Speaking of casebooks, here's a pitch to my casebook author friends: include Del. County Emples. Ret. Fund v. Sanchez. What's not to love about this opinion? First, it's a Delaware Supreme Court opinion. Second, it's short and sweet--clocking in at a mere 13 pages (I'm looking at you, Steve Bainbridge). Third, it takes on a topic of interest to law professors and law students alike: friendship. Fourth, it makes human one of the most challenging topics for the new student of corporate law: the derivative suit.
I know from experience that the derivative suit is a challenge in the classroom. Amounting to a lawsuit about whether there should be a lawsuit, it's a foreign concept to the uninitiated. Aronson v Lewis provides guidance on how to balance the fact that per DGCL 141 the board is in charge of corporate decisions (including the decision about when to sue) against the point that in the derivative context the plaintiffs usually allege that some subset of the board itself, or the whole board, should be liable. So the derivative suit is about how to sift the meritorious suits from the nuisance ones.
Aronson's first prong says such suits get to go forward if the majority of the board is interested or not independent. Interested is easy--financial interest. Independence is far more tricky--and therefore far more fun. I spent my first article as a law professor puzzling over what independence means, and how Delaware's version of it is situational, rather than the SOX/SRO status-based definition.
Strine's jurisprudence, in particular, while he was on the Chancery Court did a terrific job of limning the nuances of independence. Here's Fetishization of Independence on Delaware cases discussing independence in the context of familial relationships. Strine is all over it:
In one case, for example, Vice Chancellor Strine observed that (wholly apart from significant financial ties) he was “incredulous” about the independence of a director who was the CEO's brother-in-law on the question whether the corporation should sue the CEO. Nevertheless, Delaware courts do not always find that bare familial relationships suffice to prove a lack of independence. In Seibert v. Harper & Row, Publishers, Inc., the Delaware Chancery Court found that the mere fact that a director was the cousin of an interested director, “without more,” was not enough to show domination or control.
Delaware's approach to familial relationships is thus more flexible than an ex ante status-based approach. In Mizel v. Connelly, Vice Chancellor Strine found that a grandson was not independent for the purpose of deciding whether the corporation should sue his grandfather for rescission of an interested transaction, calling the grandfather/grandson relationship “of great consequence.” Interestingly, in a footnote the Vice Chancellor noted that the ALI's Principles of Corporate Governance: Analysis and Recommendations “do not include grandparents in their definitions of ‘related persons”’ that trigger a label of interestedness. Thus, Delaware's transaction-specific, contextual inquiry can produce a more textured and probing analysis than the corporate governance model of what having an interest (and thus lacking independence) actually means. As Vice Chancellor Strine observed, a grandchild's relationship with his grandfather can be a close one: “I could not consider impartially such a demand as to my own grandfather . . . .”
So it's nice to see Chief Justice Strine doing what he does best--writing a clear, accessible opinion acknowledging that independence is complicated and contextual. In my opinion Oracle, Beam v. Stewart, and Sanchez now make up the triumverate of cases on this issue. Here's Strine in Sanchez:
Here, the plaintiffs did not plead the kind of thin social-circle friendship, for want of a better way to put it, which was at issue in Beam. In that case, we held that allegations that directors “moved in the same social circles, attended the same weddings, developed business relationships before joining the board, and described each other as friends, ‟ . . . are insufficient, without more, to rebut the presumption of independence.”
In saying that, we did not suggest that deeper human friendships could not exist that would have the effect of compromising a director’s independence. When, as here, a plaintiff has pled that a director has been close friends with an interested party for a half century, the plaintiff has pled facts quite different from those at issue in Beam. Close friendships of that duration are likely considered precious by many people, and are rare. People drift apart for many reasons, and when a close relationship endures for that long, a pleading stage inference arises that it is important to the parties.
True, Chief Justice Strine acknowledges in the next paragraph the economic dependence that the director in question also allegedly had to the defendant. But it is his eloquent defense of friendship that resonates for me. Just last week I paraphrased the Beam court as holding that "friendship alone is not enough." But I asked students if they would feel unbiased if they were a director and the defendant and fellow boardmember was their college roommate. Their answer was an emphatic no. I hazard that Chief Justice Strine might agree.
