2014 National Lawyers Convention
For thirty years, the economic analysis of corporate law has been based on the assumption that shareholder value is a reliable proxy for social welfare. However, for some time now, the large majority of the shares in some public companies have been held by institutional investors, including pension funds and mutual funds. These investors have some incentive to favor short-term profits at the expense longer-term benefits. Can shareholder value still be reliably equated with social welfare? Or does the current incentive structure encourage the misallocation of resources and a net social loss?
The Federalist Society's Corporations, Securities & Antitrust Practice Groups presented this panel on "The Short-Termism Debate" on Thursday, November 13, during the 2014 National Lawyers Convention.
- Prof. Lucian A. Bebchuk, William J. Friedman and Alicia Townsend Friedman Professor of Law, Economics, and Finance and Director of the Program on Corporate Governance, Harvard Law School
- Prof. Jonathan R. Macey, Sam Harris Professor of Corporate Law, Corporate Finance, and Securities Law, Yale Law School
- Prof. Robert T. Miller, Professor of Law and F. Arnold Daum Fellow in Corporate Law, University of Iowa College of Law
- Mr. Steven A. Rosenblum, Wachtell, Lipton, Rosen & Katz
- Moderator: Hon. E. Norman Veasey, Former Chief Justice, Delaware Supreme Court
Mayflower Hotel Financial Services & E-Commerce Practice Group Podcast
The bank regulators require larger banking organizations to prepare and file financial projections assuming various adverse scenarios under a program called "stress testing." The Federal Reserve Board staff studies these projected financial results and approve them for some banks and reject them for other banks. If your results are rejected, you may not be allowed to pay dividends to shareholders, and you may be required to raise additional capital. Bankers have been complaining that the basis for rejection is never explained by the Fed, and the Fed has repeatedly declined to make available to the affected banks what standards it is using to approve or reject stress test results. Does this raise an issue as to whether banks are being provided due process rights in how they are regulated? Does it raise questions as to whether bank regulation is governed by the rule of law or something else? Does the Fed have a secret capital regulation that it has adopted without following the Administrative Procedures Act?
- Mr. Walter J. Mix III, Director, Berkeley Research Group
- Ms. Hester Peirce, Senior Research Fellow, Mercatus Center, George Mason University
- Moderator: Mr. Dean Reuter, Vice President and Practice Groups Director, The Federalist Society
[Listen now!] Professional Responsibility & Legal Education Practice Group Podcast
All U.S. jurisdictions (except DC) prohibit anyone not a lawyer from owning an equity interest in a law firm. Proponents of the prohibition have argued that it is an element of legal professionalism and serves the interests of lawyers' clients. Great Britain and Australia have recently abandoned this prohibition, arguing that clients may be better served by well-financed practice organizations that can acquire technology and other resources for efficient practice. Both countries have substituted regulation of practice entities' behavior for limitations on who their owners may be.
This Teleforum explores whether any changes now should be made in the U.S. approach. Our panelists have been prominent in the current debate about this issue.
- Mr. Francis J. Menton, Jr., Partner, Willkie Farr & Gallagher LLP
- Prof. Thomas D. Morgan, Oppenheim Professor of Antitrust and Trade Regulation Law, George Washington University Law School
- Mr. John E. Thies, President, Illinois State Bar Association, and Shareholder, Webber & Thies, P.C.
- Moderator: Mr. Dean A. Reuter, Vice President & Director of Practice Groups, The Federalist Society
[Listen now!] Faculty Division and the American Enterprise Institute
Conventional wisdom holds that corporations should maximize shareholder value. In her new book “The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public” (Berrett-Koehler, 2012), Lynn Stout argues that this is a harmful myth. According to Stout, shareholder value thinking leads managers to focus exclusively on short-term earnings to the detriment of investors, corporations, and the public.
According to Jon Macey, however, while shareholder value maximization may be a myth, it helpfully constrains corporate managers. Leaving corporate managers with unconstrained choices — the real result of Stout's argument — would be far more dangerous.
Join Macey and Stout as they debate shareholder value thinking and its implications for the corporate community, public policy arena, and public.
- Lynn Stout, Cornell Law School
- Jon Macey, Yale Law School
- Moderator: Alex Pollock, AEI
- Introduction: Hon. Lee Liberman Otis, Senior Vice President & Faculty Division Director, The Federalist Society
American Enterprise Institute
[Watch now!] 14th Annual Faculty Conference
The Federalist Society's Facutly Division hosted this panel on "The Sovereign Shareholder? Government Ownership and Corporate Law Post-Bailout" on Thursday, January 5, 2012, during the 14th Annual Faculty Conference. Speakers included Prof. Lynn Stout of UCLA School of Law; Prof. J.W. Verret of George Mason University School of Law; Prof. David Zaring of The Wharton School at the University of Pennsylvania; and Dean Donald Weidner of Florida State University College of Law as the moderator. Introduction by the Honorable Lee Liberman Otis, Senior Vice President & Faculty Division Director at the The Federalist Society.