As my students in Constitutional Law are well aware, my Con Law professor in law school was Archibald Cox. If you doubt me, you can look it up on his Wikipedia entry, where someone saw fit to memorialize that fact. No one ever bothered to ask me what grade I received. At this time of the year, when many of my students are coming by my office to discuss their final grade, it may be comforting for some to learn that Professor Cox gave me a “B.” I still think that he undervalued my class participation.
The Supreme Court ruled yesterday in Caperton v. A.T. Massey Coal Company that the Due Process Clause of the United States Constitution is violated by the refusal of a judge to recuse herself when the disproportionate campaign contributions of a litigant on behalf of that judge create a serious, objective risk of actual bias. Rick Esenberg has posted on some of the issues raised by the majority opinion here. For me, the most interesting part of the case was actually the dissent by Justice John Roberts. In it, Justice Roberts objects to the uncertainty that federal judges will encounter as they attempt to apply this constitutional right in future cases with disparate fact patterns. In a bit of theatricality worthy of Gilbert & Sullivan, the Chief Justice’s dissent presents a list of 40 questions that the majority opinion leaves unanswered.
The Chief Justice makes a rather stark assertion: “The Court’s inability to formulate a ‘judicially discernible and manageable standard’ strongly counsels against the recognition of a novel constitutional right.” He cites to Veith v. Jubelirer in support of this statement, which of course held no such thing. In fact, as a plurality opinion devoted to the issue of what constitutes a “political question,” the Veith case is a fairly slender reed upon which to rest such a sweeping proposition. Continue reading “Justice Roberts Has A Little List”
In my third year of law school, the speaker at our law review banquet was a Boston Globe reporter who talked about a book he was writing on the Robert Bork confirmation battle. I didn’t pay much attention to his speech, other than to complain loudly to all within hearing that a judge would have been a much more prestigious invitee than a reporter. Ethan Bronner’s book, Battle for Justice, came out the following year and has since been recognized as a classic treatment of the modern Supreme Court nomination process.
The nomination of Judge Sonia Sotomayor provided me with a convenient excuse to reread Bronner’s treatment of the Bork confirmation debate and to consider whether the lessons learned during that experience have any application to the Obama Administration’s first Supreme Court nominee. The first, and most obvious, conclusion is that extreme rhetoric about the nominee has become an accepted tactic by the opponents of the party in power. Senator Edward Kennedy’s denunciation of “Robert Bork’s America” as a land where women are forced to seek back-alley abortions and lunch counters are re-segregated will rightly be remembered as the low point in a long political career. Similarly, the former Speaker of the House, Newt Gingrich, has had his reputation irrevocably damaged by his casual labeling of Judge Sotomayor as a “racist.” However, in both cases, the extreme rhetoric served the larger purpose of energizing the base against a nomination and simultaneously engaging the attention of the public at large by raising the stakes of the confirmation. Continue reading “Bork Reconsidered, Part I”
As we await word on the nomination of Justice Souter’s replacement on the Supreme Court, many observers are wondering whether the change in personnel will make any difference in the Court’s jurisprudence. The consensus seems to be that the direction of the Court will not change significantly. Depending upon whom President Obama nominates, however, there is one area where Justice Souter’s replacement may make a difference. Continue reading “Does Justice Souter Make a Difference?”
Senator Charles Schumer recently announced plans to introduce the “Shareholder Bill of Rights Act of 2009.” This bill is a compendium of corporate governance reforms that shareholder activists have been advocating for many years. Among other things, the bill would require companies to elect the entire board of directors each year, rather than putting only a portion of the board up for a vote. It would also require that directors receive a majority of the votes cast before being allowed to serve, and the bill would make it easier for shareholders to nominate their own director candidates to run in opposition to the candidates nominated by management.
Senator Schumer’s bill is best understood as embodying the principle that, when it comes to corporate governance, more democracy is always better. The assumption is that corporate governance will improve in tandem with increased shareholder voting power. I question that assumption.
First, more democracy might actually lead to worse directors. Continue reading “Legislation of the Year . . . If the Year Is 1950”
I went to see the Star Trek movie this past weekend with my twelve-year-old son, Andrew. He was the one dressed in full Klingon regalia (true story). The star of the movie is undoubtedly everyone’s favorite Vulcan, Mr. Spock. As you will recall, Spock is the character who always insists on behaving logically. Seeing the movie made me reflect on legal education and the importance of being logical.
Teaching Constitutional Law, it is easy to get wrapped up in ideological conflicts and to overlook the key role that logical syllogisms play in the construction of Supreme Court opinions. Certainly the students do not immediately grasp the connection between formal logic and Supreme Court decision-making. They begin the semester with the assumption that the members of the Court merely vote their ideologies. As the students assimilate the various interpretive theories for reading the text, such as textualism or intentionalism, they flirt with the possibility of deriving the meaning of the Constitution in an objective manner. However, the inconsistent manner in which the members of the Court employ these interpretive methods soon frustrates a fair proportion of the class. Some students begin to drift towards the view that the decisions of the Court are merely bald assertions of political power, while others begin to flirt with nihilism and the belief that the entire interpretive enterprise is arbitrary.
