And so here I am to give the brief welcome that I promised I would give. I want to welcome everyone to this year's Osler Business Law Forum. We're delighted to have Professor Brian Chephens here. In a few minutes, Professor Len Rockman, our Perti Crawford Chair, will introduce Professor Chephens. I just want to say a few words about the forum, the Osler Business Law Forum. It was originally established, I'm just quickly doing the math, I can't. So I'll say in 2001, so it's been around for quite some time. And the general purpose of the forum is to foster the exchange of ideas about business law at the law school within the legal and business communities and in the broader Atlantic community and beyond. We're proud of the contributions that we make and continually try to make to debate around issues, current issues of business law. And this business law forum is one way that we have of doing this. So I very much hope you enjoy today's lecture. It's on a topic that our guest is eminently qualified to speak about, but now I will turn it over to Professor Len Rockman to tell us a little bit more about our guest, Professor Brian Chephens. Over to you, Professor Rockman. Thank you, Dean Cameron. I'm also quite looking forward to hearing the talk today. Because I actually haven't had an opportunity to meet Professor Chephens just yet in person, but I'm very well familiar with his writings and quite looking forward to hearing what he has to say. So I've been given the pleasure of saying a few words of introduction. And I'd like to welcome Professor Chephens to Halifax, to Dalhousie, and to welcome him back to Canada. Professor Chephens is an internationally regarded authority on the issue of corporate governance. He is currently the S.J. Burwin Professor of Corporate Law at Cambridge, and that's an appointment that he's held since 1998. And he's a Canadian, originally from Montreal. He was educated at the University of Victoria at UBC and at Cambridge. Prior to his name professorship at Cambridge, he was a professor at UBC for about 10 years. He's also held visiting appointments at Duke, Harvard, Oxford, Stanford, Western, UBC, and the Instituto di Impresa in Madrid. Sorry about my Spanish. Most recently, he was the Thomas K. McCraw Business History Fellow at the Harvard Business School. He's been awarded numerous, numerous prizes and fellowships, including what I thought was most recognizable and noteworthy, a Guggenheim Memorial Fellowship. And the Frederick I Medal for Contributions to Italian Academia, which I wanted to ask him more about later on. I thought that was really quite interesting. He's also a Fellow of the European Corporate Governance Institute. His primary research interests are corporate governance and corporate law generally. And he's particularly interested in the economic and historical aspects of corporate law and corporate governance. And as I've indicated before, Professor Chaffins has written many, many articles on various issues of corporate law, corporate governance, corporate theory, corporate history, quite an impressive list. In terms of the books that he's written, he's a co-editor of the history of modern US corporate governance, as well as the author of company law, theory, structure, and operation, the trajectory of, in parentheses, corporate law scholarship, and corporate ownership and control, British business transformed. Please join me in welcoming Professor Brian Chaffins. I'd like to begin by thanking the organizers of the Osir-Hoskin Business Law Forum for inviting me to speak. It's a great honor to give this presentation. I'm delighted to return to Halifax and the Shulish School of Law after an absence of a decade. With respect to logistics, I'd particularly like to thank Kim Brooks, who was dean, initially invited me. Dean Camille Cameron, who followed through. Dean Cameron's assistant, Elizabeth Sanford, for her help with all the logistics. And finally, Professor Rotman for his very kind introduction. Now, what I'm going to talk about today is the history of corporate governance. And in so doing, I'm drawing upon a number of papers that I've written in this area. Just click through them here. And what you'll see there is, if you have just had a chance to glance at them quickly, this writing has primarily an American orientation. Why is this? And the lecture will as well. Why? That's because the topic of corporate governance first came to the fore in the United States. So when you want to talk about the history of corporate governance, it makes sense to go where it started, which is the United States. I'll also talk today about developments in Britain and in Canada. I've written about the UK. I have not written about Canada, but I have a series of conjectures that I can offer, which I think are plausible. And but what I want to do before I turn to the history is I'm assuming here that not everyone is familiar with what corporate governance actually is, and it strikes me as kind of necessary before you go into the history to have some familiarity with what corporate governance is. And so that is what I'm going to start with. Now I'll start by defining it. Essentially corporate governance, what it does is it encompasses the checks and balances that affect those who run companies. And these balances, checks and balances can be external or internal. External corporate governance mechanisms, what they do is they operate independently of the public companies that they affect. Internal corporate governance, on the other hand, there are intrinsic features of the corporate form. I'm talking here about boards, and I'm talking about shareholders. They can impose checks on the executives who manage the company. There's disagreement about whether corporate governance, whether it should focus pretty much entirely on the interests of investors, primarily shareholders, or whether corporate governance should be thought about in the broader sense of those who are stakeholders in companies. I'm not going to get into that debate. It is a lively one. But there is a consensus that when you're talking about corporate governance, you are focusing primarily on publicly traded companies, not their closely held counterparts. Now I mentioned that what I'm going to talk about today has largely US orientation. It's important to note the way in which corporate governance developed has been strongly influenced by the manner in which ownership and control of US public companies is configured. And what this has led to is managerial control within those companies, therefore corporate governance. What it does is it responds to this and imposes checks on managers. How do you get to this point of managerial control? Well, you start by looking at corporate legislation, as in Canada, what you will see is US corporate statutes. What they do is they allocate managerial control to the board of directors. How does it get to the managers? Well, what happens is that these shareholder elected boards, what they do is they delegate heavily to full-time corporate executives, who then in turn run the company. Now what you could potentially have shareholders having a meaningful influence. But this is unwound to a significant degree with US public companies because the standard format with the US public company is that it will lack a substantial single shareholder or a tight coalition of shareholders with enough shares to dominate corporate affairs. Now what that means is that because shareholders elect the boards, and they're not, shareholders aren't doing very much, boards have delegated to the executives. What you have is a situation where in US public companies they fall under managerial control. Now this has been well-known. The idea of managerial control of companies can be traced back to a very well-known 1932 book by Berlian Means, the modern corporation and private property. And in this book, what the authors did is they asserted that while the law treats a company's shareholders as the owners of the company, investors in publicly traded firms in the US at that point did not act in the manner you would expect of an owner. Instead, what happened was that shareholders left it to full-time executives to deal with matters of importance. The upshot was there was what Berlian Means characterized as a separation of ownership, the shareholders, and control in the managers. Now in the years after Berlian Means outlined their separation of ownership and control characterization of the public company, many commentators criticized this arrangement, saying that what you had was potentially unaccountable managers. The concern was that shareholders, because they were diffuse, would be passive, and managers could do basically what they wanted. Now that is a source of concern, but it is important to note that a separation of ownership and control can have benefits. For instance, for a publicly traded firm when it has widely held shares, it will be fairly easy as and when that firm wants to access capital markets, equity markets, they can do that. They can get money from the stock market. They don't have to have recourse to dominant shareholders who will be providing cash for the company. It's also potentially beneficial in terms of hiring the people to run the business. If you have a company which is dominated by a family, you could have problems, because what might happen is that there will be a tendency to bring in members of the family to manage the company, even if they are not the best qualified to do that. When you have a situation where there is a separation of ownership and control, that is not a problem. What you can have is thoroughly meritocratic