Roberto Tallarita

Lecturer on Law

Fall 2021

Biography

Roberto Tallarita is a Senior Fellow in Law and Economics and an Associate Director of the Program on Corporate Governance, at Harvard Law School. His main research interests are corporate law, corporate governance, mergers and acquisitions, and law and economics. His recent papers focus on shareholder activism on social, environmental, and political issues, stakeholder governance, corporate political spending, and CEO political preferences.

Roberto's articles appear or are forthcoming in the Cornell Law Review, the Harvard Business Law Review, the Hastings Law Journal, the Journal of Legal Analysis, and the Southern California Law Review as well as in the Atlantic, the Boston Review and The Corporate Board. His research has been discussed, among other places, in Bloomberg Opinion, the Economist, the Financial Times, the New York Times, and the Wall Street Journal.

Prior to joining Harvard, Roberto was a partner at an Italian law firm, where he specialized in mergers and acquisitions, private equity, shareholder activism, and debt restructuring. He also worked in the M&A practice group of Kirkland & Ellis in New York.

Areas of Interest

Lucian A. Bebchuk, Kobi Kastiel & Roberto Tallarita, Stakeholder Capitalism in the Time of COVID, 40 Yale J. Regul. (forthcoming 2023).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Mergers & Acquisitions
Type: Article
Abstract
This Article investigates the time of COVID-19 to test the claims of supporters of stakeholder capitalism (“stakeholderism”). Such supporters advocate encouraging and relying on corporate leaders to use their discretion to serve stakeholders such as employees, customers, suppliers, local communities, and the environment. The pandemic followed and was accompanied by peak support for stakeholderism and broad expressions of commitment to it from corporate leaders. Nonetheless, and even though the pandemic heightened risks to stakeholders, we document that corporate leaders negotiating deal terms failed to look after stakeholder interests. Some supporters of stakeholder capitalism argue that corporate leaders should and do give weight to stakeholder interests because delivering value to stakeholders is a major element of corporate purpose. Other supporters maintain that corporate leaders considering a sale of the company should and do seek to benefit stakeholders, because fulfilling implicit promises to do so serves shareholders’ ex ante interest in inducing stakeholder cooperation, arguably essential to corporate success. We find that the evidence is inconsistent with the claims of both views. We conduct a detailed examination of all the $1B+ acquisitions of public companies that were announced during the COVID pandemic, totaling more than 100 acquisitions with an aggregate consideration exceeding $700 billion. We find that deal terms provided large gains for the shareholders of target companies, as well as substantial private benefits for corporate leaders. However, although many transactions were viewed at the time of the deal as posing significant post-deal risks for employees, corporate leaders largely did not obtain any employee protections, including payments to employees who would be laid off post-deal. Similarly, we find that corporate leaders failed to negotiate for protections for customers, suppliers, communities, the environment, and other stakeholders. After conducting various tests to examine whether this pattern could have been driven by other factors, we conclude that it is likely to have been driven by corporate leaders’ incentives to benefit stakeholders only to the extent needed to serve shareholders’ interests. While we focus on decisions in the acquisition context, we explain why our findings also have implications for ongoing-concern decisions, and we discuss and respond to potential objections to our conclusions. Overall, our findings cast substantial doubt on the claims made by supporters of stakeholder capitalism. Those who seriously care about corporations’ external effects on shareholders should not harbor illusory hopes that corporate leaders would protect stakeholder interests on their own. Instead, they should concentrate their efforts on securing governmental interventions (such as carbon taxes and employee protection policies) that could truly protect stakeholders.
Lucian A. Bebchuk & Roberto Tallarita, Will Corporations Deliver Value to All Stakeholders? 75 Vand. L. Rev. (forthcoming May 2022).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Corporate Law
,
Shareholders
Type: Other
Abstract
