Reinier H. Kraakman

Ezra Ripley Thayer Professor of Law

Hauser 202

617-495-3586

Assistant: Kim Peterson / 617-496-7244

Biography

Reinier Kraakman is the Ezra Ripley Thayer Professor of Law at Harvard Law School. He was previously Professor of Law at Yale Law School (1981 -1986) and Visiting Professor of Law at both Georgetown University Law Center (1993) and New York University Law School (1996 -1997). He was also a law clerk for Judge Henry J. Friendly of the U.S. Court of Appeals for the Second Circuit. He currently teaches corporate law, corporate finance, and a seminar devoted to theoretical issues in organizational law. He has been an advisor on company law reform in Russia and Vietnam. He has written numerous articles on topics in corporate law, corporate governance, and liability strategies for controlling corporate behavior. He was elected an ECGI research associate in 2006. His more recent better-known articles include The End of History for Corporate Law (with Henry Hansmann), 89 GEORGETOWN LAW JOURNAL 439 (2000); The Essential Role of Organizational Law (with Henry Hansmann), 110 YALE LAW JOURNAL 387 (2000); and Russian Privatization and Corporate Governance: What Went Wrong? (with Bernard Black and Anna Tarassova), 52 STANFORD LAW REVIEW 1731 (2000). He is a lead author of a recent treatise on comparative corporate law that is now in its second edition, R. Kraakman, et al., The Anatomy of Corporate Law: A Comparative and Functional Approach (2nd ed.) (Oxford University Press: 2009), and a co-author of a book of cases and discussion of the law of business organizations, W. Allen, R. Kraakman, and G. Subramanian, Cases and Commentaries on the Law of Business Organization, (4th Ed. Wolters Kluwer, Aspen Press 2012). His current areas of research include corporate include the corporate governance of widely-held corporations, ownership structure and corporate governance, the empirical and legal determinants of CEO turnover, comparative corporate law and finance, the bases for individual- and firm- level liability in corporate settings, the meaning and legal implications of price efficiency in capital markets.

