Mississippi State University is getting $37.2 million dollars in federal R&D earmarks this year, just as its senior senator Thad Cochran has ascended to the chair of the appropriations committee.  Its earmarks from last year totaled only $19.8 million, while Ted Stevens of Alaska was chair.  Among the past beneficiaries of government largess in Mississippi are the Thad Cochran National Warmwater Aquaculture Center at MSU Stoneville, the Thad Cochran Research, Technology and Economic Development Park at MSU Starkville, and the Thad Cochran Research Center at his alma mater Ole Miss.   

According to CSM:

"Universities have long mastered the whole vanity game of naming rights [for new campus facilities], and in recent years they've added politicians who, unlike philanthropic donors giving their own money, are the Thad Cochrans of the world giving someone else's money," says Ron Utt, a budget expert at the Heritage Foundation, a conservative think tank in Washington.

Besides the interesting tale of MSU's success in garnering federal funds, CSM has a companion piece detailing the increasing efforts of academic institutions to lobby Congress for "directed appropriations." 

Academic earmarks jumped from $15 million the first year of the Reagan presidency to $336 million in fiscal year 1989, the year he left office.  By the 1990s, academic institutions rivaled defense contractors as consumers of lobby services to win federal earmarks - and helped define a new lobbying specialty in Washington's K Street corridor.

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Last week the Second Circuit upheld Bernie Ebbers 25 year sentence, calling it “harsh, but not unreasonable.” In fact the Second Circuit highlighted the difference between his sentence on those for violent crimes, noting “25 years is a long sentence for a white-collar crime, longer than the sentences routinely imposed by many states for violent crimes, including murder, or other serious crimes such as serial child molestation.” The Second Circuit nevertheless upheld the sentence as reasonable apparently because, based on the manner in which the sentencing guidelines are structured, Congress had made a judgment that the loss associated with some economic crimes warranted significant sentences and because Ebbers appeared to have been motivated by personal financial circumstances. The White Collar Crime blog poses some interesting questions about the decision, and about how we should assess the reasonableness of such sentences. http://lawprofessors.typepad.com/whitecollarcrime_blog/2006/07/commentary_on_e.html

It is a hard question. On the one hand, the Second Circuit’s language seems to invite us to assess reasonableness by comparison to violent crimes, with predictable results. Indeed, that assessment—does any economic crime merit greater punishment than the punishment we would impose on a serial child molester?—tempts us to conclude that all economic crimes should receive less punishment than violent crimes. On the other hand, Congress seems to have placed a lot of emphasis on the loss caused by economic crimes. While the emphasis acknowledges that such crimes can have a significant impact on individuals and the market, such an emphasis seems like it could lead to disproportionate results. Indeed, does the person who commits a financial fraud at a Fortune 100 company merit greater punishment than the person who commits the same fraud at a small closely held firm? Viewed in this light, the case and sentence raise an important question not about what's reasonable, but rather about how we determine reasonableness.

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My daughter is preparing to attend my alma mater, BYU, this fall. I thoroughly enjoyed college, which probably explains why I am a professor, and all of this preparation has made me jealous.

She is enrolled in the Freshman Academy (which the BYU website describes as "groups of students who take several classes together, live near each other, and work with faculty and peer mentors to become outstanding scholars, citizens, and disciples of Jesus Christ"), and her group recently received a summer reading assignment for significant portions of the Qur’an. Next week, we are having lunch with one of my law school colleagues, Asifa Quraishi, who teaches Islamic Law, so that we can discuss the readings. (Thanks, Asifa!)

At the end of August, we will drive to BYU, and my daughter will enroll in a one-week course as part of the Late Summer Honors Program. She is taking a class called "Waka Waka! Becoming a Japanese Poet, No Japanese Required." From the course description: "Waka, literally meaning Japanese poem, is a 31-syllable poetic form from which all Japanese poetry developed. Waka were first composed, before the advent of writing in Japan to celebrate victories in religion, battle, and love! We will study poetics as well as compose our own poetry based upon Japanese models while mastering the basics including structure, diction, and content."

Once the semester begins, she will be taking a class in ancient civilizations from Egyptologist Wilfred Griggs, whom I remember from my time at BYU because he was in charge of an important Egyptian exhibition that came to campus. She also has a class devoted entirely to Mozart.

Last week, she was discovered by her new roommate, and they have been emailing. My daughter wants to plan decorations for their room. By the way, she is living in the same dorm complex where I lived when I was a student, which makes me feel old, but all the more nostalgic.