Amid growing concerns for the effects that corporations have on stakeholders, supporters of stakeholder governance encourage society to rely on corporate leaders to use their discretion to protect stakeholders, and they seem to take corporate pledges to do so at face value. By contrast, critics of stakeholder governance question whether corporate leaders have incentives to protect stakeholders and doubt the reliability of pledges by corporate leaders to do so. We provide empirical evidence that can contribute to resolving the debate between these rival views. The most celebrated pledge by corporate leaders to protect stakeholders was the Business Roundtable’s Statement on the Purpose of a Corporation (the “BRT Statement”). Signed by CEOs of most of the country’s major companies, the BRT Statement expressed a commitment to deliver value to all stakeholders and not just shareholders and was widely viewed as a major milestone that would usher in a new stakeholder capitalism and significantly improve the treatment of stakeholders. If any companies could be expected to follow through on stakeholder rhetoric, the companies whose CEOs signed the highly visible BRT Statement would be natural candidates to do so, and they thus provide an instructive test case for an empirical investigation. To investigate whether the BRT Statement represented a meaningful commitment or was mostly for show, we review a wide array of hand-collected corporate documents of the over 130 U.S. public companies that joined the BRT Statement (the “BRT Companies”). We present the following six findings: First, examining the almost one-hundred BRT Companies that updated their corporate governance guidelines in the sixteen-month period between the release of the BRT Statement and the end of 2020, we find that they generally did not add any language that improves the status of stakeholders and, indeed, most of them chose to retain in their guidelines a commitment to shareholder primacy; Second, reviewing all the corporate governance guidelines of BRT Companies that were in place as of the end of 2020, we find that most of them reflected a shareholder primacy approach, and an even larger majority did not include any mention of stakeholders in their discussion of corporate purpose; Third, examining the over forty shareholder proposals regarding the implementation of the BRT Statement that were submitted to BRT Companies during the 2020 or 2021 proxy season, and the subsequent reactions of these companies, we find that none of these companies accepted that the BRT Statement required any changes to how they treat stakeholders, and most of them explicitly stated that their joining the BRT Statement did not require any such changes. Fourth, reviewing all the corporate bylaws of the BRT Companies, we find that they generally reflect a shareholder-centered view; Fifth, reviewing the 2020 proxy statements of the BRT Companies, we find that the great majority of these companies did not even mention their signing of the BRT Statement, and among the minority of companies that did mention it, none indicated that their endorsement required or was expected to result in any changes in the treatment of stakeholders; Sixth, we find that the BRT Companies continued to pay directors compensation that strongly aligns their interests with shareholder value. Furthermore, we document that the corporate governance guidelines of BRT Companies as of the end of 2020 commonly required such alignment of director compensation with stockholder value and generally avoided any support for linking such compensation to stakeholder interests. Overall, our findings support the view that the BRT Statement was mostly for show and that BRT Companies joining it did not intend or expect it to bring about any material changes in how they treat stakeholders. These findings support the view that pledges by corporate leaders to serve stakeholders would not materially benefit stakeholders, and that their main effect could be to insulate corporate leaders from shareholder oversight and deflect pressures for stakeholder-protecting regulation. Stakeholder governance that relies on the discretion of corporate leaders would not represent an effective way to address growing concerns about the effects corporations have on stakeholders. This paper is part of a larger research project on stakeholder capitalism of the Harvard Law School Corporate Governance. Other parts of this research project are The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita, and For Whom Corporate Leaders Bargain by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita.
Lucian A. Bebchuk & Roberto Tallarita, The Perils and Questionable Promise of ESG-Based Compensation, J. Corp. L. (forthcoming 2022).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
Type: Article
Abstract
With the rising support for stakeholder capitalism and at the urging of its advocates, companies have been increasingly using environmental, social, and governance (ESG) performance metrics for CEO compensation. This Article provides a conceptual and empirical analysis of this trend, and exposes its fundamental flaws and limitations. The use of ESG-based compensation, we show, has at best a questionable promise and poses significant perils. Based partly on an empirical analysis of the use of ESG compensation metrics in S&P 100 companies, we identify two structural problems. First, ESG metrics commonly attempt to tie CEO pay to limited dimensions of the welfare of a limited subset of stakeholders. Therefore, even if these pay arrangements were to provide a meaningful incentive to improve the given dimensions, the economics of multitasking indicates that the use of these metrics could well ultimately hurt, not serve, aggregate stakeholder welfare. Second, the push for ESG metrics overlooks and exacerbates the agency problem of executive pay, which both scholars and corporate governance rules have paid close attention. To ensure that they are designed to provide effective incentives rather than serve the interests of executives, pay arrangements need to be subject to effective scrutiny by outsiders. However, our empirical analysis shows that in almost all cases in which S&P 100 companies use ESG metrics, it is difficult if not impossible for outside observers to assess whether this use provides valuable incentives or rather merely lines CEO’s pockets with performance-insensitive pay. The current use of ESG metrics, we conclude, likely serves the interests of executives, not of stakeholders. Expansion of ESG metrics should not be supported even by those who care deeply about stakeholder welfare.
