Addressing the Short-Termer Problem in Corporate Governance

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.

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Me and the Man

I just got back from Florida State, where I presented a paper at a faculty workshop.  (Many thanks to Professor and PrawfsBlawger Dan Markel for being a terrific host.)  In the paper, I propose a new type of specialized drug court built around restorative justice principles.  (The paper is not on SSRN yet, but look for it soon.)  The FSU folks had a lot of helpful comments and questions.  In one of the more interesting exchanges, my interlocutor raised a concern that restorative justice, with its focus on personal accountability, would detract from a broader social justice agenda, drawing attention away from the structural inequalities in society that contribute to the prevalence of crime in low-income communities.  It’s a fair point, although I think my proposed RJ program, which would draw lay community representatives into conferences with drug offenders, is capable of contributing to the sort of community mobilization and political activism that my interlocutor favors.  In any event, I was a bit surpised to find myself defending RJ from a social justice challenge.  RJ proponents sometimes present themselves as the vanguard of a revolutionary social movement.  How ironic, then, that when I first advocate an RJ solution to an important social problem, it is suggested that I am really acting as (to use Chad Oldfather’s phrase) “Agent of the Man”!

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Science Explores the Power of Storytelling to Persuade

I read an interesting article from the Scientific American blog this morning, The Secrets of Storytelling:  Why We Love a Good Yarn.  As the article states, “Psychologists and neuroscientists have recently become fascinated by the human predilection for storytelling. Why does our brain seem to be wired to enjoy stories? And how do the emotional and cognitive effects of a narrative influence our beliefs and real-world decisions?”

As a legal writing professor, the most interesting part of this research is the way it is confirming, with good evidence, what good litigators have long recognized: “stories have a unique power to persuade and motivate, because they appeal to our emotions and capacity for empathy.”  I try to teach my students to think about the role of narrative in their legal analysis from the beginning of their work with a legal problem.  Of course, legal arguments must be based upon the law, but the best legal arguments are the ones that find a legal backbone for an appealing story.  (We are fortunate to have on the faculty at Marquette a leading scholar who has written extensively about narrative in legal discourse, David Papke.)

If you are interested in reading more specifically what the science shows, you could start with the “Happily Ever After” section of the article I am discussing, which discusses a few recent findings.  Some law professors are studying this stuff, too.  Kathryn Stanchi from Temple University (who had a long and strong litigation practice before going into teaching) has written two good articles on the subject: The Science of Persuasion:  An Initial Exploration and Playing with Fire:  The Science of Confronting Adverse Material in Legal Advocacy.  

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