Spring 2021 - Blue Sky Talks

January 27, 2021 (Wed)
12:15 PM EST

Josh Mitts

  • Associate Professor of Law and Milton Handler Fellow,
    Columbia Law School

Location: Virtual session.  Link distributed a few days before the event.  Email cmark@law.columbia.edu for more information.

Paper/Topic: The Index-Fund Dilemma: An Empirical Study of the
Lending-Voting Tradeoff

Co-authors: Edwin Hu, Haley Sylvester

Abstract: Institutional investors' role in shareholder voting is among the most hotly debated subjects in corporate governance. Some argue that institutions lack adequate incentives to effectively monitor managers; others contend that the largest institutions have developed analytical resources that produce informed votes. But little attention has been paid to the tradeoff these institutions face between voting their shares and earning
profits--both for themselves and for the ultimate beneficiary of institutional funds--by lending those shares.

Using a unique dataset and a recent change in SEC rules as an empirical setting, we document a substantial increase in the degree to which large institutions lend shares rather than cast votes in corporate elections. We show that, after the SEC clarified funds' power to lend shares rather than vote them at shareholder meetings, institutions supplied 58% more shares for lending immediately prior to those meetings. The change is concentrated in stocks with high index fund ownership; a difference-in-differences approach shows that supply increases from 15.6% to 22.3% in those stocks. Even when it comes to proxy fights, we show, stocks with high index ownership see a marked increase in shares available for lending immediately prior to the meeting. Overall, we show that loosening the legal constraints on institutional share lending has had significant implications for how index funds balance the lending-voting tradeoff.

March 10, 2021 (Wed)
12:15 PM EST

Sarath Sanga

  • Associate Professor of Law,
    Pritzker School of Law, Northwestern University

  • Associate Professor in the Strategy Department,
    Kellogg School of Management, Northwestern University

Location: Virtual session.  Link distributed a few days before the event.  Email cmark@law.columbia.edu for more information.

Paper: The Origins of the Market for Corporate Law

Abstract: I study the origins of the market for corporate charters and the emergence of Delaware as the leader of this market. Specifically, I assemble new data on 19th and 20th-century corporations to evaluate two widely-held beliefs: (1) the U.S. Supreme Court is responsible for enabling a national market for corporate charters in the 19th century and (2) Delaware became the leader in this market only because New Jersey (the initial leader) repealed its extremely liberal corporate laws in 1913. I argue that both claims are false: The Supreme Court always opposed a national market for corporate charters, and New Jersey’s decline began a decade before its 1913 repeal. It is more likely that the market for corporate charters emerged as a collateral consequence of interstate commerce and that New Jersey declined because Delaware and other states simply copied its laws.

March 31, 2021 (Wed)
12:15 PM EDT

Mark Roe

  • David Berg Professor of Law,
    Harvard Law School

Location: Virtual session.  Link distributed a few days before the event.  Email cmark@law.columbia.edu for more information.

Paper: Corporate Purpose and Corporate Competition

Abstract: The large American corporation faces ever-rising pressure to pursue a purpose that’s more than just for shareholder profit. This rising pressure interacts with sharp changes in industrial organization in a way that has not been comprehensively analyzed and is generally ignored.

Three changes are most relevant: the possibility of declining competition, the counter-possibility that what seems to be a competitive decline is really increasing winner-take-all competition, and the possibility that the ownership of the big firms has concentrated (even if the firms themselves have not) and thereby diluted competitive zeal. Consider competitive decline: In robustly competitive economies, firms cannot deviate much from profit maximization for expensive corporate purpose programs, unless expanded purpose bolsters profitability (by branding the firm positively for consumers or by better motivating employees, for example). In economies with slack competition, in contrast, monopolistic and oligopolistic firms can accommodate purpose pressure, sometimes even expensive purpose pressure, from the profits they garner above what a competitive firm requires. In simplistic form, purpose can pressure such firms to redirect their excess profit from shareholders to stakeholders—to customers, employees, or the public good—in ways that firms in strongly competitive industries cannot. By most accounts, competition has been declining in the United States. By some accounts, it has declined precipitously.

