ANDREW S. GOLD, Brooklyn Law School
Email: andrew.gold@brooklaw.edu

This chapter is a contribution to a book on John Gardner’s work in private law theory. The chapter takes up a puzzle that Gardner raised: why is there no “reasonably loyal trustee” in fiduciary law? Notably, he proposes that the role of a trustee might lack a law-independent counterpart. That, in turn, could make it impossible for trust law (and by implication, fiduciary law) to “pass the buck” to whatever it is that the “reasonably loyal person” would do. I will suggest that fiduciary relationships frequently do have law-independent counterparts, and moreover that such counterparts can evolve over time. Relatedly, I will argue that a wide range of extra-legal conceptions of loyalty are available for buck passing purposes; not all loyalty is built on a prior meaningful relationship between a loyal party and the object of her loyalty. Lastly, I will conclude with some thoughts on why buck passing could be valuable.

JEREMY MCCLANE, University of Illinois College of Law
Email: jmcclane@illinois.edu

For many years corporate lenders have been a crucial force in the boardroom, providing a check on management and contributing to firm governance. However, lenders’ influence has receded in recent years for a large and important class of corporate borrowers. The culprit is a familiar one in a less familiar guise: the sale of loans by originating banks for securitization—like that which gained notoriety with pre-financial crisis mortgage-backed securities, but now are deployed in the market for corporate loans. As this Article points out, the shift from relationship lending to arms-length securitization has the potential to intensify moral hazard, leading banks to provide less monitoring for their highly securitized clients. Recent data suggests that creditor governance is waning at a moment when U.S. corporations carry more debt than at any time in history (totaling half of U.S. gross domestic product).

This Article presents a theoretical and empirical examination of the change in creditor corporate governance and its implications. It shows how the diminishment of lenders’ role in governance is a predictable result of a confluence of forces in the financial markets, in particular, the use of structured finance to securitize loans, which in turn has driven a lending market with diminishing checks on borrower profligacy. It also shows how this new market is weakening governance norms in ways that are harmful to borrowing companies, lenders, and society as a whole.

The Article makes two contributions to the literature. First, it empirically documents the decline of lenders’ corporate governance interventions, cataloging original data on all borrower loan covenant violations—a primary mechanism by which lenders intervene in governance—from 2008 through 2018. Second, it adds a missing component to the literature by showing how corporate governance and the financial system affect one another, and proposing solutions to bolster both.

VIRGINIA TORRIE, University of Manitoba
Email: virginia.torrie@umanitoba.ca

The Companies' Creditors Arrangement Act (CCAA) has been on Canada's statute books for almost 90 years. In the last four decades the Act has been used to resolve the insolvencies of numerous large firms, including household names, such as Air Canada, Algoma Steel, Eaton's, Sears Canada, Target Canada, Canwest Global Communications, and DavidsTea, to name a few. In that same timeframe insolvency practice has developed into a robust field, leading to the establishment of publications like the Annual Review of Insolvency Law and its marquee conference. Yet, until recently, there has been little enquiry into the CCAA's history. Thus, my monograph, Reinventing Bankruptcy Law: A History of the Companies' Creditors Arrangement Act, published by University of Toronto Press in 2020, offers the first historical account of the origins and development of Canada's premier corporate restructuring regime. Reinventing Bankruptcy Law uses several lenses of analysis, including law, history, political science, and sociology, to provide a multi-dimensional narrative of legal change in Canadian corporate restructuring law over the twentieth-century. The book addresses the question of, "What makes the CCAA, 'the CCAA'?" The answer is, admittedly, not for the faint hearted. As Professor Anthony Duggan (University of Toronto, Faculty of Law), writes in his foreword, "the book explodes the conventional wisdom surrounding the CCAA's underlying policy objectives, and it exposes the historical errors in the more recent case law to devastating effect." This article highlights three of the book's key findings.

MATTHEW BAUGH, Arizona State University (ASU) - School of Accountancy
Email: matt.baugh@asu.edu
KYONGHEE KIM, Michigan State University
Email: kimkyon9@msu.edu
KWANG J. LEE, College of Business, Korea Advanced Institute of Science and Technology (KAIST)
Email: kjlee2017@kaist.ac.kr

Prior research suggests that even for the same decision task there will be variation in decision outcomes across decision makers due to idiosyncrasies in their styles. This variation brings up a fundamental challenge in the realm of regulations, where consistency of application is of great importance. This study examines whether the idiosyncrasies of individual employees of the SEC contribute to inconsistent regulatory outcomes. Using a sample of SEC comment letters, we show that SEC reviewers’ idiosyncratic style plays a significant role in explaining the cross-sectional variation in filing review outcomes, even after holding firm and disclosure attributes constant. In addition, the likelihood of restatement during the review process varies systemically with the reviewers’ review style. These findings suggest that reviewer style influences shareholders and other stakeholders via its impact on the costs in resolving comment letter issues and the quality of corporate disclosure. They also have public policy implications for the way financial reporting rules and regulations are applied.

NICHOLAS MACK, Vanderbilt University, Law Schoo