Kaal claims by topic: governance-design

814 atomic, individually citable claims from the published work of Wulf A. Kaal tagged governance-design.

A jurisdiction supplying corporate law as an unbundled statutory product faces low fixed costs, principally statute drafting, and near zero marginal costs, because additional users impose no new adjudication costs and registration costs are insignificant. 2004
To the extent adjudication over U.K. corporate law is expected to take place outside the U.K., the U.K. has not in fact exported a bundled product; its users are demonstrating a preference for an unbundled package. 2004
Member States unwilling to incur the rule switching costs of conducting judicial proceedings in English could be precluded from marketing their corporate charters in other Member States that do not share their language. 2004
Forum unbundling is the arrangement in which the incorporation jurisdiction's statutes and interpretive case law are unbundled only from the adjudication services of its courts, so corporations may choose a different adjudicator in their charters. 2004
None of the Delaware based solutions, whether importing bundled or unbundled Delaware law, is likely to be viable for Europe. 2004
Unless the Member State of incorporation specifically provides in its corporate statute that arbitration is permissible when allowed in the charter or a shareholders agreement, investors run the risk that courts refuse to enforce the arbitration provision. 2004
Empirically, at least 48 companies with German names carrying the GmbH designation were formed as private limited companies under U.K. law in the ten months after the Inspire Art decision, indicating that charter migration accelerated after the ruling. 2004
More disclosure does not always mean better governance, because the information provided may be hard to assess and evaluate. 2009
European boards of directors and company lawyers should follow the Morrison decision and the section 7216 legislative process closely, prepare for the resulting changes, and ask Congress to reconsider section 7216. 2010
Codetermination makes the German supervisory board's decision making more cumbersome, so a co determined Aufsichtsrat may not respond quickly enough to fast moving events such as an escalation of portfolio risk or a liquidity crisis. 2010
Because the Aufsichtsrat owes its duty of loyalty to the firm rather than to shareholders alone, and because non shareholder constituencies such as employees and creditors are more risk averse than diversified shareholders, German supervisory boards may take a more conservative attitude toward risk than U.S. shareholder oriented boards. 2010
The second trigger, which increases voting rights before resolution, should fire on evidence that conversion into equity was unsuccessful, that conversion came too early or too late, or that the firm's financial performance keeps trending downward. 2011
Beyond super-voting rights and dilution, the second trigger functions as a reorganization tool that operates independently of management decisions and of corrective action by regulators. 2011
The incentive effects of corporate governance controls may not operate in systemically important financial institutions, because managers and owners who anticipate a bailout commitment adjust their risk preferences upward. 2011
Departing from Coffee's design, super-voting rights should be allocated to contingent capital holders only if the first trigger failed to improve the institution's financial health; at the first trigger the new shareholder gets one vote per share. 2011
To balance constituent incentives and prevent abuse, the voting rights increase should be calibrated so that contingent capital holders obtain a majority stake only in combination with the largest institutional shareholder. 2011
Information asymmetries between market participants and a systemically important institution's management before default can be reduced if a financial weakening after conversion of contingent capital triggers a voting rights increase. 2011
The second trigger voting rights increase should never actually be triggered; its function is to level the playing field between constituents, incentivize negotiation, and provide an alternative to reorganization. 2011
German corporate law permits increases in voting rights only in very limited circumstances, such as grandfathered multiple voting shares, so the proposed voting rights increase would require statutory reform in Germany. 2011
Allocating super-voting stock to contingent capital holders satisfies Delaware's legitimate business purpose requirement, because the allocation serves to avoid insolvency and dissolution of the institution. 2011
Exchange uniform voting rights policies should not be applied to contingent capital securities, and the NYSE and Nasdaq would themselves benefit from an exemption because it could increase marketability and trading on each exchange. 2011
Expanded SEC enforcement under the Dodd-Frank provision runs a serious risk of being perceived as an encroachment on the corporate governance of foreign companies. 2011
A second, sequential trigger placed before reorganization or resolution cushions the risk that policy makers misstructure the first trigger, absorbing the negative effects of inadequate or untimely conversion at the moment the institution needs capital. 2012
Early European initiatives to put contingent convertible bonds into executive pay lack governance-improving designs; contingent convertible bonds with an early conversion trigger should be used in executive compensation instead. 2012
