As I mentioned earlier, I’m having my research assistant pull together bi-weekly top ten lists of SSRN downloads of papers announced during the last 60 days for corporate law, corporate governance law, and securities law. See below the fold for the lists.
Archive for June, 2006
SSRN Top Tens for Corporate, Corporate Governance, and Securities Law
Posted by Bill Sjostrom on June 22, 2006
Posted in SSRN | Comments Off
An Insider Trading Policy a Monkey Would Love
Posted by Thom Lambert on June 21, 2006
As Josh noted, Henry Manne recently published a WSJ op-ed arguing for liberalization of insider trading on efficiency grounds — chiefly, because such trading “aids capital allocation decisions and informs business executives through market-price feedback of the best predictions about the value of new plans.” (For a more complete statement of Henry’s argument, see here.)
Today’s WSJ includes several letters in response, including one by Kenneth Kehl, who accuses Henry of “emphasiz[ing] efficiency at the expense of fair play.” I hear versions of this “I Don’t Care If It’s Efficient, It’s Just Not Fair” argument all the time. They’re generally unpersuasive, for if insider trading were legal, any investor who bought stock of a company that had not privately (i.e., contractually) banned such trading would know what she was getting herself into and would be compensated (via a price adjustment) for the risk associated with such trading.
Kehl’s argument, though, is not actually a fairness argument; he’s really concerned with efficiency. Read the rest of this entry »
Posted in business, corporate law, economics, insider trading, markets | 4 Comments »
The NYT on SCOTUS’s Wetlands Decision
Posted by Thom Lambert on June 20, 2006
Yesterday, the U.S. Supreme Court issued a fractured decision in consolidated appeals raising the issue of which wetlands come within the ambit of the federal Clean Water Act (“CWA�). The wetlands at issue were next to drainage ditches that, when full of water, would eventually flow into navigable waters. The record did not establish whether the connections between the wetlands and the drainage ditches were continuous or intermittent, or whether the ditches contained continuous or merely occasional flows of water.
Deeming those missing facts irrelevant, the Army Corps of Engineers (the agency the CWA charges with granting “dredge and fill permits� for wetlands) determined that the wetlands were within the scope of the CWA. A five-justice majority found that determination to be hasty and voted to remand the cases for further consideration of whether the wetlands at issue were within the CWA’s reach. The five justices disagreed, though, on the proper standard to apply. Justice Scalia, joined by Chief Justice Roberts and Justices Thomas and Alito, articulated one test; Justice Kennedy set forth a less stringent test (which the lower court will presumably apply on remand).
The New York Times is unhappy with the Court’s judgment but insists that “it could have been much worse� if Justice Scalia had garnered a fifth vote in favor of his “very restricted view of the Clean Water Act.� The Times insists that Justice Scalia’s test for what constitutes a covered wetland is “largely invented�; that the views of the Scalia-led plurality amount to “judicial activism�; and that Justice Kennedy’s alternative test, presented in a “careful opinion,� is laudably “moderate.�
The Times is wrong on all these points. Read the rest of this entry »
Posted in environment, regulation | Comments Off
The origin of option backdating?
Posted by Bill Sjostrom on June 20, 2006
An article in yesterday’s NYT describes the genesis of option backdating at Micrel Inc., a silicon valley semiconductor company:
Throughout the 1990′s, Silicon Valley companies were locked in an intense battle to recruit employees, and stock options were their primary tool.
* * *
So when new hires began complaining that the [Micrel's] volatile share price meant that colleagues who had arrived just days earlier were receiving stock options worth thousands of dollars more, Micrel executives moved to satisfy the troops. They raised with their auditor, Deloitte & Touche, the idea of adopting a new options pricing strategy similar to one that other tech companies, including Microsoft, used at the time.Instead of granting options at the market price on a new employee’s hire date, Micrel proposed setting the price at the lowest point in the 30 days from when the grant was approved.
It seemed like an ideal solution. The 30-day window could help Micrel attract and reward new hires on a more equal footing, while helping to retain existing employees. And if it were extended up the corporate ladder, the prospect of built-in gains and tax breaks, worth millions of dollars, could enrich senior executives.
Deloitte allegedly approved the strategy but five years later reversed course. By then, however, the practice had become the norm in Silicon Valley and perhaps ultimately led to the option backdating scandal we’re now in the midst of.
Posted in option timing scandal, securities regulation | 6 Comments »
SEC provides more comfort re: foreign exchange acquisitions.
Posted by Bill Sjostrom on June 16, 2006
Following up on this post, the SEC has just released a fact sheet concerning potential cross-border exchange mergers (see here). The fact sheet provides more comfort that the acquisition of a foreign exchange by a U.S. company will not automatically subject the foreign exchange and its listed companies to SEC regulations.
Here’s some excerpts:
- Joint ownership of a U.S. exchange and a non-US exchange would not result in automatic application of U.S. securities regulation to the listing or trading activities of the non-U.S. exchange.
