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2006

  • Compensation Experts Offer Ways to Help Curb Executive Salaries, New York Times, December 30, 2006.
    Executive compensation issues are tricky; the devil is often deep in the footnotes of proxy statements, employment agreements and stock option plans. It will take a concerted effort by both investors and boards to effect real change. Otherwise, lawmakers have threatened to get involved. “It’s not like Iraq, where everybody says it is bad, but nobody says what to do,” said Lucian Bebchuk, a Harvard Law School professor who has been an outspoken critic of executive pay. “The problem is making the process and the people who play a key role in making the decisions want to make improvements.”
  • Opposing view: Well-paid CEOs enrich U.S., USA Today, December 26, 2006.
    Critics, notably Lucian Bebchuk of Harvard, argue that corporate boards are held captive by CEOs, who essentially dictate their own pay. Actually, though, rising pay has coincided with a trend toward more powerful and independent boards.
  • Just Capitalism, The Washington Post, December 22, 2006.
    What proportion of bosses’ pay should be regarded as excessive? In a paper published last year, Harvard’s Lucian Bebchuk and Cornell University’s Yaniv Grinstein take a careful look at this question. They begin by noting that executive pay was already raising eyebrows back in 1993 and that it has nonetheless grown mightily since then. Then they observe that sales and profits of top companies have risen, which would tend to cause the bosses’ pay to rise in tandem; and that an increasing share of the top companies are new-economy outfits, which tend to pay more. By analyzing the statistical relationship between executive pay and firms’ size, profits and product mix, Mr. Bebchuk and Mr. Grinstein calculated how much compensation could have been expected to rise between 1993 and 2003. Their result: In 2003 the top five executives at the average public company could have been expected to earn a collective $6 million-but they actually received almost twice that.
  • Sarbanes-Oxley stifling? Say it with a straight face, Houston Chronicle, December 21, 2006.
    Just nine months after the practice of backdating options for executives became the latest business scandal, a study released Monday found backdating extends to company directors as well. … The study, which was sponsored by the Harvard Law School Program on Corporate Governance, explains in part why executive backdating was so prevalent. Directors, the guardians of shareholder interest and the people who are supposed to monitor executive pay, were taking their own turn at the trough.
  • Will Backdating Scandal Thwart Effort to Roll Back Reforms?, Wall Street Journal, December 20, 2006.
    Clearly, something’s amiss in the orchard. A new study out this week helps explain what that might be. Three scholars — Lucian Bebchuk, Yaniv Grinstein, and Urs Peyer — have run the numbers on 29,000 grants of stock options to directors, and found that 9% of them were “lucky” — that is, they occurred on a day when the stock price hit a monthly low. “Lucky” is in quotes, because the authors clearly believe that many, if not most, were the result not of luck but of backdating.
  • US Options Scandal Derails S&N Deal, The Guardian, December 19, 2006.
    Clearly, something’s amiss in the orchard. A new study out this week helps explain what that might be. Three scholars — Lucian Bebchuk, Yaniv Grinstein, and Urs Peyer — have run the numbers on 29,000 grants of stock options to directors, and found that 9% of them were “lucky” — that is, they occurred on a day when the stock price hit a monthly low. “lucky” is in quotes, because the authors clearly believe that many, if not most, were the result not of luck but of backdating.
  • Op-Ed by Lucian Bebchuk and Urs Peyer: ‘Lucky’ Grants Point to a Deeper Governance Malaise,Financial Times, December 18, 2006
  • Study: Board Outsiders Got Backdated Stock, Investment News, December 18, 2006.
    The backdated stock option scandals that ignited Securities and Exchange Commission investigations included not just top executives, but about 1,400 other directors as well, according to a Harvard Law School study to be released today, The New York Times reported.
  • Outside Directors’ “lucky” Days, The Red Herring, December 18, 2006.
    Many outside directors have been feasting alongside corporate executives on backdated options, according to an academic study released Monday. The report found that 9 percent of all option grants to outside directors from 1996 to 2005 fell on days when the company’s stock price fell to a monthly low. The study, by professors at Harvard and Cornell universities and the French business school Insead, concluded that the “lucky grant events” could not be accounted for by chance.
  • Backdating Not Limited To Execs: Study, Securities Law360, December 18, 2006.
    “This paper shows that opportunistic timing problems have not been limited to executives’ grants, as has been thus far assumed, but rather have also affected outside directors’ grants,” wrote co-authors Lucian Bebchuk of Harvard Law School, Yaniv Grinstein of Cornell University and Urs Peyer of Insead business school in France.
  • Get Ready For A Red-Hot Proxy Season, Forbes, December 18, 2006.
    If the 2006 proxy season felt dramatic, just wait until spring. The folks with their fingers on the pulse of big shareholder groups have already identified the top five areas of activity this year: majority voting, executive compensation, board declassification, poison pill elimination and activist hedge funds. … Meanwhile, the movement toward board declassification has gathered so much momentum that Connolly advised companies not to waste their resources fighting it. Already, 53% of publicly traded companies have declassified boards, and last year saw 94 proposals. Academic studies by Harvard’s Lucian Bebchuk and others correlate staggered boards with lethargic stock performance, and shareholders have taken notice. Connolly thinks they have simply concluded that a classified board has no benefits for them as owners.
  • ‘Lucky’ Grants Point to a Deeper Governance Malaise, Financial Times, December 18, 2006.
    More than 130 companies are under scrutiny in the US for alleged backdating of stock options and dozens of executives have lost their jobs, but the significance for the corporate governance system is in dispute. To what extent has backdating been the product of systemic problems? Is it relevant for the future or only for the past? Our empirical work on backdating (co-authored with Yaniv Grinstein) suggests this practice deserves all the attention it has been getting and more.
  • Study Cites Role Outside Directors Had With Options, Wall Street Journal, December 18, 2006.
    A new academic study suggests that many outside directors received manipulated stock-option grants, a finding that may help explain why the practice of options backdating wasn’t stopped by the boards of some companies. The study is notable because it suggests that outside, or independent, directors — who are supposed to play a special role safeguarding against cozy board relationships with management — may have been co-opted in options backdating by receiving manipulated grants themselves. The New York Stock Exchange requires that a majority of board seats, and all compensation- and audit-committee members, be independent. The study doesn’t address whether directors were aware that their options were propitiously timed… Lucian Bebchuk, a law professor at Harvard, said the study didn’t calculate how much extra money outside directors may have received by exercising options with fortuitous grant dates. “We don’t expect the numbers to be very large,” he said. “Directors don’t get very large grants.”
