Showing papers on "Principal (commercial law) published in 1993"

The Optimal Structure of Law Enforcement

Abstract: WHEN society endeavors to control undesirable behavior, it employs methods that differ in fundamental ways, and one wonders why it has made the choices that it evidently has. Why should society sometimes engage in outright prevention of acts-as when a policeman stops a person from shooting a gun-and other times employ the threat of sanctions to deter unwanted behavior-as when the state exacts fines for violation of safety regulations or imposes liability for causing harm? And when sanctions are applied, why should they sometimes be monetary in nature and at other times take the form of imprisonment? Further, why should society sometimes rely on private citizens to report violations of law, as happens under the tort system, and at other times resort to police or other public enforcement agents for that purpose? I will suggest in this article that these basic questions about the observed structure of law enforcement can be answered by reference to the theoretically optimal structure of enforcement; the actual pattern of enforcement seems to be broadly consistent with the pattern that is most effective in theory. To this end, I begin in Section I by defining socially desirable and socially undesirable acts. Next, in Section II, I set out what may be considered the principal dimensions of law enforcement and then describe important means of enforcement (including tort law, criminal law, and safety regulation) in terms of these dimensions. In Section III, I consider the determination of the theoretically optimal structure of en-

Universal International Law

Abstract: In this shrinking world, states are increasingly interdependent and interconnected, a development that has affected international law. Early international law dealt with bilateral relations between autonomous states. The principal subjects until well into this century were diplomatic relations, war, treaties and the law of the sea. One of the most significant developments in international law during the twentieth century has been the expanded role played by multilateral treaties addressed to the common concerns of states. Often they clarify and improve rules of international law through the process of rendering them in binding written agreements. These treaties also promote the coordination of uniform state behavior in a variety of areas. International organizations, themselves the creatures of multilateral treaties, have also assumed increasing prominence in the last half of this century. They contribute to the coordination and facilitation of contemporary international relations on the basis of legal principles.

Contract and Fiduciary Duty

Abstract: During the last two centuries, courts have been adapting this duty of loyalty and its remedy to other agency relations, under the title "fiduciary" duty.1 That is adaptation, not extension. The many agency relations that fall under the "fiduciary" banner are so diverse that a single rule could not cover all without wreaking havoc. Courts have applied the term to relations as diverse as guardian-ward, attorney-client, and bank-borrower. Does anything other than the word "fiduciary" and an appeal to a duty of loyalty (in its strong form, a duty that the agent work for the "exclusive benefit" of the principal) unite these situations? Principles of ethics? Is the fiduciary morally bound to act in a particular way, perhaps? Or are the different situations wholly distinct, so that a union's fiduciary "duty of fair representation" in labor law is unrelated to a corporate manager's fiduciary obligations to investors?

Information Control in the Principal-Agent Problem

Abstract: This paper compares the principal's payoff in agency models under different assumptions about the agent's access to information. The agent may make decisions before (is uninformed) or after (is informed) learning the state of nature. When there are two possible outcomes, the principal typically prefers informed to uninformed agents, whether the agent receives the information before or after contracting. This result is false when there are more than two outcomes. Conditions under which a principal prefers one agent to another, when the agents differ only in their disutility of effort, are also given. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

The relationship of the rule in Foss v. Harbottle to the statutory remedies for minority shareholders

Abstract: In this thesis I consider the problem of the minority shareholder in the private corporation who seeks to recover compensation on behalf of the company where the wrongdoers are in control and thus prevent any action being taken. At common law the minority shareholder was severely restricted by the Rule in Foss v. Harbottle. This stated that the company was the proper plaintiff for wrongs done to it and that internal irregularities could be cured by the company in general meeting. From this various exceptions developed to allow the minority shareholder the right to bring a derivative action on behalf of the corporation. The conditions to allow this to happen were, however, extremely restrictive. Accordingly various law reform committees recommended the introduction of statutory remedies to alleviate the problems of the minority shareholder. In Australia, the principal statutory remedy introduced was the oppression remedy, now contained in s.260 of the Corporations Law. This remedy has suffered from a number of defects. The judiciary has given s.260 a more narrow scope than was arguably intended and there are a number of problems with the wording of the section and its interrelationship with other areas of the law. It is therefore apposite to consider the alternatives offered to the minority shareholder in England, Canada and the United States, as well as other common law options available in Australia. These options including the personal action by the minority shareholder to recover on the basis that there has been a breach of the constitution of the company and/or an action in tort. Both Canada and the United States have developed a procedural framework to allow shareholders to bring a derivative action and this appears to provide the member with easier access to the courts than the present Australian options. Finally, I conclude by submitting that the existing avenues; the oppression remedy, the personal action and the tortious remedy do not provide convenient avenues for the minority shareholders to pursue wrongs to the corporation by those in control and that Australia would benefit from the introduction of the statutory derivative action. The law is stated as at 31/8/1992.

