Volume 1.1
June
2022

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Volume 1.1
ESG and Private Ordering
Michal Barzuza
Professor of Law, University of Virginia School of Law

For useful comments and suggestions we are grateful to Elizabeth Pollman and participants at the University of Chicago Business Law review, inaugural symposium.

Quinn Curtis
Albert Clark Tate, Jr., Professor of Law, University of Virginia School of Law
David H. Webber
Professor of Law and Paul M. Siskind Research Scholar, Boston University School of Law

Easterbrook and Fischel’s seminal book The Economic Structure of Corporate Law has taught us the crucial role of markets in shaping the corporate contract. With the rise of ESG, the nature of that contract is changing, but the importance of markets (and of their limitations) is not. In this piece, building on our previous work that traces the remarkable growth of ESG to a shift in demand, primarily, but not solely, among millennials, we discuss the role of markets in shaping ESG, as well as their limitations.

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Volume 1.1
Competing Views on the Economic Structure of Corporate Law
Lucian A. Bebchuk
James Barr Ames Professor of Law, Economics, and Finance, and Director of the Program on Corporate Governance, Harvard Law School

For disclosure of other affiliations and activities, see http://www.law.harvard.edu/faculty/bebchuk/bio.shtml. I benefitted from discussions with and comments from Scott Hirst, Kobi Kastiel, and participants in the University of Chicago Symposium on the Economic Structure of Corporate Law.

Written for a symposium issue celebrating the thirty-year anniversary of the publication of The Economic Structure of Corporate Law by Frank Easterbrook and Daniel Fischel (“E&F”), this Essay discusses the interaction of my research over the years with their writings. During the period in which the book and articles were written, and in the many years since then, I have paid close attention to E&F’s writings in my research in the economics of corporate governance.

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Volume 1.1
Just Say No? Shareholder Voting on Securities Class Actions
Albert H. Choi
Paul G. Kauper Professor of Law, University of Michigan
Stephen J. Choi
Bernard Petrie Professor of Law and Business, New York University
A.C. Pritchard
Frances and George Skestos Professor of Law, University of Michigan

The U.S. securities laws allow security-holders to bring a class action suit against a public company and its officers who make materially misleading statements to the market. The class action mechanism allows individual claimants to aggregate their claims. This procedure mitigates the collective action problem among claimants, and also creates potential economies of scale. Despite these efficiencies, the class action mechanism has been criticized for being driven by attorneys and also encouraging nuisance suits.

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Volume 1.1
Hidden History of Securities Damages
Allen Ferrell
Greenfield Professor of Securities Law, Harvard Law School; PhD

Approaches to calculating fraud on the market 10b-5 damages have evolved substantially from the 1970s to the present. In this Essay I discuss the various approaches used over this span of time, including the rise of the event study approach.

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Volume 1.1
Purpose Proposals
Jill E. Fisch
Saul A. Fox Distinguished Professor of Business Law, University of Pennsylvania Law School

I thank participants at the University of Chicago Business Law Review Symposium, the Tulane Corporate and Securities Roundtable and the BYU Winter Deals Conference as well as Rick Alexander, Cathy Hwang, Sanford Lewis, Peter Molk, Alessio Pacces and Harwell Wells for their many helpful comments and suggestions.

Repurposing the corporation is the hot issue in corporate governance. Commentators, investors, and increasingly issuers, maintain that corporations should shift their focus from maximizing profits for shareholders to generating value for a more expansive group of stakeholders. Corporations are also being called upon to address societal concerns—‍from climate change and voting rights to racial justice and wealth inequality.

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Volume 1.1
Rereading the “One Share, One Vote” Principle: Is It Also a Matter of Competition?
Federico Ghezzi
Full Professor of Corporate and Competition Law at Bocconi University, Milan, Italy
Chiara Mosca
CONSOB Commissioner; Associate Professor of Corporate and Financial Markets Law at Bocconi University, Milan, Italy (on leave)

The opinions expressed in this Article are the sole responsibility of the author and should not be taken to represent an official position of the institution in which she serves.

Maria Lucia Passador
Academic Fellow in Corporate and Financial Markets Law at Bocconi University, Milan, Italy

Despite being a cumbersome principle of corporate governance, the “one share, one vote” principle à la Easterbrook and Fischel is constantly challenged by several attempts to circumvent the original structure of capitalism democracy, based on the provision (often a default provision) that no more and no less than one vote is attributed to each share.

