We Studied 38 Incidents of CEO Bad Behavior and Measured Their Consequences https://t.co/EsjCrTpKFD— Harvard Biz Review (@HarvardBiz) June 9, 2016
Very interesting article. https://t.co/f0zvYWEVLr— Dan Gallagher (@DanGallagherGrp) June 8, 2016
New paper reports that:
Against the lively debate on whether a staggered board (SB) of directors hurts or benefits stockholders I present new evidence suggesting that in general, an SB has no significant effect on stock value. The evidence is based on the effects of two Delaware court rulings in 2010 in the case of Airgas on stock prices of Delaware companies that could be affected by these rulings. The October 8 ruling weakened the potency of the SB for companies that have their annual meeting late in the year and the November 23 decision restored its potency. (A detailed description of these rulings appears in a post on the Forum here.) ...
It seems that the value effect of an SB is idiosyncratic. It benefits stockholders in well-managed companies and harms firm value in badly managed ones. It is doubtful that one can make a general statement on the value effect of an SB, as some participants in this debate do.
The full paper is available here.
I didn't care much for Civil procedure in law school and, obviously, I don't blog about it much. But since some readers may, I pass along a link to our friend Francis Pileggi's article for Directorship on Hazout v. Tsang, which broadened the scope of personal jurisdiction in Delaware courts over officers and directors of Delaware corporations. Here's what seems to be the money quote, but do go read the whole thing:
Delaware courts have historically interpreted Section 3114 to only impose personal jurisdiction on directors and officers of a Delaware corporation when claims against them were made for breach of fiduciary duty or other related violations of the Delaware General Corporation Law. Thus, this decision is notable because it expands the interpretation of the statute to allow directors and officers of Delaware corporations to be subject to the jurisdiction of Delaware courts when they are merely a necessary party (e.g., a person whose interests are impacted by the outcome of a lawsuit) or a proper party (someone who merely has a legal interest in a lawsuit), even if there are no claims for breach of fiduciary duty.
Using a recipe from Making Artisan Pasta, I made a batch of whole wheat fettuccine using the Pasta Roller and Cutter Attachments to my KitchenAid Stand Mixer. I also turned two small zucchini into noodles using the medium size cutter on the Spiralizer Attachment. I brought a large pot of generously salted water to a boil and then cooked the pasta for 5 minutes. After the pasta had cooked for 2 minutes, I added the zucchini. When they were done, I drained the pasta in a colander and returned it to the pan.
Meanwhile I had drained a jar of Tonnino Ventresca Tuna in Olive Oil in a strainer set over a bowl. In a small pan I heated half a jar of Mario Batali Alfredo Sauce to which I added 1 tablespoon shredded Parmesan cheese, 1 teaspoon dried parsley flakes, 1 teaspoon freeze-dried chives, and a tablespoon of the reserved olive oil drained off the tuna. Once the sauce had warmed, I added the tuna, mixed it well, and turned off the heat.
I added the sauce to the pasta and served. We drank a Qupé Bien Nacido Cuvée (Santa Maria Valley) 2013--see note from August 2015--which made a most agreeable match.
My latest paper is now up on SSRN:
Abstract: On its surface, Jesus’ Parable of the Talents is a simple story with four key plot elements: (1) A master is leaving on a long trip and entrusts substantial assets to three servants to manage during his absence. (2) Two of the servants invested the assets profitably, earning substantial returns, but a third servant — frightened of his master’s reputation as a hard taskmaster — put the money away for safekeeping and failed even to earn interest on it. (3) The master returns and demands an accounting from the servants. (4) The two servants who invested wisely were rewarded, but the servant who failed to do so is punished.
Neither the master nor any of the servants make any appeal to legal standards, but it seems improbable that there was no background set of rules against which the story plays out. To the legal mind, the Parable thus raises some interesting questions: What was the relationship between the master and the servant? What were the servants’ duties? How do the likely answers to those questions map to modern relations, such as those of principal and agent? Curiously, however, there are almost no detailed analyses of these questions in Anglo-American legal scholarship.
This project seeks to fill that gap.
Number of Pages in PDF File: 23
Keywords: Fiduciary Duty, Agent, Principal, Servant, Master, Parable, Law and Religion, Law and Literature
JEL Classification: K22
Dinner tonight was duck fried "rice," with the rice in scare quotes because it was mostly riced cauliflower left over from last night. I started with two Muscovy duck breasts left over from Helen's birthday trifecta weekend. I scored the fat and then marinated for a couple of hours in a mixture of:
For the last half hour I transferred the duck from the refrigerator to the counter top to let it warm up some. I removed the duck from the marinade, wiped the breasts dry with paper towels, and put them skin side down in a preheated Calphalon Contemporary 12-Inch nonstick skillet over medium high heat until the fat had rendered and the skin was a deep brown. This makes it a lot easier to remove the skin, which I did after allowing the breasts to rest for 10 minutes. I discarded the duck fat because it had picked up a lot of black bits, which was unfortunate. Duck fat is liquid gold in the kitchen. I wiped the pan clean with paper towels and set it aside. After the breasts had rested, I peeled off the skin and diced the meat.
