I've been listening to a fascinating conference on the administrative law of the bailout, hosted by Alan Morrison and Jeff Lubbers at AU.  Lots of luminaries involved, and it's a soup to nuts approach - from passage of the statute to its implementation to judicial review - it's all in there.

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Automaker CEOs are back in Congress today pressing their case to receive $34 million in assistance from the federal government.   Part of their case apparently now includes an agreement to earn a $1 annual salary if the government provides such assistance.  The $1 salary issue arose the last time automaker executives were before Congress.  At that time, when members of Congress asked if the executives would agree to such a salary cut, there was resistance to the idea.  Now, those executives appear ready to accept the salary reduction in exchange for federal aid.  Watching the back and forth, I did wonder, why wasn’t such a reduction made a part of other bailout packages? 

1.       Is it that executive compensation is more excessive in the auto industry than in other industries?  Interestingly, a 2008 Forbes CEO Compensation Report for the 2007 fiscal year indicates that the compensation for FORD CEO Alan Mulally and GM CEO Richard Wagoner ranked 153 and 433 respectively.  Chrysler CEO Robert Nardelli already had agreed to a $1 yearly salary when he signed on with the company in 2007.  In this regard, many CEOs in other industries, including the troubled financial industry, make more than their automaker counterparts.

2.       Maybe, given the performance history of the automakers as contrasted with performance in some other industries, a greater concern exists that the compensation in the auto industry is not sufficiently linked to performance?

3.       Or perhaps the concern that CEOs in other industries would not be willing to work for such a low salary simply does not exist with respect to these executives, particularly given that they have now voluntarily agreed to the wage cut?

4.       Or maybe there is greater concern that the auto industry will not be able to pay back the federal funds?

5.       Or maybe it is just that there is greater precedent for the $1 salary in the auto industry to accept such a deal.  Indeed, we know that Lee Iaccoca made a similar gesture when he asked for help for Chrysler in the 1970s.  Yet CEO of companies in other industries, both profitable and floundering, have made similar gestures.  Apparently heads of some 32 companies have done so, including Apple CEO Steve Jobs and Yahoo’s Jerry Yang.

6.       To be sure, it could simply be that the behavior of executives in other bailed out firms have caused Congress to take a harder line with those currently seeking federal funds. 

To be sure, other bailout packages included limits on executive pay, but none are as drastic—at least symbolically so—as this one.  Then too, at least one company receiving federal funds has now incorporated the salary reduction.  Thus, AIG CEO Edward Libby recently agreed to cut his salary for 2008 and 2009 to $1 a year—no doubt in response to some of the outrage over that company’s spending behavior.  Hence, perhaps companies that look for federal funds in the future also can look forward to a salary cut.  And of course, many have pointed out that (a) even with salary cuts, sometimes executives continue to make money through stocks awards and other benefits, and (b) the salary cut does not impact or alter other potentially problematic spending practices at troubled companies and hence does not really respond to the larger issue.   Regardless, it does seem interesting that this $1 salary issue appears to have received the most traction with respect to auto industry executives. 

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I've felt a little remiss ever since Thanksgiving because we skipped the customary around-the-table acknowledgement of what we are thankful for. (Well, 2 members of our party might have been discussing it at length, but they were 6 months and 14 months old, and frankly, it was hard to get a word in edgewise.)

In these unsettling economic times I'm thankful to have a good job, a joyful job, even. One thing I'm particularly thankful for is the generosity of colleagues both at my home institution and at others willing to take the time to read my work and give me feedback on it. Even before I went on the market, when I was just a lowly associate slogging away on a draft, I sent the piece to people I had no connection to, with a pathetic introduction along the lines of, "Hi, I read your X piece and really enjoyed it. I'm interested in going on the market. Any thoughts or feedback would be greatly appreciated." Translation: "I know you're busy and important. I am floundering. Please help me!" Of course, some didn't respond, but no one emailed to berate me for having the temerity to ask.* Overall, I was amazed at how generous people could be with their time--and it is time, largely unsung time that you can't account for as "service" in any institutionally rewarded way.

Now that I'm a leetle more seasoned, I'm trying to give back and do the same, although I never feel like my comments add as much as I'd like. Still, I celebrate the generosity I've encountered in this profession.

more ...

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By now you probably have seen some version of the IBM/Go Green commercial that starts in black and white with an employee and/or director seeking to make a pitch regarding why the corporation should engage in apparently environmentally friendly/socially responsible practices.  However, before the pitch begins, a stoic employer/board member rejects the pitch, basically on the grounds that the corporation does not find it appropriate to adopt such practices simply because they are favored by “tree-huggers.”  The employee responds by pointing out the economic benefits that flow from adopting the policies.  At this point, the commercial bursts into color and the Wizard of Oz Optimistic Voices Lyrics “You’re Out of the Woods, You’re Out of the Light” begins to play.  The message imparted: engaging in socially responsible/environmentally friendly practices is not about doing good, but about enhancing the financial bottom line.  Hence, we can all “step into the light.”  It is a cute commercial and it conveys the notion that corporations are socially responsible, or at least giving the impression that they are.  Yet I have wondered if these commercials send a message that could prove problematic for advocates of corporate social responsibility (“CSR”). 

