David C. Donald

Shareholder Voice and Its Opponents

This article revisits half of the classic governance dichotomy, “voice” and “exit”. It aims to illustrate that the principal, legal arguments against shareholder voice—that shareholders neither own corporations nor are restricted by legal duties—are without merit. It explains the legal nature of the property rights that shareholders have in corporations. In an analysis restricted to US law, it presents the fiduciary and other types of duties that temper and restrain shareholder behaviour in ways very similar to the existing legal checks on management behaviour. It also seeks to clarify why—although shareholders have complete freedom under US law to structure their corporations according to taste—they almost always end up the complete wards of management. By way of conclusion, the article outlines how a steady increase in institutional ownership that continued at least until the end of 2004 has prompted measures that palpably facilitate shareholder voice.

Securities Settlement Systems

Securities settlement is the process of transferring to the buyer ownership of the security bought and to the seller ownership of the purchase price. This process must fulfill the legal requirements for transferring ownership of the securities, should be fast, reliable, and safe, and should preserve the nature of the transferred securities. Best practice currently recommends that a settlement system include a central securities depository, in which securities should be immobilized so that claims to them can be transferred electronically, and a central counterparty that assumes the counterparty risk for delivery, and debits or credits netted amounts on securities accounts held with the depository.

A Financial Centre for Two Empires: History’s marks on Hong Kong law

The endowments of an international financial centre International financial centres, like internationally active trading ports, are outward looking. Their domestic prosperity depends on the ability to attract foreign capital, goods and the deals connected to them. Although the volume of solely domestic transactions may be dwarfed by that of transactions conducted with wholly foreign legs, it is the domestic institutional environment and available skills that draw in these funds, goods and deals. Since its creation in 2007, the Global Financial Centres Index has placed four cities with very different economic and political positions – London, New York, Hong Kong and Singapore – in the top four slots globally. During this period, New York was also the domestic financial centre for the world’s largest economy, while London served a like function for an economy with a ranking between sixth and eighth, and both Singapore and Hong Kong served domestic economies of negligible size whose GDP amounted to barely 10 per cent of the UK’s. Thus, as international financial centres, both London and New York are divided: they are both national financial centres for their large domestic economies (of different sizes) and centres for activity that spans the globe without significant link to either the UK or the US domestic economy. Regardless of whether transactions in these cities are purely domestic, purely foreign or somewhere in between, they are drawn to the financial centre by an economic and institutional condition that reflects the institutional characteristics of the nation itself. In New York, it will be the American economy, institutions and laws, and in London, the corresponding support elements of the UK. The same domestic institutions and laws facilitate both domestic and purely foreign transactions. These respective sets of institutions and laws have developed within the larger context of the nation, received legitimacy from the power of that nation’s state, and yet gained their support for international usage from and among persons based in other countries. While performing very similar functions, Hong Kong and Singapore present a dramatically different origin and composition. They inherited their legal systems from the British Empire, developed their international orientation as trade hubs of the same, and have achieved their status as leading financial centres significantly free of the (lacking) dimension of their domestic economies (which themselves are composed in good part of international financial services).

Law in Regression? Impacts of Quantitative Research on Law and Regulation

Quantitative research (QR) has undeniably improved the quality of law- and rulemaking, but it can also present risks for these activities. On the one hand, replacing anecdotal assertions regarding behavior or the effects of rules in an area to be regulated with objective, statistical evidence has advanced the quality of regulatory discourse. On the other hand, because the construction of such evidence often depends on bringing the complex realities of both human behavior and rules designed to govern it into simple, quantified variables, QR findings can at times camouflage complexity, masking real problems. Deceptively objective findings can in this way prevent the kind of deep, difficult granular investigation a problem needs.In this paper, I examine the methodology of QR, highlighting points where objectivity and verifiability can be threatened. I then discuss a number of case studies where common patterns emerge in the interaction between QR and policymaking. These include the displacement of qualitative problems with inaccurate quantification, the release of powerful, statistical or otherwise quantitative ‘sound bites’ that immediately move policy but are later found to be incorrect, deflating like a ‘bubble’, and the abdication of governance duties by regulators in favour of quantitative indicia like the performance benchmarks of an ‘efficient market’. These case studies reveal a particularly troubling tension between the strength of QR in reaching generalized findings and the uniquely context-specific nature and operation of most laws and regulations.I recommend a number of measures to improve the use of QR in policymaking, including increasing the transparency of data generation and analysis within the academic community, putting more emphasis on inter-disciplinary creation and validation of findings, using certain cautionary disclosure when making ‘public offerings’ of quantitative findings, and holding policymakers more strictly to their statutory mandates, even if not complementary with quantitative analysis.