ProfessorBainbridge.com

The Latin Rite

For hundreds of years, the Latin Mass was a potent symbol of the Church Universal, which transcended nationality, ethnicity, culture, and language.

The Latin Mass familiar to Catholics old enough to remember how worship was conducted before Vatican II was known as the Tridentine Rite because it had been codified by the Council of Trent. From 1570, when Pope Pius V's Quo Primum bull authorized the use of that rite, "without scruple of conscience or fear of penalty," until the post-Vatican II liturgical reforms of the 1960s and 1970s, the Tridentine Mass was the distinguishing characteristic of the Roman Church.

The Vatican II reformers pressed a broad liturgical modernization program, at the core of which was a move towards conducting the Mass in the local vernacular. Granted, there was a case to be made for de-emphasizing Latin. First, Christ's Great Commission commands Christians to "make disciples of all nations." The arcane elements of the Tridentine Mass and the use of a strange tongue supposedly made evangelism by Catholics nearly impossible. Second, many uneducated Catholics had only a limited understanding of the Mass and, as a result, lacked a meaningful worship experience. Indeed, among the least educated, the Tridentine Mass had magical and superstitious connotations. Third, even as to Catholics who fully understood what was happening in the Tridentine Rite and possessed a reasonable command of the Latin liturgy, the structure of the Tridentine Mass precluded the full and active participation of the laity in the ritual.

The Sacrosanctum Concilium (i.e., Constitution on the Sacred Liturgy) issued by the Second Vatican Council began a process of reform that culminated in the 1970 Missal and, to some extent, continues even today. Contrary to popular belief, Vatican II did not ban the use of Latin or the Tridentine Rite. Instead, the choice of whether to permit the use of the Tridentine Rite and/or Latin was left to the discretion of each diocesan bishop.

In the United States, the vast majority of diocesan bishops have sharply restricted the use of the Tridentine Rite. This remains the case even though Pope John Paul II's 1988 Ecclesia Dei declaration stated that "respect must everywhere be shown for the feelings of all those who are attached to the Latin liturgical tradition" and urged diocesan bishops to make "wide and generous application" of their power to authorize the use of that tradition. In the Archdiocese of Los Angeles, for example, Cardinal Mahoney reportedly insists that the Tridentine Mass should be available only to those were alive and actively attending Mass pre-1965. Those of us born into the Church (or, as in my case, who converted) after 1965 are denied access to the Tridentine Mass. (Fortunately, Mahoney's opposition to the Tridentine Rite does not preclude the use of Latin entirely. My parish, St. Victor Church in West Hollywood, has a lovely Sunday Vigil Mass in which extensive use is made of Gregorian chant.)

Almost since the beginning of Pope Benedict XVI's papacy, there has been rampant speculation that he will issue a universal indult that will bypass recalcitrant diocesan bishops like Cardinal Mahoney. The Times of London reported recently on the latest rumors out of the Vatican, which sound as though it is a done deal:

"Pope Benedict XVI is understood to have signed a universal indult — or permission — for priests to celebrate again the Mass used throughout the Church for nearly 1,500 years. The indult could be published in the next few weeks, sources told The Times. ... The new indult would permit any priest to introduce the Tridentine Mass to his church, anywhere in the world, unless his bishop has explicitly forbidden it in writing."

In other words, although the new indult will not ensure that the Tridentine Mass is universally available, it would reverse the presumption against the Tridentine Rite by requiring local bishops proactively to proscribe that Rite. It remains to be seen whether Vatican II diehards like Mahoney will accept the change with good grace or actively resist it with written proscriptions.

There is no guarantee that the rumors are true, of course. The Vatican remains very much a black box in this area, as in many others. Yet, we may nevertheless ponder the merits of the rumored indult.

The arguments for the vernacular mass are undoubtedly strong. In theory, at least, the Mass has become more accessible both to cradle Catholics and prospective converts. In practice, however, the post-Vatican II liturgy all too often has been trite or even embarrassing. As "liberal" Archbishop Rembert Weakland observed back in 1999, many priests "adopted a kind of colloquial style that was and is unbefitting the liturgical movement." And, of course, the music has been even worse. To again quote Weakland, "most of the new music created for the liturgy has been and continues to be trite in both musical form and text, more fit for the theatre and the pub than for church."

