Thursday, February 12, 2004

Changing Times

The judges in the Federal District Courts are no fools. As the Enron class cases begin to flow through the tort courts, the judges, keen on public opinion, are resetting the standard for implicating the board of directors for breach of fiduciary duty. In 1995 the CEOs got Congress to pass a law making it virtually impossible to prove director negligence. The law stands, but the judges have made the connection that senior management "knows" and thus, the plaintiff does not have the insurmountable burden to prove scienter. For all practical purposes, this move makes liability insurance ridiculous. With liability easy to establish and insurance unobtainable, you tell me how this will play out in the grand scheme of things. The end of judgment, making a stab in the dark in the field of ignorance, where knowledge development to shrink that field is practical, is rapidly approaching. I was never a fan of whim, intuition, caprice, judgment and other limbic system attributes in place of knowledge development. Besides, Trevor always asserts the most common of the common senses. When they nail Martha Stewart, now a certainty, just who, exactly, is safe?