UCLA Conference Notes

You may have guessed from my silence that the wireless connection was unreliable at the UCLA Sloan Foundation Conference. You would be right. Here are some reflections on a great conference. (The schedule is here.)

* If you read only one paper from this conference, read Bill Bratton and Joe McCahery's, The Equilibrium Content of Corporate Federalism (pdf). That title does not do the paper justice. It is a detailed and fascinating tour of the history of corporate regulation in the U.S., with special emphasis on the relationship between federal and state (Delaware) regulation.

* For some deep thoughts on the first session, see Steve Bainbridge's comments here. As a legal topic, corporate social responsibility (CSR) has become somewhat stale, but Larry Ribstein launched a very creative idea, which you can read about on Ideoblog: "My solution to the problems of corporate governance is to put pressure on managers to distribute excess cash by increasing owner distribution and liquidation rights." My co-author Cindy Williams also presented an interesting paper on the global CSR movement. (pdf)

* Tom Smith of The Right Coast participated in the second session, which was a discussion of stakeholders and stockholders. Marleen O'Connor and Lisa Fairfax bemoaned the failure of "progressive corporate law" to show progress, and Charles Elson said this panel felt like Groundhog Day because he keeps waking up to the same conversation.

* For me the most interesting segment of the conference was Friday afternoon, when discussion turned to the theory of the firm. Economic theorists Oliver Hart and Luigi Zingales both presented, and both were sterling. Oliver has a new project with John Moore (pdf), which discusses incomplete contracts that take certain issues off the negotiation table, but leave other issues open. These contracts are exceedingly common, especially among firms. Luigi's paper was in very early form, but he is thinking about the allocation of control rights ex ante and ex post. Both of these papers are closely connected to some work I am doing on relationship structure, but more on that in some future post.

* I moderated a session this morning that included Bill Bratton, Jill Fisch, and Steve Presser. Jill has written an important paper about the difference between firm value and stockholder value. (pdf) Steve did a thorough doctrinal analysis for enterprise liability doctrine. (pdf) It was an excellent panel.

* The last session of the conference was a roundtable on the board of directors, which turned into a discussion of the SEC's proposed director nomination rule (Rule 14a-11). Confirming our collective suspicion, Jeff Gordon announced that "the rule is dead."

* Justice Jack Jacobs of the Delaware Supreme Court said that he hoped the issue of director nomination by stockholders would be settled elsewhere, but Jeff Gordon proceeded to suggest that firms adopt nomination provisions on their own. If this happened, the issue would land in Jack's chambers. as he would need to decide whether stockholders are allowed to take the nomination power from directors. (Mike Dooley thinks this is a no-brainer, and I hope he is right, but I am not so sanguine.) Of course, before this will happen, stockholders need to get such a proposal on the ballot, and the recent Disney no-action letter shows the SEC's unwillingness to let that happen.