appointment of executives, and that can be beneficial. Now, that said, there are downsides. If in a situation where there's a separation of ownership and control by definition, the executives only own a small percentage of the shares. That means that when they are generated, when they're running the company, they will, as shareholders, benefit very little. And that, in turn, means that you can have a situation where they may want to use their control over corporate assets to further their own interests at the expense of shareholders. They need some me time. That what you've got is a situation where they're creating all this wealth for the shareholders. Come on, we deserve some, too. Now, so what this has been characterized as, this potential problem, has been characterized by economists as the agency cost problem in public companies. And it's said that when managers pursue their own agenda at the expense of shareholders, they impose agency costs on the shareholders. How can they do this is a bunch of different ways. They can shirk that's inattentiveness. So they could play golf. That's unlikely, because they're not lazy. They're real type A people. Or maybe they pursue their own business ventures. Another possibility is they might play it safe. They've got a good gig. They don't want to get dislodged. Don't want to be too innovative. Just want to stay in control. But in a way that ultimately is going to have adverse consequences for the company against its rivals. More egregiously, there can be what can be referred to as looting. And I don't mean to go to the company safe and take cash out. I mean that there is improper diversion of corporate assets. These could be unduly lavish offices. Or there can be foreign travel to conferences, things like this. Perhaps most controversially, there can be quote unquote excessive executive pay, where the executives use their influence over the board to ensure that they get paid over the odds, given what their contribution to the business is. Now, this all sounds pretty gloomy. You have managerial control. You have a situation where they want to act in their own interest at the expense of shareholders. This sounds pretty bad for the publicly traded firm, the widely held company. And yet, in the United States, the widely held company dominates. This is also the case in Britain, that companies with the few shareholdings publicly held are the leading firms within those two countries. How can this happen, given the agency cost problem? Well, part of this is because there are external constraints that executives operate under. For instance, there's the labor market for executives. These are ambitious people. They might want to go and work elsewhere for more money. Now, what's the best way to do that? Well, it's certainly not to run your company into the ground because you go to your alternative employers and say, how did your last job go with CEO? Well, we went bankrupt. That's not gonna work so well. So they want to perform well to get jobs elsewhere. There's markets for products and services. So you can find all sorts of companies that what happens is that the company is run badly, market share will fall, revenues will collapse, and the company can go out of business, and you can think of retailers, all sorts of retailers right now who are facing precisely these kinds of problems. Capital markets, if managers have ambitions for their companies, they need money to fulfill these. When they do this, they will be subject to external scrutiny, either by potential shareholders or potential creditors. Finally, there's the market for corporate control. If a company is poorly managed, its share price will fall. What you can get is someone will say, look, those assets, you should be getting way more out of them. They make a bid to the shareholders and say, we'll give you a little bit more of the share price, give us control and we can make a lot of money from that. Now, why is this a market-oriented constraint? Because executives don't like this because what will happen if after a hostile takeover bid, they lose, they're gone. What they do, get out in front of the problem and say, actually, what we'll do is we're gonna run the company in the interest of shareholders in the first place. Keep the share price high enough so that there's no bidder who comes in and says we can do better. Now, then you'd think, oh, well, good, we're all sorted. The market will solve it, except that these market constraints, while significant, aren't by no means perfect. For instance, market for managerial talent, how often do CEOs move around? Not a lot, where you get mobility is lower down, not so much at the top. Markets for products and services, well, if a company has market power, it can take years for the company to be brought to its knees by the market. Market for corporate control, takeovers, they're expensive, they're cyclical, and now, particularly say in the United States, there's lots of defensive techniques can be used to stop hostile bids. So that means that executives, despite these market forces, retain scope to pursue their own agenda, at least to some extent. And what occurs, then, is that internal corporate governance mechanisms, I've said, I've just been talking about external mechanisms, internal mechanisms can operate as a beneficial corrective. And so what's happened is that over the past, since the mid-1970s, there has been emphasis, increased emphasis, on these internal mechanisms. A lot of them have been there, but they were kind of ignored before that, but they've been emphasized more since. What do I, and there's three basic themes that have come to the fore with respect to how corporate governance has changed. One, with respect to the board of directors, you look to independent or outside directors, those who are not executives to keep an eye on the executives. Second, you reform executive pay. What you do is you align pay with performance. Then the executives go, oh, we'll make a lot of money if the company gets run well, and that can help to eliminate the agency cost problem. Finally, what you do is you encourage shareholders to intervene, even though they're diffuse, you say, come on, get with it, and you will benefit if you intervene when companies are going off the rails. Now, I've talked about the nature of ownership and control in the US. It's standard with the large publicly traded firm that there'd be diffuse share ownership. And this can be characterized in the US as an outsider arms length system of ownership and control. The US has this, Britain does, probably no other country has it in quite its purest form. Why is it referred to this? It's outsider oriented because large public companies lack a dominant shareholder. So all the shareholders are outsiders. Arms length reflects the fact that they're typically passive, that they don't intervene. In most other countries, to greater or lesser degrees, you can characterize corporate governance as insider control oriented. Why is this? Well, what you've got is companies are less likely to be publicly traded than they are in the US or the UK, and crucially what you have is typically those public companies have a dominant shareholder. That will be the insider side of things and they will, as dominant shareholders, exercise control. So therefore it's control oriented. Where does Canada fit on here? Canada has a well-developed stock market by global standards and its corporate economy shares key features with those of the US and the UK. However, with respect to ownership and control, so what you have here, this is put together by Morcadale in 2005, this is the proportion of firms that lack a 10% shareholder, which they treat as freestanding and widely held. And what you'll see here, the most recent data is 98, typically it's about a quarter of Canadian companies are like that. And what that means is that, is that the typical arrangement in a Canadian public company is there will be a meaningful shareholder. So characterizing Canada as being outsider arms length, not correct. And this in turn has important corporate governance implications. Now insider control oriented corporate governance, it can be good. How can it be good? Well, one thing that's good about it, what I've been talking about is how these managers with the power they have can do all sorts of naughty things. Well, if you have a dominant shareholder, what you're gonna have is you're gonna have a shareholder who has both the incentive because it's a lot of their money at stake and the power because of their shareholder votes to exercise influence over the managers. So managerial fidelity to the dominant shareholder at the very least is much less likely to pose a problem. Cause the executives know if they go off the rails and the dominant shareholder twigs to this, they're gone. Large rock holders, I mean, and they're better positioned to do this because they have so much money at stake. They tend to be well informed compared to their diffuse shareholder counterparts in the US and the UK. So they're more likely to be vigilant. Also, a company with a blockholder, it can benefit from a longer time horizon. It's often said that companies that are widely held, all they're doing is running around for the latest financial results. If you have a dominant shareholder, they can afford to play the long game and that can be beneficial because by virtue of the continuity which exists, they can pursue projects that are gonna take place over a longer period of time and they develop strong relationships with key stakeholders, such as valued employees and important customers. So you think, well, well, this must be the way to go except that there are downsides inside these dominant shareholder companies. The problem is that what can happen is they can act in their own interests, the dominant shareholders, to the expense of outside investors. The term that can be used to describe this is that, and they'll be working with management here because management knows which side of the bread is buttered, which is, you know, they wanna get along with the dominant shareholders. And what they will do is they will extract what can be referred to as private benefits of control. How can they do this?  