Taking Shareholders\u27 Social Preferences Seriously: Confronting a New Agency Problem

Oliver Hart, Nobel Laureate in Economics for 2016, and economist Luigi Zingales recently published an article justifying companies’ pursuit of social objectives at the expense of profits from within the shareholder primacy framework. This Article highlights an important consequence of this approach: a new agency problem between managers and shareholders regarding social preferences. This Article provides two possible solutions to this agency problem: a bottom-up solution focused on shareholders’ ability to submit proposals on such issues and a top-down solution based on an independent board sub- committee intended to identify social objectives and forward them for shareholder approval

Missing Inaction: Internalizing Beneficial Omissions

Are beneficial omissions treated the same as beneficial commissions of the same magnitude? Does it actually matter? In this Article I argue that while scholarship has paid attention to the omission bias in the context of harms (i.e., the discounting of harms caused by omissions relative to harms caused by commissions), it has not considered the omission bias in the context of benefits (i.e., the discounting of benefits caused by omissions relative to benefits caused by commissions). This Article argues not only that we should recognize beneficial omissions, but also that policymakers should pay more attention to beneficial omissions than to either beneficial or harmful commissions

Radiation-Pressure-Mediated Control of an Optomechanical Cavity

We describe and demonstrate a method to control a detuned movable-mirror Fabry-Perot cavity using radiation pressure in the presence of a strong optical spring. At frequencies below the optical spring resonance, self-locking of the cavity is achieved intrinsically by the optomechanical (OM) interaction between the cavity field and the movable end mirror. The OM interaction results in a high rigidity and reduced susceptibility of the mirror to external forces. However, due to a finite delay time in the cavity, this enhanced rigidity is accompanied by an anti-damping force, which destabilizes the cavity. The cavity is stabilized by applying external feedback in a frequency band around the optical spring resonance. The error signal is sensed in the amplitude quadrature of the transmitted beam with a photodetector. An amplitude modulator in the input path to the cavity modulates the light intensity to provide the stabilizing radiation pressure force

Global Antitakeover Devices

This Article explores a hidden mechanism that insulates management from hostile takeovers and activist intervention: the global antitakeover device ( GAD\u27\u27). A GAD is based on the ability of public firms to mix and match between different forms of regulation by cross-listing on multiple stock exchanges or incorporating in foreign jurisdictions. This action subjects any hostile engagement with these firms to multiple jurisdictions\u27 regulatory frameworks and creates regulatory barriers, complexity, and uncertainty. This Article provides a comprehensive analysis of these GADs, the costs they generate to potential bidders, and the unique features they possess relative to traditional antitakeover devices

Toward the Personalization of Copyright Law

In this Article, we provide a blueprint for personalizing copyright law in order to reduce the deadweight loss that stems from its universal application to all users, including those who would not have paid for it. We demonstrate how big data can help identify inframarginal users, who would not pay for copyrighted content, and we explain how copyright liability and remedies should be modified in such cases

Towards magnetic slowing of atoms and molecules

We outline a method to slow paramagnetic atoms or molecules using pulsed magnetic fields. We also discuss the possibility of producing trapped particles by adiabatic deceleration of a magnetic trap. We present numerical simulation results for the slowing and trapping of molecular oxygen

Reversing the Fortunes of Active Funds

In 2019, for the first time in the history of U.S. capital markets, passive funds surpassed active funds in terms of total assets under management. The continuous growth of passive funds at the expense of active funds is a genuine cause for concern. Active funds monitor the management and partake of decision-making in their portfolio companies. Furthermore, they improve price efficiency and managerial performance by engaging in informed trading. The buy/sell decisions of active funds provide other market participants reliable information about the quality of firms. The cost of active investing is significant and it is exclusively borne by active funds; the benefits, by contrast, are spread over all shareholders, including passive funds that free-ride on the efforts of their active peers. Therefore, the contraction of active funds threatens to set back the quality of corporate governance in U.S. firms. This Essay proposes a way to reverse this trend. To preserve the benefits presented by active funds, we explore the possibility of employing tax mechanisms to help defray the extra cost borne by active funds. Perversely, at present, our tax laws exacerbate the problem. Since active funds trade more frequently than passive ones, they face a substantially heavier tax burden. We argue that taxation is the key to leveling the playing field in capital markets.Specifically, we establish a prima facie case for using tax credits to support active funds and enhance their market share. We focus on two types of tax credits: effort-based tax credits and result-based tax credits. Effort-based tax credits would be granted whenever an active fund undertakes prespecified measures to improve corporate governance irrespective of their success. Result-based tax credits would be contingent on the attainment of certain outcomes. The two types are not mutually exclusive and, as we will show, can be combined for maximal effect. Our proposal has three potential advantages over competing initiatives that seek to induce passive funds to become more active. First, taxes constitute a highly effective tool for altering behavior as they transform the underlying motivations of the subject. Second, our proposal has the potential to create a virtuous financial cycle: the expected increase in tax revenues from the improved performance of firms generated by the tax credit should cover the cost of providing the credits. Third, and finally, from a political economy standpoint, our proposal, on account of its noncoercive nature, will not attract opposition from the investment industry and thus stands a realistic chance of being adopted