Conglomerate

Tyco Executives' Ban and Reputation

2009-07-16T13:29:33-06:00

On Tuesday (and after some seven years!), the SEC finally reached a settlement with Dennis Kozlowski and Mark Swartz, the former CEO and CFO of Tyco. Among other things, the settlement permanently bans both Kozlowski and Swartz from being an officer or director of a public company. Given that both are currently serving jail sentences for grand larceny, conspiracy, securities fraud and falsifying business records—i.e., looting their company—one would think that their reputations are so tarnished that such a ban would hardly be necessary. In other words, is it really the case that either could serve as director or officer of a company after their stint in jail?

On the one hand, at least one study on reputational effects of financial fraud demonstrates that when directors serve on firms facing shareholder lawsuits alleging financial fraud, those directors experience significant decline in other directorships, and that such decline is greater for more severe allegations of fraud or when directors are in positions with greater responsibility. This suggests that the reputational impact of Kozlowski and Swartz’s convictions and sentences should result in them not being welcomed in board rooms or executive suites, particularly because of the apparent severity of their crime and their involvement in the misdeeds.

On the other hand, that same study concluded that whether directors lose board seats also depended upon the governance structures of corporations, and thus that directors were less likely to experience declines in their board seats at companies with weak governance structures. In other words, some companies may be willing to have people serve on their boards or in their executive suites even if they are tainted by fraud allegations. To be sure, a fraud allegation is far different from situations where someone has actually been convicted of fraud, and thus perhaps a conviction will have a greater reputational impact even in the context of entities with weak governance structures.

Of course, at first glance it could seem that this issue is moot. After all, both Kozlowski and Swartz were sentenced to up to 25 years in prison. If they serve their maximum sentence, Kozlowski, who was sentenced at 58, would not get out of jail until he was about 83, while Swartz, sentenced at 45, would not get out of jail until he was about 70. In either case, neither one of them would likely be re-entering the business arena. Of course, legal experts do not anticipate that either Tyco executive will serve his maximum sentence. Instead, legal experts anticipated that both Kozlowski and Swartz would be eligible for parole in six years and eleven months after their conviction, and such experts predicted that neither would serve more than ten years. If these predictions are correct, Kozlowski may get out when he is about 65, while Swartz could get out when he is about 52. That certainly leaves time for them to re-enter the business world. Hence, while I initially thought that the SEC ban may have been more symbolic than anything else, it not only is possible that the ban could have some real impact on both executives, but it also is possible that the ban takes over where reputational sanctions leave off.

Treasury Proposes Executive Comp Legislation

2009-07-16T13:04:48-06:00

On the one hand, the big paydays for traders surely encouraged them to take risks, but it is amazing how much time during the financial crisis has been spent on compensation, ranging from AIG's bonuses to today's news that Treasury will seek legislation to make compensation committees as independent as SOX audit committees (a pain if your firm is small and so your three person board is full of insiders), and so-called say on pay for all public companies.

Goodbye blawg, hello econoblog?

2009-07-16T09:24:05-06:00

Law.com's Robert J. Ambrogi proclaimed the demise of the legal blogosphere last week, citing posts from Mike Cernovich of Crime and Federalism and 11D. Both posts cite a kind of prelapsarian egalitarian blogging world circa 2005 where every voice was heard and it was easy to communicate meaningfully across traditional boundaries. Cernovich provocatively claims that now:

Law blogging is like high school or college. The black kids, white kids, and Asian kids are all sitting at separate tables. The law professors, lawyers, and law students all link to members of their respective subcultures. There thus isn't much debate worth reading.

Maybe it's just me, but I don't think that's true here in our little corner of cyberspace. I know from comments and conversation that we boast a readership of law profs, big law and small firm lawyers, regulators, and students.

If you're looking to branch out to a different discipline, though, today's WSJ describes the "new stars of the blogosphere": economists. Check out its Reader's Guide to Econoblogs. But don't stay too long! Return to us and prove that reports of the blawg's death have been greatly exaggerated.

