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Martin Gelter

Fordham University, Law, Faculty Member

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Pierre-Henri Conac

Université du Luxembourg

Università Bocconi

Federico M . Mucciarelli

Università degli studi di Modena e Reggio Emilia

University of Groningen

Università degli Studi di Palermo

Vladislav Galitsin

National Research University Higher School of Economics

giovanni strampelli

André Luís Monteiro

Pontifícia Universidade Católica de São Paulo

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Papers by Martin Gelter

$Research paper thumbnail of Constraining Dominant Shareholders\u27 Self-dealing: The Legal Framework in France, Germany, and Italy$

Constraining Dominant Shareholders\u27 Self-dealing: The Legal Framework in France, Germany, and Italy

All jurisdictions supply corporations with legal tools to prevent or punish asset diversion by th... more All jurisdictions supply corporations with legal tools to prevent or punish asset diversion by those, whether managers or dominant shareholders, who are in control. As previous research has shown, these rules, doctrines and remedies are far from uniform across jurisdictions, possibly leading to significant differences in the degree of investor protection they provide. Comparative research in this field is wrought with difficulty. It is tempting to compare corporate laws by taking one benchmark jurisdiction, typically the US, and to assess the quality of other corporate law systems depending on how much they replicate some prominent features. We take a different perspective and describe how three major continental European countries (France, Germany, andItaly) regulate dominant shareholders\u27 self-dealing by looking at all the possible rules, doctrines and remedies available there. While the doctrines and remedies reviewed in this article are familiar enough to corporate lawyers an...

The Law, Economics, and Governance of Generation COVID-19 Long-Haul

Indiana Health Law Review, 2022

The SARS-CoV-2 novel coronavirus is an external shock to all societies with lasting impacts that ... more The SARS-CoV-2 novel coronavirus is an external shock to all societies with lasting impacts that have changed individual, political, and corporate decisions profoundly. Increasing evidence reveals that an estimated 10-50% of those previously infected with COVID-19 face a longer-term or long-term health impact and/or chronic debilitation that in many cases comes and goes in waves. This phenomenon has already been referred to as a pandemic within the pandemic. The broad-based and long-term impact of COVID Long Haulers have also holds the potential to change our world and modern society, lasting through the following three outlined speculative trends: (1) The coronavirus crisis has widened novel and already existing inequalities, of which the rather surprising finance performance versus real economy liquidity constraint gap led to unequal emotional and sociopsychological crisis fallout propensities. Corporate governance and political economy power dynamics may shift in the eye of Long Haulers' relation to work and a healthy, productive environment. Employers will likely face pressure to create a safe and secure working environment but also have rising tort liability risks that may be mitigated by hiring health consulting agents. Proactive care for maintaining a healthy workforce and the overall long-term well-being of employees, including preventive care in teams, will become an essential corporate feature to attract qualified labor, whose bargaining power increased in the eye of labor shortages in direct contact industries and positions. (2) Long Haulers may initiate an artificial intelligence revolution of self

Preliminary Procedures in Shareholder Derivative Litigation: A Beneficial Legal Transplant?

SSRN Electronic Journal, 2022

This material builds on the OECD work titled "OECD (2020), "Report on derivative litigation" in P... more

Is Economic Nationalism in Corporate Governance Always a Threat?

SSRN Electronic Journal, 2022

I am deeply grateful to Julia Puaschunder as well as to participants of the Ohio State Business L... more I am deeply grateful to Julia Puaschunder as well as to participants of the Ohio State Business Law Journal's 2021 symposium for very helpful comments on the paper and discussions on the topic. In addition, I thank Mariana Pargendler and Mathias Siems for insightful comments on a prior draft. Errors remain my own.

Introduction to comparative corporate governance

Comparative Corporate Governance, 2021

stating that the shift from corporate law to corporate governance reflects a legal view of the co... more

Whose Trojan Horse? The Dynamics of Resistance against IFRS

University of Pennsylvania Journal of International Law, 2014

The introduction of International Financial Reporting Standards (IFRS) has been debated in the Un... more The introduction of International Financial Reporting Standards (IFRS) has been debated in the United States since at least the accounting scandals of the early 2000s. While publicly traded firms around the world are increasingly switching to IFRS, often because they are required to do so by law or by their stock exchange, the SEC seems to have become more reticent in recent years. Only foreign issuers have been permitted to use IFRS in the US since 2007. By contrast, the EU has mandated the use of IFRS in the consolidated financial statements of publicly traded firms since 2005. In the US, IFRS, which are promulgated by the London-based International Accounting Standards Board (IASB), are often seen as an attempt by Europeans to colonize US accounting standard setting, in other words an element of a foreign legal system alien to US capital markets and securities law. In this article, we suggest that this perception is actually a myth, which we are trying to debunk. In fact, the int...

