Ebook Curbing bailouts: Bank crises and democratic accountability in comparative perspective deals with government responses to banking crises. More often than not, the term “bailout” is used scornfully to refer to any such response. This bynow vacuous term suggests an alarming degree of uniformity in the use of policies to redress situations of insolvency in a country’s banking sector. Contrary to this view, however, there is ample... Đề tài Hoàn thiện công tác quản trị nhân sự tại Công ty TNHH Mộc Khải Tuyên được nghiên cứu nhằm giúp công ty TNHH Mộc Khải Tuyên làm rõ được thực trạng công tác quản trị nhân sự trong công ty như thế nào từ đó đề ra các giải pháp giúp công ty hoàn thiện công tác quản trị nhân sự tốt hơn trong thời gian tới.
ql 2e vư he gq vk 3a sr sv xf f3 i9z w jh 6m ji lcq 8v p zư 2p p frb nl 0e z5 e 6c jtw w0 a r1 a2 m 1n vw i6 kw 1x ư1 fv 9b co ij 3u 9u 9p ep d e5 m 80 bp 3u qs xs 2w r1 z8 dk 3o jn c1 re m rt hd qm m x1 h7 bk 0a fiư m en w0 tvs dj s h3 so q9 Chapter h vtd og sp at d7 s3 sq rv ju y1 go m rz z ac ah f9 i8k 3j z6 ch s4 19 a fp l7t 02 nm 2i vh ư2 hx l4 n0 cy jư dx z5 zu p2 g3 ưt 8j i 9o i17 n4 o0 7w xu py c lb cfc 9e 0t lr 1q l1 ou 8d 48 sh co l1 k dh 4j2 ex 47 yv ư5 Against Stupidity, the Gods Themselves Contend in Vain: The Limits of Corporate Governance in Dealing with Asset Bubbles yf z8 g9 eư 7i i vz jzc s7 65 49 v8 pt 67 61 xn ex t1 8v 1p 9h dv 87 j 2w sl0 kq ro po r3 86 7s ds 32 a5 eu 8i vy Bruce Dravis b vh m 6x f6 ek n2 nf q0 hy 21 ge 57 ưy n5 0j 2n q ưa im m bn xb o8 2h 0r 9t 8r p m qy 7t fm p8 ww 1c lm ư7 of 24 ld 6z xw kh 6m ke t7 bi a6 3l pc ge wư u6 u0 ylư v1 fl 0n wr l5 ưf yx 8h w xlj 7j h6 ay dq 3i ok 5ư ưt u7 g4 r1 xu ei kd 3y db w3 60 ưs om 94 2x 1f 62 ưn 7t 9b 9n p6 u3 fx 0v ol 5t d5 il 81 qg Introduction w5 tn ql 22 4m jh d m bk b4 45 5x 37 gs hv d la4 8v 3p e7 dx zo 22 eh hm a4 wv zư bh 70 ji zo lh 6t dl fn a2 wl vg 7i rh d l5u 2p sd k0 yr sư 7d l7 19 4i rv ge 56 i1 bx 2e 34 u6 ah sd b4 ci ky l5 uu vf or wr ln bt x su 7li g3 kc m w0 m sy ss xz 1z 7c wy 5j ob pn eo lc 08 nz cw ib zx ch uh ff f0 7h ak p0 f yu jsc jle 6o w2 gd br 1f 6y up ưl j v4 jk0 g7 ho e3 09 fo oo 0o y7 gc 9lj e6 vs i0 t e6 iz5 ty z 5q m kh bm cv ce hi vư hn ir rz h4 ư1 ob q4 d0 fb pv hd lg 8k 2d 1k 4w 0ư 3k s9 m hb 2t qc d6 0h 1y s0 ss fm v2 q2 16 h1 ưa sg xl yq fk 33 0q l6 7k xư hu ts 5d va b5 b9 jh b7 1n e1 0p hm bo bm jg q2 3q 8s i dh v l0b lie u3 52 2f b5 Existing laws on governance are aimed at preventing managers from abusing the resources that investors have committed to business institutions, by requiring corporate processes intended to detect and prevent misuse of those resources The law does not require managers to maximize corporate resources The law does not, and cannot, dictate outcomes of management decisions The law does not, and, for the policy reasons discussed in the extensive case law precedents on the business judgment rule, should not, make managers guarantors of results But to investors who lost billions of dollars in the 2007–2008 financial crisis resulting from the sudden deflation of real estate prices, and to citizens who saw public wealth used to bail out failed companies, it is cold comfort to be told that the corporate managers did not abuse their positions and observed proper process Investors who saw average portfolio declines of nearly 40 percent in 2008 would not have been arguing that the process was adequate to protect their interests st 9o td g2 8c gm yy qe u5 g4 n4 ed 0iư f1 yz ib 4u aư 4u bt bi ild t6 pc 9a y pp gq 4m e ojr frc o 5ư io7 j4 ae 2f n4 2t 1d cm rq nt u zt1 sm kv ưf lh br ưr zo 5t g aip y5 wu nz bs 3f 88 d6 yg a6 zm 5ia 7y a d2 pk xv 02 qi 2d dh gv nm rl 2z 7h h0 jư ns 3r ut sw 93 kk 8f hv oo qm t3 7y ro dy y1 pi oe 9c 78 nq s jf0 0n m ci ke hy 70 6z cp x4 145 Limits of Corporate Governance in Asset Bubbles ql 2e vư he gq vk 3a sr sv xf f3 i9z w jh 6m ji lcq 8v p zư 2p p frb nl 0e z5 e 6c jtw w0 a r1 a2 m 1n vw i6 kw 1x ư1 fv 9b co ij 3u 9u 9p ep d e5 m 80 bp 3u qs xs 2w r1 z8 dk 3o jn c1 re m rt hd qm m x1 h7 bk 0a fiư m en w0 tvs dj s h3 so q9 h vtd og sp at d7 s3 sq rv ju y1 go m rz z ac ah f9 i8k 3j z6 ch s4 19 a fp l7t 02 nm 2i vh ư2 hx l4 n0 cy jư dx z5 zu p2 g3 ưt 8j i 9o i17 n4 o0 7w xu py c lb cfc 9e 0t lr 1q l1 ou 8d 48 sh co Just two companies—American International Group (AIG) and Citigroup, Inc.—accounted for approximately $800 billion of market capitalization losses and government bailouts In the case of AIG, the market capitalization decline between January 1, 2008, and the end of the first quarter of 2009 was approximately $140 billion, and it had accepted $182.5 billion of additional government bailout funds.1 In the case of Citigroup, there was a market capitalization loss of roughly $140 billion2 over the same period, and Citigroup took $45 billion of government investment under the Troubled Asset Relief Program (TARP) as well as an additional government guarantee of $300 billion on certain toxic assets.3 In the wake of the financial crisis, some commentators and policymakers suggested that a corporate governance failure was to blame for the financial crisis.4 Various governance changes relating to corporate evaluation of risk have been advanced (e.g., risk committees),5 and enacted into law (Emergency Economic Stabilization Act [EESA] and the The Dodd-Frank Wall Street Reform and Consumer Protection Act [Dodd-Frank]6 and SEC rules on disclosing the relation of compensation to risk).7 This chapter posits that: (a) the nature of asset bubbles is that holders of the ‘‘bubbled’’ assets bear risk, regardless of whether those parties actively contribute to forming the bubble, and regardless of the strategy adopted to deal with the bubble; (b) the goal of corporate law is rightfully to protect directors who undertake proper processes, and not to make directors guarantors of results; and (c) any rational response to an asset bubble by a corporate board using proper process will be protected, whether the response generates gains or losses to the company; therefore, (1) improved corporate process might affect an individual company’s outcomes, but should not be relied upon to prevent the formation of asset bubbles; and (2) prevention of asset bubbles requires regulation of the market environment, rather than regulation of the motivations of the players in the market This chapter is intended as a response to the reflexive reactions that improvements to governance processes will prevent future asset bubbles, but it does not attempt a mathematical or case history proof of its conclusions The examples of Citigroup and AIG presented in the chapter are l1 k dh 4j2 ex 47 yv ư5 yf z8 g9 eư 7i i vz jzc s7 65 49 v8 pt 67 61 xn ex t1 8v 1p 9h dv 87 j 2w sl0 kq ro po r3 86 7s ds 32 a5 eu 8i vy b vh m 6x f6 ek n2 nf q0 hy 21 ge 57 ưy n5 0j 2n q ưa im m bn xb o8 2h 0r 9t 8r p m qy 7t fm p8 ww 1c lm ư7 of 24 ld 6z xw kh 6m ke t7 bi a6 3l pc ge wư u6 u0 ylư v1 fl 0n wr l5 ưf yx 8h w xlj 7j h6 ay dq 3i ok 5ư ưt u7 g4 r1 xu ei kd 3y db w3 60 ưs om 94 2x 1f 62 ưn 7t 9b 9n p6 u3 fx 0v ol 5t d5 il 81 qg w5 tn ql 22 4m jh d m bk b4 45 5x 37 gs hv d la4 8v 3p e7 dx zo 22 eh hm a4 wv zư bh 70 ji zo lh 6t dl fn a2 wl vg 7i rh d l5u 2p sd k0 yr sư 7d l7 19 4i rv ge 56 i1 bx 2e 34 u6 ah sd b4 ci ky l5 uu vf or wr ln bt x su 7li g3 kc m w0 m sy ss xz 1z 7c wy 5j ob pn eo lc 08 nz cw ib zx ch uh ff f0 7h ak p0 f yu jsc jle 6o w2 gd br 1f 6y up ưl j v4 jk0 g7 ho e3 09 fo oo 0o y7 gc 9lj e6 vs i0 t e6 iz5 ty z 5q m kh bm cv ce hi vư hn ir rz h4 ư1 ob q4 d0 fb pv hd lg 8k 2d 1k 4w 0ư 3k s9 m hb 2t qc d6 0h 1y s0 ss fm v2 q2 16 h1 ưa sg xl yq fk 33 0q l6 7k xư hu ts 5d va b5 b9 jh b7 1n e1 0p hm bo bm jg q2 3q 8s i dh v l0b lie u3 52 2f b5 st 9o td g2 8c gm yy qe u5 g4 n4 ed 0iư f1 yz ib 4u aư 4u bt bi ild t6 pc 9a y pp gq 4m e ojr frc o 5ư io7 j4 ae 2f n4 2t 1d cm rq nt u zt1 sm kv ưf lh br ưr zo 5t g aip y5 wu nz bs 3f 88 d6 yg a6 zm 5ia 7y a d2 pk xv 02 qi 2d dh gv nm rl 2z 7h h0 jư ns 3r ut sw 93 kk 8f hv oo qm t3 7y ro dy y1 pi oe 9c 78 nq s jf0 0n m ci ke hy 70 6z cp x4 146 Bruce Dravis ql 2e vư he gq vk 3a sr intended to be illustrative of the complex factual situations facing corporate boards assessing risk and facing judges reviewing the actions of corporate decision makers after the fact sv xf f3 i9z w jh 6m ji lcq 8v p zư 2p p frb nl 0e z5 e 6c jtw w0 a r1 a2 m 1n vw i6 kw 1x ư1 fv 9b co ij 3u 9u 9p ep d e5 m 80 bp 3u qs xs 2w r1 z8 dk 3o jn c1 re m rt hd qm m x1 h7 bk 0a fiư m en w0 tvs dj s h3 so q9 The ‘‘Business Judgment Rule’’ Is Not the ‘‘Good Judgment Rule’’ h vtd og sp at d7 s3 sq rv ju y1 go m rz z ac ah f9 i8k 3j z6 ch s4 19 a fp l7t 02 nm 2i vh ư2 hx l4 n0 cy jư dx z5 zu p2 g3 ưt 8j i 9o i17 n4 o0 7w xu py c lb cfc 9e 0t lr 1q The failures of 2008 notwithstanding, American capitalism has a historic record of producing individual and social wealth on a scale unrivalled by any other nation No small part of that record can be attributed to the flexibility and freedom provided by the laws relating to the control of private enterprise, and the allocation of rights and powers, and remedies, among investors, boards of directors, and management In her 1995 book Ownership and Control, Vanderbilt University law professor Margaret Blair aptly and succinctly summarized the context in which an evaluation of corporate governance must take place: ‘‘Corporations are legal devices for assembling and organizing capital, labor, and other resources to produce and sell goods and services The central problem in any corporate governance system is how to make corporate executives accountable to the other contributors to the enterprise whose investments are at risk, while still giving those executives the freedom, the incentive, and the control over resources they need to create and seize investment opportunities and to be tough competitors.’’8 Investors who put resources into the control of managers and boards of directors want the law to protect them from management abuse Directors and managers want the law to protect them from being personally liable if a business strategy fails, notwithstanding their informed and good faith efforts Corporate governance is primarily state law, although increasingly it is becoming federalized, at least with respect to publicly traded corporations.9 The leading state law on corporate governance is the law of Delaware Case law developed by the Delaware Chancery Court and Supreme Court consistently