They're no longer suited to do it. They're past your sell-by date, but they kinda love it. So they just stick around until the thing just goes down.  So I'm gonna show them and I'm gonna put them in charge. And that doesn't go so well. Again, more, well, is it more nefariously? What they can do if they're, you know, they're keen to get some money out of this successful publicly-traded company and get some more into their own hands is they can arrange transaction-related party transactions with companies that they own 100% that are in favor of the 100% company. So the money slides out of the public company to the benefit of the dominant shareholder. And so what you got is a different set of corporate governance problems. And I'll tie this in by looking at the particular Canadian context. What you got, given what I talked about in terms of ownership and control setup, if your concern is dominant shareholders, then what you've got in Canada is that the priority, instead of accountable managers, arguably should be, let's not let the blockholders get out of line. And Morgan Young said about this in 2006, in Canada, corporate governance problems are likely to pit public shareholders against controlling shareholders, as in Hollinger, as to pit shareholders against managers, as in Enron. What are they talking about here? Well, I think there'll be quite a few people here who will have heard Enron, which was a widely held firm, energy firm that collapsed in a huge scandal in 2001. A few years later, you had a scandal at Hollinger and this was run by Conrad, well, it was run, yeah, to a substantial extent by Conrad Black, he owned a dominant stake. So what you had here was Enron, widely held company, managers doing naughty things. Canadian corporate governance scandal at the same time was a dominant shareholder problem. And the implications of this, Morgan Young, and this is this long quote at the bottom, Canadian corporate governance laws, regulations and best practices must attend to controlling versus public shareholder disputes in firms with controlling shareholders and to shareholder manager disputes in firms without them. This requires a fundamentally broader focus than in the United States, the United Kingdom, where controlling shareholders are relatively rare and good governance is mainly about preventing or solving shareholder manager disputes. So that means in Canada, it's a little more complicated. You can't lose sight of these dominant shareholders. All right, I've now introduced you to corporate governance. I'll talk about some history now, okay? Now, the issues which are involved with corporate governance history have been around in the broadest sense since the corporate form has existed, concerns about how companies are run and how things could potentially go off the rails. So you could at some level say that the history of corporate governance extends back to even to the 17th century when you had charter corporations such as the East India Company and the Hudson's Bay Company. While that's the case and you could theoretically extend the history of corporate governance back that far, you'd be sort of twisting things around because if you went before 1975 and you said, ah, I'm investigating the history of corporate governance, they wouldn't know what you were talking about, okay? The term was not used. And I'll just illustrate this through a series of slides. So here what you've got is, just stories, academic articles, how often corporate governance was talked about in the U.S. and in major U.S. newspapers. So here's how much corporate governance was talked about up to 1974, one there, and that's it, okay? So it started in the 1970s, okay? And this wasn't just the U.S. What you've got in the U.S., it started in the 70s. Other countries, it was happening later. So here's Britain. So financial times, well-known newspaper, almost nothing, and then boom, up there, 1990. The Guardian Observer and other well-known English newspapers, nothing, nothing, nothing. 1990 is when things happened there. What about Canada? So the Globe and Mail, a couple of burps in the 19, because being that close to the U.S., someone would have recognized it, but then it was the 80s and really the 90s it took off. When did academics in Canada start writing about it? A few bumps here, this was a seminar, this was a conference in the U of T law journal. But basically, that was how that went, okay? So that just gives you a sense. With corporate governance, if you're talking about the history of it, you're sure you go back to 1948 and say, in time travel, I'm investigating the history of corporate governance. As I said, people, what are you talking about? So now to be fair, to flip things around, maybe this is just a change in terminology, okay? Maybe nothing really changed, and suddenly, oh, corporate governance, that's what we'll talk about, but nothing had changed. I don't think so. It was more than a change in terminology. And why? Well, so what was going on is that you had a situation where the use of the term corporate governance reflected a change in the way that people were thinking about accountability mechanisms within companies. And what was happening was that, what was happening was that there was increased emphasis on the internal mechanisms of corporate accountability, and that was what the use of the term corporate governance was capturing. It was not simply terminological. Now I'm gonna make that point after I talk and provide a platform for where things were at before the change. And this can be referred to as the managerial capitalism era. And what I'm talking about here is the 1950s and 1960s, here I'm returning now to the United States. And what I'm talking about is the way in which publicly traded firms, the way in which they were operating, and it was an era of managerial capitalism. Now, because what you had was a situation where ownership was separating from control, that's what Berlin mean said, it took a couple more decades before you had a situation where widely held firms were truly dominant. So you get to the 50s and the 60s. And this was a situation where you had managerial capitalism. And what's meant by this? Well, it was a situation where managers were in control because of the lack of dominant shareholders. And it was perfectly set up for managers to be in control because the majority of shares were owned by retail investors, individuals, and it was said of them in 1958 that they were known for their indifference to everything about the companies they owned except dividends and the approximate price of the stock. Anything else? Didn't care. What about boards? Boards, they also weren't particularly likely to constrain management because in this situation what it was is that typically boards had a lot of insiders on them and the outside directors were carefully selected by the insiders for their connections or their friendliness. So this is what the Wall Street Journal said about an Eastern manufacturer, said about boards, quote, 1960, quote, too many boards still meet in secret so they can pass all the resolutions at once and spend most of the time talking about shooting, fishing, and women. So the upshot was that managers led and directors and shareholders followed. Now, you'd think, wow, this is just a recipe for a disaster. These managers are gonna be putting their hands in the till all the time. This is gonna be a huge problem. And yet, 50s and 60s, there was not much appetite for change. You can, if you search around, you can find some kind of two-bit instances of managerial misconduct, but there were no N-Rons, not even close. There were conglomerate mergers where they tacked a bunch of businesses together.  But basically, as I said, little appetite for change. Why is this? Well, shareholders were doing well. The U.S. economy was really rocking in the 50s and 60s and shareholders collateral benefited from this, so they weren't too keen to upset the apple cart. But they're also, crucially, was confidence that executives running these publicly traded firms would not take improper personal advantage of their positions. They would not really, they would not be egregious misconduct in which they would engage. And this is reflected by Burley. Now, Burley, again, wrote the 1932 book and he did it to scare people.  This is pretty scary. By 1959, he acknowledged, you know, things aren't bad. Things are pretty good. He said, quote, the principles and practice of big business are considerably more responsible, more perceptive, and in plain English, more honest than they were in 1929. So, everything seemed to be good. Why was this?  