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Steve Bainbridge
Interests: Law, corporate governance, economics, politics, religion, education, books, food, and wine
Recent Activity
In Lee v Tam, SCOTUS affirms and holds that disparagement provision of the trademark laws is unconstitutional. — SCOTUSblog (@SCOTUSblog) June 19, 2017 An unusually clear refutation from SCOTUS of the "hate speech is not free speech" nonsense: pic.twitter.com/Nxx4bl32Am — PopehatWitchHunt (@Popehat) June 19, 2017 Continue reading
Posted 6 days ago at ProfessorBainbridge.com
It's kind of a depressing time, isn't it. There's no obvious end game for all the legal wrangling in DC that would be acceptable to a majority of the country. Any outcome that would make liberals happy is unlikely to be acceptable to conservatives, and vice-versa. We likely will continue to see polarization as politics becomes increasingly tribal and as the values half of us hold dear are increasingly rejected by the other half. (I assume you saw this poll: https://www.voterstudygroup.org/…/political-divisions-in-20… ). There are certainly no signs we are coming together on issues like abortion, free exercise of religion, and... Continue reading
Posted 6 days ago at ProfessorBainbridge.com
Andrew Ledbetter, Louis Lehot, and Nicole Hatcher offer an analysis of proxy trends in 2017: In 2017 proxy access continues to be the hottest topic among shareholders in the annual meeting process, especially for Fortune 500 companies. We believe that proxy access will move into Russell 3000 companies over the course of the next few years. And, while it is possible that the new administration will make some changes to the corporate governance landscape that will impact public companies, so far the new administration's focus on health care and deregulation has had little impact on corporate governance matters. The forces... Continue reading
Posted 6 days ago at ProfessorBainbridge.com
Bebchuk, Lucian A. and Cohen, Alma and Hirst, Scott, The Agency Problems of Institutional Investors (June 1, 2017). Available at SSRN: https://ssrn.com/abstract=2982617: We analyze how the rise of institutional investors has transformed the governance landscape. While corporate ownership is now concentrated in the hands of institutional investors that can exercise stewardship of those corporations that would be impossible for dispersed shareholders, the investment managers of these institutional investors have agency problems vis-à-vis their own investors. We develop an analytical framework for examining these agency problems and apply it to study several key types of investment managers. We analyze how the... Continue reading
Posted 6 days ago at ProfessorBainbridge.com
These are difficult but important questions, which Paul Rose addresses in an interesting new article: With trillions of dollars in assets, sovereign wealth funds (SWFs) play a major role in financial markets around the world. With billions (and probably well over a trillion) dollars’ worth of equity investments around the world, the investment behavior of SWFs is of primary concern to regulators, portfolio firms and other investors. The routinely cited perils of sovereign investment, such as politicization, corporate espionage, and mercantilism, are typically seen as emanating from equity investments by SWFs. On the other hand, SWFs offer the promise of... Continue reading
Posted 6 days ago at ProfessorBainbridge.com
NPR reports: Shareholders in a zoo near Shanghai, frustrated that they weren't making a profit on their investment, fed a live donkey to zoo tigers as a form of protest. Video of the scene shows the donkey pushed down a makeshift ramp into the water surrounding the tiger habitat, where it is promptly pounced upon. Tigers bite and claw the donkey as it bleeds and struggles in the water. The footage has prompted protest and outrage in China. In a statement, shareholders who invested in Yancheng Safari Park say they held a meeting and voted in favor of feeding the... Continue reading
Posted Jun 15, 2017 at ProfessorBainbridge.com
The NY Times reports: David Bonderman, an Uber board member and partner at private equity firm TPG, resigned from the board of the ride-hailing company after he made a disparaging remark about women at an Uber meeting on Tuesday. Earlier in the day at an Uber staff meeting to discuss the company’s culture, Arianna Huffington, another board member, talked about how one woman on a board often leads to more women joining a board. “Actually, what it shows is that it’s much more likely to be more talking,” Mr. Bonderman responded. In context, the remark probably was a sarcastic dig... Continue reading
