Mark J. Roe

David Berg Professor of Law

Biography

Mark J. Roe is a professor at Harvard Law School, where he teaches corporate law and corporate bankruptcy.  He wrote Strong Managers, Weak Owners: The Political Roots of American Corporate Finance (Princeton, 1994), Political Determinants of Corporate Governance (Oxford, 2003), and Bankruptcy and Corporate Reorganization (Foundation, 2011). Recent academic articles include: The Derivatives Market’s Payments Priorities as Financial Crisis Accelerator, 63 Stanford Law Review 539 (2011), available at http://ssrn.com/abstract=1567075;  Corporate Structural Degradation Due to Too-Big-to-Fail Finance, University of Pennsylvania Law Review (forthcoming), available at http://ssrn.com/abstract=2262901; and Corporate Short-Termism — In the Boardroom and in the Courtroom,  68 Business Lawyer 977 (2013), available at http://ssrn.com/abstract=2239132.

Areas of Interest

Mark J. Roe, Structural Corporate Degradation Due to Too-Big-To-Fail Finance, 162 U. Pa. L. Rev. 1419 (2014).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Commercial Law
,
Business Organizations
,
Corporate Governance
,
Corporate Law
,
Corporate Bankruptcy & Reorganization
Type: Article
Abstract
Corporate governance incentives at too-big-to-fail financial firms deserve systematic examination. For industrial conglomerates that have grown too large to be efficient, internal and external corporate structural pressures push to resize the firm. External activists press the firm to restructure to raise its stock market value. Inside the firm, boards and managers see that the too-big firm can be more efficient and more profitable if restructured via spinoffs and sales. But a major corrective for industrial firm overexpansion fails to constrain large, too-big-to-fail financial firms when (1) the funding boost that the firm captures by being too-big-to-fail sufficiently lowers the firm’s financing costs and (2) a resized firm or the spun-off entities would lose that funding benefit. Propositions (1) and (2) have both been true and, consequently, a major retardant to industrial firm overexpansion has gone missing for large financial firms. The effect resembles that of a corporate poison pill, but one that disrupts the actions of both outsiders and insiders.
Mark J. Roe, The Derivatives Market’s Payment Priorities as Financial Crisis Accelerator, 63 Stan. L. Rev. 539 (2011).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Banking
,
Contracts
,
Finance
,
Financial Markets & Institutions
,
Financial Reform
,
Investment Products
,
Business Organizations
,
Corporate Bankruptcy & Reorganization
,
Corporate Governance
,
Corporate Law
,
Securities Law & Regulation
Type: Article
Abstract
Chapter 11 bars bankrupt debtors from immediately repaying their creditors, so that the bankrupt firm can reorganize without creditors’ cash demands shredding the bankrupt’s business. Not so for the bankrupt’s derivatives counterparties, who, unlike most other secured creditors, can seize and immediately liquidate collateral, readily net out gains and losses in their dealings with the bankrupt, terminate their contracts with the bankrupt, and keep both preferential eve-of-bankruptcy payments and fraudulent conveyances they obtained from the debtor, all in ways that favor them over the bankrupt’s other creditors. Their right to jump to the head of the bankruptcy repayment line, in ways that even ordinary secured creditors cannot, weakens their incentives for market discipline in managing their dealings with the debtor because the rules reduce their concern for the risk of counterparty failure and bankruptcy. If derivatives counterparties and financial repurchase creditors, who are treated similarly well in bankruptcy, were made to account better for counterparty risk, they would be more likely to insist that there be stronger counterparties on the other side of their derivatives bets, thereby insisting for their own good on strengthening the financial system. True, because derivatives counterparties bear less risk, nonprioritized creditors bear more and those nonprioritized creditors thus have more market-discipline incentives to assure themselves that the debtor is a safe bet. But the derivatives markets’ other creditors—such as the United States—are poorly positioned either to consistently monitor the derivatives debtors well or to fully replicate the needed market discipline. Bankruptcy policy should harness private incentives for counterparty market discipline by cutting back the extensive advantages Chapter 11 and related laws now bestow on these investment channels. More generally, when we subsidize derivatives and similar financial activity via bankruptcy benefits unavailable to other creditors, we get more of the activity than we otherwise would. Repeal would induce these burgeoning financial markets to better recognize the risks of counterparty financial failure, which in turn should dampen the possibility of another AIG-, Bear Stearns-, or Lehman Brothers-style financial meltdown, thereby helping to maintain systemic financial stability. Repeal would end the de facto bankruptcy subsidy of these financing channels. Yet the major financial reform package Congress enacted in response to the financial crisis lacks the needed changes.
Mark J. Roe & Travis G. Coan, Financial Markets and the Political Center of Gravity 2 J.L Fin. & Acct. 125 (2017).
Categories:
Corporate Law & Securities
,
Banking & Finance
,
Government & Politics
,
Disciplinary Perspectives & Law
Sub-Categories:
Financial Markets & Institutions
,
Securities Law & Regulation
,
Corporate Governance
,
Empirical Legal Studies
,
Law & Economics
,
Politics & Political Theory
Type: Article
Abstract
In recent decades, academics across multiple disciplines and policymakers in multiple institutions have searched for the economic, political, and institutional foundations for financial market strength. Promising theories and empirics have developed, including major explanations from differences in nations’ political economy. A common view among multiple academic observers is that, particularly because many pro-market corporate reforms occurred in Europe during the 1990s, when social democratic parties governed and financial markets deepened, basic left-right explanations fail to explain financial market depth. Hence, more complex political explanations are in play, and the correlation of left governments, market-oriented reforms and financial deepening presents an unexpected paradox. This finding might be interpreted to indicate that left-right orientation is unimportant in affecting financial development and that either nonpolitical institutional issues or different political considerations are more central. We show here, first, that conceptually it’s not relative local placement of the governing coalition on the nation’s left-right spectrum that counts, but whether the polity as a whole — i.e., its political center of gravity or its dominant governing coalition — is left or right on economic issues. If interests and opinion shift in a nation, such that its political center of gravity is no longer statist and anti-market, then even locally left parties could and would often implement pro-market reforms. (And conversely, in an earlier era when interests and opinions were statist and anti-market, one should not expect to see even locally right parties pushing pro-market financial reforms forward.) Second, we bring forward data showing substantial movement over recent decades of political parties and governing coalitions; these shifts must be accounted for in assessing the impact of left-right divisions on financial and securities markets. In large measure, these political shifts correlate with financial markets shifts. Leftright matters not only in the fixed-in-time cross-section, but also the left-right economic shifts over time make an often significant empirical difference. The result from this data and study, in our view, leads to results and correlations that comport with most observers’ intuitions about the impact of left-right politics on financial market depth. The results thereby further buttress the importance of a nation’s basic left-right political orientation in explaining financial market outcomes.
Mark J. Roe, Three Ages of Bankruptcy, 7 Harv. Bus. L. Rev. 188 (2017).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Bankruptcy & Reorganization
Type: Article
Abstract
During the past century, three decisionmaking systems have arisen to accomplish a bankruptcy restructuring — judicial administration, a deal among the firm’s dominant players, and a sale of the firm’s operations in their entirety. Each is embedded in the Bankruptcy Code today, with all having been in play for more than a century and with each having had its heyday — its dominant age. The shifts, rises, and falls among decisionmaking systems have previously been explained by successful evolution in bankruptcy thinking, by the happenstance of the interests and views of lawyers that designed bankruptcy changes, and by the interests of those who influenced decisionmakers. Here I argue that these broad changes also stem from baseline market capacities, which shifted greatly over the past century; I build the case for shifts underlying market conditions being a major explanation for the shifts in decisionmaking modes. Keeping these three alternative decisionmaking types clearly in mind not only leads to better understanding of what bankruptcy can and cannot do, but also facilitates stronger policy decisions today here and in the world’s differing bankruptcy systems, as some tasks are best left to the market, others are best handled by the courts, and still others can be left to the inside parties to resolve.
Mark J. Roe & Michael Troege, Degradation of the Financial System Due to the Structure of Corporate Taxation (Eur. Corp. Governance Inst. (ECGI) – Law Working Paper No. 317/2016, July 3, 2016).
Categories:
Banking & Finance
,
Corporate Law & Securities
,
Taxation
Sub-Categories:
Commercial Law
,
Finance
,
Financial Reform
,
Financial Markets & Institutions
,
Business Organizations
,
Corporate Governance
,
Taxation - Corporate
,
Taxation - Federal
Type: Other
Abstract
egulators have sought since the 2008 financial crisis to further strengthen the financial system. Yet a core source of weakness and a powerful additional instrument for strengthening the financial system persists unchanged and absent from the regulatory agenda — namely the relentless impact of the corporate tax on the choice between risky debt and safer equity. The tax penalty for equity and the concomitant boost for debt undermines the capital adequacy efforts that have been central to the post-crisis reform agenda. Yet this result is not inevitable. By repurposing tax tools used elsewhere in the world, we show how the safety-undermining impact of the current corporate tax can be ended or even reversed. The best trade-off of goals and practical potential is, first, to reduce the corporate income tax burden on bank equity levels above the required minimum, by according an imputed deduction for the cost of equity capital above the regulatory-required amount. This tax benefit can then, second, be made revenue-neutral to the finances by offsetting it, such as by decreasing the tax deductibility of the riskiest classes of financial system liabilities. That offsetting tax rate can, we show, be quite low, because the financial system’s debt base is wide while its equity base is narrow. Standard bank regulation is command-and-control style. Regulators order what banks can and cannot do; banks resist, lobby to reverse and undermine the commands, find transactional alternatives, and distort their behavior when approaching regulatory constraints. Regulators cannot in many areas know as much as the regulated; with a tax instrument, they do not need to know as much. Existing cross-country and cross-state data show the tremendous potential from this reform to incentivize more safely capitalized banks. The magnitude of the safety benefit should rival the size of all the post-crisis regulation to date. Thus the main thesis we bring forward is not a small or technical claim but a call for a major shift in regulatory style. Authors
Mark J. Roe & Frederick Tung, Bankruptcy and Corporate Reorganization: Legal and Financial Materials (Found. Press 4th ed. 2016).
Categories:
Banking & Finance
,
Corporate Law & Securities
,
Legal Profession
Sub-Categories:
Banking
,
Finance
,
Financial Markets & Institutions
,
Commercial Law
,
Business Organizations
,
Corporate Bankruptcy & Reorganization
,
Corporate Governance
,
Corporate Law
,
Shareholders
,
Fiduciaries
,
Legal Education
Type: Book
Abstract
This casebook for a basic bankruptcy course takes a deal-oriented finance approach to bankruptcy, with a focus on business bankruptcy. The student will not only learn the major elements of bankruptcy and corporate reorganization in chapter 11 of the Bankruptcy Code, but also the major facets of bankruptcy that influence financing transactions. The hidden message behind these materials is how to understand complex financial deal-making and how to integrate finance with law, in the context of bankruptcy.
Mark J. Roe, The Trust Indenture Act of 1939 in Congress and the Courts in 2016: Bringing the SEC to the Table, 129 Harv. L. Rev. F. 360 (2016).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Banking
,
Finance
,
Investment Products
,
Commercial Law
,
Corporate Bankruptcy & Reorganization
,
Corporate Governance
,
Corporate Law
Type: Article
Abstract
Distressed firms with publicly issued bonds often seek to restructure the bonds’ payment terms to better reflect the firm’s weakened repayment capabilities and thereby avoid a bankruptcy. But Depression-era securities law bars the bondholders from agreeing via a binding out-of-bankruptcy vote to new payment terms, thus requiring individualized consent to the new payment terms, despite that such binding votes are commonplace now in bankruptcy and elsewhere. Recent judicial application of this securities law rule to bond recapitalizations has been more consistent than it had previously been, with courts striking down restructuring deals that twisted bondholders’ arms into consenting to unwanted deals. These coercive bond exchanges first became common in the 1980s, when many hostile tender offers for public companies had a similarly coercive deal structure. The coercive deal structure in these takeover offers was brought forward then to justify wide managerial countermeasures, but this structure disappeared in takeovers. However, it persisted in bond exchange offers. While these court decisions striking down the coercive bond exchanges faithfully apply Depression-era securities law to thwart issuers from twisting bondholders’ arms into exchanging, the bond market and distressed firms would be better served by exempting fair votes that bind all bondholders to new payment terms. The Securities and Exchange Commission now has authority to exempt fair restructuring votes from this now out-of-date securities law.
