Category: Current Events

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Rule of Recognition for Party Nominations

There are many scenarios that could play themselves out at the Republican National Convention this July, but here is one that I thought I’d flag.  Suppose the loser claims that he was cheated out of the nomination by a manipulation of the rules, questionable rulings on delegate credentials, etc.  A lawsuit challenging the official result would almost certainly go nowhere, but . . .

How does a state official decide who is the Republican nominee for President?  This is almost always a ministerial task, but what if the loser argues to, say, the Secretary of State of Florida that he was the real winner of the nomination and should appear on the ballot.  (Kind of like the medieval period where there were two Popes each claiming that the other was not legitimate.) Does that Secretary of State have the discretion to decide who won?  If so, how would she decide?  And if that decision were challenged by another candidate, on what basis would a state court overturn that decision?

 

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AALS, Professor Dan Markel, and the Scholarly Tradition

This week is the annual law professor conference in New York City. The AALS conference is always a wonderful ritual of learning, discussion, and friendship. Indeed, it was the one time of the year that guaranteed a lunch, dinner, or chat with brilliant criminal law theorist and incredible friend Dan Markel. When Dan was murdered in the summer of 2014, I wrote this post for Forbes about his life’s lessons. For colleagues who are going to AALS this year, CoOp will be having a Markelfest in his honor tomorrow night. I wish that I could be there to celebrate Dan and his passion for scholarship and the world of ideas. We miss you, Dan.

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Hot Topics 2015 to 2016: A New Year Note

What an eventful 2015! Thanks to you, my friends and colleagues in media, business, investing, and academia, for engaging conversations, publications, and gatherings on a range of topics. These include Berkshire Hathaway, shareholder activism, the AIG case, celebrity contract disputes, and many more.  During 2016, I’ll continue to offer insights, interviews, and commentary and lecture widely on the vital business stories of the day. As we move into the New Year, herewith a forecast of hot topics in 2016 I’ve been following, gratefully along with many of you, in 2015:

  1. Shareholder Activistm 2.0 . A subject of ascending importance, I’m especially interested in the activist personalities and target cultures, and in 2015 commented for a profile of Carl Icahn in the  San Jose Mercury News (by Michelle Quinn) and of Nelson Peltz in the Wilmington News Journal (Maureen Milford & Jeff Wordock) as well as the case of DuPont Company on WDEL Radio (Frank Geravce). Expect to see more of the younger generation of activists—even younger than Bill Ackman and with fewer resources—as this approach to governance cements as mainstream. I am directly involved in a few of these efforts, including as a director nominee.
  1. Google and Gloms. As a cross-current against activism, I foresee continued restoration of the conglomerate business model. In 2015, I endorsed Google’s move in that direction, as noted in stories in The Omaha World-Herald (Steve Jordan), Quartz (Max Nisen), and MarketWatch (Tim Mullaney). I expect to see more conglomerates, even as many shareholder activists oppose them, and predict that the clash will be resolved by switching from a general aversion to gloms to the specific question of the model’s suitability for particular personalities, ownership structures, and corporate cultures.
  1. Berkshire Culture. I continue to believe that Berkshire corporate culture is special and full of lessons. In 2015, I was grateful to many editorial page editors for printing my op-eds on this theme. These addressed corporate culture and leadership in The Wall Street Journal (thanks Mark Lasswell & Paul Gigot); what’s so instructive about Berkshire in The Omaha World-Herald (thanks Deb Shanahan & Steve Jordan); and numerous aspects of Berkshire and Buffett in the Dealbook of The New York Times (thanks Jeff Cane & Peter Henning, Wayne State U.). More to come in 2016 as the company continues to both evolve and stay the same, as thoughtfully put in various stories in which I’m quoted, including in Fortune (Roger Lowenstein) and Reuters (Luciana Lopez).

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Guns and Abortion

I guess I should say something about the most recent discussion on guns in the United States. My take is that the answer to the problem of gun violence rests on changing culture rather than law.

The right to own a gun for self-defense and the right to have an abortion are both constitutional freedoms that many people reject as too costly (in other words, they kill lots of people). In both instances, though, if you ended the rights in question there would be plenty of lawbreaking that would be even more costly. So what is the upshot?  You can have regulations that marginally restrict the activity, but they are largely symbolic (say, banning partial birth abortion or things that are characterized as assault weapons).

Another solution involves just persuading people that the act in question is wrong or unnecessary.  This is much harder and far less satisfying because it concedes that the activity will continue, but in terms of reducing the harm it’s probably the more effective answer.