Archbishop Weakland argued that the post-Vatican II liturgical reforms have created serious theological shortcomings in Catholic practice by promoting "a diminution of respect for and belief in the real presence in the Eucharist". Among the problems Weakland identified are "the tendency to stand, not kneel," "the placement of the tabernacle in the church away from the central axis," and the demise of genuflections. Taken together, he argued, the reforms "have reduced the sense of the transcendent and an appreciation for God's presence and role in the liturgy."

Weakland's critique, of course, was a call for more and better liturgical reform rather than for a restoration of the Latin Tridentine Mass. Yet, given the repeated failures of the reform movement, and with the Tridentine Rite lying to hand as a long-proven alternative, why not at least make it widely available as an option?

Making the Tridentine Rite widely available in Latin would be an important signal to Catholics and all Christians that we are members of a universal Church. The Catholic Church is universal across both time and space. In temporal terms, it is a partnership between the living, those who have gone before us, and those who will come after us. Christians throughout history used the Latin Mass. When we use it today, we reaffirm our place in that history. It reminds us of the traditions of our faith and, as St. Paul put it, of the great cloud of witnesses before whom we run our race.

In spatial terms, the Church transcends national boundaries and linguistic barriers. The Latin Mass reminds us that we are just Americans but also Catholic Christians. Indeed, it reminds us that we are Christians first and Americans second. There is something very profound and moving in knowing that millions of people around the world, in dozens of countries, are saying precisely the same words that you are speaking.

Catholics around the world hunger for the return of the Latin Mass, not just quasi-schismatic traditionalists and sedevacantists. In Atlanta, for example, it is reported that the regularized Latin Mass mainly by "younger people who want to pass on the faith and its true expression." One hopes Pope Benedict will not disappoint them.

Tignanello (Tuscany) 1990

This exceptional red "Super-Tuscan" wine is fully mature but holding well. It reminds me more of a well-aged claret than a Chianti, which is okay by me. The bouquet is earth, leather, and dried red fruits. On the palate, currants and dried cherries dominate. Grade: A-/A

Will v Hewitt re Miers

As a work of invective, George Will's latest anti-Harriet Miers column is brilliant:

Such is the perfect perversity of the nomination of Harriet Miers that it discredits, and even degrades, all who toil at justifying it. Many of their justifications cannot be dignified as arguments. Of those that can be, some reveal a deficit of constitutional understanding commensurate with that which it is, unfortunately, reasonable to impute to Miers. Other arguments betray a gross misunderstanding of conservatism on the part of persons masquerading as its defenders.

It's a must read, even if you have to register with the WaPo.

You might want to check out Hugh Hewitt's response for the pro-Miers view (or, as Hugh calls himself, apparently to hedge his bets, the anti-anti-Miers view). Instead of joining issue with the thrust of Will's column, Hewitt invokes a passing reference by Will in an earlier column to Justice Lewis Powell, whom Will described as embodying "mainstream conservative jurisprudence," a comment that becomes a stick with which Hugh then beats Will. In fact, Powell did embody a strain of conservative legal jurisprudence - that of big firm, country club Republican lawyers - that was mainstream when Powell was appointed to the Court back in the early 1970s. The modern conservative jurisprudence embodied by people like Scalia and Thomas was just as much a reaction to the jurisprudence of people like Powell as the liberal jurisprudence exemplified by Brennan. At least as a factual statement, Will's comment is unremarkable. In any event, if Hewitt wants us to think Will admires Powell as the embodiment of what modern conservatives ought to believe about the law, Hugh needs stronger evidence than this passing observation.

Hugh also criticizes Will for referring to those who played the faith card as being "crude people." Sorry, Hugh, but the faith card was a stupid and crude move. In context, I believe that was the point Will was making. As such, it's a fair characterization. Hugh simply reads too much into the comment.

