Lucian A. Bebchuk

James Barr Ames Professor of Law, Economics, and Finance

Director, Program on Corporate Governance

Biography

Lucian Bebchuk is the James Barr Ames Professor of Law, Economics, and Finance and Director of the Program on Corporate Governance at Harvard Law School. Bebchuk is also a Fellow of the American Academy of Arts and Sciences, Research Associate of the National Bureau of Economic Research, Inaugural Fellow of the European Corporate Governance Network, and Director of the SSRN Corporate Governance Network.

Trained in both law and economics, Professor Bebchuk holds an LL.M. and S.J.D. from Harvard Law School and an M.A. and a Ph.D. in Economics from the Harvard Economics Department. His research focuses on corporate governance, law and finance, and law and economics. Upon electing him to membership in 2000, the American Academy of Arts and Sciences cited him as "[o]ne of the nation's leading scholars of law and economics," who "has made major contribution to the study of corporate control, governance, and insolvency."

Bebchuk is the author or coauthor of more than one hundred research papers, as well the widely acclaimed book Pay without Performance: the Unfulfilled Promise of Executive Compensation. Bebchuk’s papers have appeared in the top academic journals in law, in economics, and in finance. The Social Science Research Network (SSRN) ranks him first among legal academics of all fields in terms of citations to his work.

Bebchuk’s work has been recognized by his having been elected to serve as President of the Western Economics Association International, President of the American Law and Economics Association, and Chair of the Business Association Section of the American Association of Law Teachers. His recent awards include the International Corporate Governance Network’s Award for Excellence in Corporate Governance, the Investor Responsibility Research Center Institute’s best academic paper award, and the Marshall Blume prize in financial research.

Bebchuk has been a frequent contributor to policy-making, practice, and public debate in the fields of corporate governance and financial regulation. He has appeared in hearings and roundtables before the Senate Finance Committee, the Senate Banking Committee, the House of Representatives Committee of Financial Services, and the SEC; has authored numerous op-ed pieces, including in the Wall Street Journal, the New York Times, and the Financial Times; has advised governmental bodies, such as the Special Master on TARP executive compensation during the financial crisis, and publicly traded firms; has served on the board of directors of OJSC MMC Norilsk Nickel, the world’s largest producer of nickel and palladium; and heads the Shareholder Rights Project, a program that has represented public pension funds and charitable organizations in bringing about board declassifications at more than 75 S&P 500 and Fortune 500 companies. Bebchuk was included in the list of the "100 most influential players in corporate governance" of Directorship, the "100 most influential people in finance" of Treasury & Risk Management, and the list of top 10 ”governance stars” of Global Proxy Watch.

Areas of Interest

Lucian A. Bebchuk, The Myth That Insulating Boards Serves Longterm Value, 113 Colum. L. Rev. 1637 (2013).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Corporate Law
,
Mergers & Acquisitions
,
Securities Law & Regulation
,
Shareholders
Type: Article
Lucian A. Bebchuk, The Case for Increasing Shareholder Power, 118 Harv. L. Rev. 833 (2005)(Reprinted in Foundations of Corporate Law, 2nd ed., (Romano, ed., 2010)).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Shareholders
Type: Article
Lucian A. Bebchuk & Jesse Fried, Pay without Performance: The Unfulfilled Promise of Executive Compensation (Harvard Univ. Press 2004).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Financial Reform
,
Corporate Governance
,
Corporate Law
Type: Book
Abstract
The Unfulfilled Promise of Executive Compensation Lucian A. Bebchuk. on flawed schemes — to get unprecedented amounts of compensation that were to a substantial degree unrelated to their own performance. The stock market boom is a ...
Lucian A. Bebchuk & Assaf Hamdani, Making Independent Directors Work, U. Pa. L. Rev. (forthcoming 2017).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Corporate Law
,
Shareholders
Type: Article
Abstract
Independent directors are a prominent feature of modern corporate law, and lawmakers increasingly rely on them to protect public investors from controlling shareholders' opportunism. In this Article, however, we argue that the prevailing director election regime significantly undermines the ability of independent directors to adequately perform their assigned role. Under current director election arrangements, both the election and the retention of independent directors depends on the controlling shareholder. As a result, such directors have incentives to go along with controllers’ wishes or at least inadequate incentives to protect public investors. To ensure that independent directors can be relied upon to monitor controlling shareholders, we argue, some independent directors should be accountable to public investors. This can be achieved by empowering the investors to determine or at least influence these directors’ election or retention. These “enhanced-independence” directors should play a key role in vetting “conflicted decisions” — that is, self-dealing transactions and other matters hat raise a conflict between the controller's interests and those of public investors — but not over other corporate issues. Enhancing the independence of some directors would substantially improve the protection of public investors without undermining the ability of the controller to set the firm's strategy. We explain how the Delaware courts, other U.S. regulators, and policymakers around the world can introduce enhanced-independence arrangements. Our analysis offers a framework of director election rules that allows policymakers to produce the precise balance of power between controlling shareholders and public investors that they find appropriate. We also analyze the proper role of such directors as well as respond to objections to their use. Overall, we show that enhanced-independence directors can provide a solid foundation for protecting public investors in controlled companies.
John C. Coates, IV, Lucian A. Bebchuk, Reinier Kraakman & Mark J. Roe (with Bernard S. Black, John C. Coffee, James D. Cox, Ronald J. Gilson, Jeffrey N. Gordon, Lawrence A. Hamermesh, Henry Hansmann, Robert J. Jackson, Marcel Kahan, Vikramaditya S. Khanna, Michael Klausner, Donald C. Langevoort, Brian J.M. Quinn, Edward B. Rock & Helen S. Scott, Supreme Court Amicus Brief of 19 Corporate Law Professors, Friedrichs v. California Teachers Association, No. 14-915 (U.S. Nov. 6, 2015).
Categories:
Corporate Law & Securities
,
Constitutional Law
Sub-Categories:
First Amendment
,
Corporate Law
,
Shareholders
Type: Article
Abstract
The Supreme Court has looked to the rights of corporate shareholders in determining the rights of union members and non-members to control political spending, and vice versa. The Court sometimes assumes that if shareholders disapprove of corporate political expression, they can easily sell their shares or exercise control over corporate spending. This assumption is mistaken. Because of how capital is saved and invested, most individual shareholders cannot obtain full information about corporate political activities, even after the fact, nor can they prevent their savings from being used to speak in ways with which they disagree. Individual shareholders have no “opt out” rights or practical ability to avoid subsidizing corporate political expression with which they disagree. Nor do individuals have the practical option to refrain from putting their savings into equity investments, as doing so would impose damaging economic penalties and ignore conventional financial guidance for individual investors.
Lucian A. Bebchuk, Alon Brav & Wei Jiang, The Long-Term Effects of Hedge Fund Activism, 115 Colum. L. Rev. 1085 (2015).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Financial Markets & Institutions
,
Shareholders
,
Corporate Law
,
Corporate Governance
Type: Article
Lucian Bebchuk, Jeff Greene, Richard Ruback, Paul Clancy & Paul Hilal, Ernst & Young LLP Roundtable on Activist Investors and Their Implications for Corporate Managers, 27 J. Applied Corp. Fin. 8 (2015).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Corporate Governance
Type: Article
Lucian A. Bebchuk & Robert J. Jackson, Toward a Constitutional Review of the Poison Pill, 114 Colum. L. Rev. 1549 (2014).
