The leading view among corporate law scholars is that an insolvent firm's managers should maximize the sum of the values of all financial claims - both those held by shareholders and those held by creditors - against the firm. This Article points out a previously unrecognized problem with this...

This paper provides an overview of the main theoretical elements and empirical underpinnings of a "managerial power" approach to executive compensation. Under this approach, the design of executive compensation is viewed not only as an instrument for addressing the agency problem between...

Venture capitalists investing in U.S. startups typically receive preferred stock and extensive control rights. Various explanations for each of these arrangements have been offered. However, scholars have failed to notice that these arrangements, when combined, often lead to a highly unusual...

Academics studying public firms' choice of governance arrangements have largely assumed that stock prices accurately reflect the effect of these arrange¬ments on firm value. As a result, firms going public generally have an incentive to seek arrangements that maximize shareholder value, and...

Rule 10b 5 of the Securities Exchange Act of 1934, the primary instrument for regulating insider trading, prohibits insiders from trading on material inside information. However, Rule 10b 5 does not prohibit insiders from using inside information to abstain from trading. For example, a CEO who...

Public companies in the United States and elsewhere increasingly use open market stock buybacks, rather than dividends, to distribute cash to shareholders. Academic commentators have emphasized the possible benefits of such repurchases for shareholders. However, little attention has been paid to...

This paper develops an account of the role and significance of rent extraction in executive compensation. Under the optimal contracting view of executive compensation, which has dominated academic research on the subject, pay arrangements are set by a board of directors that aims to maximize...