Saturday, August 17, 2019

ICYMI: #corpgov Weekend Roundup (Aug. 17, 2019)

August 17, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, August 7, 2019

ICYMI: #corpgov Midweek Roundup (Aug. 7, 2019)

August 7, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, July 31, 2019

ICYMI: #corpgov Midweek Roundup (July 31, 2019)

July 31, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, July 24, 2019

ICYMI: #corpgov Midweek Roundup (July 24, 2019)

July 24, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, July 17, 2019

ICYMI: #corpgov Midweek Roundup (July 17, 2019)

July 17, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, July 10, 2019

ICYMI: #corpgov Midweek Roundup (July 10, 2019)

July 10, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, July 3, 2019

ICYMI: #corpgov Midweek Roundup (July 3, 2019)

July 3, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, June 26, 2019

ICYMI: #corpgov Midweek Roundup (June 26, 2019)

June 26, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Saturday, June 22, 2019

Deadweight Loss or Utopian Benefit?

I am in Colorado attending the Law & Economics Center’s 34th Economics Institute for Law Professors. It’s a fantastic conference, and I highly encourage you to attend if you can. You can view this year’s agenda here. (If you have trouble with the links, try a different browser.  If that doesn't work, let me know.)

This past Wednesday, during the “Economics of Innovation and Dynamic Competition” class, Prof. John Yun discussed the difference between static and dynamic models of competition, and how this might impact our assessment of monopolists. One aspect of this discussion focused on the concept of “deadweight loss.” For those of you not familiar with this concept, go watch the following 3-minute video from “ACDC Econ”: https://youtu.be/YNcPxPz9fng .

The video provides the standard assessment that monopolies create “deadweight loss” and that this deadweight loss is inefficient. Consequently, the conventional wisdom is that government regulation/intervention is therefore justified. However, this analysis is based on comparing the expected behavior of a monopolist with a static model of perfect competition. One of the problems with using a static model is that it fails to take into account where we’ve been or where we’re actually likely to go. A more dynamic view might prompt questions such as, “If monopoly pricing power didn’t exist, would we ever get the innovation that creates monopoly power in the first place?” Or, “If perfect competition rarely, if ever, exists in the real world, why are we using it as a benchmark for regulation?” Put another way, does it really make sense to regulate away the incentive to innovate that is created by monopoly pricing power (and the accompanying consumer and producer surplus) merely because we theorize that if we lived in the magical world of perfect competition we’d have even more surplus?

The foregoing led me to ask whether it might not be better to use “utopian benefit” rather than “deadweight loss” to describe the difference between what we get with monopoly pricing as opposed to what we’d expect to get with perfect competition. It is natural to react to a “loss” of surplus as something that should be made up, corrected, or restored – but calls to put innovation at risk in order to pursue a “utopian benefit” might lead to more appropriate caution and humility when it comes to regulation.  Let's see if we can get "utopian benefit" to catch on as an alternative to "deadweight loss."

June 22, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, June 19, 2019

ICYMI: #corpgov Midweek Roundup (June 19, 2019)

June 19, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, June 12, 2019

ICYMI: #corpgov Midweek Roundup (June 12, 2019)

June 12, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, June 5, 2019

ICYMI: #corpgov Midweek Roundup (June 5, 2019)

June 5, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, May 29, 2019

Faculty Opening: The Goodyear Tire & Rubber Company Chair in Intellectual Property Law

ICYMI: #corpgov Midweek Roundup (May 29, 2019)

May 29, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, May 22, 2019

Looking at Shareholder Voting through the Lens of Authority

The following comes to us from Bernard Sharfman:

I have slightly revised a key paragraph from the Introduction of my new article, Enhancing the Value of Shareholder Voting Recommendations. This paragraph takes the approach that shareholder voting is really more about authority than accountability. Using this approach has significant implications for the use of board voting recommendations. I would appreciate any comments that you may have on the following:

[S]hareholder voting in a public company cannot be looked at as simply another tool of accountability, i.e., a device to minimize agency costs or enhance efficiency, such as when shareholders file a direct or derivative lawsuit, initiate a proxy contest, attempt a hostile takeover, or take significant positions in the company and then advocate for change (hedge fund activism, here and here). When shareholders vote they are also participating, alongside the board, in corporate decision making. That is, they are temporarily transformed into a locus of corporate authority that rivals the authority of the board. As co-decision makers it is critical that shareholders and those with delegated voting authority, such as mutual fund advisers, have at their disposal informed and sufficiently precise voting recommendations, no matter what the source, including the board of directors. If shareholders and investment advisers with delegated voting authority feel that the board can provide them with the most precise voting recommendations, then those are the recommendations that they should use.

May 22, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, May 15, 2019

ICYMI: #corpgov Midweek Roundup (May 15, 2019)

May 15, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, May 8, 2019

ICYMI: #corpgov Midweek Roundup (May 8, 2019)

May 8, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, May 1, 2019

ICYMI: #corpgov Midweek Roundup (May 1, 2019)

May 1, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, April 24, 2019

ICYMI: #corpgov Midweek Roundup (Apr. 24, 2019)

April 24, 2019 in Stefan J. Padfield | Permalink | Comments (0)

Wednesday, April 17, 2019

ICYMI: #corpgov Midweek Roundup (Apr. 17, 2019)

April 17, 2019 in Stefan J. Padfield | Permalink | Comments (0)