Kimberly D. Krawiec

A Woman's Worth

Kimberly D. Krawiec — Sat, 29 May 2010 13:46:09 PDT

This Article examines three traditionally “taboo trades”: (1) the sale of sex, (2) compensated egg donation, and (3) commercial surrogacy. The Article purposely invokes examples in which the compensated provision of goods or services (primarily or exclusively by women) is legal, but in which commodification is only partially achieved or is constrained in some way. I argue that incomplete commodification disadvantages female providers in these instances, by constraining their agency, earning power, or status. Moreover, anticommodification and coercion rhetoric is sometimes invoked in these settings by interest groups who, at best, have little interest in female empowerment and, at worst, have economic or political interests at odds with it.

Narratives of Diversity in the Corporate Boardroom: What Corporate Insiders Say about Why Diversity Matters

John M. Conley et al. — Sun, 07 Jun 2009 14:11:35 PDT

Over the last generation, the concept of diversity has become commonplace and taken-for-granted in discourses ranging from law to education to business. In higher education, for example, it is hard to imagine a faculty job search or a student admissions discussion that was not heavily laden with talk of diversity, in the sense of the representative inclusion of women and racial and ethnic minorities in a group or organization. In this paper we present the results of an interview-based study of the discourse of diversity in a particular business setting: the corporate boardroom. Our principal observation is that—thirty-one years after the Supreme Court’s Bakke decision introduced the term into public discourse--corporate insiders appear not to have arrived at a master narrative to explain the pursuit of diversity on boards of directors. Instead, their accounts stress a variety of factors and feature few concrete examples.

Sunny Samaritans & Egomaniacs: Price-Fixing in the Gamete Market

Kimberly D. Krawiec — Sat, 23 May 2009 11:00:20 PDT

This Article considers the market structure of the human egg (or “oocyte”) donation business, particularly the presence of anti-competitive behavior by the fertility industry, including horizontal price-fixing of the type long considered per se illegal in other industries. The Article explores why this attempted collusion has failed to generate the same public and regulatory concern prompted by similar behavior in other industries, arguing that the persistent dialogue of gift-giving and altruistic donation obscures both the highly commercial nature of egg “donation” and the benefits to the fertility industry of price control over a necessary input into many fertility services – namely, eggs. A comparison to the egg market’s closest cousin – the sperm market – does not reveal similar collusive attempts to depress the price of sperm. A further analysis of the industry explores potential reasons for this difference.

Why We Should Ignore the "Octomom"

Kimberly D. Krawiec — Sat, 23 May 2009 10:53:11 PDT

Thanks to the “Octomom” – a single, low-income, California mother of six, who recently gave birth to octuplets conceived through IVF -- the American public this year turned its attention to assisted reproductive technology. In this essay, I take issue with one set of proposals to arise from the controversy: embryo-transfer limits, variations on which have been proposed in Georgia, Missouri, and, most recently, by Naomi Cahn and Jennifer Collins. Examining national and international multiple-birth rates, as well as similar limits in other countries, I argue that government mandated embryo-transfer limits would produce fewer benefits and higher costs in the United States than proponents assume. First, the Octomom is a sad and disturbing, but aberrant, case. Second, questions of embryo transfer and multiple birth inevitably intersect with other politically contentious issues, including the moral and legal status of embryos and abortion. These political minefields render it highly unlikely that the United States will implement comprehensive embryo-transfer regulation effectively designed to reduce multiple births anytime soon.

Price and Pretense in the Baby Market

Kimberly D. Krawiec — Sat, 14 Feb 2009 09:48:41 PST

Throughout the world, baby selling is formally prohibited. And throughout the world babies are bought and sold each day. As demonstrated in this Essay, the legal baby trade is a global market in which prospective parents pay, scores of intermediaries profit, and the demand for children is clearly differentiated by age, race, special needs, and other consumer preferences, with prices ranging from zero to over one hundred thousand dollars. Yet legal regimes and policymakers around the world pretend that the baby market does not exist, most notably through prohibitions against “baby selling” – typically defined as a prohibition against the relinquishment of parental rights in exchange for compensation. This Essay explores the costs of societal pretense that legal baby markets do not exist. Those costs include scarcity, forgone opportunities to address market failures, an inability to develop regulations designed to further particular public policies unlikely to be advanced solely through the goal of profit-maximization, and the promotion of rent-seeking. This Essay focuses specifically on the rent-seeking problem, arguing that, although frequently defended by those who contend that commercial markets in parental rights commodify human beings, compromise individual dignity, or jeopardize fundamental values, bans against baby selling (at least as currently written and enforced) serve little purpose other than enabling anti-competitive behavior by the most economically and politically powerful baby market participants.

