Wednesday, May 9, 2007

Generalists Versus Specialists

Posted by Jeff Lipshaw

I have recently been dipping my toe into an area that is new to me, and a colleague who I respect as much or more than anyone in the world offered the wise and well-meaning FWIW counsel that this may Toe be something you don't want to try at home.  That may be par for the course in the funny hybrid that is legal academia, and a source of the prevalent (and by no means trivial) sense that "law and . . . " requires a deep level of expertise, if not an advanced degree, in the ". . ."  In this particular case, the warning was that the specialists in the particular field believed that attempts to generalize or analogize from the specialty were usually off-base, because you had to be a specialist truly to understand the point, and most non-specialists screwed it up. 

That is counsel worth taking to heart, but is it the end of the story?  It certainly bespeaks caution, and in my case it was a wake-up to respect the precision of the particular specialty.  But I started wondering about several things.

First, I drew on long practical experience to say "I have a natural distrust, born of many years of being a generalist dealing with specialists, of specialists telling me that only specialists can really understand the subject matter of the specialist, but being unable to tell me why because I'm not a specialist."  When you are the generalist sitting "atop" an acquisition, for example, it's often the case that you compromise the optimum position in a specialist's area, whether it is real estate, or environmental, or insurance.  But it's also possible really to hack up something if you don't understand it - I'm thinking in particular of transitional service agreements that are common when the buyer of a division needs the seller to provide a set of services to the business for a period after the closing.  I have seen instances where the generalists did not understand, for example, how the SAP contract allocates "seats", because of insufficient specialized knowledge, with the result that the buyer either ended up paying more to resolve the issue, or simply had no support service. 

Second, as to counseling businesses more generally, you can think of a Venn diagram with overlapping circles representing law and business, respectively.  My position was always that the lawyers were responsible for understanding the overlap and being able to explain it to the business people.  It didn't mean that a lawyer had to be an accountant or a manufacturing engineer, but it meant understanding enough of the cross-discipline to get the overlap right.  (Many litigators love being litigators because they have to become "experts" capable of communicating to fact-finders the essence of something as to which they are not experts over and over again.)

Third, I have written before on a Harvard Business Review article from the early 1990s by Womack and Jones, the authors of the classic industrial organization study The Machine that Changed the World, entitled The Myth of the Horizontal Organization.   As businesses within diversified corporations became more "empowered" and "decentralized" and "specialized," and the organization got "flatter," the question was who would be responsible for seeing the opportunities that lay between these specialties.  By and large, it couldn't be the specialists.

Fourth, there's no question that scientific theories take on an analogized popular meaning.  If you say something outside of quantum physics about the Heisenberg Uncertainty Principle, you are probably not talking about issues of particle momentum and position, but instead some kind of polarity in which being precise about one pole means that you cannot be precise about the other.  I don't know how nuclear physicists feel about that.  Do they just shake their heads and say - "what can you do?"  Relativity and Freudian psychology have produced similar effects.

But does that mean the analogies, or the popular sense of the scientific principle, are invalid?   Do you have to be an expert in both disciplines to be cross-disciplinary?  Am I wrong in saying the great 20th century philosophers of science were not scientists?  Do philosophers of science and scientists of philosophy (brain science?) have anything to say to each other?  Perhaps a dose of pragmatism is helpful here:  if the analogy is useful, regardless of its technical bona fides, then it is worth something.

May 9, 2007 in General Counsel, Law & Business, Law & Society, Lipshaw, The Practice | Permalink | Comments (4) | TrackBack (0)

Tuesday, April 24, 2007

Name Change

Posted by Jeff Lipshaw

I recently thought about changing mine to "Cash" Sunstein or "Bryce" Ackerman to see if it would help in the law review article placement process, but no, this post not about that.  I decided to re-title an article that was already out to the law reviews and posted on SSRN.  It was bugging me, because having "futility" as the second word just wasn't right, and it wasn't just about self-referential systems.  Plus it didn't capture the Namechangeadditional thread of tension or paradox between the first person and third person views of the relationship underlying a contract.   So it's now Instrumentality, Objectivity, Self-Reference, and the Futility of Justifying Contract Law.  (Hmm.  For some reason, the revised abstract is not up.  Note to self:  always remember to click on "Save.")

Aproposner* of similar name issues, there is a lawyer out there who has had a spectacularly successful career and who I respect immensely.  I would hire him in a heartbeat.  Let's call him Abraham Smith.  The only problem was that when Abe showed up as a young associate many years ago, one of the even more spectacularly successful lawyers and a named partner in the firm also happened to be named Abraham Smith.  Abraham Smith the elder made it clear that Abraham Smith the younger was going to have to do something to make sure that there was no confusion in the mail room or otherwise between the two.  So for the rest of his career, the younger one added his middle name "Spencer" to the letterhead, and was known for the next thirty years or so as Abraham Spencer Smith.   I'm sure I was no different than anybody else, but I had a several transactions in which lawyer Smith was on the other side, and true to my note-taking style of referring to participants by their initials, he was, of course, ASS.  I wonder if his parents thought about this.  And I always felt a little guilty because I really did think he was a good guy.

*  HT to Professor Childress, who coined this phrase.

April 24, 2007 in Lipshaw | Permalink | Comments (0) | TrackBack (0)

Monday, April 9, 2007


I have new respect for the MPRE.  This is slightly lower than Alan predicted.  All the NCBE tells you in the "How to Interpret Your Scaled Score" is that the high is 150, the low is 50, and the mean is 100.  I don't know what the standard deviation is.  I am in the midst of rationalizing why I didn't get a 150.

[Jeff Lipshaw]

April 9, 2007 in Bar Discipline & Process, Lipshaw, Professional Responsibility | Permalink | Comments (5) | TrackBack (0)

Friday, April 6, 2007

Is SSRN Overwhelmed Right Now?

It took almost nine days from the time I submitted a piece until it moved from "Author-Approved" to "Approved."  I submitted a revision on April 3 and it's now April 6, and it's still sitting there as "Submitted."  During most of the year, revisions seem to get approved in a matter of hours.  I'm assuming, on account of "submission season," SSRN is also inundated.

