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INSTITUTE for LAW and ECONOMICS

ILE ANNUAL REPORT 2006–2007 A Joint Research Center of the Law School, the Wharton School, and the Department of Economics in the School of Arts and Sciences at the University of Pennsylvania

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INSTITUTE for LAW and ECONOMICS

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Institute for Law and Economics

COVER PHOTOS

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Board of Advisors

1 Silverman Hall interior, with entrance to ILE offices at top of stairs.

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Message from the Chair

2 Deal Day, Spring 2007. (see page 18).

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Message from the Dean

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Message from the Co-Directors

3 Chancery Court Panel on “Compliance.” From left: Simon M. Lorne, Millennium Management, LLC; Janet L. Kelly, ConocoPhillips Company; Michael L. Wachter, University of Pennsylvania Law School; Hon. Leo E. Strine, Jr., Delaware Chancery Court (see page 16).

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Roundtable Programs Corporate Governance, Spring 2007 Corporate Finance, Fall 2006 Corporate Law, Spring 2006 Labor Law, Fall 2005 Corporate Law, Spring 2005 Chancery Court Panels Deal Day, Spring 2007 Deal Day, Spring 2006 and Spring 2005

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Lectures Law and Entrepreneurship Distinguished Jurist

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Academic Events NYU / Penn Joint Conference, Spring 2007 Penn / NYU Joint Conference, Spring 2006 ILE / Finance Seminars ILE Seminar Series

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Publications and Papers

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Associate Faculty

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Institute Investors

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4 Distinguished Jurist lecturer Hon. Richard A. Posner, U.S. Seventh Circuit Court of Appeals and University of Chicago Law School (see page 24). 5 Corporate Finance Roundtable, Fall 2006. Front row: William A. Ackman, Pershing Square Capital Management, L.P. Middle row: Jill Fisch, Fordham University School of Law; Roy J. Katzovicz, Pershing Square Capital Management, L.P. Back row: Benjamin Strauss, Pepper Hamilton LLP (see page 10). 6 University of Pennsylvania Law School, Silverman Hall.

University of Pennsylvania Law School, Tanenbaum Hall; The Wharton School, Steinberg Hall-Dietrich Hall.

ounded in 1980, the Institute for Law and Economics at the University of Pennsylvania has an ambitious agenda that is timelier than ever. The study of law and economics remains the most rapidly growing movement in legal scholarship and jurisprudence. Under the sponsorship of the Law School, the Wharton School, and the Department of Economics in Penn’s School of Arts and Sciences, the Institute has played a leading role in this expanding field. Cross-disciplinary research, the cornerstone of the ILE, seeks to influence the national policy debate by analyzing the impact of law on the global economy, spotlighting the significant role that economics plays in fashioning legal policy. Our innovative roundtables and conferences, launched in 1985, complement these goals by provoking in-depth and, frequently, ground-breaking examinations of critical issues. These and other programs highlighted in this Annual Report have helped the Institute to stay on the leading edge of this cross-discipline. The Institute for Law and Economics has unique advantages. We draw on the research and teaching strengths of the Law School, the Wharton School, and the Department of Economics. Our geographic location is optimal, allowing us to bring together participants from Washington and New York for full-day meetings and still get everyone home in time for dinner. We have been able to call on the expertise of Penn Law School alumni who occupy key positions in law, business, and government. And, critically, we have an extraordinarily distinguished cadre of board members and sponsors who are willing to give of their time and expertise to make our programming a success. In each area, from our public lectures through our closeddoor roundtables to our more academically oriented faculty workshops, we are driven by the same mission: to use the tools of economics to understand the law. In a world in which complex legal rules govern economic relationships, the tools of economics provide a way of asking whether the law creates appropriate incentives to encourage actors to maximize social welfare. Funding for the ILE comes from a diverse group of corporations, law firms, foundations, and individuals who endorse our work each year. Over the past decade, the Institute has more than tripled its donor base to provide ongoing support for the programs discussed in this Annual Report. A list of Institute Investors for 2006–2007 appears on page 40.

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board of advisors

BOARD OF ADVISORS

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Barry M. Abelson Pepper Hamilton LLP Philadelphia, PA James H. Agger Chair, 1994–2001 Retired Senior Vice President, General Counsel and Secretary Air Products and Chemicals, Inc. Allentown, PA Alan Alpert Managing Partner, M&A Transaction Services Deloitte Tax LLP New York, NY William D. Anderson, Jr. Managing Director Goldman, Sachs & Co. New York, NY Marshall B. Babson Hughes Hubbard & Reed LLP New York, NY Michael J. Biondi Chair, 2007– Co-Chairman, Investment Banking Lazard Frères & Co. LLC New York, NY Fred Blume Chairman Emeritus Blank Rome LLP Philadelphia, PA Charles I. Cogut Simpson Thacher & Bartlett LLP New York, NY Isaac D. Corré Senior Managing Director Eton Park Capital Management New York, NY Pamela Craven Chief Administrative Officer Avaya Communications Basking Ridge, NJ Richard D’Avino V.P. Taxes-GE Capital and NBC Universal General Electric Company Stamford, CT Kenneth C. Frazier Executive Vice President and General Counsel Merck & Co., Inc. Whitehouse Station, NJ Joel E. Friedlander Bouchard, Margules & Friedlander Wilmington, DE

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Robert L. Friedman Chair, 2001–2007 Senior Managing Director and Chief Legal Officer The Blackstone Group L.P. New York, NY Joseph B. Frumkin Sullivan & Cromwell LLP New York, NY Perry Golkin Member Kohlberg Kravis Roberts & Co. New York, NY John G. Harkins, Jr. Chair, 1980–1990 Harkins Cunningham LLP Philadelphia, PA Leon C. Holt, Jr. Retired Vice Chairman and Chief Administrative Officer Air Products and Chemicals, Inc. Allentown, PA William B. Johnson Chairman Emeritus Whitman Corporation Chicago, IL Stephen J. Jones Vice President, General Counsel and Secretary Air Products and Chemicals, Inc. Allentown, PA Cynthia B. Kane Special Assistant to the Secretary of State Delaware Department of State Wilmington, DE Roy J. Katzovicz General Counsel Pershing Square Capital Management, L.P. New York, NY Paul S. Levy Founder JLL Partners New York, NY Robert A. Lonergan Executive Vice President, General Counsel and Corporate Secretary Rohm and Haas Company Philadelphia, PA

Simon M. Lorne Vice Chairman and Chief Legal Officer Millennium Management, LLC New York, NY Michael E. Lubowitz Weil, Gotshal & Manges LLP New York, NY J. Anthony Messina Buchanan Ingersoll & Rooney PC Philadelphia, PA Alan Miller Co-Chairman Innisfree M&A Incorporated New York, NY G. Daniel O’Donnell Dechert LLP Philadelphia, PA James E. Odell General Counsel, The Americas UBS Investment Bank New York, NY John E. Osborn Executive Vice President, General Counsel and Secretary Cephalon, Inc. Frazer, PA James A. Ounsworth Managing Director The Musser Consulting Group Wayne, PA

John F. Schmutz Chair, 1990–1994 Retired Senior Vice President and General Counsel E. I. du Pont de Nemours & Company, Inc. Wilmington, DE Howard L. Shecter Morgan, Lewis & Bockius LLP Philadelphia, PA Robert C. Sheehan Executive Partner Skadden, Arps, Slate, Meagher & Flom LLP New York, NY Victoria E. Silbey Senior Vice PresidentLegal and General Counsel SunGard Data Systems Inc. Wayne, PA David M. Silk Wachtell, Lipton, Rosen & Katz New York, NY Bruce L. Silverstein Young Conaway Stargatt & Taylor, LLP Wilmington, DE A. Gilchrist Sparks III Morris, Nichols, Arsht & Tunnell LLP Wilmington, DE

Morton A. Pierce Dewey Ballantine LLP New York, NY

Hon. Leo E. Strine, Jr. Vice Chancellor Delaware Court of Chancery Wilmington, DE

Martha L. Rees Vice President and Assistant General Counsel E. I. du Pont de Nemours & Company, Inc. Wilmington, DE

Nancy Straus Sundheim Senior Vice President, General Counsel and Secretary Unisys Corporation Blue Bell, PA

Myron J. Resnick Retired Senior Vice President and Chief Investment Officer Allstate Insurance Company Northbrook, IL Robert H. Rock Chairman and Publisher Directors & Boards Philadelphia, PA Gerald Rosenfeld Chief Executive Officer Rothschild North America New York, NY

Jere R. Thomson Jones Day New York, NY

1 Gil Sparks (left) and Joe Frumkin 2 Barry Abelson 3 Bruce Silverstein 4 Jerry Rosenfeld 5 Pam Craven 6 Don Wolfe 7 Bob Lonergan 8 Joel Friedlander 9 Casey Cogut 10 Paul Levy 11 Martha Rees 12 Bob Sheehan 13 Jim Odell 14 Dan O’Donnell (left) and Jim Agger 15 David Silk 16 Victoria Silbey 17 Howard Shecter 18 Alan Miller 19 Cynthia Kane 20 Marshall Babson

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Hon. E. Norman Veasey [Chief Justice, Supreme Court of Delaware, 1992–2004] Weil, Gotshal & Manges LLP New York, NY, and Wilmington, DE Marc Weingarten Schulte Roth & Zabel LLP New York, NY Donald J. Wolfe Potter Anderson & Corroon LLP Wilmington, DE

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MESSAGE FROM THE DEAN

MESSAGE FROM THE CHAIR

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his is my last letter as Chairman of the Board of Advisors as I step down after serving as Chairman since 2001. An organization such as the Institute for Law and Economics benefits if the leadership of its Board of Advisors regularly turns over. I am delighted that Mike Biondi has agreed to succeed me as Chairman. I have known Mike for a long time and I am confident that the ILE will thrive under his leadership. It has been extremely gratifying to witness the ILE’s accomplishments over the past six years. Its programs have become more relevant and important than ever, focusing on the issues that the academic, legal and business communities care about. Participation in these programs by leaders in their fields is at an all-time high. Over the past six years, the ILE has considerably broadened its financial base of support and even more importantly it has garnered the crucial participation and programmatic advice of its distinguished donors. Today the Institute enjoys an outstanding international reputation for the excellence of its roundtable conferences, where leaders in business, financial management, legal practice and academic scholarship candidly discuss the intersection of theory and practice on a host of significant issues facing the business community. On behalf of the Board, I want to express our gratitude to everyone who has helped the Institute during this past year, whether through financial contributions or by participation in ILE programs. One of the foremost goals of the Institute is to broaden and diversify our foundation, both in terms of the entities that support us and the individuals who take part in our programs. Once again this year, we have served that goal well. I am delighted to report some superb additions to our Board of Advisors during the past year. We are pleased to welcome the following new members: Richard D’Avino (General Electric Company); Stephen J. Jones (Air Products and Chemicals, Inc.); Roy J. Katzovicz (Pershing Square Capital Management, L.P.); Alan Miller (Innisfree M&A Incorporated); James E. Odell (UBS Investment Bank); Martha L. Rees (E.I. du Pont de Nemours & Company, Inc.); Victoria E. Silbey (SunGard Data Systems Inc.); and Marc Weingarten (Schulte Roth & Zabel LLP). These accomplished individuals will greatly enhance the work of the Institute and broaden the composition of our Board. All of the members of our Board give graciously to the Institute, not just financially but also of their time and expertise, and I am very grateful for all of their contributions. Very special thanks must be given to ILE Benefactors Paul Levy, Skadden, Arps, Slate, Meagher & Flom LLP (through Bob Sheehan) and Wachtell, Lipton, Rosen & Katz (through David Silk). Their extraordinary level of financial support enables the Institute to continue to lead the field, and I want to express our sincere appreciation to each of them. The one thing that stands out from my six years as Chairman of the Board of Advisors is the truly outstanding job that Ed Rock and Michael Wachter have done as co-directors of the Institute. Notwithstanding the terrific financial and programmatic support the Institute has received from all of its Board members, donors and program participants, the

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F remarkable position the ILE enjoys today could not have remotely been achieved without the efforts of Ed and Michael. Their tireless dedication to all aspects of the Institute’s work and their ceaseless ability to come up with timely programs and attract the ideal participants to make every program an unqualified success are why the ILE is world-renowned as the forum for interesting dialogue on topical issues for corporations and their financial and legal advisors. It has been a real pleasure to work with Ed and Michael over the past six years.

Robert L. Friedman Senior Managing Director and Chief Legal Officer The Blackstone Group L.P. September 2007

ILE Board Chairs. Top row: Edward B. Rock, University of Pennsylvania Law School; Michael L. Wachter, University of Pennsylvania Law School; James H. Agger, Chair, 1994–2001. Middle row: Leon C. Holt, Jr.; John F. Schmutz, Chair, 1990–1994. Bottom row: John G. Harkins, Jr., Chair, 1980–1990; Michael A. Fitts, University of Pennsylvania Law School; Robert L. Friedman, Chair, 2001–2007.

or over twenty years, the Institute for Law and Economics has successfully demonstrated the benefits of a cross-disciplinary perspective. Its programs provide a model for how to build bridges between disciplines by creating ties between schools, between faculty members, between students, and between experts in the field from around the world. ILE combines Penn’s greatest strengths in the Law School, the Wharton School, and the Department of Economics to focus on complex questions that concern all of these fields. The Institute proves that when you bring the right people—judges, deal-makers, regulators, business leaders, lawyers, bankers, policymakers, academics, and more—to convene outside of their own niches, remarkably original insights are generated. As our world grows more complex every day, the topics the Institute addresses are both exciting and relevant. It is no longer enough to approach complicated questions such as appraisal law, corporate compliance, and the effect of legal enforcement on financial markets from solely a legal, economic, or business perspective. Indeed, no significant business issue can be addressed without paying attention to the underlying economic trends and legal regulations. All of ILE’s participants contribute to and benefit from the profound understanding such analysis affords. In addition to its unique focus, another of the Institute’s strengths is the variety of programs it offers. The roundtables—ILE’s signature events—bring together distinguished members of the bar, judiciary, government, business world, and academia for open discussion and intellectual exploration. ILE’s public lectures by leading jurists, executives, and entrepreneurs attract participants from all sectors of the University and from the wider community. During the past year the outstanding talks, workshops, and conferences organized by the Institute covered a wide range of topics and programs, from corporate finance and corporate governance to private equity and investing, hedge funds and labor law, and large-scale entrepreneurship and management. The Institute’s highly successful seminar series, including sessions jointly sponsored with Wharton’s Finance Department, provides a forum for leading academics from around the country to present their work and receive feedback from the Penn community. Since my cross-disciplinary vision for the Law School and the purposes of the Institute for Law and Economics are so similar, it is personally gratifying to me that the Institute is generously supported by contributors who understand the importance of what we do and the unique position the Institute holds. Many of these contributors also serve as members of the Institute’s Board of Advisors, helping to plan the direction and focus of the programs and lending their expertise as panelists and commentators for Institute events. The Institute’s extraordinary chair, Bob Friedman, has my particular thanks at the end of his highly successful term for his many exceptional contributions and his proactive role in engaging new participants and supporters. Like all who serve as advisors for ILE, Bob contributes his very valuable time and the

benefit of his expertise, in addition to his numerous contacts in the legal and financial communities. We are also extremely grateful to him for his leadership support as an Institute Benefactor. I extend the deepest appreciation to all ILE supporters and participants for their commitment and investment during the past year. With the proper support and sponsorship, the Institute for Law and Economics has limitless potential for growth and expansion in the future. We welcome others to join in backing and participating in this extremely worthwhile endeavor.

