January 18, 2017 (Wednesday) at 12:10 PM
Mariana Pargendler, Professor of Law at Fundação Getulio Vargas (FGV) Law School in São Paulo;
Director of the Center for Law, Economics, and Governance (at FGV)
Case Lounge (Jerome Greene Hall room 701)
The standard history of the business corporation is one of continued success and inevitable expansion to different contexts. This Article seeks to complicate this view by showing how recent legal developments in Brazil have significantly watered down the canonical elements of the corporate form, namely (i) legal personality and capital lock-in, (ii) limited liability, (iii) delegated management, (iv) transferable shares, and (v) investor ownership. It then examines these developments in view of efficiency and distribution considerations. In particular, it explores whether “decorporatization” of enterprise in Brazil may constitute a second-best response to a deficient institutional environment.
March 8, 2017 (Wednesday) at 12:10 PM
Bruno Salama, Visiting Professor of Law at Columbia Law School (Spring 2017);
Professor of Law at the São Paulo School of Law at the Fundação Getulio Vargas (FGV);
Director of the Center for Law, Economics, and Governance (at FGV)
Case Lounge (Jerome Greene Hall room 701)
Legislation that seems unreasonable to courts is less likely to be followed. Building on this premise, we propose a model and obtain two main results. First, the enactment of legislation prohibiting something raises the probability that courts will allow related things not expressly forbidden. In particular, the imposition of an interest rate ceiling can make it more likely that courts will validate contracts with interest rates below the legislated cap. Second, legal uncertainty is greater with legislation that commands little deference from courts than with legislation that commands none. We discuss examples of effects of legislated prohibitions (and, in particular, usury laws) that are consistent with the model.
March 29, 2017 (Wednesday) at 12:10 PM
Aaron Dhir, Justin D'Atri Visiting Professor of Law, Business and Society at Columbia Law School (Spring 2017)
Associate Professor, Osgoode Hall Law School, York University (Toronto)
Jerome Greene Hall, room 646
Challenging Boardroom Homogeneity: Corporate Law, Governance, and Diversity
(Cambridge University Press)
Chapter 1: Introduction: Homogeneous Corporate Governance Cultures
Chapter 4: Norway's Socio-Legal Journey: A Qualitative Study of Norway's Boardroom Diversity Quotas
The lack of gender parity in the governance of business corporations has ignited a heated global debate leading policymakers to wrestle with difficult questions that lie at the intersection of market activity and social identity politics. Drawing on semi-structured interviews with corporate board directors in Norway and documentary content analysis of corporate securities filings in the United States, Challenging Boardroom Homogeneity(Cambridge University Press) investigates two distinct regulatory models designed to address diversity in the boardroom: quotas and disclosure. The author's study of the Norwegian quota model demonstrates the role that gender diversity can play in corporate governance, while also revealing the challenges diversity mandates pose. His analysis of the U.S. regime shows how a disclosure model has led corporations to establish a vocabulary of “diversity.” At the same time, the analysis highlights the downsides of affording firms too much discretion in defining that concept.
April 10, 2017 (Monday) at 12:00 to 2:00 PM
Mini-Workshop: Legal Infrastructure of Securities Markets
Markets are complex institutional infrastructures. They may take the form of informal clubs, private or public trading platforms or complex networks of parties and counter parties with or without clearing houses or sophisticated information technology linking market participants to each other. Yet, little attention is paid to how the organization of markets affects outcomes, including the distribution of power and wealth.
Delphine Nougayrede and David Donald will present their recent work on the legal infrastructure of securities markets. Delphine will tackle the transparency of ownership in securities markets; David places the advance of computer, and in particular blockchain technology, into a broader historical perspective of market transformations.
The event is co-sponsored by the Center on Global Legal Transformation and the Center for Law and Economic Studies (the Blue Sky Lunch series).
