University of Pennsylvania Carey Law School Penn Law: Legal Scholarship Repository Comparative Corporate Governance and Financial Regulation Select Seminar Papers Spring 2016 The Manner in Which Corporate Law and Financial Regulations Are Made Supawich Sirikanchana University of Pennsylvania Sharareh Zand Goethe University Follow this and additional works at: https://scholarship.law.upenn.edu/fisch_2016 Part of the Administrative Law Commons, Business Law, Public Responsibility, and Ethics Commons, Business Organizations Law Commons, Comparative and Foreign Law Commons, and the European Law Commons Repository Citation Sirikanchana, Supawich and Zand, Sharareh, "The Manner in Which Corporate Law and Financial Regulations Are Made" (2016). Comparative Corporate Governance and Financial Regulation. 6. https://scholarship.law.upenn.edu/fisch_2016/6 This Seminar Paper is brought to you for free and open access by the Select Seminar Papers at Penn Law: Legal Scholarship Repository. It has been accepted for inclusion in Comparative Corporate Governance and Financial Regulation by an authorized administrator of Penn Law: Legal Scholarship Repository. For more information, please contact [email protected]. GLOBAL RESEARCH SEMINAR ON COMPARATIVE CORPORATE GOVERNA NC E The Manner in which Corporate Law and Financial Regulations are made present to Prof. Brigitte Haar (Goethe-University) Prof. Jill E. Fisch (Penn Law School) written by Sharareh Zand (Goethe-University) Supawich Sirikanchana (Penn Law School) TABLE OF CONTENTS LIST OF ABBREVIATIONS IV LIST OF LITERATURE VI A. Introduction 1 B. The manner in which corporate law is made in Germany 1 I. An introduction to German corporate law 2 II. Historical Development of German corporate law 3 1. The origins of German corporate law 3 2. Corporate Law in the time of German liberalism 3 3. The 20th century: dissociation from codifications 4 4. Corporate law (on its way) in the 21st century 6 III. Europeanization of German corporate law 7 1. Daily Mail 8 2. Centros 8 3. Überseering 9 4. Inspire Art 9 5. Range and meaning of the decisions of the EuGH 10 6. Further endeavours towards Europeanization: Societas Europaea 11 IV. Corporate Governance in Germany 12 1. “Legal” basis: The German Corporate Governance Codex 13 2. Section 161 of the AktG 14 3. Structure of the DCGK 14 4. Legal nature of the DCGK or “comply or explain” 15 5. The DCGK under German constitutional law 17 V. Conclusion 17 II C. The manner in which corporate law and financial regulations are made in the US 19 I. The U.S. Corporate Governance Structure 19 1. State Law 19 2. The Idea behind State Law 23 3. Federal Statute 25 a) Managerial Capitalism Era 26 b) Investor Capitalism Era 28 c) Executive Defense and the Ideology of Shareholder Value Era 29 d) The Public Company Accounting Reform and Investor Protectism Act of 2002 (The Sarbanes-Oxley Act) 30 e) The Wall Street Reform and Consumer Protection Act of 2010 33 4. The Idea behind Federal Statute 36 5. Conclusion 38 D. Comparative Part 40 I. Legal Practice of Corporate Governance in the U.S. and Germany 40 1. How Corporate Governance is Made in the U.S. 40 2. How Corporate Governance is Made in Germany 41 3. The shareholder approach in the context of U.S. law principles 43 a) Shareholder Primacy Regime 43 b) Dispersed Share Ownership 45 c) Mandatory disclosure regime 47 4. The stakeholder approach 49 II. Harmonization 50 1. On a global level 50 2. On EU level 53 a) Approximation of national corporate laws 53 III b) New supranational legal forms 53 c) Control by the EuGH 53 III. Conclusion 54 IV LIST OF ABBREVIATIONS §(§) section(s) AEUV Treaty on the Functioning of the European Union AktG Stock Corporation Act AG Stock company AT Official section B-Corp Benefit Corporation BGB German Civil Code BGBL Federal Law Gazette CEO Chief Executive Officer Cf. compare DCGK German Corporate Governance Code DGCL Delaware General Corporation Law DNotZ German Notary Journal Dodd-Frank Wall Street Reform and Consumer Protection Act DRC Democratic Republic of Congo CSR Corporate Social Responsibility e.g. for example eBAnz Elektronischer Bundesanzeiger EC Treaty establishing the European Economic Community ECMH Efficient Capital Market Hypothesis ESOP Employee Stock Option Plan et seq(q). and the following(s) EuGH European Court of Justice F(f). Following(s) G-20 Group of Twenty GmbH Limited Liability Company V GmbHG Act on Limited Liability Companies HGB German Commercial Code IOSCO International Organization for Securities KG Limited Partnership LLC Limited Liability Company Ltd Limited MBCA Model Business Corporation Act MMOU Multilateral Memorandum of Understanding No. Number OECD Organisation for Economic Co-operation and Development OHG Partnership p(p). page(s) para(s). paragraph(s) PCAOB Public Company Accounting Oversight Board RabelsZ The Rabel Journal of Comparitive and International Private Law SEC Securities and Exchange Commission SOX The Sarbanes-Oxley Act TFEU Treaty on the Functioning of the European Union UK United Kingdom US/U.S. United States of America v./vs. versus Vol. volume RGBL Imperial Law Gazette ZCG Journal for Corporate Governance ZGR Journal for Business and Corporate Law ZHR Journal for Commercial and Economic Law VI LIST OF LITERATURE Achleitner, Ann-Kathrin; Ausgewählte Aspekte der Vorstandsvergütung in Rapp, Marc Stefan; Börsennotierten Unternehmen: Familien- vs. Nicht- Schaller, Philipp; Familienunternehmen Wolff, Michael ZCG No. 3 (2010), pp. 113-125, cited as: Achleitner/Rapp/Schaller/Wolff, ZCG 2010, p(p). 