A Reputational Theory of Corporate Law. This post comes from Roy Shapira, LLM ’09, SJD ’14

April 13, 2015 in Uncategorized by Anastasia A. Tolu, M.Jur. CGC Site Administrator

In a paper recently published in Stanford Law and Policy Review, I argue that corporate law’s main impact is not in imposing sanctions but rather in producing information. The process of litigation or regulatory investigations produces information on the behavior of defendant companies and businesspeople. This information reaches third parties and affects the way that outside observers treat the parties to the dispute. In other words, litigation affects behavior indirectly, through shaping reputational sanctions.

The Article then explores how exactly information from the courtroom translates into the court of public opinion. By analyzing the content of media coverage of famous corporate law cases, we gain two sets of insights. First, we learn that judicial scolding does not necessarily hurt the misbehaving company’s reputation. The reputational impact of litigation depends on factors such as whom the judge is scolding, what she is scolding them for, and how her scolding compares to the preexisting information environment. Second, we flesh out the ways in which information flows from the courtroom get distorted. Information intermediaries selectively disseminate certain pieces of information and ignore others. And defendant companies produce smokescreens in an attempt to divert the public’s attention.

The Article conclude by sketching policy implications, such as reevaluating the desirability of open-ended standards and liberal pleading mechanisms, or the proper scope of judicial review of the Securities and Exchange Commission’s actions.

The full article is available to download here.

Roy Shapira is a research fellow at Harvard Law School, and a consultant at the Reputation Institute.

— Anastasia Tolu, Corporate Governance Concentration site administrator

April 13, 2015


Company Law in Ghana: Beyond the Template. This post comes from Robert Clegg, LLM ’14.

March 24, 2015 in Uncategorized by Anastasia A. Tolu, M.Jur. CGC Site Administrator

Ghana is in the process of reviewing its Companies Act to facilitate the ease of doing business. In this article, Robert cautions Ghana’s lawmakers against the tendency of some developing countries to copy and paste precedents from the West in the name of law reforms, justifying the description of them in the academic literature as mere imitators.

Robert traces the history of companies law-making in Ghana from 1958, a year after the attainment of independence to date. He argues that in the end, Ghana’s new Companies Act cannot by itself transform Ghana’s business landscape but would merely set the stage for the attainment of this ideal.

He recommends making the tax regime attractive for investments, empowering the commercial court, strengthening corporate law institutions, encouraging the diffusion of the massive blocks of shares on the stock market and crafting corporate laws to reflect sound policy considerations.

The full text of the article can be accessed here.

Robert Nii Arday Clegg, LLM ‘14 is the Managing Partner at Clegg & Everett, a Business Law Firm located in Accra, Ghana.

— Anastasia Tolu, Corporate Governance Concentration site administrator

March 24, 2015

The Dividing Line Between Shareholder Democracy and Board Autonomy: Inherent Conflicts of Interest as Normative Criterion. This post comes from Sofie Cools, LLM 2004.

March 5, 2015 in Uncategorized by Anastasia A. Tolu, M.Jur. CGC Site Administrator

In a recent article, I explore the recommended scope for shareholder say and for board autonomy respectively, in public companies.

In the past decades, shareholder democracy has been the center of attention in corporate governance research. Academic commentators have lined up on both sides of the debate and have fiercely advocated either increasing or limiting shareholder power. Yet, the scope of many of these arguments has so far been unclear, so that they could in fact always be used again for even more, or even less, shareholder democracy, until the board or the shareholder meeting is entirely depleted of authority.

In this article, I put forward a normative criterion that can be consistently applied to the various subject matters of corporate decision-making. A criterion based on “inherent” conflicts of interest of directors, I argue, is economically efficient and meets the underlying rationale of existing corporate law systems in Europe and the United States. Specifically, shareholder power should comprise, but also be limited to, matters in which directors face an inherent conflict of interest. The problems of shareholder passivity, short-termism and empty voting and the concern about stakeholder interests do not call for a further reduction of shareholder power beyond this limitation.

The published version of the article can be accessed here and here.

Sofie is a Senior Research Fellow at the Max Planck Institute for Comparative and International Private Law in Hamburg, Germany, an S.J.D. candidate at Harvard Law School, and an Affiliated Senior Researcher at the University of Leuven, Belgium.

— Anastasia Tolu, Corporate Governance Concentration site administrator

March 5, 2015

Announcement from CGC Administrators

February 6, 2015 in Uncategorized by Anastasia A. Tolu, M.Jur. CGC Site Administrator

Dear All:

Feel free to send over public memos, articles, and other developments for posting to the Concentration website.  We often see articles and developments from you, but some get unnoticed and we are happy to bring the CGC community’s attention to this news.

— Anastasia Tolu, Corporate Governance Concentration site administrator

February 6, 2015

The Single Supervisory Mechanism – Panacea or Quack Banking Regulation? This post comes from Tobias Tröger, LLM’04.

February 6, 2015 in Uncategorized by Anastasia A. Tolu, M.Jur. CGC Site Administrator

Preliminary Assessment of the New Regime for the Prudential Supervision of Banks with ECB Involvement.

In a recent article I analyze the new architecture for the prudential supervision of banks in the euro area. I am primarily concerned with the likely effectiveness of the Single Supervisory Mechanism (SSM) as a regime that intends to bolster financial stability in the steady state.

Using insights from the political economy of bureaucracy I find that the SSM is overly focused on sharp tools to discipline captured national supervisors and thus under-incentivizes their top-level personnel to voluntarily contribute to rigid supervision. The success of the SSM in this regard will hinge on establishing a common supervisory culture that provides positive incentives for national supervisors. To this end, the internal decision making structure of the ECB in supervisory matters provides some integrative elements. Yet, the complex procedures also impede swift decision making and do not solve the problem adequately. Ultimately, a careful design and animation of the ECB-defined supervisory framework and the development of inter-agency career opportunities will be critical.

The ECB will become a de facto standard setter that competes with the EBA. A likely standoff in the EBA’s Board of Supervisors will lead to a growing gap in regulatory integration between SSM-participants and other EU Member States.

Joining the SSM as a non-euro area Member State is unattractive because the current legal framework grants no voting rights in the ECB’s ultimate decision making body. It also does not supply a credible commitment opportunity for Member States who seek to bond to high quality supervision

The article can be accessed here.

Tobias is a Professor of Private Law, Business and Trade Law at Goethe University, Frankfurt, Germany.

— Anastasia Tolu, Corporate Governance Concentration site administrator

February 6, 2015