(from the Harvard Law School Program on Corporate Governance website)
Hindering the S.E.C. From Shining a Light on Political Spending, New York Times DealBook, December 21, 2015 The omnibus budget agreement adopted by Congress includes a provision that prevents the Securities and Exchange Commission from issuing a rule next year that would require public companies to disclose their political spending. […] In July 2011 we [Lucian A. Bebchuk and Robert J. Jackson Jr.] were co-chairmen of a bipartisan committee of 10 corporate and securities law professors that considered this issue and submitted a rule-making petition to the S.E.C. The petition urged the agency to develop rules requiring public companies to disclose their spending on politics.
The Case For and Against Activist Hedge Funds, ValueWalk, October 20, 2015 Activist hedge funds can count on a number of supporters in academia and in the media rising up in defense of their actions. No doubt activist hedge funds have found their most persistent academic supporters in Professor Lucian Bebchuk of the Harvard Law School and his co-authors. In several papers, but most particularly in the Bebchuk, Brav and Jiang (2013) paper, the authors make several claims, which are summarized in Bebchuk’s op-ed piece in the Wall Street Journal: […]
Some Companies Balk at Disclosing Details of Political Giving, Wall Street Journal, September 15, 2015 Shareholders are hitting a wall with some major companies in their effort to persuade them to disclose how they spend corporate money to support political candidates. According to the Center for Political Accountability, at least one in 10 big publicly traded companies doesn’t reveal details of its donations to electoral candidates, parties or causes on its website, where investors could easily find it...Many investors want to know how and where companies put corporate funds to work, said Lucian Bebchuk, a professor at Harvard Law School. “Without disclosure and accountability, companies may well spend funds on political causes that insiders favor but shareholders do not.”
As Dark Money Floods U.S. Elections, Regulators Turn a
Blind Eye, Newsweek, September 30, 2013
In addition, nearly a dozen senators and more than 40 members of the House have supported [the SEC rulemaking petition], according to one of the petition’s drafters, Lucian Bebchuk, a professor of law, economics and finance at Harvard. Bebchuk scoffs at those who say new rules to disclose corporate political spending will hurt confidentiality. “One could understand such an argument for letting individuals anonymously contribute their money,” he told Newsweek. “But such an argument loses its force when public companies make political contributions. In such a case, executives contribute not their own money but shareholders’ money, and there is little basis for allowing them to keep the contribution hidden from the shareholders whose money is spent.”
77-Year-Old Man Good At Twitter, Dealbreaker, August 13, 2013
Here you can read Lucian Bebchuk’s claim that activist investors tend on the whole to improve the long-term operational performance of the companies they invest in, and here you can read Justin Fox’s application of that result to defend Bill Ackman, pointing out that his job is to “identify companies that [he thinks] could be worth a lot more than their share price indicates, and push for changes.”
CEO Pay Continues Its Crazy Upward Spiral, PolicyMic, July 17, 2013
“Short-term shareholders” is one of those loaded phrases that embattled companies love to use to describe troublesome activist hedge funds. How real is the label? Well, it may actually be a myth. And a new study shows that so-called short-term hedge funds actually create long-term value. … Mr. Lipton’s sometime foil, Lucian A. Bebchuk, a shareholder governance activist at Harvard and columnist for DealBook, took up this challenge. A recent paper by Mr. Bebchuk, Alon P. Brav and Wei Jiang examined more than 2,000 hedge fund activist events from 1994 to 2007. The authors found that in the short run, hedge fund interventions produced a 6 percent rise in stock prices. Over the longer term, a five-year period, these gains held and the firms did not underperform. Looking at other measures of returns, like returns on assets, they found similar results. The long-term gains from activism held even when the hedge funds advocated taking on leverage or other “quick buck” strategies.
A Label for Activist Investors That No Longer Fits, New York Times, July 9, 2013
The United States' economic recovery continues to limp and wheeze along, but that hasn’t stopped CEOs from raking in millions in compensation and getting a big raise last year. The New York Times recently reported that median pay package of CEOs in 2012 was $15.1 million, a hefty jump of 16% from 2011. (Compensation included salary, cash bonuses, perks, and other forms of cash, and stock as well as stock options.) …Rather, boards of directors — who set CEO packages — are influenced by “various economic incentives, reinforced by social and psychological factors, to go along with arrangements favorable to top managers,” according to professors Lucian Bebchuk at Harvard Law School and Rakesh Khurana at Harvard Business School.
Allowing Firms to Restrict Suits to Delaware to Change Legal Landscape, Wall Street Journal, July 7, 2013
A recent ruling in Delaware is poised to change the landscape in big-ticket corporate litigation-to the delight of many companies and the likely chagrin of some shareholders. Chancellor Leo Strine of the Delaware Court of Chancery late last month ruled that corporate boards may adopt bylaws requiring that most shareholder lawsuits against the companies be filed in Delaware. … The ruling effectively gives the thousands of businesses incorporated in Delaware home-field advantage in shareholder suits. … "It is undesirable for boards to have the power to adopt such limitations unilaterally without shareholder approval," said Lucian A. Bebchuk, a law professor at Harvard University and an expert on corporate governance. "Directors should not be setting the rules governing how they themselves may be sued."
New Momentum for Change in Corporate Board Elections, New York Times, July 7, 2013
Shareholder efforts that actually succeed in changing dubious corporate governance policies are so rare that when they happen, it makes you sit up and take notice. So it's worth examining the results achieved so far this year by the Shareholder Rights Project, a program operating at the Harvard Law School. And with any luck, its success might shame do-nothing investment managers, like those running many mutual funds, into action. … Directed by Lucian A. Bebchuk, a professor at the Harvard Law School and director of its Program on Corporate Governance, the Shareholder Rights Project works with seven large pension funds and a foundation to effect change at companies whose shares they own.
Annual Elections for Corporate Boards: For or Against? Huffington Post, July 7, 2013
Important developments were highlighted today by Gretchen Morgenson in The New York Times about "35 Big Steps To Accountability" in corporate board governance. According to her column, 35 additional companies have joined with the 42 that had already agreed with the Shareholder Rights Project (SRP) to reject staggered corporate board elections in favor of annual ones. The SRP is led by Harvard Law School Professor Lucian A. Bebchuk.
Harvard Prof. Says SEC Can Require Political Donation Info, Corporate Counsel, June 4, 2013
There is nothing in the Constitution—including the First Amendment—that bans the Securities and Exchange Commission from requiring public companies to disclose their spending on politics, according to Harvard law professor Lucian Bebchuk…. In a post on his Harvard law blog Monday, Bebchuk countered critics who oppose a petition [PDF] filed by him and eight other law professors asking the SEC to develop rules making public companies disclose their political spending. Bebchuk, along with Columbia associate law professor Robert Jackson Jr., co-chairs the group.
C.E.O.’s Don’t Need to Earn Less. They Need to Sweat More
Most C.E.O.’s used to be able to handle their pay negotiations in private, but the Dodd-Frank reforms, which were passed in 2010, now give shareholders the right to vote on executive compensation. This has helped usher in a so-called “say on pay” revolution, which tries to stop executives from making more money when their companies don’t do that well …Lucian Bebchuk, a professor at Harvard Law School and perhaps the leading academic voice for corporate reform, told me that the problem isn’t (just) greed. It’s the boards of directors. The directors are supposed to represent the stockholders’ interests, he says, but most public firms, where C.E.O.’s can have considerable influence over board appointments, neuter those interests. They are structured so that a board tends to side with its chief.”
White to Republicans - SEC not writing political spending rule, Reuters, May 16, 2013
The head of the U.S. Securities and Exchange Commission told lawmakers on Thursday that her agency, despite pressure from liberal groups, is not currently drafting a rule that would call for public companies to disclose their political spending. … The fifth commissioner, Democrat Elisse Walter, recently told reporters the issue was "not high" on the SEC's rulemaking agenda, and she declined to offer an opinion on the substance of the proposal. … Still, Lucian Bebchuk, a professor at Harvard Law School and one of the principal drafters of the petition, said he is optimistic that it will prevail in the end.
SEC pressed to abandon corporate political spending disclosures petition, The Washington Post, May 16, 2013
During a three-hour hearing, lawmakers said they were disturbed to learn that the SEC is considering a petition that would require publicly traded companies to disclose their political contributions. …
The professors who submitted the petition have noted that they did not agree on whether corporate political spending helped or hurt shareholders, but they all shared the view that public companies should not have free reign to spend their shareholders’ money on political communication without revealing what they’re doing. … One of the professors, Lucian Bebchuk of Harvard Law School, said the SEC would merely be doing its job if it adopted the disclosure rule, not playing politics.
Editorial: SEC could lead on disclosure of campaign funds, The Sacramento Bee, April 28, 2013
Oil companies, the chamber and other corporate interests have come out against an informed public. Specifically, they're opposing a petition urging the Securities and Exchange Commission to develop a rule requiring that publicly traded corporations disclose their political donations. … Petitioners include deep thinkers such as law professors Lucian A. Bebchuk of Harvard and Robert Jackson of Columbia, who have led the effort, and advocates such as Public Citizen, which helped organize the petition drive. There also are thousands of investors who are trying to follow their conscience.
Group Tells White to Make Issuer Disclosure Of Political Spending Her First Priority at SEC, Bureau of National Affairs, April 17, 2013
In a telephone conference with reporters, Liz Kennedy, counsel at CRC member Demos, noted that American investors and the public have submitted more than 500,000 comments in support of a rulemaking petition calling on the SEC to require the disclosures. … The rulemaking petition in question was submitted to the SEC in August 2011 by the Committee on Disclosure of Corporate Political Spending, a group comprising securities and corporate law professors co-chaired by Harvard Law professor Lucian Bebchuk and Columbia Law School professor Robert J. Jackson Jr. (153 SLD, 8/9/11).
Harvard Study: Boards, Not Shareholders, Are Short-Term Thinkers, aiCIO, April 17, 2013
The Chinese Wall between boards and shareholders that some corporations believe leads to long-term value serves the opposite end, according to a paper. ...
Lucian Bebchuk, the director of Harvard Law School's corporate governance program, has published an exhaustive study and literature review on the argument for board insulation. His conclusion: it's utter baloney.
At Banks, Board Pay Soars Amid Cutbacks, New York Times DealBook, March 31, 2013
Since the financial crisis, compensation for the directors of the nation’s biggest banks has continued to rise even as the banks themselves, facing difficult markets and regulatory pressures, are reining in bonuses and pay. … “While the Goldman pay is high, the directors are paid all in equity that cannot be cashed until they leave the board,” added Lucian A. Bebchuk, a professor at Harvard Law School. “These features are beneficial for shareholders but reduce the value of the compensation for the directors.”
Fed pushes banks to ignore rivals when setting bonuses, Reuters, March 22, 2013
The Federal Reserve is pushing banks to ignore competitors' performance when awarding bonuses, and focus squarely on their own profitability, according to pay consultants and other people familiar with the matter. … Proponents of relative value metrics say that the measures prevent executives from getting bonuses simply because the economy is growing. "I remain a strong supporter of relative performance over absolute performance," said Lucian Bebchuk, a professor at Harvard Law School who focuses on compensation and corporate governance. Bebchuk advised pay czar Kenneth Feinberg when the latter was charged with keeping bonuses in check at bailed-out banks. "Absolute performance rewards managers for improvements that are not due to their own performance," he said, adding that "when the sector as a whole does not do well, absolute performance might well fail to reward those executives who do relatively well."
Shareholders question corporate political spending, Wall Street Journal MarketWatch, February 7, 2013
The [Securities and Exchange Commission] said last month that it plans to announce a rule proposal in April requiring public companies to disclose their spending on politics … “Because the interests of managers and investors often diverge when it comes to political spending,” Harvard Law’s Lucian Bebchuk and Columbia Law’s Robert Jackson said in a blog post welcoming the SEC announcement, “disclosure is necessary to ensure that insiders are held accountable when they decide to spend investors’ funds on politics.”
Group Applauds SEC for Movement On Corporate Political Spending Issue, Bureau of National Affairs, January 14, 2013
During the CRC press call, coalition members told reporters that it is unusual for the SEC to state in its regulatory agenda that it is considering acting on a rulemaking petition. They said that sends a strong signal that the commission intends to move forward on the matter. “I'm quite optimistic that the SEC consideration will result in the issuance of a proposed rule this year,” said Harvard Law professor Lucian Bebchuk, co-chair of the Committee on Disclosure of Corporate Political Spending.
Campaign finance fight lands at the SEC’s door, Politico, January 8, 2013
Coming off the most expensive election in the country's history, the Securities and Exchange Commission is weighing a move to force public companies to stop hiding their political spending of shareholders’ dollars. [...] The push to require more disclosure began in August 2011 when a group headed by Harvard Law professor Lucian Bebchuk and Columbia Law School professor Robert J. Jackson, Jr. petitioned the agency to put a rule in place.
Fund Files Novel Suit in Delaware to Inspect Qualcomm Records on Political Expenditures, Bureau of National Affairs, January 7, 2013
The rulemaking petition thus far has resulted in more than 320,000 comments, the overwhelming majority by shareholders voicing support for mandated disclosures. In response to the large number of comments, the SEC's Division of Corporation Finance currently is considering whether to recommend that the commission move forward with the rulemaking (44 SRLR 2072, 11/12/12) [...] Harvard Law professor Lucian Bebchuk, co-chair of the Committee on Disclosure of Corporate Political Spending, Jan. 4 told BNA that the New York state fund's lawsuit is “yet another manifestation” of investors' strong interest in how companies spend their resources on political activities.
SEC Staff Considers Proposal on Corporate Political Donations, Wall Street Journal CFO Report, November 8, 2012
While many companies do make some disclosures about their political activities, there are no formal disclosure rules that make the information comparable between organizations. Companies are hesitant to disclose the donations, saying it is part of ordinary business operations...But the professors who submitted the petition, including Harvard Law School’s Lucian Bebchuk and Columbia Law School’s John Coffee, said that political spending disclosures should be required.
