I've just posted a new article to SSRN:
Abstract: In a 2014 opinion (ATP Tour, Inc. v. Deutscher Tennis Bund), the Delaware Supreme Court upheld a fee-shifting bylaw, which required unsuccessful shareholder litigants in either derivative or direct actions to reimburse the corporation for its legal expenses. Although the entity in question was a non-profit, non-stock corporation, most observers expected the Delaware courts to extend that holding to for-profit stock corporations. In the months that followed, about 50 Delaware corporations adopted such bylaws.
In its 2015 legislative session, however, the Delaware legislature adopted amendments to the Delaware General Corporation Law (S.B. 75) that effectively bans such bylaws. This article argues that this ban is contrary to sound public policy and adverse to Delaware’s own interests. It then advances an interest group analysis, focusing on the power of the Delaware bar, to explain why the Delaware legislature would have inflicted such a serious wound on itself.
This analysis leads to two take-home lessons. First, if it wishes to ensure that future legislation advances both sound public policy and the state’s financial interests, the Delaware legislature needs to free itself from the bar’s influence. In addition, the business community needs to invest lobbying resources in Delaware so as to counter the bar’s influence in cases such as this. Second, states in which the corporate bar wields less legislative influence thus may have a significantly easier time adopting legislation authorizing such bylaws. If so, the likelihood that S.B. 75 will significantly reduce Delaware’s dominance of corporate law will go up substantially.
Bainbridge, Stephen M., Fee Shifting: Delaware's Self-Inflicted Wound (June 29, 2015). UCLA School of Law, Law-Econ Research Paper No. 15-10. Available at SSRN: http://ssrn.com/abstract=2624750
Now it just needs to find a law review home.
Inside Higher Ed ponders the future of small evangelical colleges post-Obergefell:
Friday's Supreme Court decision that states must authorize and recognize gay and lesbian marriages could create major legal challenges for religious colleges -- primarily evangelical Christian colleges that bar same-sex relationships among students and faculty members. Or the decision may not create much of a legal challenge at all. Or it may create challenges, but not soon. ...
"Private institutions that dissent from today's reformulation of marriage must be prepared for aggressive legal attacks on all fronts," said Michael W. McConnell, the Richard and Frances Mallery Professor and director of the Constitutional Law Center at Stanford University Law School. ...
Michael A. Olivas, director of the Institute for Higher Education Law and Governance at the University of Houston and author of The Law and Higher Education, said that the Supreme Court ruling should prompt Christian colleges to rethink their policies. "In an area of social change that is as well defined as this issue is, why would any college want to violate the law by banning relationships that are not only legal, but if they led to marriage would be legal and recognizable in every jurisdiction in the country?" he asked
Olivas said that this issue will likely play out as the Bob Jones case did. ...
Olivas said he could see a "small" exemption for seminaries that train clergy, but not for most Christian colleges that train undergraduates and students for a variety of careers other than becoming a member of the clergy. For most religious institutions, he said, they would need to renounce tax exemptions to maintain their policies. "They can't have it both ways," he said.
And thus, thanks to Professor Olivas and his allies in the secular left, religious liberty likely will die a little bit more, so as to force religious colleges to adopt the changing mores of secular elites.
Lucian Bebchuk and Robert Jackson opine that:
Last week, the House Appropriations Committee included in its 2016 appropriations bill for financial services agencies a provision that would prevent the SEC from developing rules that would require public companies to disclose their political spending. Although this provision is unlikely to become law, its adoption is regrettable. In our view, Congress should let the SEC do its job and use its expert judgment—free of political pressures in any direction—to determine what information should be disclosed to public-company investors.
The notion that the SEC process will be apolitical and lead to a technocratic solution is, of course, risible. The activists who are backing this proposal are folks like unions, liberal NGOs, and Democrats. These interest groups think political spending disclosure will defund the right by deterring corporations from contributing to GOP candidates:
The resignation of Mozilla CEO Brendan Eich over a personal $1,000 donation he made in 2008 in support of California’s Proposition 8 shows the dark side of campaign disclosure laws and how liberals are using them to intimidate, harass, and bully anyone who disagrees with them on social and cultural issues. ...
What has been happening in recent years is no different then what racist government officials in Alabama were trying to do in the late 1950s when they subpoenaed the NAACP’s membership lists.
The left-liberal community therefore will bring enormous pressure to bear on the three Democrat members of the SEC, whose increasing willingness to push through highly partisan rules on a 3-2 basis will make them easy targets.
