The Faculty Lounge

Can the Law Speak Directly to its Subjects?

Even the first part of the title of this new article caught my eye:

Rebeea Assy, Can the Law Speak Directly to its Subjects? The Limitati0n of Plain Language, 38 J. L. & Soc'y 376 (2011)

I haven't read it yet, but the abstract looks promising:

Can we dispense with lawyers as intermediaries between the law and its subjects? Can laypeople have direct access to the law? The Plain English Movement (PEM) has long promoted the use of plain language in legal writing as the way to demystify the law, and many governments and private corporations have expended significant resources on drafting legislation and legal documents in plain language. This article argues that the PEM has exaggerated the capacity of plain language to render the law intelligible to the non-lawyer, obscuring the deeper question of legal complexity by focusing solely on language and style. Using the law effectively requires expertise that goes far beyond understanding the meaning of the words used to communicate it: certain complex aspects of the law cannot be eliminated by mere simplification of language and this article demonstrates that other specialized skills are required over and above the ability to penetrate technical language. The paradigmatic illustration of the need for such skills is litigation.

Note that non-subscribers (me, for example) can only access the article on-line by paying for it.

As a transactional lawyer, I emphasize the importance of planning, and contracting, in reducing potential disputes.  The problems with contracts are the problems with all language:  completeness and interpretation. Like mathematical systems, no non-trivial contract can be complete.

The problem of interpretation--what did you say when you said what you meant?--is doubled, if not squared, when you are talking about communication between two persons:  how did the other person understand what you said? Is that black-and-white spotted dog mainly black, with white spots, mainly white, with black spots, or somewhere in between.  There is a particular color that I always see/describe as clearly gray, though a blue-ish gray, and my wife always sees/describes as clearly blue, with a touch of gray.  I now think of it as "that color," and try to remember that my wife sees/describes it differently--course of dealing, I suppose you'd call that.

Is the Audit Market Too Concentrated?

The UK Office of Fair Trading  is worried about the market for large company audits:

The OFT has been concerned for some time that this market is highly concentrated, with substantial barriers to entry and switching.

As a result, the OFT announced today (July 29, 2011) that it has provisionally decided to make a reference of the market of large company audits to the UK Competition Commission. Under Section 131 of the UK Enterprise Act of 2002, the OFT may make such a reference if it

has reasonable grounds for suspecting that any feature, or combination of features, of a market in the United Kingdom for goods or services prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the United Kingdom or a part of the United Kingdom.

I don't teach, either US or comparative, antitrust, but I do remember that the key issue is the definition of the relevant "market."  Wholly apart from whether the UK sub-market is really a separate market, I wonder about the ability of national governments to force changes in international markets. Perhaps the only that will happen is the UK large companies will just move their "headquarters" out of the UK.  If that's not enough, they might also reorganize so that they no longer are organized under UK law.

Hat tip:  UK Corporate Law and Governance blog.

FCPA

My friend Mike Koehler has a "new and improved" website for his blog devoted to the Foreign Corrupt Practices Act.  Here's the link.

The Invisible Woman Versus The “First And Only”

Via my colleague, Kate Bartlett, I came across this short article by Amanda Gerut, Still Working to Cure ‘Invisible–Woman Syndrome,’ in Agenda.  The article opens: 

Women on boards aren’t considered token members anymore. But they still must work doubly hard to claim leadership positions and sometimes to prove their value to male board colleagues. 

The piece probably caught my attention because of some similarities to the narratives of tokenism that Lissa Broome, John Conley, and I discuss in Does Critical Mass Matter? Views From the Boardroom. Several of our female respondents reported that they worked harder and prepared more for board meetings than their male colleagues.

For many, this felt need to work harder did not just emerge in the boardroom, but reflected a lifetime pattern of behavior derived from being the first and only female or minority at many important career stages.  For example, in response to a question about whether she felt she was being held to a higher standard as a woman and therefore had to work harder, one respondent—a pioneering white female director as well as a member of her company’s management team—recounted her up-bringing and her education:

A: I think that I have a tendency to create that higher standard for myself, because having grown up in the timing that I did, I was al- ways the only woman doing whatever it was, and so, as a result, I always felt I had to work harder—example, being in an accounting class where I was the only woman, and back there that was—back then it was very common, and the professor saying that he had never given a woman an A. And, I mean, he announced that to the class. And you couldn’t do that today. So there was always that tendency that you had to work harder. 

My father was the type who didn’t feel that a woman should go to college, that a two-year school was all that a woman needed. And I had to—I proved him wrong. I paid for myself to go to college, whereas he totally paid for my brother and gave him a car. So I had to prove that I was going to do better than my brother. So I think you get that ingrained into you.

In a similar vein, an African American female director said that she “absolutely” prepared more for board meetings than other directors. Her explanation centered on being black, female, and middle class:

I was always told, and remember I grew up in the 60s when I was a teenager and went to college, that I have to go that extra mile, I have to extend myself beyond the benefit of the doubt ‘cause I’m not going to be extended the benefit of the doubt, so, if I’m asked to X, I have to do X plus Y.

A white female academic and former board member remarked that when she was the only woman on one board, “it did feel like I was continually representing something, or being a token. And that didn’t feel nearly as good as being part of a group of two or three” as she was on another board she later served on.  She also mused: 

I was just trying to figure out whether there are ways in which women are more or less likely to want to serve on boards as men; or whether minority people are more or less likely? Whether they feel that they will have too heavy a burden because they’ll be expected to be responsible for womanhood or minorityhood? I don’t think that’s true of most boards in fact. But whether, before you’ve ever served on one you might think you were going to have to? I don’t know if that’s a concern for some potential board members . . . if so, I would hope people would be able to lay those worries to rest.