Do ‘Good’ Boardrooms Boost Returns?, Wall Street Journal SmartMoney, September 13, 2012
Corporate governance advocates have long tried to persuade investors they can have it both ways: Do good, and you end up doing well too. New research suggests that advice may not hold true. [...] “Just because something is a good governance provision doesn’t mean it’s a good investment,” says co-author Lucian Bebchuk. Bebchuk, who wrote the paper with two other researchers, Alma Cohen and Charles C.Y. Wang, is well-known for his criticism of the way public companies are run — in particular for his arguments that outsize executive pay reflects top executives’ political sway within the corporate world rather than realistic prices set by the market.
GE Elects Ex-Chairman of Vanguard to Board, Wall Street Journal, July 30, 2012
General Electric Co., GE +0.34% still struggling to get investors excited about its prospects, has named a person affiliated with its biggest shareholder to its board. The chairman emeritus of Vanguard Group Inc., John Brennan, was elected as a director on Friday, expanding the board's ranks of independent directors to 16. Mr. Brennan, who remains a Vanguard senior adviser, is also the lead governor of the Financial Industry Regulatory Authority, the financial industry's self-regulatory body. [...]
Bringing a representative from an investor onto a board is unusual, according to some governance experts. "Mutual funds have generally avoided board representation, because it creates legal issues for money managers," said Lucian Bebchuk, a Harvard law professor and head of the law school's corporate-governance program.
Investors Continue to Press SEC for Rules On Corporate Disclosure of Political Spending, BNA Money and Politics Report, July 18, 2012
A coalition of 14 investor and public interest groups July 16 urged the Securities and Exchange Commission to issues rules requiring companies to disclose their political expenditures, saying that shareholder interest in such disclosures is reaching new highs in 2012. [...] Harvard law professor Lucian Bebchuk, co-chair of the Committee on Disclosure of Corporate Political Spending, told BNA that he believes the SEC ultimately will take up the rulemaking. “The petition has attracted a record number of comments, and the comments have been overwhelmingly positive,” Bebchuk said. “There is strong evidence that investor interest in receiving more information on the subject is substantial, and the case for greater transparency in this area is very strong. I therefore fully expect that the SEC will give a serious consideration to the rulemaking petition.”
The Great Debate, Corporate Counsel, July 1, 2012
But it appears that broader support is out there. Last August a group of 10 corporate and securities law experts submitted a petition to the Securities and Exchange Commission urging the agency to develop rules that require public companies to disclose to shareholders the use of corporate resources for political activities. In May the group reported that the proposal had won massive support from a record 260,000 comment letters. On average the commission receives about 70 comments from the public on a rule-making petition, and even high-profile rules proposed by the SEC itself often garner only 500 to 600. "To the best of our knowledge, the petition has drawn considerably more commentary than any other rule-making petition in the SEC's history," wrote group cochair and Harvard law professor Lucian Bebchuk in a Harvard law blog.
Paycheck Fairness and Market Failure, New York Times Economix, June 25, 2012
Professor Eisenberg argues that pay secrecy helps explain why the salaries of chief executives have skyrocketed in recent years. Drawing on research by Lucian Bebchuk and Jesse Fried, summarized in their book “Pay Without Performance,” she points out that institutional arrangements — such as the structure of corporate boards — influence chief executive compensation more than the forces of supply and demand.
Shareholders Making Voices Heard To Boards, Philadelphia Inquirer, June 1, 2012
Lopsided favorable vote tallies in most corporate elections are so routine that it’s only when a company loses a vote that you realize that, occasionally, shareholders can rally to send a message to the board. [...] The proposal, sponsored by the Illinois State Board of Investment, attracted 77.98 million "for" votes, or 60 percent of the votes cast. The public pension fund, with $11.5 billion in assets as of June 30, was advised by the Harvard Law School Shareholder Rights Project, which has been involved in similar declassification efforts at 35 other public companies in 2012.
More Shareholders Looking to Declassify Boards of Directors, Corporate Counsel, May 29, 2012
Could board declassification edge out say-on-pay as the hottest issue of this year’s proxy season? According to a new report from The Conference Board titled “Proxy Voting Fact Sheet,” proposals to declassify boards of directors—meaning all directors would be up for election on an annual basis—have generated overwhelming support from shareholders so far this year. [...] Board declassification is viewed by many corporate governance experts as sine qua non good practice, because it holds all board members to account in a given year, not just a handful at a time. The Harvard Shareholder Rights Project, led by Harvard Law professor Lucian Bebchuk, has aided major pension funds in putting forth declassification proposals—and has thus far convinced 44 companies to agree to bring management proposals to declassify their boards.
Chesapeake Could Use a Fresh Start in a New Home, Reuters, May 24, 2012
Entrenching a so-called classified board puts Chesapeake out of step with about three-quarters of the S&P 500. This proxy season, dozens more corporations have agreed to declassify. The evidence isn't clear-cut, but research by Harvard Law School's Lucian Bebchuk and Alma Cohen shows companies with annual elections fetch higher valuations.
JPMorgan Gave Risk Oversight to Museum Head, Businesseek, May 24, 2012
What the risk committee of the biggest U.S. lender [JPMorgan Chase & Co.] lacks, and what the five next largest competitors have, are directors who worked at a bank or as financial risk managers. … JPMorgan should have “put together a risk committee with more expertise in financial institutions and the risks produced by their decisions,” said Lucian Bebchuk, director of Harvard Law School’s program on corporate governance.
Political Advocacy Piques Shareholders' Interest, Chicago Tribune, May 18, 2012
In this presidential election year, shareholders are increasingly curious about the political agendas of public companies. [...] Residents also have been flooding the SEC with comments in support of a petition calling for mandatory reporting. The petition was filed last year by a group of academics led by Lucian Bebchuk of Harvard Law School and Robert Jackson Jr. of Columbia Law School.
CEOs Stumble over Ethics Violations, Mismanagement, USA Today, May 14, 2012
Yahoo CEO Scott Thompson lasted just four months before revelations of résumé padding forced him to resign over the weekend. [...] "Boards do seem to move faster" to deal with scandals and public failings that attract shareholder and media attention, says Lucian Bebchuk, director of the corporate governance program at Harvard Law School.
Yahoo CEO Scott Thompson's Resume 'Error' Could Get Him Booted, MSNBC, May 7, 2012
That's true, but the alleged falsehood could still spell trouble for the struggling Internet company. "To the extent that the CEO misreported his education, such misreporting would raise significant concerns regardless of whether the misreporting could be linked directly linked to underperformance," said Lucian Bebchuk, director of the program on corporate governance at Harvard Law School. "Misreporting and lack of integrity are detrimental to shareholders’ long-term interests even if the direct link to performance is not observed."
Silicon Valley Is Moving Backward on Shareholder Rights, Bloomberg, May 3, 2012
It’s springtime in America and that means it’s proxy season, when most publicly traded companies hold annual meetings, and shareholders elect corporate directors. So it seems a good time to review the state of corporate governance: It’s slipping. [...] Numerous companies have recently agreed to consider ending staggered boards, also known as classified boards. Studies by Bebchuk, a leader in efforts to end the practice, show that such boards depress a company’s value. But Silicon Valley’s dual-class model probably has more entrenchment power than staggered boards ever did.
Chesapeake and the Executive Pay Sell Signal, Reuters, May 3, 2012
As Chesapeake Energy Corp shows, fat executive compensation all too often comes twinned with lousy investor returns. [...] Another 2009 study by Lucian Bebchuk of Harvard, Martijn Cremers of Yale and Urs Peyer of French business school Insead, found lower stock market returns tend to go hand-in-hand with periods when companies are reporting an increase in the share of overall compensation going to top executives.
The Cost of Well-Run Companies, Financial Times, May 2, 2012
Shareholders are revolting, and not the way Occupy might claim. On both sides of the Atlantic, companies face embarrassing shareholder rebellions over pay. They are long overdue. [...] Harvard Law School academics Lucian Bebchuk, Alma Cohen and Charles Wang found last year that during the past decade the previously strong link between corporate governance and share price performance broke down. They argue this is because investors understood the importance of good corporate governance, so it was already in the price.
How to Get a Pay Raise (If You're a CEO), Businessweek, April 26, 2012
[...] CBS (CBS) directors decided to give Chief Executive Officer Leslie Moonves a $69.9 million pay package last year only after assessing the competitive market for senior executive talent. The board of directors, however, looked at companies that are, on average, more than twice as large as CBS and included many in businesses far afield from media. [...] Many directors “have incentives to make compensation decisions that are more favorable to executives” than to shareholders, says Lucian Bebchuk, a Harvard Law School professor who has researched CEO pay. One reason: Directors may not want to risk upsetting their board position or their relationship with a CEO, he says.
Chesapeake Backtracks on What Board Knew of CEO's Transactions, Wall Street Journal, April 26, 2012
Just last week, Chesapeake Energy Corp.'s CHK -3.64% general counsel, Henry Hood, said the company's board of directors was "fully aware of the existence" of Chief Executive Aubrey McClendon's financing transactions. Thursday, the company backtracked, saying that it wished "to clarify" that statement. [...] The board is "seeking to distance itself from the sweeping endorsement suggested by the general counsel's earlier statement," said Harvard Law School professor Lucian Bebchuk, adding that the board now seems to appreciate "the necessity of a more careful and detailed review of the transactions than has been undertaken in the past."
Moonves Making $69M Shows Boards Biased, Businessweek, April 25, 2012
CBS Corp. (CBS) directors decided to give Chief Executive Officer Leslie Moonves a $69.9 million pay package last year after assessing the competitive market for senior executive talent. [...] Many directors “have incentives to make compensation decisions that are more favorable to executives” than to shareholders, said Lucian Bebchuk, a Harvard Law School professor who has researched CEO pay. Directors may not want to risk upsetting their board position or their relationship with a CEO, he said.
Bebchuk Defends Shareholder Proposals, Lawdragon, April 23, 2012
Harvard Law professor Lucian Bebchuk, a prior member of our Lawdragon 500 guides, defended the work of the school’s Shareholder Rights Project, for which he serves as director, in an op-ed on the Times DealB%k page. Specifically, the esteemed professor is defending how the clinical program has assisted pension funds and other investors in submitting proposals to large public companies that they move away from staggered boards, and instead have members face election each year – which “is viewed by investors as a best practice of corporate governance.”
Columbia Professor Defends Harvard Law from Wachtell Attack, Thomson Reuters, April 3, 2012
In the rarified interactions between elite law firm partners and elite law schools, the former usually fall all over themselves to shower the latter with praise, and, even more importantly, money. It's a heartwarming tale of romance between Mr. White Shoe Alumnus and Ms. Ivy League 3L (or vice versa). But even perfect - and perfectly codependent - relationships have their bumps, which is perhaps the mildest way to describe a post by Wachtell, Lipton, Rosen & Katzon Harvard Law School's blog on corporate governance and financial regulation on March 23. As you'll see, the Wachtell memo was no mash note. Of course, there's nothing that draws attention quite like a high-profile lovers' quarrel. On Tuesday, Columbia Law School professor Jeffrey Gordon rushed to defend his alma mater with a response to Wachtell at the HLS blog.
Weighing the Arguments For and Against Staggered Boards, Corporate Counsel, March 23, 2012
To have a staggered board, or not to have a staggered board? That’s the corporate governance question sparked by this week’s progress report from the Harvard Law School Shareholder Rights Project (SRP), and an ensuing sharp rejoinder penned by AmLaw 100 firm Wachtell, Lipton, Rosen & Katz. [...] Bebchuk begs to differ, and says the clinic’s agenda is neither narrow nor his alone. “While Wachtell does not find the evidence persuasive, a majority of investors have formed a decidedly different view,” he says in an email response to CorpCounsel.com. [...] Between January 1, 2010, and June 30, 2011, “the average percentage of votes cast in favor of shareholder proposals to declassify boards of S&P 500 companies has exceeded 75 percent,” according to Bebchuk.
Spat Over Staggered Corporate Boards Pits Wachtell Against Harvard's Bebchuk, American Lawyer Daily, March 21, 2012
On Wednesday morning, Wachtell, Lipton, Rosen & Katz issued a sharply worded memo in which four of its top partners attacked a Harvard Law School initiative aimed at pressing large corporations to drop their staggered boards of directors. By day's end, Harvard Law professor Lucian Bebchuk was firing back. In the memo, Wachtell—whose profits per partner rank at the top of the Am Law 100—objected to this week's announcement by The Harvard Law School Shareholder Rights Project (SRP) touting its success in persuading a significant number of S&P 500 companies to move to annual elections by declassifying their staggered, or classified, boards.
Wachtell Defends Staggered Boards, New York Times DealBook, March 21, 2012
Despite a campaign led by a Harvard Law School professor to remove them, staggered boards still have an outspoken defender in Wachtell, Lipton, Rosen & Katz. [...] In a memorandum published on Wednesday entitled “Harvard’s Shareholder Rights Project Is Wrong,” the law firm stood up for the practice, in which only a portion of a company’s directors come up for election in a given year. Staggered boards have been criticized by some corporate governance experts as potent antitakeover devices.
The Case Against Staggered Boards, New York Times DealBook, March 20, 2012
Here is a corporate governance puzzle to ponder. Companies that are already public are rushing headlong to ditch their staggered boards. More evidence of this comes from the Harvard Law School Shareholder Rights Project. [...] The project has succeeded in getting about a third of all the S.&P. 500 companies that had a staggered board to eliminate it. The rights project is led by a corporate governance advocate, Professor Lucian A. Bebchuk, and a research fellow, Scott Hirst, both from Harvard Law School.
Cash Bonuses on Wall Street to Drop 14%, MarketWatch, February 29, 2012
Cash bonuses paid to Wall Street employees for 2011 are expected to drop 14% to their lowest level since the global financial crisis, according to an estimate released Wednesday that highlights the ongoing challenges faced by the securities industry. [...] “The financial sector is beginning to recognize and internalize that they cannot expect the high and ever-growing levels of profits the financial sector became used to expecting in the pre-crisis years,” said Lucian Bebchuk, a professor at Harvard Law School who is also the author of a book on executive pay.
