Barbarians Inside the Gates: Raiders, Activists, and the Risk of Mistargeting
This Article argues that the conventional wisdom about corporate raiders and activist hedge funds—lambasting raiders and praising activists—is wrong. The authors explain how activists are more likely than raiders to engage in mistargeting, implying they are also more likely to destroy value and, ult…
A Proposed Postpandemic Framework for Ordinary Course and MAE Provisions in Merger Agreements: Reviewing Recent Market Practice Changes and Addressing Skewed Incentives
This empirical analysis of merger agreements indicates an evolution in market practice since the COVID-19 pandemic toward providing additional flexibility to targets to respond to extraordinary events that may occur pending closing. This Essay argues that relying on the buyer’s providing consent for…
Corporate Governance Reform and the Sustainability Imperative
Promoting sustainable corporate governance will require reforming features of the corporation that incentivize excessive risk-taking and cost externalization. This Feature critiques how prevailing theories cabin the debate and presents an alternative approach more conducive to reform, evaluating dis…
The Corporate Governance Gap
This Article offers an empirical account of the differences in governance practices between large- and small-cap companies, resulting in what this Article terms the “Corporate Governance Gap.” Recognizing a disparity in the operation of driving forces that promote governance practices, the Article p…
In Search of Good Corporate Governance
In this Forum Response, Dorothy Lund considers whether the “corporate governance gap” between large and small public companies is the product of harmful or beneficial forces, and in so doing, rejects the idea that there is a single governance framework that is optimal for all public companies.
For decades firms have asserted their support for diversity efforts but struggled to achieve increased demographic diversity. This Essay argues that institutional investors should require firms to disclose information regarding the current demographic diversity of their workforces and supply chains,…
Title 18 Insider Trading
Securities regulation is a poor host for insider trading doctrine. This Note advances an alternative: the law of federal criminal fraud. It argues that a standalone model of Title 18 insider trading can resolve stubborn doctrinal puzzles, stamp out judge-made securities crimes, and reanchor the offe…
Distorted Choice in Corporate Bankruptcy
Two new strategies—restructuring support agreements and deathtrap provisions—distort the voting process in nearly every big Chapter 11 case. Although they could be banned, this Article, the first comprehensive assessment, calls for a more nuanced approach, outlining four rules of thumb for determin…
The Proceduralist Inversion – A Response to Skeel
This essay assesses Distorted Choice in Corporate Bankruptcy, by David Skeel. While Skeel usefully identifies how Restructuring Support Agreements (RSAs) help debtors secure support for Chapter 11 reorganizations, this essay argues that Skeel fails to appreciate that RSAs can also short-circuit the …
The Strategies of Anticompetitive Common Ownership
This Article examines the mechanisms through which anticompetitive effects may arise when institutional investors hold stakes in competing firms. Most mechanisms, including cartel facilitation and passive failures to encourage competition, either lack empirical evidence or else are contrary to the i…
The #MeToo Movement Migrates to M&A Boilerplate
A new provision in M&A boilerplate addresses the business risk of sexual-harassment allegations in the #MeToo era. While the #MeToo clause was designed to maximize corporate profit, this Note argues for its potential to both reduce buy-side risk and to incentivize companies to maintain effective rep…
Special Meetings and Consent Solicitations: How the Written-Consent Right Uniquely Empowers Shareholders
Despite a decline in takeover defenses, provisions barring shareholders from acting by written consent remain intact. Companies frequently argue that the written-consent right is unnecessary because it is equivalent to the right to call a special meeting. This Note shows why that equivalence is fals…
Prosecuting Corporate Crime when Firms Are Too Big to Jail: Investigation, Deterrence, and Judicial Review
Some corporations have become so large or so systemically important that the government cannot credibly threaten efficient criminal sanctions. This Note presents a microeconomic model of corporate criminal prosecution for Too-Big-to-Jail businesses and offers several prosecutorial reforms to help ho…
A Cooperative Federalism Approach to Shareholder Arbitration
Arbitration has begun to take a new form: mandatory arbitration provisions built into corporate charters and bylaws. The debate about the merits of arbitration is well worn, but its application to shareholder claims opens the door to a different set of responses. This Essay provides one, explaining …
The Agency Costs of Equal Treatment Clauses
