d ILE INSTITUT E for LAW and ECONOMICS ANNUAL REPORT 2006–2007 A Joint Research Center of the Law School, the Wharton School, and the Department of Economics in the School of Arts and Sciences at the University of Pennsylvania d INSTITUTE for LMAW and ECONOMICS 1 Institute for Law and Economics COVER PHOTOS ounded in 1980, the Institute for Law and Economics at the University of Pennsylvania has an ambitious agenda 2 Board of Advisors 1 Silverman Hall interior, with entrance to ILE offices at top of stairs. that is timelier than ever. The study of law and economics remains the most rapidly growing movement in legal 4 Message from the Chair 2 Deal Day, Spring 2007. (see page 18). Fscholarship and jurisprudence. Under the sponsorship of the Law 5 Message from the Dean 3 Chancery Court Panel on “Compliance.” From left: Simon M. Lorne, School, the Wharton School, and the Department of Economics Millennium Management, LLC; Janet L. Kelly, ConocoPhillips Company; in Penn’s School of Arts and Sciences, the Institute has played a 6 Message from the Co-Directors Michael L. Wachter, University of Pennsylvania Law School; Hon. Leo E. leading role in this expanding field. Strine, Jr., Delaware Chancery Court (see page 16). Cross-disciplinary research, the cornerstone of the ILE, 7 Roundtable Programs 8 Corporate Governance, Spring 2007 4 Distinguished Jurist lecturer Hon. Richard A. Posner, U.S. Seventh Circuit seeks to influence the national policy debate by analyzing the 10 Corporate Finance, Fall 2006 Court of Appeals and University of Chicago Law School (see page 24). impact of law on the global economy, spotlighting the significant 12 Corporate Law, Spring 2006 role that economics plays in fashioning legal policy. Our innovative 13 Labor Law, Fall 2005 5 Corporate Finance Roundtable, Fall 2006. Front row: William A. Ackman, roundtables and conferences, launched in 1985, complement 14 Corporate Law, Spring 2005 Pershing Square Capital Management, L.P. Middle row: Jill Fisch, Fordham these goals by provoking in-depth and, frequently, ground-breaking University School of Law; Roy J. Katzovicz, Pershing Square Capital 15 Chancery Court Panels examinations of critical issues. These and other programs high - 18 Deal Day, Spring 2007 Management, L.P. Back row: Benjamin Strauss, Pepper Hamilton LLP 19 Deal Day, Spring 2006 and Spring 2005 (see page 10) . lighted in this Annual Report have helped the Institute to stay on the leading edge of this cross-discipline. 20 Lectures 6 University of Pennsylvania Law School, Silverman Hall. The Institute for Law and Economics has unique advantages. 21 Law and Entrepreneurship We draw on the research and teaching strengths of the Law 24 Distinguished Jurist School, the Wharton School, and the Department of Economics. 27 Academic Events Our geographic location is optimal, allowing us to bring together 28 NYU / Penn Joint Conference, Spring 2007 participants from Washington and New York for full-day meet - 29 Penn / NYU Joint Conference, Spring 2006 ings and still get everyone home in time for dinner. We have 30 ILE / Finance Seminars been able to call on the expertise of Penn Law School alumni 31 ILE Seminar Series who occupy key positions in law, business, and government. And, critically, we have an extraordinarily distinguished cadre 32 Publications and Papers of board members and sponsors who are willing to give of their 34 Associate Faculty time and expertise to make our programming a success. In each area, from our public lectures through our closed- 40 Institute Investors door roundtables to our more academically oriented faculty workshops, we are driven by the same mission: to use the tools of economics to understand the law. In a world in which complex legal rules govern economic relationships, the tools of economics provide a way of asking whether the law creates appropriate University of Pennsylvania Law School, Tanenbaum Hall; incentives to encourage actors to maximize social welfare. The Wharton School, Steinberg Hall-Dietrich Hall. Funding for the ILE comes from a diverse group of corpora - tions, law firms, foundations, and individuals who endorse our work each year. Over the past decade, the Institute has more than tripled its donor base to provide ongoing support for the programs discussed in this Annual Report. A list of Institute Investors for 2006 –2007 appears on page 40. 