Global Investor Protection: Securities Law Enforcement Around the World

Fordham Journal of Corporate & Financial Law, 2020

Handbook on Comparative Corporate Governance : Introduction

This chapter introduces the Research Handbook on Comparative Corporate Governance and surveys sev... more This chapter introduces the Research Handbook on Comparative Corporate Governance and surveys several of the central themes addressed in the book. Most corporate governance research deals with the interaction between board members, officers, and shareholders, primarily in large, publicly traded corporations. Considerable volumes of literature thus are preoccupied with reducing conflicts of interest between shareholders and management, and consequently minimizing agency cost, thus vindicating the narrow finance perspective. Given the predominance of controlling shareholders around the globe, the literature increasingly focuses acutely on conflicts between controlling and minority shareholders. In a comparative or international context, research also often addresses all groups whose interests are affected by corporate activities and who have some degree of influence on corporations, such as creditors and employees. The book attempts to take a broad perspective. It deals with interacti...

Opportunity Makes a Thief: Corporate Opportunities as Legal Transplant and Convergence in Corporate Law

CGN: Comparisons of 2-5 Countries (Topic), 2017

The paper surveys the corporate opportunities doctrine in four jurisdictions: the US, the UK, Ger... more The paper surveys the corporate opportunities doctrine in four jurisdictions: the US, the UK, Germany, and France. Our analysis enables us to trace the development of the doctrine, exposing the way in which certain models of dealing with a particular issue have arisen, and how these models have then spread. Fiduciary duties are often today held out as typical instruments of shareholder protection in the US and the UK, both of which are often held out as model jurisdictions in corporate governance internationally. However, fiduciary duties in these two jurisdictions often operate in strikingly different ways. While the US relies on an open-ended standard, the UK corporate opportunities doctrine effectively constitutes a rule. We explore the transplantation of the corporate opportunities doctrine, largely based on the US model, to France and Germany. In Germany, the law historically prohibited officers of the corporation from engaging in competing business activities; the statutory pr...

Letting Companies Choose between Board Models: An Empirical Analysis of Country Variations

SSRN Electronic Journal, 2021

and Roma Tre for helpful comments. The authors thank Julia M. Puaschunder for introducing us to c... more

COVID-19 and Comparative Corporate Governance

SSRN Electronic Journal, 2021

With the pandemic caused by the novel coronavirus SARS-CoV-2 raging around the world, many countr... more With the pandemic caused by the novel coronavirus SARS-CoV-2 raging around the world, many countries' economies are at a crucial juncture. The COVID-19 external shock to the economy has the potential to affect corporate governance profoundly. This article explores its possible impact on comparative corporate governance. For an economy to operate successfully, a society must first find a politically sustainable social equilibrium. In many countries, historical crises-such as the Great Depression and World War II-have resulted in a reconfiguration of corporate governance institutions that set the course for generations. While it is not yet clear whether COVID-19 will have a similar effect, it is possible that it will change patterns of what kind of firms are-from an evolutionary perspective-likely to survive, and which ones are not. We argue that to some extent, it will accelerate ongoing trends, whereas in other areas it put corporations on an entirely new course. We observe three trends, namely the need for resilience, a growth of nationalist policies in corporate law, and an increasing orientation toward 'stakeholder' interests. First, firms will have to become resilient to the crisis, and consequently long-term oriented. Corporations that are not operating merely on an arm's length capital market basis but are integrated into a network, generated by core shareholders, state ownership or bank lending may be more likely to survive. In addition, firms are beginning to interact with their workforce differently in their attempts to maintain what could be called 'healthy human capital.' Second, we are likely to see a resurgence of nationalism in corporate governance to ensure that foreign ownership and interconnected supply chains do not put national security at risk. Third, the existing critiques of inequality but also climate change awareness will accelerate the trend toward a broadening of corporate purpose toward 'stakeholderism' and public policy issues. As in the past years, institutional investors acting as 'universal owners' will play a role in shaping this trend.