Contingent convertible bonds placed in executive compensation serve a different purpose than those sold to investors: the point is not capital infusion during a crisis but governance-improving design that optimizes management incentives. 2012
The conversion feature of contingent convertible bonds affects corporate governance in a SIFI only if issuance volumes are sufficient and design features are adequate, because the governance effect runs through the threat of dilution of existing equity positions. 2012
Market solutions and private ordering alone are unlikely to produce contingent capital designs that improve corporate governance in SIFIs, because privately negotiated sales so far have not produced governance-sensitive designs. 2012
Adding contingent convertible bonds with an early trigger to executive compensation packages creates a corporate governance mechanism that addresses the inability of contractual control rights to constrain executive opportunism. 2012
A contingent capital award to executives without a conversion feature yields only limited governance improvement and only limited incentive to lower risk-taking; in its current form it operates as a mere compensation supplement. 2012
The impending threat of dilution from a possible conversion of investor-held contingent convertible bonds can motivate existing shareholders to become actively involved in the governance of the entity. 2012
Trigger designs that work well in institutions with the traditional mix of debt-holders and shareholders may be suboptimal once executives themselves hold contingent convertible bonds. 2012
An early trigger design for contingent convertible bonds in executive compensation enables earlier signaling of default risk, increases incentives for creditors and shareholders to monitor, and increases executives' incentives to lower risk-taking. 2012
Because both European regulatory initiatives and the United States academic debate concentrate on the technical design features of contingent capital securities, the possible corporate governance applications of those securities are mostly ignored. 2012
Combined with other corporate governance mechanisms, contingent capital securities function as an internal, institution specific mechanism that could fill the void left by regulators' apparent inability to supervise financial institutions effectively. 2012
The threat of dilution of stock holdings, combined with the threat of loss on conversion, reduces the pressure shareholders place on the management of systemically important financial institutions to take higher risks. 2012
Contingent capital by itself, without additional measures and supplemental corporate governance improvements, may not prevent firm failure; its real potential unfolds only when it supplements other corporate governance improvements. 2012
If a market evolves in which contingent capital designs appear to provide sufficient protection against systemic risk and contagion, decision makers may come to rely on the design of those securities and neglect their own role as monitors. 2012
Regular corporate governance controls may not work in systemically important financial institutions, because those institutions are considered too big to fail and their leaders, anticipating a bailout commitment, are incentivized to shift their risk preferences upwards. 2012
Where institutions hold each other's contingent capital and share similar risk profiles, they will be hesitant after conversion to vote for necessary organizational changes at a competitor or otherwise exercise their voting rights, because they are similarly exposed and may face reciprocal voting power. 2012
Absent cross holdings, the opposite conflict arises: institutions holding a competitor's converted contingent capital could be tempted to exercise their voting rights against the interests of that competitor. 2012
The combination of demonstrated investor interest and an underdeveloped regulatory structure in the United States presents a unique opportunity to experiment with contingent capital designs and with their application to the corporate governance of systemically important financial institutions. 2012
A contingent capital design that increases voting rights on conversion allows systemically important institutions to lower risk taking implicitly and to achieve an indirect, institution specific form of corporate governance reform through increased checks and balances. 2012
Because the threat of a change of control leads leaders to take fewer risks in order to avoid triggering conversion, a contingent capital design with increased voting rights allows those leaders to act more in accordance with their moral convictions and conscience. 2012
Management incentives for risk control are heightened upon conversion, especially where management knows that holders of converted contingent capital would command a majority vote, with or without institutional shareholders. 2012
The nearly insurmountable standard for liability in oversight cases in the United States undermines the signalling of the expected standard of conduct, and this could have long-term implications for American corporate law. 2013
Stable rules may not suffice to make directors' oversight role more robust, so contractual and quasi law forms of dynamic governance are a promising supplement for improving the duty of oversight. 2013
Without a workable duty of oversight, corporate directors who seek to comply with the oversight duty lack meaningful guidance about the conduct expected of them. 2013
