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Business Law at Oxford University

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Eclipse of the Public Corporation Revisited: Concentrated Equity Ownership Theory

This research piece was written at the invitation of the Business Law group at the University of Oxford. The original contribution can be found here.

The era of the U.S. public corporation is in decline. Tectonic shifts in seemingly disparate regions of the corporate landscape are underway. Through the lens of a new theory of the firm, these phenomena are eerily consistent with Harvard Professor Michael Jensen’s bold prediction in Eclipse of the Public Corporation (1989). Yet, much debate in securities law and corporate governance continues to be premised upon the 1932 Berle-Means corporation, marked by a separation between share ownership and managerial control. Eighty-five years later, that ownership structure is being displaced by a more robust organizational form that is particularly suitable to exponential innovation and growth in highly competitive markets – conceptualized as the founder centric firm... [read more]

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Business Law Advisory Council

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December 12, 2016

Business Law Policy
Consumer and Business Policy Unit
Ministry of Government and Consumer Services

Re: Business Law Advisory Council Report to Minister of Government and Consumer Services for reform of Ontario’s corporate and commercial legislation

Thank you for the opportunity to comment on the Business Law Advisory Council Report to the Ministry of Government and Consumer Services (“Ministry”) on recommended changes to Ontario’s corporate and commercial legislation, which was published for comment on November 16, 2016. We appreciate the opportunity to be a part of this legislative process and to contribute to these important developments. 

Hurt Capital Inc. is a founder centric investment and venture capital platform. Since 2008, our investment selections in the capital markets have outpaced the S&P 500. This was achieved with minimal trading, and predominantly a buy-and-hold approach to investing. We attribute this success to a research-driven investment methodology powered by proprietary governance analytics, alongside the traditional value investing principles taught by Ben Graham at Columbia University in the 1930’s and espoused by Warren Buffett with much success in recent years. 

The origins of our founder centric methodology were discovered during intensive research at the intersection of law and economics on the inherent efficiencies of certain concentrated ownership structures in publicly-traded companies. This novel economic discovery, with its legal foundations published in a highly ranked peer-reviewed law journal, is conceptualized alongside Good Corporate Citizen Theory™ – an innovative framework that challenges the dominant paradigms of shareholder primacy and stakeholder theory. Our Founder Centric™ Governance Analytics Platform is a proprietary governance ranking system connected to our investment analysis on firms with dominant shareholders. This academic work has powered a highly scalable eight-year track record in the capital markets that rivals those of the world’s greatest investors. In expanding this theory’s real-world applications to new ventures, Hurt Capital actively promotes Founder Centricity™ in innovative companies.

Over the next two decades, with bold leadership from all levels of government and the private sector, the Canadian Innovation Triangle – marked by Montréal, the Toronto-Waterloo Corridor, and Vancouver – will become the nexus of a value creation engine that rivals the economic output of ‘Silicon Valley’. Our research indicates that fostering growth in founder centric technology companies – from early stages to well-beyond IPO – is a crucial step in Canada’s economic transformation. For start-ups and growing ventures, we leverage over 600 professionals and partners in 14 offices to help founders build their vision of the future. Our work strives to contribute to Canada’s economic prosperity and competitiveness as a jurisdiction of choice for entrepreneurial activity, investor engagement, and business expansion.

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Business Law Policy Consultation – Ontario

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October 16, 2015

Business Law Policy Consultation
Consumer and Business Policy Unit
Ministry of Government and Consumer Services

Re:     Ministry of Government and Consumer Services – Business Law Agenda: Priority Findings and Recommendations Report (“Business Law Agenda Report”) for reform of Ontario’s corporate and commercial legislation

Thank you for the opportunity to comment on the Ministry of Government and Consumer Services (“Ministry”) Business Law Agenda Report on priorities and recommendations for reform of Ontario’s corporate and commercial legislation, which was published for comment on July 9, 2015. We appreciate the opportunity to be a part of the Ministry’s reform process and to contribute to these important developments. 

Innovative Business and Concentrated Share Ownership

In a study on U.S. firms, funded by the Investor Responsibility Research Center Institute and conducted by Institutional Shareholder Services Inc., researchers found that controlled companies are on the rise. In 2002, the S&P 1500 Composite had 87 controlled firms; by 2012 this number was up 31% to 114. Within these firms, 79 contained multi-class capital structures with unequal voting rights, while 35 were controlled through a single class of voting stock.[3] The technology sector is at the forefront of this trend, as represented by Google’s (U.S. $464 billion, market capitalization) multi-class share split to concentrate voting control in the hands of two shareholders, the control position of a single shareholder over Facebook ($270 billion), and the concentrated shareholdings found in Amazon ($263 billion), Netflix ($43 billion), Tesla ($29 billion) and other emerging and newly listed technology companies.

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Submission to Canadian Securities Administrators

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June 29, 2015

British Columbia Securities Commission
Alberta Securities Commission
Financial and Consumer Affairs Authority of Saskatchewan
The Manitoba Securities Commission
Ontario Securities Commission
Autorité des marchés financiers
Superintendent of Securities, Prince Edward Island
Nova Scotia Securities Commission
Financial and Consumer Services Commission (New Brunswick) 
Securities Commission of Newfoundland and Labrador
Superintendent of Securities, Yukon Territory
Superintendent of Securities, Northwest Territory
Superintendent of Securities, Nunavut 

Dear Sirs/Mesdames: 

Re:     Canadian Securities Administrators (CSA) Proposed Amendments to Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids and changes to National Policy 62-203 Take-Over Bids and Issuer Bids

Thank you for the opportunity to comment on the proposed amendments to Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids (MI 62-104) and changes to National Policy 62-203 Take-Over Bids and Issuer Bids (NP 62-203), (collectively, the Proposed Amendments), both of which were published for comment on March 31, 2015. We appreciate the opportunity to be a part of the CSA’s regulatory reform process and to contribute to these important developments. 

Overall, we are supportive of the intent of the Proposed Amendments to allow issuers subject to an unsolicited bid time to adequately evaluate and consider competing proposals. In extending the period, however, a careful balance must be maintained to minimize the cost burdens and risk exposure for offerors. The 120 day period may act as a deterrent to offerors, providing disincentive for potential transactions that would otherwise enhance value. 

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