Michael A. Fitts Dean, University of Pennsylvania Law School Bernard G. Segal Professor of Law September 2007

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MESSAGE FROM THE CO-DIRECTORS

ROUNDTABLE PROGRAMS

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he Institute for Law and Economics presented an ambitious program schedule this past year, as is evident in this report. The Fall Corporate Finance Roundtable addressed the issue of assessing value in appraisal law, particularly in Delaware (pages 10–11). The problems associated with corporate voting—and how to fix them—were the focus of our Spring Corporate Governance Roundtable (pages 8–9). We held two Chancery Court programs in the spring, one addressing the corporate board’s compliance function, and one dealing with labor’s views on corporate governance (pages 15–16). In addition, we presented three fascinating Law and Entrepreneurship lectures (pages 21–22). In the fall, Henry R. Silverman, Chairman and CEO of the Realogy Corporation, spoke about the problems of management in the 21st century, and Pamela Daley, the Senior Vice President for Corporate Business Development at General Electric, lectured on large-scale entrepreneurship at GE. In the spring, board member Isaac D. Corré, Senior Managing Director for Eton Park Capital Management, explained to the audience how he uses his legal background to bet on legal risk. For our Distinguished Jurist lecture, the Honorable Richard A. Posner from the U.S. Seventh Circuit Court of Appeals and the University of Chicago Law School spoke to an overflowing audience on “The Embattled Corporation” (page 24). Finally, in May, we held a Deal Day program in New York City, where Brian Gavin, Senior Managing Director at The Blackstone Group L.P., explained how Blackstone evaluates the hedge funds it invests in (page 18). Our more “academic” programs also flourished. The Law and Finance series, held jointly with The Wharton School’s Finance Department, continued with presentations by Luigi Zingales (Robert C. McCormack Professor of Entrepreneurship and Finance, University of Chicago, Graduate School of Business) and John C. Coffee, Jr. (Adolf A. Berle Professor of Law, Columbia University School of Law), (page 30). In February, ILE co-sponsored the third annual Penn/NYU Law and Finance Conference, a joint venture of Penn Law, Wharton Finance, New York University School of Law, and the Finance Department of the Leonard N. Stern School of Business (page 28). And throughout the year scholars from around the country came to present papers in the Law and Economics seminar series, co-organized this year by Penn Law professors Matthew Adler and Chris Sanchirico (page 31). This range of programs provides for an extraordinary cross-fertilization of ideas. For the Corporate Roundtables, we gather together academics, judges, business leaders, lawyers, investment bankers, private equity fund managers, hedge fund managers and policymakers for intensive discussion of critical current issues. In our programs with the Delaware Chancery Court, we are able to focus on key issues arising in Delaware corporate law with the active participation of students, followed by dinners where the conversation continues informally. The Deal Day series gives an audience of professionals, academics and students an opportunity to hear presentations at the market’s cutting edge. In our two public lecture series, we recognize leaders who have played important roles in fashioning law, economic policy and business strategy. Our Law and Entrepreneurship speakers are for the most part law graduates who have developed their careers in unique ways, providing exemplary models for our students of the value of a legal education. The Distinguished Jurist series brings to Penn judges and regulators who work at the cutting edge of business regulation. These lectures have a wide appeal throughout the university, drawing students and faculty from all sectors, as well as members of the ILE advisory board and the larger community. 6

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Finally, our academic programs build on our relationship with the Wharton Finance Department to bring leading scholars from both disciplines to Penn. These programs, along with the joint conferences with NYU, contribute to creating a network of scholars from around the world who are considering the question of how law and economics influence each other. The Institute’s greatest strength lies in the quality of our supporters and their active, enthusiastic participation in our programs. Our board members and sponsors make our programs possible, both as key participants and with their financial support. We would particularly like to acknowledge our wonderful outgoing board chair, Bob Friedman of The Blackstone Group, for his dedicated and enthusiastic work over the past six years. Bob has played a critical role building ILE’s support base, and we are extraordinarily grateful for all of his efforts. In addition, we are pleased to welcome the new chair, Mike Biondi of Lazard Frères & Co. With his assistance, we will build on the successes already accomplished, and expand them. We are also delighted to have added eight new members to the board, and we welcome them: Richard D’Avino (General Electric Company); Stephen J. Jones (Air Products and Chemicals, Inc.); Roy J. Katzovicz (Pershing Square Capital Management, L.P.); Alan Miller (Innisfree M&A Incorporated); James E. Odell (UBS Investment Bank); Martha L. Rees (E. I. du Pont de Nemours & Company, Inc.); Victoria E. Silbey (SunGard Data Systems Inc.); and Marc Weingarten (Schulte Roth & Zabel LLP). We would also like to express congratulations to our Program Director, Bonnie Clause, who retired this past May after seven years of committed service to the Institute. Bonnie’s hard work and many talents were indispensable in building the Institute to its current level of success. We offer her our thanks and best wishes for her future. At the same time, we welcome Vicki Hewitt who will pick up where Bonnie left off as we move forward. We also extend our heartfelt thanks to all of our supporters for bringing your perspective, your ideas, your experience, and your expertise to all that we do. Your participation is necessary to realize the Institute’s purpose and objectives, and it makes our job as Institute directors immensely satisfying and worthwhile.

Edward B. Rock Co-Director, Institute for Law and Economics Saul A. Fox Distinguished Professor of Business Law september 2007

t the heart of the Institute’s work is the Roundtable series, which brings together members of the Institute’s Associate Faculty and other academics with corporate executives, practicing attorneys, judges, public policymakers, and students. Each roundtable provides a forum for lively discussion of current issues that emerge from the research and teaching of the Institute. Over the years, the Institute has sponsored roundtables on a broad range of topics—including labor law and bankruptcy, as well as corporate law, governance, and finance—engaging the interest and participation not only of scholars but also of leaders in the business and public sectors. The high caliber of the participants guarantees that each affair is intense and informative. ILE’s longstanding off-the-record policy for the roundtables is often the impetus for an energetic and wide-ranging exchange of ideas among some of the nation’s most accomplished scholars, attorneys, and business people.

Michael L. Wachter Co-Director, Institute for Law and Economics William B. Johnson Professor of Law and Economics

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roundtable programs

roundtable programs

The Hanging Chads of Corporate Voting Marcel Kahan New York University School of Law Edward B. Rock University of Pennsylvania Law School

Corporate Governance 20 april 2007

Welcome Michael A. Fitts Bernard G. Segal Professor of Law Dean, University of Pennsylvania Law School Morning Session The Hanging Chads of Corporate Voting Marcel Kahan George T. Lowy Professor of Law New York University School of Law Edward B. Rock Saul A. Fox Distinguished Professor of Business Law University of Pennsylvania Law School Commentators Henry T. C. Hu Allan Shivers Chair in the Law of Banking and Finance The University of Texas Law School Hon. Leo E. Strine, Jr. Vice Chancellor Delaware Court of Chancery Institutional Investors and Proxy Voting: The Impact of the 2003 Mutual Fund Voting Disclosure Regulation Roberta Romano Oscar M. Ruebhausen Professor of Law Yale Law School Commentators Peter Friz Vice President of Global Voting and Transaction Services Institutional Shareholder Services Lynn A. Stout Paul Hastings Professor of Corporate and Securities Law University of California-Los Angeles School of Law

Afternoon Session Panel Discussion on What Is Wrong with Corporate Voting and How to Fix It Moderators 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 Hon. Carolyn Berger Justice Supreme Court of Delaware James F. Duffy Executive Vice President and General Counsel NYSE Regulation, Inc. Cary I. Klafter Vice President, Legal and Government Affairs Intel Corporation Alan Miller Co-Chairman Innisfree M&A Incorporated David K. Musto Associate Professor of Finance The Wharton School University of Pennsylvania A. Gilchrist Sparks III Morris, Nichols, Arsht & Tunnell LLP John C. Wilcox Senior Vice President and Head of Corporate Governance TIAA-CREF

Never has voting been more important in corporate law. With greater activism among shareholders, there are numerous close contests over mergers, director elections, executive compensation and shareholder proposals. But is the basic technology of corporate voting adequate to the task? In this article, the authors first describe the incredibly complicated system of U.S. corporate voting, a complexity that is driven by the underlying custodial ownership structure. They then identify three ways in which things predictably go wrong: pathologies of complexity; pathologies of ownership; and pathologies of misalignment (of interests), and review the current legal treatment of these pathologies. The authors then consider a variety of directions for reform, ranging from incremental modifications to fundamental redesign. The paper shows that, absent a fundamental reconstruction of the ownership structure, the existing system will continue to be noisy, imprecise and disturbingly opaque. Given the problems with the existing system, and the difficulties in improving it, one should be skeptical of calls to expand the opportunities for shareholder voting in corporate governance. More shareholder power in corporate elections will generate more close outcomes and will impose even more stress on an already overstressed system. Institutional Investors and Proxy Voting: The Impact of the 2003 Mutual Fund Voting Disclosure Regulation Martijn Cremers Yale School of Management Roberta Romano Yale Law School The proxy voting process is thought to be a key mechanism by which shareholders monitor corporate managers. It is the means by which managers are replaced through proxy contests over director elections, and by which their major plans are reviewed as state law and stock exchange rules require shareholder approval of significant transactions. Moreover, in recent

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years, activist institutional investors have used the proxy process to advocate changes in corporate policies, such as repeal of takeover defenses and changes in board composition or managerial compensation. In January 2003, the U.S. Security and Exchange Commission (SEC) required mutual funds to disclose how they voted on proxy proposals presented at shareholder meetings. This rule followed a series of significant federal government interventions into firms’ corporate governance in the Sarbanes-Oxley Act (SOX), Congress’ response to the scandals of 2001-02 that began with the implosion of Enron. This paper examines the impact of the mutual fund voting disclosure rule on corporate governance by examining its effect on proxy voting outcomes. To this end, the authors construct a sample of firms that experienced similar proposals, sponsored either by management or shareholders, both before and after the 2003 rule change. They then examine the difference in voting outcomes before relative to after this rule change, particularly in relation to mutual fund ownership, controlling for firm characteristics, including profitability, non-mutual fund institutional ownership and governance features. The authors find that voting support for management has been declining for close to a decade and that mutual funds appear to support management less frequently than other investors. However, there is no evidence that the rule decreased mutual funds’ voting in support of management. Indeed, some of the data suggest that mutual funds’ support for management increased after the rule’s adoption, particularly for executive equity incentive compensation plan proposals. This finding is contrary to the expectation of disclosure rule advocates, who contended that funds voted with management due to conflicts of interest and would reduce that support once their votes were transparent.

1 David C. McBride, Young Conaway Stargatt & Taylor, LLP, and James E. Odell, UBS Investment Bank. 2 William D. Anderson, Jr., Goldman Sachs. 3 Front row: Alan Miller, Innisfree M&A Incorporated. Middle row: Jennifer Gae Hill, Sydney Law School, University of Sydney. Back row: Richard Mertl, JD’08 University of Pennsylvania Law School. 4 Front row: Cary I. Klafter, Intel Corporation; James F. Duffy, NYSE Regulation, Inc. Back row: Edmund W. Kitch, University of Virginia School of Law; Lynn A. Stout, University of California-Los Angeles School of Law; Marcel Kahan, New York University School of Law; Peter Friz, Institutional Shareholder Services.

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5 Front row: Charles I. Cogut, Simpson Thacher & Bartlett LLP; Hon. Carolyn Berger, Supreme Court of Delaware; John C. Wilcox, TIAA-CREF; David K. Musto, The Wharton School, University of Pennsylvania. Middle row: Roy J. Katzovicz, Pershing Square Capital Management, L.P.; Yair J. Listokin, Yale Law School. Back row: Jonathan Charles Lipson, James E. Beasley School of Law, Temple University. 6 A. Gilchrist Sparks III, Morris, Nichols, Arsht & Tunnell LLP.

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roundtable programs

roundtable programs

Corporate Finance 8 december 2006

Welcome Michael A. Fitts Bernard G. Segal Professor of Law Dean, University of Pennsylvania Law School Morning Session The Short and Puzzling Life of the ‘Implicit Minority Discount’ in Appraisal Law Lawrence Hamermesh Ruby R. Vale Professor of Corporate and Business Law Widener University School of Law Michael L. Wachter William B. Johnson Professor of Law and Economics University of Pennsylvania Law School Commentators Thomas J. Allingham II Skadden, Arps, Slate, Meager & Flom LLP Andrew Metrick Associate Professor of Finance The Wharton School University of Pennsylvania The Value of Control: Implications for Control Premia, Minority Discounts, and Voting Share Differentials Aswath Damodaran Professor of Finance and David Margolis Teaching Fellow Stern School of Business New York University Commentators John C. Coates John F. Cogan, Jr. Professor of Law and Economics Harvard Law School Joel E. Friedlander Bouchard Margules & Friedlander

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Afternoon Session Panel Discussion on Delaware Appraisal Law: Challenges and Proposals for Change Moderators 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 William A. Ackman Managing Member Pershing Square Capital Management, L.P. Robert W. Holthausen Nomura Securities Company Professor of Accounting and Finance Chair, Department of Accounting The Wharton School University of Pennsylvania Hon. Stephen P. Lamb Vice Chancellor Delaware Court of Chancery David C. McBride Young Conaway Stargatt & Taylor, LLP A. Gilchrist Sparks III Morris, Nichols, Arsht & Tunnell LLP Randall S. Thomas John S. Beasley II Professor of Law and Business Vanderbilt University Law School

The Short and Puzzling Life of the ‘Implicit Minority Discount’ in Appraisal Law Lawrence Hamermesh Ruby R. Vale Professor of Corporate and Business Law Widener University School of Law Michael L. Wachter William B. Johnson Professor of Law and Economics University of Pennsylvania Law School The financial/empirical assertion of the implicit minority discount, or IMD, is quite simple: it posits that, no matter how liquid and informed the financial markets may be, all publicly traded shares persistently and continuously trade in the market at a substantial discount relative to their proportionate share of the value of the corporation. This discount, it is said, arises because the stock prices on national security markets represent “minority” positions, and minority positions trade at a discount to the value of the company’s equity. The consequence of the IMD in appraisal proceedings is limited in scope, but substantial in scale: in applying a valuation technique (known as “comparable companies analysis,” or “CCA”) that estimates subject company value by reference to market trading multiples observed in shares of comparable publicly traded firms, the result must be adjusted upward by adding a premium to offset the “implicit minority discount” asserted to exist in the comparable companies’ share prices. In the last several years, the size of this upward adjustment (and the supposed discount that it “corrects”) has been routinely fixed, even without supporting expert testimony, at 30 percent. Not a single piece of financial or empirical scholarship affirms the core premise of the IMD that public company shares systematically trade at a substantial discount to the net present value of the corporation. To the contrary, the one treatise on which the Delaware courts have relied in invoking the IMD has, in its most recent edition, explicitly warned against routinely applying an upward adjustment in order to offset some supposed IMD.

Fortuitously, in some cases, where allegations of incumbent board wrongdoing are combined with the appraisal case, the IMD may result in the correct answer when it offsets an incumbent controller’s wrongful acts. But, that result can be achieved more directly, by accepting petitioner’s evidence that the respondent’s anticipated cash flow projections or other operational performance measures are too low. In short, the authors’ core submission is that the Delaware courts, in their valuation of shares (particularly in squeeze out mergers), should abandon the IMD and rely instead on a more direct approach to addressing concerns about past or future abuse by controlling stockholders. The arsenal of corporate finance techniques available to measure going concern value, correctly applied, would award shareholders the correct amount.

The Value of Control: Implications for Control Premia, Minority Discounts, and Voting Share Differentials Aswath Damodaran Professor of Finance and David Margolis Teaching Fellow Stern School of Business New York University It is not uncommon in private company and acquisition valuations to see large premiums attached to estimated value to reflect the “value of control.” But what, if any, is the value of control in a firm, and if it exists, how do we go about estimating it? This paper examines the ingredients of the control premium. In particular, the author argues that the value of controlling a firm has to lie in being able to run it differently (and better). Consequently, the value of control will be greater for poorly managed firms than well run ones. The value of control has wide ranging implications beyond acquisitions. The paper shows that the expected likelihood of control changing is built into the price of every publicly traded company and that this provides a way of measuring the payoff to strong corporate governance. It also argues that getting a better handle on the value of control can allow one to better explain the differences between voting and non-voting share prices and the minority discount in private company valuations.

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1 Front row: Hon. Donald F. Parsons, Jr., Delaware Court of Chancery; David C. McBride, Young Conaway Stargatt & Taylor, LLP; Hon. Stephen P. Lamb, Delaware Court of Chancery. Middle row: Merritt B. Fox, Columbia Law School; Bruce L. Silverstein, Young Conaway Stargatt & Taylor, LLP. Back row: James G. McMillan, Bouchard Margules & Friedlander. 2 Michael E. Lubowitz, Weil, Gotshal & Manges LLP.

3 Foreground: Eileen Nugent, Skadden, Arps, Slate, Meagher & Flom LLP. Background: Robert L. Friedman, The Blackstone Group L.P. 4 Front row: William A. Ackman, Pershing Square Capital Management, L.P. Middle row: Jill Fisch, Fordham University School of Law; Roy J. Katzovicz, Pershing Square Capital Management, L.P. Back row: Benjamin Strauss, Pepper Hamilton LLP.

5 Front row: Merritt B. Fox, Columbia Law School; Bruce L. Silverstein, Young Conaway Stargatt & Taylor, LLP; Roberta Romano, Yale University Law School. Back row: Adam C. Pritchard, University of Michigan Law School; David G. Clarke, The Griffing Group, Inc.; Martin S. Lessner, Young Conaway Stargatt & Taylor, LLP. 6 Roy J. Katzovicz, Pershing Square Capital Management, L.P.

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roundtable programs

roundtable programs

Corporate Law

Labor Law

28 april 2006

11 november 2005

Welcome Michael A. Fitts Bernard G. Segal Professor of Law Dean, University of Pennsylvania Law School Morning Session Hedge Funds in Corporate Governance and Corporate Control Marcel Kahan George T. Lowy Professor of Law New York University School of Law Edward B. Rock Saul A. Fox Distinguished Professor of Business Law University of Pennsylvania Law School Commentators William D. Anderson, Jr. Managing Director Goldman, Sachs & Co. Eric L. Talley The Law School University of Southern California Vote Trading and Information Aggregation Christopher Geczy Assistant Professor of Finance The Wharton School University of Pennsylvania David K. Musto Associate Professor of Finance The Wharton School University of Pennsylvania Commentators Henry T. C. Hu Alan Shivers Chair in the Law of Banking and Finance The University of Texas Law School Hon. Leo E. Strine, Jr. Vice Chancellor Delaware Court of Chancery

Afternoon Session Panel Discussion on Regulating Hedge Funds to Protect Investors Moderators 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 Thomas H. Bell Simpson Thacher & Bartlett LLP Isaac D. CorrĂŠ Senior Managing Director Eton Park Capital Management Harvey Goldschmid Dwight Professor of Law Columbia University School of Law Simon M. Lorne Millennium Management, LLC Robert Plaze Associate Director Division of Investment Management Securities and Exchange Commission

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4 1 Front row, left to right: Gerald Rosenfeld, Rothschild North America; Jedd Wider, Morgan Lewis; John Schmutz, ILE Board of Advisors; Jennifer Adams, Jones Day. Back: Adam Reed, University of North Carolina; Susan Christoffersen, McGill University; Christopher Geczy, The Wharton School; David Musto, The Wharton School. 2 David McBride, Young Conaway Stargatt & Taylor; Eileen Nugent, Skadden, Arps, Slate, Meagher & Flom. Back: Eric Talley, The Law School, University of Southern California; William D. Anderson, Jr., Goldman Sachs; Bruce Silverstein, Young Conaway Stargatt & Taylor.

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5 3 Front: Thomas Bell, Simpson Thacher & Bartlett; Robert Plaze, Securities and Exchange Commission. Back: Donald Langevoort, Georgetown University Law Center; Robert Rasmussen, Vanderbilt University Law School; Sean Griffith, University of Connecticut School of Law. 4 Donald J. Wolfe, Jr., Potter Anderson & Corroon; David Silk, Wachtell, Lipton, Rosen & Katz; Robin Sampson, Drinker Biddle & Reath. 5 Simon Lorne, Millennium Management; Harvey Goldschmid, Columbia Law School. Background: Robert Thompson, Vanderbilt University Law School; Merritt Fox, Columbia Law School.

