Chapter 11 and Asbestos: Encouraging Private Enterprise or Conspiring to Avoid Liability?

This paper explores the American bankruptcy system -- especially the Chapter 11 code -- which since 1978 has allowed insolvent companies the opportunity to restructure and reorganise with the benefit of court protection from creditors. Particular attention is focused on asbestos companies, such as Johns--Manville, which have been among the most consistent and controversial filers for bankruptcy under Chapter 11. The history of asbestos and Chapter 11 is explored, against the backdrop of the burgeoning asbestos crisis, caused by increasing mortality and litigation. Some of the business and ethical issues involved are highlighted by examining in detail a recent bankruptcy (Federal Mogul/T&N in 2001) that has implications in both Britain and America. Chapter 11 bankruptcy is evaluated, particularly in the light of the trend towards similar mechanisms of insolvency in the UK, Europe and the rest of the world. It is concluded that, certainly as regards the experience with asbestos, Chapter 11 offers an inefficient and inequitable method of rehabilitating or rescuing failing businesses.     

游离于公司法、破产法之间的债权人保护

如何加强对债权人的保护是学术界一直在研究的论题,有种观点认为公司的管理者在公司资不抵债时应当由对股东负责转为对债权人负责;公司的主要目的是为股东创造收益,破产的目的是保护债权人的利益。因此,应当废除公司领域中对债权人的保护,使其尽快回归到专门为债权人服务的破产领域,让公司法和破产法各司其职,使股东利益和债权人的保护得到强化。     

Strategically Surviving Bankruptcy during a Global Financial Crisis: The Importance of Understanding Chapter 15

Chapter 15 of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act allows foreign courts more power in cases that include foreign multinational firms. U.S. businesses unexpectedly have to file a claim in another country with bankruptcy rules that are sometimes drastically different from those in U.S. courts. This paper outlines the different bankruptcy laws in selected countries and exemplifies how some countries place U.S. creditors at a disadvantage relative to employees and stockholders. This knowledge should be incorporated into management's strategic contingency plans in the case of supplier or business customer default. During periods of global financial instability such as the 2008 financial crisis, an understanding of Chapter 15 is essential.     

Saddled with Attention: Overreaction to Bankruptcy Filings

We analyze the effect of investor attention on stock prices around Chapter 11 bankruptcy filings. We measure investor attention as abnormal search volume from Google, and find that attention‐grabbing companies have more negative abnormal stock returns in the days before and during bankruptcy filings and more positive abnormal returns immediately thereafter. That is, for companies receiving high attention, investors overreact to a bankruptcy filing; for companies receiving low attention, they underreact. This pattern is more pronounced for companies with low institutional ownership and holds after controlling for standard predictors of stock performance during bankruptcy.     

我国企业集团内部的关联交易及其规范

我国企业集团内部关联交易,既有国外企业集团内部关联交易的一般动机,也有我国企业自己的特殊动机,这种特殊动机直接导致了关联交易的不公平性。我国上市子公司与集团公司的不公平关联交易划分为“输入利益型”和“抽取利益型”两种类型;不公平关联交易对上市子公司自身、中小股东、债权人利益造成损害。必须规范企业集团内部的关联交易,从完善《公司法》、子公司法人治理结构、关联交易的信息披露制度三个方面提出了相应的对策。     

Three perspectives of Chapter 11 bankruptcy: Legal,managerial and moral

With cach successive generation of management, managers have been faced with different goals dictated by that current society's needs and mores. For example, in the early 1900's, industrial growth was essential to society's needs; at the same time, such growth would not be hampered by social costs that were perceived as unimportant. Those social costs viewed as unimportant have not been properly factored into the cost of goods produced. Therefore, the products sold were underpriced, failing to reflect their true social costs. Additionally, this miscalculation or misappropriation of such costs caused a misallocation of resources, such as the manufacturing of asbestos without regard to future health costs. Finally, the payment for the miscalculation of these social costs is due: present day management is now forced to provide a viable solution for payment of debts incurred by previous management. The most notable examples of such misappropriation are provided in the Manville, A. H. Robins and Continental cases. Unfortunately, the choice is often limited to a Chapter 11 bankruptcy.This article views the solution of Chapter 11 bankruptcy from three perspectives: legal, managerial, and moral. The legal review consists of the law and the current jurisprudence. Particularly emphasized are cases dealing with the discharge of executory contracts, tort claims and debts both secured and unsecured. Additionally, an examination of implementing a Chapter 11 bankruptcy plan from the viewpoint of current management is made. Closely associated with both the legal and managerial aspects of this issue is the moral facet of using bankruptcy as a management tool. The broad question is: how prevalent and how reasonable is it for management to declare Chapter 11 bankruptcy to manipulate the corporation's creditors, employees, and stockholders to achieve management's desired end.Professor Hogg currently teaches Managerial Perspectives and Business Law at the A. B. Freeman School of Business, Tulane University. In addition, he is an adjunct faculty member at the Joseph A. Butt, S. J. College of Business Administration, Loyola University, New Orleans, Louisiana, where he teaches courses on Business Ethics and the Legal and Regulatory Environment of Business. Also, he has received several awards for excellence in teaching. His primary research is in the field of Business Ethics.Dinah Payne is licensed to practice law in the state of Louisiana. She has given a number of presentations, including a recent Continuing Legal Education Program on the use of bankruptcy as a management tool. Dr. Payne has also published articles in a number of journals, includingJournal of Business Ethics, Labor Law Journal, Managerial Accounting, andAccounting Today. She has been teaching at UNO since 1988.     