Why weren't they just going for a lot of me-time? Now, various reasons. The, basically what it was is that the nature of corporate leadership at the time was constrained in ways that we probably have difficulty imagining now with the way executives are characterized in the way in which they think. The prototypical executive at this time was a bureaucratically oriented, quote, unquote, and I know the term organization man, but just the way the demographics were, that's just the way it was. And what it was is the key here is organization, because what they did is they subordinated their personal aspirations in favor to foster the pursuit of corporate goals. They were focusing on the organization. And what you had, and again, I realize it's not gender neutral language, but it wasn't gender neutral then, nor is it silverly now. CEOs functioned as industrial statesmen, and what that meant by that was that they specialized in accommodating a wide range of constituencies, and they were cornerstones of, and this is a US social scientist saying this, a moderate pragmatic corporate elite based primarily in the largest American corporations. So why were they not putting their hands in the proverbial till that's too harsh? Why weren't they grabbing more me time? Well, one thing that mattered, these executives, their formative era was the depression and World War II. And these were situations where people were cooperating to get along. There was development of common values of duty, honesty, and service. That may well have been a constraint. But there were other more pragmatic reasons. One, banks were pretty heavily regulated then, so if you wanted to get money to do stuff, it was kind of hard. The banks weren't handing out the money that often. And so, adventurous risk takers, banks just look at you and go, I don't think so. Now, there were other factors. The extent that executives were gonna go crazy. Unions were keeping a pretty close look at them. That's hard, you're unions, are you kidding? But back in the 1950s, 35% of employees in the US were members of unions, and they were very powerful in some really crucial industries. Federal securities laws, which were passed in the mid-1930s, they imposed constraints. The way it was described is David Skel in a 2005 book, what he did is he drew upon the Greek myth of the ill-fated Icarus to describe as a carrion, you could have these business people who were a carrion. They would take risks, risks, risks, risks, fly up close to the sun and crash. So, he had to talk about like the 50s and 60s, like what happened to these Icarian people? Well, he said because of the disclosure involved with federal securities laws, he said it made it, quote, much harder for an Icarian entrepreneur to disguise what he was doing and take desperate gambles. So, that was a constraint. There was also market structure was a constraint. What you had was a situation where in key industries in the US, they were oligopolies, tiny handful of companies dominated these. And what they did is they could be kind of cozy in this situation. They could take a safety first approach, no need to take ridiculous gambles because hey, we're on top. So, what you had is a situation where despite the agency cost problem, despite appalling internal corporate governance, they weren't doing bad things. And this, you know, you didn't need corporate governance. Things then began to change. Yeah, so, the cracks beginning to appear. Well, what happened was as you moved to the 1970s, conditions were changing. And what was happening was the corporate prosperity that had muted concerns, it was fading. Recessionary era, things were becoming more expensive. Things were just a lot tougher. There was meaningful foreign competition for the first time too. So, you just couldn't take into account just the good times, everything would be fine. Now, there were early casualties of these changing conditions. And what it did is it set the scene for the initial use of corporate governance terminology, as I showed with the slides a few minutes ago. There was also, and then again, this wasn't just terminology, there was increased emphasis on internal governance mechanisms as playing a meaningful role, the ones that were largely ignored during the heyday of managerial capitalism. So, where were these early casualties? Well, one was Penn Central. Penn Central was a railway crunched together through a merger and then through a real estate empire on top, and it all collapsed in 1970. It was set in this context, well, the directors had really no clue what was happening, and the board was characterized as a rubber stamp and a horrible example. Then you also had what was happening. There were revelations of dozens of US companies that were engaging in ethically dubious or outright illegal domestic and foreign payments to secure favored treatment. Outside directors of these companies had no clue what was going on, they had no clue. The SEC, the Securities and Exchange Commission said of this, they characterized it as, quote, frustration of our system of corporate accountability. So, we're getting to see some problems arising here, and it was in this context that corporate governance came on to the agenda. What you had in 1977 is that the SEC held six weeks of public hearings to examine shareholder participation into the corporate electoral process and corporate governance generally. Now, ultimately, the SEC refrained from making substantial recommendations as a result of the hearings, but it was certainly being talked about, and in 1980, two bills were proposed in Congress that contained a series of corporate governance-related proposals, such as mandating independent directors for a majority on the board. So, you had corporate governance was of interest in Washington. It was also of interest elsewhere. You had the American Bar Association and the Business Roundtable. The Business Roundtable is a group of chief executive officers, and what they were doing in the late 1970s, they were making proposals saying that the boards of public companies should typically have a majority of outside directors, and that they should delegate key tasks to committees, nomination committee, compensation committee, and audit committee, staffed entirely by independent directors to enhance accountability. The American Law Institute, what it does is it undertakes projects to clarify and modernize areas of the law. It said, yeah, we're gonna take on corporate governance. So, a lot of talk inside and outside Washington about corporate governance. And now to get back to the point, this was not just a matter of terminology. What was happening was there was an emphasis on looking into the company to try to enhance managerial accountability. The consensus was in the 50s and 60s if you want to impose constraints on managers of public companies, you're gonna have to do it through forces external to the corporation. Law, just tell them they can't do it. Public opinion, or you could have market forces. But in the 1970s, the emphasis switched, which was there was people began to believe that, look, if we energize the board of directors, they can do serious work to keep these managers from going off the rails. You won't get another pen central. You won't get all this bribery. Shareholders, it's a little later for them. Shareholders in the 70s were still viewed as kind of hopeless, but in the 80s, things changed and they began to be seen as a potential force for good and for change. And this happened because what is called the deal decade in the 1980s. Now, what happened was interest in Washington diminished in corporate governance. Why was this? Ronald Reagan was elected president in 1980. He, being market friendly, was not interested in the corporate governance initiatives of the SEC or those in Congress. They died. Also what happened was that you had a situation where in terms of the intellectual movement, law and economics, sort of a free market oriented spin on things became influential and they said the market will take care of it. So interest in corporate governance seemed to be waning for a little while. What you had though in the 1980s, and this was gonna set the scene ultimately for corporate governance to come back even stronger, was that you had a lot of hostile takeovers. And I've already talked about how hostile takeovers, how they can be an external mechanism of corporate accountability. That was fine. Things take you along in the 80s. People go takeovers will do it. Takeovers will do it. We don't have to worry about this other stuff too much. But then the deal decade ended and I don't just mean chronologically. The takeover boom of the 1980s collapsed and hostile bids were particularly hard hit. And what this did is people were going, gosh, you know, if we don't have takeovers to keep these managers attentive, what are we gonna do exactly? And so there's an article in the Washington Post, for instance, that noted in 1990 that the takeover artists have all but disappeared acknowledging that this created apprehension that without the raiders standing in the shadows, a key force has disappeared that had served to keep US business leaned energetic and resourceful. And so then people went, hmm, what are we gonna do to keep these managers in line if we don't have the hostile takeovers? This was a boom for corporate governance. Why? Because then attention was refocused on internal governance mechanisms and what they could do to keep managers in check. Twinned with this was that managerial capitalism was fading away rapidly because what you had was a situation of a rethink of the position of shareholders. Now I've indicated under managerial capitalism, you had these industrial statesman, they took into account the interests of all stakeholders and everything was calm, move forward. And what happened was by virtue of the deal decade, they were forced to start thinking a lot more about shareholders. Why is that? Why was there increased emphasis on shareholders? Well, what happened was this increased emphasis on shareholders inculcated