COVID-19-Shock: Considerations on Socio-Technological, Legal, Corporate, Economic and Governance Changes and Trends

SSRN Electronic Journal, 2020

Addressing the Auditor Independence Puzzle: Regulatory Models and Proposal for Reform

SSRN Electronic Journal, 2019

Auditors play a major role in corporate governance and capital markets. Ex ante, auditors facilit... more Auditors play a major role in corporate governance and capital markets. Ex ante, auditors facilitate firms' access to finance by fostering trust among public investors. Ex post, auditors can prevent misbehavior and prevent financial fraud by corporate insiders. In order to fulfill these goals, however, in addition to having the adequate knowledge and expertise, auditors must perform their functions in an independent manner. However, auditors often find themselves in situation where their actual independence or their independence in appearance is compromised (sometimes without a conscious decision or the auditor necessarily realizing the problem). For example, non-audit services may contribute to such conflicts. Moreover, the mere fact that the audited corporation typically selects the auditor raises questions about whether the system is set up for truly independent audits. Policymakers and scholars around the world have attempted to solve the auditor independence puzzle through a variety of mechanisms, including prohibitions of certain services, auditor rotation, and more recently breaking up of audit firms and the empowerment of shareholders. This paper argues that none of these solutions is entirely convincing. Drawing from the corporate governance, law and economics, and accounting literatures, this paper proposes a new model to strengthen auditor independence. We argue that future reform should emphasize three primary pillars for the benefit of public investors, but also for the promotion of firms' access to finance and the development of capital markets. First, in controlled firms, auditors should be elected with a majority-of-the-minority vote. Second, the role, composition of the audit committee are crucial to strengthen auditor independence. Third, policymakers must pay close attention to the internal governance and compensation systems of audit firms. We argue that increased transparency of audit firms is essential to enhance the independence and credibility of auditors.

Comparative Corporate Governance: Old and New

SSRN Electronic Journal, 2016

The most fundamental comparative corporate governance debates have often focused on two issues. T... more The most fundamental comparative corporate governance debates have often focused on two issues. The first one concerns ownership structure: Why are large corporations in some corporate governance system owned by a multitude of disempowered shareholders, thus effectively giving management free rein? Why are corporations typically governed by a controlling shareholder or a coalition of controlling shareholders in other systems? The second issue is the role of other 'constituencies' of the corporation besides shareholders, of which labor is most central to the debate. Some jurisdictions explicitly give labor an influential voice in corporate affairs, whereas in others its influence is developed through factual power or unintended consequences of legislation. This chapter explores the interactions between firm ownership and labor, focusing on the United States on the one hand and Continental Europe, particularly Germany, on the other. It distinguishes between 'old' and 'new' comparative corporate governance, the former referring to the dichotomy studied by scholars of comparative corporate law up to the early 2000s. Recent changes, heralded by intermediated, but widespread share ownership are leading us to a new equilibrium whose contours have only begun to emerge. Over the past decades, outside investors have gained power both in the United States and in Continental Europe. However, neither in the US nor in Continental Europe has the traditional corporate governance system been completely superseded by a new one. The US remains to a large extent manager-centric. Continental Europe retains powerful large shareholders, and labor as an independent force has remained more important than in the United States. Outside institutional investors-sometimes from the US-have become a player to be reckoned with, thus adding an additional layer of complexity to the system.

The Structure of Regulatory Competition in European Corporate Law

Journal of Corporate Law Studies, 2005

In its opinions in the cases Centros, Überseering and Inspire Art, the ECJ has begun to open Euro... more In its opinions in the cases Centros, Überseering and Inspire Art, the ECJ has begun to open European corporate law for regulatory competition, as it has been discussed in the US for several decades. This article analyzes the structural conditions of competition, on the supply and demand sides of the market for corporate law, and the impact of supranational influence. In doing so, it identifies several factors that have received little attention in the incipient European debate. The supply-side analysis shows that a European Delaware is implausible because of the interdependence of competitive advantages and incentives to compete. On the demand side, an analysis of the effects of differences of financial structures indicates that a race to the bottom is more likely in Europe. The comparatively weak threat of supranational intervention in Europe makes actions and decisionmaking an unlikely factor to affect the decisions of national actors.

British Home Stores collapse: the case for an employee derivative claim

Journal of Corporate Law Studies, 2018

British Home Stores collapsed led 11,000 employees to lose their jobs and faced substantial cuts ... more British Home Stores collapsed led 11,000 employees to lose their jobs and faced substantial cuts to their pension with a £571 million pension deficit. In light of the BHS scandal, the UK Government has proposed a set of corporate governance reforms to strengthen the employee voice. Although the government's approach towards strengthening the employees' protection is well intentioned, we argue that without providing a derivative claim right for employees, these measures will likely have little impact in practice. Hence we suggest that to safeguard the employees' interest in the company and to enhance the overall protection of the company, in addition to the current proposed reforms, the standing for bringing derivative claims should be broadened to the employee's representative.

