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The "disinterested and independent majority" is one of the most important concepts in corporate law. Corporate actions are almost immune to legal challenge if a suitable majority of directors stands ready to approve it. Scholars have extensively debated the proper meaning and effect of "disinterested and independent," but no such literature analyzes "majority." As a matter of arithmetic, how do we compute whether a given set of directors contains a suitable majority? While seemingly innocuous, the concept of a majority means different things to different courts. Indeed, there may be no majority rule for majority independence. The Article charts and analyzes a puzzle somehow undiscovered, though at the heart of a field. In so doing, it asks questions important to debates far afield of corporate law. Majority rules matter for flawed democracies everywhere. [ABSTRACT FROM AUTHOR]

The business judgment rule (BJR) is a corporate law doctrine that protects a decision of directors from fairness review by a court of law unless there is sufficient evidence that the director has breached his fiduciary duties or that the decision-making process is tainted. Given that the BJR acts as a protective armor for directors as their personal liability is not engaged for a corporate decision irrespective of its outcomes provided that some requirements are satisfied, the purpose of this paper is to critically assess whether directors of Mauritian companies are sufficiently protected and encouraged in the exercise of their duties. To achieve the research objective, the black letter research method was adopted to collect secondary data and a comparative analysis with some other countries' rules on business judgment was conducted. A desk-based approach and content analysis were used to collect this information. The countries selected for the comparison are the United Kingdom and United States. Mauritian law does not afford protection to directors for decisions taken based on business judgment whereas this research has demonstrated that the laws of other countries being the United Kingdom and the United States as well as their judicial instances both recognize and apply the BJR. [ABSTRACT FROM AUTHOR]

Directors have a duty to act in good faith and in the best interests of the company. Yet, the scope of this duty remains disputed. Longstanding debate has surrounded the duty, with arguments principally concerning to whom it is owed and what constitutes the company's interests. More recently, this debate continues in light of increasing societal expectations of good corporate behaviour and the sustainability crises facing the Earth system. In this context, this paper explores how directors of New Zealand companies interpret their duty to act in good faith and in the best interests of the company. It draws on data generated in 22 qualitative interviews conducted with current professional directors sitting on private sector boards in New Zealand. The paper begins with a discussion of the duty, which is enshrined in statute under s 131 of the Companies Act 1993, before outlining the research design. The findings detail an entity conceptualisation of the company whose interests are broadly construed to encompass not only its shareholders' interests, but also those of other stakeholders including the community and environment. The paper subsequently reflects on this consensus, considering the current legal landscape and implications for any further clarification of the duty. [ABSTRACT FROM AUTHOR]

Traditional conceptions of corporate governance are being challenged by recent events and debates in and outside Australia. Developments such as the Business Roundtable's 2019 restatement of corporate purpose, the World Economic Forum's Davos Manifesto as well as the ways in which companies and their directors are expected to identify, supervise, manage, and disclose environmental, social and governance issues, are causing corporations, directors and other stakeholders to stop and ask: what is the purpose of the corporation; what kinds of interests and consequences should directors consider when making decisions; and how far ahead should they look? Australian responses have been fragmented and uncertain, permeated by soft law. What lessons may be drawn from other jurisdictions, such as the United Kingdom and the United States? How, and to what extent, should corporate law in Australia address the purposes and activities of a corporation and then require, or permit, the identification, supervision, management and disclosure of risk when those purposes and activities intersect with or affect the interests of shareholders, asset owners, financiers, regulators, governments and communities? Or is a whole of law response required which adopts a system-level view and review of the regulatory network affecting corporate conduct and governance in shaping the modern corporation and its role in society? [ABSTRACT FROM AUTHOR]