Areas of Interest

The Anatomy of Corporate Law: A Comparative and Functional Approach (Reinier H. Kraakman et al. eds., Oxford Univ. Press 2d ed. 2009).
Categories:
Corporate Law & Securities
,
International, Foreign & Comparative Law
Sub-Categories:
Business Organizations
,
Corporate Governance
,
Corporate Law
,
Fiduciaries
,
Mergers & Acquisitions
,
Securities Law & Regulation
,
Shareholders
,
Foreign Law
,
Comparative Law
Type: Book
Abstract
This is the long-awaited second edition of this highly regarded comparative overview of corporate law. This edition has been comprehensively updated to reflect profound changes in corporate law.
Reinier H. Kraakman, John Armour & Henry Hansmann, Agency Problems, Legal Strategies, and Enforcement, in The Anatomy of Corporate Law: A Comparative and Functional Approach (Reinier H. Kraakman et al. eds. Oxford Univ. Press 2d ed. 2009).
Categories:
Banking & Finance
,
Corporate Law & Securities
,
Disciplinary Perspectives & Law
,
International, Foreign & Comparative Law
Sub-Categories:
Commercial Law
,
Fiduciary Law
,
Business Organizations
,
Corporate Governance
,
Corporate Law
,
Fiduciaries
,
Shareholders
,
Law & Behavioral Sciences
,
Foreign Law
,
Comparative Law
Type: Book
Abstract
This article is the second chapter of the second edition of "The Anatomy of Corporate Law: A Comparative and Functional Approach," by Reinier Kraakman, John Armour, Paul Davies, Luca Enriques, Henry Hansmann, Gerard Hertig, Klaus Hopt, Hideki Kanda and Edward Rock (Oxford University Press 2009). The book as a whole provides a functional analysis of corporate (or company) law in Europe, the U.S., and Japan. Its organization reflects the structure of corporate law across all jurisdictions, while individual chapters explore the diversity of jurisdictional approaches to the common problems of corporate law. In its second edition, the book has been significantly revised and expanded. "Agency Problems and Legal Strategies" establishes the analytical framework for the book as a whole. After further elaborating the agency problems that motivate corporate law, this chapter identifies five legal strategies that the law employs to address these problems. Describing these strategies allows us to more accurately map legal similarities and differences across jurisdictions. Some legal strategies are "regulatory" insofar as they directly constrain the actions of corporate actors: for example, a standard of behavior such as a director's duty of loyalty and care. Other legal strategies are "governance-based" insofar as they channel the distribution of power and payoffs within companies to reduce opportunism. For example, the law may accord direct decision rights to a vulnerable corporate constituency, as when it requires shareholder approval of mergers. Alternatively, the law may assign appointment rights over top managers to a vulnerable constituency, as when it accords shareholders - or in some jurisdictions, employees - the power to select corporate directors. We then consider the relationship between different enforcement mechanisms - public agencies, private actors, and gatekeeper control - and the basic legal strategies outlined. We conclude that regulatory strategies require more extensive enforcement mechanisms - in the form of courts and procedural rules - to secure compliance than do governance strategies. However, governance strategies, for efficacy, require shareholders to be relatively concentrated so as to be able to exercise their decisional rights effectively. In addition to Chapter 2, Chapter 1, "What is Corporate Law?," is available in full text on the SSRN at http://ssrn.com/abstract=1436551
Reinier H. Kraakman, John Armour & Henry Hansmann, The Essential Elements of Corporate Law, in The Anatomy of Corporate Law: A Comparative and Functional Approach (Reinier H. Kraakman et al. eds. Oxford Univ. Press 2d ed. 2009).
Categories:
Corporate Law & Securities
,
International, Foreign & Comparative Law
Sub-Categories:
Corporate Law
,
Corporate Governance
,
Fiduciaries
,
Business Organizations
,
Shareholders
,
Foreign Law
,
Comparative Law
Type: Book
Abstract
This article is the first chapter of the second edition of The Anatomy of Corporate Law: A Comparative and Functional Approach, by Reinier Kraakman, John Armour, Paul Davies, Luca Enriques, Henry Hansmann, Gerard Hertig, Klaus Hopt, Hideki Kanda and Edward Rock (Oxford University Press, 2009). The book as a whole provides a functional analysis of corporate (or company) law in Europe, the U.S., and Japan. Its organization reflects the structure of corporate law across all jurisdictions, while individual chapters explore the diversity of jurisdictional approaches to the common problems of corporate law. In its second edition, the book has been significantly revised and expanded. As the book's introductory chapter, this article describes the functions and boundaries of corporate law. We first detail the economic importance of the