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Professor Lynn A. Stout Publishes Opinion Piece in Wall Street Journal
By Amy E. Wong

Lynn A. Stout, the Paul Hastings Professor of Corporate and Securities Law at UCLA School of Law, published a really enlightening opinion piece in the Wall Street Journal.

A couple of years ago when the Enron story broke out, it was obvious that public shareholders were victims of corporate greed. Ever since then, the Securities and Exchange Commission (SEC) has taken active measures to protect the public.

This is evident through the rise of mutual funds, adjustments to SEC’s proxy rules, and the enforcement of the Sarbanes-Oxley Act. Now, the SEC is debating hard on the “shareholder access” rule, which would allow public shareholders to vote on how a public company operates.

However, Professor Stout has noticed a telling trend:

“Corporate directors and executives are growing tired of public investors' shrill, often conflicting and apparently endless demands, and many are finding they have an alternative. Instead of dealing with whiny public shareholders, they can go to one of many rapidly growing private equity funds like KKR, BlackRock or Carlyle Group, and raise the capital they need to buy the company's stock back from its shareholders. Voila! A company once owned by the investing public is now owned by the private equity fund and the company's managers.”

What are we supposed to do with this news? It is evident that many public companies are choosing to go private by buying back large chunks of their stock. They will do what they must to retain control in order to avoid, as Stout coined, “high maintenance” shareholders who nag about everything from cutting carbon emissions to reducing executive compensation.

The effort to “democratize” public companies seems futile, but honestly, I think it’s okay when I recall all the troublesome and stringent government regulations that companies already abide by.

The times have changed. With growing transparency in corporate culture and the proliferation of class action lawsuits, I would hope that executives are more responsible and accountable for their company’s overall performance.

URL: http://www.law.ucla.edu/home/News/Detail.aspx?page=20&recordid=1053

Posted on: 03/15/2007 10:33 AM | Number of feedback 2

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Posted by: jking on 09/24/2012 08:50 PM

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University of Michigan Ann Arbor School of Law

The University of Michigan Ann Arbor School of Law or the Michigan School of Law as it is popularly known is one of the oldest law schools of the U.S. and it consistently ranks among the top 10 law schools of the U.S. in rankings published by different sources and organizations. Michigan Law School is considered to have one of the best campuses and collegiate environment among U.S. law schools.