By Edward Zelinsky

Because the rate of inflation for 2009 has effectively been zero, the Social Security Administration has announced that Social Security payments will stay flat for 2010. In response, the Obama Administration has asked Congress to send every Social Security recipient an additional $250 in 2010.

This is a bad idea. The Administration’s proposal is both unfair and misfocused.

Many Americans would be delighted to have the same deal as Social Security recipients, namely, the identical cash income in 2010 that they received in 2009. To millions of newly unemployed Americans, that looks like a good deal. Not as good as being president of a bailed-out bank, but still a good deal.

For 2010, the salaries of many Americans working in the private sector are frozen or reduced. In countless cases, compensation decreases are taking the form of fringe benefits eliminated or reduced, for example, the termination of employers’ 401(k) contributions.

As the latest saying goes, for these working Americans, flat is the new up. It is inequitable for federal taxpayers to finance $250 checks in 2010 for Social Security recipients with stable incomes, but not for the working and unemployed Americans whose incomes have declined, often precipitously.

And this is before we consider the tax-free nature of most Social Security benefits.

To illustrate, compare a young married couple with a retired couple receiving Social Security benefits. Let us suppose that both of these families have annual incomes of $20,000. The members of the hypothetical young family have minimum wage jobs while the retired family receives yearly Social Security benefits of $20,000.

While the nominal, pre-tax incomes of these two families are identical, the younger couple pays FICA taxes of $1,530. In contrast, the retired couple receives all of its Social Security payments tax-free. Thus, on an after-tax basis, the younger family has substantially less income per person than the older couple.

If federal checks are to be sent to either of these couples, the younger family is the more deserving recipient. Neither of these families is rolling in dough. However, there is no reason to target federal largesse to the retired couple rather than the young working family, with the same nominal income but which pays FICA taxes on all of its income.

In effect, the younger family would, by its FICA tax payments, finance the $250 checks the President wants to send to seniors.

The Administration has suggested other programs for 2010 which make more sense than the proposed $250 check to Social Security recipients. The Administration has advocated that, in light of the poor job market, unemployment benefits be extended and that so-called COBRA subsidies also be prolonged to help the unemployed purchase continuing medical insurance from their former employers. Both of these suggestions are compelling. Indeed, the COBRA subsidy should be made permanent.

If the federal fisc provides additional relief beyond this, Congress should expand the earned income tax credit for 2010 to relieve low-income working families, like our hypothetical younger couple, of some of their tax burden.

In contrast, the proposal to send all Social Security recipients $250 is ill-conceived. This proposal is not fair to working and unemployed Americans struggling with reduced incomes and tax obligations. This proposal misdirects the focus of federal assistance. When it comes to the $250 checks for seniors, Congress should just say no.

Chris Mallin is Professor of Corporate Governance and Finance & Director of the Centre for Corporate Governance Research at the University of Birmingham. She is the author of Corporate Governance and she blogs with fellow OUP author Bob Tricker at Corporate Governance. The below post is an adapted version of one found on that blog, and is about whether companies should split the roles of Chair and CEO. Her previous OUP posts can be found here, here and here.

It is widely recognised that corporate scandals and collapses often occur when there is a single powerful individual in control of a company. This is exacerbated when there is a lack of independent non-executive directors on the board. Therefore it seems axiomatic that powerful individuals can be constrained, and the temptations they may face conquered, by having in place a sound corporate governance structure achieved through dividing the roles of Chair and CEO.

UK Context

Back in 1992, the much lauded Report of the Committee on the Financial Aspects of Corporate Governance, often referred to as the Cadbury Report after the Chair of the Committee, Sir Adrian Cadbury, identified the potential danger of combining the roles of Chair and CEO in one person. The Cadbury report recommended ‘there should be a clearly accepted division of responsibilities at the head of a company, which will ensure a balance of power and authority, such that no one individual has unfettered powers of decision’. This principle was embodied in corporate governance best practice in the UK, with the Combined Code on Corporate Governance (2008) stating ‘there should be a clear division of responsibilities at the head of the company between the running of the board and the executive responsibility for the running of the company’s business. No one individual should have unfettered powers of decision’, and furthermore the Combined Code explicitly states ‘the roles of chairman and chief executive should not be exercised by the same individual.’

Whilst combining the roles of Chair and CEO is rare in the UK’s largest companies, Marks and Spencer PLC is a notable exception. In May 2004 Sir Stuart Rose was appointed to the position of Chief Executive and subsequently in 2008 he became both chairman and CEO until July 2011. This combination of roles goes against the Combined Code’s recommendations of best practice. As a result in 2008 some 22 per cent of the shareholders did not support the appointment of Sir Stuart Rose as chairman. Nonetheless he remains in the combined role although there is still considerable shareholder unrest and 2009 has seen more dissent by shareholders on this issue.

US Context

In the US, the roles of Chair and CEO have often been combined but now more and more companies are appointing separate individuals to the two roles. A recent example of a US company which has decided to appoint an independent chairman is Sara Lee, the famous producer of gateaux, beverages and body care products. Sara Lee has decided to make this change as a response to investor pressure and also the growing trend in the US to split the two roles. Kate Burgess in her article ‘Sara Lee to separate executive roles’ explores this case in more detail.

Institutional Investor Pressure

In the UK there has long been pressure brought to bear by institutional investors on companies which have tried to combine these roles. This pressure, together with the long history in UK corporate governance codes against the combination of roles, means that few large companies seek to combine the roles (although as noted above, Marks and Spencer plc is an exception).