Directors who are inadequately informed about the expected standard of conduct will underestimate their personal liability exposure and engage in riskier behavior than is desirable for the company itself. 2013
Delaware's signalling of expected conduct could be dramatically improved by adopting a moderate rather than near insurmountable standard for liability in cases involving breaches of the duty of oversight. 2013
Increased liability is no panacea and cannot alone adequately address the central shortcomings of the duty of oversight and of corporate governance in the United States, because heightened liability does not give part-time outside directors the capacity to monitor complex corporations. 2013
The author endorses the conclusion that attempts to enhance oversight in the United States may fail and that emphasizing improved oversight as a means of enhancing corporate governance could be ill-advised. 2013
The common denominator between the Sarbanes-Oxley Act, the Dodd-Frank Act, and other reform proposals is a top down regulatory approach of direct regulatory intervention with stable and supposedly optimal rules. 2013
Governance adjustments are often enacted merely to address the problem perceived in the given market environment and the then existing economic conditions, without regard to possible future developments. 2013
The economic conditions and the corresponding requirements for optimal and stable rules are constantly evolving, so rules fixed at one moment lose their fit over time. 2013
Dynamic Regulation is defined as an adapting governance mechanism that is constantly evolving and adjusting to the given market environment, financial innovation, and regulatory environment. 2013
Using court decisions and stable rules to make the oversight role more robust could be insufficient, whereas contractual and quasi law forms of dynamic governance could help improve the duty of oversight. 2013
Corporate Integrity Agreements are one form of dynamic governance that may be able to temporarily increase fiduciary duties as a form of quasi law. 2013
More research is needed to understand how dynamic forms of governance could help improve fiduciary duties and corporate governance. 2013
Since 2002 United States corporate governance has been substantially upgraded twice in response to crises, following more than seventy years of comparative regulatory inactivity, a concentration of regulatory activity in a short timespan that is itself striking. 2013
Managers are incentivized to manage their institutions so as to avoid contingent capital triggers, and that incentive itself can optimize the governance of financial institutions. 2013
Prosecutors negotiating deferred prosecution agreements may lack the expertise needed to negotiate high level corporate governance changes such as personnel changes and internal corporate and compliance procedures. 2013
Corporate integrity agreements improve corporate governance because the ease of reopened prosecution, increased government scrutiny, and the potential for crippling penalties improve boards' and managements' knowledge of pertinent issues in the institution and its monitoring. 2013
Although CIAs sit outside the formal legal framework that defines fiduciary duties, they belong to the penumbra of extra legal forces that clarifies what is expected of directors. 2013
A CIA raises the stakes for directors who would otherwise neglect their governance responsibilities, because the agreement puts the company effectively on parole and gives the government direct access that facilitates detection of compliance failures. 2013
Although CIAs are not laws, they go beyond aspirational governance standards because they set forth concrete governance rules that more clearly define the duties to be informed, to exercise oversight, and to maintain effective reporting systems, thereby requiring a higher standard of care. 2013
When a company operates under a CIA, the judicial distinction between the law and aspirational corporate governance becomes less clear. 2013
Governance of health care providers is distinctively complicated because directors must balance patients, physicians, taxpayers, the government, and shareholders, and substantial government involvement and liability through Medicare and Medicaid make the taxpaying public a stakeholder. 2013
As a unique hybrid category, CIAs transcend both the law of fiduciary duties and aspirational corporate governance, and courts may come to interpret CIAs and other hybrid forms such as deferred prosecution agreements as expanding the basic legal duty of care. 2013
More research and empirical work is needed to determine how CIAs and other hybrid forms may change or expand directors' obligations. 2013
Contrary to the dominant view of corporate governance as a forward looking endeavor, dynamic governance structures are properly categorized as backward looking ex ante forms of corporate governance. 2014
Traditional forward looking corporate governance systems adopt backward looking perspectives only after stable and optimal rules have emerged as suboptimal and require replacement or amendment. 2014
Targeted use of governmental contracts allows the government to successfully reform corporate governance not only in individual public corporations but across entire industries. 2014
Over 97 percent of the non and deferred prosecution agreements executed in the United States between 1993 and 2013 contained governance changes, including required business changes in 30 percent and board and senior management changes in 38 percent. 2014