SpongeBob at the NYSE

2009-07-15T15:42:05-06:00

In case you missed it, SpongeBob Squarepants rang the Closing Bell at the NYSE today, in honor of the tenth anniversary of Nickelodeon's animated television show SpongeBob Squarepants. SpongeBob is a sponge that lives in a pineapple under the sea along with his bestfriend Patrick Star, a starfish that lives under a rock in the sea. Despite that, or maybe because of it, SpongeBob Squarepants has been the number one animated show for kids ages 2-11 for more than seven consecutive years. And actually can be quite entertaining even for kids outside of that age range. In fact, some think that the show's cross-generational appeal is the secret to its success. Indeed, while Spongebob's creator never thought that a show about a sponge would survive past the first season, the show reportedly generates nearly $8 billion a year in merchandising revenue, and its 700 license partners worldwide make it the most widely distributed franchise in MTV Networks history. Quite a big success for a sponge. So happy anniversary SpongeBob--some entertaining and upbeat news for the market.

Google Tasks & Google Calendar

2009-07-14T21:39:13-06:00

I am an inveterate list maker, and for many years, my tool of choice has been Post-it Notes. But Post-its create clutter, and they tend to stay on my desk, so when I am at home or on the road, I can't easily access them.

In 2007, when I started "going Google" (see here and here), I looked for cleaner, more portable solutions. For long lists that I wanted to retain, I started using Google Notebook, which I still find very useful, even though Google announced earlier this year that they have stopped development of the product. (At some point, I will export my Notebook items to Google Docs, but it will have to be a slow day.)

For shorter, temporary lists ("to do lists"), Google didn't have a great option in 2007, so I turned to Remember the Milk. RTM seems like a fine program, and you can integrate it into Google Calendar, even if the result is a bit clunky. Nevertheless, though I have had RTM on Google Calendar for almost two years, I hardly ever use the program to guide my actions. The list is a pop-up, so I usually just ignore it, and maintaining the list is a bit of a hassle, even on the RTM site.

Today, I noticed the Tasks link in the sidebar of my Gmail. Tasks has been around for awhile, but just today it graduated from Google Labs. And the best part is that it can be integrated into Google Calendar. I have been fiddling around with the program tonight, and it is simple, fast, and versatile. You can make multiple lists, set due dates that automatically appear in both Tasks and on the calendar, and include notes on each task. It even includes limited formatting options to make the lists amenable to sub-tasks.

If you haven't already switched to Google Calendar, Tasks is yet another reason, but you might also be interested in some other new bells and whistles. The ability to include a background image is fun, but the coolest new feature allows you to attach a Google Doc to the Calendar. For example, I have a meeting this Friday with the Dean and some other professors, so I accessed the email in which the document we will be discussing was attached, opened the document into Google Docs, then added it to my meeting entry on Google Calendar. Wow!

Not-So-Family Film Blogging: Public Enemies

2009-07-14T16:05:54-06:00

The Boardman Art Theater in downtown Champaign is showing Public Enemies, a movie (loosely) based on Vanity Fair's Bryan Burrough's book of the same title about 1930s criminals such as John Dillinger, Bonnie & Clyde, the Barker Gang, Machine Gun Kelly, Pretty Boy Floyd and Baby Face Nelson. The movie focuses almost entirely on John Dillinger, so the art theater hung up signs on the outside advertising "Refrigeration" to mimic the outside of the Biograph in Chicago, where Dillinger was shot after escaping the summer heat with a Clark Gable film.

The movie wants to create a tension between FBI agent Melvin Purvis and gangster Dillinger that parallels the Javert/Jean Valjean pairing in Les Miserables. Purvis/Javert is a two-dimensional character, with very little personal information given and no background at all. Dillinger/Valjean is the criminal with a heart, who turned to his fugitive life after an unjust imprisonment. The end even tells us that Purvis died of his own hand, echoing Javert's throwing himself in the river to drown after facing Valjean in the sewer. This could make for great cinema, I guess, except creating that parallel is quite a stretch.