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.
Mark J. Roe & Massimiliano Vatiero, Corporate Governance and Its Political Economy (Harvard Law Sch. John M. Olin Ctr. for Law, Econ. & Bus., Discussion Paper No. 827, 2015).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Commercial Law
,
Financial Markets & Institutions
,
Corporate Law
,
Corporate Governance
,
Business Organizations
,
Corporate Bankruptcy & Reorganization
,
Fiduciaries
,
Shareholders
Type: Article
Abstract
To fully understand governance and authority in the large corporation, one must attend to politics. Because basic dimensions of corporate organization can affect the interests of voters, because powerful concentrated interest groups seek particular outcomes that deeply affect large corporations, because those deploying corporate and financial resources from within the corporation to buttress their own interests can affect policy outcomes, and because the structure of some democratic governments fits better with some corporate ownership structures than with others, politics can and does determine core structures of the large corporation. In this review piece for the Oxford Handbook on Corporate Governance, we analyze the generalities and then look at core aspects of corporate governance that have been, and continue to be, politically influenced and sometimes politically driven: first, the historically fragmented ownership of capital in the United States; second, the postwar power of labor in Europe and its corporate impact; and, third, the ongoing power of the American executive and the American board as due in part to their influence on political and legal outcomes.
Mark J. Roe & Michael Tröge, A Smarter Way to Tax Big Banks, Wall St. J., Feb. 2, 2015, at A11.
Categories:
Banking & Finance
,
Taxation
Sub-Categories:
Banking
,
Financial Markets & Institutions
,
Tax Policy
Type: News
Mark J. Roe & Stephen Adams, Restructuring Failed Financial Firms in Bankruptcy: Selling Lehman’s Derivatives Portfolio, 32 Yale J. on Reg. 363 (2015).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Banking
,
Finance
,
Financial Markets & Institutions
,
Financial Reform
,
Business Organizations
,
Corporate Bankruptcy & Reorganization
,
Corporate Governance
,
Corporate Law
Type: Article
Abstract
Lehman Brothers’ failure and bankruptcy deepened the 2008 financial crisis whose negative effects the United States’ economy suffered from for several years. Yet, while Congress reformed financial regulation in hopes of avoiding another crisis, bankruptcy rules such as those that governed Lehman’s failure, have persisted unchanged. When Lehman failed, it lost considerable further value when its contracting counterparties terminated their financial contracts with Lehman. These broad terminations degraded Lehman’s overall value to its creditors beyond the immediate losses that caused its downfall. Lehman’s financial portfolio was thought to be running a paper profit of over $20 billion when it filed, and is said to have lost up to $75 billion as a result of the post-filing liquidation by Lehman’s counterparties of their deals with Lehman. How such a vast value loss can occur and how bankruptcy can ameliorate the problem are the subjects of this Article. For bankruptcy to handle a systemically important financial institution successfully, it must be able to market those parts of the failed institution’s financial contracts portfolio that are saleable at its fundamental value, i.e., other than at fire sale prices. Current law prevents this marketing, however. It allows only two polar choices: sell the entire portfolio, intact, or allow for the liquidation of each contract, one-by-one. The latter is what happened for Lehman, disrupting markets worldwide. The former — sale intact — cannot be accomplished as a business matter for a very, large financial contracts portfolio (and the most serious are embedded in the world’s biggest financial institutions) and would be economically undesirable even if possible. Bankruptcy needs authority, first, to preserve the failed firm’s overall portfolio value, and, second, to break up and sell a very large portfolio that is too large to sell intact. Congress and the regulators have said that bankruptcy is the favored means for financial resolution. Yet, while regulatory initiatives have sought to make failure less likely and resolution more viable than it proved during the crisis, bankruptcy law has neither been fixed nor even updated here since the financial crisis. If a major financial institution were to fail today, the same bankruptcy problems that arose during the past crisis and vexed Lehman could again disrupt the country’s and the world’s financial systems. We here outline one critically needed fix: authorizing bankruptcy to break up a large derivatives portfolio by selling its constituent product lines, one-by-one, instead of limiting bankruptcy to its current constraints of either a sale of the entire portfolio or a Lehman-style close-out of each contract, one-by-one.
Edward R. Morrison, Mark J. Roe & Christopher S. Sontchi, Rolling Back the Repo Safe Harbors, 69 Bus. Law. 1015 (2014).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Commercial Law
,
Corporate Bankruptcy & Reorganization
,
Business Organizations
,
Corporate Governance
,
Corporate Law
,
Shareholders
Type: Article
Abstract
Recent decades have seen substantial expansion in exemptions from the Bankruptcy Code’s normal operation for repurchase agreements. These repos, which are equivalent to very short-term (often one-day) secured loans, are exempt from core bankruptcy rules such as the automatic stay that enjoins debt collection, rules against prebankruptcy fraudulent transfers, and rules against eve-of-bankruptcy preferential payment to favored creditors over other creditors. While these exemptions can be justified for United States Treasury securities and similarly liquid obligations backed by the full faith and credit of the United States government, they are not justified for mortgage-backed securities and other securities that could prove illiquid or unable to fetch their expected long-run value in a panic. The exemptions from baseline bankruptcy rules facilitate this kind of panic selling and, according to many expert observers, characterized and exacerbated the financial crisis of 2007–2009. The exemptions from normal bankruptcy rules should be limited to United States Treasury and similar liquid securities, as they once were. The more recent expansion of these exemptions to mortgage-backed securities should be reversed.
Mark J. Roe, Clearinghouse Overconfidence, 101 Calif. L. Rev. 1641 (2013).
Categories:
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Financial Reform
,
Financial Markets & Institutions
,
Business Organizations
,
Corporate Governance
,
Corporate Bankruptcy & Reorganization
Type: Article
Abstract
Regulatory reaction to the 2008-2009 financial crisis focused on complex financial instruments that deepened the crisis. A consensus emerged that these risky financial instruments should move through safe, strong clearinghouses, which would be bulwarks against systemic risk, and that the destructive impact of the failures during the crisis of AIG, Lehman Brothers, and the Reserve Primary Fund could have been softened or eliminated had strong clearing-houses been in place. Via the Dodd-Frank Wall Street Reform Act, Congress instructed regulators to construct clearinghouses through which these risky financial instruments would trade and settle. Clearinghouses could cut financial risk, reduce contagion, and halt a local financial problem before it becomes an economy-wide crisis. But clearinghouses are weaker bulwarks against financial contagion, financial panic, and systemic risk than is commonly thought. They may well be unable to defend the economy against financial stress such as that of the 2008-2009 crisis. Although they are efficient financial platforms in ordinary times, they do little to reduce systemic risk in crisis times. They generally do not reduce the core risk targeted-that the failure of a financial firm will cause other firms to fail-but rather transfer that risk of loss to others. The major reduction in risk among the inside-the-clearinghouse traders is largely achieved by pushing that risk elsewhere, often to a systemically dangerous spot. Financial contagion can thus side-step the clearinghouse fortress and bring down other core financial institutions. Worse, clearinghouses could not have readily handled the major stresses that afflicted the economy in 2008-2009, could well have transmitted and magnified them, and can only weakly affect the type of financial stress that Congress targeted with Dodd-Frank. When we add in the other weaknesses of the new clearinghouses-as too-big-to-fail institutions, as institutions whose members' incentives to contain clearinghouse riskiness are weaker than the public's, and as institutions that will not be easy to regulate-even the direction of clearinghouses' impact on systemic risk is uncertain. The stakes are high in correctly assessing the value of clearing-houses in containing systemic risk. Much like an overconfidence inspired by powerful military fortresses that an invading enemy can side-step, the reigning overconfidence in clearinghouses lulls regulators to be satisfied that they have done much to arrest problems of contagion and systemic risk by building up clearing-houses, when they have not.
Mark J. Roe & Joo-Hee Chung, How the Chrysler Reorganization Differed from Prior Practice, 5 J. Legal Analysis 399 (2013).
Categories:
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Contracts
,
Commercial Law
,
Corporate Bankruptcy & Reorganization
,
Business Organizations
,
Corporate Governance
,
Corporate Law
Type: Article
Mark J. Roe & Frederico C. Venezze, A Capital Market, Corporate Law Approach to Creditor Conduct, 112 Mich. L. Rev. 59 (2013).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Banking
,
Commercial Law
,
Contracts
,
Corporate Governance
,
Business Organizations
,
Corporate Bankruptcy & Reorganization
,
Corporate Law
Type: Article
Abstract
The problem of creditor conduct in distressed firms — for which policymakers ought to have the economically-sensible repositioning of the distressed firm as a central goal — has vexed courts for decades. Because courts have not come to coherent, stable doctrine to regulate creditor behavior and because they do not focus on using doctrine to facilitate the sensible repositioning of the distressed firm, social costs arise and those costs may be substantial. It’s easy to see why developing a good rule here has been hard to achieve: A rule that facilitates creditor operational intervention going beyond ordinary collection on a defaulted loan can induce creditors to intervene perniciously, to shift value to themselves even at the price of mismanaging the debtor. But a rule that confines creditors to no more than collecting their debt can allow failed managers to continue mismanaging the distressed firm, with the only real managerial alternative — the creditor — paralyzed by judicial doctrine. The doctrinal difficulty and the potential for creditor paralysis arise from unclear and inconsistent judicial doctrine. Some courts hold that it’s the creditor’s inequitable control of the debtor that is the characteristic that leads to creditor liability. Others rule that the creditor contract rights go beyond simply suing and collecting, fully allowing the creditor to condition its own forbearance from suing on the debtor complying with the creditor’s wishes, even if the conditions are costly to the firm’s other creditors. Worse for encouraging positive creditor engagement, the doctrinal standard via which courts shift from protected contract rights to perniciously-exercised control is obscure. Leading cases have the same basic facts, sometimes even the same court, but sharply differing results. Creditor control is the key doctrinal metric; but the creditor’s goal is the better metric for judicial focus. Here we show, first, that there is often no on-the-ground, operational difference between these two standards — pernicious control and free-wheeling contract enforcement — and that this lack of sharp difference helps to explain why the judicial results are vexing, contradictory, and costly. We next show how similar problems are dealt with differently in corporate law settings — by courts evaluating the questioned transaction for business judgment deference to boards of directors . Then we show how putting a layer of basic corporate duties — entire fairness for conflicted transactions and business judgment rule deferential review for non-conflicted transactions — atop the creditor intervention doctrines clarifies the creditor in control problem and lights up a conceptual way out from the problem. A safe harbor for creditors is plausible — if courts could reduce the extent of creditor conflict for critical decisions — and would both encourage constructive creditor intervention and discourage detrimental value-shifting creditor intervention. And then we show that modern financial markets yield a practical way out, using this corporate doctrine as the map: Modern capital markets’ capacity to build options, credit default swaps, and contracts for equity calls provides new mechanisms that, when combined with the classic corporate doctrinal overlay, can better inform courts and parties on how to evaluate and structure creditor entry into managerial decisionmaking. The capital markets and corporate doctrine combination can create a doctrinal conduit to better incentivize capital market players to improve distressed firms than the current doctrines regulating creditor conduct.
Mark J. Roe & Frederick Tung, Breaking Bankruptcy Priority: How Rent-Seeking Upends the Creditors' Bargain, 99 Va. L. Rev. 1235 (2013).
