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October 03, 2006


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I can't believe you're worried about "federalization of corporate law." What little there is left to legislate will undoubtably come soon. It's already too late.

The USG has the power to make any laws it likes. It is already federalizing the criminal codes.

Although the constitution is an inclusive (where powers of government are listed) document, it is treated as exclusive (where powers not given to government are listed), thanks to the general welfare phrase. Therefore, when legislating laws, the constitution is ignored, and, therefore, is obsolete.

Today, there is no such thing as an unconstitutional federal law. Mostly, the supremes tolerate and accept every federal law. Occasionally, they may deem a state law to be unconstitutional (that way they can encroach on state powers and further increase their judicial domain), but how many federal laws have they deemed unconstitutional?


Of course, Sarbanes-Oxley has nothing to do with corporate law. SOX applies only to publicly-traded firms. Private firms are still perfectly able to use executive loans. Indeed, you might very well put your theories to the test by trying to understand to what extent private companies (in particular, private equity backed companies) continued to use executive loans after the passage of SOX.

Another data point to consider. Traditional deferred compensation (as opposed to executive loans, which I would consider to be like deferred compensation to the extent required repayment is tied to performance) has effectively been outlawed for all firms, public and private, by new IRC Section 409A. What do you make of that?

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