The governance improvements documented in governmental contracts counteract or at least discount the standard criticisms of them, including unequal bargaining power, the government's lack of governance expertise, and the potential for prosecutorial abuse. 2014
Dynamic governance structures involving governmental contracts are backward looking because the multilevel feedback effects they generate require an exchange of information about past events in order to anticipate future regulatory contingencies. 2014
The increasing use of non prosecution and deferred prosecution agreements has allowed federal prosecutors to expand their traditional role incrementally, marking a shift in prosecutorial culture away from an ex post focus on punishment toward an ex ante emphasis on compliance. 2014
Prior scholarship on the corporate governance effects of non and deferred prosecution agreements rests largely on anecdotal evidence and individual case studies rather than on systematic evidence, which is why its conclusions about those effects are unreliable. 2014
Because the population of executed non and deferred prosecution agreements is now large, their real trends and real governance impact are quantifiable and measurable, so policy makers can be given evidence based guidance rather than conjecture. 2014
Coding of all publicly available non and deferred prosecution agreements executed between 1993 and 2013 shows that 97.41 percent of them, or 264 of 271 agreements, contained relevant corporate governance changes. 2014
In 63.47 percent of the coded non and deferred prosecution agreements the agreement itself referenced preemptive remedial measures the corporation had instituted before the agreement was executed. 2014
Business change provisions in non and deferred prosecution agreements can go as far as requiring the entity to fundamentally change its business model or to shut down entire business units. 2014
Although 45 percent of sampled agreements required improved communication and training, only 11 percent required the entity to create the position of chief compliance officer, so the most structural compliance remedy is the rarest. 2014
The increasing execution of non and deferred prosecution agreements since 2002 has raised the overall regulatory burden borne by the corporate entities subject to them. 2014
If leading corporations in an industry are bound by substantially similar agreements, the government's privileged access to information and its continuing oversight beyond the agreement term can make business and governance practices in that industry change lastingly. 2014
Because the board changes mandated by non and deferred prosecution agreements consist largely of additional reporting obligations and committee reform rather than removal of officers or directors, those reforms alone may not create sufficient incentives for boards and management to improve governance and avoid execution of an agreement. 2014
The threat of bad press, reputational harm, legal costs, stock price declines, and the cost of implementing mandated governance changes can partly substitute for the weak direct incentives, pushing boards and management to optimize governance and keep the entity out of an agreement. 2014
Because 63.47 percent of the sampled agreements were executed even after the corporation had already instituted preemptive remedial measures, the current quantity, quality, comprehensiveness, and effectiveness of those preemptive measures may be insufficient to prevent an agreement. 2014
High quality and effective preemptive remedial measures are themselves part of good corporate governance and can help a corporation avoid investigation, prosecution, and the execution of a non or deferred prosecution agreement. 2014
Governance reform delivered through non and deferred prosecution agreements is comparatively cheap for corporations because it adversely affects only a small number of board and management positions. 2014
Corporate wrongdoers are unlikely to prefer regulation by prosecution over regulation by legislation because prosecution and execution of an agreement carry large reputational implications. 2014
In the long run, increased regulation by prosecution may be able to offset many of the shortcomings of legislative governance reform, even though it is less predictable than legislation. 2014
Because non and deferred prosecution agreements typically run for a limited term, it remains unclear whether the governance reforms they impose survive in the long term. 2014
If corporate wrongdoing is not in fact caused by deficient corporate governance, then the governance reform imposed through a non or deferred prosecution agreement is merely a method of settlement rather than a lasting reform effort. 2014
The underlying corporate governance problems in United States corporations may be more severe than non and deferred prosecution agreements are capable of adequately addressing. 2014
The cooperation requirements documented in this study are likely to produce an increasing need for corporations and their counsel to anticipate prosecutorial actions in advance. 2014
The evidence assembled in this study supports the conclusion that non and deferred prosecution agreements can play a legitimate role in addressing corporate governance shortcomings, contrary to the broad legitimacy critique in the literature. 2014
Corporate governance provisions in non and deferred prosecution agreements increased significantly over the decade to 2013, raising prosecutors' influence over corporate governance to unprecedented levels. 2014