What people like Bebchuk, Jackson, ands the other securities law professors they've recruited are doing is giving academic cover to a highly partisan attack. Their efforts to add a neutral patina to a biased project must be resisted.
Joan Heminway writes:
I had the privilege of sitting in on a stimulating paper session on "Private Fiduciary Law" at the Law and Society Association conference in Seattle last month. The program featured some super work by some great scholars. My favorite piece from the session, however, is a draft book chapter written by Gordon Smith that he recently posted to SSRN. Aptly entitled The Modern Business Judgment Rule, the chapter grapples with the current state of the business judgment rule in Delaware by tracing its development and reading the disparate doctrinal tea leaves. Here is a summary of his "take," as excerpted from his abstract (spoiler alert!): "The modern business judgment rule is not a one-size-fits-all doctrine, but rather a movable boundary, marking the shifting line between judicial scrutiny and judicial deference."
In the mere 18 pages of text he uses to engage his description, analysis, and conclusion, Gordon gives us all a great gift. His summary is useful, his language is clear, and his analysis and conclusions are incredibly useful, imho. I am no soothsayer, but I predict that this will be a popular piece of work.
I concur. It's a really good article with some excellent insights. Not to mention a very fair summary of my argument that the business judgment rule is an abstention doctrine.
Gordon's inviting comments over at the Conglomerate blog.
From the WSJ:
Securities and Exchange Commission Chairman Mary Jo White, speaking in Chicago on Thursday, said the SEC is developing rules that would make it easier for shareholders to vote on board candidates offered by investors, in competition with those pushed by the company’s management.
The possible new rules, which are at an early stage of development, focus on what is known as a “universal ballot,” a single voting form in contested corporate elections. Currently, voters in contested elections receive two sets of ballots, each featuring a rival slate of board candidates.
For investors and governance advocates, the proposed rules could bolster activist campaigns, as the universal ballot is widely seen as more helpful to outsiders trying to get a seat on a board, especially in seeking the votes of smaller investors.
The problems with this proposal are numerous:
Richard Layton Fingers reports:
Senate Bill 75, which contains several important amendments to the General Corporation Law of the State of Delaware (the “DGCL”), was signed by Delaware Governor Jack Markell on June 24, 2015. As described in this alert, the 2015 legislation includes, among other things:
The post goes on to provide a pretty detailed analysis of each provision.
In reviewing today's Supreme Court decisions on Obamacare and disparate impact, I'm feeling pretty betrayed by Roberts and Kennedy. Why is it that so many purportedly conservative justices slide so far to the left once they're on the court?
In any case, Black Thursday prompts me to observe that the opposite of schadenfreude is gluckschmerz - i.e., experiencing pain from observing someone else's pleasure - which is precisely what I'm feeling about liberals and the SCOTUS.
It is a common refrain from corporate governance "reformers" that a company's CEO should not also serve as the firm's chairman of the board of directors. I have argued that a hard rule requiring such separation makes no sense:
Aug 4, 2009 ... One of the most obvious areas of abuse concerns the resolute insistence by most public companies to have the CEO serve as chairman of the ...
Sep 14, 2010 ... Marty Robins: It's common knowledge that separating the roles of CEO and Board Chairman (see Chairmen's Forum) is considered by most the ...
Nov 3, 2014 ... I previously commented on the 2015 ISS Benchmark Policy Consultation re Independent Chair Shareholder Proposals and praised Randi Val ...
Nov 6, 2014 ... Davis Polk on ISS Policy re Combined CEO and Chairman of the ... on the 2015 ISS Benchmark Policy Consultation re Independent Chair ... on ...
Apr 25, 2010 ... Section 973 of the Dodd Wall Street reform bill mandates new disclosures from all firms -- Main Street as well as Wall Street -- explaining "the ...
A new study offers additional support for my position:
Many scholars have been quick to criticize the merits of CEO duality, a situation where a company's Chief Executive Officer is also the Chair of the Board, by claiming that CEO duality undermines the board's ability to effectively monitor and constrain self-interested CEOs. These criticisms are often based on empirical studies that use firm outcomes — aggregate performance measures — as proxies to evaluate the merits of an incentive structure such as duality on the behavior of CEOs. In this paper, I construct a novel and more direct measure of CEO behavior by gathering information submitted by companies to the Securities and Exchange Commission. This variable measures how aggressively a CEO whose company is being sold negotiates with a prospective buyer during the pre-announcement sale process. I find that dual CEOs act in the interest of their shareholders by bargaining 16.1% more aggressively in takeover negotiations than do single role CEOs. The paper’s main finding is consistent with the view that managers, when given higher levels of responsibility, act as good stewards on behalf of the firm and its shareholders.