Categories:
Corporate Law & Securities
,
Constitutional Law
Sub-Categories:
Corporate Governance
,
Corporate Law
,
Mergers & Acquisitions
,
Securities Law & Regulation
,
Shareholders
Type: Article
Lucian A. Bebchuk & Allen Ferrell, Rethinking Basic, 69 Bus. Law. 671 (2014).
Categories:
Civil Practice & Procedure
,
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Financial Markets & Institutions
,
Corporate Law
,
Securities Law & Regulation
,
Class Action Litigation
Type: Article
Lucian Bebchuk, Alma Cohen & Charles C.Y. Wang, Golden Parachutes and the Wealth of Shareholders, 25 J. Corp. Fin. 140 (2014).
Categories:
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Economics
,
Finance
,
Shareholders
,
Corporate Governance
Type: Article
Abstract
Golden parachutes (GPs) have attracted substantial attention from investors and public officials for more than two decades. We find that GPs are associated with higher expected acquisition premiums and that this association is at least partly due to the effect of GPs on executive incentives. However, we also find that firms that adopt GPs experience negative abnormal stock returns both during and subsequent to the period surrounding their adoption. This finding raises the possibility that even though GPs facilitate some value-increasing acquisitions, they do have, on average, an overall negative effect on shareholder wealth; this effect could be due to GPs weakening the force of the market for control and thereby increasing managerial slack, and/or to GPs making it attractive for executives to go along with some value-decreasing acquisitions that do not serve shareholders' long-term interests. Our findings have significant implications for ongoing debates on GPs and suggest the need for additional work identifying the types of GPs that drive the identified correlation between GPs and reduced shareholder value.
Lucian A. Bebchuk, Alma Cohen & Charles C.Y. Wang, Learning and the Disappearing Association Between Governance and Returns, 108 J. Fin. Econ. 323 (2013).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Corporate Law
,
Securities Law & Regulation
Type: Article
Abstract
The correlation between governance indices and abnormal returns documented for 1990-1999 subsequently disappeared. The correlation and its disappearance are both due to market participants' gradually learning to appreciate the difference between good-governance and poor-governance firms. Consistent with learning, the correlation's disappearance was associated with increases in market participants' attention to governance; market participants and security analysts were, until the beginning of the 2000s but not subsequently, more positively surprised by the earning announcements of good-governance firms; and, although governance indices no longer generated abnormal returns during the 2000s, their negative association with firm value and operating performance persisted.
Lucian A. Bebchuk, Alon Brav, Robert J. Jackson & Wei Jiang, Pre-Disclosure Accumulations by Activist Investors: Evidence and Policy, 39 J. Corp. L. 1 (2013).
Categories:
Corporate Law & Securities
Sub-Categories:
Securities Law & Regulation
,
Shareholders
,
Mergers & Acquisitions
,
Corporate Governance
,
Corporate Law
Type: Article
Abstract
The Securities and Exchange Commission (SEC) is currently considering a rulemaking petition requesting that the Commission shorten the ten-day window, established by Section 13(d) of the Williams Act, within which investors must publicly disclose purchases of a five percent or greater stake in public companies. In this Article, we provide the first systematic empirical evidence on these disclosures and find that several of the petition’s factual premises are not consistent with the evidence. Our analysis is based on about 2,000 filings by activist hedge funds during the period of 1994–2007. We find that the data are inconsistent with the petition’s key claim that changes in market practices and technologies have operated over time to increase the magnitude of pre-disclosure accumulations, making existing rules “obsolete” and therefore requiring the petition’s proposed “modernization.” The median stake that these investors disclose in their 13(d) filings has remained stable throughout the 17-year period that we study, and regression analysis does not identify changes over time in the stake disclosed by investors. We also find that: * A substantial majority of 13(d) filings are actually made by investors other than activist hedge funds, and these investors often use a substantial part of the ten-day window before disclosing their stake. * A significant proportion of poison pills have low thresholds of 15% or less, so that management can use 13(d) disclosures to adopt low-trigger pills to prevent any further stock accumulations by activists — a fact that any tightening of the SEC’s rules in this area should take into account. * Even when activists wait the full ten days to disclose their stakes, their purchases seem to be disproportionately concentrated on the day they cross the threshold and the next day; thus, the practical difference in pre-disclosure accumulations between the existing regime and the rules in jurisdictions with shorter disclosure windows is likely much smaller than the petition assumes. * About ten percent of 13(d) filings seem to be made after the ten-day window has expired; the SEC may therefore want to consider tightening the enforcement of existing rules before examining the proposed acceleration of the deadline. Our analysis provides new empirical evidence that should inform the SEC’s consideration of this subject — and a foundation on which subsequent empirical and policy analysis can build.
Lucian A. Bebchuk & Robert J. Jackson, Shining Light on Corporate Political Spending, 101 Geo. L.J. 923 (2013).
Categories:
Government & Politics
,
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Elections & Voting
Type: Article
Lucian Bebchuk, Scott Hirst & June Rhee, Toward the Declassification of S&P 500 Boards, 3 Harv. Bus. L. Rev. 157 (2013).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Shareholders
Type: Article
Abstract
This report provides an overview and analysis of the work that the Shareholder Rights Project (SRP) undertook on behalf of a number of institutional investors during 2012 and 2013, the SRP’s first two years of operations. During 2012 and 2013, the SRP worked on behalf of eight SRP-represented investors on board declassification proposals submitted for a vote at the 2012 and/or 2013 annual meetings of 122 S&P 500 and Fortune 500 companies, and this work has produced substantial results: 100 Negotiated Outcomes: Negotiated outcomes involving a commitment to board declassification were reached with 100 S&P 500 and Fortune 500 companies, about three-quarters of the companies receiving proposals in 2012 and/or 2013. 58 Successful Precatory Proposals: During 2012 and 2013, declassification proposals brought by SRP-represented investors received majority support at 58 annual meetings of 53 S&P 500 and Fortune 500 companies (all but three of the annual meetings in which such proposals went to a vote), with average support of about 80% of votes cast. 81 Board declassifications: A total of 81 S&P 500 and Fortune 500 companies already declassified their boards during 2012 and 2013 as a result of the work of the SRP and SRP-represented investors. These 81 companies, which have an aggregate market capitalization exceeding one trillion dollars (as of Dec, 31, 2013), represent about 65% of the companies with which engagements took place and about 60% of the S&P 500 companies that had classified boards as of the beginning of 2012. Expected Impact by End of 2014: The work of the SRP and SRP-represented investors is expected to produce a significant number of additional board declassifications during 2014 as a result of (i) management declassification proposals that will go to a vote pursuant to 2012 and 2013 agreements, (ii) companies agreeing to follow the preferences of shareholders expressed in 58 successful precatory declassification proposals, and (iii) ongoing engagement by the SRP and SRP-represented investors. We estimate that, by the end of 2014, this work will have contributed to movements towards board declassification by about 100 S&P 500 and Fortune 500 companies; this large-scale change can be expected to increase board accountability and thereby to enhance shareholder value and company performance in the affected companies. Beyond Board Declassification: The SRP’s 2012 and 2013 work also facilitated a substantial increase in successful engagement by public pension funds, and in their ability to obtain governance changes favored by shareholders. The proposals that the SRP worked in 2012 and 2013 on represented over 50% of the shareholder proposals by public pension funds that received majority support in 2012 and 2013, and over 20% of all precatory shareholder proposals (by all proponents) that received majority support in 2012 and 2013. The Shareholder Rights Project (SRP) is a clinical program operating at Harvard Law School and directed by Professor Lucian Bebchuk. The SRP works on behalf of public pension funds and charitable organizations seeking to improve corporate governance at publicly traded companies, as well as on research and policy projects related to corporate governance. Any views expressed and positions taken by the SRP and its representatives should be attributed solely to the SRP and not to Harvard Law School or Harvard University.