The Return of the Rogue

Kimberly D. Krawiec — Fri, 13 Feb 2009 14:48:20 PST

The rogue trader—a figure that captured public attention in the 1990s— has returned to the spotlight, largely due to two phenomena. First, market volatility stemming from problems in the U.S. mortgage market spilled over into stock, commodity, and derivative markets worldwide, causing large losses at many financial institutions and bringing to light previously hidden unauthorized positions. Second, the rogue trader has returned to prominence due to domestic and international regulatory changes that have forced banks worldwide to focus more attention on operational risk, an important component of which is rogue trading.

Although critics have raised a number of objections to the Basel II operational risk provisions, few have examined those requirements as a species of enforced self-regulation. I contend in this Article that, of the many regulatory options for addressing operational risk available to the Basel committee, it arguably chose the worst—an enforced self-regulatory regime that is unlikely to substantially alter the success with which financial institutions manage operational risk. That regime also carries with it the threat of high costs, a false sense of security, and perverse incentives. Particularly with respect to the low frequency, high impact events – including rogue trading -- that are the greatest operational risk concern to many, attempts at enforced self-regulation are unlikely to produce capital set-asides sufficient to avoid threats to bank stability and soundness. This is because those financial institutions with the highest operational risk are unlikely to credibly assess that risk and set aside adequate capital under a regime of enforced self-regulation.

Show Me the Money: Making Markets in Forbidden Exchange

Kimberly D. Krawiec — Wed, 14 Jan 2009 09:46:25 PST

As your parents doubtless told you, money can’t buy everything. Nearly all cultures reserve certain items, activities, and entitlements as inalienable for profit. It would be incorrect to assume, however, that the individual mental accounting, social norms, and laws regarding the proper scope of commercial activity are universal, preordained, or inflexible. In fact, researchers across disciplines have demonstrated both the malleability and context-dependency of individual mental accounting, and the socially constructed nature of relational boundaries and the accepted means of exchange within them, which vary across time and cultures. Moreover, technological innovation, social or political change, or other developments may create previously unknown circumstances for which there are no existing rules of accepted exchange, causing social strain.

The contributors to this volume consider at length the consequences of making – and restricting -- markets in various types of traditionally forbidden or contested exchange, including human blood, organs, eggs, sperm, reproductive services, and labor. What are the problems with, objections to, defenses of, impediments for, developments in, and challenges facing markets in these traditionally forbidden or contested areas of commercial exchange? What is the effect of prohibiting or impeding commercially-motivated transactions in these areas? As we move toward greater market-based exchange in some of these items and activities, what outcomes might we expect? What must those markets look like, who will intermediate them, and how must the legal regime governing the market participants be structured in order to guard against our traditional fears of market-based approaches to exchange in certain areas of life? Here, Rene Almeling, David E. Bernstein, Clark C. Havighurst, Melissa B. Jacoby, Kimberly D. Krawiec, Thomas C. Leonard, Julia D. Mahoney, Hugh V. McLachlan, Elizabeth S. Scott, and J. Kim Swales seek, if not answers, at least insight to these questions.

Common Law Disclosure Duties and the Sin of Omission: Testing the Meta-theories

Kimberly D. Krawiec et al. — Mon, 08 Dec 2008 11:22:37 PST

Since ancient times, legal scholars have explored the vexing question of when and what a contracting party must disclose to her counterparty, even in the absence of explicit misleading statements. This fascination has culminated in a set of claims regarding which factors drive courts to impose disclosure duties on informed parties. Most of these claims are based on analysis of a small number of non-randomly selected cases and have not been tested systematically. This article represents the first attempt to systematically test a number of these claims using data coded from 466 case decisions spanning over a wide array of jurisdictions and covering over 200 years.

The results are mixed. In some cases it appears that conventional wisdom is correct. For example, our data support the claim that courts are more likely to require disclosure of latent, as opposed to patent, defects. In addition, courts are more likely to require full disclosure between parties in a fiduciary or confidential relationship. On the other hand, our results cast doubt on much of the conventional wisdom regarding the law of fraudulent silence. Indeed, our results challenge ten of the most prominent theories that have been asserted to explain when courts will require disclosure. We find that courts are no more likely to impose disclosure duties when the information is casually acquired as opposed to deliberately acquired and that unequal access to information by the contracting parties is not a significant factor that drives courts to require disclosure. We do find, however, that when these two factors are present simultaneously courts are significantly more likely to force disclosure. Perhaps most interestingly, although it is generally understood that courts have become more likely to impose disclosure duties over time, we find that courts actually have become less likely to require disclosure over time.

