The Supreme Court concluded in 1909 that a corporation, like an individual, can be held criminally responsible for its misconduct. Yet even now, corporate-criminal liability has yet to overcome the same skeptical argument it faced then — and, for that matter, for centuries prior. The skeptic’s challenge appears as simple as it is persistent: Lacking a mind distinct and independent from its constitutive stakeholders, a corporation cannot produce the sorts of intentional attitudes needed to satisfy the law’s mens rea component. In other words, a corporation is straightforwardly incapable of satisfying one of criminal law’s most basic requirements. Accordingly, to the skeptic the very idea of corporate-criminal liability is, and always has been, pure nonsense. Though it presents as a simple, common-sense challenge to a corporation’s ability to intend — criminally or otherwise — unpacking the skeptic’s critique quickly implicates profound considerations regarding the nature of personhood and proper methods of attribution. Animating the dispute between skeptics and proponents of corporate-criminal liability is a disagreement over how to evaluate personhood, and further how one’s conception of personhood licenses attributions of actions, attitudes, and ultimately responsibility to the entity in question. This brand of disagreement is nothing new: These themes recur throughout Western thought and extend far beyond corporate law, from Plato’s Phaedo to Boethius and Bartolus of Sassoferato, from Thomas Hobbes to John Locke. Given the intellectual lineage behind what is otherwise an ordinary policy disagreement, perhaps it should not be terribly surprising that skepticism about corporate-criminal liability was never put to rest. I don’t expect that we can break this conceptual stalemate all at once, if at all, to solve the challenge facing corporate crime. More to the point, we don’t need to. As it turns out, in taking up this very dispute at the turn of the 20th century, courts and legislature sided with the proponents of corporate crime in a way that the skeptic cannot, or at least should not want to, unwind. The proponents of corporate-criminal liability did not just win the policy fight; they did so in a way that rendered the skeptic’s position incompatible with broader theoretical commitments that are now instrumental to the modern corporation.This Article offers two contributions to the debate over corporate-criminal liability: one conceptual, and one practical. First, the same argument embraced by today’s skeptics was tried but rejected in the late 1800s, when the practice of holding corporations responsible first developed. Courts previously receptive to the skeptic’s reasoning abandoned the view — and more importantly, the relationship between personhood and attribution underwriting it — as increasingly untenable amidst a changing economic environment in which commercial corporations transformed from tiny, narrowly constrained, quasi-state entitie
{"title":"How and Why Corporations Became (and Remain) Persons Under the Criminal Law","authors":"W. R. Thomas","doi":"10.2139/ssrn.2834645","DOIUrl":"https://doi.org/10.2139/ssrn.2834645","url":null,"abstract":"The Supreme Court concluded in 1909 that a corporation, like an individual, can be held criminally responsible for its misconduct. Yet even now, corporate-criminal liability has yet to overcome the same skeptical argument it faced then — and, for that matter, for centuries prior. The skeptic’s challenge appears as simple as it is persistent: Lacking a mind distinct and independent from its constitutive stakeholders, a corporation cannot produce the sorts of intentional attitudes needed to satisfy the law’s mens rea component. In other words, a corporation is straightforwardly incapable of satisfying one of criminal law’s most basic requirements. Accordingly, to the skeptic the very idea of corporate-criminal liability is, and always has been, pure nonsense. Though it presents as a simple, common-sense challenge to a corporation’s ability to intend — criminally or otherwise — unpacking the skeptic’s critique quickly implicates profound considerations regarding the nature of personhood and proper methods of attribution. Animating the dispute between skeptics and proponents of corporate-criminal liability is a disagreement over how to evaluate personhood, and further how one’s conception of personhood licenses attributions of actions, attitudes, and ultimately responsibility to the entity in question. This brand of disagreement is nothing new: These themes recur throughout Western thought and extend far beyond corporate law, from Plato’s Phaedo to Boethius and Bartolus of Sassoferato, from Thomas Hobbes to John Locke. Given the intellectual lineage behind what is otherwise an ordinary policy disagreement, perhaps it should not be terribly surprising that skepticism about corporate-criminal liability was never put to rest. I don’t expect that we can break this conceptual stalemate all at once, if at all, to solve the challenge facing corporate crime. More to the point, we don’t need to. As it turns out, in taking up this very dispute at the turn of the 20th century, courts and legislature sided with the proponents of corporate crime in a way that the skeptic cannot, or at least should not want to, unwind. The proponents of corporate-criminal liability did not just win the policy fight; they did so in a way that rendered the skeptic’s position incompatible with broader theoretical commitments