Topic
Principal (commercial law)
About: Principal (commercial law) is a research topic. Over the lifetime, 1579 publications have been published within this topic receiving 35379 citations. The topic is also known as: Principal (commercial law).
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30 Apr 1997
TL;DR: The Latvian-born legal theorist P.I. Stuchka as discussed by the authors was one of the principal architects of modern Soviet legal theory and the Soviet legal system itself, was a prodigious author and editor.
Abstract: The Latvian-born legal theorist P.I. Stuchka (1865-1932), generally recognized as one of the principal architects of modern Soviet legal theory and the Soviet legal system itself, was a prodigious author and editor. Twenty essays by Stuchka written between 1917 and 1931 were selected for translation
36 citations
Posted Content•
TL;DR: In this article, the authors consider the problem of whether unobservable agency contracts can serve as precommitments and show that, in terms of Nash equilibrium outcomes, no when it is common knowledge that there exists a contract that "solves" the standard agency problems and that the principal and agent have the same preferences over income and effort.
Abstract: The players in most economically important games are agents, not principals. This raises the possibility of the principal's setting a strategic compensation scheme. The central question addressed here is whether unobservable agency contracts can serve as precommitments. I argue that, in terms of Nash equilibrium outcomes, the answer is no when it is common knowledge that there exists a contract that "solves" the standard agency problems and that the principal and agent have the same preferences over income and effort. However, I also show that when these conditions are not satisfied (as they typically will not be), provisions of the agency contract enacted solely to deal with incentive and risk sharing problems of the agency relationship may have the secondary effect of credibly precommitting the agent in the game he plays with other agents. I also briefly consider the effects of contract renegotiation.(This abstract was borrowed from another version of this item.)(This abstract was borrowed from another version of this item.)
36 citations
TL;DR: Anthony as mentioned in this paper argued that notice-and-comment does not always provide genuine public participation in legislative rulemaking; it is useful primarily as a record-making device and is generally employed when a rule is in near-final form.
Abstract: I have only two principal disagreements with Bob Anthony. First, I believe that a court should not go behind the objective terms of a statement of agency policy to speculate about whether the statement was "really intended" to bind the public. If by its terms an agency's general statement of agency policy is limited to establishing general policies and explicitly states that the policies must be justified de novo in subsequent applications where the policies are challenged, then a court should not invalidate the policies-on the grounds that, contrary to what the agency's statement says it is, the court thinks that it is "really" or "practically" a "non-rule rule" made without benefit of proper rulemaking procedures.1 Second, I believe that courts should not attempt to force all agency policymaking into the mold of notice-and-comment rulemaking. Noticeand-comment does not always provide genuine public participation in legislative rulemaking; it is useful primarily as a record-making device and is generally employed when a rule is in near-final form.
36 citations
TL;DR: In this paper, an economic analysis of the self-dealing problem is presented based on the novel theory that legal protections can be classified into "property rules" or "liability rules" not only in the context of individual rights but also in the case of group rights.
Abstract: Self-dealing presents a major problem in corporate law. It finds its particular expression in everyday corporate actions and deals between corporations and their controlling parties, subsidiaries, directors, corporate officers, or any other entity in which shareholders may have an interest. Conflict of interests in the context of corporate law may be controlled by a variety of means, ranging from the absolute prohibition of self-dealing to the prohibition of voting with conflicting interests (the "majority of the minority" vote), the imposition of fairness duties, and non-interventionary approaches. Based on an economic analysis, the Article presents an innovative and comprehensive theory accounting for the problems inherent in self-dealing (i.e., conflict of interests). The theory enables the author to provide a unique presentation and evaluation of the relative efficiency of the solutions to the conflict of interests problem adopted by different corporate laws.The Article's analysis of the self-dealing problem is based on the novel theory that legal protections can be classified into "property rules" or "liability rules" not only in the context of individual rights but also in the context of group rights. Applying this theory to self-dealing transactions, in which the "group" is composed of the minority shareholders, the author demonstrates that each of the two most effective solutions to the self-dealing problem can be classified as either a property rule or a liability rule. The requirement of a majority-of-the-minority vote, which prevents any transaction from proceeding without the minority group's consent, can be defined as a property rule. The fairness test, which allows transactions to be imposed on an unwilling minority group but ensures that the minority receives adequate compensation in objective market-value terms, can be defined as a liability rule.The choice between the two types of rules is a function of the total transaction costs in a particular legal system. These transaction costs include both the negotiation costs attendant upon a property rule, as well as the adjudication costs associated with a liability rule. The Article further reveals that the sum of transaction costs is influenced by the efficacy of the judicial system and of extra-legal mechanisms, such as the market for corporate control, the capital market, and the type of investors active in the market.An empirical survey and analysis of the regulation of self-dealing in several countries -- Delaware, United Kingdom, Canada, Germany, and Italy -- reveal and confirm the main theoretical claims of this Article. The Article arrives at three principal conclusions. First, corporate laws must incorporate some form of minority protection against self- dealing as a mandatory rule. Second, because of the transaction costs associated with each means of legal protection, there is no single efficient solution suitable for every jurisdiction; any solution chosen to cope with the self-dealing problem must take into account the relevant local conditions. Third, Delaware's rules governing self-dealing, which were believed to be indeterminate and opaque, are shown, for the first time, to be efficient and coherent.
36 citations
TL;DR: This article studied the ability of an agent and a principal to achieve the first-best outcome when the agent invests in an asset that has greater value if owned by the principal than by the agent.
Abstract: This paper studies the ability of an agent and a principal to achieve the first-best outcome when the agent invests in an asset that has greater value if owned by the principal than by the agent. When contracts can be renegotiated, a well-known danger is that the principal can holdup the agent, undermining the agent's investment incentives. We begin by identifying a countervailing effect: Investment by the agent can increase his value for the asset, thus improving his bargaining position in renegotiation. We show that option contracts will achieve the first best whenever this threat-point effect dominates the holdup effect. Otherwise, achieving the first best is difficult and, in many cases, impossible.
35 citations