I wonder whether gun control proponents will start moving in the direction of direct protests (say, outside their local gun shop) the way anti-abortion activists target clinics.

From Territorial to Functional Governance

Susan Crawford is one of the leading global thinkers on digital infrastructure. Her brilliant book Captive Audience spearheaded a national debate on net neutrality. She helped convince the Federal Communications Commission to better regulate big internet service providers. And her latest intervention–on Uber–is a must-read. Crawford worries that Uber will rapidly monopolize urban ride services. It’s repeatedly tried to avoid regulation and taxes. And while it may offer a good deal to drivers and riders now, there is no guarantee it will in the future.

A noted critic of the sharing economy, Tom Slee, has backed up Crawford’s concerns, from an international perspective. “For a smallish city in Canada, what happens to accountability when faced with a massive American company with little interest in Canadian employment law or Canadian traditions?”, Slee asks, raising a very deep point about the nature of governance. What happens to a city when its government’s responsibilities are slowly disaggregated, functionally? Some citizens may want to see the effective governance of paid rides via Uber, of spare rooms via AirBnB, and so on. A full privatization of city governance awaits, from water to sidewalks.

If you’re concerned about that, you may find my recent piece on the sharing economy of interest. We’ll also be discussing this and similar issues at Northeastern’s conference “Tackling the Urban Core Puzzle.” Transitions from territorial to functional governance will be critical topics of legal scholarship in the coming decade.

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Conscientious Objections to Following the Law

There is one aspect of the Kim Davis situation that is not getting enough attention.  Let’s suppose that you think that officials like her should be given an exemption from following a law that they think is very wrong on religious grounds. Wouldn’t that mean that religious people would be less likely to get elected or chosen for public office?

Under the exemption scenario, the public or the appointing official would have every right to inquire about the religious beliefs of the candidate or applicant.  Now, of course, a candidate could say “My religious views would not affect my public duties” or “I will always follow the law.”  But people might not believe these statements, or just may be less inclined to take a chance on openly religious people.  Thus, I would think that creating or extending such an exemption would actually harm religious folks who want to serve.

 

Berlusconi-fication: Cutting Out the Middle Man

2630085549_eebd0ce895_oRecently Rick Perlstein described American elections as a “plutocrat’s right to choose.” Such concerns have also been raised by conservative media. A political economy premised on the trading of money for power, and power for money, gives rise to an oligarchic constitutional order. Political science responds with “investor theories” of politics, where the key players are not the voters, but the donors. Politicians become vessels for their agendas.

As Jeffrey Winters observes, many types of oligarchies can develop. Americans might be interested in learning more about what might be deemed a “direct” oligarchy, where one-time donors forego buying the favor of leaders, and simply run for office themselves. Some very wealthy candidates of the right and left have fit this bill, and done passably as leaders. But the independence afforded by great wealth can also lead to flamboyantly erratic behavior, particularly among men long unaccustomed to accounting for their actions to others. Consider, for instance, the billionaire Silvio Berlusconi, a long-time Italian leader:

Perhaps the most famous example of Berlusconian rule-bending—and the one with the most popular results—was his takeover of Italian TV. Television was introduced to Italy, in 1954, through a single channel, RAI, administered by the ruling Christian Democratic Party; the highlight of its programming was the Pope’s Sunday-morning Mass, which is still on the air. For decades, the government controlled television: in the seventies, political parties were allotted news coverage in exact proportion to their votes in parliament. Then, in 1976, the Italian Supreme Court ruled that private broadcasting could be allowed on a local level. Berlusconi, who had made a fortune building suburban housing developments, began buying up local stations and broadcasting the same content on all of them. In order to comply with the letter of the court’s ruling, he staggered the broadcasts by a few seconds on each network.

Technically, these were local broadcasts; effectively, as Berlusconi made clear to advertisers, he had a national market, which he glutted with American programs like “Dallas,” “Dynasty,” and “Falcon Crest”—stories of sex and money…Berlusconi…believed that appetites existed to be stoked and sated, and he imported both American entertainment and the advertising environment that supported it. “I’m in favor of everything American before even knowing what it is,” he once told the Times.

Despite a long record of self-dealing, scandal, and outrageous statements, Berlusconi spent 9 years as Prime Minister. He had great appeal as a rascally anti-hero, exulting in a mix of la dolce vita and la vida loca. Thank goodness America, a mature democracy, could never fall for such a dubious mix of wealth and celebrity.

Photo Credit: CluPix.