that are now instrumental to the modern corporation.This Article offers two contributions to the debate over corporate-criminal liability: one conceptual, and one practical. First, the same argument embraced by today’s skeptics was tried but rejected in the late 1800s, when the practice of holding corporations responsible first developed. Courts previously receptive to the skeptic’s reasoning abandoned the view — and more importantly, the relationship between personhood and attribution underwriting it — as increasingly untenable amidst a changing economic environment in which commercial corporations transformed from tiny, narrowly constrained, quasi-state entitie","PeriodicalId":437920,"journal":{"name":"Law & Society: Public Law - Corporations eJournal","volume":"142 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-09-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115995499","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}
Matthew D. Cain, S. McKeon, Steven Davidoff Solomon
This study evaluates the relation between hostile takeovers and 17 takeover laws from 1965 to 2014. Using a data set of largely exogenous legal changes, we find that certain takeover laws, such as poison pill and business combination laws, have no discernible impact on hostile activity, while others such as fair price laws have reduced hostile takeovers. We construct a Takeover Index from the laws and find that higher takeover protection is associated with lower firm value, consistent with entrenchment and agency costs. However, conditional on a bid, firms with more protection achieve higher premiums, consistent with increased bargaining power.
{"title":"Do Takeover Laws Matter? Evidence from Five Decades of Hostile Takeovers","authors":"Matthew D. Cain, S. McKeon, Steven Davidoff Solomon","doi":"10.2139/ssrn.2517513","DOIUrl":"https://doi.org/10.2139/ssrn.2517513","url":null,"abstract":"This study evaluates the relation between hostile takeovers and 17 takeover laws from 1965 to 2014. Using a data set of largely exogenous legal changes, we find that certain takeover laws, such as poison pill and business combination laws, have no discernible impact on hostile activity, while others such as fair price laws have reduced hostile takeovers. We construct a Takeover Index from the laws and find that higher takeover protection is associated with lower firm value, consistent with entrenchment and agency costs. However, conditional on a bid, firms with more protection achieve higher premiums, consistent with increased bargaining power.","PeriodicalId":437920,"journal":{"name":"Law & Society: Public Law - Corporations eJournal","volume":"161 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-07-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114913934","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}
The competitive, market-based economy and adversarial legal system in the U.S. encourage strategic behavior and decision-making. This system often yields positive economic results. The system has a dark side, however, since strategic and unethical actors exploit the high costs of the legal system to harm individuals, small businesses, non-profits and society. In particular, strategic legal bullying exploits the high costs of the legal system to advance a weak or non-existent legal claim or argument that yields a favorable result at the expense of a weaker party. This article defines and analyzes this harmful practice in economic terms and classifies it as a form of rent-seeking behavior. The article also analyzes the various manifestations of strategic legal bullying practices and the defensive methods through which it can be countered. Business norms and ethics play a fundamental role in the ongoing efforts to counterbalance the harmful effects of strategic legal bullying.
{"title":"Strategic Legal Bullying","authors":"David Orozco","doi":"10.2139/ssrn.2697273","DOIUrl":"https://doi.org/10.2139/ssrn.2697273","url":null,"abstract":"The competitive, market-based economy and adversarial legal system in the U.S. encourage strategic behavior and decision-making. This system often yields positive economic results. The system has a dark side, however, since strategic and unethical actors exploit the high costs of the legal system to harm individuals, small businesses, non-profits and society. In particular, strategic legal bullying exploits the high costs of the legal system to advance a weak or non-existent legal claim or argument that yields a favorable result at the expense of a weaker party. This article defines and analyzes this harmful practice in economic terms and classifies it as a form of rent-seeking behavior. The article also analyzes the various manifestations of strategic legal bullying practices and the defensive methods through which it can be countered. Business norms and ethics play a fundamental role in the ongoing efforts to counterbalance the harmful effects of strategic legal bullying.","PeriodicalId":437920,"journal":{"name":"Law & Society: Public Law - Corporations eJournal","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-04-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130820638","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 this article, I consider to what extent economic actors (mainly companies) enjoy the rights to privacy and data protection under Articles 7 and 8 of the Charter of Fundamental Rights of the EU, in the light in particular of such rulings as Schecke, Digital Rights Ireland and Google Spain.