Update: In my excitement I neglected to link to Ann Lipton's excellent post about Sanchez. Give it a look, and the lively discussion from law profs in the comments.
President Obama's SOTU address was easy to dismiss as standard-issue liberal class-baiting. But when within the span of a week I see two eminent right-of-center publications headlining class division in America, maybe it's time to take notice. Thursday's WSJ featured front-page article on How a Two-Tier Economy Is Reshaping the U.S. Marketplace. Basically, the crisis hit everyone, but since 2009 the rich have been getting richer, and they're spending up a storm at Whole Foods and at "luxury retailers" like Neiman Marcus. Meanwhile, Target, Macy's, J.C. Penny's, and Sears have seen sales slump. Hmm. I don't shop at Needles Markup, and have a well-worn Target card. Workers of the world, unite!
More incisive analysis came from this week's Economist, which described America's new aristocracy. The thesis is that "today’s rich increasingly pass on to their children an asset that cannot be frittered away in a few nights at a casino. It is far more useful than wealth, and invulnerable to inheritance tax. It is brains."
This charge hits a lot closer to home, and takes me back to my clerkship days. My judge had 4 clerks. Quickly the consensus arose among the other 3 that I was the least impressive clerk--by which they meant that my background made my attainment of an prestigious appellate court clerkship something more to be expected than exclaimed over. Mind you, my parents were academics who made less money--much less money--than the parents of two of my fellow clerks. But my compatriots vociferously maintained that my parental background, dappled as it was with 2 PhDs, 1 MD, and several MAs, gave me a serious leg up in this particular game. In the end, I conceded that they were right.
Where do I stack up in the new aristocracy? While we may be slumming it at Target with the rest of the common people, we are a two-degree household. Our children go to public schools, but they're good public schools and my oldest girl is on the Athens Area Girls Math Team (no, I'm not kidding and yes, it's awesome). I talk college all the time with my 7 and 4 year old--largely because we live in a college town and drop-offs and pickups involve passing college kids en route to dorm or class. Given all these things, I'm pretty sure they will have leg up in the academic game.
This advantage is a problem if we want a "natural aristocracy" of brains and talent--otherwise America's promise of meritocracy becomes a plutocracy or a cerebrocracy. The Economist recommends leveling the field by improving childcare and early childhood education, funding schools at the state level, encouraging vouchers, having colleges base admissions decisions solely on academic merit, and disclosure of the return college graduates receive on their degrees. All of these sound like plausible reforms, with a likelihood of being adopted ranging from "maybe" to "unlikely" to "nil." But it's sure interesting that it's not just the liberal bastions remarking on the gap between the haves and have-lesses in the United States today.
Also, just in case you haven't heard it, this.
My father, Eusebio Leo Rodrigues, died last month at age 87. He was a professor of English at Georgetown for 26 years. A hard thing about death is that, for all that one wants to stop all the clocks, they keep ticking away. I spoke at his funeral mass on Wednesday, but I'd like to commemorate him publicly. So I'm publishing my remarks after the fold. It feels strange to post something so personal, but my dad always loved reading this blog. Indeed, one of my first posts mused on my going into the family business.So this one's for him.
In the beginning was the Word, and the Word was with God, and the Word was God. For my father, the word was perhaps the most important thing. It’s impossible to sum up all my father has taught me and given me with words. But I am going to talk about 2 things today: Words. And love.
First, my father was a writer. He had a writer’s belief in the power of words. “The verb is the muscle of the language,” he would tell me. And “there is no writing, there is only rewriting.” While growing up, I would bring him my school writing assignments for comments. He was merciless. Every white space on the page would be crammed with red ink. He would tighten my grammar, challenge me at every turn, question my word choice with a scrawled “Why?”
Why? was a favorite question of his.
The back and forth could be incredibly frustrating. I honestly think it never even crossed his mind that he might cut me some slack because I was young. For him, the writing was what mattered. Writing clearly and powerfully, without sentimentality, laziness, or cliché. The passive voice was a special bugaboo of his.