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Gordon posted recently on "Law and Entrepreneurship," a field that I think we're all still trying to define clearly.  Gordon is focused, quite sensibly, on the way that legal organizations help entrepreneurs develop an idea into an organization with a commercially viable idea, whether it be through a VC-backed start-up, university tech transfer, internal corporate R&D, a strategic alliance, etc.  This fall I'll be teaching a class in this area for the first time.  While I very much share Gordon's interest in this research agenda, I wonder if I might shift the discussion a bit and ask if anyone has thoughts about teaching this subject. 

What's the best way to teach a course in this area?  I've looked at a few syllabi from classes in entrepreneurship or venture capital at various schools, and they tend to focus on the classic stages of a tech start-up, from initial funding (perhaps angel funding), to VC funding, to IPO or other acquisition/exit.  There's a lot to be said for this format.  But looking at these syllabi, I can't figure out how they're conceptually organized.  And I'm afraid my students will have the same struggle.  In my experience, having clear themes makes it much easier for students to retain what they learn in the long-run.  It's what distinguishes a law school course from a CLE seminar.

So I wonder if the classic focus on tech entrepreneurship and venture capital is the right way to go.  From the point of view of training lawyers, is there a better way to conceptually organize the course?  In my research in the area, I've noticed certain elements of legal organization that seem to recur, again and again and again, like a chorus.  (E.g. regulatory exemptions from tax, securities, ERISA, two-and-twenty comp structure, incomplete contracts and unenforced/unenforceable contractual rights ...)  When you look at these elements, a VC-backed startup has more in common with the portfolio company of a private equity fund than it does with other new businesses. 

So with that in mind, I'm considering making private investment funds, rather than entrepreneurship per se, the central focus.  I'm tentatively organizing it around the following key ideas:

1.  The source of investment capital differs from other areas of finance, creating unique opportunities for regulatory flexibility (and some unique concerns). 

2.  Conditions of extreme uncertainty and risk require active intermediaries (VCs and private equity professionals) to source and monitor investments.

3.  The pressure for rapid exit affects the design of the legal infrastructure employed at the portfolio company level.

4.  Reputation often replaces or supplements contractual solutions.

(Some readers may notice that in this course design I'm borrowing pretty heavily from Ron Gilson's research, though I'm adding my own regulatory focus to his transactional focus.) 

The course would, broadly speaking, work from the top of the organizational structure downwards, starting with the investors.  We'll touch on portfolio design, ERISA, securities exemptions, UBIT, and tax.  Next will come fund organization, including the 40 Act exemptions and the "Two and Twenty" compensation structure.  Only then do we get to portfolio company design, with choice of entity, board organization, form of investment, and so on. 

Does this course structure work?  If not, then what is it, exactly, that makes a course in "Law and Entrepreneurship", "Entrepreneurial Finance", "Venture Capital", or "Venture Capital and Private Equity" a worthwhile part of the curriculum?  What's the best way to distinguish it from other corporate/transactional courses? 

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One of the intangible assets that a company has is its reputation.  Corporate reputation is a perception of high esteem or respect for a firm's activities, strategies, etc.  The quality of a firm's choices and outcomes are one driver of reputation, but reputation also has a life of its own.  Once a firm establishes strong visibility in the media and among investors and analysts, improvements in quality tend to lead to stronger gains in reputation.  Reputation is also related to non-financial performance criteria, such as the ability of a firm to deal well with its stakeholders.  When a firm is viewed as being fair to employees and the larger global community, its reputation is enhanced.

I bring up corporate reputation because it is one way that firms that are attentive to nonshareholder constituencies may improve their total market value.  As I mentioned in my earlier posts, attending to all stakeholder demands may be important to maximizing the total market value of the firm.  Corporate reputation is the mechanism linking stakeholder management with market value maximization.  A lot of good organizational research indicates that improved corporate reputation leads to improved financial performance (e.g. Fombrun and Shanley 1990; Landon and Smith 1997).   Roberts and Dowling  (2002) demonstrate that reputation actually enhances long-term financial performance, which assuages critics who argue that reputation offers only temporary financial gains.  They argue that reputation is important to market value creation because it is so difficult to replicate.  If it were easy to create a good reputation, any firm would do it and it would immediately lose its value.  Thus, reputation is a source of persistent competitive advantage.