Categories:
Corporate Law & Securities
Sub-Categories:
Business Organizations
,
Corporate Bankruptcy & Reorganization
,
Corporate Governance
,
Shareholders
,
Fiduciaries
Type: Article
Abstract
Bankruptcy reallocates value in a faltering firm. The bankruptcy apparatus eliminates some claims and alters others, leaving a reduced set of claims to match the firm’s diminished capacity to pay. This restructuring is done according to statutory and agreed-to contractual priorities, so that lower-ranking claims are eliminated first and higher ranking ones are preserved to the extent possible. Bankruptcy scholarship has long conceptualized this reallocation as a hypothetical bargain among creditors: creditors agree in advance that if the firm falters, value will be reallocated according to a fixed set of predetermined rules and contracts. In any given reorganization case, creditors may contest how the priority rules are applied — arguing over which creditor is prior and by how much. But once creditors’ relative status under the fixed priority rules is determined or compromised, the lowest-ranking financiers are eliminated. If there is not enough value left to go around for a group of equal-ranking creditors, creditors in that lowest-ranked group share proportionately. In this paper, we argue that over the long haul, the normal science of Chapter 11 reorganization differs from this creditors’ bargain. The bargain is never fixed because creditors regularly attempt to alter the priority rules and often succeed. Priority is in fact up for grabs. Bankruptcy should be reconceptualized as an ongoing rent-seeking contest in which creditors continually seek to break priority — to obtain categorical changes in priority rules in order to jump themselves ahead of competing creditors. Creditors seek to break priority by inventing innovative transactional structures, by persuading courts to validate their priority jumps with new doctrine, or by inducing Congress to enact new rules. Because these breaks are often successful, creditors must continually adjust to other creditors’ successful jumps. They can adjust to a priority break either by accepting it and modifying their terms for future transactions, or by attempting to suppress it with countermeasures. In recent years, major priority jumps have come from transactional innovation — such as special purpose vehicles — and from judicial sanction — via roll-up financing and critical vendor payment doctrines. And they have come from lobbying Congress. Financial industry participants obtained jumps from Congress for derivatives and repurchase agreements in the 1980s and 1990s, concessions that facilitated the financing that exacerbated the 2007-2009 financial crisis. Priority jumping, and the subsequent acquiescence, reaction, and reversal, are also part of bankruptcy history, from the equity receivership to the chapter X reforms of the 1930s to the 1978 Bankruptcy Code. We explain how priority jumping interacts with finance theory and how it should lead us to reconceptualize bankruptcy not as a simple, or even a complex, creditors’ bargain, but as a dynamic process with priority contests fought in a three-ring arena of transactional innovation, doctrinal change, and legislative trumps. The process of breaking bankruptcy priority, of reestablishing it, or of adapting to it is where bankruptcy lawyers and judges spend a large portion of their time and energy. While a given jump’s end-state (when a new priority is firmly established) may sometimes be efficient, bankruptcy rent-seeking overall has significant pathologies and inefficiencies.
Mark J. Roe, Derivatives Markets in Bankruptcy, 55 Comp. Econ. Stud. 519 (2013).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Contracts
,
Commercial Law
,
Financial Reform
,
Financial Markets & Institutions
,
Business Organizations
,
Corporate Bankruptcy & Reorganization
,
Corporate Governance
,
Corporate Law
Type: Article
Abstract
By treating derivatives and financial repurchase agreements much more favorably than it treats other financial vehicles, American bankruptcy law subsidizes these arrangements relative to other financing channels. By subsidizing them, the rules weaken market discipline during ordinary financial times in ways that can weaken financial markets, thereby exacerbating financial failure during an economic downturn or financial crisis emanating from other difficulties, such as an unexpectedly weakened housing and mortgage market in 2007 and 2008. Moreover, and perhaps unnoticed, because this favorable treatment in the Bankruptcy Code is readily available only for short-term financing arrangements, the Bankruptcy Code thereby favors short-term financing arrangements over more stable longer term arrangements. While some policymakers and proponents of bankruptcy's favorable treatment justify it as reducing financial contagion, there is reason to think that the safe harbors do not reduce contagion meaningfully and did not reduce it in the recent financial crisis, but instead contributed to runs and weakened market discipline. A basic application of the Modigliani & Miller framework suggests that the risks policymakers might hope the favored treatment would eliminate are principally shifted from inside the derivatives and repurchase agreement markets to creditors who are outside that market. The most important outside creditor is the United States, as de jure or de facto guarantor of too-big-to-fail financial institutions.
Mark J. Roe, Corporate Short-termism -- In the Boardroom and in the Courtroom, 68 Bus. Law. 977 (2013).
Categories:
Corporate Law & Securities
Sub-Categories:
Business Organizations
,
Corporate Governance
,
Corporate Law
,
Fiduciaries
,
Shareholders
Type: Article
Abstract
A long-held view in corporate circles has been that furious rapid trading in stock markets has been increasing in recent decades, justifying corporate governance and corporate law measures that would further shield managers and boards from shareholder influence, to further free boards and managers to pursue their view of sensible long-term strategies in their investment and management policies. Here, I evaluate the evidence in favor of that view and find it insufficient to justify insulating boards from markets further. While there is evidence of short-term stock market distortions, the view is countered by several underanalyzed aspects of the American economy, each of which alone could trump a prescription for more board autonomy. Together they make the case for further judicial isolation of boards from markets untenable. First, even if the financial markets were, net, short-term oriented, one must evaluate the American economy from a system-wide perspective. As long as venture capital markets, private equity markets, and other conduits mitigate, or reverse, much of any short-term tendencies in public markets, then a potential short-term problem is largely local but not systemic. Second, the evidence that the stock market is, net, short-termist is inconclusive, with considerable evidence that stock market sectors often overvalue the long term. Third, managerial mechanisms inside the corporation, including compensation packages with a duration that is shorter than typical institutional stock market holdings, and managerial labor markets across firms, including managerial efforts to get good results on their watch, are important sources of short-term distortions; insulating boards from markets further would exacerbate these managerial short-term-favoring mechanisms. Fourth, courts are not well positioned to make this kind of basic economic policy, which, if determined to be a serious problem, is better addressed with policy tools unavailable to courts. And, fifth, the widely held view that short-term trading has increased dramatically in recent decades over-interpret, the data; the duration for holdings of many of the country’s major stockholders, such as mutual funds run by Fidelity and Vanguard, and major pension funds, does not seem to have shortened. Rather, a high-velocity trading fringe has emerged, and its rise affects average holding periods, but not the holding period for the country’s ongoing major stockholding institutions. The view that stock market short-termism should affect corporate lawmaking fits snugly with two other widely supported views. One is that managers must be free from tight stockholder influence, because without that freedom boards and managers cannot run the firm well. Whatever the value of this view and however one judges the line between managerial autonomy and managerial accountability to stockholders should be drawn, short-termism provides no further support for managerial insulation from the influence of financial markets. The autonomy argument must stand or fall on its own. Similarly, those who argue that employees, customers, and other stakeholders are due more consideration in corporate governance point to pernicious short-termism to support their view further. But these stakeholder considerations can be long-term and they can be short-term. As such, the best view of the evidence is similarly that the pro-stakeholder view must stand or fall on its own. It gains no further evidence-based, conceptual support from a fear of excessive short-termism in financial markets. Overall, system-wide short-termism in public firms is something to watch for carefully, but not something that today should affect corporate lawmaking.
Mark J. Roe, Capital Markets and Financial Politics: Preferences and Institutions, in The Oxford Handbook of Corporate Governance (Mike Wright, Donald S. Siegel, Kevin Keasey & Igor Filatotchev eds., 2013).
Categories:
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Banking
,
Finance
,
Financial Markets & Institutions
,
Financial Reform
,
Business Organizations
,
Corporate Governance
,
Corporate Bankruptcy & Reorganization
Type: Book
Mark J. Roe, Capital Markets and Financial Politics: Preferences and Institutions, in The Oxford Handbook of Capitalism (Dennis C. Mueller ed., 2012).
Categories:
Banking & Finance
,
Government & Politics
Type: Book
Abstract
For capital markets to function, political institutions must support capitalism in general and the capitalism of financial markets in particular. Yet the shape, support, and extent of capital markets are often contested in the polity. Powerful elements — from politicians to mass popular movements — have reason to change, co-opt, and remove value from capital markets. And the competing capital markets’ players themselves have reason to seek rules that favor their own capital channels over those of others. How these contests are settled deeply affects the form, extent, and effectiveness of capital markets. And investigation of the primary political economy forces shaping capital markets can lead us to better understand economic, political, and legal institutions overall. Much important work has been done in recent decades on the vitality of institutions. Less well emphasized, however, is that widely-shared, deeply-held preferences, often arising from the interests and opinions that prevail at any given time, can sometimes sweep away prior institutions, establish new ones, or, less dramatically but more often, sharply alter or replace them. At crucial times, preferences can trump institutions, and how the two interact is well-illustrated by the political economy of capital markets. Since North’s (1990) famous essay, academic work has focused on the importance of institutions for economic development. Here, I emphasize the channels by which immediate preferences can trump institutional structure in determining the shape and extent of capital markets.
Mark J. Roe, A Spatial Representation of Delaware-Washington Interaction in Corporate Lawmaking, 2012 Colum. Bus. L. Rev. 553.
Categories:
Government & Politics
,
Corporate Law & Securities
Sub-Categories:
Securities Law & Regulation
,
Corporate Law
,
Corporate Governance
,
Shareholders
,
Congress & Legislation
,
State & Local Government
Type: Article
Abstract
Delaware and Washington interact in making corporate law. In prior work I showed how Delaware corporate law can be, and often is, confined by federal action. Sometimes Washington acts and preempts the field, constitutionally or functionally. Sometimes Delaware tilts toward or follows Washington opinion, even if that opinion does not square perfectly with its own consensus view of the best way to proceed. And sometimes Delaware affects Washington activity, effectively coopting a busy Washington from acting in ways that do not accord with Delaware’s major constituents’ view of best practice. Delaware influences Washington decision-making when Delaware is positioned between its own ultimate preferences (determined in part by its primary constituencies’ consensus position) and Washington’s prevailing preferences. Since Congress has a long and complex agenda, if key players in Washington become satisfied that the Delaware legal outputs are close enough to their own preferences, Delaware can induce Washington to desist from going further. At the Columbia Symposium on Delaware corporate lawmaking, I presented a straight-forward spatial model paralleling spatial models that political scientists have used to illustrate other contexts of government jurisdictional interaction. In this article, I describe and set forth that model to illustrate Delaware-Washington interaction in the last decade’s making of proxy access rules.
Mark J. Roe, The Corporate Shareholder’s Vote and Its Political Economy, in Delaware and in Washington, 2 Harv. Bus. L. Rev. 1 (2012).
Categories:
Corporate Law & Securities
Sub-Categories:
Shareholders
,
Securities Law & Regulation
Type: Article
Abstract
Shareholder power to effectively nominate, contest, and elect the company’s board of directors became core to the corporate governance reform agenda in the past decade, as corporate scandal and financial stress put business failures and scandals into headlines and onto policymakers’ agendas. As is well known to corporate analysts, the incentive structure in corporate elections typically keeps shareholders passive, and incumbent boards largely control the electoral process, usually nominating and electing themselves or their chosen successors. Contested corporate elections are exceedingly rare. But shareholder power to directly place their nomination for a majority of the board in the company-paidfor voting documents, as the SEC has pushed toward, could revolutionize American corporate governance by sharply shifting authority away from insiders, boards, and corporate managements. During the past decade, the SEC proposed, withdrew, and then promulgated rules that would shift the control of some corporate election machinery, to elect a minority of the board, away from insiders and into shareholders’ hands. Then, in July 2011, the D.C. Circuit Court of Appeals struck down the most aggressive of the SEC’s rules. During this decade-long process a core corporate law was up for grabs, but the action was in Washington, D.C. until the end of the decade, not the states, despite that a century of corporate law theory has focused on jurisdictional competition among states in making corporate law. In earlier work, I amended the state competition understanding with a view that many key features of American corporate lawmaking are Washington-oriented: Washington often makes corporate law directly, it did so for the central corporate controversy in most decades of the twentieth century, and it can influence state lawmaking, either directly or by establishing complements and substitutes to state corporate law. Shareholder access fits this federal-state paradigm and goes beyond it. It fits in that states were largely silent on these shareholder-power initiatives until 2009, when Delaware amended its corporate code to facilitate shareholder nominees. Indeed, it’s hard to understand Delaware passing its 2009 shareholder statute if the issue had not been on the national agenda for nearly a decade. But the interaction goes beyond the basic Washington-Delaware paradigm in that Delaware’s corporate lawmaking could have influenced the federal outcome and, quite plausibly, corporate players sought it, or used it, as a tool to dampen federal congressional, judicial, and regulatory actors’ enthusiasm for strong shareholder access. The federal-state interaction is two-way, with the strongest interest group inputs at each jurisdictional level sharply differing. Overall, the vertical interaction between states and Washington in reforming shareholder-insider voting power in the past decade is a far cry from the classical understanding of American corporate law being honed in horizontal state-to-state competition, and it implicates sharply differing political economy, interest-group dynamics.