在本文中，我考虑经济行为者(主要是公司)在欧盟基本权利宪章第7条和第8条下享有隐私权和数据保护权的程度，特别是鉴于Schecke, Digital rights Ireland和Google Spain等裁决。
{"title":"Privacy and Data Protection: The Rights of Economic Actors","authors":"Peter Oliver","doi":"10.2139/SSRN.2782414","DOIUrl":"https://doi.org/10.2139/SSRN.2782414","url":null,"abstract":"In this article, I consider to what extent economic actors (mainly companies) enjoy the rights to privacy and data protection under Articles 7 and 8 of the Charter of Fundamental Rights of the EU, in the light in particular of such rulings as Schecke, Digital Rights Ireland and Google Spain.","PeriodicalId":437920,"journal":{"name":"Law & Society: Public Law - Corporations eJournal","volume":"81 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-11-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128142182","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}
Abstract: Particularly in the wake of the global financial crisis, ensuring effective enforcement of the rules governing the relationship between financial institutions and their (potential) clients ranks high on the EU political agenda. Traditionally, such rules were enforced by civil courts at the initiative of one of the parties through the means available within national private laws. Over the past three decades or more, however, the EU and national legislators have tended to resort to the state and its agencies in monitoring the financial institutions’ compliance with their obligations towards the clients and ensuring the optimal level of enforcement. The rise of public enforcement by administrative agencies in the field of European private law for financial services gives rise to many interesting issues. How do financial watchdogs actually ‘manage’ private relationships between financial institutions and their clients? In what way does this affect the development of (European) private law? What role is left for private enforcement, in particular that by the judiciary, in the new reality? How do public and private enforcement interplay with each other? To what extent are the answers to these questions determined at EU level? And what are the major challenges in ensuring effective enforcement in the financial services field? By using the examples from EU law, as well as several European legal systems, this article seeks to address these issues and develop an agenda for further research.
{"title":"Public and Private Enforcement of European Private Law in the Financial Services Sector","authors":"O. Cherednychenko","doi":"10.54648/erpl2015040","DOIUrl":"https://doi.org/10.54648/erpl2015040","url":null,"abstract":"Abstract: Particularly in the wake of the global financial crisis, ensuring effective enforcement of the rules governing the relationship between financial institutions and their (potential) clients ranks high on the EU political agenda. Traditionally, such rules were enforced by civil courts at the initiative of one of the parties through the means available within national private laws. Over the past three decades or more, however, the EU and national legislators have tended to resort to the state and its agencies in monitoring the financial institutions’ compliance with their obligations towards the clients and ensuring the optimal level of enforcement. The rise of public enforcement by administrative agencies in the field of European private law for financial services gives rise to many interesting issues. How do financial watchdogs actually ‘manage’ private relationships between financial institutions and their clients? In what way does this affect the development of (European) private law? What role is left for private enforcement, in particular that by the judiciary, in the new reality? How do public and private enforcement interplay with each other? To what extent are the answers to these questions determined at EU level? And what are the major challenges in ensuring effective enforcement in the financial services field? By using the examples from EU law, as well as several European legal systems, this article seeks to address these issues and develop an agenda for further research. ","PeriodicalId":437920,"journal":{"name":"Law & Society: Public Law - Corporations eJournal","volume":"155 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114422171","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}
This Article addresses mutual fund governance, explaining how in recent years it has become entangled with the norms of corporate governance. There are two essential features of mutual funds, however, that differentiate them fundamentally from ordinary corporations. First, mutual funds are not only separate legal entities; they are also financial products (or services). Mutual fund investors are therefore both shareholders and customers. This stands, of course, in marked contrast to ordinary corporations, whose shareholders and customers are two distinct and separate groups. Second, mutual funds are fundamentally different owing to the right of redemption, a right of investors to withdraw their capital. The right of redemption is not only a financial right, it is also essential to the governance of mutual funds, imposing direct discipline upon a fund’s adviser. In contrast, redemption rights are antithetical to the organizing principles of ordinary corporations, whose economic viability in the markets depends upon the ability to lock in shareholders’ capital. This Article examines how recent mutual fund rulemaking by the SEC rests on mistaken comparisons to corporate governance, and makes recommendations as to how the SEC can improve its approach. In particular, this Article proposes that the SEC take steps to allow two new types of mutual funds that can compete in the marketplace alongside traditional mutual funds. One type is the unitary investment fund, which would retain fund boards solely to serve as monitors of fund advisers’ legal and fiduciary duties, while leaving judgments over the competitiveness of an adviser’s fees to the marketplace. The other is a “crowdfunded” mutual fund that would allow for investors themselves, rather than investment advisers, to initiate and organize funds.