Welcome Michael A. Fitts Bernard G. Segal Professor of Law Dean, University of Pennsylvania Law School

Afternoon Session Panel Discussion on Bargaining Before Recognition in a Global Market: How Much Will It Cost?

Morning Session Decline of Labor Unions in the United States Michael L. Wachter William B. Johnson Professor of Law and Economics University of Pennsylvania Law School

Moderators Marshall B. Babson Hughes Hubbard & Reed LLP Edward B. Rock Saul A. Fox Distinguished Professor of Business Law University of Pennsylvania Law School

Commentators Charles I. Cohen Partner, Labor and Employment Morgan, Lewis & Bockius LLP Cynthia Estlund Isidor and Seville Sulzbacher Professor of Law Columbia Law School A Reduction in the Disadvantages of British Unionism? John T. Addison Hugh C. Lane Professor of Economic Theory Moore School of Business, University of South Carolina and Universidade de Coimbra, Portugal Commentators Paul Davies Cassel Professor of Commercial Law London School of Economics John Wilhelm President, Hotel Division UNITE HERE

Panelists James A. Gross Professor of Labor Policy & Labor Arbitration School of Industrial and Labor Relations Cornell University Jonathan P. Hiatt General Counsel AFL-CIO Peter Hurtgen Morgan, Lewis & Bockius LLP (former chairman, National Labor Relations Board) Hon. Wilma Liebman Member National Labor Relations Board

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1 From left: Pamela Craven, Avaya Inc; Hon. Wilma B. Liebman, National Labor Relations Board; Jonathan Hiatt, AFL-CIO. 2 Left, John Wilhelm, UNITE HERE; right, Arthur Rosenfeld, National Labor Relations Board. 3 Keith Hylton, Boston University School of Law.

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4 Left to right: Patrick Szymanski, International Brotherhood of Teamsters; Hon. Robert Battista, National Labor Relations Board; Betsey Engel, International Union, UAW. 5 Marshall Babson, Hughes Hubbard & Reed. Background: Edward B. Rock, University of Pennsylvania Law School.

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roundtable programs

roundtable programs

Chancery Court Panels

Corporate Law 15 april 2005

Welcome Michael A. Fitts Bernard G. Segal Professor of Law Dean, University of Pennsylvania Law School Morning Session The Fair Value of Cornfields in Delaware Appraisal Law Lawrence A. Hamermesh Ruby R. Vale Professor of Corporate and Business Law Widener University Law School Michael L. Wachter William B. Johnson Professor of Law and Economics University of Pennsylvania Law School Commentators Michael Klausner Nancy and Charles Munger Professor of Business; Professor of Law Associate Dean for Research and Academics Stanford Law School Bruce L. Silverstein Young Conaway Stargatt & Taylor, LLP The Public and Private Faces of Derivative Lawsuits Randall S. Thomas Professor of Law Vanderbilt University Law School Commentators Jill E. Fisch Alpin J. Cameron Professor of Law Director, Center for Corporate, Securities and Finance Law Fordham University School of Law David M. Silk Wachtell, Lipton, Rosen & Katz

Afternoon Session Panel Discussion on Hedge Funds, Private Equity, and Control Contests

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Moderators 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 4

3 Panelists William D. Anderson, Jr. Managing Director Goldman, Sachs & Co. Isaac D. Corré Senior Managing Director Eton Park Capital Management Saul A. Fox Chief Executive Officer Fox Paine & Company, LLC Robert L. Friedman Senior Managing Director and Chief Legal Officer The Blackstone Group L.P. Simon M. Lorne Vice Chairman and Chief Legal Officer Millennium Management, LLC Andrew Metrick Associate Professor of Finance The Wharton School Alan Miller Co-Chairman Innisfree M&A Incorporated

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1 Left: Saul A. Fox, Fox Paine & Company; Andrew Metrick, The Wharton School. Background, Merritt B. Fox, Columbia Law School. 2 Left: Albert S. Dandridge III, Schnader Harrison Segal & Lewis; David M. Silk, Wachtell, Lipton, Rosen & Katz. 3 From left: Saul A. Fox, Fox Paine & Company; Andrew Metrick, The Wharton School; Isaac D. Corré, Eton Park Capital Management; William D. Anderson Jr., Goldman Sachs.

4 William D. Anderson Jr., Goldman Sachs. Background, Michael Klausner, Stanford Law School. 5 Left: Robert L. Friedman, The Blackstone Group; Simon M. Lorne, Millennium Management.

ILE’s series of Chancery Court Panels was initiated in fall 2003 as a component of a Penn Law course on corporate law and finance co-taught by Leo E. Strine, Jr., Vice Chancellor of the Delaware Chancery Court, and Michael L. Wachter, William B. Johnson Professor of Law and Economics. The topic of this year’s seminar was the evolving role of independent directors in corporate governance. Two special sessions of the class were opened to the entire University community, as well as to ILE board members and invited guests, under the auspices of ILE. These open sessions featured panels of lawyers, corporate general counsels, and representatives from the labor community who shared their wealth of experience in issues of corporate governance and compliance. Since the topics combine areas of finance and law, faculty of The Wharton School often participate actively in the Chancery Court Programs. The Chancery Court panels are followed by Corporate Governance Dinners with further commentary and discussion. ILE’s Corporate Governance Dinners—whether as stand-alone events or as adjuncts to lectures, presentations, Chancery Court panels, and other formal programs—provide an opportunity for further off-the-record commentary and conversation among presenters and members of the board of advisors, their invited colleagues, and the Institute’s associate faculty. Each dinner features focused commentary on a current issue in corporate governance, followed by a general discussion moderated by ILE co-directors Edward Rock and Michael Wachter.

Chancery Court Panels Moderators Vice Chancellor Leo E. Strine, Jr. Chancery Court of Delaware Michael L. Wachter University of Pennsylvania Law School

Panelists and Dinner Commentators Richard C. Ferlauto Director of Pension and Benefit Policy American Federation of State, County and Municipal Employees (AFSCME) Michael Musuraca Assistant Director, Department of Research and Negotiations District Council 37, American Federation of State, County and Municipal Employees (AFSCME)

Damon Silvers Associate General Counsel American Federation of Labor and Congress of Industrial Organizations (AFL-CIO)

5 April 2007 Labor’s Views on Corporate Governance and the Role of the Corporate Board: How Has Labor’s Perspective Changed over the Decades? What Are the Current Objectives? 1 Before World War II, unions were not a significant force in investment markets. Between 1945 and 1980, there was an enormous growth in union pension funds. Today, more than $5 trillion is invested on behalf of unionized workers, more than $400 billion of which is in union-sponsored pension funds. Since the mid-1990s, the labor movement has sought to define a governance agenda for workers as long-term investors that is distinct from the agendas of both self-interested managers and short-term investors like day traders, leveraged buyout players and hedge funds. This perspective is now being challenged by the rise of hedge funds and private equity. This program focused on the evolution of labor’s perspectives about corporate directors and officers and what corporate governance initiatives are in labor’s best interests as owners and stakeholders. In particular, the program discussed labor’s views of corporate takeovers, executive pay, and director elections—and highlighted labor’s agenda for the upcoming proxy season.

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1 Damon Silvers, AFL-CIO. 2 Hon. Leo E. Strine, Jr., Delaware Chancery Court and Damon Silvers, AFL-CIO.

3 Michael L. Wachter, University of Pennsylvania Law School; Hon. Leo E. Strine, Jr., Delaware Chancery Court; Damon Silvers, AFL-CIO; Michael Musuraca, AFSCME; Richard C. Ferlauto, AFSCME. 4 Michael Musuraca, AFSCME and Richard C. Ferlauto, AFSCME.

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roundtable programs

roundtable programs

Chancery Court Panels

Chancery Court Panels

13 March 2007 Structuring the Board’s Compliance Function: Should the Corporation Continue to ‘Dump It into Audit’ or Are Fresher Approaches Needed? How should corporations best organize their board committees and officer structure to address the myriad, increasingly complex and diverse legal and financial mandates that corporations must contend with? The traditional boardroom approach to addressing legal and financial compliance—to “dump it into audit,” which is what Enron did— remains the prevalent model. This program focused on whether that is the most prudent way to use the board’s talents and to organize the corporation’s compliance function, and whether there are other models that might be more effective and efficient. One alternative is to carve out areas, such as tax or special public policy issues, and give them to board committees that have specialized knowledge of the areas. The weakness of this plan is that compliance issues are often related. The advantage of leaving compliance issues with the audit committee is that a single committee benefits from having knowledge of the full array of compliance issues the corporation is facing.

Panelists and Dinner Commentators Mark J. Gentile Richards, Layton & Finger Janet L. Kelly Deputy General Counsel ConocoPhillips Company Simon M. Lorne Vice Chairman and Chief Legal Counsel Millennium Management, LLC Robert H. Mundheim Shearman & Sterling LLP Victoria E. Silbey Senior Vice President-Legal and General Counsel SunGard Data Systems, Inc.

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1 Simon M. Lorne, Millennium Management, LLC; Janet L. Kelly, ConocoPhillips Company; Michael L. Wachter, University of Pennsylvania Law School; Hon. Leo E. Strine, Jr., Delaware Chancery Court. 2 Victoria Silbey, SunGard Data Systems Inc.

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3 Robert H. Mundheim, University of Pennsylvania and Shearman & Sterling.

Chancery Court Programs

4 April 2006

18 February 2006

Panel Discussion of the Toys “R” Us Litigation

“The Technicolor Saga” Discussion with Members of the Delaware Chancery Court

Toys “R” Us is a fascinating case, recently decided by Vice Chancellor Leo Strine, involving the merger of the company with an acquisition vehicle of KKR. The plaintiffs asserted that the board of directors failed to act reasonably in pursuit of the highest attainable value. The Toys “R” Us case is thus a fiduciary duty suit rather than an appraisal case. However, the case provides an excellent study, filled with intricate corporate valuation principles and showing the interplay of fiduciary duty suits and valuation. The panel and audience on April 4 brought together the major participants representing the defendant and the plaintiff in Toys “R” Us.

The Technicolor saga began in 1983 following a cash-out merger of the minority shareholders of Technicolor Incorporated by a company controlled by Ron Perelman. There were five remands by the Delaware Supreme Court to the Court of Chancery and two appraisal trials, the first in 1989 before Chancellor Allen. The litigation finally ended with a Chancery Court opinion from Chancellor Chandler in 2004. The appraisal remedy, available in a cash-out merger, has become more frequently utilized and thus more frequently debated over the last several years as a result of the “going- private” boom.

Panelists and Dinner Commentators Thomas J. Allingham II Skadden, Arps, Slate, Meagher & Flom William D. Anderson, Jr. Goldman, Sachs & Co. John G. Finley Simpson Thacher & Bartlett LLP Robin M. Rankin Credit Suisse First Boston

Panelists and Dinner Commentators Hon. William T. Allen Former Chancellor Delaware Chancery Court Hon. William B. Chandler III Chancellor Delaware Chancery Court Hon. Leo E. Strine, Jr. Vice Chancellor Delaware Chancery Court

Toys “R” Us 1 Left to Right: Thomas J. Allingham II, Skadden, Arps, Slate, Meagher & Flom; Robin Rankin, Credit Suisse First Boston; John Finley, Simpson Thacher & Bartlett. 2 Left to Right: John Finley, Simpson Thacher & Bartlett; Hon. Leo E. Strine, Jr., Delaware Chancery Court; Michael Wachter, University of Pennsylvania Law School. 3 Front: Joel Friedlander, Bouchard Margules & Friedlander; Bruce Silverstein, Young Conaway Stargatt & Taylor. Background, left: David Silk, Wachtell, Lipton, Rosen & Katz.

Technicolor 4 Front row: Donald J. Wolfe, Jr., Potter Anderson & Corroon; A. Gilchrist Sparks III, Morris, Nichols, Arsht & Tunnell. Second row: John Schmutz, ILE Board of Advisors; Steven Reed, Harkins Cunningham; Eileen Nugent, Skadden, Arps, Slate, Meagher & Flom. 5 William T. Allen, New York University School of Law (former Delaware Chancellor); William B. Chandler III, Chancellor, Delaware Court of Chancery. 6 Leo E. Strine, Jr., Delaware Court of Chancery; Michael Wachter, University of Pennsylvania Law School.

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4 Pamela F. Craven, Avaya Inc. 5 Eileen Nugent, Skadden, Arps, Slate, Meagher & Flom.

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roundtable programs

roundtable programs

Deal Day

Deal Day in New York

Spring 2007

1 Timothy L. Barefield, Pershing Square Capital Management, L.P.; George J. Mazin, Dechert LLP; Gerald Rosenfeld, Rothschild North America; Michael L. Wachter, University of Pennsylvania Law School; Edward B. Rock, University of Pennsylvania Law School.

Deal Day taps the expertise of our board and sponsors to examine in depth current opportunities and challenges. By looking at the details of complex transactions, we examine cutting edge issues at the intersection of law, finance, governance and operations. The goal of these programs is to allow the participants to understand the “guts of the deal” as a way of understanding the issues at the cutting edge of deal making. In May 2007, Brian Gavin, head of Blackstone’s hedge fund monitoring group, presented Blackstone’s approach to evaluating hedge funds in its $20 billion fund of hedge funds. In previous years, we’ve held Deal Days in New York, London and Tel Aviv that have examined international and domestic private equity transactions, the role of the investment banker for a special committee in a management buyout, as well as the role of a specialty corporate court.

DEAL DAY in New York 4 May 2007 The Penn Club of New York Moderators 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

2 Eric L. Talley, School of Law Boalt Hall, University of California, Berkeley. 3 Brian Gavin, The Blackstone Group L.P.

4 Timothy L. Barefield, Pershing Square Capital Management, L.P.; George J. Mazin, Dechert LLP; Gerald Rosenfeld, Rothschild North America. 5 George J. Mazin, Dechert LLP; Gerald Rosenfeld, Rothschild North America; Michael L. Wachter, University of Pennsylvania Law School; Edward B. Rock, University of Pennsylvania Law School; Brian Gavin, The Blackstone Group L.P.

Monitoring Hedge Funds: Investor Due Diligence

Deal Day in New York

spring 2006 and spring 2005

1 Saul A. Fox, Fox Paine & Company.

1 Michael J. Biondi, Lazard Frères & Co. LLC; left, Joseph D. Gatto, Goldman, Sachs & Co.

DEAL DAY in ISRAEL 25 May 2006 Tel Aviv, Israel Co-Sponsored by Institute for Law and Economics Kiryat Ono College of Law Office of the Delaware Secretary of State Moderators Zohar Goshen Columbia Law School and Academic College, Kiryat Ono Edward B. Rock University of Pennsylvania Law School

The 2002 Acquisition of Paradigm Geophysical by Fox Paine Presentation by Saul A. Fox Fox Paine & Company, LLC (California) Mitchell S. Presser Wachtell, Lipton, Rosen & Katz (New York) Eldad Weiss Paradigm Geophysical (Israel)

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Afternoon Session From Delaware to Israel The Role of a Specialized Business Court

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Deal Day in Israel

Morning Session What Are American Private Equity Firms Looking for in Israeli Companies?

Presentation by Brian Gavin Senior Managing Director The Blackstone Group L.P. Commentators Timothy L. Barefield Chief Operating Officer Pershing Square Capital Management, L.P. George J. Mazin Dechert LLP Gerald Rosenfeld Chief Executive Officer Rothschild North America

Deal Day

Delaware-Style Moot Court Hon. Stephen P. Lamb Vice Chancellor Delaware Chancery Court David C. McBride Young Conaway Stargatt & Taylor (Delaware) Donald J. Wolfe, Jr. Potter Anderson & Corroon LLP (Delaware) Panelists Hon. Aharon Barak President Supreme Court of Israel Hon. Myron T. Steele Chief Justice Supreme Court of Delaware Hon. Moshe Teri Chair Israel Securities Authority Theodore N. Mirvis Wachtell, Lipton, Rosen & Katz (New York)

DEAL DAY in NEW YORK 23 May 2005 The Penn Club of New York Moderator Edward B. Rock Saul A. Fox Distinguished Professor of Business Law University of Pennsylvania Law School Morning Session Lazard’s Representation of the Special Committee in the Battle for Hollywood Entertainment (Movie Gallery/Blockbuster/Leonard Green Partners/Icahn) Presentation by Michael J. Biondi Co-Chairman of Investment Banking Lazard Frères & Co. LLC Commentators Joseph B. Frumkin Sullivan & Cromwell LLP Joseph D. Gatto Managing Director Goldman, Sachs & Co. Robert E. Spatt Simpson Thacher & Bartlett Afternoon Session The Creation of Advance PCS (through the Merger of Advance Paradigm and PCS) and its Subsequent Merger into Caremark, to Create the Largest PBM in America

2 Hon. Aharon Barak, President, Israel Supreme Court; and Hon. Myron T. Steele, Chief Justice, Delaware Supreme Court. 3 From left: Theodore H. Mirvis, Wachtell, Lipton, Rosen & Katz; Donald J. Wolfe, Jr., Potter Anderson & Corroon; David C. McBride, Young Conaway Stargatt & Taylor; Zohar Goshen, Columbia Law School and Academic College, Kiryat Ono; Hon. Myron T. Steele, Delaware Supreme Court; Cynthia B. Kane, Delaware Department of State; Hon. Stephen P. Lamb, Delaware Chancery Court.

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2 Front, from left: Morton A. Pierce, Dewey Ballantine; Michael C. Bond, Avaya Inc.; Pamela F. Craven, Avaya Inc. Background: John S. Stroebel, Rohm and Haas Company; Simon M. Lorne, Millennium Management. 3 Paul S. Levy, JLL Partners; right, Alan Alpert, Deloitte Tax. 4 John E. Osborn, Cephalon, Inc.

