Business Law Prof Blog

Delaware legislature to consider attorney fee shifting bylaws

A couple of weeks ago, I posted about the Delaware Supreme Court's recent decision in ATP Tour, Inc., et al. v. Deutscher Tennis Bund, et al., which held that nonstock corporations may adopt bylaws that require unsuccessful plaintiffs engaged in intracorporate litigation to pay the defense's attorneys fees.  Though the decision did not technically apply to stock corporations, nothing in the decision suggested the analysis for stock corporations would be any different.

The decision prompted an immediate, somewhat panicked response from the Delaware plaintiffs' bar, while some defense attorneys counseled their clients to adopt such bylaws to discourage merger litigation.

Though, as the previous link shows, Steven Davidoff, at least, is skeptical that these provisions would become popular with publicly traded corporations, there has been a quick push to have the Delaware legislature amend the DGCL to overrule ATP.  The Delaware Corporation Law Council has proposed new legislation that will be considered by the Delaware legislature by June 30.

My MOOC Experiences

Last year, Harvard Business School Professor Clayton Christensen said “15 years from now half of US universities may be in bankruptcy.”  

So, I guess half of our schools have about 14 more years to go, according to Christensen.

At least part of the reason for Clayton Christensen’s prediction is the rise of online education, including so-called “massive open online courses” or “MOOCs.”

Recently, I completed a few MOOCs, mostly because I wanted to learn about MOOCs first-hand.  I also picked subjects that interested me.

The courses I took were:

Yale – Game Theory (Ben Polak)

MIT – The Challenges of Global Poverty (Abhijit Banerjee and Esther Duflo)

Northwestern – Law and the Entrepreneur (Esther Barron and Steve Reed)

I will share some of my thoughts on MOOCs during my normal Friday posting slot, in three installments: (1) Effective MOOCs? (2) MOOCs v. In-Person Courses, and (3) MOOCs and the Future of Higher Education. 

ISS Goes After Wal-Mart and Target

Institutional Shareholder Services (ISS) has always had a lot of influence - some think too much- and it's also received quite a bit of press this week. First, the Wall Street Journal reported that the proxy advisory firm slammed Wal-Mart's board for lack of independence regarding its executive pay practices in particular how compensation is (un)affected by declining company performance. ISS also raised concerns about the company's ongoing FCPA troubles and how or whether executives will be held accountable. ISS called for more board independence. Given the fact that the Walton family owns 50% of the company stock, it’s not likely that ISS’ recommendations will have much weight, but it’s still noteworthy nonetheless.

This morning, the press reported that ISS took aim at another troubled company, Target. In addition to its revenue declines, Target also reported a massive data breach last year, which led to numerous shareholder derivative suits. ISS recommended that seven of the ten board members lose their seats for failing to adequately monitor the risk. Target has already made a number of significant management changes. This recommendation from ISS may be an even bigger wake up call to board members (including those outside of Target) about their Caremark duties, even if Target shareholders do not follow the ISS recommendation.

I will stay tuned and will be sure to save these articles for next semester's business associations class.

 

Greetings from Law and Society

Greetings from the Law and Society conference. Tomorrow I serve as the discussant on a panel entitled Theorizing the Corporation at Legal Intersections with Professors Charlotte Garden of Seattle, Sarah Haan of Idaho and Elizabeth Pollman of Loyola, Los Angeles. We will debate/discuss corporate personhood and how Citizens United has affected elections in ways that people might not expect. I'll explain more about that and other panel discussions in next week's blog.

If you're at the conference or Minneapolis, swing by the University of St. Thomas, Room MSL 458 at 12:45 on Friday.

Business Law Professor Jobs

Babson College (near Boston, MA), well-known for their entrepreneurship program, recently posted a tenure track assistant or associate professor of business law position.

University of Wisconsin - Madison has posted two Clinical Assistant Professor positions in their Law & Entrepreneurship Clinic: Systems and Operations. 

Heminway on Investor and Market Protection in the Crowdfunding Era

Professor Joan MacLeod Heminway (Tennessee) has a new article posted on SSRN entitled Investor and Market Protection in the Crowdfunding Era: Disclosing to and for the 'Crowd.' I look forward to reading the article this summer.  The article abstract is posted below:

This article focuses on disclosure regulation in a specific context: securities crowdfunding (also known as crowdfund investing or investment crowdfunding). The intended primary audience for disclosures made in the crowdfund investing setting is the “crowd,” an ill-defined group of potential and actual investors in securities offered and sold through crowdfunding. Securities crowdfunding, for purposes of this article, refers to an offering of securities made over the Internet to a broad-based, unstructured group of investors who are not qualified by geography, financial wherewithal, access to information, investment experience or acumen, or any other criterion.

