ProfessorBainbridge.com

Is UCLA violating Prop 209?

The Daily Bruin reports that:

UCLA Undergraduate Admissions could be violating Proposition 209, a California law that prohibits state institutions from taking race into account during the admissions or hiring process, according to a report by a UCLA law professor.

Richard Sander, who studies affirmative action policy, wrote a report that suggests race may factor into the admission of students who are on the line between acceptance and rejection. ...

Currently, admissions at UCLA is based on a “holistic” process, which was adopted in 2006. The process takes into account 14 different categories of attributes for every student, including non-academic categories like whether an applicant’s parents went to college, family income and whether they had “difficult personal or family situations.” ...

“What seems to be happening is that there is discrimination after the holistic scores are generated,” Sander said. “(Admissions officials) seem to be making discriminatory decisions with lots of black and Hispanic students with poor holistic scores being admitted.”

It wouldn't surprise me if holistic admissions is being used to evade Prop 209. As I wrote in The Holes in Holistic Admissions:

UC Berkeley's experience with its similar system of comprehensive review suggests that holistic admissions in fact will affect the racial composition of the student body:

Although race is not overtly mentioned as a factor in the comprehensive-review admissions process, the numbers indicate that it plays a significant role. A Los Angeles Times analysis shows that at UC Berkeley, low-scoring blacks and Hispanics were admitted at twice the rate of similarly scoring Asians and whites.[6]

A cynic thus might wonder whether the readers charged with holistically evaluating admission files share UM President Coleman's refusal to "stand by while the very heart and soul of this great university is threatened," and are taking into account the race of candidates despite Proposition 209's ban. Indeed, when Berkeley adopted comprehensive review, student activist Hoku Jeffrey noted that it gave "admissions officials the ability on paper to reverse the segregation ... and that's what must be done."[7]

The trouble with holistic admissions is that the readers don't have to explain why they make their admission decisions. They simply score the files. Whether consciously or unconsciously, the readers thus could systematically bias their scores so as to promote diversity, and no one would be the wiser. Even if required to offer an explanation for their scores, moreover, readers likely would point to some wrinkle other than race in each application that purportedly justified their decision.

[6] Lance T. Izumi, Berkeley's "F": Unfair admissions game, Nat'l Rev. Online (Nov. 24, 2003), available at http://www.nationalreview.com/comment/izumi200311240932.asp

[7] Eric Ostrem, Regents Committee Passes Comprehensive Admissions, Daily Californian (Nov. 15, 2001), available at http://www.dailycal.org/sharticle.php?id=7076

Academics moving left and the consequences thereof

Inside Higher Ed reports:

Academics, on average, lean to the left. A survey being released today suggests that they are moving even more in that direction.

Among full-time faculty members at four-year colleges and universities, the percentage identifying as "far left" or liberal has increased notably in the last three years, while the percentage identifying in three other political categories has declined. ...

Daniel Klein, a professor of economics at George Mason University who has written extensively about faculty political attitudes, said he was not surprised by the shift to the left. He said that he has seen "tendencies toward uniformity" in disciplines and departments, and that these trends tend to build upon themselves.

Klein said academe should worry about the impact of being further tilted to the left. He said that those in the ideological majority in higher education "shouldn't be so confident in their own outlook" that they don't see the cost of being seen by many as outside the mainstream. "For all the people who are skeptical of the left, and that's a lot of people, they will see academe as this vast apparatus of leftist groupthink."

Too few too rotate

Erik Gerding notes that:

On Thursday, I travelled to Houston and gave a statement before the Public Company Accounting Oversight Board in a roundtable hearing, as the PCAOB considers whether to impose a mandatory auditor rotation rule. In using its new inspection powers, the PCAOB has found worrying evidence of auditors compromising their independence, objectivity, and professional skepticism (see the PCAOB’s concept release soliciting public feedback).

This problem and whether mandatory auditor rotation is an appropriate solution present a bramble bush of questions that have solicited a great deal of comments (you can see the statements at the Houston roundtable (including my own) here); the PCAOB also held roundtables previously inWashington, D.C. and San Francisco).

Gerding then proceeds to review the state of the art in legal scholarship on the foundational question of whether true auditor independence can ever be achieved. It's a very good summary, which I recommend highly. (FWIW, I tend to come down on Bill Bratton's side of the debate.)