Fiduciary law has become the doctrine of choice in scholarship aiming to protect vulnerable parties from powerful decisionmakers. But fiduciary law cannot fill all the gaps in those impersonal, public relationships because the beneficiary class is large, disparate, and widely dispersed. Public leaders and decision makers cannot zealously pursue the interests of all parties vulnerable to their decision making and they are often driven by various personal interests in choosing which set of beneficiary interests to prioritize. The persistent myth that leaders of large groups are fiduciaries and that fiduciary obligation is the answer to all power imbalance problems harms the very people it claims to protect. This Article is the first to argue that the fiduciary myth is harmful. The myth is most prevalent in corporate governance, in the notion that corporate directors owe fiduciary duties to the corporation and its shareholders. The move to replicate corporate fiduciary duties in other settings is misguided because the fiduciary myth undermines, rather than promotes, ethical director behavior in corporate law. It would do even worse in other public relationships. Trustworthiness, not fiduciary loyalty, is the character trait the law should work to inculcate in public leaders and decision makers. Fiduciary doctrine obscures trustworthiness. The threat of fiduciary litigation makes the supposed fiduciary relationship adversarial. It sets the parties at odds with each other, when the goal is supposed to be to align their interests and to encourage empathy on the part of those in power. Attempts to adapt fiduciary obligation to the contexts of other public relationships can only replicate the harms of the fiduciary myth. Suggestions to export fiduciary principles are well-intentioned. But good intentions alone do not effective solutions make, and such suggestions often do more harm than good when they over-promise and underdeliver. [ABSTRACT FROM AUTHOR]

Directors' duty to act in good faith and to act in the best interests of the company relates to the interests of shareholders held in the company as a separate legal entity. The obligation to act in the best interests of shareholders is potentially bounded by corporate purpose as the office requires directors to act in accordance with the constitution and Companies Act. The origin of the duty is traced to the emergence of permanent capital in the business corporation and the resulting new oaths sworn by directors in the seventeenth and eighteenth centuries with Charitable Corporation v Sutton considered in that historical context. The analysis illustrates that the duty is not owed to shareholders collectively at any time, but rather to the company as a separate entity from its shareholders. The interests of shareholders are held in the company as its capital base. The duty is considered in relation to the even longer-standing obligation that officers of corporations act faithfully to ensure compliance with the corporation's charter. The article concludes that the re-inclusion of purpose provisions in company constitutions combined with recognition that the modern company is an entity rather than contractual could significantly influence the application of the good faith and best interests duty. [ABSTRACT FROM AUTHOR]

This article discusses deficiencies in existing models of the company. It outlines three immutable layers of corporate ontology and argues for a mental model of the company based on general systems theory. The model reveals that each company has at its heart a managerial hierarchy which controls corporate actions through direct and indirect means. The most important participants in the everyday life of the company are its senior and middle managers. Consequently, greater emphasis needs to be placed upon managers' corporate governance/compliance responsibilities. The legislature should provide for an obligation on companies to engage in risk-mapping and an obligation on managers to ensure, within their areas of responsibility, compliance with the law. [ABSTRACT FROM AUTHOR]

Corporate law lacks a general theory of a board's power as fiduciary, and consequently, the law governing corporate fiduciary duties is notably unstable. This Article offers a novel theory that grounds corporate fiduciary duties in stronger microeconomic and legal foundations. The theory, coined the Judicial Monitoring Model (JMM), shows that even imperfect judicial monitoring makes shareholders and boards better off, even when there is no claim of a breach of the duties of loyalty or care as currently understood. The JMM synthesizes the law governing corporate fiduciary duties and other doctrines that protect principals, beneficiaries, and creditors from the risk of agent misconduct due to moral hazard. And it explains why courts evaluate corporate fiduciary conduct in some situations and defer to the board's business judgment in others. The JMM also generates surprising empirical predictions. It predicts that, in some cases, courts can and do provide substantive review of corporate transactions even if boards are informed, disinterested, and appear to be acting in good faith. The Article finds evidence of such review in old and recent cases, including a startling number of overlooked cases involving corporate waste. [ABSTRACT FROM AUTHOR]

Economic abuse is a form of family violence that severely inhibits victim survivors’ capacities to rebuild their lives. Although its effects are widely felt, it remains a hidden problem. This article contributes to the burgeoning scholarship on economic abuse by investigating its perpetuation through family-owned companies. Victim survivors commonly bear the liability for business failure and phoenix activity as ‘straw’ directors. Recent reforms introduced to deter and penalise illegal phoenix activity have increased the risks for survivors who are coerced or defrauded into becoming directors. The study examines how corporate law and the courts have responded to straw directors in the context of family companies. It interrogates the notion that victim survivors assume responsibility for business decisions voluntarily, as rational economic men with relatively equal bargaining power. This article proposes reforms to disrupt harm from economic abuse through coerced directorships, and to militate against the unintended consequence of recent reforms. [ABSTRACT FROM AUTHOR]

