This paper compares the performance of privatized and state firms in the transition economies of Central Europe, while controlling for various forms of selection bias. It argues that privatization has different effects depending on the types of owners to whom it gives control. In particular, privatization to outsider, but not insider, owners has significant performance effects. Where privatization is effective, the effect on revenue performance is very pronounced, but there is no comparable effect on cost reduction. Overlooking the strong revenue effect of privatization to outsider owners leads to a substantial overstatement of potential employment losses from post-privatization restructuring.

This paper available through MIT Press

Complex "derivative" financial instruments are often used in aggressive tax planning. In response, the government has implemented mark-to-market type reforms, but only partially. Considered in isolation, these incremental reforms are likely to seem well advised in measuring income more accurately. However, there is an important "second best" cost, emphasized in this Article: the ability of well-advised taxpayers either to avoid the new rule or to turn it to their advantage (here called "defensive" and "offensive" planning options, respectively). This Article uses two case studies to identify how these planning options arise and to suggest ways of combating them in future reforms. The first case study, Section 475, requires securities dealers to use mark-to- market accounting. Although this rule curtails tax planning by securities dealers themselves, it enables dealers to serve as accommodation parties for their clients' tax planning: Once exempted from generally applicable rules, dealers can offer clients a tax benefit (e.g., accelerated losses) without experiencing a corresponding tax cost (e.g., accelerated income). The second case study, the contingent debt regulations, requires lenders and borrowers to report pre-realization gains and losses based on assumed annual returns. Although this reform seeks to accelerate the lender's interest income, the rule's narrow scope allows tax-sensitive lenders to avoid this result. Accordingly, the new rule is likely to apply only when tax-exempt entities lend to tax-sensitive borrowers, who enjoy the regulations' accelerated interest deductions. This Article offers ways to remedy these reforms, as well as general guidance about how to implement incremental mark-to-market reforms without exacerbating the planning option.

Before the 1960s, United States regulatory institutions effectively enforced the principle that interstate commerce in goods produced in violation of workers' rights of association is an unfair trade practice. Thereafter, the same institutions facilitated the de facto non-enforcement of those core labor rights. This experience is best understood through regulatory models of 'coordinated decentralization'. The experience of United States labor federalism points to several institutional features that are likely to prove critical to the success or failure of any supranational architecture for enforcement of international labor rights, including: the regulatory endogeneity of interest groups; the structure of non-governmental institutions that span the tiers of federal public institutions; the mechanisms that mutually reinforce procedural and substantive rights of association; and the public-private networks that seek economic growth through agglomeration of human physical capital or, instead, through minimization of unit labor costs.

This paper available through the Journal of International Economic Law - Oxford University Press

The UCC and common law have used "good faith" to interpret long-term, open quantity contracts in a manner which ignores the parties' allocation of discretion. With no theory to guide them, courts have rewritten contracts to say, in effect, that a seller agrees to keep running his factory at a loss in order to generate waste (the waste removal company being the purchaser under the long-term contract) or that a buyer in a long-term requirements contract has promised to never run its facility at full capacity. Commentators have routinely accepted these interpretations without recognizing the peculiar features of this default rule. The simple theoretical point is that a long-term contract will often grant one party discretion with regard to quantity, in the form of output or requirements contracts, to adapt to changed circumstances. That discretion will typically be constrained by the requirements (or output) of a particular facility. To protect the opposite party's reliance, the contract will often impose additional constraints on that discretion so that the first party must take this reliance seriously when making quantity decisions. The paper analyzes a number of cases from this perspective and concludes that, with the possible exception of cases in which the buyer eliminates its requirements by selling the plant, the courts should not use good faith to override the contractual allocation of discretion.

The coincidence of the new millennium and the fifteenth anniversary of the Delaware Supreme Court's announcement of a new approach to takeover law provides an appropriate occasion to step back and evaluate a remarkable experiment in corporate law - the Delaware Supreme Court's development of an intermediate standard for evaluating defensive tactics. I will argue that Unocal has developed into an unexplained and, I think, inexplicable preference that control contests be resolved through elections rather than market transactions. In doing so, I will highlight the remarkable struggle between the Chancery Court and the Supreme Court for Unocal's soul, a contest I will suggest the Supreme Court won only by fiat. I will also maintain that the current debate over shareholder-adopted bylaws that repeal or amend director-adopted poison pills provides a vehicle to reposition Delaware takeover law. Finally, I will end my retrospective on a note of praise. Intertwined with the development of Delaware takeover law is a reassessment and important expansion of the role of independent directors in corporate governance. There is no reason why this important development cannot be preserved if the Delaware Supreme Court chooses otherwise to restore balance to the law of takeovers.

