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Displaying results 1 to 7 of 7.

  1. The perils of small-minority controllers
    Author: Bebchuk, Lucian A.; Kastiel, Kobi
    Published: 2018
    Publisher:  Harvard Law School, Cambridge, MA

    This Article contributes to the long-standing and heated debate over dual-class companies by placing a spotlight on a significant set of dual-class companies whose structures raise especially severe governance concerns: those with controllers holding... more

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    Helmut-Schmidt-Universität, Universität der Bundeswehr Hamburg, Universitätsbibliothek
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    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
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    This Article contributes to the long-standing and heated debate over dual-class companies by placing a spotlight on a significant set of dual-class companies whose structures raise especially severe governance concerns: those with controllers holding a small minority of the company's equity capital. Such small-minority controllers dominate some of the country's largest companies, and we show that their numbers can be expected to grow. We begin by analyzing the perils of small-minority controllers, explaining how they generate considerable governance costs and risks and showing how these costs can be expected to escalate as the controller's stake decreases. We then identify the mechanisms that enable such controllers to retain their power despite holding a small or even a tiny minority of the company's equity capital. Using a hand-collected analysis of governance documents of these companies, we present novel empirical evidence of the current incidence and potential growth of small-minority and tiny-minority controllers. Among other things, we show that governance arrangements at a substantial majority of dual-class companies enable the controllers to reduce their equity stake to below 10% and still retain a lock on control, and that a sizable fraction of such companies enable retaining control with less than a 5% stake. Finally, we examine the considerable policy implications that arise from recognizing the perils of small-minority controllers. We first discuss disclosures necessary to make transparent to investors the extent to which arrangements enable controllers to reduce their stake without forgoing control. We then identify and examine measures that public officials or institutional investors could take to ensure that controllers maintain a minimum fraction of equity capital; to provide public investors with extra protections in the presence of small-minority controllers; or to screen midstream changes that can introduce or increase the costs of small-minority controllers

     
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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
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    Edition: Last revised: December 2018
    Series: Discussion paper / Harvard John M. Olin Center for Law, Economics, and Business ; no. 985 (12/2018)
    Subjects: Corporate governance; agency problems; dual-class; controllingshareholders; small-minority controllers; tiny-minority controllers; wedge,nonvoting stock; IPO
    Scope: 1 Online-Ressource (circa 61 Seiten)
    Notes:

    Forthcoming in Georgetown Law Journal (2019)
  2. How Twitter pushed stakeholders under the bus
    Author: Bebchuk, Lucian A.; Kastiel, Kobi; Toniolo, Anna
    Published: [2023]
    Publisher:  Harvard Law School, Cambridge, MA

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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Edition: Last revised April 2023
    Series: Discussion paper / Harvard John M. Olin Center for Law, Economics, and Business ; no. 1102 (04/2023)
    Subjects: stakeholders; stakeholder capitalism; stakeholder governance; corporate social responsibility; corporate purpose; Twitter; Elon Musk
    Scope: 1 Online-Ressource (circa 30 Seiten)
  3. Does enlightened shareholder value add value?
    Author: Bebchuk, Lucian A.; Kastiel, Kobi; Tallarita, Roberto
    Published: [2022]
    Publisher:  Harvard Law School, Cambridge, MA

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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Edition: Last revised May 2022
    Series: Discussion paper / Harvard John M. Olin Center for Law, Economics, and Business ; no. 1077 (05/2022)
    Subjects: Corporate purpose; corporate social responsibility; stakeholders; stakeholder governance; stakeholder capitalism; stakeholderism; corporate constituencies; enlightened shareholder value; corporate governance; short-termism
    Scope: 1 Online-Ressource (circa 32 Seiten)
    Notes:

    This paper can also be downloaded without charge from: The Social Science Research Network Electronic Paper Collection: ssrn.com/abstract=4065731

    This paper is also Discussion Paper No. 2022-5 of the Harvard Law School Program on Corporate Governance
  4. The untenable case for perpetual dual-class stock
    Author: Bebchuk, Lucian A.; Kastiel, Kobi
    Published: 04/2017
    Publisher:  Harvard Law School, Cambridge, MA

    The desirability of a dual-class structure, which enables founders of public companies to retain a lock on control while holding a minority of the company's equity capital, has long been the subject of a heated debate. This debate has focused on... more