113, cited page(s). Allen, Hilary J. A New Philosophy for Financial Stability Regulation, 45 U. Chi. L. Rev. 173, (2013). Allen, William Commentaries and Cases on the Law of Business Organization (4th ed. 2012). Armour, John Who Should Make Corporate Law? EC Legislation versus Regulatory Competition ECGI - Law Working Paper No. 54/2005, online available on: http://ssrn.com/abstract=860444, cited as: Armour, ECGI No. 54/2005, cited page(s). The Essential Elements of Corporate Law: What is Corporate Law?, Leaflet No. 643, John M. Olin Center’s Program on Corporate Governance, Harvard Law School (2009). Armour, John; European Company Law 1999-2010: Renaissance and Ringe, Wolf-Georg Crisis Oxford Legal Studies Research Paper No. 63/2010, online available on: http://ssrn.com/abstract=1691688, cited as: Armour/Ringe, Oxford LSRP No. 63/2010, cited VII page(s). Bagaric, Mirko; Principles of Contemporary Corporate Governance Du Plessis, Jean Jacques; 3rd edition (2014), Hargovan, Anil; cited as: Bagaric/Du Plessis/Hargovan/Harris, Principles of Harris, Jason Contemporary Corporate Governance, cited page(s). Bainbridge, Stephen M. Corporate Law 1-2 3rd ed. 2015. Baums, Theodor Europäische Modellgesetzt im Gesellschaftsrecht Goethe Institute for Law and Finance, Working Paper No. 75, 01/2008, cited as: Baums, ILF 01/2008, cited page(s). Baums, Theodor; Corporate Governance in Germany (1998) Birkenkkaemper, Anja online available on: http://ssrn.com/abstract=158038, cited as: Baums/Birkenkaemper, CG, section. Bayer, Walter; Aktienrecht im Wandel II, Grundsatzfragen des Habersack, Mathias (editors) Aktienrechts (2007) cited as: author, in Bayer/Habersack, cited page(s). Bebchuk, Lucian The Powerful Antitakeover Force of Staggered Boards: Theory, Evidence, and policy, 54 Stan. L. Rev. 1, (2002). Becht, Marco; Corporate Governance and Control Bolton, Patrick; ECGI - Finance Working Paper No. 02/2002, Röell, Ailsa online available on: http://ssrn.com/abstract=343461, cited as: Becht/Bolton/Roell, ECGI No. 02/2002, cited page(s). VIII Berle, Adolf A.; The Modern Corporation and Private Property (1932). Means, Gardiner C. Black, Jr., Lewis S. Why Corporations Choose Delaware 1-10 Delaware Department of State eds., 2007. Bohrer, Andreas The Impact of the Financial Crisis on the Law and the Legal Profession, International Junior Faculty Forum 2009, Harvard Law School & Stanford Law School (Feb. 5, 2016, 9:00 PM), http://ssrn.com/abstract=1511323. Braendle, Udo; The Societas Europaea - A Step Towards Convergence of Noll, Juergen Corporate Governance Systems? (2005), online available on: http://ssrn.com/abstract=704881, cited as: Braendle/Noll, SE, cited page(s). Bainbridge, Stephen M. Director vs. Shareholder Primacy in the Convergence Debate, Leaflet No.02-04, UCLA School of Law, Research Paper (2002). The Corporate Governance Provisions of Dodd-Frank, Leaflet No.10-14, UCLA School of Law, Law-Econ Research Paper (2010). Branson, Douglas M. Corporate Governance (1993). Bratton, William W. Enron and the Dark Side of Shareholder Value, 76 Tul. L. Rev. 1275, (2002). Bratton, William W.; Introduction: Institutional Investor Activism Hedge Funds McCahery, Joseph A., and Private Equity, Economics and Regulation, William W. Bratton and Joseph A. McCahery eds., 2015. IX Brummer, Chris Soft Law and The Global Financial System Rule Making in the 21st Century, 2nd ed. (2015). Cunningham, Lawrence A. Behavioral Finance and Investor Governance, 59 Wash. & Lee L. Rev. 1, (2002) (behavioral finance). Cheffins, Brian R. The History of Corporate Governance, Leaflet No.184/2012, ECGI-Law Working Paper (2012). Clark, Robert C. Corporate Governance Changes in The Wake of The Sarbanes-Oxley Act: A Morality Tale for Policymakers Too. Leaflet No. 525 John M. Olin Center’s Program on Corporate Governance, Harvard Law School (2005). Coffee Jr., John C. What Caused Enron?: A Capsule Social and Economic History of the 1990‘s, Leaflet No.204, Columbia Law and Economics Working Paper (2003). Cox, James D. How Delaware Law Can Support Better Corporate Governance, (F. Scott Kieff and Troy A. Parades eds., 2010). Cuervo-Cazurra, Alvaro; Codes of Good Governance Worldwide: What is the Aguilera, Ruth V. Trigger? Organization Studies, Vol. 25 No. 3 (2004) online available on: http://ssrn.com/abstract=260869, cited as: Cuervo-Cazurra/ Aguilera, cited page(s). Dammann, Jens The Future of Codetermination After Centros: Will German Corporate Law Move Closer to the U.S. Model? Fordham Journal of Corporate and Financial Law, Vol. 8 X (2003), pp. 607-684, online available on: http://ssrn.com/abstract=811564, cited as: Dammann, Fordham 2003, 607, cited page(s).