ProfessorBainbridge.com: May 2014

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May 2014

05/19/2014

Studying Law in the USA: A Guide for Foreign LLM Candidates

This is a presentation I gave students at the University of Auckland on May 19, 2014. It provides a very brief overview for foreign law graduates considering pursuing an LLM degree at a U.S. law school, with specific application to the UCLA School of Law.

Posted at 08:39 PM in Law School | Permalink | Comments (1)

05/17/2014

Congratulations to UCLA School of Law Class of 2014

I wish I could be there in person to congratulate you as your law school career comes to its end, but duty called and I am showing the UCLA flag down here in New Zealand (and rough duty it is ... not).

So let me offer long distance congratulations and best wishes for a happy and successful career.

Keep in touch.

Posted at 01:04 PM in Law School | Permalink | Comments (0)

05/14/2014

USA Insider Trading Law: Recent Developments

I'm giving a talk at the University of Auckland Faculty of Law today on the titular subject of this post. I'll review of insider trading law, with emphasis on its application to recent cases involving hedge funds. Reviews Preet Bharara’s scorecard, the Galleon case, materiality and the “Mosaic Theory," and tipping chains.

Posted at 01:30 PM in Insider Trading | Permalink | Comments (0)

05/13/2014

Keeping nationalism out of business

Greetings from New Zealand, where I am the Cameron Visiting Fellow at the University of Auckland Faculty of Law for the next three weeks. An article in yesterday's NZ Herald caught my eye. UK Telegraph commentator Allister Heath opposes government efforts to block Pfizer from buying AstraZeneca:

There is no room for nationalism in business, and no place for meddling politicians. Countries still matter immensely but their role is now as hosts and hubs: they provide the legal and physical infrastructure, the workforce and the tax system.

Companies locate themselves wherever makes sense to them, guided almost exclusively by commercial considerations. That is the reality of the world in which Western as well as emerging nations operate, and we should embrace, not fear it, for it works better than any other system when it comes to creating growth, productivity and jobs. ...

I basically agree with his argument, so long as we're talking about countries with more or less shared values on issues like the rule of law, protection of intellectual property rights, and so on. In contrast, Heath would carve out only "a very small number of exceptions relating to genuine questions of national security," which I don't think goes far enough.

In any case, I certainly agreed with his ultimate conclusion:

On balance, competitive profit-seeking capitalists are less likely to take bad decisions than politicians, and countries that allow market forces to determine ownership, investment, research and jobs perform better than those that politicise business.

Posted at 02:49 PM in Business | Permalink | Comments (0)

05/09/2014

Class actions benefit trial lawyers but not consumers: Shut down Trial Lawyers Inc.

Alison Frankel has the smoking gun.

Posted at 03:33 PM in Law, Lawyers | Permalink | Comments (1)

05/08/2014

The execrable Joe Nocera gets a serious spanking from NYT "public editor"

The NY Times Joe Nocera is one of the worst business "journalists" in that business. Highly opinionated and dumb makes for a bad combination. So it warmed my heart to see the Times' public editor take Nocera to the woodshed for his egregious recent columns on St. Warren:

Mr. Nocera made some serious factual errors in those columns, particularly in the second one, in which he also took Mr. Buffett to task, calling him “cowardly and hypocritical.”

After a complaint from Mr. Buffett, which I was sent a copy of, corrections were appended to the columns, and published in print. (One correction, however, was left out. In his first column, Mr. Nocera referred to Mr. Buffett as a member of the Coca-Cola board; that hasn’t been true for eight years. That error was never formally corrected, although it gets a mention in the second column, in which, remarkably, Mr. Nocera uses his own original error to bash Mr. Buffett further: “He should be embarrassed. It’s actually worse than I had realized. My original assumption was that Buffett didn’t want to offend his fellow board members, especially those on the compensation committee, who had vouched for the equity plan. But Buffett left the board in 2006.”)

But there’s a much bigger problem. The entire premise of the second column is built on a mistake: that Mr. Buffett had changed his tone after “licking his wounds” over the reaction to statements he made on April 23, including Mr. Nocera’s criticism. As Mr. Nocera told it in the second column, after several days of this embarrassment passed, Mr. Buffett decided to “bite back” by going on the offensive in a Fortune interview on April 28.