In any case, I don't see how mandatory auditor rotation can work in an environment in which there are only 4 big accounting firms. Because most public companies get a variety of non-audit services from one or more of the Big 4, as well as having another as their independent auditor, mandatory rotation will create huge conflict of interests.

The anti-conservative bias lawsuit at Iowa Law keeps getting uglier

From news report:

A University of Iowa law professor who testified on behalf of a conservative colleague alleging she wasn't hired because of her conservative viewpoints says the school is retaliating by falsely suggesting he was under investigation for sexual misconduct. ...

While Osiel was on the witness stand, assistant attorney General George Carroll said that Osiel had recently faced a misconduct investigation after someone complained about hearing sexual grunting noises coming from his office at the law school. Carroll argued that information was relevant because it went to Osiel's credibility.

Osiel, 57, testified that the noises were from him taking part in exercises suggested by doctors to treat medical ailments. ...

"Raising this issue, which is legally irrelevant to the testimony that I was providing, shows how low the university will stoop in retaliating against its employees of 20 years," said Osiel, who has written extensively about legal responses to mass atrocity. "The university is manufacturing something for the purposes of the trial."

I'm damned glad I don't teach at Iowa. Adding retaliation to bias is going to make the place a hostile working environment for anyone right of center, whether student or faculty, assuming they haven't already purged everyone right of center from their liberal enclave.

Why not let Lance keep his titles?

Ellis Cashmore argues it's time to legalize sports doping:

Were we to treat athletes as mature adults capable of making informed decisions based on scientific information, we could permit the use of performance enhancing substances, monitor the results and make the whole process transparent. ...

Twenty-four years after the Johnson scandal, performance-enhancing drugs are as abundant as ever and, as the Armstrong experience reminds us, the testers remain embarrassingly behind the curve. Despite the major advances since 1988, several athletes have evaded detection not just for the odd competition, but for entire careers. ...

No sensible observer of sport today denies the prevalence of drugs in practically every major sport, yet none would argue they can ever be eliminated completely. Money alone guarantees that much. The days of the gentleman-amateur have long gone: Athletes today are competing for high stakes, not just millions, but dozens of millions (Armstrong is worth about $70 million,according to Forbes).

A while back, I argued that:

The only rationales for caring I've ever been able to see are (1) paternalism to protect players from themselves and (2) drug use by some creates a market for lemons (see my TCS column Drug Testing and the Market for Lemons). I'm somewhat persuaded by the latter, but at the end of the day it's just not much of an issue for me. I wouldn't watch baseball or cycling whether the players were juiced or not, while I would watch football and basketball whether the players were juiced or not.

Cashmore doesn't discuss the latter, but he also rejects the former:

There are too many dangers. Of course there are -- as the situation is now. By inviting athletes to declare with impunity what they are using, we encourage and open discourse and promote research so we'd be in a position to advise on the relative values and risks of different substances. This openness isn't possible while we continue to force drug-taking underground. Opening up sport in the way I'm advocating would render it a safer, more secure environment.

Schramsberg Brut Rosé (North Coast) 2008 with Lobster Mac & Cheese

For dinner tonight I made a version of Ina Garten's Lobster Macaroni and Cheese. as is my wont, of course, I made some tweaks. To start with, I cut the recipe in half, which gave Helen and I good servings and leftovers for tomorrow. I used an Australian lobster tail as the source of the meat. Inspired by Giada de Laurentis' recipe for Penne with Lobster and Bacon, I made the cheese sauce by frying 4 rashers of thick bacon slices. When the bacon was done, I drained the slices on paper towels. Meanwhile, in the same All-Clad Stainless 3-Quart saucier I combined three tablespoons of the bacon fat with ¼ cup all-purpose flour to make a roux, which I cooked to a very light brown stage. For cheese, I used 6 ounces of imported Italian fontina and 4 ounces of imported Gruyere. As the sauce began to come together, I chopped the bacon fine and added it to the sauce, followed by the cooked lobster meat and macaroni. Lastly, I used Panko bread crumbs mixed with 2 tablespoons of bacon drippings and 2 tablespoons very finely grated Parmesan as the topping. Otherwise, I stuck to Ina's directions. A side salad completed the yummy meal (if I do say so myself).