Altruism and Intermediation in the Market for Babies

Kimberly D. Krawiec — Fri, 08 Aug 2008 10:04:34 PDT

Central to every legal system is the principle that certain items are off-limits to commercial exchange. In theory, babies are one such sacred object. This supposed ban on baby selling has been lamented by those who view commercial markets as the most efficient means of allocating resources, and defended by those who contend that commercial markets in parental rights commodify human beings, compromise individual dignity, or jeopardize fundamental values. However, the supposed and much-discussed baby selling ban does not, and is not intended to, eliminate commercial transactions in children. Instead, it is an asymmetric legal restriction that limits the ability of baby market suppliers to share in the full profits generated by their reproductive labor, insisting instead that they derive a large portion of their compensation from the utility associated with altruistic donation. Meanwhile, a wide range of baby market intermediaries profit handsomely in the baby market, without similar restrictions on their market activities. Baby selling “bans” thus have more in common with the rent-seeking by powerful marketplace actors seen in other commercial markets than with normative statements about the sanctity of human life. The author concludes with a call for the removal of the last vestiges of the “ban” against baby selling and other laws that diminish the capacity of baby market suppliers to access the marketplace.

Signaling Through Board Diversity: Is Anyone Listening?

Kimberly D. Krawiec et al. — Tue, 13 May 2008 13:34:36 PDT

The ethnic and gender make-up of corporate boards has been the subject of intense public and regulatory focus in many countries, including the United States, in recent years. Of particular interest has been quantitative research on the impact, if any, of board diversity on corporate performance. This body of work leaves substantial gaps in our understanding of the precise mechanisms by which board diversity may alter the corporate environment, if indeed it does. In this symposium, we discuss some preliminary findings from our first 35 of a series of confidential, semi-structured interviews of 45 to 90 minutes in length with corporate directors and other parties of interest. Due to multiple board service, these interviews represent 96 public company board experiences at 85 different public companies.

We limit our discussion in this Symposium to an analysis of the rationale for board diversity that figured most prominently in the interviews with our initial sample of respondents: signaling theory. Although signaling is frequently mentioned by our respondents and other researchers as a rationale supporting board diversity, we conclude that the distribution of costs and benefits of board diversity in “good” firms versus “bad” firms is unknown. We thus are unable to conclude that “bad” firms are not mimicking the signal, undermining the stability of board diversity as a meaningful signal. We, therefore, approach blanket assertions of the signaling benefits of board diversity with caution. We conclude that the signaling rationale for board diversity is at its strongest under particular conditions that may not exist at all corporations at all times.

Operational Risk Management: An Emergent Industry

Kimberly D. Krawiec — Sat, 10 May 2008 17:06:29 PDT

Financial institutions have always been exposed to operational risk – the risk of loss from faulty internal controls, human error or misconduct, external events, or legal liability. Only in the past decade, however, has operational risk risen to claim a central role in risk management within financial institutions, taking its place alongside market and credit risk as a hazard that financial institutions, regulators, and academics seriously study, model, and attempt to control and quantify. This newfound prominence is reflected in the Basel II capital accord, in numerous books and articles on operational risk, and in the emergence of a rapidly expanding operational risk management profession that is expected to grow at a compound annual rate of 5.5%, from US$992 million in 2006 to US$1.16 billion in 2009.

This increased emphasis on operational risk management corresponds to a much wider trend of “responsive” or “enforced self-” regulation, both in the United States and internationally, that attaches significant importance to the internal control and compliance mechanisms of business and financial institutions. Driven by legal changes and well-organized compliance industries that include lawyers, accountants, consultants, in-house compliance and human resources personnel, risk management experts, and workplace diversity trainers (hereafter, “legal intermediaries”), internal compliance expenditures have increased substantially throughout the past decade, assuming an ever-greater role in legal liability determinations and organizational decision-making, and consuming an ever-greater portion of corporate and financial institution budgets.

This chapter situates operational risk management – particularly those components of operational risk related to legal risk and the risk of loss from employee misconduct – within the broader literature on enforced self-regulation, internal controls, and compliance, arguing that the increased focus on operational risk management portends both positive and negative effects. On the one hand, business and financial institutions that are law abiding and avoid unforeseen and unaccounted for disasters are an obvious positive. At the same time, however, all operational risk management is not created equally. Some operational risk expenditures may prove more effective at enhancing the profits or positions of particular firm constituencies and legal intermediaries, or luring regulators and firm stakeholders into a false confidence regarding operational risk management, than at significantly reducing operational risk losses. Indeed, recent rogue trading losses such as those at Société Générale and MF Global Ltd. demonstrate that operational risk measures such as those embraced in Basel II are no substitute for sound firm management and regulatory oversight.