Why do Shareholder Derivative Suits Remain Rare in Continental Europe?

SSRN Electronic Journal, 2012

company, 6 I discuss only the former (derivative suits tend to be easier in the latter category).... more company, 6 I discuss only the former (derivative suits tend to be easier in the latter category). Section 1.2 describes the general issue all corporate law systems have to deal with, namely the tradeoff between effective enforcement of corporate law and prevention of abusive lawsuits that are used to divert resources to plaintiffs. Part 1.3 gives a brief overview of the various European models of shareholder litigation. Part 2 discusses possible reasons for the absence of derivative suits in Continental Europe. Some of the arguments have been discussed frequently, such as minimum ownership thresholds and the distribution of litigation risk through litigation cost rules. Others have received less or no attention, such as limits to the information available to defendants, and limits to who can be sued derivatively. Part 3 suggests that the absence of derivative suits may not be as detrimental as one might think at first glance by showing that derivative litigation is not the only possible avenue for private corporate law enforcement. Without attempting to provide a complete picture, I look at three Continental European enforcement models, as follows: Part 3.1 investigates rescission (nullification) suits, which are common in several countries, but subject to a particularly intense debate in Germany, where it is often argued that they can be abused by "predatory shareholders"; 3.2 discusses criminal enforcement under French law, on which shareholders are able to "piggyback"; and 3.3 looks at the Dutch model, where derivative suits are not available and the unique "inquiry proceedings" are the chosen method for resolution of many corporate conflicts of interest. The larger theoretical point is that shareholders will seek the "path of least resistance" in litigation. If derivative litigation does not provide a good option, maybe another legal mechanism (such as the ones described in Part 3) will. Finally, the Conclusion summarizes and concludes.

Lift not the Painted Veil! To Whom are Directorss Duties Really Owed?

SSRN Electronic Journal, 2014

In this article, we identify a fundamental contradiction in the law of fiduciary duty of corporat... more In this article, we identify a fundamental contradiction in the law of fiduciary duty of corporate directors across jurisdictions, namely the tension between the uniformity of directors' duties and the heterogeneity of directors themselves. American scholars tend to think of the board as a group of individuals elected by shareholders, even though it is widely acknowledged (and criticized) that the board is often a largely self-perpetuating body whose inside members dominate the selection of their future colleagues and eventual successors. However, this characterization is far from universally true internationally, and it tends to be increasingly less true even in the United States. Directors are often formally or informally selected by specific shareholders (such as a venture capitalist or an important shareholder) or other stakeholders of the corporation (such as creditors or employees), or they are elected to represent specific types of shareholders (e.g. minority investors). The law thus sometimes facilitates the nomination of what has been called "constituency" directors. Once in office, legal rules tend nevertheless to treat directors as a homogeneous group that is expected to pursue a uniform goal. We explore this tension and suggest that it almost seems to rise to the level of hypocrisy: Why do some jurisdictions require employee representatives that are then seemingly not allowed to strongly advocate employee interests? Why can a director representing a specific shareholder not advance this shareholder's interests on the board? Behavioral research indicates that directors are likely beholden to those who appointed them and will seek to pursue their interests in order to maintain their position in office. We argue that for many decision-making processes, it does not matter all that much what specific interest directors are expected to pursue by the law, given that across jurisdictions, enforcement of the corporate purpose is highly curtailed.

How the Old World Encountered the New One: Regulatory Competition and Cooperation in European Corporate and Bankruptcy Law

SSRN Electronic Journal, 2006

The Eurpean framework for creditor protection has undergone a remarkable tansfomation in recent y... more The Eurpean framework for creditor protection has undergone a remarkable tansfomation in recent years. While the European Court of Justice s Centros case and its progeny have given European Union businesses bee choice with respect to the state of incorporation, and hence to the substantive corporate law regime, the European Insolvency Regulation has introduced uniform conflict-of-law rules for insolvencies. However, this regime has opened up some forum shopping opportunities for corporate debtors. Both regulatory competition in corporate law and forum shopping in bankruptcy law have been discussed in the United States foryears, whie they are relative4ynew territoryin the European Union. Tis article attempts to pull together the two emerging discussions and analyzes possible consequences for the relationship between sharholdes, managers, and creditors in European corporations. We argue thatin the absence of evidence of eithera race to the top or the bottom, we cannot rule out adverse consequences of either regulatory competition in corporate law or forum shopping in banAruptcy However, the hiscussion so far has large4' considered only the

