Objectivity, Proximity and Adaptability in Corporate Governance

Countries appear to differ considerably in the basic orientations of their corporate governance structures. We postulate the trade-off between objectivity and proximity as fundamental to the corporate governance debate. We stress the value of objectivity that comes with distance (e.g. the market oriented U.S. system), and the value of better information that comes with proximity (e.g. the more intrusive Continental European model). Our key result is that the optimal distance between management and monitor (board or shareholders) has a bang-bang solution: either one should capitalize on the better information that comes with proximity or one should seek to benefit optimally from the objectivity that comes with distance. We argue that this result points at an important link between the optimal corporate governance arrangement and industry structure. In this context, we also discuss the ways in which investors have "contracted around" the flaws in their own corporate governance systems, pointing at the adaptability of different arrangements.http://deepblue.lib.umich.edu/bitstream/2027.42/39651/3/wp266.pd

Publication Design Workbook: A Real-World Design Guide

A book review of Publication Design Workbook by Timothy Samara

Response to Theodore J. St. Antoine and Michael C. Harper

Symposium: New Rules for a New Game: Regulating Employment Relationships in the 21st Century, held at the Indiana University School of Law-Bloomington

Response to Theodore J. St. Antoine and Michael C. Harper

Symposium: New Rules for a New Game: Regulating Employment Relationships in the 21st Century, held at the Indiana University School of Law-Bloomington

The Corporate Governance of Public Utilities

Rate regulated public utilities own and operate one-third of U.S generators and nearly all the transmission and distribution system. These firms receive special regulatory treatment because they are protected from competition and subject to rate caps. In the past decade, they also have been at the center of high-profile corporate scandals. They have bribed regulators to secure subsidies for coal-fired generators and nuclear reactors. They have caused wildfires and coal ash spills that resulted in hundreds of deaths and billions of dollars in liability. Their failure to maintain reliable electric service has contributed to catastrophic blackouts. Perhaps most consequentially, they have emerged as powerful opponents of state and federal climate action. This Article describes the unique corporate governance challenges public utilities face and argues that these governance challenges contribute to the pervasive inefficiencies and the frequency of corporate misconduct that characterize utility industries. American corporate law provides special protections to shareholders such as the right to elect corporate boards and the requirement that directors and managers owe fiduciary duties to shareholders. The economic justification for these protections is that shareholders are the residual claimants of corporations: because they receive any value a corporation generates beyond what it owes to its fixed claimants, they have the appropriate incentives to pursue value-enhancing investments. But the theoretical premise that underlies the American system of corporate governance does not apply to public utilities. Rate regulation limits the value shareholders receive when a firm innovates or reduces costs. It therefore converts shareholders into fixed claimants with the same incentives creditors have in non-utility industries. Because ratepayers, not shareholders, receive the residual value the firm generates beyond what it owes to its fixed claimants, standard corporate law theory suggests that public utilities should be run to advance ratepayer and not shareholder interests. The implication is that managers and directors of public utilities should owe fiduciary duties to their ratepayers, that ratepayers should be represented on the corporate boards of public utilities, and that managers of public utilities should receive less deference on business decisions than they do in other industries. As we discuss, however, these reforms are difficult, and perhaps impossible, to implement

How to include anonymised routine data in emergency care research

A workshop on development and use of anonymised datasets using ambulance and other health service data

The Corporate Governance of Public Utilities

Rate-regulated public utilities own and operate one-third of U.S generators and nearly all the transmission and distribution system. These firms receive special regulatory treatment because they are protected from competition and subject to rate caps. In the past decade, they also have been at the center of high- profile corporate scandals. They have bribed regulators to secure subsidies for coal-fired generators and nuclear reactors. They have caused wildfires and coal- ash spills that resulted in hundreds of deaths and billions of dollars in liability. Their failure to maintain reliable electric service has contributed to catastrophic blackouts. Perhaps most consequentially, they have emerged as powerful opponents of state and federal climate action. This Article describes the unique corporate governance challenges public utilities face and argues that these governance challenges contribute to the pervasive inefficiencies and the frequency of corporate misconduct that characterize utility industries. American corporate law provides special protections to shareholders, such as the right to elect corporate boards and the requirement that directors and managers owe fiduciary duties to shareholders. The economic justification for these protections is that shareholders are the residual claimants of corporations: because they receive any value a corporation generates beyond what it owes to its fixed claimants, they have the appropriate incentives to pursue value-enhancing investments. But the theoretical premise that underlies the American system of corporate governance does not apply to public utilities. Rate regulation limits the value shareholders receive when a firm innovates or reduces costs. It therefore converts shareholders into fixed claimants with the same incentives creditors have in non-utility industries. Because ratepayers, not shareholders, receive the residual value the firm generates beyond what it owes to its fixed claimants, standard corporate law theory suggests that public utilities should be run to advance ratepayer and not shareholder interests. The implication is that managers and directors of public utilities should owe fiduciary duties to their ratepayers, that ratepayers should be represented on the corporate boards of public utilities, and that managers of public utilities should receive less deference on business decisions than they do in other industries. As we discuss, however, these reforms are difficult, and perhaps impossible, to implement effectively. That, in turn, highlights the need for strong regulatory oversight and offers additional reasons to be skeptical of the utility model