Several women also reported that they understood in some sense that whether they did well as the first female board member might influence whether or when another woman would be invited to join the board. One white female board member told us that she was the first woman on a particular corporate board, joining an African American male who was already on that board. She acknowledged that by the time she left the board, there were four female board members, then quipped, “I guess I didn’t mess up too badly.” She also commented, however, on the pressure that this placed on her:

I never really had a bad experience as a token. In fact, they seemed to be particularly curious in what I did think. And that put some pressure on—if you were speaking, you didn’t want to just blurt out stupid things. But I never really felt intimidated about asking questions, either. 

And this leads to an important caveat to our respondent’s narratives about their potential token status:  although we heard stories of the stresses associated with being the first and only female or minority board member, this narrative is in tension with our respondents’ professed comfort with their first and only status and the benefits that they perceive accompany these stresses. Many of our respondents tend to view themselves as pathbreakers—often the first and only female or minority at many important career stages. They exhibit a certain pride in the notion that they are highly qualified corporate directors, accustomed to their “outsider” status, and need no additional reassurance or support from the presence of other members of their demographic group. All report an ability to function as effective directors, even when the sole female or minority in the boardroom.

One respondent, an African American female director, gave a vivid version of this account, made especially powerful by its framing as a retelling of a conversation that she had just had with her son: 

A: Well I’ll answer that question [how it felt to be the only racial minority on a particular board] this way because I just had that conversation with my son last night, yesterday, who’s going to take a new job. He’s a recent graduate. I told him that the first thing you have to do is recognize that you have the job because you have the skills to do it, and throughout my life I have never gone into any situation thinking that I was a minority. I know I’m a minority, but I don’t go into any situation with that as a conscious part of it. Any situation that I’m in is because I’m there as a person, and I’m there because I have something to contribute, I have some skill, I have some expertise, and so that is the mindset that I took to the [name of company] board. I’m here because I have something that they wanted and it’s regulatory expertise and that’s what I’m here to provide, and so I never let being a woman or a minority come to the forefront and I think when you do that, it can put you at a disadvantage because that’s what you focus on and so when you say how was it, I never dwelled on that. I was there because they asked me to be there for a particular reason and that was the value that I brought to the board so it was not an issue for me, and I don’t think that they viewed that as an issue either. One of the things that I know happens when boards actively seek other members who don’t look like them, they’re not white and they’re not male; they’re at a point in their life that they recognize that they have to do things differently from a business standpoint. 

The paper contains numerous additional quotes highlighting this tension between our respondents’ recognition of the stresses associated with being the first and only female or minority in the boardroom and their apparent embrace of their “first and only” pathbreaker status. 

Image Source

 

Berle II Volume Is Here!

The Berle II symposium volume -- The Second Annual Symposium of the Adolf A. Berle, Jr. Center on Corporations, Law & Society -- organized last year by Chuck O'Kelley at Seattle University is now available on-line.  The volume contains many excellent pieces, including, of course, this one.   All of the papers are downloadable in pdf from the law review's website, embedded below.  

I think this one definitely wins the prize for fastest turn-around from meeting to publication (less than six months, if I'm counting right).  Amazing work from all the symposium participants and the Seattle law review editors, particularly EIC Kurt E. Kruckeberg and our lead article editor, Robert Iff. 

Law Firm Hiring: There's an App for That!

The Benesch law firm has just released an app for iPhones and iPads to notify recent law grads and lawyers potentially interested in lateraling to the firm of upcoming job opportunities.  It will be interesting to see if this mode of recruitment takes off.  And, if it does, will recent grads be downloading multiple apps from multiple firms or will some entrepreneurial aggregator come along and offer a service of aggregating all available law firm jobs and making them available in an app format that notifies potentially interested applicants of job availability?  Is this the future of legal recruiting?

Call For Papers -- AALS Business Associations

AALS Section on Business Associations

Call for Papers

January 2012 Annual Meeting

 

            The AALS Section on Business Associations will meet during the AALS Annual Meeting in Washington, D.C., from 2.00-5.00 pm on January 5, 2012.

            The topic for this year’s session is:  The “New” Corporate Governance.   

            At least one panelist will be chosen on the basis of submissions made in response to this Call for Papers.  The topic is intended to be broad, to encourage submissions that deal with the state and federal “corporate law” systems, questions about Dodd-Frank and its governance role, as well as international corporate and business topics.  The Executive Committee welcomes submissions on a broad range of issues related to this year’s topic, including empirical and theoretical perspectives.  The Committee specifically encourages submissions from junior scholars.

            If you are interested in presenting a paper, please submit a summary of no more than three double-spaced pages, preferably by e-mail, before Wednesday, July 20, 2011.  In addition to the summary, you also may submit a complete draft of your paper.  Direct your submission to:

Professor Hillary Sale

Washington University School of Law

One Brookings Drive

Campus Box 1120

St. Louis, MO 63130

 

            Papers will be selected after review by members of the Executive Committee of the Section on Business Associations, including:

 

Jayne Barnard (William & Mary)                                  Jessie Fried (Harvard)

Kent Greenfield (Boston College, Past Chair)            Daniel Greenwood (Hofstra)

Joan Heminway (Tennessee)                                         Kim Krawiec (Duke)           

Don Langevoort (Georgetown)                                       Brett McDonnell (Chair Elect)

Brett McDonnell (Minnesota)                                         Lawrence Mitchell (George Washington)

Tamara Piety (Tulsa)                                                          Roberta Romano (Yale)

Hillary Sale (Washington U., Chair)                            Cheryl Wade (St. John’s) 

            Authors of accepted papers will be notified by September 9, 2011.  Please feel free to pass this Call for Papers along to any colleagues who may be interested.