One of the most well known researchers of corporate reputation is Charles Fombrun of the Reputation Institute.  For anyone looking for a straightforward and comprehensive treatment of the subject, I recommend Fombrun's (coauthored with Cees Van Riel) Fame and Fortune: How Successful Companies Build Winning Reputations.  In the book, Fombrun and Van Riel outline the pathways from reputation to financial performance. One path is by improving the operating performance of a company.   

In general terms, a good reputation can improve a company's efficiency and effectiveness by stimulating employee productivity.  It also creates a reservoir of goodwill toward the company that derives from partners, suppliers, dealers, creditors, and regulators whose support often manifests itself in the form of lower input prices, including a lower cost of capital, and translates into higher margins.  The company's lower input costs are supported by its ability to charge better prices for its offerings, a factor that enhances the company's margins, encourages financial analysts to give favorable ratings to the company and fuels demand for its shares (pg. 27).

The logic is similar to that offered by Joel Podolny in his book Status Signals.  He argues that status (which is similar but not sociologically synonymous with reputation) exhibits the Matthew Effect.  Firms that have high status typically attract better employees who are willing to work for the firm at a lower wage, simply because of the status benefits it provides to their ego.  Suppliers want to do business with high status firms, so they are willing to take some profit hits in order to do so.  The result is that high status (or high reputation) firms can offer the same quality product for a lower price than their competitors.  The result of this feedback process is that high status firms become firmly embedded in a status hierarchy.  Status and reputation, thus, tend to reproduce themselves.

Of course, the whole point of Fombrun's project is to encourage managers to do things that will enhance their reputation, so he believes that there is at least some mobility in reputational assessments.  How do firms improve their reputations?  One of the most crucial things that they can do is improve their standing among stakeholders that are often ignored by profit-seeking companies.  In chapter 3, Fombrun and Van Riel demonstrate empirically that the best way to enhance reputation is to "improve its emotional appeal to consumers" (pg. 59).  To improve these perceptions by 7 percent, a firm could improve perceptions of its social responsibility by 26 percent.  Thus, doing good things for the environment, for communities, and for activist-related stakeholders inevitably feeds back on consumer perceptions, which in turn leads to improve reputation and enhanced market value.

The link between corporate reputation and market value shouldn't be forgotten when discussing directors' or managers' dealings with nonshareholder constituencies.  Secondary stakeholders are, in this sense, important to the total market value of the firm.  In extremely competitive industries, the firm that comes out on top may be the firm that is best able to handle its stakeholders and consequently enhance its reputation.

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Peter Rip is bothered by the question, "What's your business model?":

The reason the question "what's your business model?" bothers me it that the inquirer often judges the answer based on its parsimony, as though simple is prima facie evidence of good.  Occam’s razor applied to business strategy. 

I myself will sometimes ask others the question, but I use it to test for complexity, not simplicity.  I use it as a Rorschach to see how deeply the respondent has thought about the market and which aspects of the business appear most salient to him or her. 

Peter seems to be confusing two distinct concepts: simplicity and simplism. The ability to communicate complex ideas simply is a mark of genius, but oversimplification suggests lack of depth.

The companion of oversimplification is excessive complexity, which may not signal lack of depth, but is indicative of muddled thinking. Consider the chart that Peter "sat down and drew" to illustrate the complexity of business plans:

Peter refers to the chart as a "checklist," so why make a chart out of it? The spatial organization -- ten aspects of business plans organized around a box labeled "Business Model Levers to Impact Return on Equity" -- has no significance whatsoever. I strongly suspect that Peter could refine the chart to make it more meaningful, but that would take lots of time. And if he were attempting to communicate effectively, I suspect the chart would become simpler, not more complex. (Of course, it is possible that this chart was not designed to teach, but rather to illustrate the complexity of business plans. In that case, the chart had darn well better be complex!)

HT Brad Feld.

P.S. Did you notice Peter's use of "impact" as a verb? You can read my thoughts about that here.

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Wal-Mart has decided to exit from Germany, eight years after entering the market. German retailers beat Wal-Mart with low prices. From the W$J:

After Wal-Mart acquired two small, struggling German retail chains eight years ago, it ran up against several problems. It found itself being underpriced by local retailers called hard discounters, such as Aldi. German shoppers flock to these stores, which sell a limited selection -- often 850 to 1,000 items, compared with 100,000 at Wal-Mart -- and stock mainly their own store brands.

Some 80% of German consumers are about 20 minutes from an Aldi, according to Nestle's research. The hard discounters account for about 40% of the German retail market, compared with Wal-Mart's share of less than 2%, analysts say.

