Deconstructing sunbeam - Contemporary issues in corporate governance

University of Cincinnati Law Review

Volumn 67, Issue 4, 1999, Pages 1099-1127

  Hill, Jennifer G ^a  

^a UNIVERSITY OF TEXAS AT AUSTIN   (United States)

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EID: 0033431562     PISSN: 00096881     EISSN: None     Source Type: Journal    
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References (278)

1. NEW FICTION NO. 15, Jan. 1978.
2. See, e.g., MARGARET M. BLAIR, OWNERSHIP AND CONTROL: RETHINKING CORPORATE GOVERNANCE FOR THE TWENTY-FIRST CENTURY 3-4 (1995); John Holland, Self Regulation and the Financial Aspects of Corporate Governance, 1996 J. BUS. L. 127, 128-29; Ian M. Ramsay, The Corporate Governance Debate and the Role of Directors' Duties, in CORPORATE GOVERNANCE AND THE DUTIES OF COMPANY DIRECTORS 2 (Ian M. Ramsay ed., 1997).
3. See, e.g., MARGARET M. BLAIR, OWNERSHIP AND CONTROL: RETHINKING CORPORATE GOVERNANCE FOR THE TWENTY-FIRST CENTURY 3-4 (1995); John Holland, Self Regulation and the Financial Aspects of Corporate Governance, 1996 J. BUS. L. 127, 128-29; Ian M. Ramsay, The Corporate Governance Debate and the Role of Directors' Duties, in CORPORATE GOVERNANCE AND THE DUTIES OF COMPANY DIRECTORS 2 (Ian M. Ramsay ed., 1997).
4. See, e.g., MARGARET M. BLAIR, OWNERSHIP AND CONTROL: RETHINKING CORPORATE GOVERNANCE FOR THE TWENTY-FIRST CENTURY 3-4 (1995); John Holland, Self Regulation and the Financial Aspects of Corporate Governance, 1996 J. BUS. L. 127, 128-29; Ian M. Ramsay, The Corporate Governance Debate and the Role of Directors' Duties, in CORPORATE GOVERNANCE AND THE DUTIES OF COMPANY DIRECTORS 2 (Ian M. Ramsay ed., 1997).
5. See, e.g., Martin Lipton, Corporate Governance in the Age of Finance Corporatism, 136 U. PENN. L. REV. 1, 3 (1987) (stating that "[e]ach generation must conduct the corporate governance debate within the parameters set by the prevailing manifestation of corporatism"). See also Sir Adrian Cadbury, Highlights of the Proposals of the Committee on Financial Aspects of Corporate Governance, in CONTEMPORARY ISSUES IN CORPORATE GOVERNANCE 45, 45-46 (D.D. Prentice & P.R.J. Holland eds., 1993) (arguing that, in contrast to the relatively predictable legal constraints, "the boundaries to corporate behaviour set by . . . society are continually shifting.").
6. See, e.g., Martin Lipton, Corporate Governance in the Age of Finance Corporatism, 136 U. PENN. L. REV. 1, 3 (1987) (stating that "[e]ach generation must conduct the corporate governance debate within the parameters set by the prevailing manifestation of corporatism"). See also Sir Adrian Cadbury, Highlights of the Proposals of the Committee on Financial Aspects of Corporate Governance, in CONTEMPORARY ISSUES IN CORPORATE GOVERNANCE 45, 45-46 (D.D. Prentice & P.R.J. Holland eds., 1993) (arguing that, in contrast to the relatively predictable legal constraints, "the boundaries to corporate behaviour set by . . . society are continually shifting.").
7. See Eddy Wymeersch, The Corporate Governance Discussion in Some European States, in CONTEMPORARY ISSUES IN CORPORATE GOVERNANCE 3 (D.D. Prentice & P.R.J. Holland eds., 1993) (suggesting that a number of jurisdictions, which have adopted die English expression, may not necessarily imbue it with the same meaning).
8. See L.S. Scaly, Corporate Governance and Directors'Duties, 1 N.Z. BUS. L.Q. 92, 93 (1995).
9. See REPORT OF THE COMMITTEE ON THE FINANCIAL ASPECTS OF CORPORATE GOVERNANCE (1992) (chaired by Sir Adrian Cadbury) [hereinafter THE CADBURY REPORT].
10. Nowhere is the tension between these two values more apparent than in the 1998 report of the Committee on Corporate Governance, which states at the outset: "The importance of corporate governance lies in its contribution both to business prosperity and to accountability. In the UK the latter has preoccupied much public debate over the last few years. We would wish to see the balance corrected." Committee on Corporate Governance: Final Report § 1, para. 1.1 (1998) (chaired by Sir Ronald Hampel) [hereinafter The Hampel Report]; see generally Dignam, A Principled Approach to Self-Regulation? The Report of the Hampel Committee on Corporate Governance, 19 COMPANY LAW. 140 (1998); see also Mae Kuykendall, Symmetry and Dissonance in Corporate Low: Perfecting the Exoneration of Directors, Corrupting Indemnification and Straining the Framework of Corporate Law, 3 COLUM. BUS. L. REV. 443 (1998).
11. Nowhere is the tension between these two values more apparent than in the 1998 report of the Committee on Corporate Governance, which states at the outset: "The importance of corporate governance lies in its contribution both to business prosperity and to accountability. In the UK the latter has preoccupied much public debate over the last few years. We would wish to see the balance corrected." Committee on Corporate Governance: Final Report § 1, para. 1.1 (1998) (chaired by Sir Ronald Hampel) [hereinafter The Hampel Report]; see generally Dignam, A Principled Approach to Self-Regulation? The Report of the Hampel Committee on Corporate Governance, 19 COMPANY LAW. 140 (1998); see also Mae Kuykendall, Symmetry and Dissonance in Corporate Low: Perfecting the Exoneration of Directors, Corrupting Indemnification and Straining the Framework of Corporate Law, 3 COLUM. BUS. L. REV. 443 (1998).
12. See John A. Byrne, At Least Chainsaw Al Knew How to Hire a Board, BUS. WK., June 29, 1998, at 40 (quoting Charles M. Elson as stating, "'[t]he governance lesson is that an equity-holding board works'").
13. F. Scott Fitzgerald, The Crack-Up, NOTEBOOKS E (Edmond Wilson ed., 1945).
14. Subsequently, in September 1996, Michael Steinhardt's hedge fund wound down its 21 % stake in Sunbeam by returning the stock directly to fund investors. See E.S. Browning & Eleena de Lisser, Is It Time Yet to Cash Out of Sunbeam?, WALL. ST. J., Sept. 27, 1996, at C1.
15. See Joann S. Lublin & Martha Brannigan, Sunbeam Names Albert Dunlap as Chief, Betting He Can Pull Off a Turnaround, WALL ST. J., July 19, 1996, at B2.
16. The previous Chief Executive Officer (CEO), Roger W. Schipke, resigned following lackluster first-quarter results.
17. Al Dunlap: Exit Bad Guy, ECONOMIST, June 20, 1998, at 70 (noting that Dunlap's other "bloodcurdling nickname" was "Rambo in pinstripes").
18. The five-year Scott deal included options to acquire 750,000 shares and 50,000 shares of restricted stock, plus a bonus and long-term incentive plan. See Lublin & Brannigan, supra note 11, at B2.
19. See Marketing Brief, Sunbeam Corp: Two Outlet Stores Open in Distribution Strategy, WALL ST. J., Mar. 11, 1997, available in 1997 WL-WSJ 2412571.
20. See Jonathan R. Laing, Dangerous Games; Did "Chainasaw Al" Dunlap Manufacture Sunbeam's Earnings Last Year?, BARRON'S, June 8, 1998, at 17.
21. See Sunbeam Attributes $234.7 Million Loss to Its Restructuring, WALL ST. J., Jan. 30, 1997, at B4.
22. See Sunbeam Corp.: Profit More Than Tripled to $26.2 Million in Quarter, WALL ST. J., July 24, 1997, at B4.
23. According to one analyst from CIBC Oppenheimer, this was the first time that Dunlap had failed to deliver on his commercial promises. See Jacqueline Bueno & Rick Brooks, Sunbeam Earnings Trail Forecasts: Stock Drops 9.5%, WALL ST. J., Jan. 29, 1998, at A6.
24. See Laing, supra note 16, at 17.
25. See Daniel Kadlec, Is That You, At? A Famous Cost-Cutter Decides to Build, Not Sell, TIME, Mar. 16, 1998, at 44.
26. See id.
27. See id. The other two companies acquired were Signature Brands and First Alert. See id.
28. Michael Price was the largest shareholder at this time with 17% of Sunbeam's stock.
29. The Coleman deal, announced on March 2, 1998, valued Coleman shares at $32.34 per share. This was a 55% premium over the price of Coleman shares on February 27, 1998, the last day of trading before the announcement See Martha Brannigan, For Perelman, Sunbeam Stake Turns a Bit Pale, WALL ST. J., June 4, 1998, at C1. For background to the Coleman deal, see Patricia Sellers, Exit for Chainsaw? Sunbeam's Investors Draw Their Knives, FORTUNE, June 8, 1998, at 30; Daniel Kadlec, Business, TIME, June 29, 1998, at 46.
30. The Coleman deal, announced on March 2, 1998, valued Coleman shares at $32.34 per share. This was a 55% premium over the price of Coleman shares on February 27, 1998, the last day of trading before the announcement See Martha Brannigan, For Perelman, Sunbeam Stake Turns a Bit Pale, WALL ST. J., June 4, 1998, at C1. For background to the Coleman deal, see Patricia Sellers, Exit for Chainsaw? Sunbeam's Investors Draw Their Knives, FORTUNE, June 8, 1998, at 30; Daniel Kadlec, Business, TIME, June 29, 1998, at 46.
31. The Coleman deal, announced on March 2, 1998, valued Coleman shares at $32.34 per share. This was a 55% premium over the price of Coleman shares on February 27, 1998, the last day of trading before the announcement See Martha Brannigan, For Perelman, Sunbeam Stake Turns a Bit Pale, WALL ST. J., June 4, 1998, at C1. For background to the Coleman deal, see Patricia Sellers, Exit for Chainsaw? Sunbeam's Investors Draw Their Knives, FORTUNE, June 8, 1998, at 30; Daniel Kadlec, Business, TIME, June 29, 1998, at 46.
