Nadelle Grossman Copyright (c) 2011 All rights reserved. http://works.bepress.com/nadelle_grossman Recent documents in Nadelle Grossman en-us Thu, 15 Sep 2011 03:24:17 PDT 3600 Strategic Management and the Role of Legal Norms in Creating Corporate Value http://works.bepress.com/nadelle_grossman/8 http://works.bepress.com/nadelle_grossman/8 Tue, 13 Sep 2011 11:41:04 PDT Delaware corporate law currently requires that directors oversee their firm’s systems to monitor risk so that they can limit their firm’s losses from such risks. Corporate law does not, however, require either directors or officers to oversee the interrelated process of managing that firm’s strategy for gains. Yet managing both risk and strategy are essential to a firm in creating value. In fact, as I argue in the paper, the current focus by business courts and academic commentators only on risk management oversight to prevent losses could actually undermine a firm’s management of its strategy for gains. I therefore propose in this paper a model for how Delaware corporate law can drive firms to manage their strategies for gains, in addition to their risk of loss, to create value.

This proposal is especially needful in light of the fact that companies such as General Motors collapsed not because of excessive risk-taking, but because of defects in their processes for the formulation and implementation of innovative strategies for gains. This proposal also opens a new avenue for courts to combat the significant problem of short-termism, or the drive by firms to create short-term profits regardless of whether doing so creates value. That is because this proposal will create an expectation on officers and directors to oversee their firm’s strategic management system to achieve long-term value-creating objectives. As such, employees could use those objectives, rather than next quarter’s earnings targets, to guide their decisions.

]]> Nadelle Grossman Corporations Strategic Management and the Role of Legal Norms in Creating Corporate Value http://works.bepress.com/nadelle_grossman/7 http://works.bepress.com/nadelle_grossman/7 Tue, 13 Sep 2011 09:16:43 PDT Delaware corporate law currently requires that directors oversee their firm’s systems to monitor risk so that they can limit their firm’s losses from such risks. Corporate law does not, however, require either directors or officers to oversee the interrelated process of managing that firm’s strategy for gains. Yet managing both risk and strategy are essential to a firm in creating value. In fact, as I argue in the paper, the current focus by business courts and academic commentators only on risk management oversight to prevent losses could actually undermine a firm’s management of its strategy for gains. I therefore propose in this paper a model for how Delaware corporate law can drive firms to manage their strategies for gains, in addition to their risk of loss, to create value.

This proposal is especially needful in light of the fact that companies such as General Motors collapsed not because of excessive risk-taking, but because of defects in their processes for the formulation and implementation of innovative strategies for gains. This proposal also opens a new avenue for courts to combat the significant problem of short-termism, or the drive by firms to create short-term profits regardless of whether doing so creates value. That is because this proposal will create an expectation on officers and directors to oversee their firm’s strategic management system to achieve long-term value-creating objectives. As such, employees could use those objectives, rather than next quarter’s earnings targets, to guide their decisions.

]]> Nadelle Grossman Corporations Strategic Management and the Role of Legal Norms in Creating Corporate Value http://works.bepress.com/nadelle_grossman/6 http://works.bepress.com/nadelle_grossman/6 Tue, 30 Aug 2011 14:21:10 PDT Delaware corporate law currently requires that directors oversee their firm’s systems to monitor risk so that they can limit their firm’s losses from such risks. Corporate law does not, however, require either directors or officers to oversee the interrelated process of managing that firm’s strategy for gains. Yet managing both risk and strategy are essential to a firm in creating value. In fact, as I argue in the paper, the current focus by business courts and academic commentators only on risk management oversight to prevent losses could actually undermine a firm’s management of its strategy for gains. I therefore propose in this paper a model for how Delaware corporate law can drive firms to manage their strategies for gains, in addition to their risk of loss, to create value.