The Pension System and the Rise of Shareholder Primacy

SSRN Electronic Journal, 2012

analyzing markets in the presence of transaction cost). 17. Occasionally, it has been pointed out... more

$Research paper thumbnail of Constraining Dominant Shareholders\u27 Self-dealing: The Legal Framework in France, Germany, and Italy$

Constraining Dominant Shareholders\u27 Self-dealing: The Legal Framework in France, Germany, and Italy

All jurisdictions supply corporations with legal tools to prevent or punish asset diversion by th... more All jurisdictions supply corporations with legal tools to prevent or punish asset diversion by those, whether managers or dominant shareholders, who are in control. As previous research has shown, these rules, doctrines and remedies are far from uniform across jurisdictions, possibly leading to significant differences in the degree of investor protection they provide. Comparative research in this field is wrought with difficulty. It is tempting to compare corporate laws by taking one benchmark jurisdiction, typically the US, and to assess the quality of other corporate law systems depending on how much they replicate some prominent features. We take a different perspective and describe how three major continental European countries (France, Germany, andItaly) regulate dominant shareholders\u27 self-dealing by looking at all the possible rules, doctrines and remedies available there. While the doctrines and remedies reviewed in this article are familiar enough to corporate lawyers an...

The Law, Economics, and Governance of Generation COVID-19 Long-Haul

Indiana Health Law Review, 2022

The SARS-CoV-2 novel coronavirus is an external shock to all societies with lasting impacts that ... more The SARS-CoV-2 novel coronavirus is an external shock to all societies with lasting impacts that have changed individual, political, and corporate decisions profoundly. Increasing evidence reveals that an estimated 10-50% of those previously infected with COVID-19 face a longer-term or long-term health impact and/or chronic debilitation that in many cases comes and goes in waves. This phenomenon has already been referred to as a pandemic within the pandemic. The broad-based and long-term impact of COVID Long Haulers have also holds the potential to change our world and modern society, lasting through the following three outlined speculative trends: (1) The coronavirus crisis has widened novel and already existing inequalities, of which the rather surprising finance performance versus real economy liquidity constraint gap led to unequal emotional and sociopsychological crisis fallout propensities. Corporate governance and political economy power dynamics may shift in the eye of Long Haulers' relation to work and a healthy, productive environment. Employers will likely face pressure to create a safe and secure working environment but also have rising tort liability risks that may be mitigated by hiring health consulting agents. Proactive care for maintaining a healthy workforce and the overall long-term well-being of employees, including preventive care in teams, will become an essential corporate feature to attract qualified labor, whose bargaining power increased in the eye of labor shortages in direct contact industries and positions. (2) Long Haulers may initiate an artificial intelligence revolution of self

Preliminary Procedures in Shareholder Derivative Litigation: A Beneficial Legal Transplant?

SSRN Electronic Journal, 2022

This material builds on the OECD work titled "OECD (2020), "Report on derivative litigation" in P... more

Is Economic Nationalism in Corporate Governance Always a Threat?

SSRN Electronic Journal, 2022

I am deeply grateful to Julia Puaschunder as well as to participants of the Ohio State Business L... more I am deeply grateful to Julia Puaschunder as well as to participants of the Ohio State Business Law Journal's 2021 symposium for very helpful comments on the paper and discussions on the topic. In addition, I thank Mariana Pargendler and Mathias Siems for insightful comments on a prior draft. Errors remain my own.

Introduction to comparative corporate governance

Comparative Corporate Governance, 2021

stating that the shift from corporate law to corporate governance reflects a legal view of the co... more

Whose Trojan Horse? The Dynamics of Resistance against IFRS

University of Pennsylvania Journal of International Law, 2014

The introduction of International Financial Reporting Standards (IFRS) has been debated in the Un... more The introduction of International Financial Reporting Standards (IFRS) has been debated in the United States since at least the accounting scandals of the early 2000s. While publicly traded firms around the world are increasingly switching to IFRS, often because they are required to do so by law or by their stock exchange, the SEC seems to have become more reticent in recent years. Only foreign issuers have been permitted to use IFRS in the US since 2007. By contrast, the EU has mandated the use of IFRS in the consolidated financial statements of publicly traded firms since 2005. In the US, IFRS, which are promulgated by the London-based International Accounting Standards Board (IASB), are often seen as an attempt by Europeans to colonize US accounting standard setting, in other words an element of a foreign legal system alien to US capital markets and securities law. In this article, we suggest that this perception is actually a myth, which we are trying to debunk. In fact, the int...