Is This "Insider Trading"?

Readers who teach corporate securities law may find fodder for classroom discussion of "insider trading" at this link.

Check Processing and Overdraft Charges

WARNING:  This post includes a citation to the Uniform Commercial Code.  Viewer discretion is advised.

Assume that a bank is presented on a single day with multiple checks drawn on the customer's account.  No big deal if the account has sufficient funds to cover all of the checks.  But what if the account has a balance insufficient to cover all of the checks?  ("How could this occur?" you might ask.  Perhaps the customer has made an innocent math error in tracking the account balance.  Or perhaps the customer erroneously assumed that certain checks might not be presented for payment until after upcoming payroll deposits would hit the account.)  Now the bank must decide in which order it will pay the checks, creating the possibility that some checks will be dishonored (or perhaps be subject to overdraft charges).

As a general rule, the UCC gives the bank complete discretion in determining the order in which checks will be paid.  (See 4-303(b).)  A few years ago, a student directed my attention to this article in USA Today,  which indicated that eight of the nation's ten largest banks paid same-day checks in the order of largest to smallest.  If we assume that the largest checks we write may be the most important (e.g., monthly mortgage and car note payments), then the policy makes some sense.  The trade-off, though, is that under such a policy the number of checks that may be adversely affected increases.  And as that number increases, so, too, might the various fees.

Now comes word that Citibank will start paying checks in the order of smallest to largest in a few months.

Good idea?  I suppose it depends.  If you keep a minimum balance in your account and avoid jaw-dropping math errors, you probably don't care about the policy because it rarely, if ever, affects you.  But if you're living from paycheck to paycheck and struggling to make ends meet, then maybe you'll see a reduction in those annoying fees.  (But might your chances of a mortgage default or a vehicle repo increase?)

Will other banks follow Citibank's action?  Only time will tell.  My guess?  Don't expect a stampede.

Corporate Board Diversity Symposium Volume Is Here!

I blogged a few times last year (here and here) about a great symposium on corporate board diversity co-sponsored last year by Duke and UNC law schools and Duke Energy.  The volume is now out in the North Carolina Law Review (exactly on schedule, good job UNC editors!) and contains some really interesting papers that are substantial contributions, not only to the research on corporate board diversity, but to research on diversity more generally.  Below is the program, with links to all the papers.  Many thanks to all the authors, commenters, attendees, and editors. 

 

Dangerous Categories: Narratives of Corporate Board Diversity

Lissa L. Broome, John M. Conley, and Kimberly D. Krawiec

In this article, we report the results of a series of interviews with corporate directors about racial, ethnic, and gender diversity on corporate boards. On the one hand, our respondents were clear and nearly uniform in their statements that board diversity was an important goal worth pursuing. Yet when asked to provide examples or... »

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Corporate Board Gender Diversity and Stock Performance: The Competence Gap or Institutional Investor Bias? [Commentary]

Frank Dobbin & Jiwook Jung

Women now make up a sixth of corporate board members in the Fortune 500. Some scholars suggest that women board members boost financial performance, and thus stock price, by making boards more effective.  Indeed, early studies showed a correlation between women on boards and both profits and stock price.  But more rigorous studies have suggested that... »

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Commentary: Puzzles About Corporate Boards and Board Diversity [Commentary]

Donald C. Langevoort

Those who seek greater gender or ethnic diversity on corporate boards of directors work under the self-imposed burden to show that board-level diversity adds value to the firm in some tangible way. In a perfect world, board diversity follows naturally from the fair distribution of talent and skill between the genders and among... »

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Justifying Board Diversity

James A. Fanto, Lawrence M. Solan, and John M. Darley

In this Article, we point out that advocates for board diversity in public companies feel pressure to justify it in terms of its contribution to shareholder value. This pressure is not surprising, insofar as the dominant social identity of boards, which itself is partly a creation of the discipline of finance, views shareholder value... »

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The Mismatch Critique: Comment on Fanto, Solan, & Darley [Commentary]

Jerry Kang

James Fanto, Lawrence Solan, and John Darley build their paper, Justifying Board Diversity, on the basis of two essential claims—one legal, the other empirical. The legal claim is that existing law does not much constrain how corporate boards address the (lack of) diversity of their membership. The empirical claim is that board... »

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Board Diversity Revisited: New Rationale, Same Old Story?

Lisa M. Fairfax

Recently, board diversity advocates have relied on market- or economic-based rationales to convince corporate America to increase the number of women and people of color in the boardroom, in lieu of moral or social justifications. This shift away from moral or social justifications has been deliberate, and it stems from a belief that corporate... »

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Diversity on Corporate Boards—Limits of the Business Case and the Connection Between Supporting Rationales and the Appropriate Response of the Law [Commentary]

Thomas Lee Hazen

Some observers suggest that diversity on corporate boards of directors will lead to new perspectives and hence better decision-making by the board. It would seem to follow that improved decision-making will lead to better corporate performance and thus presents a “business case” for increasing diversity on corporate boards. This essay explores the limits of... »

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The Diversity Double Standard

Sung Hui Kim

In Grutter and Gratz (2003), the twin cases that challenged the University of Michigan’s affirmative action programs, corporate America praised educational diversity as a compelling interest. But as is well known, they did so not on social justice grounds but on the empirical claim that “diversity is good for business.” In particular, education in... »

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Different Strokes for Different Folks: A Different Standard is not Inherently a Double Standard [Commentary]

James E. Coleman, Jr.

