ProfessorBainbridge.com

Paraduxx (Napa Valley) 2007

Paraduxx is owned by Duckhorn, one of our favorite wineries. In 2007, it was a blend of 78% Zinfandel, 18% Cabernet Sauvignon, 9% Merlot, and 1% Cabernet Franc. Oddly, however, for me the dominant flavor association was a cherry-chocolate that I associate with Merlot. Plus pepper, spice, and toasty oak. Grade: B/B+

Do compensation consultants really "make prostitutes look respectable"?

Apparently former UK Chancellor of the Exchequer and Tory peer Lord Lawson thinks so:

Lord Lawson, who ran Britain’s finances under Margaret Thatcher, refused to back down even when a female witness giving evidence to him took exception to the characterisation.

Carol Arrowsmith, a senior pay consultant with accountancy firm Deloitte, said it was ‘difficult’ to accept the suggestion that her profession was worse than prostitution.

‘It may be difficult but it may be true,’ retorted the famously outspoken Westminster grandee.

Lord Lawson, who as Nigel Lawson served as Chancellor under Margaret Thatcher, said pay consultants feared missing out on future advisory fees if they angered bank bosses by suggesting modest pay deals.

I discuss compensation consultants in my book Corporate Governance after the Financial Crisis. It's not a happy story, as Lord Lawson's complaint about their conflicts of interest is well taken for the most part, although I lack the expertise to know if his precise comparison has merit.

Does Chevron mandate deference to the SEC on Rule 10b5-2?

Just read two different articles on the titular topic. A student note by Joseph Pahl (106 Nw. U. L. Rev. 1849) says no:

Rule 10b5-2(b)(1) overreaches the statutory authority of the SEC by creating liability under § 10(b) without the existence of deception or manipulation. It is unreasonable to interpret a promise not to disclose confidential information as a simultaneous agreement not to use that information (while keeping it confidential) for an individual's personal benefit. The acts of disclosure and use are temporally separate acts, and it would be perverse to believe that, when an individual agrees not to disclose a piece of information, it is inherently deceitful to use that information for his personal benefit while maintaining confidentiality. ...

Assuming arguendo that 10b5-2(b)(1) is not contrary to the courts' interpretation of the meaning of the statute, the rule does not pass the second prong of the Chevron test: Rule 10b5-2(b)(1) is “arbitrary, capricious, or manifestly contrary to the statute.” ... A confidentiality agreement alone fails to create a situation where a deceptive act is possible by trading without some further fiduciary or fiduciary-like relationship. 

I am highly sympathetic to that line of argument, but Professor Steven Cleveland argues that (65 Fla. L. Rev. 73):

To date, commentators [including yours truly, as Cleveland notes] have argued against the rule's validity by applying the Supreme Court's securities law jurisprudence without considering the role of administrative law-despite the Court's comments that the pertinent statute is ambiguous, despite express delegation of rulemaking authority by Congress to the Commission, and despite developments in administrative law subsequent to the Court's relevant securities law decisions. By not considering the role of administrative law, commentators have approached the rule with undue skepticism. Administrative law principles dictate judicial deference to the Commission's rule. The Commission once commanded deference from courts. The time has come to resurrect that deference.

Cleveland makes a thoughtful and reasoned argument. But in my judgment, however, the time for deference has not yet come.

I will once again quote Michael Greve:

I’m teaching something called, fraudulently, administrative “law.” Believe you me: nothing in that corpus juris poses any meaningful constraint on government. E.g., I’m supposed to teach and therefore do teach that judges must bow to any bureaucrat’s take on the law (unless it’s completely nuts) because otherwise the D.C. Circuit might end up running the country and good sense and lawful government might break out.

I will also note that deference ought to be earned rather than given by Supreme Court fiat. To wit, consider Business Roundtable v. SEC, 647 F.3d 1144 (DC Cir. 2011):

Under the APA, we will set aside agency action that is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” ...

We agree with the petitioners and hold the Commission acted arbitrarily and capriciously for having failed once again—as it did most recently in American Equity Investment Life Insurance Company v. SEC, 613 F.3d 166, 167–68 (D.C.Cir.2010), and before that in Chamber of Commerce, 412 F.3d at 136—adequately to assess the economic effects of a new rule. Here the Commission inconsistently and opportunistically framed the costs and benefits of the rule; failed adequately to quantify the certain costs or to explain why those costs could not be quantified; neglected to support its predictive judgments; contradicted itself; and failed to respond to substantial problems raised by commenters.

