Truth on the Market

I am saddened that our co-blogger Todd Henderson is putting up his blogging hat.  He leaves us with an academic reputation that is unsurpassed, unfortunately I can’t say that the reputation of everyone involved has held up very well in light of the very personal nature of attacks from various corners.  I don’t have much to add about the recent blogging that Bainbridge and Ribstein haven’t said already.

I do think, however, that this is a good opportunity to focus the world on the wide range of scholarly work from Professor Henderson, and I am only sorry he won’t be on the blog to give us more commentary on his work and the corporate events of the day.  Here are a few papers of his on ssrn worth reading (this certainly won’t be the last time we link to his work at TOTM):

In Insider Trading and CEO Pay, Prof. Henderson examines the effectiveness of insider trading as a compensation device using a study of 10b5-1 trading plans.  His findings are in line with Henry Manne’s original thesis from nearly 40 years ago that insider trading didn’t diminish firm market value on net and may serve a useful purpose as an executive compensation device to motivate managers to maximize the value of the firm.

In Two Visions of Corporate Law, Prof. Henderson challenges the view of Prof. Robert Ahdieh that the race debate in corporate federalism has become stale, instead arguing that competition retains an import role as a supplement to the markets for control, talent, production and customers.  Along the way he offers an interesting guide for how the corporate federalism debate can be expected to evolve and a new lens through which to analyse that debate.

As a side note, from it’s outset I think there has been a flaw in the corporate federalism literature, which is the missing element of intra-state competition between institutional players.  My focus on that missing element is guided by what I am currently working to contribute to the debate in my next piece.  Henderson’s essay takes a much broader view, so I don’t fault him for not adding new dimensions to the debate, but I think it needs to be added to the literature at some point and I plan to do just that.  All in all, Two Visions is a must read for those interested in the corporate federalism debate.

One of Professor Henderson’s classic pieces was co-authored with Douglas Baird, Other People’s Money, and took issue with the principle of a fiduciary duty to maximize shareholder value.  I personally disagree with their argument that the fiduciary duty standard is sub-optimal for the corporate form and that it inaccurately describes the nature of corporate law.  Delaware’s focus on shareholder wealth maximization is in fact a dominate theme in its opinions and evidenced in the DGCL in particular by provisions granting exceptions to that general principle.  I also don’t think that it is sub-optimal given the range of alternative entity forms available and the availability of limited fiduciary duty opt-outs in the corporate form.  My personal views aside, this article is a very popular and well-cited piece, and is a must read for anyone who teaches or writes in corporation law.

Professor Henderson, you will be missed by your co-bloggers and your readers here.