{"title":"Disentangling Mutual Fund Governance from Corporate Governance","authors":"Eric D. Roiter","doi":"10.2139/ssrn.2568392","DOIUrl":"https://doi.org/10.2139/ssrn.2568392","url":null,"abstract":"This Article addresses mutual fund governance, explaining how in recent years it has become entangled with the norms of corporate governance. There are two essential features of mutual funds, however, that differentiate them fundamentally from ordinary corporations. First, mutual funds are not only separate legal entities; they are also financial products (or services). Mutual fund investors are therefore both shareholders and customers. This stands, of course, in marked contrast to ordinary corporations, whose shareholders and customers are two distinct and separate groups. Second, mutual funds are fundamentally different owing to the right of redemption, a right of investors to withdraw their capital. The right of redemption is not only a financial right, it is also essential to the governance of mutual funds, imposing direct discipline upon a fund’s adviser. In contrast, redemption rights are antithetical to the organizing principles of ordinary corporations, whose economic viability in the markets depends upon the ability to lock in shareholders’ capital. This Article examines how recent mutual fund rulemaking by the SEC rests on mistaken comparisons to corporate governance, and makes recommendations as to how the SEC can improve its approach. In particular, this Article proposes that the SEC take steps to allow two new types of mutual funds that can compete in the marketplace alongside traditional mutual funds. One type is the unitary investment fund, which would retain fund boards solely to serve as monitors of fund advisers’ legal and fiduciary duties, while leaving judgments over the competitiveness of an adviser’s fees to the marketplace. The other is a “crowdfunded” mutual fund that would allow for investors themselves, rather than investment advisers, to initiate and organize funds.","PeriodicalId":437920,"journal":{"name":"Law & Society: Public Law - Corporations eJournal","volume":"45 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-06-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127624570","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}
Jolanta Olender, G. Fry, Sigrid Robinson, Sara Anicic, Kath Hall
In 2008 the Australian National University College of Law commenced a program of law reform and social justice activities, a key part of which is to give law students opportunities to explore and enhance the role of law in society through study, research and social justice initiatives. Law students are encouraged to develop and run their own projects, and in 2012 the Global Corporate Power Project (‘the Project’) began. From humble beginnings, the students involved in the Project have undertaken research on the size, geographical spread and regulation of global corporations in the banking, insurance, food and beverage, military technology, mining, hotel, pharmaceuticals, automotive and consumer electrics industries. Defining a “global corporation” and determining how powerful such corporations are has been an underlying desire of the research.This article explores the Project and some of its key findings. It begins by discussing globalisation and corporations, and the implication of these implications for state sovereignty. In Part 2, the article sets out the methodology and criteria used in the Project to identify and classify corporations based on their geographical spread. An initial review of the literature on globalisation revealed that “global corporate power”, if defined, was almost universally related to profitability rankings. One of the unique aspects of the Project therefore was that it developed its own methodology to identify geographically diverse corporations. In Part 3, the key findings in the banking, insurance, food and beverage, tobacco, and military technology industries are identified and discussed. The discussion highlights how, in all these sectors, there are six or fewer global corporations that dominate. Not surprisingly, many of these corporations are household names and would be familiar to regulators, consumers and governments around the world. Finally, in Part 4, the article reflects on the importance of such research for student learning and future research directions.
