Daily Archives: March 18, 2005

Outside directors’ liability

Posted on by
Reply

directors2.gifBernard S. Black, a University of Texas Law School professor, contributed to this timely article that summarizes the landscape of outside directors’ liability to investor lawsuits in the wake of the recent Enron and WorldCom directors’ settlements. The article nicely sets forth the current state of the law on outside directors’ liability, and includes the following money passage on whether Enron and WorldCom-type settlements really induce outside directors to do a better job of overseeing management:

Outside directors fearing financial ruin will no doubt be more careful than directors feeling immune to out-of-pocket liability will be. But by how much? We simply don?t know. And there can be too much of a good thing. With jittery directors at the helm, prudent caution can readily transform into counterproductively defensive decision making and even paralysis in the boardroom.

Hat tip to Professor Bainbridge for the link to this article.

George Kennan, RIP

Posted on by
4

marshallposter.jpgDiplomat and Pulitzer Prize-winning historian George F. Kennan died Thursday night at his Princeton, N.J. home at the age of 101.
Mr. Kennan was one of America’s foremost foreign policy experts of the post-World War II and Cold War eras. He was one of the primary architects of the highly successful Marshall Plan that underwrote the reconstruction of Western Europe after World War II, and he had an equal amount of influence on the development of the containment postwar foreign policy that the United States government adopted to combat the Soviet Union’s promotion of totalitarism during the Cold War.
When he was chief of the State Department’s policy planning staff, Mr. Kennan was the author identified only as “X” in a famous 1947 article in the Foreign Affairs journal that outlined the containment policy and predicted the demise of Soviet communism that eventually occurred over 40 years later. When the Communist Party was finally driven from power in the Soviet Union after the 1991 coup attempt, Mr. Kennan publicly called the development “a turning point of the most momentous historical significance.”
georgekennan.jpgDespite the “X” article and his work in formulating the Marshall Plan, Mr. Kennan left government service in 1950 after he and Truman administration Secretary of State Dean Acheson disagreed over the reunification of Germany (Kennan supported it). He briefly served as ambassador to Moscow in May 1952, but he soon left foreign service again until the Kennedy Administration after butting heads with the Eisenhower Administration’s first Secretary of State, John Foster Dulles.
During the Kennedy Administration, Mr. Kennan returned to foreign service in as ambassador to Yugoslavia from 1961-63, but his highest profile engagement during the 60’s came in 1967 when he persuaded Svetlana Alliluyeva, the daughter of Soviet dictator Josef Stalin, to come to the United States. During the late 1960s, Mr. Kennan opposed American involvement in Vietnam because he argued that the United States had only five areas of vital interest — the Soviet Union, Britain, Germany, Japan and the United States.
Mr. Kennan won the Pulitzer Prize for history and a National Book Award for Russia Leaves the War (1956) and a second Pulitzer Prize in 1967 for Memoirs 1925-1950. As a young college student, I read my late father’s copy of the latter book and it stimulated an interest in foreign affairs that continues to this day. Mr. Kennan’s honors also included the Presidential Medal of Freedom in 1989, Albert Einstein Peace Prize in 1981, the German Book Trade Peace Prize in 1982, and the Gold Medal in History from the American Academy and Institute of Arts and Letters in 1984.
Professor Drezner, who is one of the blogosphere’s most insightful foreign policy analysts, has more on Mr. Kennan here.

The high risk of conducting business in Russia

Posted on by
Reply

chubais.jpgEarlier this year, the Yukos chapter 11 case in Houston highlighted the fact that governmental persecution is a risk of doing business in the still emerging capitalist markets of Russia. An incident yesterday underscored another risk of doing business in Russia that is difficult to hedge effectively — i.e., that extra-judicial means are still the approach favored by many in resolving business disputes in Russia.
Anatoly Chubais, the CEO of Russia’s state electric company and one of Russia’s most prominent pro-Western politicians, survived a brazen assassination attempt in Moscow yesterday as the attackers detonated a roadside bomb and then sprayed Mr. Chubais’s armored car with machine-gun fire. A retired Russian army colonel and explosives specialist was arrested a few hours after the attack, which was at least the third on Mr. Chubais’ life over the years.
Inasmuch as he was the architect of the rigged privatizations during the 1990s that transferred the country’s business wealth from the state into the hands of a few Kremlin-connected cronies, Mr. Chubais certainly has his share of enemies. More recently, he has been pushing a plan to overhaul Russia’s deteriorating power grid and to restructure the state electric company. Mr. Chubais also has a somewhat testy relationship with Russian president Vladimir Putin after Chubais sided with a liberal party against Mr. Putin in the most recent parliamentary elections in Russia.
Although the number of business contract murders in Russia reportedly have declined in recent years from the “cowboy era” of the period after Communism failed, the killings still occur and the Russian government’s response tends to differ based on the state view of the moment toward the victim. That does not evoke warm and fuzzy feelings for foreign investors who are considering committing capital in any of Russia’s numerous undercapitalized industries or markets.