After last week’s entertaining analyst conference call for Blockbuster, Inc., you have probably heard by now that Carl Icahn won shareholder approval this week for planting himself and two friendly directors on the Blockbuster board. Mr. Icahn’s moves prompted an interesting discussion between two of the blogosphere’s most insightful commentators regarding corporate law issues.
First, Professor Bainbridge posted this analysis in which he predicts that the current trend of hedge fund activism is unlikely to alter the basic precept of corporate law and governance — i.e., separation of ownership and control.
Then, Professor Ribstein responded with posts here and here in which he suggests that hedge funds may be able to minimize the “agency costs” that result from the separation of ownership and control in corporate governance, particularly the cost of managerial misconduct.
Meanwhile, my sense is that the recent hedge fund activity in corporate governance signals that it is only a matter of time before the Lord of Regulation deems it necessary to substitute his wisdom regarding such matters for that of the market.