For my father, language was a thing of beauty and of joy. Think of a chef testing a sauce and pausing to take a mental inventory of spices before selecting just the right flavor. A golfer considering between two clubs, weighing the wind and the terrain. My father was that way with words: a master craftsman intent on selecting precisely the right tool. For my father, words mattered.
Some of you know that I flew up to Maryland shortly after my father went into the hospital, ten days before his death. He was still in the ICU, and when I arrived things looked grim indeed. Last rites had been administered. I did not think that I would ever get the chance to speak with him again. But my sister Esme stubbornly refused to give up hope—and she was right. Sunday morning my father was much better, beginning first to nod in response to questions, and then to speak. I told him how my family back in Georgia was doing: my husband, our three children. He nodded, and then croaked out a “Henry?” He always asked after the dogs.
He slept a little, and then talked about writing. He said I was a good writer because of my mixture of English study and law training. I told him I was a good writer because of him.
Dad was quiet. He said he wanted to think.
About what? Life.
What about life?
Life goes on. Art endures.
Then he said "problem." He said he wanted to think about the problem of the meaning of life. I teased him, saying I'd give him an hour to think it over and get back to me. That people have been thinking about that particular problem since at least the ancient Greeks.
Then he said "to love". That's the answer to the problem of the meaning of life. I turned to wipe away a few tears. I was thinking of way back, when there was a dog one of our neighbors kept out for hours and hours. It would bark and howl. "It is not loved," my father said of it. And that explained everything.
I've anticipated this moment for years, as my father has declined in health--it always seemed impossible for me to imagine a life without him here. But of course he is still with us. He was with me while I sat down to write this remembrance—which was one of the hardest things I’ve ever had to write. He suggested that I change the sentence “last rites had been administered” to avoid the passive voice. I told him that the “last rites” phrase was what gave power to the sentence, and so I would lead with that. He shrugged philosophically. For him, what always mattered was that I could articulate a reason for my choice. That I had an answer to his favorite question.
I’ll close by calling attention to the inscription on your prayer card. My father chose it as an epigraph for his novel. The quotation is from John: God is love. Most of all, what I think my father would tell us is that the Word is God. And God is love.
Last year my daughter asked me, "You're in Glorytown, aren't you mom?" Startled, I managed an "Uh, I don't know... I guess?" Apparently in the current Athens kindergarten curriculum, arriving at "Glorytown" means having a good job that you love. That mystery cleared up, I managed a more confident, "Oh, yes, then I am in Glorytown."
Last week's WSJ reported on colleges that have begun disclosing return-on-investment figures--detailing by major averages post-graduation salaries. I have mixed feelings. I generally think more data is better. Yet as an English major and the daughter of an English professor, I find all this talk of ROI a tad short-sighted.
I get it, I get it. The liberal arts are so 1990s. Gone are the days when college was a highbrow finishing school reserved for the white, the wealthy, the privileged. I had an excellent student last year disparage his history major as a waste of time. What good did it do him?
Writing clearly and thinking clearly will get you far in the world, I told him. He countered that a history minor would have been enough for that, and maybe he's right. But I can't help but feel like getting to Glorytown has more to do with grit and work ethic than school- or major-specific ROIs.
Example #1: I'm reading Stephen King's memoir-cum-meditation on writing. He's made a heck of a lot of money despite being an English major. I haven't done so shabby myself. Most of my fellow-English majors from Georgetown have done pretty well. One of my best friends from high school played it safe by majoring in accounting, but abandoned that profession because she didn't find it fulfilling. She's a substitute teacher now--making much less money, but much happier.
Example #2: take 4 undergraduates.
- One smart, hardworking and driven, majors in English.
- The second, not as smart, hardworking and driven majors in finance.
- The third, not as as smart, middling driven, just wants to clock in the 4 years in college and get a job, majors in accounting.
- The fourth, brilliant, not hardworking, majors in physics.