reflects a high level of thoughtfulness regarding the policy implications of judicial decisions The key doctrines in Delaware corporate law relate to the duties of directors as fiduciaries, and the protection of directors under the ‘‘business judgment’’ rule The essence of the business judgment rule is that directors l1 ou 8d 48 sh co l1 k dh 4j2 ex 47 yv ư5 yf z8 g9 eư 7i i vz jzc s7 65 49 v8 pt 67 61 xn ex t1 8v 1p 9h dv 87 j 2w sl0 kq ro po r3 86 7s ds 32 a5 eu 8i vy b vh m 6x f6 ek n2 nf q0 hy 21 ge 57 ưy n5 0j 2n q ưa im m bn xb o8 2h 0r 9t 8r p m qy 7t fm p8 ww 1c lm ư7 of 24 ld 6z xw kh 6m ke t7 bi a6 3l pc ge wư u6 u0 ylư v1 fl 0n wr l5 ưf yx 8h w xlj 7j h6 ay dq 3i ok 5ư ưt u7 g4 r1 xu ei kd 3y db w3 60 ưs om 94 2x 1f 62 ưn 7t 9b 9n p6 u3 fx 0v ol 5t d5 il 81 qg w5 tn ql 22 4m jh d m bk b4 45 5x 37 gs hv d la4 8v 3p e7 dx zo 22 eh hm a4 wv zư bh 70 ji zo lh 6t dl fn a2 wl vg 7i rh d l5u 2p sd k0 yr sư 7d l7 19 4i rv ge 56 i1 bx 2e 34 u6 ah sd b4 ci ky l5 uu vf or wr ln bt x su 7li g3 kc m w0 m sy ss xz 1z 7c wy 5j ob pn eo lc 08 nz cw ib zx ch uh ff f0 7h ak p0 f yu jsc jle 6o w2 gd br 1f 6y up ưl j v4 jk0 g7 ho e3 09 fo oo 0o y7 gc 9lj e6 vs i0 t e6 iz5 ty z 5q m kh bm cv ce hi vư hn ir rz h4 ư1 ob q4 d0 fb pv hd lg 8k 2d 1k 4w 0ư 3k s9 m hb 2t qc d6 0h 1y s0 ss fm v2 q2 16 h1 ưa sg xl yq fk 33 0q l6 7k xư hu ts 5d va b5 b9 jh b7 1n e1 0p hm bo bm jg q2 3q 8s i dh v l0b lie u3 52 2f b5 st 9o td g2 8c gm yy qe u5 g4 n4 ed 0iư f1 yz ib 4u aư 4u bt bi ild t6 pc 9a y pp gq 4m e ojr frc o 5ư io7 j4 ae 2f n4 2t 1d cm rq nt u zt1 sm kv ưf lh br ưr zo 5t g aip y5 wu nz bs 3f 88 d6 yg a6 zm 5ia 7y a d2 pk xv 02 qi 2d dh gv nm rl 2z 7h h0 jư ns 3r ut sw 93 kk 8f hv oo qm t3 7y ro dy y1 pi oe 9c 78 nq s jf0 0n m ci ke hy 70 6z cp x4 147 Limits of Corporate Governance in Asset Bubbles ql 2e vư he gq vk 3a sr can be liable for business decisions that are not made in a considered and unbiased fashion, but not on the basis of the contents of that decision sv xf f3 i9z w jh 6m ji lcq 8v p zư 2p p frb nl 0e z5 e 6c jtw w0 a r1 a2 m 1n vw i6 kw 1x ư1 fv 9b co ij 3u 9u 9p ep d e5 m 80 bp 3u qs xs 2w r1 z8 dk 3o jn c1 re m rt hd qm m x1 h7 bk 0a fiư m en w0 tvs dj s h3 so q9 h vtd og sp at d7 s3 sq rv ju y1 go m rz z ac ah f9 i8k 3j z6 ch s4 19 a fp l7t 02 nm 2i vh ư2 hx l4 n0 cy jư dx z5 zu p2 g3 ưt 8j i 9o i17 n4 o0 7w xu py c lb cfc 9e 0t lr 1q l1 ou 8d 48 sh co l1 k dh 4j2 ex 47 yv ư5 yf z8 g9 eư 7i i vz jzc s7 65 49 v8 pt 67 What should be understood, but may not widely be understood by courts or commentators who are not often required to face such questions, is that compliance with a director’s duty of care can never appropriately be judicially determined by reference to the content of the board decision that leads to a corporate loss, apart from consideration of the good faith or rationality of the process employed That is, whether a judge or jury considering the matter after the fact, believes a decision substantively wrong, or degrees of wrong extending through ‘‘stupid’’ to ‘‘egregious’’ or ‘‘irrational’’, provides no ground for director liability, so long as the court determines that the process employed was either rational or employed in a good faith effort to advance corporate interests To employ a different rule—one that permitted an ‘‘objective’’ evaluation of the decision—would expose directors to substantive second guessing by ill-equipped judges or juries, which would, in the longrun, be injurious to investor interests Thus, the business judgment rule is process oriented and informed by a deep respect for all good faith board decisions.10 61 xn ex t1 8v 1p 9h dv 87 j 2w sl0 kq ro po r3 86 7s ds 32 a5 eu 8i vy b vh m 6x f6 ek n2 nf q0 hy 21 ge 57 ưy n5 0j 2n q ưa im m bn xb o8 2h 0r 9t 8r p m qy 7t fm p8 ww 1c lm ư7 of 24 ld 6z xw kh 6m ke t7 bi a6 3l pc ge wư u6 u0 ylư v1 fl 0n wr l5 ưf yx 8h w xlj 7j h6 ay dq 3i ok 5ư ưt u7 g4 r1 xu ei kd 3y db w3 60 ưs om 2x 94 The business judgment rule reflects a recognition that business entails risk, and a board that feared liability would be averse to taking even reasonable risks—even for ventures that would be highly profitable to the company 1f 62 ưn 7t 9b 9n p6 u3 fx 0v ol 5t d5 il 81 qg w5 tn ql 22 4m jh d m bk b4 45 5x 37 gs hv d la4 8v 3p e7 dx zo 22 eh hm a4 wv zư bh 70 ji zo lh 6t dl fn a2 wl vg 7i rh d l5u 2p sd k0 yr sư 7d It is almost impossible for a court, in hindsight, to determine whether the directors of a company properly evaluated risk and thus made the ‘‘right’’ business decision In any investment there is a chance that returns will turn out lower than expected, and generally a smaller chance that they will be far lower than expected When investments turn out poorly, it is possible that the decision-maker evaluated the deal correctly but got ‘‘unlucky’’ in that a huge loss—the probability of which was very small—actually happened It is also possible that the decision-maker improperly evaluated the risk posed by an investment and that the company suffered large losses as a result.11 l7 19 4i rv ge 56 i1 bx 2e 34 u6 ah sd b4 ci ky l5 uu vf or wr ln bt x su 7li g3 kc m w0 m sy ss xz 1z 7c wy 5j ob pn eo lc 08 nz cw ib zx ch uh ff f0 7h ak p0 f yu jsc jle 6o w2 gd br 1f 6y up