On a related point, Hugh criticizes Will for referring to some who are "crudely obsessed with abortion" by asking what:

... does "crudely obsessed with abortion" mean? Rod Dreher of NationalReview.com's The Corner thought this Will column quite devastating to Miers' nomination supporters. Does Rod agree that seriousness about abortion is "crude?" Does K-Lo? Does William F. Buckley?

This is just a bit unfair. Will's reference must be read in context, specifically by relating it back to Will's earlier comment that:

... Thoughtful conservatives' highest aim is not to achieve this or that particular outcome concerning this or that controversy. Rather, their aim for the Supreme Court is to replace semi-legislative reasoning with genuine constitutional reasoning about the Constitution's meaning as derived from close consideration of its text and structure. Such conservatives understand that how you get to a result is as important as the result. Indeed, in an important sense, the path that the Supreme Court takes to the result often is the result.

Is Hugh saying that nothing matters except overturning Roe? If so, isn't Hewitt siding with the Critical Legal Studies types who say that law is just politics in another guise?

Next, Hugh offers this aside:

I see many on the web are exercised about Harriet Miers' support for affirmative action in the private setting of support for resolutions of the Texas Bar urging quotas in hiring at private law firms. It is not a policy with which I would agree either, but it also not a matter of constitutional law, unless under Brentwood the action of the Texas Bar in urging private firms to set strict goals has converted into a state action. Don't know what Brentwood is? Or the state action doctrine? Not many people do. But those that don't ought not to be confusing ConLaw with the private decisions of private firms while arguing that this policy makes Miers suspect on Bollinger. Now, if she supported a soft line on the Bollinger cases, that would be a legitimate area of concern, but not the Texas Bar resolutions.

The Texas State Bar calls itself:

... an administrative agency of the judicial branch in Texas. Every licensed attorney is a member of the State Bar, which provides a wide array of services to its members and the public.

Whether or not that's enough to raise Miers' conduct to the level of state action may be debatable; what's not debatable is that this is one more piece of evidence that Miers is not authentically conservative, which is the principal issue under debate, after all. (Ed Morrissey has more.)

Speaking of Bollinger v. Grutter, John Yoo wrote:

By all accounts, Miers distinguished herself as a loyal, dedicated and hard-working aide. But, according to press reports, she did not win a reputation as a forceful conservative on issues such as the administration’s position on stem cell research or affirmative action.

David Frum elaborated:

Yoo is referring here to the case of Grutter v. Bollinger, a challenge to the constitutionality of preferential treatment for minorities in education. Many in the administration wanted to take a strong stand in favor of color-blindness. In the end, the administration faltered and argued that racial preferences are okay, up to a point. It is hard to imagine a more central issue to modern legal conservatives. Where was Miers? On the wrong side.

See also my post Miers on Affirmative Action for more.

*****

First, the blogosphere. Then Robert Bork. Then National Review. Now George Will. These are serious people and real conservatives who have concluded that the Harriet Miers nomination was a slap in the face to those who have toiled for decades to bring the Constitution beck from exile. It's sad to see Miers' defenders like Hewitt dismiss such folks as having "run off the cliff."

Note to TTLB: I oppose the Miers nomination. To which regular readers will respond, "well, duh."

Hook & Ladder The Tillerman (Russian River Valley) 2005*

This is a light to medium bodied dry white wine. The varietal mix is undisclosed, but my guess is that it includes some (unoaked) Chardonnay and Gew�rztraminer (both of which the De Loachs are known to grow) plus some Viognier or perhaps a touch of Riesling. The color is a little light for Viognier but the dominant stone fruit (white peach and apricot) aromas and flavors definitely suggest some Viognier, as does the strong bouquet. At about $15/bottle, this is a great wine to serve with light seafood or pasta in a light cream sauce. There's enough acidity, especially on the finish, however, to suggest it could also match up to Spaghetti Aglio e Olio. As for me, I served it with a bento box dinner of shrimp tempura, ahi and yellow tail sashimi, and California rolls. Lovely. Grade: B++ (bonus for good value)

Rodney Strong Cabernet Sauvignon (Sonoma County) 2002*

At $19, this is an acceptable commercial Cabernet. Canned olives, black cherry, a whiff of dill. Chalky tannins coat the mouth on the finish. Grade: B-

Bush 43 has been a disaster for conservatives

My Examiner column:

Although press reports suggest that President Bush and Karl Rove are predicting the GOP will experience minimal losses in the November election and, as a result, hold both the House and Senate, this optimism appears wholly misplaced.

