Faculty Bibliography

How do private law institutions of developing countries differ from those of developed countries? A common view is that the legal systems of the Global South are often outdated, failed transplants of Global North models, or plagued by enforcement challenges. This book project offers a different perspective by focusing on legal innovation and adaptation in the Global South. We examine how countries in the Global South have embraced legal doctrines and solutions that deviate from approaches that currently hold the status of orthodoxy in richer countries, and pursue distinct and potentially broader public policy objectives or reflect different values, in response to conditions that are commonplace in developing countries. Our analysis points to reasons why the legacy of colonialism, limited fiscal capacity, economic dependence on richer countries and macro-economic volatility may encourage lawmakers in poor countries to develop heterodox doctrines. We explore different manifestations of legal heterodoxy across various areas of private law in a range of countries in the Global South. Recognizing legal heterodoxies in the Global South enlarges our understanding of legal experiences and possibilities, and contributes to our understanding about the driving forces and direction of legal evolution around the world.

Controlling shareholders have been directly involved in some of the largest and most consequential bribery scandals in the world over the course of the last decade. Nevertheless, the academic literature and the dominant international model of anticorruption law have neglected the dynamics and implications of controlling shareholder involvement in the payment of bribes. We argue that controlling shareholders, especially in family-controlled firms, may be uniquely positioned to lead corrupt schemes. We then analyze the incidence of this phenomenon in recent U.S. enforcement actions under the FCPA and in Brazilian enforcement actions under the Car Wash (Lava Jato) anticorruption operation. Controlled companies account for a minority of the FCPA cases, but for a large majority of the Brazilian cases. Controlling shareholders were implicated in a significant portion of actions against controlled companies in both contexts. We argue that the dominant international model, which is premised on organizational liability and incentives for compliance programs, is ill-suited to addressing cases of bribery led by controlling shareholders, and call for a distinct array of legal responses.

Legal discourse about business entities has displayed a logical fallacy regarding the consequences of corporate separateness. A fallacy of equivocation occurs when a term is used with one meaning in the premise and with another meaning in the conclusion. Legal personality undoubtedly provides a separate—in the sense of distinct—nexus for the imputation of legal rights and duties. This, however, does not mean that corporations are or should be treated as legally separate—in the sense of insulated—from shareholders in all contexts. Moreover, legal insulation between corporations and shareholders for some purposes (e.g., limited liability) does not necessarily entail insulation for other purposes (e.g., the application of a contractual or regulatory scheme). In effect, there is significant, if varying, permeability between the legal spheres of corporations and shareholders across different areas of law, including corporate law. Rather than a nonconductor that always isolates the legal spheres of the corporation and related parties, legal personality operates as a semi-permeable membrane. Nevertheless, the recurrent fallacy of complete corporate separateness has obscured and hampered the development of legal doctrine in several contexts.

How does corporate law treat legal entity boundaries in groups of companies? This is a critical question given that large corporations typically have hundreds of subsidiaries. Investigating the treatment of this question in key jurisdictions over time reveals a critical, but thus far overlooked, development in corporate law around the globe. Corporate law rules of internal governance increasingly overcome entity boundaries and apply on a pass-through basis, such as by allowing shareholders of a parent company to sue subsidiary directors, inspect subsidiary books and records, and approve major asset sales by subsidiaries. This phenomenon, which can be described as the rise of “entity transparency” in corporate law, reflects a gradual trend that has accelerated in the twenty-first century. Interestingly, there appears to be little direct correlation between a jurisdiction’s willingness to disregard entity boundaries to enforce shareholder rights, on the one hand, and to impose liability on shareholders for the benefit of creditors, on the other. The Article then offers an economic account for the distinct treatment of corporate separateness vis-à-vis shareholders and creditors, and explores the broader theoretical and normative ramifications of its analysis. The rise of entity transparency in corporate law underscores the importance of unbundling different dimensions of corporate separateness, challenges the view that overcoming entity boundaries between parent companies and subsidiaries invariably requires extraordinary circumstances, and has implications for a wide array of legal issues across various areas of law.

This book provides a theoretical framework for the understanding of corporate (or company) law from both a functional and a comparative perspective and illustrates how corporate laws in core jurisdictions (namely, Brazil, the U.S., the UK, France, Germany, Italy, and Japan) conform to that framework. Corporations in all jurisdictions share the same key legal attributes: namely, legal personality, limited liability, delegated management, transferable shares, and investor ownership. Businesses using the corporate form give rise to three basic types of agency problems, namely those between: (1) managers and shareholders as a class; (2) controlling shareholders and minority shareholders; and (3) shareholders as a class and other corporate constituencies, such as corporate creditors and employees. After identifying the common set of legal strategies used to address these agency problems and discussing their interaction with enforcement institutions, the book illustrates how a number of core jurisdictions around the world deploy such strategies. In so doing, it highlights the many commonalities across jurisdictions and reflects on the reasons why they differ on specific issues. The analysis covers the basic governance structure of the corporation, including the powers of the board of directors and the shareholder meeting, both when management and when a dominant shareholder is in control. It then analyses the role of corporate law in shaping labor relationships, the protection of external stakeholders, the relationships with creditors, related-party transactions, fundamental corporate actions such as mergers and charter amendments, takeovers, and the regulation of capital markets.

This paper is the first chapter of the third edition of The Anatomy of Corporate Law: A Comparative and Functional Approach, by Reinier Kraakman, John Armour, Paul Davies, Luca Enriques, Henry Hansmann, Gerard Hertig, Klaus Hopt, Hideki Kanda Mariana Pargendler, Georg Ringe, and Edward Rock (Oxford University Press, 2017). This paper is the first chapter of the third edition of The Anatomy of Corporate Law: A Comparative and Functional Approach, by Reinier Kraakman, John Armour, Paul Davies, Luca Enriques, Henry Hansmann, Gerard Hertig, Klaus Hopt, Hideki Kanda Mariana Pargendler, Georg Ringe, and Edward Rock (Oxford University Press, 2017). The book as a whole provides a functional analysis of corporate (or company) law in Europe, the U.S., and Japan. Its organization reflects the structure of corporate law across all jurisdictions, while individual chapters explore the diversity of jurisdictional approaches to the common problems of corporate law. In its third edition, the book has been significantly revised and expanded. As the introductory chapter to the book, this paper introduces the book’s analytic framework, which focuses on the common structure of corporate law across different jurisdictions as a response to fundamentally similar legal and economic problems. It first details the economic importance of the corporate form’s hallmark features: legal personality, limited liability, transferable shares, delegated management, and investor ownership. The major agency problems that attend the corporate form and that, therefore, must be addressed, are identified. The chapter next considers the role of law and contract in structuring corporate affairs, including the function of mandatory and default rules, standard forms, and choice of law, as well the debate about the proper role of corporate law in promoting overall social welfare. While almost all legal systems retain the core features of the corporate form, individual jurisdictions have made distinct choices regarding many other aspects of their corporate laws. The forces shaping the development of corporate law, including evolving patterns of share ownership, are examined.