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Presentation by Paul S. Levy Senior Managing Director JLL Partners Commentators Alan Alpert Managing Partner, M&A Transaction Services Deloitte Tax LLP Michael S. Knoll Professor of Law and Real Estate University of Pennsylvania Law School John E. Osborn Senior Vice President and General Counsel Cephalon, Inc

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lectures

LECTURES

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he Institute for Law and Economics presents two series of public lectures: Law and Entrepreneurship and Distinguished Jurist. In sponsoring these events, the Institute aims to spotlight and honor lawyers who have led noteworthy careers and made significant contributions as corporate executives and entrepreneurs, or as members of the judiciary at the state or federal levels. Audiences are drawn from all sectors of the University and the legal and business communities. These eminent speakers hold particular appeal and inspiration for students of Penn’s Law School and the Wharton School, with whom they talk informally at receptions following each lecture. The Law and Entrepreneurship lecture is supported in part by the Ronald N. Rutenberg Fund.

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Law and Entrepreneurship Lectures

28 February 2007 Law, Legal Risks, and the Financial Markets Isaac D. Corré Senior Managing Director Eton Park Capital Management Isaac D. Corré is responsible for the event oriented activities of Eton Park. In his talk for ILE, Corré spoke on how he used his legal training in the world of investing by evaluating legal risks when a company’s situation may be significantly affected by an uncertain legal outcome. Prior to joining Eton Park, Corré was a partner at Scoggin Capital Management, a New York-based multi-strategy hedge fund. At Scoggin, Corré managed the merger arbitrage and special situations portfolio that included investments in complex restructurings, stub trades and securities affected by legal and regulatory changes. Corré also managed the firm’s investment in a sovereign trade claims business. He was deeply involved in managing the distressed debt and value equities portfolios. Before joining Scoggin, Corré practiced law for more than nine years. His legal practice focused principally on complex commercial litigation,

involving mergers and acquisitions, securities issuance, corporate governance and bankruptcy. He graduated with a BA, summa cum laude, from Yeshiva University in 1985 and a JD, cum laude, from Harvard Law School in 1989. Isaac serves on the Board of Trustees of the Yeshiva University business school.

“The United States features what many rightly consider the world’s most efficient capital markets and stable legal regime. These are mutually reinforcing, but the financial markets have a lot to learn about the legal system and the law has a lot to learn about the financial markets. Perhaps forums such as this will facilitate the critical transfer of knowledge between these two systems.

29 November 2006 Large-Scale Entrepreneurship: Business Development at GE Pamela Daley Senior Vice President for Corporate Business Development General Electric Company Pamela Daley is responsible for GE’s mergers, acquisitions, and divestiture activities worldwide. In her November lecture, Daley described GE’s evolution into one of the largest companies in the world, and GE’s recent initiatives to invest in new fields and sectors. Before assuming her present position, she was Vice President and Senior Counsel for Transactions at GE. Before arriving at GE in 1989, Daley was a tax partner of the national law firm of Morgan, Lewis & Bockius where she specialized in tax-oriented financings and M&A. From 1982 to 1989, she was an adjunct professor at the University of Pennsylvania Law School, where she taught federal income taxation of partners and partnerships. Daley serves on the Board of Directors of General Electric Capital Corporation, GE Capital Services, Inc., the GE Foundation, and the World Wildlife Fund, and is a past director

of Genworth Financial, Inc. (NYSE: GNW) (2004–2006). She also serves on the Board of Overseers of the University of Pennsylvania Law School. Daley received her B.A. degree with highest honors from Princeton University in 1974 in Romance Languages and Literatures. In 1979, she graduated first in her class from the University of Pennsylvania Law School, where she served as Editor-inChief of the Law Review. She is a member of Phi Beta Kappa and Order of the Coif.

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lectures

lectures

Law and Entrepreneurship Lectures

16 February 2006

Past Law and Entrepreneurship Lectures

23rd Law and Entrepreneurship Lecture

26 October 2006 Managing in the 21st Century Henry R. Silverman Chairman & CEO Realogy Corporation Henry R. Silverman is chairman & CEO of Realogy Corporation, the world’s largest residential brokerage franchisor and the largest U.S. residential real estate brokerage firm. From 1997 through August 2006, Silverman served as chairman and CEO of Cendant Corporation, ranked 107th in the 2006 Fortune magazine list of the 500 largest U.S. companies. Cendant was the largest global provider of consumer and business services within the travel and residential real estate sectors before its decision to separate into four new companies effective July 31, 2006. Realogy Corporation is comprised of the business units from Cendant’s former Real Estate Services Division. Prior to the formation of Cendant in 1997, Silverman was chairman, president and chief executive officer of HFS Incorporated, which he founded in 1990. Silverman gave a Law and Entrepreneurship lecture in 1998 on crisis management, focusing on his discovery of accounting fraud at Cendant after his company merged with it, and how he led the corporation in rebuilding. His lecture in the fall of 2006 addressed to problems of managing a corporation in the post-Enron, post-Sarbanes-Oxley Act, post-tech bubble era. At the same time that globalization is making the business world increasingly competitive, he

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believes that the anti-business climate fostered by the government and the media is hurting American companies’ productivity. In 1998, Silverman received the American Heritage Award from the Anti-Defamation League for lifetime achievement in fighting discrimination. He has been honored twice for his efforts to promote diversity in the workplace—first in 2001, by the Jackie Robinson Foundation and again in 2003, by the U.S. Hispanic Chamber of Commerce. Silverman graduated from Williams College in 1961, and the University of Pennsylvania Law School in 1964, and served as an officer in the U.S. Navy Reserve from 1965 to 1972. “The most important thing that we can all do is to understand that in the final analysis, every good partnership—whether it is in business, in friendship, or in marriage—is based on trust and integrity.”

The Banker as Entrepreneur Michael J. Biondi Co-Chairman, Investment Banking Lazard Frères & Co. LLC

26 October 2005 Founding and Building a New Venture: The Story of the National Women’s Law Center Marcia Greenberger Founder and Co-President National Women’s Law Center 7 April 2005 A Swing of the Pendulum: 20 Years in M&A Joseph D. Gatto Managing Director Goldman, Sachs & Co.

Michael Biondi has extensive experience in advising companies and independent board committees on domestic and cross-border transactions in a broad array of industries—media/communications, transportation, utilities, general industrial and retail. He joined Lazard from Dresdner Kleinwort Wasserstein, where he held a number of senior positions, including Chairman and Co-Chief Executive of the Americas and Co-Head of Global Investment Banking. Prior to that, he was a founding partner of the boutique investment bank Wasserstein Perella & Co., serving as its Chairman and Chief Executive Officer from 1996 until its sale early in 2001. His talk for ILE focused on his experiences in starting and building Wasserstein Perella & Co. and ultimately selling it for $1.37 billion. More recently, Biondi has played a key role at Lazard as part of the team that assumed control and took the company public. Known as the world’s preeminent advisory investment bank, Lazard has offices in 16 countries around the globe. The firm provides advisory services—including mergers and acquisitions, asset management, and restructuring—to corporations, partnerships, institutions, governments, and individuals.

Biondi has a particular expertise in advising independent directors in conflict situations. When a parent company seeks to acquire a partially owned subsidiary, current practice requires that the subsidiary board appoint a special committee of independent directors to look after the interests of minority shareholders. For these committees to fulfill their responsibilities, they need independent and expert investment banking advice. Whom do they call? Mike Biondi. Michael Biondi began his M&A career as a lawyer at Skadden, Arps, Slate, Meagher & Flom. He holds both an M.B.A. from The Wharton School and a J.D. from Penn Law.

“Once you’ve done something entrepreneurial, once you’ve met a payroll, once you’ve been responsible for hundreds of people who’ve been willing to follow you into battle— whether rightly or wrongly—it is very hard to go to work at a big bureaucratic organization.... And it’s that spark, it’s that essence, it’s that feel of a small firm that keeps me doing this...the thrill of both counseling people over the long run and staying cutting edge with what’s going on in your business. I wouldn’t be doing this today if I didn’t have a place where I could be doing both of those things.”

24 March 2004 The WNBA and Women’s Team Sports: A New Sports Marketing Proposition for the New Millennium Val Ackerman President Women’s National Basketball Association 30 October 2003 The Role of Entrepreneurship in Urban Education: Past, Present and Future James E. Nevels Chairman and CEO The Swarthmore Group, Inc. Chairman, Philadelphia School Reform Commission 6 November 2002 Public Trust—and Distrust— in American Business: What Needs to be Done Peter G. Peterson Chairman, The Blackstone Group Chairman, Federal Reserve Bank of New York Co-Chair, Conference Board Commission on Public Trust and Private Enterprise 26 September 2002 What They Did Not Teach Me in Law School Robert M. Potamkin Co-Chairman and Co-CEO Planet Automotive Group, Inc.

19 April 2002 Smart People Making and Losing Money: Some Recent Examples Perry Golkin Kohlberg Kravis Roberts & Co.

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25 October 2001 The Economics of Sports Team Franchises for Cities Hon. Edward G. Rendell Governor, Commonwealth of Pennsylvania [former Mayor, City of Philadelphia; former General Chair, Democratic National Committee] 21 February 2001 Private Equity: Difficult Investing in a Difficult Time Paul S. Levy Senior Managing Director Joseph Littlejohn & Levy 2 March 2000 Perspectives on the Health Care Revolution Charles A. Heimbold, Jr. Chairman and CEO Bristol-Myers Squibb Company 18 November 1999 Ethics in Sports: Deciding the Game Anita DeFrantz Vice President International Olympic Committee President, Amateur Athletic Foundation 23 October 1997 How to Maintain Entrepreneurial Values While Your Company Climbs into the Fortune 500 Brian L. Roberts President Comcast Corporation 27 March 1997 The Unique Impact of the Law on the Leveraged Buyout Business Saul A. Fox Fox Paine &Company, LLC

1 Peter G. Peterson

5 Paul S. Levy

2 James E. Nevels

6 Perry Golkin

3 Edward G. Rendell

7 Val Ackerman

4 Marcia Greenberger

8 Joseph D. Gatto

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lectures

lectures

Distinguished Jurist Lectures

11 October 2006

16 March 2006

The Embattled Corporation Hon. Richard A. Posner U.S. Seventh Circuit Court of Appeals and University of Chicago Law School

Technology Mergers in a Shrinking World Hon. Vaughn R. Walker Chief Judge U.S. District Court for the Northern District of California

Richard Posner, as an academic and as a judge, is one of the pioneers of Law and Economics. In numerous books, articles and judicial opinions, he has examined legal issues through the lens of economic analysis. He came to Law and Economics indirectly after graduating from Yale College in 1959, summa cum laude, junior Phi Beta Kappa, and an English major. Three years later, after graduating from Harvard Law School first in his class, magna cum laude, and president of the Law Review, he went to work in Washington—as law clerk to Justice William J. Brennan,Jr., as an assistant to Commissioner Philip Elman of the Federal Trade Commission, as an assistant to the Solicitor General of the U.S., Thurgood Marshall, and as general counsel of President Johnson’s Task Force on Communications Policy. Posner entered law teaching in 1968 at Stanford as an associate professor, and became professor of law at the University of Chicago Law School in 1969, where he remained (later as Lee and Brena Freeman Professor of Law) until his appointment to the Seventh Circuit in 1981. During this period Posner wrote a number of books (including Antitrust Law: An Economic Perspective, Economic Analysis of Law, and The Economics of Justice) and many articles exploring the application of economics to a variety of legal subjects, including antitrust, public utility and common carrier regulation, torts, contracts, and procedure. He founded the Journal of Legal Studies, primarily to

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encourage economic analysis of law, and was a research associate of the National Bureau of Economic Research. In his talk for ILE, Posner discussed the ways in which his thoughts on law and economics have changed since Economic Analysis of the Law was first published, and his current thoughts on executive compensation, organizational dynamics, and irrationality in the market. Posner became a Judge of the U.S. Court of Appeals for the Seventh Circuit in December 1981 and served as Chief Judge from 1993 to 2000. He has written almost 2200 published judicial opinions. He continues to teach part time at the University of Chicago Law School, where he is Senior Lecturer, and to write academic articles and books. He has written 38 books and more than 300 articles and book reviews. His academic work since his becoming a judge has included studies in the economics of criminal law, labor law, and intellectual property; in jurisprudence, law and literature, and the interpretation of constitutional and statutory texts; and in the economics of sexuality and of old age.

“The stock option is not a very tailored way of motivating chief executive officers to do their best, because a lot of things affect the price of stock other than the efforts of the CEO. To tie a CEO’s income to the value of his company’s stock is a little like if the salary of the President of the United States was tied to the GNP.”

Hon. Vaughn R. Walker became a federal judge in 1990 after having been nominated by Presidents Reagan and George H. W. Bush and confirmed by the Senate. He studied law at the University of Chicago and Stanford and practiced law in San Francisco, handling antitrust and other business cases, from 1972 until his appointment to the bench. As a federal judge, Walker has been described as “a pioneer who understands business law.” In his Distinguished Jurist talk he shared insights gained in presiding over the Oracle antitrust trial and other highprofile litigation involving mergers and

intellectual property issues in hightech companies (such as the landmark case that pitted Apple Computer against Microsoft). His lecture focused on the implications for antitrust merger analysis of the increasing importance of intellectual property (i.e., technology) in commercial activity, and the impact of globalization.

28 October 2004 A Twelve-Year Retrospective on Delaware Corporate Jurisprudence and Governance Issues Hon. E. Norman Veasey Chief Justice Delaware Supreme Court 1992–2004

3 March 2005 “In an industry whose products derive their value from their intellectual or conceptual content, not from their physical characteristics, the traditional tools we’ve used in merger analysis are much less useful. They don’t fit the kinds of dynamics that a technology industry displays in quite the same way that the traditional physical kind of product fits those standards.... We’ve seen that judges in our courts have approached these merger cases with a healthy skepticism. This, I think, has been a wholesome development that eventually may spur and forward the search for a more workable metric of competition in a fast-changing, shrinking world.”

Corporate Federalism: Event Horizons in Corporate Governance Hon. Myron T. Steele Chief Justice Delaware Supreme Court The Honorable Myron T. Steele is a former Vice Chancellor of the Delaware Court of Chancery, Resident Judge of Superior Court, Deputy Attorney General, Senate (Delaware) Attorney and Chairman of the Consumer Affairs Board. He has presided over major corporate litigation, LLC and limited partner governance disputes, and he writes frequently on issues of corporate document interpretation and corporate governance. He has published over 300 opinions disposing of disputes among members of limited liability companies, and limited partnerships, and between shareholders and management of both publicly traded and closed corporations. In his talk, Chief Justice Steele described how the federal government’s desire to protect shareholders in corporations has led to a “one-sizefits-all regulatory model” that is often less sensitive to a corporation’s particular situation than the corresponding state laws would be. As early as the Securities Act of 1933 and the Exchange Act of 1934, the federal regulation of corporations has been

“The larger the federal presence, the less scope to the states’ radically different approaches and their influence in shaping corporate governance. Like black holes, the federal government’s gravitational pull inevitably swallows everything in its path.” creeping further and further into the domain of individual states’ regulation, he said. He sees the Sarbanes-Oxley Act, passed in 2002 in response to corporate financial and accounting scandals, as a troubling harbinger of growing federal control. Since 2002, corporations have spent $8 billion attempting to comply with the new restrictions, the Chief Justice said, and he expressed concern that there would be further costs, not only in direct compliance expenditures, but in losses from restricted business practices.

Chief Justice Veasey presented “a thematic look through the rear-view mirror” of some of the Delaware Supreme Court decisions handed down during a term that began in April of 1992 and ended in the spring of 2004. He discussed changes during his time on the bench in liability exposure of directors; standards of conduct and standards of review; trends in fiduciary duty law and the evolving expecations of directors, including good faith; deal protection; duty of disclosure; derivative suits; the role of best practices; and federalism vs. federalization. In summing up his observations across all of these areas, he offered the over-arching conclusion that “the corporate governance regime depends on an active board, and it works only when people of integrity operating in the right corporate culture make it work. The system depends on trust in people—especially the directors, regulators and courts.” During Mr. Veasey’s tenure as Chief Justice, the U.S. Chamber of Commerce ranked Delaware’s courts first in the nation for three consecutive years for their fair, reasonable and efficient litigation environment. Chief Justice Veasey has also been credited with leading nationwide programs to

restore professionalism to the practice of law and adopt best practices in the running of America’s courts. Currently, E. Norman Veasey is a senior partner at Weil, Gotshal & Manges, serving as a strategic advisor to the firm’s roster of prominent global clients on a wide range of issues related to mergers and acquisitions, restructuring and litigation. Additionally, he advises on corporate governance issues involving the responsibilities of corporate directors in complex financial transactions and crisis management. He is a member of the ILE Board of Advisors.

“The best way to demonstrate that federal intervention into the internal affairs of corporations is unnecessary and undesirable is for boards of directors—guided by business lawyers—to continue what the Delaware judges have consistently encouraged, which is the quest for best practices of due care, loyalty, good faith, independence, constructive skepticism and demanding total understanding before acting.”