My personal view is that the United States Constitution is a political document, constructed via compromise between various interest groups and left intentionally ambiguous in several key respects. Continue reading “The Importance of Being Logical”
The Director of the Securities and Exchange Commission’s 21st Century Disclosure Initiative, Dr. Bill Lutz, was on the Marquette University campus May 4. He was kind enough to give an update on the Initiative over lunch to a group of faculty from the Law School and the College of Business Administration. Dr. Lutz is an interesting choice to lead the SEC’s effort to reconceptualize the manner in which the agency collects, analyzes, and disseminates financial information. He is Professor of English emeritus at Rutgers University, and one rarely thinks of the words “English language” and Form 10-K in the same breath.
The 21st Century Disclosure Initiative finished its Report in January 2009. You can read the Report here: www.sec.gov/spotlight/disclosureinitiative/report.shtml. The recommendations in the Report are both modest and potentially revolutionary. Today the SEC continues to operate under the same system of preparing and filing specific disclosure documents such as annual reports and quarterly reports that was instituted in 1934. In the 1990s, the Commission adopted EDGAR, a system for filing and viewing each individual report electronically. However, the “document centric” format remains and anyone searching for specific items of company data today on EDGAR still has to typically scroll through hundreds of pages to find what they are looking for.
The Report by the Initiative proposes the adoption of company-specific databases for each company required to file reports with the SEC. Continue reading “Little Reforms Have Big Implications at SEC”
I am very excited to undertake my duties as Faculty Blogger for the month of May. My colleagues have done an outstanding job in making the Marquette University Law School Blog a “go to” destination for ideas and information about law, politics and society. They have demonstrated an inspired vision of how technology can bring the Marquette community together, and the inaugural year of the blog has been an unqualified success. This makes their apparent lapse in judgment in inviting me to serve as Faculty Blogger for this month all the more surprising. I will try my best not to embarrass anyone.
Arthur Brooks of the American Enterprise Institute had an interesting op ed in the Wall Street Journal on April 30 entitled “The Real Culture War is Over Capitalism.” You can find it on the Journal’s website. His key quote: “Advocates of free enterprise must learn from the growing grass-roots protests [like the “tea parties”], and make the moral case for freedom and entrepreneurship.” I agree with his central point, which is that free market conservatives have made the mistake of assuming that capitalism is a good in and of itself, and have failed to make the case that free markets have moral ends. Is it in fact demonstrable that free market capitalism leads to the greatest economic benefit to the greatest number of Americans, a utilitarian standard with its roots in the classical Greek conception of government? Alternatively, can free market advocates demonstrate that the best way to preserve and promote the dignity of human beings is through a marketplace unfettered by regulation or government oversight, a standard that comes from Catholic social teaching? Shouting “Socialism!” at every government intervention in the market is not enough. Continue reading “Capitalism on Sale?”
The current crisis our nation faces on Wall Street and in the broader economy will be the primary focus of the next President. The crisis is complex, with many facets, and any solution will be equally complex. Issues such as the effectiveness of regulatory oversight versus deregulation, the transparency of specific types of financial transactions and market actors under current law, and the proper accounting rules to ensure an accurate depiction of a banking institution’s financial health will all be part of the debate over how to resolve the present crisis and how to prevent a future recurrence. However, my advice to the next President is that he should not overlook the beneficial role that private civil lawsuits under the securities laws can play in deterring risky market behavior.
Much has been made of the greed and speculative fervor that gripped the investment professionals on Wall Street. Clearly bets were being made with borrowed money that risked the very existence of institutions that are necessary to preserve the liquidity of capital in our markets. Expanding the oversight of the Treasury Department, increasing the transparency of transactions that involve derivatives and hedge funds, and re-examining accounting rules may all be necessary components of a plan to avoid such risk-taking in the future, but they will not be sufficient in and of themselves. From personal experience in the boardroom, I can vouch that nothing deters executive approval of speculative investment strategies as much as the prospect of a potential civil lawsuit if the deal goes sour.
Continuing our faculty workshop series, Nadelle Grossman presented a work in progress earlier this week entitled “Clarifying the Long-Term Nature of Director and Shareholder Fiduciary Duties.” Her presentation examined the various factors that have magnified the influence of short-term institutional shareholders, such as hedge funds and activist investors, over the decisions of corporate management. These factors include the way the market punishes firms that fail to meet their quarterly earnings targets, the incentives of money managers to maximize their own fees by boosting the share price of their holdings, and the increasing effectiveness of the shareholder franchise. Professor Grossman argued that the increasing influence of the “short-termers” has impaired management’s ability to set a long-term strategy for the corporation. Her thesis is that the fiduciary duties of directors and institutional shareholders should be re-examined in order to promote the adoption of business strategies with longer time frames. Continue reading “Addressing the Short-Termer Problem in Corporate Governance”