and loans made to individuals for consumer purposes. It requires disclosure of finance and other charges; it imposes ceilings on rates of finance charges; it regulates credit insurance; it provides remedies for consumers and limits the remedies of creditors; and it establishes an administrator with powers over all consumer credit suppliers. A good case can be made that consumer credit law is now ready for the recodification and uniformity that the Code provides. Legislators, administrators, and courts have been working on consumer credit problems at the state level for a half century, and a great volume of wellintended legislation has been enacted on the subject, particularly in the last 25 years. Some of this legislation has been beneficial and some of it has not. In those years we've learned a great deal, and the many people who have labored these past five years on the consumer credit code have worked to incorporate this experience into that act in order to build the kind of sensible, practical legal foundation that will allow consumer credit to continue its growth in years to come with adequate protection for the interests of both consumers and credit suppliers. Little in the Consumer Credit Code is new; almost all of it has been tried in one jurisdiction or another. Consumer credit is now a problem of national scope and interest to consumers and creditors alike and the code is an attempt to bring nationwide uniformity to the area.
{"title":"THE UNIFORM CONSUMER CREDIT CODE","authors":"W. D. Warren, Homer Kripke, Francis A. Miskell, Paul R. Moo","doi":"10.2307/1120895","DOIUrl":"https://doi.org/10.2307/1120895","url":null,"abstract":"Recently the Commissioners on Uniform State Laws adopted by unanimous vote the Consumer Credit Code as a uniform law. My objective is to give a brief survey of some of the major policy decisions made in shaping the Code. As you know, the Code covers credit sales and loans made to individuals for consumer purposes. It requires disclosure of finance and other charges; it imposes ceilings on rates of finance charges; it regulates credit insurance; it provides remedies for consumers and limits the remedies of creditors; and it establishes an administrator with powers over all consumer credit suppliers. A good case can be made that consumer credit law is now ready for the recodification and uniformity that the Code provides. Legislators, administrators, and courts have been working on consumer credit problems at the state level for a half century, and a great volume of wellintended legislation has been enacted on the subject, particularly in the last 25 years. Some of this legislation has been beneficial and some of it has not. In those years we've learned a great deal, and the many people who have labored these past five years on the consumer credit code have worked to incorporate this experience into that act in order to build the kind of sensible, practical legal foundation that will allow consumer credit to continue its growth in years to come with adequate protection for the interests of both consumers and credit suppliers. Little in the Consumer Credit Code is new; almost all of it has been tried in one jurisdiction or another. Consumer credit is now a problem of national scope and interest to consumers and creditors alike and the code is an attempt to bring nationwide uniformity to the area.","PeriodicalId":35814,"journal":{"name":"Business Lawyer","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"1968-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81803187","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1962-01-01DOI: 10.1007/0-387-25320-3_14
B. A. Bowman
{"title":"SMALL BUSINESS INVESTMENT COMPANIES","authors":"B. A. Bowman","doi":"10.1007/0-387-25320-3_14","DOIUrl":"https://doi.org/10.1007/0-387-25320-3_14","url":null,"abstract":"","PeriodicalId":35814,"journal":{"name":"Business Lawyer","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"1962-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79207531","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1961-01-01DOI: 10.1108/ir.2002.04929fab.010
Samuel B. Stewart
These have not been resolved. I will not go into the detail of these problems, but will ensure that the incoming Trustees are well acquainted with the issues at hand and the proposed resolutions thereto. Suffice to say that the problems include inter alia a number of items that the Trustees believe should have been delivered by the Developer. We have taken legal advice on some of these issues and believe that we are in a strong position.
{"title":"The Chairman's Report","authors":"Samuel B. Stewart","doi":"10.1108/ir.2002.04929fab.010","DOIUrl":"https://doi.org/10.1108/ir.2002.04929fab.010","url":null,"abstract":"These have not been resolved. I will not go into the detail of these problems, but will ensure that the incoming Trustees are well acquainted with the issues at hand and the proposed resolutions thereto. Suffice to say that the problems include inter alia a number of items that the Trustees believe should have been delivered by the Developer. We have taken legal advice on some of these issues and believe that we are in a strong position.","PeriodicalId":35814,"journal":{"name":"Business Lawyer","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"1961-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78979285","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
1. The enclosed Intelligence Information Special Report is part of a series now in preparation based on the SECRET USSR Ministry of Defense publication Collection of Articles of the Journal "Military Thought". This article presents critical comments on a previous article on the subject, taking particular issue with theoperational disposition of air forces and removal of aircraft to dispersal,airfields. The author also criticizes the previous article's presentation of air support, stating this concept as a specific group of tasks to be carried out with conventional weapons in cooperation with ground forces. IHe agrees that air defense should have one overall commander for aviation and surface-to-air missiles and that the air army commander is in the best position to assume this function and reallocate air forces as required. This article appeared in Issue No. 1 (71) for 1964.
{"title":"THE CENTRAL INTELLIGENCE AGENCY","authors":"A. Dulles","doi":"10.5860/choice.51-1244","DOIUrl":"https://doi.org/10.5860/choice.51-1244","url":null,"abstract":"1. The enclosed Intelligence Information Special Report is part of a series now in preparation based on the SECRET USSR Ministry of Defense publication Collection of Articles of the Journal \"Military Thought\". This article presents critical comments on a previous article on the subject, taking particular issue with theoperational disposition of air forces and removal of aircraft to dispersal,airfields. The author also criticizes the previous article's presentation of air support, stating this concept as a specific group of tasks to be carried out with conventional weapons in cooperation with ground forces. IHe agrees that air defense should have one overall commander for aviation and surface-to-air missiles and that the air army commander is in the best position to assume this function and reallocate air forces as required. This article appeared in Issue No. 1 (71) for 1964.","PeriodicalId":35814,"journal":{"name":"Business Lawyer","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"1960-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85744688","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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