Last night, as part of the NPR Marketplace series "The Price of Profits," a report by Scott Tong provided an intellectual history of shareholder primacy, from Milton Friedman through Gordon Gekko and on to the present. The overview was fairly long for a news program -- my wife wondered if we had stumbled into a podcast -- and sought to provide an in-depth look at the shareholder primacy phenomenon. Lynn Stout was quoted in her role as the loyal opposition. Perhaps the newsiest part of the segment was the perspective of Michael Jensen, long one of the intellectual godfathers of primacy. Although Jensen defended the initial discipline that shareholder primacy imposed on markets, he backed away from any sort of muscular approach to the doctrine. Here's the excerpt:
“Has it happened the way I wanted it to happen? Eh, probably not,” Jensen said. “There’s always going to be some people who take it too far. And then cause damage.”
Jensen said focusing solely on stocks and stockholders is a “misreading” of his scholarship. He wrote in 1990 that CEOs should “do what’s in the shareholders’ best interests.”
“I wouldn’t put shareholders at the center," he said. "I’m still unhappy about the situation where people end up thinking that shareholders are primary. That they are our only bosses. No.”
Jensen has backed away from his scholarship -- or, at least, the commonly understood ramifications of his scholarship -- before. In 2007, he told the New York Times that "I would never award the standard executive stock option again," despite his early advocacy for such compensation packages.
See below: it's a good group there:
The Bentley University Law Taxation and Financial Planning Department has been approved to hire a tenure-track Assistant Professor. The position is funded to begin teaching in the fall of 2017, with a July 1, 2017, start date. Here is a direct link to the Assistant Professor job posting:
If you are interested in the position and believe yourself to be qualified, please apply electronically. Please note that, although the deadline for submission of applications is September 30, we hope to interview at the ALSB annual conference in San Juan in August due to our limited budget for bringing candidates to campus in Massachusetts. To that end, we will begin reviewing applications in July so as to schedule San Juan interviews. Therefore, if you plan to attend the August ALSB conference in San Juan, we encourage you to apply by mid-July to ensure that your application can be reviewed before the conference.
I've got a post on the increasing efforts to create voluntary, or in some cases mandatory, responsibility for businesses regarding human rights up over at RegBlog. Here's a bit of it:
International businesses must now decide whether to sign on to a lengthy and disparate list of principles and standards that aim to promote human rights. Sometimes associations of regulators promulgate these human rights standards for businesses; other times non-governmental organizations promulgate them and ask businesses to sign them. Regardless of who adopts them, these “voluntary” standards constitute a different form of regulation, and not just because of their subject matter. In promulgation, content, and authority, these efforts do not entail traditional rulemaking or adjudication.
But human rights standards are a growth industry. In fact, it is fair to say that the obligation of businesses to consider human rights is at a turning point. Although business-based standards to improve human rights are all less than a decade old, they are gaining adherents, even among regulators. Even the U.S. Securities and Exchange Commission (SEC) and the European Union have now announced rules that discourage the use of conflict minerals in manufacturing. Other countries are following suit in restricting trafficking in conflict diamonds, a phenomenon which I examine further in this paper.
You can find the rest over here, if it's the sort of thing you like.
Over at DealBook, I try to forecast the most likely prominent challenges to the Consumer Financial Protection Bureau's Payday Lending Rule. Here's the start:
The new payday lending rule, once complete, will force many payday lenders out of business. That means that a legal challenge is certain, and also the courts, which worry about regulations that require bankruptcies, will take it seriously.
That is good news for challengers of the rule. The bad news is that their claims will probably fail.
Payday lenders will challenge the authority of the Consumer Financial Protection Bureau to issue the rule, the cost-benefit analysis behind the rule and the constitutionality of the consumer agency itself.
When they fail, we will know that we have a new and powerful financial regulator, one that can touch not just banks but any source of credit, including credit cards, payday lenders and other informal ways to get money.
Go give it a look!
The Dodd-Frank Wall Street Reform Act allowed the Securities and Exchange Commission (SEC) to bring almost any claim that it can file in federal court to its own administrative law judges (ALJs). The agency has since taken up this power against a panoply of alleged insider traders and other perpetrators of securities fraud. Many targets of SEC ALJ enforcement actions have sued on equal protection, due process, and separation of powers grounds, seeking to require the agency to sue them in court, if at all. This Article evaluates the SEC’s new ALJ policy both qualitatively and quantitatively, offering an in-depth perspective on how formal adjudication— the term for the sort of adjudication over which ALJs preside—works today. It argues that the suits challenging the SEC’s administrative proceedings are without merit; agencies have almost absolute discretion as to whom and how they prosecute, and administrative proceedings, which have a long history, do not threaten the Constitution. The controversy illuminates instead dueling traditions in the increasingly intertwined doctrines of corporate and administrative law: the corporate bar expects its judges to do equity; agencies and their adjudicators are more inclined to privilege procedural regularity.