That decline suggests three possibilities: One—the central thesis of this Article— purpose pressure has greater potential to succeed if competition has declined; in competitive markets, the profit-oriented purpose-pressured firm has no choice but to refuse the purpose pressure (or to give it only lip service), while in monopolistically-organized industries, the purpose-pressured firm has more room to maneuver. Two, the normative bases undergirding shareholder primacy, although still strong, are less powerful in monopolistic markets. Three, declining corporate competition and rising corporate profits create a lush field for social conflict inside the firm and the polity for shareholders and stakeholders to seek a share of those profits. The result can infuse basic corporate governance with social conflict. This new, or expanded, field for conflict can contribute to and exacerbate our rising political and social instability. Expanding purpose pressure is one manifestation of this conflict.

April 7, 2021 (Wed)
12:15 PM EDT

Chris Brummer

  • Agnes N. Williams Research Professor;
  • Faculty Director, Institute of International Economic Law;
  • Professor of Law,
    Georgetown Law School

Location: Virtual session.  Link distributed a few days before the event.  Email cmark@law.columbia.edu for more information.

Paper: Duty and Diversity
             (co-author: Leo E. Strine, Jr.)

Abstract: In the wake of the brutal deaths of George Floyd and Breonna Taylor, a slew of reforms from Wall Street to the West Coast have been introduced, all aimed at increasing Diversity, Equity, and Inclusion (“DEI”) in corporations. Yet the reforms face difficulties ranging from possible constitutional challenges to critical limitations in their scale, scope and degree of legal obligation and practical effects.

In this Article, we provide an old answer to the new questions facing DEI policy, and offer the first close examination of how corporate law duties impel and facilitate corporate attention to diversity. Specifically, we show that corporate fiduciaries are bound by their duties of loyalty to take affirmative steps to make sure that corporations comply with important civil rights and anti-discrimination laws and norms designed to ensure fair access to economic opportunity. We also show how corporate law principles like the business judgment rule do not just authorize, but indeed encourage American corporations to take effective action to help reduce racial and gender inequality, and increase inclusion, tolerance and diversity given the rational basis that exists connecting good DEI practices corporate reputation and sustainable firm value. By both incorporating requirements to comply with key anti-discrimination laws mandatorily, and enabling corporate DEI policies that go well beyond the legal minimum, corporate law offers critical tools with which corporations may address DEI goals that other reforms do not—and that can embed a commitment to diversity, equity, and inclusion in all aspects of corporate interactions with employees, customers, communities, and society generally. The question therefore is not whether corporate leaders can take effective action to help reduce racial and gender inequality—but will they?

April 21, 2021 (Wed)
12:15 PM EDT

Alex Raskolnikov

  • Wilbur H. Friedman Professor of Tax Law,
    Columbia Law School

Location: Virtual session.  Link distributed a few days before the event.  Email cmark@law.columbia.edu for more information.

Paper: Certainty and Severity of Sanctions: An Uncertain

Co-author: Giuseppe Dari-Mattiacci

Abstract: Deterrence theorists have long known that the certainty and severity of sanctions are substitutes, so the analysis has focused on identifying the optimal tradeoff between the two. Yet many enforcement environments feature rewards as well as sanctions; and many environments are neither mandatory nor universal as the standard model assumes. We show that introducing rewards and optional participation into the basic deterrence model significantly complicates the certainty-severity tradeoff. If rewards are present and participation is universal, adjusting the probability of a sanction has a greater deterrent effect than adjusting its magnitude. Still, for a given change in probability it is possible to change the magnitude in order to keep the deterrence incentives unchanged. If, however, rewards are present and participation is optional, the probability-magnitude tradeoff becomes more complex still, and it is no longer possible to compensate for a change in one of these two variables by adjusting the other. In some cases — which we will identify in the analysis — probability and magnitude have opposite effects on all outcomes (compliance, violation and participation). We emphasize that policymakers face significant uncertainty about the precise relationship between the probability and magnitude of sanctions given the challenges of recognizing the presence of rewards, evaluating their magnitude, and modifying their size.

April 28, 2021 (Wed)
12:15 PM EDT

R. Glenn Hubbard & Kate Judge

    R. Glenn Hubbard:

    • Dean Emeritus and Russell L. Carson Professor of Finance and Economics, Columbia Business School
    • Professor of Economics (Arts and Sciences)
      Columbia University
    • Visiting Scholar,
      American Enterprise Institute

    Kate Judge:

    • Harvey J. Goldschmid Professor of Law,
      Columbia Law School

    Location: Virtual session.  Link distributed a few days before the event.  Email cmark@law.columbia.edu for more information.

    Topic: Draft Report, The Financial Stability Task Force
      (Paper not yet public.)