German shoppers are accustomed to buying merchandise strictly based on price, German retail consultants say. They are willing to buy laundry detergent at one store and then go to another to get a better price on paper towels. That behavior is called "basket splitting." It is the antithesis of what American shoppers like: one-stop shopping. A big plank of Wal-Mart's strategy in the U.S. and elsewhere is getting shoppers to turn to it for an increasingly wide array of goods.

According to the article, this is not the only international problem for Wal-Mart. It's worth a read.

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Remember last year when Larry Ellison decided to settle a civil suit alleging insider trading charges in California even though a similar suit was dismissed in Delaware?  I blogged about it here, and Larry Ribstein added much here.  At issue was whether the California law (Section 25402 and 25502.5 of the California Corporations Code) that allows issuers to sue insiders for trading on inside knowledge and receive treble damages violates the internal affairs doctrine if applied to corporations incorporated outside of California.  Because Ellison settled, we could only speculate.  Well, we may know soon.

The litigation trustee of Peregrine Systems, Inc., a Delaware corporation headquartered in California, sued directors and officers under this provision in 2004.  The trial court in San Diego threw out the charges, citing the internal affairs doctrine.  The plaintiffs filed a petition for writ of mandamus and won (Friese v. Superior Court, 134 Cal.App.4th 693 (2005).  The court of appeals issued the writ, reasoning that the California statute was more like a blue sky law, pertaining to securities, than a law articulating fiduciary duties, pertaining to internal affairs.  This writ was denied review on March 15, 2006.  But wait, it's not over!  The defendants filed a petition for a writ of certiorari in the U.S. Supreme Court on June 12, 2006 (Moores v. Friese, No. 05-1590, 74 U.S. Law Week 3704).  The petition presents two questions:

(1) With respect to claim of breach of official duty to corporation, does commerce clause permit state to substitute its own substantive law for that of state of incorporation? (2) Does due process clause permit directors and officers of corporation incorporated in one state to be sued under substantive law of another state for breach of official duty to corporation?

I must be a really big nerd to be this excited, but this is exciting! I tend to agree with the California Court of Appeals (shocker). Trading of securities on inside information seems more like a state law we recognize against foreign corporations (blue sky laws) than the ones we don't. Now, the next question that follows is why we have allowed that distinction to go on for so long. Why have we had federal securities laws living parallel to state securities laws for so long? Surely the reason can't just be to make first-year associates lives miserable preparing Blue Sky Memos. How is the line between corporate governance and corporate securities so distinguishable?

I also know that there are some out there (usually me included) that are skeptical of insider trading laws in general. However, this one seems to get at some of the problems because the plaintiff is the issuer. Theoretically, if the trader has usurped some corporate knowledge, then the one with the cause of action is the issuer. All that aside, if we have insider trading laws, and we have a system that allows states to apply laws that govern securities to foreign corporations, then I still agree with the California Court of Appeals.

BTW, the "Moores" is former director and chairman of the board John Moores, founder of BMC Software and owner of the San Diego Padres.

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Floyd Landis denies doping: "I declare convincingly and categorically that my winning the Tour de France has been exclusively due to many years of training and my complete devotion to cycling."  He claims that his body naturally produces high levels of testosterone. Which leads us to the poll question ...

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This W$J article notes how the pension bill going through Congress would make it easier for pension funds to get into hedge funds.  Sounds scary and risky, right?  It shouldn't.  Under current law, if an investment fund takes more than 25% of its money from pension funds (and isn't a "venture capital operating company" or VCOC - long story), the hedge fund becomes an ERISA fiduciary, which apparently is a pain in the behind.  The bill would exempt public employee and government pensions from counting against the 25%. 

I think this makes sense -- public employee pension funds (think CalPERS) are usually big powerhouse players who can figure out which funds are better to invest in, and the 25% rule can make it difficult for pension funds to get into the best funds.  A few questions, though:

1 -- Instead of drawing a line based on public employee vs. private pension funds, why not draw a line based on the size of the pension fund?  Presumably size is a better proxy for sophistication than govt vs. private. 

2 -- Couldn't Congress turn the rule around to look at the percentage of assets that a pension fund invests in a given hedge fund rather than the the percentage of money in a hedge fund that comes from pension funds?  I'd be concerned if my pension were all invested in one hedge fund, but not if 15% of my pension money is spread across five different funds. 