Burrough's book is pure nonfiction (not historical fiction, etc.). It has a lot of endnotes and seems (to the nonhistorian) to be well-documented. When items are rumored, he puts down a footnote to tell you why the rumor is probably true or false. But the movie takes some liberties with the facts, and not just disputed facts or rumors. However, Burrough said he saw the script and thought it was the best one could hope for from Hollywood. Since filming, he's repeated this. (Maybe he has another book/movie deal in the works?)

But to me, one of the most interesting aspect of the book was its portrayal of the 1930s FBI. The birth of the FBI seems as well-thought out as going over to the DOJ and handing all the U.S. Attorneys guns (or not handing them guns) and telling them to go arrest a group of suspected armed and dangerous terrorists holed up a few blocks away. The book shows all of the goofs and gaffes and poor detective work in hunting down Dillinger, et al., and in particular shows the rise and fall of Melvin Purvis. Although the movie seems to show Purvis at the top of his career the night Dillinger is gunned down at the Biograph, in truth he had been demoted by J. Edgar Hoover, who wouldn't even speak to him because of what he saw as the failure of the Chicago office to catch Dillinger. Hoover was enraged that Purvis was there when Dillinger was stopped and really, really enraged that he got the credit. I'm not sure if anyone knows why Purvis committed suicide, but it's more likely because Hoover wrecked his life, not because he felt remorse for being there when Dillinger died. (Most people agree, according to Burrough, that Purvis did not shoot Dillinger.)

The turning point between Hoover and Purvis was the shoot-out at Little Bohemia, Wisconsin. And yes, director Michael Mann shot at the actual site, but he makes it look like a tie between Purvis and Dillinger, when the FBI lost big time. In the movie, Baby Face Nelson is shot and killed, although Dillinger gets away. In reality, both gangsters got away, and two innocent bystanders were killed because FBI agents were so spooked in the dark woods that they shot at the first people they saw. The movie does not make it seem like those two bodies were bystanders. The movie also suggests that the FBI knew Dillinger was there because they brazenly tortured an accomplice who was dying in jail. Although the FBI was "taking the gloves off," the FBI was clued into Dillinger's presence because the owner of the Little Bohemia resort contacted them. So, the FBI knew Dillinger's gang was there, had the drop on them, but at the end had only dead bodies of FBI agents and bystanders to show for it. This is definitely not reflected in the movie, mostly by falsely showing Nelson to have been killed there.

Of course, I ruined the movie by reading the book; I know that. So, see the movie -- then read the book!

Mixed Signals

2009-07-14T14:15:14-06:00

(Thanks again to Gordon and the Conglomerate for allowing me to join your community for a few weeks.)

It has been very difficult in the past few weeks to decipher the meaning and relevance of conflicting indicators about the state of economic "recovery." Is rising unemployment a sign that things are bad and will be for a while or is that a lagging indicator? Should we, instead, be looking at certain positive profit reports or rising retail sales?

It's no wonder Wall Street has not reacted to any of this news in the last few days. Just today, I read two very different viewpoints about the economy. One declaring that the recession is over, and the other, that it's actually worse than we thought it was.

I wonder if it's just partisanship that explains the difference or if we are all trying to see what we want to see in the data.

Refco Attorney Joseph Collins Found Guilty of Securities Fraud

2009-07-14T10:02:42-06:00

This is the result we've all been waiting for (OK, maybe just me). Joseph Collins, as you may recall, is a partner in Mayer, Brown and was named in a shareholder suit under Rule 10b-5 for committing securities fraud as the outside counsel for Refco. He claimed he had no idea that fraud was occurring and that he was kept in the dark. A district court judge dismissed the lawsuit against him, reminding us all that parties may not be sued as aiders and abetters to securities fraud, but only as primary actors. And, the court, must have reasoned, no jury could find by a preponderance of the evidence that Mr. Collins was a primary actor in the Refco securities fraud. Now, in private securities litigation speak, this doesn't mean that a jury couldn't find that Collins knew about the fraud and kept going; in fact, the district judge thought that was almost surely true. But to find that Collins perpetrated securities fraud against investors after Stoneridge Investors v. Scientific-Atlanta, the investors must have known that the fraudulent statements were coming from Collins in order to have "relied" on him. So, since the fake documents that were prepared by Collins were put in filings without investors really associating them with the law firm, Collins is in the clear as far as a private civil lawsuit goes.

