Lucian Bebchuk

In November 2012, the corporate law guru who is most revered by managers faced off against the corporate law guru who is most feared by managers, at the Conference Board think tank in New York, in a friendly debate that was about to turn hostile. Martin Lipton has defended CEOs against all comers since forming Wachtell, Lipton, Rosen & Katz 50 years ago. Lucian Bebchuk, a Harvard Law School professor, champions the "activist" hedge funds that assail CEOs in an intensifying struggle for control of America's boardrooms...Lucian Bebchuk, age 59, likes to attack blue chip stocks. His astonishing success has made him the only law professor listed among the 100 Most Influential People in Finance by Treasury and Risk magazine. A lowly student clinic led by Bebchuk—the Shareholder's Rights Project—has destaggered about 100 corporate boards on the Fortune 500 and the S&P 500 stock index since 2011. As a critic of CEO compensation, Bebchuk paved the way for the Dodd-Frank Act rules that give shareholders more "say on pay." Shareholder activism has drawn him into debates with Lipton in 2002, 2003, 2007, and more or less continually since 2012.

...[former Lehman Brothers C.E.O. Dick] Fuld remains fabulously wealthy, although just how wealthy remains a subject of some dispute. During the same October 2008 congressional hearing in which he sparred with Mica and Henry Waxman, the committee chairman, about how much money he had made at Lehman, Waxman released a chart showing that Fuld had been paid $484 million between 2000 and 2007. Under oath, Fuld argued he had received closer to $310 million. Later in the hearing he conceded that it may have been $350 million. A subsequent analysis by Harvard law professor Lucian Bebchuk and colleagues concluded that the figure was $522.7 million.

The latest rap against big corporations is that they’re returning too much money to shareholders through dividends and stock repurchases. What they should be doing, the complaint goes, is using that money to build new factories, create new products and increase research. Their stinginess, the argument continues, is one reason for the lackluster recovery...Similarly, most executives don’t automatically favor share purchases over hard investment projects, argues Harvard law professor Lucian Bebchuk, an expert on corporations. If they had hard projects that were more profitable than purchasing shares, they would actually do better personally, he says. Firms would become more profitable, so their stock prices and executive compensation would rise even further. What’s happening, Bebchuk says, is that investment funds are being channeled from slow-growing to fast-growing sectors.

Statistics released by the Social Science Research Network (SSRN) indicate that, as of the end of 2014, Harvard Law School faculty members featured prominently on SSRN’s list of the 100 most-cited law professors.

A U.S. Securities and Exchange Commission member’s dispute with a prominent Harvard Law School professor has turned into something of a gang fight, academy style. More than 30 law professors from universities such as Harvard, Columbia and Stanford are calling on SEC Commissioner Daniel Gallagher to withdraw his paper accusing Harvard’s Shareholder Rights Project of filing misleading proposals in corporate elections. The project, led by Lucian Bebchuk, has sought annual elections for boards of directors. “We are especially concerned that a sitting SEC commissioner has chosen to issue such allegations without support from a prior investigation by the SEC staff and without due process of law,” the professors wrote in a paper posted today on Harvard Law School’s blog on corporate governance and financial regulation.

An Op-Ed by Noah Feldman. A sitting member of the Securities and Exchange Commission co-writes an article accusing Harvard University of violating securities laws -- because, the article claims, a professor’s biased research has been used to argue for eliminating staggered corporate board terms....And for the moment, let’s leave aside the content of their argument, namely that the Shareholder Rights Project, led by my Harvard Law School colleague Lucian A. Bebchuk....

A normally academic question about corporate governance has erupted into a nasty, often personal battle among elite professors, regulators and white-shoe lawyers that has raised the suggestion of securities fraud on one side and abuse of authority on the other. At the heart of the dispute is an academic paper written last month by Daniel M. Gallagher, a member of the Securities and Exchange Commission, and Joseph A. Grundfest, a professor at Stanford Law School and himself a former S.E.C. commissioner, that was titled “Did Harvard Violate Federal Securities Law? The Campaign Against Classified Boards of Directors.” The paper took aim at Lucian A. Bebchuk, a Harvard Law School professor who has long researched corporate governance issues and has been an outspoken advocate for increased democracy in corporate America’s boardrooms...“The paper’s spurious allegations are unworthy of a sitting S.E.C. commissioner and a former commissioner,” Mr. Bebchuk, who learned about the paper the night before it was published, said in an email. “I was also surprised that the authors chose not give me an opportunity to correct the paper’s reckless factual and legal errors.”

