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Hillary A Sale - One of the best experts on this subject based on the ideXlab platform.
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the new Public Corporation
Law and contemporary problems, 2011Co-Authors: Hillary A SaleAbstract:The United States has experienced a financial crisis, a market crash, and a shift in the perception of America’s place in the global economy. New financial reform legislation will increase the role of the government in the socalled private-law world of Corporations and will press further on our conception of what the rights and responsibilities of “Public Corporations” actually are and will push us to reconceive the definitions of Public Corporations and corporate governance. This article explores that issue - the definition of Public Corporation and its impact on corporate governance. Rather than accepting the definition of Public Corporations as those that are traded in markets, this article argues that, when viewed in light of the ways in which society’s views of Corporations have changed, that definition is impoverished. Public Corporations are not just creatures of Wall Street. They are creatures of Main Street, the media, bloggers, Congress, and the government. Indeed, the article argues, it is the failure of the fiduciaries of Public Corporations to understand their “Publicness” that accounts for many of the recent scandals.
Lynn A Stout - One of the best experts on this subject based on the ideXlab platform.
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a team production theory of corporate law
The Journal of Corporation Law, 1999Co-Authors: Margaret M Blair, Lynn A StoutAbstract:A Team Production Theory of Corporate Law^ INTRODUCTION Who owns a Corporation? Most economists and legal scholars today seem inclined to answer: Its shareholders do. Contemporary discussions of corporate governance have come to be dominated by the view that Public Corporations are little more than bundles of assets collectively owned by shareholders (principals) who hire directors and officers (agents) to manage those assets on their behalf.1 This principal-agent model, in turn, has given rise to two recurring themes in the literature: First, that the central economic problem addressed by Corporation law is reducing "agency costs" by keeping directors and managers faithful to shareholders' interests; and second, that the primary goal of the Public Corporation is-or ought to be-maximizing shareholders' wealth. In this Article we take issue with both the prevailing principal-agent model of the Public Corporation and the shareholder wealth maximization goal that underlies it. Because Corporations are fictional entities that can only act through human agents, problems of agent fealty are frequently encountered by those who study and practice corporate law. Yet the Public Corporation is hardly unique in its use of agents. Other organizational forms, including partnerships, proprietorships, privately-held Corporations, and limited liability companies, also routinely do business through hired managers and employees. Thus, while the principal-agent problem may be important in understanding the business firm, we question whether it necessarily provides special insight into the theory of the Public Corporation. We explore an alternative approach that we believe may go much further in explaining both the distinctive legal doctrines that apply to Public Corporations and the unique role these business entities have come to play in American economic life: the team production approach. In the economic literature, team production problems are said to arise in situations where a productive activity requires the combined investment and coordinated effort of two or more individuals or groups.2 If the team members' investments are firm-specific (that is, difficult to recover once committed to the project), and if output from the enterprise is nonseparable (meaning that it is difficult to attribute any particular portion of the joint output to any particular member's contribution), serious problems can arise in determining how any economic surpluses generated by team production-any "rents"should be divided. Ex ante sharing rules invite shirking,3 while ex post attempts to divvy up rewards create incentives for opportunistic rent-seeking4 that can erode and even destroy the economic gains that flow from team production. Yet trying to prevent shirking and rent-seeking by defining individual team members' duties and rewards through explicit contracts can be impossibly difficult, especially when the team production process is complex, continuous, or uncertain. While team production problems are less well studied than principal-agent problems, we believe the former may represent a more appropriate basis for understanding the unique economic and legal functions served by the Public Corporation. Our analysis rests on the observation-generally accepted even by corporate scholars who adhere to the principal-agent model-that shareholders are not the only group that may provide specialized inputs into corporate production.5 Executives, rank-and-file employees, and even creditors or the local community may also make essential contributions and have an interest in an enterprise's success. And in circumstances where it is impossible to draft explicit contracts that deter shirking and rent-seeking among these various corporate "team members" by preallocating rewards and responsibilities, we suggest that the problem may be better left to an institutional substitute for explicit contracts: the law of Public Corporations. …