Social Efficiency of the Bankruptcy Reform Act of 1978 With Regard to Personal Bankruptcy

A socially efficient bankruptcy law is one that would have the effect of minimizing the present value of social costs stemming from bankruptcy while permitting debtors to make a “fresh start.” Analysis of a sample of petitions for personal nonbusiness bankruptcy filed under the Bankruptcy Reform Act of 1978 shows that about 30 percent of petitions for Chapter 7 and about 25 percent of petitions for Chapter 13 were cases where social costs were not minimized as would be required under socially efficient bankruptcy legislation. The social costs of Chapter 7 may be reduced under proposed reform [S. 445 and H. R. 1800] as the judge would be provided with information concerning estimates of debts repayable under both chapters and would disallow those Chapter 7 cases which represented a substantial abuse of bankruptcy law. The study data suggest that guidelines for acceptance of Chapter 13 cases should also be scrutinized. In particular, petitioners should be discouraged from providing “token” debt repayment plans while maintaining ownership of large accumulations of assets.     

Consumer Bankruptcy: A Right or a Privilege? The Role of the Courts in Establishing Moral Standards of Economic Conduct

The Norwegian Consumer Bankruptcy Act was passed 17 July 1992 to give persons with "serious debt problems (. . .) the possibility to gain control over their economy." The Act contains provisions for negotiations between the debtor and the creditors, for court rulings on repayment plans, and for a discharge of the debts not covered by the plan. The origin of the Act was a social welfare approach to the problem of overindebtedness. However, the Act embodies an inherent contradiction in that it also includes moral elements in order to prevent it from exerting a negative influence on the perceived obligation to pay one's debts. This contradiction has given the courts a wide scope of discretion in the application of the Act. As a result, cases are treated differently in different jurisdictions. Some judges put more emphasis on moral evaluations than others. This situation also gives room for strategic action from creditor groups who typically are repeat players in cases of consumer bankruptcy. In this way the more objective, social welfare approach of the Act is undermined.     

Changing Definitions of Fresh Start in U.S. Bankruptcy Law

Consumer bankruptcy law in the United States has been distinguished by its commitment to the fresh start concept, enabling the debtor to discharge indebtedness and begin a new economic life. In this paper recent developments respecting four important limitations on the scope of the fresh start are examined. The four limitations are: (1) the debtor must give up non-exempt property; (2) in some parts of the country debtors are effectively required to complete 3 to 5 year debt repayment plans (called Chapter 13 plans) before receiving a discharge; (3) certain debts are "excepted" from discharge; and (4) many rights of secured creditors in collateral are preserved despite discharge.The author concludes that, with respect to the first three limitations, debtor's rights have been restricted over the past 15 years approximately. In the conclusion possible reasons for these restrictions in scope of the debtor's fresh start are discussed. The author discusses the tremendous increase in consumer bankruptcy filing rates in the United States but concludes that the best evidence indicates that increased filings are not a good reason to restrict the scope of the fresh start. He suggests that one important factor for increasing limitations on the fresh start has been a reduced political commitment to values that historically have justified the granting of a discharge to consumer debtors.     