... Here is an utterly loony paper by Securities Exchange Commissioner Daniel Gallagher and former SEC commissioner Joseph Grundfest arguing that Harvard is violating the securities laws in its Shareholder Rights Project. That project, run by Harvard professor Lucian Bebchuk, submits shareholder proposals to public companies asking them to de-stagger their boards, so that all directors are elected every year instead of electing one-third of directors a year to three-year terms. Staggered boards make activism hard and hostile takeovers nearly impossible, and so are often viewed as shareholder-unfriendly. There is some empirical evidence that they are in fact bad for shareholders. There is other empirical evidence that they are good for shareholders. There is yet other empirical evidence that they are sometimes good and sometimes bad. (This is how empirical corporate governance research always works out, by the way.)

A top official at the Securities and Exchange Commission has taken the unusual step of saying Harvard University could be vulnerable to legal action from the agency or investors over a corporate governance project. In an academic paper, Daniel Gallagher, one of five SEC commissioners, criticized the Shareholder Rights Project at Harvard, which helps large investors like pension funds file shareholder ballot measures meant to help investors get more influence over corporate boards...Lucian Bebchuk, director of the Harvard project, rejected any suggestion the project’s efforts violate securities laws, saying its work is “entirely consistent with SEC rules and not false or misleading in any way.”

Contrary to claims that activism hurts a company’s long term outlook, Lucian Bebchuk, speaking at the Federalist Society Conference in Washington DC, said activism actually helps. Bebchuk, author of a forthcoming study with Alon Brav, and Wei Jiang titled “The Long-Term Effects of Hedge Fund Activism,” due out in June 2015 from the Columbia law review, says the claims by myopic activists are just wrong, specifically pointing out one activist critic by name – Marty Lipton.

You might be able to add the so-called poison pill to the list of Bill Ackman’s conquests this year. On Tuesday, a judge in California ruled that Ackman is allowed to vote his shares at a key meeting next month in the long-running takeover battle for botox maker Allergan....Lucian Bebchuk, a Harvard professor who has called laws that uphold poison pills provisions unconstitutional in the past, isn’t claiming a victory yet. He says the California judge’s ruling doesn’t change much. Activists always had the ability to vote out board members to get around poison pill agreements. “The poison pill remains highly relevant and [is still] the key defense tool that targets use to block offers,” says Bebchuk.

Voters are usually inclined to vote their pocketbooks. But that's become more difficult with every election, as the pocketbooks that carry the most weight aren't those of the individual voter, but corporations and plutocrats...Shareholder interest in how much money their companies spend on politics, and where, is high. In recent years, according to a study by Lucian Bebchuk of Harvard and Robert L. Jackson Jr. of Columbia, disclosure of such spending has been the top subject of shareholder proposals at U.S. public companies...Inevitably, at least some shareholders will consider themselves out of step with the corporate brass: "Shareholders do not sort themselves among companies according to their political preferences," Bebchuk and Jackson observe.

The compensation of American executives—CEOs and their “C-suite” colleagues—has long been a matter of controversy, especially recently, as the wages of average workers have stagnated and economic inequality has moved to the center of the national debate. Just about every spring, the season of corporate proxy votes, we see the rankings of the highest-paid CEOs, topped by men like David Cote of Honeywell, who in 2013 took home $16 million in salary and bonus, and another $9 million in stock options...But Lucian Bebchuk and Jesse Fried, in their 2004 book Pay Without Performance, argued that this procedure is a comforting fiction. They wrote that skyrocketing executive pay is the blatant result of CEOs’ power over decisions within U.S. firms, including compensation...Bebchuk and Fried showed that CEOs typically have considerable influence over the nominating process and can exert their power to block or put forward nominations, so directors have a sense that they were brought in by the CEO.

Investors have been pushing for—and often winning—big changes at companies. This week, Ebay EBAY -2.066% split off its PayPal division, a move long urged by Carl Icahn, who controls 30 million shares of the company...One influential study looks at what happened to 2,000 companies targeted by activists over a number of years. It concluded that activism worked out fine for investors, even over a period as long as five years. And “operating performance relative to peers improves consistently,” writes co-author Lucian Bebchuk, an economist at Harvard. This was true even for companies that took on debt or cut capital spending. But another recent study is less upbeat, finding little impact on growth and profit margins.

