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2009

  • 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.
  • 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.”
  • 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.”
  • Op-Ed by Lucian Bebchuk: Who Should Be Bailed Out?, Project Syndicate, December 2009
  • Op-Ed by Mark Roe: End bankruptcy priority for derivatives, repos and swaps, Financial Times, December 15, 2009
  • 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.”
  • Op-Ed by Hal Scott: Do We Really Need a Systemic Regulator?, Wall Street Journal, December 2009
  • 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.”
  • Op-Ed by Lucian Bebchuk, Alma Cohen and Holger Spamann: Bankers had Cashed in Before the Music Stopped, Financial Times, December 2009
  • Legal expert: Hershey trust has no good options, The Deal Pipeline, December 6, 2009
    From his office in Cambridge, Mass., Robert Sitkoff is keeping an eye on comings and goings in Hershey, Pa. A professor at Harvard Law School and a leading expert on trusts and estates, Sitkoff follows developments at the philanthropic Hershey Trust, which funds a school for low income children. The trust is the controlling stockholder in Hershey Co. — by far its biggest asset — and may soon push Hershey to make a white knight bid for Cadbury plc. Meanwhile, the U.K. confectioner confronts a hostile $16.3 billion stock and cash offer from Kraft Foods Inc.(Subscription required.)
  • Mending the Seams, Investment Professional, December 2009
    As the global economy begins to find its way back from the brink following the financial crisis, the impetus is shifting from the day-to-day efforts to keep the system afloat to the long-term fixes that are needed to maintain and increase its stability and flexibility…The excessive fragmentation of the US regulatory structure bears a lot of responsibility for the financial crisis and makes it extremely difficult to cooperate internationally in any effective manner, asserts Hal Scott, the Nomura Professor of International Financial Systems at Harvard Law School and director of the CCMR (Committee on Capital Markets Regulation). And because corporations, Congress, and regulators all have a stake in maintaining the system the way it is, change is unlikely.
  • Op-Ed by Lucian Bebchuk and Jesse Fried: Taming the Stock Option Game, Project Syndicate, November 2009
  • Quick pay, near-sighted execs, The Boston Globe, November 26, 2009
    Until this week, most people believed that when two of the biggest financial firms in the country collapsed, their top executives went down with them. But a report released Sunday by the Program for Corporate Governance at Harvard Law School showed that the top five executives at Bear Stearns and at Lehman Brothers made a collective $1.4 billion and $1 billion, respectively, in cash bonuses and stock sales in the years preceding their firms’ failure. The executives, with the exception of former Bear Stearns CEO James E. Cayne, sold more stock shares between 2000 and 2007 than they held when the firms collapsed in 2008. The firms also paid the executives large cash bonuses based on high earnings and stock prices but never “clawed back’’ those bonuses when the firms failed. In the end , the executives fared a heck of a lot better than shareholders. Their near-sightedness was rewarded.
  • Harvard Study Faults CEO Pay, Harvard Crimson, November 25, 2009
    Evidence pointing to excessive risk-taking by executives at investment banks Bear Stearns and Lehman Brothers continues to emerge more than a year after the two investment banks collapsed in 2008—this time from a paper released online this weekend by three Harvard Law School affiliates. According to the study, the collapse of the two firms reflected not shortsightedness on the part of top executives, but rather compensation structures that shielded the executives from the consequences of the firms’ economic meltdown. Compensation structures of cash bonuses and equity options liquid regardless of the firm’s financial state led to sustained profits for these executives even after the financial collapse.
  • 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.
  • Foreign Suits Reward Plaintiffs That Discriminate Against U.S. Firms, Law.com, November 25, 2009
    An op-ed by Professor Hal Scott: This year’s outbreak of the H1N1 influenza has demonstrated that contagions know few boundaries and spread wherever they can find an available host. Likewise, because of their broad jurisdictional rules, U.S. courts can be easy targets for “forum shopping” by foreign plaintiffs seeking redress against American companies for torts they claim have taken place abroad.
  • Cadbury-Hershey: Too Much Risk for the Trust’s Kids?, Wall Street Journal, November 24, 2009
    Milton Hershey had no children so he said he would make the “orphan boys of the United States” his heirs. To that end, the chocolatier founded the Milton Hershey School, which today serves 1,700 underprivileged children and has an endowment of $6.2 billion…On some levels, it sounds idyllic, but Robert Sitkoff, a Harvard University Law professor who focuses on trust law, says the Trust has been problematic not just for the Hershey Corp. but for the students at the school.
  • Study: Wall St. Execs Cashed In Before Collapse, Today Show, November 24, 2009 (Video)
  • Lehman, Bear Officials Made $2.5 Billion, Study Says, Bloomberg, November 23, 2009
    The top five officials at Lehman, which filed for bankruptcy in September 2008, received $1.03 billion in cash bonuses and proceeds from equity sales during the period, according to the report, “The Wages of Failure,” released today by Harvard Law School’s Program on Corporate Governance. Bear Stearns’s top executives made $1.46 billion in the years before JPMorgan Chase & Co. agreed to buy the firm in 2008.