To assess disclosure to and for the crowd, this short symposium piece proceeds in three principal parts before concluding. First, the article briefly describes securities crowdfunding and the related disclosure and regulatory environments. Next, the article summarizes basic principles from scholarly literature on the nature of investment crowds. This literature outlines two principal ways in which the behavioral psychology of crowds interacts with securities markets. On the one hand, crowds can be “mad” — irrational, foolish, and even stupid. On the other hand, crowds can be “wise” — rational, sensible, and intelligent. After outlining these two strains in the literature on the behavioral attributes of crowds, the article assesses the possible implications of that body of literature for the regulation of disclosure in the securities-crowdfunding setting. The work concludes by asserting that, when considering and designing disclosure to and for the securities-crowdfunding crowd, the insights from this behavioral literature should be taken into account.

Law & Society Corporate Law Panels 2014

Tomorrow kicks off the 2014 Law & Society Annual meeting in Minneapolis, MN.  Law & Society is a big tent conference that includes legal scholars of all areas, anthropologists, sociologists, economists, and the list goes on and on.  A group of female corporate law scholars, of which I am a part, organizes several corporate-law panels. The result is that we have a mini- business law conference of our own each year.  Below is a preview of the schedule...please join us for any and all panels listed below.

	Thursday 5/29	Friday 5/30	Saturday 5/31
8:15-10:00		0575 Corp Governance & Locus of Power U. St. Thomas MSL 458 Participants: Tamara Belinfanti, Jayne Barnard, Megan Shaner, Elizabeth Noweiki, and Christina Sautter
10:15-12:00		1412 Empirical Examinations of Corporate Law U. St. Thomas MSL 458 Participants: Elisabeth De Fontenay, Connie Wagner, Lynne Dallas, Diane Dick & Cathy Hwang
12:45-2:30		1468 Theorizing Corp. Law U. St. Thomas MSL 458 Participants: Elizabeth Pollman, Sarah Haan, Marcia Narine, Charlotte Garden, and Christyne Vachon	1:00 Business Meeting Board Rm 3
2:45-4:30	Roundtable on SEC Authority View Abstract 2967 Participants: Christyne Vachon, Elizabeth Pollman, Joan Heminway, Donna Nagy, Hilary Allen	1473 Emerging International Questions in Corp. Law U. St. Thomas MSL 458 Participants:  Sarah Dadush, Melissa Durkee, Marleen O'Conner, Hilary Allen, and Kish Vinayagamoorthy	1479 Examining Market Actors U. St. Thomas MSL 321 Participants:  Summer Kim, Anita Krug, Christina Sautter, Dana Brackman, and Anne Tucker
4:45-6:30			1474 Market Info. & Mandatory Disclosures U. St. Thomas MSL 321 Participants: Donna Nagy, Joan Heminway, Wendy Couture, and Anne Tucker

While You’re At It: A Request to the U.S. Supreme Court to Fix Another Case

A New York Times article this weekend explained that many U.S. Supreme Court decisions are altered after they have been published, sometimes quickly and other times much later.  Article author Adam Liptak explains:

The Supreme Court has been quietly revising its decisions years after they were issued, altering the law of the land without public notice. The revisions include “truly substantive changes in factual statements and legal reasoning,” said Richard J. Lazarus, a law professor at Harvard and the author of a new study examining the phenomenon.

The court can act quickly, as when Justice Antonin Scalia last month corrected an embarrassing error in a dissent in a case involving the Environmental Protection Agency.

But most changes are neither prompt nor publicized, and the court’s secretive editing process has led judges and law professors astray, causing them to rely on passages that were later scrubbed from the official record. 

I have followed this particular change because of my interest in the EPA case, but I suspect this article is the first many people had heard of it.  It makes some sense that articles would be fixed before going to final print, but the idea that opinions have been changed years later is rather remarkable to me, especially without some sort of formal notice.  Now that we all know they can go back and fix opinions, though, I have one I’d like the court to revisit.  