the way corporate governance was thought about. In this market friendly decade, that was crucial. Because corporate governance in the 70s, it kind of had a, I mean, Ralph Nader for those of you know who he was was a strong advocate of corporate governance in the 1970s. That would be enough to send people running for the hills in the 80s pretty much. But then shareholder value began to inculcate thinking about corporate governance. And why was this? The takeover wave was crucial here. What was happening was people typically assumed shareholders, they're hopeless. But then in the 80s, what was happening is that the fate of the largest companies in the US was hinging quite frequently on whether shareholders accepted takeover bids or not. And that meant in turn people had to go, ah, you know, shareholders and their votes, they really matter. So what you had was that corporate governance was getting transformed from its kind of soft left 70s version into a more, I guess, neutral, but certainly shareholder incorporated entity that fortified its strength. And you could see this, what you had was in terms of shareholders becoming more involved is the percentage of shares owned by institutional investors, pension funds and so on, increased dramatically from the 60s to the 80s. So they were owning a lot of the shares. And what that meant was they had voting clout and they had reason to care because they had a lot of money in these public companies. And the catalyst initially for them becoming involved in corporate governance in a way that retail investors never would was takeover defenses. Institutional shareholders, they loved takeovers because takeovers, there would be takeover to Premiere and then they would, that would improve their returns. Then the nefarious managers started putting in takeover defenses and the institutional shareholders, they opposed this led by CalPERS initially, a California pension fund. And that was where they started really beginning to push on governance issues, but they did not stop there. Because then as you shifted to the 1990s is really when corporate governance in its modern form began to take hold. You had a situation where, and this was referred to by the Financial Times, the 1990s were the decade of corporate governance according to the Financial Times. Expectations rose about the contribution boards and shareholders couldn't should make. And you had, for instance, talking about boards. Jay Lorsch, an expert on board, said in 2001, after he characterized them as pawns in 1989, he said in 2001, they're like potentates. These are the directors are like potentates. According to Ron Gilson, a very well-known U.S. corporate law academic directors were energized by 2001. And why this happened? Well, they were getting fortified by input by institutional shareholders who were pushing boards to fire CEOs more and they were pushing them to try to put in greater emphasis on performance oriented pay. Now, why did corporate governance become a higher priority in the 1990s? Why was this happening? Well, by this point, managerial capitalism had pretty much completely unraveled in the sense of your industrial statesman, organization, man sort of situation. Because what you had was a situation where executives were now beginning to matter more to their companies and their contribution they could make than they could previously. And in this context, what this meant is the executives began to matter more. Then what should happen is investors should be going, you know, we got to keep an eye on these people and we will you rely on boards to do this. Why were executives mattering more? Well, one was deregulation was deregulation because what was happening here was that the oligopolistic markets of the 50s and 60s, they were being unraveled by deregulation. And what that meant was that ambitious companies could prosper and ones that had been protected previously, they were suddenly exposed to the markets in ways they never had been before. So the way the extent to which executives were performing effectively mattered more. Union power drained away to the extent that unions were constrained on executives. Unions by virtue of combination of economic forces and legal change, they became way less significant. That meant if executives wanted to change things up to deal with foreign competition, intensified competition, they could outsource and downsize in ways that they could have never done in the 50s and 60s. They also had greater access to finance. So, so what happened was in the 1980s is you had a dramatic unshackling of corporate finance. So suddenly companies could get access to money they never could before. So that meant that they could grow in ways they couldn't have before. And as explained by Thomas, the opportunities for American executives expanded tremendously, but it was also kind of scary because what happened was that public companies in their oligopolistic form in the 50s and 60s, they could kind of coast along. By the 80s and pretty much through the 90s, what was happening was if you had bright sparks, disruptors was the term frequently used. Disruptors in the 50s and 60s, they couldn't have got the capital they needed to challenge. 90s, no problem, venture capital, all sorts of ways in which they could get money and they could challenge much more effectively. So the upshot was that you had a situation where the managerial function was changing dramatically. And so it was a situation where people began to think executives really matter a lot more than they used to. And what happened was that people began to quote there being a CEO ain't what it used to be. And so then you had the superstar CEO. And this was for the late 90s. You might recognize her, she's famous for another reason now, Carly Fiorina, she's currently running for president. But she was an example of a superstar CEO of this era. And what happened was it was said that the definition of an effective CEO reputedly changed from that of a competent manager to a charismatic leader. There was an example of this. So there was a huge scandal involving Tyco. And, but this was favorable. I mean, this was described as a profile in business week, the most aggressive CEO. This was great. This was a good thing.  He said, I don't think there's a better CEO in America. He was, Kosolowski was in jail for about 10 years soon thereafter. So this was how dramatic the celebrity CEO culture was developing. What were the implications for corporate governance? Well, with CEOs mattering more, what you wanted, you wanted to have the right person in charge. You wanted to have them with robust incentives to perform. And so what you had there was, what was occurring in the 90s, it appeared, was a growing emphasis on linking executive pay with performance. There was higher CEO turnover. It looked like governance was doing what it was supposed to do in the 1990s. And this was corporate governance, really, in its full flourish. Actually, nah, there was more to it. Because what was gonna happen, and I think what I'll do, what time am I supposed to wrap up? How much longer do I have? How much longer do I have me talk for? How much do you need? I don't know. 12 minutes? 12 minutes. All right, okay. Okay, so I will talk about corporate governance going international. So what was happening was, I've talked about the US up to this point. And I've indicated through my slides that no one was talking about corporate governance in the other countries before the 1990s. Things changed in the early 1990s. It started in Britain with, for those who follow corporate governance, probably the most famous report in the history of corporate governance was the Academy Report of 1992. And what was crucial about this was it became an appendix to the stock exchange, London Stock Exchange Listing Rules. And what had to happen is it had this code at the back of it and companies had to either comply with the code or they had to explain why not. And so corporate governance codes, dozens of countries have them now and complier explain is a crucial part of this. Canada was a first mover in this, well, not Britain was the first mover, but Canada got right on this because in 1994 there was the day report on corporate governance. And this led the TSC, the Toronto Stock Exchange, to bring in complier explain oriented around corporate governance in 1994. Now at the same time this was happening, so what you had was Australia, Canada, Britain, they got in there in the early 90s. Then in the mid 90s, you began to have a situation where you began to have a situation where it was happening in Europe. Because what was happening was in the mid 90s there were some corporate scandals in Europe. Also what was happening is that as European borders were breaking down with a single market, they needed more money. So they went to US capital markets, but what happened was that there was a trade that if US pension funds were gonna give money to European public companies, they wanted to have higher corporate governance standards. So European companies had to think about this. The process repeated itself elsewhere in the late 1990s with Asia, because what there was in the late 90s was that you had a 1997 stock market crash in Asia. And basically the US was still riding high and they're saying, well, you know, the way to get with the program has become more like the US. And the way you do that is to bring in US corporate governance models. And because they could say, well, you have these tycoons and we don't, so you gotta shackle these people and you'll do it through corporate governance. And indeed, there were studies which indicated