- Whether a non-U.S. exchange, and thereby its listed companies, would be subject to U.S. registration depends upon a careful analysis of the activities of the non-U.S. exchange in the United States.
- The non-U.S. exchange would only become subject to U.S. securities laws if that exchange is operating within the U.S., not merely because it is affiliated with a U.S. exchange.
Posted in securities regulation | Comments Off
TOTM, Now with Extra Nuance!
Posted by Josh Wright on June 16, 2006
In response to Thom’s post on the merits of federal subsidies for private efforts to develop alternative fuels, frequent and thoughtful commentor William Goodwin issues a critique of Thom’s post, and of TOTM more generally. I will leave the merits of Mr. Goodwin’s specific criticisms (do read them) to Thom, but this particular portion caught my eye:
As for Hayek, public choice, etc., these critiques apply to all government action, and say nothing interesting or specific about how to solve the collective-action problem raised by positive externalities. And while I realize that every post at Truth on the Market effectively ends: “Let the market figure it out,� at some point it’d be nice to hear a more nuanced, and less ideological, position.
Do TOTM bloggers advocate market-based solutions for public policy problems more frequently than our friends at the other blawgs? Probably. But I’m puzzled by the notion that the prescription to “let the market figure it out” is an inherently simplistic and ideology-driven position. This sort of criticism is often leveled at those who advocate market-based solutions to public policy problems, so I do not mean to single out Mr. Goodwin, but this view, in my mind, suggests a fundamental misunderstanding of how markets work. Why? Read the rest of this entry »
Posted in economics, markets | 10 Comments »
Study of Beauty in Politics
Posted by Bill Sjostrom on June 16, 2006
A reader of this blog asked me to post the following:
Several studies document that beauty plays a role in the labor market: beautiful people earn more than others. Three economists are conducting a study to see whether there is a beauty premium in politics as well, such that beautiful candidates have greater electoral success. You are hereby invited to participate in the study, run by Associate Professor Niclas Berggren (The Ratio Institute), Dr. Henrik Jordahl (Uppsala University) and Professor Panu Poutvaara (University of Helsinki). Click here to participate in the study–it involves taking a web survey where you assess photos of politicians.
Posted in announcements, economics | Comments Off
SSRN Top 10s
Posted by Bill Sjostrom on June 15, 2006
I’m planning to have my research assistant put together bi-weekly posts of SSRN Top 10 new paper downloads like Frank does on the contracts prof blog. I was thinking a list for corporate, corporate governance, and securities. I’ll try to roll it out next week.
Posted in legal scholarship, SSRN | Comments Off
The FTC Takes On the DOJ in Schering-Plough
Posted by Josh Wright on June 15, 2006
There is a very interesting development in the ongoing saga of the FTC v. Schering-Plough Corporation, a very important antitrust case involving a payment from a branded pharmaceutical manufacturer to a generic to delay entry (a “reverse payment”). The interesting development is that the FTC, who offered a brief in favor of cert., has now also filed a supplemental brief in response to the DOJ’s brief recommending denial of cert. The excellent Antitrust Review blog has been all over this, and has posted copies of the FTC and DOJ briefs (see also Patently-O).
Does anyone know of another example of an inter-agency conflict of this nature between the FTC and Solicitor General on an antitrust issue?
Posted in antitrust, federal trade commission, patent | 2 Comments »
The Case Against Mandatory Annual Director Elections and Shareholders’ Meetings
Posted by Bill Sjostrom on June 15, 2006
I’ve recently posted on SSRN my latest draft article entitled The Case Against Mandatory Annual Director Elections and Shareholders’ Meetings. Here’s the abstract:
The article examines the mandatory requirement under state corporate law and stock exchange listing standards that public corporations hold annual shareholders’ meetings for the election of directors. Specifically, I question the value of requiring corporations to (1) elect directors annually, and (2) hold shareholders’ meetings annually. I critique the various justifications for these requirements and find none of them persuasive. I then explore a different approach taken by Minnesota corporate law with respect to the frequency of director elections and shareholders’ meetings and conclude that the approach is superior to the current scheme. Recognizing, however, that any less strict state approach is overridden by exchange listing standards requiring annual elections and meetings, I propose that these listing standards be abolished. This would give effect to the Minnesota approach, but more importantly, it would allow state “laboratories� to experiment with alternative rules with respect to the frequency of elections and meetings. Consequently, it would add another variable for consideration in connection with the various proposed corporate governance reforms (e.g., shareholder proxy access, proxy contest reimbursement, majority voting) under debate, some of which may impact the propriety of annual director elections and shareholders’ meetings.
You can download the article here. It’s relatively short for a law review article (44 pages; 18,500 words), so it should be a quick read. If you do read it and have comments, please email them to me at sjostromw(at)nku(dot)edu.
Posted in corporate governance, corporate law | Comments Off