What to serve with this meal? An old saying holds that a wine's first duty is to be red, which is a proposition with which I am in complete agreement. I probably drink 20 red wines for every white. But this was not a meal for a red. Tannins and lobster make a bad match. Plus, you want high acidity to cut the richness of the mac & cheese. Scrubbing bubbles to refresh the palate might help too.

Aha! A brut rosé methode champenoise sparkling wine from Schramsberg fit the bill ideally. Crisp acidity. Scrubbing bubbles aplenty. Plus, it's at least pink, if not actually red.

A lovely pinkish-salmon color, with many very fine bubbles. Light cherry and strawberry notes, plus something floral (rose petals?) on the nose. The palate is much the same, while adding some yeasty bread flavor associations. It was a perfect match for the meal. Complementary. Refreshing. Great value (at $35). In context, I'd give it a grade of A. Standing alone, out of context, probably B+/A-

Employers telling employees that excessive government regulation is bad for business shocks leftists

Stefan Padfield complains that:

You may have heard the stories making the rounds this week about employers pressuring their employees to vote for particular candidates.  Much of this activity apparently traces back to Mitt Romney expressly encouraging business owners to do this.  As NBCNews.com reported (here):

The candidate himself suggested that business owners adopt this practice during a virtual town hall meeting with the National Federation of Independent Businesses back in June.  “I hope you make it very clear to your employees what you believe is in the best interest of your enterprise and therefore their job and their future in the upcoming elections," he said, telling the audience, "Nothing illegal about you talking to your employees about what you believe is best for the business, because I believe that will figure into their election decision, their voting decision."

Personally, I think a number of the reported tactics rise to the level of an abuse of power.  At least to the extent these are corporate employers, my rationale is:

1.  The leverage used on these employees is at least partly attributable to the corporate form.  That is to say, without the capital accumulation benefits of corporate status, the owners of these businesses would likely not have nearly as much power to exert over this captive audience of employees.

2.  These business owners were not granted the right to operate in the corporate form so they could pressure employees to vote for particular candidates.  Rather, they were granted the right to operate in the corporate form because of legislative judgments that making incorporation widely available would benefit society as a whole.  (If you believe that it is possible to create a corporation solely via private contracting, then this point will be unconvincing to you.  However, please let me know if you ever actually manage to pull off that feat.)

3.  Given this public aspect of corporate status, it is improper to divert the power of this corporate form to force the business owner’s personal political views on employees.

First, how is this different from a union telling its members how to vote? Or, for that matter, the UC system sending me emails about how the world will end if Prop 30 doesn't pass? The notion that a business can't tell its employees that elections have consequences strikes this observer as absurd, not to mention a gross infringement on First Amendment rights. Should the First Amendment really be interpreted as giving pornographers more rights than employers?

Second, blaming the corporate form is particularly inapt. If the issue is employer pressure on employees, that issue exists regardless of the legal structure of the employer. If you think employers shouldn't be telling employees how government regulation affects business, shouldn't you want to restrict employer speech regardless of whether the employer is structured as a corporation, partnership, or sole proprietorship? Indeed, if we really are living in the age of the uncorporation, as my late friend Larry Ribstein used to argue, growing numbers of employers will be unincorporated. Corporate personhood and Citizens United thus are nothing but red herrings in this debate.

Third, even if you think that incorporation is a privilege, wouldn't restrictions on the speech of senior management be an unconstitutional condition?

In sum, this whole kerfuffle is just another way in which the left is seeking to silence its opponents.

CalPERS adopts insider trading policy

CalPERS (the world's largest pension fund) has proposed a new policy on insider trading by its employees (CalPERS is against it, of course). But Keith Paul Bishop is dubious. While I agree with Bishop's take that the policy is probably unnecessary and also badly designed, I suspect this is a case in which CalPERS is taking a belts-and-suspenders approach to ensuring that it has minimal organizational risk (e.g., control person liability) in the event that one of its employees goes rogue. As a client briefing letter from Pepper Hamilton explains:

 As a result of the Insider Trading and Securities Fraud Enforcement Act of 1988 (ITSFEA), insider trading policies have become a mainstay of corporate compliance programs. Since the enactment of ITSFEA, federal regulations impacting insider trading have further evolved as a result of the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The heightened scrutiny of the insider trading landscape today compels consideration by public companies to adopt appropriate policies to prevent insider trading and to enforce compliance with these policies. ...