corporate form's hallmark features: legal personality, limited liability, transferable shares, delegated management, and investor ownership. We then identify the major agency problems that attend the corporate form, and that, therefore, corporate law must address: conflicts between managers and shareholders, between controlling and minority shareholders, and between shareholders as a class and non-shareholder constituencies of the firm such as creditors and employees. In our view, corporate law serves in part to accommodate contract and property law to the corporate form and, in substantial part, to address the agency problems that are associated with this form. We next consider the role of law in structuring corporate affairs so as to achieve these goals: whether, and to what extent standard forms - as opposed, on the one hand, to private contract, and on the other, to mandatory rules - are needed, and the role of regulatory competition. Whilst the ‘core’ features of corporate law are present in all - or almost all - legal systems, different systems have made different choices regarding the form and content of many other aspects of their corporate laws. To assist in explaining these, we review a range of forces that shape the development of corporate law, including domestic share ownership patterns. These forces operate differently across countries, implying that in some cases, complementary differences in corporate laws are functional. However, other such differences may be better explained as a response to purely distributional concerns. In addition to Chapter 1, Chapter 2 of the Anatomy of Corporate Law (2nd ed.), Agency problems, Legal Strategies, and Enforcement is also available (full text) on SSRN at http://ssrn.com/abstract=1436555.
Reinier H. Kraakman & Bernard Black, Delaware's Takeover Law: The Uncertain Search for Hidden Value, 96 Nw. U. L. Rev. 521 (2002).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Fiduciary Law
,
Corporate Law
,
Corporate Governance
,
Fiduciaries
,
Shareholders
,
Business Organizations
Type: Article
Abstract
It is easy sport to criticize the Delaware takeover cases as inconsistent with the empirical evidence, each other, and a sensible allocation of power between managers and shareholders. We in fact believe all of these things. Here, however, we offer a more sympathetic account of the core Delaware takeover cases. We argue that they reflect an often unstated "hidden value" model, in which a firm's true value is visible to corporate directors but not to shareholders or potential acquirers. We explore the assumptions needed to make the hidden value model internally consistent, and contrast those assumptions to those that underlie to a "visible value" model in which shareholders and potential acquirers are well informed about firm value or can be made so through disclosure by the target's board. (One outcome of carefully stating the hidden value model's assumptions is to expose the model's problems.) We also address and reject a "control premium" theory, sometimes invoked by the Delaware courts, in which control is a corporate asset that the law protects by imposing Revlon duties on the target's board. Assuming that the Delaware courts continue to embrace hidden value, we argue that takeover decisions should, at a minimum, be governed by a bilateral decision-making structure, in which a target board's initial decision to approve an acquisition, block a takeover bid, or choose one bidder over another must be approved or rejected by shareholders. Under this approach, target boards could adopt modest deal protections and say "no" to a takeover bid by adopting a poison pill, but could not say "never" by using a staggered board to block a bid after the bidder wins a proxy contest. The courts must also strictly limit efforts by target boards to stuff the ballot box or otherwise alter shareholder vote outcomes.
Reinier H. Kraakman & Henry Hansmann, The Essential Role of Organizational Law, 110 Yale L.J. 387 (2000).
Categories:
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Contracts
,
Commercial Law
,
Business Organizations
,
Corporate Governance
,
Corporate Law
,
Fiduciaries
,
Mergers & Acquisitions
,
Shareholders
Type: Article
Abstract
The answer we offer is that organizational law goes beyond contract law in one critical aspect, permitting the creation of patterns of creditors' rights that otherwise could not practicably be established. In part, these patterns involve limits on the extent to which creditors of an organization can have recourse to the personal assets of the organization's owners or other beneficiaries--a function we term "defensive asset partitioning." But this aspect of organizational law, which includes the limited liability that is a familiar characteristic of most corporate entities, is of distinctly secondary importance. The truly essential function of organizational law is, rather, "affirmative asset partitioning." In effect, this is the reverse of limited liability: It involves shielding the assets of the entity from the creditors of the entity's owners or managers. Affirmative asset partitioning offers efficiencies in bonding and monitoring that are of signal importance in constructing the large-scale organizations that characterize modern economies. Surprisingly, this crucial function of organizational law--which is essentially a property-law-type function--has largely escaped notice, much less analysis, in both the legal and the economics literature.