Lucian A. Bebchuk & Alon Klement, Negative-Expected-Value Suits, in Procedural Law And Economics 341 (Chris William Sanchirico ed., Edward Elgar Pub. 2012).
Categories:
Banking & Finance
,
Civil Practice & Procedure
Sub-Categories:
Economics
,
Remedies
Type: Book
Abstract
With contributions from some of the leading scholars in law and economics, this comprehensive book summarizes the state of economic research on litigation, procedure and evidence.
Lucian A. Bebchuk & Robert J. Jackson, The Law and Economics of Blockholder Disclosure, 2 Harv. Bus. L. Rev. 40 (2012).
Categories:
Corporate Law & Securities
Sub-Categories:
Securities Law & Regulation
Type: Article
Abstract
The Securities and Exchange Commission is currently considering a rulemaking petition that advocates tightening the rules under the Williams Act, which regulates the disclosure of large blocks of stock in public companies. In this Article, we explain why the Commission should not view the proposed tightening as a merely “technical” change needed to meet the objectives of the Williams Act, provide market transparency, or modernize its regulations. The drafters of the Williams Act made a conscious choice not to impose an inflexible 5% cap on pre-disclosure accumulations of shares to avoid deterring investors from accumulating large blocks of shares. We argue that the proposed changes to the SEC’s rules should similarly be examined in the larger context of the optimal balance of power between incumbent directors and these blockholders. We discuss the beneficial and documented role that outside blockholders play in corporate governance and the adverse effect that any tightening of the Williams Act’s disclosure thresholds can be expected to have on such blockholders. We explain that there is currently no evidence that trading patterns and technologies have changed in ways that would make it desirable to tighten these disclosure thresholds. Furthermore, since the passage of the Williams Act, the rules governing the balance of power between incumbents and outside blockholders have already moved significantly in favor of the former — both in absolute terms and in comparison to other jurisdictions — rather than the latter. Our analysis provides a framework for the comprehensive examination of the rules governing outside blockholders that the Commission should pursue. In the meantime, we argue, the Commission should not adopt new rules that would tighten the disclosure thresholds that apply to blockholders. Existing research and available empirical evidence provide no basis for concluding that such tightening would protect investors and promote efficiency. Indeed, there is a good basis for concern that such tightening would harm investors and undermine efficiency.
Lucian A. Bebchuk & Itay Goldstein, Self-fulfilling Credit Market Freezes, 24 Rev. Fin. Stud. 3519 (2011).
Categories:
Banking & Finance
Sub-Categories:
Financial Markets & Institutions
,
Banking
,
Economics
Type: Article
Lucian A. Bebchuk, K.J. Martijn Cremers & Urs C. Peyer, The CEO Pay Slice, 102 J. Fin. Econ. 199 (2011).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Corporate Law
,
Securities Law & Regulation
,
Shareholders
Type: Article
Lucian A. Bebchuk, Yaniv Grinstein & Urs Peyer, Lucky CEOs and Lucky Directors, 65 J. Fin. 2363 (2010).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Corporate Law
Type: Article
Lucian A. Bebchuk & Robert J. Jackson, Corporate Political Speech: Who Decides?, 124 Harv. L. Rev. 83 (2010).
Categories:
Corporate Law & Securities
,
Constitutional Law
Sub-Categories:
First Amendment
,
Corporate Governance
,
Corporate Law
,
Shareholders
Type: Article
Lucian A. Bebchuk, How to Fix Bankers’ Pay, 139 Daedalus 52 (2010).
Categories:
Banking & Finance
Sub-Categories:
Banking
,
Financial Markets & Institutions
,
Financial Reform
Type: Article
Oren Bar-Gill & Lucian A. Bebchuk, Consent and Exchange, 39 J. Legal Stud. 375 (2010).
Categories:
Civil Practice & Procedure
,
Banking & Finance
Sub-Categories:
Contracts
,
Remedies
,
Private Law
,
Litigation & Settlement
Type: Article
Abstract
In some cases, the law permits a party that unilaterally provides a benefit to another party to recover the estimated value of this benefit. Despite calls for expanding the set of cases to which such a restitution rule applies, the law commonly applies a mutual consent rule under which a party providing another with a benefit cannot obtain any recovery without securing the advance consent of the beneficiary to the transaction. We provide an efficiency rationale for the undesirability of broad use of the restitution rule by identifying significant adverse ex ante effects of the rule that are avoided by the consent requirement. Even assuming that courts' errors in estimating buyer benefits would be unbiased, a restitution rule would strengthen sellers' hand by providing them with a put option that they may but do not have to use. As a result, the restitution rule would encourage inefficient market entry by low-quality sellers that would not contribute to any efficient transactions but would be able to extract payments from buyers seeking to avoid an exchange with them. Furthermore, the restitution rule would discourage efficient market entry by some or all potential buyers of a good or service. Beyond the restitution rule, we extend our analysis to show that similar adverse effects can also arise from other "pricing" rules that provide buyers or sellers with call or put options to force an exchange at a judicially-determined price.
Lucian A. Bebchuk & Jesse M. Fried, Paying For Long-Term Performance, 158 U. Pa. L. Rev. 1915 (2010).
Categories:
Corporate Law & Securities
,
Labor & Employment
Sub-Categories:
Corporate Governance
,
Corporate Law
,
Shareholders
,
Executive Compensation
Type: Article
Abstract
Firms, investors, and regulators around the world are now seeking to ensure that the compensation of public company executives is tied to long-term results, in part to avoid incentives for excessive risk taking. This Article examines how best to achieve this objective. Focusing on equity-based compensation, the primary component of executive pay, we identify how such compensation should best be structured to tie pay to long-term performance. We consider the optimal design of limitations on the unwinding of equity incentives, putting forward a proposal that firms adopt both grant-based and aggregate limitations on unwinding. We also analyze how equity compensation should be designed to prevent the gaming of equity grants at the front end and the gaming of equity dispositions at the back end. Finally, we emphasize the need for widespread adoption of limitations on executives’ use of hedging and derivative transactions that weaken the tie between executive payoffs and the long-term stock price that well-designed equity compensation is intended to produce.
