ProfessorBainbridge.com

Screwcaps

More evidence of the superiority of screw caps over tree bark cork.

What is means to be Catholic

The WSJ reports on the very public fight between the Archdiocese of St Louis and parishioners of St. Stanislaus Kostka Polish Roman Catholic Church, characterizing the dispute as one over property and money. It is no such thing, as Richard John Neuhaus explains:

< blockquote dir="ltr">

As reflected in the news reports, it is thought that what must really be at stake is power or money, or both. What is most importantly at stake, however, is the very definition of what it means to be Catholic. A parish is Catholic if it is in full communion with a bishop who is in full communion with the Bishop of Rome.

The Archbishop may have excommunicated the leaders of the Parish's rebellion, but it was the latter who opted for schism. As for the legal issues, i.e., who owns parish assets, that's the subject of my next law review article. Watch this space for updates.

Is Annoying People a Viable Business Model

Someday Google will make an interesting case study of the proposition that annoying potential partners is a viable business strategy. First, Google's efforts to put books online annoyed authors and publishers. Now Google's annoying whole countries by publishing satellite imagery of secure installations. Assuming you can go through life pissing off potential business partners with impunity is a sure sign of the narcissism of immature leaders.

Meltdown at Hollywood Presbyterian

Back before I crossed the Tiber, I was a member of First Presbyterian Church of Hollywood, so I was very interested to see Hugh Hewitt link to the public resignation letter posted by a Hollywood Presbyterian member (I knew the resigning member slightly). In following up, I discovered that Hollywood Pres seems to be coming apart at the seams.

Hollywood Pres is a hugely important church:

Under the energetic direction of Louis Evans, it became North America's largest Protestant church -- about 9,000 members, if I recall correctly.  Henrietta Mears redefined Christian education, pioneered college-age ministry, and mentored greats ranging from Billy Graham to Bill Bright to Donn Moomaw to Dale Bruner and beyond.  Dick Halverson and Lloyd Ogilvie went from FPCH to serve as chaplains of the U.S. Senate.  Ogilivie was renowned as one of the world's 10 or 12 most gifted preachers. (Link)

Unfortunately, under its immediate past pastor, Alan Meenan, the church has been caught up in the struggle between traditionalists and modernists. The Presbytery of the Pacific voted to oust Meenan, purportedly due to the church's financial troubles. In fact, however, the problem seems to have been Meenan's efforts to modernize the church.

The leaders of a worship service for seekers, skeptics and mostly young people – including many with tattoos and body-piercings – have decided to leave Hollywood Presbyterian Church in the aftermath of the Presbytery of the Pacific's vote to have an administrative commission run the congregation. (Link)

Meenan and a significant percentage of the church thought that the church had to adapt to the culture that surrounds it.

One member of the staff said "there is an entrenched minority that was in place before Pastor Meenan came to Hollywood. They are quite traditional and don't like the innovative ministry and nontraditional worship that's become part of some services." (Link)

I can see both sides of this issue.

On the one hand, we Christians are taught to be in but not of the world. On the other hand, we are also taught to be as "wise as serpents and harmless as doves" (Matthew 10:16). We are also taught that some truths are universal while others are culturally bound. St. Paul's comment that he became "all things to all men" (1 Cor. 9:22), for example, implies that he was willing to accommodate cultural variations that did not offend the universal moral truths to which he was committed.

In terms of worship style, which seems to have been a big issue at Hollywood Pres, so long as Christ's salvific sacrifice is taught and God is honored, I'm inclined to leave the rest to individual aesthetic taste.

Personally, my aesthetic tastes run to the traditional and liturgical. Meenan's ever growing emphasis on praise music and the like thus left me profoundly dissatisfied. De gustibus non est disputandum.

Did I leave Hollywood Pres and become a Catholic solely over aesthetics? No. The decision was motivated by a host of considerations, most of which were deeply theological (I could no longer accept the fundamental Protestant principles of sola fides and sola scriptura). As I like to say, moreover, I'm the only person I know who came to Catholicism via economics.

Yet, I can't deny that aesthetics was a factor. Thomas Howard (whose brilliant book Evangelical is not Enough was a big factor in my conversion) has said:

The major reason why I became Anglican in my twenties was aesthetic. Their worship, their church buildings, their vestments, their language (the sixteenth-century Prayer Book), and, most notably, their hymnody, left our johnny-come-lately Protestantism looking like a flea-market, to my mind. Of course, living as an Anglican, I "grew in the faith" so to speak, in that I found that there was much more at stake than aesthetics. A whole Incarnational, sacramental theology, a fathomless history, and a universality of vision, again, seemed to reduce our little efforts to tiddly-winks.