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Volume 1.1
The New Corporate Governance
Oliver Hart
Harvard University

We are grateful to Lucian Bebchuk, Ronald Gilson, Bernard Sharfman, Robert Sitkoff, Holger Spamann, David H. Webber, and participants at the University of Chicago Business Law Review Symposium for helpful discussions and feedback. We thank Jack Li for excellent research assistance. Oliver Hart gratefully acknowledges financial support from the Harvard-Radcliffe Institute. Luigi Zingales gratefully acknowledges financial support from Stigler Center at the University of Chicago.

Luigi Zingales
University of Chicago

We are grateful to Lucian Bebchuk, Ronald Gilson, Bernard Sharfman, Robert Sitkoff, Holger Spamann, David H. Webber, and participants at the University of Chicago Business Law Review Symposium for helpful discussions and feedback. We thank Jack Li for excellent research assistance. Oliver Hart gratefully acknowledges financial support from the Harvard-Radcliffe Institute. Luigi Zingales gratefully acknowledges financial support from Stigler Center at the University of Chicago.

In the last few years, there has been a dramatic increase in shareholder engagement on environmental and social issues. In some cases shareholders are pushing companies to take actions that may reduce market value. It is hard to understand this behavior using the dominant corporate governance paradigm based on shareholder value maximization. We explain how jurisprudence has sustained this criterion in spite of its economic weaknesses.

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Volume 1.1
Endogenous Choice of Stakes Under Common Ownership
C. Scott Hemphill
Moses H. Grossman Professor of Law, New York University School of Law

We thank Chris Conlon, Angel Lopez, Alessio Piccolo, and participants at the NYU Law and Economics Workshop and the NBIM Common Ownership Mini-Conference for helpful comments.

Marcel Kahan
George T. Lowy Professor of Law, New York University School of Law

We thank Chris Conlon, Angel Lopez, Alessio Piccolo, and participants at the NYU Law and Economics Workshop and the NBIM Common Ownership Mini-Conference for helpful comments.

We present a simple model of common ownership in which an investor chooses its stake in competing firms in light of the effects on firm behavior and firm profits. Two firms compete in Cournot duopoly, and ownership affects a firm’s objective function in the manner posited by Bresnahan & Salop (1986) and Salop & O’Brien (2000).

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Volume 1.1
Should There Be Corporate Governance Police?
M. Todd Henderson
Michael J. Marks Professor of Law, University of Chicago Law School

If a company misbehaves, lawsuits are one way of providing a remedy and encouraging that company and others to behave in the future. If the misbehavior is securities fraud, there are two potential plaintiffs—‍traders allegedly injured by the fraud may bring a private suit, and the government (through the SEC or DOJ) may sue to enforce the public interest in truthful disclosures of corporate information. If the misbehavior is violations of corporate governance rules, however, only private suits are available.

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Volume 1.1
Shadow Contracts
Jessica S. Jeffers
Ph.D., Assistant Professor of Finance and David G. Booth Faculty Fellow, Booth School of Business, University of Chicago

We are grateful to collaboration of Eighteen East Capital partners, Dave Portmann and Thomas Venon, Swedish International Development Agency, Global Affairs Canada, the Impact Finance Research Consortium, the Wharton Social Impact Initiative, and the Rustandy Center, in particular fellows, and participant fund general partners, for making this paper possible. Jim Hicks & Hanson Ho provided excellent research assistance; all errors are our own.

Anne M. Tucker
Anne M. Tucker, Professor & Faculty Director of Legal Analytics & Innovation, Georgia State University College of Law

We are grateful to collaboration of Eighteen East Capital partners, Dave Portmann and Thomas Venon, Swedish International Development Agency, Global Affairs Canada, the Impact Finance Research Consortium, the Wharton Social Impact Initiative, and the Rustandy Center, in particular fellows, and participant fund general partners, for making this paper possible. Jim Hicks & Hanson Ho provided excellent research assistance; all errors are our own.

This project explores side letters in private market funds. Side letters, separate agreements between a fund and an investor, act as an invisible amendment to the main contract. This article introduces a new use case for side letters: impact investments, where funds target social, as well as financial, returns. Using a hand-collected data set, we examine the scope and role of side letters in this growing space.

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