 1998 ended with voluminous copyright legislation, pompously titled the "Digital Millennium Copyright Act" ["DMCA"], and intended to equip the copyright law to meet the challenges of online digital exploitation of works of authorship. 1999 and 2000 have brought some of the ensuing confrontations between copyright owners and Internet entrepreneurs to the courts. The evolving caselaw affords an initial opportunity to assess whether the copyright law as abundantly amended can indeed respond to digital networks, or whether the rapid development of the Internet inevitably outstrips Congress' and the courts' attempts to keep pace. This Article addresses recent Internet-related controversies concerning technological protection measures and copyright management information; fair use and linking; "private" copying online services; and choice of law issues posed by foreign websites accessible in the U.S. T

he Internet copyright cases this Article examines call not only for interpretation of the provisions of the DMCA, but also for application of principles developed in pre-DMCA cases involving digital media and digital networks. What may make the current controversies different is the intensity of their impact on end-users. While the defendants in the current cases are generally, albeit not exclusively, commercial intermediaries, many of the practices here at issue pose the prospect of mass uncompensated copying by the public. Hence the feeling of desperation and even moral outrage that one senses pervades many of the copyright owners' actions. From the user perspective, digital media offer unparalleled opportunities to access and enjoy copyrighted works; copyright owners' endeavors to staunch the free (as in unpaid) flow of works are misguided attempts to stop the inexorable forward march of technology for the sake of preserving mastodontic business models of distribution. Certainly the Internet will compel adoption of new business models, and the sooner copyright owners adapt, the better. The tools the DMCA and copyright caselaw give copyright owners to confront copyright use on the Internet should be employed to promote broad distribution of works of authorship at reasonable, and variable, prices. If copyright owners instead wield these tools to enhance control without facilitating dissemination, we can expect to see courts expand the zones of excused uses, whether or not the excuses are doctrinally persuasive. Copyright owners cannot, and should not, control every Internet use, but neither should every use prompt an excuse, lest we undermine the ability of copyright owners, and especially of individual creators, to make a living from their creativity.

Recent commentary has argued that deep and liquid securities markets and a dispersed shareholder base are unlikely to develop in civil law countries and transitional economies for a variety of reasons, including (1) the absence of adequate legal protections for minority shareholder, (2) the inability of dispersed shareholders to hold control or pay an equivalent control premium to that which a prospective controlling shareholder will pay and (3) the political vulnerability of dispersed shareholder ownership in left-leaning "social democracies." Nonetheless, this article finds that significant movement in the direction of dispersed ownership has occurred and is accelerating across Europe. To understand how dispersed ownership can arise in the absence of the supposed legal and political preconditions, this article reconsiders the appearance of dispersed ownership in the late 19th and early 20th Century in the U.S. and the U.K. During this era, the private benefits of control were high, and minority legal protections in the U.S. were notoriously lacking, as the famous Robber Barron of the age bribed judges and legislators and effectively employed regulatory arbitrage to escape regulation. Nonetheless, strong self-regulatory institutions (most notably, the New York Stock Exchange) and private bonding mechanisms by which leading underwriters pledged their reputational capital by placing directors on the board of sponsored firms enabled the equity market to expand and dispersed ownership to arise. In contrast, in the U.K., the London Stock Exchange for a variety of path-dependent reasons played a far more passive role and did not become an effective self-regulator until much later in the 20th Century. Yet, dispersed ownership also arose, although at a slower pace. The lesser role for private self-regulation in the U.K. may have been the consequence of its lesser need for self-regulation as a functional substitute for formal law, given both earlier legislation in the U.K. and lesser exposure to judicial corruption and regulatory arbitrage. Based on these examples, this article argues that "functional convergence" will dominate "formal convergence" and that the principal mechanism of functional convergence may be private self-regulation. However, rather than reject the "law matters" hypothesis, this article suggests that one of the principal advantages of common law legal systems is their decentralized character, which encourages self-regulatory initiatives, whereas civil law systems may monopolize all law-making initiatives. Further, this article proposes that legal reforms, while important, are likely to follow, rather than precede, market changes -- as happened in both the U.S. and the U.K. Once however a constituency for liquid and transparent securities market is thus created, it will predictably seek and secure legislation that fills in the enforcement gap that self-regulation leaves. Both in the U.S., the U.K. and Europe today, the growth of securities markets has been largely divorced from politics. What then are the preconditions for the separation of ownership and control? The key answer is that public shareholders be able to retain control, protected from the threat of stealth raiders who can assemble controlling blocks without paying a control premium. In both the U.S. and the U.K., these protections were first developed through private (or semi-private) ordering and then formalized in legislation.

Under standard accounts of corporate governance, capital markets play a significant role in monitoring management performance and, where appropriate, replacing management whose performance does not measure up. Recent case law in Delaware, however, appears to have altered dramatically the mechanisms through which the market for corporate control must operate. In particular, the interaction of the poison pill and the Delaware Supreme Court's development of the legal standard governing defensive tactics in response to tender offers have resulted in a decided, but as yet unexplained, preference for control changes mediated by means of an election rather than by a market. In this paper, we begin the evaluation of the preference for elections over markets that the Delaware Supreme Court has not yet attempted. We apply to this effort both doctrinal logic and insights derived from an interesting but complex formal literature that has developed to understand how voting structures work in political contests and jury deliberations. Since these contexts differ substantially from transfers of corporate control, our analysis raises a question of fit: are voting models suitable for analyzing the question asked here; In our view, the models do shed some light on the takeover institution, but if this view is ultimately rejected, then we will have eliminated what at least superficially appears to be a useful set of tools.