On to the "rice":
I preheated the same skillet over medium-high heat and then added just enough olive oil (pure not EVOO) to coat the bottom. In went the duck meat, which was still very rare to sauté for 2-½ minutes. Next in went the mushrooms to sauté for another minute. Next the onion, garlic, and ginger to sauté for 30 seconds. Next into the pan were all of the remaining ingredients except for the eggs. They sautéed for 5 minutes, stirring frequently. At the 5 minute mark, I moved the mixture to the outer edges of the skillet to create about a five-inch diameter opening in the center of the skillet into which I poured the eggs. I scrambled them briefly and then mixed the eggs into the fried "rice." Serve immediately.
I was in the mood for fried "rice" and also in the mood for a Napa Cab, which admittedly is not a pairing I would normally approve (or even admit to making). But damned if it didn't work.
I decanted the Etude about an hour before dinner. It had thrown a lot of light sediment, which made decanting a real pain and ultimately required filtering the last quarter of the bottle through an unbleached coffee filter because it was so mixed with the wine (despite having stood the bottle up for 3 days to settle and very careful handling). Bright ruby color. Good bouquet of blackberry, cassis, tobacco, and mocha java. Ditto the palate with a dash of cedar on the finish. Soft silky tannins and just the right level of acidity. Well balanced. I've got one bottle left in my cellar and I think I'll drink it by the end of 2017. No point in waiting.
Stuffed Rack of Lamb
Hold a very sharp paring knife (I use a Calphalon Contemporary 4-1/2-Inch blade, which I sharpen using a Chef's Choice sharpener) horizontally parallel to the lamb meat and insert it to the hilt. Spin the blade to make a tunnel through the meat. Turn the rack around, insert the knife into the other end, and repeat. Push a wooden spoon handle through one end until it comes out the other and spin to widen the tunnel. Combine the tomatoes, pesto, and garlic, and push into the cavity you've created in the lamb. Make sure that your stuffing fills the entire cavity and then sort of press the meat to even out lumps. Season the surface of the meat (top and bottom) with salt and pepper and let rest at room temperature while you make the crust.
Combine the nuts in a Cuisinart Mini-Prep and process until they are the size of bread crumbs. Add the tomatoes and process briefly. Smear the top side of the lamb with about a tablespoon of pesto and press the nut mixture into the meat to form a crust. (You may not need all of the nuts).
Preheat the oven to 425° and roast the rack of lamb for 23 minutes for medium-rare. Allow the lamb to rest while preparing the cauliflower, carve into double rib chops, and serve.
Curried Cauliflower "Rice"
I am on something of a Paleo kick these days, so in lieu of the risotto I would usually serve with rack of lamb, I made some cauliflower rice in my new KitchenAid Food Processor Attachment. Take 1 head of cauliflower, trim off any leaves, and cut the florets off the inner core. Discard the core or save it for stock. Chop the florets roughly and put half in the processor. Using pulses, process the cauliflower until it has broken down into rice-size pieces. Repeat with the other half. I reserved half the resulting product for use tomorrow night and used half for tonight's side dish.
I did not want the side dish to be really spicy because I planned on serving it with a 30 year old Bordeaux and didn't want the spice to blow the wine out of the water. If you went with a younger, more assertive wine, you could ramp up the spice (a lot). But I wanted warm and mellow, which is what I got.
Chop the green onions, dividing the white (and white-ish) parts from the green. Heat a Calphalon Contemporary 12-Inch nonstick skillet over medium-high heat and then add enough olive oil ("pure" not EVOO) to coat. Add the white part of the green onions and sauté for about a minute. Add the almonds and sauté for about 3 minutes. Add garlic, ginger, chili paste, garam masala, and curry paste and sauté for about 30 seconds. Reduce heat to medium and add the tomatoes, raisins, parsley, and processed cauliflower. Season with salt (just a pinch) and pepper. Cook over medium heat for about 4 minutes. Add fish sauce and cook another minute. Stir in green parts of green onions, taste to see if it needs more salt (it probably won't), and serve immediately.
This cru bourgeois from one of Bordeaux's lesser regions could blow a lot of classed growths out of the water. It's the same age as Lindsay Lohan and just about as immature, although not as blowsy, as Ms Lohan. Of course, immaturity at age 21 is a much more desirable characteristic in wine than people. ...Given the Sociando-Mallet's youthfulness, intense fruit, richness, and over-the-top intensity, in a blind tasting I likely would have said it was a 10-year old Napa cabernet. Fans of the austere style of claret likely would regard all that as a fault, but I find this wine to be very fine.
In 2013, I wrote in part that:
Ms. Lohan seemingly has not matured, but the 1986 Chateau Sociando-Mallet has. This bottle's cork was stained almost to the top and the bottle was showing ulllage down to the very bottom of the neck, which was quite worrisome. But all was well. Although it still had dark fruit in plenty (and remained a deep garnet color), this bottle offered many more maturity markers such as smoke, leather, dried fruits, and so on.
With two bottles left in my cellar, I will not be looking for more at auction. Instead, I'll probably open the next in 2016 and see where we go from there with respect to the last bottle.
