Winds of change are blowing. Last year, a widely respected business law professor wrote a little book titled "The Shareholder Value Myth." In her book, Professor Lynn Stout argued that there is no valid legal precedent for the concept of giving control to the desires of short-term investors, such as hedge funds. It’s a cogent, easy to read book, and well worth the time.
Today, the NYT’s DealBook column includes Andrew Sorkin reporting on Marty Lipton writing a memo that tees off against the short-term thinking that has hedge funds trying to dictate outcomes to Apple as to its hoard of cash. This is not a new view – Mr. Lipton’s view often are made public, such as his prior advice on fending off hedge funders. Mr. Sorkin’s column also points out fairly parallel comments by Chancellor Leo Strine. Meanwhile, Joe Nocera of the NYT previously covered Professor Stout’s book, in a column with a retrospective look at having been around when T. Boone Pickens was one of the early barbarians gathering at corporate gates. Mr. Nocera’s column also collects cites and links to other scholarly articles on the shareholder value issues.
Why are shareholder value myths relevant to mass tort lawyers? Why should inside and outside lawyers think or care about the winds of change for the shareholder value myth? Because winds of change go in many directions. Winds of change are blowing – or will blow – across many areas of law, including product liability and mass tort rules. Today’s supposedly certain black letter rule could be tomorrow’s discarded precedent. Today’s "no brainer" could be tomorrow’s bad decision. Short-term thinking is once again becoming riskier.