Hearsay

Short takes from faculty op-eds

America Is on Trial as Much as Khalid Sheikh Mohammed

Professor Alan Dershowitz
The Globe and Mail
Nov. 13, 2009

Illustration
Grady Mcferrin

“The Obama administration has announced that Khalid Sheikh Mohammed, the self-confessed mastermind of 9/11, will be subjected to an ordinary criminal trial in the federal court of New York. … Despite the fact that Mr. Mohammed has confessed to virtually everything, his trial will face daunting challenges. …

“Foremost is the reality that he was subjected to torture, both physical and psychological. He was waterboarded, which clearly amounts to torture under the law. It was also reported that, when he was arrested, his young children were apprehended. If this is true, his lawyers will surely insist that the circumstances surrounding the detention of his children, particularly whether they were used as bargaining chips, must be fully developed and exposed.”

Lawyers Should Be Recruited Like Doctors

Professor Ashish Nanda
The American Lawyer
Oct. 13, 2009

Illustration
Grady Mcferrin

“The new-associate recruitment market is fundamentally broken, and it has been for some time. Incremental changes are not going to address its underlying problems. The market needs a structural fix—a centralized matching authority, like the one that the medical profession has been using for more than half a century. …

“Some market participants recoil from the idea of centralized matching because they conflate centralized markets with centralization of power. Centralized matching does not take choice away from individual students or firms. Instead, it provides a common platform for the labor market to function efficiently. In that regard, it is akin to a stock exchange, which allows people to execute trades according to their individual preferences but within the ambit of explicit rules that increase the efficiency and robustness of trading.”

Regulatory Reform Needs Rethink

Professor Hal Scott, director of the Committee on Capital Markets Regulation
Financial News Online
Sept. 21, 2009

Illustration
Grady Mcferrin

“The U.S. regulatory structure is highly fragmented and ineffective. While other big economies, such as Germany, Japan and the U.K., have consolidated regulation, the U.S. has more than 100 financial regulators. … Consumer protection should be consolidated along with other areas of regulation. The Committee on Capital Markets Regulation recommended in its May report that consumer and investor protection with respect to all financial services be either part of a division of a new U.S. Financial Services Authority (in the model of the U.K.’s FSA) or be part of a separate consumer/investor protection agency, or CIP. …

“The Obama administration has taken a very different approach. It has not recommended the creation of a U.S. FSA. Since it sought to preserve the jurisdiction of other agencies, the Consumer Financial Protection Agency would have authority over only some areas of consumer protection and very little jurisdiction over investor protection.”

Bonus Guarantees Can Fuel Risky Moves

Professor Lucian Bebchuk LL.M. ’80 S.J.D. ’84
The Wall Street Journal
Aug. 27, 2009

Illustration
Grady Mcferrin

“It’s now well recognized that bonus plans based on short-term results which may turn out to be illusory can produce excessive risk-taking, and that plans should therefore be structured to account for the time horizon of risks. But even though tying bonus plans to long-term results is desirable, it isn’t sufficient to avoid excessive incentives to take risks. Bonus plans tied to long-term results can still produce such incentives if they reward executives for the upside produced by their choices but insulate them from a significant part of the downside.

“Bonus plans that provide executives with such insulation from downsides—either by establishing a guaranteed floor or otherwise—can seriously backfire. Firms setting bonus plans, and regulators monitoring compensation structures, would do well to recognize and pay close attention to this problem.”


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