  • 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.”
  • Op-Ed by Lucian Bebchuk: Should Bondholders be Bailed Out?, Project Syndicate, October 2009
  • A Costly Lesson in the Rule of ‘Loser Pays’, Financial Times, November 1, 2009
    An op-ed by Professor John Coates: As Lord Justice Jackson reviews proposals to reform costs in the UK’s civil justice system by abolishing the “loser pays” rule in collective lawsuits, a current case before the US Supreme Court may provide a useful caution. Jones v. Harris Associates L.P., which will be argued this week, clearly demonstrates that lowering the “loser pays” barrier could have serious consequences.
  • Tort Lawyers Target Mutual Funds, Wall Street Journal, November 1, 2009
    If you invest in mutual funds, you should be worried about a case argued today at the U.S. Supreme Court. The lawsuit aims at overturning the way investment managers of mutual funds are paid. The process has worked well and fairly for decades. If it is thrown out, every mutual-fund fee arrangement could end up being litigated in a federal court. This will not benefit the vast majority of investors…The mutual-fund market is competitive, and investors are sensitive to management fees. A 2007 study by Columbia Business School Dean Glenn Hubbard and Harvard Law Prof. John C. Coates found that a 10% increase in fees results in a drop of fund assets of up to 28%, after controlling for other relevant factors.
  • Fees Case Strikes at Heart of Mutual Funds, Wall Street Journal, October 30, 2009
    The money-management fees that drive the mutual-fund industry are at stake Monday when the Supreme Court hears a case that asks how much is too much. A ruling for shareholders could push down fees that last year approached $100 billion by some estimates in the $10 trillion industry. …Harvard law professor Jesse Fried, a corporate-governance specialist, said a shareholder win would encourage plaintiff lawyers, “for their own selfish reasons, [to] monitor compensation structures in these firms,” filing suits when pay looks out of line. “That will keep the compensation down,” he said.
  • What’s at Stake as the Supreme Court Examines Fund Fees, Morningstar, October 28, 2009
    Morningstar’s Ryan Leggio interviews professors John Coates of Harvard and Birdthistle of Chicago Kent about the possible outcomes of the Jones v Harris Supreme Court fund fee case, the level of competition in the fund industry, fund fee structures for institutional versus retail investors, the dispersion of fees for funds following the same index, and the effectiveness of fund boards.
  • Pay Czar Increased Base Pay at Firms, Wall Street Journal, October 28, 2009
    Treasury Department pay czar Kenneth Feinberg last week announced sharp cuts in total compensation at the finance and auto companies under his control…”It’s got to reflect his judgment that for competitive purposes he’s got to keep these people,” said Jesse Fried, a Harvard Law School professor who specializes in executive pay. He said cash bonuses, not cash salaries, were the root of the problem.
  • Executive compensation: Is it criminal?, Philadelphia Inquirer, October 25, 2009
    … He cites the studies assembled by Harvard scholars Lucian Bebchuk and Jesse Fried in their 2004 book, Pay Without Performance, which “clearly demonstrated there is not a necessary correlation” between high pay and excellent performance.
  • Officials fear systemic risks of bailout, Marketplace, October 21, 2009
    … Hal Scott: “So if we break up our banks and Europe doesn’t break up theirs and the Chinese don’t break up theirs, this is going to have an immense impact on who are the players in the international banking system.”
  • 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.
  • Op-Ed by Lucian Bebchuk and Holger Spamann: Reducing Incentives for Risk-Taking, New York Times: Dealbook, October 12, 2009
  • 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.
  • Why Excessive Risk-Taking Is Not Unexpected, The New York Times: DealBook, October 5, 2009
    An op-ed by Lecturer on Law Leo Strine, Jr.: Whatever the possible causes of the recent financial debacle, it seems clear that there is one cause that can be ruled out: that the directors and managers of the failed firms were unresponsive to investor demands to take measures to raise profits and increase stock prices. Rather, to the extent that the crisis is related to the relationship between stockholders and boards, the real concern seems to be that boards were warmly receptive to investor calls for them to pursue high returns through activities involving great risk and high leverage.
  • The year’s biggest bailouts, Canada.com, October 4, 2009
    It has been a year since the U.S. Congress created the US$700-billion Troubled Asset Relief Program, originally intended as a bailout just for the financial system. Emphasis might be placed on the word “Troubled,” as TARP has been plagued by controversy since conception…”My understanding is that the administration would like to use it for another rainy day,” says Harvard law professor Hal Scott, who also directs the independent Committee on Capital Markets Regulation. “I think that would be wise.”
  • 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.
  • Birthday For A Bailout, Forbes, October 2, 2009
    As of Saturday, it will have been a year since the U.S. Congress created the $700 billion Troubled Asset Relief Program, originally intended as a bailout just for the financial system…”My understanding is that the administration would like to use it for another rainy day,” says Harvard law professor Hal Scott, who also directs the independent Committee on Capital Markets Regulation. “I think that would be wise.” If another big bank were on the brink of collapse, he says, there might no other alternative than to use TARP funds to keep it from pulling down the economy.
