CORPORATE LAW & GOVERNANCE
THE HOLDING FOREIGN COMPANIES ACCOUNTABLE (HFCA) ACT: A CRITIQUE
Jesse M. Fried & Tamar Groswald Ozery
The 2020 Holding Foreign Companies Accountable (HFCA) Act will force China-based firms to delist from U.S. exchanges if China fails to permit audit inspections during a two-year period. The Act also requires such firms, as soon as China blocks such inspections, to disclose ties to the Chinese party-state. We first explain why the delisting provisions, while well-intentioned, may well harm U.S. investors. We then turn to the disclosure provisions, explaining that they appear to be motivated by a desire to name-shame Chinese firms rather than to protect investors. While China-based firms do pose unique risks to U.S. investors, the Act fails to mitigate—and may well exacerbate—these risks.
TECHNOLOGY & INNOVATION • BANKING
BANK RUNS DURING CRYPTO WINTER
Gary B. Gorton & Jeffery Y. Zhang
“Crypto Winter” refers to a systemic event that occurred in the cryptocurrency ecosystem—what we call “crypto space”—in 2022. Crypto space was wracked by plummeting crypto prices, the troubles of a large crypto hedge fund, and runs on many crypto lending platforms. Several large crypto firms went bankrupt. Collectively, everyday people lost billions of dollars. And crypto investors are still feeling the aftershocks.
CORPORATE LAW & GOVERNANCE
THE NEW CORPORATE LAW OF CORPORATE GROUPS
Mariana Pargendler
How does corporate law treat legal entity boundaries in groups of companies? This is a critical question given that large corporations typically have hundreds of subsidiaries. Investigating the treatment of this question in key jurisdictions over time reveals a critical, but thus far overlooked, development in corporate law around the globe. Corporate law rules of internal governance increasingly overcome entity boundaries and apply on a pass-through basis, such as by allowing shareholders of a parent company to sue subsidiary directors, inspect subsidiary books and records, and approve major asset sales by subsidiaries. This phenomenon, which can be described as the rise of “entity transparency” in corporate law, reflects a gradual trend that has accelerated in the twenty-first century. Interestingly, there appears to be little direct correlation between a jurisdiction’s willingness to disregard entity boundaries to enforce shareholder rights, on the one hand, and to impose liability on shareholders for the benefit of creditors, on the other. The Article then offers an economic account for the distinct treatment of corporate separateness vis-à-vis shareholders and creditors, and explores the broader theoretical and normative ramifications of its analysis. The rise of entity transparency in corporate law underscores the importance of unbundling different dimensions of corporate separateness, challenges the view that overcoming entity boundaries between parent companies and subsidiaries invariably requires extraordinary circumstances, and has implications for a wide array of legal issues across various areas of law.
CORPORATE LAW & GOVERNANCE • ENVIRONMENTAL, SOCIAL, & GOVERNANCE
THE MAKING AND MEANING OF ESG
Elizabeth Pollman
ESG is one of the most notable trends in corporate governance, management, and investment of the past two decades. It is at the center of the largest and most contentious debates in contemporary corporate and securities law. Yet few observers know where the term comes from, who coined it, and what it was originally aimed to mean and achieve. As trillions of dollars have flowed into ESG-labeled investment products, and companies and regulators have grappled with ESG policies, a variety of usages of the term have developed that range from seemingly neutral concepts of integrating “environmental, social, and governance” issues into investment analysis to value-laden notions of corporate social responsibility or preferences for what some have characterized as “conscious” or “woke” capitalism.
BANKING
PRIVATIZING DEPOSIT INSURANCE
Christina Parajon Skinner
For the past 90 years, the federal government has provided insurance to bank depositors against the risk of loss associated with a bank’s failure. In many ways, this insurance scheme—managed by the Federal Deposit Insurance Corporation (“FDIC”)—is the bedrock of banking law. FDIC insurance aims to preempt bank runs by ensuring that depositors remain confident in the security of their funds, even when turbulent times hit. In practice, however, FDIC insurance has suffered from one key design flaw—it has never managed to reconcile the tradeoffs between the moral hazard it produces and the financial stability it ensures. In large part, this is due to policymakers’ inability to credibly commit to maintaining the limits on insurance payouts that Congress statutorily sets. Over the past forty years, the cap has consistently been lifted to protect uninsured depositors in each successive banking crisis.