I believe close examination of the relevant history fo the SEC's adoption of Rule 10b5-2 will reveal precisely the same shortcomings that mandated striking down the proxy access rule. Compare, e.g., both the majority and Judge Winter's separate opinions in the old Chestman case to the proposing and adopting releases for Rule 10b5-2. The first pair is thoughtful, analytical, reasoned. The second one isn't. 

Something sensible on the constitutionality of gun control

My colleague Adam Winkler has co-authored a letter signed by a slew of prominent law professors in which they address the constitutionality of gun control legislation:

In 2008, the U.S. Supreme Court held that the Second Amendment, which provides, "A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed," guarantees an individual's right to have a functional firearm in the home for self-defense. The Court's decision in that case, District of Columbia v. Heller, struck down a D.C. law that effectively barred the use of any firearm for self-defense. The law is now clear that the government may not completely disarm law-abiding, responsible citizens. The Court also made clear, however, that many gun regulations remain constitutionally permissible. "Like most rights," the Court explained, "the right secured by the Second Amendment is not unlimited." Writing for the Court, Justice Antonin Scalia explained that restrictions on "dangerous and unusual" weapons are constitutional and that "nothing in our opinion should be taken to cast doubt" on laws that prohibit "the possession of firearms by felons or the mentally ill" or laws that impose "conditions and qualifications on the commercial sale of arms."

In this sense, Justice Scalia recognized in Heller that, like other constitutional rights, the Second Amendment is not an absolute. The First Amendment, for example, provides that "Congress shall make no law... abridging the freedom of speech," but the Supreme Court has long and consistently held that some types of speech -- for example, defamation, obscenity and threats -- can be regulated; that some people -- for example, public employees, members of the military, students and prisoners -- are subject to greater restrictions on their speech than others; and that the government can reasonably regulate the time, place and manner of speech. As Justice Scalia explained in Heller, the rights guaranteed by the Second Amendment are likewise subject to appropriate regulation in order to enhance public safety.

As Brian Leiter observes:

It's a pretty sober and straightforward analysis, and it doesn't even question the decision in Heller ....

The signatories include the usual suspects but also include folks like  libertarian legal giant Richard Epstein and ex-conservative Charles Fried (who, granted, is well on his way to becoming one of the usual suspects).

Second Amendment absolutists will have their usual conniption, as will the gun confiscation crowd, but reasonable people will find the argument persuasive.

I'll keep my day job

When I was a kid I wanted to be (among other things) a science fiction writer when I grew up. But I think I'll keep my day job. Apparently being one of the best current writers out there just doesn't pay all that well. 

MOOCing Corporate Law?

An interesting item from Inside Higher Ed:

News of universities partnering with massive open online course providers has become commonplace, which is why Yale University stands out for what it’s not doing: rushing.

While many top universities -- including Harvard and Stanford Universities, along with many others -- were announcing partnerships and launching their first MOOCs, Yale sat back, watched, and evaluated.

In December, some eight months after Princeton, the University of Pennsylvania and the University of Michigan at Ann Arbor joined Coursera and three months after Brown, Columbia, Emory, and Vanderbilt Universities did the same, Yale’s Committee on Online Education, a faculty committee, submitted its online report and recommendations to the dean of Yale College. Though the report suggests that Yale investigate different MOOC platforms, there is no timeline for when the university, seemingly already late to the MOOC party, might select a company or start providing MOOCs.

Are MOOCs coming to the law school near you? Harvard law prof Glenn Cohen says maybe not:

We in the law school who use the Socratic method may be particularly insulated from the MOOC treatment since the interactivity is part of what is prized. 

Which might be true except for the inconvenient facts that (1) the Socratic method is a crappy way of teaching and (2) law schools are not immune from the same economic forces affecting higher ed more generally. Indeed, if this year's huge drop in applications proves permanent, we may suddenyl find ourselves on the cutting edge of change.

Which leads me to ponder:

1. How would UCLA make money off a MOOC?
2. How would some of that money come my way?
3. Would I make more money MOOCing than professing? I'm imagining here the "Stephen M Bainbridge School of Corporate Law" as a stand-alone business enterprise. Other than the damnable barriers to entry of the legal profession created by the bar, it could work....
4. How would I teach a corporate law MOOC?
5. Assuming I retire on schedule in 2023, will it have come to pass by then?