Stock prices respond significantly and predictably in a positive direction to the DOJ press release announcing execution of a non- or deferred prosecution agreement and to the start of the N/DPA term. 2015
Investor response to N/DPAs is not uniform: it varies with the firm's industry, the severity of the financial fine, and the extent of the governance improvements the N/DPA mandates. 2015
Investors treat the expiration of an N/DPA term as a negative event for the firm. 2015
The combination of a positive market reaction at the start of the N/DPA term and a negative reaction at its end is evidence that the governance changes N/DPAs mandate actually matter to firm value. 2015
Because N/DPAs are contractual arrangements between corporations and the Department of Justice that remedy identified governance shortcomings, it is the DOJ, rather than Congress or the courts, that is changing U.S. corporate governance practice. 2015
The DOJ announcement is the only ascertainable point at which the market can assess the impact of the governance changes an N/DPA mandates, because the announcement typically accompanies release of the agreement document itself. 2015
The positive post-announcement reaction is best read as the market rewarding both the end of a costly DOJ investigation and the governance terms the N/DPA is expected to impose. 2015
From the first day of the N/DPA term through day twenty five, the period in which mandated governance improvements are in force, the market prices the N/DPA as a positive event for the firm. 2015
Negative returns after the end of the N/DPA term are evidence that investors regard the expiration of the term, and the consequent unenforceability of the associated governance improvements, as bad news for the firm. 2015
The positive market reaction at announcement and at the start of the term is the market acknowledging that an N/DPA gives the firm an opportunity to be better managed, more compliant, and less exposed to penalties. 2015
The negative market reaction at the end of the N/DPA term is the market acknowledging that suboptimal governance practices are likely to resume once the term expires. 2015
The data support Hypothesis 3: the market reacts positively when N/DPA governance changes become mandatory at the start of the term and negatively when they cease to be mandatory at its end. 2015
The paired positive reaction at the start and negative reaction at the end of the N/DPA term is direct evidence that N/DPA mandated governance changes matter to investors. 2015
The market values N/DPA governance changes during the term because those changes effectively address the underlying corporate wrongdoing and its damage to goodwill and reputation while reducing the likelihood of continuing fines and litigation. 2015
Despite wide-ranging criticism of N/DPAs on authority, fairness, and expertise grounds, scholars agree that N/DPAs do influence corporate governance. 2015
The observed growth in N/DPA execution, especially since 2002, indicates that N/DPAs will continue to shape major U.S. corporations across a range of industries. 2015
Prior coding of all publicly available N/DPAs from 1993 to 2013 across more than 230 governance categories shows that N/DPAs have a substantial effect on corporate governance. 2015
The traditional mutual fund governance model, in which one board serves multiple discrete funds within a sponsor's group, is subject to significant oversight challenges. 2016
In a multimanager series trust the board is largely independent of any adviser in the fund group, because the structure is centered on an unaffiliated administrator rather than on the sponsoring investment adviser. 2016
Despite open issues and possible shortcomings, the multimanager series trust structure appears to offer lasting substantive governance improvements for mutual funds. 2016
The pace of innovation is incompatible with existing regulatory approaches that demand comprehensive knowledge as a precondition for regulatory action, because innovation is too decentralized, too fast, and too pervasive. 2016
The United States lacks an anticipatory system at the national level because no mechanism exists for bringing foresight and policymaking into an effective relationship. 2016
Dynamic regulation optimizes anticipatory governance for innovation by emphasizing adaptation to and anticipation of the unforeseen contingencies associated with innovation. 2016
The DAO failed because of fundamental flaws in its own code, which allowed hackers to move one third of its funds to a subsidiary account, showing that governance built entirely on smart contracts inherits the defects of its code. 2017
The DAO failed because its code had not yet been perfected: hackers took a third of the DAO tokens and transferred them to another account, and that hack together with other technological limitations led to the demise of the DAO. 2017
Unlike traditional hierarchical organizations where face-time and unproductive meetings are the norm, the self-governing DAO token optimizer avoids corporate hierarchy inefficiencies and the bad outcomes that come from top-down direction. 2017
The authors stipulate distributed jurisdiction as a regulatory alternative in which conflict resolution for blockchain transactions is supplied by governance solutions inherent in the blockchain technology itself rather than by external legal authorities. 2017
Because the challenges crypto transactions pose to the existing legal and jurisdictional infrastructure are severe, including good governance in crypto transactions requires instituting governance solutions inherent in the blockchain technology itself. 2017