  • Study Finds Outside Directors Also Got Backdated Options, New York Times, December 18, 2006.
    Board members were not just blissfully ignorant or willfully blind bystanders when they backdated stock option grants for corporate executives, according to a new study. Some 1,400 outside directors themselves may have received manipulated grants over the past decade. The research, to be released today, sheds new light on the stock options manipulation that has entangled more than 120 companies in a nationwide scandal. It suggests that what has been widely seen as a dot-com phenomenon to enrich managers in the executive suite probably extended to directors in the boardroom as well. The study, sponsored by the Harvard Law School Program on Corporate Governance, also raises serious questions about corporate governance if the outside directors, who are supposed to act as a final backstop against bad practices, received — and in many cases may have even approved — fraudulent option grants. “Opportunistic timing of directors’ grants is unlikely to have large dollar significance,” said Lucian A. Bebchuk, a Harvard Law School professor who is one of the study’s three authors. “But it has a large governance significance.”
  • ‘Lucky’ Stock Options Not Limited to Executives, Washington Post, December 18, 2006.
    Chief executives weren’t the only ones enjoying near-guaranteed profits from stock options in the past decade. Outside directors at hundreds of American companies also received option grants that are likely to have been manipulated, a new study found. According to the study, 9 percent of 29,000 option grants to outside directors from 1996 to 2005 were granted on a day when the company stock price was at a monthly low. The likelihood of such a concentration of “lucky” grants is so low as to be statistically impossible, the study’s authors said. “It’s like going to Vegas thousands of times and betting on red every time and winning more than half the time,’ said Lucian Bebchuk, the Harvard University professor who co-authored the report, titled “Lucky Directors,” with Cornell University’s Yaniv Grinstein and Urs Peyer, a professor at the French business school Insead. “From a numerical standpoint, it can’t be random. There has to be some manipulation of the outcome.”
  • Doubt Cast on Stock Options of Directors, LA Times, December 18, 2006.
    Nearly 1,400 corporate board members appear to have profited from the manipulation of stock option grant dates over a 10-year period, according to a study being released today. The analysis raises the possibility that hundreds of board members were aware that options were backdated to boost their value to themselves and company executives. That could be seen as a conflict with their role as advocates for all company shareholders. “Rather than merely failing to notice or stop the manipulation of executives’ grants, many outside directors have received manipulated option grants and thus directly benefited from the manipulation practices,” according to the study by Harvard professor Lucian Bebchuck and two other scholars.
  • Study Links Directors to Options Scandal, Financial Times, December 18, 2006.
    More than 1,000 directors of US companies have benefited from the controversial practice of backdating stock options to boost their pay, according to new research set to open another front in a scandal that is spreading rapidly across corporate America…The study by three academics – to be published today- is the first to provide evidence that options of outside directors were backdated in the same way as the ones awarded to chief executives. It could prompt regulators and companies to widen their probes to include backdating by directors. The study, by Harvard Law School’s Lucian Bebchuk, Cornell Universit’s Yaniv Grinstein, and Insead’s Urs Peyer, found that about 1,400 directors at 460 US companies benefited from stock options backdated to the lowest price in a monthly period. (Subscription required.)
  • Options Backdating Frequent, Report Says, Associated Press, December 18, 2006.
    About 1,400 corporate directors received option grants whose timing was manipulated, according to an academic study released Monday. Of all options grants to directors, about 9 percent were received at “lucky” times _ when the stock price was equal to a monthly low, according to a Harvard Law and Economics paper released Monday. After studying the period form 1996 to 2005, academics at Harvard Law School, Cornell University and INSEAD in France estimated that about 800 lucky grant events were the result of opportunistic timing. The report was written by Lucian Bebchuk at Harvard, Yaniv Grinstein at Cornell and Urs Peyer at INSEAD.
  • N.C.-Based Company Rewards CEO for Paying Off His Debt to Firm, Dow Jones/Associated Press, December 15, 2006.
    Lucian A. Bebchuk, Harvard Law School professor and director of its corporate governance program, said that he had never encountered an executive bonus that took into account the recipient’s payback of loans, and he called individual debt reduction “a very funny performance measure.”
  • Firm Rewards CEO for Paying Off His Debt, Houston Chronicle, December 14, 2006.
    How about a bonus for paying off your debt to the company? That’s the unusual compensation arrangement Speedway Motorsports Inc. set up for its chief executive. Part of Chairman and Chief Executive O. Bruton Smith’s $1.45 million bonus for 2006 was based on the fact that he repaid some of the money he’s owed his company for at least four years, according to a recent filing with the Securities and Exchange Commission. This has compensation experts puzzled. … Lucian A. Bebchuk, Harvard Law School professor and director of its corporate governance program, said that he had never encountered an executive bonus that took into account the recipient’s payback of loans, and he called individual debt reduction “a very funny performance measure.”
  • Study Ties CEO’s Clout, Backdating, The Atlanta Journal-Constitution, December 14, 2006.
    Corporations that systematically backdated stock options were headed by strong chief executives who influenced boards that had a minority of outside, or independent, directors, a new Harvard Law School research report suggests. … “We estimate that about 10 percent of all CEOs and about 12 percent of all companies engaged in backdating,” research leader Lucian A. Bebchuk said in a telephone interview. The options were usually dated from the stock’s lowest price in the grant month, but about 43 percent of the grants studied were awarded from the lowest price of the quarter, the research found…But historically, backdating was an issue waiting to surface as a controversy. It was discovered in the 1990s by academic researchers who noticed that the coincidence of options grants to subsequent share price gains of certain executives was statistically suspect. And that’s basically what Bebchuk and his researchers — Yaniv Grinstein and Urs Peyer — looked at. They studied the options practices of 6,000 public companies from 1996 through 2005.
  • The FSA may be no Easy Pushover for Nasdaq, Financial Times, December 10, 2006.