  • 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.
  • Op-Ed by Lucian Bebchuk: Unblocking Corporate Governance Reform, Project Syndicate, September 2009
  • New Hostility for an Old Delaware Antitakeover Law, Wall Street Journal: Deal Journal, September 24, 2009
    A pickup in hostile deals and a weakening of the poison pill have brought into focus an overlooked Delaware law that has thwarted takeover attempts–but might be unconstitutional, according to a new study by a Harvard University professor. Delaware’s M&A bar and judiciary are abuzz over a yet-unpublished 63-page paper by Guhan Subramanian, a professor at Harvard’s law and business schools, that raises questions about constitutionality of Delaware’s antitakeover statute–Section 203 of the state’s corporate code. Covering more than half of all U.S. corporations, it is the most important antitakeover law in the country.
  • Profs. Sign Amicus Brief, The Harvard Crimson, September 24, 2009
    Four Harvard Law School professors signed a statement in support of the defendant in a case regarding executive pay that will be heard by the Supreme Court next week. In the case, Jones et al. v. Harris Associates, several mutual fund investors charged that the fund had overpaid its advisors. The Seventh Circuit Court of Appeals in Chicago dismissed a full court rehearing of the lawsuit in May 2008. Law professors John C. Coates, Robert C. Clark, Allen Ferrell, and J. Mark Ramseyer signed an amicus brief earlier this month in support of the defendant, Harris Associates, along with more than 20 other corporate law and finance professors…”I didn’t think the research I had worked on was presented fairly in the other briefs,” Coates said. “I wanted to make sure the Supreme Court understood what the research out there really meant.”
  • Op-Ed by Hal Scott: Regulatory Reform Needs Rethink, Financial News Online, September 21, 2009
  • Obama Outlines Sweeping Financial Reforms in Wall Street Speech, DSNews.com, September 14, 2009
    One year to the day after the colossal failure of Lehman Brothers Holdings Inc. sent markets into a tailspin and raised questions about the adequacy of U.S. financial regulations, President Barack Obama said Monday that the need for intense government involvement in the financial sector was “waning,” but he still laid a blueprint for wide-reaching regulatory reforms…”The American regulatory structure is in total disarray and what has been proposed to fix it is partial, and even then there is heavy resistance,” Hal Scott, Nomura Professor of International Financial Systems at Harvard Law School, told Reuters. “I don’t see us coming out with any significant change to the structure. The right rules and the wrong system is what we might end up with.”
  • Financial Reform May Fail to Avert Another Lehman, Reuters, September 10, 2009
    The collapse of Lehman Brothers a year ago has been likened to the 1994 crash that killed Formula One star Ayrton Senna, in the way it has spurred calls for root-and-branch review of risk in the financial sector… “The American regulatory structure is in total disarray and what has been proposed to fix it is partial, and even then there is heavy resistance,” said Hal Scott, Nomura Professor on International Financial Systems at Harvard Law School. “I don’t see us coming out with any significant change to the structure. The right rules and the wrong system is what we might end up with.”
  • U.S. Turns up Heat on Basel Bank Reform, Reuters, September 3, 2009
    “Basel, in my view, was a total failure. None of the Basel changes will lead to the right result. What we learnt from the crisis is that simple leverage ratios prevented more damage from being done than Basel was doing,” said Hal Scott, a professor of international finance at Harvard Law School.
  • SEC Madoff Review Was A Scandal, Portfolio.com, September 2, 2009
    Hal Scott, Nomura Professor of International Financial Systems at Harvard Law School, said the problems that the SEC had catching an out-and-out financial crook like Madoff were a reflection of an overly legalistic agency culture that is good at enforcing rules but not good at understanding complex business issues such as options trading. “They just didn’t have the knowledge or resources to detect this,” he said. “My takeaway is that they were understaffed. And not only were they understaffed…they lacked economic sophistication.”
  • Sheila Bair Goes on the Attack Again, The Deal, September 1, 2009
    … But as Judge Richard Posner argues in a detailed critique of the Treasury reform plan (you can find the two-part piece at the Harvard Law School Forum on Corporate Governance and Financial Regulation), the reform schemes that have been put forward by Treasury are undercut by the simplistic explanations for the cause of the crisis in the first place.
  • Op-Ed by Lucian Bebchuk: Why Financial Pay Shouldn’t be Left to the Market, Project Syndicate, August 2009
  • Op-Ed by Lucian Bebchuk: Bonus Guarantees Can Fuel Risky Moves, Wall Street Journal Online, August 27, 2009
  • 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.
  • Op-Ed by Hal Scott: The Fed’s independence is at risk, Financial Times, August 24, 2009
  • Law Firms Submit Joint Letter to SEC to Oppose Shareholder Nominations to Corporate Boards,Law.com, August 19, 2009
    “We believe that providing shareholders with rights to place director candidates on the company’s proxy card, as the SEC proposes doing, would improve director accountability,” wrote Harvard Law School professor Lucian Bebchuk on behalf of the group.
  • 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’sFinancial 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.