Global Investor Protection: Securities Law Enforcement Around the World

Fordham Journal of Corporate & Financial Law, 2020

Handbook on Comparative Corporate Governance : Introduction

This chapter introduces the Research Handbook on Comparative Corporate Governance and surveys sev... more This chapter introduces the Research Handbook on Comparative Corporate Governance and surveys several of the central themes addressed in the book. Most corporate governance research deals with the interaction between board members, officers, and shareholders, primarily in large, publicly traded corporations. Considerable volumes of literature thus are preoccupied with reducing conflicts of interest between shareholders and management, and consequently minimizing agency cost, thus vindicating the narrow finance perspective. Given the predominance of controlling shareholders around the globe, the literature increasingly focuses acutely on conflicts between controlling and minority shareholders. In a comparative or international context, research also often addresses all groups whose interests are affected by corporate activities and who have some degree of influence on corporations, such as creditors and employees. The book attempts to take a broad perspective. It deals with interacti...

Opportunity Makes a Thief: Corporate Opportunities as Legal Transplant and Convergence in Corporate Law

CGN: Comparisons of 2-5 Countries (Topic), 2017

The paper surveys the corporate opportunities doctrine in four jurisdictions: the US, the UK, Ger... more The paper surveys the corporate opportunities doctrine in four jurisdictions: the US, the UK, Germany, and France. Our analysis enables us to trace the development of the doctrine, exposing the way in which certain models of dealing with a particular issue have arisen, and how these models have then spread. Fiduciary duties are often today held out as typical instruments of shareholder protection in the US and the UK, both of which are often held out as model jurisdictions in corporate governance internationally. However, fiduciary duties in these two jurisdictions often operate in strikingly different ways. While the US relies on an open-ended standard, the UK corporate opportunities doctrine effectively constitutes a rule. We explore the transplantation of the corporate opportunities doctrine, largely based on the US model, to France and Germany. In Germany, the law historically prohibited officers of the corporation from engaging in competing business activities; the statutory pr...

Letting Companies Choose between Board Models: An Empirical Analysis of Country Variations

SSRN Electronic Journal, 2021

and Roma Tre for helpful comments. The authors thank Julia M. Puaschunder for introducing us to c... more

COVID-19 and Comparative Corporate Governance

SSRN Electronic Journal, 2021

With the pandemic caused by the novel coronavirus SARS-CoV-2 raging around the world, many countr... more With the pandemic caused by the novel coronavirus SARS-CoV-2 raging around the world, many countries' economies are at a crucial juncture. The COVID-19 external shock to the economy has the potential to affect corporate governance profoundly. This article explores its possible impact on comparative corporate governance. For an economy to operate successfully, a society must first find a politically sustainable social equilibrium. In many countries, historical crises-such as the Great Depression and World War II-have resulted in a reconfiguration of corporate governance institutions that set the course for generations. While it is not yet clear whether COVID-19 will have a similar effect, it is possible that it will change patterns of what kind of firms are-from an evolutionary perspective-likely to survive, and which ones are not. We argue that to some extent, it will accelerate ongoing trends, whereas in other areas it put corporations on an entirely new course. We observe three trends, namely the need for resilience, a growth of nationalist policies in corporate law, and an increasing orientation toward 'stakeholder' interests. First, firms will have to become resilient to the crisis, and consequently long-term oriented. Corporations that are not operating merely on an arm's length capital market basis but are integrated into a network, generated by core shareholders, state ownership or bank lending may be more likely to survive. In addition, firms are beginning to interact with their workforce differently in their attempts to maintain what could be called 'healthy human capital.' Second, we are likely to see a resurgence of nationalism in corporate governance to ensure that foreign ownership and interconnected supply chains do not put national security at risk. Third, the existing critiques of inequality but also climate change awareness will accelerate the trend toward a broadening of corporate purpose toward 'stakeholderism' and public policy issues. As in the past years, institutional investors acting as 'universal owners' will play a role in shaping this trend.