    Most of the corporate scandals arose – with the notable exception of Enron – at companies where the roles of the chief executive and chairman were combined. The imperial CEO’s accountability to shareholders is weak. Huge stock option grants, which provided these individuals with an increased incentive to cook the books, were not subject to a UK-style shareholder vote. Meanwhile, a new Harvard paper by Lucian Bebchuk, Yaniv Grinstein and Urs Peyer tells us that “lucky grants” of backdated options were more likely when the company lacked a majority of independent directors and/or the CEO had longer tenure – factors both associated with increased influence of the CEO on pay-setting and board decision-making. Not all the news is bad, though. The Scott Committee on capital markets regulation last week retracted its endorsement of ballot stuffing by brokers in director elections, under pressure from its more shareholder-friendly members. And its other proposals on shareholder rights will be hard to ignore.
  • ‘Lucky’ Option Grants Detailed; Study Points to Manipulation, Boston Globe, December 9, 2006.
    About 1,150 options granted to chief executives at the lowest stock price of the month were the result of manipulation, according to estimates in a Harvard Law and Economics paper released yesterday. The study looked at “lucky” grants, which it defined as grants given to chief executives at a stock’s lowest price for the month…The study was done by Lucian Bebchuk of Harvard Law, Yaniv Grinstein of Cornell University, and Urs Peyer of the INSEAD business school in France.
  • CEO Thievery Triggers Shareholder Outrage, Investment News, November 27, 2006.
    Meanwhile, an independent board reduced by 33% the chance that a company would be involved in the backdating of stock options, the study concluded. The study, by Harvard University professor Lucian Bebchuk, Ithaca, N.Y.-based Cornell University professor Yaniv Grinstein and visiting University of Chicago professor Urs Peyer, examined stock grants between 1996 and 2005. It’s the latest in a series of papers by academic and governance research groups that attempt to measure the extent of the backdating scandal and to explain how it spread.
  • Let’s all Get Rich by Backdating Everything, Miami Herald, November 27, 2006.
    A study by Lucian Bebchuk, a Harvard law professor, and Yaniv Grinstein, a Cornell management professor, concluded 12 percent of firms they looked at provided “lucky grants'” of manipulated option dates between 1996 and 2005.
  • Is Blackstone Setting a Bridge Too Far?, Wall Street Journal, November 25, 2006.
    Harvard professor Lucian Bebchuk, a critic of executive compensation trends, calculates that senior managers receive up to 10% of after-tax profits in any single year. On this arithmetic, companies could save as much by outsourcing 100 top management jobs to India as by eliminating 10,000 workers. But America’s club of corporate executives won’t be looking too closely at this form of outsourcing.
  • Options Backdating: A Scandal With Wide Reach, Philadelphia Inquirer, November 19, 2006.
    But late last week, the picture changed, with release of a Harvard study, titled “Lucky CEOs,” which found backdating among “old economy” firms as well as high-tech ones. It concluded that 720 companies – 12 percent of firms studied – had backdated options for about 850 chief executive officers between 1996 and 2005.
  • Backdated Awards Added 10% to Executive Pay, The Independent, November 18, 2006.
    Lucky CEOs, a paper by Lucian Bebchuk, Yaniv Grinstein and Urs Peyer, examined the effect of particularly suspicious, or “lucky”, share options grants. The authors say it is wrong to assume that options backdating has been a technical or trivial issue. “We estimate the average gain to chief executives from grants that were backdated to the lowest price of the month to exceed 20 per cent of the reported value of the grant. The gain increases the CEO’s total reported compensation for the year by more than 10 per cent.”
  • Study Charts Broad Manipulation of Options, New York Times, November 17, 2006.
    Abuses of stock option grants are perceived to have spread like a virus among high-technology companies. But a new study suggests that hundreds of old-economy companies may also have caught the backdating bug. … “It is not the case that people should concentrate on new-economy firms,” said Lucian Bebchuk, a Harvard Law School professor and director of its corporate governance program. “That is the impression that one might get from the cases that have come under scrutiny thus far.” Professor Bebchuk co-wrote the study with Yaniv Grinstein, a Cornell University professor, and Urs Peyer of the French business school Insead. It is to be posted today on the Web site of the Harvard Law School corporate governance program.
  • Backdated Options Pad CEO Pay By Average of 10%, Wall Street Journal, November 17, 2006.
    About 850 U.S. chief executives received backdated or otherwise manipulated stock option grants that boosted their annual pay, on average, by at least 10%, according to a new study. … The researchers also found that executives who reaped riches from backdating options started out with reported compensation that was richer than their peers at similar companies. On top of that above-average pay, executives received an average of an extra $1.3 million to $1.7 million through each manipulated grant, the academics found. “It’s not pocket change,” said Lucian Bebchuk, a professor of law, economics and finance at Harvard and one of the study’s authors.
  • More Than Backdating in Common, Washington Post, November 17, 2006.
    Companies that lacked a majority of independent board members and that had long-serving chief executives were more likely to award questionably timed stock options to senior executives, according to a study to be released today. … In addition, Harvard University professor Lucian Bebchuk said, companies in the study that were implicated in backdating already paid their top executives high cash compensation, which was increased by backdated options by more than 10 percent a year on average.
  • A Board Link to Option Timing, Los Angeles Times, November 17, 2006.
    Backdating of stock options was more likely to occur at companies that did not have independent board directors in the majority, according to a study being released today. … An independent board – one on which the majority of members were not insiders nor had other business dealings with the company – reduced by 33% the chance that a company would provide lucky grants to its chief executives, said Lucian Bebchuk, a Harvard professor and a coauthor of the report.
  • Study Hits Out at Options Practice, Financial Times, November 17, 2006.
    The controversial practice of backdating stock options to boost executive pay went hand-in-hand with poor corporate governance practices and overbearing chief executives, according to a study published today. The research is the first to posit a link between lax internal controls and stock options backdating. The scandal has so far engulfed more than 130 US companies in internal and regulatory probes but the study suggests that number could eventually climb to 720…”These findings are consistent with the view that grant date manipulation reflects governance problems rather than a compensation device used for valid business reasons,” conclude the report’s authors – Harvard Law School’s Lucian Bebchuk, Yaniv Grinstein from Cornell University and INSEAD’s Urs Peyer.”
  • A Republican Senator’s Corporate Misdeeds, AlterNet, November 9, 2006.
    Stock options, a controversial form of director compensation, are designed to encourage future risk taking and align the interest of the director with the interests of the shareholder,says attorney Beth Young, a corporate governance expert now lecturing at Harvard Law School. Re-electing a director who might have to resign within weeks is a little unusual,she says, and granting him additional options prior to his anticipated departure at an early annual meeting is very unusual.
  • Sarbanes-Oxley Likely To Stand With Democrats, Investor’s Business Daily, November 8, 2006.