With apologies to the cast of Cabaret, dark money makes the political world go round. Confusing rules and a regulatory void in campaign finance have unleashed a tsunami of cash from anonymous donors that is expected to have unprecedented influence over the midterm elections in November...The petition has found grassroots groups and investors on Wall Street largely in agreement for once. In addition, nearly a dozen senators and more than 40 members of the House have supported it, according to one of the petition’s drafters, Lucian Bebchuk, a professor of law, economics and finance at Harvard. Bebchuk scoffs at those who say new rules to disclose corporate political spending will hurt confidentiality. “One could understand such an argument for letting individuals anonymously contribute their money,” he told Newsweek. “But such an argument loses its force when public companies make political contributions. In such a case, executives contribute not their own money but shareholders’ money, and there is little basis for allowing them to keep the contribution hidden from the shareholders whose money is spent.”

An op-ed by Lucian Bebchuk. Wall Street is eagerly watching what is expected to be one of the largest initial public offering in history: the offering of the Chinese Internet retailer Alibaba at the end of this week. Investors have been described by the media as “salivating” and “flooding underwriters with orders.” It is important for investors, however, to keep their eyes open to the serious governance risks accompanying an Alibaba investment. Several factors combine to create such risks. For one, insiders have a permanent lock on control of the company but hold only a small minority of the equity capital. Then, there are many ways to divert value to affiliated entities, but there are weak mechanisms to prevent this. Consequently, public investors should worry that, over time, a significant amount of the value created by Alibaba would not be shared with them.

More than a million comments have been filed with federal regulators urging the government to begin requiring publicly traded corporations to report on their political spending....“The overwhelming support from public comments the petition has attracted, and the strength of the arguments for transparency put forward in the petition, provide a strong case for SEC initiation of a rulemaking process,” Lucian Bebchuk, director of the corporate governance program at Harvard Law School and one of a group of academics who, in 2011, submitted the original petition on the issue, said at a press conference here last week. “Furthermore, opponents of the petition have failed in their comments to provide any good basis for avoiding such a process.”

A coalition of academics, good-government advocacy groups and shareholder activists announced last week that one million Americans have written the Securities and Exchange Commission (SEC) asking for a rule to make corporations reveal how they spend money for political purposes...In a blog post, Jackson and fellow petitioner Lucian Bebchuk noted that the issue had attracted far more comments than any other the SEC had ever considered. Asked why, Bebchuk, a widely cited professor of law, economics and finance at Harvard, said, “The case for transparency in this area is clear and compelling to a broad spectrum of people, including individuals who would otherwise not consider expressing a view on SEC matters. The current freedom of public companies to spend money on politics without telling their investors is clearly unacceptable to a large number of people who care enough about it to write to the SEC.”

America's corporate citadels are becoming less impregnable. A more aggressive stance by shareholders is opening new avenues to hostile bids and ushering in radical changes to boards and management teams. ... In 2002, 60% of S&P 500 companies had staggered boards, according to Institutional Shareholder Services Inc. Today, just 10% do. A project spearheaded by Harvard Law School Prof. Lucian Bebchuk has floated nearly 200 proposals to destagger boards since 2012. The nonbinding measures received 80% of votes cast, and at least 98 companies have voluntarily adopted them, according to the project's website.

We’re living in the era of the activist investor. Last year Carl Icahn and his ilk launched initiatives at 200 companies—including Microsoft, Dell, and Dow Chemical—aimed at sprucing up management, improving operations, selling off certain units, and ultimately improving the share price. That’s a sevenfold jump compared with a decade earlier, according to Harvard research, and the ranks of prominent megaphone-wielding investors seem only to be growing. That prompts an obvious question: When Icahn leaps, should you jump too? The short answer: Yes. Evidence shows that buying stocks after change-oriented campaigns are instigated can yield superior returns for several years…Lucian Bebchuk, a Harvard Law School professor who also heads the university's Program on Corporate Governance, found similar initial gains.

POISON pills are again being dispensed by corporate America with all the enthusiasm of an exterminator in a rat-infested basement. The metaphorical rodents nowadays are not just hostile bidders—the pests that the poison-pill defence was designed to exterminate, back in the 1980s—but in some cases shareholders simply trying to change the way companies are run…Lucian Bebchuk, a Harvard law professor and campaigner for corporate-governance reforms, calls this “pernicious”: the board would be seeking to stifle legitimate debate among the owners of the company by making it hard to build a majority for change.