Who'll make the most money 15 years after graduation? My money is on number one or two. Hardworking and driven, I suspect, gets you farther than anything else. Don't get me wrong, ROI is a fine metric, and with tuition where it is you'd be crazy not to think about what jobs your college degree will get you. But if you're in a job just for the salary, you probably won't be that successful--and you'll be entering a job market beset by peers attracted by that self-same salary. Obamacare has a better chance of being repealed than the law of supply and demand, my friends.
The guilty verdict for Virginia ex-governor Bob McDonnell on charges of public corruption is a major headline of today. I've been thinking a lot about corruption for the past few months, so here are a few thoughts:
-Corruption is in the eye of the beholder. My Essay turns on the proximity of time of two donations and legislative action. In the most notable case, a member of the House introduced a bill the day after receiving a $1000 donation. Readers' reactions to the story fall into two distinct camps. One: OMG! I can't believe that! Two: So what? Why does that necessarily mean there's corruption? In answer I say:
-Timing does matter. From the WaPo:
[Prosecutors] backed up his story by using other evidence to weave a strong circumstantial case that an agreement had been reached between the businessman and the first couple based on the close timing of Williams’s gifts and loans and efforts by the McDonnells to assist Williams and his company.
In one instance, McDonnell directed a subordinate to meet with Williams on the same night he returned from a free vacation at his lake house. In another, six minutes after e-mailing Williams about a loan, McDonnell e-mailed an aide about studies Williams wanted conducted on his product at public universities.
-definitions are the name of the game. The Supreme Court's 2014 McCutcheon decision narrowed the definition of corruption to only cases of quid pro quo corruption--cases where there's an actual exchange. The McDonnell defense apparently conceded that there was an exchange, but contested whether the quo in question--events at the governor's mansion, setting up meetings for the donor--counted as "official acts." This is a broad definition.
-Corporations are always going to participate in political life. We expect them to lobby for positions favorable to their firms. See here for a recent WSJ article on disclosure of political spending, with quotations from some sterling law professors, including friends-of-Glom Mike Guttentag and Steve Bainbridge, who quite rightly observes that the risk is that managers spend the corporation's money "on their own preferences, as opposed to what's good for the company."
-So in corporate governance terms the question is how to sort the "good" spending that is for the benefit of the company from the "bad" spending that is driven by idiosyncratic managerial preference and doesn't do the corporation any good. But in political governance terms, the question is how to regulate even "good" corporate spending that we find to be corrupting. I at least don't have a good idea of how to draw that line. The Court says trading donations for access is fine, and so are donations that secure a candidate's gratitude. My hunch is a lot of people might call those corruption. But corporations need to be able to explain to candidates how the government's rules and regulations affect their business. I'm certainly not confident that the average politician knows much of anything about any particular issue.
So where does that leave me? Still wondering about corruption, and eager to get back to corporate and securities law, that's where!
Like Elizabeth I attended Seattle University's fantastic Berle VI conference. The quality of the talks was uniformly high, and the tone of the conference was one of engagement and dialogue, not ideology. In short, it was a great conference.
Unusually for me, I didn't present a paper, but was a mere participant (or, as I like to think of it, "invited guest"). I felt it my duty as invited audience member to ask questions, even though I was always the last to raise my hand in elementary school, college, and even law school.
This is what I want to type next: here's the secret about law conferences--and, I'd be willing to guess, academic conferences in general. The women in the audience are counting. Always. They're counting the number of women speakers. They're counting the number of questions women ask. Particularly if the speaker calls on his own questioners, they're aware of how many women he calls on and whether he ignores women who have had their hands up for some time to call on men who raise their hand later. A constant back-of-the-mind tally is part and parcel of the woman academic's conference world.
I don't know if that's true, though--that's why I'm uncertain about the authoritative tenor of the prior paragraph. It's something I've talked about with women academics many times. Never with men. But it's something I do almost subconsciously. If I had my druthers I'd take a while to frame my question, hear what others have to say, see if I have anything to add, formulate and reformulate. But if there's a 15-minute Q-and-A period and no woman has raised her hand at the 10-minute mark, I start to feel a lot of pressure to say something. Anything. Particularly at my home institution, since it's the deep South and I don't want it to look like we're some backwater where women are oppressed/unengaged/unintellectual.