Op-Ed by Lucian Bebchuk: Regulate Financial Pay to Reduce Risk-Taking, Financial Times, August 4, 2009

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.”

Bankers’ Bonuses Beat Earnings as Industry Imploded, Washington Post, July 31, 2009
“The details of design in many cases still fall short of what is necessary,” said Lucian Bebchuk, a Harvard law professor who has met with Obama administration officials to discuss pay principles. “There is substantial distance we need to go before we have effective tying of pay with long-term results.”

Op-Ed by Lucian Bebchuk: Let the Good Times Roll Again?, Project Syndicate, July 2009

Wall Street keeps paying out huge bonuses to star performers as recession batters economy,Associated Press, July 31, 2009
Overall, the banks are on track to pay out more than they did before the recession began. If current patterns hold, the biggest banks will pay their workers $156 billion in 2009, compared to the $143 billion paid in 2006, adjusted for inflation, said Lucian Bebchuk, a Harvard University professor and leading expert on corporate pay.

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.

New legislation may change exec pay, Marketplace from American Public Media, July 31 2009
Lucian Bebchuk: “That’s an element that could potentially be quite consequential, depending on whether regulators indeed make substantial use of the power”. Bebchuk says regulators could force banks to tie bonuses to long-term performance rather than short-term profits.

Op-Ed by Lucian Bebchuk and Alma Cohen: Back to the Good Times on Wall Street, Wall Street Journal Online, July 31 2009

No Rhyme or Reason: The “Heads I Win, Tails You Lose” Bank Bonus Culture, New York Attorney General’s Office, July 30, 2009
Through various inquiries, the New York State Attorney General’s Office has been examining the causes oflast year’s economic downturn. We have reviewed the failures of the credit rating agencies, the role of government regulators, the flaws of the credit default swap market, and the effects of over-leverage and fraud in the housing and mortgage markets, among others.

House Set to Vote on Curbs for Executive Pay, The Christian Science Monitor, July 29, 2009
… Meanwhile, executive pay has been rising steadily. In the early 1990s, total pay for the top five executives typically equalled about 5 percent of corporate profits, according to research by Lucian Bebchuk of Harvard University and Yaniv Grinstein of Cornell University. By early in this decade, that percentage had roughly doubled, they found.

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.

Interview with Bloomberg TV on Executive Pay Reform (Video), July 28, 2009

Congress urged to curb insurers’ risky behavior, Reuters, July 28, 2009
A large U.S. consumer group urged Congress on Tuesday to clamp down on insurers’ risky practices after last year’s near collapse of AIG due to its foray into exotic derivative instruments… Hal Scott, a professor of international finance at Harvard Law School, urged creation of an optional federal charter for insurers, so that insurers could opt to be overseen by the federal government.

Enron Foe to Aid in Study of Financial Collapse, Las Vegas Sun, July 27, 2009
Lucian Bebchuk, who runs the corporate governance program at Harvard Law School and consults with Georgiou on those issues, said he brings a rich experience and broad perspective.

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.

Capitol Deal Frees Up Capital, Las Vegas Sun, July 24, 2009
… Georgiou serves on the advisory board of Harvard Law School Program on Corporate Governance.

Op-Ed by R. Glenn Hubbard, Hal Scott, and John Thornton: The Fed Can Lead on Financial Supervision, Wall Street Journal Online, July 24, 2009

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. …”

Op-Ed by Lucian Bebchuk: Paying for Performance at Goldman, Wall Street Journal Online, July 24, 2009

U.S. Banks Paying Bonuses Like Pre-Crisis, United Press International, July 23, 2009
Harvard economics and law professor Lucian Bebchuk told the Post he considered the big bonuses especially “surprising, given that the lessons of the financial crisis are so fresh and clear and that the need for compensation reform is so widely accepted.”

