By Andrew Cohen
Berkeley Law’s push to be a global crossroads for scholars and ideas from around the world took another step forward Nov. 12 at a conference hosted by the Korea Law Center. Co-sponsored by South Korea’s Korea Legislation Research Institute (KLRI), the event featured a timely exchange of research findings between Berkeley Law professors and a group of Korean legal experts.
After a welcome from Dean Sujit Choudhry, KLRI President Won Lee opened the conference with a discussion of land exploration legislation in Korea. Scholars then addressed topics as varied as corporate governance, e-commerce, and administrative bureaucracy. During each presentation, scholars described one of their recent papers and a discussant from the other country offered questions and comments.
The presentations included policy analyst Sukham Sung tracking developments in South Korea’s information communication technologies law; KLRI research fellow Kyungho Choi highlighting key issues within the Korean Foreign Legal Consultant Act; and Berkeley Law Professor Anne Joseph O’Connell unpacking her award-winning paper “Bureaucracy at the Boundary,” which explains how a large swath of U.S. bureaucracy exists outside of executive agencies.
Here’s a more in-depth look at the other presentations:
Clashing US and EU privacy laws
“In the EU, we see many efforts to protect consumers and many contractual terms that are contestable,” Schwartz said. “In the U.S., it’s harder to say something is unconscionable or otherwise unenforceable. By and large, if terms are available to the consumer beforehand, they’re upheld.”
EU privacy law mirrors its contract law by demanding certain protections to establish legal consent—without the requirement of showing actual harm. By comparison, Schwartz said the U.S. system’s “libertarian bent” means that “unless a contract term is highly problematic,” people are held accountable for their own decisions.
In forecasting a future convergence or divergence among the two legal systems, Schwartz leans toward divergence. “Europe’s strong constitutional basis for data protection prompts courts there to take positive steps to prevent harm to the individual,” he said. “In the U.S., we’d never argue that anything in our Constitution requires such positive steps to make real privacy possible.”
South Korea’s e-commerce woes
Korean law professor Kichang Kim lamented his country’s 1999 Electronic Signature Act, which imposed the same legal effect on digital signatures as on traditional signatures. Due to “unfortunate features” such as mandating nationally-rooted certificate authorities and government-licensed service providers, Kim said South Korea has not met its e-commerce expectations.
“If you tried to log onto a Korean website from an outside country, you’d see a security warning pop up,” Kim said. “This insular certification made users set up additional software on their devices. The most vulnerable part of user behavior, the most dangerous online security threat, is making people install additional software.”
He noted that South Korea’s certificate authority is not well recognized by international web browser vendors, heightening their security concerns. Korean web users, Kim said, are required to blindly trust their country’s websites.
Kim detailed two legislative reforms enacted this year, including one that eases national restrictions on outside security systems implemented by banks and credit card companies. “But the industry hasn’t shown early signs of change,” he said, and Korea’s e-commerce industry remains bound by regulators and is “largely inaccessible to the rest of the world.”
Who drives corporate governance?
Professor Stephen Davidoff Solomon tracked the rise of shareholder activism in the U.S. and its effect on corporate governance. “For years, academics have claimed that if only we had better corporate governance, companies would create more wealth,” he said. “Yet we have no good research about the ability of these measures to do that.”
Recent governance trends include hiring independent directors and splitting the positions of chairman and CEO to gain better company oversight. Davidoff Solomon’s paper shows the push for independent directors hampered by a small talent pool—as companies sought candidates with CEO experience—and by salaries that paid far less than candidates’ previous compensation.
Such directors are also usually nominated by a major shareholder—typically a hedge fund eager to alter the company’s strategic direction. After companies shifted from paying directors a salary to a share of company profits, Davidoff Solomon said this “golden leash” arrangement raised concerns about “whether directors would care more about the interests of the hedge fund, because of profit potential, than the company itself.”
After companies began adopting bylaws barring directors from receiving such exorbitant compensation, Institutional Shareholder Services denigrated the practice and urged shareholders to withhold their vote in such companies. “Then a curious thing happened,” Davidoff Solomon said. “All these companies that adopted bylaws prohibiting the golden leash suddenly repealed them.”
Yet again, the presence—or non-presence—of these bylaws made no impact on share prices. “Companies are economic enterprises designed to produce wealth that will enhance society,” Davidoff Solomon said. “If you find that these new corporate governance measures aren’t producing more wealth, maybe they’re not good.”