February 3, 2010

Mandating gender balance on corporate boards

It hasn't worked out well for Norway.

January 26, 2010

Around the web, January 26

• "The Coming Counter-Reformation in Securities Litigation" [Boris Feldman via Kevin LaCroix] "Could new regs bring more lawsuits?" [CFO.com]
• "Obama's reckless blast at the Court" [Steve Chapman] Related on Citizens United: Jacob Sullum.
• "Workers seek $500 million over benzene vapor release at Texas City refinery" [SE Texas Record]
• Claim: more California lawyers have turned to dishonesty because of economic recession [Above the Law]
• "$165 Million Schering-Plough Class Action Settlement Includes $37 Million in Fees" [NJLJ, securities fraud]
• "Bonus is poison": a tale of financial managers and their incentives [Hodak Value]

January 3, 2010

"Incorporation Transparency and Law Enforcement Assistance Act"

Larry Ribstein and J.W. Verret (George Mason, Mercatus Center) explain a pending Congressional bill sponsored by Senators Levin (D-MI), Grassley (R-IA), and McCaskill (D-MO), requiring among other things that states keep regularly updated track of the beneficial ownership of privately held firms, and they explore the very considerable burdens it would heap on legitimate small businesses.

December 28, 2009

Liability for credit rating agencies

A WSJ editorial takes note of changes in the language of a Barney Frank bill:

Also removed from the bill was a bizarre "joint liability" scheme in which all the credit raters would be responsible for each other's work, so that a bad report by Fitch could be grounds for a lawsuit against Moody's. Unable to restrain themselves entirely from bestowing gifts upon trial lawyers, House Democrats have instead increased liability for the raters on their own work.

December 15, 2009

Gelinas and Stoll on financial regulation

Manhattan Institute senior fellow Nicole Gelinas, author of the newly published After the Fall: Saving Capitalism from Wall Street -- and Washington, and Ira Stoll, founder and editor of FutureOfCapitalism.com, have a discussion going this week about her book and its ideas on financial regulation.

December 7, 2009

Sarbanes-Oxley before the Supreme Court

Today the U.S. Supreme Court takes up the constitutionality of the Public Company Accounting Oversight Board (PCAOB). Larry Ribstein: "I've been watching the SOX debacle play out for seven years. It will be interesting to see how this ends." More: Hans Bader, Examiner and earlier; WSJ Law Blog; our earlier coverage.

December 6, 2009

Nicole Gelinas, "Saving Capitalism from Wall Street -- and Washington"

In the mail: the new book by Nicole Gelinas (Manhattan Institute) on the financial crisis and its lessons. An informative webpage is here which includes high praise for the book from historians John Steele Gordon and Amity Shlaes, scholar/judge Richard Posner, and business professor Luigi Zingales.

November 13, 2009

"One of the Biggest Pay-to-Play Deals Is Little Known"

Interesting letter to the editor the other day (Nov. 6) in the Wall Street Journal from Edward Siedle of Benchmark Alert, responding to a Journal editorial. It is reprinted here with his permission:

It is true, as your Oct. 31 editorial "Pay-to-Play Torts" says, that public pension pay-to-play schemes involving plaintiffs law firms deserve the same enhanced scrutiny that many states are now bringing to financial brokers and other intermediaries. There is simply no justification for special treatment of lawyers. Indeed, given the nature of legal services and the special fiduciary duties that apply to the attorney-client relationship, more intense scrutiny should be applied to lawyers than to the public-pension broker or intermediary hires.

Sometimes campaign contributions to public officials by plaintiffs lawyers influence or determine the selection of these firms by these same officials. But campaign contributions alone cannot explain the countless hires of plaintiffs firms by thousands of public-pension managers around the country. A major drawback of campaign contributions is that they are relatively easy to trace. Another drawback is that for most public pensions a single elected official or even multiple elected officials may not control the lay board.
On the other hand, in virtually all public-pension class-action litigation, class-action law firms share fees with local fund counsels in order to secure hires. Public-pension local fund counsels generally have substantial experience in labor matters. Their relationships with labor groups explain their role with the pension funds. They have little knowledge to offer regarding investment matters or securities class actions. In many cases, poor public-pension investment decisions can be linked to ineffectual legal representation in their negotiations with Wall Street investment firms. Yet these local fund lawyers can earn substantial referral fees on class actions which dwarf the standard retainers they receive from pensions.

The amount of fees paid by plaintiffs firms to local fund lawyers are largely undisclosed to public-pension boards. In my 25 years of public pension experience I have never met a public-pension board member who had even the vaguest understanding of the massive referral fees local fund counsels receive. These board members would be shocked to find that their local fund counsel earned more for recommending class actions than from hourly billings for providing advice to the fund.

By far the most common and least transparent form of pay-to-play involving public-pension legal services involves plaintiffs firm hiring or entering into fee-sharing arrangements with local fund counsel intermediaries. Until disclosure is mandated and attention is drawn to the powerful economic incentives impacting these "legal gatekeepers," you will see lots of public funds jumping on the class-action bandwagon.

November 6, 2009

Small business Sarbanes-Oxley exemption

Rahm Emanuel, for one, is said to be pressing for it [Bloomberg] The New York Times's Floyd Norris is predictably having a fit.

October 26, 2009

Marc Hodak on bank compensation curbs

The wrong solution to the wrong problem:

OK, incentives at banks have been deficient. I've seen them all: bonuses based on loan volume; banking fees based on a percentage of the debt issued; traders being richly rewarded for unsustainable performance shortly before getting fired....I'm just wondering who out there believes that it is worth having every major bank submit their incentive plans to prior judgment by federal officials. Especially when there is zero evidence that incentive plans actually contributed to the financial crisis, and plenty of evidence that the Fed did contribute to it.

Related: Crit-turned-fed-governor Daniel Tarullo is emerging as a major force for more heavy-handed bank regulation, per the WSJ. "Some Fed officials said privately Mr. Tarullo can have an overbearing skepticism of banks and supervisors. Some Fed staffers are so wary of being second-guessed they ask him to approve even mundane bank applications."