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Yesterday, Prof. Bainbridge annotated my "creed" on corporate governance, and I appreciated his take. In fact, many of his chosen sources would have been mine.

In a later footnote, he noted that he was not sure what I meant by my statement: "I believe that public companies should be able to plan like private companies . . . ." I thought I'd try to explain. 

My intent there was to address my perception that there is a prevailing view that private companies and public companies must be run differently.  Although there are different disclosure laws and other regulations for such entities that can impact operations, I'm speaking here about the relationship between shareholders and directors when I'm referencing how public and private companies plan. 

Public companies generally have far more shareholders than private companies, so the goals and expectations of those shareholders will likely be more diverse than in a private entity. Therefore, a public entity may need to keep multiple constituencies happy in a way many private companies do not.  However, that is still about shareholder wishes, and not the public or private nature of the entity itself.  A private company with twenty shareholders could crate similar…

Yesterday, Carl Icahn sent a letter to eBay shareholders, which starts like this:

Dear Fellow eBay Stockholders,

We have recently accumulated a significant position in eBay’s common stock because we believe there is great long-term value in the business. However, after diligently researching this company we have discovered multiple lapses in corporate governance. These include certain material conflicts of interest, which we believe could put the future of our company in peril. We have found ourselves in many troubling situations over the years, but the complete disregard for accountability at eBay is the most blatant we have ever seen. Indeed, for the first time in our long history, we have encountered a situation where we believe we should not even have to run a proxy fight to change the board composition. Rather, we believe that in any sane business environment these directors would simply resign immediately from the eBay Board, either out of pure decency or sheer embarrassment at the public exposure of the extent of their self-serving activities.

Wow. You could almost drop the mic there.  Icahn does not, though. He goes on to outline a series of transactions from board members and the CEO that raise reasonable questions about the independence of certain board members.  (click below for more)

As noted over at the Family Law Prof Blog, Stanford Graduate School of Business recently issued a report, "Separation Anxiety: The Impact of CEO Divorce on Shareholders” (pdf),  in which a study considered the impact CEO divorces have on the CEO's corporation.  The report indicates that recent events "suggest that shareholders should pay attention to matters involving the personal lives of CEOs and take this information into account when making investment decisions." 

The study found that a CEO's divorce has the potential to impact the corporation and shareholders in three primary ways. First, is a possible reduction in influence or control if a CEO as to sell or transfer stock in the company as part of the divorce settlement. Second, divorce can negatively impact "the productivity, concentration, and energy levels of the CEO" or even result in premature retirement.  Third, the sudden change in wealth because of the divorce could lead to a change in the CEO's appetite for risk, making the CEO either more risk averse or more willing to take risks.  

The report argues that this matters because:

1. Divorce can impact the control, productivity, and economic incentives of an executive—and therefore corporate value.

…

Chancellor Chandler issued his ruling yesterday upholding the poison pill Airgas, Inc.'s board of directors adopted in response to Air Products and Chemicals, Inc.'s $5.8 billion hostile takeover ($70/share, all cash). Chancellor Chandler determined that the Airgas board of directors "acted in good faith and in the honest belief that the Air Products offer, at $70 per share, is inadequate.”  (PDF of the case here, thanks to Francis G.X. Pileggi.)

One reason this decision bugs me is that I suspect a good number of people who don't like insider trading restrictions would be supportive of this decision.  To me, it's the same question:  What does the shareholder want for his or her shares?  Period.  

For some who don't like insider trading restrictions, they argue that, at least in non-face-to-face insider trading transactions, the sharedholder did not suffer harm. (See, e.g., Henry Manne.) Sharedholders were offered a price they deemed acceptable, and sold.  Who cares who was on the other side of the transaction?  I find parts of this rationale compelling, although I also find the property rights concerns related to insider trading even more compelling. (See, e.g., Professor Bainbridge.)

For me, the anti-insider-trading rationale…