Mark J. Roe & Jordan Siegel, Political Stability's Impact on Financial Development, 39 J. Comp. Econ. 279 (2011).
Categories:
Banking & Finance
,
Government & Politics
,
International, Foreign & Comparative Law
,
Disciplinary Perspectives & Law
Sub-Categories:
Financial Markets & Institutions
,
Law & Economics
,
Politics & Political Theory
,
Comparative Law
Type: Article
Abstract
We here bring forward strong evidence that political instability impedes financial development, with its variation a primary determinant of differences in financial development around the world. As such, it needs to be added to the short list of major determinants of financial development. First, structural conditions first postulated by Engerman and Sokoloff (2002) as generating long-term inequality are shown here to have strong empirical support as exogenous determinants of political instability. Second, that exogenously-determined political instability in turn holds back financial development, even when we control for factors prominent in the last decade’s cross-country studies of financial development. The findings indicate that inequality-perpetuating conditions that result in political instability and weak democracy are fundamental roadblocks for international organizations like the World Bank that seek to promote financial development. The evidence here includes country fixed effect regressions and an instrumental model inspired by Engerman and Sokoloff’s (2002) work, which to our knowledge has not yet been used in finance and which is consistent with current tests as valid instruments. Four conventional measures of national political instability – Alesina and Perotti’s (1996) well-known index of instability, a subsequent index derived from Banks’ (2005) work, and two indices of managerial perceptions of nation-by-nation political instability – persistently predict a wide range of national financial development outcomes. Political instability’s significance is time consistent in cross-sectional regressions back to the 1960s, the period when the key data becomes available, robust in both country fixed effects and instrumental variable regressions, and consistent across multiple measures of instability and of financial development. Overall, the results indicate the existence of an important channel running from structural inequality to political instability, principally in nondemocratic settings, and then to financial backwardness. The robust significance of that channel extends existing work demonstrating the importance of political economy explanations for financial development and financial backwardness. It should help to better understand which policies will work for financial development, because political instability has causes, cures, and effects quite distinct from those of many of the key institutions most studied in the past decade as explaining financial backwardness.
Mark J. Roe & David Skeel. Assessing the Chrysler Bankruptcy, 108 Mich. L. Rev. 727 (2010).
Categories:
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Contracts
,
Finance
,
Secured Transactions
,
Banking
,
Business Organizations
,
Corporate Bankruptcy & Reorganization
,
Corporate Governance
,
Corporate Law
,
Securities Law & Regulation
,
Shareholders
Type: Article
Abstract
Chrysler entered and exited bankruptcy in 42 days, making it one of the fastest major industrial bankruptcies in memory. It entered as a company widely thought to be ripe for liquidation if left on its own, obtained massive funding from the United States Treasury, and exited via a pseudo sale of its main assets to a new government-funded entity. The unevenness of the compensation to prior creditors raised concerns in capital markets, which we evaluate here. We conclude that the Chrysler bankruptcy cannot be understood as complying with good bankruptcy practice, that it resurrected discredited practices long thought interred in the 19th and early 20th century equity receiverships, and that its potential, if followed, for disrupting financial markets surrounding troubled companies in difficult economic times is more than small.
Mark J. Roe, A Political Theory of American Corporate Finance, in Corporate Governance: Law, Theory and Policy 290 (Thomas W. Joo ed., 2d ed. 2010).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Shareholders
Type: Book
Mark J. Roe, Delaware's Shrinking Half-Life, 62 Stan. L. Rev. 125 (2009).
Categories:
Corporate Law & Securities
,
Taxation
,
Government & Politics
Sub-Categories:
Corporate Law
,
Business Organizations
,
Securities Law & Regulation
,
Shareholders
,
Corporate Governance
,
Congress & Legislation
,
State & Local Government
,
Taxation - State & Local
,
Taxation - Corporate
Type: Article
Abstract
A revisionist consensus among corporate law academics has begun to coalesce that, after a century of academic thinking to the contrary, states do not compete head-to-head on an ongoing basis for chartering revenues, leaving Delaware alone in the ongoing interstate charter market. The revisionist view pushes us to consider how free Delaware is to act. Where and when would it come up against boundaries, punishments, and adverse consequences? When do other states (and Washington) constrain Delaware? Recent state corporate lawmaking helps us to define those boundaries in terms of potential state competition and to see that the critical actors are not other states’ lawmakers directly, but Delaware’s own corporate constituents who, if disgruntled, can induce other states to enact new laws. Moreover, analysis of previously unassembled chartering revenue data from Delaware’s Secretary of State’s office displays a vital dimension of state competition, once thought to be relatively unimportant, but that’s becoming increasingly powerful: Delaware’s tax base is eroding, and it’s eroding faster in the past decade or so than ever. Delaware must move ever faster to replenish that erosion. The dynamism of American business interacts with even a lackluster state-based corporate chartering market to put powerful pressure on Delaware, whose business base is persistently eroding as firms merge, close, and restructure.
Mark J. Roe & Jordan Siegel, Finance and Politics: A Review Essay Based on Kenneth Dam's Analysis of Legal Traditions in The Law-Growth Nexus, 47 J. Econ. Literature 782 (2009).
Categories:
Banking & Finance
,
Corporate Law & Securities
,
Legal Profession
,
Disciplinary Perspectives & Law
Sub-Categories:
Banking
,
Finance
,
Financial Markets & Institutions
,
Financial Reform
,
Economics
,
Business Organizations
,
Corporate Law
,
Corporate Governance
,
Law & Economics
,
Legal History
Type: Article
Abstract
Strong financial markets are widely thought to propel economic development, with many in finance seeing legal tradition as fundamental to protecting investors sufficiently for finance to flourish. Kenneth Dam, in the Law-Growth Nexus, finds that the legal tradition view inaccurately portrays how legal systems work, how laws developed historically, and how government power is allocated in the various legal traditions. Yet, after probing the legal origins’ literature for inaccuracies, Dam does not deeply develop an alternative hypothesis to explain the world’s differences in financial development. Nor does he challenge the origins core data, which could be origins’ trump card. Hence, his analysis will not convince many economists, despite that his legal learning suggests conceptual and factual difficulties for the legal origins explanations. Yet, a dense political economy explanation is already out there and the origins-based data has unexplored weaknesses consistent with Dam’s contentions. Knowing if the origins view is truly fundamental, flawed, or secondary is vital for financial development policymaking, because policymakers who believe it will pick policies that imitate what they think to be the core institutions of the preferred legal tradition. But if they have mistaken views, as Dam indicates they might, as to what the legal traditions’ institutions really are and which types of laws really are effective, or what is really most important to financial development, they will make policy mistakes ─ potentially serious ones.
Howell E. Jackson & Mark J. Roe., Public and Private Enforcement of Securities Laws: Resource-Based Evidence, 93 J. Fin. Econ. 207 (2009).
Categories:
Banking & Finance
,
Corporate Law & Securities
,
Government & Politics
,
Civil Practice & Procedure
Sub-Categories:
Financial Markets & Institutions
,
Securities Law & Regulation
,
Corporate Law
,
Corporate Governance
,
Remedies
,
Private Law
,
Practice & Procedure
,
Courts
Type: Article
Abstract
Ascertaining which enforcement mechanisms work to protect investors has been both a focus of recent work in academic finance and an issue for policy-making at international development agencies. According to recent academic work, private enforcement of investor protection via both disclosure and private liability rules goes hand in hand with financial market development, but public enforcement fails to correlate with financial development and, hence, is unlikely to facilitate it. Our results confirm the disclosure result but reverse the results on both liability standards and public enforcement. We use securities regulators’ resources to proxy for regulatory intensity of the securities regulator. When we do, financial depth regularly, significantly, and robustly correlates with stronger public enforcement. In horse races between these resource-based measures of public enforcement intensity and the most common measures of private enforcement, public enforcement is overall as important as disclosure in explaining financial market outcomes around the world and more important than private liability rules. Hence, policymakers who reject public enforcement as useful for financial market development are ignoring the best currently available evidence.
Mark J. Roe, Juries and the Political Economy of Legal Origin, in Perspectives in Company Law and Financial Regulation: Essays in Honour of Eddy Wymeersch 583 (Michael Tison, Hans De Wulf, Christoph Van der Elst & Reinhard Steennot eds., 2009).
Categories:
Legal Profession
,
International, Foreign & Comparative Law
,
Banking & Finance
,
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Financial Markets & Institutions
,
Economics
,
Commercial Law
,
Corporate Governance
,
Courts
,
Comparative Law
,
Legal History
Type: Book
Mark J. Roe, Delaware and Washington as Corporate Lawmakers, 34 Del. J. Corp. L. 1 (2009).
Categories:
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Securities Law & Regulation
,
Corporate Law
,
State & Local Government
Type: Article
Abstract
American corporate law scholars have long focused on state-to-state jurisdictional competition as a powerful engine in the making of American corporate law. Yet much corporate law is made in Washington, D.C. Federal authorities regularly make law governing the American corporation, typically via the securities law - from shareholder voting rules, to boardroom composition, to dual class stock, to Sarbanes-Oxley - and they could do even more. Properly conceived, the United States has two primary corporate lawmaking centers - the states (primarily Delaware) and Washington. We are beginning to better understand how they interact, as complements and substitutes, but the foundational fact of American corporate lawmaking during the past century is that whenever there has been a big issue - the kind of thing that could strongly affect capital costs - Washington acted or considered acting. Here I review the concepts of the vertical interaction, indicate what still needs to be examined, and examine one Washington-Delaware interaction in detail over time. Overall, we cannot understand the governmental structure of American corporate lawmaking well just by examining the nature, strength, and weaknesses of state-to-state jurisdictional competition.
Mark J. Roe, Is Delaware's Corporate Law Too Big to Fail?, 74 Brook. L. Rev. 75 (2008).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Securities Law & Regulation
Type: Article
Abstract
An enduring inquiry for American corporate law scholars is why the small state of Delaware dominates corporate chartering in the United States. Several theories explain the result. I add another partial explanation: size alone makes Delaware attractive to reincorporating firms by making the state’s corporate law more important to the American economy - and corporate interest groups - than that of other states. Any single state with a small number of incorporations could disrupt their firms’ corporate structures without inducing any repercussions in Washington. But Delaware - or really its corporate law - is “too big to fail.” Damaged players in other states would be unable to enlist Washington to reverse the result. Nor would the low volume players be wary of Washington’s attention and the possibility of it over-reacting if a major corporate issue reached its agenda. Delaware, though, as home to about half of the American corporate economy, could not seriously disrupt American business without repercussion.
Mark J. Roe, Juries and the Political Economy of Legal Origin, 35 J. Comp. Econ. 294 (2007).
