ProfessorBainbridge.com

LA Times has more details on Milken to UCLAW Gift Controversy

The LA Times is reporting that:

A $10-million gift to UCLA's law school from alumnus Lowell Milken is stirring debate on the campus about the decision to name a business law institute for the former financier, who was linked to Wall Street's junk bond scandal two decades ago.

A prominent business law professor has raised objections to the Milken gift and to UCLA's announcement this month that it will establish the institute in his name. But other law school faculty, along with top UCLA administrators, say they welcome the donation, noting that Milken was not convicted of any wrongdoing. ...

Concerns about the latest donation were raised by UCLA business law professor Lynn A. Stout, an expert on corporate and securities law, in a letter last month to UC President Mark G. Yudof and UCLA Chancellor Gene Block. Stout said the gift posed "serious ethical problems and reputational risks for UCLA" and could damage her own reputation as well.

In an interview Tuesday, Stout said she also worried that Milken's name on the new institute would imply that the law school endorsed him as a role model for its students. "I don't think someone who has been banned from the security industry and barred from the New York Stock Exchange is an appropriate model for UCLA alumni and students," she said. ...

Law Professor Kenneth Klee said Stout appeared to be alone among the law school faculty in criticizing the donation. "Everybody else here is thrilled with this gift," said Klee, who like Stout is an expert on business law. He noted that the 1989 indictment against Lowell Milken was dropped the following year.

As for Milken being a role model, Klee said: "I think we would want more of our alumni to become leading philanthropists." ...

UCLA Law School Dean Rachel F. Moran said she was "mystified" by Stout's criticism of the gift. Moran noted that Stout had sought and received funds from an earlier Milken donation to offset the costs of a law school conference next month that the professor is helping to organize.

UCLA spokeswoman Carol Stogsdill said up to $49,000 from that previous, unrestricted Milken grant to the law school could be spent on the September conference.

Stout said that meeting, which she said is being organized by UCLA and the Aspen Institute, would receive some Milken funds but she said she would not benefit personally from her association with it.

In the blogosphere, Above the Law has their typical tabloid-level perspective (hitting Prof Stout with an unfair guilt by association smear and asking "What’s wrong with milkin’ a Milken?"). Meanwhile, Larry Ribstein weighs in by observing that:

I have more perspective [on the Mlken's role in the 1980s takeover wars] in my paper, Imagining Wall Street.  There I note that Oliver Stone’s film Wall Street

may have helped create an environment that became increasingly unfriendly to takeovers.  In the year following the film’s release, Drexel and Milken were prosecuted, eventually culminating in the fining and jailing of Milken along with many others in the takeover game, and the demise of Drexel Burnham. Milken pleaded guilty and was sentenced to ten years in jail.68 [United States v. Milken, No. (S) 89Cr.41(KMW), 1990 WL 264699 (S.D.N.Y. Nov. 21, 1990)]  * * * It is hard to say how much of that attitude was based on actual events reported in the media, and how much on the fiction Wall Street helped create. Milken was prosecuted not for insider trading, but rather for technical violations of the Williams Act—that is, using Boesky to accumulate non-disclosed positions in target shares.69 [Id. at 4]

In short, there is a big question whether Lowell’s history is such as to taint UCLA by his gift.

But I am not unsympathetic with the idea that law schools are supposed to be teaching their students that ethics trumps money, and so should be careful about whom they take money from, and more generally the company they keep. Indeed, for that reason I wrote critically last year about Bill Lerach’s foray into law teaching.

The real question here is where you draw the line and who decides.  Is the decision to turn down a gift based on ethics or politics?  More to the point, would the same people who oppose the Milken gift also object to an association with Lerach?

And how do you balance those considerations against the institution’s needs?  Interestingly, Professor Stout has written extensively about the need to take the interests of all constituencies into account in corporate decision-making.  Where would UCLA’s students stand in the decision Professor Stout favors to reject the Milken gift?

NY Times on the Milken gift to UCLAW

The NY Times reports that:

When the U.C.L.A. School of Law announced a $10 million gift from Lowell Milken to establish a business law institute in his name earlier this month, the university described him as a “pioneer in education reform” and a “leading philanthropist.”

Behind the scenes, Mr. Milken’s big donation has set off an internal debate at the school. ...

