TY  - JOUR
ID  - publications22270
UR  - http://tse-fr.eu/pub/30623
IS  - 2
A1  - Litov, Lubomir P.
A1  - Sepe, Simone M.
A1  - Whitehead, Charles
N2  - The accepted wisdom — that a lawyer who becomes a corporate director has a fool for a client — is outdated. The benefits of lawyer-directors in today’s world significantly outweigh the costs. Beyond monitoring, they help manage litigation and regulation, as well as structure compensation to align CEO and shareholder interests. The results have been an average 9.5 percent increase in firm value and an almost doubling in the percentage of public companies with lawyer-directors. This Article is the first to analyze the rise of lawyer-directors. It makes a variety of other empirical contributions, each of which is statistically significant and large in magnitude. First, it explains why the number of lawyer-directors has increased. Among other reasons, businesses subject to greater litigation and regulation, and firms with significant intangible assets (such as patents) value a lawyer-director’s expertise. Second, this Article describes the impact of lawyer-directors on corporate monitoring. Among other results, it shows that lawyer-directors are more likely to favor a board structure and takeover defenses that reduce shareholder value — balanced, however, by the benefits of lawyer-directors, such as the valuable advice they can provide. Finally, this Article analyzes the significant reduction in risk-taking and the increase in firm value that results from having a lawyer on the board. Our findings fly in the face of requirements that focus on director independence. Our results show that board composition — and the training, skills, and experience that directors bring to managing a business — can be as or more valuable to the firm and its shareholders.
VL  - 102
TI  - Lawyers and Fools: Lawyer-Directors in Public Corporations
AV  - none
EP  - 480
Y1  - 2014/01//
PB  - Georgetown Law Journal Association
JF  - Georgetown Law Journal
KW  - Corporate governance
KW  - Board of directors
KW  - Board composition
KW  - Lawyer-directors
SN  - 0016-8092
SP  - 413
ER  -