Tax Changes Urged for Mutual Funds, Wall Street Journal Online, July 21, 2009
The U.S. system for taxing mutual funds needs to change to keep the domestic-fund industry competitive with Europe, according to a person who consults on funds to the Securities and Exchange Commission. John C. Coates, a professor at Harvard Law School, has written a set of recommendations on taxing and regulating mutual funds that says some features of the U.S. industry are anticompetitive. In a report released by the Committee on Capital Markets Regulation, an independent, nonpartisan research organization, Mr. Coates proposes several changes.

Op-Ed by Mark Roe: What Happens When the Government Enters the Ring?, Forbes, July 21, 2009

Panel Probing Financial Crisis Has Wall Street Ties, The Wall Street Journal, July 18, 2009
Mr. Georgiou is described as “of counsel” by his law firm, and functions as a liaison with institutional investors. He has worked closely with the commission’s chairman, former California Treasurer Phil Angelides. Mr. Georgiou also is a business owner and an adviser to a Harvard Law School corporate-governance program. He had a long career in state government in California in addition to his work with plaintiff law firms, and has litigated on behalf of farm workers.

Democrat Appointments to Financial Crisis Inquiry Commission, The Wall Street Journal: Real Time Economics, July 15, 2009
Byron Georgiou, who is a Las Vegas-based businessman and attorney. Mr. Georgiou serves on the advisory board of the Harvard Law School Program on Corporate Governance which hosts the leading blog on corporate governance and financial regulation. Mr. Georgiou is the President of Georgiou Enterprises, a company with a wide range of business interests from international carbon emission reductions projects to residential and commercial real estate and golf course management and development.

California’s Angelides to Lead Financial Crisis Probe, Bloomberg, July 15, 2009
… Democratic leaders also appointed Brooksley Born, former chairman of the Commodity Futures Trading Commission; former U.S. Senator Bob Graham of Florida; John Thompson, chairman of Cupertino, California-based Symantec Corp.; Heather Murren, a retired managing director at Merrill Lynch & Co.; and Byron Georgiou, a Las Vegas lawyer and member of the advisory board of Harvard Law School’s corporate governance program.

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.”

The Role of the Law Schools in the Recovery from the Current Depression, The Atlantic: A Failure of Capitalism, July 11, 2009
As a result, with a few notable exceptions, such as Lucian Bebchuk, Edward Morrison, and Steven Schwarcz, academic lawyers (and Bebchuk and Morrison have Ph.Ds in economics, as well as law degrees) have not made a contribution to the understanding and resolution of the current economic crisis, even though it bristles with legal questions.

Op-Ed by Lucian Bebchuk: The Fall of the Toxic-Assets Plan, Wall Street Journal Online, July 9, 2009

The Mark-To-Market Change Will Kill The PPIP Will Kill The Mark-To-Market Change, The Atlantic Online, July 9, 2009

Lucian Bebchuk on the PPIP, The Washington Post, July 9, 2009

Still Skeptical About Banks, Seeking Alpha, July 7, 2009

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.

Financial and Economic Crisis – Law Firms Executive Compensation: Major Changes On The Way,The Metropolitan Corporate Counsel, June 30, 2009
… I recently read an insightful discussion paper by Harvard professors Lucian Bebchuk and Holger Spamann on the capital structure of banks. According to the authors, excessive leverage and government backstops on deposits have resulted in distorted incentives for bank executives. They believe that compensation of bank executives requires totally different considerations than compensation for executives of other institutions.

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.

Op-Ed by Lucian Bebchuk: Toxic Tests, Project Syndicate, June 2009

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.

Lucian Bebchuk and Jesse Fried: How to Tie Equity Pay to Long-Term Performance, Harvard Business Review, June 24, 2009

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.”

Op-Ed by Lucian Bebchuk and Jesse Fried: Equity Compensation for Long-Term Results, Wall Street Journal Online, June 16, 2009

Independent Finance Experts: Bank Execs, Boards Should Be Fired, The Huffington Post, June 15, 2009
… Though the other two panelists were more than comfortable suggesting a legal framework for further action against finance executives, Harvard Law professor Lucien Bebchuk seemed reluctant to prescribe new legislation to the committee.

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.

Op-Ed by Mark Roe: The Chrysler Bankruptcy Sale: An Assessment, Forbes, June 15, 2009

Outlook dim for adviser SRO in financial-reform proposal, Investment News, June 14, 2009
Indeed, the administration is “being pushed away from any significant regulatory change by the forces that have opposed reform,” said Hal Scott, a law professor at Harvard Law School in Cambridge, Mass., who is director of the Committee on Capital Markets Regulation. “Those forces are the industry, Congress and the existing regulators,” who all want to maintain the status quo, he said.