 

A disgruntled Admin Law prof's take on his subject

Michael Greve:

I’m teaching something called, fraudulently, administrative “law.” Believe you me: nothing in that corpus juris poses any meaningful constraint on government. E.g., I’m supposed to teach and therefore do teach that judges must bow to any bureaucrat’s take on the law (unless it’s completely nuts) because otherwise the D.C. Circuit might end up running the country and good sense and lawful government might break out.

Barrall on Elson on Executive Compensation

Prominent UCLA law alum/LA lawyer Jim Barrall reports:

It was my special privilege and pleasure to serve as the moderator of The Conference Board Governance Center-sponsored debate between Charles Elson and Craig Ferrere of the John L. Weinberg Center for Corporate Governance at the University of Delaware, in one corner, and Ira Kay of Pay Governance LLC, in the other corner, on the subject of executive pay in the USA, held on January 18, 2013.

Simply put, this 90 minute exchange is the single best discussion on the subject of the causes and effects of peer group benchmarking, and on the subject of CEO pay in general, that I have ever heard in my many years of working in the executive pay and governance arena.

The catalyst for this friendly but intense debate was Charles and Craig’s paper, “Executive Superstars, Peer Groups and Overcompensation: Cause, Effect and Solution,” which argues that:

• Peer group benchmarking of CEO pay is not justified by market forces based on  data which shows that over many years relatively few CEOs quit to take other CEO jobs
• There is little CEO mobility because CEO skills generally are not transferable
• Benchmarking CEO pay ratchets it up and has been the prime cause of its inexorable rise since World War II (punctuated only occasionally when stock market bubbles burst)
• Companies and investors would be better served by benchmarking CEO pay internally to that of other officers and
• Internal executive pay benchmarking is attracting support from investors and will become more influential.

...

Anyone who is in any way involved in designing or evaluating executive pay plans and practices should watch the video debate, take notes and then reflect on what Charles, Craig, and Ira have said.  If I chaired a Compensation Committee, I would make it mandatory viewing for the committee, and would ask the company to note it as a best 2013 practice in the next CD&A.

The video or the debate is here:http://www.conferenceboard.org/directorroundtables/peergroups.

 

Academic conferences should be done electronically

Admittedly, I have a vested interest in this idea because I (1) hate to fly and (2) love going to academic conferences. But considering that 90%+ of law professors are liberals in good standing, they ought to go along with the idea. After all, as their favorite newspaper reports today:

Your Biggest Carbon Sin May Be Air Travel

...

For many people reading this, air travel is their most serious environmental sin. One round-trip flight from New York to Europe or to San Francisco creates about 2 or 3 tons of carbon dioxide per person. The average American generates about 19 tons of carbon dioxide a year; the average European, 10.

So if you take five long flights a year, they may well account for three-quarters of the emissions you create. “For many people in New York City, who don’t drive much and live in apartments, this is probably going to be by far the largest part of their carbon footprint,” says Anja Kollmuss, a Zurich-based environmental consultant.

A report on smart meetings opines that:

Traveling by plane to meetings and conferences makes up a significant part of many companies’ internal carbon footprint, often 50 percent or more among non-manufacturing companies.  

So wouldn't it make sense that sending law professors flying around the country for workshops and conferences is the biggest part of a law school's carbon footprint?

The smart meeting report continues:

Technology and services are available that can support virtual meet- ings and conferences in a much more time and resource efficient way. Online meeting rooms, video-conferencing, ad hoc Internet video links such as Skype, remote desktop sharing, webcasts, and other advanced communication aids are giving businesses tools to work remotely and thereby avoid business trips or physical commuting. Virtual meetings range in sophistication from high definition immersive telepresence experiences (which can even allow surgery to be performed remotely) down through dedicated medium resolution office to office systems, to pure audio conferencing and on to simple online text chats. One or another of these new techniques can be used with the same or better result as a physical meeting in many cases. 

So why aren't we using them to conduct legal conferences? Can you imagine what the carbon footprint of the AALS annual meeting must be?

In the meanwhile, in case you were wondering, my current rule is that I will attend an academic conference or workshop if I can get there by car in a day (or so) or via Amtrak (with a sleeper car). But I'd rather Skype from home. 

Obama's playing by Alinsky's rule book, but Paul Ryan's got him figured out

The Hill:

Rep. Paul Ryan (R-Wis.) on Saturday warned that President Obama was working to delegitimize the Republican Party, and urged conservatives not to fall into the president’s trap by playing the villain.

“[Obama] needs to delegitimize the Republican Party—and House Republicans, in particular,” Ryan told conservatives at the National Review Institute Summit in Washington, D.C. “He’ll try to divide us with phony emergencies and bogus deals. He’ll try to get us to fight with each other—to question each other’s motives—so we don’t challenge him. ...

