More on Sinclair Broadcasting

Over at Right Coast, my friend Tom Smith opines:

So here, apparently, is what happened with "Stolen Honor." Bill Lerach, strike suit entrepreneur, threatened Sinclair with a shareholder suit if it ran the movie. Then the controller of the state of New York, in charge of a public employee pension funds, threatened Sinclair with legal action as well. Sinclair caved, but who can blame them. Running the movie probably would have been good business, but standing up to political thuggery is not. ...

As to the New York state pension fund, well, some of us in the corporate law world said a long time ago that shareholder activism was a bad idea. Pension funds are run by bureaucrats, who are no more immune to the temptations of power than anybody else. The idea that a New York pension fund has an economic stake in whether Sinclair shows a movie, which probably would have garnered many viewers, is beyond absurd. The political hack who made that call should be tossed out of her job, but who's going to launch the hostile tender offer on the pension fund and the state of New York? Oh, I forgot, nobody monitors the Solons at the pension funds.

As long time readers know, I'm one of those folks "in the corporate law world [who] said a long time ago that shareholder activism was a bad idea." See, e.g., my article Director v. Shareholder Primacy in the Convergence Debate, which argues:

Abstract: Although the question of whether international corporate governance is converging on the U.S. model remains contested, there is general agreement as to the nature of that U.S. model. Specifically, virtually all participants in the convergence debate assume that U.S. corporate law is based on a norm of shareholder primacy. This assumption is wrong. U.S. corporate law is far more accurately described as a system of director primacy than one of shareholder primacy. In this essay, the author argues that the comparative corporate governance literature's erroneous understanding of the U.S. model distorts both the positive and normative aspects of the convergence debate. On the positive side, if we use the extent of shareholder primacy as our metric, we end up with a distorted estimate of the extent to which systems have converged. On the normative side, corporate governance is a potentially important instrument by which to increase the economy's efficiency. In recent years, elite U.S. corporate law scholars have played a significant role in "reforming" the corporate laws of transition economies. If the goal is to export the U.S. model, on the assumption of its superiority, we do those economies no good - and may do much harm - by exporting the wrong model. Hence, we are constrained to examine the normative question: Does it matter? Is director primacy superior to shareholder primacy? This essay acknowledges that investor participation in corporate governance has economic benefits, but argues that director primacy is preferable on balance.