[Jeff Lipshaw]

April 6, 2007 in Lipshaw | Permalink | Comments (3) | TrackBack (0)

Rent a Wonderful Vacation House from a Contract Theorist

Posted by Jeff Lipshaw

Char1 My wife and I own a wonderful little house in Charlevoix, Michigan.  It is available for vacation rentals this summer.  We hired an agent to rent the place, but we can also do it on our own (and not pay the commission).  We are still working through some of theChar2_2 growing pains of being vacation landlords, and screwing up certainly puts my contract theorizing to the test.  (Prime weeks in beautiful Northern Michigan still available, by the way.)

Here's the not-so-hypothetical.  We rent the house for $1,500 a week during the summer.  We listed it not only with our agent, but on  We and the agent did not do a Char3 good job of communicating with each other (actually, in this instance, my fault), and we each rented the house, signed contracts, and received deposits for one of the weeks.  In our case, we had actually agreed to rent the house for only six days for $1,300.  We had agreed to rent the house to another client for eight days and that rental overlapped by one day, but did not have a signed agreement or a deposit.  What was the role of contract law in the resolution of this problem?

The answer follows the fold.

Continue reading

April 6, 2007 in Law & Business, Lipshaw | Permalink | Comments (2) | TrackBack (0)

Saturday, March 31, 2007

I Wouldn't Want to Join an Anthropological Study Sample That Would Have Me as a Member

Posted by Jeff Lipshaw

I just got back from the gym.  Since the headphone jack for the sound on the TVs on the machine I like to use doesn't work, I usually grab one of the magazines on the rack for diversion purposes.  WhileHarpers_208x86 usually I would prefer the ones that assess the ten best and ten worst Oscar night gowns (this year I voted for Nicole Kidman and Cate Blanchett, but then every year I vote for Nicole Kidman and Cate Blanchett), for some reason I took the January 2007 edition of Harper's.

What caught my attention was an essay entitled "Army of Altruists: On the alienated rDgraeberight to do good" by David Graeber, a Yale anthropology associate professor (left).  Right off the bat, I liked the non-extreme and nuanced view that neither egoism nor altruism is somehow inherent in human nature.  Says Graeber, "very few of our actions could be said to be motivated by anything so simple as untrammeled greed or utterly selfless generosity."  Nevertheless, we manage to set egoism and altruism in opposition to each.  From there, Graeber develops the following propositions:

1.    The coalition of economic libertarians and fundamental religionists that is the political Right tries to enhance the division between egoism and altruism and thus to appeal to the extreme views on each.  The left seeks to efface the distinction by holding that you can do good and make good at the same time (using the Kennedy family as the paragon of this).

2.  "The real problem of the American left is that although it does try in certain ways to efface the division between egoism and altruism, it largely does so for its own children.  This has allowed the right, paradoxically, to represent itself as the champion of the working class."  Here the thesis is that the working class views it as difficult but not impossible to become rich, but impossible to join the intelligentsia.  The child of a working person has a shot at being a corporate executive, but almost no chance of being "an international human-rights lawyer or a drama critic for the New York Times."

3.  The avenue by which the children of the working class can achieve the nobility of altruism is by joining the military.  On the other hand, the campus radicals of the 1960s became the academicians of the 70s, 80s, and 90s.  They had "set out to create a new society that destroyed the distinction between egoism and altruism, value and values.  It did not work out, but they were, effectively, offered a kind of compensation:  the privilege to use the university system to create lives that did so, in their own little way, to be supported in one's material needs while pursuing virtue, truth, and beauty, and, above all, to pass that privilege on to their own children."

Now, despite my initial good feeling about the nuance in Graeber's interesting and lively essay, I realized that I had been sucked into an anthropological view of the relationship between culture and moral choice.  Intuitively, I react badly to the idea that I am not a moral free agent, regardless of my potty-training or academic pedigree, but, of course, it's entirely possible that I have this intuition because of my potty-training and academic pedigree.  But I also juxtapose Graeber's anthropological observations on the academy with two views that have circulated in the academic blogosphere recently (neither of which I necessarily endorse, but both of which now give me pause):  (a) Jeff Harrison's view over at MoneyLaw and elsewhere that "being a law professor is a privilege largely enjoyed by children of privilege who have developed a sense of entitlement," and (b) Kaimi Wenger's post at Concurring Opinions, but especially the comments to it, in which it seems to be common knowledge, as though it were something you checked off in the questionnaire for inclusion in the AALS directory, who on a faculty (at least at Harvard and Stanford) is a Republican, a Democrat, a liberal, a libertarian, or a conservative.

But now that I am a law professor (and I've even filled out the AALS questionnaire), I guess I'm part of this anthropological sample, and it has me just a little bit worried.  I'd be a poor (or at least unhappy) politician for the same reason that I was an unhappy litigator:  I wanted everybody to love me.  But I know I didn't come from the elite (unless you view me from the standpoint of an unrepentant anti-Semite, in which case I come by it honestly).  And while I don't see myself as being invited onto the Harvard or Stanford faculties any time soon, at least as a thought experiment, we can consider it, and the question is:  does somebody know better than I do whether I am a Republican, Democrat, liberal, libertarian or conservative?

March 31, 2007 in Hot Topics, Law & Society, Lawyers & Popular Culture, Lipshaw | Permalink | Comments (0) | TrackBack (0)

Friday, March 23, 2007

How I Spent My Spring Break

Posted by Jeff Lipshaw

Some weeks back, I posted something on the blog about a new Harvard Law Review article on contract theory entitled The Divergence of Promise and Contract by Professor Seana Shiffrin (UCLA).  I thought it was a marvelous article, but I didn't agree with everything in it, and so I wrote a little 3,000 word response for the HLR Forum, which is the on line "respond and comment" site akin to the Yale Law Journal Pocket Part.  I don't know quite why, but the editors in their sublime wisdom chose to publish a response by Charles Fried (Harvard), author of the classic Contract as Promise.  His response is entitled The Convergence of Promise and Contract, which certainly had it all over my working title Looking for Law in All the Wrong Places (with a dutiful cite to Johnny Lee).

ButGalaxy in the words of my heroes from Galaxy QuestNever Give Up, Never Surrender!  The piece, now essay length, is posted (provisionally, mind you) on SSRN under the far more distinguished title The Futility of Justifying Contract Law as Self-Referential System.  (The point of the post title is that most of the expansion came during spring break to the chagrin of my wife who expected me to tear myself away from the computer for a couple seconds.  But when the muse hits....) 