Berle VI was an ideal conference in gender terms--centered around an article by 2 women academics, nearly half the attendees women, which is almost unheard of in corporate or securities law. Thus it seems like a good time to voice these thoughts. This is something that feels quite personal, and something I've never blogged about--nor read about--but have thought about a lot. Hence the title of this post-- I'm posing a question about conference questions and how others perceive them. How many women feel this way? How many men have any clue that they do?
Haskell Murray and Anne Tucker recently blogged quite engagingly about their Fear of Missing Out (FOMO). They made me feel old--not only because of these newfangled acronyms, but also because I remember feeling that way myself. I found particularly brave their articulation of the suspicion that they weren't "good enough" and had somehow lucked into the job. I remember feeling that way, too, and I have a sneaking suspicion that there are 2 kinds of junior faculty members: 1) those who think they're not really as smart as everyone else, and 2) those who really aren't as smart as everyone else. "Arrogance" is just a few letters away from "ignorance."
But I digress. I remember feeling this way, and I had a mentor give me excellent advice my first year:
Just say no.
At least, your default answer should be "no." To my chagrin, I realized something at the end of my first year of teaching: This job has infinite demands. There are 3 elements to it: teaching, scholarship, and service. You could devote every waking moment to your teaching, and still have more you could do. Ditto for service. Ditto to the nth degree for scholarship: always another talk you could attend, an article you could read. But you can't do those things and write. At least, I can't. You have to get used to always feeling like there's more you can do. You'll feel guilt, but you have to make your peace with it.
I set boundaries for myself, like trying not to travel more than once a month while classes are in session. But the best piece of advice I got was that your default answer should be "no."
P.S. Haskell, I'd love for people to think that I'm some kind of superwoman, but that was my schedule for a brief period of my life. Baby #3 started sleeping through the night at about 6 months. Hallelujah!
I can't resist medal tables. No - not the top of the tables, where imperial sports machines duke it out. I love the bottom of the tables. More particularly, rooting for the tiniest of countries and particularly those countries that have never had a medal winning athlete. My assumption: those athletes don't have a huge apparatus supporting them. And one local medalist is more likely to generate dancing in the streets in Montenegro than Munich.
The assumption doesn't always hold. Some big time athletes relocate to micronations to save on taxes (like Austrian skiier Marc Ghirardelli to Luxembourg in the '80s and '90s). Some Gulf States have been on a spending spree to buy African athletes to win summer medals.
Even so, go Liechenstein!*
* Liechenstein won skiing medals in the '70s and '80s thanks to two pairs of siblings.
I've been quite busy so far this semester, juggling two and a half classes, finishing up a symposium piece and trying to rework a piece for submission this spring. (Sometimes I think of channeling Richard Scarry with a "What Do Law Professors Do All Day?" post. Gripping as that tale would be, it would lack the Tyrolean charm of a be-sneakered Lowly Worm and the unlikely disasters of Mr. Frumble. Perhaps best not.)
On that last task, I was finally able to turn back to my spring piece in earnest last week (I know the window's maybe/possibly/definitely open. Please don't tell me). I presented the paper a few times in the fall and got excellent feedback that convinced me I need to take the data I have in a different direction. I spent this past Monday getting back up to speed on the draft, and then kind of spun my wheels, reading legislative history, taking some notes, not making much headway. As the day wound down into futility I thought--you know, I'll go running tomorrow and figure this all out. Sure enough, about 15 minutes in to my morning run, I had rethought the paper and had a new direction mapped out.
Of course my big rethink might come to naught. But it is nice to know myself well enough to recognize when I'm stuck, and to know how to get unstuck. That oracle was on to something.
After over four years of work, my book Law, Bubbles, and Financial Regulation came out at the end of 2013. You can read a longer description of the book at the Harvard Corporate Governance blog. Blurbs from Liaquat Ahamed, Michael Barr, Margaret Blair, Frank Partnoy, and Nouriel Roubini are on the Routledge’s web site and the book's Amazon page. The introductory chapter is available for free on ssrn.
Look for a Conglomerate book club on the book on the first week of February!
