Any serious attempt at financial reform has to grapple with three laws that Congress cannot repeal or amend:
1. Gresham’s Law. Centuries ago, Gresham observed that bad money drives out good. He was commenting on currency debasement, but his principle applies to many other human endeavors. For instance, banks that aggressively exploited regulatory capital rules [...]
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Three Laws Congress Can’t Change
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Financial Reform Glossary
After reviewing President Obama’s “Financial Regulatory Reform: A New Foundation” white paper, I am sure there is one conclusion we can all agree on: the financial world is all about the acronyms.
Sure, we may be losing the OCC, OTS and PWG, but with the addition of the CFPA, FCCC, FSOC, NBS and ONI the acronym count [...]
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Governance: The Platonic Ideal(s)
When we say a corporation’s governance is good or bad, what exactly do we mean by that?
I get the sense that a lot of us have in mind a Platonic ideal form of corporate governance against which we measure individual companies, sorting those deviating the least from the ideal into the “good” category and those [...]
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Same Pointless Disclosure, None of the Fun
SEC Chairman Schapiro’s Congressional testimony yesterday included the following promise of new disclosure requirements:
Next month we will take up a broad package of corporate disclosure improvements, all designed to provide shareholders with important information about their company’s key policies, procedures and practices, including compensation policies and incentive arrangements…. Also, shareholders should understand how compensation structures [...]
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The Enforcement Scorecard
From “In Cox Years at the SEC, Policies Undercut Action”:
During Cox’s tenure, penalties imposed on companies fell 84 percent, from $1.59 billion in 2005 to $256 million in 2008.
Speaks for itself, doesn’t it? The Washington Post seems to think so, printing the above sentence without further explanation.
But I wonder.
Was the level of culpable conduct similar [...]
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The Pill’s Antidote
Senator Schumer’s proposed Shareholder Bill of Rights would impose one-year terms on public company directors, thereby eliminating staggered boards.
The trend has already been to move away from staggered boards: Shearman & Sterling’s 2008 corporate governance survey showed that only 27 of the 100 largest U.S. public companies had classified boards.
When a company eliminates its staggered [...]
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Why Our Agreements Look Like Crap
You might think corporate lawyers, whose professional lives depend on words, who are often known to others only through their words, would care how those words look. You might think that, but you’d be wrong, at least judging from the persistent kludginess of the agreements clogging up my inbox.
After reviewing Matthew Butterick’s wonderful Typography for [...]
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The Right Termism
Senator Schumer’s draft Shareholder Bill of Rights Act of 2009 includes a finding that the “most basic duties” of management and boards require them:
to enact compensation policies that are linked to the long-term profitability of their institutions, … and most importantly, to prioritize the long-term health of their firms and their shareholders….
This focus on the [...]
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The More Things Change
Reading excellent accounts of two of our more notorious scandals du jour – Madoff and Stanford – called to mind Yellow Kid Weil and his “Get Rich Quick Bank.”
Yellow Kid Weil was a con man, famous for saying he promised something for nothing and delivered nothing for something. As detailed in his fascinating book Con [...]
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Kafka Esq.
Franz Kafka earned his living as a corporate lawyer, toiling away in-house at the Workmen’s Accident Insurance Institute, a large Czech insurer. An academic press recently published a collection of documents he wrote on the job, described by a reviewer as including:
a panegyric welcoming … the new director of the Institute; long sections of annual [...]
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