Lucian A. Bebchuk, Kobi Kastiel & Roberto Tallarita, For Whom Corporate Leaders Bargain, 94 S. Cal. L. Rev. 1467 (2021).
Categories:
Corporate Law & Securities
Sub-Categories:
Corporate Governance
,
Corporate Law
,
Mergers & Acquisitions
,
Securities Law & Regulation
,
Shareholders
Type: Article
Abstract
At the center of a fundamental and heated debate about the purpose that corporations should serve, an increasingly influential “stakeholderism” view advocates giving corporate leaders the discretionary power to serve all stakeholders and not just shareholders. Supporters of stakeholderism argue that its application would address growing concerns about the impact of corporations on society and the environment. By contrast, critics of stakeholderism object that corporate leaders should not be expected to use expanded discretion to benefit stakeholders. This Article presents novel empirical evidence that can contribute to resolving this key debate. During the hostile takeover era of the 1980s, stakeholderist arguments contributed to the adoption of constituency statutes by more than thirty states. These statutes authorize corporate leaders to give weight to stakeholder interests when considering a sale of their company. We study how corporate leaders in fact used the power awarded to them by these statutes in the past two decades. In particular, using hand-collected data, we analyze in detail more than a hundred cases governed by constituency statutes in which corporate leaders negotiated a sale of their company to a private equity buyer. We find that corporate leaders have used their bargaining power to obtain gains for shareholders, executives, and directors. However, despite the risks that private equity acquisitions posed for stakeholders, corporate leaders made very little use of their power to negotiate for stakeholder protections. Furthermore, in cases in which some protections were included, they were practically inconsequential or cosmetic. We conclude that constituency statutes failed to deliver the benefits to stakeholders that they were supposed to produce. Beyond their implications for the long-standing debate on constituency statutes, our findings also provide important lessons for the ongoing debate on stakeholderism. At a minimum, stakeholderists should identify the causes for the failure of constituency statutes and examine whether the adoption of their proposals would not suffer a similar fate. After examining several possible explanations for the failure of constituency statutes, we conclude that the most plausible explanation is that corporate leaders have incentives not to protect stakeholders beyond what would serve shareholder value. The evidence we present indicates that stakeholderism should be expected to fail to deliver, as have constituency statutes. Stakeholderism therefore should not be supported, even by those who deeply care about stakeholders. This paper is part of a larger research project of the Harvard Law School Corporate Governance on stakeholder capitalism and stakeholderism. Another part of this research project is The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita.
Lucian A. Bebchuk, Robert J. Jackson, Jr., James David Nelson & Roberto Tallarita, The Untenable Case for Keeping Investors in the Dark, 10 Harv. Bus. L. Rev. 1 (2020).
Categories:
Corporate Law & Securities
,
Constitutional Law
,
Government & Politics
Sub-Categories:
First Amendment
,
Securities Law & Regulation
,
Shareholders
,
Corporate Law
,
Politics & Political Theory
,
Congress & Legislation
Type: Article
Abstract
This Article seeks to contribute to the heated debate on the disclosure of political spending by public companies. A rulemaking petition urging SEC rules requiring such disclosure has attracted over 1.2 million comments since its submission seven years ago, but the SEC has not yet made a decision on the petition. The petition has sparked a debate among academics, members of the investor and issuer communities, current and former SEC commissioners, and members of Congress. In the course of this debate, opponents of mandatory disclosure have put forward a wide range of objections to such SEC mandates. This Article provides a comprehensive and detailed analysis of these objections, and it shows that they fail to support an opposition to transparency in this area. Among other things, we examine claims that disclosure of political spending would be counterproductive or at least unnecessary; that any beneficial provision of information would best be provided through voluntary disclosures of companies; and that the adoption of a disclosure rule by the SEC would violate the First Amendment or at least be institutionally inappropriate. We demonstrate that all of these objections do not provide, either individually or collectively, a good basis for opposing a disclosure rule. The case for keeping political spending under the radar of investors, we conclude, is untenable.

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