    Regulatory changes, however, are unlikely to be sweeping or surprising, observers said, as legislators have already tipped their hand by introducing policies to regulate hedge funds and expose excessive executive compensation. “My assessment is that it’s not going to create a major shift,” said Lucian Bebchuk, director of the Harvard University Program on Corporate Governance. However, Democrats will be able to slow the momentum for rolling back previous reforms, he said.
  • Grasso Pension Ruling Puts Boards on Notice, U.S. News & World Report, October 20, 2006.
    And the judge’s ruling that Grasso had a duty to inform his board about his big pension account could have implications for executives at all kinds of businesses, says Lucian Bebchuk, a Harvard law professor and expert on executive pay.
  • Investors Press Their Demands, National Law Journal, October 9, 2006.
    In another high-profile ballot-access case claimed as a shareholder win, the plaintiff was shareholder-power advocate Lucian Bebchuk, a Harvard Law School professor and director of Harvard’s Program on Corporate Governance. As a shareholder of CA Inc., formerly Computer Associates, Bebchuk proposed a bylaws amendment involving the way the company adopts a poison pill. The company declined to put the proposal on the proxy, saying that the bylaw would violate Delaware law.
  • The $100 million CEO club: Rewarding execs with big stock options made many a millionaire in the 90’s, Forbes, October 3, 2006.
    It may be time for firms to change the way they distribute equity awards. Firms could tie options more closely to performance by forcing executives to hold them longer, says Lucian Bebchuk, a professor at Harvard Law School and author of Pay Without Performance: The Unfulfilled Promise of Executive Compensation.
  • Activist Shareholders Outfoxing Top Execs, Investor’s Business Daily, October 2, 2006.
    The growing power of shareholders in takeovers was highlighted in September when Harvard Law School professor Lucian Bebchuk persuaded the Delaware Chancery, the most sophisticated corporate law court in the U.S., to let him include a proposal on the proxy of computer services giant CA, (CA) formerly Computer Associates. Bebchuk, holding just 140 CA shares, wanted to change the company’s bylaws so that poison pills would require shareholder approval or unanimous board approval.
  • HP spying scandal back in the spotlight, Financial Times, September 27, 2006.
    Lucian Bebchuk, a professor at Harvard Law School, says efforts to clear the air have been complicated by Mr Hurd’s decision to engage Morgan Lewis, attorneys, to lead an investigation into the scandal. Mr Hurd surprised observers last week when he announced that the firm’s investigation had been reporting to him, rather than to the HP board. Prof Bebchuk says that Mr Hurd’s decision to have the investigation report to him when the questions remain about the extent of his involvement in the scandal presented a conflict of interest, even if he felt he had no choice in the face of a dysfunctional board.
  • Ruling May Open Access to Proxies, LA Times, September 8, 2006
    This can make a significant difference in the process of corporate elections, making them somewhat more real than they have been in the past,” said Lucian Bebchuck, a Harvard professor who specializes in corporate governance issues. “It makes it possible to remove directors without expending huge costs.
  • Executive Pay Practices Under Scrutiny, BusinessWeek, September 5, 2006.
    The end run around Section 162(m) may have cost the federal government billions of dollars in lost taxes since the rule was enacted 13 years ago. Harvard Law School Professor Lucien Bebchuk estimates that forgone taxes as a result of widespread abuse of 162(m) has cost the U.S. Treasury at least $20 billion. “The numbers are gigantic,” he says.
  • Delaware Rules: Heated debates over governance, director independence, and executive pay will likely be resolved in Delaware’s Chancery Court, CFO Magazine, August 1, 2006.
    Wachtell Lipton’s Martin Lipton, the inventor of the poison-pill defense in the 1980s, worries too about the impact if Delaware courts rule for Harvard University professor Lucian Bebchuk in a current case. As a shareholder of CA Inc., Bebchuk is suing the company as part of a campaign to get companies to allow binding stockholder votes. His proposal would let shareholders change antitakeover provisions of company bylaws to require a unanimous vote of directors and force poison pills to expire after one year, unless holders approve their extension. Some companies approved similar proposals from Bebchuk, but CA responded that the amendment violates Delaware law.
  • Op-Ed by Lucian Bebchuk: Investors Must Have Power, Not Just Figures on Pay, Financial Times, July 27, 2006
  • New Rule to Expose Pay Packages, USA Today, July 27, 2006.
    “The iceberg of retirement benefits will very much come to the surface,” says Harvard University law professor Lucian Bebchuk, co-author of the book Pay Without Performance and a critic of “stealth compensation” he sees in the form of deferred compensation, pensions and assorted perks.
  • More Data on Pay at the Top Is Mandated, LA Times, July 27, 2006.
    “Paradoxically, it will seem as if pay levels are going up and there is an increase in performance-decoupled pay,” said Lucian Bebchuk, a professor at Harvard Law School. “That’s not because things are getting worse. We are just going to learn about things that have been bad for some time. They will come to the surface.”
  • Retaking the High Ground, Investment Dealers’ Digest, July 24, 2006.
    The short-term versus long-term debate is sometimes not as clear-cut as it seems. For example, Lucian Bebchuk, a professor at Harvard University, has advocated majority voting instead of the plurality vote that many US companies have. He argues that it is easier to manipulate the outcome of a vote in a plurality system, in which a director can be elected with as little as one vote. Majority voting, on the other hand, would help ensure that the goals of activists were aligned with other shareholders, since a large block would have to be convinced that the new way makes sense.
  • Dancing Delicately in Delaware: Wilmington’s balancing act continues as corporations and shareholders face off, and examining the merits of outsiders as CEOs, The Daily Deal, July 21, 2006.
    In Lucian Bebchuk v. CA Inc., Vice Chancellor Stephen Lamb studiously declined to rule on the legality of a bylaw that seeks to limit the CA Inc. board’s ability to keep a poison pill in place because shareholders of the Islandia, N.Y., computer products distributor had not yet approved it. CA has resisted putting the proposal on its ballot, claiming that such a bylaw would be illegal under Delaware law. Lamb held that Bebchuk, a Harvard Law School professor and longtime critic of poison pills, could pursue his case before the Securities and Exchange Commission or in the federal courts. The extent to which shareholders may bind a board by passing bylaws has been a key bone of contention between shareholder activists and corporations.
  • Bebchuk’s Crimson Tirade, Institutional Investor, July 15, 2006.