3 -- Why do we think hedge funds are more dangerous than venture funds?  I think the purpose of the rule here is to discourage pension fund managers from pushing their fiduciary obligations off onto other passive investment managers who aren't ERISA fiduciaries.  VC funds can fit into a different policy box because they actively exercise management rights.  They aren't passive investors.  (I think a lot of private equity funds also manage to fit into the VCOC box, but I'm not sure.)  As hedge funds become more active investors, then maybe the right policy choice here would be to loosen the VCOC rules a little, not change the 25% rule. 

If that's not the rational for the VCOC exception, then what is?

Anyone know of a good law review article that talks about these rules? 

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Somewhere out there is someone (NeedsCash) who has a short-term need for cash and someone else (HasCash) who would like a place to park some money for a short while.  NeedsCash goes to a bank and finds that a nonrecourse loan will cost him 14.89% (the average this week for personal, two-year loans).  His credit card rate is higher than that.  Meanwhile, HasCash goes to her bank and finds that a two-year CD only guarantees her a rate of 5.00%, but she has to put in at least $10,000.  Treasuries are a little less, but the minimum is $1000.  HasCash considers mutual funds, but needs a guaranteed return.  Stalemate?

Just as the Internet has gotten rid of intermediaries in other industries, Prosper now matches up would-be borrowers and would-be lenders and let's them participate in auctions.  (Hat Tip:  Katie Porter at Credit Slips.)  The borrowers submit themselves to being rated by providing a lot of information and then divulges personal information (and a photo) about why they need to borrow the money and how they will repay it.  Lenders can bid to be part of the syndicate, so lenders may bid $50 or $5000.  There aren't many places that someone with $50 to spare can earn 9% and not that many places where someone who needs $2000 to fill the gap between taking the bar and starting a job can pay a mere 9%.  Sounds promising.

Just as how eBay created professional online merchants, Prosper seems to have created professional online lenders -- some of the auctions are merely to raise money for other Prosper investments.  Cool.  Prosper encourages lenders to spread out their loans across borrowers to diversify.

Some nagging questions:  Here is Prosper's About page.  How will would-be lenders (professional or otherwise) will sort out the borrowers on Prosper?  (Prosper tells lenders to use their own criteria.)  Will their be conscious or unconscious discrimination based on race?  Age?  Beauty? Grammar?  Prosper services the loans and pays the return (minus a transaction fee) to the lenders.  Is Prosper a broker-dealer?  Is Prosper selling bonds, securities, notes?  How does the law describe this, and will it regulate it?  Is this merely an individual getting loans from 10 other individuals, or is this a discount broker-dealer showing would-be investors a portfolio of bond investment choices?    The loans are not insured, but Prosper assures lenders that if they make 10 loans and 2 default, their overall return is still good.  Oh, enough legal suspicions.  Just relax and enjoy the entreprenurship.

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Exxon Mobil reported second quarter profits of $10.36 billion, its second best quarter ever.  But the Washington Post reports that the profit report has been met with a round of criticism from those who believe that the company is getting rich at the expense of consumer motorists.  Apparently even analysts are concerned about the pressure such profits may generate from outside groups.  Indeed, apparently there are some in Congress who want to tax oil companies on what they see as their "profit windfall."  So, according to the Washington Post, Exxon Mobil had to spend time in its call to analysts allaying concerns about the negative attention and reaction its profit report would generate.  Since I have been spending a lot of time looking at corporate rhetoric, I have to wonder if this is just talk or if there is really some concern that the perception that Exxon Mobil is getting rich while motorists suffer will have some serious negative repurcussions.  Ultimately, however, this story made me think about the famous quote from Henry Ford who once described the large profits the Ford Motor Co. was making as "awful." 

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The blogosphere is again hopping with commentary on the debate over affirmative action in law school, with special reference to the empirics.  Bill Henderson at ELS has just posted a very thoughtful comment on the state of play on the empirics of Richard Sander's A Systemic Analysis of Affirmative Action in American Law Schools.  Bill's comment responded to a provocative plea by TOTM's Josh Wright asking for clarity on the debate: 

Does anybody following the empirical exchange more closely than I have a sense of whether a consensus has in fact been reached in either direction? If so, what is it? Is the perception that Sander’s results have been debunked? If so, what is it that he has identified? If there is no consensus, what are the open questions?

The money quote from Bill's reply:

I am tired of academics trying to score points at Sander’s expense without offering an alternative hypothesis that directly confronts the data. Faced with the bleak statistics on minorities and the legal profession, our time would be better spent embarking on a Manhattan Project for legal education that examines each nexus of the lawyer creation process, including law school pedagogy. A panel of respected, independent scholars to review the questions raised by Sander and his critics would be a step in the right direction.