It is difficult to advance the ESG agenda using company law, especially in common law legal systems. Cases show that directors' duties require directors to prioritise the 'interests of the company', which is equated with 'shareholders' interests as a whole', whether under the traditional common law or, for the UK, under the codified section 172 of the Companies Act 2006. In addition, when determining if directors have acted in the interests of the company, judges typically decline to examine the merits of a business decision, focusing instead on the decision-making process. What this means is that even if directors must take ESG considerations into account, courts have held that the duty to act in the company's best interests does not impose a positive duty for directors to adopt aggressive ESG focused strategies. We argue that this has always been and should continue to be the correct judicial approach. [ABSTRACT FROM AUTHOR]

The article examines the potential effects of interested voting by corporate directors, arbitrageurs, institutional investors, and other stakeholders on the operation of a corporation. Also cited are how corporation laws can offer remedies against said voting by controlling shareholders and acquirers in mergers and acquisitions (M&A), as well as other topics like bright-line rules and open-ended standards.

This article looks at the United Kingdom Supreme Court’s judgment in the case of BTI 2014 LLC v Sequana SA & Others [2022] UKSC 25, which one of the judges involved hailed as a ‘momentous’ decision for the purposes of corporate law. The judgment provides much clearer guidance than had previously existed as to when, and to what extent, directors of an English company must have regard to the interests of creditors when discharging their duties to the company. [ABSTRACT FROM AUTHOR]

An exception to the most sacrosanct feature of company law, the opaque corporate veil, applies to directors of companies that have failed to remit taxes that have been withheld from payments to third persons, including employees' salaries. Replacing an earlier crown priority for debts owed to the government by bankrupt individuals and liquidating companies, tax law now creates a personal liability of directors for non-remitted taxes that were withheld from payments to third parties. In recent years, this personal liability has been extended to primary obligations of companies to remit amounts related to their superannuation and goods and services tax responsibilities. Extending directors' personal liability to include primary company income tax would be a logical extension of the policy underlying the current rules. [ABSTRACT FROM AUTHOR]

UK common law recognises that directors owe a fiduciary duty to consider creditors' interests when a company is insolvent or in financial difficulty. However, the scope of this duty remains unclear, particularly the degree of financial difficulty necessary for it to arise. In 2022, in BTI v Sequana, the Supreme Court did little to resolve these uncertainties, retaining a context first approach, where the duty's triggering point is based on the facts and the risk borne by creditors in the specific case. In contrast, Ireland codified its creditor duty in 2022, setting out a series of legislatively defined financial situations where the duty applies and what the duty entails. This article argues that while a search for complete doctrinal certainty in this area is misguided, a degree of certainty over and above the position in Sequana can be achieved and that Ireland's codification offers valuable lessons for future UK reform. [ABSTRACT FROM AUTHOR]

166 In November 2022 the Council and the European Parliament adopted Directive (EU) 2022/2381 on improving the gender balance among directors of listed companies and related measures. Thus, by 30 June 2026, European Member States must ensure that large, listed companies reach the Directive's gender balance objectives. Gender balance is achieved when members of the underrepresented sex hold at least 40% of non-executive director positions or members of the underrepresented sex hold at least 33% of all director positions, including both executive and non-executive directors. To achieve gender balance Member States must set up a procedure for selecting candidates for appointment or election to director positions. Although the article finds that quotas are the best model to bring about a real improve to gender balance on company boards, it questions whether the model, the Commission has chosen will achieve the objective of the Directive. However, the article also finds that it is likely to have a positive effect in the Member States that has been lagging behind. Moreover, the article criticizes that the Directive does not openly address the company law implications of the established procedure, and finds that the application of principles of equal treatment in top-management positions place the Directive in an unclear position between employment matters and company law. 167 [ABSTRACT FROM AUTHOR]