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lectures lectures

ACADEMIC EVENTS

Past Distinguished Jurist Lectures

4 March 2004 Corporate Decision-Making in Delaware Courts The Honorable Carolyn Berger Justice Delaware Supreme Court

12 February 1998 The Value of Predictability in Corporate Law The Honorable E. Norman Veasey Chief Justice Delaware Supreme Court

27 February 2003 The Effects of Collegiality on Judicial Decision Making The Honorable Harry T. Edwards Circuit Judge U.S. Court of Appeals for the D.C. Circuit

11 February 11 1997 What Economics of Law Must Address Next: Some Thoughts on Theory The Honorable Guido Calabresi U.S. Court of Appeals for the Second Circuit

29 November 2001 Fee Shifting as a Control Against the Rogue Litigant The Honorable Jack B. Jacobs Justice, Supreme Court of Delaware [former Vice Chancellor, Delaware Court of Chancery]

7 February 1996 The MTV Constitution The Honorable Alex Kozinski U.S. Court of Appeals for the Ninth Circuit

6 March 2001 Administering Capital Punishment: Is Texas Different? The Honorable Patrick E. Higginbotham U.S. Court of Appeals for the Fifth Circuit 24 February 2000 The Court of Chancery as Teacher of Corporate Law The Honorable William B. Chandler III Chancellor Delaware Court of Chancery 11 February 1999 Why Do People Bring Employment Discrimination Cases When They Usually Lose? The Honorable Diane Wood U.S. Court of Appeals for the Seventh Circuit

22 March 1995 Accountability: Popular Will, Interest Groups, or the Invisible Hand The Honorable Stephen F. Williams U.S. Court of Appeals for the District of Columbia

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13 April 1994 On the Constitution The Honorable Antonin Scalia Associate Justice, U.S. Supreme Court 14 October 1992 Nonprice Competition The Honorable Douglas H. Ginsberg U.S. Court of Appeals for the District of Columbia 3 December 1991 Corporate Takeovers and Our Schizophrenic Conception of the Corporation The Honorable William T. Allen Chancellor Delaware Court of Chancery 1990 The Constitution and the Spirit of Freedom The Honorable Anthony M. Kennedy Associate Justice U.S. Supreme Court

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1 The Honorable Harry T. Edwards

4 The Honorable Diane Wood

2 The Honorable Jack B. Jacobs

5 The Honorable Antonin Scalia

3 The Honorable William B. Chandler III

6 The Honorable Carolyn Berger

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ajor one- and two-day symposia are organized under the sole sponsorship of the Institute for Law and Economics, and in cooperation with other organizations within the Law School and Wharton. In February 2005 we launched an annual conference on Law and Finance, jointly sponsored by ILE, the Wharton Finance Department, and the Center for Law and Business at NYU Law School, and the Stern School Finance Department. The conference location alternates between Penn and NYU. In October 2002 ILE debuted the first installment in the new ILE/Wharton Finance series, providing an opportunity for faculty and advanced students from the Law School, the Wharton School, and the Department of Economics to come together around an area of common interest and strengthening the Institute’s core academic relationships. A dinner follows each presentation, with commentary presented by members of ILE’s Associate Faculty from Law, Wharton Finance, and the Department of Economics and a general discussion. This series continued with two seminars during 2006–2007. ILE and Finance alternate in selecting speakers, and the venue for the presentations alternates between the Law School and Wharton. The organizers of the series are Michael Wachter (Law) and Andrew Metrick (Wharton). ILE Seminars provide an opportunity for scholars from the University of Pennsylvania and elsewhere to present provocative ideas on timely issues and a wide range of subjects. All participants are invited to engage in give-andtake with the presenter, an interchange that is a hallmark of these workshops. Papers, which are usually works in progress, can be downloaded from the ILE Web site at www.law.upenn. edu/ile/seminarseries.html, and copies are provided to faculty and advanced students upon request. The 2006–2007 ILE Seminar Series was organized by Professors Matthew Adler and Chris William Sanchirico.

During the 2006–2007 academic year Michael Knoll (Penn Law and the Wharton School), Chris William Sanchirico (Penn Law and the Wharton School), and Reed Shuldiner (Penn Law), with funding from the University of Pennsylania Provost’s Office, ran a Seminar on Tax Policy and Public Finance. As part of that seminar, six prominent tax academics and one high-ranking government official were brought to the University to make presentations.

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1 Raghuram G. Rajan, International Monetary Fund. 2 Roberta Romano, Yale Law School. 3 Left, Bruce Silverstein, Young Conaway Stargatt & Taylor; right, Andrew Metrick, The Wharton School.

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4 Marcel Kahan, New York University School of Law; Gerald Rosenfeld, Rothschild North America. 5 From left: Augustine Landier, Stern School of Business; Vinay Nair, The Wharton School; Michael Roberts, The Wharton School.

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academic events

NYU/Penn Conference on Law and Finance 23–24 February 2007 New York University School of Law Jointly sponsored by Institute for Law and Economics University of Pennsylvania Financial Institutions Center The Wharton School Center for Law & Business New York University Organized by Yakov Amihud Stern School of Business New York University Stephen Choi New York University School of Law Richard Kihlstrom The Wharton School University of Pennsylvania Edward B. Rock University of Pennsylvania Law School Session I The Short and Puzzling Life of the “Implicit Minority Discount” in Delaware Appraisal Law Lawrence A. Hamermesh Widener University School of Law Michael L. Wachter University of Pennsylvania Law School Commentator: David L. Yermack Stern School of Business New York University Chair: Stephen J. Choi New York University School of Law Session II Governance Problems in Close Corporations Venky Nagar Ross School of Business The University of Michigan Kathy R. Petroni The Eli Broad College of Business and The Eli Broad Graduate School of Management Michigan State University Daniel Wolfenzon Stern School of Business New York University National Bureau of Economic Research Commentator: Jill Fisch Fordham University School of Law

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academic events

Chair: William T. Allen Stern School of Business New York University New York University School of Law Session III Institutional Investors and Proxy Voting: The Impact of the 2003 Mutual Fund Voting Disclosure Regulation Martijn Cremers Yale School of Management Roberta Romano Yale Law School Commentator: Joy Ishii Stanford Graduate School of Business Chair: William T. Allen Stern School of Business New York University New York University School of Law Session IV Predatory Lending in a Rational World Philip Bond The Wharton School University of Pennsylvania David K. Musto The Wharton School University of Pennsylvania Bilge Yılmaz The Wharton School University of Pennsylvania

Malcolm Baker Harvard Business School National Bureau of Economic Research Joshua Coval Harvard Business School National Bureau of Economic Research Jeremy C. Stein Harvard University, Economics Department National Bureau of Economic Research Commentator: Robert M. Daines Stanford Law School Chair: Edward B. Rock University of Pennsylvania Law School Session VII Did Reform of Prudent Trust Investment Laws Change Trust Portfolio Allocation? Max M. Schanzenback Northwestern University School of Law Robert H. Sitkoff New York University School of Law

Commentator: William N. Goetzmann Yale School of Management Chair: Edward B. Rock University of Pennsylvania Law School Session VIII Who Blows the Whistle on Corporate Fraud? Alexander Dyck Rotman School of Management University of Toronto Adair Morse The University of Michigan Luigi Zingales The University of Chicago Graduate School of Business National Bureau of Economic Research Centre for Economic Policy Research Commentator: Jeffrey N. Gordon Columbia Law School Chair: Kose John Stern School of Business New York University

Commentator: Michael Barr The University of Michigan Law School Chair: Andrew Metrick The Wharton School University of Pennsylvania Session V Pay Distribution in the Top Executive Team Lucian Arye Bebchuk Harvard Law School Martijn Cremers Yale School of Management Urs Peyer INSEAD Commentator: Steve Kaplan The University of Chicago Graduate School of Business Chair: Andrew Metrick The Wharton School University of Pennsylvania Session VI Corporate Financing Decisions When Investors Take the Path of Least Resistance

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Penn/NYU Conference on Law and Finance 24–25 February 2006 University of Pennsylvania Law School Jointly sponsored by Institute for Law and Economics University of Pennsylvania Financial Institutions Center The Wharton School Center for Law & Business New York University Organized by Yakov Amihud Stern School of Business New York University Marcel Kahan New York University School of Law Andrew Metrick The Wharton School University of Pennsylvania Michael L. Wachter University of Pennsylvania Law School Session I Ex Ante Choices of Law and Forum: An Empirical Analysis of Corporate Merger Agreements Theodore Eisenberg Cornell University Law School Geoffrey P. Miller New York University School of Law Commentator: Matthew Rhodes-Kropf Columbia University Graduate School of Business Moderator: Merritt B. Fox Columbia Law School

3 1 Gerald Rosenfeld, Rothschild North America and William T. Allen, Stern School of Business, New York University and New York University School of Law. 2 Daniel Wolfenzon, Stern School of Business, New York University and National Bureau of Economic Research; Jill Fisch, Fordham University School of Law; Yakov Amihud, Stern School of Business, New York University.

4 3 Hon. Stephen P. Lamb, Delaware Court of Chancery; Yakov Amihud, Stern School of Business, New York University; Hon. Donald F. Parsons, Jr., Delaware Court of Chancery; William T. Allen, Stern School of Business, New York University and New York University School of Law. 4 Foreground: David K. Musto, The Wharton School, University of Pennsylvania. Background: Michael Barr, The University of Michigan Law School.

Session II Is Financial Contracting Costly? An Empirical Analysis of Debt Covenants and Corporate Investment Sudheer Chava C. T. Bauer School of Business University of Houston Michael R. Roberts The Wharton School University of Pennsylvania Commentator: Michael Klausner Stanford Law School Moderator: Andrew Metrick The Wharton School University of Pennsylvania

Session III Bottom-Up Corporate Governance Augustin Landier Stern School of Business New York University David Sraer CREST & GREMAQ David Thesmar HEC Paris (Groupe HEC) & CEPR Commentator: Ehud Kamar University of Southern California, Law School Moderator: Jill Fisch Fordham University School of Law

Session VII Hedge Funds in Corporate Governance and Corporate Control Marcel Kahan New York University School of Law Edward B. Rock University of Pennsylvania Law School Commentator: Laura T. Starks McCombs School of Business University of Texas at Austin Moderator: William T. Allen New York University School of Law

Session IV Legal Origins and Stock Markets in the Twentieth Century Mark J. Roe Harvard Law School

Session VIII Judge-Specific Effects in Chapter 11 and Firm Outcomes Tom Chang Massachusetts Institute of Technology Antoinette Schoar Sloan School of Management Massachusetts Institute of Technology Commentator: Barry F. Adler New York University School of Law Moderator: William W. Bratton Georgetown University Law Center

New York University School of Law Co-Sponsored by

Commentator: Luigi Zingales The University of Chicago Gradate School of Business Moderator: H. Franklin Allen The Wharton School University of Pennsylvania Session V The Law and Economics of Self-Dealing Simeon Djankov The World Bank Rafael LaPorta Dartmouth College Florencio Lopez-de-Silanes University of Amsterdam Andrei Shleifer Harvard University

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Commentator: John C. Coates Harvard Law School Moderator: Michael L. Wachter University of Pennsylvania Law School Session VI How Law Affects Lending Rainer Haselmann Leipzig Graduate School of Management Katharina Pistor Columbia Law School Vikrant Vig Graduate School of Business Columbia University Commentator: Viral V. Acharya London Business School Moderator: Bernard Black University of Texas School of Law

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Penn/NYU Conference on Law and Finance 1 Edward Rock, University of Pennsylvania Law School. 2 Michael Klausner, Stanford Law School. 3 Jeffrey Gordon, Columbia Law School.

4 Werner Ebke, New York University Law School. 5 Front row: Phillip Bond and Hulya Eraslan, The Wharton School. Back row: Reiner Haselmann, Vikrant Vig, and Hayong Yun, Graduate School of Business, Columbia University; Katharina Pistor, Columbia Law School; H. Franklin Allen, The Wharton School; Jun Qian, Carroll School of Management, Boston College.

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academic events

academic events

ILE/Finance Seminars

Co-Sponsored by Institute for Law and Economics and Department of Finance The Wharton School 22 March 2007 Law and the Market: The Impact of Enforcement John C. Coffee, Jr. Adolf A. Berle Professor of Law Columbia University School of Law Commentators: Philip Bond Wharton Finance Jill Fisch Fordham University School of Law; Penn Law (visiting) Wayne R. Guay Wharton Finance Tobias B. Wolff Penn Law This paper explores the possible relationship between the intensity of enforcement efforts by securities regulators in selected nations, and (i) the cost of equity capital by nation and (ii) the extraordinary listing premium that non-U.S. firms exhibit upon cross-listing on a U.S. exchange. Enforcement intensity may dissuade issuers from entering a particular market and thus may be responsible for the asserted decline in the “competitiveness” of the U.S. capital markets. This paper suggests that one legal variable—the level of enforcement— does distinguish jurisdictions in a manner that can explain national differences in the cost of capital (especially between common law and civil law countries) and that may help explain financial development. Because enforcement intensity appears to play a dual role, both enhancing share value for foreign issuers that cross-list into a high enforcement legal regime and deterring many foreign issuers from entering high enforcement jurisdictions, reasonable persons might disagree about whether the best policy response is to increase or relax it.

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30 November 2006 Who Blows the Whistle on Corporate Fraud? (co-authored with Alexander Dyck and Adair Morse) Luigi Zingales Robert C. McCormack Professor of Entrepreneurship and Finance The University of Chicago Graduate School of Business Commentators: Aditi Bagchi Penn Law John E. Core Wharton Finance Andrew Metrick Wharton Finance Edward B. Rock Penn Law The large and numerous corporate frauds that emerged in the United States at the onset of the new millennium have provoked an immediate legislative response in the Sarbanes Oxley Act (SOX). This law was predicated upon the idea that the institutions designed to uncover fraud had failed, and their incentives as well as their monitoring should be increased. The political imperative to act quickly prevented any empirical analysis to substantiate the law’s premises. The authors gathered data on a comprehensive sample of alleged corporate frauds in companies with more than 750 million dollars in assets that took place between 1996 and 2004. Through an extensive reading of each fraud’s history, they identified who was involved in the revelation of the fraud, and what were the circumstances that lead to its detection. In particular, they studied the source of the information and the incentives detectors face in bringing the fraud to light. The authors found that no specific actor dominates the revelation of fraud. The SEC accounts for only 6 percent. Even using the most comprehensive and generous interpretation, the revelation can be attributed to shortsellers in only 9 percent of the cases. Financial analysts and auditors do a little better (respectively 15 and 14 percent of the cases), but they hardly dominate the

scene. More surprising is the key role played by actors who lack a governance mandate, such as employees (19 percent), the media (15 percent), and industry regulators (15 percent). Having identified the whistle blowers, the authors then investigated the cost-benefits trade off they face. Overall, analysts, journalists, auditing firms, and employees who bring fraud to light do not seem to be rewarded in monetary or in career terms. In fact, conditional on a fraud being committed, auditing firms are more likely to lose the job when they reveal it than when they do not. The only exception is employees who reveal a fraud against the government to avail themselves of the qui tam statute, which guarantees

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them a percentage of the money recovered by the government. Generalizing from these results, the authors arrived at what might be called a paradox of whistle blowing: those with the best access to information have weak incentives to blow the whistle and are most active, while those with less access to information have better incentives and are least active. This paradox has important policy implications: rather than increase the layers of monitors (as done in SOX), it would be more cost effective to increase the reward for people to come forward.

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spring 2007 & fall 2006

6 April 2006 The States as Laboratory: Legal Innovation and State Competition for Corporate Charters Roberta Romano Allen Duffy/Class of 1960 Professor of Law Yale University Law School Commentators: Richard E. Kihlstron Wharton Finance Andrew Metrick Wharton Finance Chris W. Sanchirico Penn Law Bruce L. Silverstein Young Conaway Stargatt & Taylor 20 October 2005 Creating Constituencies for Reform Raghuram G. Rajan Economic Counsellor and Director, Research International Monetary Fund Commentators: William W. Burke-White Penn Law Robert P. Inman Wharton Finance Jason Scott Johnston Penn Law Bilge Yilmaz Wharton Finance 31 March 2005 What Matters in Corporate Governance? Lucian Arye Bebchuk Harvard Law School Commentators: Hulya Eraslan Wharton Finance Andrew Metrick Wharton Finance Edward B. Rock Penn Law David A. Skeel Penn Law

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2 John C. Coffee, Jr.

