I’m delighted to report that J.W. Verret, a law professor at George Mason University School of Law, will be guest-blogging this week about his new law review article, Treasury Inc.: How the Bailout Reshapes Corporate Theory and Practice. Prof. Verret has written extensively on corporate law topics, and was invited to testify before various House and Senate Committees four times during the financial crisis of 2009 regarding all of the central provisions of the Obama Administration’s 2009 financial regulatory reform proposals; and he’s a regular guest contributor to three of the most noted corporate law and financial regulation law blogs: the Harvard Law School Corporate Governance and Financial Regulation Forum, Deallawyers.com, and The Conglomerate. Here’s a summary of his article (the entire draft can be downloaded from SSRN):
Corporate law theory and practice considers the implications of ownership by shareholders separated from control by Boards of Directors. Yet through the TARP bailout and the government’s resultant shareholding in private companies, ownership and control at many companies has merged, leaving corporate theory and practice for the financial and automotive sectors in chaos. This article ... updates the six central theories of corporate law to reveal that none are prepared for a controlling government shareholder that enjoys sovereign immunity from corporate and securities law. Government ownership of shares will also bring a tectonic shift for current understanding about insider trading, securities class actions, share voting, and state corporate law. The article closes with three recommendations, one of which has contributed to Sens. Warner and Corker’s introduction of implementing legislation.
john jones says:
Professor Verret’s work is very important. The United States owns all, most, or a big part of GM, AIG, and Citibank. What’s the exit strategy? And, by the way, we’ve nationalized Fannie and Freddie such that the federal government and not the private sector runs the mortgage market in the U.S. Is that permanent? While we enjoy playing Monday morning General and debating when to leave Afganistan and Iraq, we should also be talking about how and when to exit the private sector. While it’s all well and good to celebrate when the taxpayer makes money on investments in the private sector, let’s remember that most if not all of us would rather the government own no preferred stock. Personally I’d rather take a loss and get out of these investments than strategize about how to advance taxpayer as investor interests at the expense of non-taxpayer holders of equity and debt. I know that now what’s good for GM is literally good for America, but it’s hard for me to cheer for GM at the expense of Ford when Ford didn’t need government help and GM did.
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October 12, 2009, 2:36 pmTueday Highlights | Pseudo-Polymath says:
[...] corporate law and the bailout … and the implications of a large stake-holding government sharesholder immune to corporate [...]
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