Lucian A. Bebchuk & Ehud Kamar, Bundling and Entrenchment, 123 Harv. L. Rev. 1549 (2010).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Corporate Law
,
Shareholders
Type: Article
Lucian A. Bebchuk & Zvika Neeman, Investor Protection and Interest Group Politics, 23 Rev. Fin. Stud. 1089 (2010).
Categories:
Corporate Law & Securities
Sub-Categories:
Shareholders
,
Corporate Governance
,
Corporate Law
Type: Article
Lucian A. Bebchuk & Michael S. Weisbach, The State of Corporate Governance Research, 23 Rev. Fin. Stud. 939 (2010).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
Type: Article
Lucian A. Bebchuk & Scott Hirst, Private Ordering and the Proxy Access Debate, 65 Bus. Law. 329 (2010).
Categories:
Corporate Law & Securities
Sub-Categories:
Shareholders
,
Corporate Law
,
Corporate Governance
,
Securities Law & Regulation
Type: Article
Lucian A. Bebchuk, Nell Minow & Joseph Stiglitz, Compensation in the Financial Industry, Testimony before the House Committee on Financial Services, H.R. Doc. No. 111-98 (Jan. 22, 2010).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Finance
,
Financial Reform
,
Corporate Governance
Type: Presentation
Abstract
House Committee on Financial Services
Lucian A. Bebchuk & Holger Spamann, Regulating Bankers’ Pay, 98 Geo. L.J. 247 (2010).
Categories:
Banking & Finance
Sub-Categories:
Financial Markets & Institutions
,
Banking
,
Financial Reform
Type: Article
Abstract
This paper seeks to make three contributions to understanding how banks’ executive pay has produced incentives for excessive risk-taking and how such pay should be reformed. First, although there is now wide recognition that pay packages focused excessively on short-term results, we analyze a separate and critical distortion that has received little attention. Equity-based awards, coupled with the capital structure of banks, tie executives’ compensation to a highly levered bet on the value of banks’ assets. Because bank executives expect to share in any gains that might flow to common shareholders, but are insulated from losses that the realization of risks could impose on preferred shareholders, bondholders, depositors, and taxpayers, executives have incentives to give insufficient weight to the downside of risky strategies. Second, we show that corporate governance reforms aimed at aligning the design of executive pay arrangements with the interests of banks’ common shareholders - such as advisory shareholder votes on compensation arrangements, use of restricted stock awards, and increased director oversight and independence -cannot eliminate the identified problem. In fact, the interests of common shareholders could be served by more risk-taking than is socially desirable. Accordingly, while such measures could eliminate risk-taking that is excessive even from shareholders’ point of view, they cannot be expected to prevent risk-taking that serves shareholders but is socially excessive. Third, we develop a case for using regulation of banks’ executive pay as an important element of financial regulation. We provide a normative foundation for such pay regulation, analyze how regulators should monitor and regulate bankers’ pay, and show how pay regulation can complement and reinforce the traditional forms of financial regulation.
Lucian A. Bebchuk, Alma Cohen & Holger Spamann, The Wages of Failure: Executive Compensation at Bear Stearns and Lehman 2000-2008, 27 Yale J. on Reg. 257 (2010).
Categories:
Banking & Finance
,
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Banking
,
Commercial Law
,
Finance
,
Financial Markets & Institutions
,
Shareholders
,
Corporate Law
,
Administrative Law & Agencies
Type: Article
Abstract
The standard narrative of the meltdown of Bear Stearns and Lehman Brothers assumes that the wealth of the top executives at these firms was largely wiped out along with their firms. In the ongoing debate about regulatory responses to the financial crisis, commentators have used this assumed fact as a basis for dismissing both the role of compensation structures in inducing risk-taking and the potential value of reforming such structures. This Article provides a case study of compensation at Bear Stearns and Lehman Brothers during 2000-2008 and concludes that this assumed fact is incorrect. We find that the top-five-executive teams at these firms cashed out large amounts of performance-based compensation during this period. From 2000-2008, they were able to cash out large amounts of bonus compensation that were not clawed back when the firms collapsed, and to pocket large amounts from selling shares. Overall, we estimate that the top executive teams of Bear Stearns and Lehman Brothers derived cash flows of about $1.4 billion and $1 billion, respectively, from cash bonuses and equity sales during 2000-2008. These cash flows substantially exceeded the value of the executives' initial holdings at the beginning of the period, and the executives' net payoffs for the period were thus decidedly positive. The divergence between how the top executives and their shareholders fared implies that it is not possible to rule out, as standard narratives suggest, that the executives' pay arrangements provided them with excessive risk-taking incentives. We discuss the implications of our analysis for understanding the possible role that pay arrangements have played in the run-up to the financial crisis and how they should be reformed going forward.
Lucian Bebchuk & Jesse Fried, Long-Term Performance Is Key, 87 Harv. Bus. Rev. 113 (2009).
Categories:
Corporate Law & Securities
Sub-Categories:
Shareholders
,
Corporate Governance
Type: Article
Lucian A. Bebchuk & Assaf Hamdani, The Elusive Quest for Global Governance Standards, 157 U. Pa. L. Rev. (2009).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Shareholders
Type: Article
Lucian Bebchuk, Alma Cohen & Allen Ferrell, What Matters in Corporate Governance?, 22 Rev. Fin. Stud. 783 (2009).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
Type: Article
Abstract
We investigate the relative importance of the twenty-four provisions followed by the Investor Responsibility Research Center (IRRC) and included in the Gompers, Ishii, and Metrick governance index (Gompers, Ishii, and Metrick 2003). We put forward an entrenchment index based on six provisions: staggered boards, limits to shareholder bylaw amendments, poison pills, golden parachutes, and supermajority requirements for mergers and charter amendments. We find that increases in the index level are monotonically associated with economically significant reductions in firm valuation as well as large negative abnormal returns during the 1990-2003 period. The other eighteen IRRC provisions not in our entrenchment index were uncorrelated with either reduced firm valuation or negative abnormal returns.
Lucian A. Bebchuk, The Myth of the Shareholder Franchise, 93 Va. L. Rev. 675 (2007).
Categories:
Corporate Law & Securities
Sub-Categories:
Shareholders
,
Corporate Governance
Type: Article
Lucian Bebchuk, Yaniv Grinstein & Urs C. Peyer, Lucky Directors (NBER Working Paper no. w12811, Dec. 2006).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
Type: Article
Abstract
While prior empirical work and much public attention have focused on the opportunistic timing of executives' grants, we provide in this paper evidence that outside directors' option grants have also been favorably timed to an extent that cannot be fully explained by sheer luck. Examining events in which public firms granted options to outside directors during 1996-2005, we find that 9% were "lucky grant events" falling on days with a stock price equal to a monthly low. We estimate that about 800 lucky grant events owed their status to opportunistic timing, and that about 460 firms and 1400 outside directors were associated with grant events produced by such timing. There is evidence that the opportunistic timing of director grant events has been to a substantial extent the product of backdating and not merely spring-loading based on private information. We find that directors' luck has been correlated with executives' luck. Furthermore, grant events were more likely to be lucky when the firm had more entrenching provisions protecting insiders from the risk of removal, as well as when the board did not have a majority of independent directors.