In 1992, the court heard Quill v. North Dakota, 504 U.S. 298, deciding that a state may not impose a tax collection obligation on a business that lacks a physical presence in the state.  The court noted, though, that Congress could change that reality with legislation.  In Quill, in declining to apply a bright-line rule, the court referred to an energy law case, Public Utils. Comm’n of R.I. v. Attleboro Steam & Elec. Co., 273 U.S. 83 (1927). 

In Attleboro, that Court determined that a Rhode Island Commission order allowing an electricity seller to increase its price in a wholesale electric requirements contract between a Rhode Island utility (seller) and a Massachusetts utility (buyer) “place[d] a direct burden upon interstate commerce.”  Id. at 84. The Court stated that neither state could regulate the interstate transaction because such regulation was only permissible at the federal level.  This decision led Congress to pass the Federal Power Act (FPA), which was created (in part) to close what was dubbed the “Attleboro Gap.”

The U.S. Supreme Court has confirmed this more than once:

[T]he original FPA did a great deal more than close the gap in state power identified in Attleboro. The FPA authorized federal regulation not only of wholesale sales that had been beyond the reach of state power, but also the regulation of wholesale sales that had been previously subject to state regulation.”

New York v. FERC, 535 U.S. 1, 20-21 (2002) (citing Attleboro).

Similarly, in another case, the Court stated that the FPA 

intended to “fill the gap”—the phrase is repeated many times in the hearings, congressional debates and contemporary literature—left by Attleboro in utility regulation. Congress interpreted that case as prohibiting state control of wholesale rates in interstate commerce for resale, and so armed the Federal Power Commission with precisely that power.

United States v. Public Utils. Comm’n of Cal., 345 U.S. 295, 307-08 (1953).  (For a detailed description of Attleboro’s history, see Frank R. Lindh & Thomas W. Bone Jr.’s Energy Law Journal article, State Jurisdiction Over Distributed Generators (pdf here).

Returning to the Quill case, there Court stated:

Attleboro distinguished between state regulation of wholesale sales of electricity, which was constitutional as an "indirect" regulation of interstate commerce, and state regulation of retail sales of electricity, which was unconstitutional as a "direct regulation" of commerce.

 Id. at 317.  As I see it, this statement is wrong, though I admit I find this exerpt useful for getting students to discuss these concepts in Energy Law. Again, Attelboro held that direct regulation of retail sales was permissible, but that the regulation of interstate wholesale rates was not permissible by either state. As the cases above show, Quill did not change the state of the law, but Quill still mischaraterizes the law of Attleboro.  So, this is my request: Should any Supreme Court Justices or their clerks (or others who can help) be reading the Business Law Prof Blog, please consider putting pen to paper and cleaning up Quill. Or, as Oscar Rogers likes to say, "Fix it!"

A Dedicated Bibliophile Admits E-Readers are Ready

I love books. I have been buying and collecting books since I was a kid. But I have decided it's finally time to change. E-readers have finally arrived. I know that electronic books and readers have been around for a long time now, but they’re finally good enough to satisfy even bibliophiles like me.

I have been reading everything from law review articles to law school memos on my laptop for some time now. But, until recently, that hasn’t extended to books, either the books I read for work or the books I read for pleasure.

It wasn’t for lack of interest. I looked at the earliest e-readers when they came out, but decided they wouldn’t allow me to do everything I could do with a physical book in hand. A few years ago, I bought a Nook from Barnes and Noble, but it’s been in a drawer for quite a while. The image was excellent; reading on it was a pleasant experience. But it just didn’t allow me to move around in the book, highlight, and take notes as well as I wanted to.

Six months ago, I bought a Kindle from Amazon. Not the Kindle Fire, with the full-color Internet browser. I’m perfectly happy with my smartphone for Internet browsing when I’m not on my computer. I bought the Kindle Paperwhite, a dedicated e-reader. And that, in the words of Robert Frost, has made all the difference.

I love my Kindle. (To be fair, I have heard that the latest edition of the Nook is also much better than the earlier version I bought.) I can do everything I would do with a physical book and more.

The print is incredibly easy to read. I can change the backlighting to accommodate where I’m reading. I can change the font to accommodate my aging eyes.

I can navigate within the book easily using a pull-down menu. For most new books, I can go to footnotes simply by clicking on them. I can easily see how much I have left to read in a chapter, without even having to turn a page.

I can highlight. I can take notes. I can easily access all of those highlights and notes in a single location, but quickly go to the particular page to see the full context. I can instantly look up words I don’t know. (I always did this as a student, with a dictionary sitting on my study desk, but I seldom have a dictionary handy when I’m sitting on the couch reading casually.)