COVID-19-Shock: Considerations on Socio-Technological, Legal, Corporate, Economic and Governance Changes and Trends

SSRN Electronic Journal, 2020

Addressing the Auditor Independence Puzzle: Regulatory Models and Proposal for Reform

SSRN Electronic Journal, 2019

Auditors play a major role in corporate governance and capital markets. Ex ante, auditors facilit... more Auditors play a major role in corporate governance and capital markets. Ex ante, auditors facilitate firms' access to finance by fostering trust among public investors. Ex post, auditors can prevent misbehavior and prevent financial fraud by corporate insiders. In order to fulfill these goals, however, in addition to having the adequate knowledge and expertise, auditors must perform their functions in an independent manner. However, auditors often find themselves in situation where their actual independence or their independence in appearance is compromised (sometimes without a conscious decision or the auditor necessarily realizing the problem). For example, non-audit services may contribute to such conflicts. Moreover, the mere fact that the audited corporation typically selects the auditor raises questions about whether the system is set up for truly independent audits. Policymakers and scholars around the world have attempted to solve the auditor independence puzzle through a variety of mechanisms, including prohibitions of certain services, auditor rotation, and more recently breaking up of audit firms and the empowerment of shareholders. This paper argues that none of these solutions is entirely convincing. Drawing from the corporate governance, law and economics, and accounting literatures, this paper proposes a new model to strengthen auditor independence. We argue that future reform should emphasize three primary pillars for the benefit of public investors, but also for the promotion of firms' access to finance and the development of capital markets. First, in controlled firms, auditors should be elected with a majority-of-the-minority vote. Second, the role, composition of the audit committee are crucial to strengthen auditor independence. Third, policymakers must pay close attention to the internal governance and compensation systems of audit firms. We argue that increased transparency of audit firms is essential to enhance the independence and credibility of auditors.

Comparative Corporate Governance: Old and New

SSRN Electronic Journal, 2016

The most fundamental comparative corporate governance debates have often focused on two issues. T... more The most fundamental comparative corporate governance debates have often focused on two issues. The first one concerns ownership structure: Why are large corporations in some corporate governance system owned by a multitude of disempowered shareholders, thus effectively giving management free rein? Why are corporations typically governed by a controlling shareholder or a coalition of controlling shareholders in other systems? The second issue is the role of other 'constituencies' of the corporation besides shareholders, of which labor is most central to the debate. Some jurisdictions explicitly give labor an influential voice in corporate affairs, whereas in others its influence is developed through factual power or unintended consequences of legislation. This chapter explores the interactions between firm ownership and labor, focusing on the United States on the one hand and Continental Europe, particularly Germany, on the other. It distinguishes between 'old' and 'new' comparative corporate governance, the former referring to the dichotomy studied by scholars of comparative corporate law up to the early 2000s. Recent changes, heralded by intermediated, but widespread share ownership are leading us to a new equilibrium whose contours have only begun to emerge. Over the past decades, outside investors have gained power both in the United States and in Continental Europe. However, neither in the US nor in Continental Europe has the traditional corporate governance system been completely superseded by a new one. The US remains to a large extent manager-centric. Continental Europe retains powerful large shareholders, and labor as an independent force has remained more important than in the United States. Outside institutional investors-sometimes from the US-have become a player to be reckoned with, thus adding an additional layer of complexity to the system.

The Structure of Regulatory Competition in European Corporate Law

Journal of Corporate Law Studies, 2005

In its opinions in the cases Centros, Überseering and Inspire Art, the ECJ has begun to open Euro... more In its opinions in the cases Centros, Überseering and Inspire Art, the ECJ has begun to open European corporate law for regulatory competition, as it has been discussed in the US for several decades. This article analyzes the structural conditions of competition, on the supply and demand sides of the market for corporate law, and the impact of supranational influence. In doing so, it identifies several factors that have received little attention in the incipient European debate. The supply-side analysis shows that a European Delaware is implausible because of the interdependence of competitive advantages and incentives to compete. On the demand side, an analysis of the effects of differences of financial structures indicates that a race to the bottom is more likely in Europe. The comparatively weak threat of supranational intervention in Europe makes actions and decisionmaking an unlikely factor to affect the decisions of national actors.

British Home Stores collapse: the case for an employee derivative claim

Journal of Corporate Law Studies, 2018

British Home Stores collapsed led 11,000 employees to lose their jobs and faced substantial cuts ... more British Home Stores collapsed led 11,000 employees to lose their jobs and faced substantial cuts to their pension with a £571 million pension deficit. In light of the BHS scandal, the UK Government has proposed a set of corporate governance reforms to strengthen the employee voice. Although the government's approach towards strengthening the employees' protection is well intentioned, we argue that without providing a derivative claim right for employees, these measures will likely have little impact in practice. Hence we suggest that to safeguard the employees' interest in the company and to enhance the overall protection of the company, in addition to the current proposed reforms, the standing for bringing derivative claims should be broadened to the employee's representative.

Why do Shareholder Derivative Suits Remain Rare in Continental Europe?

