Eric W. Orts

We have argued that bank regulators should disclose more bank information than is now required. [1] This is because supervisory practices generally do little to promote transparency, which leads to opacity that interferes with the pricing of risk and undermines financial stability. More complete and timely disclosure would improve market discipline and ultimately complement supervisory efforts.

Strategic alliances are pivotal in industries like biopharmaceuticals, where collaboration can make or break innovation and success. A key yet under-explored element of these alliances is good faith provisions – clauses that require parties to act with good intentions and fairness but that are often ambiguous and unpredictably enforced. In a new study, we explore when and why they are used in strategic alliances.

How do shareholders want companies to manage political spending? This is a critical question for senior management and boards as the 2024 elections enter the final stage and the 2025 proxy season opens. It's particularly important and timely as companies face pressure on at least two fronts:

Since the introduction of ChatGPT, large language models (LLMs) have completed a variety of tasks with impressive results, from summarizing complex documents to conducting sentiment analysis to extracting relevant information. But are LLMs up to even greater challenges like, say, making informed financial decisions?

The term “private benefits of control” refers to the privileges and advantages that accrue to controlling shareholders at the exclusion of minority shareholders. These benefits can take a variety of forms, ranging from cash extractions to more intangible manifestations, such as nepotism and decision-making that prioritizes the controller's prestige over the profitability of the firm. For example, former Delaware jurist Leo Strine has likened the ownership of a culturally salient business to possession of a “tool that allows [the owner] to hang with stud athletes, supermodels, hip hop gods, and other pop culture icons.”

This update provides an overview of the major developments in federal and state securities litigation since our Securities Litigation 2023 Year-End Update . A recent NERA Economic Consulting (NERA) study provides an overview of recent developments in filings. This section highlights several notable trends.

Can we speak of a “purpose” for corporations or, more broadly, corporate law? The doctrine of shareholder primacy has long had an easy answer: Both individual corporations and corporate law should strive to maximize shareholder wealth. But this reductive and avaricious principle has begun to fall out of favor. We see evidence of this change in the letters of Larry Fink, the 2019 Business Roundtable statement, the growth of ESG and other social-justice funds, and the interest in a stakeholder-oriented approach to corporate governance. As part of this shift, the field of corporate governance has undertaken a renewed focus on corporate purpose.

In a typical activist campaign, the activist threatens to launch a proxy fight unless the board of directors agrees to take certain actions to increase shareholder value, such as selling off company assets or replacing the CEO. Increasingly, however, there are fewer proxy fights. Instead, the activist and the board, behind closed doors, quickly agree to settle. The activist withdraws the proxy-fight threat, and, in return, the board appoints directors designated by the activist. This “cooperation agreement” allows the incumbent directors to keep their positions and the activist to claim victory. It profoundly interferes, however, with the voting interests of the non-activist shareholders – who are given no opportunity to vote on the designated directors in a contested election.

The U.S. Securities and Exchange Commission (“SEC”) has disbanded its Climate and ESG Task Force in the Division of Enforcement. The Task Force was established in March 2021 with the purpose of identifying ESG-related misconduct, including material gaps or misstatements in issuers' disclosure of climate risks, and assessing disclosure and compliance issues relating to investment advisers' and funds' ESG strategies. According to the SEC, the “expertise developed by the task force now resides across the Division” signaling that the SEC will continue to pursue ESG-related matters as part of its broader enforcement strategy.

Although we use money every day, few of us really understand it. Most define it by its most obvious manifestation – government-issued paper certificates or coins that specify units of currency, such as dollars or euros. But that superficial definition does not capture changing forms of money, such as electronically evidenced – or “digital” – currencies, which are confounding many members of the media, policymakers, and regulators. The resulting uncertainty can lead to laws that are sub-optimal.