It now seems clear that George W. Bush has permanently lost the confidence of the bulk of the American people. His approval ratings remain mired in the 30s and, unlike past election cycles, many Republican candidates are running away from Bush as fast as they can. As the Los Angeles Times noted in endorsing California Gov. Arnold Schwarzenegger for re-election: "He has distinguished himself from the Bush administration. …"

Bush was blessed with the opportunity to effect many long-term conservative goals. For most of his presidency, the GOP controlled the White House and Congress, as well as having a solid critical mass in the courts. Despite these advantages, however, what has Bush really accomplished?

Is government smaller? Have we hacked away at the nanny state? Are the unborn any more protected? Have we set the stage for a durable conservative majority?

To be blunt, no.

In foreign policy, Bush opted to treat terrorism as a war rather than a problem for police and intelligence agencies. This choice remains problematic. Even if he was right to do so, he has waged the war incompetently. Osama bin Laden remains at large to taunt America. Even if bin Laden is essentially powerless, he remains a potent symbol. And the Taliban threatens to make a comeback in Afghanistan, where we seemingly have far too few troops to maintain control.

As for Bush’s war of choice in Iraq, it is clear that the administration lacked a plan for succeeding with the occupation. We still don’t have a handle on the security problems in Iraq. Our feckless handling of the country looks likely to breed another generation of jihadists, and there is no sign that Bush has a viable exit plan. Worse yet, he created an American gulag: Abu Ghraib, Guantanamo, secret renditions, the use of water-boarding and other coercive interrogation techniques that are little short of torture.

As conservative icon Russell Kirk observed of George H.W. Bush’s Middle East policy, "devastating Iraq (and the rescued Kuwait) is an uncompromising way of opening an era of sweetness and light. Peoples so rescued from tyrants might cry, as did the boy whom Don Quixote de la Mancha had saved from beating by the muleteers but who was thrashed by them not long later, nevertheless — ‘In the name of God, Don Jorge de la Casablanca, don’t rescue me again!’ "

We can debate whether invading Iraq was a necessary step in the war on terrorism. What we can no longer debate is that the Iraq war has brought the larger conservative agenda to a crashing halt, wasting a moment for which many in the conservative movement have waited for decades. If public perceptions of the GOP don’t improve soon, they threaten to undermine the conservative realignment for which we have long hoped.

At home, Bush has done little to advance the conservative movement’s agenda. Taxes were cut, but the budget deficit has ballooned. Entitlement programs haven’t been cut; instead, Bush rammed through the biggest expansion of entitlement programs in decades when he pushed the Medicare prescription drug benefit. No Child Left Behind and Sarbanes-Oxley vastly expanded the reach of the federal government in education and corporate governance — areas traditionally regulated by the states. The Harriet Miers debacle culminated a series of appointments motivated by cronyism rather than merit and commitment to conservative values.

In short, Bush has been a disaster for conservatives. We’ve made little progress, while suffering major setbacks. Worse yet, Bush’s well-deserved unpopularity threatens to rub off on conservative policies and leaders.

Kirk once observed that the GOP "attracted public support by its appearance of practicality, its defense of private property and of a competitive economy, its reluctance — most of the time — to embark upon adventures abroad." Bush has disavowed these traditions. In turn, it is now time for the conservative movement to disavow Bush.

Instead of spending the next two years propping up a tottering presidency and a corrupt Congressional leadership, the conservative movement needs to cut the cord with Bush and start moving forward again.

SEC Delays Action on the Proxy Rules

Several years ago the SEC proposed a new rule (14a-11), which would have allowed shareholders to put nominees for the board of directors on the company's proxy statement. I opposed that proposal for the reasons set out in my article A Comment on the SEC Shareholder Access Proposal. Wisely, the SEC deicded to let the rule quietly die rather than adopt it.