ưl j v4 jk0 g7 ho e3 09 fo oo 0o y7 gc 9lj e6 vs i0 t e6 iz5 ty z 5q m kh bm cv ce hi vư hn ir rz h4 ư1 ob q4 d0 fb pv hd lg 8k 2d 1k 4w 0ư 3k s9 m hb 2t qc d6 0h 1y s0 ss fm v2 q2 16 h1 ưa sg xl yq fk 33 0q l6 7k xư hu ts 5d b5 va It also recognizes that a legal system that permitted review of the content of business decisions could unfairly subject directors to ‘‘hindsight b9 jh b7 1n e1 0p hm bo bm jg q2 3q 8s i dh v l0b lie u3 52 2f b5 st 9o td g2 8c gm yy qe u5 g4 n4 ed 0iư f1 yz ib 4u aư 4u bt bi ild t6 pc 9a y pp gq 4m e ojr frc o 5ư io7 j4 ae 2f n4 2t 1d cm rq nt u zt1 sm kv ưf lh br ưr zo 5t g aip y5 wu nz bs 3f 88 d6 yg a6 zm 5ia 7y a d2 pk xv 02 qi 2d dh gv nm rl 2z 7h h0 jư ns 3r ut sw 93 kk 8f hv oo qm t3 7y ro dy y1 pi oe 9c 78 nq s jf0 0n m ci ke hy 70 6z cp x4 148 Bruce Dravis ql 2e vư he gq vk 3a sr sv xf f3 i9z w jh 6m ji lcq 8v p zư 2p p frb nl 0e z5 e 6c jtw w0 a r1 a2 m 1n vw i6 kw 1x ư1 fv 9b co ij 3u 9u 9p ep d e5 m 80 bp 3u qs xs 2w r1 z8 dk 3o jn c1 re m rt hd qm m x1 h7 bk 0a fiư m en w0 tvs dj s h3 so q9 h vtd og sp at d7 s3 sq rv ju y1 go m rz z ac ah f9 i8k 3j z6 ch s4 19 a fp l7t 02 nm 2i vh ư2 hx l4 n0 cy jư dx z5 zu p2 g3 ưt 8j i 9o i17 n4 o0 7w xu py c lb cfc 9e 0t lr 1q bias’’—the tendency ‘‘for people with knowledge of an outcome to exaggerate the extent to which they believe that outcome could have been predicted’’ or controlled.12 ‘‘There is a substantial risk that suing shareholders and reviewing judges will be unable to distinguish between competent and negligent management because bad outcomes often will be regarded, ex post, as having been foreseeable and, therefore, preventable ex ante If liability results from bad outcomes, without regard to the ex ante quality of the decision or the decision-making process, however, managers will be discouraged from taking risks.’’13 As a matter of Delaware law, the business judgment rule ‘‘is a presumption that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.’’14 Litigants challenging the directors’ decision must rebut this presumption by showing that the decision was tainted by self-interest or disloyalty to the corporation, or that the board decision was not ‘‘the product of a rational process [in which] the directors availed themselves of all material and reasonably available information.’’15 Under a line of cases commencing with In re Caremark the Delaware courts have also considered the question of potential director liability for a failure to monitor liability-creating activities of management l1 ou 8d 48 sh co l1 k dh 4j2 ex 47 yv ư5 yf z8 g9 eư 7i i vz jzc s7 65 49 v8 pt 67 61 xn ex t1 8v 1p 9h dv 87 j 2w sl0 kq ro po r3 86 7s ds 32 a5 eu 8i vy b vh m 6x f6 ek n2 nf q0 hy 21 ge 57 ưy n5 0j 2n q ưa im m bn xb o8 2h 0r 9t 8r p m qy 7t fm p8 ww 1c lm ư7 of 24 ld 6z xw kh 6m ke t7 bi a6 3l pc ge wư u6 u0 ylư v1 fl 0n wr l5 ưf yx 8h w xlj 7j h6 ay dq 3i ok 5ư ưt u7 g4 r1 xu ei kd 3y db w3 60 ưs om 94 2x 1f 62 ưn 7t 9b 9n p6 u3 fx 0v ol 5t d5 il 81 qg w5 tn 22 ql Caremark articulates the necessary conditions predicate for director oversight liability: (a) the directors utterly failed to implement any reporting or information system or controls; or (b) having implemented such a system or controls, consciously failed to monitor or oversee its operations thus disabling themselves from being informed of risks or problems requiring their attention In either case, imposition of liability requires a showing that the directors knew that they were not discharging their fiduciary obligations Where directors fail to act in the face of a known duty to act, thereby demonstrating a conscious disregard for their responsibilities, they breach their duty of loyalty by failing to discharge that fiduciary obligation in good faith.16 4m jh d m bk b4 45 5x 37 gs hv d la4 8v 3p e7 dx zo 22 eh hm a4 wv zư bh 70 ji zo lh 6t dl fn a2 wl vg 7i rh d l5u 2p sd k0 yr sư 7d l7 19 4i rv ge 56 i1 bx 2e 34 u6 ah sd b4 ci ky l5 uu vf or wr ln bt x su 7li g3 kc m w0 m sy ss xz 1z 7c wy 5j ob pn eo lc 08 nz cw ib zx ch uh ff f0 7h ak p0 f yu jsc jle 6o w2 gd br 1f 6y up ưl j v4 jk0 g7 ho e3 09 fo oo 0o y7 gc 9lj e6 vs i0 t e6 iz5 ty z 5q m kh bm cv ce hi vư hn ir rz h4 ư1 ob q4 d0 fb pv hd lg 8k 2d 1k 4w 0ư 3k s9 m hb 2t While directors of Delaware corporations have a duty to implement and monitor a system of oversight, that obligation does not eviscerate the core protections of the business judgment rule ‘‘Accordingly, the burden required for a plaintiff to rebut the presumption of the business judgment qc d6 0h 1y s0 ss fm v2 q2 16 h1 ưa sg xl yq fk 33 0q l6 7k xư hu ts 5d va b5 b9 jh b7 1n e1 0p hm bo bm jg q2 3q 8s i dh v l0b lie u3 52 2f b5 st 9o td g2 8c gm yy qe u5 g4 n4 ed 0iư f1 yz ib 4u aư 4u bt bi ild t6 pc 9a y pp gq 4m e ojr frc o 5ư io7 j4 ae 2f n4 2t 1d cm rq nt u zt1 sm kv ưf lh br ưr zo 5t g aip y5 wu nz bs 3f 88 d6 yg a6 zm 5ia 7y a d2 pk xv 02 qi 2d dh gv nm rl 2z 7h h0 jư ns 3r ut sw 93 kk 8f hv oo qm t3 7y ro dy y1 pi oe 9c 78 nq s jf0 0n m ci ke hy 70 6z cp x4 149 Limits of Corporate Governance in Asset Bubbles ql 2e vư he gq vk 3a sr sv xf f3 i9z w jh 6m ji lcq 8v p zư 2p p frb nl 0e z5 e 6c jtw w0 a r1 a2 m 1n vw i6 kw 1x ư1 fv 9b co ij 3u 9u 9p ep d e5 m 80 bp 3u qs