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.

Finance Reforms Pared Back, Wall Street Journal Online, June 9, 2009
The Obama administration is backing away from seeking a major reduction in the number of agencies overseeing financial markets, people familiar with the matter say, suggesting that the current alphabet-soup of regulators will remain mostly intact… “It’s not only an opportunity, they are avoiding a necessity,” says Hal Scott, a professor at Harvard Law School. “I understand all these political forces — they’ve been obstructing necessary change for decades. But we are in a very serious situation. The regulatory system has demonstrated its inability to function, and I really think its incumbent on somebody to do what’s right.”

Op-Ed: by Reinier Kraakman: The Directors Guild, New York Times, June 7, 2009

Op-Ed by Lucian Bebchuk: The False Promise of Global Governance Standards, Project Syndicate, May 2009

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.

Reshaping Financial Oversight, Wall Street Journal Online, May 28, 2009
The worst financial crisis since the Great Depression is about to prompt the most far-reaching renovation of the rules and institutions that regulate finance since the 1930s. And the change won’t wait for the economy to recover. The Obama administration is rushing to finish a proposal for reshaping financial regulation and wants Congress to act on it by the fall… But how much power to give the Fed? Here’s where it gets interesting. In the past week, two private-sector groups emphatically said the Fed should be the sole financial stability regulator. The groups are the Committee on Capital Markets Regulation, a collection of Wall Street executives and academics led by Harvard law professor Hal Scott, and the Squam Lake Group, 15 academics convened by Dartmouth finance professor Kenneth French. Neither could agree on what the Fed should do beyond, as the Squam Lake Group put it, “gathering, analyzing and reporting information about significant interactions between and risks among financial institutions.”

Op-Ed: by Lucian Bebchuk: The SEC’s Proxy Access Proposal, Wall Street Journal Online, May 27, 2009

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.”

Op-Ed: by Mark Roe: Delayed Petrol Tax Beats CAFE Plan, Financial Times, May 21, 2009

Op-Ed: by Lucian Bebchuk: Near-Sighted Stress Tests, Forbes.com, May 20, 2009

Op-Ed by Mark Roe: Stress Testing the Government’s Chyrsler Plan, Forbes, May 13, 2009

AIG Trustees Should Answer to Taxpayers, Not Fed, Towns Says, Bloomberg.com, May 12, 2009
A House panel plans to ask trustees assigned to safeguard the U.S. government’s $182.5 billion investment in American International Group Inc. whether their supervision by the Federal Reserve Bank of New York serves taxpayers’ interests…”The people appointed are long-time Fed players,” said Mark Roe, a professor at Harvard Law School in Cambridge, Massachusetts, who has written a book on corporate governance. “They’re likely to take signals from the Fed anyway, even if not obligated to.”

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.

Bernanke Urges Revising Gramm-Leach-Bliley Law, American Banker, May 8, 2009
The tests’ whole point was to encourage banks to build cushions against future losses, but Hal Scott, the director of Harvard Law School’s program on international financial systems, said more capital and regulation do not result in less risk. “It’s fair to say that capital requirements have proven completely inadequate,” he said. “The most intensive and detailed area of regulation — capital — has not worked. More regulation therefore does not necessarily translate into less systemic risk.”

Retail Investors in Buying Mood Despite Downturn , Investment News, May 7, 2009
… Principal-protected mutual funds are also becoming popular, said Allen Ferrell, Harvard Greenfield Professor of Securities Law at Harvard Law School in Cambridge, Mass. “But these products promise to return the amount invested over a 3-, 5- or 7-year time period in nominal terms,” he said. “Particularly in an environment where inflation is possible, what is the value of that guarantee?”

Op-Ed by Hal Scott: Banks Need Fewer Carrots and More Sticks, Wall Street Journal, May 6, 2009

Op-Ed by Lucian Bebchuk: The PPIP: keep banks out, FinancialTimes.com, May 5, 2009

Early Days of Chrysler Bankruptcy Will Define What ‘Speedy’ Can Be, Detroit News, May 4, 2009
“This could get messy,” Mark Roe, a Harvard Law professor, wrote last week in the Wall Street Journal. “First off, in a bankruptcy any single creditor is entitled to get the liquidation value of its claim. So any creditor can assert that what it would get if Chrysler sold its factories quickly would be more than the 32 cents per dollar that Treasury had guaranteed Chrysler’s secured creditors before the government deal fell apart this week. Not all of those who’ve already raised their hands in favor prior to bankruptcy, especially the smaller investors, will still be raising their hands inside Chapter 11. They can change their mind, and some just didn’t want any negative publicity before the bankruptcy.”