Wall Street Bonuses Down 14%, GlobalPost, February 29, 2012
Wall Street bonuses fell 14 percent to $19.9 billion in 2011, according an estimate from New York State Comptroller Thomas DiNapoli released today, CNN reported. [...] “The financial sector is beginning to recognize and internalize that they cannot expect the high and ever-growing levels of profits the financial sector became used to expecting in the pre-crisis years,” Lucian Bebchuk, a Harvard Law School professor and author of a book on executive pay, told MarketWatch.
Fight Looms as SEC Mulls Campaign Money Disclosures, Law360, February 28, 2012
Executives at public companies are feeling intense pressure to disclose corporate political donations made legal by the U.S. Supreme Court's Citizens United ruling, but experts say the U.S. Securities and Exchange Commission will face resistance as it begins crafting a rule that would force the issue. [...] Some executives have resisted disclosure on grounds that they simply should be free to manage corporations as they see fit, according to Harvard Law School Professor Lucian Bebchuk. Executives have argued that "companies and their shareholders will benefit from being able to contribute without the contribution becoming public," Bebchuk said.
The Dumbest Investment Move: Why Owning Your Company's Stock In Your 401(K) Can Be a Big Mistake, SmartMoney, February 22, 2012
[T]he most foolish investment of all may be right in front of you. And there's a worrying chance you're buying it. The investment? Stock in your own employer. [...] [A]re CEOs really investing in the company? Most just get free stock and options -- which they then sell. Among top executives, stock "sales outweigh purchases by a substantial margin," says Lucian Bebchuk, a Harvard professor and a leading expert on executive pay; most of them, he adds, "keep getting equity incentives as part of their compensation and they unload them over time."
Shift Index 2011: The Most Important Business Study - Ever?, Forbes, January 25, 2012
[...] It would thus be useful to separate out extraordinary gains in compensation documented in Lucian Bebchuk and Jesse Fried’s comprehensive book, Pay without Performance), the retirement benefits documented in Ellen Schultz’s incisive book, Retirement Heist (Portfolio, 2011) and the returns to private equity documented in Josh Kosman’s book, The Buyout of America, (2005).
The Payout to the Boss of RBS Is a Disastrous Deal for the Taxpayer, Guardian, January 23, 2012
[...] Well, we know how much the RBS boss got last year. The bank's annual report shows his salary as £1.22m. Add in the benefits and pensions and the shares awarded as part of the company's incentive scheme, and Hester was awarded a total of £5.85m last year. You may not have thought he was on so much, largely because the press normally quotes only the not-so-basic pay. But the rest would be what Harvard law professor and corporate-governance expert Lucian Bebchuk calls "camouflage" compensation – that is, payment expressly designed not to be noticed by the public and so not stir up outrage.
Why Should Captains Stick By Their Ships?, Forbes, January 18, 2012
We need only look at the captains of industry to see how far the pervasive phenomenon looking after oneself ahead of one’s charges has come to be the norm. In Lucian Bebchuk and Jesse Fried’s comprehensive book, Pay without Performance), “Flawed compensation arrangements have been widespread, persistent, and systemic, and they have stemmed from defects in the underlying governance structure that enable executives to exert considerable influence over their boards...”
Focus on Donations Grows, Inside Investor Relations, Decemeber 16, 2011
When the US Supreme Court ruled in 2010 that corporate political contributions are protected by free speech, the five-four split-decision signaled deep divisions. [...] Writing in the Harvard Law Review last year, Robert Jackson of Columbia Law School and Lucian Bebchuk of Harvard Law School, the two prime movers behind the petition, pointed out that while the Supreme Court made clear the free speech rights of corporations, the question of ‘who should have the power to decide whether a corporation will engage in political speech’ remains unanswered.
Why Are Fannie & Freddie CEOs Paid So Much?, Forbes, November 16, 2011
One could look at the Fannie/Freddie salaries as a one-off single decision on excessive pay. That would be a mistake. In fact, the salaries reflect a pervasive phenomenon of “pay without performance” at the CEO level, and in particularly in the financial sector, as documented in the insightful book by Lucian Bebchuk and Jesse Fried, Pay without Performance: The Unfulfilled Promise of Executive Compensation.
America’s New Robber Barons, New York Review of Books, November 16, 2011
One reason for the discrepancy between the US and other countries is that boards of directors in the US are especially willing to give their CEOs and other high level executives big raises and generous stock options. Lucian Bebchuk of Harvard has done a lot of research on this so-called “governance” issue. Meantime, as Bebchuk’s work shows, shareholder influence over executive compensation is far too weak. And there is also the issue of culture itself.
High CEO Salaries Can Mean Lower Profits,The Australian, October 17, 2011
Profitability tends to suffer when chief executives get paid significantly more than their senior executive cohort, new research shows. [...] The US research Mr Jordan worked with, by economists Lucian Bebchuk, Martijn Cremers and Urs Payer, produced five conclusions about companies with a high chief executive pay slice.
US Banks Defer 60% of Executive Bonuses, Financial Times, October 5, 2011
The largest US banks are deferring more than 60 per cent of senior bank executives’ bonuses, according to a survey by the Federal Reserve. [...] Regulators argue this ensures employees keep their company’s overall performance in mind when taking risks but pay expert Lucian Bebchuk of Harvard Law School reckons that stock grants simply incentivise bankers and traders to take bigger risks. The more risk taken, the greater the potential the bank’s share price – and the value of the banker’s bonus – will rise, he says.
A Growing Consensus on What to Do About Citizens United, Huffington Post, September 25, 2011
But election wonks are not the only ones worried about the impact of corporate dollars in American elections. Corporate law experts have also voiced their objections. Corporate law professors including Bebchuk and Coates at Harvard, Jackson and Gilson at Columbia and Klausner at Stanford have expressed concern that the Supreme Court has fundamentally misunderstood how corporate democracy works.
Governance Leaders Recognized, Corporate Secretary, September 16, 2011
The International Corporate Governance Network (ICGN) has honored Colette Neuville, Lucian Bebchuk and Dr. Stephen Davis with awards for their outstanding contributions to corporate governance. [...] The second ICGN award was presented to Professor Lucian Bebchuk of Harvard Law School, who has conducted extensive research on executive compensation and provided other extensive work in the field, including what the ICGN described as ‘unprejudiced analysis’. Bebchuk’s widely acclaimed book, co-authored by Jesse Fried and entitled Pay without performance: the unfulfilled promise of executive compensation, was published in 2004.
One Thing Can Stop Corporations From Buying the 2012 Election: Transparency, Atlantic, September 13, 2011 Op-ed by James Kwak, Program on Corporate Governance Fellow: As the 2012 campaign season draws near, one of the major questions is what impact corporate spending will have on the balance of power in Washington and around the country. [...] Last month, an all-star committee of corporate law professors petitioned the Securities and Exchange Commission to write rules requiring corporate disclosure of political activities.
From Blood Transfusions to Poison Pills, Deal Magazine, September 2, 2011 Interview with William B. Chandler III, former Chancellor Delaware's Court of Chancery: I got the views of all of my colleagues on the court on both the pill question, which was Airgas II, and on the bylaw question, which was Airgas I. They were very helpful to me in writing it and getting it out in a timely way. If the question is, "Would I have written this as long or in the same way?" probably not, because back when I wrote Unitrin in the mid-1990s, there hadn't been as much ink spilled by academics. You saw a lot of academic references in the opinion, and that probably resulted in a slightly different approach to how to write it, because I was writing it for the parties but also acknowledging the views of various academics on this question from professor [Lucian] Bebchuk to others.
SEC Proposal Would Disclose Political Donations by Public Companies, Washington Post, August 31, 2011
A group of 10 law professors filed a formal petition asking the [Securities and Exchange Commission] to require corporations to list political contributions in annual proxy statements sent to shareholders. The professors cite a growing interest among shareholders for disclosure of political contributions. "Many shareholders recognize that the interests of executives and directors with respect to political spending might differ from those of shareholders," said Lucian Bebchuk, a Harvard Law School professor who co-chaired the group of professors seeking the new rule. "Such shareholders are naturally concerned when, as is commonly the case, their company provides them with no information about its political spending."
More Board Elections Mean Easier Targets for Icahn, MarketWatch, August 23, 2011
As recently as 2000, almost two-thirds of America’s biggest companies maintained a controversial policy that discourages hostile takeovers and limit the kinds of investor insurgencies Icahn and others have conducted at dozens of U.S corporations. [...] The policy - known as a staggered or classified board - typically means than every year only a third of the corporation’s directors come up for election.[...] Harvard Law School Professor Lucian Bebchuk, a leader in efforts to declassify boards, cites a study he conducted that found classified boards are associated with lower firm valuation.
Will Funny Money Elect The Next President?, United Press International, August 21, 2011
Is the American political process drowning in corporate money, dammed-up funds in long confinement finally set loose by a U.S. Supreme Court decision so controversial even its supporters defend it with a wink and a smirk? [...] Concern over the source of independent money led 10 corporate law law professors, including Harvard Law School's Lucian Bebchuk and Columbia Law School's Robert Jackson, to petition the Securities and Exchange Commission, The Wall Street Journal reported Aug. 5.
Courts Should Curb Executive Pay, National Law Journal, August 15, 2011
Well-respected scholars of corporate law have also pointed out that CEO remuneration is not geared to rewarding the performance of those top officers. In their book Pay Without Performance, professors Lucian Bebchuk and Jesse Fried of Harvard Law School attacked what they call the "official view" that directors fix executive pay in arm's-length negotiations with corporate leaders to provide them incentives to increase shareholder wealth. In reality, those top executives set their own pay through captured boards that they control.
Law Professors Ask SEC to Require Disclosure of Campaign Donations, Wall Stret Journal, August 5, 2011
A group of 10 corporate law professors asked the Securities and Exchange Commission to require corporations to disclose to shareholders most political spending. [...] The law professors, led by Lucian Bebchuk, of Harvard Law School, and Robert Jackson, of Columbia Law School, argue that while the Supreme Court declared unconstitutional any restrictions on corporate speech during elections, the high court’s ruling in the case, Citizens United v. Federal Election Commission, assumed shareholders would be able to monitor the use of corporate resources on political activities.
SEC Urged To Make Companies List Political Spending, Reuters, August 5, 2011
A group of securities law experts are pushing for federal regulations forcing companies to reveal how much they spend on political activities. The 10 professors have formally petitioned the U.S. Securities and Exchange Commission to quickly write rules requiring regular disclosures to shareholders. [...] The group of academics includes Lucian Bebchuk from Harvard Law School; John Coffee from Columbia Law School; James Cox from Duke Law School; Robert Jackson, Jr. from Columbia Law School; and Donald Langevoort from Georgetown Law School.
SEC Urged To Require Disclosure of Corporate Political Spending, Dow Jones Newswires, August 5, 2011
A group of 10 law professors is asking the Securities and Exchange Commission to draft rules requiring public companies to disclose the political contributions they make, a followup to a recent Supreme Court decision prohibiting the government from banning corporate spending in political campaigns. [...] The petition is led by Lucian Bebchuk, of Harvard Law School, and Robert Jackson, of Columbia Law School.
Icahn’s Power Stems from His People, Boston Globe, July 5, 2011
Investor Carl Icahn is dispatching his Harvard team to a new corporate confrontation at yet another medical company. [...] Most recently, Icahn has challenged the management at drugmaker Forest Laboratories Inc., the company that paid $1.2 billion for Newton’s Clinical Data Inc. in February. He acquired 6.9 percent of the company’s shares and proposed four candidates for a nine-member board. Among them: Richard Mulligan and Lucian Bebchuk.
10 Things CEOs Won't Tell You, SmartMoney, July 5, 2011
It's shocking to discover the average CEO of an S&P 500 company made $11.4 million in total compensation in 2010. That's enough to pay the salaries of more than 250 firefighters, according to the AFL-CIO. But for investors, there's more to executive compensation than pure sticker shock. Over the years, a series of academic studies have tied higher CEO pay to lower returns for shareholders. [...] How much the CEO makes compared to the other executives in the C-suite also matters: Companies where the CEO grabs a bigger piece of the total compensation pie awarded to the top five executives tend to have a lower value and generate lower stock returns as the CEO's share of the pay pie increases, according to a 2009 study by Harvard Law School professor Lucian Bebchuk and colleagues at the Yale School of Management and INSEAD.
Why they’re winning on CEO pay, Washington Post, June 24, 2011
We’ve been having this argument about executive pay for 30 years, and we’re still pretty much where we began: Executives think the market has affirmed that they are worth every penny of what they get, and the rest of us think they’re grossly overpaid. By my lights, the best academic work on this subject has been done by two law school professors, Lucian Bebchuk and Jesse Fried at Harvard, who unlike most finance professors understand that the market for executive compensation is essentially rigged. Their studies have found that the top five executives capture about 10 percent of the net profits of large public companies, up from about 5 percent in the early 1990s, which means that it has a material effect on shareholders. [...] Put more simply, the firms with high CEO pay turn out not to be the best performers.
Bonus Cuts, Pay Raises, Then Layoffs, New York Times DealBook, June 20, 2011
It’s hardly surprising that Wall Street is bracing for layoffs. The European debt crisis is rocking the markets. New regulations are crimping bank profit centers. And smaller bonuses are sending other compensation costs soaring. [...] Lucian A. Bebchuk, the director of the Program on Corporate Governance at Harvard Law School, said he was not convinced that raising salaries was the problem at all. "Look, it makes things less flexible, but not in a bad way," he said. To Mr. Bebchuk, the larger problem is that overall compensation has not come down. "I’m surprised it hasn’t come down more."
The Raj Insider Dealing Sideshow, Reuters, May 12, 2011
And in fact the times of worst excess in compensation are exactly the same times when shares are rising to unsustainable peaks, as in 2000 and 2007, as boards and executives play a cozy game of writing and cashing in share options. Now theoretically shareholders can oust boards and thereby impose pay discipline on executives, but the reality is that there are massive impediments to them doing so. Lucian A. Bebchuk, a Harvard Law School professor, went so far as to describe the idea of the power of the shareholder franchise as a “myth,” though given the way investors are treated like children perhaps the better term would be fable.