Or, as a reviewer of Howard's subsequent book On Being Catholic, which explored his conversion from Anglicanism to Catholicism, and which was also very influential on my own thinking, explained:

For Howard, to have become Catholic is not to have ceased being "evangelical" in the richly Christian sense of that word, but to have moved beyond the partial perspectives of Protestantism to embrace the "glad tidings" to be found in the amplitude of Catholic tradition, in the deeper meaning of Catholic piety, dogma, spirituality, vision, and practice. It is these "glad tidings" of Catholicism that Howard communicates remarkably well, particularly to Evangelical Protestants (but also to many Catholics), who may be surprised that he finds so much to be joyful about in the Catholic tradition. ...

Howard is perhaps at his best in describing the sacramental or incarnational aspect of Catholic life and practice. Why all the smells and bells and ceremony? Why not a more purely "spiritual" religion? Howard has a keen sense of how we sooner or later give visible shape to what is in our hearts. With commonplace examples of birthdays, cakes, candles, and gifts (that recall his magisterial book, Chance or the Dance?), he illustrates how we are ceremonial creatures. We mark our awareness of significance in a visible, external, concrete way. The same is true of faith.

Only, Catholic worship is not an arbitrary abstraction. From the beginning its essential rubrics were prescribed. While the Book of Acts only alludes to "the breaking of bread," the shape of the liturgy, like the shape of catechesis, is clearly outlined from the earliest sources of Church history. Howard points out that if a pagan shopkeeper in ancient Smyrna had expressed the desire to become a Christian, he would not have simply been given John 3:16 and asked to invite Jesus into his heart; rather, he would have been invited to meet the bishop, become a catechumen, and start participating in the weekly liturgy. The Church is neither secondary nor incidental to the Gospel, according to Catholicism; rather, it is itself part of the Gospel's "glad tidings."

Having been a conservative before I was a Catholic, I love old things. Russell Kirk has written that:

... the conservative adheres to custom, convention, and continuity. It is old custom that enables people to live together peaceably; the destroyers of custom demolish more than they know or desire. It is through convention—a word much abused in our time—that we contrive to avoid perpetual disputes about rights and duties: law at base is a body of conventions. Continuity is the means of linking generation to generation; it matters as much for society as it does for the individual; without it, life is meaningless. When successful revolutionaries have effaced old customs, derided old conventions, and broken the continuity of social institutions—why, presently they discover the necessity of establishing fresh customs, conventions, and continuity; but that process is painful and slow; and the new social order that eventually emerges may be much inferior to the old order that radicals overthrew in their zeal for the Earthly Paradise.

Conservatives are champions of custom, convention, and continuity because they prefer the devil they know to the devil they don’t know. Order and justice and freedom, they believe, are the artificial products of a long social experience, the result of centuries of trial and reflection and sacrifice. Thus the body social is a kind of spiritual corporation, comparable to the church; it may even be called a community of souls. Human society is no machine, to be treated mechanically. The continuity, the life-blood, of a society must not be interrupted.

It is precisely the sense that, despite the changes wrought by Vatican II, Roman Catholic worship offers a continuity with the past that makes it attractive for me. Is it any wonder that my favorite service at St. Victor is the Saturday Vigil service at which we use the Gregorian Chant in the original Latin? Is it any wonder that Meenan's changes at Hollywood Pres didn't do it for me?

Having said all that, however, my heart goes out to my brothers and sisters in Christ at Hollywood Pres, who clearly have been deeply wounded by the turmoil:

Whatever happens, the storm that lashed one of the most prominent evangelical congregations in the Presbyterian Church (USA) is not expected to subside quickly. Strapped financially and bitterly divided, the Hollywood church remains in a precarious predicament. (Link)

When I attend Mass tomorrow, I shall say a prayer and light a candle for them.

Charlie Stross Channels HP Lovecraft

Ollie North meets Cthulhu. Yes, really. It's not as mature a work as the stories Charles Stross turned into Atrocity Archives, but it's nevertheless a pretty good read.

SOX 404 Relief

The SEC's Advisory Committee on Smaller Public Companies held a hearing today on potential small firm relief from Sarbanes-Oxley compliance costs. (Agenda here; webcast archived here.) I've made the case for regulatory relief for small firms in a number of blog posts and TCS columns, most notably Shedding Light on SOX and SOXing it to Small Business.

Speed governors in the frozen north

Walter Olson forwarded this little item which just goes to show how the nanny state continues to grow in the frozen north:

"Canadian auto regulators are testing a system that would enforce speed limits by making it harder to push down the car's gas pedal once the speed limit is passed, according to a newspaper report. The system being tested by Transport Canada, the Canadian equivalent of the U.S. Department of Transportation, uses a global positioning satellite device installed in the car to monitor the car's speed and position. If the car begins to significantly exceed the speed limit for the road on which it's travelling the system responds by making it harder to depress the gas pedal, according to a story posted on the Toronto Globe and Mail's website." ("Device stops speeders from inside car", CNNMoney, Dec. 4).