The ethics of using Chapter XI as a management strategy

In the past decade, the use of the Chapter XI has soared to the detriment of many creditors, workers, and consumers. A good number of cases were not based on imminent insolvency, but on firms attempts to avoid litigation claims against them, to terminate labor or other contractual obligations, or to gain new financing.These filings for Chapter XI highlight the use of bank-ruptcy as a strategic option used by management in running a viable organization. This usage is even advised by some academics and management consultants.While such uses may not be illegal, this paper questions the seeming ease with which a firm may use bankruptcy to escape contractual obligations to customers, suppliers, and other stakeholders. It also questions the ethics of the academics and management consultants who recommend such usage. Finally, the paper calls for a change in the law in order to minimize the opportunity for the unethical abuse of the bankruptcy law.Dr. Mahmoud Salem is a lecturer, consultant, and executive training specialist. He is President of The Center for Organizational Synergy in Uniondale, New York. His major areas of interest are Global Strategic Management, Organizational System Transformation, Executive Integrity and Business Ethics.Ms. Opal-Dawn Martin is on the administrative staff of Science Applications International Corporation in McLean, Virginia. Her major areas of interest are International Business and Finance.     

Rehabilitation or Liquidation: Consumers' Choices in Bankruptcy

The purpose of this analysis is to identify the legal, environmental, and economic characteristics of debtors that are predictive of their Bankruptcy Code choices. The probability that debtors file under the rehabilitation procedure provided by the Bankruptcy Code (Chapter 13) is influenced by the availability of credit counseling as an alternative to bankruptcy and by the adverse effects of a liquidation bankruptcy (Chapter 7) on future ability to qualify for consumer and mortgage credit. More generous state laws protecting debtors' assets from liquidation in Chapter 7 have a negative effect on the probability that a debtor will contract to repay some debts out of future income in Chapter 13. The results also suggest that the enactment of the Bankruptcy Amendments and Federal Judgeship Act of 1984, which restricted Chapter 13 plans providing zero repayment of unsecured debts, precipitated a decline in the probability that nonbusiness debtors would choose the rehabilitation alternative.     

Ethical issues in bankruptcy: A Jewish perspective

The ethical issues involved in bankruptcy affect the debtor, the creditor and the society in which they operate. Facing the debtor is his responsibility to pay back the loans and credit extended to him while the creditor has to decide whether or not to press his legal rights, irrespective of the consequences to the debtor. Society will have to determine to what extent, if any, it is prepared or obligated to fund the rehabilitation of the debtor and those employees, whose employment is terminated as a result of the bankruptcy. These issues will be determined according to the value structure of the particular souly in which debtor and creditor operate. This paper views the issues in a Jewish perspective. Debtors are considered to always be liable for their debts and there is a moral shame attached to bankruptcy, except in those cases where it is caused by natural disasters. While creditors are taught and encouraged to voluntarily waive their rights, this is considered charity with all its negative overtones. The courts are obligated to review the debtors assets and sell them, if necessary, to meet the creditors loans, leaving only basic necessities for minimal living of the debtor and his family. Society however, including the creditor, a part of the group, are obligated to fund the rehabilitation of the debtor either through its interest-free loan, charity or the provision of alternative employment. These may be funded out of communal taxes. Dr. Meir Tamari Formerly Senior Lecturer in Corporate Finance, Bar Illan University. Until recently Chief Economist of the office of the Governor of the Bank of Israel (Israel's Central Bank). Presently Director of the Institute for Ethics in Economics, Jerusalem. Author of With All Your Possessions; Jewish Ethics and Economics Life.     

特别清算论——对我国公司法修改中的一点建议

特别清算,是与普通清算相对应的一种清算制度,其在日本公司法及我国台湾地区的公司法中均有规定,克服了普通清算对债权人利益保护不周的弊端,也避免了破产清算的高额花费,较好地兼顾了当事人自治与社会秩序,均衡了效益与公平。我国现行公司法中缺乏对特别清算的相关规定,进而造成了某些公司未经清算即丧失主体地位的情况,极大地损害了社会主义市场经济信用体制的建立,在未来公司法修改中,诚有加以填补的必要     

The operation of the insolvency system in the U.K.: Some implications for entrepreneurialism

An inquiry of entrepreneurs in economic theory is followed by an overview of the insolvency system in the UK. The impact of the insolvency system upon entrepreneurs in the UK is then discussed. It is concluded that while there have been ostensible attempts at reforming insolvency law, these efforts have primarily benefitted large firms. Moreover, it is maintained that the current operation of insolvency law remains principally geared toward the protection of creditors. As a consequence, small entrepreneurial firms have little or no alternative to liquidation, irrespective of the best interests of the company or its creditors. The entrepreneurial founders of these failed firms are then faced with potential disqualification and long-term, if not permanent, financial obstacle to continued entrepreneurship. It is proposed that the severity of the regime discourages the re-entry of entrepreneurs into the market thereby depriving the UK economy of an experienced and potentially vital force for innovation.     

