ProfessorBainbridge.com

Congratulations to Leo Strine

Kudos to Delaware Vice Chancellor Leo Strine who has been nominated to succeed William Chandler as Chancellor (i.e., chief judge) of the Delaware Chancery Court. Strine is the spiritual successor of William Allen as an active and thoughtful maker of corporate law and is a great choice. I'm a big fan of his work, even if his opinions are almost always too long to fit into my case book!

The news of Strine's elevation comes from Francis Pileggi, whose attractively redesigned blog remains essential reading for anyone with an interest in Delaware corporate law. Best wishes to Francis as he starts his affiliation with a new law firm.

Sadly, Francis also brings us news that Sam Glasscock has been named to replace Strine as one of the 4 Vice Chancellors. My stealth campaign for the job apparently flew too far under the radar for the governor to notice. Just as well, however, since being a judge sounds like real work.

CalPERS Ethics Foibles ... Again

When you're an activist shareholder, constantly complaining about corporate governance problems in management of portfolio companies, you need to be purer than Caesar's proverbial wife. In recent years, CalPERS has taken repeated black eyes for ethical and governance failures. James McRitchie reports on the latest:

CalPERS was in the news negatively again. The Fair Political Practices Commission is investigating more than four dozen CalPERS board members and employees over allegations they failed to accurately report gifts. ... Hopefully, this investigation will turn out to be less than it appears on the surface and many of the mistakes discovered will be shown to have been unintentional errors. Rob Feckner, CalPERS President, recently settled with the FPPC. “I have now signed the stipulation order and submitted payment for my $400 fine for two dinners in five years.”

CalPERS staff and officers need to be scrupulous about following the law, but I suspect that in the case of this investigation, a mountain is probably being made out of a small hill.

To paraphrase the Biblical aphorism, even if CalPERS problems are a more of a molehill than a mountain, CalPERS still needs to get the molehill out of its eye before it next complains about an alleged mountain in some board of directors' eye.

Dicta: Law book reviews on line

Gordon Smith reports that:

The Texas Law Review just launched a new site -- Dicta -- for reviews "recent books published on various legal and interdisciplinary topics." I think it's a splendid idea, and I hope they succeed.

Ditto. But I also have two suggestions: (1) an RSS feed so readers know when new reviews are posted and (2) Amazon links to make buying the books easy as pie (and make them a few bucks as Amazon Associates).

Overciminalization

Justice Scalia’s dissent in Sykes v. United States makes critical reading:

We face a Congress that puts forth an ever-increasing volume of laws in general, and of criminal laws in particular. It should be no surprise that as the volume increases, so do the number of imprecise laws. And no surprise that our indulgence of imprecisions that violate the Constitution encourages imprecisions that violate the Constitution. Fuzzy, leave-the-details-to-be-sorted-out-by-the-courts legislation is attractive to the Congressman who wants credit for addressing a national problem but does not have the time (or perhaps the votes) to grapple with the nitty-gritty. In the field of criminal law, at least, it is time to call a halt.

We observe this phenomenon in the ever-increasing criminalization of agency costs, with basic business blunders being turned into felonies.

But we also need to keep harping on the related phenomenon of the militarization of law enforcement:

Americans have long maintained that a man's home is his castle and that he has the right to defend it from unlawful intruders. Unfortunately, that right may be disappearing. Over the last 25 years, America has seen a disturbing militarization of its civilian law enforcement, along with a dramatic and unsettling rise in the use of paramilitary police units (most commonly called Special Weapons and Tactics, or SWAT) for routine police work. The most common use of SWAT teams today is to serve narcotics warrants, usually with forced, unannounced entry into the home.

These increasingly frequent raids, 40,000 per year by one estimate, are needlessly subjecting nonviolent drug offenders, bystanders, and wrongly targeted civilians to the terror of having their homes invaded while they're sleeping, usually by teams of heavily armed paramilitary units dressed not as police officers but as soldiers. These raids bring unnecessary violence and provocation to nonviolent drug offenders, many of whom were guilty of only misdemeanors. The raids terrorize innocents when police mistakenly target the wrong residence. And they have resulted in dozens of needless deaths and injuries, not only of drug offenders, but also of police officers, children, bystanders, and innocent suspects.

