Vol. 74 No. 2 -- Spring 2019

  May 2019

Symposium

Business & Corporate

Capitalism and Pragmatism Govern New Paradigms for Corporate Governance

74(2) 367-372 For purposes of this essay, I have analyzed two recently promulgated paradigms for reformation of current frameworks of corporate governance. In The New Paradigm, Martin Lipton and his co-authors essentially recalibrate the relationship between public corporations and their major institutional investors, and conceptualize corporate governance as a collaboration among corporations, their CEOs and boards of directors, and institutional investors and asset managers working together to achieve long-term value. The New Paradigm is premised on the idea that corporations and institutional investors can forge a meaningful and successful private sector solution to “short-termism.” In Outsourcing the Board, Professors Stephen M.Bainbridge and M. Todd Henderson propound a new corporate governance model whereby board services would be provided not by individual directors but by “board service providers” (“BSPs”)—outsourcing the functions of a board of dirrectors to an integrated professional services company.

Articles

Business & Corporate

A Case for Eliminating Quarterly Periodic Reporting: Addressing the Malady of Short-Termism in U.S. Markets with Real Medicine

74(2) 387-416 The author maintains that “short-termism” is a serious malady for which the only effective remedy is (1) elimination of quarterly periodic reporting on Form 10-Q, and the companion disclosure regime of quarterly earnings releases and conference calls, (2) conversion to annual-only periodic reporting on Form 10-K, coupled with a new annual earnings guidance requirement, and (3) retention of current interim disclosure of select material events on Form 8-K. The author reviews how the current quarterly disclosure regimes lead inevitably to short-termism behaviors, and are temptations to other problematic conduct, by corporate actors and market participants. The author contends that the proposed disclosure regime would reduce substantially such behavior and temptations, without compromising the quality of disclosures, protection of investors, or effectiveness of the capital markets system. The author argues that only such a fundamental change from the short-term timetable of the current disclosure regimes can curb short-termism, promote longer term and more strategic focus by corporate actors, and lead analysts, investors, and other market participants to focus on longer-term value propositions.

Business & Corporate

How Efficient Is Sufficient: Applying the Concept of Market Efficiency in Litigation

74(2) 417-434 The concept of market efficiency has been adopted by courts in a variety of contexts. In reality, markets can never be perfectly efficient or inefficient, but exist somewhere in between depending on the facts and circumstances. Courts, therefore, face a problem in deciding how efficient is sufficient in any particular legal context. Because market prices incorporate the views of numerous market participants, courts have often been willing to presume that a market is efficient so long as the appropriate criteria are satisfied. However, those criteria are different for different types of cases, such as securities class actions, appraisal actions, and cram downs in bankruptcy.

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