that standard corporate governance, they could get their capital more cheaply. So corporate governance had spread around the world by the end of the 1990s. Why were things different? So the UK, what you're talking about, the UK is viewed now as a corporate governance leader. Why did they wait until the early 90s? Why didn't they just, like the US, similar corporate governance? Why not? Well, a variety of reasons. One, the UK didn't have the SEC. The SEC was an early corporate governance promoter and a very effective one. The UK didn't have that. It had the London Stock Exchange, which wasn't gonna be in the business promoting better corporate governance. With boards, what was happening to in Britain and it's sort of hard to imagine, it was, I mean, you may have been, Jeremy Corbin's become leader of the Labour Party and he's quite left wing. And he is like a throwback to the 70s. And the 70s, they were there. What were they talking about in Britain then? It was how they were gonna, and this looked like it was gonna happen with the Labour government, how they were gonna bring employee directors. Half the board was gonna be made up of employee representatives. Needless to say, if you were a UK public company or though you were interested in board structure, that was the top of your agenda. This sort of nonsense was happening in the States. Who cares? I mean, we're talking a major reconfiguration. So that ended that. And so it wasn't until the 1990s that they began to talk about corporate governance seriously. What about other countries? Well, here we go back to the ownership and control patterns. Ownership and control, the thing is, what I talk about in the US was that managers were beginning to matter more because of changes to markets and so on. Other countries, all the market changes were all happening but the thing is that who owned the companies didn't change. And so what that meant was, you didn't have to worry about these so much about your managers getting out of control because the dominant shareholders would simply keep a watch on them. So you didn't need the corporate governance until the 90s when you had a situation when basically US investors said we want better corporate governance. What about Canada? Because you think that Canada in the 70s would have, they'd have been paying attention. Why weren't they? Well, here I can only speculate because I haven't written about Canada. 1970s, there were no scandals here like there were in the US. That may have mattered. Canadian Securities Commissions, they were there but they didn't have the clout of the SEC to promote better corporate governance. Finally, and Nova Scotia's an exception but throughout most of the country there was corporate law reform occurred and everyone was kind of going, hey, wow, we've solved everything. So maybe they just didn't think they really needed it. Right, so to begin to, so now we go back to the US. What happened was, it appeared I'd set things up in a situation where, set things up so that, wow, corporate governance responded, this is all good, we don't have to worry. Turned out corporate governance as it existed at the beginning of the, around 2000, wasn't good enough. The way it was described was that the corporate governance, it could not cope with public companies, this is a skill again, with the mass producing new, accurate heroes du jour and giving them the ability to take huge risks almost instantly.  The corporate governance changes, they just could not keep up. They just could not keep up. And so you had Enron, WorldCom, other scandals. Then you had the counter response. This started with Sarbanes-Oxley, which imposed a series of legislative restrictions on public companies reinforced by changes to listing rules of prominent US stock exchanges. Prediction was, by Barron's in 2003, goodbye the Imperial CEO, so it proved. According to Arthur Levitt, former chairman of the SEC, 2005, gone are the days of the autocratic muscular CEO whose picture appeared on the covers of business magazines. The Imperial CEO is no more. Similarly Levitt said in 2005, said it wasn't actually regulation that was the driver here. Rather we are experiencing a cultural change in America that's been building slowly, accelerated by Enron, WorldCom and other corporate debacles. Wall Street Journal concurred in 2007, saying there was a new post-revolutionary generation of power in corporate America, exemplified by CEOs on shorter leashes, more beholden to their board of directors. Now what you should be thinking as we come to 2007 is if you remember the financial crisis, you're going, what, what? Before I get to that, there was evidence that could sustain this. One, this is non-financial US public companies. Their balance sheets in the mid-2000s were in great shape. They had found governance, religion. CEO pay, incredible as it might seem, fell in the 2000s. It fell. And you had the 2008 financial crisis. What you would have expected to see is all sorts of scandals. When share prices dropped 50%, you didn't. Non-financials, you did not see it. Stress test, they passed with flying colors. But there were banks. Banks, the imperial CEOs, they survived Sarbanes-Oxley, they survived those scandals. Why? Because what they delivered in the early 2000s was phenomenal by the standards of the time stock market returns. So people went, okay, imperial CEOs, for banks, yeah, we need them. We need Richard Fould. We need Angela Mozilla. We need Stan O'Neill because they're delivering. It didn't work out so well. Financial crisis after they rolled the dice. Financial crisis, governance really kicked in kind of after the horse bolted. But they fired CEOs. They were changing executive pay, all sorts of things during the financial crisis. The pressure did not let up when the crisis ended. So what you had by 2013, large banks burned by years of scandals, often with swashbucking CEOs at the helm were turning to new bosses who sport well-polished veneers of boringness. Why did this happen? It wasn't driven by the market. It was more driven by regulation, unlike what Levitt said about non-financials. Final step I want to talk about, shareholders became much more active in the 2000s. What were they? Well, what it was is it couldn't just be a situation where US public companies could go totally boring in the 2000s because hedge funds would have come, would have stepped in. Other institutional shareholders, they weren't that interested. Activist hedge funds, they were really interested. You can debate whether activist hedge funds are good or bad for public companies, but they matter. So Cajan and Rock said in 2010 that because of hedge fund activism, CEOs felt embattled, not imperial, embattled. And this has meant a couple of quotes here. Because of hedge fund activism, the balance of power has shifted to shareholders, according to USA Today, New York Times, 2014. Corporate America, previously ruled by chief executives and boards, is racing to do shareholders bidding. This happens because the mainstream institutional shareholders, they like hedge fund activism by and large, creating a happy complementarity. So activist hedge funds, they're not going away anytime soon. So to conclude, I've talked something about other countries, but what I really want to focus on to conclude, not surprisingly given, I've emphasized the US, it's not clear what's going to replace this managerial capitalism.  But regardless of how the new era is characterized, corporate governance has emerged as a significant feature. It's even been said by Rock that the central problem of US corporate law for the last 80 years, the separation of ownership of controls has been largely solved. Whether it's true or not, I mean, you can argue, but what is definitely the case is that if you look at where the public company was in the 1950s and the 1960s and how it was governed then and how it's governed now, there have been a lot of changes. And this has happened under the umbrella of corporate governance. So the rise of corporate governance has had crucial implications. It's not just nomenclature, it's really changed things for public companies. Thanks. Sorry if I want to get over it. Yes. Right. So why would it be different? Well, there's a variety of possibilities. One is simply the size of the economy. So what you've got is a situation where what happens is there's a general tendency that the bigger the company, the more likely it is to have to few share ownership. Why is that? Well, what happens is that companies grow more and more and more and more and more and more and more and more and more and more and more and more and more and more and more and more and more and more bigger they need capital. So what they have to do is they have to issue more shares that tends to make ownership more diffuse. And so what you're going to tend to have is that US, well kind of duh, and the UK will have bigger public companies than Canada will. So that's going to create a tendency. But more offers a different explanation. And this will be more controversial. I haven't written about it so don't stand for this. But what he says is that basically Canada has kind of a crony capitalism. And what it's got is if you want to have deals struck between government and public companies, they'll stick better if you have dominant shareholders because you can count on them being there. And so what happens is basically it's a way of, it's a sideswipe at the nature of Canadian capitalism, essential and Canadian political culture. Saying that what you've got is you've got a bunch of sweetheart deals between politicians and large businesses and they work better if