Olson also points out that evil trial lawyers (a redundancy, I know) want to do the same thing here in the US:

Back on Oct. 26, 1999 we took note of a report that trial lawyers were taking a look at trying to get courts to hold automakers liable for not installing speed governors on vehicles.

Personally, they can have my gas pedal when they pry it from my cold dead hands. If God had meant for us to be speed weenies, after all, would he have given us resources like metals, rubbers, and fuels that can be put together to make vehicles capable of 200+ miles per hour? Indeed, we learn from the prophet Nahum (chapter 2, verse 4) that:

The chariots shall rage in the streets, they shall justle one against another in the broad ways: they shall seem like torches, they shall run like lightnings.

Of course, the Canadians are all becoming atheists or pagans anyway, which explains a lot.

CSR in Time

Time Magazine has a piece on corporate social responsibility, in which yours truly is quoted:

"In a nutshell, the problem with CSR," says Stephen Bainbridge, a corporate-law professor at the University of California, Los Angeles, "is that managers who are responsible to all of their constituencies are accountable to none."

Is Delaware Law Indeterminate?

There is a (small) school of thought that claims Delaware corporate law is indeterminate.

[Ehud Kamar, for example,] argues that the market for corporate law is imperfectly competitive, and therefore may not yield the optimal product to either shareholders or managers. Delaware dominates the market as a result of several competitive advantages that are difficult for other states to replicate. These advantages include network benefits emanating from Delaware's status as the leading incorporation jurisdiction, Delaware's proficient judiciary and Delaware's unique commitment to corporate needs. Delaware can enhance these advantages by developing indeterminate and judge-oriented law, even if such law is otherwise undesirable. Indeterminacy makes Delaware laws inseparable from its application by Delaware's courts and thus excludes non-Delaware corporations from network benefits, accentuates Delaware's judicial advantage, and makes Delaware's commitment to firms more credible. Whether state competition constitutes a race to the top, to the bottom, or somewhere in between, excessive indeterminacy may add an additional degree of inefficiency to the law.

I've never bought this argument. It is true that Delaware law tends to rely on standards, but is is simply not true that Delaware law is indeterminate in the sense of being unpredictable (or even difficult to predict).

In a very interesting piece on the recent Disney shareholder litigation, which was published in the Hofstra Law Review's new Ideas forum, Jonathan Macey writes:

The outcome in the case was fairly predictable. In fact, my colleague Henry Hansmann predicted it. Illinois College of Law professor Larry Ribstein even wrote an ersatz opinion shortly before the real opinion was released opining on the issue of whether the evidence at trial supports the complaint’s allegations and meets the standards for liability under the business judgment rule and section 102(b)(7) of the Delaware Code that closely tracks the one ultimately issued by Chancellor Chandler. Ribstein wrote that “[a]fter a thorough trial in which the facts were ably and fully presented on both sides, I conclude that this record does not support relief.”

In other words, the evidence supports Roberta Romano’s well known argument that one of the major selling points that Delaware has to offer companies is the predictability of its law. Specifically, Romano has shown that “Delaware is so successful in the corporate charter business” because it (like many other states) offers an attractive and flexible mix of corporate law rules, and then most importantly, it provides a credible commitment that it will continue to supply this desirable mix of rules in the future.

Thus, consistent with Romano’s theory, it appears that people knew with a fair degree of precision what the outcome of the Disney litigation would be.

So much for the indeterminacy theory. Macey then goes on to offer some interesting thoughts on “why it took so much time and so much money to generate the result that everybody was expecting all along.” It's a good read.

The value of independent directors

In theory, director independence ought to be a very good thing. In practice, director independence has been foisted upon most public US corporations by virtue of Sarbanes-Oxley and stock exchange listing standards. Surprisingly, however, the empirical evidence on director independence is quite equivocal. I reviewed the evidence as it stood through 2002 in my paper A Critique of the NYSE's Director Independence Listing Standards, in which I argued that the evidence in favor of director independence was, at best, inconclusive. There are many studies suggesting that boards dominated by independent directors actually tend to under perform boards with a healthy admixture of insiders. All of which is by way of introduction to an interesting new paper, Board Compensation and Firm Performance: The Role of  'Independent' Board Members:

This paper examines the link between firm performance, board  structure and top executive pay. We use a panel of firms from  the Portuguese Stock Market, where the institutional context  differs markedly from the U.K. and U.S., but is very similar to  most other European countries. The standard organizational  structure is a single-tier board, which includes the CEO as well  as executive and non-executive members. The results confirm a  large effect of firm size on top executive compensation. However, there is no relationship between the board remuneration and  company performance. We examine whether the governance structure  of companies is relevant in influencing top executive pay.  Specifically, we consider the role of non-executive board  members as mediators of the management and shareholders  relationship. Our results suggest that firms with more  non-executive board members pay higher wages to their  executives. Furthermore, we find that firms with zero  non-executive board members actually have less agency problems,  and have a better alignment of shareholders' and managers'  interests. These results cast some doubts on the effectiveness  of independent board members incentive systems, and on their  stated monitoring role.