32. See Kadlec, supra note 21, at 44.
33. See Laing, supra note 16, at 17.
34. Dunlap blamed the first quarter results partially on El Nino, described by two financial commentators as "this year's all-purpose corporate excuse."James R. Hagerry & Martha Brannigan, Sunbeam Plans to Cut 5,100 Jobs as CEO Promises Rebound from Dismal Quarter, WALL ST. J., May 12, 1998, at A3.
35. Said.
36. See Brannigan, supra note 25.
37. See Laing, supra note 16, at 17. See also John A. Byrne, How Al Dunlap Self-Destructed: The Inside Stay of What Drove Sunbeam's Board to Act, BUS. WK., July 6, 1998, at 58.
38. See Laing, supra note 16, at 17. See also John A. Byrne, How Al Dunlap Self-Destructed: The Inside Stay of What Drove Sunbeam's Board to Act, BUS. WK., July 6, 1998, at 58.
39. Al Dunlap; Exit Bad Guy, supra note 13, at 70.
40. See Holman W. Jenkins, Jr., Untalented Al? The Sorrows of a One-Trick Pony, WALL ST. J., June 24, 1998, at A19.
41. Laing, supra note 16, at 17, 19.
42. Soon after Dunlap was removed from office, Arthur Andersen stated that its opinion should not be relied upon and commenced a special audit of Sunbeam's financial statements with the assistance of Deloitte & Touche. In October 1998, the company issued a restatement of its earnings for the period of Dunlap's tenure as CEO. See Martha Brannigan, Shareholder Scoreboard, WALL ST. J., Feb. 25, 1999, at R7.
43. See Byrne, supra note 31, at 58; Kadlec, supra note 25, at 46.
44. In spite of his removal as CEO, Dunlap in fact remained on the board of directors until August 1998, signifying his attendance at the beginning of meetings by conference call. See Martha Brannigan, If 'Chainsaw Al' Is Listening In, Can't Sunbeam's Board Hang Up?, WALL ST. J., Aug. 5, 1998, at B1.
45. See Brannigan, supra note 35, at R7.
46. EPISTULAE EX PONTO, bk 3, no 4, 1.79.
47. See Korn/Ferry's New Study Trades 25 Years of Change in America's Corporate Boardrooms, BUS. WIRE, Sept. 24, 1998.
48. The size of U.S. boards varies depending upon the type of company, ranging from 14 or 15 in the financial sector to 10 in retail and advanced technology See KORN/FERRY INTERNATIONAL, BOARDS OF DIRECTORS IN AUSTRALIA AND NEW ZEALAND 1998, at 6.
49. See id. In Australia and New Zealand, for example, the average number of directors on boards of public companies is eight. See id.
50. See, e.g., David Yermack, Higher Market Valuation of Companies with a Small Board of Directors, 40 J. FIN. ECON. 185 (1996); Theodore Eisenberg & Stefan Sundgren, Larger Board Size, Decreasing Firm Value, and Increasing Firm Solvency, 48 J. FIN. ECON. 35 (1998).
51. See, e.g., David Yermack, Higher Market Valuation of Companies with a Small Board of Directors, 40 J. FIN. ECON. 185 (1996); Theodore Eisenberg & Stefan Sundgren, Larger Board Size, Decreasing Firm Value, and Increasing Firm Solvency, 48 J. FIN. ECON. 35 (1998).
52. See Rajeswararao S. Chaganti et al., Corporate Board Size, Composition and Corporate Failures in Retailing Industry, 22 J. MGMT. STUD. 400 (1985). The authors suggest that a larger board, while more easily controlled by management, may nonetheless be "valuable for the breadth of its 'services.'" Id. at 405.
53. See Byrne, supra note 8, at 40.
54. In the United Kingdom, see, for example, THE CADBURY REPORT, supra note 6, para. 4.11. In Australia, see REPORT OF THE WORKING GROUP ON CORPORATE PRACTICES AND CONDUCT 14 (chaired by Henry Bosch) (3d ed. 1995); AUSTRALIAN INVESTMENT MANAGERS' ASSOCIATION, CORPORATE GOVERNANCE: A GUIDE FOR INVESTMENT MANAGERS AND CORPORATIONS 20 (2d ed. 1997). In the United States, see 1 AMERICAN LAW INSTITUTE, PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS AND RECOMMENDATIONS 110 (1994) [hereinafter PRINCIPLES OF CORPORATE GOVERNANCE]. See generally Ramsay, supra note 2, at 8-9.
55. In the United Kingdom, see, for example, THE CADBURY REPORT, supra note 6, para. 4.11. In Australia, see REPORT OF THE WORKING GROUP ON CORPORATE PRACTICES AND CONDUCT 14 (chaired by Henry Bosch) (3d ed. 1995); AUSTRALIAN INVESTMENT MANAGERS' ASSOCIATION, CORPORATE GOVERNANCE: A GUIDE FOR INVESTMENT MANAGERS AND CORPORATIONS 20 (2d ed. 1997). In the United States, see 1 AMERICAN LAW INSTITUTE, PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS AND RECOMMENDATIONS 110 (1994) [hereinafter PRINCIPLES OF CORPORATE GOVERNANCE]. See generally Ramsay, supra note 2, at 8-9.
56. In the United Kingdom, see, for example, THE CADBURY REPORT, supra note 6, para. 4.11. In Australia, see REPORT OF THE WORKING GROUP ON CORPORATE PRACTICES AND CONDUCT 14 (chaired by Henry Bosch) (3d ed. 1995); AUSTRALIAN INVESTMENT MANAGERS' ASSOCIATION, CORPORATE GOVERNANCE: A GUIDE FOR INVESTMENT MANAGERS AND CORPORATIONS 20 (2d ed. 1997). In the United States, see 1 AMERICAN LAW INSTITUTE, PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS AND RECOMMENDATIONS 110 (1994) [hereinafter PRINCIPLES OF CORPORATE GOVERNANCE]. See generally Ramsay, supra note 2, at 8-9.
57. In the United Kingdom, see, for example, THE CADBURY REPORT, supra note 6, para. 4.11. In Australia, see REPORT OF THE WORKING GROUP ON CORPORATE PRACTICES AND CONDUCT 14 (chaired by Henry Bosch) (3d ed. 1995); AUSTRALIAN INVESTMENT MANAGERS' ASSOCIATION, CORPORATE GOVERNANCE: A GUIDE FOR INVESTMENT MANAGERS AND CORPORATIONS 20 (2d ed. 1997). In the United States, see 1 AMERICAN LAW INSTITUTE, PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS AND RECOMMENDATIONS 110 (1994) [hereinafter PRINCIPLES OF CORPORATE GOVERNANCE]. See generally Ramsay, supra note 2, at 8-9.
58. In the United Kingdom, see, for example, THE CADBURY REPORT, supra note 6, para. 4.11. In Australia, see REPORT OF THE WORKING GROUP ON CORPORATE PRACTICES AND CONDUCT 14 (chaired by Henry Bosch) (3d ed. 1995); AUSTRALIAN INVESTMENT MANAGERS' ASSOCIATION, CORPORATE GOVERNANCE: A GUIDE FOR INVESTMENT MANAGERS AND CORPORATIONS 20 (2d ed. 1997). In the United States, see 1 AMERICAN LAW INSTITUTE, PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS AND RECOMMENDATIONS 110 (1994) [hereinafter PRINCIPLES OF CORPORATE GOVERNANCE]. See generally Ramsay, supra note 2, at 8-9.
59. See Laura Lin, The Effectiveness of Outside Directors as a Corporate Governance Mechanism: Theories and Evidence, 90 NW. U. L. REV. 898, 904-12 (1996); April Klein, Firm Performance and Board Committee Structure, 41 J.L. & ECON. 275, 280 n.15 (1998).
60. See Laura Lin, The Effectiveness of Outside Directors as a Corporate Governance Mechanism: Theories and Evidence, 90 NW. U. L. REV. 898, 904-12 (1996); April Klein, Firm Performance and Board Committee Structure, 41 J.L. & ECON. 275, 280 n.15 (1998).
61. See Ira M. Millstein & Paul W. MacAvoy, The Active Board of Directors and Performance of the Large Publicly Traded Corporation, 98 COLUM. L. REV. 1283, 1286 (1998).
62. See generally Sanjai Bhagat & Bernard Black, Board Composition and Firm Performance: The Uneasy Case far Majority-Independent Boards, 1053 PLI/CORP. 95, 106 (1998). The percentage of outside or non-executive directors has also been increasing in other countries, such as the United Kingdom. See, e.g., Richard Bostock, Company Responses to Cadbury, 3 CORPORATE GOVERNANCE: AN INTERNATIONAL REVIEW 72 (1995); Michael J. Peel & Edmond O'Donnell, Board Structure, Corporate Performance and Auditor Independence, 3 CORPORATE GOVERNANCE: AN INTERNATIONAL REVIEW 207, 208, 215 (1995).
63. See generally Sanjai Bhagat & Bernard Black, Board Composition and Firm Performance: The Uneasy Case far Majority-Independent Boards, 1053 PLI/CORP. 95, 106 (1998). The percentage of outside or non-executive directors has also been increasing in other countries, such as the United Kingdom. See, e.g., Richard Bostock, Company Responses to Cadbury, 3 CORPORATE GOVERNANCE: AN INTERNATIONAL REVIEW 72 (1995); Michael J. Peel & Edmond O'Donnell, Board Structure, Corporate Performance and Auditor Independence, 3 CORPORATE GOVERNANCE: AN INTERNATIONAL REVIEW 207, 208, 215 (1995).
64. See generally Sanjai Bhagat & Bernard Black, Board Composition and Firm Performance: The Uneasy Case far Majority-Independent Boards, 1053 PLI/CORP. 95, 106 (1998). The percentage of outside or non-executive directors has also been increasing in other countries, such as the United Kingdom. See, e.g., Richard Bostock, Company Responses to Cadbury, 3 CORPORATE GOVERNANCE: AN INTERNATIONAL REVIEW 72 (1995); Michael J. Peel & Edmond O'Donnell, Board Structure, Corporate Performance and Auditor Independence, 3 CORPORATE GOVERNANCE: AN INTERNATIONAL REVIEW 207, 208, 215 (1995).
65. See KORN/FERRY INTERNATIONAL, 25TH (1998).
66. See Victor Brudney, The Independent Director - Heavenly City or Potemkin Village?, 95 HARV. L. REV. 597, 658 (1982) (distinguishing between the roles of independent director as monitor of integrity, efficiency, or social responsibility).