you have dominant shareholders that the politicians can rely upon to keep the bargains. That's the nefarious explanation. Following the point with politicians, about the loss of the UK in the 80s, it's cozy of theirs, you probably know, geography is cozy of this. If there was an industrial, I use the word advisedly, industrial crisis, maybe in a group of companies or in a single company, the government, in my experience, tended to intervene, not always publicly, but nudge, nudge, way quick. That was certainly true when I worked for Mrs. Thatcher. Really, which companies were they saving? British Aerospace is one that comes to mind. Right. Right, okay. So that might explain why they didn't talk about governance in the 80s. The only point I was making is I think, I don't disagree with your pattern at all, but a computer in the UK, all of the interests and governments looking to avoid this, to stabilize that and it really was on a nudge, nudge, way quick. Sometimes nudging the board, sometimes pushing so the board changed management. Right. And I think that was an important factor in ensuring, and it's pretty sure it's basic, it was the big one, was to turn around and share price belt or the power and I don't know why stock was gonna take it over and the government didn't want that to happen. Yeah, that to me is a rarity. I mean, really what was happening in Britain in the 80s and why you didn't get corporate governance, they felt they didn't really need it and why was this? I mean, I would tell kind of the opposite story because what was happening in the 80s was that, that's when you had Hansen and you had BAT and they were doing all sorts of takeovers. And what it was is that the reason, you didn't need to worry about your boards very much because if a company was underperforming Hansen would just buy it. And so I actually think in the 80s what it was is that the market was going crazy in Britain. Not the, I mean, sure, strategic sort of military things maybe, but I mean, you're looking at brewers, you're looking at all sorts of industries. It was, they didn't care about their boards because they knew takeovers would do it. And so they faced the same phenomenon that the US did when the takeovers ended, is go, what now? And then it was in the early 90s that the British went, oh, we better look to our boards. And in a nice, nice drinks, the government succeeded there. The government was very interested in what Kevin Sharp was doing in a number of things, not necessarily domesticated. Sure, they might have been interested, but. And old and had objectives to be achieved. Right, yeah. Which were achieved. Right, gee, you know, hearing that Margaret Thatcher was the agent of state capitalism, that must be a pretty minority view. I mean, that the 80s, you know, maybe there were elements of that. You obviously have some inside information, but like in most of the corporate world in Britain in the 1980s, it was market forces went wild. So I think you're telling a very tiny slice of the story even if you have inside information about it. Sure, fine, but I mean, I just, you know, the vast majority of it, they just let it rip. That was what Thatcher was all about. Certainly compared to what they had in the 70s. Yes. So at this point. Is it optimistic or just before the next disaster? All right, so at this point, the way I characterize it now is reasonably agnostic. Essentially the point I'm seeking to make is that in a taxonomic point of view, the public company functions, even though they continue to dominate, particularly in the US, the way in which boards and shareholders interact and what you expect out of them is considerably different than it was 50 years ago. So then the testing question is, will the public company continue to be the dominant form of capitalism within the United States? Have these changes sufficed so that they can continue to meet the challenges? And that is a difficult question because what you've seen in the US is that IPOs have collapsed. So they don't, and then if you go back to the mid 2000s, there were lots of companies being taken private. And you know, you, if you trawl around, you can find a series of people arguing that the public company's future is very dismal. I am less convinced of that. If you still look at who dominates in the US, they are still publicly traded firms. There's all the unicorns out there, for example, that have billion dollar value and they're still waiting to go public. But ultimately the ones that are successful will, they're ones that will fade away, but they probably all will either end up, either bought by, it will be bought by a publicly traded firm, or they will go public or they will disappear. The idea that they are gonna stay over say 10, 12, 15, 20 years as a private company with a value of over a billion dollars, to me seems unlikely. So they're gonna end up channeled in as public companies. Public companies will continue to dominate. Of course, you know, is there another financial crisis coming around the corner? If I knew that, well, you know, I wouldn't be up here talking, I'd be investing. But tentative conclusion, and it's something I'm thinking about, is that there is, is optimism right, it depends on your view of the public company. That if what you're gonna be thinking about is, I don't think the corporate governance with its orientation around public companies is going out of business anytime soon. It will be around, so will the public company. You know, that's optimistic, but that's what I'd say. Very complicated story in a very easily digestible way. You have too fast. One thing I was curious though, is that you didn't touch much on jurisprudence. I was wondering why is that because you don't feel that it has as much of a role to play or just more curiosity as your commentary and why you didn't touch as much on jurisprudence? Well, I have a paper that'll probably end up about 65 pages in print that's coming out talking about basically what was Delaware's contribution. And so, what was Delaware's contribution? Because I mean, for those of you who don't know, Delaware is the premier corporate law state in the US because that's where 55, 60% of public companies were incorporated. And they have a court system where they hear a lot of important cases. And the way I basically say it would be executive pay, Delaware was largely irrelevant because the statutes say nothing and the Disney case indicates they didn't wanna regulate executive pay. Shareholder activism, hedge funds, not really particularly significant. But where they did matter was in two ways. One was I indicated that corporate governance changed when takeovers ended because they suddenly when the tide went out, they kinda had to go, oh, we better do something else if the takeover raters aren't gonna do it. Delaware jurisprudence did definitely play a role in ending or greatly curtailing hostile takeovers. So that was one change. The other is that in terms of boards, there were key Delaware decisions that what they did is they nudged and encouraged public companies to use independent directors. And so, they were going with the grain but it certainly reinforced the idea that independent directors should play a crucial corporate governance role. So it was definitely there, but again, it was only a paper in which I talked about it. Definitely played a role but it tended to be only in a subset of areas and they tended to go with what was the governance grain ultimately. But in terms of ending takeovers, they were potentially important. They were important. Because the Delaware chancellors are notorious for writing in academic journals and lecturing and doing all the things that academics do. Do you think part of it may be also that their influence perhaps was more pervasive in that form as opposed to necessarily in their judicial decisions? So the way that went down is that if you cast your mind back, if you get your sense of what the Delaware courts, they're so high profile, they're everywhere now. Things were way different in the mid 80s. They was just a quiet court. Everyone knew that companies were corporate there but if you were looking, if you picked up a 1982 edition of the case book, there were not a lot of high profile Delaware decisions in it. There was this synergy between the takeover cases in the 1980s and the influence that the Delaware courts had on those but the takeover cases in the 1980s made the Delaware courts. It brought them high, and so the first really high profile judge there was William Allen. And what William Allen was the first one to get out there and write a ton of stuff. And that was late 80s, it was a 1990s phenomenon. And so I would say that by that point, what they were doing is they were trying to influence public companies through their writing. The real strying does it a lot. But to the extent that they were doing this, it was tended to reinforce already existing norms. Have better boards, have more independent directors. But some of the sting was taken out of it with the Disney case, for instance, because when they didn't hold the board libel in Disney, for all the stuff that Chandler was saying about, oh, you can't have an imperial prince running the magic kingdom and all this kind of stuff, which is what he said about Eisner, the board wasn't held libel. At which point, I think directors kind of went, oh, okay. After Smith and Van Gorken, where they actually were held libel, I mean, because it's another project I've worked on, the chances of a director being held personally libel with a public company through state level court decisions, Danishingly small. And that has an impact, because it kind of goes to kind of the cry wolf problem. Okay, yeah, you can say what we gotta do, but if it doesn't stack up, we're not gonna, they just begin to ignore it. So it's complicated, definitely part of the story, but ultimately, and I'm not sure that the Delaware audience when I gave the talk, I think they're kind of going, ah, we wanna hear we're really important. But I played it straight and called, because it's gonna end up as a paper. I don't wanna exaggerate, get it wrong. So significant, can't ignore it, but not dominant. Any other questions? Just, if you can help me make a comment. Okay, thank you for this. I teach corporate governance, that was the street, a raw school of business. I was just wondering, it's a very nice summary from the campus, the evolution of corporate governance. I was wondering, what do you think about that 1993 SCC requirement, disclosure of executive compensation? How does it help? Help? It helped make, it helped CEOs get a lot richer.  