This proposal is especially needful in light of the fact that companies such as General Motors collapsed not because of excessive risk-taking, but because of defects in their processes for the formulation and implementation of innovative strategies for gains. This proposal also opens a new avenue for courts to combat the significant problem of short-termism, or the drive by firms to create short-term profits regardless of whether doing so creates value. That is because this proposal will create an expectation on officers and directors to oversee their firm’s strategic management system to achieve long-term value-creating objectives. As such, employees could use those objectives, rather than next quarter’s earnings targets, to guide their decisions.

]]> Nadelle Grossman Corporations Strategic Management and the Role of Legal Norms in Creating Corporate Value http://works.bepress.com/nadelle_grossman/5 http://works.bepress.com/nadelle_grossman/5 Sat, 27 Aug 2011 13:13:02 PDT Delaware corporate law currently requires that directors oversee their firm’s systems to monitor risk so that they can limit their firm’s losses from such risks. Corporate law does not, however, require either directors or officers to oversee the interrelated process of managing that firm’s strategy for gains. Yet managing both risk and strategy are essential to a firm in creating value. In fact, as I argue in the paper, the current focus by business courts and academic commentators only on risk management oversight to prevent losses could actually undermine a firm’s management of its strategy for gains. I therefore propose in this paper a model for how Delaware corporate law can drive firms to manage their strategies for gains, in addition to their risk of loss, to create value.

This proposal is especially needful in light of the fact that companies such as General Motors collapsed not because of excessive risk-taking, but because of defects in their processes for the formulation and implementation of innovative strategies for gains. This proposal also opens a new avenue for courts to combat the significant problem of short-termism, or the drive by firms to create short-term profits regardless of whether doing so creates value. That is because this proposal will create an expectation on officers and directors to oversee their firm’s strategic management system to achieve long-term value-creating objectives. As such, employees could use those objectives, rather than next quarter’s earnings targets, to guide their decisions.

]]> Nadelle Grossman Corporations TURNING A SHORT-TERM FLING INTO A LONG-TERM COMMITMENT: BOARD DUTIES IN A NEW ERA http://works.bepress.com/nadelle_grossman/4 http://works.bepress.com/nadelle_grossman/4 Thu, 09 Apr 2009 11:09:39 PDT Corporate boards face significant pressure to make decisions that maximize profits in the short run. That pressure comes in part from executives who are financially rewarded for short-term profits despite the long-term risks associated with those profit-making activities. The current financial crisis, where executives at AIG and numerous other institutions ignored the long-term risks associated with their mortgage-backed securities investments, arose largely because those executives were compensated for the short-term profits generated by those investments despite their longer-term risks. Pressure on boards for short-term profits also comes from activist investors who seek to make quick money off of trading in stocks whose prices overly reflect short-term firm values.

Yet this excessive focus on producing short-term profits runs counter to the interests of non-short-termist investors, other corporate constituents, as well as our economy and society as a whole in creating corporate enterprises that are profitable on an enduring basis. Once again, the current financial crisis provides a lens through which we can see the distressing impact – both to individual businesses as well as to the entire U.S community - of an excessive focus on short-term profits.

I propose a solution to address this problem of short-termism. Under my proposal, directors would be required to make decisions that are in the long-term best interest of stockholders and the corporation under their fiduciary duties. I explain in the article why I propose fixing the short-termism problem through fiduciary duties as well as how, practically, my proposal would be implemented.

]]> Nadelle Grossman Corporations TURNING A SHORT-TERM FLING INTO A LONG-TERM COMMITMENT: BOARD DUTIES IN A NEW ERA http://works.bepress.com/nadelle_grossman/3 http://works.bepress.com/nadelle_grossman/3 Tue, 31 Mar 2009 11:20:06 PDT Corporate boards face significant pressure to make decisions that maximize profits in the short run. That pressure comes in part from executives who are financially rewarded for short-term profits despite the long-term risks associated with those profit-making activities. The current financial crisis, where executives at AIG and numerous other institutions ignored the long-term risks associated with their mortgage-backed securities investments, arose largely because those executives were compensated for the short-term profits generated by those investments despite their longer-term risks. Pressure on boards for short-term profits also comes from activist investors who seek to make quick money off of trading in stocks whose prices overly reflect short-term firm values.