The essay is the latest in my seemingly never-ending attempt to articulate my idiosyncratic (but absolutely correct) view about the "morality or fairness versus welfare" debate among legal philosopherGodels in contract theory.  Should contract law reflect in its fundamental approach (where all cannot be accommodated) the sanctity of promise (Fried), or the affirmation of freely given consent (Barnett), or maximizing of material well being (Schwartz, Craswell, Posner, and a host of others)?  I, of course, think they are either all correct or all misguided, and keep trying to explain why.   (To be fair, the accommodationists out there are Jody Kraus and my friend Nate Oman.)  What was really fun about this was digging into Douglas Hofstadter's Godel, Escher, Bach, and Godel's Theorem,* and the back and forth in the literature about the applications and misapplications of a proof in number theory to the law.  (To go beyond that, you have to read my essay.)

Here's the abstract:

All heretofore proffered justifications of the institution of contract law founder on the shoals of the implicit paradox of systems that attempt to justify their own assumptions. There is a paradox, or antinomy, of the subjective and objective in the resort to contract law – the parties couch first-party wants or needs in justifications that would make it appear that those wants or needs are consistent with objective truth. The quotidian result is that the only objective truth about the positive law of contract is that it exists to resolve private disputes peaceably. The ironic conclusion is a recognition that formalism – the resolution of disputes to some lesser or greater degree without acknowledge of the specific context – is consistent with a view that the law has limited efficacy as a social mechanism. This is because law itself is a model that cannot ultimately contain its own assumptions. It must look outside itself, and when it does it sees a myriad of justifications for particular results, all of which sit apart from what law will never know: how the parties would have resolved the problem had it never been objectified.

* I apologize but I am too lazy to transport an "o" with an umlaut over here.

March 23, 2007 in Abstracts Highlights - Academic Articles on the Legal Profession, Law & Society, Lipshaw | Permalink | Comments (4) | TrackBack (0)

Monday, March 19, 2007

The Mastery Mindset and the Resolution of Paradox

Posted by Jeff Lipshaw

The most recent issue of Stanford, the magazine of the university's alumni association (not the law Toc_cover school alumni magazine) has an article about Professor Carol Dweck and her work in the psychology of success and failure.  (HT to my wife on this one.)  She was interviewed on NPR about her book Mindset.  (Interestingly, if you follow the link to Professor Dweck's web page, it will take you to a link that includes a decidedly mixed review - praising the idea underlying the book, but not the execution of the book itself, which appears to written more in popular self-improvement than scholarly style.)

The thesis is that there is an additional outlook, or mindset, wholly unrelated to intelligence, that frames how we look at problems.  The distinction is between a "fixed mind-set" that sees intelligence as static, and a "growth" or "mastery" mind-set that sees intelligence as something that can be developed.  The fixed mind-set about wanting merely to be smart, but the mastery mind-set is about wanting to learn.  As a result, if you simply are smart but not a learner, you would have a tendency to discount effort, avoid challenges, give up easily in the face of obstacles, and be defensive, particularly about making mistakes.  Learners, on the other hand, like challenges, persist in the face of setbacks, embrace effort, and tend to find lessons in mistakes.  I thought one of the conclusions in a diagram of the model was interesting - it generalizes that fixed mind-set confirms a deterministic view of the world but a mastery mind-set gives a greater sense of free will.

When I was in business I thought the creation of learning organizations was a great aspiration.  Learning organizations are or can be quite different from schools.  There are, of course, four possibilities (per the consultant's four-quadrant matrix): that a school is or is not a learning organization, and that a "not-school" (like a business) is or is not a learning organization.  And one of the critical things making something a learning organization was its orientation to mistakes.  (See Peter Senge's The Fifth Discipline, and particularly his anecdote about the Japan Air Lines pilot who landed his plane in San Francisco Bay a couple miles short of the SFO runway.)

I was going to pose a thought-provoking question here about your organization, but I decided not to because I didn't want to get criticized.  And it's not worth the effort.  I give up.

March 19, 2007 in Law & Society, Lipshaw, Teaching & Curriculum | Permalink | Comments (0) | TrackBack (0)

Thursday, March 15, 2007

Law & Society Annual Meeting - Panel on The New Formalism

Posted by Jeff Lipshaw

I thoMzeisbergught, particularly after taking the MPRE without too noticeable an increase in my heart rate, I wasLsa2007logo2 beyond getting too nervous about professional challenges any more.  But this one may test my aerobic condition.

Larry Solum (Illinois) has organized an otherwise luminous round table for Saturday afternoon (2:30 pm), July 28, at the Law & Society Association's annual meeting at Humboldt University in Berlin, and somehow  got confused and included me on it.  The subject is "The New Formalism," and in addition to Larry, the participants will be Dennis Patterson (Rutgers-Camden), Randy Barnett (Georgetown), and Mariah Zeisberg (Michigan - Political Science, left).  Here's the abstract of the planned discussion:

Formalist modalities of legal reasoning have recently come to the fore in a variety of contexts. In the theory of constitutional interpretation, the so-called “new originalism” or “original meaning originalism” has gained new prominence and transcended association with conservative judicial politics. In the theory of statutory interpretation, plain meaning or textualist approaches, once considered outre, are increasing dominant in both judicial practice and scholarly debates. Even in the realm of common-law judicial decision making, instrumentalist approaches are challenged by advocates of “strong stare decisis”. This roundtable will discuss the “new formalism,” from the a variety of perspectives, including jurisprudence, political theory, and the philosophy of language.

I will be making my first official appearance with "Suffolk Law School" on my badge.  If my voice does not quaver too much, I will offer some thoughts on formalism and neo-formalism in contract law.

March 15, 2007 in Conferences & Symposia, Law & Society, Lipshaw | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 14, 2007

Bebchuk, Cremers, and Peyer on CEO Pay Slice

Posted by Jeff Lipshaw

Lucien Bebchuk (Harvard), Martijn Cremers (Yale - Management), and Urs Peyer (INSEAD) have posted Pay Distribution in the Top Executive Team on SSRN.  Here is the abstract, with some commentsTobin following.

We investigate the distribution of pay in the top executive team in public companies. In particular, we study the CEO's pay slice (CPS), defined as the fraction of the aggregate top-five total compensation paid to the CEO. The level of a firm's CPS might reflect the relative centrality of the CEO in the top executive team in terms of ability, contribution to the firm, or power.