I mean, what it did is the disclosure, just meant you could find out more readily what other executives made. Disclosure, the idea that disclosure is gonna bring down executive pay is, no. Disclosure accelerates executive pay. The 1992, I mean, and the thing is, is a project I'm actually working on right now, is like, why was it, why, so the interesting issue in part was, executive pay in the US, the way things worked was, it rocketed it up in the 80s and the 90s, but from the 40s to the 70s, did nothing. It was flat, in fact, they lost ground. So what we're investigating is why, like what, quote unquote, worked during that era. And the way we talk about disclosure, there's a variety of things going on, but I think the norm structure's changed. I think the influence of unions changed. A whole bunch of things changed. And what that meant is disclosure and what it could do, like in the 40s, 50s, and 60s, disclosure probably scared executives, and they would not take as much money as they otherwise would. So it was kinda scary. But then through the 80s, when basically the norm structure of public companies changed and ties into what I've talked about, people by the 90s were thinking that executives were way more important than they used to think they were in the 70s. So by the 90s, what was happening is they were going, we need to have our superstar CEOs, we need to align pay with performance. And what that would mean is, if they deliver the goods, we gotta pay them a lot. And then adding fuel to the fire would be, oh, well, what we're gonna do is we're gonna throw a lot more information out there so they can find out just how much their rival across the street is being paid. And then what you've got is the exact comp people would go, yeah, well, they'd go to the boards and what would happen is, you go to the boards and they go, the exact comp people would, the advisors would go, look, board, do you think you have a below average company? And of course, no, of course not. Do you think you have a below average CEO? No, of course not. And then what you would do is you go, okay, we have all this raft of data that we've got from the SEC that indicates that in fact, your CEO is paid below average. I think it's time to get with the program, reflect the fact that this is like a great CEO. And of course, what we'll do is we'll have a lot, lobby performance oriented.  And we will recognize just how wonderful a company you have and just what a wonderful CEO you've got. And you could use the disclosure so it accelerated things in the nineties in ways that in the fifties and sixties would have damped things down. On the other side, look at Michael Jensen, he said that if development there, these people will be robbing everything, even the pigs and mortars and we'll be taking to their houses, because no one will be knowing what they're doing and they'll be taking everything from the corporation. At least we know right now that there is activism in us and not stop that. So there is a better relationship, I think. Maybe, I still haven't seen anyone that said, I mean, the idea that, sure, you know what they're taking, I guess, but the idea that that has had any depressing effect on CEO pay, I don't think so. You know, I mean, Grave Crystal, who's a well-known, so he said in the late, the 1990s, actually his early 2000s, he said he could not believe what happened because he was an advisor to the SEC in the early nineties and he wanted to get executive pay down. He found religion and wanted to get executive pay down. So he advised me, he said, you know, what you gotta do is you gotta enhance disclosure. And he could not believe that these executives would so shame, so unashamed, take more money. He's, what? This isn't the way things are supposed to go down.  So, yeah. But I'd love to hear maybe a few more thoughts on the role of maybe technology and some of these things. You mentioned in the context of so we're getting opinions, but I was wondering if you could say something more about the challenge to corporate governments posed by technology to come to the rise of high-pricy trading, algorithmic trading, even virtual currencies that are going for it. So where I would see it coming from, more with the story that I'm developing, technology is really important. Why is it important? Well, what I've argued is that corporate governance was a response to a situation where managers were operating with fewer constraints than they previously had. Now what happened was that in the 80s and the 90s is that it became possible through technological innovation for dis, I mean, it all seems so primitive as to what the internet was in the 90s and whatever. But what they were able to do is that with technology you could take on the first movers so much more readily than you could before.  And you just look at, I mean, you can look at Microsoft how they rose and took on IBM and stopped them. Then Microsoft gets taken out. That's all technology. Now, tech is a little tricky though because it throws out some interesting governance twists like Google, which have dominant shareholders, which is kind of different. And you've got a situation where is Google gonna become? Is it kind of like a 60s conglomerate? One or the other thing it could be is I think a parallel could work because I'm still thinking about this and I think the paradigmatic company for tracking through how US corporate governance evolved was AT&T because it went from a situation where it was quintessential managerial corporation and then it got disrupted. And what it had, though, as an example of its statesman-like, and again, I use the term advisedly, it was Bell Labs. And it was phenomenal the amount of, they threw at it. But then it was brought down by changing market circumstances. Deregulation was obviously pivotal there, but so was technology. I mean, part of the thing that was going on as to why they couldn't have the telephone monopoly is cellular phones and the whole thing and it all just fell down. And that's technology driving it. Anyway, what is Google? And the parallel I find kind of intriguing, only to think about it a little bit more, is Google is kind of like Bell Labs. They're throwing all this money at these electric cars for goodness' sake. I mean, it's not a standard conglomerate which goes out and buys the businesses. It's trying to build them. It's experimenting. And we'll see how that plays out. Even Google, with their dominant shareholders, they kind of go, well, we better separate it out because the markets find it a little bit confusing, not surprisingly. So anyway, to make that sort of a, that was, but technology really is important to the story. High-speed trading and how important is it to the story? Well, I've got a paper which argues that in fact you'd be surprised at how effective share price, how effective stock markets were in terms of translating information into prices over 100 years ago. They did, the amount of information in the market was not particularly substantial, but they were super fast. People go, well, the telegraph, well, that's a joke. But the fact of the matter is that prices and developments, they got priced in, like that, really, really fast. And so how important it, so my initial reaction is that I don't see that that is having huge changes. I'd be more likely to see things like ETFs as having a huge impact because they're real passive shareholders more than high-speed trading. It's not really even what hedge funds do, not the kind of activist hedge funds. They go in, they can get a big stake pretty fast by virtue of technology really matters, but not quite the way you framed it. And maybe just to come back to some unclear with your help on Google and AT&T, so basically sell Google shares if you've got one. Well, you know, AT&T had a pretty good run for quite a long time.  And of course the thing is that AT&T, they ultimately had hinged on a government monopoly. The key here is that it's been a privately constructed, not monopoly, but you know what I mean, they're dominant, right? And it's gonna be hard to displace that. They should have a pretty good run as long as they can do that. But, you know, the thing is, if you've got such a phenomenal company, the fact that they engage in a little bit of private benefits of control, you know, you still, there are lots of companies where there's some private benefits of control that you kind of go, yeah, I wouldn't mind grabbing those coattails. Google might be like that. No, no, no, as I said, I wouldn't be doing this if it was worth anything. I wouldn't be here, you know, I'd be in my yacht. Terrific lecture. Thank you. And I appreciate it.