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a team production theory of corporate law
Virginia Law Review, 1999Co-Authors: Margaret M Blair, Lynn A StoutAbstract:Contemporary corporate scholarship generally assumes that the central economic problem addressed by Corporation law is getting managers and directors to act as loyal agents for shareholders. We take issue with this approach and argue that the unique legal rules governing Publicly-held Corporations are instead designed primarily to address a different problem - the "team production" problem - that arises when a number of individuals must invest firm-specific resources to produce a nonseparable output. In such situations team members may find it difficult or impossible to draft explicit contracts distributing the output of their joint efforts, and, as an alternative, might prefer to give up control over their enterprise to an independent third party charged with representing the team's interests and allocating rewards among team members. Thus we argue that the essential economic function of the Public Corporation is not to address principal-agent problems, but to provide a vehicle through which shareholders, creditors, executives, rank-and-file employees, and other potential corporate "stakeholders" who may invest firm-specific resources can, for their own benefit, jointly relinquish control over those resources to a board of directors. This alternative to the principal-agent approach offers to explain a variety of pivotal doctrines in corporate law that have proven difficult to explain using agency theory, including: the requirement that a Public Corporation be managed by a board of directors rather than by shareholders directly; the meaning and function of a Corporation's "legal personality" and the rules of derivative suit procedure; the substantive structure of directors' fiduciary duties, including the application of the business judgment rule in the takeover context; and the highly-limited nature of shareholders' voting rights. The team production model also carries important normative implications for legal and popular debates over corporate governance, because it suggests that maximizing shareholder wealth should not be the principal goal of corporate law. Rather, directors of Public Corporations should seek to maximize the joint welfare of all the firm's stakeholders - including shareholders, managers, employees, and possibly other groups such as creditors or the local community - who contribute firm-specific resources to corporate production.
Ronald J Gilson - One of the best experts on this subject based on the ideXlab platform.
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deconstructing equity Public ownership agency costs and complete capital markets
Columbia Law Review, 2007Co-Authors: Ronald J Gilson, Charles K WhiteheadAbstract:The traditional law and finance focus on agency costs presumes, without acknowledgement, that the premise that diversified Public shareholders are the cheapest risk-bearers is immutable. In this Essay, we raise the possibility that changes in the capital markets have called this premise into question, drawn into sharp relief by the recent private equity buying wave in which the size and range of Public companies being taken private expanded significantly. In brief, we argue that private owners, in increasingly complete markets, can transfer risk in discrete slices to counterparties who, in turn, can manage or otherwise diversify away those risks they choose to forego, arguably becoming a lower cost substitute for traditional risk capital. If diversified shareholders are no longer the cheapest risk-bearers, then the associated agency costs may now be voluntary; and, if risk management can substitute for risk capital, without requiring a transfer of ownership, then why go Public at all? Do more complete capital markets herald (once again) the eclipse of the Public Corporation? We offer some preliminary responses, suggesting that the line between Public and private firms may begin to blur as the traditional balance between agency costs and the benefits of Public ownership shifts towards a new equilibrium. For some, the benefits of Public ownership may continue to outweigh the associated agency costs. For others, changes in risk transfer may implicate how a firm is (or should be) governed. The Essay then ends with a final question: If the opportunity to invest in common stock recedes, by what means will former investors in Public equity be able to invest capital?
Kai Zhang - One of the best experts on this subject based on the ideXlab platform.
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Application of analytic hierarchy process for Intellectual Property Rights in High-Tech Public Corporation
2011 Seventh International Conference on Natural Computation, 2011Co-Authors: Kai ZhangAbstract:This paper addresses the theme of analytic hierarchy process in Intellectual Property Rights (IPRs) of High-Tech Public Corporation considering the characteristics of Intellectual Property Rights (IPRs) (including high-risk, multi-stage, expandability, product life circle, etc.).The paper expanse Discounted Cash flow Analysis, relative valuation method and Black-Scholes formula to the analytic hierarchy process model for evaluating of the uncertainty. A solution algorithm which transforms the Black-Scholes equation into constant coefficient diffusion equation is developed. The expanded analytic hierarchy process under uncertainty achieves investment decision-making optimality that is generally not well presented in traditional approaches for Intellectual Property Rights (IPRs).