Declassification: Florida Strikes Back at Entrenched Corporate Boards, BNET, May 10, 2011
While other shareholder activists have taken on CEO pay not tied to performance and the responsible (or irresponsible) directors who approve it, Florida’s state pension fund has quietly made unprecedented progress in making all directors accountable to shareholders on an annual basis. The Florida State Board of Administration (FSBA), the $158.9 fund administered by the state for pensions and other purposes, has announced that seven major companies have agreed to eliminate their classified boards. Instead of electing directors to staggered three-year terms so that only a third of them are put to a vote each year, the companies have agreed to switch to annual election of the entire board. Working with the American Corporate Governance Institute (ACGI), headed by Harvard Law School professor Lucian Bebchuk, FSBA has withdrawn shareholder proposals in exchange for a promise to switch to annual election [...]
7 CEOs Who’ve Made Over $200 Million Since 2006, Business Insider, May 7, 2011
Overall, the financial crisis may have had a positive effect on CEO compensation. “Short-term incentive has been de-accentuated over the last year or two, and long-term incentive has been restored,” says James Reda, managing director of the executive compensation firm James F. Reda & Associates. When CEOs are incentivized over the long-term, they tend to make decisions that are good for the enduring strength of their company rather than ones that boost stock prices – and compensation -- in the short term, according to a 2010 paper by Harvard Law Professor and corporate governance expert Lucian A. Bebchuk.
Quiet Proxy Season Means Fewer Fights in the Boardroom, New York Times DealBook, May 3, 2011
Proxy season is a bust. Shareholder activism intended to spur change in the boardroom is down significantly so far this year. At the same time, activism by hedge funds to oppose takeover transactions is rising. [...] And the corporate governance activist Lucian A. Bebchuk at Harvard Law School and his American Corporate Governance Institute have continued to push for boards to hold annual elections of directors instead of electing directors in one-third tranches each year, making them harder to unseat.
'Eroded' Takeover Law Favors Directors, Delaware’s Chief Business Judge Says, Westlaw Journal, April 18, 2011
Delaware case law balancing the conflicting interests of directors and shareholders in corporate takeovers has been "eroded," tilting the merger and buyout playing field in favor of management, the state business court’s chief judge said at a legal conference Monday. [...] Chandler presided over a recent high-profile case involving a takeover battle between Airgas Inc. and Air Products & Chemicals. [...] Famed Harvard law professor Lucian Bebchuk predicted that at least one of the takeover defenses that Airgas relied on, the “staggered board” provision, will fade away as shareholders refuse to approve them for the charters of new companies.
More Directors Face Yearly Votes, Wall Street Journal, April 18, 2011
This proxy season, an unusually high proportion of companies have accepted activists' demands that all board members stand for annual elections by shareholders, replacing staggered terms for directors that typically last three years. [...] The Florida State Board of Administration and the Nathan Cummings Foundation, advised by Harvard law professor Lucian Bebchuk, recently dropped half of 28 resolutions seeking yearly elections after 14 of the big companies they targeted agreed—ahead of a vote—to support the change at 2011 or 2012 annual meetings. [...] Board declassification "could be expected to benefit shareholders by improving firm value and performance," Mr. Bebchuk says.
Are CFOs Smarter Than CEOs — or Do They Just Invest That Way?, BNET, April 14, 2011
Lucian A. Bebchuk, J. Martijn Cremers, and Urs Peyer have created a new measure they have dubbed the CEO Pay Slice to assess the relative importance of the CEO within the hierarchy of a firm, with a paper examining the proportion of the total pay for the top five executives at a firm that goes to the CEO as a component of performance. My firm, GovernanceMetrics International, considers it a red flag if the ratio of the CEO’s pay to the median pay of other named executive officers is 3x or more.
Peltz Pushes Greater Latitude in Proxy Voting, MarketWatch, April 4, 2011
Shareholder activist Nelson Peltz on Monday applauded a provision in the Dodd-Frank financial-reform law, held up by a lawsuit from a top business lobby, intended to give stockholders a greater say in corporate board elections. [...] "He wants and it seems a reasonable idea that once he satisfies all the disclosure requirements, there would be some card that has all the candidates, dissident and management candidates, and people can make their choices from the options there," said Harvard Law School Professor Lucian Bebchuk.
At Forum for Deal Makers, M.&A. Meets the Law, New York Times DealBook, March 29, 2011
The 23rd annual Tulane Corporate Law Institute, an annual gathering of deal makers in New Orleans, begins on Thursday [...] A number of roiling issues are at the top of the deal-making agenda. [...] The proper balance of takeover defenses will be a topic at Tulane. The Delaware Chancery Court recently allowed Airgas the use of a poison pill to defeat a hostile bid by Air Products. [...] But the decision is spurring shareholder activists to seek work-arounds. Lucian A. Bebchuk, a Harvard Law professor and a leading advocate for shareholders, has written that shareholders need to increase their lobbying efforts to force corporations to drop staggered boards because of Airgas.
Is Ford CEO Alan Mulally Overpaid?, CBS MoneyWatch, March 23, 2011
United Auto Workers President Bob King is not happy with the $54.5 million compensation package Ford Motors CEO Alan Mulally is receiving for his performance at the company. [...] But theory does not always translate into practice, and high CEO pay may cause performance to get worse rather than better. A recent paper by Lucian Bebchuk, Martijn Cremers and Urs Peyer found that the pay slice of CEOs has been increasing over time, and CEOs receive a larger fraction of the total pay of the top four executives than they did in the past.
The Conference Board Issues Poison Pill Recommendations, Conference Board, March 18, 2011
The recent Delaware Court of Chancery Air Products v. Airgas decision and the spate of poison pill adoptions in recent months lends credence to the theory that the anti-takeover shareholder rights plans are alive and well. [...] However, in a Feb. 24 Wall Street Journal Op-Ed piece (An Antidote for the Corporate Poison Pill) the well-known Harvard Law School professor and director of its corporate governance program, Lucian Bebchuk, warns that while the Delaware court decision upholds the validity of certain poison pills, pressure by shareholders could "substantially limit their toxicity."
Compensation for Corporate Directors Rises Sharply, USA Today, March 4 2011
Compensation for corporate directors is rising sharply, a USA TODAY analysis of 2011 proxy filings finds. Behind the gains: higher cash retainers, fees and rising values of stock and stock option grants. [...] Harvard University governance expert Lucian Bebchuk says paying for savvy board members is worthwhile for shareholders. But excessive pay has drawbacks.
Inequality and Political Power, New York Times Economix, March 3, 2011 Inteview with Jacob Hacker and Paul Pierson - Hacker: As Lucian Bebchuk of Harvard and others have documented, many features of American corporate pay practices seem designed to maximize C.E.O. leverage and minimize oversight— something the corporate scandals of the early 2000s cast in stark light.
Lehman Bankruptcy Seen Undeterred by Laws Curbing Compensation, Bloomberg, February 23, 2011
The Financial Crisis Inquiry Commission said last month that Wall Street pay practices pushed traders and managers to disregard risk. New rules must include longer restrictions on selling shares and require higher levels of stock ownership among top traders and managers in order to be effective in promoting risk awareness, said compensation experts including Harvard Law School professor Lucian Bebchuk.
A Pill of a Swan Song, TheDeal Magazine, February 18, 2011
Chancellor William B. Chandler III's Feb. 15 opinion finding for Airgas Inc. in a case where Air Products and Chemicals Inc. sought to force Airgas to redeem its poison pill is one of the most remarkable decisions from a Delaware court in many years. [...] As he came to the end of the opinion, Chandler nodded to the two great antagonists in the debate over the poison pill, Lucian Bebchuk of Harvard Law School and Martin Lipton, the lawyer most closely identified with the pill, whose firm, Wachtell, Lipton, Rosen & Katz, represented Airgas.
Buzz Tracker, New York Times DealBook, February 2, 2011
Staggered Boards and Valuations: A new research paper from Lucian Bebchuk, Alma Cohen and Charles Wang finds that while the Delaware courts “appear to disagree, the markets believe that staggered boards are value reducing.”
Making Fear and Greed Pay in Investing, New Zealand Herald, December 29, 2010
[...] Fear and greed, together with the desire to follow the herd, are the primary emotions underpinning investment decisions and business strategy, as countless academic studies have shown. [...] The misalignment of interests and assessment of risk is also a fault highlighted by Harvard University professors Lucian Bebchuk and Holger Spamann in their analysis of the financial crisis.
Staggered Boards and Company Value, New York Times DealBook, November 12, 2010
A background issue in the battle between Airgas and Air Products and Chemicals is the effectiveness of staggered boards and what academic research has to bear on the issue. [...] This back and forth on this issue in the debate over Airgas and Air Products also raises another chance to review these studies. Lucian A. Bebchuk, Alma Cohen and Charles Wang, professors at Harvard, have seized this opportunity. In a study released on Wednesday, the professors examine how a Delaware Chancery Court decision in the Airgas dispute affected corporate value.
Activists pressure U.S. companies on political money, Reuters, November 5, 2010
Two social activist investment groups said this week they have begun pressuring major U.S. companies, including Pfizer Inc and PepsiCo Inc to review contributions to trade groups such as the Chamber of Commerce. [...] The activists' proposals ask each of the four companies to review political spending and contributions, with an eye on their own corporate rules against political spending.
Shareholders are likely to introduce more such measures as similar legislation stalls in Washington, said Lucian Bebchuk, a Harvard University law school professor who studies corporate governance.
Death of a democracy, MarketWatch, October 19, 2010
[...] In case you missed it, recent Supreme Court rulings mean that corporations can now effectively spend freely on political campaigns, including during elections. Loopholes in the tax code, particularly pertaining to 501(c)4 nonprofits, mean they can do so secretly through anonymous front groups. [...] Shareholders will have no say. “Political-speech decisions can be made without input from shareholders, a role for independent directors or detailed disclosure,” law professors Lucian Bebchuk of Harvard and Robert Jackson of Columbia will report in a forthcoming paper on the issue. As Bebchuk told me: “Companies certainly are not required, and do not disclose, contributions to intermediaries that engage in political spending.”
SEC will examine faulty pay data, Boston Globe, October 11, 2010
US securities regulators say they plan to look into dozens of cases in which publicly traded Massachusetts companies misstated how much their top executives earned over the past few years. [...] "The company does not believe any further action was warranted," said James Levine, its chief financial officer. "The compensation components reported in the table were all correct — the errors were in select totals." But a Harvard Law School professor, Lucian Bebchuk, said "there is a good chance" the SEC will order companies to correct significant errors, including Verenium's.
In reporting pay, firms can err big, Boston Globe, October 4, 2010
In its annual report on executive pay last spring, Verenium Corp. of Cambridge told shareholders its top lawyer had earned less than $629,000 in 2008. In fact, he earned nearly twice that amount. [...] These are among the dozens of mistakes publicly traded companies in Massachusetts made in reporting executive compensation to shareholders and federal regulators over the past few years, according to a Globe review of documents filed with the Securities and Exchange Commission. [...] Lucian Bebchuk, a Harvard Law School professor who has studied executive compensation, said he was troubled by the error rate, saying it raised serious concerns.
The U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness released a study on September 28 conducted by Hal S. Scott, Nomura professor of international financial systems, Harvard Law School that highlights the unintended consequences the proposed “bank tax” would have on access to credit, job creation, and the overall economy. The study, “Financial Crisis Responsibility Fee: Issues for Policymakers,” concludes that imposing the tax now – more than three years in advance of the legislative deadline – could lead to a $1 trillion decline in lending, reducing access to credit for job creators and consumers at a time when the economy is still struggling to recover.
Calling on Corporate Law to Defend Democracy, Boston Review, September 15, 2010
While Lessig is rightly concerned about institutional corruption, Congress is not the only institution at risk. Corporations themselves may be corrupted by political spending. As Harvard Law professor Lucian Bebchuk has noted, corporate meddling in politics is potentially bad for capitalism because managers may seek to water down corporate-governance rules to the detriment of investors. Moreover, given that shareholders likely will hold a range of political convictions, corporate managers’ spending inclinations may not match up with shareholders’ preferences.
Rusal Hopes to Regain Norilsk Board Seats, Wall Street Journal, September 10, 2010
Russian aluminum giant United Co. Rusal is pursuing its efforts to extend its influence over the world's largest nickel producer, OAO Norilsk Nickel, which it partially owns. [...] Rusal is also courting minority investors, and has launched a website called "SaveNorNickel" that lays out its views on the miner. Rusal is trying to marshal support ahead of special meeting of Norilsk shareholders scheduled to take place next month, after Rusal lost one of its four board seats at Norilsk's annual meeting in June. One person it has approached to run for the Norilsk board is Lucian Bebchuk, who heads the program on corporate governance at Harvard Law School. Mr. Bebchuk said he has agreed to run for the Norilsk board.
The Directorship 100, Directorship Magazine, September 1, 2010
A consummate proponent of shareholder activism, and a sometimes participant, Harvard’s Lucian A. Bebchuk is among the most influential academics on the corporate governance scene In addition to being professor of management practice at Harvard Business School and former CEO of device maker Medtronic, William W. George currently serves as a director of Exxon Mobil and Goldman Sachs, and is a frequent critic of those who shirk their executive duties. Earlier this year, he took Toyota CEO Akio Toyoda to task for not accepting responsibility for problems at the automaker. Ben W. Heineman Jr. is a distinguished senior fellow at Harvard Law School and senior fellow of the Belfer Center for Science and International Affairs at the Kennedy School of Government.
Dodd-Frank's 'say on pay' could impact executive pay, MarketWatch, August 26, 2010
One of the lesser-known elements of the sweeping Dodd-Frank Act aimed primarily at reforming the nation's banks is directing the Securities and Exchange Commission to write rules that could temper the compensation of executives across multiple industries. [...] Harvard Law School Professor Lucian Bebchuk contends that shareholders understand that compensation packages should differ based on unique expectations at each firm. However, he argued that there are some compensation arrangements that investors can agree are undesirable and should be removed from all U.S. corporations. A golden parachute pay-package for a CEO that is retained as a top executive by an acquiring firm, is a good example of the kind of compensation provisions that could be removed, he said.