Wrong. There is no debate. Only one active member of the faculty is complaining:

“The creation of a Lowell Milken Institute for Business Law and Policy will damage my personal and professional reputation, as I have devoted my career to arguing for investor protection and honest and ethical behavior in business,” Lynn A. Stout wrote in a letter last month to the president of the University of California and U.C.L.A.’s chancellor.

Despite the Times' implication that there's some sort of debate roiling the halls, the truth is that everybody else is supportive of and appreciative of the gift:

“Save for one dissident professor, the entire business law faculty is grateful for this gift,” Kenneth N. Klee, a bankruptcy law scholar, said. ...

Lauri Gavel, a law school spokeswoman, also issued a written statement: “Only one member of the business law faculty has expressed anything less than gratitude — and that concern was surprising, given that this professor was involved early in the process, has been a beneficiary of the donor’s philanthropy, and did not raise objections until quite recently.”

Oddly, the Times reporters decided to also drag another gift to the law school--one wholly unrelated to the Milken gift--into the alleged debate:

The capital drive also led to the creation of the Stewart and Lynda Resnick Endowed Fund in Support of Public Interest Law. The Resnicks are the Beverly Hills beverage industry entrepreneurs who own Fiji Water and Pom Wonderful.

Last fall, the Federal Trade Commission filed a civil lawsuit against the Resnicks, accusing them and their company, Pom Wonderful, of making “false and unsubstantiated claims” that their pomegranate juice product helped reduce the risk of heart disease and erectile dysfunction.

Jill Gottesman, a spokeswoman for Pom Wonderful and the Resnicks, which are fighting the charges, has called the government’s allegations “completely unwarranted.”

Is the implication that unproven charges are supposed to have the law school blacklist a donor? I don't think so, but maybe the Times thinks (a) the donor is guilty until proven innocent and therefore (b) the law school is guilty by association.

The Times story points to several occasions on which universities have given back gifts:

In the 1980s, Princeton returned money from Ivan Boesky to build a Jewish Center after the government charged the Wall Street financier with insider trading crimes. Seton Hall removed the name of L. Dennis Kozlowski from an academic building in 2005, after the conviction of the former Tyco chief executive for looting his company.

But those cases aren't on point. Boesky and Kozlowski were convicted of crimes. Lowell Milken was never charged with a crime. To be sure, the Times tries to spin that as a problem:

Michael Milken and his younger brother, Lowell, were central figures in creating the booming junk-bond market of the 1980s and the subsequent collapse of the investment bank where they worked, Drexel Burnham Lambert.

In a controversial deal with the government, Michael pleaded guilty to securities law violations after the government agreed to drop criminal charges against Lowell. Michael served a 22-month prison term and paid $600 million in fines and restitution.

Some of us who were active in the field at the time--as I was--remember the story a bit differently. In our view, the government used threats to go after Lowell as one of the ways on which they coerced Michael into taking a plea deal.

As for the Milkens and their time at Drexel, Daniel Fischel's book Payback: The Conspiracy to Destroy Michael Milken and His Financial Revolution is sadly out of print but can be acquired as a used book and provides a useful contrarian account of the period. As Christopher Faille summarized Fischel's argument in a review (42-DEC FEDRLAW 45):

In the 1980s, the government frequently prosecuted individuals for insider trading even though they had come by market-useful information through no such underhanded means, but rather by inference from publicly accessible sources, diligently studied. On dubious statutory authority, the government began to contend that the simple possession of information, not generally available to those members of the investing public without an opportunity for diligent study, can render a trader a tainted “insider.” This taint, in turn, renders any exchange in the stock of a takeover-targeted firm a crime. It was against criminals of that alleged stripe that Rudolph Guiliani -- then U.S. Attorney for the Southern District of New York, now the mayor of New York City -- waged his high-profile holy war, which Fischel calls a “Reign of Terror.” It was pursuant to that, that he “got” Michael Milken. ...

t is not any sympathy for [Michael] Milken that should motivate a reaction against Giuliani's terror. Milken, after all, seems to have survived his imprisonment rather well, and (in a development too recent for inclusion in Fischel's book) has received a large consulting fee from Ted Turner for his part in negotiations between that communications magnate and the executives at Time-Warner. What ought to motivate a reaction is that the government of the United States has thrown the sporadic and unpredictable exercise of its coercive powers into the thick of boardroom conflicts, and has done so precisely in order to protect the grave inefficiencies that exist at the heart of our system of production. It has done so by criminalizing precisely the sort of trading that most threatens such inefficiency: trading by or in support of suitors in a takeover bid.