On 7 August 2020, the President of the Federal Republic of Nigeria assented to the Companies and Allied Matters Bill which culminated in the Companies and Allied Matters Act of 2020. The new Act repeals the Companies and Allied Matters Act of 1990 which had been in operation for thirty years. The Act contains provisions that regulate the right of a party to institute an action for harm caused to a company by majority shareholders or directors, a principle of corporate law widely known as derivative suit. This article, therefore, examines the provisions of the Act. It argues that, unlike the 1990 Act, the provisions of the 2020 Act have achieved significant milestones in enhancement of the rights of minority shareholders, companies, directors and the roles of courts in shareholders' derivative litigation. However, there are gaps in the Act which may threaten the utility of derivative suits in corporate governance in Nigeria. The article suggests a hybrid of reforms to the Act and useful guides to courts that will be beneficial to shareholder applicants, directors and corporations in derivative litigation. [ABSTRACT FROM AUTHOR]

The statutory statement of directors' duties contained in the Companies Act 2006 imposes a duty on directors to 'only exercise powers for the purposes for which they are conferred'. The duty has been equiparated with the equitable fraud on a power doctrine. This paper challenges the correctness of this approach, and argues that the unwarranted 'merging' of the duty and the doctrine has resulted in a legal chimera standing in the way of a proper understanding of the roles of each of the duty and the doctrine. It is submitted that this erroneous linking of two entirely different concepts is the result of a failure to (i) separate the different measures that have evolved to control directorial exercise of corporate powers, and (ii) pay due heed to the distinctive nature of the devolution of corporate power. [ABSTRACT FROM AUTHOR]

This article provides a comparative perspective on the issue of directors' liability for actions by a company which causes or contributes to human rights impacts. International, European and national regulatory developments in business and human rights are influencing company law. This article will consider directors' duties in relation to the meaning of 'the best interests of a company' and how the expectations on directors from various stakeholders are changing due to legislation, court decisions and practice. Based on this, there is an analysis of the link between directors' duties and human rights due diligence, and about access to remedy for the victims of actions arising from the acts or omissions of directors, including any decisions made by directors without proper regard for the human rights of those affected by the company's activities. It considers what might be the personal liabilities of directors in this area and possible ways forward, including in relation to probable EU regulation on this area. [ABSTRACT FROM AUTHOR]

The concept of De-facto Director, whose declaration is attributed to judges, is a reality in Colombian corporate law. Without in any way claiming to exhaust the subject matter, this paper pretends to reflect on the orientation and application of current legal regime of de-facto director in a deductive form. To do so, it first analyses the application of the concept; and, then, it studies judgements passed by the Superintendence of Corporations, in exercise of its judicial function, regarding this notion, by extracting the jurisprudential standards built from the case-law, which have facilitated the incorporation of the most advanced stances regarding this topic into our corporate law system. [ABSTRACT FROM AUTHOR]

According to the 2019 Directive on Digital Tools and Processes in Company Law (referred to here as 'the Digitalization Directive'), Member States are required until August 2023 to lay down a set of rules defining what kind of persons are not legally allowed to be directors of companies (e. g. those with a criminal background). Building their paper around long-standing critics of the EU company law regime and the transposition rules thereof, the authors present legal provisions of Croatian company law where special regard is paid to the 'disqualified directors' and the recipes for how to deal with these new challenges imposed by the Digitalization Directive. One of the positive aspects of the Digitalization Directive is that it requires Member States to clearly state the reasons why persons are not allowed to be company directors and that a list of these disqualified directors must be maintained. Company directors risk losing their rights of setting up or representing a company if they fail to meet their legal responsibilities. Although practically all Member States have at least one reason for disqualification, in practice there is wide variation in the reasons and in whether or not a list is kept. Given the scope and aim of the Digitalization Directive, the paper seeks to find out whether and to what extent the term 'disqualified directors' would and should be introduced into Croatian law. The paper argues that the EU regime allows the introduction of the 'disqualified directors' test into Croatian law. Alongside examining legal sources and literature, the authors pursue their research by systematically analyzing rules on 'disqualified directors' under the Digitalization Directive and Croatian Companies Act. After the introduction, the second part of the paper considers the concept of disqualified directors and provides an overview of other Member States. The paper gives a background picture of why the Digitalization Directive proposed certain actions, inherent problems inherent, and what major critiques have been brought forward in the meantime regarding 'disqualified directors'. The third part analyses the Croatian legal regime, aiming at revisiting it in the light of the 'transposition test'. The fourth part summarizes and concludes. [ABSTRACT FROM AUTHOR]