SSRN Electronic Journal, 2012

company, 6 I discuss only the former (derivative suits tend to be easier in the latter category).... more company, 6 I discuss only the former (derivative suits tend to be easier in the latter category). Section 1.2 describes the general issue all corporate law systems have to deal with, namely the tradeoff between effective enforcement of corporate law and prevention of abusive lawsuits that are used to divert resources to plaintiffs. Part 1.3 gives a brief overview of the various European models of shareholder litigation. Part 2 discusses possible reasons for the absence of derivative suits in Continental Europe. Some of the arguments have been discussed frequently, such as minimum ownership thresholds and the distribution of litigation risk through litigation cost rules. Others have received less or no attention, such as limits to the information available to defendants, and limits to who can be sued derivatively. Part 3 suggests that the absence of derivative suits may not be as detrimental as one might think at first glance by showing that derivative litigation is not the only possible avenue for private corporate law enforcement. Without attempting to provide a complete picture, I look at three Continental European enforcement models, as follows: Part 3.1 investigates rescission (nullification) suits, which are common in several countries, but subject to a particularly intense debate in Germany, where it is often argued that they can be abused by "predatory shareholders"; 3.2 discusses criminal enforcement under French law, on which shareholders are able to "piggyback"; and 3.3 looks at the Dutch model, where derivative suits are not available and the unique "inquiry proceedings" are the chosen method for resolution of many corporate conflicts of interest. The larger theoretical point is that shareholders will seek the "path of least resistance" in litigation. If derivative litigation does not provide a good option, maybe another legal mechanism (such as the ones described in Part 3) will. Finally, the Conclusion summarizes and concludes.

Lift not the Painted Veil! To Whom are Directorss Duties Really Owed?

SSRN Electronic Journal, 2014

In this article, we identify a fundamental contradiction in the law of fiduciary duty of corporat... more In this article, we identify a fundamental contradiction in the law of fiduciary duty of corporate directors across jurisdictions, namely the tension between the uniformity of directors' duties and the heterogeneity of directors themselves. American scholars tend to think of the board as a group of individuals elected by shareholders, even though it is widely acknowledged (and criticized) that the board is often a largely self-perpetuating body whose inside members dominate the selection of their future colleagues and eventual successors. However, this characterization is far from universally true internationally, and it tends to be increasingly less true even in the United States. Directors are often formally or informally selected by specific shareholders (such as a venture capitalist or an important shareholder) or other stakeholders of the corporation (such as creditors or employees), or they are elected to represent specific types of shareholders (e.g. minority investors). The law thus sometimes facilitates the nomination of what has been called "constituency" directors. Once in office, legal rules tend nevertheless to treat directors as a homogeneous group that is expected to pursue a uniform goal. We explore this tension and suggest that it almost seems to rise to the level of hypocrisy: Why do some jurisdictions require employee representatives that are then seemingly not allowed to strongly advocate employee interests? Why can a director representing a specific shareholder not advance this shareholder's interests on the board? Behavioral research indicates that directors are likely beholden to those who appointed them and will seek to pursue their interests in order to maintain their position in office. We argue that for many decision-making processes, it does not matter all that much what specific interest directors are expected to pursue by the law, given that across jurisdictions, enforcement of the corporate purpose is highly curtailed.

How the Old World Encountered the New One: Regulatory Competition and Cooperation in European Corporate and Bankruptcy Law

SSRN Electronic Journal, 2006

The Eurpean framework for creditor protection has undergone a remarkable tansfomation in recent y... more The Eurpean framework for creditor protection has undergone a remarkable tansfomation in recent years. While the European Court of Justice s Centros case and its progeny have given European Union businesses bee choice with respect to the state of incorporation, and hence to the substantive corporate law regime, the European Insolvency Regulation has introduced uniform conflict-of-law rules for insolvencies. However, this regime has opened up some forum shopping opportunities for corporate debtors. Both regulatory competition in corporate law and forum shopping in bankruptcy law have been discussed in the United States foryears, whie they are relative4ynew territoryin the European Union. Tis article attempts to pull together the two emerging discussions and analyzes possible consequences for the relationship between sharholdes, managers, and creditors in European corporations. We argue thatin the absence of evidence of eithera race to the top or the bottom, we cannot rule out adverse consequences of either regulatory competition in corporate law or forum shopping in banAruptcy However, the hiscussion so far has large4' considered only the

The Pension System and the Rise of Shareholder Primacy

SSRN Electronic Journal, 2012

analyzing markets in the presence of transaction cost). 17. Occasionally, it has been pointed out... more