Real world court decisions on smart contract disputes, even where attainable, may not carry the same legitimacy and authority for the parties as intra-blockchain dispute resolution mechanisms. 2017
The second core requirement of distributed jurisdiction is governance from within the blockchain technology itself, which is what allows the problems inherent in blockchain based smart contracts to be effectively addressed. 2017
The economic incentive for Aragon judges to follow the more popular vote, since judges keep their bond only if they voted with the majority, calls into question whether the mechanism delivers effective, non arbitrary, and fair dispute resolution. 2017
The conversion feature of contingent capital securities has the potential to change the control dynamic, the distribution of power, and the dependencies within systemically important financial institutions. 2017
The threat of dilution of stock holdings, combined with the threat of loss upon conversion, could help reduce the pressure shareholders place on management of systemically important financial institutions to take increasing risks. 2017
ICOs cannot be qualified as donations and are therefore distinguishable from crowdfunding, because ICO participants acquire a financial stake in the company and, as the case may be, a right to vote on future decisions. 2017
Token holders, unlike shareholders in the traditional corporate infrastructure, cannot vote for or against directors or nominate directors, so ordinary ICO investors have no governance channel and simply must trust the promoters and their business intent. 2017
ICO promoters should make significant and ongoing disclosures on vesting and lockup periods and should never manipulate the smart contract to change ICO sales rules mid-course during the offering. 2017
Fundamental flaws in the DAO's code let hackers move one third of its total funds to a subsidiary account, and that hack together with further technological limitations destroyed the DAO initiative. 2017
Because a series of smart contracts granted DAO token holders voting rights, the blockchain based smart contracts performed the function of articles of association or corporate bylaws, in an organization that had no directors, managers, or employees. 2017
Open legal questions about the DAO, including which regime governs token issuance, minority token holder protection, taxation, the binding force of DAO smart contracts, ownership of intellectual property, and conflict resolution, must be answered before future DAO structures can operate seamlessly. 2017
US corporate codes function as enabling statutes that give enterprises wide flexibility, but that flexibility stops at mandatory provisions, which the parties cannot contract around. 2017
Under MBCA Section 7.32 the ten year duration limit is only a default rule, unlike the corresponding limit for voting trusts, so parties who specify a longer term are permitted to have it. 2017
Duration ceilings contained in voting trust statutes do not carry over to other types of shareholder agreements, and courts have repeatedly sustained shareholder agreements intended to run indefinitely. 2017
MBCA Section 7.32 requires a writing but, departing from earlier statutes, does not require the agreement to sit in the articles or bylaws, so stand alone written shareholder agreements are expressly valid. 2017
Voting arrangements are not self executing: their existence does not relieve the corporation of observing the legal formalities of director and shareholder action. 2017
The articles function as the corporation's constitution and are deliberately hard to change, requiring action by both directors and shareholders unlike most corporate decisions. 2017
Where a shareholder agreement is folded into the charter or bylaws, it thereby becomes subject to whatever amendment procedure those documents or the statute provide, so charter integration exposes the arrangement to later modification. 2017
Shareholders frequently fail to place their agreements in the charter or bylaws, sometimes through ignorance or inadvertence and sometimes deliberately, because charters are public records and the parties prefer not to expose their arrangement to outsiders. 2017
Absent explicit statutory authorization, many courts have refused to enforce veto provisions contained in shareholder agreements, which is why such provisions should be implemented through charter or bylaw amendment. 2017
States lacking specific authorization for shareholder control agreements generally still permit departure from the default rule of director control if the departure is set forth in the corporation's charter or bylaws. 2017
Even though New York decisions such as Adler v. Svingos suggest veto arrangements outside the charter will be specifically enforced, the better practice remains to amend the charter to insert them. 2017
Because damages rarely provide an adequate remedy for breach of a shareholder agreement, refusing specific enforcement amounts in substance to declaring the agreement invalid. 2017
The extent to which a company uses data and algorithms will separate the winning companies of the future from the rest, because algorithmically driven firms gather consumer behavior data and instantaneously feed it back into an improved consumer experience. 2017
Reforms that increase executive accountability to shareholders and increase shareholder control over executives do not solve the problem of corporate short-term focus. 2017