    For two decades, Harvard Law professor Lucian Bebchuk has been an outspoken voice for shareholder rights, railing in books and interviews against the excesses of entrenched corporate executives and directors. Now he’s no longer just a commentator – he’s a combatant.
  • What the boss makes; Compensation By the numbers, Seattle Times, July 9, 2006.
    “Flawed compensation arrangements have not been limited to a small number of ‘bad apples’; they have been widespread, persistent and systemic,” wrote professors Lucian Bebchuk of Harvard Law School and Jesse Fried of the Boalt Hall School of Law at the University of California, Berkeley, who co-authored “Pay Without Performance: The Unfulfilled Promises of Executive Compensation.”
  • Corporate Funding For Shareholder Activism? Critics Cite Strategic Issues, But Backers See Fairer Game; Judge Offers a Compromise, Wall Street Journal, July 3, 2006.
    Harvard Law School Prof. Lucian Bebchuk counted only 108 challenges for board seats, excluding hostile-takeover attempts, at U.S. companies between 1996 and 2004. Thirty-eight challengers won, but only two at companies with market capitalizations greater than $200 million. For medium-size and large companies, he says, “the risk of removal via the ballot box is practically negligible.”
  • CA to Add Shareholder Proposal to Proxy, Associated Press, June 27, 2006.
    The Islandia, N.Y., technology company originally denied a request to add the proposal to its upcoming proxy statement, claiming the proposal was a violation of Delaware law. The rejection resulted in a court challenge by the drafter of the resolution, Harvard professor and shareholder rights activist Lucian Bebchuk.
  • Islandia-based CA to Include Poison Pill Provision in Its Proxy, Long Island Business News, June 27, 2006.
    The Islandia-based software company had previously fought corporate governance expert Lucian Bebchuk’s attempt to include a bylaw amendment on CA’s proxy – due in July, a month before the company’s annual meeting. The proposal, part of a growing trend of greater shareholder involvement, directly challenged corporate policy of leaving bylaw decisions in the hands of directors.
  • Sky-High Payouts To Top Executives Prove Hard to Curb, Wall Street Journal, June 26, 2006.
    Yet, because CEOs have influence over who gets on the board — the only board slate offered to shareholders is the one proposed by management – directors are careful not to offend them. “Displeasing the CEO hurts one’s chances of being put on the company slate, so directors have an incentive to support or at least go along with pay arrangements that favor top executives,” says Lucian Bebchuk, a Harvard University law school professor and co-author of “Pay Without Performance.” “They don’t have an incentive to change those arrangements.”
  • In a Culture of Greed, How Bad Is an Affair?, New York Times, June 25, 2006.
    In fairness to Mr. Nardelli, he is not the by public companies to their top five executives from 1993 to 2003 was about $350 billion which is a lot worse in my book than a little hanky-panky between consenting adults.
  • Court Deems CA Shareholder Suit “Not Ripe”, Long Island Business News, June 23, 2006.
    Vice Chancellor Steven Lamb said Professor Lucian Bebchuk’s challenge to CA’s proxy was “not yet ripe” for consideration.
  • Judge Won’t Settle CA Poison Pill Dispute, Associated Press, June 23, 2006.
    Harvard corporate governance expert Lucian Bebchuk wants to amend CA’s bylaws to require a unanimous vote by the board of directors to adopt or extend a “poison pill” antitakeover plan, and to set a one-year expiration date for any such plan. Any attempt to repeal or amend the bylaw also would require a unanimous board vote.
  • Judge Says Fight on CA Poison Pill Proxy Not Ready for Decision, MarketWatch.com, Jun 23, 2006.
    Vice Chancellor Stephen Lamb said the battle between CA and Harvard Law professor and shareholder rights activist Lucian Bebchuk is not ripe for decision yet.
  • Congress must increase minimum wage, protect average investors, Journal Times On Line, June 22, 2006.
    A recent study by Harvard’s Lucian Bebchuk and Cornell’s Yaniv Grinstein found that in 1993 the total compensation for the top five executives of American public companies made up 4.8 percent of company profits. Just ten years later that proportion had more than doubled to 10.3 percent and the total amount paid to executives over that period was approximately $290 billion.
  • What Price Talent? Why US investors are now less content to hail the chief, Financial Times, June 16, 2006.
    But academic and empirical evidence suggests that this ideal can be difficult to realise, given the ties between independent directors and management. Professors Lucian Bebchuk and Jesse Fried, who analysed the issue in their book Pay Without Performance, concluded: “Compensation arrangements have often deviated from arm’s length contracting because directors have been influenced by management, sympathetic to executives, insufficiently motivated to bargain over compensation or simply ineffective.”
  • Court to say whether CA holders vote on ‘poison pill’, MarketWatch.com, June 16, 2006.
    Vice Chancellor Stephen Lamb said Friday he would rule before then on whether CA must include a proposal from Harvard Law School Professor Lucian Bebchuk that involves poison pills, a hot-button issue for corporate-governance experts.
  • Runners and Raiders: Companies are Under Attack Again, This Time from Activist Hedge Funds that Want to Enrich Shareholders, Not Chief Executives, Financial Times, June 10, 2006.
    For Lipton, the lessening stigma is partly a consequence of the efforts by some academics and unions to shift the nature of US companies from a “director-centric management system” to a “shareholder-centric” one. This movement, best illustrated by the work of Professor Lucian Bebchuk at Harvard, threatens to replace the “imperial chief executive” with the “imperial shareholder”, says Lipton. Combined with the reaction to the wave of corporate scandals at the end of the stock market boom and media coverage of soaring executive pay, their efforts “provide wonderful cover” for activist shareholders. Lipton fears it could ultimately lead to US companies becoming more like UK companies in terms of the active role of shareholders. This, in his view, would be “a disaster” for US companies and “for the economy as a whole”.
  • Canada CEO Pay Doesn’t Reflect Stock Performance, Wall Street Journal, June 1, 2006.
    U.S. studies of executive pay have found some correlation between higher pay for top executives and better returns for investors, “although not as much as one would like,” said Lucian Bebchuk, director of the Harvard Law School corporate governance program. In the U.S., “there is a similarly too-weak link between pay and performance,” Prof. Bebchuk said.
  • Big Bonuses Still Flow, Even if Bosses Miss Goals, New York Times, June 1, 2006.