We find that CPS has been going up over the past decade. During this period, CEOs have increased their fraction of both equity-based compensation and non-equity compensation. The level of CPS is associated with various characteristics of the top team and the firm's governance arrangements. Among other things, CPS is high when the CEO has long tenure; when the CEO chairs the board; when few other executives are members of the board; and when the firm has more entrenching provisions.

High CPS is associated with lower firm value as measured by Tobin's Q. Using a simultaneous equations approach yields findings consistent with the possibility that this negative correlation is at least partly due to high CPS, or the relative CEO centrality it might reflect, bringing about a lower Tobin's Q. Consistent with the negative correlation between high CPS and Q, high CPS is associated with a less favorable market reaction, and a higher likelihood of a negative market reaction, to acquisitions announced by the firm. We also find that high CPS is associated with lower variability of stock returns over time. Overall, our results indicate that the distribution of compensation in the top executive team is an aspect of pay arrangements and corporate governance that deserves researchers' attention.

This is an interesting paper, and a real learning experience to study on both a methodological and substantive basis. 

First, what is Tobin's Q?  It is the ratio (developed by James Tobin, above right, winner of the 1981 Nobel Prize in Economics) between a firm's enterprise value (its market capitalization and its debt) and the replacement value of its assets.  Intuitively, we can understand what this is saying.  If it would cost $100 million to replace all the assets of Company A today, but the market values Company A at $200 million, the management of Company A is doing something right with those assets!  And that management team is doing a better job than the team at Company B, which has $50 million of replacement value assets, but whose enterprise value is $75 million (although Company B is still being rewarded by the market). 

Both Company A and Company B are preferable to Company C, which has replacement value assets of $200 million, but whose enterprise value is $150 million.  The management of Company C would appear to be destroying asset value.  The Tobin's Q of Company A would be 2, that of Company B would be 1.5, and that of Company C would be .75. 

That is one side of the correlation work.  The other side is the chunk of pay that the CEO takes relative to a few of the other very senior executives.  The SEC's rules for proxy disclosures for public companies for the last twenty years or so have required companies to disclose the compensation of the CEO and the next four most highly paid executives within the firm.  So the study calculates CPS or "CEO Pay Slice" as a percentage of those highest paid executives.

Understand what is and is not being measured here.  The measurement is NOT the extent to which there is pay differential within the entire company, nor is it even measuring the pay differential among the executives of the company.  It is measuring simply the slice of pay the CEO takes of the top five who are reported.

And the study shows that there is a negative correlation between CPS and Tobin's Q.  What does that mean?   For some reason, as a rule, when there is a big relative pay difference between the CEO and the next few highest paid executives, the firm doesn't get as much market bang for the buck out of its assets.

Putting aside the highly theoretical question whether Tobin's Q is a good measure of firm performance (it is used in finance studies, and Bebchuk et al do appear to have done what is usually done to account for the fact that determining replacement value of assets, particularly intangible assets and assets that have been around for a long, is a dicey business), the conclusion is an fascinating one to me.   What, if any, causal explanation is there?  I like the phrase "the relative CEO centrality it might reflect."  Does a firm that pays its CEO not necessarily too much or too little on an absolute scale, but a lot relative to the rest of the team, tend also to have, perhaps, command-and-control CEOs who do not exploit their human assets, much less their physical assets?

In my view, having hung out in that neighborhood, that is a really good question.

March 14, 2007 in Abstracts Highlights - Academic Articles on the Legal Profession, Law & Business, Lipshaw | Permalink | Comments (0) | TrackBack (0)

Saturday, March 10, 2007

MPRE & Reality TV Episode 24: You Join the Betting Pool On Jeff's Score

Posted by Alan Childress
At my school, the mailroom guys who run the sports "gaming" pools always seem to have chosen and eliminated the 24-10 result -- or Duke in the Final Four -- before the rest of us get the pickings (though this year it won't be Duke at least for men's).  Me?  I'm left with the chance to win $100 ifSroctop1 only the score reflects three safeties by the end of the third quarter, or Slippery Rock makes the Final Four.  "Go The Rock."  That is one college mascot you don't want to screw with.

But not this time, baby!  I am picking 132 as Jeff's final scaled MPRE score and intend to win this sucker. 

Please post your own estimate of Jeff's score (0 to 150) in Comments here (which will show up later after 653570_billiards_2 someone posts them).  If you're closest, you win a lunch at the next AALS (or sometime in Boston or New Orleans) courtesy Jeff.   At least I say so without his authorization.  Relatives of Jeff, and Jeff, may play as well.   His students are in fact expected to play, not only for the chance to win lunch with him where he won't mention the UCC, but also better yet for just investing emotionally in having that feeling that he is going through what you are going through.  We will trust that he will report his 655784_swimming_pool score accurately even if it means he loses the pool and costs himself $17.50 in free food to someone else.   

A personal prediction and warning:  If you pick "79," and win, don't expect that he will follow through on this vicarious offer in any way.

Keep in mind that Jeff has recently been described this way by no less than David McGowan:  "Lipshaw is one of the best and most interesting writers currently working on ethics-related issues."   Hazardous Use:  despite this accolade, choosing "150" is a sucker bet, like Vegas putting up the highly lucrative but illusory odds that next year the Oakland Raiders will run the table and finally join the '72 Dolphins as the only unbeaten team.  But if one of his three kids wants to pick "150"  just to692910_sorrow_and_worry_1 put more public pressure on him and be able to have that "at least you tried" faux-supportive parental-esque conversation with him after he scores 132 (priceless), well by all means do so.  Shame is the high-voltage cattle prod of all winners, and parental disappointment masked in Lifesavers speeches the ultimate secret to success.  Enjoy.

March 10, 2007 in Lipshaw | Permalink | Comments (9) | TrackBack (0)

Friday, March 9, 2007

Rodrigues on Board Independence

Posted by Jeff Lipshaw

As Vic Fleischer over at Conglomerate observes, The Fetishization of Independence just posted byRodrigues Usha Rodrigues (Georgia, right) is a terrific piece of work.  Here is the abstract, with some comments following (in Larry Solum blue):

According to conventional wisdom, a supermajority independent board of directors is the ideal corporate governance structure. Debate nevertheless continues: empirical evidence suggests that independent boards do not improve firm performance. Independence proponents respond that past studies reflect a flawed definition of independence.