Well, now a jury has found that beyond a reasonable doubt, Mr. Collins committed securities fraud. Not just that he was engaged in a conspiracy to commit securities fraud, but also that he committed two counts of securities fraud.

One of these would seem to be wrong to a bystander just walking by, observing. How could the evidence against someone be enough for a criminal conviction, but not enough for a civil lawsuit? The short answer is because the elements of criminal fraud don't require much, and the elements of securities fraud, at least for private parties, do. The prosecutor doesn't have to prove that anyone relied or was damaged by Collins' fraud -- only that he knew of the fraud and kept going. Because we have made a decision that the frivolous securities lawsuit is inefficient and too costly for defendants to bear, we require private plaintiffs to prove (basically without discovery) that they relied on the particular actor's part of the fraud and that they were economically damaged. This, obviously can lead, and has in this instance led, to some crazy situations. What a crazy world if Mr. Collins is sufficiently blameless to avoid civil liability but must spend part of his life in prison for the same act. Sentencing will come later. The CEO is in prison for 16 years; the President for 10 years.

If readers are interested in the legal structures and practices that make it possible for this disconnect, feel free to read The Undercivilization of Corporate Law (33 J. Corp. L. 361 (2008)).

Banks and the End Run Around New Credit Card Rules?

2009-07-14T09:52:45-06:00

The Los Angeles Times has an interesting story about banks doing an “end run” on the new credit card rules by changing the terms of credit card accounts before the new rules take effect. In particular, at least two major banks have been changing some accounts with fixed rates to variable rates. As one industry expert notes, the impact of this change is that it allows banks to “keep your rate stable while rates are really low, so that they can raise them when rates go back up again—and rates will go up.” Among other things, the Credit Card Accountability, Responsibility, and Disclosure Act, provides that credit card accounts with a fixed interest rate cannot be changed for the first year after the card is issued, and that credit card issuers cannot raise the rate, fee or finance charge applicable to outstanding balances unless the account is 60 days delinquent—and if the cardholder pays on time for six months, the original rate must be restored. However, these rules do not apply to promotional offers or variable rate accounts. Hence the change from fixed to variable rate accounts. Do these changes reflect an end run by banks?

On the one hand, these kinds of changes to credit card accounts appear to be precisely what the Act was seeking to prevent. Indeed, the Act was passed amidst stories of banks constantly changing terms and hiking up interest rates on customers, including customers whose accounts were in good standing. One survey found that 57.9% of cardholders said that card companies had recently increased their interest rates or fees, reduced their credit limit or raised their minimum payments. Hence, the Act seeks to curtail these practices, and even has a provision aimed at ensuring that increases in interest rates for cardholders in good standing can only occur based on factors tied to a cardholder’s behavior related to the card.

On the other hand, some banks warned that the Act would prevent them from distinguishing between risky and non-risky cardholders, thereby forcing them to increase rates for everyone. And one can certainly read the move away from fixed-rate accounts as consistent with this warning. Indeed, given the reality of market and banking conditions, it is no surprise that banks would seek ways to limit their exposure and cover their record losses. Interestingly, a recent survey shows that interest rate hikes on credit cards have gone up since February (the month when the Act was passed). Spokespeople for the banks insist that these recent changes reflect an attempt to better manage risks and better respond to changing market conditions. But one wonders if that is just short hand for end run. Certainly the public seems to think so. An informal poll at the LA Times sites reveals 89% of those who took the poll believe that the changes simply reflect a “bait and switch” by the banks.

Jack Welch, Grumpy Old Man? "There's No Such Thing as Work-Life Balance."