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When Love’s Promises Are Fulfilled By the U.S. Supreme Court

Today, in a 5-4 decision, the United States Supreme recognized the fundamental nature of love’s promises. In Obergefell et al. v. Hodges, the Court held,  “the Fourteenth Amendment requires a State to license a marriage between two people of the same sex and to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-State.”  Referring to marriage as a “keystone” of the U.S.’s “social order,” Justice Kennedy declared same-sex marriage bans unconstitutional. Importantly, the case makes clear that forcing gay couples to go across state lines to marry only to deny them the franchise after returning home undermines fundamental principles of liberty.

It’s no surprise that Professor Martha Ertman’s powerful book: Love’s Promises: How Formal and Informal Contracts Shape All Kinds of Families on which she copiously and beautifully toiled while rearing her son debuts the summer that equality in marriage becomes a fundamental right for gay men and women. Nor should anyone be surprised if the book, along with the decision itself, becomes a central text at universities and beyond. In what David Corn calls a “love letter to marriage,” from the pen of Justice Kennedy, the Court reasoned:

“No union is more profound than marriage, for it embodies the highest ideals of love, fidelity, devotion, sacrifice, and family. In forming a marital union, two people become something greater than once they were. As some of the petitioners in these cases demonstrate, marriage embodies a love that may endure even past death. It would misunderstand these men and women to say they disrespect the idea of marriage. Their plea is that they do respect it, respect it so deeply that they seek to find its fulfillment for themselves. Their hope is not to be condemned to live in loneliness, excluded from one of civilization’s oldest institutions. They ask for equal dignity in the eyes of the law. The Constitution grants them that right.“

With that, the Supreme Court overruled the prior judgement of the Court of Appeals for the Sixth Circuit and set in gear the reversal of centuries’ worth of stigma, shame and inequality, which may not erase overnight, but overtime will ease. Professor Ertman might also suggest that by the decision, the Court resituates contracts too. That is to say, if viewed from the lens of contracts, which serves as the core, theoretical foundation of Love’s Promises, this decision recognizes a fundamental right in contract for gay men and women. Further, the case expands the “contract” franchise to include gay women and men.

Some scholars approach gay marriage primarily from the constitutional liberties encapsulated in the 14th Amendment, upholding equal protection for U.S. citizens regardless of their status, others approach the issue as a matter of privacy. For Professor Ertman, contracts offer an additional lens and much to deliberate about on matters of marriage, parenting, and familial intimacy. Professor Ertman’s writings on contract (The Business of Intimacy,  What’s Wrong With a Parenthood Market?, and Reconstructing Marriage to name a few) precede the book, and presaged its birth.

Here for example, in a passage from Chapter Eight, she explains that “[i]t takes two more trips to the lawyer’s office to hammer out terms that satisfy Karen, Victor, the attorney, and me, from lawyerly technicalities to the emotional terms we call “mush.” From what started out as an addendum to Victor’s and my coparenting agreement has blossomed into a bouquet of wills and powers of attorney, alongside the amended parenting agreement.” She tells readers, “On the way downstairs, clutching documents still warm from the copying machine, Karen squeezes my hand, as if she too feels that signing all those dotted lines brought a family into being every bit as much as vows of forever that we plan to recite…” As she explains, “if you scratch the surface of marriage—straight or gay—you’ll find contracts there, too.”

Professor Ertman urges us to remember time and again that what builds relationships and sustains them are the formal and informal contracting that take place daily in marriage; they establish the foundation for marriage and what comes after. She works diligently in the book to demonstrate love too undergirds contracts. That is to say, she wants readers to reimagine contracts—not as the products of cold, calculated bargaining or business arrangements—though one must acknowledge contracts can be that too—even in marriage.  Often marriage is the product of love, intimacy, and warm innocence.  At other times, it is the product of business arrangements.  It was that too in the U.S. chattel system: contracts that gave legal sufficiency to the buying, selling, bartering, and even destroying of slaves, including children (among them the Black biological offspring of slave owners). In light of that history yet to be fully explored and appreciated in law, it is a formidable task to resituate or reintroduce contract in the space of families and intimacy. However, Professor Ertman rises to that challenge.

Like it or not, contracts pervade marriage and suffuse premarital agreements. Sometimes contracting in this regard attempts to resituate power and status expost marriage, providing the economically weaker spouse economic stability after the breakup. Martha highlights cases from that of Catherine Simeone who received a “raw deal,” to those of celebrities, including Michael Douglas and Beyonce. Who knew that Beyonce would receive $5 million for “each of their children,” if she and Shawn Carter (otherwise known as Jay-Z) divorced? Professor Ertman might argue that despite the businesslike nature of contracts, these legal arrangements and agreements make most matters clearer for everybody. Professor Ertman explains that contracts and even verbal agreements provide information, they can provide context, and they offer choice.

