Icarus in the Boardroom: The Fundamental Flaws in Corporate America and Where They Came From (Law and Current Affairs Masters)

261 Pages·2005·1.06 MB·English

by  David Skeel

Icarusin the Boardroom

David Skeel
Icarus in the Boardroom
The Fundamental Flaws
in Corporate America and
Where They Came From
1
2005
1
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Library ofCongress Cataloging-in-Publication Data
Skeel,David A.,1961–
Icarus in the boardroom :the fundamental flaws in corporate America
and where they came from / by David Skeel.
p.cm.
ISBN-13 978-0-19-517471-7
ISBN0-19-517471-2
1. Corporate governance—United States. 2.Directors ofcorporations—United States.
3.Industrial management—United States. I.Title.
HD2785.S437 2004
338.0973—dc22 2004009677
9 8 7 6 5 4 3 2 1
Printed in the United States ofAmerica
on acid-free paper
For Carter and Stephen
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Acknowledgments
Thanks go first to David Kairys and Dedi Felman. David, a
friend and colleague for well over a decade, first proposed
that I write the book in fall 2002,then spent months going back
and forth with me on the ideas and structure.Dedi,my editor,
also shaped both the initial structure and final version of the
book,reading and editing every paragraph ofevery chapter with
extraordinary care and insight. It would be hard to overstate
Dedi’s and David’s influence. They have been collaborators—
almost like co-authors—on every aspect ofthe book.
I was blessed to have several excellent research assistants while
I was writing the book. Seth Chertok spent a year plowing
through old hearings and other historical information,as well as
researching more recent developments. Michael Sherman pro-
vided equally able assistance in his final year oflaw school,before
heading offto New York law practice.
Several colleagues and friends read drafts ofthe entire manu-
script.I am especially grateful to Mitu Gulati and Mark West for
extensive comments and encouragement throughout the project.
Brian Cheffins provided numerous insightful suggestions, both
in writing and on a crowded train ride from London to Cam-
bridge. Reuven Avi-Yonah, Jeff Bauman, Sally Benner, Nell
Minow, and David Skeel Sr. also offered valuable comments at
key points in the writing process.
Thanks also to Bill Draper,Merle Slyhoff,and the staff at the
Biddle Law Library at the University ofPennsylvania Law School
who cheerfully (and quickly) tracked down even the most ob-
scure source materials.It is hard to imagine that there is a better
law library anywhere.
I am grateful to my dean,Mike Fitts,for his ongoing encour-
agement,to the University of Pennsylvania Law School for gen-
erous summer funding, and to Jessica Ryan and Tracy Baldwin
for the copyediting and design.
The germs of several of the arguments in the book date back
toa short piece Mark Noll and John Wilson invited me to write
forBooks and Culture,and to an op-ed John Timpane commis-
sioned for the Philadelphia Inquirer.Thanks to each of them for
the invitations.
I am most grateful of all to my family. My parents are ever-
encouraging,even when work has interfered with the possibility
of visits.My in-laws,Erich and Kay Haegele,live nearby and are
always ready to lend a helping hand.To my wife,Sharon,I owe
deep gratitude of every kind. The Proverbs say that a virtuous
woman is much to be praised; Sharon is that and much more,
from scholar to mother and wife and friend.The book is dedi-
cated to our children Carter and Stephen.Watching them grow
up is one ofthe great joys ofour lives.My prayer is that they will
look back on this time as an era when the fundamental flaws in
corporate America were addressed.
viii | Acknowledgments
Contents
Introduction 3
One Jay Cooke and the Birth ofAmerica’s
First Large-Scale Corporations 15
Two The Gilded Age and the Crisis ofCompetition 50
Three Icarus Meets the New Deal 75
Four “IWant to Be Like Mike”:LBOs and
the New Corporate Governance 107
Five Enron,WorldCom,and the Transformation
ofIcarus 143
Six “The Most Sweeping Securities Law Reforms since
the New Deal” 175
Seven “We Have Met the Corporation and It Is Us” 193
Notes 217
Index 235