Posted Jun 14, 2017 at ProfessorBainbridge.com
Since 2003, the NYSE has required the boards of listed companies to conduct an annual self-evaluation.[i] Commentators have endorsed such evaluations as being a critical corporate governance best practice, arguing that no one—not managers, shareholders, or regulators—has better information about how a board performs.[ii] Outsiders are largely limited to evaluating board members based on outputs, such as firm performance, while board members are in the room and thus able to use a much broader set of metrics to evaluate both inputs and outputs. In practice, however, boards are as bad at self-evaluation as they are most other tasks. Barely half... Continue reading
Posted Jun 13, 2017 at ProfessorBainbridge.com
I’ve completed two of the six courses I need for my Certificate in Doctrine from the @NotreDame STEP program. pic.twitter.com/Uhw2frKNfu — Professor Bainbridge (@ProfBainbridge) June 13, 2017 Continue reading
Posted Jun 13, 2017 at ProfessorBainbridge.com
The usual suspects are quite worried: Shareholder Proposals Threatened by Financial Reform Bill the House Passedhttps://t.co/d704jUuihc pic.twitter.com/RmlZLLSGYV — Consumer Reports (@ConsumerReports) June 12, 2017 Me? Not so much. I made the case for pruning the rule in my article Revitalizing SEC Rule 14a-8's Ordinary Business Exemption: Preventing Shareholder Micromanagement by Proposal (March 29, 2016). UCLA School of Law, Law-Econ Research Paper No. 16-06. Available at SSRN: https://ssrn.com/abstract=2750153: As many courts and commentators have recognized, the SEC proxy rules seek to effectuate a scheme of “corporate democracy.”[1] SEC Rule 14a-8—the so-called shareholder proposal rule—is a central tool for accomplishing that goal.[2]... Continue reading
Posted Jun 12, 2017 at ProfessorBainbridge.com
I thought about doing a big thought piece on the House passage of the Dodd-Frank reform bill. But what's the point? It'll never get past the inevitable Democratic filibuster in the Senate. For that matter, the Republican moderates in the Senate might suffice to keep it from getting 50 votes, let alone 60. Continue reading
Posted Jun 9, 2017 at ProfessorBainbridge.com
Bloomberg BNA is another case in point: The U.S. Supreme Court put sharp new limits on a favorite tool used by securities regulators to recoup money from people found to have violated federal laws ( Kokesh v. SEC, U.S., No. 16-529, opinion 6/5/17). The justices unanimously said the Securities and Exchange Commission is bound by a five-year statute of limitations when it seeks “disgorgement,” or the return of illegal profits. For Pete's sake. It's a five YEAR statute of limitations, which BTW remains subject to the usual tolling rules. It scarcely requires the speed of a striking cobra. More like... Continue reading
Posted Jun 9, 2017 at ProfessorBainbridge.com
There's an important new paper out on the misbegotten birth of the responsible corporate officer doctrine: This article analyzes the origins of the “responsible corporate officer” doctrine: the trial of Joseph Dotterweich. That doctrine holds that an officer may be personally liable for the criminal act of a subordinate if the officer was, in some indefinite way, able to prevent the violation. Applying this doctrine, the prosecution of Dotterweich entailed strict liability for a strict liability offense. The underlying offenses — the interstate sale of one misbranded and adulterated drug and one misbranded drug — were said to be strict... Continue reading
Posted Jun 9, 2017 at ProfessorBainbridge.com
Crux reports: In a decision that has religiously affiliated hospitals cheering, the Supreme Court ruled that federal pension rules don’t apply to them. The 8-0 ruling reverses lower court decisions that sided with hospital workers who argued that the exemption from pension laws should not extend to hospitals affiliated with churches. Monday’s (June 5) Supreme Court ruling in favor of the hospitals - two with Catholic and one with Lutheran ties - could also affect other religiously affiliated institutions and their employees. “The Supreme Court got it right,” said Eric Rassbach, deputy general counsel at Becket, a religious liberty law... Continue reading
Posted Jun 6, 2017 at ProfessorBainbridge.com