During the Senate’s closed confirmation hearings on President Dwight D. Eisenhower’s nomination of George E. Wilson, President of General Motors, to be Secretary of Defense, a senator asked Wilson if he would be able to make decisions as Secretary of Defense that were adverse to General Motors’ interest. Wilson replied that he would,... »

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Showcasing Diversity

Patrick S. Shin & Mitu Gulati

Diversity initiatives are commonplace in today’s corporate America. Large and successful firms frequently tout their commitments to diversity, sometimes appointing women and racial minorities to highly visible posts, including seats on their boards of directors. Why would a profit-minded firm engage in such behavior? One frequently voiced explanation is that by creating such diversity,... »

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Showcasing: The Positive Spin [Commentary]

Katharine T. Bartlett

What do companies signal when they showcase female and minority members of their corporate boards? Not necessarily more, say Patrick Shin and Mitu Gulati, than that they understand that diversity is a socially significant issue, and that they can attract members of the showcased individual’s minority group, against whom they are then probably disinclined... »

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Diversity and Corporate Performance: A Review of the Psychological Literature

Jennifer K. Brooke & Tom R. Tyler

This Review examines two approaches to diversity management in the context of procedural justice theory: 1) maximizing the benefit of diversity in the workplace and 2) minimizing any potential harm. With regard to the former, this Review argues that the application of procedural justice theory will create conditions under which employees of all backgrounds... »

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The Milieu of the Boardroom and the Precinct of Employment [Commentary]

Deborah A. DeMott

This Commentary explores differences between employer-employee relationships and service on a board of directors. Against this backdrop, this Commentary argues that the research findings surveyed by Brooke and Tyler, although specific to the employment context, may be salient in assessing the impact of diversity among members of a board of directors. »

 

The Mutual Fund Directors Forum Highlights Our Latest Paper On Critical Mass

Board Diversity - How Important is “Critical Mass?”

Professors at UNC Chapel Hill and Duke University Law School recently published a paper describing and analyzing the results of data collected form corporate directors on whether an [sic] how board diversity matters.  The paper and survey go further than previous studies on the topic to explore whether "critical mass" in board diversity, as opposed to "token" diversity, produces different boardroom decisions or outcomes.  The professors conclude based on their surveys and interviews that the data collected do not reflect significantly different boardroom outcomes resulting from a critical mass of diverse directors.

According to the paper's abstract: 

In this article, we report and analyze the results of forty-six wide-ranging interviews with corporate directors and other relevant insiders on the general topic of whether and how the racial, ethnic, and gender composition of corporate boards matters. In particular, we explore their views on the concept of “critical mass” – that is, the theory that women and racial or ethnic minorities are unlikely to have an impact in the boardroom until they grow from a few tokens into a considerable minority of the board. In contrast to other recent qualitative research on corporate boards, we find more limited support among our respondents for critical mass theory. Though some female respondents expressed the view, consistent with critical mass theory, that having more women on the board increased their comfort level and eased some of the stresses associated with being the first and only female, this narrative is in tension with our respondents’ apparent embrace of their first and only status. Moreover, with the possible exception of employee relations, our interviews largely fail to support the theory that a critical mass of female directors will produce different, and distinctly feminine, boardroom outcomes.

The study and paper were conducted and authored by Lissa L. Broome, University of North Carolina (UNC) at Chapel Hill - School of Law; John M. Conley, University of North Carolina (UNC) at Chapel Hill - School of Law; and Kimberly D. Krawiec, Duke University - School of Law.  The full text of the paper may be obtained at:  http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1781064

I’ve been too busy lately to really have a chance to talk about this newest paper much, but hopefully I’ll be able to get back here in the next week with some more thoughts on critical mass.

 

Women At Top Lift Shares, Study Shows. Or Not.

In an article yesterday headlined, “Women At Top Lift Shares, Study Shows,” the FT discussed a new report on corporate boards published by the British law firm Eversheds.  Although copies of the report do not appear to be publicly available, the firm’s website reports that a free copy can be obtained by emailing [email protected].  I’d be surprised if the study actually shows that women directors improve corporate performance, as opposed to merely confirming the by now well-known correlation between board diversity and stock performance. 

Says the firm’s website:

The report also reveals that those companies who had more female directors performed better during the financial crisis – this was particularly so in the UK and in the banking sector. However, when interviewed, only 55% of directors thought that diversity for its own sake was beneficial for board and company performance and only half that number was directly in favour of taking positive action to appoint more women onto boards.

As I’ve discussed at length here before, the claim that board diversity improves firm performance is a relatively common one, particularly post-crisis.  This could be the case, of course, though the majority of empirical studies on point conclude that gender diversity on boards has no effect or a negative effect.  (See here for a literature review of empirical studies on board diversity). 

