1 Joseph B. Frumkin, Sullivan & Cromwell LLP. 2 Front row: William W. Bratton, Georgetown University Law Center; Martha L. Rees, DuPont. Middle row: Stephen L. Brown, TIAA-CREF; Martin S. Lessner, Young Conaway Stargatt & Taylor, LLP; Andrew R. Brownstein, Wachtell, Lipton, Rosen & Katz. Back row: Christopher Foulds, Clerk, Delaware Court of Chancery; Scott Litvinoff, Clerk, Delaware Court of Chancery; Neela Mookerjee, Clerk, Delaware Court of Chancery.
Corporate Finance 8 May 2009 Welcome Michael a. Fitts, Dean and Bernard G. Segal Professor of Law, University of Pennsylvania Law School
Shareholder Primacy in a Corporatist Political Economy William W. Bratton, Professor of Law, Georgetown University Law Center michael L. Wachter, William B. Johnson Professor of Law and Economics, University of Pennsylvania Law School many look toward enactment of items on shareholder primacy’s law reform agenda to help recovery from the financial crisis. the authors negate that view, arguing that the financial crisis exposes major weakness in the claims of those who favor greater shareholder power. our claim is that shareholder empowerment delivers management a simple and emphatic marching order: manage to maximize the market price of the stock. and that is exactly what the managers of a critical set of financial firms did in recent years. they managed to a market that focused on increasing observable earnings and, as it turned out, failed to factor in concomitant increases in risk that went largely unobserved. the fact that management bears primary responsibility for the disastrous results does not by itself effect a policy connection between increased shareholder power and regulatory reform. a policy connection instead turns on a counterfactual question: Whether increased shareholder power would have imported more effective risk management in advance of the crisis. no plausible grounds exist for making such a case. Big Deal: The Government’s Response to the Financial Crisis steven m. davidoff, Associate Professor of Law, University of Connecticut School of Law david Zaring, Assistant Professor of Legal Studies, The Wharton School How should we understand the federal government’s response to the financial crisis? the government’s team, largely staffed by investment bankers, pushed the limits of its statutory authority to authorize an ad hoc series of deals designed to mitigate that crisis. It then decided to seek comprehensive legislation that, as it turned out, paved the way for more deals. the result has not been particularly coherent, but it has married transactional practice to administrative law. In fact, we think that regulation by deal provides an organizing principle, albeit a loose one, to the government’s response to the financial crisis. dealmakers use contract to avoid some legal constraints, and often prefer to focus on arms-length negotiation, rather than regulatory authorization, as the source of legitimacy for their actions, though the law does provide a structure to their deals. they also do not always take the long view or place value on consistency, instead preferring to complete the latest deal at hand and move to the next transaction. In this paper, we offer a first look at the history of the financial crisis from the fall of Bear stearns up to, and including, the initial implementation of the economic emergency stability act of 2008. We analyze each deal the government concluded, and how it justified those deals within the constraints of the law, using its authority to sometimes stretch but never truly break that law. We consider what the government’s response so far means for transactional and administrative law scholarship, as well as some of the broader implications of crisis governance by deal.
Morning Session Shareholder Primacy in a Corporatist Political Economy William W. bratton, Professor of Law, Georgetown University Law Center Michael l. Wachter, William B. Johnson Professor of Law and Economics, University of Pennsylvania Law School
Commentators Joseph B. Frumkin, Sullivan & Cromwell LLP mark J. roe, David Berg Professor of Law, Harvard Law School
3 Robert L. Friedman, The Blackstone Group L.P.; Alan L. Beller, Cleary Gottlieb Steen & Hamilton LLP; Hon. Leo E. Strine, Jr., Delaware Court of Chancery; Michael L. Wachter, University of Pennsylvania Law School. 4 Robert F. Hoyt, Department of the Treasury. 1
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Big Deal: The Government’s Response to the Financial Crisis Steven M. Davidoff, Associate Professor of Law, University of Connecticut School of Law David Zaring, Assistant Professor of Legal Studies, The Wharton School Commentators Isaac d. Corré, Senior Managing Director, Eton Park Capital Management andrew metrick, Professor of Finance, Yale School of Management Afternoon Session Panel on the Government as Shareholder
Moderators Jill e. Fisch, Perry Golkin Professor of Law edward B. rock, Saul A. Fox Distinguished Professor of Business Law michael L. Wachter, William B. Johnson Professor of Law and Economics University of Pennsylvania Law School Panelists alan Beller, Cleary Gottlieb Steen & Hamilton LLP robert F. Hoyt, Department of the Treasury robert H. mundheim, Shearman & Sterling LLP roberta romano, Oscar M. Ruebhausen Professor of Law, Yale Law School Hon. Leo e. strine, Jr., Vice Chancellor, Delaware Court of Chancery Heath tarbert, Committee on Capital Markets Regulation
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6 5 Front row: Heidi Stam, Vanguard; Hon. Donald F. Parsons, Jr., Delaware Court of Chancery; Gerald Rosenfeld, Rothschild North America. Middle row: Eric D. Roiter, Harvard Law School. Back row: Robert T. Miller, Villanova University School of Law; Matthew Rhodes-Kropf, Harvard Business School; Christine T. DiGuglielmo, Weil, Gotshal & Manges LLP. 6 Hon. Jack B. Jacobs, Supreme Court of Delaware.
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7 Front row: Hon. William B. Chandler III, Delaware Court of Chancery; Joseph B. Frumkin, Sullivan & Cromwell LLP. Middle row: Mark J. Roe, Harvard Law School; Ronald J. Gilson, Stanford Law School. Back row: Joshua Ronen, NYU Stern School of Business; Jenny Pak, RiskMetrics Group; Richard Squire, Fordham University School of Law; Robert T. Miller, Villanova University School of Law.
institute for law and economics
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roundtable programs