2009-07-13T15:08:52-06:00

About a million years ago, Dana Carvey played "the grumpy old man" on SNL, "and we liked it!" This WSJ article makes me wonder if Jack Welch was doing a grumpy old man impression at a human resources convention or whether he's just trying to wake people up. Apparently, Welch (a University of Illinois alumni) was pretty blunt: "There are work-life choices, and you make them, and they have consequences." He gave as examples the female CEOs of ADM and DuPont who had "pretty straight careers" without taking time off for family.

Wow. That's some cocktail party conversation. Lots of scattered thoughts here.

1. There are 100 CEOs of Fortune 100 firms. Now, for the other 6 billion of us. There are different ways to "have it all," and having a rich family life and being one of the top dogs at a huge conglomerate that's been around for a hundred years and probably has a strong corporate culture is one way. But there are others. I can imagine women creating their own path at a lot of other firms with different norms. I like to read Mommy CEO blog sometimes, by a female CEO of a software company. At our little corner of legal academia, we wonder a lot about women attorneys making partner, or even managing partner. These are accomplishments that may constitute what Mr. Welch refers to as a "nice career," but maybe not what he thinks of as "the top."

2. Of course, we know he's right, and that's the worst part. In a lot of jobs, in a lot of places, individuals wanting to get to the top of whatever type of career ladder have to make difficult choices. The toughest part of this next phase of career equality is realizing that yes, we can all now be anything we want to be, but maybe not everything we want to be. As Mr. Welch points out, sometimes opportunity comes when you have suited up and shown up, and if you have taken time off, you just aren't there.

3. This all brings me back to my old saw about "opt-in" programs, not "opt-out" programs. Mr. Welch seems to be talking about women who are "taking time off for family;" presumably through extended leaves or maybe a part-time or reduced hours arrangement. So, yes, the benefits we keep asking for aren't going to help -- but benefits that allow us to opt in (telecommuting technology, on-site daycare, ability to travel with family), these will. In today's world, corporate actors are there "in the clutches" via Blackberry and iPhone from airports and far-flung cities anyway. I can be "in the clutches" from Little League, no problem.

4, Other thoughts?

Family Film Blogging: Ice Age 3: Dawn of the Dinosaurs (3-D)

2009-07-13T10:00:43-06:00

On a rainy Saturday, the two older kids and I decided to go see the latest Ice Age installment. I can't say that either of my kids are big Ice Age fans (I think we have the first on DVD, but no one has watched it in years), but they are big fans of the 3-D! So, those Real D people are geniuses, and not just for coming up with glasses that stay on your face. The movie isn't one that has to be told in 3D -- I wouldn't say that the action calls for it or anything like that, but it does look cool. Sort of like going from regular cable to HD. It may be hard to go back some day!

Anyway, although we weren't there for the plot, just the glasses, the movie was ok. The best part of the movie was a new character "Buck," who's sort of like Captain Jack Sparrow for the movie: heroic, funny, and more than a little "off." The premise of the movie is that Sid the Sloth stumbles into a tropical world underneath the ice that houses a few missing links from the dinosaur era. So, no, the movie doesn't completely ignore the geological timeline by putting dinos and mammoths and saber-tooth tigers together -- it just creates an imaginary "land of the lost." This is actually good visually for the movie because the lush greenery makes for a prettier setting than the stark ice and snow. It's more colorful than the brown and white palette of ice, mammoths and sloths.

I really didn't like the movie though, because to me it seemed like an animated "Knocked Up," which was not my favorite movie. (Funny how boy-wonder directors like to make movies where chubby, unemployed, ambitionless guys find themselves living happily after ever with extremely attractive women with a lot going for them.) Anyway, in Ice Age, Manny the Mammoth's mate for life is having a baby, which makes him turn into uber-Dad, alienating the males in his "herd." Diego, the tiger, thinks domestic life is making him lose his edge, so he's taking off. Sid, the sloth, decides he's going to go out on his own, then adopts three dinosaur eggs, which he mistakenly thinks are abandoned. Even though he's clearly ill-equipped for the job, he thinks he can be a "mama" if everyone else is having babies. Once "Momzilla" returns for her three dinos, he takes on the lingo of the non-custodial parents, which is slightly uncomfortable. Perhaps I'm over-reacting, but the whole undertone of the movie was one of young people toying with the idea of parenthood, maturity and commitment. None of these topics is one that my 7 year-old boy thinks about at all, so it seemed bizarre that Sid the Sloth turns into a caricature of Levi Johnston. The stated premise is that the herd has to rescue Sid from the dangers that lurk in this anachronistic paradise, but these dangers are fleeting and the action is sort of spotty.