67. In the U.S. context, see, for example, Paul H. Zalecki, The Corporate Governance Roles of the Inside and the Outside Directors, 24 U. TOLEDO L. REV. 831, 834-35 (1993); The Role and Composition of the Board of Directors of the Large Publicly Owned Corporation: Statement of the Business Roundtable, 33 BUS. LAW. 2083, 2101 (1978).
68. In the U.S. context, see, for example, Paul H. Zalecki, The Corporate Governance Roles of the Inside and the Outside Directors, 24 U. TOLEDO L. REV. 831, 834-35 (1993); The Role and Composition of the Board of Directors of the Large Publicly Owned Corporation: Statement of the Business Roundtable, 33 BUS. LAW. 2083, 2101 (1978).
69. See THE CADBURY REPORT, supra note 6.
70. See Cadbury, supra note 3, at 45.
71. See generally Harold Marsh, Jr., Are Directors Trustees? Conflicts of Interest and Corporate Morality, 22 BUS. LAW. 35 (1966); Brudney, supra note 51, 608-09 (outlining the regulatory shift for self-dealing transactions from prohibition to use of independent directors as a filtering device).
72. See generally Harold Marsh, Jr., Are Directors Trustees? Conflicts of Interest and Corporate Morality, 22 BUS. LAW. 35 (1966); Brudney, supra note 51, 608-09 (outlining the regulatory shift for self-dealing transactions from prohibition to use of independent directors as a filtering device).
73. See generally Lin, supra note 47.
74. This, however, was a minor theme only in early debate on the role of outside directors. See Brudney, supra note 51, 603-04.
75. See D.D. Prentice, Some Aspects of the Corporate Governance Debate, in CONTEMPORARY ISSUES IN CORPORATE GOVERNANCE 25, 30-31 (D.D. Prentice & P.R.J. Holland eds., 1993).
76. See, e.g., Millstein & MacAvoy, supra note 48.
77. See generally Ronald J. Gilson & Reinier Kraakman, Reinventing the Outside Director: An Agenda for Institutional Investors, 43 STAN. L. REV. 863 (1991).
78. See Prentice, supra note 58, at 31.
79. See generally G.P. Stapledon & Jeffrey Lawrence, Board Composition, Structure and Independence in Australia's Largest Listed Companies, 21 MELB. U. L. REV. 150 (1997); Bhagat & Black, supra note 49; Millstein & MacAvoy, supra note 48, at 1296 n.43. Millstein and MacAvoy argue, however, that the inconclusive results of these studies certainly cannot be used to disprove a link between board activism and corporate performance. See id. at 1297.
80. See generally G.P. Stapledon & Jeffrey Lawrence, Board Composition, Structure and Independence in Australia's Largest Listed Companies, 21 MELB. U. L. REV. 150 (1997); Bhagat & Black, supra note 49; Millstein & MacAvoy, supra note 48, at 1296 n.43. Millstein and MacAvoy argue, however, that the inconclusive results of these studies certainly cannot be used to disprove a link between board activism and corporate performance. See id. at 1297.
81. See generally G.P. Stapledon & Jeffrey Lawrence, Board Composition, Structure and Independence in Australia's Largest Listed Companies, 21 MELB. U. L. REV. 150 (1997); Bhagat & Black, supra note 49; Millstein & MacAvoy, supra note 48, at 1296 n.43. Millstein and MacAvoy argue, however, that the inconclusive results of these studies certainly cannot be used to disprove a link between board activism and corporate performance. See id. at 1297.
82. See Klein, supra note 47.
83. Id. On the positive contributions of inside directors and reasons why it may be undesirable to have boards composed entirely of outsiders, see also PRINCIPLES OF CORPORATE GOVERNANCE, supra 46, at 112-13; Michael S. Weisbach, Outside Directors and CEO Turnover, 20 J. FIN. ECON. 431, 433-34 (1988).
84. Id. On the positive contributions of inside directors and reasons why it may be undesirable to have boards composed entirely of outsiders, see also PRINCIPLES OF CORPORATE GOVERNANCE, supra 46, at 112-13; Michael S. Weisbach, Outside Directors and CEO Turnover, 20 J. FIN. ECON. 431, 433-34 (1988).
85. E. Norman Veascy, An Economic Rationale for Judicial Decisionmaking in Corporate Low, 53 BUS. LAW. 681, 688 (1998) (quoting William T. Allen, Independence, Integrity and the Governance of Institutions, Speech to the National Association of Corporate Directors Annual Meeting 7-8 (Oct 27, 1997)).
86. E. Norman Veascy, An Economic Rationale for Judicial Decisionmaking in Corporate Low, 53 BUS. LAW. 681, 688 (1998) (quoting William T. Allen, Independence, Integrity and the Governance of Institutions, Speech to the National Association of Corporate Directors Annual Meeting 7-8 (Oct 27, 1997)).
87. BRIAN R. CHEFFINS, COMPANY LAW: THEORY, STRUCTURE, AND OPERATION 96 (1997).
88. See Byrne, supra note 8, at 40.
89. See Byrne, supra note 31, at 58.
90. See Weisbach, supra note 64.
91. Bhagat & Black, supra note 49, at 101. See Weisbach, supra note 64, at 454-55. For a psychological insight into this behavior, see MARVIN E. SHAW, GROUP DYNAMICS: THE PSYCHOLOGY OF SMALL GROUP BEHAVIOR 278 (1971). See also David J. Denis & Diane K. Denis, Performance Changes Following Top Management Dismissals, 50 J. FIN. 1029 (1995) (suggesting that forced CEO resignations are rare, not particularly timely, and are more often due to pressure from other interested parties, such as block and other shareholders, creditors, and other entities, than to normal board monitoring).
92. Bhagat & Black, supra note 49, at 101. See Weisbach, supra note 64, at 454-55. For a psychological insight into this behavior, see MARVIN E. SHAW, GROUP DYNAMICS: THE PSYCHOLOGY OF SMALL GROUP BEHAVIOR 278 (1971). See also David J. Denis & Diane K. Denis, Performance Changes Following Top Management Dismissals, 50 J. FIN. 1029 (1995) (suggesting that forced CEO resignations are rare, not particularly timely, and are more often due to pressure from other interested parties, such as block and other shareholders, creditors, and other entities, than to normal board monitoring).
93. Bhagat & Black, supra note 49, at 101. See Weisbach, supra note 64, at 454-55. For a psychological insight into this behavior, see MARVIN E. SHAW, GROUP DYNAMICS: THE PSYCHOLOGY OF SMALL GROUP BEHAVIOR 278 (1971). See also David J. Denis & Diane K. Denis, Performance Changes Following Top Management Dismissals, 50 J. FIN. 1029 (1995) (suggesting that forced CEO resignations are rare, not particularly timely, and are more often due to pressure from other interested parties, such as block and other shareholders, creditors, and other entities, than to normal board monitoring).
94. See Weisbach, supra note 64, at 459; Healy, The Effect of Bonus Schemes on Accounting Decisions, 7 J. ACCOUNTING & ECON. 85 (1985).
95. See Weisbach, supra note 64, at 459; Healy, The Effect of Bonus Schemes on Accounting Decisions, 7 J. ACCOUNTING & ECON. 85 (1985).
96. Affiliated outside directors are also called "grey" directors. See Bhagat & Black, supra note 49, at 99 (characterizing grey directors as including former company officers; relatives of company officers; persons with existing or potential business relationships with the company, such as investment bankers or lawyers). On the skewed and uneven incentives to monitor which may exist for grey directors, see Lin, supra note 47; Myles L. Mace, Directors: Myth and Reality - Ten Years Later, 32 RUTGERS L. REV. 293, 302-03 (1979).
97. Affiliated outside directors are also called "grey" directors. See Bhagat & Black, supra note 49, at 99 (characterizing grey directors as including former company officers; relatives of company officers; persons with existing or potential business relationships with the company, such as investment bankers or lawyers). On the skewed and uneven incentives to monitor which may exist for grey directors, see Lin, supra note 47; Myles L. Mace, Directors: Myth and Reality - Ten Years Later, 32 RUTGERS L. REV. 293, 302-03 (1979).
98. Affiliated outside directors are also called "grey" directors. See Bhagat & Black, supra note 49, at 99 (characterizing grey directors as including former company officers; relatives of company officers; persons with existing or potential business relationships with the company, such as investment bankers or lawyers). On the skewed and uneven incentives to monitor which may exist for grey directors, see Lin, supra note 47; Myles L. Mace, Directors: Myth and Reality - Ten Years Later, 32 RUTGERS L. REV. 293, 302-03 (1979).
99. See Brudney, supra note 51, at 601 n.10; E. Norman Veasey, An Economic Rationale for Judicial Decisionmaking in Corporate Law, 53 BUS. LAW. 681, 688 (1998).
100. See Brudney, supra note 51, at 601 n.10; E. Norman Veasey, An Economic Rationale for Judicial Decisionmaking in Corporate Law, 53 BUS. LAW. 681, 688 (1998).
101. See Warren F. Grienenberger, Institutional Investors and Corporate Governance, 1029 PLI/CORP. 63, 74-75 (1998). See also PRINCIPLES OF CORPORATE GOVERNANCE, supra note 46, at 110-113.
102. See Warren F. Grienenberger, Institutional Investors and Corporate Governance, 1029 PLI/CORP. 63, 74-75 (1998). See also PRINCIPLES OF CORPORATE GOVERNANCE, supra note 46, at 110-113.
103. See Stapledon & Lawrence, supra note 62, at 158. For the litany of factors, which may interfere with the board's capacity for detached monitoring, see Brudney, supra note 51, at 609; Martin Lipton & Jay W. Lorsch, A Modest Proposal for Improved Corporate Governance, 48 BUS. LAW. 59, 64-67 (1992); Mace, supra note 72; Lewis D. Solomon, Restructuring the Corporate Board of Directors: Fond Hope - Faint Promise?, 76 MICH. L. REV. 581, 584-86 (1978).
104. See Stapledon & Lawrence, supra note 62, at 158. For the litany of factors, which may interfere with the board's capacity for detached monitoring, see Brudney, supra note 51, at 609; Martin Lipton & Jay W. Lorsch, A Modest Proposal for Improved Corporate Governance, 48 BUS. LAW. 59, 64-67 (1992); Mace, supra note 72; Lewis D. Solomon, Restructuring the Corporate Board of Directors: Fond Hope - Faint Promise?, 76 MICH. L. REV. 581, 584-86 (1978).
