Columbia Law Professors Write Three of Top Ten Corporate and Securities Articles of 2017

Articles by Zohar Goshen, Kathryn Judge, and Eric Talley were voted best by peers, according to annual survey.

Three Columbia Law School professors are among the authors of the 10 best corporate and securities articles of 2017, according to The Corporate Practice Commentator

In the 24th annual peer-based poll, articles by Professors Zohar Goshen, Kathryn Judge, and Eric Talley were selected from more than 565 articles published last year. Here is a synopsis of their chosen works:

 

Principal Costs: A New Theory for Corporate Law and Governance

By Zohar Goshen and Richard Squire

Zohar GoshenCOLUMBIA LAW REVIEW, Volume 117 | Number 3 (2017)

For decades, corporate law and governance scholarship has focused on the need for corporations to reduce costs stemming from self-seeking conduct by managers and directors—what Columbia Law School Professor Zohar Goshen and Fordham Law School Professor Richard Squire call “agency-cost essentialism.” Agency costs include excessive officer salaries and perks, and the costs of monitoring to prevent such excesses.

In this work, Goshen and Squire argue in favor of a fuller analysis of costs—the “principal-cost theory of corporate law and governance”—including those incurred when shareholders exercise control of the corporation. Shareholders who are poor business strategists or bad at managing people may waste more firm money by retaining control than by delegating control to experienced agents. “There is an unavoidable trade-off,” the authors write, “between principal costs and agent costs.” The corporation’s goal, they argue, should be to minimize the sum of all costs.

Zohar Goshen is the Alfred W. Bressler Professor of Law and the director of the Center for Israeli Legal Studies at Columbia Law School. He teaches and writes about corporate law and governance and securities regulation.

 

Information Gaps and Shadow Banking

By Kathryn Judge

Kathryn JudgeVIRGINIA LAW REVIEW, Volume 103 | Number 3 (May 2017)

One of the lessons of the financial crisis between 2007 and 2009, writes Kathryn Judge, is that regulations for banks and capital markets are not suited to the task of supervising the shadow banking system, the $75 trillion sector that includes instruments like money market funds and asset-backed commercial paper. Judge demonstrates why neither of the existing paradigms for financial regulation can address the distinct challenges posed by shadow banking.

She also shows how “information gaps,” which are “endemic to the shadow banking system,” contribute to its fragility. Such gaps “make panics more likely,” Judge explains, and “exacerbate the degree of market dysfunction that results when confidence gives way to panic.”

Kathryn Judge writes about financial regulation, financial institutions, and central banking.

 

Contracting Out of the Fiduciary Duty of Loyalty: An Empirical Analysis of Corporate Opportunity Waivers

By Eric Talley and Gabriel Rauterberg

Eric TalleyCOLUMBIA LAW REVIEW, Volume 117 | Number 5 (2017)

In 2000, Delaware became the first state to allow corporations to waive one of the most fundamental duties that officers owe shareholders: the duty not to exploit a corporate opportunity for personal gain without authorization. In this article, Columbia Law School Professor Eric Talley and University of Michigan Law School Professor Gabriel Rauterberg, who previously served as a Columbia Law postdoctoral research scholar and Lecturer in Law, publish the results of the first broad empirical investigation of the consequences of that momentous change, which has since been followed by eight other states.

Contrary to conventional wisdom, they report, thousands of corporations have taken advantage of the law. Those that have—often to obtain financing from venture capital or private equity firms, whose principals serve on multiple boards—“tend to deliver larger overall market returns” compared to other public companies, the authors conclude. Yet even if the waivers enhance shareholder value, they warn, “there’s no guarantee that they similarly serve broader social welfare goals,” noting that waivers could “facilitate anticompetitive coordination among commonly owned, same-industry firms.”

Eric Talley is a scholar of corporate law and a governance expert who incorporates empirical methods into his teaching.

 

This is not the first time articles by the three professors have been named to this prestigious list—they have each received recognition multiple times, including Goshen and Talley last year, joined by Merritt Fox.  Scholarly works by many other Columbia Law faculty members have been recognized regularly by Corporate Practice Commentator over the years since it began publishing the list in 1992, sometimes repeatedly, including: John Coffee Jr., Ronald J. Gilson, Jeffrey N. Gordon, Ronald J. Mann, and Dean Emeritus David M. Schizer.

The full list of selected articles and other information are available here.

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Published on April 20, 2018

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