Even the squirrel, the usual comedy relief of the franchise, who frustratingly chases his elusive acorn like Wile E. Coyote, falls for a female squirrel. After some bliss in the tropical paradise, he grows weary of her domestic Honey-Do list, and falls victim to the siren call of the acorn once again.

Oh, and I finally realized that the 3D showings are $2.50 more than the regular showings. (Didn't I say those Real D people were genuises?)

Innovations at Home and Abroad.

2009-07-13T09:00:37-06:00

The Obama administration proposed consumer protection legislation on Friday, we'll outsource the analysis of the main proposals to CorpCounsel:

- Consumer Testing of Disclosures and Rules: One part of the proposal would bolster the "SEC's authority to conduct consumer testing." Consumers? I think they mean investors? The SEC's stated mission is investor protection and I don't recall the term "consumer" being mentioned in any of the existing statutes that give the SEC some sort of authority nor any of the agency's rules and regulations.

- Expand Protections for Whistleblowers: Under the proposed legislation, the SEC would gain authority to establish a fund to pay whistleblowers. Although perhaps inviting in concept, this could be tricky to implement. If the SEC Staff dislikes being a referee in the shareholder proposal process, how will they enjoy a process that involves them potentially taking sides more clearly against companies and actually having to dispense money? If adopted, I would consider becoming a bounty hunter because I've always wanted to wear big hats...

- Establish a Permanent Investor Advisory Committee: How many federal agencies have permanent advisory committees? This could set a bad precedent - and even though investors may have been under-represented by those that regularly approach the SEC in the past, the SEC has heard plenty from investors over the past few years. The creation of a permanent committee may swing the pendulum the other way so that the investor perspective dominates the SEC's view of the world.

In the long run, the much more likely result is that regularly meeting with an advisory committee would simply be a waste of time. I like the idea of roundtables on specific issues where all sides are represented - as well as the normal comment process on rule proposals - for the SEC to obtain all the outside input it needs. I'm not a big believer in conducting more meetings as a way to find solutions to problems.

In addition, Basel finalized improvements to its capital accord, widely seen as failing, today, the thing to note is that the committee also has indicated, once again, that it will be introducing a leverage ratio on banks, which could, if done aggresively, really shrink them:

The Committee's recently agreed trading book rules ( Revisions to the Basel II market risk frameworkGuidelines for computing capital for incremental risk in the trading book ), which take effect at the end of 2010, introduce higher capital requirements to capture the credit risk of complex trading activities. They also include a stressed value-at-risk (VaR) requirement, which the Committee believes will help dampen the cyclicality of the minimum regulatory capital framework.

Under the Basel II enhancements approved at the July meeting, the Committee is strengthening the treatment for certain securitisations in Pillar 1 (minimum capital requirements). It is introducing higher risk weights for resecuritisation exposures (so-called CDOs of ABS) to better reflect the risk inherent in these products, as well as raising the credit conversion factor for short-term liquidity facilities to off-balance sheet conduits. The Committee is also requiring that banks conduct more rigorous credit analyses of externally rated securitisation exposures.

More on Lawyers With Super-Sized Student Debt

2009-07-12T18:50:43-06:00

Remember the poor guy who wasn't given a license to practice in NY because of his $400k student loan debt? Well,this guy hasn't had his license taken away, but he's trying to navigate through the bankruptcy system with almost that much student debt. I'll leave the legal issues surrounding discharging student debt in bankruptcy to the experts, but I'm much more interested in the issue of how much student loan is even reasonable.