105. See Stapledon & Lawrence, supra note 62, at 158. For the litany of factors, which may interfere with the board's capacity for detached monitoring, see Brudney, supra note 51, at 609; Martin Lipton & Jay W. Lorsch, A Modest Proposal for Improved Corporate Governance, 48 BUS. LAW. 59, 64-67 (1992); Mace, supra note 72; Lewis D. Solomon, Restructuring the Corporate Board of Directors: Fond Hope - Faint Promise?, 76 MICH. L. REV. 581, 584-86 (1978).
106. See Stapledon & Lawrence, supra note 62, at 158. For the litany of factors, which may interfere with the board's capacity for detached monitoring, see Brudney, supra note 51, at 609; Martin Lipton & Jay W. Lorsch, A Modest Proposal for Improved Corporate Governance, 48 BUS. LAW. 59, 64-67 (1992); Mace, supra note 72; Lewis D. Solomon, Restructuring the Corporate Board of Directors: Fond Hope - Faint Promise?, 76 MICH. L. REV. 581, 584-86 (1978).
107. See Stapledon & Lawrence, supra note 62, at 158. For the litany of factors, which may interfere with the board's capacity for detached monitoring, see Brudney, supra note 51, at 609; Martin Lipton & Jay W. Lorsch, A Modest Proposal for Improved Corporate Governance, 48 BUS. LAW. 59, 64-67 (1992); Mace, supra note 72; Lewis D. Solomon, Restructuring the Corporate Board of Directors: Fond Hope - Faint Promise?, 76 MICH. L. REV. 581, 584-86 (1978).
108. Nomination committees, chaired by an independent outside director and comprised of a majority of independent directors, are becoming an increasingly common method to obviate this problem, though it is not a complete solution. See CHEFFINS, supra note 66, at 98-99; Solomon, supra note 75, at 605-06.
109. See James D. Cox & Harry L. Munsinger, Bias in the Boardroom: Psychological Foundations and Legal Implications of Corporate Cohesion, 48 LAW & CONTEMP. PROBS. 83, 91 (1985); SHAW, supra note 70, at 267- 78. See generally Robert J. Haft, Business Decisions by the New Board: Behavioral Science and Corporate Law, 80 MICH. L. REV. 1 (1981); Walter Werner, Corporation Law in Search of Its Future, 81 COLUM. L. REV. 1611, 1663-64 (1981); Leslie Levy, Reforming Board Reform, HARV. BUS. REV., Jan.-Feb. 1981, at 166.
110. See James D. Cox & Harry L. Munsinger, Bias in the Boardroom: Psychological Foundations and Legal Implications of Corporate Cohesion, 48 LAW & CONTEMP. PROBS. 83, 91 (1985); SHAW, supra note 70, at 267-78. See generally Robert J. Haft, Business Decisions by the New Board: Behavioral Science and Corporate Law, 80 MICH. L. REV. 1 (1981); Walter Werner, Corporation Law in Search of Its Future, 81 COLUM. L. REV. 1611, 1663-64 (1981); Leslie Levy, Reforming Board Reform, HARV. BUS. REV., Jan.-Feb. 1981, at 166.
111. See James D. Cox & Harry L. Munsinger, Bias in the Boardroom: Psychological Foundations and Legal Implications of Corporate Cohesion, 48 LAW & CONTEMP. PROBS. 83, 91 (1985); SHAW, supra note 70, at 267- 78. See generally Robert J. Haft, Business Decisions by the New Board: Behavioral Science and Corporate Law, 80 MICH. L. REV. 1 (1981); Walter Werner, Corporation Law in Search of Its Future, 81 COLUM. L. REV. 1611, 1663-64 (1981); Leslie Levy, Reforming Board Reform, HARV. BUS. REV., Jan.-Feb. 1981, at 166.
112. See James D. Cox & Harry L. Munsinger, Bias in the Boardroom: Psychological Foundations and Legal Implications of Corporate Cohesion, 48 LAW & CONTEMP. PROBS. 83, 91 (1985); SHAW, supra note 70, at 267- 78. See generally Robert J. Haft, Business Decisions by the New Board: Behavioral Science and Corporate Law, 80 MICH. L. REV. 1 (1981); Walter Werner, Corporation Law in Search of Its Future, 81 COLUM. L. REV. 1611, 1663-64 (1981); Leslie Levy, Reforming Board Reform, HARV. BUS. REV., Jan.-Feb. 1981, at 166.
113. See James D. Cox & Harry L. Munsinger, Bias in the Boardroom: Psychological Foundations and Legal Implications of Corporate Cohesion, 48 LAW & CONTEMP. PROBS. 83, 91 (1985); SHAW, supra note 70, at 267- 78. See generally Robert J. Haft, Business Decisions by the New Board: Behavioral Science and Corporate Law, 80 MICH. L. REV. 1 (1981); Walter Werner, Corporation Law in Search of Its Future, 81 COLUM. L. REV. 1611, 1663-64 (1981); Leslie Levy, Reforming Board Reform, HARV. BUS. REV., Jan.-Feb. 1981, at 166.
114. See, e.g., Levy, supra note 77, at 166, 168.
115. This is relatively common in Australia. A recent survey showed, for example, that 15% of non-executive directors of Australian public companies surveyed were current CEOs of other companies, 22% were retired CEOs of other companies, and 2% were retired CEOs of the public company on whose board they sat. See KORN/FERRY INTERNATIONAL, supra note 41, at 8. Also, it has been said that, for historical and cultural reasons, "Australia's leading companies operate under a tangle of cross-directorships," with 22 directors serving on the boards of three or more of Australia's top 50 companies. Andrew Cornell, The Cabal That Runs Australia's Companies, AUSTL. FIN. REV. 21, June 6, 1998.
116. This is relatively common in Australia. A recent survey showed, for example, that 15% of non- executive directors of Australian public companies surveyed were current CEOs of other companies, 22% were retired CEOs of other companies, and 2% were retired CEOs of the public company on whose board they sat. See KORN/FERRY INTERNATIONAL, supra note 41, at 8. Also, it has been said that, for historical and cultural reasons, "Australia's leading companies operate under a tangle of cross-directorships," with 22 directors serving on the boards of three or more of Australia's top 50 companies. Andrew Cornell, The Cabal That Runs Australia's Companies, AUSTL. FIN. REV. 21, June 6, 1998.
117. See, e.g., Brian G. M. Main, The Nomination Process and Corporate Governance - A Missing Link?, 2 CORPORATE GOVERNANCE: AN INTERNATIONAL REVIEW 161, 165-66 (1994).
118. See, e.g., JAY W. LORSCH & ELIZABETH MACIVER, PAWNS OR POTENTATES: THE REALITY OF AMERICA'S CORPORATE BOARDS 184-85 (1989).
119. See, e.g., THE CADBURY REPORT, supra note 6, para. 4.9; REPORT OF THE WORKING GROUP ON CORPORATE PRACTICES AND CONDUCT 16 (3d ed. 1995) (chaired by Henry Bosch).
120. See, e.g., THE CADBURY REPORT, supra note 6, para. 4.9; REPORT OF THE WORKING GROUP ON CORPORATE PRACTICES AND CONDUCT 16 (3d ed. 1995) (chaired by Henry Bosch).
121. See ROBERT A.G. MONKS & NELL MINOW, CORPORATE GOVERNANCE 185-86(1995). This was a particular problem on the facts in AWA Ltd. v. Daniels. Su discussion infra Part IV. Note, however, that Al Dunlap has denied any knowledge of the accounting irregularities. See Albert J. Dunlap Affirms He Had No Reason to Doubt Accuracy of Sunbeam Financial Statements, BUS. WIRE, July 9, 1998.
122. See ROBERT A.G. MONKS & NELL MINOW, CORPORATE GOVERNANCE 185-86(1995). This was a particular problem on the facts in AWA Ltd. v. Daniels. Su discussion infra Part IV. Note, however, that Al Dunlap has denied any knowledge of the accounting irregularities. See Albert J. Dunlap Affirms He Had No Reason to Doubt Accuracy of Sunbeam Financial Statements, BUS. WIRE, July 9, 1998.
123. See Cadbury, supra note 3, at 47.
124. See James A. Brickley et al., Leadership Structure: Separating the CEO and Chairman of the Board, 3 J. CORP. FIN. 189 (1997).
125. See Lipton & Lorsch, supra note 75, at 64.
126. Separation of these roles is now standard practice in the United Kingdom. See CHEFFINS, supra note 66, at 609. See generally Paul L. Davies, Institutional Investors as Corporate Monitors in the United Kingdom, in COMPARATIVE CORPORATE GOVERNANCE 47 (Klaus J. Hopt & Eddy Wymeersch eds., 1997). Similarly, in Australia, 92% of Australian public companies surveyed in 1997 split the role of CEO and chairperson. See KORN/FERRY INTERNATIONAL, supra note 41, at 6. Also, a key goal in one of Australia's most prominent examples of institutional activism was to ensure that Coles Myer, a major retailing company, had an independent chairperson. See generally Jennifer Hill, Changes in the Role of the Shareholder, in CORPORATE PERSONALITY IN THE 20TH CENTURY 175, 205-207 (Charles E.F. Rickett & Ross B. Grantham eds., 1998) (forthcoming AM. J. COMP. L.); Glenda Korporaal, Coles Must Have an Independent Chair, SYDNEY MORNING HERALD, Sept. 11, 1995, at 21. Institutional investors in the United States appear to be more ambivalent about the separate CEO/chairperson issue than their foreign counterparts. See Warren F. Grienenberger, Institutional Investors and Corporate Governance, 1029 PLI/CORP. 63, 78-79 (1998).
127. Separation of these roles is now standard practice in the United Kingdom. See CHEFFINS, supra note 66, at 609. See generally Paul L. Davies, Institutional Investors as Corporate Monitors in the United Kingdom, in COMPARATIVE CORPORATE GOVERNANCE 47 (Klaus J. Hopt & Eddy Wymeersch eds., 1997). Similarly, in Australia, 92% of Australian public companies surveyed in 1997 split the role of CEO and chairperson. See KORN/FERRY INTERNATIONAL, supra note 41, at 6. Also, a key goal in one of Australia's most prominent examples of institutional activism was to ensure that Coles Myer, a major retailing company, had an independent chairperson. See generally Jennifer Hill, Changes in the Role of the Shareholder, in CORPORATE PERSONALITY IN THE 20TH CENTURY 175, 205-207 (Charles E.F. Rickett & Ross B. Grantham eds., 1998) (forthcoming AM. J. COMP. L.); Glenda Korporaal, Coles Must Have an Independent Chair, SYDNEY MORNING HERALD, Sept. 11, 1995, at 21. Institutional investors in the United States appear to be more ambivalent about the separate CEO/chairperson issue than their foreign counterparts. See Warren F. Grienenberger, Institutional Investors and Corporate Governance, 1029 PLI/CORP. 63, 78-79 (1998).
