SB: It’s disappointing to me that leaders of the bar haven’t emerged to advocate a more responsible bar, one that strikes a balance between individual achievement as well as the common good. Why would someone graduate from our alma mater and then go to a law firm so they can help write legal briefs that keep injured consumers out of court?
I listened to two speakers at this year’s Yale Law School graduation, [YLS professor] Stephen Carter and [California Supreme Court Justice] Goodwin Liu. Both gave very good talks, focused on the role of lawyers today in advancing the public interest. They were serious about public service, and so were the graduates —– but many of them will end up writing briefs for big banks.
DL: In your discussion of proxy fights and LBOs, you describe the well-known Skadden Arps versus Wachtell Lipton rivalry — and you seem to give Marty Lipton the moral high ground, in terms of his criticism of corporate raiders and their focus on short-term results. As a Wachtell alum myself, I can’t say I disagree — but how would you respond to the critics who claim that Lipton’s worldview is self-serving, given that Wachtell often defends companies and existing management?
SB: [The late Skadden name partner] Joe [Flom] is not here to argue the other side, but I understand the argument. Yes, many companies are badly run — and if activist investors wants to improve shareholder value, who is Marty Lipton to say they can’t do that?
But there’s no question that the result of short-term thinking has been very bad for the country. For example, take executive compensation and corporate acquisitions. A lot of CEOs do acquisitions just so they can be CEOs of bigger companies — which, when the compensation consultants come around, means bigger compensation for the CEO.
DL: You express optimism about the pushback against short-term thinking in corporate America. But at the same time, hedge fund magnates who make money by pressuring companies to “increase shareholder value” seem to be doing better than ever. Do you really think that a more stakeholder-oriented view can and will take hold?
SB: Yes, I do. This is one area where you can see the possibility of both incremental and not-so-incremental reforms. For example, imagine weighted votes for how long a shareholder has held their shares, or a change to capital-gains taxation that would favor holding stocks for longer periods of time.
I talk in the book about Facebook — which, recent controversies aside, has been a very good investment. The company’s dual-class share structure has given Mark Zuckerberg the ability to focus on the long term, without fear of being taken over by another company after going public.
DL: You express skepticism towards the doctrine of commercial free speech — but at the same time, you have spent much of your career in the for-profit media sector. Do you see any tension between these two views?
SB: No, I don’t. In Citizens United, the Supreme Court just veered out of its way to give First Amendment protection to corporations of any kind. That was wrong.
The case involved a media company that wanted to make a documentary about Hillary Clinton. Who is the FEC [Federal Election Commission] to say they can’t do that? The result of Citizens United was correct — but the dicta in that case now means that everyone can do everything in terms of corporate free speech.
DL: And what, in your view, can be done about the problem?
SB: We need to pass a constitutional amendment to fix this. Some might say it’s naïve to think it can be done, given the difficulty of amending the Constitution. But public disgust around money in politics is growing so rapidly that something like this is actually possible.
One of the overriding themes of the book is: how does all this change? And one answer is that things will get so bad that they’ll get good again. The public will get so disgusted, and we’ll decide that we’re not going to take it anymore.
And money in politics is really issue number one. You can trace practically all of our other problems — health care, the tax code, infrastructure — back to money in politics.
DL: In your discussion of the “too big to jail” problem, you talk about government not cracking down enough on corporate wrongdoers, as well as the related issue of the revolving door between government and law firms. Do you have any thoughts on how to address these problems?
SB: The press has to get a lot better at writing these stories. They present settlements with big companies as big victories, but in many cases, they’re not harsh enough — and should actually be bad items on the government lawyers’ résumés.
As for the revolving door, it’s not bad that prosecutors know they can make a good living somewhere after their government service. What needs to be fixed is that the people in charge need to have real guidelines for dealing with corporate wrongdoing, and the country needs a culture of personal responsibility for the common good.
DL: What you’re calling for sounds a lot like noblesse oblige — which was something that, for all its faults, the old-boy network did believe in, to a certain extent.
SB: Absolutely. There were many bad things about the old ways of doing things — my wife had to be taken thorough the side door of a private club when she was having lunch at her Wall Street law firm — but there was a certain sense back then of, “I got it good, so I need to give something back.”
When I was at the American Lawyer, I used to make fun of lockstep compensation, another old way of doing things. But it did have the virtue of not making partners compete with each other. If one partner has low hours because of pro bono work or because he’s sick, that’s okay — we are partners.
The whole thing is about balance. Communism in theory is good because everyone eats. But under Communism, if you have no incentives, then no one eats. You need a balance. The whole history of our country is about striking a balance between individualism and equality.
DL: You end on an optimistic and hopeful note, but when I read the book, the forces contributing to decline generally sounded much more powerful to me than the forces of reform you highlight. Do you truly think that the trends you describe in the book can be reversed — especially since, as you describe so well in the book, many reforms end up being twisted or “boomeranging”?
SB: In doing the reporting for the book, to understand the problems, I met so many people working against the problems. I talk about them in the book — the people behind organizations like Issue One, OpenSecrets, C4Q (Coalition for Queens), and Baruch College, to name a few.
They’re not crazy or naïve or stupid. They’re resilient — and there are millions of people like them out there, who are going to lead that revolution.
In the end, what choice do we have? This country isn’t just going to roll over.
DL: Which brings us to President Donald Trump, of whom you’re not a fan. Does his presidency give you pause in terms of thinking that the country can be turned around?
SB: Trump is going to help break the fever. When the coal miners realize that they haven’t gotten their jobs back, when factory workers don’t have jobs on Election Day 2020, they’re going to blame someone — and sooner or later, they won’t blame the Democrats.
Of course, we need political figures who can lead these people. Hillary [Clinton] just wasn’t able to connect. But even if she had gotten those 70-something thousand votes, we would still be having a conversation about a country in paralysis.
Trump rode a wave of frustration and got 46 percent of the popular vote. If someone can ride that same wave, but without cynicism and division, that someone should be able to get 56 percent.
DL: In closing, what can lawyers and law students do to help take back our economy and our democracy?
SB: It’s so obvious, but always think about the balance between personal achievement and the common good. That’s what the law is for.