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The Institutions of Corporate Governance

The Institutions of Corporate Governance MARK J. ROE Harvard Law School; European Corporate Governance Institute (ECGI) August 2004 Harvard Law and Economics Discussion Paper No. 488
Abstract: In this review piece, the author outlines the institutions of corporate governance decision-making in the large public firm in the West. By corporate governance, the author means the relationships at the top of the firm - the board of directors, the senior managers, and the stockholders. By institutions he means those repeated mechanisms that allocate authority among the three and that affect, modulate, and control the decisions made at the top of the firm. Core corporate governance institutions respond to two distinct problems, one of vertical governance (between distant shareholders and managers) and another of horizontal governance (between a close, controlling shareholder and distant shareholders). Some institutions deal well with vertical corporate governance but do less well with horizontal governance. The institutions interact as complements and substitutes, and many can be seen as developing out of a primitive of contract law. In Part I, the author sorts out the central problems of corporate governance. In Part II, he catalogs the basic institutions of corporate governance, from markets to organization to contract. In part III, considers contract law as corporate law's primitive building-block. In Part IV, he briefly examines issues of corporate legitimacy that affect corporate governance by widening or narrowing the tools available. The interaction between political institutions and corporate governance institutions is an inquiry still in its infancy but promises large returns. In Part V, he re-examines corporate governance in terms of economies of scale, contract, markets, and property rights. Then the author summarizes and concludes.

SSRN-Aspirations and Settlement

Aspirations and Settlement

RUSSELL B. KOROBKIN
University of California, Los Angeles - School of Law
Forthcoming in Cornell Law Review


Abstract:
The legal-academic literature on litigation settlement describes a range of factors that affect settlement outcomes, but litigant "aspirations", or ideal goals, are not among them. Negotiation scholars, however, routinely claim that high aspirations can improve bargaining outcomes. This article presents a theory of settlement that reconciles these competing approaches by situating negotiator aspirations within the standard legal-academic model of settlement. Based on that theory, the article offers a series of hypotheses concerning the role of aspirations in settlement negotiations, and then reports the results of experimental tests that demonstrate the hypotheses to be plausible. Finally, in light of the theory of the role of aspirations, the article reconsiders the usual prescriptive advice offered by negotiation scholars that litigants should set high aspirations for themselves in bargaining situations.

The Rhetorics of Negotiation

The Rhetorics of Negotiation

GERALD B. WETLAUFER
University of Iowa, College of Law
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July 23, 2005

Abstract:

This article offers a framework for understanding negotiations in terms of several distinct and coherent "rhetorics" (or sets of speech acts). These are (1) the rhetoric of distributive bargaining (haggling); (2) the rhetoric of integrative or "win-win" bargaining; (3) the rhetoric of argument, including formal legal argument; (4) the rhetorics of selling and threatening; (5) the rhetorics by which one party might seek to manage the other's understandings of the parties and their situation; (6) the rhetoric of narrative; and (7) the rhetoric of reciprocity. In this way, the author seeks to identify and explain the full range of speech acts that may simultaneously bear upon the conduct and the outcome of negotiations. The author departs from existing literatures that divide the universe of possible negotiations according to their particular characteristics (e.g., zero-sum v. non-zero-sum games); identify alternative styles or approaches among which negotiators must choose (e.g., competitive v. cooperative, win-lose v. win-win); or argue that one such style or approach is ethically or instrumentally superior to another. The author's argument draws on the literatures of rhetoric, communications and argumentation; economics and game theory; sociology, social psychology, anthropology and literary theory; political and diplomatic history; labor management relations; the manuals for criminal interrogation; and six centuries of self-help books.

The Efficient Design of Option Contracts: Principles and Applications

The Efficient Design of Option Contracts: Principles and Applications

AVERY WIENER KATZ
Columbia Law School
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March 2004

Columbia Law and Economics Working Paper No. 248


Abstract:
The law of contracts has often treated options quite differently from other contractual transactions;for example, the characterization of a transaction as an option contract calls forth specially required formalities, but on the other hand often has the effect of releasing parties from doctrinal limitations on their contractual freedom, such as the duty to mitigate damages or the rule that holds excessively high liquidated damages void as penalties. Such differential treatment is challenging to explain from a functional viewpoint, in part because all contracts resemble options to the extent they are enforceable in terms of monetary damages, and in part because contracts that are nominally structured as explicit options can be close economic substitutes for contracts that are nominally structured as unconditional.

This essay sets out a theoretical account of the efficient design of option contracts - one that explains how contracting parties should strike the balance among option premium, option life, and exercise price, in order to maximize the expected surplus from their transaction. It shows that the tradeoffs between these various aspects of option contracts can affect the parties incentives to acquire and disclose information, to invest in relation-specific investments, and to take efficient precautions against the event of breach. It then goes on to develop an organizing framework for private parties choosing whether and how to structure their contractual arrangements as options, and for policymakers choosing whether or how to regulate such private choices. In short, the appropriate balance between option premium, option life, and exercise price will depend on the relative importance that the one attaches to these various dimensions of incentives.