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    Helmut-Schmidt-Universität, Universität der Bundeswehr Hamburg, Universitätsbibliothek
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    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
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    The desirability of a dual-class structure, which enables founders of public companies to retain a lock on control while holding a minority of the company's equity capital, has long been the subject of a heated debate. This debate has focused on whether dual-class stock is an efficient capital structure that should be permitted at the time of initial public offering (“IPO”). By contrast, we focus on how the passage of time since the IPO can be expected to affect the efficiency of such a structure.Our analysis demonstrates that the potential advantages of dual-class structures (such as those resulting from founders' superior leadership skills) tend to recede, and the potential costs tend to rise, as time passes from the IPO. Furthermore, we show that controllers have perverse incentives to retain dual-class structures even when those structures become inefficient over time. Accordingly, even those who believe that dual-class structures are in many cases efficient at the time of the IPO should recognize the substantial risk that their efficiency may decline and disappear over time. Going forward, the debate should focus on the permissibility of finite-term dual-class structures — that is, structures that sunset after a fixed period of time (such as ten or fifteen years) unless their extension is approved by shareholders unaffiliated with the controller.We provide a framework for designing dual-class sunsets and address potential objections to their use. We also discuss the significant implications of our analysis for public officials, institutional investors, and researchers

     
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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
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    Series: Discussion paper / Harvard John M. Olin Center for Law, Economics, and Business ; no. 905
    Subjects: corporations; dual-class; controlling shareholders; corporategovernance; agency costs; sunset
    Scope: 1 Online-Ressource (circa 50 Seiten)
    Notes:

    This paper is also Discussion Paper 2017-6 of the Harvard Law School Program on Corporate Governance
  5. Stakeholder capitalism in the time of COVID
    Author: Bebchuk, Lucian A.; Kastiel, Kobi; Tallarita, Roberto
    Published: [2022]
    Publisher:  Harvard Law School, Cambridge, MA

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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Edition: Last revised December 2022
    Series: Discussion paper / Harvard John M. Olin Center for Law, Economics, and Business ; no. 1088 (12/2022)
    Subjects: stakeholders; stakeholder capitalism; corporate social responsibility; corporate purpose; COVID-19; employees; managerialism; mergers
    Scope: 1 Online-Ressource (circa 77 Seiten), Illustrationen
    Notes:

    Forthcoming, Yale Journal of Regulation, Volume 40, 2023
  6. Stakeholder capitalism in the Ttme of COVID: appendix
    Author: Bebchuk, Lucian A.; Kastiel, Kobi; Tallarita, Roberto
    Published: [2022]
    Publisher:  Harvard Law School, Cambridge, MA

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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Edition: Last revision: December 2022
    Series: Discussion paper / Harvard John M. Olin Center for Law, Economics, and Business ; no. 1089 (12/2022)
    Subjects: stakeholders; stakeholder capitalism; corporate social responsibility; corporate purpose; COVID-19; employees; managerialism; mergers
    Scope: 1 Online-Ressource (circa 93 Seiten)
  7. The rise of private equity continuation funds
    Author: Kastiel, Kobi; Nili, Yaron
    Published: [2024]
    Publisher:  Stigler Center for the Study of the Economy and the State, University of Chicago Booth School of Business, Chicago, IL

    This Article provides the first comprehensive examination of an emerging practice within the private equity sector-continuation funds. Continuation funds break from the traditional private equity model by allowing sponsors to hold on to assets beyond... more

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    This Article provides the first comprehensive examination of an emerging practice within the private equity sector-continuation funds. Continuation funds break from the traditional private equity model by allowing sponsors to hold on to assets beyond the typical fund term and, instead of selling the assets to third parties, sell them to their own newly established fund. Lauded by the private equity industry as providing "optionality" to investors, by allowing them to cash out or roll over, continuation funds have grown to represent a major segment of investment activity in the United States. Despite their surging popularity among private equity sponsors, they are subject to investor resistance, and, puzzlingly, most existing investors in the original funds decline the option to roll over their stakes into a continuation fund, even though it is run by the same private equity firm with which they have cultivated relationships for years. This Article addresses this puzzle and makes three contributions to the literature. First, we highlight the labyrinth of concerns that cast a shadow on the growing prevalence of continuation funds. Specifically, we show that private equity managers have strong incentives to establish continuation funds and explore the web of conflicts of interest between sponsors and investors and among investors themselves. Second, employing in-depth interviews with market participants from both sides of the aisle- -investors and sponsors--we examine the practical dynamics of continuation funds, exploring the cautionary tale they present to the conventional deference of law and economic theory to private contracting among sophisticated parties. Third, we present two alternative viewpoints regarding continuation funds: the market outcome view and the market failure view, and against this backdrop, we offer several policy recommendations that are particularly timely in light of the SEC's recently adopted rules addressing the issue.

     
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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Other identifier:
    hdl: 10419/281759
    Edition: Draft November 2023
    Series: New working paper series / Chicago Booth, Stigler Center for the Study of the Economy and the State ; no. #340 (January 2024)
    ECGI working paper series in law ; no 733 (November 2023)
    Subjects: Private Equity; Continuation Funds; Corporate Governance; Corporate Law,Securities Law; Reputation; Related Party Transactions; SEC
    Scope: 1 Online-Ressource (circa 66 Seiten), Illustrationen