Op-Ed by Mark Roe: A Chrysler Bankruptcy Won’t Be Quick, Wall Street Journal, May 1, 2009

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.

Op-Ed by Lucian Bebchuk: How to Avoid Overpaying for Toxic Assets, Wall Street Journal, April 21, 2009

Welcome to Tax-Dodge City, USA, Guardian, April 13, 2009
Mark Roe, a professor at Harvard Law School, says Delaware has a huge incentive to make company-friendly laws to lure multinationals which are not necessarily in the interests of either shareholders or the public. “Delaware understands that the principal actors in deciding where to incorporate are the managers of companies and insiders,” says Roe. The risk, he says, is “they come up with law as friendly to insiders as it can be while still being credible”.

Does AIG Really Need to Pay Its Counterparties in Full?, ProPublica, April 7, 2009
A third option, advocated most prominently by Lucian Bebchuk, director of the Program on Corporate Governance at Harvard University, is for AIG to simply file for Chapter 11 bankruptcy. A bankruptcy court would then have powers to renegotiate the company’s swaps and demand substantial concessions from counterparties.

Bankruptcy Fears for GM and Chrysler Weigh Heavily on NASCAR, The Birmingham News, April 2, 2009
“People often think that bankruptcy means the company shuts down and stops activities,” said Harvard law professor Mark Roe, an expert on corporate bankruptcy and reorganization. “That can happen, but it doesn’t have to. And in a successful Chapter 11 reorganization, it doesn’t.”

Evening Reading: Loving the Geithner Plan, But One Improvement Please, The Wall Street Journal: Deal Journal, April 1, 2009
Over at the Harvard Law School Corporate Governance Forum, Lucian Bebchuk, a professor of law, economics and finance at Harvard Law School, has some criticism of the plan. Bebchuk, though, isn’t like most critics who have panned the plan. In fact, he was an early supporter of purchasing the troubled-assets from the nation’s banks.

New GM CEO Doesn’t Rule Out Bankruptcy, Detroit News, April 1, 2009
… But Harvard law professor Mark Roe, a top bankruptcy expert, said it would likely take significantly longer than the 30-day bankruptcy procedure described by the Obama administration for GM to deal with its many brands and dealers, as well as liabilities to the UAW and bondholders, even under a Section 363 procedure. “If a company went into bankruptcy and its only problem was bond debt, 30 days might be pushing it, but that’s thinkable,” he said. “But if it’s more complicated — and GM is more complicated — it’s hard to do that unless you do it without addressing the structural problems.”

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.

Op-Ed by Lucian Bebchuk: A Fix For Geithner’s Plan, Washington Post, March 31, 2009

Obama Ratchets up Pressure on GM, Chrysler, Christian Science Monitor, March 30, 2009
When President Obama issued his stark warning about bankruptcy Monday, he was talking about General Motors and Chrysler – but his message was targeted at a much broader audience…”It does put pressure on them, because they have been thinking that when push comes to shove, the government will bail out General Motors,” said Mark Roe, a bankruptcy expert at Harvard Law School. Now, “it looks like Obama and the auto task force are laying down a marker.”

Limiting Executive Pay Could be the Only Way to Save Capitalism, Los Angeles Times, March 29, 2009
A study by Harvard professor Lucian Bebchuk found, for example, that pay and perks granted to the five most highly compensated officers at U.S. companies nearly doubled over a decade and now eat up an average of 9% of company profits. And that figure doesn’t account for the millions of dollars that companies pay in retirement benefits to executives.

Time to Let AIG Take the Big Dirt Nap, Examiner.com, March 27, 2009
Even mainstream media is beginning to point out that we may not need to save AIG. Here is Lucian Bebchuk from Harvard Business School doing an opinion piece for the Wall Street Journal to that effect.

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.

Corporate Directors’ Group Gives Repair Plan to Boards, The Wall Street Journal, March 24, 2009
No report alone, regardless of its source, will restore investor confidence, some governance specialists say. “The public wants to see good results, not just good principles,” said Lucian Bebchuk, a Harvard Law School professor and head of its corporate-governance program.

Some Experts Say Rescue Program Might Not Work, Washtington Post, March 24, 2009
There was also widespread agreement that the Obama administration, like its predecessor, has not done enough to explain its choice of a fraught and controversial approach. “I think we suffer from the lack of a fuller explanation. I think they would inspire much more confidence if they explained their rationale,” said Hal Scott, a Harvard Law School professor who specializes in financial systems. Scott and others favor alternative approaches to restoring the health of the banking system.

Fannie Mae Takeover Confuses a Class Action, Legal Times, March 24, 2009
Federal conservatorships are extremely rare, and not a particularly developed area of law, says Harvard law professor Mark Roe, who researches corporate bankruptcy and reorganization.

