Volume 2.1
January
2023

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Article
Volume 2.1
A Critique of The American Law Institute’s Draft Restatement of the Corporate Objective
Stephen M. Bainbridge
William D. Warren Distinguished Professor of Law, UCLA School of Law

The American Law Institute (ALI) is currently working on a Restatement of the Law of Corporate Governance (Restatement). At the ALI’s May 2022 annual meeting, the membership approved, inter alia, § 2.01, which purports to restate the objective of the corporation. Section 2.01 differentiates between what the drafters refer to as common law jurisdictions and stakeholder jurisdictions.

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Volume 2.1
The (Mis)uses of the S&P 500
Adriana Z. Robertson
Donald N. Pritzker Professor of Business Law, University of Chicago Law School. arobertson@uchicago.edu

This article was originally drafted in 2018. While the arguments remain equally relevant today, the data and analysis date to that time. I would like to thank Pat Akey, Benjamin Alarie, Anita Anand, Oren Bar-Gill, William Birdthistle, Bernie Black, Vincent Buccola, Ignacio Cofone, Mary Condon, Peter Cziraki, Jared Ellias, Jeff Gordon, Andrew Green, Will Goetzmann, Jill Fisch, Gillian Hadfield, Jim Hines, Richard Hynes, Joshua Mitts, Ed Morrison, Roger Myerson, Anthony Niblett, Shu-Yi Oei, Omer Pelled, Roberta Romano, Sarath Sanga, Holger Spamann, Michael Trebilcock, Andrew Verstein, Albert Yoon, an anonymous referee, and the editors of the University of Chicago Business Law Review, as well as seminar participants at the Canadian Economics Association annual meeting, the Conference on Empirical Legal Studies, DiTella University, Northwestern University Pritzker School of Law, the Purdy Crawford Emerging Business Law Scholars Workshop, the STILE Law & Economics Workshop, the University of Chicago Law School, the University of Pennsylvania Carey Law School, the University of Southern California Gould School of Law, and the University of Toronto Faculty of Law. Financial support from the Tory Fund and the Connaught New Researcher Award are gratefully acknowledged. Alvin Yau provided exceptional research assistance. All remaining errors and shortcomings are my own.

The S&P 500 is widely used to (i) direct capital through “passive” investing, (ii) benchmark investment portfolios, and (iii) evaluate firm performance. The securities regulatory regime’s approach to each of these uses is fundamentally flawed. I show that the index is neither neutral nor constant: it represents substantial amounts of discretionary decision-making and is simply one particular large-cap portfolio.

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Volume 2.1
Banking on the Edge
Graham S. Steele
Assistant Secretary for Financial Institutions, U.S. Department of the Treasury, and former Minority Chief Counsel, U.S. Senate Committee on Banking, Housing, and Urban Affairs

The author’s professional affiliation is provided for identification purposes only. The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency of the U.S. government. The author is grateful to Jeremy Kress, Patricia McCoy, Arthur E. Wilmarth, Jr., Heidi Mandanis Schooner, Saule Omarova, Thomas Hoenig, and Anat Admati for their insightful comments and feedback. Most importantly, great thanks to the talented staff of the University of Chicago Business Law Review for their hard work and substantial improvements to this Article.

What’s old is new again. The risks of international banking have returned to prominence in the wake of the Russian invasion of Ukraine. Global banks are playing a central role in the economic sanctions regime imposed upon Russia in response to its acts of military aggression. Foreign banks have retrenched from serving the Russian economy. International markets for debt, equity, and commodities are experiencing significant disruptions. The solvency measures and quarterly earnings of global banks have been impacted. These risks are new versions of an old story.

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Volume 2.1
Unplugging Heartbeat Trades and Reforming the Taxation of ETFs
Jeffrey M. Colon
Professor of Law, Fordham University School of Law

I would like to thank Anna Heim and Xinran Hu for their excellent research assistance.

The much-touted tax efficiency of equity exchange traded funds (ETFs) has historically been built upon portfolios that track indices with low turnover and the tax exemption for in-kind distributions of appreciated property.

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Comment
Volume 2.1
Material Regulation of Out-of-State Production Processes as Impermissible Extraterritorial Law
Rebecca Zhu
J.D. Candidate 2023, The University of Chicago Law School

Many thanks to the editors and staff of the University of Chicago Business Law Review and to Professor Joan E. Neal for their valuable feedback.

A circuit split exists on whether the Supreme Court limited the Dormant Commerce Clause’s extraterritoriality doctrine to price affirmation statutes in Pharmaceutical Research & Manufacturers of America v. Walsh. This Comment argues that the Supreme Court has never drawn this limiting principle—in Walsh or otherwise—such that the Ninth Circuit incorrectly characterized Walsh in National Pork Producers Council v. Ross, and it should have held that the district court’s dependence on this reading constituted clear error in North American Meat Institute v. Becerra.