Wall Street reform gives regulators power over executive pay, Washington Post, August 19, 2010
That largely overlooked provision of the law gives federal agencies expanded powers to write regulations dictating pay at financial firms. How they choose to use these powers could have a major impact on whether banks pursue excessive risks.
"The financial crisis made patently clear that the direct regulation of the choices that banks make is bound to be imperfect because regulators are often following behind," said Lucian A. Bebchuk, a Harvard Law School professor who has advised the Obama administration on executive compensation issues. "It's valuable for regulators to have an extra tool to influence the private incentives that will shape executives' decision-making."
Message to Potash Corp: Poison pills taste bad, Globe and Mail, August 18, 2010
It's commonly known as a poison pill provision, a sometimes-controversial tactic used to stall a takeover bid or put the kibosh on it altogether. If it seems at odds with the concept of free markets and shareholder interests, it often is. [...] According to Lucian Bebchuk, professor of law, economics and finance at Harvard Law School, a problem arises however when they are used as more than a stalling tactic. "From the perspective of shareholders and good corporate governance, it is undesirable to allow the use of poison pills to just say 'no' indefinitely to an offer," he said in an e-mail.
Shareholders Wise Up, Corporate Board Member, August 9, 2010
Investing in companies that are well governed no longer guarantees the superior returns it once did, according to a study by three university professors. Harvard Law School’s Lucian A. Bebchuk, Tel Aviv University’s Alma Cohen, and Stanford’s Charles C. Y. Wang divided companies into two groups, ones with good governance and ones with bad, and compared their performance from 2000 to 2008. They found that investors gained little advantage by favoring well-governed companies versus putting their money into ill-governed ones.
Why the SEC’s Proxy-Access Plan Won’t Help Tame Wall Street, BNET, August 5, 2010
[T]he SEC is set to make it easier for shareholders to nominate corporate directors! [...] Citing data from CalPERS, California’s giant state pension fund, governance expert Lucian Bebchuk of Harvard recently noted that the 10 largest pension funds hold less than 2.5 percent of Bank of America, Exxon Mobile, IBM and Microsoft. Even if these giant investors were to join forces, in fact, they’d still fall short of the three percent ownership requirement.
Say What? Pay What? Real World Approaches to Executive Compensation Reform, Corporate Counsel, August 5, 2010
In their new paper, "Paying for Long-Term Performance" (University of Pennsylvania Law Review, v. 158 No. 7, at 1915), professors Lucian Bebchuk and Jesse Fried offer some concrete suggestions for ways to tie executive compensation to a company's long-term performance. Bebchuk and Fried argue that equity incentives can be designed to prevent the gaming of equity grants both at the front end, when they are granted, and at the back end, when they are exercised.
Ken Feinberg's Lame Report on Wall Street Pay Shows We're Back to Square One, BNET, July 23, 2010
Common shareholders in banks tend to be equally thrill-seeking, studies show, and for similar reasons. The more risk a company takes, the more money they can make. That’s why say-on-pay doesn’t work in banking. Because when both bankers and investors benefit the more risk a company takes, giving shareholders a voice over how those bankers should be compensated merely reinforces the firm’s taste for action. As Harvard’s Lucian Bebchuk, a leading corporate governance expert, has written: [...]
Pay CEOs in debt, Business Spectator, July 17, 2010
This emphasis has been likely been driven by the long-standing belief that, empirically, executives don’t hold debt. [...] Indeed, recent empirical studies (eg, Bebchuk and Jackson 2005, Sundaram and Yermack 2007, and Gerakos 2007) found that CEOs do in fact hold substantial amounts of debt in their own firm (known as “inside debt”), in the form of defined benefit pensions and deferred compensation.
Heading Off The Next Credit Crisis, Forbes, July 12, 2010
[...] This sort of self-fulfilling credit crunch is the focus of Wharton research that explores alternative ways to prevent inefficient credit tightening from causing further damage to an already wounded economy. In a paper titled, "Self-Fulfilling Credit Market Freezes," Wharton finance professor Itay Goldstein and Lucian A. Bebchuk of Harvard Law School examine different approaches to halt an overreaching credit crunch.
Playing paymaster, Mint, July 5, 2010
[...] The old regulatory principle of letting managers' incentives align with those of shareholders needn't hold true here. That’s because, for commercial banks that are important for the financial system, shareholders' incentives are already skewed. Harvard Law School’s Lucian Bebchuk has argued that shareholders know the government will bear the downside risk: They could well be goading managers to take on more risk.
Should executives be paid with debt? No!, Fortune, July 2, 2010
As investigators comb through the wreckage of the financial meltdown, one fact remains clear and startling: Credit default swaps and collateralized debt obligations, as well as debt and equity from large financial firms were useless as indicators of fiscal health. One of the biggest revelations has been the utter failure of markets to capture the relevant information required to set accurate prices on securities [...] But is tying pay to debt, even as a partial solution, really the answer? Harvard Law School professor Lucian Bebchuk has argued in a series ofpapers prepared for the Investor Research Responsibility Center Institute that it is.
Harvard’s Bebchuk Urges More Shareholder Control of Executive Pay, Investment Advisor, June 17, 2010
Standard pay arrangements reward executives for short-term gains and generate incentives for them to take excessive risks and trade off long-term stock performance, says an in-depth Harvard study on how to tie compensation to shareholder value.
“The standard narrative assumed that the executives of [Bear Stearns and Lehman Brothers] saw their own wealth wiped out together with the firms when the firms melted down,” said one of the study’s authors, Lucian Bebchuk, a Harvard Law School professor and director of the school’s program on corporate governance, in a Tuesday, June 15, webinar about the study’s findings.
Rich, failed bankers show pay-reform shortcomings, Baltimore Sun, June 6, 2010
There is a seductive myth that the economic destruction of recent years had nothing to do with the limitless pay dangled like a 10,000-pound jelly doughnut before American CEOs. [...] The top five executives at Bear Stearns pulled $1.4 billion out of the company from 2000 through 2008, calculates Harvard's Lucian Bebchuk with two colleagues in a paper being published in the Yale Journal on Regulation. The top five bosses at Lehman Brothers pocketed $1 billion over the same period.
Fuld Understated Pay More Than $200 Million, Lehman’s Budde Says, Bloomberg, April 29, 2010
Before Lloyd Blankfein of Goldman Sachs Group Inc. took his place, Richard S. Fuld Jr.’s angry face was the universal symbol of Wall Street greed. [...] In “The Wages of Failure: Executive Compensation at Bear Stearns and Lehman, 2000-2008,” Harvard Law professor Lucian Bebchuk; Alma Cohen, a visiting professor from Tel Aviv University; and Holger Spamann, a Harvard Law lecturer, calculate that Fuld earned $522.7 million from 2000 to 2007, only slightly less than Budde’s tally.
The rewards of virtue, The Economist, April 26, 2010
Once again, corporate-governance reform is back on the legislative agenda, not least in the United States. [...] Critics of reform were never convinced. A new study co-written by Lucian Bebchuk, a Harvard professor who is also an activist for corporate-governance reform, gives rise to further doubts—at least at first glance. “Learning and the Disappearing Association Between Governance and Returns,” by Mr Bebchuk, Alma Cohen and Charles Wang, repeats the study by Mr Gompers and his colleagues for 2000-08. It finds that, in contrast with the 1990s, neither the 24-factor index nor the six-factor one would have helped investors beat the market.
Learning from Ken Feinberg, Reuters Blog, March 25, 2010
When Pay Czar Kenneth Feinberg first slashed executive compensation at U.S. firms that benefited most from a government bailout the cry was that this would hurt these weakened firms when they could least afford it, as the best and brightest would leave for better money elsewhere, where the free market still ruled. […] Lucian Bebchuk of Harvard Law School has argued that relations between top executives and boards are not truly arm’s length. There are simply too many ways for management to reward boards for overpaying them.
Secondary Sources: Paid to Fail, Libertarians, Inflation Targeting, Wall Street Journal Blog, March 24, 2010
A roundup of economic news from around the Web. "Paid to Fail": Writing for Project Syndicate Lucian Bebchuk, Alma Cohen and Holger Spamann say that Bear Stearns and Lehman executives made out pretty well. “After Bear Stearns and Lehman Brothers melted down, ushering in a worldwide crisis, media reports largely assumed that the wealth of these firms’ executives was wiped out, together with that of the firms they navigated into disaster.
The Big Wall Street Pay Days That Ken Feinberg Missed, Wall Street Journal Blog, March 23, 2010
As the pay czar reviews bonuses paid out to Wall Street firms that received Troubled Asset Relief Program funding, it is worth remembering the big pay days that preceded the federal bailout and some might say helped create the need for one.
We are talking about stock sales by Bear Stearns and Lehman Brothers Holding executives. A trio of Harvard researchers, including Lucian Bebchuk, recently calculated that the top five executives at Bear and Lehman cashed out $1.1 billion and $850 million, respectively, from 2000 to 2008.
Goldman executives benefit from fund investments, Financial Times, March 21, 2010
Goldman Sachs’ executives took home millions of dollars last year from investments in funds run by the bank, after the furore over pay forced Wall Street banks to rein in awards to their top staff. [...] Some experts say that amounts to a monetary benefit. Lucian Bebchuk, a professor at Harvard, said: “Given the size of the distributions to the top executives, it seems that they likely have rather large amounts invested in those funds and that saving the costs of management fees and overrides can be substantial.”
Obama, Lehman and ‘The Dragon Tattoo’, The New York Times, March 20, 2010
Far from being held liable for the chicanery and recklessness that would destroy their company and threaten their country’s economy, these executives benefited big time. In a study late last year, three Harvard Law School researchers examined public documents to assess whether one “standard narrative” of the crash was true — that “the meltdown of Bear Stearns and Lehman Brothers largely wiped out the wealth of their top executives.” It turned out to be a fairy tale.
Semiannual Bonuses Gain Traction, The Wall Street Journal, March 15, 2010
More bosses are getting two bites at their bonus apples...The trend also troubles Lucian Bebchuk, co-author of the book "Pay Without Performance." The economic crisis proved "it's important to link pay to long-term results," says Mr. Bebchuk, a Harvard law professor and head of its corporate-governance program. "Semiannual bonuses move companies in exactly the opposite direction from which they should be heading with their pay practices."
Study Finds, for First Time, Data Boards Bundle Items for Votes, Securities Regulation & Law Report, March 8, 2010
In a new study, two professors from Harvard Law School and the University of Southern California Gould School of Law are reporting that, for the first time, they have found empirical evidence that corporate management, to obtain outcomes it wants, bundles charter amendments that might be unfavorable to shareholders with measures that enjoy shareholder support. The study, authored by Harvard's Lucian Bebchuk and USC's Ehud Kamar, reviewed the bundling of corporate mergers with a move to a staggered board structure. It used hand-collected data relating to governance changes in 393 public mergers occurring in companies of similar size from 1995 to 2007.
An Irish Mirror, The New York Times, March 7, 2010
Everyone has a theory about the financial crisis. These theories range from the absurd to the plausible — from claims that liberal Democrats somehow forced banks to lend to the undeserving poor (even though Republicans controlled Congress) to the belief that exotic financial instruments fostered confusion and fraud. But what do we really know? [...] Third, key players had an incentive to take big risks, because it was heads they win, tails someone else loses. [...] There was a lot of this in the United States, too: as Harvard’s Lucian Bebchuk and others have pointed out, top executives at failed U.S. financial companies received billions in “performance related” pay before their firms went belly-up.
These CEOs Are Bleeding Your Investments, The Motley Fool, February 27, 2010
New research on compensation suggests that highly paid CEOs are taking money out of your pocket. Finance professor Raghavendra Rau of Purdue University and two co-researchers examined the relationship between executive pay and stock returns for around 1,500 businesses per year over the 12-year period ending in 2006. [...] This trend seems to be confirmed by another study on compensation by Lucian Bebchuk at Harvard Law School. Bebchuk examined CEO pay at more than 2,000 companies. He concluded that the higher the chief exec's proportion of pay, the less the company was likely to earn in the future.
Will the Citizens United Ruling Prove Harmful to Capitalism?, Wall Street Journal Law Blog, February 26, 2010
We’ve read lots — trust us, lots — on the pros and cons of the Citizens’ United case. Frankly, at this point, the debate is getting a little shopworn. [...] But Harvard law professor and corporate governance expert Lucian Bebchuk, the author of Pay Without Performance, which took a critical look at current executive compensation practices, weighed in on Thursday with a thoughtful piece about why fewer limits on corporate campaign expenditures is a bad thing.
Some CEOs Are Selling Their Companies Short, BusinessWeek, February 25, 2010
Some companies, including Procter & Gamble and Kellogg, ban executive hedging, but they are a minority. Lucian Bebchuk, head of the Program on Corporate Governance at Harvard Law School, predicts growing problems with hedges as companies make executives hold on longer to shares as a way of prodding them to work for long-term gains. A manager might have to keep a stock award for three years after it vests, for example. If he can hedge his shares and essentially cash out of them before the holding period ends, he eludes that restriction. That's why Bebchuk sees an all-out ban as the only solution. "Allowing executives the freedom to hedge," he says, "defeats the purpose of equity compensation."
Despite outrage, AIG bonus fiasco could happen again, Reuters, February 19, 2010
To many Americans, it's a matter of common sense: traders who failed so spectacularly at their jobs that they nearly brought down the global economy should be fired, not rewarded with handsome bonuses. [...] "Many financial firms have already announced they will be using clawbacks going forward, but unfortunately they have not given outsiders the ability to assess whether the clawbacks are effective or merely cosmetic," said Lucian Bebchuk, a professor at Harvard Law School and a leading expert on the subject of compensation. "The devil is in the details."
A different class, The Economist, February 18, 2010
The spectacular collapse of so many big financial firms during the crisis of 2008 has provided new evidence for the belief that stockmarket capitalism is dangerously short-termist. After all, shareholders in publicly traded financial institutions cheered them on as they boosted their short-term profits and share prices by taking risky bets with enormous amounts of borrowed money. [...] Although no American firms have dual classes of shareholders, they do sometimes resort to another device designed to resist pressure to pursue short-term goals: “staggered boards”, in which only a minority of directors face re-election each year. According to Lucian Bebchuk of Harvard Law School, who has studied their impact, they are strongly associated with lower long-term returns.