Categories:
Banking & Finance
,
Corporate Law & Securities
,
Government & Politics
,
Legal Profession
,
Disciplinary Perspectives & Law
,
International, Foreign & Comparative Law
Sub-Categories:
Commercial Law
,
Fiduciary Law
,
Financial Markets & Institutions
,
Business Organizations
,
Corporate Governance
,
Corporate Law
,
Law & Economics
,
Courts
,
Foreign Law
,
Legal History
Type: Article
Abstract
Legal origin has been brought forward as a key influence on modern finance, because common law institutions protect investors better than do civil law institutions, it is claimed. These institutional differences are said, in the legal origin explanation, to have been hard-wired into nations centuries ago. Daniel Klerman and Paul Mahoney challenge the legal origin description of the jury as emerging and achieving prominence in 12th- and 13th-century England while remaining unimportant in France. That contrast has been offered as a key difference between common and civil law, one dependent on the differences in relative power between the English monarch and the French one in the 13th century. But the investigation of the jury here should give pause to those promoting the overall legal origin thesis. The first reason to hesitate is that the jury is not central to protecting outside investors in common law nations. Indeed America's premier corporate court—the Delaware Chancery court—sits without a jury, and the usual view in legal circles is that the jury's absence (and the resulting decision-making by expert judges, not juries) is a strength of the court, not a weakness. The second reason is that Britain did not generally transfer the jury system to its colonies, because to have done so would have conflicted with its colonial goals. That is not a secondary point: political economy issues regularly trump issues like legal origin—colonial policy was just one example of how political goals displace secondary institutions. The third reason is that analysis for the jury differences between civil and common law nations depends on political economy differences centuries ago. But if political economy differences determined institutional differences in the earlier centuries, it is plausible that political economy differences in the intervening centuries would also have affected financial outcomes. Indeed modern political economy differences that lead some nations to support capital markets and others to denigrate them could explain modern financial differences as much as, or more than, 13th century political differences.
Mark J. Roe, Legal Origins and Modern Stock Markets, 120 Harv. L. Rev. 460 (2006).
Categories:
Banking & Finance
,
Corporate Law & Securities
,
Legal Profession
Sub-Categories:
Banking
,
Economics
,
Financial Markets & Institutions
,
Finance
,
Financial Reform
,
Corporate Governance
,
Corporate Law
,
Securities Law & Regulation
,
Business Organizations
,
Legal History
Type: Article
Abstract
Legal origin — civil vs. common law — is said in much modern economic work to determine the strength of financial markets and the structure of corporate ownership, even in the world’s richer nations. The main means are thought to lie in how investor protection and property protection connect to civil and common law legal origin. But, I show here, although stockholder protection, property rights, and their supporting legal institutions are quite important, legal origin is not their foundation. Modern politics is an alternative explanation for divergent ownership structures and the differing depths of securities markets in the world’s richer nations. Some legislatures respect property and stock markets, instructing their regulators to promote financial markets; some do not. Brute facts of the twentieth century — the total devastation of many key nations, wrecking many of their prior institutions — predict modern postwar financial markets’ strength well and tie closely to postwar divergences in politics and policies in the world’s richest nations. Nearly every core civil law nation suffered military invasion and occupation in the twentieth century — the kinds of systemic shocks that destroy even strong institutions — while no core common law nation collapsed under that kind of catastrophe. The interests and ideologies that thereafter dominated in the world’s richest nations and those nations’ basic economic tasks (such as postwar reconstruction for many) varied over the last half century, and these differences in politics and tasks made one collection of the world’s richer nations amenable to stock markets and another indifferent or antagonistic. These political economy ideas are better positioned than legal origin concepts to explain the differing importance of financial markets in the wealthy West.
Mark J. Roe, Delaware's Politics, 118 Harv. L. Rev. 2491 (2005).
Categories:
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Corporate Governance
,
Corporate Law
,
Judges & Jurisprudence
,
Courts
,
State & Local Government
Type: Article
Abstract
Delaware makes the corporate law governing most large American corporations. Since Washington can take away any, or all, of that lawmaking, a deep conception of American corporate law should show how, when, and where Washington leaves lawmaking authority in state hands, and how it affects what the states do. The interest groups and ideas in play in Delaware are narrow, the array in Congress wide. Three key public choice results emanate from this difference. First, interest groups powerful enough to dominate Delaware lawmaking forgo a winner-take-all strategy because federal players may act if they see state results as lopsided. Second, the major state-level players usually want to minimize federal authority in making corporate law, because a local deal cuts in fewer players; a federal deal splits the pie with outsiders. Third, we can delineate the space where the states have room to maneuver from where they risk federal action. Delaware law typically represents the status quo. It's when its law is the first on the ground - as it often is because the federal agenda is large and Delaware is small - that it gains most of its discretion vis-a-vis the federal authorities. When it moves first, especially when its two main players - managers and investors - agree on what to do, it sets the initial content of American corporate law. Federal authorities might then change the state-made result, and players and ideologies absent in Delaware but big in Washington affect the federal result. Those new players and ideas give the original Delaware players reason to resist federal action. Doctrines that limit federal effort are public-regarding justifications for deferring to interests that prevail on the state level. But when Delaware cannot act first - either because media saliency puts the matter on the federal agenda or because its primary players disagree - Delaware loses its dominance. I analogize the relationship between Delaware and Congress to that between federal agencies and Congress. Federal agencies have discretion and first-mover advantages, but their independence even when wide is not without limits, ending when they provoke Congress. So it is with Delaware.
Mark J. Roe, Regulatory Competition in Making Corporate Law in the United States -- And Its Limits, 21 Oxford Rev. Econ. Pol'y 232 (2005).
Categories:
Corporate Law & Securities
,
International, Foreign & Comparative Law
Sub-Categories:
Corporate Law
,
Comparative Law
,
European Law
Type: Article
Abstract
American corporate-law scholars have focused on jurisdictional competition as an engine-usually as the engine-making American corporate law. Recent decisions in the European Court of Justice open up the possibility of similar competition in the EU. That has led analysts to wonder whether a European race would mimic the American, which depending on one`s view is a race to the top-promoting capital markets efficiency-or one to the bottom-demeaning it by giving managers too much authority in the American corporation. But the academic race literature underestimates Washington`s role in making American corporate law. Federal authorities are regularly involved, regularly make law governing the American corporation-from shareholder voting rules, to boardroom composition, to dual class stock-and they could do even more. In structure, the United States has two corporate lawmaking powers-the states (primarily Delaware) and Washington. We are only beginning to understand how they interact, as complements and substitutes, but the foundational fact of American corporate lawmaking during the twentieth century is that whenever there is a big issue-the kind of corporate policy decision that could strongly affect capital costs-Washington acted or considered acting. We cannot understand the structure of American corporate lawmaking by examining state-to-state jurisdictional competition alone
Mark J. Roe, Explaining Western Securities Markets, in Corporate Governance: Accountability, Enterprise and International Comparisons 235 (Kevin Keasey, Steve Thompson & Mike Wright eds., 2005).
Categories:
Corporate Law & Securities
Sub-Categories:
Securities Law & Regulation
Type: Book
Mark J. Roe, On Sacrificing Profits in the Public Interest, in Environmental Protection and the Social Responsibility of Firms 88 (Bruce L. Hay, Robert N. Stavins & Richard H.K. Vietor eds., 2005).
Categories:
Environmental Law
,
Corporate Law & Securities
,
Discrimination & Civil Rights
Sub-Categories:
Public Interest Law
Type: Book
Abstract
In Environmental Protection and the Social Responsibility of Firms, some of the nations leading scholars in law, economics, and business examine commonly accepted assumptions at the heart of current debates on corporate social ...
Corporate Governance Political and Legal Perspectives (Mark J. Roe ed., Edward Elgar Publ'g 2005).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
Type: Book
Mark J. Roe, The Inevitable Instability of American Corporate Governance, in Restoring Trust in American Business 9 (Jay W. Lorsch, Leslie Berlowitz & Andy Zelleke eds., 2005).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
Type: Book
Mark J. Roe, The Inevitable Instability of American Corporate Governance, in Restoring Trust in American Business 9 (Jay W. Lorsch, Leslie Berlowitz & Andy Zelleke eds., 2005).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
Type: Article
Mark J. Roe, The Institutions of Corporate Governance, in Handbook of New Institutional Economics 371 (Claude Menard & Mary M. Shirley eds., 2005).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
Type: Book
Mark J. Roe, The Institutions of Corporate Governance, in Handbook of New Institutional Economics 371 (Claude Menard & Mary M. Shirley eds., 2005).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
Type: Book
Convergence and Persistence in Corporate Governance Systems (Mark J. Roe & Jeffrey Gordon eds., Cambridge Univ. Press 2004).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Corporate Governance
,
Business Organizations
,
Shareholders
Type: Book
Abstract
Corporate governance is on the reform agenda all over the world. How will global economic integration affect the different systems of corporate ownership and governance? Is the Anglo-American model of shareholder capitalism destined to become the template for a converging global corporate governance standard or will the differences persist? This reader contains classic work from leading scholars addressing this question as well as several new essays. In a sophisticated political economy analysis that is also attuned to the legal framework, the authors bring to bear efficiency arguments, politics, institutional economics, international relations, industrial organization, and property rights. These questions have become even more important in light of the post-Enron corporate governance crisis in the United States and the European Union's repeated efforts at corporate integration.
Mark J. Roe, Explaining Western Securities Markets, in Corporate Governance and Firm Organization: Microfoundations and Structural Forms 279 (Anna Grandori ed., 2004).
Categories:
Corporate Law & Securities
Sub-Categories:
Securities Law & Regulation
Type: Book
Abstract
This chapter questions the power of law in solving CG problems and maintains that there are societal and political forces that are likely to shape governance structures irrespective of any regulation. In particular, the most common configuration of those forces around the world tends to reinforce concentrated ownership no matter what laws are adopted to protect minority shareholders. The chapter presents a new regression analysis of a wide database on political indicators and ownership concentration in sixteen major countries, which supports the conjecture that political variables, in particular the degree of employment protection and trade union strength, are strong inverse correlates of ownership separation and the diffusion of public companies.
Mark J. Roe, Delaware's Competition, 117 Harv. L. Rev. 588 (2003).
Categories:
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Corporate Law
,
Securities Law & Regulation
,
State & Local Government
,
Congress & Legislation
Type: Article
Abstract
One of corporate law's enduring issues has been the extent to which state-to-state competitive pressures on Delaware make for a race to the top or the bottom. States, or at least some of them, are said to compete with their corporate law to get corporate tax revenue and ancillary benefits. Delaware has "won" that race, with the overwhelming number of American large corporations chartering there. Here I argue that this long-standing debate is misconceived. Delaware's chief competitive pressure comes not from other states but from the federal government. When the issue is big, the federal government takes the issue or threatens to do so, or Delaware players are conscious that if they mis-step, Federal authorities could step in. These possibilities of ouster, threat, and consciousness have conditioned Delaware's behavior. Moreover, even if Delaware were oblivious to the Federal authorities, those authorities can, and do, overturn Delaware law. That which persists is tolerable to the Federal authorities. This reconception a) explains corporate law developments and data that neither theory of state competition can explain well, b) fits several developments in takeover law, going private transactions, and the rhetoric of corporate governance in Delaware, and c) can be detected in corporate law-making in Washington and Wilmington from the very beginning in the early 20th century "origins" of Delaware's dominance right up through last summer's Sarbanes-Oxley corporate governance law and the corporate governance failure in Enron and WorldCom. This analysis upsets the long-standing analysis of state corporate law competition as a strong race (whether to the top or to the bottom) because when a corporate issue is important, the federal government takes it over, or threatens to do so, or Delaware fears federal action. As such, we cannot tell whether Delaware, if it indeed raced to the top, did so because of the looming federal "threat". Nor can we tell whether Delaware, if it raced to the bottom, a) did so because national politics meant that, had they taken the locally efficient path, Congress, subject to wider pressures than is Delaware, would have taken the issue away, or b) would have instead raced to the top on other, more important issues that directly affected the mechanisms of a race to the top, had the states fully controlled them. Nor can we tell if that which persists is that which the Federal players approved of, or at least found tolerable. Too many of the truly important decisions, the ones that could affect capital costs - the mechanism driving the race-the-top theory - are taken away from Delaware or are at risk of removal or the Delaware actors know could be taken away if they seriously damaged the national economy or riled powerful interests. That is not to say that what happens at the state level in corporate law is trivial, but that the results are ambiguous in terms of the race debate. If efficiency is the usual result, then the Federal vertical element could correspond to the strengths of other organizational structures (like separating proposals from ratification in decision-making, of the checks and balances in the M-form corporation). If inefficiency is the usual result, we do not know whether the states, if free to compete without a federal "veto" possibility, would have raced toward efficiency. When we add this "vertical," Federal-state competition atop the horizontal state competition in corporate law, the state race debate - one that has stretched across the 20th century from Brandeis to Cary and beyond - is rendered empirically and theoretically indeterminate.