This Essay explores the agency costs associated with equal treatment clauses, which require all share classes to receive equal consideration in the event of an acquisition. Despite these clauses’ benign appearance, they actually create another hurdle to the sale of a controlled company to the potent…
Reinterpreting Corporate Inversions: Non-Tax Competitions and Frictions
Corporate inversions have drawn outrage from all segments of society. In an inversion, a company reincorporates abroad to escape its U.S. tax burden. Regulators and academics have typically sought tax law solutions to curb tax inversions. However, the resulting tax regu…
Hedge Fund Activism, Short-Termism, and a New Paradigm of Corporate Governance
Chief Justice Strine’s important article, Who Bleeds When the Wolves Bite?, brings a much-needed perspective to the modern corporate governance debate. Chief Justice Strine looks at the corporate governance world through the lens of what he calls the “human investors,” i.e., the ordinary individuals…
Their Bark Is Bigger Than Their Bite: An Essay on Who Bleeds When the Wolves Bite
Delaware Chief Justice Leo Strine is of the view that America is in terrible shape. Specifically, he identifies deep problems in the fabric of American society, which include “growing income inequality, inflated executive pay, job losses, [and] wage stagnation.” Having noted these problems, Strine l…
Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System
Few topics are sexier among commentators on corporate governance now than whether activist hedge funds are good for, a danger to, or of no real consequence to public corporations and the people who depend upon them. As befits tradition in this space, catchy pejorat…
Corporate Control and Idiosyncratic Vision
This Article offers a novel theory of corporate control. It does so by shedding new light on corporate-ownership structures and challenging the prevailing model of controlling shareholders as essentially opportunistic actors who seek to reap private benefits at the expense of minor…
Unpacking Wolf Packs
Wolf-pack activism has surged in the past three years. A wolf pack is composed of a group of activist investors working in unison to gain control of corporate boards.1 These activist investors collectively buy stock in a public company and then leverage their aggregate stake to influence …
Locked In: The Competitive Disadvantage of Citizen Shareholders
Introduction Indirect investors—especially mutual fund investors—are often low-dollar, low-incentive, rationally apathetic investors facing enormous information asymmetries and collective action problems. These traits raise difficult corporate governance questions about how indirect i…
Ritchie v. Rupe and the Future of Shareholder Oppression
In 1988, the Texas Court of Appeals held in Davis v. Sheerin that minority shareholders in close corporations are entitled to a buy-out of their shares if they are “oppressed” by the majority shareholders.1 Davis synthesized other states’ case law in order to arrive at a two-part test …
The JOBS Act and Middle-Income Investors: Why It Doesn’t Go Far Enough
122 Yale L.J. 2069 (2013).
Recoupment Under Dodd-Frank: Punishing Financial Executives and Perpetuating “Too Big To Fail”
122 Yale L.J. 507 (2012).
Corporate Purposes in a Free Enterprise System: A Comment on eBay v. Newmark
121 Yale L.J. 2405 (2012).
Cross-National Patterns in FCPA Enforcement
121 Yale L.J. 1970 (2012).
This Note undertakes an empirical examination of U.S. enforcement actions under
the Foreign Corrupt Practices Act (FCPA) in order to explore the cross-national patterns
associated with the United States’ international antibribery enforcement. I investigate a number
Common Control and the Delineation of the Taxable Entity
121 Yale L.J. 624 (2011).
This Note proposes a solution to what has been one of the most vexing problems in state corporate taxation and in multijurisdictional taxation generally: the delineation of the scope of the entity that an individual jurisdiction is entitled to tax. Starting from the observa…
To "Make Full Disclosure and Play No Tricks": A Proposal To Enhance Fee Transparency After Jones v. Harris Associates
120 Yale L.J. 1579 (2011).
The Right Solution to the Wrong Problem: The Status of Controlling Shareholders After In re John Q. Hammons Hotels Inc.
120 Yale L.J. 1251 (2011).
Securities Regulation in the Shadow of the Antitrust Laws: The Case for a Broad Implied Immunity Doctrine
120 Yale L.J. 910 (2011).
This Note provides a defense of the Supreme Court’s decision in Credit Suisse Securities (USA) LLC v. Billing, in which the Court reaffirmed a broad standard for determining when securities market activities are impliedly immune from antitrust liability. It argues that, c…
Trade Secret Law and the Changing Role of Judge and Jury
120 Yale L.J. 955 (2011).
Privacy, Personhood, and the Courts: FOIA Exemption 7(C) in Context
120 Yale L.J. 379 (2010).
Taking Exit Rights Seriously: Why Governance and Fee Litigation Don’t Work in Mutual Funds
120 Yale L.J. 84 (2010).
Unlike shareholders of ordinary companies, mutual fund shareholders do not sell their shares—they redeem them from the issuing funds for cash. We argue that this unique form of exit almost completely eliminates mutual fund investors’ incentives to use voting, boards, and f…