128. Separation of these roles is now standard practice in the United Kingdom. See CHEFFINS, supra note 66, at 609. See generally Paul L. Davies, Institutional Investors as Corporate Monitors in the United Kingdom, in COMPARATIVE CORPORATE GOVERNANCE 47 (Klaus J. Hopt & Eddy Wymeersch eds., 1997). Similarly, in Australia, 92% of Australian public companies surveyed in 1997 split the role of CEO and chairperson. See KORN/FERRY INTERNATIONAL, supra note 41, at 6. Also, a key goal in one of Australia's most prominent examples of institutional activism was to ensure that Coles Myer, a major retailing company, had an independent chairperson. See generally Jennifer Hill, Changes in the Role of the Shareholder, in CORPORATE PERSONALITY IN THE 20TH CENTURY 175, 205-207 (Charles E.F. Rickett & Ross B. Grantham eds., 1998) (forthcoming AM. J. COMP. L.); Glenda Korporaal, Coles Must Have an Independent Chair, SYDNEY MORNING HERALD, Sept. 11, 1995, at 21. Institutional investors in the United States appear to be more ambivalent about the separate CEO/chairperson issue than their foreign counterparts. See Warren F. Grienenberger, Institutional Investors and Corporate Governance, 1029 PLI/CORP. 63, 78-79 (1998).
129. Separation of these roles is now standard practice in the United Kingdom. See CHEFFINS, supra note 66, at 609. See generally Paul L. Davies, Institutional Investors as Corporate Monitors in the United Kingdom, in COMPARATIVE CORPORATE GOVERNANCE 47 (Klaus J. Hopt & Eddy Wymeersch eds., 1997). Similarly, in Australia, 92% of Australian public companies surveyed in 1997 split the role of CEO and chairperson. See KORN/FERRY INTERNATIONAL, supra note 41, at 6. Also, a key goal in one of Australia's most prominent examples of institutional activism was to ensure that Coles Myer, a major retailing company, had an independent chairperson. See generally Jennifer Hill, Changes in the Role of the Shareholder, in CORPORATE PERSONALITY IN THE 20TH CENTURY 175, 205-207 (Charles E.F. Rickett & Ross B. Grantham eds., 1998) (forthcoming AM. J. COMP. L.); Glenda Korporaal, Coles Must Have an Independent Chair, SYDNEY MORNING HERALD, Sept. 11, 1995, at 21. Institutional investors in the United States appear to be more ambivalent about the separate CEO/chairperson issue than their foreign counterparts. See Warren F. Grienenberger, Institutional Investors and Corporate Governance, 1029 PLI/CORP. 63, 78-79 (1998).
130. Separation of these roles is now standard practice in the United Kingdom. See CHEFFINS, supra note 66, at 609. See generally Paul L. Davies, Institutional Investors as Corporate Monitors in the United Kingdom, in COMPARATIVE CORPORATE GOVERNANCE 47 (Klaus J. Hopt & Eddy Wymeersch eds., 1997). Similarly, in Australia, 92% of Australian public companies surveyed in 1997 split the role of CEO and chairperson. See KORN/FERRY INTERNATIONAL, supra note 41, at 6. Also, a key goal in one of Australia's most prominent examples of institutional activism was to ensure that Coles Myer, a major retailing company, had an independent chairperson. See generally Jennifer Hill, Changes in the Role of the Shareholder, in CORPORATE PERSONALITY IN THE 20TH CENTURY 175, 205-207 (Charles E.F. Rickett & Ross B. Grantham eds., 1998) (forthcoming AM. J. COMP. L.); Glenda Korporaal, Coles Must Have an Independent Chair, SYDNEY MORNING HERALD, Sept. 11, 1995, at 21. Institutional investors in the United States appear to be more ambivalent about the separate CEO/chairperson issue than their foreign counterparts. See Warren F. Grienenberger, Institutional Investors and Corporate Governance, 1029 PLI/CORP. 63, 78-79 (1998).
131. Separation of these roles is now standard practice in the United Kingdom. See CHEFFINS, supra note 66, at 609. See generally Paul L. Davies, Institutional Investors as Corporate Monitors in the United Kingdom, in COMPARATIVE CORPORATE GOVERNANCE 47 (Klaus J. Hopt & Eddy Wymeersch eds., 1997). Similarly, in Australia, 92% of Australian public companies surveyed in 1997 split the role of CEO and chairperson. See KORN/FERRY INTERNATIONAL, supra note 41, at 6. Also, a key goal in one of Australia's most prominent examples of institutional activism was to ensure that Coles Myer, a major retailing company, had an independent chairperson. See generally Jennifer Hill, Changes in the Role of the Shareholder, in CORPORATE PERSONALITY IN THE 20TH CENTURY 175, 205-207 (Charles E.F. Rickett & Ross B. Grantham eds., 1998) (forthcoming AM. J. COMP. L.); Glenda Korporaal, Coles Must Have an Independent Chair, SYDNEY MORNING HERALD, Sept. 11, 1995, at 21. Institutional investors in the United States appear to be more ambivalent about the separate CEO/chairperson issue than their foreign counterparts. See Warren F. Grienenberger, Institutional Investors and Corporate Governance, 1029 PLI/CORP. 63, 78-79 (1998).
132. See MONKS & MINOW, supra note 83, at 189-91. Separation of the role of CEO and chairperson is, however, more common in major U.S. non-profit organizations, such as universities and hospitals. See LORSCH & MACIVER, supra note 81, at 185.
133. See Lipton & Lorsch, supra note 75, at 70. Some U.S. companies, such as General Motors, have now adopted in their corporate governance guidelines a policy of having either a nonexecutive chair or a lead outside director. See Melvin A. Eisenberg, The Board of Directors and Internal Control, 19 CARDOZO L. REV. 237, 239 (1997). In 1997, 24% of U.S. companies with executive chairpersons had a lead director among the outside directors. See KORN/FERRY INTERNATIONAL, supra note 41, at 6.
134. See Lipton & Lorsch, supra note 75, at 70. Some U.S. companies, such as General Motors, have now adopted in their corporate governance guidelines a policy of having either a nonexecutive chair or a lead outside director. See Melvin A. Eisenberg, The Board of Directors and Internal Control, 19 CARDOZO L. REV. 237, 239 (1997). In 1997, 24% of U.S. companies with executive chairpersons had a lead director among the outside directors. See KORN/FERRY INTERNATIONAL, supra note 41, at 6.
135. See Lipton & Lorsch, supra note 75, at 70. Some U.S. companies, such as General Motors, have now adopted in their corporate governance guidelines a policy of having either a nonexecutive chair or a lead outside director. See Melvin A. Eisenberg, The Board of Directors and Internal Control, 19 CARDOZO L. REV. 237, 239 (1997). In 1997, 24% of U.S. companies with executive chairpersons had a lead director among the outside directors. See KORN/FERRY INTERNATIONAL, supra note 41, at 6.
136. See Holman W. Jenkins, When CEOs Can't Add Up the Numbers, WALL ST. J., Aug. 19, 1998, at A19 (claiming that both Cendant and Oxford were "short of institutional checks on the founder's charisma").
137. See Bhagat & Black, supra note 49, at 104.
138. See Uma V. Sridharan, CEO Influence and Executive Compensation, 31 FIN. REV. 51 (1996).
139. See Weisbach, supra note 64, 433; Lin, supra note 47, at 916-17.
140. See Byrne, supra note 8, at 40.
141. See, e.g., Charles M. Elson, Director Compensation and the Management-Captured Board - The History of a Symptom and a Cure, 50 SMU L. REV. 127 (1996); Charles M. Elson, Applying Theory on Directors to Real World, PENSIONS & INV., Apr. 14, 1997, at 12.
142. See, e.g., Charles M. Elson, Director Compensation and the Management-Captured Board - The History of a Symptom and a Cure, 50 SMU L. REV. 127 (1996); Charles M. Elson, Applying Theory on Directors to Real World, PENSIONS & INV., Apr. 14, 1997, at 12.
143. See generally John H. Farrar & Ian M. Ramsay, Director Share Ownership and Corporate Performance - Evidence from Australia, 6 CORPORATE GOVERNANCE: AN INTERNATIONAL REVIEW 233 (1998).
144. See generally Richard M. Buxbaum, Corporate Governance and Corporate Monitoring: The Whys and Hows, 6 AUST. J. CORP. L. 309 (1996); John F. Olson et al., Audit Committees of the Board of Directors: Duties and Liabilities, 623 PLI/COMM. 163 (1992); THE CADBURY REPORT, supra note 6, at 27-30.
145. See generally Richard M. Buxbaum, Corporate Governance and Corporate Monitoring: The Whys and Hows, 6 AUST. J. CORP. L. 309 (1996); John F. Olson et al., Audit Committees of the Board of Directors: Duties and Liabilities, 623 PLI/COMM. 163 (1992); THE CADBURY REPORT, supra note 6, at 27-30.
146. See generally Richard M. Buxbaum, Corporate Governance and Corporate Monitoring: The Whys and Hows, 6 AUST. J. CORP. L. 309 (1996); John F. Olson et al., Audit Committees of the Board of Directors: Duties and Liabilities, 623 PLI/COMM. 163 (1992); THE CADBURY REPORT, supra note 6, at 27-30.
147. See Albert J. Dunlap Affirms He Had No Reason to Doubt Accuracy of Sunbeam Financial Statement, supra note 83.
148. See Ronald M. Loeb et al., A Corporate Governance Audit: Topics in the Contemporary Corporate Governance Debate and the Role of Board Committees, 822 PLI/CORP. 83, 113 (1993).
149. For discussion of whether a specialized body, such as the audit committee, can fulfill this function, see Buxbaum, supra note 97.
150. See Bostock, supra note 49, at 74-75.
151. Buxbaum, supra note 97, at 321.
152. See id. at 322; Katz, Characteristics of an Effective Audit Committee, 115 BANKING L.J. 37 (1998).
153. See id. at 322; Katz, Characteristics of an Effective Audit Committee, 115 BANKING L.J. 37 (1998).
154. See NYSE Chair Richard Grasso, NASD Chair Frank Zarb and Blue Ribbon Panel Co-Chain Ira Millstein and John Whitehead Announce "Ten Point Plan" to Improve Oversight of the Financial Reporting Process (SEC News Release), 1998 WL 53083.