Can Financial Firms Get Executives to Give Back Pay?, Time, January 27, 2010
In the past few months, a number of financial firms have instituted or beefed up rules that would allow them to force employees to return year-end bonuses. So-called clawbacks would be triggered by subsequently discovered misconduct and some firms say they may even apply in cases where employees made trades that looked profitable at first, but go sour. [...] On Friday, Wall Street pay was again in the spotlight in Washington. The House Committee on Financial Services held a hearing on executive compensation. Harvard professor Lucian Bebchuk, who recently consulted pay czar Kenneth Feinberg in setting compensation limits at bailed-out firms, said Congress should regulate and "place limits" on Wall Street pay.
Wall Street Toughens Rules on Clawbacks, Wall Street Journal, January 27, 2010
Banks and securities firms are toughening rules that give them power to seize pay from employees whose bets or other actions blow up later. But they still mightn't be tough enough. [...] "Firms have not been providing outsiders with the information that is necessary to assess whether the clawbacks are meaningful and effective or merely cosmetic," says Lucian Bebchuk, a Harvard University law professor who runs the college's corporate-governance program.
A failure of public financial sector governance, Financial Times Online, January 26, 2010
As the Financial Crisis Inquiry Commission begins looking at the causes of the recent financial crisis, we need to consider that crisis is a failure of governance. Lucian Bebchuk from Harvard Law School has written extensively on the failure of private sector governance: boards that failed to make informed judgments or control the risks incurred by their institutions, self-serving management that lost control over reckless risk taking and compensation systems that invited speculation by traders. Although Sheila Bair, chair of the Federal Deposit Insurance Corporation (FDIC), has openly expressed her discontent with the governance of the banks and the FDIC is considering tying premiums to compensation, we are likely to witness the largest bonus season the industry has ever seen.
Economists: More must be done on executive pay, Boston Globe, January 22, 2010
Top US economists warned at a House Financial Services Committee hearing today that more must be done to reign in pay practices which led to the 2008 financial collapse. The witnesses called by US Representative Barney Frank—Nobel Laureate Joseph Stiglitz, Harvard Law School professor Lucian Bebchuk and The Corporate Library co-founder Nell Minow—testified that shareholders should have more power over executive pay and better rules were needed to limit the incentives tied to compensation that lead to excessive risk taking.
US lawmakers seek to give investors more say on pay, Reuters, January 22, 2010
The hearing comes as the White House ratchets up its attacks on Wall Street banks with a proposal to rein in their risky activities and a plan to force the firms to pay up to $117 billion to reimburse taxpayers for the bailout. [...] Lucian Bebchuk, a Harvard Law School professor, told the House panel that giving shareholders say on pay was only part of the reform of shareholder rights that is necessary.
Frank taking aim at Wall Street bonuses, Boston Globe, January 22, 2010
As bonus season arrives on Wall Street, heralded by yesterday’s announcement that Goldman Sachs set aside $16.2 billion for total compensation, Representative Barney Frank is opening a new review by the House Financial Services Committee of ways to impose limits on executive pay. [...] No banking executives will testify at Frank’s hearing today, but a witness list includes Nobel laureate Joseph Stiglitz; Harvard professor Lucian Bebchuk; and Nell Minow, cofounder of the Corporate Library, a major compensation and financial services research firm.
Strong Year for Goldman, as It Trims Bonus Pool, New York Times, January 21, 2010
No one was crowing about their big paychecks at Goldman Sachs headquarters in New York on Thursday. Despite a record 2009, the bank announced that it had set aside only $16.2 billion to reward its employees. [...] Goldman’s move undermined banks’ claims that they could never cut bonuses because they would lose talent, said Lucian A. Bebchuk, a professor of finance at Harvard and an adviser to the United States Treasury on compensation. “This announcement suggests that firms have flexibility in setting pay levels,” he said.
FDIC reveals plans to crack down on executive pay, Risk Magazine, January 13, 2010
The US Federal Deposit Insurance Corporation (FDIC) is seeking to increase levies on banks with short-term compensation policies, under proposed rules released for comment yesterday. The FDIC cites a recent study by Harvard researchers Lucian Bebchuk, Alma Cohen and Holger Spamann into pay at the failed banks Lehman Brothers and Bear Stearns, which found that senior executives at both banks received a total of $2.4 billion via unrecoverable bonus payments and stock sales in the eight years leading up to the banks' collapse in 2008.
The Board That Couldn’t Think Straight, The Conference Board Review, January 13, 2010
Most of the condemnation heaped upon Merrill Lynch, Bear Stearns, Bank of America, Citigroup, Lehman Brothers, and Countrywide has fallen not on the non-executive board members but upon the CEOs. The tallest trees take the lightning hits. Perhaps their directors have escaped ignominy because they are perceived as feckless, the human analog to "parsley on fish—decorative but useless," in the words of U.S. Steel chairman Irving Olds some six decades ago. [...] Only when tacitly accepted bad behavior becomes sufficiently serious to violate what Harvard’s Lucian Bebchuk calls the "outrage constraint" do outside authorities step in and attempt to “reform” boards with measures such as SarbOx.
Fresh round of Wall Street bonuses rekindles scrutiny, Washington Post, January 12, 2010
As resurgent Wall Street banks prepare to hand out billions of dollars in bonuses - their first since returning federal bailout funds - the payments are drawing intense scrutiny from regulators and politicians. [...] "All indications are that levels continue to be quite high," said Lucian Bebchuk, a Harvard law professor who has advised the Obama administration on executive compensation. "Thus far, the evidence is not encouraging, with neither levels or structures being reformed to the extent that is necessary for addressing the problems of the crisis."
U.S. Bankers Are Fed Up With British Regulations, New York Times, January 10, 2010
A tough new requirement by Britain’s securities regulator that top banking executives and earners must defer 60 percent of their total compensation for a three-year period is pushing some American banks with extensive London operations to say that they just won’t take it anymore. [...] “The U.K. may be ahead, but it is not the only one going in this direction,” said Lucian A. Bebchuk, a professor of finance at Harvard and an adviser to the United States Treasury on compensation. “This is a consensus view all over the world.”
Bank Bailout Overseer, an HLS Professor, Named Bostonian of the Year, Harvard Crimson, January 5, 2010
The Boston Globe has named Harvard Law School Professor Elizabeth Warren its 2009 Bostonian of the Year for bringing “a sense of sanity to the economic crisis” as the official overseer of the U.S. bank bailout program. [...] "As head of the TARP oversight panel, Elizabeth Warren has been an extremely effective and influential monitor of one of the consequential economic programs in history, and in this role she has successfully and effectively put a spotlight on issues of great significance," said Law School Professor Lucian A. Bebchuk, who has written prolifically about TARP and executive pay, in an e-mailed statement from abroad.
High CEO Pay May Correlate With Lower Long-Term Stock Value, According To Two Studies, Huffington Post, December 31, 2009
But two recent studies suggest that lavish CEO compensation may in fact undermine shareholder wealth. [...] A separate study led by Harvard Law's Lucian Bebchuk investigated the relationship between future company performance and "CEO pay slice" (CPS) -- the percentage of the total compensation for the top five executives that is allocated to the CEO alone. Bebchuk and his colleagues found a negative relationship between a higher CEO share of the executive compensation pot and firm value.
What’s a Bailed-Out Banker Really Worth?, New York Times Magazine, December 29, 2009
Will Feinberg’s work become a model for changing that structure? [...] “The boards of these companies just don’t have an arm’s-length relationship with these executives,” says Lucian Bebchuk, a Harvard Law School expert on executive compensation who advised Feinberg. Board members are frequently executives or board members at other big corporations, Bebchuk explains, and therefore are likely to be steeped in the same entitlement culture.
Does Golden Pay for the CEOs Sink Stocks?, Wall Street Journal, December 26, 2009
Why does it seem that it's always Christmas in corporate boardrooms? And how can investors tell whether those glittering pay packages are worth the cost? …The first study, led by corporate-governance expert Lucian Bebchuk of Harvard Law School, looked at more than 2,000 companies to see what share of the total compensation earned by the top five executives went to the CEO. The researchers call this number—which averages about 35%—the "CEO pay slice."
Goldman bows to pressure over pay, Wall Street Journal, December 10, 2009
Goldman Sachs Group Inc., moving to defuse public outrage over its pay, said its top 30 executives will receive no cash bonuses for 2009 despite the firm's expected record profits…Lucian Bebchuk, a Harvard University law professor who focuses on corporate compensation, said the new bonus structure "is a very good way of going about tying compensation with long-term value."
Institutional Investors See Light at End of Downturn Tunnel, FindLaw, December 7, 2009
For the institutional investment fund managers and advisers attending the annual Global Shareholder Activism Conference in New York Dec. 3, it is both the best of times and the worst of times, a panel of corporate and business law experts agreed. [...] Prominent Harvard Law School professor Lucian Bebchuk added that investors suffer far more than corporate officers when stock prices go on a short-term profit roller-coaster ride.
Bebchuk et al. and the comp behind the crisis, The Deal Pipeline, December 7, 2009
There are straw men everywhere, and much of the debate over the origins of the financial crisis involves whacking them as vigorously as possible and declaring victory. In Monday's Financial Times, Lucian Bebchuk and two of his colleagues from Harvard Law School's corporate governance program, Alma Cohen and Holger Spamann, go after the straw man argument that most senior Wall Streeters at firms like Lehman Brothers Holdings Inc. and Bear Stearns Cos. were "largely wiped out" when their firms collapsed. "Many -- in the media, academia and the financial sector -- have used this account to dismiss the view that pay structures caused excessive risk-taking and that reforming such structures is important."
A healthy appetite for the right price, Financial Times, November 25, 2009 So, while a Kraft-Cadbury takeover faces cultural obstacles, a merger between Hershey and Cadbury could be encumbered by financial leverage. Shareholders have to weigh up the conflicting risks, and these are usually reflected in share prices during the offer period. Allowing shareholders to decide is not perfect but it is better than the alternatives. Research by Lucian Bebchuk, a Harvard professor, found that US companies with mechanisms to block takeovers underperform those that lack them.
"The evidence is that giving managers the power to decide is not in the long-term interests of shareholders. Markets can get it wrong, but are the best aggregators of judgment," he says.
What was really behind last year's market crash?, The Guardian, November 25, 2009 Economics, when you strip away the guff and the mathematical sophistry, is largely about incentives. At any time, these can get distorted in a particular market…In a 2009 paper, Lucian Bebchuk and Holger Spamann, of Harvard Law School, pointed out that giving a Wall Street CEO a big package of stock options amounts to giving them a heavily levered and one-sided bet on the value of the firm's assets. If the bank's investments do well, the stockholders, including the CEO, get to pocket virtually all the gains. But if the firm suffers a catastrophic loss, the equity holders quickly get wiped out, leaving the bondholders and other creditors to shoulder the bulk of the burden.
Executives Kept Wealth as Firms Failed, Study Says, New York Times, November 22, 2009 But three professors at Harvard are disputing that logic in a new study, saying it is an urban myth that executives at Bear and Lehman were wiped out along with their companies. ... “There’s no question they would have done massively better had their firms not collapsed,” said Lucian Bebchuk, one of the study’s authors. “But the wealth of those top executives was hardly wiped out. The idea that they were devastated financially has kind of colored the picture people have about what payoffs they were facing.”
Lehman, Bear Executives Cashed Out Big, Wall Street Journal, November 22, 2009 Bear Stearns Cos. and Lehman Brothers Holdings Inc. executives cashed out nearly $2.5 billion from their firms between 2000 and 2008 even though the financial crisis hammered the shares they held, according to a study set to be released Monday.
The study's authors include Lucian Bebchuk, executive director of Harvard Law School's corporate-governance program and an adviser to Treasury Department official Kenneth Feinberg.
I'm doing 'God's work'. Meet Mr Goldman Sachs, Sunday Times, November 8, 2009 Blankfein goes on to say something equally audacious. We should welcome the return of titanic paydays at Goldman. ... Many disagree, arguing that in the new, flatter economic landscape, megabucks pay is no longer necessary. Lucian Bebchuk, professor of law, economics and finance at Harvard Law School, says: "These days, it’s easier for banks to keep their employees from being raided. The outside opportunities are less attractive now than in 2007."
Windfall Seen as Bank Bonuses Are Paid in Stock, New York Times, November 7, 2009 Even as Washington tries to rein in Wall Street pay, bankers are likely to make unusually large gains on the stock grants and options they received after shares in their companies fell sharply during the financial meltdown…The Treasury Department declined to comment when asked if these bank executives were being set up for windfalls. Lucian A. Bebchuk, a Harvard Law School professor who advised Treasury on pay rules, said, “What should we have done differently?” “It would be better if you could take the stock and somehow neutralize what the government did, but that’s really tricky,” he said. “If you have equity compensation, sometimes there are massive windfalls.”
Who Gets Paid What, New York Times , October 21, 2009 For months, in the basement of the Treasury Department, Washington’s pay masters pushed one way, and the seven beleaguered giants of the bailout era pushed the other. ... By late July, the pay team, in consultation with two prominent compensation experts, Lucian A. Bebchuk and Kevin J. Murphy, devised a 20-page document laying out Mr. Feinberg’s demands for information.
Six degrees of reparation, MarketWatch, October 19, 2009 Many reforms have already taken place. Others are still under consideration on Capitol Hill and at the SEC. Harvard Law School Professor Lucian Bebchuk, a longtime advocate of strengthening shareholder rights, anticipates that much of the investor-friendly legislation on Capitol Hill will be approved. He contends that the proposed changes are part of a broad movement that is transforming shareholder-corporation relations in a post-financial crisis period.
In Merrill’s Failed Plan, Lessons for Pay Czar, The New York Times, October 8, 2009 It sounds like something Washington’s pay czar might propose to rein in runaway bonuses on Wall Street…“What we have here is something that was by and large good, and now the spotlight is on plans like this,” said Lucian A. Bebchuk, a professor at Harvard Law School who has studied compensation. “But there are elements that could be improved on.”