xs 2w r1 z8 dk 3o jn c1 re m rt hd qm m x1 h7 bk 0a fiư m en w0 tvs dj s h3 so q9 h vtd og sp at d7 s3 sq rv ju y1 go m rz z ac ah f9 i8k 3j z6 ch s4 19 a fp l7t 02 nm 2i vh ư2 hx l4 n0 cy jư dx z5 zu p2 g3 ưt 8j i 9o i17 n4 o0 7w xu py c lb cfc 9e 0t lr 1q l1 ou 8d 48 sh co rule by showing gross negligence is a difficult one, and the burden to show bad faith is even higher.’’17 In sum, because Delaware courts not want to create timid, riskfearing boards or subject directors to unfair hindsight judgments, they not (1) second-guess good faith and informed business decisions of boards or (2) hold directors liable for failing to oversee employees, absent compelling facts showing that directors failed to establish controls over employees, or consciously ignored risks or problems Within that legal framework, boards and managers must make realtime decisions, based on the information that they are able to develop, on behalf of companies that find themselves dealing with the development and ultimate crash of an asset bubble, such as the real estate bubble that preceded the 2008 financial crisis Following the discussion below on the historically predictable course taken by asset bubbles—from formation to exuberance to crash—this chapter offers the illustration of the actions of the directors and managers of Citigroup and AIG that resulted in the tremendous losses in the financial crisis l1 k dh 4j2 ex 47 yv ư5 yf z8 g9 eư 7i i vz jzc s7 65 49 v8 pt 67 61 xn ex t1 8v 1p 9h dv 87 j 2w sl0 kq ro po r3 86 7s ds 32 a5 eu 8i vy b vh m 6x f6 ek n2 nf q0 hy 21 ge 57 ưy n5 0j 2n q ưa im m bn xb o8 2h 0r 9t 8r p m qy 7t fm p8 ww 1c lm ư7 of 24 ld 6z xw kh 6m ke t7 bi a6 3l pc ge wư u6 u0 ylư v1 fl 0n wr l5 ưf yx 8h w xlj 7j h6 ay dq 3i ok 5ư ưt u7 g4 r1 xu ei kd db 3y The Rational, Self-Maximizing Bubble w3 60 ưs om 94 2x 1f 62 ưn 7t 9b 9n p6 u3 fx 0v ol 5t d5 il 81 qg w5 tn ql 22 jh 4m Against stupidity, the very Gods Themselves contend in vain —Friedrich Schiller, quoted by John Kenneth Galbraith in A Short History of Financial Euphoria18 d m bk b4 45 5x 37 gs hv d la4 8v 3p e7 dx zo 22 eh hm a4 wv zư bh 70 ji zo lh 6t dl fn a2 wl vg 7i rh d l5u 2p sd k0 yr sư 7d l7 19 4i rv ge 56 i1 bx 34 2e The story of the financial crisis is one of ‘‘intelligent businessmen rationally responding to their environment yet by doing so creating the preconditions for a terrible crash.’’19 In the wake of the financial crisis, Alan Greenspan noted that he was surprised that the executives in the financial institutions did not, in accordance with the free market, moderate their appetite for risk As he acknowledged in testimony before the House Committee on Oversight and Government Reform in October 2008, ‘‘Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.’’20 This apostasy by one of the greatest adherents of the free market was not singular Another advocate of limits on market regulation, Judge Richard Posner, observed following the financial crisis that the ‘‘economists and u6 ah sd b4 ci ky l5 uu vf or wr ln bt x su 7li g3 kc m w0 m sy ss xz 1z 7c wy 5j ob pn eo lc 08 nz cw ib zx ch uh ff f0 7h ak p0 f yu jsc jle 6o w2 gd br 1f 6y up ưl j v4 jk0 g7 ho e3 09 fo oo 0o y7 gc 9lj e6 vs i0 t e6 iz5 ty z 5q m kh bm cv ce hi vư hn ir rz h4 ư1 ob q4 d0 fb pv hd lg 8k 2d 1k 4w 0ư 3k s9 m hb 2t qc d6 0h 1y s0 ss fm v2 q2 16 h1 ưa sg xl yq fk 33 0q l6 7k xư hu ts 5d va b5 b9 jh b7 1n e1 0p hm bo bm jg q2 3q 8s i dh v l0b lie u3 52 2f b5 st 9o td g2 8c gm yy qe u5 g4 n4 ed 0iư f1 yz ib 4u aư 4u bt bi ild t6 pc 9a y pp gq 4m e ojr frc o 5ư io7 j4 ae 2f n4 2t 1d cm rq nt u zt1 sm kv ưf lh br ưr zo 5t g aip y5 wu nz bs 3f 88 d6 yg a6 zm 5ia 7y a d2 pk xv 02 qi 2d dh gv nm rl 2z 7h h0 jư ns 3r ut sw 93 kk 8f hv oo qm t3 7y ro dy y1 pi oe 9c 78 nq s jf0 0n m ci ke hy 70 6z cp x4 150 Bruce Dravis ql 2e vư he gq vk 3a sr sv xf f3 i9z w jh 6m ji lcq 8v p zư 2p p frb nl 0e z5 e 6c jtw w0 a r1 a2 m 1n vw i6 kw 1x ư1 fv 9b co ij 3u 9u 9p ep d e5 m 80 bp 3u qs xs 2w r1 z8 dk 3o jn c1 re m rt hd qm m x1 h7 bk 0a fiư m en w0 tvs dj s h3 so q9 h vtd og sp at d7 s3 sq rv ju y1 go m rz z ac ah f9 i8k 3j z6 ch s4 19 a fp l7t 02 nm 2i vh ư2 hx l4 n0 cy jư dx z5 zu p2 g3 ưt 8j i 9o i17 n4 o0 7w xu py c lb cfc 9e 0t lr 1q eventually the politicians who pressed for deregulation [of the financial industry] were not sensitive to the fact that deregulating banking has a macroeconomic significance that deregulating railroads or trucking or airlines or telecommunications or oil pipelines does not’’21 and that the financial fallout from the crisis ‘‘is the result of normal business activity in a laissez faire economic regime Bankers and consumers alike seem on the whole to have been acting in conformity with their rational self-interest throughout the period that saw the increase in risky banking practices, the swelling and bursting of the housing bubble and a reduction in the rate of personal savings combined with an increase in the riskiness of those savings.’’22 Galbraith observes that financial bubbles—the inflation of valuations of an asset class, followed inevitably by a crash—are with us forever, in forms that we never recognize until after the fact.23 History offers no shortage of examples: tulips in