Mark J. Roe, Political Determinants of Corporate Governance: Political Context, Corporate Impact (Oxford Univ. Press 2003).
Categories:
Corporate Law & Securities
,
International, Foreign & Comparative Law
Sub-Categories:
Corporate Governance
,
Shareholders
,
Comparative Law
Type: Book
Abstract
Before a nation can produce, it must achieve social peace. That social peace has been reached in different nations by differing means, some of which have then been embedded in business firms, in corporate ownership patterns, and in corporate governance structures. The large publicly held, diffusely owned firm dominates business in the United States despite its infirmities, namely the frequently fragile relations between stockholders and managers. But in other economically advanced nations, ownership is not diffuse but concentrated. It is concentrated in no small measure because the delicate threads that tie managers to shareholders in the public firm fray easily in common political environments, such as those in the continental European social democracies. Social democracies press managers to stabilize employment, to forego some profit-maximizing risks with the firm, and to use up capital in place rather than to downsize when markets no longer are aligned with the firm's production capabilities. Since managers must have discretion in the public firm, how they use that discretion is crucial to stockholders, and social democratic pressures induce managers to stray farther than otherwise from their shareholders' profit-maximizing goals. Moreover, the means that align managers with diffuse stockholders in the United States-incentive compensation, hostile takeovers, and strong shareholder-wealth maximization norms-are weaker and sometimes denigrated in continental social democracies. Hence, public firms there have higher managerial agency costs, and large-block shareholding has persisted as shareholders' best remaining way to control those costs. Social democracies may enhance total social welfare, but if they do, they do so with fewer public firms than less socially responsive nations. The author therefore uncovers not only a political explanation for ownership concentration in Europe, but also a crucial political prerequisite to the rise of the public firm in the United States, namely the weakness of social democratic pressures on the American business firm.
Mark J. Roe, Can Culture Constrain the Economic Model of Corporate Law?, 69 U. Chi. L. Rev. 1255 (2002).
Categories:
Corporate Law & Securities
,
Disciplinary Perspectives & Law
Sub-Categories:
Corporate Law
,
Law & Economics
Type: Article
Abstract
The economic model of corporate law could, with a few simple moves, be seen as potentially having cultural limits. Or, better put, the economic model works well in the United States because not much impedes Coasean-style re-bargaining among the corporate players. Begin with the economic model without limit: Takeovers persisted in the face of anti-takeover law, one can argue, due to executive compensation that paid senior managers to stop strongly opposing takeovers. But executive compensation cannot be varied everywhere as easily as it can be raised in the Untied States. Where it cannot be easily varied, this kind of a Coasean re-bargain is harder than it is here. More generally, culture a) could affect the quality of institutional substitutes, b) could degrade some organizational-types but not others, and c) could reconfigure even a persisting economic model by choosing among equally effective arrangements. Other basic structures of corporate law - indeed, one could imagine even the public firm with diffuse ownership itself - could be subject to the degree to which local norms (and culture) allow parties to vary their deals smoothly. When norms make key variations costly, boundaries to the economic model of a type rarely present in the American corporation appear. I sketch out, with the help of the Symposium's papers, where those boundaries can be glimpsed.
Mark J. Roe, Corporate Law's Limits, 31 J. Legal Stud. 233 (2002).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Corporate Governance
,
Shareholders
Type: Article
Abstract
A strong theory has emerged that the quality of corporate law primarily determines whether ownership and control separate, particularly to the extent law stymies controllers' self-dealing transactions that damage minority stockholders. But in several rich nations, shareholders seem satisfactorily protected, but separation is narrow. Something else has impeded separation. Separation should be narrow if shareholders face very high managerial agency costs if ownership diffused. But these agency costs are not corporate law's focus. Judicial doctrine attacks self-dealing, not business decisions that are bad for stockholders. Indeed, the business judgment rule puts beyond direct legal inquiry most key agency costs - such as over-expansion, over-investment, and reluctance to take on profitable but uncomfortable risks. Thus, even if a nation's core corporate law is 'perfect,' it directly eliminates self-dealing, not most managerial mistake or most misalignment with shareholders. If the risk of managerial misalignment varies widely from nation-to-nation, or from firm-to-firm, ownership structure should also vary widely, even if conventional corporate law tightly protected shareholders everywhere from insider machinations. I show why this variation in managerial alignment is likely to have been deep.
Mark J. Roe, Les rentes et leurs conséquences en matière de gouvernance des entreprises, 5 Finance Contrôle Stratégie 167 (2002).
Categories:
Corporate Law & Securities
Sub-Categories:
Antitrust & Competition Law
,
Corporate Governance
Type: Article
Mark J. Roe, Rents and Their Corporate Consequences, 53 Stan. L. Rev. 1463 (2001).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Shareholders
,
Corporate Governance
Type: Article
Abstract
Product markets are weaker in some nations than they are in others. Weaker product markets have more monopolies and more monopoly profits, both of which affect politics and corporate governance structures. They affect corporate governance structures directly by increasing managerial agency costs to shareholders, which shareholders then seek to reduce. One would expect corporate governance structures, laws, and practices to differ in nations with monopoly-induced high agency costs from those prevailing in nations with more competition, fewer monopolies, and lower agency costs. The monopoly profits also affect corporate governance structures indirectly by setting up a fertile field for conflict inside the firm as the corporate players - shareholders, managers, and employees - seek to grab those monopoly profits for themselves. And we might speculate that these rents when large enough affect democratic politics and law-making: directly by making monopolists political targets (and political forces); and indirectly as the players inside the firm seek to capture those monopoly profits through political action, with political parties and ideologies (and, in time, laws and standards) that parallel the players' places inside the firm. Data from the industrial organization, finance economics, and political science literature is consistent.
Mark J. Roe, Les Conditions Politiques au Développement de la Firme Managériale, 4 Finance Contrôle Stratégie 123 (2001).
Categories:
International, Foreign & Comparative Law
,
Corporate Law & Securities
,
Disciplinary Perspectives & Law
Sub-Categories:
Corporate Governance
,
Law & Political Theory
,
Comparative Law
,
European Law
Type: Article
Mark J. Roe, Labor Policy and Shareholder Primacy, in アメリカ型経済社会の二面性: 市場論理と社会的枠組/Amerika-gata keizai shakai no nimensei: shijo ronri to shakaiteki wakugumi (Hiroshi Shibuya, Shinʼya Imura, Masaharu Hanazaki eds., 2001) (in Japanese).
Categories:
Corporate Law & Securities
,
Labor & Employment
Sub-Categories:
Shareholders
Type: Book
Mark J. Roe, The Shareholder Wealth Maximization Norm and Industrial Organizations, 149 U. Pa. L. Rev. 2063 (2001).
Categories:
Corporate Law & Securities
,
International, Foreign & Comparative Law
Sub-Categories:
Corporate Law
,
Corporate Governance
,
Shareholders
,
Comparative Law
,
European Law
Type: Article
Abstract
Industrial organization affects the relative effectiveness of the shareholder wealth maximization norm in maximizing total social wealth. In nations where product markets are not strongly competitive, a strong shareholder primacy norm fits less comfortably with social wealth maximization than elsewhere because, where competition is weak, shareholder primacy induces managers to cut production and raise price more than they otherwise would. Where competition is fierce, managers do not have that option. There is a rough congruence between this inequality of fit and the varying strengths of shareholder primacy norms around the world. In Continental Europe, for example, shareholder primacy norms have been weaker than in the United States. Historically, Europe's fragmented national product markets were less competitive than those in the United States, thereby yielding a fit between their greater skepticism of the norm's value and the structure of their product markets. As Europe's markets integrate, making its product markets more competitive, pressure has arisen to strengthen shareholder norms and institutions.
Mark J. Roe, Political Preconditions To Separating Ownership from Corporate Control, 53 Stan. L. Rev. 1463 (2000).
Categories:
Corporate Law & Securities
,
International, Foreign & Comparative Law
Sub-Categories:
Corporate Governance
,
Corporate Law
,
Shareholders
,
Comparative Law
,
European Law
Type: Article
Abstract
The large public firm dominates business in the United States despite its critical infirmities, namely the frequently fragile relations between stockholders and managers. Managers' agendas can differ from shareholders'; tying managers tightly to shareholders has been central to American corporate governance. But in other economically-advanced nations ownership is not diffuse but concentrated. It is concentrated in no small measure because the delicate threads that tie managers to shareholders in the public firm fray easily in common political environments, such as those in the continental European social democracies. Social democracies press managers to stabilize employment, press them to forego even some profit-maximizing risks with the firm, and press them to use up capital in place rather than to down-size when markets no longer are aligned with firm's production capabilities. Since managers must have discretion in the public firm, how they use that discretion is crucial to stockholders, and social democratic pressures on managers induce them to stray from their shareholders' preference to maximize profits. Moreover, the means that align managers with diffuse stockholders in the United States--incentive compensation, transparent accounting, hostile takeovers, and strong shareholder-wealth maximization norms--are harder to implement in continental social democracies. Hence, public firms in social democracies will, all else equal, have higher managerial agency costs, and large-block shareholding will persist as shareholders' next best remaining way to control those costs. Indeed, when we line up the world's richest nations on a left-right continuum and then line them up on a close to diffuse ownership continuum, the two correlate powerfully. True, the effects on total social welfare are ambiguous; social democracies may enhance total social welfare, but if they do, they do so with fewer public firms than less socially-responsive nations. We thus uncover not only a political explanation for ownership concentration in Europe, but also a crucial political prerequisite to the rise of the public firm in the United States, namely the absence of a strong social democracy and the concomitant political pressures it would have put on the American business firm.
Mark J. Roe, Corporate Reorganization and Bankruptcy: Legal and Financial Materials (Found. Press 2000).
Categories:
Corporate Law & Securities
,
Legal Profession
Sub-Categories:
Corporate Bankruptcy & Reorganization
,
Legal Education
Type: Book
Abstract
Students will learn the major elements of corporate reorganization in Chapter 11 of the Bankruptcy Code, along with the major facets of bankruptcy that influence financing transactions.
Employees and Corporate Governance (Margaret M. Blair & Mark J. Roe eds., Brookings Inst. Press 1999).
Categories:
Corporate Law & Securities
,
Labor & Employment
Sub-Categories:
Corporate Governance
Type: Book
Abstract
This volume turns the spotlight on the neglected role of employees by analyzing many of the formal and informal ways that employees are actually involved in the governance of corporations, in U.S. firms and in large corporations in Germany ...
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, (Romano ed., 2d 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
Gérard Charreaux, Jean-Pierre Daviet, Michel Hau & Mark Roe, La Corporate Governance en Perspective, 21 Entreprises et Histoire 100 (1999).
Categories:
Corporate Law & Securities
,
International, Foreign & Comparative Law
Sub-Categories:
Corporate Governance
,
Comparative Law
Type: Article
Mark J. Roe, German Codetermination and German Securities Markets, 5 Colum. J. Eur. L. 199 (1999).
Categories:
Corporate Law & Securities
,
International, Foreign & Comparative Law
Sub-Categories:
Securities Law & Regulation
,
Corporate Governance
,
European Law
Type: Article
Abstract
Germany lacks good securities markets. Initial public offers are infrequent, securities trading is shallow, and even large public firms typically have big blockholders that make the big firms resemble 'semi-private' companies. These 'private' firm characteristics of German ownership are often attributed to poor legal protection of minority stockholders, to the lack of an equity-owning and entrepreneurial culture, and to permissive rules that allow big banks and bank blockholding in ways barred in the U.S. Here, I sketch out another explanation. German codetermination (by which employees control half of the seats on the German supervisory board) undermines diffuse ownership. First, stockholders may want the firm's governing institutions to have a blockholding 'balance of power,' a balance that, because half the supervisory board represents employees, diffusely owned firms may be unable to create. Second, managers and stockholders sapped the supervisory board of power (or, more accurately, stopped it from developing power). Board meetings are infrequent, information flow to the board is poor, and the board is often too big and unwieldy to be effective. Instead of boardroom governance, out-of-the-boardroom shareholder caucuses and meetings between managers and large shareholders substitute for effective boardroom action. But, because diffuse stockholders will at key points in a firm's future need a plausible board (due to a succession crisis, a production downfall, or a technological challenge), diffuse ownership for the German firm would deny the firm both boardroom and blockholder governance. Blockholder governance would be gone (if the block dissipated into a diffuse securities market) and board-level governance would be unavailable because the shareholders and managers had weakened the board beforehand. Stockholders would face a choice of charging up the board (and hence further empowering its employee-half) or of living with sub-standard (by current world criteria) boardroom governance. In the face of such choices, German firms (i.e., their managers and blockholders) retain their 'semi-private,' blockholding structure, and German securities markets do not develop.