Lucian A. Bebchuk & Assaf Hamdani, Federal Corporate Law: Lessons From History, 106 Colum. L. Rev. 1793 (2006).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
Type: Article
Lucian A. Bebchuk, Letting Shareholders Set the Rules, 119 Harv. L. Rev. 1784 (2006).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Shareholders
Type: Article
Lucian A. Bebchuk & Richard A. Posner, One-Sided Contracts in Competitive Consumer Markets, 104 Mich. L. Rev. 827 (2006).
Categories:
Banking & Finance
,
Consumer Finance
Sub-Categories:
Contracts
,
Commercial Law
,
Consumer Protection Law
,
Consumer Contracts
Type: Article
Abstract
This paper shows that "one-sided" terms in standard contracts, which deny consumers a contractual benefit that seems efficient on average, may arise in competitive markets without informational problems (other than those of courts). A one-sided term might be an efficient response to situations in which courts cannot perfectly observe all the contingencies needed for an accurate implementation of a "balanced" contractual term when firms are more concerned about their reputation, and thus less inclined to behave opportunistically, than consumers are. We develop this explanation, discuss its positive and normative implications, and compare them to those of information-based explanations for one-sided terms.
Oren Bar-Gill, Michal Barzuza & Lucian A. Bebchuk, The Market for Corporate Law, 162 J. Institutional & Theoretical Econ. 1 (2006).
Categories:
Corporate Law & Securities
,
Disciplinary Perspectives & Law
,
Banking & Finance
,
Government & Politics
Sub-Categories:
Economics
,
Corporate Law
,
Securities Law & Regulation
,
Empirical Legal Studies
,
State & Local Government
Type: Article
Lucian A. Bebchuk & Jesse M. Fried, Pay without Performance: Overview of the Issues, 20 Acad. Mgmt. Persp. 5 (2006).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Corporate Governance
,
Securities Law & Regulation
,
Shareholders
Type: Article
Lucian Bebchuk, Yaniv Grinstein & Urs C. Peyer, Lucky CEOs (NBER Working Paper no. w12771, 2006).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
Type: Article
Abstract
The analysis of this paper was subsequently combined with that of our companion paper “Lucky Directors,” http://ssrn.com/abstract=952239. The combined paper, titled “Lucky CEOs and Lucky Directors,” is available on SSRN at http://ssrn.com/abstract=1405316 and was published at Journal of Finance, Vol. 65, No. 6, pp. 2363-2401, 2010. We study the relation between corporate governance and opportunistic timing of CEO option grants. Investigating the incidence of lucky grants - defined as grants given at the lowest price of the month - we estimate that about 1,150 lucky grants resulted from opportunistic timing, and that 12% of firms provided one or more lucky grant due to opportunistic timing during the period 1996-2005. We find no evidence that opportunistically timed grants served as a substitute for other forms of compensation; indeed, total reported compensation from other sources was higher (relative to peer companies) in firms providing lucky grants. For any given CEO with two or more grants, grants were more likely to be lucky when they took place in months in which the potential payoffs from opportunistic timing were relatively high. Grants were also more likely when the company did not have a majority of independent directors on the board and/or the CEO had longer tenure, both factors that are associated with increased influence of the CEO on pay-setting and board decision-making. Luck was persistent, with a CEO's chance of getting a lucky grant increasing when a preceding grant was lucky as well. Finally, we find that opportunistic timing was present in each of the economy's 12 (Fama-French) industries, and we do not find evidence that it was significantly driven by industry norms and culture. Because our analysis suggests that the existence of lucky CEO grants is a variable that can be useful to research studying firms’ governance and decision-making, we make available on the website of the Harvard Program on Corporate Governance a dataset of CEO luck indicators based on our work.
Lucian A. Bebchuk & Robert J. Jackson, Jr., Executive Pensions, 30 J. Corp. L. 823 (2005).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Corporate Governance
,
Shareholders
Type: Article
Abstract
Because public firms are not required to disclose the monetary value of pension plans in their executive pay disclosures, financial economists have generally analyzed executive pay using figures that do not include the value of such pension plans. This paper presents evidence that omitting the value of pension benefits significantly undermines the accuracy of existing estimates of executive pay, its variability, and its sensitivity to performance companies. Studying the pension arrangements of CEOs of S&P 500, we find that the CEOs' plans had a median actuarial value of $15 million; that the ratio of the executives' pension value to the executives' total compensation (including both equity and non-equity pay) during their service as CEO had a median value of 34%; and that including pension values increased the median percentage of the executives' total compensation composed of salary-like payments during and after their service as CEO from 15% to 39%.
Lucian A. Bebchuk & Alma Cohen, The Costs of Entrenched Boards, 78 J. Fin. Econ. 409 (2005).
Categories:
Corporate Law & Securities
,
Disciplinary Perspectives & Law
Sub-Categories:
Shareholders
,
Corporate Law
,
Corporate Governance
,
Empirical Legal Studies
Type: Article
Abstract
This paper investigates empirically how the value of publicly traded firms is affected by arrangements that protect management from removal. Staggered boards, which a majority of U.S. public companies have, substantially insulate boards from removal in either a hostile takeover or a proxy contest. We find that staggered boards are associated with an economically meaningful reduction in firm value (as measured by Tobin's Q). We also provide suggestive evidence that staggered boards bring about, and not merely reflect, an economically significant reduction in firm value. Finally, the correlation with reduced firm value is stronger for staggered boards that are established in the corporate charter (which shareholders cannot amend) than for staggered boards established in the company's bylaws (which shareholders can amend).
Lucian A. Bebchuk & Yaniv Grinstein, The Growth of Executive Pay, 21 Oxford Rev. Econ. Pol'y 283 (2005).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Corporate Law
Type: Article
Abstract
This paper examines both empirically and theoretically the growth of US executive pay during the period 1993-2003. During this period, pay has grown much beyond the increase that could be explained by changes in firm size, performance, and industry classification. Had the relationship of compensation to size, performance, and industry classification remained the same in 2003 as it was in 1993, mean compensation in 2003 would have been only about half of its actual size. During the 1993-2003 period, equity-based compensation has increased considerably in both new-economy and old-economy firms, but this growth has not been accompanied by a substitution effect, i.e. a reduction in non-equity compensation. The aggregate compensation paid by public companies to their top-five executives during the considered period added up to about $350 billion, and the ratio of this aggregate top-five compensation to the aggregate earnings of these firms increased from 5 per cent in 1993-5 to about 10 per cent in 2001-3. After presenting evidence about the growth of pay, we discuss alternative explanations for it. We examine how this growth could be explained under either the arm`s-length bargaining model of executive compensation or the managerial-power model. Among other things, we discuss the relevance of the parallel rise in market capitalizations and in the use of equity-based compensation.