Two prominent progressive senators, Bernie Sanders and Elizabeth Warren, have recently proposed that employees should be allowed to elect forty to forty-five percent of the directors of large corporations. If implemented, such a reform would bring U.S. corporate law substantially closer to European countries like Denmark, Germany, and Sweden, where worker codetermination has long been a central feature of corporate governance. An extensive body of theoretical and empirical scholarship analyzes codetermination's economic impact on corporations and their employees. This Article focuses on a different issue. It examines codetermination's potential for protecting our democracy against the dangers inherent in the accumulation of extreme wealth and power by private corporations. Concentrated corporate wealth creates the risk that corporations will use their resources to undermine democratic institutions. This Article argues that codetermination can mitigate this risk by splitting corporate voting rights between shareholders and employees, thereby playing a role that is broadly similar to that of the Constitutional separation of powers. [ABSTRACT FROM AUTHOR]

Georgian models of corporate governance of a Joint Stock Company are analyzed in the paper using a comparative-legal research method. The period from 1994 to present is reviewed. Special focus is made on separate institutions integrated in corporate governance by the new Law of Georgia "On Entrepreneurs" and the goal of these institutions is to ensure efficiency of this process. [ABSTRACT FROM AUTHOR]

The extensive literature on strategic climate litigation focuses mainly on lawsuits brought against private litigants or the state based on breaches of environmental law, tort law, human rights law or public law. Relatively far less has been written about corporate and securities litigation against companies or their directors, let alone in relation to Asia. This article fills these gaps. It critically examines whether and how the enforcement of corporate law and securities law can be used as a tool to address climate-related risks in three leading common law jurisdictions in Asia – India, Singapore, and Hong Kong. The central argument of this article is that because of the limitations of private and public enforcement of corporate law, public enforcement of securities law and listing rules is a more effective mechanism in addressing climate risks in the three jurisdictions. [ABSTRACT FROM AUTHOR]

The Insolvency and Bankruptcy Code (IBC) of India which offers a mode of reorganisation for distressed corporations prevents promoters and directors with non-performing assets from submitting plans to rescue their company. This provision is contained under section 29A of the IBC. Judicial interpretation has required corporate reorganisations under India's Companies Act to give effect to the limitations under section 29A as well. The introduction and application of section 29A is reflective of a broader scepticism towards allowing promoters and directors whose companies entered financial distress from regaining control. This article evaluates whether section 29A has addressed the problems it had set out to and finds that some ineligibilities prescribed for the incumbent management under section 29A can be relaxed. It also uses the example of the United Kingdom's insolvency regime (with which India bears similarities) to explain why resolution plans from the incumbent management should not be disallowed. [ABSTRACT FROM AUTHOR]

The paper studies whether and to what extent the control of a public company can be ensured by means of share privileges. The question is raised by Article 360 of the Turkish Commercial Code, which does not allow the majority of directors of a public corporation to be appointed through board representation privileges. Also examined is the question whether this restriction applies to voting privilege, an alternative tool that can potentially be employed for controlling the board. Another issue the paper deals with is the efficiency of voting privileges in public corporations and whether board representation or voting privileges can be used for appointing independent directors. Finally, the paper discusses whether a veto right conferred by the articles of association of a company is valid from a corporate law perspective and if such rights can serve as a means of corporate control. [ABSTRACT FROM AUTHOR]