Bernard S. Black, Reiner H. Kraakman, & Anna S. Tarassova, Guide to the Russian Law on Joint Stock Companies (Kluwer L. Int'l 1998).
Categories:
Corporate Law & Securities
,
International, Foreign & Comparative Law
Sub-Categories:
Business Organizations
,
Foreign Law
Type: Book
Abstract
This book is the Russian language version of our treatise on the Russian Law on Joint Stock Companies, which we participated in drafting. You can download either the entire book at http://ssrn.com/abstract=246670 or one or more of its parts. It contains three parts: (1) a general overview of the theory (a "self enforcing model of corporate law") behind the law. You can download this part of the book from http://ssrn.com/abstract=263141 (2) a detailed section-by-section analysis and critique of the law. You can download this part of the book from the download button below. (3) appendices containing the text of the law, a model Russian joint stock company law drafted by Bernard Black and Anna Tarassova, relevant excerpts from the Russian civil Code, and an important judicial interpretation of the law. You can download this part of the book from http://ssrn.com/abstract=263143 Please note: The downloadable book is written in Russian. The English language version is available from Kluwer Law International. Contact sales@kluwerlaw.com The concept of a self-enforcing corporate law is developed in Bernard Black & Reinier Kraakman, A Self-Enforcing Model of Corporate Law, Harvard Law Review, vol. 109, pp. 1911-1982, 1996, available at http://ssrn.com/abstract=10037
Reinier H. Kraakman & Bernard Black, A Self-Enforcing Model of Corporate Law, 109 Harv. L. Rev. 1911 (1996).
Categories:
Banking & Finance
,
Corporate Law & Securities
,
International, Foreign & Comparative Law
,
Legal Profession
Sub-Categories:
Commercial Law
,
Fiduciary Law
,
Business Organizations
,
Corporate Governance
,
Corporate Law
,
Shareholders
,
Fiduciaries
,
Comparative Law
,
Developing & Emerging Nations
,
Foreign Law
,
Legal Reform
Type: Article
Abstract
This paper develops a "self-enforcing" approach to drafting corporate law for emerging capitalist economies, based on a case study: a model statute that we helped to develop for the Russian Federation, which formed the basis for the recently adopted Russian law on joint-stock companies. The paper describes the contextual features of emerging economies that make importing statutes from developed countries inappropriate, including the prevalence of controlled companies and the weakness of institutional, market, cultural, and legal constraints. Against this backdrop, we argue that the best legal strategy for protecting outside investors in emerging economies while simultaneously preserving the discretion of companies to invest is a self-enforcing model of corporate law. The self-enforcing model structures decisionmaking processes to allow large outside shareholders to protect themselves from insider opportunism with minimal resort to legal authority, including the courts. Among the examples of self-regulatory statutory provisions are a mandatory cumulative voting rule for the selection of directors, which assures that minority blockholders in controlled companies have board representation, and dual shareholder- and board-level approval procedures for self-interested transactions. The paper also examines how one can induce voluntary compliance and structure remedies in emerging economies, as well as the implications of the self-enforcing model for the ongoing debate over the efficiency of corporate law in developed economies.
Ronald J. Gilson & Reinier H. Kraakman, Reinventing the Outside Director: An Agenda for Institutional Investors, 43 Stan. L. Rev. 863 (1991).
Categories:
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Finance
,
Fiduciary Law
,
Commercial Law
,
Business Organizations
,
Corporate Governance
,
Corporate Law
,
Fiduciaries
Type: Article
Henry Hansmann & Reinier H. Kraakman, The Uneasy Case for Limiting Shareholder Liability in Tort, 100 Yale L.J. 1879 (1991).
Categories:
Corporate Law & Securities
,
Civil Practice & Procedure
Sub-Categories:
Shareholders
,
Corporate Law
,
Corporate Governance
,
Business Organizations
,
Torts
,
Torts - Business
Type: Article
Reinier H. Kraakman, Corporate Liability Strategies and the Costs of Legal Controls, 93 Yale L.J. 857 (1984).
Categories:
Corporate Law & Securities
,
Disciplinary Perspectives & Law
Sub-Categories:
Business Organizations
,
Corporate Governance
,
Corporate Law
,
Shareholders
,
Fiduciaries
,
Law & Economics
Type: Article
Ronald J. Gilson & Reinier H. Kraakman, The Mechanisms of Market Efficiency, 70 Va. L. Rev. 549 (1984).
Categories:
Corporate Law & Securities
,
Disciplinary Perspectives & Law
,
Banking & Finance
Sub-Categories:
Commercial Law
,
Finance
,
Business Organizations
,
Corporate Governance
,
Corporate Law
,
Mergers & Acquisitions
,
Fiduciaries
,
Shareholders
,
Law & Economics
Type: Article
Henry Hansmann, Reiner Kraakman & Richard Squire, Incomplete Organizations: Legal Entities and Asset Partitioning in Roman Commerce (European Corporate Governance Inst. (ECGI) – Law Working Paper No. 271/2014, Yale L. & Econ. Research Paper No. 511, Oct. 3, 2014).
Categories:
Banking & Finance
,
Corporate Law & Securities
,
International, Foreign & Comparative Law
,
Legal Profession
Sub-Categories:
Banking
,
Commercial Law
,
Fiduciary Law
,
Business Organizations
,
Corporate Governance
,
Corporate Law
,
Foreign Law
,
Comparative Law
,
Legal History
Type: Other
Abstract
In this chapter we analyze ancient Rome’s law of business entities from the perspective of asset partitioning, by which we mean the delimiting of creditor collection rights based on the distinction between business assets and personal assets. Asset partitioning, which is an essential legal attribute of modern business forms such as the partnership and the business corporation, reduces borrowing costs by simplifying credit-risk assessment and expediting insolvency proceedings. We find that ancient Roman business arrangements, such as the societas (very loosely, “partnership”) and the slave-run business endowed by the slaveowner with a peculium (a sum of capital), did not give business creditors the first claim to business assets, making these forms of organization non-entities according to the criterion of asset partitioning. It appears that the only true legal entity used to form profit-seeking firms was the societas publicanorum, which roughly resembled the modern limited partnership. But use of that form was generally limited to firms providing services contracted out by the state. Moreover, the societas publicanorum was largely a creature of the Republic, and was largely abandoned during the Empire. Although Rome had a complex economy and sophisticated commercial law, and was familiar with most of the types of asset partitioning we see in modern legal systems, it ultimately failed to develop legal entities for general use in commerce. Apparent reasons include the Roman aristocracy’s disparagement of commerce, the emperors’ wariness of strong organizations outside the state, and the society’s continuing reliance on the family -- a durable and complex legal entity in its own right -- to handle many of the needs of commerce.
Reinier H. Kraakman, Bernard Black & Anna Tarassova, Russian Privatization and Corporate Governance: What Went Wrong? 52 Stan. L. Rev. 1731 (2000).
Categories:
Banking & Finance
,
Corporate Law & Securities
,
International, Foreign & Comparative Law
Sub-Categories:
Banking
,
Finance
,
Fiduciary Law
,
Business Organizations
,
Corporate Governance
,
Corporate Law
,
Fiduciaries
,
Shareholders
,
Comparative Law
,
Developing & Emerging Nations
,
Foreign Law
Type: Article
Abstract
In Russia and elsewhere, proponents of rapid, mass privatization of state-owned enterprises (ourselves among them) hoped that the profit incentives unleashed by privatization would soon revive faltering, centrally planned economies. The revival didn't happen. We offer here some partial explanations. First, rapid mass privatization is likely to lead to massive self-dealing by managers and controlling shareholders unless (implausibly in the initial transition from central planning to markets) a country has a good infrastructure for controlling self-dealing. Russia accelerated the self-dealing process by selling control of its largest enterprises cheaply to crooks, who transferred their skimming talents to the enterprises they acquired, and used their wealth to further corrupt the government and block reforms that might constrain their actions. Second, profit incentives to restructure privatized businesses and create new ones can be swamped by the burden on business imposed by a combination of (among other things) a punitive tax system, official corruption, organized crime, and an unfriendly bureaucracy. Third, while self-dealing will still occur (though perhaps to a lesser extent) if state enterprises aren't privatized, since self-dealing accompanies privatization, it politically discredits privatization as a reform strategy and can undercut longer-term reforms. A principal lesson: developing the institutions to control self-dealing is central to successful privatization of large firms.

Education History

Current Courses

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Hauser 202

617-495-3586

Assistant: Kim Peterson / 617-496-7244