Lucian A. Bebchuk, Why Firms Adopt Antitakeover Arrangements, 152 U. Pa. L. Rev. 713 (2003).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Corporate Governance
,
Mergers & Acquisitions
,
Shareholders
Type: Article
Lucian A. Bebchuk, The Case for Shareholder Access to the Ballot, 59 Bus. Law. 43 (2003).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Shareholders
,
Corporate Law
Type: Article
Lucian A. Bebchuk & Alma Cohen, Firms' Decisions Where to Incorporate, 48 J.L. & Econ. 383 (2003).
Categories:
Corporate Law & Securities
,
Disciplinary Perspectives & Law
,
Government & Politics
Sub-Categories:
Corporate Law
,
Empirical Legal Studies
,
State & Local Government
Type: Article
Abstract
This paper empirically investigates the decisions of publicly traded firms where to incorporate. We study the features of states that make them attractive to incorporating firms and the characteristics of firms that determine whether they incorporate in or out of their state of location. We find that states that offer stronger antitakeover protections are substantially more successful both in retaining in-state firms and in attracting out-of-state incorporations. We estimate that, compared with adopting no antitakeover statutes, adopting all standard antitakeover statutes enabled the states that adopted them to more than double the percentage of local firms that incorporated in-state (from 23% to 49%). Indeed, we find no evidence that the incorporation market has even penalized the three states that passed antitakeover statutes widely viewed as detrimental to shareholders. We also find that there is commonly a big difference between a state's ability to attract incorporations from firms located in and out of the state, and we investigate several possible explanations for this home-state advantage. Our findings have significant implications for corporate governance, regulatory competition, and takeover law.
Lucian A. Bebchuk & Jesse Fried, Executive Compensation as an Agency Problem, 17 J. Econ. Persp. 71 (2003).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Corporate Law
Type: Article
Lucian A. Bebchuk, John C. Coates & Guhan Subramanian, The Trouble with Staggered Boards: A Reply to Georgeson's John Wilcox, 11 Corp. Governance Advisor 17 (2003).
Categories:
Corporate Law & Securities
Sub-Categories:
Mergers & Acquisitions
,
Corporate Governance
Type: Article
Abstract
In recent work, we presented evidence indicating that staggered boards have adverse effects on target shareholders. John Wilcox, the Vice-Chair of Georgeson, recently published a critique of our work, urging shareholders to support staggered boards. We respond in this article to Wilcox's critique and explain why it does not weaken in any way our analysis of staggered boards. The study criticized by Wilcox, "The Powerful Antitakeover Force of Staggered Boards: Theory, Evidence, and Policy," 54 Stanford Law Review 887-951 (2002), is available at http://ssrn.com/abstract=304388. In a separate reply, "The Powerful Antitakeover Force of Staggered Boards: Further Findings and a Reply to Symposium Participants," 55 Stanford Law Review 885-917 (2002), which is available at http://ssrn.com/abstract=360840, we respond to several other responses to our original study and present additional evidence that confirms its conclusions.
Lucian Bebchuk, Alma Cohen & Allen Ferrell, Does the Evidence Favor State Competition in Corporate Law?, 90 Calif. L. Rev. 1775 (2002).
Categories:
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Corporate Law
,
Business Organizations
,
State & Local Government
Type: Article
Lucian A. Bebchuk & Assaf Hamdani, Optimal Defaults for Corporate Law Evolution, 96 Nw. U. L. Rev. 489 (2002).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
Type: Article
Lucian A. Bebchuk, John C. Coates & Guhan Subramanian, The Powerful Antitakeover Force of Staggered Boards: Theory, evidence, and policy, 55 Stan. L. Rev. 885 (2002).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Corporate Law
Type: Article
Oren Bar-Gill & Michal Barzuza, The Market for Corporate Law (NBER Working Paper No. w9156, Sept. 2002).
Categories:
Banking & Finance
,
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Financial Markets & Institutions
,
Corporate Law
,
State & Local Government
Type: Article
Abstract
This paper develops a model of the competition among states in providing corporate law rules. The analysis provides a full characterization of the equilibrium in this market. Competition among states is shown to produce optimal rules with respect to issues that do not have a substantial effect on managers' private benefits but not with respect to issues (such as takeover regulation) that substantially affect these private benefits. We analyze why a Dominant state such as Delaware can emerge, the prices that the dominant state will set and the profits it will make. We also analyze the roles played by legal infrastructure, network externalities, and the rules governing incorporations. The results of the model are consistent with, and can explain, existing empirical evidence; they also indicate that the performance of state competition cannot be evaluated on the basis of how incorporation in Delaware in the prevailing market equilibrium affects shareholder wealth.
Lucian A. Bebchuk, Jesse Fried & David Walker, Managerial Power and Rent Extraction in the Design of Executive Compensation, 69 U. Chi. L. Rev. 751 (2002).
Categories:
Corporate Law & Securities
,
Disciplinary Perspectives & Law
Sub-Categories:
Corporate Law
,
Corporate Governance
,
Empirical Legal Studies
Type: Article
Lucian A. Bebchuk, The Case Against Board Veto in Corporate Takeovers, 69 U. Chi. L. Rev. 973 (2002).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Corporate Governance
,
Mergers & Acquisitions
Type: Article
Lucian A. Bebchuk, & Allen Ferrell, On Takeover Law and Regulatory Competition, 57 Bus. Law. 1047 (2002).
Categories:
Corporate Law & Securities
Sub-Categories:
Shareholders
,
Securities Law & Regulation
,
Mergers & Acquisitions
,
Corporate Law
,
Corporate Governance
Type: Article
Lucian A. Bebchuk, John C. Coates & Guhan Subramanian, The Powerful Antitakeover Force of Staggered Boards: Theory, evidence, and policy, 55 Stan. L. Rev. 885 (2002).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Corporate Law
,
Mergers & Acquisitions
Type: Article
Lucian A. Bebchuk, Ex Ante Costs of Violating Absolute Priority in Bankruptcy, 57 J. Fin. 445 (2002).
Categories:
Corporate Law & Securities
Sub-Categories:
Shareholders
,
Corporate Bankruptcy & Reorganization
Type: Article
Lucian A. Bebchuk, Property Rights and Liability Rules: The Ex Ante View of the Cathedral, 100 Mich. L. Rev. 601 (2001).
Categories:
Banking & Finance
,
Civil Practice & Procedure
,
Property Law
Sub-Categories:
Economics
,
Remedies
,
Property Rights
Type: Article
Lucian A. Bebchuk & Allen Ferrell, Federal Intervention to Enhance Shareholder Choice, 87 Va. L. Rev. 993 (2001).
Categories:
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Shareholders
,
Corporate Law
,
Federalism
Type: Article
Lucian A. Bebchuk & Jesse Fried, A New Approach to Valuing Secured Claims in Bankruptcy, 114 Harv. L. Rev. 2386 (2001).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Secured Transactions
,
Corporate Law
,
Corporate Bankruptcy & Reorganization
Type: Article
Lucian A. Bebchuk & Omri Ben-Shahar, Precontractual Reliance, 30 J. Legal Stud. 423 (2001).
Categories:
Banking & Finance
Sub-Categories:
Contracts
,
Economics
Type: Article
Lucian A. Bebchuk, & Allen Ferrell, A New Approach to Takeover Law and Regulatory Competition, 87 Va. L. Rev. 111 (2001).
