I am an Assistant Professor at Haifa University’s Faculty of Law, and a visiting scholar at the Faculty of Industrial Engineering & Management at the Technion - Israel Institute for Technology.
My primary research interests lie in corporate law and governance and in securities regulation, with a focus on venture capital and the entrepreneurial process. Although corporate law literature mainly centers on public corporations and markets, an ever-growing share of the overall economic activity is carried out by private venture-capital backed firms. My scholarship responds to this long-term trend by examining the legal conditions that facilitate the growth of these companies and that influence the distribution of the wealth these companies create. My work specifically emphasizes the relationship between venture capital and human capital and reconceptualizes the boundaries between corporate and securities law, on one hand, and labor law, on the other.
JSD in Law, 2020
Donna Schweers and Thomas Geiser Interdisciplinary Graduate Fellowship (Stanford SIGF)
David. E Fischman Scholarship
Decalogue Fund Scholarship
Stanford Rock Center for Corporate Governance Research Grant
John M. Olin Program in Law and Economics at Stanford Research Grant
P.E.O. International Peace Scholarship
Silvan Cohen Fund Scholarship
Lamas Fund Scholarship
John M. Olin Program in Law and Economics Fellowship
John Ely Hart Award for Legal Writing
Stanford Legal Writing Award in IP Law
Gerald Gunther Award in Modern American Legal Thought
Stanford Law School Scholarship
Hebrew University's Law School LLM Valedictorian
Hebrew University's Law School LLB Valedictorian
Lionel Cohen Award
Wolf Foundation Award
The securities regulation regime has traditionally focused almost exclusively on financial capital investments. However, the widespread and growing practice of providing equity compensation has transformed high-skilled labor from a pure employment relationship into one that involves a significant investment component. I argue that it is therefore time for securities regulators to catch up with market dynamics and address the challenges of human capital investments by start-up employees. The article establishes, both on theoretical and empirical grounds, that, similarly to financial capital investments, human capital investments are susceptible to agency problems and information asymmetry. It argues that the current framework—namely, Rule 701, adopted by the SEC in 1988—fails to address these concerns. The article offers an outline for better regulation of the relationship between private issuers and their equity-compensated employees by tailoring the disclosure requirements under Rule 701 to the distinct attributes of venture capital-backed firms.
The paper examines an understudied aspect in the literature on employee mobility and innovation—the impact of employee stock options on talent allocation. My research reconciles between two schools of thought regarding noncompete agreement by highlighting the role of Silicon Valley’s business norm of granting stock options to virtually all employees. This custom emerged during Silicon Valley’s inception as an alternative model to the more centralized and hierarchical organizational culture of East Coast corporate America, which held that companies should reserve equity grants solely to senior management. My work suggests that Silicon Valley start-ups can capture the returns on their investments in training and innovation despite California’s ban on noncompetes because stock options generate a retention incentive that offsets employees’ incentive to free ride on these investments. However, unlike noncompete agreements, stock options induce retention in a highly selective manner: they temporarily suppress the mobility of employees of successful private companies (because, due to tax considerations, employees holding valuable options wait for a liquidity event, such as an initial public offering or acquisition, to cash out), but they do not limit the earning potential and mobility of laid-off employees and of employees of unsuccessful companies (whose stock options are virtually worthless). Stock options thus create an efficient breach mechanism that channels employees of less successful firms toward more promising ones and prevents inefficient retention. The paper also explores the crucial role of liquidity in the constant development of start-up ecosystems. Due to the retention effect of valuable but illiquid equity grants, I argue that companies’ current tendency to delay holding liquidity events might overly restrict the mobility of employees of large private companies and impair the talent allocation mechanism that gave Silicon Valley its competitive edge.
This paper examines the effect of creating a specialised economic court on subsequent litigation rates, forum selection, and court performance. To do so, we utilized a quasi-experimental research design and compared court decisions under two time frames: before and after the reform, and two judicial frameworks: the specialised court vs. generalist courts. Using unique data from Israel, where an Economic Division within the Tel Aviv District Court was established in the last decade, we find evidence that specialisation fosters a fast development of a coherent and consistent body of law. This effect is driven by fast adjudication and by judges’ relying on each other’s past decisions to jointly develop the case law. Importantly, although increased efficiency was not exclusively related to specialisation, further analysis suggests that the specialised division is more capable of managing a particularly time-consuming docket. Lastly, although the reform did not lead to the initiation of a greater number of lawsuits, it did cause a major shift in forum selection. We conclude that specialisation may be especially productive in developing markets like Israel, where the use of private lawsuits to promote investor protection is relatively new and growing rapidly.