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ICNC - Application of analytic hierarchy process for Intellectual Property Rights in High-Tech Public Corporation
2011 Seventh International Conference on Natural Computation, 2011Co-Authors: Kai ZhangAbstract:This paper addresses the theme of analytic hierarchy process in Intellectual Property Rights (IPRs) of High-Tech Public Corporation considering the characteristics of Intellectual Property Rights (IPRs) (including high-risk, multi-stage, expandability, product life circle, etc.).The paper expanse Discounted Cash flow Analysis, relative valuation method and Black-Scholes formula to the analytic hierarchy process model for evaluating of the uncertainty. A solution algorithm which transforms the Black-Scholes equation into constant coefficient diffusion equation is developed. The expanded analytic hierarchy process under uncertainty achieves investment decision-making optimality that is generally not well presented in traditional approaches for Intellectual Property Rights (IPRs)
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application of real options analysis for r d project valuation in high tech Public Corporation
International Conference on Computer Education Simulation and Modeling, 2011Co-Authors: Kai ZhangAbstract:This paper addresses the theme of real options decision-making in R&D projects of High-Tech Public Corporation considering the characteristics of R&D projects (including high-risk, multi-stage, expandability, product life circle, etc.).The paper expanse traditional discounted Cash flow Analysis to the uncertain process, and presents the Black-Scholes formula for evaluating of the uncertainty. A solution algorithm which transforms the Black-Scholes equation into constant coefficient diffusion equation is developed. The expanded discounted Cash flow Analysis under uncertainty achieves investment decision-making optimality that is generally not well presented in traditional approaches for R&D projects.
Rene M Stulz - One of the best experts on this subject based on the ideXlab platform.
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eclipse of the Public Corporation or eclipse of the Public markets
National Bureau of Economic Research, 2018Co-Authors: Craig Doidge, Kathleen M Kahle, Andrew G Karolyi, Rene M StulzAbstract:Since reaching a peak in 1997, the number of listed firms in the U.S. has fallen in every year but one. During this same period, Public firms have been net purchasers of $3.6 trillion of equity (in 2015 dollars) rather than net issuers. The propensity to be listed is lower across all firm size groups, but more so among firms with less than 5,000 employees. Relative to other countries, the U.S. now has abnormally few listed firms. Because markets have become unattractive to small firms, existing listed firms are larger and older. We argue that the importance of intangible investment has grown but that Public markets are not well-suited for young, R&D-intensive companies. Since there is abundant capital available to such firms without going Public, they have little incentive to do so until they reach the point in their lifecycle where they focus more on payouts than on raising capital.
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The shrinking number of Public Corporations in the US
2017Co-Authors: Kathleen M Kahle, Rene M StulzAbstract:In his famous Harvard Business Review article titled "Eclipse of the Public Corporation," Jensen (1989) argues that Public Corporations are inefficient organizational forms because private firms can resolve agency conflicts between investors and managers better than Public firms. His prediction initially appeared invalid. As shown in Figure 1, the number of Public firms increased sharply in the first half of ...
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is the u s Public Corporation in trouble
Journal of Economic Perspectives, 2017Co-Authors: Kathleen M Kahle, Rene M StulzAbstract:We examine the current state of the U.S. Public Corporation and how it has evolved over the last 40 years. After falling by 50 percent since its peak in 1997, the number of Public Corporations is now smaller than 40 years ago. These Corporations are now much larger and over the last twenty years have become much older; they invest differently, as the average firm invests more in RD and compared to the 1990s, the ratio of investment to assets is lower, especially for large firms. Public firms have record high cash holdings and, in most recent years, the average firm has more cash than long-term debt. Measuring profitability by the ratio of earnings to assets, the average firm is less profitable, but that is driven by smaller firms. Earnings of Public firms have become more concentrated – the top 200 firms in profits earn as much as all Public firms combined. Firms’ total payouts to shareholders as a percent of earnings are at record levels. Possible explanations for the current state of the Public Corporation include a decrease in the net benefits of being a Public company, changes in financial intermediation, technological change, globalization, and consolidation through mergers.
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is the american Public Corporation in trouble
2016Co-Authors: Kathleen M Kahle, Rene M StulzAbstract:We examine the current state of the American Public Corporation and how it has evolved over the last forty years. There are fewer Public Corporations now than forty years ago, but they are much older and larger. They invest differently, as the importance of R&D investments has grown relative to capital expenditures. On average, Public firms have record high cash holdings and in most recent years they have more cash than long-term debt. They are less profitable than they used to be and profits are more concentrated, as the top 100 firms now account for most of the net income of American Public firms. Accounting statements are less informative about the performance and the value of firms because firms increasingly invest in intangible assets that do not appear on their balance sheets. Firms’ total payouts to shareholders as a percent of net income are at record levels, suggesting that firms either lack opportunities to invest or have poor incentives to invest. The credit crisis appears to leave few traces on the course of American Public Corporations.