Controlling person liability would not apply where the "controlling person acted in good faith and did not directly or indirectly induce" the violation. However, such exposure to liability would exist where a "controlling person" allows access to material non-public information (about itself or another entity) without implementing procedures to prevent insider trading or improper disclosure by the "controlled person."

Ridge Jimsomare Cabernet Sauvignon (Santa Cruz Mts.) 1997

Ridge reports that:

The vineyard was originally planted by Pierre Klein, an Alsatian who came to California in 1875. In 1888, he purchased 160 acres on Monte Bello Ridge; a property now known as the Jimsomare Ranch. Initially, he planted Bordeaux varieties on their own roots. But when phylloxera attacked his vines after the turn of the century, he did not replant. Retiring in 1910, he sold the property in 1913. In 1936, it was purchased by the Schwabacher family of San Francisco, who renamed the property “Jimsomare” from their names: Jim, Sophie, Marie. Although Klein’s Bordeaux varietals had died out, a small nineteenth-century zinfandel vineyard survived. Ridge bought those grapes, and made its first Jimsomare Zinfandel in 1968. Ridge then convinced the family to replant the Bordeaux varietals, plus a small amount of chardonnay. In exchange, Ridge provided rootstock, and a promise to purchase the grapes. The first cabernet bottling was in 1978. By the late 1990s, Ridge acquired the long-term least to the property, and took over all aspects of day-to-day farming. Today, Ridge farms this original Klein property as part of its Monte Bello Estate.

Although the wine made from the Jimsomare Cabernet grapes normally goes into either the Monte Bello or the Santa Cruz Mts. bottlings, Ridge occasionally makes a single vineyard wine exclusively from the Jimsomare Ranch Cabernet grapes. 1997 was such a year.

At age 15, this was still a vibrant and youthful wine. Lots of dark cherry and berry fruit, as well as plum and prune associations. Strong oak influences. Despite the dominant youthful fruit flavor associations, the smooth tannins suggested that this wine was definitely mature, but even so I'd guess it probably would have lasted another 5 years at the very least. Improved with air. Grade: B++

I served this with Flatiron Steak with Herbed Red Bliss Potatoes, Red Onion Marmalade and Red Wine Demi-Glace, for which it made a great match.

Book Review: The Partisan

The late Chief Justice William H. Rehnquist died in September 2005 after a full, consequential and in some ways controversial life. From modest and Midwestern circumstances, he distinguished himself in school, law practice and public service. He was confirmed to the Supreme Court during turbulent times and was for many years a powerful and prescient critic of what he saw as a too-liberal court's innovations and excesses.

Rehnquist believed that the Supreme Court is charged with a crucial but limited task and that a justice's job isn't to design public policy but to preserve the Constitution's careful system of checks and balances. He succeeded in moving the court's doctrines in a number of important areas, and—as the drama surrounding the decision last summer in the Obamacare case illustrated—he changed the conversation about our nation's public law, reminding lawyers and citizens alike of the first principles that inspired the American founding.

Such a figure's life and work deserve a careful, close biographical study. John Jenkins's "The Partisan" isn't such a book. It is a tediously partisan, relentlessly tendentious and superficial expansion of a similarly flawed New York Times Magazine profile published more than 25 years ago.

via online.wsj.com

I don't think Rick liked it.

California’s New LLC Act – Call Keith Bishop Laocoon, But He Foresees A Mess!

On Friday, Governor Brown signed SB 323 (Vargas) into law. It was chaptered by the Secretary of State the same day.  Section 20 of the bill adds the California Revised Uniform Limited Liability Company Act (RULLCA) to the Corporations Code as a new Title 2.6.  The RULLCA will become operative on January 1, 2014 (See new Corporations Code Section 17713.13).  The existing Beverly-Killea Limited Liability Company Act found in Title 2.5 is repealed as of that same date unless a later enacted statute, that is enacted before that date, deletes or extends that date.

Out with old, in with the new, what could be wrong with that?  It turns out plenty.

At the most fundamental level, the repeal of the Beverly-Killea Act as to existing limited liability companies is unconstitutional.