155. WILLIAM SHAKESPEARE, MEASURE FOR MEASURE, act 2, sc. 1.1.
156. Eisenberg, supra note 89, at 240.
157. 698 A.2d 959 (Del. Ch. 1996).
158. 188 A.2d 125 (Del. 1963).
159. See id. The court found no evidence that the board had actual knowledge of the illegal acts or imputed notice that should have put the board on guard. See id. at 128-29.
160. See id. at 130; E. Norman Veasey & Julie M.S. Seitz, The Business Judgment Rule in the Revised Model Act, the Trans Union Case, and the ALI Project - A Strange Porridge, 63 TEX. L. REV. 1483, 1500-01 (1985).
161. See id. at 130; E. Norman Veasey & Julie M.S. Seitz, The Business Judgment Rule in the Revised Model Act, the Trans Union Case, and the ALI Project - A Strange Porridge, 63 TEX. L. REV. 1483, 1500-01 (1985).
162. Current statutory provisions giving this protection include DEL. GEN. CORP. L., § 141(e) and MODEL BUS. CORP. ACT, § 8.30(b). For some of the implications of this protection, see Buxbaum, supra note 97, at 315-16.
163. Graham, 188 A.2d at 130.
164. See Re City Equitable Fire Insurance Co. Ltd. [1925] Ch 407; The Marquis of Bute's Case [1892] 2 Ch 100. On the history of the duty of care in England, see generally, M.J. Trebilcock, The Liability of Company Directors for Negligence, 32 MOD. L. REV. 499 (1969); Vanessa Finch, Company Directors: Who Cares About Skill and Care?, 55 MOD. L. REV. 179 (1992).
165. See Re City Equitable Fire Insurance Co. Ltd. [1925] Ch 407; The Marquis of Bute's Case [1892] 2 Ch 100. On the history of the duty of care in England, see generally, M.J. Trebilcock, The Liability of Company Directors for Negligence, 32 MOD. L. REV. 499 (1969); Vanessa Finch, Company Directors: Who Cares About Skill and Care?, 55 MOD. L. REV. 179 (1992).
166. See Re City Equitable Fire Insurance Co. Ltd. [1925] Ch 407; The Marquis of Bute's Case [1892] 2 Ch 100. On the history of the duty of care in England, see generally, M.J. Trebilcock, The Liability of Company Directors for Negligence, 32 MOD. L. REV. 499 (1969); Vanessa Finch, Company Directors: Who Cares About Skill and Care?, 55 MOD. L. REV. 179 (1992).
167. Melvyn I. Weiss et al., Emerging Duties and Liabilities of Outside Directors to Ensure that Adequate Information and Control Systems are in Place: Caremark and "Good Faith Attempts," 1023 PLI/CORP. 491, 501 (1997) (discussing a number of decisions applying the Graham principle in circumstances where the directors had sufficient knowledge to satisfy the "red flag" criterion).
168. See L.S. Sealy, The Director as Trustee, 1967 CAMBRIDGE L.J. 83, 87-88.
169. See Jennifer Hill, The Liability of Passive Directors: Morley v. Statewide Tobacco Servs. Ltd., 14 SYDNEY L. REV. 504, 507 (1992).
170. See Eisenberg, supra note 89; James D. Cox, Changing Perceptions into Reality: Fiduciary Standards to Match the American Directors'Monitoring Function, 1 BOND L. REV. 218 (1989).
171. See Eisenberg, supra note 89; James D. Cox, Changing Perceptions into Reality: Fiduciary Standards to Match the American Directors'Monitoring Function, 1 BOND L. REV. 218 (1989).
172. Francis v. United Jersey Bank, 432 A.2d 814, 823 (N.J. 1981).
173. See In re Caremark Int'l Inc. Derivative Litig., 698 A.2d 959 (Del. Ch. 1996).
174. For further factual background to the case, see Steven F. Funk, In Re Caremark International Inc. Derivative Litigation: Director Behavior, Shareholder Protection, and Corporate Legal Compliance, 22 DEL. J. CORP. L. 311, 314 (1997). See also Mark J. Loewenstein, The Corporate Director's Duty of Oversight, 27 COLO. LAW. 33 (1998); Weiss et al., supra, note 114.
175. For further factual background to the case, see Steven F. Funk, In Re Caremark International Inc. Derivative Litigation: Director Behavior, Shareholder Protection, and Corporate Legal Compliance, 22 DEL. J. CORP. L. 311, 314 (1997). See also Mark J. Loewenstein, The Corporate Director's Duty of Oversight, 27 COLO. LAW. 33 (1998); Weiss et al., supra, note 114.
176. For further factual background to the case, see Steven F. Funk, In Re Caremark International Inc. Derivative Litigation: Director Behavior, Shareholder Protection, and Corporate Legal Compliance, 22 DEL. J. CORP. L. 311, 314 (1997). See also Mark J. Loewenstein, The Corporate Director's Duty of Oversight, 27 COLO. LAW. 33 (1998); Weiss et al., supra, note 114.
177. Robert Charles Clark, CORPORATE LAW 130 (1986).
178. See Caremark, 698 A.2d at 970; cf. E. Norman Veasey, An Economic Rationale for Judicial Decisionmaking in Corporate Law, 53 BUS. LAW. 681, 692 (1998) (stating that, while the oversight duty is dynamic, "[t]hat is not to say that Graham would not be decided the same way today on its particular facts").
179. See Caremark, 698 A.2d at 970; cf. E. Norman Veasey, An Economic Rationale for Judicial Decisionmaking in Corporate Law, 53 BUS. LAW. 681, 692 (1998) (stating that, while the oversight duty is dynamic, "[t]hat is not to say that Graham would not be decided the same way today on its particular facts").
180. Veasey, supra note 122; see also id. at 691 (advising that as an "aspirational matter," modern compliance systems enhance corporate practice).
181. See Caremark, 698 A.2d at 970.
182. See Charles J. Walsh & Alissa Pyrich, Corporate Compliance Programs as a Defense to Criminal Liability: Can a Corporation Save its Soul?, 47 RUTGERS L. REV. 605 (1995); William S. Laufer, Integrity, Diligence, and the Limits of Good Corporate Citizenship, 34 AM. BUS. L.J. 157, 163 (1996). Corporate compliance programs are becoming increasingly important in Australia as a means to deflect corporate criminal liability under the Criminal Code Act 1995.
183. See Charles J. Walsh & Alissa Pyrich, Corporate Compliance Programs as a Defense to Criminal Liability: Can a Corporation Save its Soul?, 47 RUTGERS L. REV. 605 (1995); William S. Laufer, Integrity, Diligence, and the Limits of Good Corporate Citizenship, 34 AM. BUS. L.J. 157, 163 (1996). Corporate compliance programs are becoming increasingly important in Australia as a means to deflect corporate criminal liability under the Criminal Code Act 1995.
184. For a discussion of the uncertain impact of compliance programs on corporate criminal liability in the United States, see Kevin B. Huff, The Role of Corporate Compliance Programs in Determining Corporate Criminal Liability: A Suggested Approach, 96 COLUM. L. REV. 1252 (1996).
185. See Funk, supra note 120.
186. See Caremark, 698 A.2d at 970 ("Obviously the level of detail that is appropriate for such an information system is a question of business judgment.").
187. See id, at 970-71.
188. See Veasey, supra note 122, at 692.
189. See AWA Ltd v. Daniels trading as Deloitte Haskins & Sells, 7 ACSR 759 (1992).
190. See Daniels v. Anderson, 16 ACSR 607 (1995).
191. See G. P. Stapledon, The AWA Case: Non-Executive Directors, Auditors, and Corporate Governance Issues in Court, in CONTEMPORARY ISSUES IN CORPORATE GOVERNANCE 187, 217-18 (D.D. Prentice & P.R.J. Holland eds., 1993).
192. See, e.g., Robert Baxt, One "AWA Case" is Not Enough: The Turning of the Screws for Directors, 13 CO. & SEC. L.J. 414 (1995); Alex Chernov, The Role of Corporate Governance Practices in the Development of Legal Principles Relating to Directors, in CORPORATE GOVERNANCE AND THE DUTIES OF COMPANY DIRECTORS 33,37 (Ramsay ed., 1997); A.S. Sievers, Directors' Duty of Care: What is the New Standard?, 15 Co. & SEC. L.J. 392 (1997).
193. See, e.g., Robert Baxt, One "AWA Case" is Not Enough: The Turning of the Screws for Directors, 13 CO. & SEC. L.J. 414 (1995); Alex Chernov, The Role of Corporate Governance Practices in the Development of Legal Principles Relating to Directors, in CORPORATE GOVERNANCE AND THE DUTIES OF COMPANY DIRECTORS 33,37 (Ramsay ed., 1997); A.S. Sievers, Directors' Duty of Care: What is the New Standard?, 15 Co. & SEC. L.J. 392 (1997).
194. See, e.g., Robert Baxt, One "AWA Case" is Not Enough: The Turning of the Screws for Directors, 13 CO. & SEC. L.J. 414 (1995); Alex Chernov, The Role of Corporate Governance Practices in the Development of Legal Principles Relating to Directors, in CORPORATE GOVERNANCE AND THE DUTIES OF COMPANY DIRECTORS 33,37 (Ramsay ed., 1997); A.S. Sievers, Directors' Duty of Care: What is the New Standard?, 15 Co. & SEC. L.J. 392 (1997).
195. See AWA, 7 ACSR at 867.
196. See Bird, The Duty of Care and the CLERP Reforms, 17 COMPANY. & SEC. L.J. 141 (1999); see also Solomon, supra note 75, 588,587-88 (noting that the monitoring model covers a broad spectrum of possible detail, with one end of the spectrum limited to "broad statements of the most general level of policy").
197. See Bird, The Duty of Care and the CLERP Reforms, 17 COMPANY. & SEC. L.J. 141 (1999); see also Solomon, supra note 75, 588,587-88 (noting that the monitoring model covers a broad spectrum of possible detail, with one end of the spectrum limited to "broad statements of the most general level of policy").
198. According to Rogers CJ, delegation would be unreasonable and therefore fail to protect a director only "where the director was aware of circumstances of such a character, so plain, so manifest and so simple of appreciation that no person, with any degree of prudence, acting on his behalf, would have relied on the particular judgment information and advice of the officers." See AWA, 7 ACSR at 868.