“The president will bait us. He’ll portray us as cruel and unyielding,” Ryan said. “Just the other day, he said Republicans had 'suspicions' about Social Security. He said we had 'suspicions' about feeding hungry children. He said we had 'suspicions' about caring for the elderly. Look, it’s the same trick he plays every time: Fight a straw man. Avoid honest debate. Win the argument by default.”

Completed updated my aStore

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Memo to Barry Gross and his lawyers

Get over yourselves and stop trying to profit from frivolous lawsuits. So your sandwich was an inch short of a foot? Back in college I noticed that "60 Minutes" actually only runs for 58 minutes. So you going to sue them next?

Even a plaintiff lawyer gets it:

Lawsuits like this - and celebrities that sue for every possible slight - really sends a message to people, who later become jurors, that the judicial system is not often a place for serious justice. So when an injured plaintiff begins a trial, she does not begin on the 50 yard line. She starts deep in her own territory. That's not an impossible mission for a worthy plaintiff by any stretch - people flip quickly when they learn facts. But it makes the hill a tougher climb and it can change the way they value personal injury cases.

Subway says the word "footlong" should not be taken literally, as it is a trademark and "not intended to be a measurement of length." But they are misleading people. They misled me. I thought it was a foot long till I read this story. But consumers who think like me have two reasonable choices: (1) decide not to buy the Subway subs because they are mad at the false advertising, or (2) remain annoyed but say, "Hey, Subway is not perfect, I don't think many big companies are, but I think make a good sandwich and I'm going to eat it." (I pick the latter. Subway makes a good low fat sandwich, albeit with a ridiculous amount of sodium.). 

Theodore Dalrymple on the anti-smoking zealots and their trial lawyers

At Liberty Law Blog:

I am no friend to smoking, therefore; but even I feel a certain unease about the zealotry of the anti-smokers. The problem is that, in the modern world (though perhaps it was always so), a good cause is turned into rent-seeking, and generally into rent-finding as well.

Examination of the legal proceedings in the United States against the tobacco companies persuaded me that the real tort in the case was, in effect, the transfer of the profits of the tobacco companies from the shareholders to the trial lawyers. The last thing that anyone wanted to do was drive the milch-cow, the tobacco companies, into bankruptcy, or simply to close them down so that they could be sued no more. Governments, which had been deriving large revenues from the tobacco companies’ products for many years in spite of knowledge of the effects of smoking, were at least as responsible for any harm done by tobacco as the companies. No doubt the tobacco companies lied in a disgraceful fashion about the harmfulness of their products, but I have never met anyone who believed their lies; and although no longer young, I grew up knowing that smoking was bad for you in the same way that I knew that the world was round and the Battle of Hastings was in 1066. As to the supposed impossibility of giving up smoking once started because of the addictiveness of nicotine, this was clearly nonsense; what millions of people (including my mother) have done cannot be impossible.

And where there are rents to be found, lawyers will be there to take our cut.

Even The Economist finally figures out Obama is a liberal

From this week's issue:

[At the inauguration], to the delight of most, for there were not too many Republicans among them, they heard him deliver a terse and powerful statement in defence of government and collective action, far bolder and less compromising than the words he delivered from the same spot four years ago. It was, noted one columnist, “the most liberal speech that he has delivered as president”.

Do entitlements discourage work?

There was an interesting juxtaposition yesterday in the WSJ. Let's start in the letters section:

Richard Vedder is incorrect in stating that one of the main reasons for lack of labor-force participation is government benefits ("The Wages of Unemployment," op-ed, Jan. 16). The opposite is true. The existence of growing government benefits, especially food stamps, is evidence of the lack of jobs that pay enough to live on without food stamps.

Now to the news section:

Many Israelis say they are growing fed up with the generous housing and other living benefits doled out to ultraorthodox Jews, who represent about 10% of this country of 7.7 million people and whose high birthrate suggests that will grow. ...

A 28-year-old married father of three studying in ultraorthodox seminary, for example, receives about $1,200 per month in subsidies, say court filings. ...

As benefits swelled, and more ultraorthodox remained in study to avoid the military, their workforce participation fell. When Mr. Begin took power, 75% of ultraorthodox men had jobs. Today that number is around 38%.

Granted, there is a religious component to the ultraorthdox's decision making, but doesn't the Israeli data suggest that an overly generous entitlement system in fact creates a class of takers who prefer the dole to work?