You can find the article here or here. The constitutional claims against SEC ALJs are coming fast and furious, so it's worth taking a step back and seeing how the program actually works. So do give it a look!
I'm co-chairing ASIL's biennial conference on international economic law this year, and I hope that many friends of the Glom will consider attending, and even giving a paper. You can find the call for papers here, and Georgetown's International Law Journal is willing to serve as a publication outlet for those interested in pursuing that, their announcement is here. As we say in the call,
We encourage submissions on all aspects of international economic law, including those that do not focus on cross-cutting issues. The themes listed below are illustrative only and non-exhaustive. If your paper fits within one or more of these themes, please make a note of it in your proposal. Illustrative Themes:
Cross-fertilization opportunities between trade, tax, monetary and finance law: How does monetary law impact trade and finance, and vice-versa?
Soft law in international economic law: Are there lessons to be drawn from financial regulation for trade and investment? How does regionalism shape and challenge international economic law?
Dispute resolution in the face of trade and investment treaty convergence: What are the opportunities and challenges raised by recent innovations? Is a unified system possible or desirable?
International economic law and systemic risk
Public-private partnerships in international economic law
I hope you'll consider joining me in DC in September (it is a great time to be there, inter alia).
Georgia Law's graduation ceremony is tomorrow. We do commencement well here at Georgia-- on our historic North Campus, under the shade of old oak trees. Professors have funny roles on graduation day. The ceremony is not about us, of course, although we do play an important part in it. (I mean, surely they'd miss us if we weren't there?) It came to me while watching another ceremony, Tamika Montgomery-Reeves' investiture--the professors are the repeat players at commencement.
Now, the phrase "repeat player" has a particular connotation in the legal academy, one stemming from Marc Galanter's excellent article "Why the 'Haves' Come out Ahead: Speculations on the Limits of Legal Change."1 Whether in litigation or in transactions, those who repeatedly interact with a given legal system have an advantage over "one-shotters" that engage with it only once. The more I learn about the law, the more explanatory power Galanter's insight seems to hold.
Luckily, faculty and students are not adversaries at graduation. Nor are professors the only repeat players in the ceremonies of our lives. As I reflected on Vice-Chancellor Montgomery-Reeve's investiture, where Chancellor Bouchard and other Chancery Court employees guided us expertly through the ceremony, I recollected myself being helped at ceremonies where I played the one-shotter. Weddings, funerals, christenings. Sit here, step to the podium, wait for the music. Priests, rabbis, and ministers, often serve as the repeat players in these ceremonies, singular for the participants, familiar for them.
Familiar, but not routine. Sometimes my students ask, "It's probably no big deal for you, Professor Rodrigues, right? After all the graduations you've attended?" No, it's still a big deal. But it's different kind of deal. Being the repeat player at commencement grants us the luxury of observing the students and their families-- chuckling self-consciously over their old fashioned robes and mortar boards, nervous and uncertain. We know they'll adjust their caps at least 6 times, and fidget with their tassels. It's a big day for them and their families, and although they've longed for it, when it comes to it, they're a little unsure of what they're supposed to do and what it all will mean.
Perhaps this is the value of the repeat player in a ceremony. For each graduate, there is a sense of joy and singularity, but overlaying it is a sense of tradition and continuity. I think perhaps that combination is what makes these ceremonies so meaningful. We celebrate the singular nature of this particular day, these celebrants--be they graduates, bride and groom, or judge. But we celebrate with the knowledge that the ceremony-- with its rituals, words, and trappings-- has unfolded more or less like this many times in the past, and will continue in the future. It's a link to celebrants past and future, and the repeat player can appreciate that in a way that those enveloped in the giddiness of the moment cannot.
No matter the reason, it's still one of my favorite days of the year. Congratulations, Class of 2016.
I blogged earlier about Donald Trump's proposed list of potential replacements for Justice Scalia's open seat. The stories I have seen thus far are largely of the "I can't believe that it's this reasonable," "I like the list but don't trust Trump," or "they are conservative ideologues" varieties. But to me, the biggest story is that this list of eleven potential jurists is entirely white people.