Finally, I can get any book immediately, whenever I want it. No more checking to see if the local library or bookstore has it. No more waiting several days for Amazon to deliver it. And my carry-on baggage is suddenly several pounds lighter!

I know many of you have already made the jump to e-readers. But if you haven't yet, now's the time. (To be completely honest, I must admit I still haven’t convinced my wife the law librarian. She stubbornly clings to her three-foot-high pile of books in our living room. But, if you, unlike her, haven’t sworn to go to your grave with a physical book in your hand, check out the newest generation of e-readers.)

ICYMI: Tweets From the Week (May 25, 2014)

"The Role of Tort Law in Disrupting Corporate Manipulation of Societal Cognition" http://t.co/CTvp4iwKEd

— Stefan Padfield (@ProfPadfield) May 19, 2014

"management of distressed companies often bury their heads in the sand until it is too late" http://t.co/X3SFyrTEYx #corpgov

— Stefan Padfield (@ProfPadfield) May 20, 2014

Critiquing Cost-Benefit of Financial Regulation event background readings are posted here http://t.co/2TgZVd39P1 #cbaf

— Martha McCluskey (@MarthaMcCluskey) May 20, 2014

"This paper..argues that the self-regulation of investment bankers offers no credible deterrence against misconduct." http://t.co/mueTlSRi8d

— Stefan Padfield (@ProfPadfield) May 22, 2014

Rebellious Economics Students Have a Point : The New Yorker - http://t.co/XlSi12MelE

— Pavlina R Tcherneva (@ptcherneva) May 15, 2014

Two Tiers

Following up on Steven Bradford’s post regarding the Fourth Circuit’s interpretation of Janus Capital Group v. First Derivative Traders (2011):

The SEC recently announced  that it intends to pursue more cases under Section 20(b) of the Exchange Act, which prohibits people from violating the Exchange Act “through or by means of any other person.”  I suspect this move will have serious implications for private cases under Section 10(b).

[read more]

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McDonnell on Fiduciary Duty in Benefit Corporations

Brett McDonnell (Minnesota) recently posted a new article entitled Committing to Doing Good and Doing Well: Fiduciary Duty in Benefit Corporations.  I have not read the article yet, but it is printed and in my stack for the summer.  The abstract is below. 

Can someone running a business do good while doing well? Can they benefit society and the environment while still making money? Supporters of social enterprises believe the answer is yes, as these companies aim at both making money for shareholders while also pursuing other social benefits. Since 2010, states have begun to enact statutes creating the “benefit corporation” as a new legal form designed to fit social enterprises. Benefit corporations proclaim to the world that they will pursue both social good and profits, and those who run them have a fiduciary duty to consider a broad range of social interests as they make their decisions rather than a duty to focus solely on increasing shareholder value. Does this novel fiduciary duty effectively commit these businesses to doing good? How will courts actually apply this duty in practice? Will this new duty accomplish its goals without unduly high costs?

 

This article is among the first to analyze in detail the fiduciary duty provisions in several versions of these new benefit corporation statutes. It compares duties in benefit corporations to duties in traditional corporations in the leading categories of fiduciary duty cases. It argues that there is likely to be a modest “flattening” in the risk of liability for directors and officers of benefit corporations. That is, as compared to the level of risk in ordinary corporations, the risk of being held personally liable will be bigger for decisions where that risk is weakest in ordinary corporations, while the risk of liability will be smaller for decisions where that risk is highest in ordinary corporations.

 

The article then asks whether the statutes strike the proper balance in holding directors and officers accountable. The statutes could be too strong if they scare off investors and managers. They could be too weak if they allow managers to proclaim their virtue while ignoring their duties with no fear of legal sanctions. Neither possibility can be dismissed, but this paper argues that the statutes have got it just right. They create enough risk of liability that managers must pay attention to their legal duties, allowing courts to help shape norms of appropriate behavior, while not imposing such high risk that this promising new business form becomes unattractive.

Commencement Speakers and The Giver

Much has been written about the protests at various schools over proposed commencement speakers.  I am not sure I have much original to add to the many thoughts that have been shared on the issue (See, e.g., Jonathan Adler (Case Western), The Volokh Conspiracy; Stephen Carter (Yale), Bloomberg; Glenn Harlan Reynolds (Tennessee), USA Today; Editorial Board, Washington Post), but the controversy did make me think of the dystopian society in The Giver where “Sameness” rules.