A bunch of insitutional investors have decided to try using the SEC shareholder proposal rule (14a-8) to end run the SEC's inaction. Under that rule, shareholders can put certain types of proposals on the agenda for a shareholder meeting. Some institutions (mostly public sector unions, which may tell you something) are trying to use shareholder proposals to impose a nomination process on the company and majority vote for directors via bylaw amendments.

A court case involving AFSCME ordered the SEC to let shareholders use the proposal rule in this way. In response, the SEC announced it would consider revising the proxy rules. Recently, however, the SEC announced that regulatory action would delayed at least until December:

"It was a can of worms then. It's a can of worms now. It was very divisive last time. They didn't reach a consensus," said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. (Link)

Charles may be right about the SEC Commissioners' inability to reach consensus, but as a policy matter the issue really is pretty simple.

As I detail in The Short Life and Resurrection of SEC Rule 19c-4, the DC Circuit's seminal decision in Business Roundtable v SEC, the federal proxy rules were not intended to deal with the substantive aspects of shareholder voting rights. The federal proxy rules are properly concerned only with the need for full disclosure and fair solicitation procedures.

It is state corporation law that decides the rule of the game by which directors are elected. It is precisely for this reason that the exclusion of matters relating to election of directors created by Rule 14a-8(i)(8) needs to get an expansive interpretation. The logic of the Business Roundtable case is that deciding what issues are the proper subject of shareholder action is a matter of state law (which is also the logical interpretation of SEC Rule 14a-8(i)(1)'s exclusion of matters that are not a proper subject of shareholder action).

Les Forts de Latour (Pauillac) 1995

At age 11, still a big wine with deep ruby color. Currants, rosemary, cedar, and leather. Will improve. Grade: A-/A

Iron Horse T Bar T Vineyard Merlot (Alexander Valley) 2002

The bouquet is an odd mix of vegetal (canned green beans?) and industrial aromas. The palate is slightly sweet with, again, some very funky berry and industrial (rubber?) flavors. Poor and not recommended. Grade: D

Robert Mondavi Cabernet Sauvignon Oakville District (Napa Valley) 1998

A relatively modest effort for this brand, but it still offers pretty currant and mocha java flavors. The bouquet includes a whiff of pencil shavings. Ready to drink, but has some life left. I've got one more bottle in the cellar and expect to give it until 2008 to see what happens. Grade: B

The Communitarian Connundrum

From my latest TCS column:

University of Chicago law professor Geoffrey Stone recently offered 10 tenets of modern liberalism, which included the following nugget:

It is liberals who maintain that a national community is like a family and that government exists in part to "promote the general welfare."

It is this communitarian aspect of modern liberalism, of course, which marks a principal difference between the modern version and classical liberalism. I suspect it is this over-broad understanding of what it means to be a community that is one of the things conservatives and libertarians steeped in the classical liberal tradition find most off-putting about modern liberalism.

The great moral difficulty with communitarianism is that, if taken to extremes, it treats individuals as though they were little more than cells of a larger organism. Just as when doctors kill cells to prevent cancer from spreading, communitarianism readily justifies state intrusion into the private sphere in the name of some communal good.

Worse yet, communitarian societies require a standard of behavior more demanding than most members of an unredeemed society are unable or unwilling to meet most of the time, and that all are unable to meet all of the time. Hence, it is hardly surprising that world history is littered with the failures of communitarian utopia. The communitarian agenda simply cannot be attained without invoking the state's monopoly on coercive force. Hence, as has been observed of the British (New) Labour Party's version of communitarianism, it amounts to "the nationalization of people instead of companies, as individuals are subsumed by their designated communities."

This is precisely why conservatives have always balanced the communitarian elements of our philosophy with a strong commitment to ordered liberty. Our goal is not some national "community" whose rules are enforced by the state, but rather the promotion of intermediating institutions that build what George Weigel calls "a citizenry regulating itself from within according to a shared public 'language of good and evil.'"