I certainly don't mean that as an attack on the nominees themselves. They are all established jurists with distinguished records and solid credentials. Given their qualifications, it is not surprising that a number of conservative commentators have reacted positively. And the nominees didn't ask for this scrutiny. For the most part, it looks like they were not asked or even informed that they would be on any sort of Supreme Court list -- a fairly shocking lack of professional courtesy. (Of course, Trump gave out Lindsey Graham's cell phone number for fun -- remember that?)
But there's no getting around the fact they they are all white. This list is a purely symbolic gesture. Trump has made no commitment to use the list, and it's kind of absurd to be releasing a list of eleven -- eleven! -- names for one nomination that is entirely hypothetical at this point. The list is meaningless, at least in terms of an actual nomination -- it's just political theater. And in many ways, the list is "a very wide mix of judges," in terms of geography and background. But they are all conservative -- and they are all white.
So for this purely symbolic gesture, which Donald Trump put out to show what types of people he would choose to run the country, Trump could not find one African-American, one Latino, one Asian-American, or any other non-white person to put on this list. And it's not like he just had a list of two or three people. This one goes to eleven! It's strange enough to put out a list of eleven potential nominees. But then to have such a lack of racial diversity -- that is a statement. And this statement in the context of accusations that Trump was too slow to disclaim white supremacist supporters, that Trump doggedly held onto the birther accusations well past their plausibility, that Trump's entire campaign is based on a white nationalist platform. For Trump to put out an eleven (eleven!) person list with all white people on it is at best incredibly tin-eared, and at worst diabolically intentional.
People may not want to highlight this issue for fear of being accused of playing the race card. But with this list, Trump has already played it.
- All sitting judges.
- Eight men, three women.
- All white/Caucasian.
- No one from D.C. Circuit.
- "The list includes some of the most extreme conservatives on the federal bench today."
- "It’s a good list of some of the outstanding judges who give ample sign of being faithful to the Constitution."
- "Trump’s potential Supreme Court justice list is actually very good."
- Were these judges contacted ahead of time?
- Would they agree to a nomination by Trump?
- Would Trump agree to limit his pick to this list?
- Why eleven for one seat? Are we going to have a new show on NBC this fall -- "The Apprentice: Supreme Court Nominee"?
- Why no racial diversity?
I know, I know, I'm behind. That's what happens when you become the Associate Dean for Faculty and Curriculum. But, I have been to the movies a couple of times, including to see Disney's The Jungle Book. (Not to be confused with the Warner Bros. version, which is also in production.) Funnily enough, though we were all eagerly anticipating this movie after seeing the trailer, the old folks loved it, but our eight year-old (target audience?) did not. Why not? This is our hypothesis:
So, the movie has one speaking actor that is not animated. Mowgli, played by Neel Sethi) interacts with a jungle filled with animated mammals, reptiles and birds. Those animals are voiced by great actors, though some animals oddly don't seem to have language abilities. The result is really quite impressive, and I'm sure if you had a time machine and showed the movie to folks in the 1980s, they would wonder at how the director was able to train the real-live animals to do all of these things. The movie is also very impressive when you realize that a little boy had to basically film an entire movie by himself with Iron-Man director and actor Jon Favreau. The scene-stealers are Bill Murray voicing an animated Baloo (the bear) and Christopher Walken as King Louie (the orangutan). Watch closely for the "cowbell" reference -- I was embarrassed that my fourteen year-old got it before I did.
So, why did the only real "kid" in our midst not like the movie? My teenage girl's hypothesis is "the uncanny valley." According to this aesthetic theory, humans find animation that is very close to real to be "creepy," while animation that is cartoon-y (like Frozen, etc.) to be just fine. Apparently, this theory explains audience revulsion to animated movies such as Christmas Carol, Polar Express, and Mars Needs Moms. These are all movies that my kids hate, btw. So, the "almost real" animals may be too creepy -- not cute, not real, just creepy. However, none of the over-12 set that went with us had this reaction.