But that “remarkable interview” with Fortune – the so-called biting back — actually took place the same day as the initial statements, not after five days of wound-licking.

I asked Mr. Nocera if he planned to write anything in his column about the errors; he said he thought the corrections were sufficient, since they did not gloss over the seriousness of the errors.

The question now is: What more would it take for Nocera to get fired?

Posted at 07:11 PM in Business | Permalink | Comments (0)

A key practical lesson of the Loeb-Sotheby's fight is the importance of email hygiene

There's a very interesting passage in Delaware Vice Chancellor Parson's opinion in Third Point LLC V. Ruprecht, C.A. 9469-VCP (May 2, 2014):

... while Plaintiffs have made much of the derogatory way in which various Defendants [including members of the Sotheby's board] referred to Loeb in several emails, I am not persuaded that Plaintiffs have a reasonable probability of demonstrating that the Board‘s decisions vis-à-vis Third Point were motivated by an impermissible animus directed at Loeb. As an initial matter, I note that the majority of the communications in which Loeb is referred to pejoratively were authored by Ruprecht. Additionally, many of those communications were between Ruprecht and a family member, not a fellow Board member. I cannot conclude on the record before me that, with the exception of Ruprecht—who may have taken personally Loeb‘s harsh critiques and open efforts to replace him—anywhere near a majority of the Sotheby‘s Board felt that they had endured a similar affront at the hands of Loeb such that it would impede their judgment or motivate their actions with respect to Third Point. It also is difficult to reconcile the notion that the Board, on a personal level, found Loeb so distasteful that it adopted the Rights Plan for the primary purpose of impairing Third Point‘s electoral rights so that Loeb could not win in a proxy contest, and, yet, later would offer him a seat on the Board as part of settlement discussions. The Sotheby‘s Board was not required to like Loeb, and it very well may not have liked him. The current record, however, does not support a reasonable inference that Plaintiffs have a reasonable probability of establishing that any such "dislike" was the driving force behind any of the Board‘s decisions regarding Third Point.

I've never met Dan Loeb but I suspect he'd be a hoot. One of his core tactics is being a very funny jerk. Consider some of the letters he's sent boards of directors over the years:

Dan Loeb To the Warnaco Board of Directors (8/21/03): “…Do not confuse our significant equity stake with a vote of confidence in the Company’s Chairman, C.E.O. or certain members of the Board of Directors. In fact, we have grave concerns about the competency, judgement and motivation of these individuals…Stuart Buchalter, Chairman of the Board of Directors, extracted $500,000 as a non-executive Chairman in 2002 and currently receives the indefensible salary of $250,000 --- an outrageously high sum for a non-executive Chairman who had already been gifted 12,975 free shares. Appallingly, Mr. Buchalter also received a one-time cash bonus of $210,004 upon the Company’s emergence from bankruptcy in February, 2003… I met Mr. Buchalter in person at a Warnaco Annual Meeting, a handsome middle-aged gentleman, his shock of gray hair and beard and his bold red striped shirt and polka dot red tie made him look oddly like Burt Reynolds’ character, the pornographic producer, in the film ‘Boogie Nights’.”

To Irik P. Sevin: Chairman, President and CEO, Star Gas Partners L.P (2/14/05): “…Sadly, your ineptitude is not limited to your failure to communicate with bond and unit holders. A review of your record reveals years of value destruction and strategic blunders which have led us to dub you one of the most dangerous and incompetent executives in America. (I was amused to learn, in the course of our investigation, that at Cornell University there is an ‘Irik Sevin Scholarship.’ One can only pity the poor student who suffers the indignity of attaching your name to his academic record…It is time for you to step down from your role as CEO and director so that you can do what you do best: retreat to your waterfront mansion in the Hamptons where you can play tennis and hobnob with your fellow socialites.”

