Monday, February 28, 2011

Thinking Like a Lawyer for Corporate Lawyers

To be honest, I've practiced as a lawyer for more than 6 years and still, I don't know exactly what's the true meaning of thinking like a lawyer. Apparently, Prof. Bainbridge thinks that to enable more lawyers to think like a lawyer, law schools require more experienced lawyers than PhDs to teach at those schools. See the article here. You can also see a nice law review article on thinking like a lawyer here.

I have to disagree with some of his premises though. My gut feeling says that the main problem with those PhDs is not that they can't teach lawyers about other fields that can enrich a lawyer's ways of thinking but simply because the quality of those PhDs are mediocre. On the other hand, I am quite certain that asking more experienced lawyers to teach at law schools seems like a good proposal, especially if you're talking about corporate laws. Like it or not, in Indonesia, the development of corporate laws lies mostly in the hand of corporate lawyers instead of theoretical lecturers. The problem is, most of these lawyers don't have the time to share their knowledge to law students, which is a pity.

Why do I say that the teaching of corporate laws needs corporate lawyers? Corporate law is not only about legal issues per se. There is an economic structure behind the corporate laws and to understand such structure, lawyers need to have sufficient experience handling various corporate transactions. These experiences will enable lawyers to gain knowledge on the commercial issues of their clients which will further help them in understanding the economic structure of the corporate laws and how to improve such laws.

Some thought provoking questions: Why there should be a limited liability concept for companies? Why directors have fiduciary duties toward the company? Why do we need commissioners for supervising the management of the company? Why we tend to limit a company to enter into affiliated party transactions? And many more.

As you may see, the above questions pose certain economic rationales. There is no simple right or wrong answer in corporate laws as in the end, it depends on the economic structure that the regulators choose to build the foundations of corporate laws. There are virtually unlimited ways to improve our corporate laws, promote efficiency and create more preferences to the society. We need to always remember that corporations are essential institutions of the market, and therefore, it is natural if the laws that govern corporations should be designed carefully and thoughtfully.

Stay tune as I will uncover some of these economic structures in my future posts.

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Monday, February 21, 2011

SEC's Shareholder Proposal Policy and the Materiality Principle

Here is a very interesting article from Prof. Stephen M. Bainbridge on the absurdity of the new SEC's Shareholder Proposal Policy which basically gives the right to minority shareholders of a publicly listed company to force a vote in a general meeting of shareholders. The absurdity lies in the fact that according to a US court precedent, the tests for granting the validity of such proposal include matters on ethical and social significance, and not only economic matters.

Of course this would be problematic for companies as this is the same with providing the minority shareholders with the ammunition to control the company for matters which are not directly related to its financial and business performance. In this case, I fully agree with Prof. Bainbridge analysis on the importance of materiality principle in securities laws. If the shareholders want to be involved in the company's management, it should be done only for material transactions that may economically affect the investment value of the relevant shareholders in such company. If the shareholders can actively use the company for their own personal and political needs, why bother to have the concept of limited liabilities?

Luckily, Indonesia does not adopt this kind of rule, though I am surprised that the development of shareholders protection law in the United States has already reached a position where it is difficult to differentiate the role of shareholders and management.

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Saturday, February 12, 2011

Going to Chicago Law School

So I guess it's official. I will be going to the University of Chicago School of Law in September 2011! I must say that I'm very happy and excited with this result. After all, learning Law and Economics at the law school which created this field at the first place is one of my biggest ambitions. But the best part of being admitted at a first class law school like Chicago is that I will have access to "unlimited" legal materials, and not to mention the fact that I will also be able to spend nine months to read and write new materials without being disrupted with my day to day work as a lawyer. Hopefully, I will have more time to write in this blog during my school days.

Another advantage is that Chicago is not that far away from Ohio where my Shiye (the teacher of my kung fu teacher) teaches his class of Bajiquan. An opportunity to learn the art from a real living master is surely a big bonus for me, and I can only be grateful for all of these opportunities. Can't wait to go there! :)

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