Instead, it is just as likely that more successful firms have greater resources to dedicate to the pursuit of board diversity; or are under greater public scrutiny and pressure to diversify their boards; or that female and minority directors are scarce commodities who can choose to serve only on the boards of more successful firms.  Or, as mentioned by several of our respondents, modern, forward looking (and thus well-managed and successful) companies could view board diversity as simply one of many “good governance” mechanisms to be followed by companies that are (or want to be perceived as) modern, forward-looking, and well-managed.   As stated by one of our (white, male) respondents: 

To me, that’s why some boards go for diversity in part, they want to look like they’re the majors, I’m sure they want to look like world businesses, they want to look like businesses that understand the galaxy. Well, I’m serious. And so, yeah, I think a piece of it is symbolic speech. That used to make me ill when people would say, “Well you want to look like your community.” But in truth, you do. Or the community you want to be. Better yet than that, you want to look like the community you aspire to be.

Interestingly, though one can think of several theories to support the notion that diverse boards perform better than homogenous ones in times of crisis (for example, women’s risk aversion, the avoidance of group-think, etc.), our respondents make the opposite point.  Many suggest that diversity brings benefits during good times, such as more creative thinking or a focus on employee welfare (though, as we discuss at length here, these assertions are not, on the whole, well-supported or clearly articulated).  But the feeling appears to be that diversity, and its attendant “creative vibes,” is irrelevant to firms in crisis, who just need to stay alive.   Said one of our (Hispanic, female) respondents: 

If you could for a moment imagine yourself in a fast flowing river drowning looking for a lifeboat, you wouldn’t care what color it was and you wouldn’t care who was in the lifeboat. All you need is a lifeboat.

Some respondents attributed the lack of board diversity at start-ups to a similar need to focus on the basics.  Said one (white, female) respondent:

I have been on boards of far more entrepreneurial companies, like [company names omitted], where that kind of concern [i.e. board diversity] is not raised because the concerns are so different. They’re trying to stay alive, basically. It’s businesses, so diversity is down the line someplace in terms of a value, not that anybody would be precluded, but it just doesn’t come up in the same way it does. 

And for those of you who have been breathlessly waiting for the next installment of this project, it’s your lucky day.  We just posted a new paper to SSRN: Does Critical Mass Matter: Views From the Board Room.  Here is the abstract:

In this article, we report and analyze the results of forty-six wide-ranging interviews with corporate directors and other relevant insiders on the general topic of whether and how the racial, ethnic, and gender composition of corporate boards matters. In particular, we explore their views on the concept of “critical mass” – that is, the theory that women and racial or ethnic minorities are unlikely to have an impact in the boardroom until they grow from a few tokens into a considerable minority of the board.

In contrast to other recent qualitative research on corporate boards, we find more limited support among our respondents for critical mass theory. Though some female respondents expressed the view, consistent with critical mass theory, that having more women on the board increased their comfort level and eased some of the stresses associated with being the first and only female, this narrative is in tension with our respondents’ apparent embrace of their first and only status. Moreover, with the possible exception of employee relations, our interviews largely fail to support the theory that a critical mass of female directors will produce different, and distinctly feminine, boardroom outcomes.

I will, of course, be back with much more on this topic in the future.

Decision-Making Styles

I've just finished reading the 10th anniversary edition of Difficult Conversations, a business title released by Douglas Stone, Bruce Patton and Sheila Heen of the Harvard Negotiation Project.  This is a book about how to handle difficult communications in personal and professional life.  One issue that caught my attention was a description that appears in the 10th annivesary edition (but not in the earlier edition) about decision-making styles and I was wondering how it might translate to the law school/faculty governance model of decision-making.

Drawing on the work of Mark Gordon, the authors (at p 264 of the text), note that there are at least four different decision-making styles and it is important for the ultimate decision-maker to distinguish between them so there is no confusion about how a decision is being made.  The four styles are:

1/ Commanding ie I decide and tell you my decision

2/ Consulting ie I ask for your input, then I decide and tell you the decision

3/ Collaborating/Negotiating ie we decide together

4/ Delegating ie you decide

What is the most effective mode of decision-making in a law school?  Do law schools use a combination of these styles?  If so, is the dean always clear about which style is being implemented in what circumstances?  I'm interested in people's experiences of decision-making at different schools and under different deans.

Pretty and Caring Boards . . . Now Back To That Whole “Europe Is Bankrupt” Problem

Amid a debate in Germany over board gender quotas for women, Josef Ackermann, head of Germany's largest bank, Deutsche Bank, which has no women on its executive board, has generated controversy through statements that appointing women to its executive board would make it "prettier and more colourful."   AP story here. 

The story interests me because of the research I’ve been doing lately on board diversity, which includes interviews with corporate directors about what value, if any, they believe race and gender diversity brings to the boardroom.  In our most recent piece on this, Dangerous Categories: Narratives of Corporate Board Diversity  (well, the most recent that has been posted – we also have a forthcoming piece on Critical Mass that is not yet ready for prime time), we explore the difficulty our respondents appear to face in making the business case for board diversity without veering into the dangerous territory of race and gender stereotyping.

Although none of our respondents are so impolitic as to suggest that women make the boardroom prettier, many suggest that they make it warmer, more caring, and friendlier to “the little people.” Such generalizations, as we discuss, present difficulties of their own, as many of our respondents seem to recognize.

But the funniest thing I read on this story is not the retort from female German leaders (though those are funny and include such gems as telling Ackermann he should visit a flower meadow), but the comments to the story on the Telegraph.  Before degenerating into sexism, sniping, and other silliness, as blog comment sections are wont to do, several funny comments were posted, including:

- Europe is not a serious place to do business.