Should CEO Pay Restrictions Spread to All Corporations?, Christian Science Monitor, March 23, 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.”

New Rescue Effort Called Key to Resuming Lending, San Jose Mercury News, March 23, 2009
“We are giving the private side a certain package that could well be much more than is necessary to get them, in which case the taxpayers are leaving a lot of money on the table,” said Lucian Bebchuk, a Harvard Law School professor who was an early advocate of the government’s approach.

Op-Ed by Lucian Bebchuk: AIG Still Isn’t Too Big to Fail, WSJ.com, March 20, 2009

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.

Fertilizer Wars and Other Recent Events, The New York Times: DealBook, March 12, 2009
Together with a number of other law professors, I am party to a recently filed amicus brief organized by Professor Jeff Gordon at Columbia Law School in the case of Lucian Bebchuk v. Electronic Arts. The case is now pending before the United States Appeals Court for the Second Circuit.

Bernanke’s Vision for Change, Washington Post, March 11, 2009
Indeed, few of the policy ideas he offered were new. The accounting rule changes, for example, are “on everybody’s list,” said Hal S. Scott, a Harvard Law professor and director of the Committee on Capital Markets Regulation, a group of academics and finance industry leaders. “Our committee is looking at it. Every other group I know that is looking at the financial crisis is looking at it.”

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.

Every Day Brings a New Plan for Banks: Here’s Another, Seeking Alpha, March 8, 2009
The S&P 500 Financial Sector Index spent January 2007 in the 490s. It hit its all-time high of 509 on February 20, 2007. Today, it’s 82. How long do you think it will be before it reaches 490 again? If the government is going to buy toxic assets, I prefer Lucian Bebchuk’s model.

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.

Op-Ed by Lucian Bebchuk: Jump-Starting The Market For Troubled Assets, Forbes, March 3, 2009

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.

Op-Ed by Hal Scott and Maxwell Jenkins: The US Treasury is a public, not a private, investor,Financial Times, March 2, 2009

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.

The Benefits of GM Bankruptcy, Wall Street Journal, February 23, 2009
As General Motors passes around an ever-larger tin cup to Washington lawmakers, people are pondering the nuclear option: letting GM file to reorganize under Chapter 11 of the U.S. Bankruptcy Code. Law professor Mark Roe at Harvard Law School says it is a route that looks more and more sensible.

Wall Street Reform Next Up For Dems, Chicago Tribune, February 23, 2009
Hal Scott, a professor at Harvard Law School and the director of the Committee on Capital Markets Regulation, said that the near-collapse of Bear Stearns demonstrated why a new regulatory scheme was needed. “We had multiple agencies trying to deal with the problem. The Securities and Exchange Commission had supervisory authority over Bear Stearns, but it was the Federal Reserve that ultimately had to decide whether to let it fail,” Scott said.

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?

Op-Ed by John Coates and David S. Scharfstein: The Bailout is Robbing the Banks, New York Times, February 18, 2009

Op-Ed by Lucian Bebchuk: Congress Gets Punitive on Executive Pay, WSJ.com, February 17, 2009

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.

Op-Ed by Hal Scott, R. Glenn Hubbard, and Luigi Zingales: From awful to merely bad: Reviewing the bank rescue options, WSJ.com, February 9, 2009

Obama is Right to Challenge Bankers’ Salaries, International Herald Tribune, February 8, 2009
“The distorted incentives created by many of these financial arrangements was a major contribution to the financial crisis,” says Lucian Bebchuk, a law professor and director of the Program on Corporate Governance at Harvard University.

Op-Ed by Lucian Bebchuk: Pay Cap Debate, WSJ.com, February 6, 2009

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.

Op-Ed by Mark J. Roe: Would a GM Bankruptcy Crash Its Suppliers?, WSJ.com, February 2, 2009

What Red Ink? Wall Street Paid Hefty Bonuses, The New York Times, January 28, 2009
Lucian A. Bebchuk, a professor at Harvard Law School and expert on executive compensation, called the 2008 bonus figure “disconcerting.” Bonuses, he said, are meant to reward good performance and retain employees. But Wall Street disbursed billions despite staggering losses and a shrinking job market.

“This was neither the sixth-best year in terms of aggregate profits, nor was it the sixth-most-difficult year in terms of retaining employees,” Professor Bebchuk said.

Delaware: Another Credit Crunch Casualty, WSJ Deal Journal, January 7, 2009
“Firms either stay incorporated in their home state or reincorporate to Delaware, but rarely go elsewhere. Delaware has a monopoly, one that goes unchallenged,” wrote Harvard Law Professor Mark Roe in a recent paper, titled “Does Delaware Compete?”