To be sure, such advocates may view the commercials as a sign of victory.  At the very least, the commercials can be viewed as underscoring the point that consumers care about CSR, and hence corporations would be well-served in projecting an image that they too care.   Indeed, IBM’s website on CSR suggests that one reason why CSR efforts are important is that customers’ perceptions about CSR behavior impacts their purchasing behavior.  Perhaps more importantly, CSR advocates have long believed that one of the reasons corporations have been reluctant to embrace socially responsible behavior has been the inability to demonstrate a connection between that behavior and the financial bottom line.  In other words, the notion that companies should “do good” was an insufficient motivator for corporate behavior.  In this regard, the commercials seem like a positive sign for CSR advocates because they embrace the notion that such a connection exists, and thus provide an economic rationale that should enhance the likelihood that other companies will engage in such behavior.  To this end, a report on IBM’s website notes that companies are practicing CSR “in a manner that generates significant returns on to their businesses,” pointing out that “well-known companies have already proven that they can differentiate their brands and reputations as well as their products and services if they take responsibility for the well-being of the societies and environments in which they operate.”  In this regard, linking CSR with financial returns generates the kind of behavior advocates desire and hence the commercials seemed to represent a positive development.   

And yet, by seeming to belittle the non-economic rationale for CSR, the message within these commercials also seems to embrace implicitly the notion that corporations should only engage in socially responsible behavior when clear economic benefits exist.  Such a message is potentially problematic.  This isn’t to say that corporations should not consider their economic bottom line when engaging in such behavior.  Studies indicate that the more profitable a company, the more likely it is to embrace socially responsible practices, and vice versa.   However, by suggesting that corporations should only act responsibly when a clear economic upside results, the message could decrease the likelihood that corporations will act without such clear evidence of financial return, even if they had the resources.  And this could pose problems, especially for long-term changes.  This is because even when socially responsible behavior has benefits, they are not always clear-cut, and there may be valid reasons to engage in behavior even when the economic benefits are not obvious.  Indeed, the IBM report also notes that “the more advanced view of CSR demands significant long-term commitment, and definition (or re-definition) of corporate values.  It can also require wholesale changes to the way companies operate.”  That sounds like CSR involves some serious costs while raising the possibility that benefits could be delayed or even uncertain.   This is certainly a more nuanced message than the one conveyed through the commercial.  By failing to capture this more nuanced picture, and instead suggesting that CSR is only warranted when there are clear financial rewards, the commercial could reduce the likelihood that companies engage in socially responsible endeavors except in the most limited ways.  

Of course, I realize that it is just a commercial, and one that has a good message.  Moreover, during these economic difficulties it is hard to think about companies doing anything but trying to pay heed to their bottom line.  Hence, it could be that the message within the commercials is the only message that will prompt action at least in the short term.  Nevertheless, it seems important for CSR advocates to at least preserve the notion that sometimes it is okay for a company to just “do good.”

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I was pleased to be asked by the Legal Times (they've got a nice blog, too) to chime in on how the Obama Administration should handle the bailout.  I think the new team will have to weigh how far to push its extremely broad authority against the usefulness of good governance style collaboration with Congress.  That's not just a bailout issue, it implicates the separation of powers and so on.  You can find a gated version of my ponderings here, and here's a taste:

Consider the flexibility the administration will enjoy under the Emergency Economic Stabilization Act’s executive compensation scheme. The bailout statute provides only that the Treasury secretary “shall require that” participating institutions “meet appropriate standards for executive compensation and corporate governance.” Because defining those appropriate standards has been left to Treasury, there is nothing preventing the next administration from enacting, with the stroke of a pen, a more European model of management pay.

That would certainly be novel, but it is hardly the limit of the government’s flexibility. The Treasury Department also has authority to invest in institutions in exchange for equity, to purchase assets of those institutions outright, to devise an insurance scheme, and to issue “such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities or purposes” in the statute. Those purposes are many, but they include “the need to help families keep their homes and to stabilize communities” and to promote “jobs and economic growth.”

When coupled with the ability to impose conditions by contract on the recipients of bailout largesse, one can get a sense of just how innovative the Obama administration could be.

For example, though the Community Reinvestment Act has its critics, if ever there was a time when the administration might be able to encourage financial institutions to set hard targets and benchmarks for investment in the impoverished areas of the country, now is it.

Nor need the administration stop there. As industrial companies begin to line up for their own shares of government largesse, nothing in the bailout statute prevents the Obama administration from requiring a contractual commitment to a card-check scheme from the nonunionized among them in exchange for an injection of equity.

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My friend and colleague David Hyman has now left the safe ranks of blog reader and joined the Volokh Conspiracy as a full-fledged blogger.  David will be a great addition, and I look forward to reading him often.  Here is his first post, which dovetails nicely with his recent research on medical malpractice litigation.

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Ann is a natural-born blogger. Her interview in connection with the ABA Journal 100 is short, but it reminds me of sitting across the hall from her, talking about blogging. She really hasn't changed her attitude about blogging in over four years, and that's pretty amazing ...