Remarkably, neither side in the independence debate has looked to Delaware, the preeminent state source for corporate law. Comparing Delaware's notions of independence with those of Sarbanes-Oxley and its attendant reforms reveals two fundamentally different conceptions of independence. Sarbanes-Oxley equates independence with outsider status: an independent director is one who lacks financial ties to the corporation and is not a close relative of management. Delaware's approach to independence, in contrast, is situational. As different conflicts arise in different contexts, the focus of concern - the influence from which we wish to insulate directors - varies as well.

There are at least two lessons for corporate reformers. First, the definition of independence should be refined to address the conflict at hand. For example, if the area of concern is executive compensation, the question is not merely whether the director lacks financial ties to the corporation and familial ties to corporate executives, but also whether the director lacks financial ties to the executives being compensated. Current independence rules overlook this obvious hole. Second, and more fundamentally, independent directors are useful only in situations where a conflict exists. An independent director - a part-timer whose contact with the corporation is necessarily limited - is not inherently better suited to further the interests of shareholders than is an inside director. Current rules thus over-rely on independence, transforming an essentially negative quality - lack of ties to the corporation - into an end in itself, and thereby fetishizing independence.

I wholeheartedly agree with Vic:  this is a tremendously thoughtful approach to an issue often overwhelmed not only by conventional wisdom (as Usha puts it), but by those (within academia and without) with a particular agenda to push.  Here are some additional thoughts on the subject:

1.  My intuition (primarily as an old practitioner who spent a lot of time in corporate boardrooms) is that the SOX and SRO rules for non-independence are asymmetric as to their over-inclusiveness and under-inclusiveness.  That is, I would venture that many directors are independent under the rules but not really courageous, smart and/or experienced enough to be independent in the Delaware sense (think, for example, about the court's characterization of Sidney Poitier's role in the Disney case.  Fine actor, upright and moral citizen, but "independent" in a good governance sense?)  On the other hand, if somebody has a conflicting financial interest, you at least know that there is some agency cost basis for thinking they might not be independent, or appear to be independent.  So the definition of non-independence may be under-inclusive in not picking up the the patsies, and over-inclusive in picking up fine directors who happen to have a financial tie.  My intuition is there is more of the former than the latter.  And from a policy standpoint, I understand the over-inclusiveness more than the under-inclusiveness, but for that you have to think about the following point.

2.  As Usha points out, the more fundamental question goes to the question whether there is any relationship between independence, however determined, and "good governance," whatever that means (and I suspect my definition matches hers).  I think she is onto something near the end on comparing rules and standards, and Delaware's standards based approach truly does better approximate that inquiry than the meat-ax rules approach of SOX and the NYSE. 

3.  Not that I am hankering for a citation (I've already sent a contribution to Usha's favorite charity), but I discussed the failure of the rules-based approach to good governance two years ago in my Wayne Law Review article on the jurisprudence of Sarbanes-Oxley.  Then I picked on the general meaninglessness of the SOX requirement of an audit committee financial expert (the infamous "ACFE"), and always thought that independence was another prime target.  I am delighted to see Usha take it to the next level.

March 9, 2007 in Abstracts Highlights - Academic Articles on the Legal Profession, Law & Business, Law & Society, Lipshaw | Permalink | Comments (1) | TrackBack (0)

Thursday, March 8, 2007

Top Ten - Legal Ethics & Professional Responsibility, Mar. 8

Like Michael C. Jensen (Harvard Business School, right) needs my endorsement, but I was going toJensen wait a couple days before posting a new top ten.  I was reading through the abstracts, however, downloaded the slides he has posted on a theory of integrity (see paper #2), and got excited enough about it to go ahead with the post today.  (Plus Alan Childress is a little under the weather and not posting - everybody say "feel better, Alan" - so I want to take up the substantive slack that occurs when he is not around.)

The thesis appears to be that integrity as it appears in the corporate world is a fact capable of description and measurement, as opposed to other less testable norms or values.  While I am not sure that he has succeeded in demonstrating that integrity is measurable and testable as an empirical-analytic (as opposed to a normative-analytic) matter (those are Habermas' terms, by the way, not mine), I think this is tremendously interesting and exciting.  My sense is that he is trying to do the impossible, which is to find a scientific basis for the justification of integrity, and that ultimately it is a normative proposition.  But he is clearly onto something - which is that other proxies for good governance don't work, and that is the failure of things like Sarbanes-Oxley.  My initial stab at trying to say something like that (in a fumbling, puerile sort of way) was infamously titled Sarbanes-Oxley, Jurisprudence, Insurance, Game Theory, and Kant:  Toward a Moral Theory of Good Governance (much downloaded not for any particular insight, I'm pretty sure, but because it has a good technical explanation tucked in the middle of how D&O insurance works).

The abstract to the Jensen piece is below the fold.

And here are the top ten papers in the SSRN Legal Ethics & Professional Responsibility Journal as measured by downloads in the last sixty days.

1   Young Associates in Trouble, David T. Zaring, William D. Henderson, Washington & Lee University - School of Law, Indiana University School of Law - Indianapolis.

Integrity:  A Positive Model with Applications to Corporate Governance and Finance (PDF file of Keynote Slides), Michael C. Jensen, Werner Erhard, Steve Zaffron, Harvard Business School, Independent, Landmark Education Business Development.

The Hypocrisy of the Milberg Indictment: The Need for a Coherent Framework on Paying for Cooperation in Litigation Bruce H. Kobayashi, Larry E. Ribstein, George Mason University School of Law, University of Illinois College of Law

Tax Opinions, David T. Moldenhauer, Clifford Chance LLP.

The View from the Trenches:  A Report on the Breakout Sessions at the 2005 National Conference on Appellate Justice, Arthur D. Hellman, University of Pittsburgh School of Law.

Critical Legal Ethics Paul R. Tremblay, Boston College - Law School

Take Back the Night: Why an Association of Regional Law Schools Will Return Core Values to Legal Education and Provide an Alternative to Tiered Rankings Jon Garon, Hamline University School of Law

8 Effects of Reputation on the Legal Profession, Fred C. Zaharias, University of San Diego School of Law.

Differentiating Gatekeepers Arthur B. Laby, Rutgers University School of Law - Camden

10 Investment Banking:  Immediate Challenges and Future Directions , Andrew Tuch, University of Sydney - Faculty of Law.

[Jeff Lipshaw]

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March 8, 2007 in Abstracts Highlights - Academic Articles on the Legal Profession, Ethics, Lipshaw, Weekly Top Ten: SSRN Legal Ethics & Professional Responsibility | Permalink | Comments (0) | TrackBack (0)

Monday, March 5, 2007

Evolutionary Theory on Belief

Posted by Jeff Lipshaw

04cov395 I swear I read The New York Times Sunday Magazine for the articles (and the crossword), not the pictures.  Which is why I skipped yesterday's "Soft Core on Campus" in favor of "Why Do We Believe?  How Evolutionary Science Explains Faith in God" by Robin Marantz Henig.