Making Big Strides in the Middle East

China produced and sold approxi- mately 7.05 million vehicles in 2006,a number that makes it seem that Chinese auto manufacturers have never been worried about how to sell such a large number of autos.While completely satisfying the domestic market,most Chinese automakers such as Chery,Geely and Hafei,have also extended their sales networks to other developing countries.The Middle East     

An Econometric Analysis of Interstate Differences in Nonbusiness Bankruptcy and Chapter Thirteen Rates

An econometric household insolvency model was developed to explain the variation among states in nonbusiness bankruptcy rates. The model consisted of two equations with nonbusiness straight-bankruptcy rates and Chapter XIII rates as the dependent variables. Higher divorce rates and percentages of a state's total credit offices which were finance companies were associated with higher nonbusiness straight-bankruptcy rates. Higher percentages of a state's population between the ages of 25 and 34 and the existence of laws prohibiting wage garnishments were negatively related to nonbusiness straight-bankruptcy rates. Higher percentages of Blacks, divorce rates, and credit offices per 100,000 population were associated with higher Chapter XIII rates. Also, the existence of Consumer Credit Counseling Services within a state's borders was associated with higher rates of Chapter XIII petitions. Finally, the existence of laws limiting wage garnishments was associated with lower Chapter XIII rates.     

For your eyes only: U.S. technology companies,sovereign states,and the battle over data protection

Who owns an individual's electronic communications data, who should have access to it, and what can be done with it? The battle of privacy versus security is currently raging between U.S. technology companies and national security forces. U.S. technology companies are adopting corporate foreign policies to respond to sovereign states’ efforts to access customer data, which could change and possibly even destroy their business models. This article discusses the struggles faced by these companies and the policies influencing the possible outcome, as will be determined in the European Union within the next few years.     

MANVILLE: The ethics of economic efficiency?

On Thursday, August 26, 1982 the Manville Corporation (formerly Johns-Manville) and its principle American and Canadian affiliates filed for reorganization under Chapter 11 in the United States District Court for the Southern District of New York. Manville's unexpected bankruptcy petition stunned the financial community, surprised Congress, shocked their creditors, suppliers and customers, totally outraged those who have filled damage suits against them and raised a complex tangle of legal, political and ethical issues that will have far reaching implications for millions of Americans. The drama of the Manville announcement stems from the fact that this is the same Manville Corporation which last year earned $60.3 million on sales exceeding $2 billion with an uncumbered net worth of $1.1 billion. This is the same Manville which ranks 181st on the Fortune 500 list of American corporations. And this is the same Manville which has been traditionally included in the 30 companies used to calculate the prestigious Dow Jones industrial average, the most watched indicator of prices on the New York Stock Exchange. While there are many factors in the equation that resulted in Manville's final decision, Manville Chairman John A. McKinney angerly announced that his company could no longer sustain or survive the blitz of toxic torts that it was now facing.Many of Manville critics have claimed that Manville is acting in an immoral and illegal manner. They are held to be immoral insofar as their critics feel that they are using the bankruptcy boom as a means of avoiding just compensation for those who have truly been injured or killed due to excessive or abusive exposure to asbestos. Manville is accused of acting illegally in that the spirit and purpose of the 1978 Bankruptcy Act is being violated because no company has ever filed for Chapter 11 given the size of their assets, their net worth and their yearly sales figures. Other observers suggest that this is much too simplistic a response to the situation and that whatever the final merits of Manville's petition the factors involved in their decision warrant a careful and detailed analysis. A. R. Gini is Associate Professor of Philosophy at Loyola University of Chicago. His major fields are: Philosophical Anthropology, Contemporary Ethical Problems and Business Ethics. His most important publications are: Aggressivity: A Critical Overview, JPQ (Spring, 1978), and Combat: Maladjustment for Survival, Thought Quarterly Review (Spring, 1981).     

产权性质、债务融资与破产威胁效应——来自中国上市公司的经验证据

以2005-2009年陷入财务困境的上市公司为研究样本,运用因子分析、相关分析和Granger因果检验等方法研究债务融资在两类产权性质企业中的破产威胁效应。研究发现:相对于国有产权控股企业,私有产权控股企业的债务总体上更能够发挥破产威胁效应;商业信用在两类产权性质企业中均未能发挥破产威胁效应,而银行贷款在私有产权控股企业中更能够发挥破产威胁效应;短期债务在私有产权控股企业中更容易发挥破产威胁效应,而长期债务在国有产权控股企业中更难以发挥破产威胁效应。