Top-down corporate governance reform measures rarely, if ever, produce genuine change in the governance or culture of firms, and are commonly met with indifference, skepticism, or hostility from management. 2017
Much corporate governance reform consists of repackaging old content under new or revised labels rather than introducing new governance. 2017
Corporate governance intermediaries such as lawyers, accountants, auditors and consultants respond to governance requirements with minimum compliance, applying minimal effort for maximum compliance. 2017
Corporate governance initiatives designed to encourage long-term thinking rarely work as policymakers expect them to. 2017
Society is moving from a centralized infrastructure to a decentralized, unmediated, and interconnected one, and from vertical hierarchies to horizontal, open, and autonomous networks; this transition, not the short-term versus long-term debate, is the relevant frame for corporate governance. 2017
Despite the obvious benefits of technology applications in corporate governance, the technological revolution has not yet produced wide acceptance of unmediated or decentralized corporate governance structures and practices. 2017
Even after recent reforms, the corporate governance framework remains framed in terms of hierarchy, which is why it fits poorly with looser and unmediated stakeholder relationships. 2017
The monitoring and advising roles of the board are no longer sufficient, and a board confined to those roles is a missed opportunity to obtain unmediated and relevant market feedback on company initiatives. 2017
It is feasible that in the not too distant future an artificial intelligence will hold an independent board seat with voting authority and be trusted to make smarter, data-driven choices than human directors. 2017
Critics who dismiss artificial intelligence on boards as science fiction not worth engaging are wrong: AI on boards is a real prospect, and technologies such as blockchain-based smart contracts will both disrupt corporate governance and supply solutions to it. 2017
Fundamental flaws in the DAO's code allowed hackers to move one third of contributed funds to a subsidiary account, ending that initiative, but the flaws were in the implementation and do not defeat the DAO vision, which developers continue to rebuild. 2017
In a decentralized autonomous organization a series of smart contracts grants token holders voting rights, so the blockchain-based smart contract performs the function that articles of incorporation or bylaws perform in a conventional company. 2017
Contemporary corporate governance reforms are unlikely to work as policymakers and regulators intend, because experts agree improvement is needed but disagree widely on what good corporate governance is or how to achieve it. 2017
The corporate governance frameworks developed in the 2000s had little or no impact on the performance of listed companies during the financial crisis, and the number, scale, and effects of corporate scandals are not diminishing. 2017
Regulators should nudge companies and their stakeholders toward recognizing the strategic and financial benefits of an unmediated and technology-based approach to corporate governance, rather than mandating further top-down reform. 2017
Companies that adopt unmediated and technology-driven governance gain a competitive advantage in attracting talent, raising capital, finding partners, and above all in remaining relevant in hyper-competitive global markets. 2017
Reddit's upvote system imposes insignificant punishment for voting randomly, and this lack of cost compromises the informational value of an upvote, which is the failure mode a staked validation pool is designed to avoid. 2018
The platform becomes fully autonomous almost immediately after deployment, because once the Ethereum DApp is posted its authors have no more control over the evolution of the expertise tags than any other Ethereum user. 2018
Under equal token weighting a successful poster receives no greater reward than the upvoters who merely read and vote, so the system pays the same for crafting a comment as for voting on it, which encourages voting over commenting. 2018
Many token whitepapers omit information necessary for a full economic analysis, and the research team could not find a single project among the top 100 that had examined blockchain governance fully. 2018
Tokens launched before 2015 were overwhelmingly developed on a hardfork governance mechanism or a combination of hardfork and one other governance type. 2018
Outlier governance mechanisms rose sharply in the dataset: three per year in 2015 and 2016, then eighteen in 2017, and five in the first six months of 2018. 2018
Unlike its decentralized competitors, the Semada Protocol is claimed to be resistant to both Sybil attacks and Tyranny of the Majority attacks. 2018
Attack resistance should be designed to increase as the platform grows, in contrast to designs like GEMS that detect and ban malicious actors, because a self enforcement mechanism lets the incentive system steer users away from bad actors once the system matures. 2018
Unlike shareholders in traditional corporate structures who can vote for or nominate directors, ICO investors have no control whatsoever over promoters. 2018
Many new innovation driven firms that replaced hierarchy with a best-idea-wins culture have struggled to maintain that governance model and to fulfill their initial promise. 2018