This is another in the recent round of articles, inspired by the "unholy trinity of neo-atheists," Richard Dawkins (The God Delusion), Sam Harris (The End of Faith), and Daniel Dennett (Breaking the Spell), that explores the boundaries between science and faith.  Recently, Time hosted a dialogue between Dawkins and Francis Collins, the director of the Human Genome Project, who is a believing Christian, and wrote The Language of God.

It is an interesting article, with evolutionary accounts for three phenomena:  agency detection (those who presume an animus in a rustling sound - i.e., that it is a sabertooth tiger and not a rush of wind - are more likely to survive and propagate), causal reasoning, and theory of mind (i.e., understanding that others have an internal point of view like your own).  The problem, of course, with this framing of the debate, while suitable enough for the pretentious folks who read the NYT Sunday Magazine, is that it still pits extreme versus extreme - the atheist who says belief is delusion against the fundamentalist to whom God is as real as my office mates.   All of which is not particularly helpful to those (like me) I like to think of as transcendental agnostics.  We TAs generally take the accommodationist (or Kantian) route of distinguishing between what can be known empirically as truth, and that which, even if we believe it to be universal and is often expressed as a "truth," can never really be known to be true.Korsgaard

Here's an additional take from a great thinker, Christine Korsgaard (Harvard - Philosophy, right), on this issue.  Suppose, she tells us, that there is science that gives morality a genetic basis.  Assume further it has been proved empirically that "right actions" are those which promote the preservation of the species, and "wrong actions" do the opposite.  Accordingly, we have evolved into beings with a strong sense of "right" and "wrong."  But, she asks, even if you believe the theory as a matter of explanation, would it "be adequate from your own point of view" in making moral decisions?

While it is true that a theory which cannot justify moral conduct normally also cannot explain why anyone who believes that theory acts morally, the basic philosophical problem here is not one of explanation.  The case of the evolutionary theory shows that a theory could be adequate for the purposes of explanation and still not answer the normative question.  And there is an important reason for this.  The question how we explain moral behaviour is a third-person, theoretical question, a question about why a certain species of intelligent animals behaves in a certain way.  The normative question is a first-person question that arises for the moral agent who must actually do what morality says.  (Christine M. Korsgaard, The Sources of Normativity (Cambridge, Cambridge University Press, 1996), 14-16.)

Why does this have any bearing on, or place in, a blog about the legal profession?  Because Korsgaard's "bugbear," the "Scientific World View," which holds normativity at arms'-length in favor of explanation, may well be at work in a discipline like law, in which we are far more comfortable giving third party scientific explanations (Langdellian or Posnerian, no matter) than addressing the first-party moral issue.  Or as Brian Tamanaha has suggested, viewing what lawyers do as amoral instrumentality.

March 5, 2007 in Ethics, Hot Topics, Law & Society, Lipshaw | Permalink | Comments (2) | TrackBack (0)

Sunday, March 4, 2007

Still More Lawyer Unhappiness Or Lack Thereof: Adding to the Book List

Posted by Alan Childress

Jeff has helpfully re-raised the question whether anecdotal accounts of young lawyer unhappiness, or even statistical measures of relative satisfaction, state a universal attitude -- or are more or less an individual 383542_smileysentiment projected onto an entire demograph or the profession itself.  The effort to frankly discuss not only the substantive issue but also the scholarship of it has been picked up by such noteworthies as Robert Ambrogi here at Legal Blog Watch, who cleverly wrote [and linked to Jeff at SSRN]:

Are lawyers unhappy?  From a scholarly perspective, one might think the question is right up there with, "Do dogs bite?" and "Is grass green?"  But thanks to Jeffrey M. Lipshaw at Legal Profession Blog, we learn that legal scholars are examining the evidence -- and coming to different conclusions.

And also Stephanie West Allen at idealawg, who here likens the cacophony of lawyer malaise as possibly the clucks of Chicken Little:

85477_14302769I am glad to see that more critical thinking is being applied to the question of lawyer unhappiness. I have long been skeptical about the widespread and dire conclusion that the lawyer sky is falling.  Discussion is what is needed; it continues in the blogosphere.

We had previously posted abstracts and links to useful, recent studies by Zaring and Henderson, and earlier Dinovitzer and Garth, on young lawyers and job satisfaction.

Other bloggers, including John Steele and David McGowan (and excellent commenters) over at LegalEthicsForum, have cited Jeff's review essay and are asking the useful 'canons' question:  What are the right books and articles to read to get an informed or entertained picture of young lawyers in big law firms?  They and their readers list everything from fiction to chi-squared empirical studies.  On that list, I added my comment that John Jay Osborn, Jr.'s The Associates (1979) is a less-known classic and fun read of biglaw life among young Hart-like idealists; it's a worthy successor to his iconic The Paper Chase.  I love the part about a firm's fuming insistence on using an upside-down ampersand in its name.  But the ending, without giving away too much, does not necessarily indict the idea or ideal of practicing law in one's young years.  Anyway, very good writing, for a robot pimp.  Or a law professor.

One could add to the list a fairly recent book of interviews and observations regarding beginning lawyers that were094067556001 so dissatisfied with law practice that they simply got out.  That is Deborah Arron's Running from the Law:  Why Good Lawyers Are Getting Out of the Legal Profession (3d ed. 2003).  Also consider the more spirtually-driven but positive-to-law book by Steven Keeva (then an editor for the ABA Journal) called Transforming Practices:  Finding Joy and Satisfaction in the Legal Life (2001), which Booklist termed an "important book for practicing and would-be lawyers and a healthy antidote for law-bashing laypersons."  Not necessarily about biglaw practice -- but not all doom, gloom, and "golden handcuffs" either.