To Ken Griffin: President, Citadel Investment Group (9/14/05): “You are surrounded by sycophants, but even you must know that the people who work for you despise and resent you. I assume you know this because I have read the employment agreements that you make people sign…Good luck extracting exorbitant management fees and generating mediocre returns with your bloated organization and ego. By the way, there is little I enjoy as much as watching from afar as your reputation and ‘organization’ declines at the same rate as your falling returns.”

Who says that sort of stuff?

In the present case, VC Parsons reports that Loeb sent a highly derogatory letter to the Sotheby's board:

Loeb apparently made several of the accusations in his letter without actual knowledge of their veracity. In addition, the record supports an inference that Loeb included the letter with the Schedule 13D as part of an "all out assault" meant to destabilize the Company. In contemporaneous emails, Loeb described his letter as both part of a "holy jihad" intended to "make sure all the Sotheby‘s infidels are made aware that there is only one true God," and part of a "Special Operation on Sotheby‘s," which was intended to "shock and awe" the Company and "undermine the credibility" of Ruprecht. Loeb acknowledged that the letter may have caused some "collateral damage" to the Board, but believed that was "an acceptable risk" to have taken.

In this case, I suspect there is method to his seeming madness. As Steven Davidoff observed, Loeb sued to challenge Sotheby's activist pill at least in part to conduct a fishing expedition during discovery, which paid off:

Loeb lost the case, but in the hearing before a court in Delaware, emails sent among the Sotheby’s directors came out with some damning stuff. Steven B. Dodge, the lead independent director, stated that the board “is too comfortable, too chummy and not doing its job” to another director. Another email stated that at least in part Mr. Loeb was “right on the merits.”

In truth, these words led to more public-relations problems than anything else and yet another lesson that people need to be careful about what they write in an email.

Exactly. Corporate lawyers need to read clients the riot act about email hygiene. In this case, those damning emails didn't cost Sotheby's the legal battle, but they may have helped Sotheby's lose the PR war. Tell your board to "say it with roses, say it with mink, but never ever say it in ink."

Posted at 10:52 AM in Corporate Law | Permalink | Comments (0)

The Sotheby's decision upholding activist pills is a huge win for good corporate governance

In my article, Preserving Director Primacy by Managing Shareholder Interventions, I argue that, even though the primacy of the board of director primacy is deeply embedded in state corporate law, shareholder activism nevertheless has become an increasingly important feature of corporate governance in the United States. The financial crisis of 2008 and the ascendancy of the Democratic Party in Washington created an environment in which activists were able to considerably advance their agenda via the political process. At the same time, changes in managerial compensation, shareholder concentration, and board composition, outlook, and ideology, have also empowered activist shareholders.

There are strong normative arguments for disempowering shareholders and, accordingly, for rolling back the gains shareholder activists have made. Whether that will prove possible in the long run or not, however, in the near term attention must be paid to the problem of managing shareholder interventions.

This problem arises because not all shareholder interventions are created equally. Some are legitimately designed to improve corporate efficiency and performance, especially by holding poorly performing boards of directors and top management teams to account. But others are motivated by an activist’s belief that he or she has better ideas about how to run the company than the incumbents, which may be true sometimes but often seems dubious. Worse yet, some interventions are intended to advance an activist’s agenda that is not shared by other investors.

In the article, I propose managing shareholder interventions through changes to the federal proxy rules designed to make it more difficult for activists to effect operational changes, while encouraging shareholder efforts to hold directors and managers accountable.

But there's also the prospect of corporate self-help. When notorious hedge fund raider Dan Loeb took a stake in Sotheby's, the firm responded by adopting a so-called activist pill. This is a variant on the classic poison pill, which is intended to give corporate boards leverage when activist investors launch an intervention. Dan Loeb sued in the Delaware Chancery Court, seeking to have the pill invalidated. He lost, although Sotheby's then caved by putting Loeb and a couple of his cronies on their board. (For good discussions of why Sotheby's caved, see Alison Frankel's analysis and, of course, Steven Davidoff's analysis.)

The reality, of course, is that an activist pill will not insulate an incompetent board faced with legitimate shareholder gripes. In practice, such a board will still face a substantial risk of losing a proxy fight with the activist despite the pill, which drives many such boards to cave in the face of an activist intervention. As Davidoff pointed out, "even Carl C. Icahn has stated that he is 'surprised' that he is being offered board seats so often to forestall a campaign."

