Northwestern University Law Review 

About: Northwestern University Law Review is an academic journal. The journal publishes majorly in the area(s): Supreme court & Statute. It has an ISSN identifier of 0029-3571. Over the lifetime, 706 publications have been published receiving 7891 citations. The journal is also known as: Nw. UL Rev..

The Future as History: The Prospects for Global Convergence in Corporate Governance and Its Implications

Abstract: What forces explain corporate structure and shareholder behavior? For decades this question has gone unasked, as both corporate law scholars and practitioners tacitly accepted the answer given in 1932 by Adolf Berle and Gardiner Means that the separation of ownership and control stemming from ownership fragmentation explained and assured shareholder passivity.' Over this decade, however, corporate law scholars have recognized that this standard answer begs an essential prior question: if ownership fragmentation explains shareholder passivity, what explains ownership fragmentation? Although the Berle and Means model assumed that largescale enterprises could raise sufficient capital to conduct their operations only by attracting a large number of equity investors, contemporary empirical evidence finds that, even at the level of the largest firms, dispersed share ownership is a localized phenomenon, largely limited to the United States and Great Britain. Not only does the latest comparative research demonstrate that concentrated, not dispersed, ownership is the dominant worldwide pattern,2 but in-depth studies of individual countries show that shareholder activism increases in direct proportion to ownership concentration.' As a result, these findings, in turn, suggest that the conventional governance nouns in the United States may be more the product of a path-dependent history than the "natural" result of an inevitable evolution toward greater ef ficiency. Propelling this new inquiry into whether the Berle/Means corporation-with its famous "separation of ownership and control"-is the inevitable and efficient endpoint of economic evolution, or only the artifact of political forces and historical contingencies, is the unavoidable reality of increased global competition in both the product and capital markets. As a result, dispersed and concentrated ownership structures not only differ, but they may be forced to compete. Although scholars have debated the relative merits of these rival models for a decade or more, this prospect of an evolutionary competition-with its implication of a Darwinian "survival of the fittest" struggle-is very new. Ultimately, the issue thus posed is which system will dominate, and why: the stock market centered-system of dispersed ownership first described by Berle and Means, or the blockholder and cross-shareholding systems that now prevail across Europe and Asia? Of course, a clear winner does not necessarily have to emerge. The more one believes that political forces are likely to constrain and override purely economic forces, the more one is likely to expect a more muddled and contextual outcome. Thus, the current debate has two levels that can often become confused: (1) Which system of corporate governance is superior?, and (2) Which set of forces-economic or political-is likely to prove more powerful? To appreciate this distinction, it is useful to understand that the current debate has progressed through several discrete stages. First, beginning eartier in this decade, a provocative new wave of law and economics scholars advanced "political" theories that explained dispersed share ownership in large American corporations as the product of political forces and historical contingencies, not economic efficiency. An undercurrent in this criticism was the theme that political constraints had produced a suboptimal system of corporate governance, with dispersed ownership implying inherently inadequate corporate monitoring. Some of these scholars argued that the Anglo-American pattern of dispersed ownership was clearly inferior to the bank-centered capital markets of Germany and Japan, because the latter enabled corporate executives to manage for the long run, while U.S. managers were allegedly forced to maximize short-term earnings 5 Still, with the burst of the "bubble economy" in Japan, the more recent Asian and Russian financial crises, and notable monitoring failures by German universal banks, the tide of opinion has lately turned against the presumed superiority of banks as monitors. …

Rational Ignorance at the Patent Office

Abstract: It is common to assert that the Patent and Trademark Office does a bad job of examining patents, and that it should spend more time and money weeding out bad patents. In this article, Professor Lemley challenges that conventional wisdom. Using available data regarding the cost and incidence of patent prosecution, litigation, licensing and other uses of patents, he demonstrates that strengthening the examination process is not cost effective. The core insight is that very few patents are actually litigated or licensed; most simply sit on a shelf unused, or are used only for noncontroversial purposes like financing. Because of this, society would be better off spending its resources in a more searching judicial inquiry into validity in those few cases in which it matters than paying for a more protracted examination of all patents ex ante. In economic terms, the patent office is rationally ignorant of the objective validity of the patents it issues.

Ideological Drift Among Supreme Court Justices: Who, When, and How Important?