    “Lowering the hurdles is especially disconcerting because very often the goals are not set all that high to begin with,” said Lucian Bebchuk, professor at Harvard Law School and author with Jesse Fried of “Pay Without Performance.” Mr. Bebchuk said shareholders should be especially alert to increases in bonuses because more companies were shifting away from stock options and into cash incentives
  • Lawsuit seeks answer on shareholders’ power over bylaws, MarketWatch, May 12, 2006.
    The lawsuit, filed Thursday afternoon in Delaware Chancery Court on behalf of Harvard professor Lucian Bebchuk asks the courts to decide whether the actions Bebchuk seeks in a shareholder proposal are illegal under Delaware law because they would give shareholders the power to decide on an issue normally governed by directors.
  • Conflict of Interests Policies and Practices Vary Widely at Proxy Advisory Firms, SocialFunds.com, April 19, 2006.
    Harvard Law Professor Lucian Bebchuk, whose resolution calls on Chevron to reimburse shareowner expenses for resolutions receiving majority support, is a minority shareholder of Glass Lewis, serves on its advisory board, and collaborates on its shareholder rights index. Of the six shareowner resolutions up for vote at Chevron, Prof. Bebchuk’s is the only one Glass Lewis recommends votingfor.
  • Executive Pay in the U.S.: CEOs Take the Money and Run, Z Magazine, April 19, 2006.
    According to a just released study by professors Lucian Bebchuk of Harvard Law School and Yaniv Grinstein of Cornell University, based on interviews of CEOs and top managers at the 1,500 largest publicly traded corporations in the U.S., the group of 5 top managers at the corporations received collectively $122 billion in compensation between 1999-2003 compared to $68 billion for the same group during 1993-1997. On top of these 1999-2003 gains, the Harvard-Cornell study estimates another 39 percent increase in average executive compensation in 2004 for the surveyed group of the largest corporations.
  • For Leading Exxon to Its Riches, $144,573 a Day, New York Times, April 15, 2006.
    “It’s a funny thing to call it a pension; basically it’s a check of nearly $100 million,” said Lucian Bebchuk, director of the corporate governance program at Harvard Law School and the co-author of “Pay Without Performance: The Unfulfilled Promise of Executive Compensation” (Harvard University Press, November 2004).
  • Shameless Gougers, National Journal, April 14, 2006.
    That is a bad thing in itself — and, fairness aside, the scale of the resulting misallocation of resources is not small. An academic study published last year by Lucian Bebchuk and Yaniv Grinstein in the Oxford Review of Economic Policy estimated that from 2001 to 2003, the total pay of the five highest-earning CEOs of public companies was equivalent to nearly 10 percent of the companies’ earnings, roughly double the share of earnings paid out that way from 1993 to 1995. Pay on that scale, if it elicits no improvement in company performance, is perceptibly depressing return on investment. That, as I say, is serious enough, but a far larger cost comes in damage to the system’s reputation.
  • Upstart Investors For Director Accountability Targets Pfizer, MarketWatch.com, April 13, 2006.
    While Pfizer doesn’t face any shareholder proposals on CEO pay on its next proxy, the preliminary version of its proxy did contain a proposal that urged the company to let shareholders have more say over executive pay. The proposal focused on pension issues, quoting a study by Harvard Law School Professor Lucian Bebchuk that estimated that McKinnell has received about $67 million in total compensation during his tenure as Pfizer’s CEO. In contrast, the study estimates the actuarial present value of McKinnell’s expected pension benefit to be approximately $71.5 million to $83 million.
  • CEO Pay Soars in 2005 as a Select Group Break the $100 Million Mark, USA TODAY, April 10, 2006.
    Some reformers believe fundamental changes in the way CEOs are compensated won’t occur until corporate directors are held more accountable. “They’re not sufficiently dependent on shareholders, who lack real power to remove them from boards,” says Harvard University professor Lucian Bebchuk, who decries the lack of connection between pay and performance and is pushing for bylaw changes at several firms.
  • No point griping about CEO pay, The Capital, April 10, 2006.
    An oft-cited study by Lucian Bebchuk of Harvard University and Yaniv Grinstein of Cornell University has established that top U.S. executives are clearly taking home a bigger share of the profits at their companies. Mr. Bebchuk and Mr. Grinstein found that the aggregate pay of the top five executives at U.S. companies amounted to 10 percent of the combined earnings at those companies between 2001 and 2003, double the rate of take-home pay eight years earlier.
  • Smaller Fish Are Also Doing Swimmingly, New York Times, April 9, 2006.
    “In proportion to market cap and earnings, C.E.O. pay is much larger at small and midsize companies,” said Lucian A. Bebchuk, a professor at Harvard Law School and co-author, with Jesse M. Fried, of “Pay Without Performance: The Unfulfilled Promise of Executive Compensation.”
  • Spotlight on Pay Could Be a Wild Card, New York Times, April 9, 2006.
    Lucian A. Bebchuk, the director of the corporate governance program at Harvard Law School who has been sharply critical of many compensation practices, says that at the very least, the near term will reveal more exorbitant pay packages, and that this may provoke a reaction from large shareholders.
  • AFL-CIO CEO PayWatch Website Offers Sneak Peak at Top 25 Super-Pensions and Publishes Comprehensive New Data on 2005 CEO Pay, Aflcio.org, April 6, 2006.
    According to the groundbreaking research of Harvard Law Professor Lucian Bebchuk, the average CEO pension equals more than one third of his or her total compensation. These under-the-radar pensions undermine the goal of linking pay for performance. Data on Executive PayWatch provides concrete examples of how excessive CEO pensions can undermine this goal. Pfizer CEO Hank McKinnell’s pension is at the top of the list, with the choice of over $6.5 million annually or a lump sum payment of $83 million in cash. Yet under McKinnell’s leadership, Pfizer’s stock price underperformed for the last five years; between 2000 and 2005 share value plummeted by nearly half.
  • Calculating Compensation, Financial Times, April 6, 2006.
    In Pay without Performance, Lucian Bebchuk and Jesse Fried examine the issue by comparing executives with star athletes. They argue that while compensation for the latter reflects individual skill and performance, the same rationale should not be applied to executives.
  • Stock Activism’s Latest Weapon, Wall Street Journal, April 4, 2006.