Conservatives believe that the state cannot build such a citizenry, because the state cannot make people virtuous. Virtue is an adaptive response to the instinctive human recognition of (and need for) a transcendent moral order codified in a body of natural law. People are most likely to act virtuously when they believe in an external power, higher and more permanent than the state, who is aware of their shortcomings and will punish them in the next life even if they escape retribution in this life.

Civic virtue also can be created by secular communities. As James Q. Wilson observes, "something in us makes it all but impossible to justify our acts as mere self-interest whenever those acts are seen by others as violating a moral principle." Rather, "[w]e want our actions to be seen by others—and by ourselves—as arising out of appropriate motives." Voluntary communities strengthen this instinct in two ways. First, they provide a network of reputational and other social sanctions that shape incentives. Virtuous communities will use those sanctions to encourage virtue among their members. Second, because people care more about how they are perceived by those close to them, communal life provides a cloud of witnesses about whom we care and whose good opinion we value. We hesitate to disappoint those people and thus strive to comport ourselves in accordance with communal norms.

The nanny state is a poor substitute, at best, for the virtue inculcating power of faith and voluntary community. We may fear the faceless bureaucrat, but he does not inspire us to virtue. Conduct that rises above the lowest common moral denominator thus cannot be created by state action. But while the state cannot make its citizens virtuous, it can destroy the intermediary institutions that do inculcate virtue. As Richard Epstein observes, "Communities can be destroyed from without; but they cannot be created from without; they must be built from within."

To be clear, I am not arguing for some libertarian utopia in which the state has no role beyond that of a night watchman. As Edmund Burke once observed, there is "a limit at which forbearance ceases to be a virtue." At that limit, the state properly steps in.

The Calvinist principle of sphere sovereignty offers one way of thinking about the line between legitimate and illegitimate uses of government power. Social institutions—including both the state and the corporation—are organized horizontally, none subordinated to the others, each having a sphere of authority governed by its own ordering principles. Expansion of any social institution beyond its proper sphere necessarily results in social disorder and opens the door to tyranny. The trouble with the state thus is not its existence, but its expansion beyond those functions prescribed by custom and convention, which were legitimized by ancient usage, into the pervasive nanny state perpetually grasping at aspects of social life to drag into its slavering maw.

From a perspective founded on sphere sovereignty, the progressive communitarian's basic flaw is his willingness to invoke the coercive power of the state in ways that deny the right of mankind acting individually or collectively through voluntary associations to order society. In contrast, conservatives are unwilling to sacrifice ordered liberty at the altar of community. A conservative properly insists that individuals be left free to define for themselves what conduct shall be deemed trustworthy or honorable, rather than being forced to comply with, say, Geoffrey Stone's definition of what makes for a good community.

A Real Backdating Scandal

Whatever one makes of the option backdating scandal, it's hard to defend what Cablevisi on did:

Cablevision took it up a notch as it was revealed that they didn't just backdate options, they backdated a bunch so a dead executive could get the options while he was alive. Well, to be more specific, that his estate could get them.

Options are supposed to be used as incentive compensation, but it's hard to see how you incentivize a dead man.

W$J On Regulating Executive Compensation

There's a great article in today's W$J on the persistent failures by government efforts to regulate the compensation of corporate executives. One of the key claims by the article is that disclosure actually tends to push pay up, arguing that "disclosure rules allowed CEOs to see what others were getting, encouraging a competitive spiral." There is a very interesting paper< /a> by Swan and Zhou, however, which was recently posted to SSRN, which argues to the contrary: "We provide evidence contrary to both theories using data on pay levels and incentives pre- and post- disclosure. Disclosure does not appear to alter pay levels but it does enhance incentives."

BLBP comments on the W$J article:

It makes the point that with each new law attempting to control executive pay came "unexpected consequences,"  executive pay increased.  Each law had exceptions for pay that the law makers felt was justified, and companies turned the exceptions into uniform practice, increasing pay.

