Lift Not the Painted Veil! To Whom Are Directors’ Duties Really Owed?

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

Risk Governance and Deliberative Democracy in Health Care

I argue in this article that the concept of risk-centered governance is the best theoretical paradigm for understanding health law and the health care system. Over the past 20 years, an insurance-inflected discourse has migrated from the purely financial side of the health system into the heart of traditional medicine - the doctor-patient relationship. Rather than focus on doctrinal strands, I argue that scholars should analyze the law of health care as a set of governance practices organized around managing and allocating financial, as well as clinical, risk. Over the same period, the body of law that structures most private group health insurance - ERISA - has effectively delegated control of risk pooling and resource allocation to the employers that sponsor group plans. Drawing on a history of ERISA that has not been explored in legal scholarship, I demonstrate how the private welfare state of workplace-based health insurance has evolved into the creation of what amounts to corporate sovereignty in controlling access to health coverage. The discourse of managing risk bonds these two components of health law and the health care system: patient care and access to coverage. From a normative perspective, the greatest problem with risk-centered governance arises from a democracy deficit. Because almost all health insurance risk pools are based in workplaces, there is potential to draw on the social networks created by work as a mechanism for building new, localized publics engaged with health policy. Treating insurance risk pools as potential mechanisms of governance, rather than merely as actuarial units, would force the publicizing (at least within the workplace) of myriad political decisions: who gets included and excluded in the pooling process, how allocation decisions are made, and whether there are systems of accountability and checks and balances sufficient to produce a risk allocation system that is equitable, as well as efficient and flexible. The article builds on the egalitarian potential of social insurance as a technology of governance, and argues for filling a gap that exists not only in the current system, but also in all proposals for reform

A theoretical analysis of the relationship between social capital and corporate social responsibility: concepts and definitions

The paper studies the relationship between social capital (SC) and Corporate Social Responsibility (CSR) by investigating the idea of a virtuous circle, between the level of SC and the implementation of CSR practices, that fosters socio-economic development by generating social inclusion and social networks based on trust and trustworthiness. Following the literature on SC that stresses its multidimensional character, both a cognitive and a structural idea of SC are considered. The first one essentially refers to the dispositional characters of agents that affect their propensity to behave in different ways. The latter refers to social networks connecting agents. With regard to the concept of CSR, a contractarian approach is adopted and CSR is considered as an extended model of corporate governance, based on the fiduciary duties owed to all the firm’s stakeholders. Among stakeholders, a original distinction between “strong” and “weak” stakeholders is introduced. The key element that allows to distinguish between strong and weak stakeholders concerns the consequences that the break in the relationship with the firm produces both on the stakeholder and on the firm. Both these two categories have made specific investments in the firm. However, strong stakeholders are precious for the firm because they bring in strategic assets. On the contrary, weak stakeholders do not bring strategic assets into the firm and firms have material incentives at defecting in the relationship with them. Considering the notions of cognitive and structural SC, a contractarian approach to CSR and the distinction between weak and strong stakeholders, the paper shows that: a) the level of cognitive SC plays a key role in inducing the firm to adopt and observe CSR practices that respect all the stakeholders; b) the decision of adopting formal instruments of CSR contributes to create cognitive SC that is endogenously determined in the model; c) the level of cognitive SC and the decision of adopting CSR practices creates structural SC in terms of a long term relationship between the firm and the weak and strong stakeholders.Social capital, Corporate Social Responsibility, Social network, Ideal utility, Cooperation, Trust.

From Ideas to Practice, Pilots to Strategy: Practical Solutions and Actionable Insights on How to Do Impact Investing

This report is the second publication in the World Economic Forum's Mainstreaming Impact Investing Initiative. The report takes a deeper look at why and how asset owners began to include impact investing in their portfolios and continue to do so today, and how they overcame operational and cultural constraints affecting capital flow. Given that impact investing expertise is spread among dozens if not hundreds of practitioners and academics, the report is a curation of some -- but certainly not all -- of those leading voices. The 15 articles are meant to provide investors, intermediaries and policy-makers with actionable insights on how to incorporate impact investing into their work.The report's goals are to show how mainstream investors and intermediaries have overcome the challenges in the impact investment sector, and to democratize the insights and expertise for anyone and everyone interested in the field. Divided into four main sections, the report contains lessons learned from practitioner's experience, and showcases best practices, organizational structures and innovative instruments that asset owners, asset managers, financial institutions and impact investors have successfully implemented