Fed aims to rein in bank pay abuses way below top execs, USA Today , October 7, 2009 A few years ago, rank-and-file loan officers were living it up, cruising around Houston in BMWs and Hummers and partying into the wee hours…But Lucian Bebchuk and Holger Spamann of Harvard Law School say that paying CEOs in stock gives them an incentive to take big risks: If the gamble works, "gains on the upside are unlimited." If it fails, the government, which guarantees deposits, often absorbs the worst of the losses.
Introducing DealBook Dialogue, The New York Times: DealBook, October 2, 2009 Andrew Ross Sorkin and the DealBook staff invite readers to DealBook Dialogue, our first online round table. The topic is “Too Soon to Rethink? Assessing the Financial Crisis,” and the discussion will be moderated by the Deal Professor, Steven M. Davidoff. ... Beginning Monday, we will have a weeklong round table discussing this topic. ... The participants include: Lucian A. Bebchuk, the William J. Friedman and Alicia Townsend Friedman professor of law, economics and finance, and director of the program on corporate governance, at Harvard Law School.
Banker-Pay Limits May Hurt Citigroup, Bank of America, Bloomberg, September 29, 2009 Citigroup Inc., Bank of America Corp. and smaller banks seeking to attract talent and regain ground on stronger peers may face a new obstacle from the global push to rein in executive pay…Investor advocates including Lucian Bebchuk, a professor of economics and finance at Harvard Law School, say guaranteed bonuses create “perverse incentives” for executives to take excessive risks.
Did Bankers’ Pay Add to This Mess?, The New York Times, September 26, 2009 Proposals to cap the compensation of bank C.E.O.’s have gained traction lately as a means of heading off another financial crisis…There is certainly some support for the broad assumptions behind this argument, notably in a working paper by Lucian A. Bebchuk and Holger Spamann, both professors at Harvard Law School, that began circulating earlier this year. It argues that compensation for bank C.E.O.’s is asymmetrical — that they often stand to make much more money when their banks succeed than they could lose if their banks fail.
Alternatives to Sarkozy's pay caps, The Deal, August 27, 2009
Instead of basing executives' payoffs only on equity, or levered equity, compensation could be based on the value of a broader array of securities, as suggested by Harvard Law professor and compensation expert Lucian Bebchuk. In a research paper Bebchuck and Ph.D. candidate Holger Spamann write:
Instead of tying executives' compensation to the value of a specified percentage of the common shares, executives' compensation could be tied to the value of a specified percentage of the value of the common shares and the preferred shares.
Valeant CEO's Pay Package Draws Praise as a Model, Wall Street Journal, August 24, 2009
Pay experts say the deal gives Mr. Pearson incentives to boost long-term value for investors. For example, the 49-year-old CEO only gets to keep certain restricted shares if Valeant's share price increases at least 15% a year through February 2011. Mr. Pearson can't sell most restricted shares or exercised stock options for two years after they vest. "It goes a substantial distance toward addressing my concerns about executive-pay arrangements," says Lucian Bebchuk, a Harvard law professor and frequent pay critic.
Pay Regulation is Not the Best Way to Address Moral Hazard, Financial Times, August 17, 2009
Sir, Lucian Bebchuk has strongly endorsed the House of Representatives' decision to regulate the pay structure of the entire financial sector ("Regulate financial pay to reduce risk-taking", August 4). Financial institutions are special, argues Prof Bebchuk, because they impose costs on taxpayers that they do not internalise. This specialness warrants a broader role for the government in setting chief executive officers’ pay in financial institutions.
Should Executive Pay Be Regulated?, TIME, August 10, 2009
When I run this example by Lucian Bebchuk, a Harvard Law School professor who has supplied much of the intellectual firepower for the current pay-regulation campaign, he has a ready retort. "When they run out of good, substantive arguments, they come to the argument of unintended consequences," he says of pay-regulation opponents. "We have seen the consequences of the lack of intervention in the last 10 years. We have lived with that experiment."
Their Gamble, Everyone's Money, The New York Times, August 8, 2009
Lucian Bebchuk and Holger Spamann, experts in securities law at Harvard Law School, suggested that bankers' pay could be linked to other prudential rules, like capital requirements. For instance, if bankers' pay was designed to rise when the value of the assets did but not to fall commensurately when the assets went sour, they might be tempted to take on more risk than they should. If regulators determined that was the case, they might require banks to set aside more capital, just as they must when they make risky loans.
Congress Tackles Wall Street Pay, WNYC Radio Interview with Lucian Bebchuk, August 6, 2009
Congress, Lobbyists Debate Meaning of Risk, MarketWatch: Capitol Report, August 6, 2009
Harvard Law School professor Lucian Bebchuk argues in favor of government intervention in pay practices at financial institutions, in part, because, unlike other failures in other industries, the sudden insolvency of mega-banks results in high bailout costs for taxpayers. "The government has an interest in how pay structures have an impact on risk-taking of people at financial institutions because of the costs that such risk taking has on taxpayers," Bebchuk said.
Lucian Bebchuk on pay and governance, The Deal, August 4, 2009
The marriage of shareholder governance and the belief that excessive compensation is the root of all evil is an uneasy one, as Harvard Law School's Lucian Bebchuk reveals in a column in Tuesday's Financial Times. Bebchuk makes the argument that given finance's essential systemic role, the government has every right to set compensation, skirting the usual governance powers of the board, much as regulators have the right and responsibility to limit imprudent behavior. By making this argument, Bebchuk is thus trying to draw a line between, say, the big banks and the rest of corporate America.
House Backs Greater Say On Pay by Shareholders, Washington Post, August 1, 2009
"The bill does not look deliberately and consciously at the amount of compensation, only the incentives the pay structures produce," said Lucian Bebchuk, director of the program on Corporate Governance at Harvard Law School. "With respect to the shareholder 'say on pay' and bolstering on compensation committee independence, these are useful steps . . . but their effectiveness is going to be limited."
Floyd Norris on compensation, the crisis, The Deal, July 31, 2009
... In one column, Norris has managed to poke a stick at commentators (never named) as diverse as Lucian Bebchuk, Barney Frank, Matt Taibbi, the Times' own Gretchen Morgenson and the paper's own editorial board (of which he was once a member). Not a bad day's work. He'll undoubtedly be widely pilloried for it.
Should You Invest In Toxic Assets?, The Wall Street Journal, July 29, 2009
"For now, the bulk of toxic assets are not going to be in play," Harvard law professor Lucian Bebchuk, one of the intellectual architects of PPIP, told me. Changes to accounting rules and government stress tests, have taken off some of the pressure off banks, so Professor Bebchuk says banks are not as motivated to sell their toxic assets as they were when PPIP was set up in March. "For many types of toxic assets, even if the banks can get a price that's fair, if it's at a discount to face value they don't have an incentive to do it," he says.
Of Banks and Bonuses, The New York Times, July 26, 2009
An insightful reform recommended by Lucian Bebchuk, a Harvard Law professor and director of the law school's Program on Corporate Governance, would require that executive compensation be tied not only to the company's stock performance, but also to the long-term value of the firm's other securities, like bonds. That would encourage executives to be more conservative about using borrowed money to juice returns to capital, because it would expose them to the losses that leverage can exert on all the firm's investors.
The Art of Snatching Defeat Out of Victory - Part II, Daily Kos, July 23, 2009
As Harvard Law School professor Lucian Bebchuk has noticed (http://blogs.wsj.com/...), "a month after the PPIP program was announced, under pressure from banks and Congress, the U.S. Financial Accounting Standards Board watered down accounting rules and made it easier for banks not to mark down the value of toxic assets. For many toxic assets whose fundamental value fell below face value, banks may avoid recognizing the loss as long as they don’t sell the assets. ..."
Where Do We Go from Here? Part II, The Atlantic: A Failure of Capitalism, July 14, 2009
The first proposal, in the form that I will consider, is the brainchild of Lucian Bebchuk, a very able lawyer and economist who teaches at Harvard Law School. Bebchuk is a leading critic of overcompensation of CEOs, but his proposal concerning the compensation of financial executives is distinct, and even (as I'll argue) inconsistent with his general position on overcompensation.
With Big Profit, Goldman Sees Big Payday Ahead, The New York Times, July 14, 2009
Another concern is that the blowout profits might encourage rivals to try to match Goldman in the markets so they, too, can return to paying hefty bonuses. Wall Street's bonus culture is widely seen as having encouraged the excessive risk-taking that set off the financial crisis. "I find this disconcerting," said Lucian A. Bebchuk, a Harvard law professor. "My main concern is that it seems to be a return to some of the flawed short-term compensation structures that played an important role in the run-up to the financial crisis."
Altering Incentives in the Financial Industry, Seeking Alpha, July 1, 2009
Lucian Bebchuk and Holger Spamann of the Harvard Law School make the big point in an excellent recent paper. Its focus is on the incentives affecting management. These are hugely important. Still more important, however, is why a limited liability bank, run in the interests of shareholders, is so risky.
Fixing Fat Cats, Business Spectator, June 27, 2009
In an influential book, Bebchuk and Fried (2004) argued that executive compensation is set by managers themselves to maximise their own pay, rather than by boards on behalf of shareholders. Indeed, many commentators argue that executives' pay schemes were major contributors to the financial crisis, encouraging them to take on too much risk and manage their company for short-term profit.
On Executive Pay, Simpler Is Better, Harvard Business Review, June 25, 2009
... In a separate post in this debate, Lucian Bebchuk and Jesse Fried offer a complex timing scheme of vesting and cashing stock options. They're trying to retain the intense incentives of stock options while preventing gamesmanship. It's hard to see boards going along, once the outcry over executive compensation fades.
Perilous Incentives, Business Spectator, June 24, 2009
Lucian Bebchuk and Holger Spamann of the Harvard Law School make the big point in an excellent recent paper. Its focus is on the incentives affecting management. These are hugely important. Still more important, however, is why a limited liability bank, run in the interests of shareholders, is so risky.
USC Marshall Professor Testifies in D.C., USC News, June 19, 2009
The Treasury Department's counselor Gene Sperling, Harvard Law School's Lucian Bebchuk and Nell Minnow of The Corporate Library were among the panelists who also testified in front of the committee, which is chaired by Massachusetts Rep. Barney Frank, who's seeking new laws on compensation structures.
Letter From America: Critic of High C.E.O. Pay Is Vindicated, The New York Times, June 18, 2009
... But if you’re Lucian Bebchuk, professor of law, economics and finance at the Harvard Law School, and a man recently described in The New York Times as waging a "crusade" against the way corporate wages are paid, the moral question is secondary to a practical one. "I’m not a crusader by nature," Mr. Bebchuk, who was born in Poland and raised in Israel, said in a phone interview this week. "I got into this subject by intellectual interest." It was an interest, moreover, that made Mr. Bebchuk something of a prophet a few years ago, in 2004 to be exact, when he and Jesse Fried published a book titled "Pay Without Performance."
Risk vs. Executive Reward, The Wall Street Journal, June 15, 2009
... the recent papers highlight how difficult it may be to limit incentives for risk-taking. Harvard Law School professor Lucian A. Bebchuk says financial-services companies' reliance on large amounts of borrowed money offers executives the prospect of big gains while encouraging them to downplay potential risks. Mr. Bebchuk, who directs Harvard's corporate-governance program, worries that federal officials are pushing banks to adopt practices, such as granting restricted stock and giving shareholders an advisory vote on executive pay, that may make the problem worse. That is because many banks' share prices are now so low that shareholders, with little to lose, may support executives' taking big risks. He recommends tying executive pay to the performance of a company's bonds and preferred stock, in addition to its common stock, and basing bonuses on measures other than earnings per share.
Geithner's Plan on Pay Falls Short, The New York Times, June 13, 2009
On Wednesday, the Treasury secretary held a roundtable discussion with a group of about 20 government officials and outside experts; the subject was executive compensation. Kenneth R. Feinberg, the Treasury Department’s new "comp czar," was there, as was Mary Schapiro, the new chairman of the Securities and Exchange Commission; Daniel K. Tarullo, the newest Federal Reserve governor; and Lucien Bebchuk, the Harvard Law School professor who has turned his academic interest in executive compensation into a crusade.
Executive Compensation Revisited, Seeking Alpha, June 12, 2009
... So, I decided to call on some reinforcements. Lucian Bebchuk, a leading researcher of executive compensation (book; important paper discussed here), and Holger Spamann have a new paper called "Regulating Bankers' Pay" that discusses precisely this issue. They conclude not only that regulation of banks' executive compensation would be a good thing, but that it may actually be better than the traditional regulation of banks' activities.
House Panel Clashes Over Pay Restrictions, The New York Times, June 12, 2009
Lucian A. Bebchuk, a Harvard law professor who testified at the hearing, had similar criticisms about the banking industry in particular. In a written version of his opening statement to the committee, he argued that banks’ lopsided pay structure had encouraged dangerous risk-taking. "Because top bank executives were paid with shares of a bank holding company or options on such shares, and both banks and bank holding companies obtained capital from debtholders, executives faced asymmetric payoffs, expecting to benefit more from large gains than to lose from large losses of a similar magnitude."
Gene Sperling Opening Statement Before the House of Representatives, News Blaze, June 11, 2009
... Yet, as Harvard Professor Lucian Bebchuk has written, compensation packages based on restricted stock are not a fool-proof means of ensuring alignment with long-term value, as such pay structures can still incentivize well-timed strategies to manipulate the value of common equity or take "heads I win a lot, tails I lose a little" bets depending on the capital structure and degree of leverage of the firm.
New Pay Guidelines Raise Questions, Wall Street Journal, June 10, 2009
Treating bank executives' pay in a vacuum will not cure the problem of excessive risk-taking – and may prove counterproductive, says Lucian A. Bebchuk, a Harvard Law School professor and director of its corporate-governance program. He says the highly levered structure of financial-services firms gives executives the possibility for big gains, without much risk. Mr. Bebchuk said encouraging grants of restricted stock and shareholder votes on compensation packages may exacerbate the problem.