March 4, 2007 in Abstracts Highlights - Academic Articles on the Legal Profession, Blogging, Law & Society, Lipshaw | Permalink | Comments (1) | TrackBack (0)

Thursday, March 1, 2007

More on Lawyer Happiness (or the Lack Thereof)

John Steele over at Legal Ethics Forum has touched off a very interesting dialogue on the subject of lawyer happiness and unhappiness, and the scholarship of it.  Both John's observations and the comments of other really first-rate thinkers (including John) on ethics are recommended.

John credits the book we have both reviewed as "cultural criticism in the mode of Roland Barthes."  I would also (and did) give it credit as one instance of anthropological or cultural narrative, but, in fact, the author and its publisher market the book as something more: "empirical" and as involving "painstaking analysis."  I suppose in the very broadest sense that might be true, but I leave that to the reader.  I have said about as much as I want about it.

John also referred to an article by Patrick Schiltz published in the Vanderbilt Law Review back in 1999.  My reaction to the Schiltz article was about like Brad Wendel's in the comments over at LEF:  there was certainly more beef and balance to it.  And it stressed personal choice and accountability as a normative recommendation.  Plus, Schiltz had the benefit of a relatively extended stay in a big firm.  But Schiltz had his own bouts with hyperbole - I thought the description of the cocktail party was pretty funny, but it IS hyperbole, and having hors d'oeuvres at a partner's house isn't unethical, which is what it seemed to suggest it helped lead to.  (A couple shrimp wrapped in bacon, and the next thing you know you are a heroin addict!)  I used to go to a party like that just about every Christmas hosted by the head of the litigation group.  He and his wife are still married after forty years or so.  And while he was a fearsome litigator, he was one of the most honorable people I ever met.  (He did like his Dewar's, on the rocks and with a twist.)  Only to say, as law professor-anthropologist John Conley does, you have to be careful what you infer from this kind of data. 

And Schiltz's intro on depression and lawyers is highly suspect.  As my wife, an MPH, advised this morning, there's no way you can tell (as Schiltz admits, but only fleetingly) whether depression-inclined people self-select to be lawyers, or being a lawyer causes or exacerbates depression.  Given depression's biochemical etiology, I'd be inclined to think the seeds are there to begin with, but we may never know.

Finally, Bill Henderson (Indiana) of "Young Associates in Trouble" and Empirical Legal Studies passed on the followingWilkins references.  The Harvard Law Bulletin has an article in the fall 2006 issue on the "After the JD" study being undertaken by David Wilkins (Harvard, right) and the HLS Center on Lawyers and the Professional Services Industry.  This is a ten year longitudinal study tracking nearly 4,000 new lawyers.  Says the Bulletin:  "Job satisfaction is one aspect of the responses that Wilkins finds most interesting.  According to the study, and contrary to what most believe, there is 'no evidence' of 'any pervasive unhappiness in the profession,' he says - at least not among those who began practicing in 2000."  Bill also suggested John P. Heinz, Kathleen E. Hull, and Ava H. Harter, "Lawyers and their Discontents:  Findings from a Survey of the Chicago Bar," 74 Indiana Law Journal 735 (1999), which found that lawyers were no unhappier than any other profession or job.

Again, all of this to say that we need to be very careful, particularly as law professors, in describing the world as we think it is, and in figuring out how our view of the "ought" affects it, if that is at all possible.

[Jeff Lipshaw]

March 1, 2007 in Associates, Blogging, Law & Society, Law Firms, Lawyers & Popular Culture, Lipshaw, Partners | Permalink | Comments (1) | TrackBack (1)

Tuesday, February 27, 2007

Screed or Scholarship?

Posted by Jeff Lipshaw

Several weeks ago, I posted some thoughts (not positive!) about The Destruction of Young Lawyers, by Douglas Litowitz, which had gotten some play on the blogs of several well-regarded professors, including Legal Ethics Forum, Leiter's Law School Reports and Balkinization.  I have since written, and now posted on SSRN, a more fulsome review of the book, summarized by this abstract:

This is a review of The Destruction of Young Lawyers: Beyond One L by Douglas Litowitz (Akron: University of Akron Press, 2006).

While the book may be a credible (if tiresome) account of Mr. Litowitz's own unhappiness as a law student and large firm new associate, and evidence of the fact there are unhappy lawyers in the world, it overpromotes itself on two counts. Although it is written by a law professor and published by a university press, and makes broadZaringd_1 and universal claims about evils in the legal profession, it is largely a slapdash pastiche of hyperbole and anecdote. Nor is it a balanced view of the profession. Rather, it is one man's attempt to transpose his own journey through hopelessness and despair into a universal truth under the patina of scholarship.

Wihender_1       What you cannot tell from the abstract is that the review juxtaposes good work by Bill Henderson (Indiana-Bloomington, left) and DavidJ_conley_1 Zaring (Washington & Lee, above right), as well as an interesting piece by John Conley (North Carolina, below right) to which they cite briefly: "How Bad Is It Out There?: Teaching and Learning about the State of the Legal Profession in North Carolina," 82 N.C. L. Rev. 1943 (2004).

My piece will appear in Hart Publishing's Legal Ethics, of which Brad Wendel (Cornell) is the book review editor.

UPDATE:  One of the book's themes is how the unholy cabal of elite law schools and big law firms force law students to keep taking those $160,000 starting salaries to pay off the six-figure student debt.  Somebody forgot to tell NYU.  Today from Peter Lattman at the Wall Street Journal's Law Blog is a summary of Crain's New York's "The  Business of  Law  Report" which includes:

A Q&A with Joshua Perry, a recent NYU Law grad who took a job as a public defender in New Orleans. When asked about his law-school debt, he explained that at $40,000 per year there’s no way to repay a six-figure debt bill, but NYU has a generous loan repayment program. As long as Perry stays in the public interest for five years, he says that NYU picks up his loan debt and making his payments as long as his salary stays below a certain cap.

February 27, 2007 in Abstracts Highlights - Academic Articles on the Legal Profession, Billable Hours, Law & Business, Law & Society, Law Firms, Lawyers & Popular Culture, Lipshaw, Partners, Teaching & Curriculum, The Practice | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 20, 2007

Mardi Gras Day!

It's Mardi Gras Day in New Orleans.  I will be posting pictures over the next few days at my Flickr site.