This is not to fully endorse Fischel's account. As Tom Smith has observed (22 Law & Soc. Inquiry 1041):

Fischel fails to persuade me of [Michael] Milken's innocence. ...

I complain above about Fischel's lack of objectivity in Payback, yet I must concede that what this takes away in the power to persuade, it makes up for in the power to fascinate. Fischel is especially passionate and effective in responding to the ridiculously overheated claims of journalists that Milken was some kind of Nazi (Barron's) or one of the greatest criminals of all time (Wall Street Journal reporter James Stewart).

Fischel is so angry in Payback, in fact, that he discusses things one normally omits for propriety, yet that probably need saying. For example, Fischel, more than any other writer I know of, accurately captures the class and ethnic (mostly anti-Semitic) animosity that underlay some of the bitterness of the political fight over the corporate control market. Milken, T. Boone Pickens, Carl Ichan, and the other control-market pioneers also came largely from modest, or at least not wealthy, backgrounds. They were not likely to fit in at Chase Manhattan or Dillon Read. ...

Payback is a strange book. The book strives at times for academic objectivity and respectability, but then gives in entirely to passionate advocacy for Milken and what Fischel thinks he stands for. He excoriates the unfair treatment Milken got from the press and prosecutors, but freely attacks the personal integrity of prosecutors and judges, often with less than convincing support. Fischel introduces the book with broad themes of economics, but leaves them quickly behind to give us the blow by blow of the prosecution and defense of Milken, Keating, and the other defendants.

Yet, for all these contradictions, the book is a tour de force. It is not really a scholarly effort, though only a brilliant scholar could have written it. Payback is really an indictment of Giuliani and the judges, politicians, and journalists who helped him bring Milken down.

At the very least, however, one can say that the history of the 1980s takeover market simply doesn't lend itself to nice, tidy ethical stories that have obvious implications for the standing today of those who were players in that era.

As for me, where do I stand on the supposed debate? I stand by what I told the NY Times reporters:

“We’re staring down the barrel of another round of cuts in California and relying on alumni giving is essential for us to be able to provide a quality education,” said Stephen Bainbridge, a U.C.L.A. corporate law professor. “If it wasn’t for these sorts of gifts we’d have even tighter budgetary constraints.” ...

Mr. Bainbridge, the corporate law professor, said that though he considered Ms. Stout a friend, he disagreed with her position.

“I believe that Lynn genuinely thinks that this hurts the school by giving Milken the U.C.L.A. imprimatur of being a good guy and an ethical person,” said Mr. Bainbridge.

“I think it’s unfortunate that we’re dragging up stuff that happened a quarter of a century ago — and for which any debt to society has long been paid — to taint something that is going to help our students tremendously.”

A Fearless Foreign Policy Prediction

Russell Kirk once asked:

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?

With that in mind, and while in now way denigrating the courage of the rebels in Libya, I offer the following prediction: Within the next ten years, the USA will find itself in a de facto cold war with at least two of the new governments we've gone to war to install in Iraq, Afghanistan, and Libya. They'll be allied with Iran, Venezuela, and probably China in an avowedly anti-USA league and all those trillions of tax dollars and thousands of lives will have been wasted on wars of choice that were chosen poorly.

More moronic social disclosure

Broc Romanek reports that:

On Friday, I blogged a member's negative reaction to the obscure provision in Dodd-Frank that requires the SEC to adopt rules eliciting disclosure regarding "conflict minerals" in the Congo. Many corporate lawyers and others in the corporate community (which includes many shareholders) share that member's reaction. Now, Rep. Carolyn Maloney (D-NY) has introduced a House bill entitled the "Business Transparency on Trafficking and Slavery Act" (H.R. 2759) that would require companies to disclose efforts to identify and address the risks of human trafficking, forced labor, slavery and child labor in their supply chains.