In Ertman’s life, it was a contract that bestowed her wife, Karen, parenthood of their child—not something biological, legislative, or derived from courts. And she offers multiple reasons for readers to consider the salience of contracts in intimacy, including voluntariness, reciprocal promises, and equal status. She offers an additional reason: love’s promises.

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Thoughts on the British Election

The Tory victory in Thursday’s election raises several points that are worth discussing in the UK context and globally.

1.  The British constitutional system is gradually moving towards a parliamentary/direct democracy hybrid.  Referenda are now increasingly seen as necessary or desirable to resolve major issues.  There was a referendum about proportional representation in 2011, another on Scottish independence last year, and now one is promised in 2017 on EU membership.  Parliamentary sovereignty remains, but in more formal terms.

2.  More Scottish autonomy is inevitable, as Scotland now looks more like Quebec (a region with its own culture and own political party within a larger state).  I wonder what this will mean for Scottish law.  Scottish law still possess some unique characteristics, and there are many attributes of that law that influenced the Framers and resonate today.  (I’ve always thought “Not Proved” should be a possible verdict in a criminal case, for instance.)  How would a more autonomous Scottish law develop?  Would, for example, Scotland end up with a written constitution?

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Warren Buffett & Charlie Munger Annotated by Experts in Wall Street Journal

WB1996Warren Buffett’s latest letter to Berkshire Hathaway shareholders is annotated in The Wall Street Journal by 30 professors, authors, and investors.  Editors Erik Holm and Anupreeta Das assigned us each two sentences in the letter, and/or Charlie Munger’s addendum, to amplify.  Here are my two, followed by the list of contributors. Mine address the role Warren’s son Howard will play in succession and what Munger believes concerning what made Berkshire succeed.

Regarding Buffett’s reference to his son Howard (p. 36):   Buffett tries again to defend the choice of Howard to succeed him as board chairman. Many remain skeptical. But critics should appreciate the plan’s savviness. It deftly carves a niche for the son of a legend, as Howard will: (1) not be asked to perform any task his father has performed (like investing or capital allocation) and (2) be asked to perform only one task, which Warren has never performed (monitoring the CEO for adherence to Berkshire culture and dismissing any who fail). This shrewdly avoids the trap many children of legendary parents face of never being able to measure up.

Notably, besides Munger, Howard is the only individual Buffett identifies by name among Berkshire personnel in his anniversary message and, besides Buffett, Munger only names Abel and Jain. In fact, while Munger and Buffett mutually credit the other for minting the Berkshire model, they never credit any other Berkshire personnel for its success. The omission contrasts with Buffett’s letters, which rightly herald specific executives who power Berkshire and animate its culture. The difference is that these messages, while in form historical, are really about the future, and all three people identified by name are referenced in discussions of succession.

Where Munger asserts (p. 39) that “The management system and policies of Berkshire . . . were fixed early”:   Munger’s statements about how Berkshire’s “system and policies” were “fixed early” is vague. In one sense, it sounds as if they were part of a master plan at the outset back in the 1960s.  But Buffett has often stressed that Berkshire never had a strategic plan nor any business plan. And through the 1980s, most of Berkshire’s “business” consisted of investments in securities for its insurance companies, not wholly owned operating subsidiaries. So it doesn’t seem likely that, in the 1970s or even as late as the 1980s, Buffett’s goal was to create “a diffuse conglomerate.”

On the other hand, Munger subsequently clarifies (p. 40) that Buffett “stumbled into some benefits [of these policies] through practice evolution” over his career. And Buffett sculpted much of Berkshire’s culture late in the company’s life as part of a process that is still ongoing and extends well beyond these policies. Therefore these passages should not obscure the fact that the “Berkshire system” looks sharper from today’s vantage point than from Buffett’s desk “early” on. That’s important to recognize lest observers commit errors associated with hindsight bias like believing that observed outcomes were predictable, a weakness of human psychology which Munger often lectures against.

Cunningham is the author of Berkshire Beyond Buffett: The Enduring Value of Values and editor and publisher, since 1997, of The Essays of Warren Buffett: Lessons for Corporate America. For more commentary on this topic, see today’s New York Times Dealbook column, here. Read More