Paredes Speech on Hedge Fund Regulation

SEC Commissioner Troy Paredes has emerged as Paul Atkin's successor as the voice of reason on the SEC. His recent speech on hedge fund regulation hit so many nails on the head one eventually stopped counting.

His central thesis?

We must avoid constructing a financial regulatory regime that unduly burdens and constricts the U.S. financial system at the expense of our country’s economic growth and the competitiveness and dynamism of our financial markets. If we overregulate our financial markets, we run the risk that companies will find it more costly to access the capital they need to grow and to hire new employees; that businesses and individuals will find it more difficult to manage their risks effectively; that consumers will find it more challenging to get the credit they rely on to buy the goods and services they need; that investors will enjoy fewer opportunities to accumulate wealth and earn income and to transact efficiently and at low cost; and that important new ideas and technologies will not be commercialized.

Go rerad the whole thing. Along those lines, I also recommend my essay Corporate Governance and U.S. Capital Market Competitiveness (October 22, 2010):

During the first half of the last decade, evidence accumulated that the U.S. capital markets were becoming less competitive relative to their major competitors. The evidence reviewed herein confirms that it was not corporate governance as such that was the problem, but rather corporate governance regulation. In particular, attention focused on such issues as the massive growth in corporate and securities litigation risk and the increasing complexity and cost of the U.S. regulatory scheme.

Tentative efforts towards deregulation largely fell by the wayside in the wake of the financial crisis of 2007-2008. Instead, massive new regulations came into being, especially in the Dodd Frank Act. The competitive position of U.S. capital markets, however, continues to decline.

This essay argues that litigation and regulatory reform remain essential if U.S. capital markets are to retain their leadership position. Unfortunately, the article concludes that federal corporate governance regulation follows a ratchet effect, in which the regulatory scheme becomes more complex with each financial crisis. If so, significant reform may be difficult to achieve.

Just 26% Favor Continued Military Action in Libya

Count me with the 42% "against." It's too expensive. What's the exit strategy? Odds are the next guy in charge won't be all that much better than Kadaffi. Just how many dictatorships are we going to bomb into rubble? Have you noticed that we seem to be making war against buildings? We blow crap up but we don't kill the enemy, which makes it an odd sort of war.

Ten Game of Thrones Thoughts

So I've been watching HBO's adaptation of George RR Martin's A Game of Thrones: A Song of Ice and Fire: Book One (See all Literature & Fiction Books) and rereading the book at more or less the same pace. Herewith some random thoughts, offered FWIW. POSSIBLE SPOILERS WARNING

1. Peter Dinklage is stealing the TV series. He brings to the part of Tyrion precisely the right amount of Napoleonic swagger and, dare I say it, impishness. Perhaps it is my knowledge of what follows in future books, but one can see in Dinklage's performance the potential for Tyrion to turn on his family and eventually become one of the good guys. It's great that such a wonderful actor has finally gotten such a major star vehicle.
2. Catelyn Stark comes off as much less of a bitch in the TV series than in the books, but in either case she remains one of my least favorite characters.
3. I guess it's now conventional wisdom that Jon Snow will turn out to by Lyanna Stark's son. I used to think that Robert Baratheon was his father, but I've come around to the view that Snow is really Rhaegar Targaryen's son. It makes Ned's squeamishness about killing off Targaryen children much more plausible. It also fits with Ned's ruminations on the promise he made Lyanna. A promise to bury her in the North just wouldn't carry all that weight, IMHO. Plus, we know that Rhaegar raped Lyanna "hundreds of times," but I don't think we have any evidence that Robert bedded her before she died. Robert was more likely to have whored around than to seduce the daughter and sister of important allies like the Stark family.
4. I figure Snow and Daenerys end up together (it is, after all, a son of fire and ice). If Jon Snow is Rhaegar's bastard, it fits the Targaryen pattern of intra-family marriages.
5. The kid playing Arya makes her character seem much less annoying. In the books, I find her rather whiny.
6. Conversely, the kid playing Prince Joffrey has precisely the right tone of evil little sh*t for the role.
7. Lena Headey doesn't work as a blonde for me.
8. For a guy who we're told won the war in the south alone, Ned Stark sure makes a lot of dumb tactical decisions.
9. Turning Drogo and Daenerys' wedding night from a tender moment (in the book) to a virtual rape (on TV) seemed unnecessarily salacious, especially given all the other sexual chicanery the story contains.
10. I feel sort of sorry for Sean Bean. His two biggest roles--Boromir and Ned Stark--both get killed off in the first movie. Maybe someday he'll get a role that lets him stick around to the end?