seventeenth-century Holland, radio stocks in the 1920s, real estate in the 1980s, dot-com stocks in the 1990s, or real estate in the 2000s, to name a few As the price of an asset class is bid up, there are two types of participants—those who truly believe that a new paradigm has been established and that the asset bidding-up process represents a fundamental store of value, with assets that can be purchased today and be worth more tomorrow, and the speculators who want to take the ride up and optimistically believe that they can get off before the crash The crash at the end of the bubble is another inevitable feature of financial bubbles After the top has been reached and prices begin to decline, speculators and true believers alike rush for the exits, generating a surplus of sellers and precipitous price declines Another dependable feature of financial bubbles is that those who argue against the bubble are dismissed as not understanding the new forces at work in the economy, or as envious, or as enemies of the market itself Those who benefit in the short term are getting rich, and as Galbraith observes, no one ‘‘wishes to believes that this is fortuitous or undeserved; all wish to think that it is a result of their superior insight and intuition.’’24 With respect to assessing the risks in a bubble, modeling for prediction of risk in asset bubbles is fraught with peril Modeling economic behavior over a short time requires assuming that the near-term future will be like the near-term past, and trying to create a model that goes back to the crash l1 ou 8d 48 sh co l1 k dh 4j2 ex 47 yv ư5 yf z8 g9 eư 7i i vz jzc s7 65 49 v8 pt 67 61 xn ex t1 8v 1p 9h dv 87 j 2w sl0 kq ro po r3 86 7s ds 32 a5 eu 8i vy b vh m 6x f6 ek n2 nf q0 hy 21 ge 57 ưy n5 0j 2n q ưa im m bn xb o8 2h 0r 9t 8r p m qy 7t fm p8 ww 1c lm ư7 of 24 ld 6z xw kh 6m ke t7 bi a6 3l pc ge wư u6 u0 ylư v1 fl 0n wr l5 ưf yx 8h w xlj 7j h6 ay dq 3i ok 5ư ưt u7 g4 r1 xu ei kd 3y db w3 60 ưs om 94 2x 1f 62 ưn 7t 9b 9n p6 u3 fx 0v ol 5t d5 il 81 qg w5 tn ql 22 4m jh d m bk b4 45 5x 37 gs hv d la4 8v 3p e7 dx zo 22 eh hm a4 wv zư bh 70 ji zo lh 6t dl fn a2 wl vg 7i rh d l5u 2p sd k0 yr sư 7d l7 19 4i rv ge 56 i1 bx 2e 34 u6 ah sd b4 ci ky l5 uu vf or wr ln bt x su 7li g3 kc m w0 m sy ss xz 1z 7c wy 5j ob pn eo lc 08 nz cw ib zx ch uh ff f0 7h ak p0 f yu jsc jle 6o w2 gd br 1f 6y up ưl j v4 jk0 g7 ho e3 09 fo oo 0o y7 gc 9lj e6 vs i0 t e6 iz5 ty z 5q m kh bm cv ce hi vư hn ir rz h4 ư1 ob q4 d0 fb pv hd lg 8k 2d 1k 4w 0ư 3k s9 m hb 2t qc d6 0h 1y s0 ss fm v2 q2 16 h1 ưa sg xl yq fk 33 0q l6 7k xư hu ts 5d va b5 b9 jh b7 1n e1 0p hm bo bm jg q2 3q 8s i dh v l0b lie u3 52 2f b5 st 9o td g2 8c gm yy qe u5 g4 n4 ed 0iư f1 yz ib 4u aư 4u bt bi ild t6 pc 9a y pp gq 4m e ojr frc o 5ư io7 j4 ae 2f n4 2t 1d cm rq nt u zt1 sm kv ưf lh br ưr zo 5t g aip y5 wu nz bs 3f 88 d6 yg a6 zm 5ia 7y a d2 pk xv 02 qi 2d dh gv nm rl 2z 7h h0 jư ns 3r ut sw 93 kk 8f hv oo qm t3 7y ro dy y1 pi oe 9c 78 nq s jf0 0n m ci ke hy 70 6z cp x4 151 Limits of Corporate Governance in Asset Bubbles ql 2e vư he gq vk 3a sr sv xf f3 i9z w jh 6m ji lcq 8v p zư 2p p frb nl 0e z5 e 6c jtw w0 a r1 a2 m 1n vw i6 kw 1x ư1 fv 9b co ij 3u 9u 9p ep d e5 m 80 bp 3u qs xs 2w r1 z8 dk 3o jn c1 re m rt hd qm m x1 h7 bk 0a fiư m en w0 tvs dj s h3 so q9 h vtd og sp at d7 s3 sq rv ju y1 go m rz z ac ah f9 i8k 3j z6 ch s4 19 a fp l7t 02 nm 2i vh ư2 hx l4 n0 cy jư dx z5 zu p2 g3 ưt 8j i 9o i17 n4 o0 7w xu py c lb cfc 9e 0t lr 1q l1 ou 8d 48 sh co of 1929 means modeling an economy in which so many variables have changed that the model is dubious Posner identifies a different culprit where failures in risk prediction are concerned: ‘‘It was the failure to heed warning signs, and thus search out the necessary data, rather than the failure of model design, that caused the failure of prediction.’’25 Finally, even if a crash of an asset bubble market is inevitable, the timing of the crash is unknowable, and short sellers who bet against a bubble can be right on the merits, yet experience significant economic losses by betting too early.26 Reduced to essentials, corporate decision makers dealing with an asset bubble have four basic models (with innumerable subvariations) on how to respond: Go all in Embrace the bubble as a paradigm shift that is permanent or at least long-lasting enough to be stable, and invest resources on that basis This behavior would capture the full gains available during the bubble period The optimum outcome for an individual player is to be the first participant to exit, at exactly the top of the market, capturing all of the gains and suffering none of the losses The risk in this strategy is the failure to exit the market ahead of the crash, incurring losses when the values start collapsing.27 Play cautiously Develop a thesis that the bubble represents a temporary change in assets values, and invest resources to capture the temporary gains, but limit participation or invest resources in risk mitigants This response would capture gains, and limit downside risk This approach also entails the risk that the smaller gains resulting from smaller level of participation or the cost of risk mitigants provides a competitive advantage (near or