One of my younger sisters recently accepted a job with Walden Media, which is producing the upcoming film version of The Giver with The Weinstein Company (shameless plug - in theatres August 15, 2014).  My sister was amazed that I hadn’t read The Giver, as it is supposedly regular middle school reading, but it looks like the book (published in 1993) was not in the curriculum in time for me.  Yes, I feel older every day. 

Anyway, in a single day a few weeks ago, I read a borrowed copy of The Giver, which was a nice break from legal treatises and law review articles.  While I understand the “Elders” in The Giver were trying to protect people by ridding the community of differences, pain, conflict, and ridicule, it made for a shallow existence. 

Some of my most valuable moments in school occurred when I faced views I disagreed with and had to grapple with them.  As a professor, the most valuable conversations are often those with knowledgeable people with opposing opinions and ideas.  Going forward, I hope we will encourage engagement with those who see things differently than we do and continue the search for a more nuanced understanding of complex issues.

Brown and Giles on Stock Purchase Agreements

Two of my former colleagues at King & Spalding LLP, Jaron Brown and Tyler Giles, sent me their recently published book, Stock Purchase Agreements Line by Line.  Jaron Brown made partner in King & Spalding’s M&A group before moving in-house to Novelis, Inc.  Tyler Giles moved in-house earlier in his career (to Equifax, Inc.) and has since moved back to law firm life as a partner at FisherBroyles LLP.

The book appears aimed at practitioners, but it could also be a valuable resource for those who teach M&A or drafting courses.  The book includes various practical pointers for drafting typical provisions in a stock purchase agreement and, as the title suggests, goes through an SPA line by line.  The authors are true experts in their subject matter, and I look forward to using the book.   

What if Companies Could Pick Their Shareholders?

Earlier this week, Stanford University's Rock Center for Corporate Governance released a study entitled “How Investment Horizon and Expectations of Shareholder Base Impact Corporate Decision-Making.” Not surprisingly, the 138 North American investor relations professionals surveyed prefer long-term investors so that management can focus on strategic decisionmaking without the distraction of “short-term performance pressures that come from active traders,” according to Professor David F. Larcker. Companies believed that attracting the "ideal" shareholder base could lead to an increase in stock price and a decrease in volatility.

The average “long-term investor” held shares for 2.8 years while short-term investors had an investment horizon of 7 months or less.  Pension funds, top management and corporate directors held investments the longest, and companies indicated that they were least enamored of hedge funds and private equity investors.  Those surveyed had an average of 8% of their shares held by hedge funds and believed that 3% would be an ideal percentage due to the short-termism of these investors. Every investor relations professional surveyed who had private equity investment wanted to see the ownership level down to zero.

I wonder what AstraZeneca’s investor relations team would have said if they could have participated in the survey given the various reactions by its shareholders to Pfizer’s proposed takeover. (See here and here to read about the divisions within the shareholder ranks). What would AstraZeneca’s “ideal” shareholder base look like? BlackRock, which owns 8%, is the company’s largest shareholder. Will it sway AstraZeneca’s board to reconsider its rejection of Pfizer's bid and should it? Pfizer’s purported behind the scenes attempts to get shareholders to express their anger at AstraZeneca’s board may not be working, but this may be a prime example of why companies wish they could pick their shareholders.

As one of the study’s authors Professor Anne Beyer aptly concluded, “companies see very large, tangible benefits to managing their shareholder base, so there seems to be a real opportunity for some companies to improve corporate decisions and increase their value by paying close attention to who holds their shares.” 

 

 

 

2014 Proxy Season

Proxy issues are an interesting gauge of current and emerging corporate governance issues.  Even if the proposals don't pass, they provide a tool to take investors' and companies' temperature on controversial issues.  Alliance Advisors issued a detailed report on 2014 proxy season trends and expectations, which is available for download here.  A few highlights are discussed below.

• Majority Voting. A trend towards majority voting proposals with support from ISS and Vanguard means that many companies will be facing pressure to consider changes to director elections.
• Declassified Boards.  While the Harvard Law School Shareholder Rights Project has been successful in obtaining declassification of 23 of 13 target companies, the academic and industry debate continues about the efficacy or harm of classified boards.  
• Board Tenure & Diversity.  These initiatives seek to turn the tide against board compositions that are dominated by white men who hold director positions for extended periods of time.