Fascinating. I think he's got a point.

via calcorporatelaw.com

The Continuing Decline of Economic Freedom in the US

One of the things that I watch closely each year is the United States’s rating as to economic freedom.  There are two main annually released studies – one by the Heritage Foundation and the Wall Street Journal and the other by the Fraser and Cato Institutes.  Both studies have been showing the US falling.  But while the Heritage/Wall Street Journal study has the U.S. at 10, the new Fraser/Cato study has it at 18.  That is simply awful.

via libertylawsite.org

Please go read the whole thing. Your prosperity depends on fixing this problem.

Ten things I hate

In no particular order:

1. Flying
2. The TSA
3. Baseball
4. Brussels sprouts
5. A NYC law professor who shall remain nameless
6. The guy who decided to cancel Chuck
7. Obamajams
8. Baseball playoffs preempting my favorite shows
9. Asparagus
10. Being cold.

The era of director primacy has clearly begun

Steven Davidoff aptly comments that:

The departure of Vikram S. Pandit shows clearly who is in charge of Citigroup: the board of directors. For good or for bad, boards are increasingly taking charge of corporate America. The reign of the imperial chief executive is over. ...

Board supremacy is a general trend. In the wake of the financial crisis, the big banks have been forced to reconstitute their boards, with Citigroup and Bank of America at the top of the list. But others like Goldman Sachs have also been pushed to bring in more competent people. The new directors are much more aware of what happened in the years leading up to the financial crisis, and to take action.

Everything is proceeding as I have foreseen:

Today, American corporate governance looks very different. The Imperial CEO is a declining breed. Some classes of shareholders have become quite restive, indeed. Most important for our purposes, boards are increasingly active in monitoring top management rather than serving as mere pawns of the CEO.

Several important trends coalesced in recent decades to encourage more active and effective board oversight. Much director compensation now comes as stock rather than cash, which helps to align director and shareholder interests.1 Courts have made clear that effective board proc- esses and oversight are essential if board decisions are to receive the defer- ence traditionally accorded to them under the business judgment rule, especially insofar as structural decisions are concerned (such as those relating to corporate takeovers).2 Director conduct is further constrained, some say, by activist shareholders.3 The Sarbanes-Oxley Act mandated enhanced director independence from management, as did changes in stock exchange listing standards. 

Today, as a result of these forces, boards of directors typically are smaller than their antecedents, meet more often, are more independent from management, own more stock, and have better access to information. As The Economist reported in 2003, “boards are undoubtedly becoming less deferential. . . . Boards have also become smaller and more hard- working. . . . Probably the most important change, though, is the growing tendency for boards to meet in what Americans confusingly call ‘executive session,’ which excludes the CEO and all other executives.”4 In sum, boards are becoming change agents rather than rubber stamps.

In this book, I offer an interdisciplinary analysis of the emerging board-centered system of corporate governance. I draw on doctrinal legal analysis, behavioral economic insights into how individuals and groups make decisions, the work of new institutional economics on organiza- tional structure, and management studies of corporate governance. Using those tools, I trace the process by which this new corporate governance system emerged. How did we move from the managerial revolution famously celebrated by Alfred Chandler to the director independence model recently codified in the Sarbanes-Oxley Act and other post-Enron corporate governance mandates? In addition, of course, the book will look at the future. Despite the extensive changes made to the legal structure of corporate governance post-Enron, many legal academics and share- holder activists want to see still more changes, mainly designed to empower shareholders relative to both boards and managers. In the latter portions of this book, I explore whether such changes are desirable. (In short, no.) 

Rowan Atkinson: we must be allowed to insult each other

The Blackadder and Mr Bean star attacked the "creeping culture of censoriousness" which has resulted in the arrest of a Christian preacher, a critic of Scientology and even a student making a joke, it was reported.

He criticised the "new intolerance" as he called for part of it the Public Order Act to be repealed, saying it was having a "chilling effect on free expression and free protest".

Mr Atkinson said: "The clear problem of the outlawing of insult is that too many things can be interpreted as such. Criticism, ridicule, sarcasm, merely stating an alternative point of view to the orthodoxy, can be interpreted as insult."

via www.telegraph.co.uk

Indeed. Kudos to Rowan, who is both funny and wise.