Mark J. Roe & Ronald J. Gilson, Lifetime Employment: Labor Peace and the Evolution of Japanese Corporate Governance, 99 Colum. L. Rev. 508 (1999).
Categories:
Corporate Law & Securities
,
Labor & Employment
,
International, Foreign & Comparative Law
Sub-Categories:
Corporate Governance
,
East Asian Legal Studies
Type: Article
Abstract
In Japan, large firms' relationships with their employees differ from those prevailing in large American firms. Large Japanese firms guarantee many employees lifetime employment, and the firms' boards consist of insider employees. Neither relationship is common in the United States. Japanese lifetime employment is said to encourage firms and employees to invest in human capital. We examine the reported benefits of the firm's promise of lifetime employment, but conclude that it is no more than peripheral to human capital investments. Rather, the 'dark' side of Japanese labor practice--constricting the external labor market--likely yielded the human capital benefits, not the 'bright' side of secure employment. What then explains the firm's promises of lifetime employment in Japan, a practice that developed following World War II, when labor was in surplus, and hence economically weak? We hypothesize two political explanations, one 'macro' and one 'micro.' The 'macro' hypothesis is that a coalition of conservative and managerial interests sought lifetime employment to reduce the chances of socialist electoral victories. The 'micro' hypothesis is that managers tried to defeat hostile unions and win back factories from worker occupation, firm-by-firm, by offering lifetime employment to a core of workers. Neither the 'macro' nor the 'micro' goals were intended to improve human capital training, but rather to reduce worker influence, either in elections or in the factory. We assess the evidence for these hypotheses. We look at Japanese labor practices and related corporate governance institutions as 'path dependent': A political decision 'fixes' one institution and then the system evolves in light of that fixed institution by developing efficient complementary institutions.
Mark J. Roe & Ronald J. Gilson, The Political Economy of Japanese Lifetime Employment, in Employees and Corporate Governance 239 (Margaret Blair & Mark J. Roe eds., 1999).
Categories:
Labor & Employment
,
International, Foreign & Comparative Law
,
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
East Asian Legal Studies
,
Labor Law
Type: Book
Mark J. Roe, Backlash, 98 Colum. L. Rev. 217 (1998).
Categories:
Banking & Finance
,
Disciplinary Perspectives & Law
,
International, Foreign & Comparative Law
Sub-Categories:
Financial Markets & Institutions
,
Law & Economics
,
Comparative Law
Type: Article
Abstract
Economic systems produce wealth; law and economics analysts try to determine which laws are more likely to produce greater wealth and, sometimes, which will distribute that wealth acceptably. But for some economic systems, productive arrangements may generate political backlash, and this backlash could complicate the economic analysis. When the potential for wealth-decreasing political instability is high, basic efficiency analysis becomes harder than it would otherwise be. I explain several reasons why, for analyses of American institutions, this awareness of backlash has not been high, why this unawareness is sometimes justified, and when it might not be justified. Some of these reasons are rooted in American history and help to explain the American-centered nature of law economics. I first analyze the complications arising from backlash abstractly, showing how even a wealthy and Rawlsian fair society could deteriorate due to backlash, with markets sometimes unable to remedy the problem. Then I examine plausible foreign instances that fit the abstract model of wealth, fairness, and political backlash that lead to instability, turmoil, and, if not otherwise remedied, lower wealth. Finally I argue that even for the United States, some institutions that are hard to justify on normal efficiency grounds become understandable either as institutions that mitigated backlash or that resulted from backlash. Several American business laws, such as Glass-Steagall, Robinson-Patman, some anti takeover laws, and chapter 11 of the Bankruptcy Code could be seen as examples of backlash or means of avoiding more serious backlash. One could view banking law's fragmentation of finance (via the National Bank Act, the Glass-Steagall Act and related laws), and, say, America's old-style antitrust policy as politically 'efficient': each absorbed political backlash against large-scale enterprise with economically inefficient (but degradeable) structures that, although economically inefficient, did not destroy too much economic value directly and still preserved a core of competition and incentives. As later generations adjusted to large-scale enterprise, Glass-Steagall faded through regulatory reinterpretation, and the old-style antitrust came to be understood as inefficient (and ineffective), leading to its interpretive and enforcement demise. Economically inefficient rules first dampened political backlash, and then faded or reversed as the potential for backlash subsided. Several corporate structures, including anti-takeover laws and corporate reorganization, also fit the description.
Mark J. Roe, Comparative Corporate Governance, in The New Palgrave Dictionary of Economics and the Law 339 (Peter Newman ed., 1998).
Categories:
Corporate Law & Securities
,
International, Foreign & Comparative Law
Sub-Categories:
Corporate Governance
,
Comparative Law
Type: Book
Abstract
This entry for the Palgrave dictionary looks at the recent literature on comparative corporate governance. I examine reasons for the upswing in interest in comparative corporate governance, what the principal national differences seem to be, how different nations pursue different purposes through their corporate governance systems, and what we might learn (and already have learned) about structure, political differences, and convergence in corporate governance systems. I conclude by mentioning some potential pitfalls in comparative scholarship, such as selection bias, inattention to complementarities, and ad hoc comparisons, and I briefly suggest a research agenda.
Mark J. Roe, German Codetermination and German Securities Markets, 1998 Colum. Bus. L. Rev. 167.
Categories:
Corporate Law & Securities
,
International, Foreign & Comparative Law
Sub-Categories:
Corporate Governance
,
Securities Law & Regulation
,
European Law
Type: Article
Abstract
Germany lacks good securities markets. Initial public offers are infrequent, securities trading is shallow, and even large public firms typically have big blockholders that make the big firms resemble 'semi-private' companies. These 'private' firm characteristics of German ownership are often attributed to poor legal protection of minority stockholders, to the lack of an equity-owning and entrepreneurial culture, and to permissive rules that allow big banks and bank blockholding in ways barred in the U.S. Here, I sketch out another explanation. German codetermination (by which employees control half of the seats on the German supervisory board) undermines diffuse ownership. First, stockholders may want the firm's governing institutions to have a blockholding 'balance of power,' a balance that, because half the supervisory board represents employees, diffusely owned firms may be unable to create. Second, managers and stockholders sapped the supervisory board of power (or, more accurately, stopped it from developing power). Board meetings are infrequent, information flow to the board is poor, and the board is often too big and unwieldy to be effective. Instead of boardroom governance, out-of-the-boardroom shareholder caucuses and meetings between managers and large shareholders substitute for effective boardroom action. But, because diffuse stockholders will at key points in a firm's future need a plausible board (due to a succession crisis, a production downfall, or a technological challenge), diffuse ownership for the German firm would deny the firm both boardroom and blockholder governance. Blockholder governance would be gone (if the block dissipated into a diffuse securities market) and board-level governance would be unavailable because the shareholders and managers had weakened the board beforehand. Stockholders would face a choice of charging up the board (and hence further empowering its employee-half) or of living with sub-standard (by current world criteria) boardroom governance. In the face of such choices, German firms (i.e., their managers and blockholders) retain their 'semi-private,' blockholding structure, and German securities markets do not develop.
Mark J. Roe, Introduction, Cross-Border Views of Corporate Governance, 1998 Colum. Bus. L. Rev. xi.
Categories:
Corporate Law & Securities
,
International, Foreign & Comparative Law
Sub-Categories:
Corporate Governance
,
Comparative Law
Type: Article
Mark J. Roe, Mutual Funds in the Boardroom, in Studies in International Corporate Finance and Governance Systems: a comparison of the U.S., Japan, and Europe 174 (Donald H. Chew ed., 1997).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Securities Law & Regulation
Type: Book
Mark J. Roe, The Political Roots of American Corporate Finance, 9 J. Applied Corp. Fin. 8 (1997).
Categories:
Corporate Law & Securities
,
Banking & Finance
,
Government & Politics
Sub-Categories:
Financial Markets & Institutions
,
Corporate Governance
,
Securities Law & Regulation
,
Politics & Political Theory
Type: Article
Abstract
The distinctive ownership and governance structure of the large American corporation-with its distant shareholders, a board of directors that defers to the CEO, and a powerful, centralized management-is usually seen as a natural economic outcome of technological requirements for large-scale enterprises and substantial amounts of outside capital, most of which had to come from well-diversified shareholders. Roe argues that current U.S. corporate structures are the result not only of such economic factors, but of political forces that restricted the size and activities of U.S. commercial banks and other financial intermediaries. Populist fears of concentrated economic power, interest group maneuvering, and a federalist American political structure all had a role in pressuring Congress to fragment U.S. financial institutions and limit their ability to own stock and participate in corporate governance. Had U.S. politics been different, the present ownership structure of some American public companies might have been different. Truly national U.S. financial institutions might have been able to participate as substantial owners in the wave of end-of-the-century mergers and then use their large blocks of stock to sit on the boards of the merged enterprises (much as Warren Buffett, venture capitalists, and LBO firms like KKR do today). Such a concentrated ownership and governance structure might have helped to address monitoring, information, and coordination problems that continue to reduce the value of some U.S. companies. The recent increase in the activism of U.S. institutional investors also casts doubt on the standard explanation of American corporate ownership structure. The new activism of U.S. financial institutions-primarily pension funds and mutual funds-can be interpreted as the delayed outbreak of an impulse to participate in corporate ownership and governance that was historically suppressed by American politics.
Mark J. Roe, Path Dependence, Political Options, and Governance Systems, in Comparative Corporate Governance: essays and materials 165 (Klaus Hopt & Eddy Wymeersch eds., 1997).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
Type: Book
Abstract
This text has grown out of a conference entitled Comparative Corporate Governance, An International Conference, United States - Japan - Western Europe which considered the subject.
Mark J. Roe, From Antitrust to Corporate Governance: The Corporation and the Law, 1959-1995, in The American Corporation Today 102 (Carl Kaysen ed., 1996).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Antitrust & Competition Law
,
Corporate Governance
Type: Book
Mark J. Roe, Bankruptcy and Debt: A New Model for Corporate Reorganization, in Corporate Bankruptcy: economic and legal perspectives 351 (Jagdeep Bhandari & Lawrence Weiss eds., 1996).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Bankruptcy & Reorganization
Type: Book
Mark J. Roe, Commentary on “On the nature of bankruptcy”: bankruptcy, priority, and economics, in Corporate Bankruptcy: economic and legal perspectives 181 (Jagdeep Bhandari & Lawrence Weiss eds., 1996).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Bankruptcy & Reorganization
Type: Book
Mark J. Roe, The Voting Prohibition in Bond Workouts, in Corporate Bankruptcy: economic and legal perspectives 415 (Jagdeep Bhandari & Lawrence Weiss eds., 1996).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Bankruptcy & Reorganization
Type: Book
Mark J. Roe, Chaos and Evolution in Law and Economics, 109 Harv. L. Rev. 641 (1996).
Categories:
Disciplinary Perspectives & Law
,
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Corporate Governance
,
Securities Law & Regulation
,
Law & Economics
Type: Article
Abstract
I refine here the classical evolutionary model from law and economics by modifying it to accommodate three related concepts, one from chaos theory, another of path dependence, and a final one of politically-induced punctuated equilibrium from modern evolutionary theory itself. Although economic evolution selects out for extinction very inefficient results, and efficient results tend to survive, the evolutionary metaphor is by itself not rich enough to explain enough of what we see surviving, nor is it rich enough to explain fully how what survives survived. Within the looseness of acceptable efficiency, what survives depends not just on efficiency but on the initial, often accidental conditions (chaos theory) that establish an institutional structure inside which the economic players evolve. What survives also depends on the history of what problems had to be solved in the past -- problems that may be irrelevant today (path dependence); solutions to what later become irrelevant problems can be embedded in slowly-changing institutional structures. Although institutions cannot be too inefficient if they have survived, evolution toward efficiency constrains but does not fully determine the institutions we observe.