The Delaware Court of Chancery’s success has made the court a role model for both specialized economic courts in the United States and worldwide. Specialized economic courts are perceived by international organizations such as the World Bank and the OECD as an important element in the creation of a capable and effective judiciary, typically a perquisite for economic growth. In December 2010, Israel’s legislature established a specialized division in Tel Aviv District Court to adjudicate corporate and securities law violations. This study is the first to examine the reform’s results and to provide an empirical account of securities civil litigation in Israel since the specialized division’s implementation. We employed a quasi-experimental research design to evaluate whether this structural change in the court affected civil enforcement through class and derivative actions in terms of litigation rates, forum selection, and court performance. In addition, a network analysis method was used to evaluate the new tribunal’s contribution to the formulation of a new body of law in the financial field. By manually curating 242 class and derivative actions adjudicated by both the specialized division and general district courts from 2006 to 2014, we found that although the new tribunal did not lead to the initiation of a greater number of procedures, it did cause a major shift in forum selection and thus became the center of securities litigation in Israel. Moreover, specialization has led to greater efficiency in the Tel Aviv District Court and therefore has made this court equivalent to other district courts even though this court handles the more complex cases that are typical of the economic capital of Israel. More importantly, the new tribunal set numerous precedents that help clarify the legal constraints on actors in the financial market and promote deterrence. Finally, the specialized judges rely on each other’s decisions and, as such, operate as a united bench to develop coherent and consistent case law. We conclude that in the Israeli context, specialization has proven an effective means to empower the judiciary and to promote investor protection. As such, with one foot in the civil procedure realm and the other in the corporate governance realm, this study reveals the connections between specialization, civil enforcement, and the creation of new norms by the judiciary in the financial field.
Equity compensation grants for rank-and-file employees are common among venture-backed start-ups and are considered an ingrained part of their business culture. However, extremely little is known about start-up employee equity holders. This article takes a first step toward filling this gap. More than 1,000 U.S. employees with a college-level STEM degree participated in a survey experiment. Through the combination of natural language processing and machine learning techniques with conventional regression modeling, we examine employees’ financial literacy regarding equity-based compensation and their willingness to forego cash compensation for start-up equity. The findings indicate that employees commonly respond to economically irrelevant signals and misinterpret other important financial signals. Thus, respondents demonstrated a greater demand for equity grants when the number of shares offered was relatively large, even though the ownership percentage was fixed. This tendency is associated with low level of financial literacy regarding equity-based compensation as measured by a three-item test developed in this study. The findings suggest that employees harbor a range of “market illusions” regarding start-up equity that can lead to inefficiencies in the labor market and that sophisticated employers can legally exploit. The study’s results raise serious questions about the protection of employees in their investor capacity in a market in which highly sophisticated repeat players—namely, venture capital and other private equity investors—interact with unorganized and uninformed retail investors.
Israel is known as the ‘start-up nation’. Israeli start-ups raise billions of venture capital dollars every year and form the lifeblood of Israel’s high-tech economy. However, the ever-growing importance of start-ups in the global and Israeli economies still awaits appropriate academic attention. In Israel, as elsewhere, the corporate law literature is dedicated almost exclusively to public companies. This article takes a first step towards addressing this omission. The article (1) lists the unique characteristics of venture-backed start-ups compared to other companies, public and private listed; (2) explains how these differences are reflected in the corporate governance of start-ups; And (3) illustrates the argument by commentating on decisions by Israeli courts concerning start-up shareholder disputes. The article presents two main contributions: First, it argues that start-ups do not fit the classic principal-agent theory of corporate law, and instead, these firms achieve cooperation among diverse input providers (team production) by implementing a unique capital structure. As a result, start-ups’ corporate governance requires different, and often counterintuitive, legal reasoning. Second, the article demonstrates that Israeli courts’ decisions concerning start-up shareholder disputes are often inconsistent and demonstrate unfamiliarity with the characteristics of start-ups and the venture capital industry’s business norms. Thus, there is a high degree of uncertainty in litigation before Israeli courts, which can encourage the adoption of arbitration and mediation clauses. This trend may generate divergence between law in books and law in action with regard to start-ups and venture capital. The article concludes with recommendations for improving the situation, including the use of court-appointed experts who possess specific expertise in venture capital finance and strengthening the legal academia in start-up law.