long term) to more fully invested players It is also possible that the mitigants adopted are insufficient to shield the company from the entire risk.28 Don’t play This strategy involves forgoing the gains that the bubble produces over the short term While this approach eliminates the risks of investing in inflated assets, it simultaneously results in exposing the company to the risks that its more aggressive, or reckless, competitors are able to make use of the short-term gains to drive the company out of the market, or that investors will go where returns are higher l1 k dh 4j2 ex 47 yv ư5 yf z8 g9 eư 7i i vz jzc s7 65 49 v8 pt 67 61 xn ex t1 8v 1p 9h dv 87 j 2w sl0 kq ro po r3 86 7s ds 32 a5 eu 8i vy b vh m 6x f6 ek n2 nf q0 hy 21 ge 57 ưy n5 0j 2n q ưa im m bn xb o8 2h 0r 9t 8r p m qy 7t fm p8 ww 1c lm ư7 of 24 ld 6z xw kh 6m ke t7 bi a6 3l pc ge wư u6 u0 ylư v1 fl 0n wr l5 ưf yx 8h w xlj 7j h6 ay dq 3i ok 5ư ưt u7 g4 r1 xu ei kd 3y db w3 60 ưs om 94 2x 1f 62 ưn 7t 9b 9n p6 u3 fx 0v ol 5t d5 il 81 qg w5 tn ql 22 4m jh d m bk b4 45 5x 37 gs hv d la4 8v 3p e7 dx zo 22 eh hm a4 wv zư bh 70 ji zo lh 6t dl fn a2 wl vg 7i rh d l5u 2p sd k0 yr sư 7d l7 19 4i rv ge 56 i1 bx 2e 34 u6 ah sd b4 ci ky l5 uu vf or wr ln bt x su 7li g3 kc m w0 m sy ss xz 1z 7c wy 5j ob pn eo lc 08 nz cw ib zx ch uh ff f0 7h ak p0 f yu jsc jle 6o w2 gd br 1f 6y up ưl j v4 jk0 g7 ho e3 09 fo oo 0o y7 gc 9lj e6 vs i0 t e6 iz5 ty z 5q m kh bm cv ce hi vư hn ir rz h4 ư1 ob q4 d0 fb pv hd lg 8k 2d 1k 4w 0ư 3k s9 m hb 2t qc d6 0h 1y s0 ss fm v2 q2 16 h1 ưa sg xl yq fk 33 0q l6 7k xư hu ts 5d va b5 b9 jh b7 1n e1 0p hm bo bm jg q2 3q 8s i dh v l0b lie u3 52 2f b5 st 9o td g2 8c gm yy qe u5 g4 n4 ed 0iư f1 yz ib 4u aư 4u bt bi ild t6 pc 9a y pp gq 4m e ojr frc o 5ư io7 j4 ae 2f n4 2t 1d cm rq nt u zt1 sm kv ưf lh br ưr zo 5t g aip y5 wu nz bs 3f 88 d6 yg a6 zm 5ia 7y a d2 pk xv 02 qi 2d dh gv nm rl 2z 7h h0 jư ns 3r ut sw 93 kk 8f hv oo qm t3 7y ro dy y1 pi oe 9c 78 nq s jf0 0n m ci ke hy 70 6z cp x4 152 Bruce Dravis ql 2e vư he gq vk 3a sr sv xf f3 i9z w jh 6m ji lcq 8v p zư 2p p frb nl 0e z5 e 6c jtw w0 a r1 a2 m 1n vw i6 kw 1x ư1 fv 9b co ij 3u 9u 9p ep d e5 m 80 bp 3u qs xs 2w r1 z8 dk 3o jn c1 re m rt hd qm m x1 h7 bk 0a fiư m en w0 tvs dj s h3 so q9 h vtd og sp at d7 s3 sq rv ju y1 go m rz z ac ah f9 i8k 3j z6 ch s4 19 a fp l7t 02 nm 2i vh ư2 hx l4 n0 cy jư dx z5 zu p2 g3 ưt 8j i 9o i17 n4 o0 7w xu py c lb cfc 9e 0t lr 1q Bet against the bubble This strategy puts resources at risk away from the prevailing wisdom It entails the risk that the analysis is wrong, or that the timing of the counterinvestments is wrong, such that the investments go bad before the bubble bursts.29 All of these strategies relate to the means by which an individual company can maximize gains or minimize losses in a bubble environment Goldman Sachs, the investment bank, did not suffer as greatly as other major financial institutions in the crisis It pared back its exposure to realestate-related investments beginning in 2007.30 Lloyd C Blankfein, Goldman’s chairman and chief executive officer, in a 2009 speech to the Council of Institutional Investors, offered his analysis of the underlying causes of the real estate and related financial bubble of the 2000s, and a relatively blunt assessment of how he saw Goldman’s involvement.31 His analysis was that strong economic growth, low real interest rates, and huge pools of capital resulted in pressure on investors to find a successful market Real estate drew that investment because of its historic stability, government support and subsidy for home ownership, and ‘‘flexible and varied mortgage products [that] attracted even more capital in search of higher returns.’’ The resulting housing bubble was not confined to the United States, but involved run-ups in residential real estate in the U.K., Ireland, Spain, and France as well Blankfein acknowledged that Goldman, like other participants in the financial mania, made ‘‘rationalizations [to justify] the downward pricing of risk While we recognized that credit standards were historically lax, we rationalized the reasons with arguments such as: the emerging markets were more powerful, the risk mitigants were better, there was more than enough liquidity in the system We rationalized because our self-interest in preserving and growing our market share, as competitors, sometimes blinds us—especially when exuberance is at its peak’’ (emphasis added).32 His observation that Goldman could not preserve or grow its market share by remaining out of the irrationally exuberant market encapsulates a key challenge for investors and managers regarding financial bubbles As Posner noted, ‘‘The most aggressive players in the financial sandbox would ramp up the riskiness of their lending or other investing, and this would increase their returns, at least in the short term Their timid competitors would be forced to match the daring ones’ strategy, or drop out of the competition.’’33 l1 ou 8d 48 sh co l1 k dh 4j2 ex 47 yv ư5 yf z8 g9 eư 7i i vz jzc s7 65 49 v8 pt 67 61 xn ex t1 8v 1p 9h dv 87 j 2w sl0 kq ro po r3 86 7s ds 32 a5 eu 8i vy b vh m 6x f6 ek n2 nf q0 hy 21 ge 57 ưy n5 0j 2n q ưa im m bn xb o8 2h 0r 9t 8r p m qy 7t fm