-What's the fuss about? We ended up with Tony Blair as Prime Minister for 10 years because women thought he was attractive.

-I think the bank has more important things to worry about than a gender quota. Perhaps people should turn their focus back to the whole 'Europe's going bankrupt issue'

(HT: Tom Lin)

Image Source

 

Related Posts:

Dangerous Categories and “Trivial” Boards: The Wrap-Up

Dangerous Categories II (Wow, Men Are Still From Mars and Women From Venus?)

Dangerous Categories: Diversity and Stereotypes in the Boardroom

Duke-UNC-Duke Energy Board Diversity Conference Today

Quotas, Board Diversity, and Corporate Performance

Vancouver Rocks! (Part II)

“Meddling Women” In The Boardroom

Substantial Evidence or Substantial Uncertainty? If Gender Diversity on Boards Clearly Adds Value, Then Why Are There So Few Women on Boards?

Sotomayor, Diversity, And Group Dynamics: Why Do We Care? What Do We Know?

Do The Right Thing – So Long As It’s Free 

Money Is Diversity, Or Diversity Is Money?  

What Corporate Insiders Say About Why Diversity Matters

Wrapping It Up: The Struggle To Explain Why Difference Makes a Difference

 

Midwest Corporate Law Scholars Conference

I've been asked to post the following info on the Midwest Corporate Law Scholars Conference.  Inquiries may be directed to Prof Eric Chaffee at Dayton Law School.

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Corporate Law Scholars Conference  
June 15, 2010
The Ohio State University Michael E. Moritz College of Law
 
The Midwest Corporate Law Scholars Conference (MCLSC) meeting will be Wednesday, June 15th, at The Ohio State University Michael E. Moritz College of Law in Columbus, Ohio. This is the second annual meeting of the MCLSC, and we are opening up the meeting to all corporate law scholars.  Presentations will start in the morning and end late afternoon. There will be an on-campus lunch and breakfast, as well as an informal off-campus dinner Wednesday night following the end of the conference. We welcome all on-topic paper submissions and will attempt to provide the opportunity for all submitted papers to be presented.  Junior scholars are particularly encouraged to submit papers, and we will attempt to assign a commentator for each junior paper presented. 

To submit a presentation, email Profess Eric C. Chaffee at [email protected] with an abstract or paper by March 15, 2011. Please title the email “MCLSC Submission – {Name}”. If you would like to attend, but not present a paper email Professor Chaffee with an email entitled “MCLSC Attendance”.  Please specify in your email whether you are willing to serve as a commentator. A conference schedule will be circulated in May.

Conference Organizers:
Barbara Black
Eric C. Chaffee
Steven M. Davidof

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Transactional Law and Skills

If you teach (or have an interest in) transactional law courses, please view this Conglomerate message from Emory law prof Tina Stark.

FCPA: The Video

My friend Mike Koehler (a/k/a "the FCPA Professor") was one of several witnesses who testified at yesterday's Congressional hearing on the enforcement of the Foreign Corrupt Practices Act.  Readers interested in the testimony can find the C-Span video here.  And newcomers to the topic may wish to bookmark Mike's blog.

Is Women’s “Ethic of Care” Value-Decreasing?

In a new paper posted to SSRN, David A. Matsa and Amalia R. Miller examine the impact of the Norwegian quota (roughly 40% of board seats must be held by women, see here and here for prior posts) on the management style of affected firms by comparing them to other Scandinavian companies, public and private, that were unaffected by the rule. Matsa and Miller, consistent with prior research, find that the quota is associated with a relative decline in corporate profitability. (HT: Holger Spamann)

 (We review the empirical literature in our most recent paper, for those wanting more information on these various studies.)

What is new about the Matsa and Miller study, however, is that they decompose the change in profits to determine why quota firms lost value.  They conclude:

The results suggest that the decrease in profits can be explained entirely by increased labor costs. On average, labor costs increased by 21 percent, relative to firms that were unaffected by the quota. . . . Among affected firms, average employment increased even more than labor costs. This pattern is consistent with women on corporate boards directing their firms to hire or retain additional rank and file workers. Because low-wage workers are particularly vulnerable to unemployment risk, this pattern may reflect a greater concern on the part of female board members for the well-being of workers at the lower end of the wage distribution.

In a forthcoming paper, Lissa Broome, John Conley, and I discuss the results of a series of interviews with corporate directors about the value, if any, of corporate board diversity.  As I’ve discussed in several prior posts (here, here, and here), the interviews reveal a tension: while “diversity” evokes universal acclaim in the abstract, our respondents’ narratives demonstrate that it is an elusive and even dangerous subject to talk about concretely. 

Importantly for purposes of the Matsa & Miller paper, however, many of our respondents generalized about women and the ethic of care in ways that were strongly reminiscent of Carol Gilligan’s feminist classic, In A Different Voice.  Nearly all of these examples, which we excerpt in detail in the article, relate directly or indirectly to employee, community, or customer relations.  Perhaps most meaningfully, female and minority board members were credited with positive contributions in improving employee relations, and in causing the corporation to focus more deliberately on the diversity of its workforce as it considered hiring, retention, promotion, and succession issues. 

For example, a white female director stated that women “tend to be more sensitive to the people issues within the company” and “tend to deal with the softer side and understand the workers more” than their male counterparts.  Her specific examples included thinking through communicating “various things within the organization when you’re dealing with something like selling the company.”  The company wasn’t “putting enough emphasis on that piece of it [the people issues].  And so I think I was able to make an impact from that standpoint.”

