Corporate law is so boring, even most attorneys roll their eyes and fall out of their chairs when chumps and knuckleheads start blabbing about it.  Just rich people fighting over the chocolate chips, right? In case you're not familiar with this peculiar area of law, here's a factual situation from a prominent opinion issued just this past year: A derivative complaint filed by plaintiff shareholders alleged that the defendants caused the company to issue stock options in contravention of an equity incentive plan by setting the exercise price of the issued options at an unfairly low value. Huh wah? It's worse than the pseudo-speak you get on CNBC.  Court opinions based on this stuff routinely run up 70-80 typed pages.  I would have said that having a working knowledge of this cr@p gives you great job security, but, well... jury's out on that one!

Anyway, the rule of thumb for liberals when confronted with issues relating to internal corporate governance is generally set forth thus: we don't like court opinions and rules that favor greedy directors in favor of poor peon joe regular shareholders.  The courts (and when I say courts, I mean Delaware of course) do seem to favor directors -- although there is a little controversy about this particular position.

Indeed, to a person not intimately acquainted with corporate fiduciary duties, the rule of thumb seems to work great.  After all, the people usually suing the pants off greedy directors are, in fact, shareholders.  If all you knew about this finite universe was what happened to Enron and Tyco and Worldcom -- leading up to Sarbox (that lawyer speak for Sarbanes-Oxley), you'd like the rule of thumb, too, and you'd be justified.

But now we should all know better.  Who are the shareholders?  Might they be....wall street brokers?  Big mutual funds? And can one, at this late date, really expect these kinds of shareholders to exercise their votes in a rational and compassionate manner?

Companies are owned by and beholden to shareholders who don't care about what they own.  They care about stock price fluctuations.  In fact, in some situations (in the case of certain kinds of derivatives), shareholders have a financial interest in seeing the company go down in flames. Mind boggling, yes? Anyway, big shareholders look for quick and dirty profits by achieving quick and dirty increases in short term stock prices.  Directors *have* to deliver this -- or lose their jobs.  Certainly, there are a lot of crooks; when shareholders vote to write in stock options so that they are assured directors will toe the party line (if fear of unemployment won't do it, greed will), things get even more dangerous.

That giant flushing sound? That's jobs going overseas and people getting laid off so Fidelity can pull in better third quarter numbers.  Here's some more icing: don't be surprised if you find out that it's the financial industry lobby convincing Congress and all and sundry NOT to adopt trade protections and global environmental regulation because, well, it will cut into 4th quarter profits.  The saddest part? That Fidelity account is yours and my retirement savings. Which is getting a big time haircut because our employers are slashing benefits.

Traditionally, the SEC governs the trading of  the equity of public companies.  It does not (historically*) have much to say about internal corporate matters unless they have direct impact on the trading floor.  It's state corporate law that determines how much power a shareholder or director has in the company and what can and can not legally influence their behavior.  Let me give an example.  Of something that will help for the better (I'm trying to get my Chope on): if state legislatures add a minimum time requirement that a shareholder must own stock before it can exercise its voting rights, companies will begin to care less about short term profits through stock price inflation and more on long term viability (which includes, by the way, maintaining a stable and expanding work force).

Not to mention it would dampen -- at least a little -- the derivative trading madness.

*Sarbox is a federal statute that imposes some relatively new provisions that apply to director conduct; companies complain that it amounts to a paperwork requirement.  It does not, however, change the basic legal standard of behavior to which directors must adhere.  Incidentally, it also forces auditors and attorneys to do a little documentary CYA. The TARP also has some implications, but I don't have the energy to go into that just yet.

I try very, very hard not to do anything that would motivate someone -- usually someone more "conservative" -- to call me a conspiracy theorist. Spouting facts and righteous rage like Michael Moore is a one way ticket to joblessness in my (former?) profession. But in some cases I can't help but make some wry observations.  And I have to vent on this subject, although it is no longer as timely.  And I want to know what you guys think.

First, let me lay down some background. I'm no bankruptcy lawyer -- you can't pay me enough to be that kind of vulture...or at least no one has, yet -- but I did work around some (all very nice people, by the way, who seemed to land in that practice as a matter of happy accident rather than ambition...this is what working for the devil for any length of time will do to you) and I understand the basics of a Chapter 11. An "insolvent" company (as defined by the company, in the first instance -- yes, that does have some implications) files, gets together with all its creditors, and comes up with a plan to pay everyone off (less that what is owed) that the Court will approve. Debts discharged forever. During the bankruptcy, the debtor's got to find someone willing to finance it through the bankruptcy, which could take years. Let me define "creditor." That lovely legalese refers to anyone and anything the debtor owes or will owe money. That includes -- you guessed it-- not only the obvious financial lender, but also people who are owed pension plans, people who have tort claims against the company, employees....you know, normal folks. It's during the Chapter 11 process that the Court sorts out and identifies all the creditors and decides who gets paid first. It also has the power to cancel debts in certain circumstances, and also to cancel transfers of money by the debtor to certain closely related people.

