July 18, 2007
Allan Hutchinsion (York University – Osgoode Hall Law School) has posted Public Policy and Private Cupidity: Berle and Means Re-Visioned on SSRN. The article challenges the conventional interpretation of the Berle and Means classic work, The Modern Corporation and Private Property, and suggests instead other possible understandings that have been lost on corporate scholars. Here is the abstract:
Adolph A. Berle and Gardiner C. Means’ The Modern Corporation and Private Property is one of law’s undisputed canonical texts. Its 75th anniversary is an occasion both to reassess its legacy and perhaps to rework its insights. Although Berle and Means’ work was intended to redirect the governance of corporate affairs away from furthering private cupidity and towards advancing public policy, their enslaving insights have done more harm than good; they have tended to reinforce the primacy of private cupidity or, perhaps more accurately, allowed subsequent theorists to prefer the pursuit of private cupidity by equating it with the development of public policy. This is not only unfortunate, but also unnecessary. Although Berle and Means’ The Modern Corporation forms the bedrock of the prevailing paradigm in corporate law and governance, it also contains some very suggestive materials from which to construct an alternative and more democratic way of proceeding which actually subverts and transforms the established model. In this essay, therefore, I want both to celebrate The Modern Corporation, but also to lament the enduring influence of its received understanding on corporate law scholarship and practice.
July 10, 2007
Former Milberg Weiss partner David Bershad has pled guilty to one count of conspiracy in connection with an ongoing investigation into illegal kickbacks that his former firm allegedly paid to individuals who served as lead plaintiffs in class action securities litigation. According an article in today’s New York Times, Bershad has detailed how the firm, beginning in the 1970s, recruited a “stable” of clients by secretly paying them up to ten percent of the legal fees the firm obtained.
The article reports that Bershad has agreed to disgorge $7.75 million and pay a $250,000 fine. He will also cooperate with the government’s investigation of other participants in the alleged conspiracy. The plea should put pressure on the Milberg Weiss firm and partner Steven Schulman who have also been indicted. Partner Melvyn Weiss and former partner William Lerach have not been indicted, but they may also face pressure from Bershad’s guilty plea.
July 2, 2007
Robert Prentice (Texas – McCombs School of Business) has posted Sarbanes-Oxley: The Evidence Regarding the Impact of Section 404 on SSRN. The article assesses evidence regarding costs and benefits of Section 404 of the Sarbanes-Oxley Act. Like the articles posted below, Prentice concludes it is too early to tell whether Section 404 is working. He goes further, however, to argue that the current harsh criticism of 404 is likely to undermine its prospects for success in the long-term. Prentice thus takes on Sarbanes-Oxley’s critics (including Larry Ribstein and Roberta Romano) who savage the the legislation for lacking solid empirical bases for its policies. These critics, he says, commit the very sins they condemn when they attack Section 404 before conclusive evidence is available regarding its effectiveness. Here is the abstract:
Sarbanes-Oxley is the most important securities legislation since the 1930s, and whether it is ultimately considered a success will likely turn on perceptions of its controversial internal controls provision, Section 404. Indeed, whether the law is a success will likely turn on perceptions of 404. SOX 404 has been savagely attacked, especially for its burdensome cost to corporations and its adverse impact on the competitiveness of American capital markets. This article surveys the relevant empirical academic literature. Although that literature does not purport to (and does not) settle the overall question of whether SOX’s benefits generally, or SOX 404’s specifically, outweigh attendant costs, it does illustrate that the harshest criticisms of SOX are overblown. Importantly, SOX 404 has demonstrably improved corporate financial reporting in the short-term. Its potential for having long-term beneficial impact is largely dependent upon its being perceived as legitimate by capital market participants. At the moment, its legitimacy is being undermined by criticism that ignores much of the important evidence.