Ghazal, Victor A., CEO Duality and Corporate Stewardship: Evidence from Takeovers (June 9, 2015). Available at SSRN: http://ssrn.com/abstract=2616464
Silecchia, Lucia Ann, A Witness First Lives the Life He Proposes: Evangelization and the Catholic Lawyer (2015). “A Witness First Lives the Life He Proposes”: Evangelization and the Catholic Lawyer (May 21, 2015). Available at SSRN: http://ssrn.com/abstract=2616323:
This essay was presented at the lecture for legal professionals in Baltimore, Maryland, on May 21, 2015. The roots of the word evangelization are, literally, in the words that mean “to bring good news.” We live in a world that craves good news and, by virtue of our Baptism, all of us – lawyers included – are called to bring good news to a world that, despite all appearances to the contrary, aches for good news and deeply yearns to know the God from whom all good news comes, and to whom all good news leads. I am convinced that there is a powerful role for us in the legal profession to play in this great task of evangelization by being joyful, hopeful witnesses to what is good, just, and simply right. Each are called to respond to the call to evangelize in our own circumstances. This essay explores, briefly, the opportunities that we may have to evangelize, or “bring good news” as lawyers, in three distinct settings: in the ways in which we educate future lawyers; in the way in which our profession is practiced; and, in the substantive law of our land itself.
I like Larry Cunningham's take on the AIG case:
Eight years of official, media-sanctioned cover-up of the U.S. government’s trampling of the rule of law may be coming to an end.
Go read the whole thing.
My UCLA colleague Lynn LoPucki has posted an interesting article on empirical legal scholarship:
Disciplines tend to develop their own empirical methods. This article reports on a study of one hundred and twenty empirical legal studies published in the non-peer-review leading law reviews and in the peer-review Journal of Empirical Legal Studies ("JELS"). The study reveals four important categories of differences between disciplinary legal empiricism, defined as legal empiricism conducted by persons holding Ph.D. degrees (whether or not they also hold law degrees), and native legal empiricism, defined as legal empiricism conducted by persons holding only law degrees. First, the study found that Ph.D.s and J.D.-Ph.D.s collaborate more than J.D.s, but the collaboration is largely among the Ph.D. holders themselves. Second, JELS appeared to value methodological expertise over legal expertise. Only 15% of the JELS articles had no author holding a Ph.D., while 35% had no author holding a J.D. Third, the J.D.s were more likely to draw their data from published sources, while Ph.D.s and J.D.-Ph.D.s were more likely to draw their data from prior research, survey, or experiment. Lastly, the J.D.s were almost twice as likely to code their own data. These differences are important because law schools are rapidly hiring J.D.-Ph.D.s in an effort to increase the quantity and quality of legal empiricism. The study concludes that law school Ph.D. hiring is unlikely to achieve large increases in collaboration between Ph.D.s and J.D.s. It also concludes that the reduction in coding resulting from the hiring of more J.D.-Ph.D.s will escalate legal empiricism’s methodological sophistication while reducing its legal sophistication.
LoPucki, Lynn M., Disciplinary Legal Empiricism (May 17, 2015). UCLA School of Law Research Paper No. 15-17. Available at SSRN: http://ssrn.com/abstract=2607129
In other words, law schools are hiring people who are better at crunching numbers than legal analysis. Which makes no fraking sense. We're supposed to be teaching people how to be lawyers, not statisticians. We're supposed to be doing research that helps lawyers and judges solve difficult legal questions, not engaging in mathematical masturbation.
I'm off to Virginia to visit a family member having surgery. I very much doubt I'll be posting this week. But check back on June 21.
In the meanwhile, are you following my Twitter feed? I'll probably be reasonably active over there: @ProfBainbridge
Best book on religion I've read so far in 2015: Jesus: A Biography from a Believer. By Paul Johnson http://t.co/wQ5IbAJyqy Inspiring.— Stephen Bainbridge (@ProfBainbridge) June 14, 2015
My all time favorite work of military history: A History of Warfare by John Keegan http://t.co/G57gVLS4OU— Stephen Bainbridge (@ProfBainbridge) June 14, 2015