As Alan Childress has told me many times, and locals keep repeating, the essence of Mardi Gras in New Orleans is not the drunken debauchery that may well take place, if you look for it, on Bourbon Street.  It is really an occasion for family and friends.  I walked most of the length of Uptown New Orleans today, starting early in the morning near Audubon Park by myself, meeting up with friends at the Zulu parade, and getting to the French Quarter with them by early afternoon.
I hope you enjoy the pictures.  That's Mayor Nagin up at the left, riding at the head of the Zulu Parade, and me at the right.  The most treasured "throws" of the Carnival season in New Orleans are the Zulu coconuts (hand decorated by the ZuluWjeffstreasures krewe members), which by law can no longer be thrown, for fear of injuring someone.  You get one by sidling up to the float and asking for one.  That's what I did.  Having successfully secured my coconut, I decided to take a rest behind the front lines (in the chairs owned by Tulane Law School colleague Katherine Mattes, criminal clinical law professor, who with Professor Pam Metzger, runs the Tulane Law School's extraordinary and lauded clinic).

[Jeff Lipshaw]

February 20, 2007 in Lipshaw | Permalink | Comments (0) | TrackBack (0)

Wednesday, February 14, 2007

New Orleans Tornados

Posted by Jeff Lipshaw

Just when you thought it was safe to go back in the water, more weather-related problems in New Orleans (my wife and son are digging out in Indianapolis).

The night before last, at about 3:00 a.m., a tornado touched down in Westwego, which is across the Mississippi River from New Orleans, then proceeded across the river to what is known as theCarrollton Carrollton area of Uptown New Orleans.  This is a mixed student-permanent neighborhood between the Tulane campus and the bend of the Mississippi River as it proceeds north and west.  (On the map at right, the Tulane campus is the dark spot in the middle; the tornado touched down just to the left where it says "East Carrollton.")  There is also a commercial strip along Maple Street with bars, restaurants, and my regular Starbucks, which has the singular advantage of opening at 6:00 a.m.

OhouckAlthough there was a death and injuries in another affected neighborhood, as I understand it, there were no serious injuries in the Carrollton area.  Two Tulane professors live right there, and had some fairly significant damage to their homes.  When the power went out in the law school for a while yesterday morning, I went to Oliver Houck's house to see if I could help, and saw at least one house down the street that had its entire second story taken off, and another with the entire front of the house gone.  In true tornado fashion, however, two blocks to the east, there was no indication of a storm.  (I have previously noted how Professor Houck has become one of my heroes.)

I never did find Oliver; apparently he and Lisa were clearing debris in the back of the house, where most of the damage was sustained.  True, however, to his almost mythical persona, Ollie showed up later in the afternoon for the faculty meeting.  Also typical of Ollie, as nobody in the neighborhood, amazingly, was hurt, he called it one of the most exhilarating, fun days of his life, the kind of thing we experience when communities and neighborhoods truly act as communities and neighborhoods, apropos of this post-Katrina thought.

February 14, 2007 in Lipshaw | Permalink | Comments (1) | TrackBack (0)

Sunday, February 11, 2007

Mardi Gras, or Why Tulane Law School Has No Classes on Feb. 19 & 20

Img079 I visited a friend in Houston over the last couple days, and was trying to figure out why there was so much traffic on I-10 East when I got within about 25 miles of NewImg082 Orleans yesterday.  Stupid me.  The Mardi Gras parades have started.  I walked over to Napoleon Street, and saw the Sparta and Pegasus parades.  Double stupid me.  I forgot to take my good camera, so I snapped a bunch of pictures with my cell phone.  Hence, the pictures are not very good.  These are of the floats as they wait on Napoleon Street for the parade to begin.  The parade turns right on St. Charles Street and goes all the way downtown and, I am told, concludes at the site of the Mardi Gras ball of the krewe (the parade club) sponsoring the parade.  The floats are kept in warehouses around town called "dens" and repainted every year in that year's parade theme.

Img088 To the left we have the King of Sparta before he takes his place on his horse (no, this is not the dean before a faculty meeting).  In addition to the King, there is aImg084 Queen, and maids.  To the right we have a local high school band assembling.  Below, the maids are preparing "throws" - beads and Img085other tchotchkes that the participants riding on the floats throw to passersby. 

I got to the parade site about an hour below it was to start, and it was well-populated but notImg093_1 overwhelming.  Holly (right), a born and bred New Orleanian, filled me in on a lot of the details, and said that it will be substantially more crowded next weekend.  Img089_1Accordingly, there will be more of the "ladder seat" devices you see below left.

As it got dark, my beleaguered cell phone was doing the best it could, so the  pictures of the parade itself leave something to be desired.  Img096_1We have the King of Sparta on his steed, and the Queen following on her float.  Being moderately tall, it was pretty easy to snare the throws as the float riders tossed them, although there is a hierarchy to the "value" of the throws:  the longer the chains, and the heavier the beads the better, and some of the beadsImg103_1 have the medallions of the krewes.  I got two of the Sparta medallions, and Holly told me that was a good catch.  Even giving away a good portion of what I caught, I was soon wearing what felt like about twenty pounds around my neck.  The really good throws are things like plush footballs and animals, but I didn't get any.  One difference between the more family-oriented uptown parades and the French Quarter parades is that Uptown you do not find the phenomenon of flashing some part of one's bare anatomy to provoke a good throw in one's direction.  But you do need to stay alert.  The throws often come out of nowhere, and sometimes there's a whole chunk of them stuck together, and you could get hurt.

There were bands and other music interspersed between the floats, some good,Img109 and some not so good. Each parade took about twenty minutes to pass in front of mImg106_1e, with there being about twenty minutes between the two evening parades that were following the same Uptown route.

The walk back up Magazine Street to my house was about a mile and a half, and I was burdened but unbowed by the neckwear.  I got a couple waves from waiters in the restaurants, and nobody seemed to make anything of it at the Whole Foods.  Amber, another spectator (22, LSU MBA student, Southern Miss grad, native of Gretna) told me youImg110 can collect the throw to "rethrow" the next year.  Here's the stash in the living room after I sorted it out.

If you aren't Catholic, have never participated in Lent except as a spectator, and aren't quite sure why you need to party hearty in anticipation of it, the whole thing is a little weird, and about as far removed as you can be in the same country from the propriety of Boston in mid-January we had experienced only a couple weeks ago.  And I'm told that although the hotels are doing much better, there are still rooms available!

[Jeff Lipshaw]

February 11, 2007 in Lipshaw | Permalink | Comments (1) | TrackBack (0)