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Theresa Gabaldon notes: Since 1970, the SEC has successfully sought the remedy of disgorgement from violators of the federal securities laws. In 2015 alone, the amount recovered exceeded $3 billion. Although there have been glimpses in legislation along the way that Congress is aware of the existence of the remedy, it has never been expressly authorized – if it had been, there might have been explicit attention paid to whether it was subject to a statute of limitations. I think the glimpses to which she refers are probably section 304(a) of the Sarbanes-Oxley Act, whose clawback regime arguably could be... Continue reading
Posted Jun 6, 2017 at ProfessorBainbridge.com
I will have a WLF Legal Pulse post up soon on the Supreme Court's decision in Kokesh v. SEC. In the meanwhile, I urge to you to take a look at Theresa Gabaldon's thorough analysis of the case at SCOTUSblog. She makes 5 broad points: First and most obviously, the court’s decision, in an opinion written by Justice Sonia Sotomayor, is going to be an expensive one for the government, which urged the Supreme Court to review the case. Second, the opinion features one of those portentous footnotes, suggesting that the threshold matter of whether courts should be ordering disgorgement... Continue reading
Posted Jun 6, 2017 at ProfessorBainbridge.com
The Supreme Court has decided Kokesh v. Securities and Exchange Commission. In a unanimous opinion authored by Justice Sotomayor, the Court held that SEC disgorgement actions are subject to the standard 5-year statute of limitations set forth in 28 U. S. C. §2462, which applies to any “action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture.” The Hill played this as the Supreme Court turning loose future waves of Bernie Madoffs on the unsuspecting public: The Supreme Court issued a ruling Monday that curbs the power of the Securities and Exchange Commission to recoup profits... Continue reading
Posted Jun 5, 2017 at ProfessorBainbridge.com
Audited financial statements long have been accompanied by a report from the independent auditor attesting that, in its opinion, the financial statements are presented fairly in all material respects.[1] On June 1, 2017, the PCAOB adopted Auditing Standard 3101, governing the information an independent auditor must include in its report: The final standard retains the pass/fail opinion of the existing auditor's report but makes significant changes to the existing auditor's report, including the following: Critical audit matters … requires the auditor to communicate in the auditor's report any critical audit matters arising from the current period's audit of the financial... Continue reading
Posted Jun 2, 2017 at ProfessorBainbridge.com
UCLA School of Law has made the following announcement: William Warren, a former dean of UCLA School of Law who left a lasting imprint on the school and the nation's commercial laws, died on May 30, 2017. He was 92. UCLA Law grew into its current position as one of the nation's premier law schools during Warren's tenure as its fourth dean, from 1975 to 1982. Those pivotal years were marked by expansion of the school's trailblazing clinical education program, stronger ties to the firms and institutions that hire law school graduates, and a growing reputation as a place where... Continue reading
Posted Jun 2, 2017 at ProfessorBainbridge.com
I am deeply saddened to have learned that my friend and colleague William D. Warren has passed away. Bill Warren was a man of immense accomplishments who justifiably could have acted like cock of the walk, but he was far too much the gentleman to ever be anything but gracious and kind. His intelligence and deep knowledge of the law were matched by his concern for others, human warmth, and good sense. He was one of the first to welcome me to UCLA and over the next two decades consistently went out of his way to make me—and all his... Continue reading
Posted May 31, 2017 at ProfessorBainbridge.com
Seven issuers voluntarily jumped the gun and provided pay ratio disclosures in their 2017 annual proxy statements. Reportedly, however, those disclosures were typically deficient: The pay ratio disclosure provided by each of these registrants has generally been brief and, in certain cases, perhaps too brief. Only two of these registrants included disclosure that appears to fully comply with the final rule. Four registrants did not disclose the date on which the employee population was determined, and two registrants did not indicate the methodology used to measure compensation and identify the median employee. In addition, one registrant failed to express the... Continue reading
Posted May 31, 2017 at ProfessorBainbridge.com