ABA Journal: How long did it take you to find your voice?

Althouse: I think I had my voice on the first post. From day one, it felt like I'd been dying to do this.

ABA Journal: Tell me about some of the biggest hurdles to doing regular posts.

Althouse: I have none. I wake up every morning ready to blog, and I do that before anything else. During the day, when I can, I go back to the blog. The real problem for me is overblogging, not underblogging.

ABA Journal: Have you ever experienced burnout or writers block? And how did you get over it?

Althouse: Blogging is energizing for me, and I never feel burned out. Sometimes it takes me a while, reading through things, to find something I want to write about, but I consider that part of writing. You need to read with a flexible, open mind and have an eye for the bloggable. Once you see something that is bloggable, start writing. Let it flow. I like to write to see what I think, to observe my mind at work. I free associate, and since I'm pretty old, I have a lot of material to weave in. Another thing I do is photography. If I take a photo-walk, I come back with things I can make into posts.

ABA Journal: What have you learned from the blog world regarding direct, immediate feedback? Does that cause trouble for you in your day job?

Althouse: I'm fortunate to be a tenured law professor and to work with people who appreciate nontraditional writing, including a lot of writing that is only tangentially about law (or not about law at all). As for the direct feedback, I love it. I'm always checking the traffic statistics, seeing who's linking, and reading the comments. Even when people get mad at me, call me a fool, and slander me, I love being one of the characters on the Internet stage.

ABA Journal: Would you encourage other legal professionals to blog? What advice/cautions would you share?

Althouse: If you want to blog, blog. Otherwise, don't. If you don't find it intrinsically rewarding to live freely and continually in writing, on display to the world, then don't waste your time. If you're contemplating a website that will work as PR for your legal practice, I don't care what you do. I'm not interested, and I won't read you.

The last paragraph is a classic: If you want to blog, blog. Otherwise, don't. Substitute any intransitive verb for "blog," and you have some pretty good life advice.

As for the dismissal of PR blogs, it's all about authenticity ... if that word is not too dated.

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The Conglomerate was again included in the ABA Journal's top 100 best websites by lawyers, and we are very honored. This is from the press release:

"New legal blogs are springing up on a daily basis – we now have more than 2,000 in our online directory. Competition for the time and attention of lawyers is getting fiercer," says Edward A. Adams, the Journal’s editor and publisher. "Half the blogs on last year’s inaugural Blawg 100 list didn’t make the cut this year. That’s a testament to the quality of this year’s honorees, and evidence of the increasing amount of valuable information all legal blogs are publishing."

But the funnier part is their description of our blog:

The Wall Street crisis has kept these law profs focused on the blog’s marketing pitch: business/law/econom­ics/society. We all hope to be as relevant and analytical. But these profs aren’t all work and no play—their Twitter feed, “The Glom,” is a riot.

If you would like to vote for our blog -- please do! -- you can find the voting page here.

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Yesterday every bank stock fell in value 20%.  JPMorgan just crushed government-mandated acquiree Washington Mutual's payroll.  Since stock price falls (and less so layoffs) are what seems to get the government moving, should we conclude that this week will bring yet another TARP innovation?  Perhaps an emergency uptick rule?

Predictions are foolish, but foolish is the coin of the blogosphere.  So here's a prediction.  We're in the implementation phase of the government bailout.  That's different than the crisis phase, and the Fed's ever resourceful monetary machinations will continue regardless of the TARP.  So I suspect that as the administrators of the bailout get ready to leave office, and as the new administrators try to figure out what, exactly, they have been saddled with, what we'll see in the coming weeks are FDIC-directed one bank at a time mortgage relief, some regulator directed mergers, but not very interesting ones, and maybe some regulatory specifications of the bailout statute's provisions, in an effort to forestall the Obama administration's opportunity to zero out bank CEO pay and so on.

These predictions are guaranteed inaccurate.  If you have other views, do leave them in the comments.

And finally, a little housekeeping.  We are a much loved blawg.  And this article on Richard Fuld is well worth your time.

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So, what is in the Venn diagram that has the financial bailout, the University of Illinois and People magazine meeting in an intersection?  Neel Kashkari.  Kashkari, who was tapped by Paulson to lead the $700 billion infusion some weeks ago, holds both a B.A. and master's degree in engineering from the University of Illinois at Urbana-Champaign (as well as an M.B.A. from Wharton).  Now, he can add to his resume that in 2008 he was included in the "Sexiest Man Alive!" issue of People magazine.  Trying to keep everyone's publicist happy, People lists not only the "sexiest man alive," but other sexy men in various categories.  Kashkari is in the "Sexy A-Z" category under "B. . . is for Bailout Guru."  The editors are saying that Kashkari is sexy, but I guess in a miscellaneous sort of way.

Interestingly, UIUC is overrepresented in the "Sexy A-Z" category, so you may wonder what's going on out here in Champaign-Urbana.  Nathan Gunn, a tenured professor of voice in the School of Music, was "O. . . is for Opera Singer."

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