Although these bills are well-meaning, attempting to solve the world's problems through SEC filings simply is the wrong - and very expensive - way to go. How in the world did Congress start thinking they should influence foreign policy, as well as domestic social and environmental issues, through SEC filings to the determent of shareholders? Well, before Dodd-Frank, Rep. Frank Wolf (R-Va.) used an omnibus appropriations bill in early '04 to require companies to disclose business activities in countries designated by the State Department as sponsoring international terrorism (Wolf particularly was targeting Iran). Corp Fin's "Office of Global Security Risk" was born.

Social disclosure is inconsistent with the purposes of the securities laws, costly to shareholders, contributes to information overload on shareholders, and doesn't add information that most investors find useful. It should be cast into the outer darkness.

LawProf question of the day

Over at William Jacobson's corner of the blogosphere, I came across a damned fine question:

Why did [LawProf a.k.a. ScamProf Paul] Campos feel no need for anonymity when he expressed himself on political and legal topics in highly critical terms against the “right-wing” [in the op-eds and blog posts he wrote instead of doing legal scholarship], but felt the need for anonymity when criticizing his mostly left-wing profession as to its job performance?

Obviously, it's a rhetorical question. {Bracketed material my inserts}

If the trial lawyers hate Rick Perry, maybe I should reconsider him

As a highly disgruntled GOP-aligned voter, I must confess to viewing the current slate of GOP POTUS candidates with emotions running from despair to disdain.

You've got serial flip-flopper and dog abuser Mitt Romney, who with his usual brilliant sense of timing has decided that a period of serious economic concern and persistent financial populism among the public is the right time to quadruple the size of his multimillion dollar home in La Jolla.

You've got people like Michelle Bachmann and Rick Perry who seem more interested in running for President of the Southern Baptist Convention than POTUS.

You've got Sarah Palin lurking in the shadows, a prospect that gives me the willies.

And then you've got seven or so dwarves.

I sort of like Huntsman, but I figure he's got about as much chance as the proverbial snowball in that proverbial Hell that Perry and Bachmann seem to think 90% of us are going to.

Today, however, a news report gave me cause to rethink Rick Perry:

America’s trial lawyers are getting ready to make the case against one of their biggest targets in years: Texas Gov. Rick Perry.

Among litigators, there is no presidential candidate who inspires the same level of hatred — and fear — as Perry, an avowed opponent of the plaintiffs’ bar who has presided over several rounds of tort reform as governor.

And if Perry ends up as the Republican nominee for president, deep-pocketed trial lawyers intend to play a central role in the campaign to defeat him. ... The governor has pushed through a string of tort reform laws, including a 2003 measure putting a monetary cap on non-economic damage awards. He passed another law in the most recent Texas legislative session, making it easier to dismiss some lawsuits and putting plaintiffs on the hook for legal costs in certain cases that are defeated or dismissed.

The campaign for tort reform in Texas began in the 1990s, well before Perry was governor, but the Republican can legitimately claim some credit for the results. It’s a story Perry proudly tells on the stump, casting himself as the man who mastered a legal system run amok and made Texas friendlier for business.

I realize that I'm flirting with a false dichotomy--i.e., the enemy of my enemy is my friend--but anybody who's been a successful tort reformer deserves a close look in my book.

I refer the interested reader to Trial Lawyers Inc., perhaps the best web site in the world on tort reform.

As Jim Copland explained in their first report, tort litigation is a huge drag on our economy:

Total tort costs today exceed $200 billion annually, or more than 2% of America’s gross domestic product—a significantly higher percentage than in any other developed nation.[1] Moreover, even as the economy has stagnated and the stock market has plunged, the lawsuit industry’s revenues have continued to skyrocket: in 2001, the last year for which data are available, U.S. tort costs grew by 14.3%.[2] Over the last 30 years, tort costs grew at a compound annual rate of 9.1%; by comparison, the U.S. population grew 1.1% annually, the consumer price index grew 5.0% annually, and the gross domestic product grew 7.6% annually during the same period.[3]

If Rick Perry runs on a platform of doing something about that problem, I may have to hold my nose and vote for him.

Golub responds to Buffet

Henry Golub's response to Warren Buffet's call for higher taxes on the "rich" deserves to be read in full. So please go do so.

The problem with soak the rich solutions to the deficit

Proposals to close the deficit by taxing the rich are unlikely to prove effective even if they manage to squeeze past the DC GOP. Why? Because it results in a narrow tax base whose taxable income tends to be highly volatile.