Disenfranchising Shareholders: The Future of Blasius After Mercier v. Inter-Tel
119 Yale L.J. 2040 (2010).
This Note analyzes the Delaware Chancery Court’s recent decision in Mercier v. Inter-Tel (Delaware), Inc., in which the court upheld against a Blasius challenge the Inter-Tel board’s decision to postpone its imminent special meeting in order to prevent shareholders from …
A Free Pass for Foreign Firms? An Assessment of SEC and Private Enforcement Against Foreign Issuers
119 Yale L.J. 1638 (2010).
While proponents of the bonding hypothesis have posited that foreign firms crosslist in the United States to signal compliance with the strict U.S. corporate governance regime, these scholars have taken the enforcement of U.S. securities laws largely for granted. This No…
Strategic Vagueness in Contract Design: The Case of Corporate Acquisitions
119 Yale L.J. 848 (2010).
The unprecedented and unanticipated economic and financial shocks of the past couple of years have led parties to look for contractual escapes from deals. As the current crisis works its way through our economic system, however, attention will be shifted from the collaps…
Citizens Not United: The Lack of Stockholder Voluntariness in Corporate Political Speech
The Yale Law Journal Online is reissuing Elizabeth Pollman's Citizens Not United: The Lack of Stockholder Voluntariness in Corporate Political Speech in light of recent developments at the Supreme Court. With the Supreme Court hearing a new round of oral arguments in Citizens United v. Federal Elec…
Comparative Corporate Criminal Liability: Exploring the Uniquely American Doctrine Through Comparative Criminal Procedure
118 Yale L.J. 126 (2008).
In the United States, corporations—as entities—can be criminally tried and convicted for crimes committed by individual directors, managers, and even low-level employees. From a comparative perspective, such corporate liability marks the United States as relatively uniqu…
Response: Corporate Law’s Distributive Design
Minorities, Shareholder and Otherwise makes two novel claims: that corporate law places protection of minority shareholders at the heart of its endeavor; and that this minority-mindfulness should have even greater purchase in constitutional contexts. My retelling of the corporate law narrative coupl…
Minorities, Immigrant and Otherwise
Anupam Chander’s article Minorities, Shareholder and Otherwise brilliantly offers a “conservative” justification for a U.S. constitutional law truly dedicated to fairness and justice for all. It does so by counterintuitively looking to the bottom-line-oriented world of corporate law. This comm…
There Is No Affirmative Action for Minorities, Shareholder and Otherwise, in Corporate Law
In Minorities, Shareholder and Otherwise, Anupam Chander argues that, unlike constitutional law, “corporate law places minorities at the heart of its endeavor.” Central to his project is an empirical claim that corporate law has an “elaborate framework” for “protecting minority interests i…
Oops! Racism as Mistake: Lessons from Corporate Law
In Minorities, Shareholder and Otherwise, Anupam Chander points out that the law treats discrimination by corporate insiders against minority shareholders with suspicion. Yet discrimination against ordinary minorities, in buying or selling a house or applying for a job, for example, receives increas…
Profits as Commercial Success
117 Yale L.J. 642 (2008).
Courts often use the extent of a patented invention’s commercial success as crucial nontechnical proof of the patent’s validity. Relying on misguided economic reasoning, most courts use revenue as the primary yardstick for commercial success. This Note argues that courts i…
Piercing China's Corporate Veil: Open Questions from the New Company Law
117 Yale L.J. 329 (2007).
Wealth Without Markets?
116 Yale L.J. 1472 (2007)
The Wealth of Networks: How Social Production Transforms Markets and Freedom
BY YOCHAI BENKLER
NEW HAVEN: YALE UNIVERSITY PRESS, 2006. PP. 528. $40.00
The Organizational Guidelines: R.I.P.?