A decentralized autonomous organization is merely computer code with no directors, managers or employees, its governance structure built with software, code and smart contracts running on a public decentralized blockchain platform. 2018
Semada's voting algorithm is designed so that gaming the system is not economically feasible without contributing genuinely valuable improvements, because value is proven through the fees added to the system and every fee is subject to a fair validation pool. 2018
In the weighted directed acyclic graph precedent system, more reputation weight and salary flow to forum posts that other posts continuously reference, and as a precedent dissipates over time new precedent emerges naturally to replace the older one. 2018
No single, fixed, entirely algorithmic policing solution can completely prevent independent nodes in a distributed system from gaming block production to advantage some parties over others. Any consensus protocol that relies on a permanently fixed rule set will therefore be gamed as conditions change. 2018
Even though proof of stake mitigates the economy of scale advantage, block production cartels can still arise in PoS systems through lotteries, through built in voting delegations, or because the stakes required to be a block producer can simply be bought. 2018
If block producers' identities are revealed, the supranational independence and security of the blockchain are threatened, because local jurisdictions can then exert legal power over block production. This threat is most acute in delegated proof of stake, where delegates must win popularity contests. 2018
Any blockchain whose soft forks are decided through private communication between famous token holding whales is ultimately less secure than legacy centralized systems, which at least address centralized security risks deliberately. 2018
A healthy expertise will have near unanimous consensus on every evidence of work validation pool, and that very unanimity creates an impediment to development, because honest members risk their stakes by voting for untested changes. 2018
Because earlier sem tokens represent a larger percentage of the total and therefore pay out more, later experts have less motivation to join when fees are at a steady state; the authors propose that the bench may need to change the fee to token exchange rate to recruit new members. 2018
In the most successful firms governance is no longer about hierarchy or control; it is about creating a flat, open and inclusive ecosystem that leverages the talents of all stakeholders in the company's network. 2018
The design premise of the DAO was that because people do not always follow rules even when the rules are well designed, it is better to use computer code to manage an organization. 2018
In a DAO, blockchain-based smart contracts granting token holders voting rights perform the function that articles of association or bylaws perform in a conventional corporation. 2018
Fundamental flaws in the DAO's code allowed hackers to transfer one third of the total contributed funds to a subsidiary account, and this together with other technological limitations ended the initiative, but the authors argue it did not end the underlying vision of decentralized autonomous organization. 2018
The core underlying agency problems of corporate governance cannot be fully resolved within the existing theoretical and legal infrastructure, despite decades of governance experiments and extensive rule revisions. 2019
Shareholder activism reform, taken by itself, has been unable to sufficiently improve the corporate governance system. 2019
DAOs are unlikely to disrupt existing corporate structures in the foreseeable future because the blockchain industry is still in its infancy and core decentralized infrastructure elements will remain lacking. 2019
Forking a chain is an insufficient governance mechanism, and even attempts to create socially optimal chain forking rules cannot suffice as a substitute for evolutionary blockchain governance protocols. 2019
Without evolutionary governance upgrades to blockchain protocols, the cost reduction that blockchain brings to the agency relationship cannot be maintained. 2019
Dynamic power organization in a DAO succeeds only if the decentralized governance structure motivates token holders to collaborate productively by fairly rewarding development, work, and the policing of any diminishments. 2019
The core governance failure of the original 2016 DAO was its inability to create dynamic governance protocol upgrades in real time through dynamic feedback loops, because its voting structure was built for investment proposals rather than governance design. 2019
Curators were the core point of centralization in the original 2016 DAO because the smart contract could not on its own distinguish real from fake proposals, leaving curators with approval and vote prioritization power before any community vote. 2019
Participants must be incentivized to improve their own utility while simultaneously benefiting the institution over the long run; without that duality of incentivization, rational and opportunistic internal and external constituents will attempt to game the governance design. 2019
Corruption is possible whenever actors in a governance design can be identified, and every historical instantiation of institutional governance design involving identifiable humans was afflicted by corruption sooner or later. 2019
A one token one vote mechanism in existing decentralized protocols with on chain governance resembles a plutocracy, because holders of a significant share of total token supply hold more power than the rest of the members. 2019