The Corporation has a Nexus

Charles O'Kelley has posted a new paper, The Theory of the Firm: The Corporation as Sole-Proprietor Surrogate, in which he claims that:

If we depict a sole proprietorship as a circle encompassing its constituents, that firm would have a center, the sole proprietor, who owns the firm’s property, serves as the node for all contracts, and determines and directs the firm’s policies. In contrast, all corporation law scholars apparently view the corporation as a firm with no center, or, as having at its center an artificial and empty contracting node provided by corporation law.

That was news to me. To quote from my article, The Board as Nexus of Contracts:

In one sense, the corporation is a nexus [of contracts]. ...

In a more important sense, however, the corporation has a nexus. After all, to say that the firm is a nexus is to imply the existence of a core or kernel capable of contracting. But kernels do not contract—people do. In other words, it does us no good to avoid reifying the firm by reifying the nexus at the center of the firm. Hence, we must search for the person or persons who serve as the nexus of the set of contracts making up the firm. Our search will be facilitated if we first identify the central characteristic of “firmishness.”  In this part, I argue that the defining characteristic of a firm is the existence of a central decisionmaker vested with the power of fiat. Identifying that central decisionmaker is the task of Part III below. …

If the corporation has a nexus, however, where is it located? The Delaware code, like the corporate law of every other state, gives us a clear answer: the corporation’s “business and affairs . . . shall be managed by or under the direction of the board of directors.”  Put simply, the board is the nexus.

O'Kelley's paper is interesting and worth considering, but I came away think director primacy--a.k.a. board centric governance--still makes better sense than either the shareholder centric (and team production) models he critiques and the sole proprietor analogy he offers. But more on that later.

Lindsey Graham, meet Russell Kirk

The Hill reports that Lindsey Graham wants the USA to get into a fourth war:

Sen. Lindsey Graham (R-S.C.) said Sunday that it’s time to consider international intervention in Syria to avoid the further “slaughter” of people there by President Bashar al-Assad’s forces.

“If it made sense to protect the Libyan people against Gadhafi, and it did because they were going to get slaughtered if we hadn’t sent NATO in when he was on the outskirts of Benghazi, the question for the world [is], have we gotten to that point in Syria,” Graham said on the CBS' "Face the Nation."

In the first place, it didn't make sense to intervene in Libya. As Russell Kirk observed:

Are we to saturation-bomb most of Africa and Asia into righteousness, freedom, and democracy? And, having accomplished that, however would we ensure persons yet more unrighteous might not rise up instead of the ogres we had swept away? ... Perpetual War for Perpetual Peace comes to pass in an era of Righteousness -- that is, national or ideological self-righteousness in which the public is persuaded that "God is on our side," and that those who disagree should be brought here before the bar as war criminals.

In the second, what the hell happened to fiscal conservatism? The three wars were currently fighting are costing us billions of dollars a day. How many more billions does Senator Graham propose the American taxpayer be obliged to put into bombing dictators?

The proverbial bird in the hand

I'm working on a project entitled A Concise Guide to Revlon-Land—With Side Trips through Other Mysteries of Delaware Corporate Takeover Law.