Nibbling on the Chancellor’s Toesies: A “Roguish” Concurrence With Professor Baxter

Abstract: The Office of Thrift Supervision of the Department of the Treasury ("OTS"),1 successor to the now defunct Federal Home Loan Bank Board,2 regulator of thrift institutions3 and their holding companies,4 and the principal villain of this piece, has been at the forefront in advocating the broadest and most far-reaching standards of professional liability These standards, which affect not only officers and directors but also accountants and attorneys, are not established in any case law They are articulated principally in speeches given by OTS officials, especially those of its former Chief Counsel, Harris Weinstein Nevertheless, a firm understanding of the agency's views is important to academics and practitioners alike in view of the escalation of administrative enforcement activity against lawyers and law firms5

The comparative efficacy of tort law and regulation for environmental protection

Abstract: During the last two decades those interested in environmental improvement have turned to regulatory agencies, particularly in the U.S. to the federal Environmental Protection Agency, as the principal instrument for achieving their ends. Certainly these regulatory institutions play an important role in deterring the considerable damage done by environmental pollution. But long before the creation of the U.S. Environmental Protection Agency (EPA) or the many state EPA's, and before the principal pollution control statutes were enacted, the common law of tort provided a seemingly powerful set of rights to pollution victims that might also deter damaging pollution discharge. A person was entitled to the enjoyment of his property free from unreasonable interference from pollution, and riparian property owners were entitled to the flow of water undiminished in quantity and quality. This paper considers whether the focus on government regulation by the public and by economists has ignored an important and effective private tool for improving environmental management, and what role tort might play in the future. The paper will review what we know about the performance of the tort system and the regulatory system with regard to their ability to control pollution discharge and to limit the harm that such discharge causes. The review concentrates on the United States, with some consideration of Canada, and on the effectiveness of policy rather than on its economic efficiency.

Intertemporal Common Agency and Organizational Design: How much Decentralization?

Abstract: In common agency, where one agent contracts with several principals, to what extent should the principals cooperate and centralize provision of incentives? If the agency is over contract complements — where an increase in activity for one principal increases the marginal value of contracting with other principals — complete centralization seems optimal, since this internalizes all externalities. We show that this intuition is not generally valid for dynamic agency situations. For although centralization provides more accurate incentives to the agent, it also aggravates the ratchet effect, and this negative effect may dominate. The optimal degree of decentralization is discussed and partly characterized.

Intervention Under Article 62 of The Statute and the Quest for Incidental Jurisdiction without the Consent of the Principal Parties

Abstract: Article 62 remained a deadletter for almost seventyyears. The Chamber constituted to settle the frontier dispute between El Salvador and Honduras has changed this picture, and has allowed Nicaragua to intervene with respect to the legal regime of the GulfofFonseca. But it only accorded a non-party status to Nicaragua. However, the full Court had refused permission to intervene in two earlier cases with arguments that were based on the premiss of a party status for the intervening State. Only a future decision on a request for permission to intervene can tell whether the full Court will endorse the stances taken by the Chamber.

Firing in Non-Repeated Incentive Contracts

Abstract: When the presence of limited liability restricts a principal from imposing monetary fines on an agent in case of poor performance, the principal might use other kinds of punishment threats to deter the agent from shirking. If firing is costly to the agent it can be used by the principal even in non-repeated contracts. This paper considers the conditions under which a profit-sharing arrangement combined with a certain firing rule improves the principal's position compared to the situation in which firing is not an option. The optimal firing rule is established, and its effectiveness is considered as a function of exogenous economic variables. Possible applications of the proposed contract are suggested.