Corporate law is on the cusp of a paradigm shift--a revolution in the definition of the stockholder's entitlement. For a century, a simple proposition sat at the heart of corporate law: a share of stock may have some trading price, but in an intracorporate dispute that trading price has no necessary bearing on the value of an individual stockholder's entitlements. Instead, the stockholder's entitlement is determined by inquiring into the value of the corporate enterprise as a whole, not the individual fractionalized share. First articulated in the context of appraisal rights, this proposition has served as the Atlas of Delaware's corporate law, providing the theoretical underpinnings of its entire doctrinal universe. It's the centerpiece of the fairness standard, and it serves as a measure of damages for stockholders who suffer from unfaithful conduct by corporate managers. This traditional paradigm is foundational in the merger context, animating landmark decisions like Unocal and Revlon, for the powers and obligations of boards of directors make little sense if trading prices are the measure of the stockholders' entitlement. A new paradigm is emerging, however. In a series of important decisions, the Delaware Supreme Court has thoroughly refashioned the appraisal remedy, elevating the role of trading prices in delineating the stockholder's entitlement. These decisions have unfortunate consequences even in their native appraisal rights context. But they portend a far broader change that has thus far escaped the attention of commentators, one that goes to the very foundation of Delaware's corporate law. As we show in this Article, the Delaware Supreme Court has redefined the nature of the stockholders' entitlement, and the implications are potentially revolutionary. Most notably, the new paradigm calls into question the power of corporate directors to fight off a hostile bid. In concrete terms, it directly undermines the high-profile line of cases that culminates in the controversial 2011 Airgas v. Air Products decision. In Airgas, which has stood for a decade as the high-water mark of board power under Delaware law, the court allowed directors to repel a bidder offering a large premium to the market price by crediting the board's view that the corporation's value--and the value to which the stockholders were entitled--exceeded both the unaffected trading price and the bidder's offer. If, as the Delaware Supreme Court suggests in its recent appraisal cases, the legal position of stockholders entitles them to nothing more than the trading price of their shares, then the justification for the board's sweeping powers in Airgas to defend the corporation against hostile suitors has been swept away. [ABSTRACT FROM AUTHOR]

While the European Union (EU) was founded on the concept of equality as a fundamental value in 1993, the United States was created at a time when women were considered legally inferior to men. This has had the lasting effect of preventing women in the United States from making inroads into positions of power. While legislated board gender diversity (BGD) mandates have been instituted in some EU countries, the United States has been loath to take that route, relying instead on the goodwill of corporate boards, with little progress. On September 30, 2018, however, California enacted a law that has stirred much controversy for requiring at least one woman to be on the boards of corporations headquartered in the state by 2020. Based on our analysis, the California bill and other similar legislative efforts will fail without parallel constitutional action and cultural change in the United States. We begin by examining the individual, institutional, and cultural reasons why the United States lags so far behind the rest of the industrialized world. We then discuss recent activism by powerful institutions such as Nasdaq and Goldman Sachs that may signify broader cultural change and receptiveness to positive action. Next, we conduct an analysis of the legislative, cultural, and constitutional factors that have helped the EU succeed in increasing board diversity. We conclude by offering a normative solution that can pave the way to achieving gender equality in the United States. Learning from the EU model, the United States must let go of the Equal Rights Amendment and adopt a Substantive Equality Amendment to the Constitution requiring positive action to facilitate laws enabling gender equality. This solution will have broad cultural impact outside of the board context and will help change the lived experiences and outcomes for women in the United States for generations to come. It will change the course of history. [ABSTRACT FROM AUTHOR]

Corporate directors, like most people, are social creatures, and their social networks affect their decisions. But directors' social networks remain both understudied and undertheorized by scholars and inconsistently addressed by courts. This Article comprehensively examines the importance of director networks to corporate governance. Using qualitative and quantitative data, the Article uncovers the importance of director networks and the implications that network theory poses for the study of corporate law. In doing so, the Article tackles an understudied corner of corporate decision making at a critical time, when directors have an outsized influence over their companies and, in many cases, the United States economy as a whole. This Article builds on a robust literature in corporate governance and decision making. Much of the existing scholarship has focused on whether directors--especially "busy directors" who serve on multiple boards--are meeting investors' and regulators' expectations. The literature, however, overlooks an important aspect of busyness; that when directors serve on multiple boards, they also build a social network that extends beyond the companies they serve, spanning several degrees of separation. This Article shows how these broader connections affect corporate governance and discusses the legal implications of what it terms as "Social Corporate Governance." This Article makes three contributions to the existing literature. First, the Article identifies the significance of network theory to contemporary corporate governance discourse and develops a theoretical framework to better account for directors' service on multiple boards. Second, it empirically examines the direct impact that director networks have on the governance of public firms. It does so through an original data set that reveals some of the positive effects that director networks have on companies' governance, and further demonstrates how network analysis adds important insights to existing empirical studies regarding director service on multiple boards, at times significantly altering their results. Finally, the Article suggests that the current discourse by regulators, institutional investors, and academics may underestimate the importance that director networks have for companies. It then suggests several policy reforms to address these findings. [ABSTRACT FROM AUTHOR]

