Single European Law

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STEP 1
Even if I share your opinion, could you please try to show why some nevertheless argue that the EU can lead to a race to the top? Just try to explain what reasoning they adopt, and say why they did not convince you.

Some argue that EU can lead to a race to the top. The argument of Professor Winter is that free choice of incorporation was a 'race to the top'. His reasons are: First, that market forces compel the company to choose the government for incorporation that is most profitable (beneficial) to shareholder. Second, given the choice investors would not invest in " firms that that are incorporated in legal systems with a lesser degree of protection for creditors and shareholders". Third, "the lesser interest of investors and shareholders would have a negative impact on stock prices, eventually leading to a takeovers or bankruptcy."
The arguments of Professor Winter are based from the point of view of shareholders and investors. When the race to the bottom is on, the bottom is really the top from the narrow short-term perspective of the shareholders and investors. Both are interested in immediate returns and that EU country or US state of Delaware that offers the highest returns to shareholders and investors attracts the most companies. Professor Winter's stand point if flawed because it does not take into account the stand points of other stakeholders in the company and the society at large. For example it ignores the standpoint of workers who are not able to move from one country to another. Let us take another example; it ignores the standpoint of welfare beneficiaries who belong to the weaker sections of the society.
In the same vein Professor Romano claims that concentration leads to a reduction in the costs of transaction. This argument simply reduces certain costs that lead to greater profits for the company that is useful from the perspective of shareholders and investors. He is also trying to say that the race to the bottom is the race to the top. Where professor Romano also errs is that he defines top from the perspective of the narrow short-term perspective of the investors and shareholders and not from the perspective of the entire European Community or the society in general. The shareholders gain is the loss of the society and the ...