"ISS’s fall policy survey revealed that 74% of investor respondents consider board service over 10 years to be problematic. Similarly, a recent academic study of S&P 1500 companies found that firm value peaks when average director tenure reaches nine years, and then drops off by as much as 10%.

***

According to a 2013 Catalyst Census of Fortune 500 companies, the percentage of board seats held by women remained flat between 2012 (16.6%) and 2013 (16.9%)."

• Proxy Voting Mechanisms.  Shareholder activist John Chevedden is pushing proposals such as enhanced confidential voting and uniform vote reporting to reform the proxy process.
• Social Issues.   Under this diverse category of issues, a few standouts have potential significance in the 2014 season.
• Political Spending.  Shareholder proposals for disclosures of political spending will increase in the wake of the SEC's decision not to pursue these disclosures as a part of its upcoming agenda.  The Center for Political Accountability has 60 proposals pending and another coalition is sponsoring 48.
• Human Rights.  In the wake of the SEC's attention to conflict mineral disclosures, additional shareholder proposals are expected on the issue. 
• Climate Change.  Citing to the midterm elections and the flagging climate change reform occuring at the federal level, increased climiate change proposals are expected, many of which will employ creative strategies to apply pressure on corporations.

"As part of a broader climate strategy, social and environmental activists are challenging companies’ political activities on energy and climate change, particularly their involvement with certain trade associations and legislative groups whom the proponents feel are obstructing progress on climate-related legislation."

-Anne Tucker

 

Too Many Administrators in Education?: It's More Than Just Numbers

The New York Times ran two articles this week about administrator and executive pay that struck a chord with me.  One piece was about a new report linking student debt and highly paid university leaders.  The article discusses a study, “The One Percent at State U: How University Presidents Profit from Rising Student Debt and Low-Wage Faculty Labor.”  The study reviewed “the relationship between executive pay, student debt and low-wage faculty labor at the 25 top-paying public universities.”

Then-Ohio State President E. Gordon Gee was the highest-paid public university president for the time period review. The study found that

Ohio State was No. 1 on the list of what it called the most unequal public universities. The report found that from fiscal 2010 to fiscal 2012, Ohio State paid Mr. Gee a total of $5.9 million. [$2.95 million per year.] During the same period, it said, the university hired 670 new administrators, 498 contingent and part-time faculty — and 45 permanent faculty members. Student debt at Ohio State grew 23 percent faster than the national average during that time, the report found.

[In the interest of full disclosure, I should note that President Gee is the president of my institution, for the second time, and he’s my neighbor. He also makes considerably less money here.]

 The other article was about the health care industry, titled: Medicine’s Top Earners Are Not the M.D.s. That article reports that doctors, “the most highly trained members in the industry’s work force,” are in the middle of the pay scale for medical salaries.  The article explains: 

That is because the biggest bucks are currently earned not through the delivery of care, but from overseeing the business of medicine.

The base pay of insurance executives, hospital executives and even hospital administrators often far outstrips doctors’ salaries, according to an analysis performed for The New York Times by Compdata Surveys: $584,000 on average for an insurance chief executive officer, $386,000 for a hospital C.E.O. and $237,000 for a hospital administrator, compared with $306,000 for a surgeon and $185,000 for a general doctor.

And those numbers almost certainly understate the payment gap, since top executives frequently earn the bulk of their income in nonsalary compensation.

Is there a place where it isn't the case that administrators make more than those actually carrying out the endeavor?  Maybe sports and entertainment, to a degree. There has been a significant change in those areas over the past 30 or so years.  Owners (and production entities) often still make tons of money, but top player salaries often dwarf those of key executives, coaches, and managers.  That was not always the case.  Take the NBA for example. The average NBA salary in 1970 was $35,000 (equal to about $207,000 today.) Today’s average salary: $5 million.  Actors and musicians take home a lot more than they used to, also, at least among those at the top. 

I am not one to bash educational administrators.  I have been one, so that may be part of it, but even before that, I appreciated that there are things that need to happen to deliver the full educational experience that are not part of the classroom.  Still, it also seems that the number of people who are there to support the delivery of services, like education and medicine, continue to grow at an absurd rate.  Even counting contingent and part-time faculty, Ohio State hired more than 1.23 new administrators for every new teacher in the test period.