The Collaborative Integrity of Open-Source Software

The Collaborative Integrity of Open-Source Software

GREG R. VETTER
University of Houston Law Center
Utah Law Review, p. 563, 2004

Abstract: This Article analyzes legal protection for open-source software by comparing it to the venerable civil law tradition of moral rights. The comparison focuses on the moral right of integrity, with which one may object to mutilations of her work, even after having parted with the copyright and the object that embodies the work. The parallel apparatus in open-source licensing is conditional permission to use a copyrighted work. The conditions include that source code be available and that software use be royalty free. These conditions facilitate open-source collaborative software development. At the heart of both systems is the right for creators to control the view that a work presents. In the open-source system, this is the Collaborative Integrity of open-source software. The history and legacy of moral rights help us better understand Collaborative Integrity in open-source software. The right of integrity in some international jurisdictions may apply to software, thus raising questions whether it hurts or helps open-source software. Building from these insights, this Article evaluates whether the Collaborative Integrity in open-source software deserves protection as a separate right, just as the right of integrity developed separately from pecuniary copyright in civil law jurisdictions.

An Economic Analysis of the Guaranty Contract

An Economic Analysis of the Guaranty Contract

AVERY WIENER KATZ
Columbia Law School
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March 1998

Columbia Law School, Center for Law and Economic Studies, Working Paper No. 136


Abstract:
Guaranty arrangements, in which one person stands as surety for a second person's obligation to a third, are ubiquitous in commercial transactions and in commercial law. In recent years, however, scholarly attention to the topic has been scant; and there is still no theoretical treatment of this body of law or practice from a economic policy perspective. This paper, accordingly, attempts to outline the basic economic logic underlying the guaranty relationship, and applies the results to a variety of specific issues in government policy and private planning. It poses and answers three main questions: First, why would a creditor prefer to make a guaranteed loan rather than an unguaranteed one? The answer is not as obvious as might first appear, given that market competition over credit terms tends to adjust the interest rate paid by an individual borrower to reflect the specific default risk that he presents. Second, given that they bear the residual risk of debtor default, why would guarantors prefer to guarantee loans rather than make loans directly, thus foregoing the opportunity to earn interest payments that could help to compensate for the risk they bear? Third, even if it is efficient for one creditor to provide funds and another to provide insurance against default, why would the parties prefer to implement this arrangement through the triangular form of a guaranty, instead of simply having the former creditor lend to the latter and the latter lend to the ultimate borrower?

General Principles of Company Law for Transition Economies

General Principles of Company Law for Transition Economies

GAINAN AVILOV
Institute for Legislation and Comparative Law, Russian Federation - General
BERNARD S. BLACK
University of Texas at Austin - School of Law; University of Texas at Austin - Red McCombs School of Business; European Corporate Governance Institute (ECGI)
DOMINIQUE CARREAU
University of Paris
OKSANA KOZYR
Research Center for Private Law, Russian Federation - General
STILPON NESTOR
Organization for Economic Co-Operation and Development (OECD) - Corporate Affairs Division
SARAH REYNOLDS
Institute of East European Law and Russian Studies
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As published in Journal of Corporation Law, Vol. 24, pp. 190-293, 1999


Abstract:
1. This document sets forth proposed principles for a legislation on stock companies that are considered to be appropriate for a country making the transition from a centrally planned economy to a market economy. For each, views on the topic are explained and alternative approaches considered. The approaches currently used in three OECD economies - France, Germany, and the United States - are summarised, as well as those existing in the Russian Federation, a transition economy that has recently adopted a modern company law.

2. The focus of this exercise is company law, i.e. legislation that regulates commercial organizations with limited liability and investments represented by shares: corporations in the US, aktiengesellschaften in Germany, societes anonymes in France, joint stock companies in Russia. Although legislation on joint stock companies is the object of primary focus, all countries will need to have legislation providing for other types of business organisations. This will not be discussed here however, except when their provisions are relevant to the assumptions underlying this document. It is nevertheless important to note that the legislation should exhaustively list all available forms of legal entities, and that registration procedures should ensure a clear identification of every registered legal entity. This is mainly because improper formation of a legal entity might have dire consequences for both investors and third parties.

3. The discussion of company law principles in this document is based on an assumption of a civil law environment, i.e. the existence of a general civil code. Excluded from consideration are laws regulating securities exchanges and the rules for the general offering of securities to the public. It should however be noted that sometimes the boundaries between company and securities laws are blurred. Some countries will choose to regulate certain issues related to publicly-quoted companies and their shareholders through securities regulation while others include such provisions in the general company legislation. The principles that are discussed here and address these grey-area issues can be applied in either context. Regulations of the general relationship between stock companies and their employees, and special rules designed to handle the specific issues that arise for financial and industrial groups are also not discussed here. Finally, while the document considers the civil remedies for violation of the company law, it does not address criminal law issues related to stock companies and their behaviour.

Lebanon’s WTO entry may hang on piracy issues:

Fast measures towards entering the World Trade Organization are required from Lebanon as previous requirements from the EuroMed and other regional agreements were still not implemented. Slashing protective measures in the traditional service and industrious sector are one of these measures. Banks will benefit from opening markets and changing their services to micro finance activities promoting small and medium business sized enterprises.

