As a top corporate law scholar, University of Utah S.J. Quinney College of Law Professor Jeff Schwartz’s work centers on securities law, investment-management regulation, and retirement policy.
In his newest research, set to publish in a 2020 issue of the Maryland Law Review, Schwartz explores how activist funds use securities laws to their own advantage. He spoke to the College of Law recently in a Q&A about his paper, “De Facto Shareholder Primacy.”
Tell us about your research. What unique findings did you uncover?
Perhaps the most important debate in corporate law involves the purpose of corporations. Should they maximize shareholder value or balance shareholder interests against the corporation’s broader social and economic impact? As a securities law scholar, what struck me is that the debate has so far ignored the role that securities regulation plays in shaping which path companies choose. The securities laws mandate that public companies disclose their financial information. Public access to this information has a profound impact on how companies behave. Activist investors leverage the information to identify, and force companies to adopt, measures that raise short-term share prices regardless of the impact on other constituencies.
Why are your findings particularly relevant at this point in time?
Now more than ever, public corporations play an essential role in society. They have an enormous impact on politics, social issues, the environment, and the economy. When companies act solely to maximize short-term gains, the rest of society suffers. Employees earn less. Companies are less innovative. And the economy is less stable. My paper suggests that a small tweak to the securities laws would allow companies to operate more sustainably.
What’s next for you on the research front?
I continue to be interested in how law drives corporate behavior. My current project focuses on how regulations can support “social enterprises.” These companies pursue a social mission while also providing a small return for investors. They are an exciting new way to fund projects for the social good.