IN 1984, Congress taxed golden parachutes if over three times salary.  Parachutes, rare before 1984, became the norm after 1984 for all companies at -- you guessed it -- three times salary.  Now they are over three times salary and the companies pay the tax (gross up provisions).  In 1992, the SEC forces companies to disclose more on pay packages; after 1992 salaries skyrocket as CEOs now know what each other make and all demand to be in the "top half", ratcheting up the pay scale.  In 1993 Congress caps the deduction for cash salary at $1 million and exempts some kinds of "performance based" compensatory stock options.  Before 1993 most executives did not get $1 million in cash, after 1994, all CEO salaries were at $1 million in cash.  Now cash salaries over $1 million are common; companies do not worry about the deduction. Compensatory stock option grants soared.  By 2001 Larry Ellison took home $706 million in a single year.  When FASB finally required the expensing of stock options in 2003, companies began to distribute "restricted stock."  Severance payments have soared and golden parachutes, a version of severance payments, are up.  Kilts, from Gillette, took home $185 million when he sold Gillette to Proctor & Gamble (and was indignant when anyone suggested that it was too much).  Indignant.  There is the guts of the problem. The man should be ashamed, or at the very least a wee bit guilty (and thankful for his undeserved good fortune). 

Ditto Ideoblog:

The article doesn't mention the effect of changes in takeover regulation, and gives short shrift to the ultimate question of whether executive pay, though rising, is excessive.

My own take is that attempting to regulate agency costs, including pay, within the current corporate form is a losing game because this form inherently gives significant discretion to managers. See Accountability and Responsibility in Corporate Governance, 81 Notre Dame Law Review 1431 (2006). This doesn't mean, however, that pay would be, or should be, lower in alternative business forms that make managers more responsive to markets.  Consider, for example, the compensation of hedge fund managers.

Delaware's Dominance

By any reasonable measure, Delaware dominates corporate governance. More than half a million business entities have their legal home in Delaware including more than 50% of all U.S. publicly-traded companies and 60% of the Fortune 500. Because of a conflict of laws rule called the internal affairs doctrine, "the internal affairs of a corporation are governed by the law of that entity's state of incorporation." As such, Delaware law governs the corporate governance of most important US corporations.

Why Delaware dominates is a complex and controversial question. In an interesting new article, Larry Hamermesh suggests "that the following considerations are dominant: (1) enhancing flexibility to engage in private ordering, (2) deferring to case-by-case development of the law, and avoiding legislation that is prescriptive and proscriptive, (3) avoiding impairment of preexisting contractual relationships and expectations, and (4) most importantly, avoiding legislative change in the absence of clear and specific practical benefits."

What Should Patricia Dunn Have Done?

There's a very interesting article in today's W$J, which recaps the whole HP board spying mess. The author opines:

From Ms. Dunn's testimony, emails and indirect comments, it's possible to piece together an explanation for how a well-regarded chairman could go so catastrophically off course. Adamant in her desire to "fix" the leak problem, she succumbed to tunnel vision.

She had begun to see stopping leaks as one of the most crucial tasks in her chairmanship. In doing so, she neglected issues such as prudence, fairness and the potential impact on H-P's reputation. Even the extent to which the company had analyzed the legal issues or just glossed over them wasn't considered.

What should Dunn have done?

Clearly, I don't think Dunn could ignore the leaks. Boards ought to be high trust organizations, in which members have confidence in one another. Few things can be more desctructive to intra-group trust than leaks, which may be perceived as inherently a breach of confidentiality but also as attempts to litigate disputes in the media instead of in the boardroom. Indeed, if the W$J is to be believed, the leaks had negatively affected intra-board relations at HP.

With the benefit of hindsight, I think I would have advised Dunn to hire the best outside security experts she could find (instead of trying a jerry-rigged combination of in-house and outsourced resources). She then takes the experts before the board. The experts tell the board: Here's what we need to do to investigate the identity of the leaker. Dunn then asks the board to approve the investigation, making clear that the board members will be investigated. Anybody who balks should be asked to resign from the board. Leaker Keyworth thus would have been faced with the unpalatable choice of approving an investigation he now knows will include access to his phone records and so on or essentially admitting that he was the leaker by refusing to go along.