199. See Daniels, 16 ACSR at 664.
200. See id. at 666.
201. Eisenberg, supra note 89, at 240.
202. See Bird, supra note 136.
203. See Corporate Law Economic Reform Program (CLERP), Directors' Duties and Corporate Governance: Proposals for Reform: Paper No 3 22-23 (1997); Bird, supra note 136.
204. See Corporate Law Economic Reform Program (CLERP), Directors' Duties and Corporate Governance: Proposals for Reform: Paper No 3 22-23 (1997); Bird, supra note 136.
205. See Corporate Law Economic Reform Program Bill 1998 (Cth), § 180(2), sched. 1; see also Deborah A. DeMott, Legislating Business Judgment - A Comment from the United States, 16 Co. & SEC. L.J. 575, 576 (1998) (expressing doubts whether the language of the provision will in fact operate as a presumption in favor of the directors as in the US); cf. Bird, supra note 136.
206. See Corporate Law Economic Reform Program Bill 1998 (Cth), § 180(2), sched. 1; see also Deborah A. DeMott, Legislating Business Judgment - A Comment from the United States, 16 Co. & SEC. L.J. 575, 576 (1998) (expressing doubts whether the language of the provision will in fact operate as a presumption in favor of the directors as in the US); cf. Bird, supra note 136.
207. See Corporate Law Economic Reform Program Bill 1998 (Cth), § 180(2), sched. 1; see also Deborah A. DeMott, Legislating Business Judgment - A Comment from the United States, 16 Co. & SEC. L.J. 575, 576 (1998) (expressing doubts whether the language of the provision will in fact operate as a presumption in favor of the directors as in the US); cf. Bird, supra note 136.
208. See Corporate Law Economic Reform Program Bill 1998 (Cth), § 198D, sched. 1.
209. See generally Laufer, supra note 125.
210. The Australian Criminal Code Act 1995 (Cth), for example, broadened the circumstances in which a corporation may be criminally liable to include the situation in which "a corporate culture" exists that either encourages, tolerates, or fails to promote compliance. Id. § 12.3(2)(c) and (d). See generally Jennifer Hill & R. Harmer, Criminal Liability of Corporations - Australia, in LA CRIMINALISATION DU COMPORTEMENT COLLECTIF: CRIMINAL LIABILITY OF CORPORATIONS 71 (Hans de Doelder & Klaus Tiedemann eds., 1996); Brent Fisse & John Braithwaite, The Allocation of Responsibility for Corporate Crime: Individualism, Collectivism and Accountability, 11 SYDNEY L. REV. 468 (1988).
211. The Australian Criminal Code Act 1995 (Cth), for example, broadened the circumstances in which a corporation may be criminally liable to include the situation in which "a corporate culture" exists that either encourages, tolerates, or fails to promote compliance. Id. § 12.3(2)(c) and (d). See generally Jennifer Hill & R. Harmer, Criminal Liability of Corporations - Australia, in LA CRIMINALISATION DU COMPORTEMENT COLLECTIF: CRIMINAL LIABILITY OF CORPORATIONS 71 (Hans de Doelder & Klaus Tiedemann eds., 1996); Brent Fisse & John Braithwaite, The Allocation of Responsibility for Corporate Crime: Individualism, Collectivism and Accountability, 11 SYDNEY L. REV. 468 (1988).
212. On the concept of enforced self-regulation, see John Braithwaite, Enforced Self-Regulation: A New Strategy for Corporate Crime Control, 80 MICH. L. REV. 1466 (1982); Brent Fisse, Reconstructing Corporate Criminal Law: Deterrence, Retribution, Fault, and Sanctions, 56 S. CAL. L. REV. 1141 (1983).
213. On the concept of enforced self-regulation, see John Braithwaite, Enforced Self-Regulation: A New Strategy for Corporate Crime Control, 80 MICH. L. REV. 1466 (1982); Brent Fisse, Reconstructing Corporate Criminal Law: Deterrence, Retribution, Fault, and Sanctions, 56 S. CAL. L. REV. 1141 (1983).
214. Deborah A. DeMott, Organizational Incentives to Care About the Law, 60 LAW & CONTEMP. PROBS. 39, 41 (1997).
215. Lublin & Brannigan, supra note 11, at B2.
216. WILLIAM SHAKESPEARE, ROMEO AND JULIET act 2, sc. 3.
217. An influential article in this recharacterization was Michael C.Jensen & Kevin J. Murphy, CEO Incentives - It's Not How Much You Pay, But How, HARV. BUS. REV., May-June 1990, at 138. See Charles M. Yablon, Bonus Questions: An Essay an Executive Compensation and Income Inequality 4 (CLE Conference paper, University of Sydney Law School, 1997) (on file with author); D. Gordon Smith, Corporate Governance and Managerial Incompetence: Lessons from Kmart 74 N.C. L. REV. 1037, 1058-59 (1996).
218. An influential article in this recharacterization was Michael C.Jensen & Kevin J. Murphy, CEO Incentives - It's Not How Much You Pay, But How, HARV. BUS. REV., May-June 1990, at 138. See Charles M. Yablon, Bonus Questions: An Essay an Executive Compensation and Income Inequality 4 (CLE Conference paper, University of Sydney Law School, 1997) (on file with author); D. Gordon Smith, Corporate Governance and Managerial Incompetence: Lessons from Kmart 74 N.C. L. REV. 1037, 1058-59 (1996).
219. An influential article in this recharacterization was Michael C.Jensen & Kevin J. Murphy, CEO Incentives - It's Not How Much You Pay, But How, HARV. BUS. REV., May-June 1990, at 138. See Charles M. Yablon, Bonus Questions: An Essay an Executive Compensation and Income Inequality 4 (CLE Conference paper, University of Sydney Law School, 1997) (on file with author); D. Gordon Smith, Corporate Governance and Managerial Incompetence: Lessons from Kmart 74 N.C. L. REV. 1037, 1058-59 (1996).
220. One financial commentator assessed that Dunlap's renegotiated contract yielded him paper profits of $73 million in its first month of operation. See Kadlec, supra note 21, at 44.
221. ALBERT J. DUNLAP WITH BOB ANDELMAN, MEAN BUSINESS: How I SAVE BAD COMPANIES AND MAKE GOOD COMPANIES GREAT xii (1996).
222. See Bhagat & Black, supra note 49, at 104.
223. See Jensen & Murphy, supra note 151.
224. See Executive Pay, BUS. WK., Apr. 20, 1998, at 64.
225. See Runaway CEO Pay, EXECUTIVE PAY WATCH (visited Mar. 18, 1999) 〈http://www.aflcio.org/paywatch/problem/index.htm〉.
226. See Charles M. Yablon, Overcompensating: The Corporate Lawyer and Executive Pay, 92 COLUM. L. REV. 1867, 1877 (1992).
227. See Joshua A. Kreinberg, Reaching Beyond Performance Compensation in Attempts to Own the Corporate Executive, 1995 DUKE L.J. 138, 144-46; J.E. Parkinson, CORPORATE POWER AND RESPONSIBILITY: ISSUES IN THE THEORY OF COMPANY LAW 201-02 (1993).
228. See Joshua A. Kreinberg, Reaching Beyond Performance Compensation in Attempts to Own the Corporate Executive, 1995 DUKE L.J. 138, 144-46; J.E. Parkinson, CORPORATE POWER AND RESPONSIBILITY: ISSUES IN THE THEORY OF COMPANY LAW 201-02 (1993).
229. See Jeffrey N. Gordon, Employees, Pensions, and the New Economic Order, 97 COLUM. L. REV. 1519, 1520 (1997); Eric W. Orts, The Future of Enterprise Organization, 96 MICH. L. REV. 1947, 1965-66 (1998); Mark J. Roe, Backlash, 98 COLUM. L. REV. 217 (1998).
230. See Jeffrey N. Gordon, Employees, Pensions, and the New Economic Order, 97 COLUM. L. REV. 1519, 1520 (1997); Eric W. Orts, The Future of Enterprise Organization, 96 MICH. L. REV. 1947, 1965-66 (1998); Mark J. Roe, Backlash, 98 COLUM. L. REV. 217 (1998).
231. See Jeffrey N. Gordon, Employees, Pensions, and the New Economic Order, 97 COLUM. L. REV. 1519, 1520 (1997); Eric W. Orts, The Future of Enterprise Organization, 96 MICH. L. REV. 1947, 1965-66 (1998); Mark J. Roe, Backlash, 98 COLUM. L. REV. 217 (1998).
232. James K. GALBRAITH, CREATED UNEQUAL: THE CRISIS IN AMERICAN PAY 3 (1998). See also Carl T. Bogus, Excessive Executive Compensation and the Failure of Corporate Democracy, 41 BUFF. L. REV. 1, 17-19 (1993).
233. James K. GALBRAITH, CREATED UNEQUAL: THE CRISIS IN AMERICAN PAY 3 (1998). See also Carl T. Bogus, Excessive Executive Compensation and the Failure of Corporate Democracy, 41 BUFF. L. REV. 1, 17-19 (1993).
234. See, e.g., Henry Hansmann, Worker Participation and Corporate Governance, 43 U. TORONTO L.J. 589 (1993); Wai Shun Wilson Leung, The Inadequacy of Shareholder Primacy: A Proposed Corporate Regime that Recognizes Non-Shareholder Interests, 30 COLUM. J.L. & SOC. PROBS. 587, 594-95 (1997).
235. See, e.g., Henry Hansmann, Worker Participation and Corporate Governance, 43 U. TORONTO L.J. 589 (1993); Wai Shun Wilson Leung, The Inadequacy of Shareholder Primacy: A Proposed Corporate Regime that Recognizes Non-Shareholder Interests, 30 COLUM. J.L. & SOC. PROBS. 587, 594-95 (1997).
236. See Gordon, supra note 160, at 1534.
237. See Blair, supra note 2, at 12.
238. See Alfred F. Conard, Theses for a Corporate Reformation, 19 U.C. DAVIS L. REV. 259, 276-79 (1986); Lipton, supra note 3, at 7-8; Lipton & Lorsch, supra note 75, 66-67.
239. See Alfred F. Conard, Theses for a Corporate Reformation, 19 U.C. DAVIS L. REV. 259, 276-79 (1986); Lipton, supra note 3, at 7-8; Lipton & Lorsch, supra note 75, 66-67.