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In a study that is sure to make faculty meetings around the country even less pleasant, Timothy Judge, Beth Livingston, and Charlice Hurst found that more "agreeable" men earn less than disagreeable male colleagues. The earnings differential between agreeable and disagreeable women was less pronounced. At the same time, the pay gap between disagreeable men and disagreeable women was larger than the gap between agreeable men and agreeable women. This fascinating study attempts to tease out whether conforming/not conforming to gender stereotypes might explain part of the gender gap in pay. And its implications go far beyond that.
A few links to tide you over during your tryptophan-induced torpor:
- Many law faculty dream (or so I’ve heard) of splitting their school in two and separating themselves from various colleagues (mimicking the good bank/bad bank model). Well Penn State is doing just that with its two campuses. (See the Dan Filler’s short post at the Faculty Lounge and the comments thereto);
- In the NY Review of Books, Elaine Blair reviews Every Love Story is a Ghost Story, D.T. Max’s bio of David Foster Wallace. It’s fascinating discussion of how Wallace drew on his own experience in addiction recovery, to create not only characters but a map out of the intellectual wilderness of “self-consciousness and hip fatigue” in American culture high and low;
- David Nasaw has slices of his new book, The Patriarch: The Remarkable Life and Turbulent Times of Joseph P. Kennedy at Slate;
- In the New Yorker, Nick Paumgarten explores the eternal musical afterlife in the Grateful Dead tape archives;
- Steve Bainbridge on vino for Thanksgiving (what about post-Thanksgiving?) and shareholder empowerment and banks.
- Track grandma’s flight home at FlightRadar24.
Youtube - uploaded by chasefukuoka61
So the "other matter" on which I've been working this semester is Baby #3. At this point, I feel like we're officially joining the ranks of the insane (except of course, for my fellow bloggers Christine, Lisa, and Gordon, who handle 3+ child-parenting with grace and aplomb!). Baby is due in December, and my semester to-do list includes finishing teaching Corporations and co-teaching an ethics seminar, writing an exam, grading an exam, potty-training Daughter #2, and getting her to share a room and "big girl bed" with Daughter #1. Add to that 2 newish writing projects and 4 conferences/colloquia. To you shaking your head, realize this: ambitious as this might sound, it's much easier to do anything when baby is on the inside.
Then in September our older dog, Meghan, died. I've tried to write a follow-up sentence at least 10 times, and everything winds up seeming trite or inadequate, so I'll leave it there. But it was a big change for us: we were a 2-dog household before we had children. I'd gotten Meghan as a puppy my last year of law school, and she and our second dog, Henry, were ideal dogs for kids. Mellow and with a firm understanding of the rules of the house (don't steal food or run away; you can loll on whatever furniture you see fit), they spent the majority of each day lying around the house. Comforting companionship that demanded very little.
About 3 weeks after Meghan's death I added another task to this semester's list: finding a second dog. It sounds quick, I know, but the loss hit Henry hard: he'd never been a solo dog, and he seemed increasingly depressed and out of sorts. We all were. And with a new baby on the way, the task integrating a new dog took on some urgency.
I'm lucky to have friends in the dog rescue community, and so with some trepidation I placed an order for a dog: 1-2 years old, female, housebroken, good with children and with dogs, no major health issues. I felt guilty about it: Meghan was a 6-week-old SPCA special, and Henry came from a foster home at about 6 months. I kind of expect to deal with housebreaking, teething, and training when I get a new dog. Part of the bargain, the responsibility of the good dog owner. But my friend assured me that plenty of dogs killed at shelters fit my description, and that giving a dog a home was what counted.
So we told the girls we were "fostering" Sweet Pea, who was 4 years old but otherwise fit my order to a T. You can guess the rest. Sweet Pea has gotten out and stolen food a few times, and there have been some casualties as she endeavors to understand the difference between child toys and dog toys. Her hind foot is a little wonky, as my parents would say, from being hit by a car in her youth and healing incorrectly.
In short, she's perfect.
I write this post to suggest that, if you're thinking about getting a dog but dread that initial getting-acclimated period because you just don't have the time, you can probably find one that will be pretty easy to adopt. You may even feel guilty about how easy it really is.