financial innovation and governance mechanisms: the development of decoupling and transparency Henry T.C Hu; 70(2): 347-406 (Spring 2015) Financial innovation has a fundamental impact on key content- and information-based corporate governance mechanisms. “Decoupling” undermines traditional conceptions of the distribution of voting rights among shareholders (e.g.B. on “empty voting rights”), creditor control rights (e.g. B on “empty credit” and “hidden interest” or “hidden interest”) and acquisition practices (e.g. B on “morphable ownership”, in order to avoid disclosure under Article 13(d) and to avoid triggering certain toxic pills). Share-based remuneration, management performance monitoring, the corporate control market and other governance mechanisms, which depend on a strong information system and market efficiency, are undermined by the transparency challenges arising from financial innovation. The basic approach to information that the SEC has always used – the descriptive mode, which relies on “intermediate representations” of objective reality, is clearly insufficient to capture very complex objective realities, such as the realities of large banks, which have a lot to do with derivatives. Ironically, the government`s primary response to these transparency challenges — a new disclosure system that went into effect in 2013, the first since the SEC`s inception — also creates difficulties. This new parallel disclosure system, developed by banking supervisors and applicable to large financial institutions, is not primarily aimed at known transparency in terms of investor protection and market efficiency. As a starting point, this article provides a brief overview of: (1) the “decoupling” analytical framework developed in 2006-2008 and its demands for reform; and (2) the analytical framework developed in 2012-2014 to redesign “information” with respect to three “modes” and address the two parallel worlds of disclosure. With regard to decoupling, the article analyses some important developments after 2008 (including the state of play of reform efforts) and the way forward.
A detailed analysis of TELUS` December 2012 pioneering opinion before the Supreme Court of British Columbia, which contains perhaps the most complex public example of decoupling to date. This article examines recent judicial and legislative actions in Delaware, the European Union, and bankruptcy courts — and the urgent need for further SEC action. .