Now let me get more specific. In all likelihood, if the big Detroit three file, it will likely be with a "pre-pack." This means that they and their creditors will already have a plan in place, pre-judicial involvement. Not much work for lawyers there. Awe. But also not much chance for the joe regulars to have their say. If they're not at the bargaining table now, they'll never be.

If you're following, you'll begin to understand why I get CRAZY when I hear politicians (republicans?) erupting on tv like avenging angels, screaming at us about "punishing" companies for their dumb mistakes. Dumb mistakes were made, no one can doubt. Hindsight and monday morning quarterbacks etc. "Punishment," in the form of no bailout -- er, bankruptcy -- isn't punishing the companies. It's punishing its creditors. Bankruptcy, after all, was established to protect the debtor *from* its creditors. True capitalism? Letting people fail? Chapter 11, let me tell you, was not in the mind of The Great Adam Smith. It's very un-capitalistic. Chapter 7s are in the same vein; liquidation likewise leaves the debtor free of its obligations...albeit the debtor won't do business again. I shall write sometime about the origins of American bankruptcy law. Suffice to say, at this juncture, that it didn't pass our early Congress until some very important people faced the threat of gaol.

Digression aside, we're going to be paying for the big Detroit three no matter what we do. We will pay it as taxpayers through a bailout, or will shall pay through the cancellation of pension funds, medical care, and salary of big three employees. And we won't even get a say how the money is spent, in bankruptcy. Even less than we do with their new "plan" currently considered by our esteemed legislative colleagues. And I bet (and I don't have a lot of disposable income at the moment) that the stacks of paper currently before Congress will be the identical twin of those submitted before a bankruptcy Court. Yes, their financiers will take a hit...but didn't they just find a $800bn early christmas present under their trees?

Stay on your feet. No more push-ups, sit-ups, boat-rowing, snow angels or worm crawls. The NFL rulemakers also outlawed using the ball as a prop, and other such "foreign or extraneous objects that are not part of the uniform."

They don't even show the behavior earning the penalty on TV anymore. To my extraordinary disappointment. The Eagles won yesterday, and I haven't seen Brian Westbrook bust a grove in weeks. And I really really enjoy the football-bomb-o-line-collapse move. And I haven't seen the moonwalk in years.

I have to wonder why the NFL would ban such grandstanding. Maybe it's something about remembering a sense of sportsmanship lost when salaries exploded and professional athletics turned into a billion dollar industry. And I *have* to wonder whether someone will make some snarky remark during the inaugural bash. Then again, perhaps not. No one's outlawed the "point to God" gesture yet, generally observed after a homer. And the end of political speeches.

A few years ago (yes, indeed, it has been that long) I cringed away in fear from Hillary while publicly bemoaning her frontrunner status to, shamefully, not a few republican colleagues.  What with the Bush and Clinton swapping, America was starting to feel too much like 17th century England.  Keeping things all in the family, at first and second glance, is an anathema to the maintenance of liberal 21st century democracy.  Even worse than the repealing of estate taxes.  But even if we're not supposed to hand down our estates...er, multi million dollar businesses...to our family heirs, we can't help passing down family legacies and the numbers kept in the proverbial little black book.  At least, in this case, it doesn't seem confined to only the male heirs.  Score one for the 21st century.

While I suspect that the only folks willing to read this post are under 30 and occasionally exhibit -- if honest with themselves - what Jon Stewart might label "douchebag-type" behavior, I wanted to memorialize my 12-hour BSG catch-up session before the advent of the final episodes commencing January 16.  I got a lot more out of this series than the West Wing.  Or most anything on pay cable, excepting, perhaps, Showtime's The Brotherhood.

BSG explores a lot of difficult moral questions.  One of the writers' favorite themes is to challenge us to answer questions like:

"how many lives would you risk to save a friend?"
"how many lives would you end to preserve a foreign relations strategy?"
"how bad does your opponent have to be before you steal an election?"
"would you sacrifice yourself to save someone who could help your country more?"

Or how about this one:

"would you play golf and side step issues to preserve an optimal foreign relations/public relations strategy even if it meant 100s would die?"

Maybe it's worth it.  I don't have the big picture.

Ron D Moore, I shall miss you when you're gone.