Sunday, February 27, 2011
Women on Boards of Directors: A Global Snapshot, by Douglas M. Branson, University of Pittsburgh School of Law, was recently posted on SSRN. Here is the abstract:
Since my books on the role of women appeared, in 2007 and in 2010, the participation by women in corporate governance has become a front page issue in many European nations, including Norway, Spain, and France, which have adopted quota laws, and in Belgium, the Netherlands and Italy, which may soon do the same. By contrast, Germany and the United Kingdom are staunchly opposed to any such incursions into their governance regimes. On the other side of the world, the issue of women in governance has moved from the back to the front burner in just the last year, as organizations in countries such as Australia have inaugurated new programs which have shown great success. By way of further contrast, progress on issue in the U.S. has been largely dormant from 2004, or earlier, with the exception of little-noted SEC disclosure regulations taking effect in 2010. This article reviews the comparative statistics and categorizes the types of programs being implemented around the world.
New Thinking on ‘Shareholder Primacy’, by Lynn A. Stout, University of California, Los Angeles (UCLA) - School of Law, was recently posted on SSRN. Here is the abstract:
By the beginning of the twenty-first century, many observers had come to believe that U.S. corporate law should, and does, embrace a “shareholder primacy” rule that requires corporate directors to maximize shareholder wealth. This Essay argues that such a view is mistaken.
As a positive matter, U.S. corporate law and practice does not require directors to maximize shareholder wealth but instead grants them a wide range of discretion, constrained only at the margin by market forces, to sacrifice shareholder wealth in order to benefit other constituencies. Although recent “reforms” designed to promote greater shareholder power have begun to limit this discretion, U.S. corporate governance remains director-centric.
As a normative matter, several lines of theory have emerged in modern corporate scholarship that independently suggest why director governance of public firms is desirable from shareholders’ own perspective. The Essay reviews five of these lines of theory and explores why each gives us reason to believe that shareholder primacy rules in public companies in fact disadvantage shareholders. It concludes that shareholder primacy thinking in its conventional form is on the brink of intellectual collapse, and will be replaced by more sophisticated and nuanced theories of corporate structure and purpose.
The Aftermath of Morrison v. National Australia Bank and Elliott Associates v. Porsche, by Wulf A. Kaal, Mississippi College - School of Law, and Richard W. Painter, University of Minnesota Law School, was recently posted on SSRN. Here is the abstract:
This article evaluates the ambiguities and shortcomings of the U.S. Supreme Court decision in Morrison with a particular emphasis on the implications of the recent Porsche decision in the Southern District of New York. We conclude that the ambiguities in Morrison and the implications of interpreting Morrison for persons and companies in European jurisdictions and elsewhere in the world make it necessary for the U.S. Congress to further clarify the extraterritorial reach of the implied right of action under the Securities Exchange Act of 1934. We also conclude that the U.S. Congress should clarify its intent in Section 929P(b) of the Dodd-Frank Act of 2010 to give extraterritorial enforcement authority to the U.S. Securities and Exchange Commission (SEC) and U.S. Department of Justice. An SEC study of private rights of action is also required by the Dodd-Frank Act, but regardless of the outcome of this study, Congress should decline to reinstate private rights of action in “foreign-cubed” cases. Restraining and clarifying the U.S. approach to extraterritoriality could help provide certainty to international securities markets and avoid a downturn in international economic cooperation.
Stock Broker Fiduciary Duties and the Impact of the Dodd-Frank Act, by Thomas Lee Hazen, University of North Carolina (UNC) at Chapel Hill - School of Law, was recently posted on SSRN. Here is the abstract:
In recent years there has been concern about the sufficiency of broker-dealer regulation. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 mandates the SEC to review and evaluate existing regulation and to adopt such rules as may be necessary to enhance existing regulation. Existing SEC and FINRA rule-making addresses broker-dealer conduct, but by and large the regulation has been based on principles and standards rather than voluminous detailed rules specifying prohibited conduct. This article examines the extent to which additional regulation is warranted and whether to continue to rely on principles-based regulation, or whether there should be more explicit rules to heighten broker-dealer standards. The article concludes that although the existing framework for broker-dealer regulation is robust, it could be fine-tuned by possibly adding an express fiduciary duty requirement as well as more specific rule-based prohibitions.
Sanctioning Corporations, by Meir Dan-Cohen, University of California, Berkeley - School of Law, was recently posted on SSRN. Here is the abstract:
The question of corporate criminal liability should be split into (at least) two questions: (1) Should corporations be subject to criminal sanctions? (2) Should these sanctions be subject to the same substantive, procedural, and evidentiary constraints as those that apply in the case of individual defendants? I argue for a positive answer to the first question, and a negative answer to the second.
The Destructive Ambiguity of Federal Proxy Access, by Jill E. Fisch, University of Pennsylvania Law School - Institute for Law and Economics, was recently posted on SSRN. Here is the abstract:
After almost seventy years of debate, on August 25, 2010, the SEC adopted a federal proxy access rule. This Article examines the new rule and concludes that, despite the prolonged rule-making effort, the new rule is ambiguous in its application and unlikely to increase shareholder input into the composition of corporate boards. More troubling is the SEC’s ambiguous justification for its rule which is neither grounded in state law nor premised on a normative vision of the appropriate role of shareholder nominations in corporate governance.
Although the federal proxy access rule drew an unprecedented number of comment letters and is now being challenged in court, its practical significance is likely to be minimal. The SEC’s ambiguous approach to proxy access is particularly problematic because its rules continue to burden issuer-specific innovations in nominating procedures. The SEC has admitted that its rules impede shareholder participation in the nominating process, but it has refused to remove existing regulatory burdens on such participation.
The core of the problem is that, as this Article will show, federal regulation is poorly suited for regulating corporate governance. Private ordering, within the framework of existing state regulation, offers a more flexible mechanism for maintaining equilibrium in the allocation of power between shareholder and managers. The article concludes by outlining the federal regulatory changes necessary to enable effective private ordering.
Why are U.S. Stocks More Volatile?, by Sohnke M. Bartram, Lancaster University; Gregory W. Brown , University of North Carolina (UNC) at Chapel Hill - Finance Area; and Rene M. Stulz, Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI), was recently posted on SSRN. Here is the abstract:
From 1991 to 2006, U.S. stocks are more volatile than stocks of similar foreign firms. A firm’s stock return volatility in a country can be higher than the stock return volatility of a similar firm in another country for reasons that contribute positively (good volatility) or negatively (bad volatility) to shareholder wealth and economic growth. We find that the volatility of U.S. firms is higher mostly because of good volatility. Specifically, firm stock volatility is higher in the U.S. because it increases with investor protection, stock market development, research intensity at the country level, and firm-level investment in R&D. These are all factors that are related to better growth opportunities for firms and better ability to take advantage of these opportunities. Though it is often argued that better disclosure is associated with greater volatility as more information is impounded in stock prices, we find instead that greater disclosure is associated with lower stock volatility.