It's 2016 and so I opened the penultimate bottle. It showed ullage down to very high shoulder. The deeply stained cork crumbled on opening, which necessitated showing the remanent through into the bottle and then decanting it through a funnel lined with unbleached coffee filters (2 sufficed). Given the considerable sediment, decanting would have been required even if the cork had not disintegrated.
Sadly, this bottle had not rewarded additional aging. It was still healthy, with a surprising amount of tannin and good acidity. It had no faults but it also had few merits. It was pretty one dimensional. Some dark fruit and a dash of cedar, but that was about it. Drinkable. Enjoyable. But not memorable. So I think the final bottle gets drunk in the next year or so. Seemingly, there is nothing to be gained by waiting.
A few months ago, Inside Higher Ed ran a story that noted "that grades continue to rise and that A is the most common grade earned at all kinds of colleges." (emphasis added). This finding surprised me. I knew grade inflation was becoming more and more common, but I did not expect A to be the most common grade earned, especially in the undergraduate setting. ...
Is grade inflation simply an extension of the participation trophy phenomenon? "Entitled" might be the most common adjective I hear used to describe students today. "65% of Americans Say Millennials Are “Entitled,” 58% of Millennials Agree." And if these students grew up being rewarded for just showing up, why wouldn't they be entitled? For the most part, I agree with Pittsburg Steeler, James Harrison, who famously returned his children's participation trophies. To be clear, I think there is a place for team (and individual) achievement trophies and for most improved trophies, but trophies for just showing up seems to encourage mediocrity.
Go read the whole thing.
Dinner tonight was a very simple steak with potatoes, which to my mind is classic Napa Cabernet territory. The 2009 Jayson red wine is a proprietary blend of 72% Cabernet Sauvignon, 20% Merlot, 4% Cabernet Franc, and 4% Malbec. I opened and decanted the Jayson about an hour before dinner, which allowed it plenty of time to open and evolve. A very pretty color shading from purple to ruby. Huge bouquet. Blackcurrant, blackberry, black cherry, vanilla, and nutmeg. On the palate, it was smooth and silky with soft tannins. Perfectly balanced. Most wineries would be proud to have this as their reserve, let alone their second wine. Grade: 93
Shareholders who claim Citigroup deceived them into holding on to their stock by misrepresenting its exposure to risky mortgage-backed securities can sue its officers directly, the Delaware Supreme Court said May 24 in response to the 2nd Circuit’s request for an advisory ruling....
Chief Justice Strine’s opinion noted that neither the plaintiffs’ common law fraud claims nor the negligent-representation claims involve fiduciary duty or corporate governance charges or “claims otherwise belonging to the corporation.”
All of which prompted the following Twitter exchanges:
Thoughts? Comments open.
So finds a new study. Hutchens, Michelle and Rego, Sonja O. and Sheneman, Amy Genson, Influencing Profits: The Differential Impact of Lobbying on Corporate Stock Returns (April 29, 2016). Available at SSRN: http://ssrn.com/abstract=2779697 :
Prior research provides mixed evidence on whether corporate lobbying activities increase or decrease shareholder value. In this study we use detailed data on corporate lobbying expenditures to investigate which factors influence the returns to corporate lobbying activities. Specifically, we examine whether the returns vary by lobbying issue (e.g., tax-, defense-, or healthcare-related), by the severity of agency problems, by the lobbying approach employed, and by the potential benefits to be gained lobbying. Our results suggest that although the association between abnormal stock returns and total lobbying expenditures is generally positive and significant, the returns to lobbying vary substantially depending on the issue being lobbied. While investors expect lobbying on tax-, defense-, trade-, and federal budget-related issues to generate significant economic benefits for firms, they expect the returns to environment-related lobbying to actually decrease shareholder value. We also provide evidence that the returns to lobbying are more positive for firms with low free cash flows, for firms that adopt a relational approach to lobbying, and for firms with the largest potential benefits to be gained from lobbying. Overall, our research suggests that corporate lobbying activities represent strategic political investments that generate future economic benefits, not agency problems as asserted by some prior studies.
These results enhance the case for applying the business judgment rule when shareholders challenge lobbying expenses and campaign contributions and rebuts the argument for disclosure to shareholders of such spending.
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In a post on the emissions scandal that's worth reading for lots of reasons, John Armour makes a point that I think undermines the basic premise of progressive corporate law insofar as it seeks to use corporate law to influence corporate governance to regulate the externalities created by corporate conduct:
What also emerges starkly from the VW affair is the importance of distinguishing between agency costs and externalities in discussions of corporate governance. Conflicts of interest between managers and shareholders are an agency cost. But so too are conflicts of interest between employees and shareholders. Harm caused to the environment, or any other interest external to the corporation, however, is an externality. Simply because a company’s structure is designed—as codetermination does in Germany—to minimise agency costs between shareholders and employees—does not necessarily imply that it will be less problematic in terms of externalities. Corporate conduct that harms the environment but leads to corporate growth benefits both investors and employees.
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Ann Lipton has a very interesting post on the strategic uses of the titular legal rules.