ILE Seminar Series

ILE/Finance Seminars

11 November 2004 Venture Capital Investment Cycles: The Role of Experience and Specialization Paul A. Gompers Graduate School of Business Administration Harvard University Commentators: Rafi Amit Wharton Finance Sean Griffith Penn Law (visiting) Richard Kihlstrom Wharton Finance Polk Wagner Penn Law 21 April 2004 The State of U.S. Corporate Governance: What’s Right and What’s Wrong Steven Kaplan Graduate School of Business University of Chicago Commentators: Franklin Allen Wharton Finance Andrew Metrick Wharton Finance Katharina Pistor Penn Law (visiting) 9 October 2003 Understanding Material Adverse Change Clauses: Moral Hazard in Acquisitions (co-authored with Alan Schwartz) Ronald J. Gilson Columbia Law School and Stanford Law School Commentators: Franklin Allen Wharton Finance Kristin Madison Penn Law Andy Postlewaite Penn Economics 31 October 2002 Law and Finance: The Practice of Justice Andrei Shleifer Harvard University Commentators: Richard E. Kihlstrom Wharton Finance Michael S. Knoll Penn Law Jason Scott Johnston Penn Law Andrew Metrick Wharton Finance

12 April 2007 Mandated Medical Leave in the Workplace Christine Jolls Professor of Law Yale Law School 15 March 2007 Completing Contracts in the Shadow of Costly Verification Albert Choi Professor of Law Associate Director, John M. Olin Program in Law and Economics University of Virginia School of Law 1 March 2007 Unconscious Prejudice and Accountability Systems: What Must Organizations Do to Check Implicit Bias? Gregory Mitchell Professor of Law E. James Kelly, Jr.-Class of 1965 Research Professor University of Virginia School of Law 15 February 2007 The Enduring Problem of WTO Export Subsidies Rules (with Andrew Green and Vivien Milat) Michael Trebilcock University Professor Faculty of Law University of Toronto 9 November 2006 Offsetting Risks Ariel Porat Alain Poher Professor of Law Tel Aviv University Faculty of Law Visiting Professor of Law University of Chicago 12 October 2006 Mandatory versus Voluntary Disclosure of Product Risks (with Steven Shavel) A. Mitchell Polinsky Josephine Scott Crocker Professor of Law and Economics Stanford Law School

14 September 2006 Taxation and Social Security (Draft Chapter 11 from The Theory of Taxation and Public Economics, forthcoming 2007, Princeton University Press) Louis Kaplow Finn M. W. Caspersen and Household International Professor of Law and Economics Harvard Law School

Tax Policy Seminars Spring 2007 Speakers: Reuven Avi-Yonah University of Michigan Law School A Proposal to Adopt Formulary Apportionment for Corporate Income Taxation: The Hamilton Project Joseph Bankman Stanford Law School Why It Is So Difficult to Get Easy Tax Filing Anup Malani University of Chicago Law School The Case for For-Profit Charities (with Eric Posner) Richard T. Morrison Deputy Assistant Attorney General United States Department of Justice, Tax Division Recent Developments in Tax Shelter Cases Dan Shaviro NYU Law School Permanent Income and the Annual Income Tax Joel Slemrod University of Michigan The Economics of Tax Remittance Linda Sugin Fordham Law School Why Endowment Taxation is Unjust

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publications & papers

PUBLICATIONS AND PAPERS

Listed below is a sampling of recently published papers and work in progress by members of the Associate Faculty of the Institute for Law and Economics. ILE maintains a series of research papers and provides copies—electronic or paper—to interested parties upon request to vhewitt@law.upenn.edu. The Institute is a member of the Legal Scholarship Network (LSN), a subset of the Social Science Research Network. Current ILE research papers are posted in the University of Pennsylvania Law and Economics Research Paper Series on the LSN Web site. Abstracts as well as complete papers can be downloaded (http://www.ssrn.com/link/penn-lawecon.html). Faculty appointments are in the University of Pennsylvania Law School unless otherwise noted. Matthew D. Adler Leon Meltzer Professor of Law Risk Equity: A New Proposal, Harvard Environmental Law Review, forthcoming 2008. New Foundations of Cost-Benefit Analysis (co-authored with Eric Posner), Harvard University Press, 2006. Policy Analysis for Natural Hazards: Some Cautionary Lessons from Environmental Policy Analysis, Duke Law Journal, 2006. Franklin Allen Nippon Life Professor of Finance and Professor of Economics The Wharton School Understanding Financial Crises, (with D. Gale), Oxford University Press, 2007. Beauty Contests, Bubbles and Iterated Expectations in Asset Prices (with S. Morris and H. Shin), Review of Financial Studies, 2006. Large Investors, Price Manipulation, and Limits to Arbitrage: An Anatomy of Market Corners (with L. Litov and J. Mei), Review of Finance, 2006. Aditi Bagchi Assistant Professor of Law Varieties of Employee Ownership: Some Unintended Consequences of Corporate Law and Labor Law, University of Pennsylvania Journal of Business and Employment Law, forthcoming.

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The Accidental Promise: Remaking the Law of Misrepresented Intent, University of Illinois Law Review, forthcoming. Howard F. Chang Earle Hepburn Professor of Law The Effect of Joint and Several Liability under Superfund on Brownfields (with Hilary Sigman), International Review of Law and Economics, forthcoming. Cultural Communities in a Global Labor Market: Immigration Restrictions as Residential Segregation, University of Chicago Legal Forum, forthcoming 2007. Cary Coglianese Edward B. Shils Professor of Law and Professor of Political Science Legitimacy and Corporate Governance, Delaware Journal of Corporate Law, 2007. Leveraging the Private Sector: Management-Based Strategies for Improving Environmental Performance (with Jennifer Nash), Johns Hopkins University Press/Resources for the Future Press, 2006. John E. Core Associate Professor of Accounting The Wharton School Can Differences in U.S. and U.K. CEO Pay Be Explained by Differences in Equity Incentives? (with W. Guay and M. Conyon), Working Paper. Agency Problems of Excess Endowments in Not-for-Profit Firms (with W. Guay and R. Verdi), Journal of Accounting and Economics, 2006. Is U.S. CEO Compensation Inefficient Pay Without Performance? A review of Pay Without Performance: The Unfulfilled Promise of Executive Compensation by Lucian Bebchuk and Jesse Fried (with W. Guay and R. Thomas), Michigan Law Review, 2005. Gerald R. Faulhaber Professor of Business and Public Policy and Management The Wharton School Professor of Law Network Neutrality: The Debate Evolves, International Journal of Communication, forthcoming 2007. Solving the Interoperability Problem: Are We on the Same Channel?, Federal Communications Law Review, forthcoming 2007.

File Sharing, Copyright, and the Optimal Production of Music, Michigan Telecommunications and Technology Law Review, 2006.

Jason Scott Johnston Robert G. Fuller Jr., Professor of Law and Director, Program on Law, the Environment and the Economy

Lawrence A. Hamermesh Ruby R. Vale Professor of Corporate and Business Law Widener University School of Law

Desperately Seeking Numbers: Global Warming, Species Loss, and the Use and Abuse of Quantification in Climate Change Policy Analysis, University of Pennsylvania Law Review, forthcoming 2007.

The Short and Puzzling Life of the “Implicit Minority Discount” in Delaware Appraisal Law (with Michael Wachter), University of Pennsylvania Law Review, forthcoming. The Fair Value of Cornfields in Delaware Appraisal Law (with Michael Wachter), Journal of Corporation Law, 2006. The Policy Foundations of Delaware Corporate Law, Columbia Law Review, 2006. Richard J. Herring Jacob Safra Professor of International Banking, Professor of Finance The Wharton School Co-Director, Wharton Financial Institutions Center The Case of the Missing Market: The Bond Market & Why it Matters for Financial Development (with Nathporn Chatusripitak), in Recent Financial Crises: Analysis, Challenges and Implications, Edward Elgar Publishing, 2006. Implementing Basel II: Is the Game Worth the Candle?, Financial Markets, Institutions & Instruments, 2005. Robert W. Holthausen The Nomura Securities Company Professor, Professor of Accounting and Finance and Management, and Chairman, Accounting Department The Wharton School Testing the Relative Power of Accounting Standards versus Incentives and Other Institutional Features to Influence the Outcome of Financial Reporting in an International Setting, 36 Journal of Accounting & Economics, December 2003. Robert P. Inman Richard King Mellon Professor; Professor of Finance, Economics, Business and Public Policy, Real Estate The Wharton School Why Federalism?, CESifo Economic Studies, forthcoming 2007. Financing Cities, in A Companion to Urban Economics, Blackwell Publishing, 2006. Federalism and the Democratic Transition: Lessons from South Africa, American Economic Review, Papers and Proceedings, 2005.

Fashioning Entitlements: A Comparative Law and Economic Analysis of the Judicial Role in Environmental Centralization in the U.S. and Europe (with Michael G. Faure), in Responsibility and Governance, Edward Elgar Publishing, forthcoming 2007. The Return of Bargain: An Economic Theory of Standard Form Contracts and the Negotiation of Business Relationships, Michigan Law Review, 2006. Leo Katz Frank Carano Professor of Law A Theory of Loopholes, Working Paper, 2007. In Defense of Tax Shelters, Virginia Tax Review, 2007. Richard E. Kihlstrom Ervin Miller-Arthur M. Freedman Professor of Finance and Economics Chairman, Finance Department The Wharton School Risk Aversion and the Elasticity of Substitution in General Dynamic Portfolio Theory: Consistent Planning by Forward-Looking, Expected Utility Maximizing Investors, Working Paper, 2007. Takeover Defenses and Managerial Incentives Under Alternative Legal Regimes (with Michael L. Wachter), 2006. Michael S. Knoll Theodore K. Warner Professor of Law Professor of Real Estate The Wharton School Implicit Taxes and Economic Substance: A Reply, Tax Notes, 2007. Implicit Taxes and Pretax Profit in Compaq and IES Industries, Tax Notes, 2007. Friedrich K. Kübler Professor and Director of the Banking Law Institute Emeritus, University of Frankfurt, Germany Professor of Law Recht und Sozialwissenschaften— Herausforderungen und Chancen der Verhaltensökonomie (Law and Social Sciences—the Challenge and the Promise of Behavioral Economics) (with Dorothea Kubler), Kritische Vierteljahresschrift für Gesetzgebung und Rechtswissenschaft, 2007.

Gesellschaftsrecht (comprehensive treatise of German corporate law), with Hans-Dieter Assmann, 6th edition, 2006.

A Normative Theory of Bankruptcy: Bankruptcy As (Is) Civil Procedure, Washington & Lee Law Review, 2004.

The Shifting Paradigm of European Company Law, The Columbia Journal of European Law, 2005.

David K. Musto Associate Professor of Finance

Peter D. Linneman Albert Sussman Professor of Real Estate, Finance, and Public Policy The Wharton School

Vote Trading and Information Aggregation (with Susan Christoffersen, Chris Geczy, and Adam Reed), Journal of Finance, forthcoming.

A New Product to ENHANCE Shareholder Value: Bifurcating Land and Improvements to Generate Superior Returns (co-authored with Mukund Krishnaswami), Wharton Real Estate Review, 2006.

Failure Is an Option: Impediments to Short-Selling and Option Prices (with Rich Evans, Chris Geczy, and Adam Reed), Review of Financial Studies, forthcoming.

Revisiting Return Profiles of Real Estate Investment Vehicles (co-authored with Deborah Chan Moy), Wharton Real Estate Review, 2005. Kristin Madison Assistant Professor of Law Hospital Mergers in an Era of Quality Improvement, Houston Journal of Health Law and Policy, forthcoming 2007. Regulating Health Care Quality in an Information Age, U.C. Davis Law Review, forthcoming 2007. George J. Mailath Walter H. Annenberg Professor in the Social Sciences Professor of Economics School of Arts and Sciences Disappearing Private Reputations in Long-Run Relationships (with Martin W. Cripps and Larry Samuelson), Journal of Economic Theory, 2007. Social Assets (with Andrew Postlewaite), International Economic Review, 2006. Repeated Games and Reputations: Long Run Relationships (with Larry Samuelson), Oxford University Press, 2006. Andrew Metrick Associate Professor of Finance The Wharton School Venture Capital and the Finance of Innovation, John Wiley & Sons, 2007. The Economics of Private Equity Funds (with Ayako Yasuda), Working Paper, 2007. Charles W. Mooney, Jr. Charles A. Heimbold, Jr. Professor of Law The “Consumer Compromise” in Revised UCC Article 9: The Shame “of It All”, Ohio State Law Journal, 2007. Security Interests in Personal Property (with S. Harris), Foundation Press, 2006.

A Portfolio View of Consumer Credit (with Nicholas Souleles), Journal of Monetary Economics, 2006. Gideon Parchomovsky Professor of Law Tradable Patent Rights (with Ian Ayres), Stanford Law Review, forthcoming 2007. Safe Use Harbors (with Kevin Goldman), Virginia Law Review, forthcoming 2007. Of Equal Wrongs and Half Rights (with Peter Siegelman and Steve Thel), NYU Law Review, forthcoming 2007. Mark V. Pauly Bendheim Professor, Department of Health Care Systems, and Professor of Health Care Systems, Insurance and Risk Management, and Public Policy and Management, The Wharton School; Professor of Economics, School of Arts and Sciences; Co-Director, Vagelos Life Sciences and Management Program Measures of Costs and Benefits for Drugs in Cost Effectiveness Analysis, in Pharmaceutical Innovation: Incentives, Competition, and Cost-Benefit Analysis in International Perspective, Cambridge University Press, 2007. The Demand for Health Insurance in the Group Setting: Can You Always Get What You Want? (with B. J. Herring), The Journal of Risk and Insurance, 2007. Is High and Growing Spending on Cancer Treatment and Prevention Harmful to the U.S. Economy?, Journal of Clinical Oncology, 2007. Andrew W. Postlewaite Harry P. Kamen Professor of Economics School of Arts and Sciences Professor of Finance The Wharton School

Reputation and Rhetoric in Elections (with E. Aragones and T. Palfrey), Journal of the European Economic Association, forthcoming. Courts of Law and Unforeseen Contingencies (with L. Anderlini and L. Felli), Journal of Law, Economics and Organization, forthcoming. Social Assets (with G. Mailath), International Economic Review, 2006. Edward B. Rock Saul A. Fox Distinguished Professor of Business Law; Co-Director, Institute for Law and Economics; Associate Dean, University of Pennsylvania Law School Hedge Funds in Corporate Governance and Corporate Control (with Marcel Kahan), University of Pennsylvania Law Review, 2007. Symbiotic Federalism and the Structure of Corporate Law (with Marcel Kahan), Vanderbilt Law Review, 2005. Chris W. Sanchirico Professor of Law Professor of Business and Public Policy The Wharton School Progressivity and Potential Income: Measuring the Effect of Changing Work Patterns on Income Tax Progressivity, Working Paper, 2007. Inequality and Uncertainty: Theory and Legal Applications, University of Pennsylvania Law Review, 2006. Detection Avoidance, NYU Law Review, 2006. Reed Shuldiner Alvin Snowiss Professor of Law Comment on “Does the United States Tax Capital Income,” in Taxing Capital Income, Brookings Institution and Urban Institute, forthcoming 2007. Taxation of Risky Investments, 2005. David A. Skeel, Jr. S. Samuel Arsht Professor of Corporate Law Who Makes the Rules for Hostile Takeovers, and Why? The Peculiar Divergence of US and UK Takeover Regulation (with John Armour), Georgetown Law Journal, forthcoming 2007.

coming 2007. Michael L. Wachter William B. Johnson Professor of Law and Economics; Co-Director, Institute for Law and Economics The Short and Puzzling Life of the “Implicit Minority Discount” in Delaware Appraisal Law (with Lawrence A. Hamermesh), University of Pennsylvania Law Review, forthcoming. Labor Unions: A Corporatist Institution in a Competitive World, University of Pennsylvania Law Review, 2007. Susan M. Wachter Richard B. Worley Professor of Financial Management; Professor of Real Estate and Finance The Wharton School Co-Director, Institute for Urban Research What is a Tree Worth? Green-City Strategies and Housing Prices (with Grace Wong), Real Estate Economics, forthcoming. The Inevitability of Market-Wide Underpriced Risk (with Andrey Pavlov), Real Estate Economics, 2006. Neighborhood Patterns of Subprime Lending: Evidence from Disparate Cities (with Paul Calem and Jonathan E. Hershaff), Housing Policy Debate, 2005. R. Polk Wagner Professor of Law The Federal Circuit and Patentability: An Empirical Assessment of the Law of Obviousness (with L. Petherbridge), Texas Law Review, 2007. “A Teaching, Suggestion, or Motivation to Combine”: Bringing Structure and Clarity to the Obviousness Analysis, University of Pennsylvania Law Review, 2006. Comments on “Stealth Marketing and Editorial Integrity,” Texas Law Review, 2006. Amy Wax Robert Mundheim Professor of Law Group Justice, Social Wrongs and Individual Responsibility, Hoover Institution Monograph Series, forthcoming 2007. Too Few Good Men, Policy Review, 2005/2006. Unique, Like Everyone Else, Policy Review, 2006.

The Promise and Perils of Credit Derivatives (with Frank Partnoy), University of Cincinnati Law Review, forthcoming 2007. Odious Debt or Odious Regimes? (with Patrick Bolton), Journal of Law and Contemporary Problems, forth-

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ASSOCIATE FACULTY

M Left to right, from top: Matthew Adler Franklin Allen Aditi Bagchi Elizabeth Bailey Howard F. Chang Cary Coglianese John Core Patrician M. Danzon Robert W. Holthausen Jason S. Johnston Richard E. Kihlstrom Michael S. Knoll Friedrich K. Kübler Kristin Madison Andrew Metrick Charles W. Mooney, Jr. Andrew W. Postlewaite Chris Sanchirico David A. Skeel, Jr. Polk Wagner Amy Laura Wax

Matthew D. Adler Leon Meltzer Professor of Law Professor Adler is a graduate of Yale College, St. Antony’s College of Oxford University, and the Yale Law School. Prior to teaching at Penn, he worked as a law clerk for Judge Harry Edwards, U.S. Court of Appeals for the D.C. Circuit, and for Justice Sandra Day O’Connor, U.S. Supreme Court, and practiced law at Paul, Weiss, Rifkind, Wharton & Garrison in New York City. At the Penn Law School, Professor Adler teaches administrative law, constitutional law, and regulation. His current research focuses on policy analysis and on risk regulation. Franklin Allen Nippon Life Professor of Finance and Professor of Economics The Wharton School Franklin Allen is the Nippon Life Professor of Finance and Professor of Economics at the Wharton School of the University of Pennsylvania. He has been on the faculty since 1980. He is currently Co-Director of the Wharton Financial Institutions Center and President of the Financial Intermediation Research Society. He was formerly Vice Dean and Director of Wharton Doctoral Programs and Executive Editor of the Review of Financial Studies, one of the leading academic finance journals. He is a past President of the American Finance Association, the Western Finance Association and the Society of Financial Studies. He received his doctorate from Oxford University. Dr. Allen’s main areas of interest are corporate finance, asset pricing, financial innovation and comparative financial systems. He is a co-author with Richard Brealey and Stewart Myers of the eighth edition of the textbook Principles of Corporate Finance. Aditi Bagchi Assistant Professor of Law Professor Bagchi received a J.D. from Yale Law School in 2003 and a M.Sc. in economic and social history from Oxford University in 2000. She clerked for United States Court of Appeals Judge Julio Fuentes and practiced law with Cravath, Swaine & Moore LLP in New York. She joined the Penn Law faculty in 2006 and currently teaches contracts and labor law. Her areas of research interest include normative theories of private law and comparative political economy.

