MN-TU and Regret-Minimization Regimes, Willingness-To-Comply and the Effectiveness of Legal Processes for Climate Finance and Complex Corporate Instruments: Alternative Risk Premia

Abstract

At the present time and in most developed countries, EBIs/ESOs are regulated by a myriad of laws at the local, state and federal levels. This introduces complexity and conflicts, and greater transaction costs, and opportunities for forum shopping and regulatory arbitrage. This article analyzes the efficiency of legal processes for misconduct pertaining to Non-Common-Stock Equity-Based Incentives (“EBIs”); and also introduces new theories pertaining to the degree of government regulation of EBIs; and introduces new models and the theory of Willingness-to-Comply for Equity-Based-Incentives (EBIs). The major findings of this study are that: a) its most efficient to regulate EBIs with one set of laws and a combination of civil and criminal laws; b) the degree of government regulation of EBIs and the penalty regime (criminal or civil) for illegal activities in EBI-related matters should be variable and should depend on several key factors such as company size and employee tenure; c) an index of Willingness-To-Comply is developed which reflected both group-level and company-level dynamics.