A Hispanic female board member also mentioned being sensitive to employee concerns because as a woman:

You feel it. You’ve seen it. You’ve experienced it. You’re sensitive to it. You understand it and when you make a decision whatever that decision is whether it’s about an acquisition, whether it’s about anything it just makes you more sensitive to everyone that’s involved, everyone that’s involved; their health care, their retirement, all their benefits. If one of our employees becomes very ill, making sure that their family is going to be taken care of; that you have an appreciation for the contribution that they’ve made to the company.

This same board member talked about recognizing that she has a great appreciation “for the worker bees in a company”:  “I feel like part of my role is to represent the worker bees, not to lose sight of those people and to make sure that they’re remembered and not forgotten because that’s where the rubber meets the road” and a business cannot succeed without them.

For reasons we elaborate in the paper, an attention to employee relations (particularly attention to equal opportunity practices in hiring, retention, and promotion) could suffice as a business justification for the pursuit of board diversity, either from a risk management or from a profitability standpoint. But, of course, as Matsa and Miller find, too much “empathy” with employees could also reduce shareholder value; to the extent it results in inefficient labor policies.  

In the end, like so much of the dialogue associated with board diversity, women’s purported greater ethic of care appears to be a double-edged sword.  As we note in the paper, difference arguments of this sort can be dangerous enough, by opening the door to both stereotyping and invidious comparison.  

Now, Matsa and Miller point to another potential drawback.  Our respondents raised the “ethic of care” trait as an argument in favor of the business case for board diversity – positive relations with employees will provide bottom-line improvements.  And, of course, they may.  But as Matsa and Miller find, too much “empathy” could also decrease firm value, especially in tough economic times. 

Quotas, Testosterone, and Board Dynamics (and Synchronized Swimming)

In an interview at the Women at the Top conference in London, French Finance Minister Christine Lagarde spoke with the FT on video about her conference address (http://video.ft.com/v/677520169001/Lagarde-speaks-out-on-female-quotas). In the video (and in her conference speech), Lagarde comes out in favor of female quotas both in business and in political bodies.  Of particular interest to me is her statement about the need for quotas to enhance corporate board diversity. 

The conversation centers around the now-familiar contention that male testosterone is part of the reason for recent financial crises around the world.  Says Lagarde:

If you have too much testosterone spirit around, there is that atmosphere of trying to compete all the time, trying to prove yourself to the detriment of this sort of common interest that should bring us together. And I believe, either because they’ve been in the minority for such a long time or because there are some feminine values – and I have questions myself about it – but certainly those skills can be very helpful in softening, in tempering, in bringing a bit of sense when there is too much male competition around.

Lagarde goes on to say that when she was younger she was against quotas, but she now favors them, both on corporate boards and in the political arena, and discusses pending French legislation on female board representation. As an aside, I seem to be the last to realize that Lagarde was a Baker & McKenzie lawyer, and the first female president of the firm’s executive committee, an experience she discusses briefly in the interview.  She was also a member of the French national synchronized swimming team.  (I go back and forth as to which of these feats is the most impressive in a Finance Minister). 

I’ve lately been discussing a forthcoming paper, Dangerous Categories: Narratives of Corporate Board Diversity (with Lissa Broome and John Conley), and, in particular, our respondents’ claims about the unique “feminine values” that women bring to the boardroom.  The bulk of our respondents’ narratives on this front relate to women’s greater ethic of care and sensitivity to employees, consumers, and the community, rather than to female risk aversion.  

A few of our narratives touch on the risk reduction point, but normally the explanation given is that of reducing “group-think” and the risky behavior of bodies whose members all think alike, rather than the unique risk-avoidance tendencies of women as a group.  Said one respondent: 

regardless of what the statistical studies say, I think people know especially on the risk side that whenever you get anything involving sort of group think, everybody in the room having the same background, group of experiences and so forth that that is an absolute breeding ground for risk, for problems to occur.  . . . 

I think by and large the folks that believe that diversity is important put a very high value on it for that exact reason that they think this creates greater, frankly, psychological independence in the boardroom.  It creates more viewpoints in the board room and that leads to better decision making I think and I think that’s a change from certainly fifteen or twenty years ago when I think it was purely viewed in terms of sort of social equity issues about increasing participation by women and minority group members on boards of directors and I don’t see that as much today. 

I think the arguments in favor of board diversity are much more sophisticated today and that we’re really talking about trying to help boards to provide stronger oversight.  We’re trying to help boards to eliminate the possibility of groupthink, I think. 

The difference between Lagarde’s statement and our respondents’ theories regarding the impact of board diversity on corporate risk seeking is a subtle, but significant, one.  Whereas Lagarde, supported by some research on risk-seeking and testosterone levels in investor behavior, takes the position that women in the boardroom will decrease risky corporate behavior due to unique feminine risk-avoidance attributes, our respondents are making a point about risk-avoidance in heterorgenous groups more generally.

This is not to say that our respondents reject the notion of unique feminine qualities in the boardroom.  As I noted is a prior series of posts (see here, here, and here), many of our respondents generalized about women and the ethic of care in ways that were strongly reminiscent of Carol Gilligan’s feminist classic, In A Different Voice.  Yet those generalizations centered on women’s superior empathy and compassion, not on their risk-aversion. 