Yet this excessive focus on producing short-term profits runs counter to the interests of non-short-termist investors, other corporate constituents, as well as our economy and society as a whole in creating corporate enterprises that are profitable on an enduring basis. Once again, the current financial crisis provides a lens through which we can see the distressing impact – both to individual businesses as well as to the entire U.S community - of an excessive focus on short-term profits.

I propose a solution to address this problem of short-termism. Under my proposal, directors would be required to make decisions that are in the long-term best interest of stockholders and the corporation under their fiduciary duties. I explain in the article why I propose fixing the short-termism problem through fiduciary duties as well as how, practically, my proposal would be implemented.

]]> Nadelle Grossman Corporations Short-Term Fling or Long-Term Commitment: Board Duties in a New Era http://works.bepress.com/nadelle_grossman/2 http://works.bepress.com/nadelle_grossman/2 Mon, 30 Mar 2009 14:57:25 PDT Corporate boards face significant pressure to make decisions that maximize profits in the short run. That pressure comes in part from executives who are financially rewarded for short-term profits despite the long-term risks associated with those profit-making activities. The current financial crisis, where executives at AIG and numerous other institutions ignored the long-term risks associated with their mortgage-backed securities investments, arose largely because those executives were compensated for the short-term profits generated by those investments despite their longer-term risks. Pressure on boards for short-term profits also comes from activist investors who seek to make quick money off of trading in stocks whose prices overly reflect short-term firm values.

Yet this excessive focus on producing short-term profits runs counter to the interests of non-short-termist investors, other corporate constituents, as well as our economy and society as a whole in creating corporate enterprises that are profitable on an enduring basis. Once again, the current financial crisis provides a lens through which we can see the distressing impact – both to individual businesses as well as to the entire U.S community - of an excessive focus on short-term profits.

I propose a solution to address this problem of short-termism. Under my proposal, directors would be required to make decisions that are in the long-term best interest of stockholders and the corporation under their fiduciary duties. I explain in the article why I propose fixing the short-termism problem through fiduciary duties as well as how, practically, my proposal would be implemented.

]]> Nadelle Grossman Corporations Turning a Short-Term Fling into a Long-Term Commitment: Board Duties in a New Era http://works.bepress.com/nadelle_grossman/1 http://works.bepress.com/nadelle_grossman/1 Fri, 06 Mar 2009 13:59:12 PST Corporate boards face significant pressure to make decisions that maximize profits in the short run. That pressure comes in part from executives who are financially rewarded for short-term profits despite the long-term risks associated with those profit-making activities. The current financial crisis, where executives at AIG and numerous other institutions ignored the long-term risks associated with their mortgage-backed securities investments, arose largely because those executives were compensated for the short-term profits generated by those investments despite their longer-term risks. Pressure on boards for short-term profits also comes from activist investors who seek to make quick money off of trading in stocks whose prices overly reflect short-term firm values.

Yet this excessive focus on producing short-term profits runs counter to the interests of non-short-termist investors, other corporate constituents, as well as our economy and society as a whole in creating corporate enterprises that are profitable on an enduring basis. Once again, the current financial crisis provides a lens through which we can see the distressing impact – both to individual businesses as well as to the entire U.S community - of an excessive focus on short-term profits.

I propose a solution to address this problem of short-termism. Under my proposal, directors would be required to make decisions that are in the long-term best interest of stockholders and the corporation under their fiduciary duties. I explain in the article why I propose fixing the short-termism problem through fiduciary duties as well as how, practically, my proposal would be implemented.

]]> Nadelle Grossman Corporations