240. See Alfred F. Conard, Theses for a Corporate Reformation, 19 U.C. DAVIS L. REV. 259, 276-79 (1986); Lipton, supra note 3, at 7-8; Lipton & Lorsch, supra note 75, 66-67.
241. See Richard M. Buxbaum, Institutional Owners and Corporate Managers: A Comparative Perspective, 57 BROOK. L. REV. 1, 5 (1991); Orts, supra note 160, at 1966. On the possibility of greater reliance on corporate governance to induce corporations to act in environmental compliance, see Mark A. Drumbl, The Global Environmental Change and International Governance, 36 COLUM.J. TRANSNAT'L L. 761, 763-64 (1998) (book review).
242. See Richard M. Buxbaum, Institutional Owners and Corporate Managers: A Comparative Perspective, 57 BROOK. L. REV. 1, 5 (1991); Orts, supra note 160, at 1966. On the possibility of greater reliance on corporate governance to induce corporations to act in environmental compliance, see Mark A. Drumbl, The Global Environmental Change and International Governance, 36 COLUM.J. TRANSNAT'L L. 761, 763-64 (1998) (book review).
243. See Richard M. Buxbaum, Institutional Owners and Corporate Managers: A Comparative Perspective, 57 BROOK. L. REV. 1, 5 (1991); Orts, supra note 160, at 1966. On the possibility of greater reliance on corporate governance to induce corporations to act in environmental compliance, see Mark A. Drumbl, The Global Environmental Change and International Governance, 36 COLUM.J. TRANSNAT'L L. 761, 763-64 (1998) (book review).
244. See Blair, supra note 2, at 16.
245. See Martin Lipton et al., Corporate Governance in the Era of Institutional Ownership, 70 N.Y.U. L. REV. 1144, 1153 (1995) (book review).
246. See Al Dunlap: Exit Bad Guy, supra note 13, at 70. Andrew Shore of Paine Webber, who subsequently became Dunlap's nemesis, was skeptical of the appointment from the start, stating that Dunlap's "history is as a cost-cutter and not a brand builder and Sunbeam's problems are more sales related." Lublin & Brannigan, supra note 11, at B2.
247. See Al Dunlap: Exit Bad Guy, supra note 13, at 70. Andrew Shore of Paine Webber, who subsequently became Dunlap's nemesis, was skeptical of the appointment from the start, stating that Dunlap's "history is as a cost-cutter and not a brand builder and Sunbeam's problems are more sales related." Lublin & Brannigan, supra note 11, at B2.
248. See Peter F. Drucker, Management's New Paradigms, FORBES GLOBAL BUS. & FIN., Oct. 5, 1998, at 52.
249. See Jenkins, supra note 90, at Al9 (stating that the 300% post-Dunlap rise in share price at Sunbeam was "based on nothing more than his reputation as a miracle downsizer"). See also, Jenkins, supra note 33, at A19; Byrne, supra note 31, at 58.
250. Byrne, supra note 31, at 58 (quoting David M. Friedson, CEO of Windmere-Durable Holdings Inc.); see also Thomas Petzinger, Jr., Does Al Dunlap Mean Business, Or Is He Just Plain Mean?, WALL ST. J., Aug. 30, 1996, at B1, (demonstrating further bewilderment at the "beatification" of Al Dunlap).
251. Byrne, supra note 31, at 58 (quoting David M. Friedson, CEO of Windmere-Durable Holdings Inc.); see also Thomas Petzinger, Jr., Does Al Dunlap Mean Business, Or Is He Just Plain Mean?, WALL ST. J., Aug. 30, 1996, at B1, (demonstrating further bewilderment at the "beatification" of Al Dunlap).
252. See, e.g., Calvin Johnson, Stock Compensation: The Most Expensive Way to Pay Future Cash, SMU L. REV. (forthcoming 1999) (arguing that, from the perspective of the company (and shareholders), stock is a particularly expensive way to compensate management); Laing, supra note 16, at 17.
253. See, e.g., Calvin Johnson, Stock Compensation: The Most Expensive Way to Pay Future Cash, SMU L. REV. (forthcoming 1999) (arguing that, from the perspective of the company (and shareholders), stock is a particularly expensive way to compensate management); Laing, supra note 16, at 17.
254. See Geoffrey S. Rehnert, The Executive Compensation Contract: Creating Incentives to Reduce Agency Costs, 37 STAN. L. REV. 1147, 1153 (1985) (stating that the role of compensation committees in the U.S. is typically limited to reviewing remuneration proposals recommended by top executives, who as "rational, utility-maximizing individuals . . . will continue to propose remuneration plans to their executive compensation committees that maximize their income").
255. See generally Kreinberg, supra note 159.
256. GRAEF S. CRYSTAL, IN SEARCH OF EXCESS: THE OVERCOMPENSATION OF AMERICAN EXECUTIVES 98 (1991).
257. See, e.g., Executive Pay, supra note 156, (which took the view that any causal connection is tenuous at best), stating: Good, bad, or indifferent, virtually anyone who spent time in the corner office of a large public company in 1997 saw his or her net worth rise by at least several million. Thanks to an exploding stock market, CEOs were more handsomely rewarded than ever before . . . . But for many CEOs, those gains bore little relation to how well their companies - or investors - did. In the pay-for-performance sweepstakes, the "performance" half of the equation increasingly fell by the wayside.
258. See Rehnert, supra note 174, at 1159.
259. See generally Gerald L. Salamon & E. Dan Smith, Corporate Control and Managerial Misrepresentation of Firm Performance, 1979 BELL. J. ECON. 319.
260. On the perverse incentives created by some performance-based compensation plans, see generally Rehnert, supra note 174; Kreinberg, supra note 159.
261. For other recent accounting investigations by the Securities and Exchange Commission (SEC), see Top Companies Targeted in SEC Crackdown, ACCOUNTANT, Feb. 1, 1999, at 4.
262. SEC Chairman Arthur Lavitt, Concerned that the Quality of Corporate Financial Reporting is Eroding, Announces Action Plan to Remedy Problem (SEC News Release), 1998 WL 779351 (S.E.C.). See also David W. Tice, You Still Can't Trust Corporate Earnings Numbers: Outlandish Accounting Methods Still Build Up to Awful Letdowns, ON WALL ST., Dec. 1, 1998 (stating that "the proliferation of stock options has given issuers extra incentive to keep Wall Street happy").
263. SEC Chairman Arthur Lavitt, Concerned that the Quality of Corporate Financial Reporting is Eroding, Announces Action Plan to Remedy Problem (SEC News Release), 1998 WL 779351 (S.E.C.). See also David W. Tice, You Still Can't Trust Corporate Earnings Numbers: Outlandish Accounting Methods Still Build Up to Awful Letdowns, ON WALL ST., Dec. 1, 1998 (stating that "the proliferation of stock options has given issuers extra incentive to keep Wall Street happy").
264. See Hill, supra note 87, at 193-95.
265. See generally John Pound, The Rise of the Political Model of Corporate Governance and Corporate Control, 68 N.Y.U. L. REV. 1003 (1993); John Pound, The Promise of the Governed Corporation, 1995 HARV. BUS. REV. 89.
266. See generally John Pound, The Rise of the Political Model of Corporate Governance and Corporate Control, 68 N.Y.U. L. REV. 1003 (1993); John Pound, The Promise of the Governed Corporation, 1995 HARV. BUS. REV. 89.
267. See Jill E. Fisch, Relationship Investing: Will It Happen? Will It Work?, 55 OHIO ST. L.J. 1009 (1994); Deborah A. DeMott, Agency Principles and Large Block Shareholders, 19 CARDOZO L. REV. 321 (1997); Thomas A. Smith, Institutions and Entrepreneurs in American Corporate Finance, 85 CAL. L. REV. 1 (1997).
268. See Jill E. Fisch, Relationship Investing: Will It Happen? Will It Work?, 55 OHIO ST. L.J. 1009 (1994); Deborah A. DeMott, Agency Principles and Large Block Shareholders, 19 CARDOZO L. REV. 321 (1997); Thomas A. Smith, Institutions and Entrepreneurs in American Corporate Finance, 85 CAL. L. REV. 1 (1997).
269. See Jill E. Fisch, Relationship Investing: Will It Happen? Will It Work?, 55 OHIO ST. L.J. 1009 (1994); Deborah A. DeMott, Agency Principles and Large Block Shareholders, 19 CARDOZO L. REV. 321 (1997); Thomas A. Smith, Institutions and Entrepreneurs in American Corporate Finance, 85 CAL. L. REV. 1 (1997).
270. See Ellen Joan Pollock & Martha Brannigan, Mixed Grill: The Sunbeam Shuffle, or How Ron Perelman Wound Up in Control, WALL ST. J., Aug. 19, 1998, at A1.
271. See Edward B. Rock, Controlling the Dark Side of Relational Investing, 15 CARDOZO L. REV. 987 (1994); Fisch, supra note 185, at 1038. See also Lang, Troubled Sunbeam Not Out of The Woods Yee: Largest Shareholder Ron Perelman Worries Debtholders, NAT'L POST, Dec. 29, 1998, at D5 (discussing concerns that Perelman's interests were out of alignment with debtholder interests).
272. See Edward B. Rock, Controlling the Dark Side of Relational Investing, 15 CARDOZO L. REV. 987 (1994); Fisch, supra note 185, at 1038. See also Lang, Troubled Sunbeam Not Out of The Woods Yee: Largest Shareholder Ron Perelman Worries Debtholders, NAT'L POST, Dec. 29, 1998, at D5 (discussing concerns that Perelman's interests were out of alignment with debtholder interests).
273. See Edward B. Rock, Controlling the Dark Side of Relational Investing, 15 CARDOZO L. REV. 987 (1994); Fisch, supra note 185, at 1038. See also Lang, Troubled Sunbeam Not Out of The Woods Yee: Largest Shareholder Ron Perelman Worries Debtholders, NAT'L POST, Dec. 29, 1998, at D5 (discussing concerns that Perelman's interests were out of alignment with debtholder interests).
274. See Pollock & Brannigan, supra note 186, at A1.
275. See Sunbeam Shares Spurt After Perelman Accord: No 2 Shareholder Gains the Right to Increase His Stake, BALT. SUN, Aug. 14, 1998, at 3C.
276. See Jonathon R. Laing, Now It's Ron's Turn: Sunbeam Shareholders, Beware, BARRON'S, Oct. 12, 1998, at 31.
277. Ralph Waldo Emerson, Representative Men, in USES OF GREAT MEN (1850).
278. See Eisenberg, supra note 89, at 238.