The Inaugural Winter Lecture took place at the Law School on December 5, 2005, when the Hon. Frank H. Easterbrook, U.S. Court of Appeals for the Seventh Circuit and formerly Lee and Brena Freeman Professor of Law at the University of Chicago Law School, delivered a lecture entitled “The Race for the Bottom in Corporate Governance.”
As Judge Easterbrook summarized his Lecture, it is a tribute to Judge Winter’s famous essay in the late 1970s demolishing William Cary’s thesis that state law would produce a “race to the bottom” in enabling managers to exploit investors. Judge Winter observed that states compete for corporations (and corporations for capital); and in competition Adam Smith’s invisible hand produces benefits for all. The race is to the top. Recent developments in corporate law, however, are designed to eliminate competition by federalizing the rule of decision and by hampering international efforts to reallocate capital. Will this less-competitive regime, exemplified by Sarbanes-Oxley, lead a real race for the bottom? What is the public-choice dynamic of national corporate law?