    To showcase the power of this rarely used weapon, Lucian Bebchuk, a Harvard law professor best known for opposing high executive pay, has targeted eight companies with bylaw amendments this year. Three companies — American International Group Inc., Bristol-Myers Squibb Co. and Time Warner Inc. — already have accepted his proposals or variants. Five others are opposing his proposals, so shareholders will vote on them this spring.
  • Executive Compensation Linked to Good Corporate Governance, Oil & Gas Financial Journal, April 4, 2006.
    Writing in the Wall Street Journal in mid-January when the SEC was taking its initial action to require more information, the head of the Harvard Law School’s corporate governance program, Lucian Bebchuk noted billionaire Warren Buffett’s observation that executive compensation is the “acid test” of corporate governance. Then, Bebchuk concluded in a column lauding the SEC’s latest efforts that more disclosure will only emphasize that much work remains to be done to fix executive compensation.
  • Shareholders at the Gate, Boards Bow to Activist Pressure as Proxy Season Looms, MarketWatch, March 3, 2006.
    The present value of McKinnell’s pension is between $71.5 million and $83 million, according to a study by Harvard Law School Professor Lucian Bebchuk that the AFL-CIO cited in its proposal. That exceeds the $67 million that McKinnell has earned while working at Pfizer.
    The AFL-CIO is demanding that Pfizer seek shareholder approval for any senior executive retirement package that exceeds what they earned while working for the company.
  • When the Blind See Better, Forbes, February 13, 2006.
    The combined compensation for the heads of America’s 500 biggest companies increased by 54% in 2004. Harvard professor Lucian Bebchuk’s calculations show that the top five executives now collect 10% of the average big firm’s net income, double the percentage a decade ago. This is a problem that affects not just morale but competitiveness.
  • SEC’s Spotlight on Executive Pay: Will It Make a Difference?, Knowledge@Wharton, February 8, 2006.
    And a study by Lucian Bebchuk and Yaniv Grinstein of Harvard found that from 1993 through 2003, executive pay increased to about twice the level that could be explained by factors such as growth in company size and stock performance. In 2003, compensation for top executives equaled 10% of their companies’ annual earnings, compared to 5% percent in 1993, the study reported.
  • Overcompensating, The New Yorker, February 6, 2006.
    In part, executive compensation matters to investors because executives now take so much money out of corporations every year. According to the economists Lucian Bebchuk and Yaniv Grinstein, between 1993 and 2003 the top five executives at fifteen hundred companies in the U.S. were paid three hundred and fifty billion dollars. That level of pay makes sense only if it leads to better performance. But plenty of executives are getting superstar pay for journeyman work. For one thing, executives are rewarded far more for good luck in their industry (like rising oil prices that they had no control over) than they are punished for bad luck, according to a study by the professors Gerald Garvey and Todd Milbourn. Though most of their pay is now in the form of stock or stock options, C.E.O.s’ cash salaries have also risen sharply over the past decade; in 2005, the average C.E.O. got paid millions literally just for showing up. And lavish perksranging from personal use of the corporate jet to having the company cover the C.E.O.’s income taxes–remain ubiquitous.
  • A Different Kind of Carrot for our Bosses, Canberra Times, February 2, 2006.
    What this means is that executive pay practices in Australia are increasingly moving along US lines, where commentators point to a large “decoupling” of pay from performance. In Pay without Performance: The unfulfilled promise of executive compensation (Harvard University Press, 2004), prominent US law professors Lucian Bebchuk and Jesse Fried point out that in their country, between 1991 and 2003 the average CEO remuneration increased from 140 times the pay of an average worker to 500 times average pay.
  • Academic Roundup, Manifest-I, February 2, 2006.
    Executive Pensions, by Lucian A Bebchuk, Harvard Law School; and Robert J Jackson, Jr, Program on Corporate Governance. NBER Working Paper No. 11907: The authors examine executive pensions in the US and suggest the omission of such figures by the majority of financial economists has led to a sizeable underestimation of executive remuneration.
  • Keeping up with Mr. Jones, CEO, TCSDaily.com, January 24, 2006.
    While more disclosure is nice, and the goal of increasing market transparency is even nicer, the new SEC rule also places an enormous burden on shareholder activists. After all, if shareholders (the rightful owners of the company) realize that they are being ripped off, they must be prepared to discipline the CEO by applying pressure on the board of directors. However, even if shareholders receive comparable, side-by-side numbers on executive compensation, will they really be able to discipline any corporate board that approves an outrageous compensation scheme? Worse yet, if you buy into the “managerial power” model advanced by Bebchuk and Fried, which basically states that managers have stacked the compensation deck in their favor by de-coupling pay from performance and tainting the overall compensation process, board directors are powerless to stop CEOs from pushing through ever-higher compensation packages.
  • Another Job for Steve Jobs? The CEO of Apple and Pixar Could Face Conflicts of Interest As a Director of Walt Disney, Wall Street Journal, January 23, 2006.
    The frequency with which Disney has to wall off discussions about sensitive deals could end up defeating the point of having Mr. Jobs on the board in the first place, according to corporate-governance experts. If the walls are set so high that Mr. Jobs can’t engage in board discussions about substantive issues, “he can’t be an effective board member,” says Lucian Bebchuk, a Harvard Law School professor who heads the school’s corporate-governance program.
  • Companies Must Come Clean on Executive Pay, U.K. Sunday Times, January 22, 2006.
    The first is the lack of transparency. It is virtually impossible to determine from company reports just how much executives are being paid. In part this is due to the complexity of compensation packages, which include, in addition to ordinary salary, pension plans that Lucian Bebchuk and Jesse Fried in their book Pay Without Performance estimate can add more than a third to the total package; the company’s assumption of some of its executives’ tax liabilities; and a host of perks that are rarely mentioned.
  • Behind Every Underachiever, An Overpaid Board?, New York Times, January 22, 2006.
    It is indeed one of life’s mysteries why so many institutional stockholders have stayed silent on the subject of outrageous pay, lo these many years. We are talking real money, after all: Lucien A. Bebchuk, professor of law, economics and finance at Harvard Law School and director of its program on corporate governance, said compensation paid to the top five executives at all public companies in the three years ending in 2003 reached 10 percent of those companies’ earnings.
  • Executive Envy, Wall Street Journal, January 21, 2006.
    Instead, we get lectures about a new study from Harvard’s Lucian Bebchuk and Cornell’s Yaniv Grinstein noting that, from 2001 to 2003, top executive compensation amounted to 9.8% of the net income of 1,500 publicly traded firms. This is thought to be . . . exorbitant.