As my co-blogger Steve Bradford noted yesterday regarding law school curriculum reform: 

Law faculty members can legitimately disagree about the best way to educate law students. But our goal should be to provide the best education we can, within the cost constraints we face. If professors at some law schools don’t take that responsibility seriously, we might lose students to schools focusing more on enrollment than education. If so, it’s sad for the profession, but at least we’ll go down fighting for what we know is right.

The same is true at the administrative level in law schools.  We should commit to allocating resources to administrative support that supports the educational process of preparing students for practice and for ensuring students actually get to practice, if that is what they seek.  This is often true for areas like career services, bar passage, and experiential learning. We should be educating students to be able to be good lawyers and sound professionals, but we also need to help ensure they have things they need to practice (e.g., bar admission) and the ability to practice (i.e., a job). 

Sometimes that means new administrators in new or expanded roles, but that may mean reallocating resources from one area to another rather than adding new roles.  The challenge, of course, is knowing whether the new administrative hires are delivering services that our students need or are they jobs that are serving the institution at the expense of our students.  All institutions need to make a serious attempt to answer that question because it's not just about the number of administrators. It's also about what those administrators do.  

Doing what’s right for our students is not always the same as doing what they want.  Still, as faculty and administrators, we also need to be clear that doing what we want is often not the same as doing what is best for our students. 

The Wrong Reason to Oppose Curriculum Reform

OK, where were we before the disruption of the blog?

Howard Wasserman at PrawfsBlawg has posted a comment on Justice Scalia’s recent commencement address at William & Mary. Justice Scalia argued against the proposals many have made for a two-year law degree, and argued in favor of more required courses in the second and third years. (Professor Wasserman links to the full text of Scalia’s address, if you want to read it.)

Professor Wasserman supports the general idea, but argues that enacting such reforms would put schools at a competitive disadvantage. A school with upper-level requirements would lose out to a school that offered students more flexibility. All else being equal, prospective students would choose flexibility over rigid requirements.

Professor Wasserman is probably correct. At least at the margin, students would probably prefer fewer requirements. I’m not sure how much this would affect law schools with stricter requirements, given the many other factors students consider in choosing a law school. But assume for the sake of argument that stricter curriculum requirements would put a law school at a competitive disadvantage. I don’t think that’s a legitimate reason to oppose upper-level requirements or any other reform of the curriculum.

Law faculties should require the curriculum they think best prepares students for the profession of law, competitive pressures be damned. The purpose of a law school is not to maximize enrollment. The purpose of a law school is to educate students in the law and prepare them to practice. (That does not necessarily mean focusing primarily on how-to training, but that’s an argument for another day.)

Law faculty members can legitimately disagree about the best way to educate law students. But our goal should be to provide the best education we can, within the cost constraints we face. If professors at some law schools don’t take that responsibility seriously, we might lose students to schools focusing more on enrollment than education. If so, it’s sad for the profession, but at least we’ll go down fighting for what we know is right.

Apologies for the Down Time

Our apologies to those of you who were unable to access the blog yesterday. Our blog is hosted by Typepad, and Typepad was down all day yesterday. This had absolutely nothing to do with an alien invasion force from another galaxy. To repeat, they want us to tell you that THIS HAD ABSOLUTELY NOTHING TO DO WITH AN ALIEN INVASION FORCE FROM ANOTHER GALAXY. Please return to your daily business, earthlings.

ICYMI: Tweets From the Week (May 18, 2014)

"Compliance Oversight Starts and Ends with the Board" https://t.co/kObP7ch8cG #corpgov

— Stefan Padfield (@ProfPadfield) May 17, 2014

DC Court of Appeals Denies Emergency Stay of Conflict Minerals Rule: The DC Court of Appeals denied the motion... http://t.co/mqBkLtE2Ym

— TheRacetotheBottom (@RTTBCorpGov) May 16, 2014

"Why is the UK still in the minority of EU countries that has no ... right of employees to vote for directors ...?" http://t.co/4xKn7vRv9f

— Stefan Padfield (@ProfPadfield) May 16, 2014

New @HarvardCorpGov: CII Urges SEC to Require Disclosure of Third-Party Director Compensation http://t.co/K9IVibsSbB #corpgov

— HLS Corp Gov Program (@HarvardCorpGov) May 14, 2014

"legal personhood does a better job of explaining..firms..than..nexuses of contracts..principal-agent relationships" http://t.co/LgFdQqZ67o

— Stefan Padfield (@ProfPadfield) May 15, 2014