Even so, the decision is an important one. First, by confirming that an activist pill is subject to review under the Unocal standard rather than the more demanding Blasius standard, VC Parsons may well have contributed to the further erosion of Blasius, a process that may end with Blasius being overturned, which would give boards greater freedom to resist activist campaigns.

Second, VC Parsons's decision suggests that a board comprised of disinterested and independent directors--especially when assisted by independent outside financial and legal advisors--will get a lot of deference from the courts. The decision thus suggests that Delaware case law is not moving towards a more shareholder centric model.

Third, and perhaps most critically, VC Parsons confirmed that efforts by activists to obtain de facto control without paying a control premium justifiies a defensive response by the board. This suggests that Delaware courts will be sensitive to activist interventions in which the activist(s) is pursuing private rent seeking gains rather than improved corporate governance. Which is precisely what my article argues we should be trying to do.

Posted at 10:20 AM in Mergers and Takeovers, Shareholder Activism | Permalink | Comments (0)

05/07/2014

Critiquing Naked Capitalism's Critique of the Shareholder Wealth Maximization Norm

There's a post on naked capitalism by Yves Smith entitled How Milton Friedman Fomented the Barmy “Corporations Exist to Maximize Shareholder Value” Myth making the rounds, which I find wholly unpersuasive. Let's parse (quotes from Smith are in blue for clarity):

If you review any of the numerous guides prepared for directors of corporations prepared by law firms and other experts, you won’t find a stipulation for them to maximize shareholder value on the list of things they are supposed to do. ...

In my book, The New Corporate Governance in Theory and Practice (2008), I wrote that:

Although some claim that directors do not adhere to the shareholder wealth maximization norm, the weight of the evidence is to the contrary. A 1995 National Association of Corporate Directors (NACD) report, for example, stated: “The primary objective of the corporation is to conduct business activities with a view to enhancing corporate profit and shareholder gain,” albeit subject to the qualification that “long-term shareholder gain” may require “fair treatment” of nonshareholder constituents. A 1996 NACD report on director professionalism set out the same objective, without any qualifying language on nonshareholder constituencies. A 1999 Conference Board survey found that directors of U.S. corporations generally define their role as running the company for the benefit of its shareholders. The 2000 edition of Korn/Ferry International’s well-known director survey found that when making corporate decisions directors consider shareholder interests most frequently, albeit also finding that a substantial number of directors feel some responsibility towards stakeholders.

So Smith's claim is, at best, overstated.

So is Smith's next claim:

[Shareholder wealth maximization is] not a legal requirement.

Yes, it is. In my book, The New Corporate Governance in Theory and Practice (2008), I explain that:

The classic statement of the shareholder wealth maximization norm remains the Michigan Supreme Court’s decision in Dodge v. Ford Motor Co. Henry Ford embarked on a plan of retaining earnings, lowering prices, improving quality, and expanding production. The plaintiff-shareholders, the Dodge brothers, contended an improper altruism toward his workers and customers motivated Ford. The court agreed, strongly rebuking Ford:

A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end, and does not extend to a change in the end itself, to the reduction of profits, or to the non¬distribution of profits among stockholders in order to devote them to other purposes.

Consequently, “it is not within the lawful powers of a board of directors to shape and conduct the affairs of a corporation for the merely incidental benefit of shareholders and for the primary purpose of benefiting others.” Dodge’s theory of shareholder wealth maximization has been widely accepted by courts over an extended period of time. Almost three-quarters of a century after Dodge, the Delaware chancery court similarly opined: “It is the obligation for directors to attempt, within the law, to maximize the long-run interests of the corporation’s stockholders.”

For more on the relevant law see this post from February 2014 and this one from May 2012.