Abstract: I. INTRODUCTION When the U.S. Supreme Court invalidated the use of military commissions for enemy combatants in Hamdan v. Rumsfeld? the decision fueled more than a national debate over the powers of the President. It also generated commentary about the ideological composition of the Court. Conservatives proclaimed that they were just one Justice, just one vacancy, away from victory in Hamdan2 and a handful of other recent decisions that worked against their interests.3 Liberals worried about it just as much.4 The commentary over Hamdan reflects a widely shared belief among journalists, politicians, scholars, and even judges: alterations in the Court's jurisprudence are unlikely in the absence of membership change. That is because of an underlying belief that the Justices themselves do not exhibit ideological change over the course of their tenures.5 To paraphrase the old proverb: once a conservative, always a conservative. Likewise for liberals.6 Why the assumption of stable preferences is so deeply held is open to speculation. Some analysts suggest it would defy logic to expect mature persons, with years of experience in the legal world, to revisit their jurisprudential views. Would a John G. Roberts Jr.-a Justice who has studied, litigated, or adjudicated court cases for over half his life-alter his ideological preferences? The answer, according to Professor David A. Strauss, is that he would not: As Americans try to figure out what Judge John G. Roberts Jr. will be like as a U.S. Supreme Court [JJustice, one idea seems to [be] that whatever Judge Roberts is now, once he is on the [CJourt he might develop into something different. In particular, the thinking goes, even if he is the intense conservative suggested by his Reagan-era memoranda, he may become more moderate as a [J]ustice. Don't believe it.7 Shoring up intuitions about the implausibility of preference change is empirical support in the form of a William H. Rehnquist on the right and a Thurgood Marshall on the left-Justices who never seemed to veer from their preferred ideological courses. When President Richard Nixon appointed Rehnquist to the Court, virtually all observers of the day deemed the nominee a reliable conservative.8 Likewise, at the time of his appointment, the press declared Justice Marshall a probable addition to the Court's "liberal bloc."9 That these initial ideological labels well characterized the Justices' future behavior only serves to confirm Professor Strauss's claim about the unlikelihood of change. Or so the argument goes. And yet, despite the commonplace nature of the claim, it is not without its share of skeptics. Whether pointing to anecdotes or more systematic evidence, several analysts now contend that ideological drift is not just possible but likely.10 Exhibit A, they say, is Justice Harry A. Blackmun. While the Justice himself maintained that it was the Court, not he, that moved-"I don't believe I'm any more liberal, as such, now than I was before," Justice Blackmun once told a reporter"-many scholars disagree.12 To them, it is hard to believe that the same Justice who dissented from the Court's 1972 decision to strike down existing death penalty statutes13 wrote, in 1994, "[f]rom this day forward, I no longer shall tinker with the machinery of death."14 But is Justice Blackmun the rule or the rare exception? Do most Justices remain committed to a particular doctrinal course throughout their careers, as Strauss and others contend, or do the skeptics have the better case? After reviewing the relevant commentary in Part II, we deploy state-of-theart methods to address these questions. The results, as it turns out, could not be clearer: contrary to the received wisdom, virtually every Justice serving since the 1930s has moved to the left or right or, in some cases, has switched directions several times. Finding that ideological drift is pervasive, in Part IV we develop the implications of our results for two moments in the Justices' career cycle: the events surrounding their appointments to the Court and the doctrine they develop once confirmed. …

Libertarian Paternalism Is an Oxymoron

Abstract: In Libertarian Paternalism Is Not an Oxymoron, Professors Sunstein and Thaler set out to show that state control over the structure of choice options can improve the welfare of citizens without reducing personal autonomy.1 A public or private institution that adopts the perspective of the "libertarian paternalist" will "steer people's choice in directions that will improve the choosers' own welfare" but will not prescribe or proscribe any particular choices.2 This limited regulation of choice behavior should be acceptable even to the committed libertarian, Sunstein and Thaler argue, once he understands the paternalism inherent in many choice settings: because preferences are unstable and sensitive to the way in which choices are framed, public and private institutions that control choice frames will inevitably shape the preferences of choosers.3 Sunstein and Thaler's prototypical example of a libertarian paternalist policy is a 401(k) plan with the default option set to automatic enrollment to encourage participation but that permits employees to opt-out of default enrollment.4 The plan capitalizes on the "stickiness" of default rules to move individuals in a direction that they would likely choose if they did not suffer from problems of low self-control and impulsive consumption tendencies.5 However, because individuals can easily opt out of the default option, the paternalism of the plan does not overwhelm the liberty of an individual who strongly prefers a different retirement savings plan or current consumption over future consumption. As Sunstein and Thaler emphasize, because a default must be chosen, and because many individuals are likely to remain irrationally with the default option, it is better to set the default to the welfare-enhancing choice than to be blind to the power of the default. So long as individuals remain free to deviate from the default option, they argue, the libertarian should not be troubled by this weak form of paternalism.6 With this and numerous other examples of how libertarianism may be reconciled with paternalism, Sunstein and Thaler hope to overthrow the "dogmatic anti-paternalism of numerous analysts of the law" that they see causing an "inept neglect" of many problematic areas of the law.7 In this Essay, I discuss three defects present in the argument for libertarian paternalism: (1) a logical error and empirical oversight in the claim that paternalism is inevitable in situations where preferences exhibit irrational sensitivity to the choice frame; (2) a failure to justify the choice of welfare over liberty as the value guiding the paternalistic side of libertarian paternalism; and (3) a neglect of the redistributive effects of libertarian paternalism.8 Consideration of the first two defects reveals that Sunstein and Thaler's libertarian paternalism surrenders too much libertarian ground to the paternalist. Consideration of the third defect reveals that any form of libertarian paternalism, even the more truly libertarian paternalism proposed in Parts I and II below, may lead to a redistribution of resources from rational to irrational persons that cannot be reconciled with the libertarian prohibition on state-based takings for any purpose other than remedying involuntary exchanges. I conclude that, despite the ambitious efforts of Sunstein and Thaler to show otherwise, they offer no new regulatory path that will permit paternalistic efforts at welfare improvement without intruding on personal autonomy. In short, libertarian paternalism is an oxymoron. This critical exercise serves two constructive purposes. First, the Essay brings out some of the difficult issues that must be confronted when the government considers whether and how to regulate irrational behavior, issues that are becoming much more prominent with the rise of behavioral law and economics and its many paternalistic prescriptions.9 Second, the Essay shows that, while fidelity to libertarian principles leaves little room for the government to regulate irrational behavior, there are some forms of irrationality regulation more congenial to libertarian principles than Sunstein and Thaler's version of libertarian paternalism. …