Delphine Nougayrede, Lecturer in Law, Columbia Law School
In their recent books, economists Thomas Piketty and Gabriel Zucman called for the creation of a global financial register (GFR) that would map the individual ownership of financial assets, including securities, in order to monitor and combat the rise of inequality. Zucman's proposal is to build this register using the databases of the large Western central securities depositories (CSDs), such as DTC, Euroclear and Clearstream. This Article examines the viability of these proposals in light of the technical reality of securities account structure within CSDs. It explains that because they are predominantly based on "street name" registration or "omnibus" accounts, their model is not prima facie conducive to the creation of a GFR identifying end-investors. The model evolved in that way because of the depth of the intermediation chain and continuing legal and regulatory fragmentation along national lines. Ownership information at present is located within intermediaries that have little incentive to change the model. Yet counter-examples within the emerging world (China) and in smaller Western economies (Norway) point to the possibility of more transparent CSDs. Increased transparency in these institutions would also help achieve other goals in addition to a GFR, such as improved corporate governance, better protection of corporate issuer and shareholder rights, and greater effectiveness of regulations combatting unlawful uses of the financial system. The viability of the Piketty/Zucman proposal should therefore be acknowledged, and the idea of increased transparency within financial infrastructure like CSDs given proper consideration, at a policy level that would be wider than that of financial industry circles.
David C. Donald, Professor, Faculty of Law, Chinese University of Hong Kong
Nearly all securities trading occurs among brokers or dealers. For about 1000 years, merchant firms of varying size and specialization have traded securities among themselves. For most of this time, trades were effected directly and during the two centuries from roughly 1800 to 2000 through quasi-public organizations called “exchanges”. Around 2000, the largest broker-dealers began to re-internalize trading into their own proprietary matching platforms.
Although securities exchanges were first established to create monopoly conditions, they also brought efficiency: private ordering among members reduced risks from both counterparties and issuers through vetting and disclosure. Within the exchange, regular operations and transparent protocols democratized the market among broker-dealers, small and large. From the 1930s, these private institutions were brought within formal securities law, so that securities trading was made quite level, with all broker-dealers engaging each other within a transparent arena on which oversight focused. At the turn of the 21st century, however, technology and regulatory reform allowed the largest broker-dealers to escape the transparent egalitarianism that exchanges had become and create their own proprietary trade matching venues.
The story of securities trading has been an evolution from firm to market and back to firm (Coase 1937) in conjunction with varying combinations of formal and informal institutions (North 1990). This evolution has been shaped by law and technology, but driven in its entirety by broker-dealer self-interest. As we approach the end of the era of concentrated trading in highly regulated securities exchanges, this article gives evidence of what we are losing and why. The dismantling of securities exchanges, often understood as embracing innovative technology to stimulate competition and lower prices, is the result of a rational desire of the largest broker-dealers to escape the transparency and democratizing function of regulated securities exchanges so as to return trading to a model in which leading broker-dealers control the nature and direction of the market.
April 14, 2017 (Friday) at 12:10 PM
Naomi Lamoreaux, Stanley B. Resor Professor of Economics & History, Yale University;
Chair, Yale History Department
William Novak, Charles F. and Edith J. Clyne Professor of Law, University of Michigan Law School
Jerome Greene Hall Room 102A
Corporations and American Democracy (Harvard University Press, forthcoming May 2017)
The Center for Law & Economic Studies and Prof. Richard Brooks, as part of his Corporations & Constitutions Seminar, are jointly sponsoring a presentation by Naomi Lamoreaux and William Novak about their forthcoming book, Corporations and American Democracy.
April 19, 2017 (Wednesday) at 12:10 PM
Wojciech Kopczuk, Department of Economics, Columbia University
Measurement and evidence on income and wealth inequality
Although Prof. Kopczuk will not be distributing a paper, you may see his related work here.
April 24, 2017 (Monday) at 12:10 PM
Richard Holden, Professor of Economics, University of New South Wales Business School, Sydney, Australia
Using data on essentially every US Supreme Court decision since 1946, we estimate a model of peer effects on the Court. We consider both the impact of justice ideology and justice votes on the votes of their peers. To identify these peer effects we use two instruments. The first is based on the composition of the Court, determined by which justices sit on which cases due to recusals or health reasons for not sitting. The second utilizes the fact that many justices previously sat on Federal Circuit Courts and are empirically much more likely to affirm decisions from their “home” court. We find large peer effects. Replacing a single justice with one who votes in a conservative direction 10 percentage points more frequently increases the probability that each other justice votes conservative by 1.63 percentage points. In terms of votes, a 10 percentage point increase in the probability that a single justice votes conservative leads to a 1.1 percentage increase in the probability that each other justice votes conservative. Finally, a single justice becoming 10% more likely to vote conservative increases the share of cases with a conservative outcome by 3.6 percentage points–excluding the direct effect of that justice–and reduces the share with a liberal outcome by 3.2 percentage points. In general, the indirect effect of a justice’s vote on the outcome through the votes of their peers is typically several times larger than the direct mechanical effect of the justice’s own vote.