Categories:
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Corporate Law
,
Mergers & Acquisitions
,
Shareholders
,
Federalism
Type: Article
Lucian A. Bebchuk & David Walker, The Overlooked Corporate Finance Problems of a Microsoft Breakup, 56 The Bus. Law. 459 (2001).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Shareholders
,
Securities Law & Regulation
Type: Article
Lucian A. Bebcuk & Allen Ferrell, Federalism and Takeover Law: The Race to Protect Managers from Takeovers, in Regulatory Competition and Economic Integration 68 (D. Esty & D. Geradin eds., Oxford Univ. Press 2001).
Categories:
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Business Organizations
,
Corporate Governance
,
Corporate Law
,
Securities Law & Regulation
,
Mergers & Acquisitions
,
Federalism
Type: Book
Abstract
The editors bring together scholars from both Europe and the United States to examine the various aspects of the debate between "harmonization" and "regulatory competition" across three comparative dimensions: first, regulatory areas ...
Lucian A. Bebchuk, Using Options to Divide Value in Corporate Bankruptcy, 44 Eur. Econ. Rev. 829 (2000).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Securities Law & Regulation
,
Shareholders
,
Corporate Bankruptcy & Reorganization
Type: Article
Lucian A. Bebchuk & Marcel Kahan, Adverse Selection and Gains to Controllers in Corporate Freezeouts, in Concentrated Corporate Ownership 247 (R. Morck ed., U. Chi. Press 2000).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Corporate Law
,
Shareholders
Type: Book
Lucian A. Bebchuk & Luigi Zingales, Ownership Structures and the Decision to Go Public: Private Versus Social Optimality, in Concentrated Corporate Ownership 55 (R. Morck ed., U. Chi. Press 2000).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Corporate Law
,
Business Organizations
Type: Book
Lucian A. Bebchuk, Reinier H. Kraakman & George Triantis, Stock Pyramids, Cross-Ownership and Dual Class Equity: The Mechanisms and Agency Costs of Separating Control from Cash-Flow Rights, in Concentrated Corporate Ownership 295 (R. Morck ed., Univ, Chi. Press 2000).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Securities Law & Regulation
,
Corporate Governance
Type: Book
Lucian A. Bebchuk & Mark J. Roe, A Theory of Path Dependence in Corporate Ownership and Governance, 52 Stan. L. Rev. 127 (1999)(Reprinted in Foundations of Corporate Law, 2nd ed., (Romano, ed., 2010); Translated into Mandarin and reprinted in 26 Graduate L. Rev. 126 (2011) (Ning Guijun, translator)).
Categories:
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Economics
,
Corporate Governance
,
Corporate Law
Type: Article
Lucian A. Bebchuk, & Andrew Guzman, An Economics Analysis of Transnational Bankruptcies, 42 J.L. & Econ. 775 (1999).
Categories:
Banking & Finance
,
International, Foreign & Comparative Law
,
Corporate Law & Securities
Sub-Categories:
Economics
,
Corporate Bankruptcy & Reorganization
,
Foreign Law
Type: Article
Lucian A. Bebchuk, & I.P.L. Png, Damage Measures for Inadvertent Breach of Contract, 19 Int'l Rev. L. & Econ. 319 (1999).
Categories:
Banking & Finance
,
Civil Practice & Procedure
Sub-Categories:
Contracts
,
Economics
,
Remedies
Type: Article
Lucian A. Bebchuk & Christine M. Jolls, Managerial Value Diversion and Shareholder Wealth, 15 J.L., Econ. & Org. 487 (1999).
Categories:
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Economics
,
Corporate Law
,
Corporate Governance
,
Shareholders
Type: Article
Lucian A. Bebchuk & Steven M. Shavell, Reconsidering Contractual Liability and the Incentive to Reveal Information, 51 Stan. L. Rev. 1615 (1999).
Categories:
Banking & Finance
Sub-Categories:
Contracts
Type: Article
Lucian A. Bebchuk, & Allen Ferrell, Federalism and Takeover Law: The Race to Protect Managers from Takeovers, 99 Colum. L. Rev. 1168 (1999).
Categories:
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Corporate Governance
,
Corporate Law
,
Shareholders
,
Mergers & Acquisitions
,
Federalism
Type: Article
Lucian A. Bebchuk, & Howard Chang, The Effect of Offer-of-Settlement Rules on the Terms of Settlement, 28 J. Legal Stud. 489 (1999).
Categories:
Civil Practice & Procedure
Sub-Categories:
Remedies
,
Transactional Law
,
Dispute Resolution
Type: Article
Lucian A. Bebchuk & Howard F. Chang, The Effect of Offer-of-Settlement Rules on the Terms of Settlement, 28 J. Legal Stud. 489 (1999).
Categories:
Civil Practice & Procedure
Sub-Categories:
Dispute Resolution
,
Remedies
Type: Article
Abstract
Under an offer of settlement' rule, a party to a lawsuit may make a special offer to settle with the other party, such that if the other party rejects this offer, then this offer (unlike an ordinary offer) becomes part of the record in the case and may affect the allocation of litigation costs. Specifically, if the parties litigate to judgment, then the allocation of litigation costs may depend on how the judgment compares with the special offer. This paper develops a model of bargaining under offer-of-settlement rules that can be used to analyze the effect that such rules have on the terms of settlement. The analysis first sets forth a general principle that identifies the settlement amount under any such rule. We then apply this principle to derive the settlement terms under the most important of these rules, and we identify a large set of seemingly different rules that produce identical settlements. Our results have both positive and normative implications.
Lucian A. Bebchuk, Chapter 11, in The New Palgrave Dictionary of Economics and the Law 219 (Palgrave Macmillan 1998).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
Type: Book
Abstract
The New Palgrave Dictionary of Economics and the Law is uniquely placed by the quality, breadth and depth of its coverage to address this need for building bridges.
Lucian A. Bebchuk, Suits with Negative Expected Value, in The New Palgrave Dictionary of Economics and the Law 551 (Palgrave Macmillan 1998).
Categories:
Civil Practice & Procedure
Sub-Categories:
Remedies
,
Dispute Resolution
Type: Book
Abstract
Among them are Nobel Laureates in economics and eminent legal scholars. The New Palgrave Dictionary of Economics and the Law will become a benchmark for reference of the highest quality.
Lucian A. Bebchuk & Jesse Fried, The Uneasy Case for the Priority of Secured Claims in Bankruptcy: Further Thoughts and a Reply to Critics, 82 Cornell L. Rev. 1279 (1997).
Categories:
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Secured Transactions
,
Corporate Bankruptcy & Reorganization
Type: Article
Lucian A. Bebchuk & Howard Chang, An Analysis of Fee-Shifting Based on the Margin of Victory: On Frivolous Suits, Meritorious Suits, and the Role of Rule 11, 25 J. Legal Stud. 371 (1996).
Categories:
Civil Practice & Procedure
Sub-Categories:
Practice & Procedure
,
Dispute Resolution
Type: Article
Lucian A. Bebchuk, A New Theory Concerning the Credibility and Success of Threats to Sue, 25 J. Legal Stud. 1 (1996).