{"title":"Thinking Big: Student Led Research on the World's Largest Global Corporations","authors":"Jolanta Olender, G. Fry, Sigrid Robinson, Sara Anicic, Kath Hall","doi":"10.2139/SSRN.2705225","DOIUrl":"https://doi.org/10.2139/SSRN.2705225","url":null,"abstract":"In 2008 the Australian National University College of Law commenced a program of law reform and social justice activities, a key part of which is to give law students opportunities to explore and enhance the role of law in society through study, research and social justice initiatives. Law students are encouraged to develop and run their own projects, and in 2012 the Global Corporate Power Project (‘the Project’) began. From humble beginnings, the students involved in the Project have undertaken research on the size, geographical spread and regulation of global corporations in the banking, insurance, food and beverage, military technology, mining, hotel, pharmaceuticals, automotive and consumer electrics industries. Defining a “global corporation” and determining how powerful such corporations are has been an underlying desire of the research.This article explores the Project and some of its key findings. It begins by discussing globalisation and corporations, and the implication of these implications for state sovereignty. In Part 2, the article sets out the methodology and criteria used in the Project to identify and classify corporations based on their geographical spread. An initial review of the literature on globalisation revealed that “global corporate power”, if defined, was almost universally related to profitability rankings. One of the unique aspects of the Project therefore was that it developed its own methodology to identify geographically diverse corporations. In Part 3, the key findings in the banking, insurance, food and beverage, tobacco, and military technology industries are identified and discussed. The discussion highlights how, in all these sectors, there are six or fewer global corporations that dominate. Not surprisingly, many of these corporations are household names and would be familiar to regulators, consumers and governments around the world. Finally, in Part 4, the article reflects on the importance of such research for student learning and future research directions.","PeriodicalId":437920,"journal":{"name":"Law & Society: Public Law - Corporations eJournal","volume":"72 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-04-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132244138","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}
Casual observations suggest that bidder managers sometimes pay more than the economic value of target in mergers and acquisitions. This paper provides two empirical findings associated with overpayments in acquisitions among publicly traded U.S. firms during the period of 2003-2011 using the purchase price allocation data under ASC 804 (SFAS 141). First, we document that bidder managers exploit their information advantage about the pricing implications of overpaid acquisitions by increasing their stock sales on their personal accounts above normal sales level prior to the public announcement of those acquisitions. Second, we document that bidder managers pay more than the economic value of targets not due to managerial hubris or executive compensation but to strategic reasons such as negative externality or supply chain management.
{"title":"Overpayments in Acquisitions, Preannouncement Insider Trading, and Executive Compensation","authors":"Mehmet E. Akbulut, Cheol Lee, Steve C. Lim","doi":"10.2139/ssrn.2389533","DOIUrl":"https://doi.org/10.2139/ssrn.2389533","url":null,"abstract":"Casual observations suggest that bidder managers sometimes pay more than the economic value of target in mergers and acquisitions. This paper provides two empirical findings associated with overpayments in acquisitions among publicly traded U.S. firms during the period of 2003-2011 using the purchase price allocation data under ASC 804 (SFAS 141). First, we document that bidder managers exploit their information advantage about the pricing implications of overpaid acquisitions by increasing their stock sales on their personal accounts above normal sales level prior to the public announcement of those acquisitions. Second, we document that bidder managers pay more than the economic value of targets not due to managerial hubris or executive compensation but to strategic reasons such as negative externality or supply chain management.","PeriodicalId":437920,"journal":{"name":"Law & Society: Public Law - Corporations eJournal","volume":"34 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125697515","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 ATP, the Delaware Supreme Court upheld as facially valid a bylaw that required owners in a non-stock corporation to pay all legal fees in any action against the entity, its members or owners, unless owners obtained substantially all the relief sought in the complaint. While the Supreme Court has not yet expressly applied the analysis to public companies, the expansive breadth of its reasoning provided boards of “for profit” businesses with an immediate weapon that could be, and has been, used to prevent shareholders and investors from filing actions seeking to expose malfeasance by corporations and their directors. Unsurprisingly, these provisions have proved popular. The response by some has been to ignore the obvious conflict of interest that comes with allowing directors to adopt bylaws that insulate their own behavior from legal challenge and instead characterize any concern as an overstatement. In fact, the ATP decision represents a radical and unjustifiable shift in the nature of corporate law. The Court effectively dismantled a carefully crafted framework put in place by the Delaware legislature. The effect of the decision was to eliminate all meaningful limits in the DGCL on the purpose and content of bylaws adopted by directors and to give boards an effective veto over the filing of actions challenging their behavior. The decision imposed unacceptable financial risk on shareholders (and “prior” shareholders), put in place a frame-work for the creation of other types of bylaws antagonistic to the interests of shareholders, and provided the federal government with an incentive to intervene in the corporate governance process, further eroding Delaware’s historic leadership in the field.