In a recent issue of this Journal, Timothy A. Johnson argues that Congress may not make the Federal Sentencing Guidelines provisions on the sentencing of organizations (the “Organizational Guidelines”) mandatory because United States v. Booker guarantees the constitutional right of corporations…
Executives Do Not Need Waivers and Companies Should Not Offer Them: A Response to Mark Kressel
Although Mark Kressel’s proposal is novel, provocative, and even enticing, it is ultimately unnecessary and unworkable to suggest that a corporation and its high-level executives should agree, at the very commencement of their relationship, to waive the corporation’s attorney-client privilege wh…
The Corporate Origins of Judicial Review
116 Yale L.J. 502 (2006)
This Article argues that the origins of judicial review lie in corporate law. Diverging from standard historical accounts that locate the origins in theories of fundamental law or in the American structure of government, the Article argues that judicial review was the continu…
Contractual Waiver of Corporate Attorney-Client Privilege
116 Yale L.J. 412 (2006)
A corporate director, sued in her individual capacity in connection with corporate malfeasance, often seeks to raise the defense that she relied on the advice of the corporation's counsel that the proposed course of conduct was legal. A litigation impasse may arise, however, …
115 Yale L.J. 2254 (2006)
In this Essay, we first observe the rise of what we call "quasipublic executives": both "nominally private executives," that is, private executives in charge of public functions such as corrections, education, and national defense; and "nominally public executives," that is,…
For-Profit and Nonprofit Charter Schools: An Agency Costs Approach
115 Yale L.J. 1782 (2006)
This Note applies agency costs theory to explain charter schools' use of for-profit and nonprofit forms, and to suggest ways to make charter school regulation more sensitive to the differences between these forms. Borrowing from Henry Hansmann's "contract failure" theory of …
Student Derivative Lawsuits
115 Yale L.J. 1471 (2006)
In this Comment, I argue that states could help avert financial scandals like the one at American University by adopting rules less protective of university boards. Specifically, I propose that states subject all nonprofit university boards to the same fiduciary standards as…
Bridging the Book-Tax Accounting Gap
115 Yale L.J. 680 (2005)
The book-tax accounting gap allows corporations to minimize their earnings for tax purposes while maximizing them in reports to investors, all within the letter of the law. Although the U.S. Treasury has reported the rising divergence between book and taxable income with alar…
115 Yale L.J. 2 (2005)
Freezeout transactions, in which a controlling shareholder buys out the minority shareholders, have occurred more frequently since the stock market downturn of 2000 and the Sarbanes-Oxley Act of 2002. While freezeouts were historically executed as statutory mergers, recent Dela…
The Sarbanes-Oxley Act and the Making of Quack Corporate Governance
114 Yale L.J. 1521 (2005)
This Article provides an evaluation of the substantive corporate governance mandates of the Sarbanes-Oxley Act (SOX) of 2002 that is informed by the relevant empirical accounting and finance literature, and of the political dynamics that produced the mandates. The empirical …
Bargaining in the Shadow of Takeover Defenses
113 Yale L.J. 621 (2003)
For decades, practitioners and academic commentators who believe that target boards should have broad discretion to resist hostile takeover attempts have put forward the "bargaining power hypothesis" to support their view. This hypothesis states that a target with strong tak…
How To Fix Wall Street: A Voucher Financing Proposal for Securities Intermediaries
113 Yale L.J. 269 (2003)
Securities market intermediaries reduce the collective action problem facing investors in the capital markets. Analysts provide securities research. Proxy advisory firms assist investors in determining how to vote their shares. Even shareholders bringing proxy contests can be…
Minorities, Shareholder and Otherwise
113 Yale L.J. 119 (2003)
"[M]en are described as I think they are," Adolf Berle writes of his work, "rather than as they think they are." He continues: "Some will be shocked. The businessman will find that he is a politician and a commissar--perhaps even a revolutionary one. The liberal finds himsel…
The Politics of Corporate Governance Regulation
112 Yale L.J. 1829 (2003)
Why do corporate governance systems differ quite substantially around the world? The American model supervises managers through a board representing a diffuse mass of external shareholders whose rights are defended by a variety of institutional rules (such as those governing…
Vigorous Race or Leisurely Walk: Reconsidering the Competition over Corporate Charters
112 Yale L.J. 553 (2002)
Does American corporate law work effectively to enhance shareholder value? The recent corporate governance crisis makes this time as good as any for reexamining the basic structure of this body of law. This Essay provides such a reconsideration of a defining feature of U.S. c…
Coase's Penguin, or, Linux and The Nature of the Firm
112 Yale L.J. 369 (2002)
For decades our common understanding of the organization of economic production has been that individuals order their productive activities in one of two ways: either as employees in firms, following the directions of managers, or as individuals in markets, following price si…
A Dilution Mechanism for Valuing Corporations in Bankruptcy
111 Yale L.J. 83 (2001)
This Article proposes a new mechanism for valuing firms in bankruptcy. Under the "senior dilution" mechanism, a court would dilute the reorganized stock issued to senior claimants by issuing additional shares to junior claimants until there was no excess demand for the stock a…
The Rise of Dispersed Ownership The Roles of Law and the State in the Separation of Ownership and Control
111 Yale L.J. 1 (2001)
Deep and liquid securities markets appear to be an exception to a worldwide pattern in which concentrated ownership dominates dispersed ownership. Recent commentary has argued that a dispersed shareholder base is unlikely to develop in civil-law countries and transitional econo…
The Essential Role of Organizational Law
110 Yale L.J. 387 (2000)
In every developed market economy, the law provides for a set of standard-form legal entities. In the United States, these entities include, among others, the business corporation, the cooperative corporation, the nonprofit corporation, the municipal corporation, the limited …