You probably know at least the set-up: Man-cub Mowgli is somehow separated from the humans and is raised in a wolf pack. In the 1967 version, the takeaway seemed to be that the jungle was no place for Mowgli, and he is eventually reunited with the humans (after a lot of fun singing and dancing). In this version, the takeaway seems to be more that humans and animals have a symbiotic relationship and can help one another thrive. The movie opens with a "water truce," in which animals during a drought tacitly agree not to prey upon one another at the lone remaining water hole. Perhaps the message is that here in these days on Earth, we should all live in peace with one another, or maybe that's reading a bit too much into it. While the animated movie was a funny road trip movie -- Bagheera escorting Mowgli to the Man-village, and along the way they meet friends and enemies, quarrel with one another, then reunite at the end -- the new movie has more of an internal journey than an external one. Shere-Khan, the tiger, sets his sights on Mowgli, but the vindictiveness is personal and acute, not just "tiger eats human." Shere-Khan is also a little more brutal than as a cartoon. Baloo is the buddy Mowgli meets, but he is also the voice of wisdom beyond his "bare necessities" persona. Mowgli learns not just that the jungle has dangers, but also that he has skills and abilities. The movie is much more a coming-of-age story than a road trip story.
I heartily recommend it, notwithstanding one young critic's review.
It looks like the Social Science Research Network will be a private, independent company no longer. "Publishing giant" Elsevier has "snapped up" the company for "an undisclosed sum." A publishing consultant framed Elsevier's strategy as follows: "The positioning is well thought out: lock up revenues to the legacy publishing business, move into areas where piracy is not much of an issue, create deeper relationships with researchers and become more and more essential to researchers even as librarians become less so.” The acquisition follows Elsevier's purchase of Mendeley, a sciences-oriented research sharing site, three years ago. That purchase did stir concerns in the scientific community -- e.g., "When the Rebel Alliance Sells Out."
This is relatively big news in our neck of the woods, if only because SSRN seemed like it enjoyed its independence. In 2006, I asked Gregg Gordon if SSRN would ever sell itself to a larger corporation. His answer:
As for a future sale, other than myself, the shareholders are academics. They have invested their own money and time into SSRN with the goal of changing how research is distributed, value their reputations and relationships within the scholarly community, and would not risk them by selling in a manner that would jeopardize our central goal. Our intention is to never sell, but it is hard to guarantee that.
One question that leaps to mind: will the policy of free uploads and downloads continue? In his post on the acquisition, Gordon states: "SSRN will continue to enable users to 'submit for free and download for free.' For SSRN users, you are assured that our ethos will remain intact." Chairman Michael Jensen posted these thoughts about the effects of the ownership change:
We realize that this change may create some concerns about the intentions of a legacy publisher acquiring an open-access working paper repository. I shared this concern. But after much discussion about this matter and others in determining if Mendeley and Elsevier would be a good home for SSRN, I am convinced that they would be good stewards of our mission. And our copyright policies are not in conflict -- our policy has always been to host only papers that do not infringe on copyrights. I expect we will have some conflicts as we align our interests, but I believe those will be surmountable.
One change that is plausibly on the horizon: a crackdown on published papers posted to SSRN, especially if Elsevier is the publisher! There was noise about Elsevier cracking down on published papers in 2013. I think SSRN has been relatively "don't ask, don't tell" on this issue. But perhaps there will now be an effort to cleanse the repository of published papers for which the author does not hold sole copyright. If that happens, I think you will see some norms changing in how law profs interact with SSRN.
And some real concern on Twitter:
SSRN has been one of the real treasures of the open Web. Sale to Elsevier seems like disastrous news. https://t.co/XZ6z5xvXzH— James Surowiecki (@JamesSurowiecki) May 17, 2016
Terrible news that Elsevier—who profit from limiting access to research—have acquired open access archive SSRN. pic.twitter.com/avIM0GyqLw— Justin Wolfers (@JustinWolfers) May 17, 2016
This is very out of time, but I've been reading the very good dissent on the designation of MetLife as systemically significant by the independent member of the committee that does those designations - the Financial Stability Oversight Council. I disagree with the dissent because I think it requires too much of financial regulators, who want to avoid catastrophe, not encourage scientific rationality about it. But still, plenty of fine arguments. One that caught my eye, given that I've written about it, the international influence on the decision, emphasized by the decision of the global Financial Stability Board to designate MetLife as risky before the FSOC did:
Although it may be technically accurate to say that the FSB’s declaration is not legally binding on the Council, the FSB explicitly acts in collaboration with the standard-setters and national authorities with the expectation that the intended effects will be achieved by FSB member countries. The FSB’s framework for the identification of systemic risk in the financial system is clear about this intended influence: “The FSB’s decisions are not legally binding on its members – instead the organisation operates by moral suasion and peer pressure, in order to set internationally agreed policies and minimum standards that its members commit to implementing at national level.” As the FSB continues to consider other U.S. financial firms for designation as G-SIFIs, I encourage my fellow Council members whose agencies are members of the FSB to not again allow the FSB to “front-run” or pressure decisions that must be made first by the Council as a whole.