This Lewis & Clark student graduated in 2000 (nine years ago) with student loan debt that was listed as more than $360k when he filed for bankruptcy in 2005. So, what's the monthly payment on that kind of student loan? The judge thought that if he had taken advantage of an federal repayment program (consolidation?), his payments would have been $629 a month. Not fun, but not unthinkable, compared to car payments, mortgage payments, rents, childcare costs, etc. But, the debtor seems to have other expenses (child support) and a decreasing amount of income. (His three jobs since graduation have been judicial clerk in Saipan, legal aid attorney in Alaska, and most recently, a Kelly temporary worker (presumably non-legal?). So, one would think with that kind of debt, that he's picking the best work opportunities he has. Perhaps his grades were poor? Perhaps he has trouble taking the bar? Unclear, but the judges that have heard his case seem to put his limited income down to lack of ambition and personal decisions. This Chronicle of Higher Education article says that Mr. Jesperson, 43, has followed a nonlinear path, finishing college in 11 years and law school in 4 (at 2 institutions), but that he did pass the bar on the first try (Alaska? Minnesota? Unclear.) Also, he is now working as a temporary legal services worker for $25/hour.

I think these two cases in tandem should force debate on some important issues with respect to law schools, students and student debt load. How much is too much? Just as we have learned that just because someone can qualify for a home loan doesn't mean that repayment is even feasible, we have to force debate on the mathematical reality that the more student debt one has, the more income one must have to repay that debt. And, although there has historically been a correlation between mortgage principal and home FMV, car loan to resale value, there is not a direct correlation between law school cost and law degree value. This is a reality. Schools with poor employment stats do not necessarily have cheaper sticker prices than schools with great employment stats. Within a school, students with high grades and higher probabilities of post-graduation income may even pay less than other students because of scholarships. In other words, some of the students with the most debt at graduation may be the least able to repay that debt.

I graduated having taken out the maximum amount of federal loans for my institution, but that number seems so small now and that time seems like a whole different era.

Simplicity Law

2009-07-11T22:33:46-06:00

Layoff Tracker: "As of July 5, 2009, over 12,829 people have been laid off by major law firms (4,985 lawyers / 7,844 staff) since January 1, 2008."

Seems like a perfect time to start a new law firm.

Dion Persson is seizing the opportunity with gusto. Dion and I worked together at Skadden in Delaware, and for the past 15 years, he has been working in house and as Senior Vice President at Johns Manville. Now he is trying to build a national law firm that would provide services only to small businesses and entrepreneurs.

So far, Simplicity Law has two lawyers, with a few others on call. Dion tells me that this is an attempt to "build the law firm of the future," which is exactly what you would expect him to say. But could it be more than just a marketing pitch?

Dion is imagining a "new model" of law firm, one that relies on technology to provide super-fast service at fixed costs for many of the more-or-less routine transactions that arise in the small business context. Among the many things I like about the idea is the possibility that Simplicity Law will be more amenable to lawyers who are stay-at-home moms or otherwise have a hard time making it in the traditional law firm model. I am rooting for Simplicity Law.

But what do you think? Have you seen anything like this before? Is Dion onto something?

Henry Ford's "Good Idea"

2009-07-11T11:50:30-06:00

Kevin Leicht:

Henry Ford had a good idea.

In January, 1914 he announced to the world that his workers would be paid five dollars a day. The five-dollar day doubled the average wage for auto workers, produced long lines outside of the factory gates, and helped to create a mass market for the Model T and other consumer durables.

For the next 60 years, this basic formula spread. An entire consumer economy was built on steady middle class jobs that paid slowly rising wages from productivity gains.

When Henry Ford announced the $5 workday, the W$J suspected a motivation other than creating customers for the Model T or improving the quality of workers' lives: Ford was attempting to reduce the company's profits, thus depriving the Dodge brothers, who owned shares of Ford Motor, of the capital they needed to start their own company. As it turned out, Ford couldn't spend the money fast enough, so he simply stopped paying dividends, a move that lead to the famous case of Dodge v. Ford Motor. You can read more about the dispute here.