Lebanese private sector group cracks down on counterfeit products: counterfeit goods are costing the government about $100 million in lost income

20 private sectors entities have united their efforts under the Brand Protection Group (BPG) to crack down on brand counterfeiting in Lebanon which represents 10 to 15% of existing goods resulting in yearly losses of $100 million.
Recent legislation has aggravated the counterfeit penalties to a crime contrary to previous legislation considering it an offense. Penalties now include LL 75 million ($50,000) and jail sentence.

Contract Theory and the Limits of Contract Law

Contract Theory and the Limits of Contract Law

ALAN SCHWARTZ
Yale Law School; Yale University - International Center for Finance
ROBERT E. SCOTT
University of Virginia School of Law; Columbia University - Columbia Law School

Yale Law School, Public Law Working Paper No. 52; Yale Law & Economics Research Paper No. 275; Univ. of Virginia Law & Econ Research Paper No. 03-1
Yale Law Journal, Vol. 113, Nov/Dec 2003

Abstract:
This article sets out a normative theory to guide decisionmakers in the regulation of contracts between firms. Commercial law for centuries has drawn a distinction between mercantile contracts and others, but modern scholars have not systematically pursued the normative implications of this distinction. We attempt to cure this neglect by setting out the theoretical foundations of a law merchant for our time. Firms contract to maximize expected surplus and the state permits markets to function because markets maximize social welfare. Thus, there is a correspondence of interest between firms and the state, which implies that, when externalities are absent, the state should implement the preferences of firms regarding the rules that regulate their contracting behavior.

A contract law for firms would differ in three major respects from current contract law. First, such a law would have far fewer default rules and standards than current contract law contains. The high level of generality on which much contract law is written (e.g., a party must behave 'reasonably') creates unacceptable moral hazard for parties subject to it. Thus, firms in theory should, and in practice commonly do, contract out of much of the law most of the time. The primary effect of today's law, that is, is to raise transaction costs without altering substantive behavior. Second, the default theory of interpretation in a contract law for firms would require courts to base interpretations primarily on the written texts of agreements. The risks of incorrect interpretations that such a theory creates, we argue, would be more acceptable to firms than the costs that the courts' current interpretative practices create. Third, the law would contain almost no mandatory rules. To summarize, a modern law merchant would be much smaller than current contract law; would truncate broad judicial searches for parties' true intentions when interpreting their agreements; and would accord parties much more freedom to write efficient contracts than now exists.

The Globalized Judiciary and the Rule of Law

The Globalized Judiciary and the Rule of Law
KENNETH KERSCH
Princeton Law and Public Affairs Paper No. 04-019
The Good Society, Fall 2004

Abstract:
This paper argues, that, while not new in the strictest sense, the contemporary transnational turn in American law reflected in the U.S. Supreme Court's citation to foreign agreements, practices, and opinions in its recent affirmative action cases is distinctive in being part of a broad-ranging, highly politicized, reformist, intellectual movement. That movement, which is defined by its diverse commitments to a particular form of universal morality and foreign policy integration, in a turn that is novel, is currently striving to alter the domestic policies and constitutional understanding of the United States through the construction of a transnational, professionalized, global judiciary. The efforts to reform domestic policy through the construction of a quasi-autonomous, globalized judiciary, I contend, raises series rule of law problems within an American constitutional tradition premised on a theory of popular sovereignty. World events and popular constitutional resistance, however, may ultimately halt this trend. "

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Our Firm

Founded in Beirut, Lebanon in 1979, Haddad & Associates' dedication to international law is characterized by attorneys fluent in English, French and Arabic, academically qualified in civil, common law and Middle Eastern legal systems and possessing practical experience with North American, Middle Eastern and European cultures.

Haddad & Associates' advocacy for a greater use of preventive law and alternate methods of conflict resolution has earned the firm an enviable reputation for its commitment to understanding business objectives of clients, minimizing their exposure to legal risks and a faster more responsive service geared to the pace of the business world.

Through its offices and its world-wide professional affiliate relations including Amman, Damascus, Iraq, Montreal, Paris, Stockholm and Washington, the departments of Haddad and Associates can respond to clients' specific geographical needs by providing them with practitioners located in diverse jurisdictions specializing in various fields of practice

Some of the services offered include:

• Advising Lebanese clients on legal implications of their varied activities abroad
• Representing clients abroad who require attention to their interests in Lebanon
• Aiding and advising foreign attorneys concerning various local or middle eastern legal issues such as serving procedures, enforcing judgements, taking testimonies or initiating judicial actions in the Middle East.
• Advising foreign companies involved in or interested in commerce in the Middle East.
• Carrying out corporate legal audits helping identify potential legal risk then proposing and implementing remedying solutions.
• Acting as client’s litigation managers , helping them manage cases of litigation abroad and the suitability of continuing or settling them by setting strategies and objectives and ensuring continuous follow-ups with case attorneys to protect the client’s interests.

Strictly applying a set of self imposed rules for professional conduct and Guiding Principles that originate from our members' affiliation to various Bar Associations, Haddad & Associates aim to deliver the highest quality of legal services based on competence and integrity.