In my view, delegating policymaking to an international body is not that consistent with American administrative law principles, and entirely necessary in financial regulation. It will be fascinating to see how the courts grapple with the problem.
Call for Papers – Joint Program with the AALS Section on Business Associations and the AALS Section on Comparative Law
The AALS Section on Business Associations and the AALS Section on Comparative Law are pleased to announce a Call for Papers for a joint program to be held on January 5, 2017, at the AALS 2017 Annual Meeting in San Francisco. The topic of the program is “Business Law in the Global Gig Economy: Legal Theory, Doctrine, and Innovations in the Context of Startups, Scaleups, and Unicorns.”
Startups and entrepreneurs have long played an important role in the U.S. economy. From Henry Ford to Mark Zuckerberg, entrepreneurs have revolutionized the ways in which their customers receive products and services. As Phil Libin, CEO of Evernote, has explained, “There’s lots of bad reasons to start a company. But there’s only one good, legitimate reason, and I think you know what it is: it’s to change the world.”
That philosophy continues today as entrepreneurs disrupt markets and challenge business and legal norms. Traditional notions of the firm, fiduciary duties, contractual bargains, and optimal capital structures may not aptly fit entrepreneurial approaches. Indeed, entrepreneurs’ business models, financing needs, and operational objectives require lawyers and scholars to rethink governance, capital structures, and regulatory schemes that may limit or impede further innovation, both nationally and transnationally.
This program will examine the current and potential role of business, contract, and related laws on entrepreneurs and their business ventures. We hope to create a robust conversation that maps the past and future of legal theory and doctrine related to entrepreneurship—defining that concept broadly in terms of industry and size. Legal entrepreneurs also fit this model as they introduce contractual innovations and disrupt the field of business law itself. Taking a cue from entrepreneurs, the program welcomes all ideas, including those that may disrupt conventional norms.
Form and length of submission
Eligible law faculty are invited to submit manuscripts or abstracts that address any of the foregoing topics. Abstracts should be comprehensive enough to allow the review committee to meaningfully evaluate the aims and likely content of final manuscripts. Manuscripts may be accepted for publication but must not be published prior to the Annual Meeting. Untenured faculty members are particularly encouraged to submit manuscripts or abstracts.
The initial review of the papers will be blind. Accordingly, the author should submit a cover letter with the paper. However, the paper itself, including the title page and footnotes must not contain any references identifying the author or the author’s school. The submitting author is responsible for taking any steps necessary to redact self-identifying text or footnotes.
Deadline and submission method
To be considered, manuscripts or abstracts must be submitted electronically to Professor Michelle Harner, Chair-Elect of the Section on Business Associations, at email@example.com. The deadline for submission is August 24, 2016. Papers will be selected after review by members of the Executive Committees of the Sections. The authors of the selected papers will be notified by September 26, 2016.
Papers will have the opportunity to publish in the William and Mary Business Law Journal.
Full-time faculty members of AALS member law schools are eligible to submit papers. The following are ineligible to submit: foreign, visiting (without a full-time position at an AALS member law school) and adjunct faculty members, graduate students, fellows, non-law school faculty, and faculty at fee-paid non-member schools. Papers co-authored with a person ineligible to submit on their own may be submitted by the eligible co-author.
The Call for Paper participants will be responsible for paying their annual meeting registration fee and travel expenses.
There's a lot of DPAs out there, and it looks like two swallow spring of judicial supervision of them is about to come to an end, thanks to icy appellate courts. I think it's bad! And I wrote something about it over at the Times:
something must change in the world of deferred prosecution agreements. They are increasing in number every year. The threat of punishment for noncompliance with a deferred prosecution agreement is a court order. Professors who have looked at the way prosecutors supervise deferred prosecution agreements do not like what they see. Prosecutors, moreover, have little experience with the oversight of a bureaucratic effort, even a little one.
It is no way to run an oversight process. If the government is going to set up compliance programs with the specter of a court order looming at the end, then it should not expect that courts will stay out of the process from the beginning. That is how regulation works in this country, and if prosecutors are going to fashion themselves as regulators, then they are going to have to take the bitter with the sweet.