Back to Smith:

Directors and officers, broadly speaking, have a duty of care and duty of loyalty to the corporation. From that flow more specific obligations under Federal and state law. But notice: those responsibilities are to the corporation, not to shareholders in particular…

Wrong again. In Much Ado about Little? Directors' Fiduciary Duties in the Vicinity of Insolvency, I explained that directors have some duties that run to the corporate entity and some that run to shareholders: "This distinction is what differentiates direct from derivative shareholder litigation, after all. See Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, (Del. 2004) (“The stockholder must demonstrate that the duty breached was owed to the stockholder and that he or she can prevail without showing an injury to the corporation.)." I went on to further explain that:

In addition to being doctrinally questionable, the notion that directors owe duties to the corporate entity is inconsistent with the dominant contractarian theory of the firm. The insistence that the firm is a real entity is a form of reification—i.e., treating an abstraction as if it has material existence. Reification is often useful, or even necessary, because it permits us to utilize a form of shorthand—it is easier to say General Motors did so and so than to attempt in conversation to describe the complex process that actually may have taken place. Indeed, it is very difficult to think about large firms without reifying them. Reification, however, can be dangerous. It becomes easy to lose sight of the fact that firms do not do things, people do things.

In other words, the corporation is not a thing to which duties to can be owed, except as a useful legal fiction. The distinction between direct and derivative shareholder litigation is one area in which that fiction long has been thought useful.

Back to Smith again:

Appelbaum and Batt trace the origins of the managerial model of capitalist enterprise to the New Deal securities laws. They helped institutionalize dispersed shareholding, and with it, a separation of ownership and management. From the 1930s onward, there was an active debate between two schools of thought. Adolf Berle and Gardiner Means were concerned that this new approach neglected shareholder interests. By contrast, Harvard law professor Merrick Dodd contended that large-scale corporations had broader social aims, including providing employment and useful goods. By the early 1950s, the Dodd view had clearly prevailed.

So many errors in so few words. First, as a matter of historical accuracy, the separation of ownership and control long predates the New Deal. In my book Corporation Law and Economics (2002), I wrote that:

... it’s important to remember that the separation of ownership and control has proven to have significant survival value. Professor Walter Werner aptly referred to the Berle and Means account as the “erosion doctrine.” According to their version of history, Werner explained, there was a time when the corporation behaved as it was supposed to:

The shareholders who owned the corporation controlled it. They elected a board of directors to whom they delegated management powers, but they retained residual control, uniting control and ownership. In the nation’s early years the states created corporations sparingly and regulated them strictly. The first corporations, run by their proprietors and constrained by law, exercised state-granted privileges to further the public interest. The states then curtailed regulation . . . , and this Eden ended. The corporation expanded into a huge concentrate of resources. Its operation vitally affected society, but it was run by managers who were accountable only to them¬selves and could blink at obligations to shareholders and society.

The erosion doctrine, however, rested on a false account of the history of corporations. Werner explained that economic separation of ownership and control in fact was a feature of American corporations almost from the beginning of the nation: “Banks, and the other public-issue corporations of the [antebellum] period, contained the essential elements of big corporations today: a tripartite internal government structure, a share market that dispersed shareholdings and divided ownership and control, and tendencies to centralize management in full-time administrators and to diminish participation of outside directors in management.”

In addition, it's worth noting in passing that Alfred Marshall had explored the separation of ownership and control as early as 1890, as did William W. Cook in 1891, which inferentially supports the argument, made above, that ownership and control had separated well before the New Deal.

Second, as another matter of historical accuracy, the corporate social responsibility debate significantly predates the Berle-Dodd debate in the 1930s.

Third, and most important, Dodd did not win his debate with Berle. As I explained in Interpreting Nonshareholder Constituency Statutes:

Surprisingly, Berle himself believed that his argument with Dodd “ha[d] been settled (at least for the time being) squarely in favor of Professor Dodd’s contention.” This concession appears to have been motivated in large part by the New Jersey Supreme Court’s decision in A.P. Smith Mfg. Co. v. Barlow, which upheld a state statute authorizing corporate charitable giving. In doing so, the court broadly endorsed the corporate social responsibility doctrine. As described infra ..., however, Barlow’s result is not inconsistent with the profit maximization theory and, in any event, it remains in the minority among the decided cases. ...

