On Friday, March 19th, William T. Allen, former Chancellor of the Delaware Court of Chancery, delivered the Distinguished Scholar Lecture at the 22nd Annual Ruby R. Vale Interschool Corporate Moot Court Competition
After opening remarks from Vice Dean J. Patrick Kelly
, Ruby R. Vale Professor of Corporate Law Lawrence A. Hamermesh
introduced Allen, saying, “He is one of the most insightful practitioners of business and corporate law that it has been my pleasure to encounter.” As he took the podium, Allen joked, “Larry, I’d like a copy of those remarks so I can give them to my wife.”
Allen’s talk examined the origins of the financial crisis and the subsequent response. “Focus on corporate governance misses the fact that it was a systemic failure,” he stated strongly, adding, “Blaming corporate governance is obfuscating the real problem.” Describing the real problem as an “excessive of global liquidity” and an overleveraged U.S. economy, he described how the process of securitizing home mortgages, many of them risky, led to the problems of Fannie Mae and Freddie Mac. Trading of these securities led to credit default swaps in which A.I.G. would sell insurance for these investments without having the actual capital to underwrite the policies.
Allen affirmed that shareholders were a part of the problem rather than the solution, noting that shareholder were motivated by short term gains that led to riskier decision-making, and that the government’s drive for greater oversight deflected criticism from the government on to corporate executives. He added that shareholders should shoulder more of the risk because shareholder assets are more diversified than those of a corporation. He finished by saying that the “enabling approach Delaware has to corporate governance is better than the administrative law approach of the SEC.” Professor Allen took questions from the audience after concluding his remarks with the joke, “I didn’t have enough time to make it shorter.”
A graduate of New York University, William T. Allen earned his J.D. from the University of Texas School of Law. He served on the Delaware Court of Chancery from 1985 to 1997. Today he holds the Jack H. Nusbaum Chair in Law and Business and directs the New York University Pollack Center for Law & Business, a joint venture of the Leonard N. Stern School of Business and the NYU School of Law.