1 board of advisors BOARD OF ADVISORS 1 M Gil Sparks (left) and Joe Frumkin 2 Barry Abelson 3 Bruce Silverstein Barry M. Abelson Robert L. Friedman Simon M. Lorne John F. Schmutz 4 Pepper Hamilton LLP Chair, 2001 –2007 Vice Chairman and Chair, 1990 –1994 Jerry Rosenfeld Philadelphia, PA Senior Managing Director and Chief Legal Officer Retired Senior Vice President and 5 123 Chief Legal Officer Millennium Management, LLC General Counsel Pam Craven James H. Agger The Blackstone Group L.P. New York, NY E. I. du Pont de Nemours & 6 Chair, 1994 –2001 New York, NY Company, Inc. Don Wolfe Retired Senior Vice President, Michael E. Lubowitz Wilmington, DE 7 General Counsel and Secretary Joseph B. Frumkin Weil, Gotshal & Manges LLP Bob Lonergan Air Products and Chemicals, Inc. Sullivan & Cromwell LLP New York, NY Howard L. Shecter 8 Allentown, PA New York, NY Morgan, Lewis & Bockius LLP J. Anthony Messina Joel Friedlander Philadelphia, PA Alan Alpert Perry Golkin Buchanan Ingersoll & Rooney PC 9 Managing Partner, Member Philadelphia, PA Robert C. Sheehan Casey Cogut M&A Transaction Services Kohlberg Kravis Roberts & Co. Executive Partner 10 Alan Miller Deloitte Tax LLP New York, NY Skadden, Arps, Slate, Meagher & Paul Levy Co-Chairman 456 New York, NY Flom LLP 11 John G. Harkins, Jr. Innisfree M&A Incorporated New York, NY Martha Rees William D. Anderson, Jr. Chair, 1980 –1990 New York, NY 12 Managing Director Harkins Cunningham LLP Victoria E. Silbey G. Daniel O’Donnell Bob Sheehan Goldman, Sachs & Co. Philadelphia, PA Senior Vice President- Dechert LLP 13 New York, NY Legal and General Counsel Leon C. Holt, Jr. Philadelphia, PA Jim Odell SunGard Data Systems Inc. Marshall B. Babson Retired Vice Chairman and 14 James E. Odell Wayne, PA Hughes Hubbard & Reed LLP Chief Administrative Officer Dan O’Donnell ( left) and Jim Agger General Counsel, The Americas New York, NY Air Products and Chemicals, Inc. David M. Silk 15 UBS Investment Bank Allentown, PA Wachtell, Lipton, Rosen & Katz David Silk Michael J. Biondi New York, NY New York, NY 16 Chair, 2007 – William B. Johnson 7 89 John E. Osborn Victoria Silbey Co-Chairman, Investment Banking Chairman Emeritus Bruce L. Silverstein Executive Vice President, 17 Lazard Frères & Co. LLC Whitman Corporation Young Conaway Stargatt & General Counsel and Secretary Howard Shecter New York, NY Chicago, IL Taylor, LLP Cephalon, Inc. 18 Wilmington, DE Fred Blume Stephen J. Jones Frazer, PA Alan Miller Chairman Emeritus Vice President, General Counsel A. Gilchrist Sparks III 19 James A. Ounsworth Blank Rome LLP and Secretary Morris, Nichols, Arsht & Cynthia Kane Managing Director Philadelphia, PA Air Products and Chemicals, Inc. Tunnell LLP 20 The Musser Consulting Group Allentown, PA Wilmington, DE Marshall Babson Charles I. Cogut Wayne, PA Simpson Thacher & Bartlett LLP Cynthia B. Kane Hon. Leo E. Strine, Jr. Morton A. Pierce New York, NY Special Assistant to the Vice Chancellor 10 11 12 Dewey Ballantine LLP Secretary of State Delaware Court of Chancery Isaac D. Corré New York, NY Senior Managing Director Delaware Department of State Wilmington, DE Wilmington, DE Martha L. Rees Eton Park Capital Management Nancy Straus Sundheim New York, NY Vice President and Roy J. Katzovicz Senior Vice President, General Assistant General Counsel Pamela Craven General Counsel Counsel and Secretary E. I. du Pont de Nemours & Chief Administrative Officer Pershing Square Capital Unisys Corporation Company, Inc. Avaya Communications Management, L.P. Blue Bell, PA Wilmington, DE Basking Ridge, NJ New York, NY Jere R. Thomson Myron J. Resnick Richard D’Avino Paul S. Levy Jones Day Retired Senior Vice President and 14 15 16 V.P. Taxes-GE Capital Founder New York, NY 13 Chief Investment Officer and NBC Universal JLL Partners Allstate Insurance Company Hon. E. Norman Veasey General Electric Company New York, NY Northbrook, IL [Chief Justice, Supreme Court of Stamford, CT Delaware, 1992–2004] Robert A. Lonergan Robert H. Rock Kenneth C. Frazier Weil, Gotshal & Manges LLP Executive Vice President, General Chairman and Publisher Executive Vice President and New York, NY, and Wilmington, DE Counsel and Corporate Secretary Directors & Boards General Counsel Rohm and Haas Company Philadelphia, PA Marc Weingarten Merck & Co., Inc. Philadelphia, PA Schulte Roth & Zabel LLP Whitehouse Station, NJ Gerald Rosenfeld New York, NY Joel E. Friedlander Chief Executive Officer Donald J. Wolfe Bouchard, Margules & Friedlander Rothschild North America 17 18 19 20 New York, NY Potter Anderson & Corroon LLP Wilmington, DE Wilmington, DE 2 3 MESSAGE FRMOM THE CHAIR MESSAGE FRMOM THE DEAN his is my last letter as Chairman of the Board of Advisors as or over twenty years, the Institute for Law and Economics has I step down after serving as Chairman since 2001. An organ - successfully demonstrated the benefits of a cross-disciplinary ization such as the Institute for Law and Economics benefits perspective. Its programs provide a model for how to build if the leadership of its Board of Advisors regularly turns over. bridges between disciplines by creating ties between schools, Fbetween faculty members, between students, and between experts in TI am delighted that Mike Biondi has agreed to succeed me as Chairman. I have known Mike for a long time and I am confident that the ILE will the field from around the world. ILE combines Penn’s greatest strengths thrive under his leadership. in the Law School, the Wharton School, and the Department of Economics It has been extremely gratifying to witness the ILE’s accomplish - to focus on complex questions that concern all of these fields.