Barbara Hollingsworth, for example, notes that:

Newsalert has posted a chart from a Wall Street Journal blog titled “Recession and the Rich.” The chart, based on 2009 IRS figures, shows that the number of taxpayers reporting annual income over $1 million fell 39 percent between 2007 and 2009; the number of super-wealthy individuals making over $10 million annually plunged 55 percent.

The carnage wasn’t confined to millionaires. The number of taxpayers earning over $200,000 per year also decreased by 612,000 – or 13 percent. ...The chart also shows how the loss of these top income earners adversely affected the federal government’s bottom line.

In 2007, those making above $200,000 (but less than $1 million) paid $610 billion in federal income taxes. In 2009, it was only $434 billion – leading to a 29 percent decrease in government revenue.

In other words, the more dependent the government becomes on income and capital gains taxes on the rich, the greater the volatility in government income.

State governments--including those in my home state of California--are now once again rediscovering this basic proposition:

The volatile stock market highlighted a growing problem for budget planners. In recent decades, states from California to New York have become increasingly reliant on taxes generated from their residents' investment income. Now, they have found themselves more vulnerable than ever to the market's gyrations—with serious consequences for state-funded schools, courthouses and other institutions. ...

California is among the states most dependent on the wealthy and their investments, along with such states as New York, New Jersey, Connecticut and Massachusetts, according to the Rockefeller Institute.

In California, the top fifth of taxpayers accounted for 89% of personal state income tax revenue in 2007, up from 81% in 1993, as wealthy Californians profited from the dot-com and real-estate booms, according to state data. The contributions from all other income groups declined in that period.

Then came the recession, which sent the contribution of the top fifth of taxpayers slipping to 85% in 2009. That helped lead to a crippling budget crisis for the state, which resorted to IOUs to pay its bills that year.

As the state's economy continued to suffer, state forecasters were puzzled this May when they saw that income-tax collections for 2010 had come in much higher than economic data had led them to predict.

That bolstered their confidence that a recovery was under way. That belief, along with pressure to close an enormous budget gap without added taxes, persuaded Gov. Jerry Brown to boost his earlier revenue assumption by $8.4 billion by the time he signed the budget for the fiscal year starting July 1. That increase denotes the apples-to-apples rise after adjusting for other changes to the budget, said a finance-department official.

A key source of the hoped-for boost: a rise in wages and capital gains for wealthy Californians, according to the finance-department official. That means the market downturn of recent weeks will "tend to make additional revenue less likely," the official said, "but we don't know what's going to happen in the coming weeks and months."

The California Department of Finance will update its forecast in December. If it seems then that revenue will fall short of expectations, the budget calls for up to $2.5 billion in midyear cuts to schools, higher education, public safety and other areas depending on the size of the shortfall. That's on top of $15 billion in cuts and other spending-reduction maneuvers already approved this year.

The solution is to broaden the tax base, as Harvey Golub suggested in today's WSJ:

Today, top earners—the 250,000 people who earn $1 million or more—pay 20% of all income taxes, and the 3% who earn more than $200,000 pay almost half. Almost half of all filers pay no income taxes at all. Clearly they earn less and should pay less. But they should pay something and have a stake in our government spending their money too.

 

In addition, the extraordinarily complex tax code is replete with favors to various interest groups and industries, favors granted by politicians seeking to retain power. Mortgage interest deductions support the private housing industry at the expense of renters. Generous fringe benefits are not taxed at all, in order to support union and government workers at the expense of people who buy their own insurance with after-tax dollars. Gifts to charities are deductible but gifts to grandchildren are not. That's just a short list, and all of it is unfair.

Flatter (but still progressive) tax rates applicable to a much broader swath of the populace with many fewer special interest exemptions strikes this observer as a system that would be both fairer and much more stable in application. Proposals to move the tax system in the opposite direction will thus make the system less fair and more volatile, neither of which seems like a good idea.