Incomplete Contracts in a Complete Contract World

Scott A. Baker et al. — Fri, 09 May 2008 13:03:32 PDT

This paper considers the role that contract doctrine should play in facilitating optimal investment in contractual relationships. All contracts are incomplete in the sense that they do not specify the optimal actions for the buyer and seller in every future contingency. This incompleteness can lead to both under and over-investment in resources specifically targeted to the needs of the other contracting party. To solve these investment problems, economists and legal scholars have looked to complicated contractual solutions and the ownership of assets.

This Article offers another solution: contract doctrine. Specifically, we propose a contractual default rule applicable to all contract interpretation, gap-filling, and good faith inquiries (a “relationship-specific investment,” or “RSI” default) that accounts for the renegotiation position of contracting parties. Because contractual default rules form the backdrop against which parties renegotiate, the RSI default allocates bargaining power to one party or the other in much the same manner as does ownership. The RSI default favors the contracting party making an RSI , while at the same time minimizing potential problems of over-investment through a notice requirement. We also offer some preliminary thoughts on the problem of two-sided RSIs.

Organizational Form as Status and Signal

Kimberly D. Krawiec — Fri, 09 May 2008 13:03:29 PDT

In this Article, the author analyzes the reactions of 147 New York City law firms to the 1994 enactment of the New York Limited Liability Partnership statute, which provided New York law firm partners with the first convenient mechanism to limit their personal liability for partnership debts. Using both quantitative and qualitative evidence, she evaluates whether the behavior of New York law firms supports the signaling theory of organizational form—that is, the theory that firms use the partnership form to signal to the marketplace that they provide high quality legal services, due to either superior monitoring or to profit sharing. She concludes that the quantitative data do not strongly support either signaling theory of partnership. In addition, both theories face substantial theoretical hurdles.

At the same time, interviews with law firm partners suggest that signaling concerns did impact law firm choice of form, in some cases profoundly. The author proposes three modifications to the signaling theory of organizational form that render the theory both more theoretically persuasive and more consistent with the observed behavior of law firms. First, the relevant signal appears to be negative, rather than positive. Second, this negative signal is more costly to elite firms than to non-elite firms. Third, firms may attempt to signal something other than, or in addition to, quality through their choice of organizational form—namely, status.

Organizational Misconduct: Beyond the Principal-Agent Model

Kimberly D. Krawiec — Fri, 09 May 2008 13:03:25 PDT

This article demonstrates that, at least since the adoption of the Organizational Sentencing Guidelines in 1991, the United States legal regime has been moving away from a system of strict vicarious liability toward a system of duty-based organizational liability. Under this system, organizational liability for agent misconduct is dependant on whether or not the organization has exercised due care to avoid the harm in question, rather than under traditional agency principles of respondeat superior. Courts and agencies typically evaluate the level of care exercised by the organization by inquiring whether the organization had in place internal compliance structures ostensibly designed to detect and discourage such conduct.

I argue, however, that any internal compliance-based organizational liability regime is likely to fail because courts and agencies lack sufficient information about the effectiveness of such structures. As a result, an internal compliance-based liability system encourages the implementation of largely cosmetic internal compliance structures that reduce legal liability without reducing the incidence of organizational misconduct. Furthermore, a review of the empirical literature on the effectiveness of internal compliance structures suggests that many organizations have adopted precisely this cosmetic approach to internal compliance. This leads to two potential problems: first, an underdeterrence of organizational misconduct and, second, a proliferation of costly but ineffective internal compliance structures.

The Economics of Limited Liability: An Empirical Study of New York Law Firms

Scott Baker et al. — Fri, 09 May 2008 13:03:18 PDT

Since the rapid rise in organizational forms for business associations, academics and practitioners have sought to explain the choice of form rationale. Each form contains its own set of default rules that inevitably get factored into this decision, including the extent to which each individual firm owner will be held personally liable for the collective debts and obligations of the firm. The significance of the differences in these default rules continues to be debated. Many commentators have advanced theories, most notably those based on unlimited liability, profit-sharing, and illiquidity, asserting that the partnership form provides efficiency benefits that outweigh any costs. In this article, the authors test these theories empirically by examining the choice of organizational form by New York law firms. Although the evidence indicates a strong shift from the general partnership form to the limited liability partnership form, a significant number of New York law firms remain general partnerships.

The authors conclude that the prevailing theories based on unlimited liability, profit-sharing, and illiquidity are insufficient and posit that, in contrast to the beliefs of many commentators, the choice of form decision is quite complex. It is dependent on a variety of factors, including the behavior of other similarly situated firms that the decision-makers consider competitors for prestige and clients. Nonetheless, it is apparent that unlimited liability is generally considered burdensome, and it is the authors’ prediction that, at some point in time, nearly all the firms in their sample will choose to file as limited liability partnerships. The general partnership form, with its unlimited liability, will operate only as a penalty default that punishes parties who fail to sufficiently define their organization, forcing firm members to reveal relevant information to courts and interested third parties.