Deep Thoughts on Corporate Morality, Behavioral Law & Econ, and Mark Cuban

This week, I've got three "hat tips."  I set up the posts here and provide you the links.  Enjoy!

1.  For those of you that routinely ask: "Wherefore corporations?"  Professor Bainbridge takes another stab at the seemingly age-old question whether it is shareholder wealth maximization "uber alles."  The particulars of this commentary are pretty straightforward: If you're a corporate executive at GM and are confronted with data that demonstrates that placing a $40 sensor in the back of your cars will save children's lives–do you have an obligation to oppose legislation requiring such a sensor to save your company money (those $40s add up, after all)?  Discussion here.  Personally, I'm a bit disturbed by any legal regime that is premised on: "Leave your morals at the door."

2.  For those of you that like to try and predict how the Supreme Court will decide cases, here's one I think you can sink your teeth into: Jones v. Harris.  The case involves a mutual fund shareholder challenge of fees charged by the fund's financial advisers under Section 36(b) of the Investment Company Act of 1940.  Section 36(b) provides that "the investment adviser of a registered investment company shall be deemed to be a fiduciary with respect to the receipt of compensation for services."  What makes the case interesting is not that plaintiffs lost in the circuit court (apparently, not a single fee challenge under Section 36(b) has ever succeeded), but rather that it pits Judges Easterbrook and Posner of the 7^th Circuit against one another in a battle for the shape of law and economics to come (okay, I may be overstating things just a bit–but judge for yourself):  Professor Birdthistle provides excellent analysis here, here and here.  To the extent this is a battle of classical versus behavioral law & econ, you can put me down on the behavioral law & econ side (otherwise known as the side that acknowledges humans aren't always "rational").

3.  Finally, for those of you that like your law blogs to sound a bit more like reality T.V., there's the case of Mark Cuban and the law of insider trading.  Over at The Race to the Bottom, they do a great job of breaking down the case here, here, here and here.  By way of introduction, the key allegation is that Mark Cuban violated insider trading laws when he used information he had agreed to keep confidential in connection with an investment in Mamma.com, in order to avoid losses in excess of $750,000.  The key issue is whether entering into the confidentiality agreement placed Cuban in a position of confidence and/or trust (for more on the "and/or" follow the links above) vis-à-vis Mamma.com, such that he can be deemed an "insider" for purposes of securities law.  The tension you need to be aware of is between wanting to protect investor confidence in the market (if you think the market is filled with unrestricted insiders trading with an informational advantage you probably won't trade) and wanting to encourage "eat what you kill" investment research (in other words, if we flatly prohibit trading on non-public material information we eliminate the incentive for research).  From a policy perspective, I highly doubt holding Cuban liable would reduce the incentive to do research, but exonerating him might well give investors yet another reason to be distrustful of the market.