Business As Usual On Executive Pay?, FinancialTimes, June 9, 2009
According to Lucian Bebchuk, director of the corporate governance programme at Harvard Law School and co-author of Pay without Performance: The Unfulfilled Promise of Executive Compensation, individual directors are also concerned about suffering damage to their own personal standing if they agree pay awards that subsequently attract criticism. For example, following the controversy over the pension awarded to Sir Fred Goodwin at Royal Bank of Scotland, Sir Tom McKillop, the former RBS chairman who helped to negotiate it, felt obliged to step down as non-executive director at BP.
Restraints on Executive Pay, The Economist, May 30, 2009
What went wrong? With hindsight, it is clear that the industry’s leaders collectively failed to understand the nature of the risks their firms were taking on. But Lucian Bebchuk, a pay expert at Harvard Law School, sees another problem. He points out that equity-based bonus plans align bankers’ interests only with those of shareholders. This encourages them to make big bets that could dramatically increase the value of a bank’s shares. But if those bets go wrong, then it is not just shareholders who end up shouldering the catastrophic losses; they are borne by unsuspecting bondholders and taxpayers too. To solve this problem, Mr Bebchuk recommends linking bankers’ fortunes not just to share prices, but also to, say, the price of credit-default swaps on a bank’s bonds.
Re-regulation Will Fail to Curb Bankers' Worst Excesses, FinancialTimes.com, May 27, 2009
... Then there is the case of the remarkably unstressful stress tests, which showed that US banks needed no more than $75bn of fresh equity. Yet the methodology in the stress test report is open to question. Lucian Bebchuk of Harvard University points out that the report's estimate of $600bn aggregate losses takes into account losses arising from non-payment, but not discounts related to mark-to-market values.
RPT-Novel Ideas Surface For U.S. Banks' Executive Pay, Reuters, May 26, 2009
Lucian Bebchuk, a professor at Harvard Law School, and colleague Holger Spamann argue that a banker's pay should be tied to all of the bank's assets, not just to equity, which they say accounts for only about 5 percent of overall assets. "Banking regulators should monitor executive pay in banks, and prevent arrangements that incentivize top bankers to focus only on the bank's equity, which ... can gain through strategies that are detrimental to the other 95 percent," they write in a forthcoming paper. Bebchuk and Spamann suggest top bankers should be paid on a "broader set of claims, including deposits and junior debt," which would prod them "to place much greater weight on possible losses in their choice of strategy."
Funds Say Ready for US Toxic Asset Buys in June, Reuters, May 8, 2009
Harvard Law School professor Lucien Bebchuk said simply restarting frozen markets for troubled assets could lift their valuations above current fire-sale levels, but banks will still need capital injections. "The troubled assets plan will nicely complement the program for recapitalizing banks by providing a clearer picture of which banks are insolvent or undercapitalized, thus making it easier to target capital injections to banks most in need of capital," he said.
Changing Course, The Economist , April 30, 2009
When banks have only thin slices of equity, or when share prices have dropped precipitously, shareholders’ propensity to gamble goes up even more. A new paper from Lucian Bebchuk and Holger Spamann of Harvard Law School suggests that bankers’ pay be tied not just to equity but to other bits of the bank’s capital structure, such as preferred shares and bonds. Giving shareholders more control makes sense, but like every other solution to this wretched crisis, it creates problems of its own.
The Quest for Global Governance Standards, Directorship, April 23, 2009
In the search for metrics to assess governance of public companies, Harvard Law School Professor Lucian Bebchuk and Hebrew University Professor Assaf Hamdani discuss the major shortcomings of current methods plaguing researchers on The Harvard Law School Forum on Corporate Governance and Financial Regulation blog.
Target’s Challenge, The New York Times: DealBook, March 31, 2009
... In case you are wondering, only Pershing has nominated a fifth director to take office if the resolution does not pass and Target’s board remains at 13 members. Pershing Square’s fifth nominee is Ronald Gilson, a professor of law at Stanford and Columbia. Mr. Gilson is following in the shoes of Lucian Bebchuk, the Harvard professor that Carl Icahn nominated for the Yahoo board last year.
How Toxic Are They?, TIME, March 26, 2009
"One value of doing this is it would clarify which banks are and which banks aren't undercapitalized," says Harvard Law professor Lucian Bebchuk, whose September proposal for toxic-asset purchases by competing investors seems to have provided a template for Treasury's plan. "It's reasonable to expect that restarting the market for troubled assets will lead us to discover that some banks are in a healthy position and will make it absolutely clear that some banks are in an unacceptable position."
The Public-Private Partnership Investment Program (PPIP) – Will It Work?, RGE Monitor, March 25, 2009
The theoretical foundations of Geithner’s plan are provided by Lucian Bebchuk from Harvard University among others. He explains that "if the underlying market failure is at least partly one of liquidity, an effective plan for a public-private partnership in buying troubled assets can be designed. The key is to have competition at two levels. First, at the level of buying troubled assets, the government’s program should focus on establishing many competing funds that are privately managed and partly funded with private capital--and not creating one, large "aggregator bank"-- funded with public and private capital and engaging in purchasing troubled assets. Second, several potential fund managers should compete for government capital under a market mechanism resulting in maximum participation of private capital and minimum costs to taxpayers."
Column: The Bluff on Bonus, The Financial Express, March 25, 2009
The public furor has brought much needed public attention to the executive compensation racket that went out-of-control years before the crisis and stretches far beyond the financial sector. Harvard professors Lucian Bebchuk and Jesse Fried had already documented the phenomenon in their 2004 bestseller, Pay without Performance. In 1991 the average large-company CEO received 140 times the pay of an average worker; by 2003 the multiple jumped to 500. A few popular myths have aided them well in accomplishing this without much public outrage till of late.
Rule by "Hedge Fund Democrats", Institute for Public Accuracy, March 24, 2009
Lucian Bebchuk, a Harvard Law professor and centrist, now proposes Chapter 11 bankruptcy for AIG to stop the bleeding on its $1.2 trillion in credit default swaps. Paul Krugman, Nobel economist, argues for nationalizing the zombie banks to get them to shed their toxic assets and jump-start their lending activities for productive investment in real economic activity.
Some AIG (AIG) Employees Start to Return Bonuses; Death Threats Sent, Forexhound, March 20, 2009
Eleven employees who received retention bonuses of at least $1 million each have left AIG, according to the New York attorney general's office. (AIG can't even do retention bonuses right) "Regardless of whether it's important to retain employees, it is clear that the AIG bonuses did not serve a retention purpose and couldn't be justified as such," said Lucian Bebchuk, an executive-compensation expert at Harvard Law School. "A payment that's not conditional on staying doesn't really provide an incentive to stick around."
AIG CEO, Employees Get Death Threats Over Bonuses, Daily Herald, March 18, 2009
Eleven employees who received bonuses of at least $1 million each have left AIG, according to the New York attorney general's office. "Regardless of whether it's important to retain employees, it is clear that the AIG bonuses did not serve a retention purpose and couldn't be justified as such," said Lucian Bebchuk, an executive-compensation expert at Harvard Law School. "A payment that's not conditional on staying doesn't really provide an incentive to stick around."
Paying Workers More to Fix Their Own Mess, New York Times, March 18, 2009
The bonus scandal offers Mr. Obama and Mr. Bernanke a chance to get ahead of the curve — so long as they come up with changes that extend well beyond A.I.G. The starting point would be a rigorous analysis of whether the government can take specific steps to restrain pay. Some thoughtful management experts think any such efforts are doomed to fail. Others are more optimistic. "There are ways to do it," says Lucian Bebchuk, a Harvard Law professor.
Once Paid, AIG Bonuses will be Hard to Recover, The San Francisco Chronicle: SFGate, March 17, 2009
"The dismal performance of the financial products unit was apparent in the earlier part of 2008," says Lucian Bebchuk, Director of the program on Corporate Governance at Harvard Law School. "Similarly, it is hard to justify the bonuses as essential for retention, as they were not made contingent on executives' staying with the company. The executives who recently received the bonus payments are now free to leave AIG with the bonuses in their pockets," Bebchuk adds.
TALF: How To Make It Better, WSJ online, March 9, 2009
A few weeks ago, we blogged about a discussion paper written by Harvard Law School Professor Lucian Bebchuk that contained some concrete proposals on how the U.S. government could partner with private equity firms to invest in toxic assets. Shortly thereafter, The Wall Street Journal reported on some preliminary details of the Treasury’s plans for those programs, which appear to be quite similar to what Bebchuk suggests. We talked to Bebchuk about his ideas, which he says could also be applied to TALF - Term Asset-Backed Securities Loan Facility.
Should CEO Pay Restrictions Spread to All Corporations?, The Christian Science Monitor, March 9, 2009
... Another academic, Harvard Law School's Lucian Bebchuk, suspects public outrage makes the prospects of reform "better than they have been for a long time." His reform preference would be "rules and regulations that strengthen shareholder rights and make boards more accountable to shareholders." It used to be that CEO pay was a drop in the bucket compared with the size of big companies – "just" 42 times the pay of ordinary workers in 1980. But Professor Bebchuk found that during the period 2001 to 2003 the earnings of the top five executives at a set of large firms amounted to nearly 10 percent of corporate earnings. That is significant to shareholders.
Revisiting the Proxy Contest, The New York Times: DealBook, March 2, 2009
... This is why the staggered board is so controversial. A company with a staggered board has only one-third of its directors up for election in any given year. By requiring a hostile bidder to run two proxy contests in two years to force a transaction, the staggered board appears to discourage bidding, a deterrent that is not compensated for by higher share premiums. Lucian A. Bebchuk, John C. Coates and Guhan Subramanian of Harvard Law School have conducted empirical research on bids from 1996 to 2000 that confirms this finding.
How CEOs Steal From Your 401(k), MSN Money, March 2, 2009
Pedrotty's comments may come off as union rhetoric, but Harvard law professor Lucian Bebchuk puts real dollars behind the claim. The top five officers at major U.S. public companies extracted roughly a half-trillion dollars in pay, stock and perks over the past 10 years, pocketing about 9% of average corporate profits.
UPDATE 3-US FDIC Taps Private Market to Sell Bank Assets, Reuters, February 26, 2009
"This method might be appropriate for the FDIC's effort to sell assets it has come to own, but it would not be a good means of implementing Geithner's vision of restarting the market for banks' troubled assets," said Lucian Bebchuk, a Harvard professor who recently wrote a paper on how to make the federal financial bailout plan work.
An Army Of Bad Banks, Wall Street Journal, February 24, 2009
Lucian Bebchuk, a professor at Harvard Law School, tackles both at once in a recent discussion paper, which can be downloaded here. Bebchuk’s main argument is that one aggregator bank, or bad bank, won’t work. Instead, he suggests setting up a veritable army of such vehicles, with each bidding against all the others for troubled assets.
What are the Specifics?, The Associated Press, February 22, 2009
Lucian Bebchuk, professor of law, economics and finance at Harvard Law School, favors a plan that gives investors capital and the prospect of profit. The basics of his approach work like this: The Treasury Department could establish say 25 funds with capital of $10 billion each, funded by the government's Troubled Asset Relief Program, or TARP, as well as borrowed funds from the Federal Reserve. At the helm of those funds are private managers, who have no conflicts of interest and will be able to get a cut of the profits.
Whom Do Corporate Boards Represent?, New York Times, February 20, 2009
In their well-researched and cogently argued "Pay Without Performance: The Unfulfilled Promise of Executive Compensation" (Harvard University Press, 2004), Lucian A. Bebchuk and Jesse M. Fried, Harvard and Berkeley law professors, respectively, and experts on corporate governance, take straight aim at the economists’ model. Anyone interested in this topic could not do better than reading this widely praised book, along with the economist Michael S. Weisbach’s thoughtful review of it, published in the Journal of Economic Literature.
US Public-Private Fund, Financial Times: Lex, February 20, 2009
... Asset heterogeneity and vast value uncertainty complicated bringing together banks hoping to resist further losses with the government intent on taxpayer protection. The key, suggests Harvard professor Lucian Bebchuk, is to have a significant number of private funds dedicated to buying and managing assets, rather than one large fund. With low-cost, non-recourse public funding, multiple buyers would create price tension, while retaining a strong incentive not to overpay.
Executive Compensation Controversy Creates More Unintended Consequences, Seeking Alpha, February 19, 2009
... Corporate governance expert, Lucian Bebchuk, writes of the risks in the way Dodd’s amendments restrict variable compensation to stock awards. A list of similar examples of problems would go on and on. The bottom line is that companies need flexibility in setting compensation. Federal regulation of compensation is a pathway littered with unintended consequences, and has there ever been a "good" unintended consequence?
Creating Incentives to Buy Banks' Bad Assets, Associated Press, February 16, 2009
Lucian Bebchuk, professor of law, economics and finance at Harvard Law School, favors a plan that gives investors capital and the prospect of profit. The basics of his approach work like this: The Treasury Department could establish, say, 25 funds with capital of $10 billion each, funded by the government's Troubled Asset Relief Program, or TARP, as well as borrowed funds from the Federal Reserve. At the helm of those funds are private managers, who have no conflicts of interest and will be able to get a cut of the profits. They are given a mandate to use the money to buy the troubled assets, or they can park them in Treasury securities. But the only way they make money is by getting an excess return over the Treasury yield.
Capitalist Punishment, Washington Post, February 6, 2009
... Figures compiled by Lucian Bebchuk of Harvard Law School and Yaniv Grinstein of Cornell's school of management show that the pay of the top five executives in publicly traded firms amounted to 5 percent of those companies' earnings in 1993-95 and 10 percent in 2001-03. Improvements in those companies' performance and increases in their size accounted for just 20 percent of this increase, they calculated, leaving 80 percent of the increase in top-executive pay "unexplained."
Executive Pay: Obama's PATCO Moment, BusinessWeek, February 3, 2009
Not everyone agrees that Obama's move to reduce compensation on Wall Street will have broader effects. "This by itself will not necessarily improve things outside the financial sector," says Lucian Bebchuk, an executive compensation expert at Harvard Law School. Bebchuk would like to see legislation to increase shareholder rights as a bulwark against excessive pay.