In it, I'm discussing the Delaware Supreme Court's decision in  Ryan v. Lyondell, and I observe that:

The Chancery Court conceded that Lyondell’s board “was active, sophisticated and generally aware of the value of the Company and the conditions of the markets in which the Company operated.” Lyondell, 2008 WL 2923427 at *13. The board long had been kept up to date on the company’s financial outlook and plans. The board had been kept fully abreast of the negotiations with Access and another potential bidder. The board had been briefed on Access’ proposal by Lyondell’s financial advisor.

Despite all this, however, the Chancery Court found the board’s conduct deficient in a number of respects: (1) “The entire deal was negotiated, considered, and agreed to in less than seven days.” Id. at *14. This gave the court “pause as to how hard the Board really thought about this transaction and how carefully it sifted through the available market evidence.” Id. This concern is consistent with an earlier Supreme Court caution that : “History has demonstrated boards ‘that have failed to exercise due care are frequently boards that have been rushed.’” McMullin v. Beran, 765 A.2d 910, 922 (Del. 2000). Having said that, however, boards often must act quickly. If courts insist that boards beat the bushes in search of the proverbial two birds, they force boards to risk losing the equally proverbial bird in the hand.

I rather like that last turn of phrase. But what do you think? Good? Forced? Over the top?

Thomas Friedman meet Thomas Malthus

Thomas Friedman (2011):

You really do have to wonder whether a few years from now we’ll look back at the first decade of the 21st century — when food prices spiked, energy prices soared, world population surged, tornados plowed through cities, floods and droughts set records, populations were displaced and governments were threatened by the confluence of it all — and ask ourselves: What were we thinking? How did we not panic when the evidence was so obvious that we’d crossed some growth/climate/natural resource/population redlines all at once?

Thomas Malthus (1798):

The power of population is so superior to the power of the earth to produce subsistence for man, that premature death must in some shape or other visit the human race. The vices of mankind are active and able ministers of depopulation. They are the precursors in the great army of destruction, and often finish the dreadful work themselves. But should they fail in this war of extermination, sickly seasons, epidemics, pestilence, and plague advance in terrific array, and sweep off their thousands and tens of thousands. Should success be still incomplete, gigantic inevitable famine stalks in the rear, and with one mighty blow levels the population with the food of the world.

We humans are a lot more resourceful than the ecomentalists give us credit for being.

Today's political question

Why has liking Sarah Palin become a litmus test of one's conservative bona fides?

And where does one go if one can't stand Obama, Palin, or Paul (either father or son)?

[Romney is not the answer to that question.]

Shorter Buttonwood

The Democrats are going to run the economy into the ground sometime around 2030.

Greg Mankiw spots socialized medicine lurking at the Center for American Progress

One more case of liberals who hate freedom:

Chills went down my spine a few days ago when I read the following proposal from the Center for American Progress, a think tank with strong ties to the Democratic party:

Thus we also include a failsafe mechanism that would ensure significant savings. Our failsafe would be triggered if, starting in 2020, total economywide health care expenditures grow at a rate faster than the economy. Should that happen, we would empower the IPAB [the panel of experts set up by President Obama's health care law] to extend successful reforms in Medicare and other public programs to insurance plans offered in the health care exchanges and then potentially to all health care plans, such that the target is met. This will ensure that costs are constrained across the health care sector, preventing cost-shifting and maintaining access for all.*

That is, under the likely scenario that healthcare spending keeps rising faster than GDP, the Center for American Progress would give government the power to prohibit people from buying expensive health plans with their own money. That is not my idea of progress.

Mine either, but it's the future if we keep electing the sort of people who provided the intellectual theories behind Obamacare.

Washington Post blasts Obama's auto accounting

The Washington Post (of all places) fact checked Obama's claims about how successful his auto industry bailout has been and concluded

What we found is one of the most misleading collections of assertions we have seen in a short presidential speech. Virtually every claim by the president regarding the auto industry needs an asterisk, just like the fine print in that too-good-to-be-true car loan.

Ouch. But it gets better (or worse, I suppose):

"weasel words"

"sleight-of-hand accounting"

"chicanery"

"another impressive-sounding but misleading figure"

"quite a straw man"

It sounds like something from Red State, not the MSM, which makes it doubly impressive.