Leiter on LawProf Paul Campos

Now that LawProf has outed himself as Colorado law professor Paul Campos in a post that included a sharp attack on Brian Leiter, the latter replies:

Paul Campos is, of course, most notorious in the legal academy for going on the O'Reilly Factor--yes,the O'Reilly Factor--to call for Ward Churchill to be fired for his offensive political opinions (long before any allegations of academic misconduct arose).  And this wasn't an anomaly:  he also called for Glenn Reynolds (Tennessee) to be sanctioned by his university for his offensive political opinions.   Fortunately for Professor Campos, his contempt for the First Amendment rights of state university professors do not constitute binding precedents on the courts, and I am confident his university won't sanction him for his irresponsible speech.  They should, however, launch an investigation into whether he is performing his duties, since his blog is tantamount to an admission of dereliction of duties and his 'scholarly' record is prima facie evidence of failure to do his job as a professor at a major research university.

But back to the fact-free smear.  Among the gems:  (1) denying that he's met me, when we've met more than once; (2) attacking me for running law and philosophy blogs and rankings (despite my cyber-hobbies, I've produced more scholarship in the last five years than he's produced in twenty); (3) stating, falsely, that "law school costs have increased exponentially, even as the job prospects of law school graduates have declined" (law school tuition, like all higher education tuition, has increased exponentially for thirty years, and during most of that time the legal job market was strong; tuition increases have slowed considerably since the downturn in the job market that began with the Great Recession in 2008); (4) stating, falsely, that I've never held a job for which a law degree is required; and so on.  And then, of course, there's the pitiful anti-intellectualism, worthy of Rick Perry's approach to higher education, but there's no need to belabor that for this audience.  Given that Professor Campos's "scholarship" would not survive his Rick Perry approach to scholarship, perhaps it's time for him to resign? ...

It is unfortunate that some victims of the recession think, falsely, that ScamProf Campos is doing something courageous on their behalf.  He's not, he's just doing what he always does, trying to surf the wave of the latest fad and attract attention to himself.  For years, I've pressed for better job placementdata and cautioned students about the reality of the recent job market and relying on the data in US News.   There's no dispute about the importance of that.  There's no dispute that some law schools have misled prospective students; some are now being sued, and we will see what facts come to light.  There's no dispute that some faculty, in all disciplines, abuse the privilege of tenure--Campos is a prime example.   None of this warrants the absurdly offensive description of American legal education as a "scam."  The American legal system is one of the best in the world--did that happen despite American legal education?  The leading law firms continue to recruit at the leading law schools, the ones that produce all the scholarship ScamProf Campos derides.   Are they simply benighted?   Law professors, at least the good ones (like most of Campos's colleagues at Colorado that I know), teach substantive doctrine in many areas of law as well as analytical and dialectical skills that lawyers need.  (My teaching evaluations, by the way, are a matter of public record, will ScamProf Campos share his?)   There's been debates for years about the relative balance of doctrinal, theoretical, and clinical teaching in legal education, and those will no doubt continue, independent of ScamProf Campos.

Economics and the Catholic Vision of the Good Life

A debate between left-liberal John C. Médaille and conservative Robert T. Miller. Predictably, I prefer the latter's take, in part because his take is so modest:

The editors of Dappled Things have asked me to opine on the question of which of two economic systems, capitalism or distributism, is more compatible with a Catholic understanding of the good life. This is hardly the kind of the question that lends itself to a succinct response, but if a short answer is required, it is this: capitalism and distributism are equally compatible with the Catholic understanding of the good life, if by that we mean that neither system violates the moral doctrines taught by the magisterium of the Catholic Church. This answer should surprise no one, for the magisterial doctrines of the Catholic Church entail very little about economics or even politics. They do not, for example, make any particular form of government morally obligatory, and thus the autocracy of the Roman Empire, the constitutional monarchy of Elizabethan England, and the democratic republicanism of the United States are all morally permissible. Similarly, Catholic doctrine does not make any form of economic organization morally obligatory; rather, a wide range of systems, including both capitalism and distributism, are morally permissible.

Now, I suppose the editors asked my opinion on this question because they expected me to argue that capitalism has some special moral standing in Catholic doctrine. Although I will not go that far, I will defend a more modest proposition, namely, that, for people like us in a society like ours, capitalism is the most reasonable choice among the various economic systems we might adopt.

FWIW, I touched on some of the same themes in my essay Catholic Social Thought and the Corporation (October 22, 2003).

