Business Law Prof Blog

Atmel Corporation's Mess

Floyd Norris wrote a nice piece in Fridays New York Times on "Atmel's Mess:  You're Fired. No, You Are."  (page C1, col. 1).   A board of independent directors attempted to fire the CEO who, upon hearing the plans to do so, convened a special shareholder meeting to fire the independent directors.  The whole mess is now in the Delaware courts to see who fired who.  The case is just the beginning of a new focus on how the rules of the game work in corporations.  With independent boards there will be more board/CEO conflicts and with such conflicts will be more gamesmanship over election, retention, and replacement struggles in senior management.  Corporate codes are surprisingly open-ended and untested here (other than a few old well known cases), because the CEOs controlled the boards and such controversies were settled in the back-room.  Now the rules matter and many state corporate codes will find that they have holes in them that have to be addressed in these contests.  Consider the basis issue of whether shareholder have the power to pass by-laws that bind the board's discretion, for example.  Unclear in most states. 

Economy

I have been out on a limb for some time, noting over six months ago that we would see a major stock market correction this year.  My argument:  Consumers have held up the economy for fifteen years and are running (have run) out of money.  The federal reserve, faced with a slowing economy will stop rate increases even though inflation threatens.  The fed politically cannot raise rates in a slowing economy even in the fact of inflation (which should be its primary concern).  The result -- tough times for a while in the stock market.   

Econ

SEC Delays Section 404 Application

The SEC has delayed yet again the application of Section 404 of Sarbanes-Oxley to small companies.  Those publicly traded companies with a market value of less than $75 million do not have to attest to internal controls until Dec. 15, 2007 and do not have to have their internal controls audited until Dec. 15, 2008.  The SEC, in the meantime, will attempt to re-formulate the section. Can it make a silk purse out of a sow's ear???

San Diego's Pension Scam and Lawyers

The Congressional report on tax scams noted the important contributions of lawyers.  On the heels of that report we have another, a report on the pension scam in San Diego, and again lawyers played an important role.  Modern financial scams require the help of outside professionals, lawyers and accountants, and enforcement authorities need to start focusing on these professionals in their prosecutions.  It is no longer enough to catch the crooks, we need to catch those who help the crooks, in order to re-instill come sense of professional discipline. 

Martha Stewart Throws in the Towel on SEC Prosecution

Martha Stewart has settled SEC charged of insider trading.  She has paid a fine of about 200,000 dollars and has agreed not to serve as a senior executive or director of any publicly traded company for five years.  She still owns 92 percent of the voting stock of the company that carries her name, however, and can, therefore, appoint nominee directors, directors who will listen carefully to her directions.  The private suits are left. 

SEC Throws in the Towel on Hedge Fund Registration

The SEC will not appeal the DC Circuit Court ruling that voiding the agency's hedge fund registration rules.  A new ant-fraud rule aimed at hedge funds is soon to be unveiled, however.