Mark J. Roe, From Antitrust to Corporation Governance? The Corporation and the Law: 1959-1994, in The American Corporation Today (Carl Kaysen ed., 1996).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Corporate Governance
,
Antitrust & Competition Law
Type: Book
Abstract
In this essay, I analyzed changes in the law's impact on the corporation during the past thirty-five years, what the underlying bases for these changes might have been, and how these changes affected corporate law. When the first Corporation and Modern Society symposium was held in 1959, today's issues, such as competitiveness, were hardly apparent, and the issue of colossal corporate power was paramount. Antitrust law in particular was seen to be a means to restrain the large corporation. Underlying the 1959 urge to tame the large corporation was the widespread existence (or at least perception) of industrial oligopoly. It was oligopoly (or perhaps really the superior efficiency of a few American manufacturing leaders) that gave the large firm slack and induced the widespread perception of its power. What erased that image of power in the ensuing decades is clear: the reconstruction of Europe and Japan forced the American manufacturing oligopolists to compete in the international arena; an accelerating pace of technological change made old structures obsolete and brought forth new domestic competitors. While many of the old industrial firms were, or became, fit to compete in the new international arena and to ride the waves of new technological change, some weren't. Even the fit ones have to sweat to survive and cannot relax as they did four decades ago, making competitiveness considerations overshadow those of corporate power. Globalization changed the 1959 attitudes and shifted the legal focus on the corporation. Antitrust attacks to break up the giants seemed politically sensible when the three oligopolists split the U.S., and sometimes the world, market. They made no sense when the three came to be embedded in a world-wide market of ten firms. Antitrust rules relaxed. The notion of using law to control corporate power faded, and the legal questions began to focus on whether law plays some role in hindering, or enhancing corporate competitiveness.
Mark J. Roe, German 'Populism' and the Large Public Corporation, in European Economic and Business Law: Legal and Economic Analyses on Integration and Harmonization 241 (Richard Buxbaum, Alain Hirsch & Klaus J. Hopt eds., Gerard Hertig trans., 1996).
Categories:
International, Foreign & Comparative Law
,
Corporate Law & Securities
Sub-Categories:
Corporate Law
,
Corporate Governance
,
European Law
,
Comparative Law
Type: Book
Mark J. Roe, The Modern Corporation and Private Pensions: Strong Managers, Weak Owners, 8 J. Applied Corp. Fin. 111 (1995).
Categories:
Corporate Law & Securities
,
Labor & Employment
Sub-Categories:
Corporate Governance
,
Employee Benefits
,
Retirement Benefits & Social Security
Type: Article
Mark J. Roe, German “Populism” and the Large Public Corporation, 14 Int'l Rev. L. & Econ. 187 (1994).
Categories:
Corporate Law & Securities
,
International, Foreign & Comparative Law
,
Government & Politics
Sub-Categories:
Corporate Law
,
Corporate Governance
,
Politics & Political Theory
,
Comparative Law
,
European Law
Type: Article
Mark J. Roe, Strong Managers, Weak Owners The Political Roots of American Corporate Finance (Princeton Univ. Press 1994).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Shareholders
Type: Book
Abstract
"The distinctive character of corporate business enterprise in the United States - large firms guided by powerful, centralized managers, historically deferential directors, and distant shareholders - is usually thought to be the inevitable result of economic and technological forces. In this major reinterpretation of the origins and evolution of corporate structure, Mark Roe shows that the nature of the American corporation derives not only from these forces but also from political decisions that made alternative forms of organization costly or illegal. Review: Drawing upon work in economics, history, law, and political science, Roe argues that the role of politicians in mediating the interaction between firms and financiers is a critical, but neglected, part of the explanation why certain forms rather than others prevailed." "In their classic 1932 study, The Modern Corporation and Private Property, Adolf Berle and Gardiner Means argued that the separation of ownership and control was the consequence of industrial technologies requiring large-scale production, which in turn led to highly dispersed stockholding. Roe demonstrates, however, that the ownership structure of the American corporation represents just one of several possible outcomes, and that other organizational forms arose abroad (in Germany and Japan, for example) under the influence of different political conditions. Review: At a number of critical junctures, political choices were made about how savings were to be channeled to industry that sharply restricted the power of financial institutions to shape the growth of large firms. These decisions, which pre-dated the New Deal, going as far back in some cases as the nineteenth century, reflected the American public's enduring dislike of concentrated financial power. Once these rules for the governance of financial institutions were in place - but not before - the Berle-Means corporation became inevitable." "In recent years, new technological and competitive challenges have forced many of America's largest firms to restructure, often painfully. Some are now more efficient and productive, others are not. Relationships among shareholders, directors, and senior managers remain in flux, and tensions over whether shareholders are to have a greater or smaller voice in corporate management in the future may become acute. Review: If history is any guide, Roe suggests, the issue will eventually be settled not only in boardrooms and on stock exchanges but also in statehouses and in Congress." --BOOK JACKET.
Mark J. Roe, Einige Unterschiede bei der Leitung von Unternehmen in Deutschland und Amerika, in Ökonomische Analyse des Unternehmensrechts Beiträge zum 3. Travemünder Symposium zur Ökonomischen Analyse des Rechts 333 (Claus Ott & Hans-Bernd Schafer eds., 1993).
Categories:
Corporate Law & Securities
,
International, Foreign & Comparative Law
Sub-Categories:
Corporate Law
,
Corporate Governance
,
European Law
,
Comparative Law
Type: Book
Abstract
Dieses Buch enthält Untersuchungen zur ökonomischen Analyse der Unternehmung und ihrer rechtswissenschaftlichen Umsetzung im Unternehmensrecht.
Mark J. Roe, The Modern Corporation and Private Pensions, 41 UCLA L. Rev. 75 (1993).
Categories:
Corporate Law & Securities
,
Labor & Employment
,
Banking & Finance
Sub-Categories:
Investment Products
,
Corporate Governance
,
Employee Benefits
,
Retirement Benefits & Social Security
Type: Article
Mark J. Roe, Mutual Funds in the Boardroom, 5 J. Applied Corp. Fin., Jan. 1993, at 56.
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Securities Law & Regulation
Type: Article
Mark J. Roe, Takeover Politics, in The Deal Decade: What Takeovers and Leveraged Buyouts Mean for Corporate Governance 321 (Margaret M. Blair ed., Brookings Inst. 1993).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Mergers & Acquisitions
,
Securities Law & Regulation
Type: Book
Abstract
Takeovers cannot be fully understood without understanding the role of American politics in finance. Politics prohibits some ownership structures and regulates or taxes others, often powerfully influencing corporate governance. Politics' influence on takeovers falls into two categories. First, politics fragmented American finance, facilitating the scattering of shareholders of large public companies. This scattering of shareholders set the stage for takeovers. Second, takeovers created winners and losers. Those at risk of loss in takeovers had the political muscle to get state legislatures to pass anti takeover laws. Financial fragmentation came first. Before the recent takeover wave, American politics fragmented financial institutions and their portfolios and weakened coordination among those financial institutions. American laws generally raised the institutions' cost of entering the corporate boardroom. Three determinants produced this result: American federalism, popular fear of concentrated economic power, and the power of interest groups.
Mark J. Roe, Foundations of Corporate Law: The 1906 Pacification of the Insurance Industry, 93 Colum. L. Rev. 639 (1993).
Categories:
Corporate Law & Securities
,
Banking & Finance
,
Government & Politics
Sub-Categories:
Financial Markets & Institutions
,
Banking
,
Insurance Law
,
Corporate Governance
,
Fiduciaries
,
Politics & Political Theory
Type: Article
Mark J. Roe, Some Differences in Corporate Structure in Germany, Japan, and the United States, 102 Yale L.J. 1927 (1993).
Categories:
Corporate Law & Securities
,
International, Foreign & Comparative Law
,
Banking & Finance
Sub-Categories:
Banking
,
Financial Markets & Institutions
,
Corporate Law
,
Corporate Governance
,
Shareholders
,
Business Organizations
,
Comparative Law
,
East Asian Legal Studies
,
European Law
Type: Article
Ronald J. Gilson & Mark J. Roe, Understanding the Japanese Keiretsu: Overlaps between Corporate Governance and Industrial Organization, 102 Yale L.J. 871 (1993).
Categories:
Corporate Law & Securities
,
Banking & Finance
,
International, Foreign & Comparative Law
Sub-Categories:
Banking
,
Financial Markets & Institutions
,
Contracts
,
Investment Products
,
Corporate Governance
,
Shareholders
,
East Asian Legal Studies
,
Comparative Law
Type: Article
Abstract
We aim here for a better understanding of the Japanese keiretsu. Our essential claim is that to understand the Japanese system-banks with extensive investment in industry and industry with extensive cross-ownership-we must understand the problems of industrial organization, not just the problems of corporate governance. The Japanese system, we assert, functions not only to harmonize the relationships among the corporation, its shareholders, and its senior managers, but also to facilitate productive efficiency.
Mark J. Roe, Mutual Funds in the Boardroom, in Modernizing U.S. Securities Regulations -- Economic and Legal Perspectives 261 (Kenneth Lehn & Robert Kamphuis eds., 1992).
Categories:
Corporate Law & Securities
Sub-Categories:
Securities Law & Regulation
,
Corporate Governance
Type: Book
Mark J. Roe, A Political Theory of American Corporate Finance, 91 Colum. L. Rev. 10 (1991).
Categories:
Banking & Finance
,
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Risk Regulation
,
Financial Markets & Institutions
,
Economics
,
Banking
,
Shareholders
,
Securities Law & Regulation
,
Corporate Governance
,
Business Organizations
,
Politics & Political Theory
,
Congress & Legislation
,
Federalism
Type: Article
Abstract
Why is the public corporation-with its fragmented shareholders buying and selling on the stock exchange-the dominant form of enterprise in the United States? Since Berle and Means, the conventional corporate law story begins with technology dictating large enterprises with capital needs so great that even a few wealthy individuals cannot provide enough. These enterprises consequently must draw capital from many dispersed shareholders. Shareholders diversify their own holdings, further fragmenting ownership. This combination of a huge enterprise, concentrated management, and dispersed, diversified stockholders shifts corporate control from shareholders to managers. Managers can pursue their own agenda, at times to the detriment of the enterprise. In the classic story, the large public firm survived because it best balanced the problems of managerial control, risk sharing, and capital needs. In a Darwinian evolution, the large public firm mitigated the managerial agency problems with a board of directors of outsiders, with a managerial headquarters of strategic planners overseeing the operating divisions, and with managerial incentive compensation. Hostile takeovers, proxy contests, and the threat of each further disciplined managers. Fragmented ownership survived because public firms adapted. They solved enough of the governance problems created by the large unwieldy structures needed to meet the huge capital needs of modern technology. In the conventional story, the large public firm evolved as the efficient response to the economics of organization.
Mark J. Roe, Institutional Fiduciaries in the Boardroom, in Institutional Investing -- Challenges and Responsibilities of the 21st Century (Arnold W. Sametz ed., 1991).
Categories:
Corporate Law & Securities
Sub-Categories:
Fiduciaries
Type: Book
Mark J. Roe, Political Elements in the Creation of a Mutual Fund Industry, 139 U. Pa. L. Rev. 1469 (1991).
Categories:
Banking & Finance
,
Corporate Law & Securities
,
Government & Politics
Sub-Categories:
Investment Products
,
Economics
,
Banking
,
Securities Law & Regulation
,
Corporate Governance
,
Congress & Legislation
,
Politics & Political Theory
Type: Article
Mark J. Roe, Political and Legal Restraints on Corporate Control 27 J. Fin. Econ. 7 (1990).
Categories:
Corporate Law & Securities
,
Government & Poli