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Elizabeth Bailey John C. Hower Professor of Business and Public Policy The Wharton School Professor Bailey received her Ph.D. in economics from Princeton University in 1972. From 1983 until 1990, Professor Bailey served as dean of the Graduate School of Industrial Administration at Carnegie Mellon University. She joined the Wharton faculty in 1991 where she served as Chair, Department of Business and Public Policy from 1997 to 2005. She served as head of the Economics Research Department and member of the Technical Staff at Bell Laboratories between 1960 and 1977 and was commissioner and vice-chairman of the Civil Aeroneutics Board from 1977 until 1983. She has served on the boards of many organizations, including the Brookings Institution and Bancroft Neurohealth, and she currently serves on the boards of Altria Group, Inc., CSX, TIAA/CREF, and the National Bureau of Economic Research. Her research interests concern public policies that affect business, particularly those involving regulation, deregulation, and corporate governance. Howard F. Chang Earle Hepburn Professor of Law Professor Chang received a Ph.D. in economics from the Massachusetts Institute of Technology in 1992, a J.D. from Harvard Law School in 1987, a Master in Public Affairs from Princeton University in 1985, and an A.B. from Harvard College in 1982. Prior to joining the Penn faculty in 1999, he was a Professor of Law at the University of Southern California Law School, where he began teaching in 1992. He was a Visiting Professor of Law at Stanford Law School in 1998, at Harvard Law School and at the New York University School of Law in 2001, at the University of Michigan Law School in 2002, and at the University of Chicago Law School in 2007, and a Visiting Associate Professor of Law at the Georgetown University Law Center from 1996 to 1997. He served as a law clerk for the Honorable Ruth Bader Ginsburg on the U.S. Court of Appeals for the D.C. Circuit from 1988 to1989. He served on the Board of Directors of the American Law and Economics Association from 2004 to 2007. He has written on a wide variety of subjects including environmental protection, international trade, immigration, intellectual property, and the economics of litigation and settlement.

Cary Coglianese Edward B. Shils Professor of Law and Professor of Political Science Cary Coglianese is the Edward B. Shils Professor of Law and Professor of Political Science at the University of Pennsylvania Law School. He is also the director of the Penn Program on Regulation and a senior research fellow at Harvard University’s John F. Kennedy School of Government. His work has appeared in journals such as the Duke Law Journal, Law & Society Review, and Stanford Law Review. Coglianese is the founder and co-chair of the Law & Society Association’s international collaborative research network on regulatory governance, a vice chair of the E-Rulemaking Committee of the American Bar Association’s section on Administrative Law and Regulatory Practice, and a Vice Chair of the Innovation, Management Systems, and Trading Committee of the American Bar Association’s section on Environment, Energy, and Resources. He is also co-editor of the peer-reviewed journal Regulation & Governance. Coglianese received his J.D., M.P.P., and Ph.D. in political science from the University of Michigan, and for twelve years served on the faculty of the John F. Kennedy School of Government at Harvard University. He has also been a visiting professor of law at Stanford University and Vanderbilt University and an affiliated scholar at the Harvard Law School. John E. Core Associate Professor of Accounting The Wharton School John Core joined the Wharton School in 1996. He has a B.A. from Yale University and a Ph.D. from The Wharton School. He has worked as an investment banker for PaineWebber, as a compensation consultant for Ernst & Young, and as an assistant professor at MIT Sloan School of Management. He is an editor of The Accounting Review and an associate editor of the Journal of Accounting and Economics, and he serves on the editorial boards of the Journal of Accounting Research and the Journal of Management Accounting Research. His primary research interest is executive compensation and executive stock and option incentives, and he has also published work in the areas of corporate governance, equity valuation, and corporate disclosure.

Faculty appointments are in the University of Pennsylvania Law School unless otherwise noted.

Patricia M. Danzon Chair, Health Care Systems Department, Celia Z. Moh Professor of Health Care Systems, Insurance and Risk Management The Wharton School Professor Danzon received her Ph.D. in economics from the University of Chicago in 1973 and joined the Penn faculty from Duke University in 1985. She is a member of the Institute of Medicine and the National Academy of Social Insurance, and she has served as a consultant to many private and public institutions in the U.S. and worldwide. Professor Danzon’s research interests are in health care, pharmaceuticals, insurance, law and economics. She has published widely in scholarly journals on a broad range of subjects related to medical care, pharmaceuticals, insurance, and the economics of law. Gerald R. Faulhaber Professor of Business and Public Policy and Management The Wharton School Professor of Law Professor Faulhaber has published extensively on telecommunications and Internet economics and policy, focusing particularly on the interaction of business and public policy. His most recent work has focused on network neutrality, public safety communications, and file sharing and intellectual property. He spent a year on scholarly leave at Penn Law, after which he was granted a secondary appointment at the Law School. He served as Chief Economist at the Federal Communications Commission for the year ending June 30, 2001. At the FCC he worked on telecommunications and Internet issues, including the AOL-Time Warner merger. He has served on numerous scholarly boards and review committees and was VicePresident of the Board of Directors of the Telecommunications Policy Research Conference in Washington, D.C. Professor Faulhaber was the founding director of Wharton’s Fishman-Davidson Center for the Study of the Service Sector, from 1984 to 1989. Prior to his academic career, Professor Faulhaber was Director of Strategic Planning and Financial Management at AT&T, after holding the position of Head, Economics Research at Bell Laboratories. As a Visiting Scholar at INSEAD, Fountainebleau, France, and at

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the Institut d’Analisi Economica in Barcelona, Spain, Professor Faulhaber engaged in political economy research. He held an appointment at Tsinghua University School of Economics and Management, Beijing, China, as a Visiting Professor, where he lectured on technology management. His current research is in the area of public policy and broadband infrastructure for the Internet, and the use of markets and property rights for the allocation of the electromagnetic spectrum. Michael A. Fitts Dean of the Law School and Bernard G. Segal Professor of Law Michael A. Fitts was named Dean of the Law School in March 2000. Before joining the Penn Law faculty in 1985, Dean Fitts served as clerk to the Honorable A. Leon Higginbotham, Jr., U.S. Court of Appeals for the Third Circuit, and as attorney advisor in the Office of Legal Counsel in the U.S. Department of Justice. At Penn he was appointed Associate Professor of Law in 1990, Professor of Law in 1992 and Robert G. Fuller, Jr. Professor of Law in 1996. From 1996 to 1998 he served as Associate Dean for Academic Affairs at the Law School and was active in establishing a variety of joint programs with other schools within the University. In 1999 he served as Visiting Professor in Political Science at Swarthmore College. Dean Fitts’s current research focuses on the effect of various structural changes (e.g., stronger political parties, presidents or centralized legal institutions) on government budgeting and legislation. He has authored numerous law review and political science articles in this area, several co-authored with political scientists. Lawrence A. Hamermesh Ruby R. Vale Professor of Corporate and Business Law Widener University School of Law Professor Hamermesh received a B.A. from Haverford College in 1973, and a J.D. from Yale Law School in 1976. Professor Hamermesh practiced law with Morris, Nichols, Arsht & Tunnell, Wilmington, Delaware, as an associate from 1976–84, and as a partner from 1985–94. Professor Hamermesh joined the faculty at Widener in 1994, and teaches and writes in the areas of corporate finance, mergers and acquisitions, securities regulation, business organizations, and professional

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responsibility. Since 1995, Professor Hamermesh has been a member of the Council of the Corporation Law Section of the Delaware State Bar Association, which is responsible for the annual review and modernization of the Delaware General Corporation Law, and served as Chair of the Council from 2002 to 2004. In 2002 and 2003 he also served as the Reporter for the American Bar Association’s Task Force on Corporate Responsibility. He served from 2001 to 2007 as a member of the Committee on Corporate Laws of the American Bar Association Section of Business Law, which supervises the drafting of the Model Business Corporation Act. In 2007 Professor Hamermesh was appointed as Chair of the Corporate Practice Committee of the Section of Business Law. In 1999 Professor Hamermesh was elected as a member of the American Law Institute. Professor Hamermesh is also a member of the Board of Directors of ACLU Delaware, Inc., and represents that organization on the National Board of the ACLU.

Outside the university, he is cochair of the US Shadow Financial Regulatory Committee. He is a member of the Financial Economist’s Roundtable, the Advisory Board of the European Banking Report in Rome and the Institute for Financial Studies in Frankfurt. He served as co-chair of the Multinational Banking seminar from 1992–2004 and was a Fellow of the World Economic Forum in Davos from 1992–95. He was a member of the recent Group of 30 task force on the reinsurance industry and as well as an earlier study group on international supervision and regulation. Currently, he is an independent director of the DWS Scudder mutual fund complex and has served on the predecessor Deutsche Asset Management and Bankers Trust boards since 1990. Herring received his undergraduate degree from Oberlin College in 1968 and his PhD from Princeton University in 1973. He has been a member of the Finance Department since 1972. He is married, with two children, and lives in Bryn Mawr, Pennsylvania.

Richard J. Herring Jacob Safra Professor of International Banking, Professor of Finance The Wharton School Co-Director, Wharton Financial Institutions Center Richard J. Herring is Jacob Safra Professor of International Banking and Professor of Finance at The Wharton School, University of Pennsylvania where he is also founding director of The Wharton Financial Institutions Center, one of Wharton’s largest research centers. From 2000 to 2006, he served as the Director of the Lauder Institute of International Management Studies and, from 1995 to 2000, he served as Vice Dean and Director of Wharton’s Undergraduate Division. During 2006, he was a Professorial Fellow at the Reserve Bank of New Zealand and Victoria University. He is the author of more than 90 articles, monographs and books on various topics in financial regulation, international banking and international finance. At various times his research has been funded by grants from the National Science Foundation, the Ford Foundation, the Brookings Institution, the Sloan Foundation and the Council on Foreign Relations.

Robert W. Holthausen The Nomura Securities Company Professor, Professor of Accounting and Finance and Management, and Chairman, Accounting Department The Wharton School Professor Holthausen earned his doctorate and his M.B.A. at the University of Rochester. Prior to his academic career, he was a C.P.A. He worked at Price Waterhouse and was also a financial analyst with Mobil. He was on the accounting and finance faculty at the Graduate School of Business of the University of Chicago for ten years, joining the Penn faculty in 1989. During the 2001–2002 academic year, he was a visiting professor at Harvard Business School. Since 1998 he has served as the academic director of Wharton’s Mergers and Acquisitions program. Professor Holthausen’s research interests include the effects of management compensation and governance structures on firm performance, the effects of information on volume and prices, corporate restructuring and valuation, the effects of large block sales on common stock prices, and numerous other topics. He is widely published in both finance and accounting journals and is currently an editor of the Journal of Accounting and Economics.

Robert P. Inman Richard King Mellon Professor; Professor of Finance, Economics, Business and Public Policy, Real Estate The Wharton School Professor Inman received his Ph.D. in economics from Harvard University and joined the Penn faculty in 1972. He is a senior fellow of Wharton’s Leonard Davis Institute of Health Economics. He is also a research associate of the National Bureau of Economic Research. He has served as a consultant to the city of Philadelphia, the state of Pennsylvania, CitiGroup, Chemical Bank, the U.S. Department of the Treasury, the Financial and Fiscal Commission of the Republic of South Africa, the National Bank of Sri Lanka, the National Academy of Sciences, and numerous U.S. federal government agencies. His research is currently focused on fiscal federalism, the urban fiscal crisis, and the political and legal institutions of fiscal policymaking. Professor Inman held the Florence Chair in Economics at the European University Institute, Florence, Italy, for the spring quarter of 2000. He will be a Visiting Scholar at the Rockefeller Foundation’s Bellagio Study Center for the fall 2007 semester. Jason Scott Johnston Robert G. Fuller Jr. Professor of Law and Director, Program on Law, the Environment and the Economy After graduating summa cum laude from Dartmouth College, Professor Johnston obtained both his J.D. and Ph.D. in economics from the University of Michigan, where he was an Alcoa Fellow in Law and Economics and was elected to Order of the Coif. He served as law clerk for United States Court of Appeals Judge Gilbert Merritt, was a civil liability fellow at Yale Law School, and in 1995 came to the University of Pennsylvania Law School from Vanderbilt University Law School. Johnston is the founding Director of the Program on Law and the Environment at Penn Law School, and in 2001 became the Robert G. Fuller Jr. Professor of Public Law. Professor Johnston’s research includes both theoretical and empirical projects exploring various aspects of natural resource and environmental law and policy, as well as more general studies of legal rights and entitlements. He is currently in the midst of book-length projects on the law and economics of

corporate environmentalism and the centralization of environmental and natural resource regulation, and is organizing a first-of-its kind interdisciplinary conference on the law, economics and science of liability for global warming. Johnston has published dozens of articles, both in various major American law journals such as the Yale Law Journal, Virginia Law Review and Columbia Law Review, as well as in peer-reviewed economics journals such as the Journal of Law, Economics and Organization, and the Journal of Legal Studies. He has served as a Regent for the Policy Academy of the Multistate Working Group on Environmental Management Systems, on the Board of Directors of the American Law and Economics Association and on the National Science Foundation’s Law and Social Science grant review panel. He was an Olin Visiting Fellow at the University of Southern California Law Center and Visiting Professor at the University of Virginia School of Law. In Fall 2007, he will be in residence as the Bosch Public Policy Fellow at the American Academy of Berlin. Leo Katz Frank Carano Professor of Law Professor Katz graduated from the University of Chicago College and Law School. He then clerked for the Honorable Anthony M. Kennedy, at that time on the U.S. Court of Appeals for the Ninth Circuit, and he practiced corporate law for several years with Mayer, Brown and Platt in Chicago. He began teaching at the University of Michigan in 1987 and joined the Penn faculty in 1991. Professor Katz teaches and writes about both criminal and corporate law. He is the author of Bad Acts and Guilty Minds: Conundrums of the Criminal Law and Ill-Gotten Gains: Evasion, Blackmail, Fraud and Kindred Puzzles of the Law, and editor (with Michael Moore and Stephen Morse) of Foundations of the Criminal Law. He is currently working on another book, Why the Law Is So Perverse. Richard E. Kihlstrom Ervin Miller-Arthur M. Freedman Professor of Finance and Economics Chairman, Finance Department The Wharton School Richard Kihlstrom holds a doctorate from the University of Minnesota. He has been a member of the Wharton faculty since 1979, was named to the Miller-Freedman professorship in 1986, and previously served as Chair of the

Finance Department from 1988 to 1994. Before coming to Penn, he taught at Northwestern University, the University of Illinois, the State University of New York at Stony Brook, and the University of Massachusetts. He is a Fellow of the Econometric Society. His areas of research interest include information and uncertainty in economics, financial market equilibrium, and corporate finance Michael S. Knoll Theodore K. Warner Professor of Law Professor of Real Estate The Wharton School Professor Knoll joined the Penn Law and Wharton faculties from the University of Southern California Law School in 2000. He teaches courses in corporate finance and taxation in the Law School, the Wharton School, and the Wharton Executive Program. He is also an affiliate of the Zell/Lurie Real Estate Center at the Wharton School, and the editor of Forensic Economic Abstracts, an electronic journal published by the Social Science Research Network. Professor Knoll’s undergraduate and J.D. degrees are from the University of Chicago. He also earned a Ph.D. in Economics at the University of Chicago. In 1990 he joined the USC Law faculty as an Assistant Professor, and in 1995 he was promoted to full Professor. He has been a Visiting Professor of Law at Georgetown (1999), Penn (1998–99), and Virginia (2000). Professor Knoll was also a John M. Olin Senior Research Scholar at Columbia University School of Law (1996–97), a Visiting Scholar at New York University Law School (1996–97), and a John M. Olin Distinguished Visiting Professor of Law at Toronto University. He clerked for the Honorable Alex Kozinski on the U.S. Court of Appeals, Ninth Circuit, from January to August 1986, when he was appointed legal advisor to the Vice Chairman of the U.S. International Trade Commission. He has published extensively in the fields of corporate finance, taxation, economics, and real estate finance.

Friedrich K. Kübler Professor and Director of the Banking Law Institute Emeritus, University of Frankfurt, Germany; Professor of Law After earning a Dr. iur. from the University of Tübingen in 1961, Professor Kübler held appointments as teaching assistant in Tübingen and Paris; Professor of Law, University of Giessen (1966–70); Visiting Lecturer, Harvard Law School (1968–69); Professor of Law and Dean of the Graduate School of Social Sciences, University of Konstanz (1971–76); and Professor of Law, University of Frankfurt (1976–98). He first came to Penn in 1975 and again in 1983 as a Visiting Professor of Law, and in 1985 he joined the faculty as Professor of Law. He has served on the board of the Deutscher Juristentag and is a member of the American Law Institute. He was one of the six commissioners regulating concentration in the German television industry and is a member of the European Shadow Financial Regulatory Committee as well as of the Frankfurt Academy of Arts and Sciences. Professor Kübler’s teaching interests are the European Union, corporations, international finance, and mass communication. His current (comparative) research interests are in the areas of corporate governance and finance, the supervision of transnational financial markets, and broadcast regulation. Peter D. Linneman Albert Sussman Professor of Real Estate, Finance, and Public Policy The Wharton School Dr. Linneman, a member of the Wharton faculty since 1979, also serves as a strategic advisor to the Lubert-Adler Realty Funds. He also currently serves as a Director of one New York Stock Exchange firm and several privately held firms. Dr. Linneman was the Chairman of the Board of Rockefeller Center Properties, Inc. He was Senior Managing Director of Equity International Properties and a Managing Director and Vice Chairman of the Investment Committee of Amerimar Realty. He is an Urban Land Institute Research Fellow and a member of numerous professional organizations. Since 1987, Dr. Linneman has been Albert Sussman Professor of Real Estate, Finance and Public Policy at Wharton; he also served as the Director of the Wharton Real Estate Center for 13 years and was the found-

ing Chairman of the Real Estate Department. He is one of the founding co-editors of The Wharton Real Estate Review. Dr. Linneman received both his master’s degree and doctorate in economics from the University of Chicago, and he is a graduate of Ashland University. Kristin Madison Assistant Professor of Law Professor Madison received a J.D. from Yale Law School in 2000 and a Ph.D. in economics from Stanford University in 2001. She joined the Penn Law faculty in 2001 and currently teaches contracts and health care law. Her main areas of research interest are health economics and the regulation of the health care industry. Professor Madison is currently studying the diffusion of new forms of health care regulation, particularly health care quality reporting requirements. George J. Mailath Walter H. Annenberg Professor in the Social Sciences Professor of Economics School of Arts and Sciences Professor Mailath received his Ph.D. in economics from Princeton University in 1985. He is currently an associate editor of Econometrica, serves on the editorial board of Games and Economic Behavior, and is on the executive board of Theoretical Economics. His research interests include the organization of the firm, noncooperative game theory, evolutionary game theory, social norms, and the foundations of reputations, law, and authority. Andrew Metrick Associate Professor of Finance, The Wharton School Andrew Metrick is an associate professor of finance at the Wharton School of the University of Pennsylvania and a faculty research fellow at the National Bureau of Economic Research. He joined Wharton in 1999 after spending five years on the faculty of the Harvard economics department. He is the author of Venture Capital & the Finance of Innovation (Wiley, 2006), and he teaches a course of the same name to MBAs and undergraduates. He has been recognized with several teaching awards and been named by BusinessWeek as one of the best teachers at Wharton.