Right on, Bill.

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In my last post, I discussed the practical problems of using the shareholder primacy norm as a decision-making criterion.  A commenter wisely suggested that the problems would be even greater if managers did not have a norm to internally regulate their behavior.  Bainbridge suggested as much in his post response.  Absent a strong norm, what keeps managers or directors from violating the trust of the investor public?

One backdoor approach is to use stakeholder theory as a guide.  Stakeholder theory asserts that directors should take into consideration all constituencies that are affected by the corporation, including employees and members of the community.  Stakeholder theory interests me because, descriptively, it probably tells us a great deal about how corporations behave, but prescriptively it's a mess.  How can you tell a director that he is to watch out for the interests of all stakeholders when much of the time those interests seem to be in direct competition? 

This is the problem that Michael Jensen tackles in his paper, "Value Maximization, Stakeholder Theory, and the Corporate Objective Function."  Jensen, a longtime proponent of value maximization, argues that "multiple objectives is no objective."  Unless managers have one clear objective (e.g. maximize market value) decision-making is likely to be incoherent and the corporation falls into disarray.  Therefore, Jensen argues that the sole objective of any corporation should be to maximize total market value - the "sum of the market values of the equity, debt,  and any other contigent claims outstanding on the firm" (pg. 12).  However, Jensen also recognizes that nonshareholder constituencies are important components to the process of accomplishing this objective.  If you don't have satisfied customers, a motivated workforce, and trusting consumers or investors, the corporation is not maximizing its total market value.

Jensen introduces, as an alternative way of thinking about this objective, the concept of "enlightened value maximization."  By this he means that the long-term market value of the firm should be seen as the scorecard, but that it should not be the primary criterion used to guide day-to-day decision-making.  Rather, corporations need their own set of internal criteria that provide motivation and a positive self-assessment of accomplishment.

We must give people enough structure to understand what maximizing value means so that they can be guided by it and therefore have a chance to actually achieve it. They must be turned on by the vision or the strategy in the sense that it taps into some human desire or passion of their own—for example, a desire to build the world’s best automobile or to create a film or play that will move people for centuries. All this can be not only consistent with value seeking, but a major contributor to it.

And this brings us up against the limits of value maximization per se. Value seeking tells an organization and its participants how their success in achieving a vision or in implementing a strategy will be assessed. But value maximizing or value seeking says nothing about how to create a superior vision or strategy. Nor does it tell employees or managers how to find or establish initiatives or ventures that create value. It only
tells them how we will measure success in their activity.

By shifting value maximization to a discussion of strategy and motivation, Jensen has moved into the world of organizational theory.  He recognizes later in the paper that what is truly needed to further this debate is a better understanding of the "drivers of performance."  Without a sound understanding of this, it becomes very difficult for investors or directors or for anyone else to hold managers accountable for their actions.  In fact, sometimes a lack of understanding of performance underlies the finicky and volatile nature of the market.  Lacking patience, investors are prone to overreact to temporary performance declines.

Enlightened value maximization also entails that corporate decision-makers (and observers) be more sensitive to the demands of nonshareholder constituencies (ironically enough).  Rather than cast about haphazardly though, enlightened value maximization calls for a more reasoned and systematic analysis of the contribution that different stakeholders have on corporate performance.  As Jensen implies in the paper, stakeholders must also be held to account for their actions and should be given priority based on their importance to performance.  Thus, in some situations, community support will be more imperative than in others.  Some corporations, then, should be more attentive to things like social responsibility than others - depending on the extent to which reputation or external legitimacy influences total market value. 

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We were all amazed by Floyd Landis' ride in Stage 17 of this year's Tour de France. Now we learn that he tested positive for excessive testosterone in a sample taken immediately after that stage. According to his team, Landis will "ask for the counter analysis to prove either that this result is coming from a natural process or that this is resulting from a mistake in the confirmation." Here is the mother angle from ESPN:

Arlene Landis, his mother, said Thursday that she wouldn't blame her son if he was taking medication to treat the pain in his injured hip, but "if it's something worse than that, then he doesn't deserve to win."

"I didn't talk to him since that hit the fan, but I'm keeping things even keel until I know what the facts are," she said in a phone interview from her home in Farmersville, Pa. "I know that this is a temptation to every rider but I'm not going to jump to conclusions ... It disappoints me."

One of our commenters raised this possibility right after the stage. I am sad to see that commenter's suspicions appear to have been justified.

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