Motivated in part by a desire to change corporate behavior in a more pro-social direction, a number of governance inclusion mandates have been proposed that would require a corporate board to include diverse individuals or representatives of a constituency. This article applies the economic insights of the Coase theorem to determine if and how such mandates will afect corporate activities. The boardroom is a "Coasian bubble" in which the abilities to bargain and contract are greatly enhanced; inclusion of interests in the boardroom allows those interests to be taken into account. Inclusion also results in some transfer of corporate surplus from shareholders to the newly included. This implies that corporate behavior may not change since all those represented in the boardroom have incentives to maximize corporate surplus. Exceptions are where inclusion enables efficient contracting that was otherwise infeasible or if the included group has significant interests that are subject to corporate externalities. The latter channel is most likely to result in more pro-social corporate behavior since such interests represent significant "skin in the game" for avoiding corporate mageasance. Skin in the game can also be manufactured through ex post liability, such as by making a represented constituency liable for corporate failures or misbehavior; further, such liability may be necessary so that incentives are not degraded where the constituency receives benefits that are not in the nature of residual claims. Viewed through this lens, constituency mandates, in which directors are accountable to groups with signijicant interests, show some promise for promoting socially beneficial corporate behavior; diversity mandates, in which diverse but atomistic directors generally lack such accountability (at least as proposed), do not. [ABSTRACT FROM AUTHOR]

This paper analyses whether it is necessary for the General Directorate for Legal Certainty and Public Faith to require, as a condition for registration, that the clauses of articles of association or delegation resolutions limiting the directors' representative powers include an explicit reference to article 234 of the Corporations Law. We take the view that there are no reasons to deny the registration of these decisions because article 234 of the Corporations Law itself allows for their registration and it also protects third parties by establishing that any restrictions will always be ineffective vis-à-vis third parties. [ABSTRACT FROM AUTHOR]

The agency problem, the idea that corporate directors and officers are motivated to prioritize their self-interest over the interest of their corporation, has had a long-lasting impact on corporate-law theory and practice. In recent years, however, as federal agencies have stepped up enforcement efforts against corporations, a new problem has surfaced: what we call the "reverse agency problem." The surge in criminal investigations against corporations, combined with the rising popularity of settlement mechanisms, including pretrial diversion agreements and corporate plea agreements, has led corporations to sacrifice directors and officers in order to reach settlements with law enforcement authorities as expeditiously as possible. This phenomenon is the mirror image of the agency problem--the agent's problem. Although such settlements are in the best interests of companies and shareholders, they can have devastating effects on individual directors and officers. When they agree to settle a criminal prosecution, suspect companies collectively attribute wrongdoing to a large group of directors and managers without distinguishing between the guilty and the innocent. As a result, directors and officers implicated in settlements often suffer severe reputational losses, regardless of their culpability. Furthermore, the wrongdoing attributed to directors and officers in settlements exposes them to derivative lawsuits for breaches of their fiduciary duties. Unfortunately, extant law does not provide directors and officers with a means to prove their innocence or clear their names. In fact, it does not even give them a voice in the negotiations leading to the drafting of settlements. Thus, it dooms many directors and officers who have done no wrong to live with the mark of Cain and endure the economic consequences thereof. Four legal reforms could remedy the plight of nonculpable individual officers and directors. The first seeks to amplify the voices of individual corporate officers in settlement negotiations by giving them the right to a hearing prior to the completion of a settlement. The second gives directors and officers implicated in settlements the right to bring an action for a declaration of innocence that would clear their names and preempt derivative actions against them. The third solution recognizes a horizontal fiduciary duty between directors and officers, thereby allowing innocent directors and officers the right to sue their guilty colleagues for breaching such duty. The fourth, which should only become available in rare cases, is to let directors and officers sue the corporation for which they worked for the harms they suffered as a consequence of the corporation's actions and admissions. [ABSTRACT FROM AUTHOR]

The article discusses that executive officers should subjected to standards of liability as directors under current corporate governance law. Topics discussed include Disney awarded its newly appointed executive officer Michael Orvitz in cash, in stock options to leave the position, even after he proved utterly incapable of performing the duties; and Executive officer misconduct can lead to public humiliation, client loss, federal investigations, and shareholder distrust.