A.P. Smith Manufacturing Co. v. Barlow, [FN43] the most frequently cited example, upheld a corporate charitable donation on the ground, inter alia, that “modern conditions require that corporations acknowledge and discharge social as well as private responsibilities as members of the communities within which they operate.” [FN44] Ultimately, however, the differences between Barlow and Dodge have little more than symbolic import. As the Barlow court recognized, shareholders’ long-run interests are often served by decisions (such as charitable giving) that appear harmful in the short-run. [FN45] Because the court acknowledged that the challenged contribution could be justified on profit-maximizing grounds, its broader language on corporate social responsibility is arguably mere dictum. [FN46] In any case, Barlow and its ilk are still in the minority. [FN47]

As Dalia Tsuk points out in 30 Law & Soc. Inquiry 179 (2005), even Dodd recognized that Berle had won:

Berle proclaimed that Dodd had won the debate; he concluded that “modern directors [were] not limited to running business enterprise for maximum profit, but [were] in fact and recognized in law as administrators of a community system” (Berle 1960, xii; 1954, 169). Surprisingly, there was little evidence to support this argument. As Joseph L. Weiner commented, “[t]he thesis . . . that corporate powers [were] held in trust for stockholders could not be established by decisions of the 1920's, but [could] hardly be contradicted [in the 1960s]” (1969, 1466; Israels 1964). This was also Dodd's assessment in 1942, when he wrote that the New Deal legislation had made his ideal of managers as trustees for workers, consumers, and the community irrelevant for corporate law. According to Dodd, corporate law became fixated on the relationship between managers and shareholders (546-47).

I am not going to try defending Milton Friedman's famous article, which Smith takes great pains to harshly criticize, both because that article is indeed so deeply flawed that it makes an easy straw man for people like Smith to debunk.

But I trust I have persuaded you that Smith's claim that "'maximizing shareholder value' is an idea made up and promoted by economists, starting with Milton Friedman and his Chicago School cronies," is BS. It is the law and has been for at least a century.

Posted at 03:05 PM in Corporate Law, Corporate Social Responsibility | Permalink | Comments (10)

Recent and Recommended Kindle Purchases

Posted at 01:33 PM in Books | Permalink | Comments (0)

Crown Government in America: A Truly Iconoclastic Book by Frank Buckley

You need to read The Once and Future King: The Rise of Crown Government in America by F.H. Buckley:

This remarkable new book shatters just about every myth surrounding American government, the Constitution, and the Founding Fathers, and offers the clearest warning about the alarming rise of one-man rule in the age of Obama.

Most Americans believe that this country uniquely protects liberty, that it does so because of its Constitution, and that for this our thanks must go to the Founders, at their Convention in Philadelphia in 1787.

F. H. Buckley’s book debunks all these myths. America isn’t the freest country around, according to the think tanks that study these things. And it’s not the Constitution that made it free, since parliamentary regimes are generally freer than presidential ones. Finally, what we think of as the Constitution, with its separation of powers, was not what the Founders had in mind. What they expected was a country in which Congress would dominate the government, and in which the president would play a much smaller role.

Sadly, that’s not the government we have today. What we have instead is what Buckley calls Crown government: the rule of an all-powerful president. The country began in a revolt against one king, and today we see the dawn of a new kind of monarchy. What we have is what Founder George Mason called an “elective monarchy,” which he thought would be worse than the real thing.

Much of this is irreversible. Constitutional amendments to redress the balance of power are extremely unlikely, and most Americans seem to have accepted, and even welcomed, Crown government. The way back lies through Congress, and Buckley suggests feasible reforms that it might adopt, to regain the authority and respect it has squandered.

It's not just Obama, of course. Rather, complaints about the Imperial Presidency date back at least to Richard Nixon and probably well before that, but the trand over the last 20 years definitely has been accelerating in the wrong direction under both Democrats and Republicans. All of which make's Frank's book a must read.

Posted at 01:17 PM in Books | Permalink | Comments (0)

05/06/2014

If law schools were serious about evaluating teaching effectiveness, we'd ....

Over at Prawfsblawg, Jennifer Bard runs the same old concerns about student evaluations up the flagpole one more time. She provides links to some of the vast literature on how lousy student evaluations are at measuring inputs. But who cares?