Either way, the potential dangerousness of such difference-based arguments for gender diversity is clear: to suggest demographic group-based difference of this sort is to open the door to both stereotyping and invidious comparison.  This tension is evident in our respondents’ accounts, which simultaneously extol difference and express embarrassment with it (and, in my opinion, is evident even in Lagarde’s brief account).

Image Source (traders)

Image Source (Lagarde)

 

Dangerous Categories and “Trivial” Boards: The Wrap-Up

In my last two posts  -- Dangerous Categories: Diversity and Stereotypes in the Boardroom and Dangerous Categories II (Wow, Men Are Still From Mars and Women From Venus?) -- I discussed a forthcoming paper with Lissa Broome and John Conley on corporate board diversity. As I noted, all of our interview subjects (with one partial exception) agree with the abstract proposition that board diversity is a good thing. On the more specific question of why it is good, there is broad agreement—a master narrative of sorts--that board diversity results in functional improvements to board or corporate operations—a qualitative “business case” for board diversity.  Though the particulars of the functional story vary across respondents, many accounts bear a strong resemblance to Justice Powell’s original exposition of diversity in the Bakke case: a diverse group of people will engage in a richer discussion that will be informed by the multiple perspectives for which their demographic diversity is a proxy.

But it has proven difficult to get beyond this very general narrative; our respondents have been able to provide few detailed or substantive examples of this presumed benefit of diversity. Perhaps this reluctance to examine critically the benefits and drawbacks of board diversity results from the dangerousness of the categories associated with diversity--gender, race, and ethnicity.  The “different perspectives” argument requires the assumption that people of diverse demographic backgrounds really are different in some meaningful way—but difference is a concept that must be handled with great delicacy. Those who are not members of traditionally unrepresented groups do not want to be accused of stereotyping or essentializing by identifying particular unique contributions of members of those groups; no one wants to say anything like “they are especially good at that.”  Conversely, those who are members of traditionally unrepresented groups have a vested interest in presenting themselves as not being different: not as token members of a group, but as individuals who have been selected based on their own merit.  

Nevertheless, when we pressed our respondents we did find a few concrete examples of how contributions of particular female and minority board members may have benefitted the corporation.  Nearly all of these examples, which we excerpt in detail in the article, relate directly or indirectly to employee, community, or customer relations.  Perhaps most meaningfully, female and minority board members were credited with positive contributions in improving employee relations, and in causing the corporation to focus more deliberately on the diversity of its workforce as it considered retention, promotion, and succession issues.  For reasons we elaborate in the paper, this latter point could well suffice as a business justification for the vigorous pursuit of board diversity. Consequently, we find it somewhat curious that this rationale does not figure more prominently in our respondents’ abstract business case (in contrast to the more prominent but less concretely supported Bakke narrative).

As Don Langevoort notes in his commentary to our article, this muddle is surely due in part to the lack of a coherent, over-arching explanation for how boards themselves add to firm value.  (A point Larry Ribstein also makes in his excellent blog post about our paper over at Truth on The Market). Moreover, as Langevoort explains, much of the value added by the board is likely to occur in response to some exogenous crisis and, in any event, outside of the formal boardroom setting.  If so, then the “real action” of the board will be unobservable by the group and unlikely to display much that is attributable to gender or ethnicity.  

Langevoort’s description of the relative unimportance of demographic diversity in a board’s response to crisis situations is consistent with a comment from one of our respondents (a Hispanic female).  When asked about diversity concerns when she served on the board of a company experiencing deep financial distress, she said: 

If you could for a moment imagine yourself in a fast flowing river drowning looking for a lifeboat, you wouldn’t care what color it was and you wouldn’t care who was in the lifeboat.  All you need is a lifeboat. 

In other words, this crisis demanded action rather than introspection about diverse perspectives.  

Finally, Langevoort’s suggestion that board meetings are routine and ceremonial is also consistent with our respondents’ accounts.  We note in the paper some of the seemingly “trivial” contributions to board discussion that our respondents cited as evidence of the value of diversity.  Perhaps these are the best examples our respondents can offer because so much board discussion is, in fact, largely trivial.  

Why our respondents do not offer more meaningful stories of diversity’s impact outside of the boardroom we can only speculate.  One possibility, of course, is that minority and female board members are not invited to be part of the relevant out-of-meeting conversations. This theory is consistent with the account of an African-American male director who told us that he knew that some board members went out in the evening for meals and did not invite him to join them.  Overall, however, other female and minority respondents did not echo this narrative of exclusion.  Needless to say, this possibility, if true, does not bode well for the Bakke “richer conversation” rationale for board diversity invoked so frequently by our respondents, and by many researchers as well. 

That wraps up my series of posts about this draft.  Thanks for listening – and feel free to send comments my way.

 

Related Posts:

Dangerous Categories II (Wow, Men Are Still From Mars and Women From Venus?)

Dangerous Categories: Diversity and Stereotypes in the Boardroom

Duke-UNC-Duke Energy Board Diversity Conference Today

Quotas, Board Diversity, and Corporate Performance

Vancouver Rocks! (Part II)

“Meddling Women” In The Boardroom

Substantial Evidence or Substantial Uncertainty? If Gender Diversity on Boards Clearly Adds Value, Then Why Are There So Few Women on Boards?

Sotomayor, Diversity, And Group Dynamics: Why Do We Care? What Do We Know?

Do The Right Thing – So Long As It’s Free 

Money Is Diversity, Or Diversity Is Money?  

What Corporate Insiders Say About Why Diversity Matters

Wrapping It Up: The Struggle To Explain Why Difference Makes a Difference

 

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