Unlike reincorporation decisions, domestic relocations of corporate headquarters have not yet received any attention in the corporate law literature. This lack of interest is unsurprising. Under the so-called "internal affairs doctrine," a corporation's internal affairs are governed by the state of incorporation, meaning that the location of a firm's headquarters is irrelevant to corporate law. However, this traditional approach has begun to change. In 2018, California became the first state to adopt a gender quota for corporate boards. Importantly, the scope of application of this statute is determined by the location of a corporation's principal executive offices rather than by its state of incorporation. Several other states are now considering similar legislation. For corporate law theory and policy, this deviation from the internal affairs rule is nothing less than the potential beginning of a tectonic shift. To the extent that the state of the headquarters governs a corporation's internal affairs, it is the relocation of a firm's headquarters rather than a firm's reincorporation that leads to a change in the applicable corporate law. The result is an entirely new dimension of state competition in corporate law; charter competition will likely remain the dominant factor, but states' attempts to lure corporate headquarters may now also shape corporate law. This Article lays the groundwork for a discussion of this new and more complex type of state competition by providing a detailed empirical analysis of firms' relocation choices. Relying on a dataset spanning twenty-five years (1994-2018), I show that headquarters relocations from one state to another are by no means uncommon. I also present evidence that the legal environment appears to be driving relocation choices at least to some extent. These findings suggest that state competition for corporate headquarters may well begin to have an impact on state corporate law. [ABSTRACT FROM AUTHOR]

In 2018, U.S. Senator Elizabeth Warren proposed S.B. 3348, the Accountable Capitalism Act. This Act seeks to alter corporate behavior to balance the effects of corporate actions across several different stakeholder groups, rather than focusing on the primacy of shareholders as is conventional in many U.S. state corporate laws. It has traditionally been difficult to determine the effects of the law in advance. However, innovative work in empirical legal studies is enabling experimental evaluations of laws through participatory simulation. We implemented such a simulation to compare the effects of the Accountable Capitalism Act vs. Delaware corporate law on director behavior. We deployed this simulation to 300 human participants via Amazon's crowdsourcing platform. Building on previous findings that showed that participants assigned to act as shareholder-selected directors and instructed via the Accountable Capitalism Act favored shareholders over other stakeholders in forced-choice contexts, this study found that such participants instructed via Delaware corporate law favored shareholders over other stakeholders as well. However, in a context where the alternate option was one that provided balanced benefits for several stakeholder groups, those instructed via Delaware corporate law placed significantly greater emphasis on shareholders than did those instructed via the Accountable Capitalism Act. Based on the results from the human participants, we constituted 3000 "virtual boards of directors," composed of randomly selected groups of study participants assigned to different types of directorships. Results from the virtual boards of directors suggest that boards composed of shareholder-selected directors instructed via the Accountable Capitalism Act led to lower levels of disparity across different stakeholder groups than those composed of shareholder-selected directors instructed via Delaware corporate law. In addition, those composed of 60% shareholder-selected directors and 40% employeeselected directors, as specified in the Accountable Capitalism Act, led to still lower levels of disparity than those composed solely of shareholder-selected directors. While these findings are based on interactive simulations rather than the real world, and based on the behavior of everyday people rather than business executives, they nevertheless provide experimental evidence that two key aspects of the Accountable Capitalism Act--the requirement for directors to consider the effects of corporate actions on various stakeholder groups, and the representation of employees on corporate boards--both produce results in line with their desired effects. Taken together, these results provide experimental support for the proposition that the Accountable Capitalism Act would lead to more balanced corporate behavior than does Delaware corporate law. [ABSTRACT FROM AUTHOR]

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