Compare and Contrast

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Professor Martin Gelter knows no corporate law boundaries.

By 2014, judges in the country of Georgia needed help making sense of the way its corporations were supposed to do business. Since gaining independence from the Soviet Union in 1991, Georgia had rubbed shoulders with different Western countries and adapted bits and pieces of their corporate governing styles: a little from Germany here, some from the United States there, and a larger dose of European Union standards all around. This business collage caused a kind of collective headache for the judges. They needed someone to clear up the confusion; they found clarity with Fordham Law Professor Martin Gelter.

An expert in comparative corporate law, Gelter traveled to Georgia to meet the judges at a retreat set up by the United States Agency for International Development and guided them through the similarities and contrasts of different corporate structures that had cropped up in the country and how the law should approach each. Gelter has followed this kind of convergence in his field for years as corporations the world over have run themselves in increasingly similar ways.

His award-winning 2013 paper for the Seton Hall Law Review, “The Pension System and the Rise of Shareholder Primacy,” shows how failing pension funds and overburdened social security led Europe to embrace American-style 401(k)s and, in turn, American-style corporate practices. The spread of mutual funds and hedge funds has had a similar impact as institutional investors buy shares in other countries, secure voting power on boards, and expect things to be run like they are in the United States. “Financial institutions from other jurisdictions may try to impose certain standards on companies and induce them to act a certain way,” says Gelter. “For better or for worse.”

Will corporate governance continue to look more and more similar in the age of Trump and Brexit and other signs of an apparent reaction against globalization? Gelter says he doubts it, if only because another event nearly a decade ago already slowed down the convergence process: the financial crisis of 2008. European companies took the crisis as a warning to either rethink certain American-style corporate practices or revive some of their old ways of doing business. For instance, corporations in some European countries are mandated by law to place workers on their boards; many reward shareholders with extra loyalty shares if they hang on to their stock for a set period of time. “The financial crisis brought a countertrend to bring back these ideas,” says Gelter. “Things that were considered horrible by people trying to promote good corporate governance are coming back.”

Why should the internal goings-on of corporations concern the rest of us? Because, Gelter says, with more and more workers betting their retirement on the stock market, their financial fates depend on the way corporations behave. And sometimes they don’t behave with the noblest of intentions. Gelter’s “The Dark Side of Shareholder Influence” for the Harvard International Law Journal in 2009 and a more recent working paper, “Comparative Corporate Governance: Old and New,” look at how European corporations tend to fall under the sway of concentrated shareholders such as families, who may use their influence over management to pursue profit above other concerns, such as treating employees justly. Institutional investors such as mutual fund managers can wield the same influence on boards of directors in the United States, penetrating the insulation they have traditionally enjoyed with a more dispersed ownership model. “When shareholder wealth maximization is the goal, it can come at the exclusion of other goals, like being more mindful of workers,” says Gelter. However, Gelter’s writings also stress the role of labor as an independent force that can act as a check on corporate overreach. “Corporate governance needs to be seen as an equilibrium in which other fields, such as employment law, also play a role,” he says.

Gelter has studied corporate law from both sides of the ocean. A native of Vienna, his broad interests led him to study law and business simultaneously as an undergraduate. In just two years he earned both his law degree from University of Vienna and his business administration degree from WU Vienna University of Economics and Business before turning right back around to reenter those schools and get doctorates in both fields. After a few years of teaching at the university level, he set off for Harvard Law School to earn yet another doctoral law degree, in part to help him understand the American approach to law. A few international visiting professorships later, he took a position at Fordham Law, in 2009, to teach comparative corporate law, as well as other courses relating to business and economics.

Gelter feels at home in the academic world. “I’ve always wanted to really explore things and understand them; working in this environment gives me that freedom.” Gelter, who speaks English, German, French, and Italian, particularly enjoys moving at the intersection of business and the law. “It’s intellectually very stimulating because it’s so important for society to understand how a particular institution is shaped by different economic forces,” he says.

Gelter, who’s taught in the United States, Austria, Italy, and France, says his students at Fordham Law continually impress him. “In my comparative corporate law class, a lot of them write research papers that are so impressive I encourage them to get them published,” he says. Beyond teaching comparative corporate law and other business-related fields, Gelter has brought several international corporate law luminaries to the School through the Comparative Corporate Governance Distinguished Lecture Series, including Francisco Reyes Villamizar, chairman of the United Nations Commission on International Trade Law.

Lately Gelter’s writings have centered on book chapters on corporate governance issues and other topics in his realm of specialty, such as accounting and auditing. He’s also co-editing and contributing a chapter to a book on securities litigation for Cambridge University Press. And the German Society for International Cooperation (in partnership with USAID) has invited him back to Georgia for another round of discussions with the judges.

“They’ve worked hard to clean up corruption in their government,” he says. “Now, among lots of other issues, they have to focus on some nitty-gritty corporate law stuff. It’s a fascinating time for them.”

 

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