I'm always a bit skeptical of cross-cultural corporate governance comparisons, but this is another interesting counterfactual to the claims made in favor of director independence by those for whom such independence has become a universal panacea.

Suffering

My friend Harvard law professor William Stuntz turns his considerable talents to theology with a touching meditation on suffering. Highly recommended.

The Log in the SEC's Eye

The Economist's Buttonwood column points out something interesting:

Like most annual reports, the SEC’s begins with a unifying theme written by its leading executive, the chairman, Christopher Cox (“We are a nation of investors”), and a statement of integrity (“Our financial statements were presented fairly”) but then alludes to the kind of issues that, if the SEC were a private company, could send stock prices plunging: weaknesses in internal controls and overspending.

Here's what the SEC has to say about the former:

The SEC’s highest operational priority is to remedy the material weaknesses in the agency’s internal controls. ... management and the Government Accountability Office (GAO) have identified three material weaknesses for FY 2005 relating to the SEC’s controls over: (i) recording and reporting of disgorgement and penalties, (ii) information security, and (iii) preparing financial statements and related disclosures. The SEC takes these weaknesses very seriously, particularly given the agency’s unique role in monitoring the internal controls of public companies and regulated entities.

Considering that compliance with the SEC's post-SOX internal controls rules are costing businesses millions of dollars a year and "companies will spend $6.1 billion overall this year to meet Sarbanes-Oxley requirements alone," according to the W$J, maybe the SEC ought to do more than just "take these weaknesses very seriously." Maybe the SEC ought to fix its own internal controls ... and remember its own inability to do so the next time it starts an enforcement or regulatory proceeding.

Law Review Word Limits

I just found a handy guide to the new word limits that many top law reviews have adopted. (Kudos to the good folks at Emory for having pulled this together.) Wouldn't it be nice if the law reviews could agree on a single standard, however? When some prefer under 25,000 words, while others' preferred length is as high as 35,000 words, how does an author decide?

Tradesports

Chris Masse has updated his webpage on the ability of US residents to invest in Tradesport's prediction markets. The current bottom line seems to be that:

TradeSports/InTrade has to inform U.S. residents of which event-driven futures markets they are not allowed to trade. It does not say that the prediction exchange has to reject the U.S. residents' trades.

I genuinely don't understand why the government should be in the business of preventing me from taking a flyer on whether, for example, Samuel Alito will be confirmed as a Supreme Court justice. (Which is not the same thing as saying I don't know why they do it - it's simple public choice analysis: an unholy alliance of anti-gambling religious organizations, Indian gaming interests, and the Vegas casinos to prevent online gaming.)

Carl Icahn's Business Plan for AOL

Carl Icahn has morphed from a 1980s style corporate raider into one of the class of investors Porsche CEO Wendelin Wiedeking amusingly refers to as  "self-appointed guardians of corporate governance." The W$J reports that:

Amid speculation that Time Warner is close to striking an advertising alliance between its America Online unit and either Microsoft Corp. or Google Inc., the New York financier warned Time Warner's directors to tread carefully. In a filing with the Securities and Exchange Commission, Mr. Icahn said he might sue the company's directors if the board approves "a transaction that in any way would make it more difficult to realize value at AOL or Time Warner through a spinoff or sale at a later date." He said such a move would be a "scorched-earth policy."

I'll grant you that Time Warner AOL management has stunk for a long time. Although Merrill analyst Jessica Reif Cohen disagrees:

The road could be more difficult than Mr Icahn has encountered in other investments, as even frustrated investors admit management has a relatively strong track record.

In any event, does anybody really think Carl Icahn could do any better? He may have been a great greenmailer, and may still be, but he's never impressed when it comes to management of an actual business. His highest profile effort at actually running a business was TWA, which he ran into the ground.

Update: Gordon Smith makes much the same point re Kirk Kerkorian's run at GM:

To me this looks like a question of strategic judgment, not incentives. If I am right about that, then the issue is whether investors should embrace Kerkorian's (or York's) judgment over Wagoner's. Wagoner inherited a company with serious problems, and I have seen no evidence that Kerkorian or York would be better equipped to deal with those problems than Wagoner.