Smith on Shareholders

Gordon Smith has posted to SSRN an essay entitled The Role of Shareholders in the Modern American Corporation (August 13, 2011):

This chapter from the forthcoming Research Handbook on the Economics of Corporate Law (Claire Hill & Brett McDonnell, eds.) examines the role of shareholders in the modern American public corporation. The chapter starts with the Berle and Means (1932) problem of the separation of ownership and control, but notes that the rise of institutional investors has changed the situation. Shareholders have three main sets of rights through which they can protect themselves: the right to vote, to sell, and to sue. Each of these rights has evolved significantly in recent years. The chapter describes some of the changes and debates, and also briefly addresses the question of the proper beneficiaries of corporate decisions.

An excellent critical review of the key literature. A recommended read.

Anderson on the rating agencies

Long post but a good read.

Outing LawProf--Updated after he outed himself

LawProf is the nom de plume of the anonymous blogger at Inside the Law School Scam who claims to be "a tenured mid-career faculty member at a Tier One school" purportedly exposing legal education as a "scam."

His identity (and in this instance I use the pronoun to indicate gender) is now pretty widely known (or, perhaps, assumed to be _________. Larry Ribstein recently replied to his claims in a more professional way than he deserves.

Brian Leiter goes in another direction:

ScamProf is the failed academic who has done almost no scholarly work in the last decade, teaches the same courses and seminars year in and year out, and spends his time trying to attract public attention, sometimes under his own name, this time anonymously.  These are important facts about ScamProf, since he is indeed scamming his students and his state, and his initial posts were tantamount to a confession that he's not doing his job.   His colleagues, in any case, now know who he is, and are quite understandably angry, since the reckless genearlizations are naturally read as commentary on them. ... When his identity comes out, there will be additional ironies that will warrant comment.

Brian's talent for invective remains unmatched. I enjoy it even when it's directed at your truly, although not quite as much when it's directed at somebody like ScamProf.

The thing that puzzles me is: Why has nobody outed the dude? As Leiter put it the other day, his identity is obvious (although not to me, but that's just because I was too lazy to put two and two together).

My colleague Eugene Volokh thinks there are serious ethical issues involved in outing anonymous bloggers. I don't. I agree with Michael Krauss' take on an earlier case when Ed Whelan an anonymous blogger on Obsidian Wings as professor John Blevins of South Texas School of Law.

Incredibly, Blevins has defended his anonymous sniping as ethical: he didn't want to get in trouble with his law school, he didn't want to embarrass his family, he didn't want to offend his students. What Blevins didn't want to do, sez me, is take responsibility for his opinions. When you attack someone by name, you name yourself -- we are not in revolutionary times where the original Publius could go appropriately unnamed.

On the substantive debate between Blevins and Whelan, I think Whelan easily has the upper hand, but readers can decide this for themselves. On the propriety of hiding behind a pseudonym while sniping at a critic who is out in the open, I see no redeeming argument.

I have no personal proof of Lawprof's identity. But if those who do decide to out him, I'll applaud.

UPDATE: LawProf has outed himself as Paul Campos.

BTW, I'm closing comments on this post so as to preclude uninformed speculation as to LawProf's identity.

The SEC Document Destruction Kerfuffle

Bloomberg reports:

The U.S. Securities and Exchange Commission didn’t have authority to dispose of investigation documents the agency had been routinely purging since 1993, the National Archives and Records Administration said.

NARA, the Washington-based agency that oversees federal record-keeping, opened an investigation last year after an SEC employee claimed the agency was illegally destroying files pertaining to so-called matters under inquiry, NARA said in a statement yesterday. The SEC, which NARA said has since halted the practice, destroyed the documents without approval, according to the statement. ...

The allegations originated with Darcy Flynn, a 13-year SEC veteran, who claimed that the SEC illegally purged more than 9,000 documents from initial probes that never became formal investigations. Senator Charles Grassley, an Iowa Republican, this week asked SEC Chairman Mary Schapiro to respond to Flynn’s claims by the end of this month.

Broc Romanek and Jay Brown both argue for giving the SEC a pass on this "tempest in a tea pot." I wonder if they would be so willing to let it slide if it were a corporation that had been charged with violating the Sarbanes-Oxley rules on document retention?

The SEC repeatedly has proven itself unable to comply with the rules it insists every one live by.

I say they should be held to a higher standard, not a lesser one.

"The continuing quest to criminalize business judgment"

Tom Kirkendall has another excellent post in his ongoing coverage of the federal government's efforts to criminalize bad business judgment.