Categories:
Civil Practice & Procedure
,
Banking & Finance
Sub-Categories:
Economics
,
Dispute Resolution
,
Remedies
Type: Article
Lucian A. Bebchuk & Jesse Fried, The Uneasy Case for the Priority of Secured Claims in Bankruptcy, 105 Yale L.J. 857 (1996).
Categories:
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Secured Transactions
,
Corporate Bankruptcy & Reorganization
Type: Article
Abstract
This paper reexamines a longstanding principle of bankruptcy law: that secured claims are entitled to be paid in full before unsecured claims receive any payment. There is a widespread consensus among legal scholars and economists that according full priority to secured claims is desirable because it promotes economic efficiency. Our analysis, however, demonstrates that full priority actually distorts the arrangements negotiated between commercial borrowers and their creditors, producing various efficiency costs. We show that according only partial priority to secured claims could eliminate or reduce these efficiency costs - and that such an approach might well be superior to the rule of full priority. The analysis also suggests that a mandatory rule of partial priority could be effectively implemented within the framework of existing bankruptcy law, and that such an approach would be consistent with fairness and freedom of contract considerations. We therefore present two different rules of partial priority that should be considered as alternatives to full priority.
Lucian A. Bebchuk, Efficient and Inefficient Sales of Corporate Control, 109 Q.J. Econ. 957 (1994).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Economics
,
Corporate Law
,
Corporate Governance
,
Mergers & Acquisitions
Type: Article
Lucian A. Bebchuk & Chaim Fershtman, The Effects of Insider Trading on Insiders' Choice Among Risky Investment Projects, 29 J. Fin. & Quantitative Analysis 1 (1994).
Categories:
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Economics
,
Corporate Law
,
Securities Law & Regulation
,
Shareholders
Type: Article
Lucian A. Bebchuk, & Lars Stole, Do Short-Term Managerial Objectives Lead to Under- or Over-Investment in Long-Term Projects?, 48 J. Fin. 719 (1993).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Economics
,
Finance
,
Corporate Governance
,
Corporate Law
Type: Article
Lucian A. Bebchuk & Louis Kaplow, Optimal Sanctions When Individuals are Imperfectly Informed about the Probability of Apprehension, 21 J. Legal Stud. 365 (1992).
Categories:
Criminal Law & Procedure
Sub-Categories:
Sentencing & Punishment
Type: Article
Lucian A. Bebchuk, Federalism and the Corporation: The Desirable Limits on State Competition in Corporate Law, 105 Harv. L. Rev. 1435 (1992)(Reprinted in Company Law, (Sally Wheeler ed., New York Univ. Press, 1993); and (translated in Japanese) in 50 Ryvdai Law Review (1993)).
Categories:
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Corporate Law
,
Corporate Governance
,
Securities Law & Regulation
,
Federalism
,
State & Local Government
Type: Article
Lucian A. Bebchuk & Howard F. Chang, Bargaining and the Division of Value in Corporate Reorganization, 8 J.L. Econ. & Org. 253 (1992).
Categories:
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Economics
,
Corporate Law
,
Business Organizations
,
Corporate Bankruptcy & Reorganization
Type: Article
Lucian A. Bebchuk & Steven M. Shavell, Information and the Scope of Liability for Breach of Contract: The Rule of Hadley v. Baxendale, 7 J.L. Econ. & Org. 284 (1991).
Categories:
Banking & Finance
Sub-Categories:
Contracts
,
Economics
Type: Article
Abstract
According to the contract law principle established in the famous nineteenth century English case of Hadley v. Baxendale, and followed ever since in the common law world, liability for a breach of contract is limited to losses "arising ... according to the usual course of things," or that may be reasonably supposed "to have been in the contemplation of both parties, at the time they made the contract, ..." Using a formal model, we attempt in this paper to analyze systematically the effects and the efficiency of this limitation on contract damages. We study two alternative rules: the limited liability rule of Hadley, and an unlimited liability rule. Our analysis focuses on the effects of the alternative rules on two types of decisions: buyers' decisions about communicating their valuations of performance to sellers; and sellers' decisions about their level of precautions to reduce the likelihood of nonperformance. We identify the efficient behavior of buyers and sellers. We then compare this efficient behavior with the decisions that buyers and sellers in fact make under the limited and unlimited liability rules. This analysis enables us to provide a full characterization of the conditions under which each of the rules induces, or fails to induce, efficient behavior, as well as the conditions under which each of the rules is superior to the other.
Lucian A. Bebchuk & Marcel Kahan, A Framework for Analyzing Legal Policy Toward Proxy Contests, 78 Calif. L. Rev. 1071 (1990).
Categories:
Corporate Law & Securities
Sub-Categories:
Shareholders
,
Mergers & Acquisitions
,
Corporate Law
,
Corporate Governance
Type: Article
Corporate Law and Economic Analysis (Lucian A. Bebchuk ed., Cambridge Univ. Press 1990).
Categories:
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Economics
,
Corporate Law
Type: Book
Abstract
Papers from a conference held at Harvard Law School, Nov. 1986, and sponsored by the Harvard Law School Program in Law and Economics.
Lucian A. Bebchuk, The Debate on Contractual Freedom in Corporate Law, 89 Colum. L. Rev. 1395 (1989)(Reprinted in 7 Sapporo Gakvin L. Rev. 89 (1991) and in 32 Corporate Practice Commentator 425 (F. Hodge O'Neal ed., 1990)).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Contracts
,
Corporate Law
,
Corporate Governance
Type: Article
Lucian A. Bebchuk, Limiting Contractual Freedom in Corporate Law — The Desirable Constraints on Charter Amendments, 102 Harv. L. Rev. 1820 (1989).
Categories:
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Contracts
,
Corporate Law
,
Corporate Governance
Type: Article
Lucian A. Bebchuk, Takeover Bids Below the Expected Value of Minority Shares, 24 J. Fin. & Quantitative Analysis 171 (1989).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Corporate Governance
,
Mergers & Acquisitions
,
Shareholders
Type: Article
Lucian A. Bebchuk & Marcel Kahan, Fairness Opinions: How Fair are They and What Can Be Done About it?, 27 Duke L.J. 27 (1989).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
Type: Article
Lucian A. Bebchuk, Suing Solely to Extract a Settlement Offer, 17 J. Legal Stud. 437 (1988).
Categories:
Civil Practice & Procedure
Sub-Categories:
Dispute Resolution
,
Remedies
,
Litigation & Settlement
Type: Article
Lucian A. Bebchuk, A New Approach to Corporate Reorganizations, 101 Harv. L. Rev. 775 (1988).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Corporate Bankruptcy & Reorganization
Type: Article
Lucian A. Bebchuk, The Sole Owner Standard For Takeover Policy, 17 J. Legal Stud. 197 (1988).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Mergers & Acquisitions
Type: Article
Lucian A. Bebchuk, Toward Undistorted Choice and Equal Treatment in Corporate Takeovers, 98 Harv. L. Rev. 1695 (1985).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Corporate Law
,
Mergers & Acquisitions
Type: Article

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