In 26 years of law teaching, I have yet to come across anybody in the legal academy who was really willing to face the hard reality that what matters are outcomes.

The question ought not to be how popular a given teacher is (which is what evaluations currently measure for the most part), but how well have our students learned the skills and knowledge they will need for practicing law. But how to measure that fact?

Well, how about a No Law Student Left Behind approach? Have the ABA and AALS come up with a list of practice relevant courses. Require every law teacher to teach at least one practice relevant course off the list (no more larding your entire teaching schedule with Law and the Visual Arts or Law and Medieval Icelandic Blood Sagas). Develop a nationwide standardized test for each course on the list. Require all law students to sit for the standardized exam for each subject they take. Publish the results for each school on a free website, so prospective law students can compare how effectively different faculties teach the subjects in which they have the most interest. Have each school post the scores for each teacher on their intraweb, so that enrolled students can make more informed choices. Let disclosure do the rest.

I understand that No Child Left behind is controversial. I understand that teaching to the test is not ideal. But I also understand that measuring outcomes is always most controversial to the people who will be held accountable. Look at all the whining from teachers' unions about linking pay to performance on tests. Can you imagine the whining we'd get from the legal academy if this idea were widely accepted?

Of course, this idea has no hope. Because law school faculties aren't yet ready to get serious about the harsh reality that we a business and businesses require metrics by which to hold their employees accountable.

Posted at 03:40 PM in Law School | Permalink | Comments (0)

05/05/2014

Commander Data retweeted my climate science tweet

As a Star Trek fan, this made my day:

@BrentSpiner @AdamBaldwin @TheStreet One can agree with climate science, while still rejecting statist/socialist/anti-growth solutions.
— Stephen Bainbridge (@ProfBainbridge) May 5, 2014

RT @ProfBainbridge One can agree with climate science, while still rejecting statist/socialist/anti-growth solutions.--"Solutions" the key!
— Brent Spiner (@BrentSpiner) May 5, 2014

BTW, the OECD Environmental Directorate is a good place to start for climate change solutions that are pro-growth/pro-market.

Posted at 02:53 PM in Dept of Self-Promotion, Science | Permalink | Comments (0)

05/04/2014

Great advice for corporate lawyers from from Delaware Justice Jack Jacobs

An excellent analysis of what the Justuce calls "recurring" corporate governance issues, which he summarizes as follows:

If a board decision is the subject of a lawsuit, do whatever is necessary to document that the board is entitled to all of the protective presumptions of the business judgment rule—and do it before the lawsuit occurs.

Posted at 02:04 PM in Corporate Law | Permalink | Comments (0)

Dissension at the Securities and Exchange Commission

Broc Romanek has details:

“Nobody told me there’d be days like these. Strange days indeed – strange days indeed.” John Lennon’s words, but they apply to yesterday’s news out of the SEC. First, the two Republican Commissioners – Michael Piwowar & Dan Gallagher – issued this joint statement on the conflict minerals court decision. This prompt many members to assume this means that these two lost their argument and that the SEC is not issuing a stay on the conflict mineral rule, which some had expected would happen. But the SEC hasn’t said so – at least not yet – so we are all still awaiting that important decision (this WSJ article says that the SEC is preparing to implement the bulk of the rule).

Outside of the context of rule adoption and speeches, it’s pretty rare for Commissioners to issue statements like this to publicly air disputes. However, the Commission increasingly has become partisan over the past decade – and this joint statement is not that big of a surprise given the fight over the conflict mineral rule all along.

What was surprising though was the second news of the day – a dissent on a WKSI waiver! And this time by Democratic Commissioner Kara Stein! I feel bad for Chair Mary Jo White who might have a tougher time garnering consensus going forward. Back when I worked for a Commissioner in the late ’90s, Chair Arthur Levitt rarely would take a matter to a vote unless he knew he had a 5-0 vote in his pocket. That certainly is ancient history…

I had a former SEC Commissioner once tell me that the chairman during his tenure on the SEC treated the other 4 commissioners--regardless of party affiliation--like mushrooms. Votes were pro forma, at best.