{"title":"Shifting Back the Focus: Fee Shifting Bylaws and a Need to Return to Legislative Intent","authors":"J. Brown","doi":"10.2139/SSRN.2547094","DOIUrl":"https://doi.org/10.2139/SSRN.2547094","url":null,"abstract":"In ATP, the Delaware Supreme Court upheld as facially valid a bylaw that required owners in a non-stock corporation to pay all legal fees in any action against the entity, its members or owners, unless owners obtained substantially all the relief sought in the complaint. While the Supreme Court has not yet expressly applied the analysis to public companies, the expansive breadth of its reasoning provided boards of “for profit” businesses with an immediate weapon that could be, and has been, used to prevent shareholders and investors from filing actions seeking to expose malfeasance by corporations and their directors. Unsurprisingly, these provisions have proved popular. The response by some has been to ignore the obvious conflict of interest that comes with allowing directors to adopt bylaws that insulate their own behavior from legal challenge and instead characterize any concern as an overstatement. In fact, the ATP decision represents a radical and unjustifiable shift in the nature of corporate law. The Court effectively dismantled a carefully crafted framework put in place by the Delaware legislature. The effect of the decision was to eliminate all meaningful limits in the DGCL on the purpose and content of bylaws adopted by directors and to give boards an effective veto over the filing of actions challenging their behavior. The decision imposed unacceptable financial risk on shareholders (and “prior” shareholders), put in place a frame-work for the creation of other types of bylaws antagonistic to the interests of shareholders, and provided the federal government with an incentive to intervene in the corporate governance process, further eroding Delaware’s historic leadership in the field.","PeriodicalId":437920,"journal":{"name":"Law & Society: Public Law - Corporations eJournal","volume":"116 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-01-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132156980","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}
This paper investigates how legal liability influences audit quality and audit fees, particularly in the presence of government intervention. Since 2010, all Chinese audit firms were required to transform from a structure of limited liability company (LLC) to limited liability partnership (LLP), which removes the cap on the liability exposure of negligent auditors. By adopting this natural experiment, we document the following findings: First, after audit firms reorganize as LLPs, auditors are more likely to (1) issue modified audit opinions and going concern opinions, (2) constrain clients’ earnings management, and (3) charge a premium in audit fees, which suggest that exerting unlimited legal liability on negligent auditors improves both audit quality and audit fees. Secondly, the effect of the LLP adoption is more pronounced when auditors are from local audit firms, and clients are controlled by local governments. Further analyses suggest that the stock prices of clients react positively to the reform event, which indicates that LLP adoption improves the overall value of audits. In summary, our empirical findings are consistent with the argument that legal liability is able to effectively shape auditor behaviour in emerging markets where the other institutional mechanisms are relatively weaker and government intervention is heavy.
{"title":"Legal Liability, Government Intervention, and Auditor Behaviour: Evidence from Structural Reform of Audit Firms in China","authors":"Kuang He, Xiaofei Pan, G. Tian","doi":"10.2139/ssrn.2447541","DOIUrl":"https://doi.org/10.2139/ssrn.2447541","url":null,"abstract":"This paper investigates how legal liability influences audit quality and audit fees, particularly in the presence of government intervention. Since 2010, all Chinese audit firms were required to transform from a structure of limited liability company (LLC) to limited liability partnership (LLP), which removes the cap on the liability exposure of negligent auditors. By adopting this natural experiment, we document the following findings: First, after audit firms reorganize as LLPs, auditors are more likely to (1) issue modified audit opinions and going concern opinions, (2) constrain clients’ earnings management, and (3) charge a premium in audit fees, which suggest that exerting unlimited legal liability on negligent auditors improves both audit quality and audit fees. Secondly, the effect of the LLP adoption is more pronounced when auditors are from local audit firms, and clients are controlled by local governments. Further analyses suggest that the stock prices of clients react positively to the reform event, which indicates that LLP adoption improves the overall value of audits. In summary, our empirical findings are consistent with the argument that legal liability is able to effectively shape auditor behaviour in emerging markets where the other institutional mechanisms are relatively weaker and government intervention is heavy.","PeriodicalId":437920,"journal":{"name":"Law & Society: Public Law - Corporations eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-09-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130205875","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}
京公网安备 11010802042870号
京ICP备2023020795号-1
扫码关注我们
求助内容：
应助结果提醒方式：