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June 23, 2005

Bainbridge on criminalizing agency costs

biobainbridgestephen.jpgU.C.L.A. law professor Stephen Bainbridge is one of America's leading experts in the area of corporate and securities law, and he has long been generous in sharing his expertise on those subjects and others on his popular ProfessorBainbride.com weblog. Professor Bainbridge is also a formidable writer who is particularly gifted in breaking down complex legal issues in a simple and straightforward manner.

In this TCS Central op-ed (his blog post on the article is here), Professor Bainbridge takes dead aim at the dubious governmental policy of criminalizing business interests through the prosecution of agency costs, which are essentially the costs of poor corporate governance. The entire op-ed is a must read, and here is the money quote:

[S]hareholders deserve protection from theft, but not from risk taking, even when the risk in question is how much to pay an executive. Unfortunately, it's not clear that prosecutors know the difference -- or even care.

Posted by Tom at June 23, 2005 6:30 AM |

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