For centuries, the duty of loyalty has been the hallowed centerpiece of fiduciary obligation, widely considered one of the few “mandatory” rules of corporate law. That view, however, is no longer true. Beginning in 2000, Delaware dramatically departed from tradition by granting incorporated entities a statutory right to waive a crucial part of the duty of loyalty: the corporate opportunities doctrine. Other states have since followed Delaware’s...
Corporations
The project of creating a Banking Union is designed to overcome the fatal link between sovereigns and their banks in the Eurozone. As part of this project, political agreement for a common supervision framework and a common resolution scheme has been reached with difficulty. However, the resolution framework is weak, underfunded and exhibits some serious flaws. Further,...
The 2008 financial crisis raised puzzles important for understanding how the capital market prices common stocks and in turn, for the intersection between law and finance. During the crisis, there was a dramatic five-fold spike, across all industries, in “idiosyncratic risk”—the volatility of individual-firm share prices after adjustment for movements in the market as a whole.
This phenomenon is not limited to the most recent financial...
According to an influential view in corporate law writings and debates, pressure from shareholders leads companies to take myopic actions that are costly in the long term, and insulating boards from such pressure serves the long-term interests of companies as well as their shareholders. This board insulation claim has been regularly invoked in a wide range of contexts to support existing or tighter limits on shareholder rights and involvement....
In the ongoing discussions about financial services regulation, one critically important topic has not been recognized, let alone addressed. That topic is what this Article calls the “entity-centrism” of financial services regulation. Laws and rules are entity-centric when they assume that a financial services firm is a stand-alone entity, operating separately from and independently of any other entity. They are entity centric, therefore,...
Introduction In March 2015, the New York State Department of Financial Services (DFS) entered into a consent order with a major German bank (with New York affiliate branches), Commerzbank AG, regarding that bank’s violations of state and federal anti-money-laundering (AML) laws. And Commerzbank has now paid $1.45 billion to the U.S. government to settle the […]
The poison put is a contractual innovation that grants debtholders an option to redeem their debt upon the occurrence of a predefined trigger. While certain poison puts can be justified in light of Delaware corporate law’s deference to directors, one particular class of poison puts is more troubling from a corporate governance perspective: those triggered by a turnover...
Across the First Amendment, the distinction between for-profit businesses and nonprofit organizations is in trouble. In recent years, courts have rejected this distinction in the context of free-speech challenges to campaign-finance restrictions and free-exercise claims to obtain legal exemptions from health-care regulations. Although there is a great deal of popular...
We argue that the state-law rules governing poison pills are vulnerable to challenges based on preemption by the Williams Act. Such challenges, we show, could well have a major impact on the corporate-law landscape.
The Williams Act established a federal regime regulating unsolicited tender offers, but states subsequently developed a body of state anti- takeover...
In his essay, The Myth That Insulating Boards Serves Long-Term Value, Professor Lucian Bebchuk draws a stark dichotomy between so-called “insulation advocates” and proponents of shareholder-driven direct democracy. This Essay begins by rejecting this crude divide between “good” and “evil,” and focuses instead on the practical realities surrounding...