  • Op-Ed by Lucian Bebchuk: Beyond Disclosure, Forbes, January 19, 2006
  • Executive Pay, Economist, January 19, 2006.
    Obfuscation is rife in three areas in particular–pensions, perks and deferred pay–and the SEC addresses all of them. The new rules will improve the disclosure of top executives’ retirement benefits. Currently, it can require an academic study to work out the real figures. Research published last year by Lucian Bebchuk and Robert Jackson of Harvard University put the median value of the pension pots of a sample of top chief executives at $15m. Mr Bebchuk says that companies’ “massive use of defined-benefit pension plans [for their top executives] has been partly motivated by a desire to provide chunks of performance-insensitive pay under the radar screen.”
  • Learning What the Boss Really Makes, STL Today.com, January 18 2006.
    The best part about the SEC proposal is the improved summary compensation table. For the first time, companies would have to show a total pay figure for five top executives, including the value of stock options, any increase in pension value, and all perks over $10,000. A study by Harvard professor Lucian Bebchuk indicates that pensions alone amount to about 34 percent of a CEO’s total pay, and pensions are notoriously hard to understand in the current disclosure format.
  • S.E.C. to Require More Disclosure on Executive Pay, New York Times, January 18, 2006.
    “The positive effect will be that on the margin – and it is an important margin – there will be a new so-called outrage constraint,” said Lucian A. Bebchuk, the director of the corporate governance program at Harvard Law School, who has documented how executive pay is often hidden and has far outpaced compensation for other employees. “The caveat is that even though there is an outrage constraint, shareholders have very limited power to do anything about it.”
  • No More Hiding The Corporate Jet, The Monitor’s View, January 18, 2006.
    According to Harvard Law School professor Lucian Bebchuk, the salary, bonus, and stock of the top five executives at the 1,500 largest US publicly traded companies was nearly 10 percent of profits from 2001-03. That’s double the percentage from 1993-95.
  • Top executives’ pay merits a closer look, The Record, January 17, 2006.
    But another recent study shows that’s not the case. Professors Lucian Bebchuk of Harvard and Yaniv Grinstein of Cornell found that from 1993 to 2003, total cost of executive pay grew from 5 percent of annual corporate earnings to 10 percent.
  • Solving a $122 Billion Problem, Fortune, January 17, 2006.
    What’s more, new research by Lucian Bebchuk, a Harvard Business School professor who studies executive pay, indicates that pay as a proportion of earnings is growing. From 1999 to 2003, the top five execs at the 1,500 largest public companies, as a group, took home $122 billion in salary, bonus and stock. That’s not chump change.
  • The SEC’s Test, Washington Post, January 17, 2006.
    The question is whether the SEC’s proposal will go as far as it should, especially on retirement compensation. At present, firms are not required to disclose the value of defined-benefit pension promises to executives, so reports of bosses’ pay generally leave these out. But the value of these promises can be enormous. When Franklin D. Raines was pushed out of the top job at Fannie Mae in 2004, he left with an annual pension of $1.4 million for as long as he or his wife lives. Pension promises generally account for almost a third of a chief executive’s total career compensation, according to Harvard’s Lucian A. Bebchuk.
  • Obscene Executive Pay Does Affect Earnings and the Economy, Philadelphia Inquirer, January 16, 2006.
    But another recent study shows that’s not the case. Professors Lucian Bebchuk of Harvard and Yaniv Grinstein of Cornell found that from 1993 to 2003, total cost of executive pay grew from 5 percent of annual corporate earnings to 10 percent.
  • Disclosure Won’t Tame C.E.O. Pay, New York Times, January 14, 2006.
    Better disclosure rules are all fine and well, but we already know plenty about executive pay. We know that it is out of control, socially corrosive and divorced from any real rationale (did Michael Dell really need stock options to ”incent” him?). Nor is it economically insignificant. According to Lucian A. Bebchuk, an executive compensation expert at Harvard, from 2000 to 2003, the total compensation of the five best-paid officers of all publicly held companies amounted to 10 percent of corporate earnings.
  • Executive Envy, Townhall.com, January 12, 2006.
    The Wall Street Journal article relies on Harvard law professor Lucian Bebchuk — “a critic of the disconnect between pay and performance” — and Yaniv Grinstein of Cornell: “In the period from 2001 to 2003, top-executive compensation (for the top five executives) amounted to 9.8 percent of the companies’ net income, almost double the 5 percent in 1993 to 1995.” That might be interesting if stockholders measured performance by FASB earnings rather than by stock prices and dividends.
  • S.E.C. to Propose New Rules on How Executive Pay Is Reported, New York Times, January 11, 2006.
    A study by Lucian A. Bebchuk of Harvard and Yaniv Grinstein of Cornell found that corporate assets used to compensate the top five executives at companies grew from less than 5 percent to more than 10 percent of aggregate corporate earnings from 1993 to 2003. The result was a large decline in company and portfolio values with no associated strengthening of management incentives.
  • Memo to Activists: Mind CEO Pay, Wall Street Journal , January 11, 2006.
    Lucian Bebchuk, a Harvard Law scholar of executive-pay practices, published a study in the fall with Cornell’s Yaniv Grinstein that attempts to measure pay as a portion of earnings. The results are eye-opening: From 1999 to 2003, the five top dogs at each of the 1,500 largest publicly traded firms cumulatively took down $122 billion in salary, bonus and stock, compared with $68 billion from 1993 through 1997.
  • Four Years Later, Enron’s Shadow Lingers as Change Comes Slowly, New York Times, January 5, 2006.
    One study, by Lucian A. Bebchuk of Harvard and Yaniv Grinstein of Cornell, found that corporate assets used to compensate the top five executives at companies grew from less than 5 percent to more than 10 percent of aggregate corporate earnings between 1993 and 2003. The result was a large decline in company and portfolio values with no associated strengthening of management incentives.
  • Rein in the corporate wages of excess, The Atlanta Journal-Constitution, January 3, 2006.
    In the 1993-1995 period, public companies in the United States paid their top five executives the equivalent of 5 percent of profits, according to compensation researchers Lucian Bebchuk of Harvard University and Jesse Fried of the University of California at Berkeley. By 2000-2002 it had reached a staggering 12.8 percent of corporate profits. The drain declined, but was still significant at almost 10 percent in the 2001-2003 period, the latest stretch of time the two law professors considered.