"A symptom and signal of our sharp turn toward paternalism in everything from complex finance to corporate governance to the simplest products"
The New York Times' Adam Liptak has a very favorable report on the Supreme Court's decision to hear a case challenging "excessive" executive pay:
The case, Jones v. Harris Associates, may turn out to be the court's first significant statement on the corporate culture that helped lead to the Great Recession.
The case arose from the enormous fees mutual funds pay to their investment advisers. A three-judge panel of Judge [Richard] Posner's court, the United States Court of Appeals for the Seventh Circuit, in Chicago, threw out a lawsuit brought by the investors in three Oakmark mutual funds who said the funds had overpaid their investment adviser, Harris Associates.
The panel decision, written by Chief Judge Frank H. Easterbrook, another leader of the law and economics movement, said the marketplace could be trusted to regulate fees. Judge Posner, dissenting from the full court's decision not to rehear the case, said competition had not been effective in keeping the compensation under control….
But when public sentiment, economic research and even Judge Posner argue for more vigorous judicial examination of whether compensation is fair, the Supreme Court may just agree.
University of Illinois law professor Larry Ribstein offers a different view, noting that while the Court may well take Posner's side, that doesn't make it right: "Such a decision would be a symptom and signal of our sharp turn toward paternalism in everything from complex finance to corporate governance to the simplest products."
