At the invitation of UCLA School of Law Professor Stephen M. Bainbridge, many of the leading legal scholars on corporate governance met at UCLA School of Law on April 11 and 12, 2014 to discuss and critique the three competing modes of corporate governance: director primacy, shareholder primacy and team production.
UCLA School of Law and the Lowell Milken Institute for Business Law and Policy sponsored the conference.
Several conference participants contributed very brief essays which have now been published by the UCLA Law Review’s online journal, Discourse. The essays provide a concise but powerful overview of the current views of many of the leading legal academics on corporate governance.
Stephen M. Bainbridge, The William D. Warren Distinguished Professor of Law at UCLA School of Law, in his essay, An Abridged Case for Director Primacy, argues that decision making power should be vested in the board of directors because shareholders have widely divergent interests and asymmetrical access to information which makes them less effective corporate decision makers.
Iman Anabtawi, Professor of Law, UCLA School of Law, in her essay Shadow Directors, contends that activist shareholders have blurred the traditional line between corporate ownership and control in US corporate law. She asserts that activist shareholders exercising de facto control over corporate decision making should be imputed with fiduciary duties owed to all shareholders.
Christopher M. Bruner, Professor of Law and Director, Frances Lewis Law Center, Washington and Lee University School of Law, in his essay Corporate Governance Theory and Review of Board Decisions, examines the various level of judicial review applied to corporate decision making under each of the three models of corporate governance and concludes that, on balance, none of the competing models provides a compelling descriptive account of judicial review outcomes.
Lisa M. Fairfax, Leroy Sorenson Merrifield Research Professor of Law; Director of Conference Programs, C-LEAF, The George Washington University School of Law, in her essay Toward a Theory of Shareholder Leverage, argues that recent shareholder activism has not resulted in a regime of shareholder primacy but rather shareholder leverage on specific issues.
George S. Georgiev, Lowell Milken Institute Law Fellow, UCLA School of Law, in his essay Shareholder vs. Investor Primacy in Federal Corporate Governance, questions the notion that post-financial crisis federal corporate governance regulation reflects the shareholder primacy model and argues that, instead, it comports more closely with the investor protection norm embedded in the federal securities laws.
Michael G. Guttentag, Professor of Law, John T. Gurash Fellow in Corporate Law & Business, Loyola Law School, in his essay Shareholder Primacy and the Misguided Call for Mandatory Political Spending Disclosure by Public Companies, critiques the assertion that shareholder primacy necessarily leads to increased mandatory disclosures with respect to corporate political spending.
Robert T. Miller, Professor of Law and F. Arnold Daum Fellow in Corporate Law, The University of Iowa College of Law, in his essay The Board Veto and Efficient Takeovers, argues in favor of directors’ ability to veto takeover proposals favored by shareholders by using Air Products and Chemicals, Inc. v. Airgas, Inc. as a case study.
David Millon, J. B. Stombock Professor of Law, Washington and Lee University School of Law, in his essay Team Production Theory: A Critical Appreciation, offers a critique of Margaret Blair and Lynn Stout’s team production model of corporate governance by arguing that directors don’t behave in the ways predicted by the theory, and that such behavior is accounted for by a traditional model of shareholder primacy.
Stefan J. Padfield, Professor of Law, The University of Akron School of Law, in his essay Citizens United, Concession Theory and Corporate Social Responsibility, argues that the concession theory of corporate personality can be used to support arguments in favor of mandatory corporate social responsibility.
James P. Park, Professor of Law, UCLA School of Law, in his essay Averages or Anecdotes? Assessing Recent Evidence on Hedge Fund Activism, argues that Lucian Bebchuk, Alon Brav & Wei Jiang’s recent empirical Hedge Fund Study may not fully capture the potential harm caused by activist hedge funds.
Usha Rodrigues, Associate Professor, The University of Georgia School of Law, in her essay David and Director Primacy, offers an alternative critique and justification of Stephen Bainbridge’s director primacy model.
Streaming Links to Conference Panels
Panel 1- Competing Models
Panel 2- Critiques of Models
Panel 3- Implications for Corporate Purpose
Panel 4- Implications for Judicial Review of Director Decisions