Eric J. Pan

Regulatory Competition in International Securities Markets: Evidence from Europe in 1999 ? Part I

This article presents the second installment of an empirical investigation into regulatory competition in international securities markets. It contributes to the current debate about competitiveness of U.S. capital markets by offering an account of transatlantic capital raising practices at the height of technology boom of the 1990s and before the passage of the Sarbanes-Oxley Act of 2002 and the corporate scandals that precipitated the Act. This article provides evidence that European issuers in the late 1990s were already turning away from U.S. public capital markets. While regulatory considerations appear to have played a role in that trend, even more important were the growing importance of private means of access of U.S. capital, the increased off-shore presence of U.S. institutional investors, and the relatively unsatisfactory trading performance of many foreign issuers that had gone to the trouble of obtaining U.S. public listings early in the 1990s. The picture of transatlantic capital raising presented in our survey suggests that the recent decline in competitiveness of U.S. capital markets may well be more a product of long-standing trends in global financial markets than a response to the Sarbanes-Oxley Act or other requirements of federal securities laws. We have supplemented our original analysis with a post-script from the vantage point of 2008 to draw connections between our findings and those of recent academic literature.

A Board's Duty to Monitor

One of most difficult questions in corporate law is what is the board’s duty to prevent harm to the corporation? Delaware courts currently excuse boards from responsibility for harmful outcomes not involving wrongful or illegal acts. By doing so, however, Delaware courts have encouraged boards either to be ignorant or unquestioning of aggressive risk-taking by officers. The Delaware conception of the duty to monitor is in notable contrast to calls by regulators, shareholder groups and, most recently, Congress for boards to play a more active and participatory role in the management of risks affecting the corporation. As part of a larger study of the board’s duty to monitor, this particular paper examines in detail Delaware case law defining the scope and application of the duty to monitor and considers why Delaware courts have decided that boards should not be held responsible for monitoring business risks, even if the taking of such risks results in catastrophic losses. As will be more fully argued in a separate article (38 Fla. St. U. L. Rev. (forthcoming 2011)), the current Delaware position is inconsistent with the optimal role of the board in the modern corporation. Consequently, Delaware courts should expand the scope and application of the duty to monitor.