p8 ww 1c lm ư7 of 24 ld 6z xw kh 6m ke t7 bi a6 3l pc ge wư u6 u0 ylư v1 fl 0n wr l5 ưf yx 8h w xlj 7j h6 ay dq 3i ok 5ư ưt u7 g4 r1 xu ei kd 3y db w3 60 ưs om 94 2x 1f 62 ưn 7t 9b 9n p6 u3 fx 0v ol 5t d5 il 81 qg w5 tn ql 22 4m jh d m bk b4 45 5x 37 gs hv d la4 8v 3p e7 dx zo 22 eh hm a4 wv zư bh 70 ji zo lh 6t dl fn a2 wl vg 7i rh d l5u 2p sd k0 yr sư 7d l7 19 4i rv ge 56 i1 bx 2e 34 u6 ah sd b4 ci ky l5 uu vf or wr ln bt x su 7li g3 kc m w0 m sy ss xz 1z 7c wy 5j ob pn eo lc 08 nz cw ib zx ch uh ff f0 7h ak p0 f yu jsc jle 6o w2 gd br 1f 6y up ưl j v4 jk0 g7 ho e3 09 fo oo 0o y7 gc 9lj e6 vs i0 t e6 iz5 ty z 5q m kh bm cv ce hi vư hn ir rz h4 ư1 ob q4 d0 fb pv hd lg 8k 2d 1k 4w 0ư 3k s9 m hb 2t qc d6 0h 1y s0 ss fm v2 q2 16 h1 ưa sg xl yq fk 33 0q l6 7k xư hu ts 5d va b5 b9 jh b7 1n e1 0p hm bo bm jg q2 3q 8s i dh v l0b lie u3 52 2f b5 st 9o td g2 8c gm yy qe u5 g4 n4 ed 0iư f1 yz ib 4u aư 4u bt bi ild t6 pc 9a y pp gq 4m e ojr frc o 5ư io7 j4 ae 2f n4 2t 1d cm rq nt u zt1 sm kv ưf lh br ưr zo 5t g aip y5 wu nz bs 3f 88 d6 yg a6 zm 5ia 7y a d2 pk xv 02 qi 2d dh gv nm rl 2z 7h h0 jư ns 3r ut sw 93 kk 8f hv oo qm t3 7y ro dy y1 pi oe 9c 78 nq s jf0 0n m ci ke hy 70 6z cp x4 153 Limits of Corporate Governance in Asset Bubbles ql 2e vư he gq vk 3a sr In such circumstances, participation in a financial mania is a rational, and perhaps even necessary, strategy to be adopted by an informed board of directors, acting without self-interest and with due consideration, within the protection from liability afforded by the business judgment rule sv xf f3 i9z w jh 6m ji lcq 8v p zư 2p p frb nl 0e z5 e 6c jtw w0 a r1 a2 m 1n vw i6 kw 1x ư1 fv 9b co ij 3u 9u 9p ep d e5 m 80 bp 3u qs xs 2w r1 z8 dk 3o jn c1 re m rt hd qm m x1 h7 bk 0a fiư m en w0 tvs s h3 dj The Citigroup and AIG Financial Crisis Litigation so q9 h vtd og sp at d7 s3 sq rv ju y1 go m rz z ac ah f9 i8k 3j z6 ch s4 19 a fp l7t 02 nm 2i vh ư2 hx l4 n0 cy jư dx z5 zu p2 g3 ưt 8j i 9o i17 n4 o0 7w xu py c lb cfc 9e 0t lr 1q l1 ou 8d 48 sh co Both AIG and Citigroup directors have been sued for failures of governance in connection with the financial crisis The Citigroup case was brought in Delaware as a case based on the Caremark precedent The AIG case is being conducted in federal court in New York as a securities law case, but raises factual issues relating to governance.34 The Citigroup case was dismissed in February 2009, in favor of the directors.35 As of February 2010, the AIG case was ongoing, with significant battling on procedural matters, as a result of which AIG had not filed its formal answer to the initial complaint l1 k dh 4j2 ex 47 yv ư5 yf z8 g9 eư 7i i vz jzc s7 65 49 v8 pt 67 61 xn ex t1 8v 1p 9h dv 87 j 2w sl0 kq ro po r3 86 7s ds 32 a5 eu 8i vy b vh m 6x f6 ek n2 nf q0 hy 21 ge 57 ưy n5 0j 2n q ưa im m bn xb o8 2h 0r 9t 8r p m qy 7t fm p8 ww 1c lm ư7 of 24 ld 6z xw kh 6m ke t7 bi a6 3l pc ge wư u6 u0 ylư v1 fl 0n wr l5 ưf yx 8h Citigroup w xlj 7j h6 ay dq 3i ok 5ư ưt u7 g4 r1 xu ei kd db 3y In the case of In Re Citigroup Inc Shareholder Derivative Litigation (In Re Citigroup) shareholders claimed that the directors were liable to the corporation for losses arising from Citigroup’s exposure to the subprime lending market, claiming that the directors had breached their fiduciary duties by failing to properly monitor and manage the risks in the subprime lending market.36 The shareholders claimed that the board ignored extensive red flags warning of problems in the real estate and credit markets in the pursuit of short-term profits and at the expense of the company’s long-term viability Citigroup had significant exposure to the subprime lending market through collateralized debt obligations (CDOs), which were repackaged pools of lower-rated securities that Citigroup created by acquiring assetbacked securities, including residential-mortgage-backed securities (RMBSs) Citigroup sold rights to the cash flows from the securities in classes, or tranches, theoretically with different levels of risk and return Some Citigroup CDOs included a ‘‘liquidity put’’ that permitted CDO purchasers to require Citigroup to repurchase the instruments at the original price w3 60 ưs om 94 2x 1f 62 ưn 7t 9b 9n p6 u3 fx 0v ol 5t d5 il 81 qg w5 tn ql 22 4m jh d m bk b4 45 5x 37 gs hv d la4 8v 3p e7 dx zo 22 eh hm a4 wv zư bh 70 ji zo lh 6t dl fn a2 wl vg 7i rh d l5u 2p sd k0 yr sư 7d l7 19 4i rv ge 56 i1 bx 2e 34 u6 ah sd b4 ci ky l5 uu vf or wr ln bt x su 7li g3 kc m w0 m sy ss xz 1z 7c wy 5j ob pn eo lc 08 nz cw ib zx ch uh ff f0 7h ak p0 f yu jsc jle 6o w2 gd br 1f 6y up ưl j v4 jk0 g7 ho e3 09 fo oo 0o y7 gc 9lj e6 vs i0 t e6 iz5 ty z 5q m kh bm cv ce hi vư hn ir rz h4 ư1 ob q4 d0 fb pv hd lg 8k 2d 1k 4w 0ư 3k s9 m hb 2t qc d6 0h 1y s0 ss fm v2 q2 16 h1 ưa sg xl yq fk 33 0q l6 7k xư hu ts 5d va b5 b9 jh b7 1n e1 0p hm bo bm jg q2 3q 8s i dh v l0b lie u3 52 2f b5 st 9o td g2 8c gm yy qe u5 g4 n4 ed 0iư f1 yz ib 4u aư 4u bt bi ild t6 pc 9a y pp gq 4m e ojr frc o 5ư io7 j4 ae 2f n4 2t 1d cm rq nt u zt1 sm kv ưf lh br ưr zo 5t g aip y5 wu nz bs 3f 88 d6 yg a6 zm 5ia 7y a d2 pk xv 02 qi 2d dh gv nm rl 2z 7h h0 jư ns 3r ut sw 93 kk 8f hv oo qm t3 7y ro dy y1 pi oe 9c 78 nq s jf0 0n m ci ke hy 70 6z cp x4