Lawyers and Trust in Business Alliances

This Article attempts a first step in filling the gap in the legal literature about lawyers and strategic business alliances. Part I describes the distinctive nature of strategic alliances. Part II discusses why strategic alliances pose unique problems for lawyers. Part III considers how lawyers\u27 negotiation tactics can enhance rather than erode trust between the parties in alliances. Part IV suggests how lawyers can draft substantive contract terms that foster trust and cooperation in alliances. Part V explores how law schools and continuing legal education can train lawyers to perform better not only in strategic business alliances but in all situations where trust and cooperation are important

Labour co-determination and corporate governance in Germany: The economic impact of marginal and symbolic rights

For decades, some governments have fiercely opposed any statute of the Societas Europaea that foresaw German-type co-determined supervisory boards. Considering firms as pools of specific investors, we ask about the conditions that are necessary to secure the interests of specific human capitalists in an efficient way, if the real capital owners' right to residual control does not solve the ex-post bargaining problems over the sharing of quasi-rents. We disregard contract-theoretic approaches as solutions to the ex-post bargaining conflicts and suggest a constitutional approach to this major problem in the theory of the firm. From a constitutional perspective, the (non-executive) board members of the German Aufsichtsrat (Supervisory Board) - unlike the Betriebsrat (Works Council) - essentially dispose only of marginal, extremely symbolic, i.e., non-enforceable rights to represent worker investors. Legally, however, these rights are to be used first in the interests of the corporation and only secondarily in the interests of partial investors. Marginal and symbolic rights as well as fiduciary duties will make a difference in distributive bargaining, if they are legally imposed. Who is to be heard and to be involved in decision-making and what is counted as a legitimate argument or action - these are basically questions of political culture that in principle leave room for efficient international diversity. Option rights in the European directive on the Societas Europaea should thus be considered as an apt and wise decision. -- Seit Jahrzehnten wehren sich einige Regierungen vehement gegen die Schaffung einer Societas Europaea, welche mitbestimmte Aufsichtsräte nach deutschem Muster für europäische Aktiengesellschaften ermöglicht. Indem wir Firmen als Zusammenschluss spezifischer Investoren betrachten, fragen wir nach notwendigen Bedingungen, um die Interessen spezifischer Humankapitalgeber effizient abzusichern, wenn das residuale Kontrollrecht der Finanzkapitalgeber Ex-post-Verhandlungsprobleme über die Aufteilung der Quasirenten nicht zu lösen vermag. Wir sehen von vertragstheoretischen Lösungsansätzen zu Ex-post-Verhandlungsproblemen ab und empfehlen vielmehr eine konstitutionelle Annäherung an dieses Hauptproblem der Unternehmenstheorie. Aus konstitutioneller Sicht verfügen Arbeitnehmervertreter im Aufsichtsrat - im Gegensatz zum Betriebsrat - lediglich über marginale und eher symbolische, d.h. nicht die Interessen der Arbeitnehmerschaft zwingend durchsetzbare Rechte. Aus juristischer Sicht wiederum sollen diese Recht in erster Linie im Interesse des Unternehmens und erst nachrangig zur Durchsetzung von Partialinteressen verschiedener Investorengruppen genutzt werden. Marginale und symbolische Rechte ebenso wie treuhänderische Pflichten verändern die Ergebnisse von Verteilungsverhandlungen, wenn diese Rechte gesetzlich verankert sind. Wer muss gehört oder in den Entscheidungsprozess mit eingebunden werden und was gilt als legitimes Argument oder legitime Handlung - dies sind im Grunde Fragen der politischen Kultur, die im Prinzip Raum für effiziente internationale Vielfalt lassen. Optionsrechte in der europäischen Direktive der Societas Europaea sollten infolgedessen als angemessene und weise Entscheidung angesehen werden.

Lawyers and Trust in Business Alliances

This Article attempts a first step in filling the gap in the legal literature about lawyers and strategic business alliances. Part I describes the distinctive nature of strategic alliances. Part II discusses why strategic alliances pose unique problems for lawyers. Part III considers how lawyers\u27 negotiation tactics can enhance rather than erode trust between the parties in alliances. Part IV suggests how lawyers can draft substantive contract terms that foster trust and cooperation in alliances. Part V explores how law schools and continuing legal education can train lawyers to perform better not only in strategic business alliances but in all situations where trust and cooperation are important