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Professor Metrick’s current research interests are in corporate governance, venture capital, and technological innovation. He has published papers in many top academic journals in economics and finance, and his research has been supported by grants from the National Science Foundation and the National Institutes of Health. He currently serves as an associate editor of The Journal of Finance. Professor Metrick received a B.A. in Economics and Mathematics from Yale in 1989 and a Ph.D. in Economics from Harvard in 1994. Charles W. Mooney, Jr. Charles A. Heimbold, Jr. Professor of Law Professor Mooney received his J.D. from Harvard Law School in 1972. He practiced law with the Oklahoma firm of Crowe and Dunlevy and as a partner of the New York firm of Shearman & Sterling. Professor Mooney joined the Penn faculty in 1986, and during 1999 and 2000 he served as Interim Dean of the Law School. From 1998 to 2000 he served as Associate Dean for Academic Affairs. He is an active member of the American Law Institute and the American Bar Association. He served as a member of a Uniform Commercial Code Permanent Editorial Board Article 2 (Sales) Study Committee and also served as a reporter for that Board’s Article 9 (Secured Transactions) Study Committee and as a reporter for the Revised Article 9 drafting committee. He served as a member of the U.S. Security and Exchange Commission’s Advisory Committee on Market Transactions. Mooney was awarded the Distinguished Service Award, presented by the American College of Commercial Finance Lawyers. He also served as U.S. Delegate and Position Coordinator (appointed by U.S. Department of State) at the Diplomatic Conference for the Cape Town Convention on International Interests in Mobile Equipment and the Protocol on Matters Specific to Aircraft Equipment, in Cape Town, South Africa. He currently serves as a U.S. Delegate for the UNIDROIT draft convention on intermediated securities. His current research centers around the intermediated securities, security interests in bankruptcy, and bankruptcy theory.

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Robert H. Mundheim University Professor of Law and Finance Emeritus, University of Pennsylvania; Of Counsel, Shearman & Sterling; formerly Senior Executive Vice President and General Counsel of Salomon Smith Barney Holdings, Inc. Professor Mundheim received his LL.B. from Harvard Law School in 1957. He joined the New York firm of Shearman & Sterling, of which he is now Of Counsel, and then served as special counsel to the U.S. Securities and Exchange Commission before joining the Penn faculty in 1965. Professor Mundheim served as Dean of the Law School from 1982 to 1989. He has been a visiting professor at Harvard Law School, UCLA Law School, the James E. Rogers College of Law at The University of Arizona, and the University of Konstanz in Germany. Between 1977 and 1980, he served as general counsel to the U.S. Department of the Treasury. He also has served as chairman of the U.S. Tax Court Nominating Commission, a director of the Securities Investor Protection Corporation and general counsel to the Chrysler Loan Guarantee Board. He was co-chairman of the New York firm Fried, Frank, Harris, Shriver and Jacobson from 1989 to 1992. In 1992, he joined Salomon Inc. as its General Counsel and as a Managing Director and member of the Executive Committee of Salomon Brothers. Professor Mundheim is the organizer and presiding officer emeritus of the International Faculty for Corporate and Capital Market Law, a former Trustee and President of the American Academy in Berlin, a Trustee of the New School University, a director of the Appleseed Foundation, and a member of the Council of the American Law Institute and Chairman of its Governance Committee. He also serves on the American Bar Association’s Standing Committee on Ethics and Professional Responsibility. He is chairman of the Quadra Realty Trust Board of Directors and a director of eCollege, Inc. and of Arnhold & S. Bleichroeder Holdings, Inc. He is also the Chairman of the Legal Advisory Board of NASDAQ. Mr. Mundheim has served as a Consultant to the American Law Institute’s Principles of Corporate Governance: Analysis |and Recommendations (1978–1994), as a member of the American Bar Association President’s Task Force on Corporate Responsibility (2002–2003), and as a member of the Association of

the Bar of the City of New York’s Presidential Task Force on Lawyers’ Role in Corporate Governance. He has written in the areas of corporate governance, securities regulation, corporations, and professional responsibility. David K. Musto Associate Professor of Finance David K. Musto is Associate Professor of Finance at the Wharton School, where he has been on the faculty since 1995. He has a B.A. from Yale University and a Ph.D. from the University of Chicago, and between college and graduate school he worked for Roll and Ross Asset Management in Los Angeles. He is an editor of the Journal of Financial Services Research. Most of his work, both theoretical and empirical, is in the area of consumer financial services, mutual funds and consumer credit in particular. He has also published work on corporate and political voting, option pricing, short selling and cross-border taxation. Gideon Parchomovsky Professor of Law Professor Parchomovsky received his LL.B. from the Hebrew University of Jerusalem in 1993, his LL.M. from the University of California at Berkeley in 1995, and his S.J.D. from Yale Law School in 1998. Prior to joining the Penn Law faculty in fall 2002, Professor Parchomovsky served as an Associate Professor at Fordham Law School and a Visiting Lecturer at Yale Law School. His research interests include intellectual property law and property theory. His recent work focuses on unlocking synergies among sub-fields of intellectual property and devising innovative mechanisms for protecting property entitlements. Mark V. Pauly Bendheim Professor, Department of Health Care Systems, and Professor of Health Care Systems, Insurance and Risk Management, and Public Policy and Management, The Wharton School; Professor of Economics, School of Arts and Sciences; Co-Director, Vagelos Life Sciences and Management Program Dr. Pauly is a former commissioner on the Physician Payment Review Commission and an active member of the Institute of Medicine. He has made significant contributions to

the fields of medical economics and health insurance. His classic study on the economics of moral hazard was the first to point out how health insurance coverage may affect patients’ use of medical services. Subsequent work, both theoretical and empirical, has explored the impact of conventional insurance coverage on preventive care, on outpatient care, and on prescription drug use in managed care. In addition, he has explored the influences that determine whether insurance coverage is available and, through several cost effectiveness studies, the influence of use on health outcomes and cost. His interests in health policy deal with ways to reduce the number of uninsured through tax credits for public and private insurance, and appropriate design for Medicare in a budget-constrained environment. Dr. Pauly is a co-editor-in-chief of the International Journal of Health Care Finance and Economics and an associate editor of the Journal of Risk and Uncertainty. He has served on Institute of Medicine panels on public accountability for health insurers under Medicare and on improving the financing of vaccines. Dr. Pauly is a former member of the advisory committee to the Agency for Health Care Research and Quality, and most recently a member of the Medicare Technical Advisory Panel. Andrew W. Postlewaite Harry P. Kamen Professor of Economics School of Arts and Sciences Professor of Finance The Wharton School Professor Postlewaite received his Ph.D. from Northwestern University in 1974 and joined the Penn faculty from the University of Illinois in 1980. He is editor of American Economic Journal: Microeconomics, past editor of the International Economic Review and past co-editor of Econometrica. He serves on the Board of Directors of the National Bureau of Economic Research, the Executive Committee of the Game Theory Society and on the Executive Committee of the American Economic Association. He has published widely in the areas of strategic behavior and industrial organization.

Edward B. Rock Saul A. Fox Distinguished Professor of Business Law; Co-Director, Institute for Law and Economics; Associate Dean, University of Pennsylvania Law School Professor Rock received his J.D. from the University of Pennsylvania in 1983. He joined the Penn faculty in 1989 from the Philadelphia law firm of Fine, Kaplan and Black, where he specialized in antitrust, corporate and securities litigation. He has written widely in corporate law, on topics including: hedge funds; the role of institutional investors in corporate governance; close corporations; the role of norms in corporate law; the overlap between corporate law and antitrust; the overlap between corporate law and labor law; comparative corporate law; and the regulation of mutual funds. In 1994, Professor Rock was a Visiting Professor of International Banking and Capital Markets at the Institut für Arbeits-, Wirtschafts- und Zivil Recht, Johann Wolfgang Goethe - Universität, Frankfurt am Main, Germany. During the 1995–96 academic year, he was a Fulbright Senior Scholar and Visiting Professor of Law at the Law Faculty of the Hebrew University of Jerusalem, Israel. In 2001, he was appointed the first Saul A. Fox Distinguished Professor of Business Law. During 2005–06, he was again a Visiting Professor of Law, and Lady Davis Fellow, at Hebrew University. Professor Rock’s current research focuses on mergers and acquisitions, hedge funds, and corporate voting. Chris W. Sanchirico Professor of Law Professor of Business and Public Policy The Wharton School Professor Sanchirico received his A.B. from Princeton and both his law degree and his Ph.D. in economics from Yale. Before joining the Penn Law and Wharton faculties in 2003, he was a law professor at the University of Virginia and an economics professor at Columbia. Professor Sanchirico has written widely on tax policy, distributive justice, the information problems of legal enforcement, the rules governing trial evidence and pretrial discovery, and the evolution and stability of social norms. Professor Sanchirico has published extensively in top law reviews as well as the premier peerreviewed journals in both law and economics and economic theory.

Reed Shuldiner Alvin L. Snowiss Professor of Law Professor Shuldiner is a recognized expert in the taxation of financial instruments and transactions. His area of research is taxation and tax policy. His current research includes the taxation of risk under income, wealth and consumption taxes and the viability and effects of a federal wealth tax (with David Shakow). Professor Shuldiner served as Associate Dean at Penn Law from 2000–02. During Spring 2005, Professor Shuldiner was the William K. Jacobs, Jr. Visiting Professor of Law at Harvard Law School. He was a Visiting Assistant Professor at Yale Law School during 1994–95. Before joining the Penn law faculty in 1990, he served in the Office of Tax Legislative Counsel of the U.S. Department of the Treasury, was counsel to the law firm of Cadwalader, Wickersham and Taft, and was an associate with the Washington, D.C., law firm of Wilmer, Cutler and Pickering. Professor Shuldiner received his J.D. from Harvard University in 1983 and his Ph.D. in economics from the Massachusetts Institute of Technology in 1985. David A. Skeel, Jr. S. Samuel Arsht Professor of Corporate Law Professor Skeel joined the Penn faculty in 1999. He graduated in 1987 from the University of Virginia School of Law, where he was editor of the Virginia Law Review and a member of the Order of the Coif. He clerked for the Honorable Walter K. Stapleton on the U.S. Court of Appeals for the Third Circuit, and practiced for several years at Duane, Morris & Heckscher in Philadelphia, before joining the Temple University School of Law in 1990. Professor Skeel has also held visiting appointments at the University of Wisconsin Law School (1993–94), the University of Virginia School of Law (spring 1994), Georgetown University Law Center (fall 2004), and the University of Pennsylvania Law School (fall 1997). Professor Skeel specializes in corporate and commercial law and has written widely on corporate law, bankruptcy and sovereign debt. He has also has written on law and religion, and poetry and law.

Michael L. Wachter William B. Johnson Professor of Law and Economics; Co-Director, Institute for Law and Economics Professor Wachter received his Ph.D. in economics from Harvard University and joined the Penn faculty in 1970. He has held full professorships in three of Penn’s schools: the School of Arts and Sciences, where he has been professor of economics since 1976; the Wharton School, where he was professor of management, 1980–92; and the Law School, where he became professor of law and economics in 1984. He has been senior advisor to the Brookings Panel on Economic Activity in addition to consulting for the Federal Reserve’s Board of Governors and the Council of Economic Advisors. He has also served as a member of the National Council on Employment Policy and as a commissioner on the Minimum Wage Study Commission. Professor Wachter served as Deputy Provost of the University of Pennsylvania from July 1995 to January 1998, and as Interim Provost from January to December 1998. He is the author of numerous articles in law and economics as well as in corporation law and labor law and economics. Susan M. Wachter Richard B. Worley Professor of Financial Management; Professor of Real Estate and Finance The Wharton School Co-Director, Institute for Urban Research From 1998 to 2001, as Assistant Secretary for Policy Development and Research, U.S. Department of Housing and Urban Development, Dr. Wachter served as the senior urban policy official and principal advisor to the Secretary on overall HUD policies and programs. At Wharton, Dr. Wachter was Chairperson of the Real Estate Department and Professor of Real Estate and Finance from July 1997 until her 1998 appointment to HUD. She founded and currently serves as Director of Wharton’s Geographical Information Systems Lab. Dr. Wachter served as a member of the Board of Directors of the Beneficial Corporation from 1985 to 1998 and of the MIG Residential REIT from 1994 to 1998. She was the editor of Real Estate Economics from 1997 to 1999 and serves on the editorial boards for several real estate journals. Dr. Wachter has been a member of the Advanced Studies Institute of the Homer Hoyt

Institute since 1989. She is author of more than 100 scholarly publications and is the recipient of several awards for teaching excellence at the Wharton School. R. Polk Wagner Professor of Law Professor Wagner focuses his research and teaching in intellectual property law and policy, with a special interest in patent law. He is the author of more than seventeen articles on topics ranging from an empirical analysis of judicial decision-making in the patent law to the First Amendment status of software programs. His work has appeared in the Stanford Law Review, the Columbia Law Review, and the University of Pennsylvania Law Review, among several others. He is a frequent national and international lecturer on intellectual property topics, presenting his research at both academic institutions (such as Harvard, Stanford, Columbia, University of Michigan, University of Virginia, University of California at Berkeley) and prominent industry groups (such as the Intellectual Property Owner’s Organization, the American Intellectual Property Law Association, and the Association of Corporate Patent Counsel). Prior to joining the Penn faculty in 2000, Wagner served as a clerk to Judge Raymond C. Clevenger III of the United States Court of Appeals for the Federal Circuit. He holds a law degree from Stanford, an engineering degree from the University of Michigan, and was the 1994–95 Roger M. Jones Fellow at the London School of Economics. Amy Wax Robert Mundheim Professor of Law A graduate of Yale College and Harvard Medical School, Professor Wax trained as a neurologist at New York Hospital before completing a law degree at Columbia Law School in 1987. She served as a clerk to the Honorable Abner J. Mikva of the U.S. Court of Appeals for the D.C. Circuit and worked for six years at the Office of the Solicitor General at the U.S. Department of Justice, where she argued 15 cases before the U.S. Supreme Court. She taught from 1994 to 2001 at the University of Virginia Law School. Her areas of teaching and research included civil procedure, remedies, labor and employment law, poverty law and welfare policy, the law and economics of work and family, and social science and the law. Professor Wax joined the Penn Law Faculty in fall 2001.

39


ILE INVESTORS 2006–2007

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Benefactors $25,000 or above

Sponsors $10,000 to $24,999

Members $5,000 to $9,999

Donors Up to $4,999

40

Robert L. Friedman Paul S. Levy Skadden, Arps, Slate, Meagher & Flom LLP Wachtell, Lipton, Rosen & Katz

Air Products and Chemicals, Inc. Avaya Communications The Biondi Foundation Blank Rome LLP Cephalon, Inc. Isaac D. Corré Richard D’Avino Dechert LLP Delaware Department of State Deloitte Dewey Ballantine LLP DuPont Saul A. Fox Research Endowment Joel E. Friedlander Goldman, Sachs & Co. Perry Golkin Paul G. Haaga, Jr. Leon C. Holt, Jr. Hughes Hubbard & Reed LLP Innisfree M&A Incorporated

Jones Day Roy J. Katzovicz Merck & Co., Inc. Millennium Management Foundation MLR Holdings LLC Morgan, Lewis & Bockius LLP Morris, Nichols, Arsht & Tunnell LLP Pepper Hamilton LLP Potter Anderson & Corroon LLP Rohm and Haas Company Rothschild North America Schulte Roth & Zabel LLP Simpson Thacher & Bartlett LLP A. Gilchrist Sparks III Sullivan & Cromwell LLP SunGard Data Systems Inc. UBS Investment Bank Weil, Gotshal & Manges LLP Young Conaway Stargatt & Taylor, LLP

James H. Agger Buchanan Ingersoll & Rooney PC Harkins Cunningham LLP

Lockheed Martin Unisys Corporation Kenneth W. Willman

Luc M. Dowling Mary J. Grendell James A. Ounsworth

Myron J. Resnick John F. Schmutz

Design: Dyad Communications, Inc. Photography: Gregory Benson (events); John Carlano, Maureen Helwig, Tommy Leonardi (faculty portraits).

F

unding for the Institute for Law and Economics comes from a diverse group of individuals, law firms, corporations, and foundations who endorse our work each year. We are pleased and privileged to recognize and thank the ILE Investors whose generous contributions underwrite the activities described in this report. We deeply appreciate their support and their active participation in Institute programs.


Institute for Law and Economics University of Pennsylvania 3400 Chestnut Street Philadelphia, PA 19104-6204 215.898.7719 www.law.upenn.edu/ile/ Michael L. Wachter, Co-Director William B. Johnson Professor of Law and Economics 215.898.7852 mwachter@law.upenn.edu Edward B. Rock, Co-Director Saul A. Fox Distinguished Professor of Business Law 215.898.8631 erock@law.upenn.edu Vicki L. Hewitt, Program Director 215.898.7719 215.573.2025 fax vhewitt@law.upenn.edu september 2007


ILE Annual Report 2006-2007