Recently Norges Bank Investment Management (NBIM), a separate part of the Norwegian central bank (Norges Bank) and responsible for investing the international assets of the Norwegian Government Pension Fund, has started a campaign to convince US companies to split the roles of Chair and CEO and appoint independent chairmen. Kate Burgess  in her article ‘Norwegian fund steps up campaign’ highlights how NBIM has submitted resolutions to four US companies calling on them to appoint independent chairmen. The four companies are Harris Corporation, Parker Hannifin, Cardinal Health Inc, and Clorox. In addition NBIM has also voted against combined Chair/CEOs at some 700 US companies. Interestingly Sara Lee had also been the focus of action by NBIM before agreeing to appoint separate individuals to the roles in future. Also in Kate Burgess’ article, Nell Minow of The Corporate Library states ‘NBIM can leverage a lot of shareholder frustration and a widespread sense that this is a sensible, meaningful but not disruptive initiative’.

It seems to be only a matter of time before the vast majority of companies will split the roles of Chair and CEO. Of course the individuals appointed to those roles must be both capable of fulfilling the tasks expected of them, and of ensuring that ultimately the two roles, carried out by separate individuals, unite the company under a common leadership approach. That may prove more difficult than many imagine and so the appointments process must consider fully the many traits needed to ensure success.

Jennifer Burns is Assistant Professor of History at the University of Virginia.  Her new biography, Goddess of the Market: Ayn Rand and the American Right, follows Rand through her meteoric rise from struggling Hollywood screenwriter to best-selling novelist.   Burns highlights two facets of Rand’s work that make her a perennial draw for those on the right: her promotion of capitalism, and her defense of limited government.  In honor of Jennifer Burns’s The Daily Show appearance (be sure to tune in 11 tonight!) we have posted an excerpt below.

“I am coming back to life,” Rand announced as the Nathaniel Branden Institute entered its second year of existence.  Watching Nathan’s lectures fill, Rand began to believe she might yet make an impact on the culture.  Roused from her despair, she began once more to write.  In 1961 she published her first work of nonfiction, For the New Intellectual, and in 1962 launched her own monthly periodical, The Objectivist Newsletter. Over the course of the decade she reprinted articles from the newsletter and speeches she had given in two more books, The Virtue of Selfishness and Capitalism: The Unknown Ideal.  Although she occasionally talked of a fourth novel, Rand had abandoned fiction for good.  Instead she reinvented herself as a public intellectual. Gone were the allegorical stores, the dramatic heroes and heroines, the thinly coded references to real politicians, intellectuals, and events.  In The Objectivist Newsletter Rand named names and pointed fingers, injecting herself directly into the hottest political issues of the day.  Through her speeches and articles she elaborated on the ethical, political, and artistic sides of Objectivism.

Rand’s ideas were particularly attractive to a new generation of campus conservatives, who saw rebellion against a stifling liberal consensus as a basic part of their identity.  Unlike older conservatives, many right-leaning college students were untroubled by her atheism, or even attracted to it.  As Rand’s followers drew together in campus conservative groups, Ayn Rand clubs, and NBI classes, her ideas became a distinct stream of conservative youth culture.  Through her essays on government, politics, and capitalism Rand herself encouraged the politicization of her work.  In 1963 she even endorsed a new Republican on the scene, Barry Goldwater, a move that situated her as the leader of a growing political and intellectual movement.

At first look Objectivism may appear a freakish outgrowth of the turbulent 1960s, but it had significant parallels in American history.  Nearly a century before, similar reading clubs and political activism had sprung up around Edward Bellamy’s Looking Backward, a book uncannily similar to Atlas Shrugged, if diametrically opposite politically…

Rand made her network television debut in 1960, appearing on Mike Wallace’s celebrated interview show.  Her dark eyes flashing, she refused to be intimidated by the liberal Wallace and expertly parried his every question and critique.  Her performance caught the eye of Senator Barry Goldwater, who wrote Rand a letter thanking her for defending his “conservative position.”  Rand had not mentioned the senator by name, but he immediately recognized the similarity between their views.  Goldwater told Rand, “I have enjoyed very few books in my life as much as I have yours, Atlas Shrugged.”  He enclosed an autographed copy of his new book, the best-selling Conscience of a Conservative.  Shortly thereafter the two met briefly in New York.  Rand followed up this encounter with a lengthy letter urging Goldwater to support capitalism through reason alone.  Although she considered him the most promising politician in the country, Rand was distressed by Goldwater’s frequent allusions to religions.  The Conscience of a Conservative had been written primarily by L. Brent Bozell, William F. Buckley’s brother-in-law, and accordingly reflected the fusionist consensus of National Review.

In her letter to Goldwater Rand hammered on the need to separate religion and politics, a theme that would animate her for decades.  She singled out National Review for special criticism because it was a supposedly secular magazine that surreptitiously tried “to tie Conservatism to religion, and thus to take over the American Conservatives.”  If such an effort succeeded, Rand asked, what would become of religious minorities or people like herself who held no religion?  Goldwater’s response, which reiterated his Christian religious beliefs, was brief yet polite.  Rand had a powerful admirer, but not a convert.

As her depression lifted, Rand began to explore different ways she might exercise cultural influence.  She was newly interested in politics because of her esteem for Goldwater and her dislike of the dashing presidential contender, Jack Kennedy, to her a glamour candidate who offered no serious ideas.  She made her first venture back into political commentary with a scathing attack on Kennedy, “JFK: High Class Beatnik,” a short article published in the libertarian journal Human Events.  In the summer of 1960 she even dispatched Nathan to investigate the possibility of her founding her own political party. It was unclear if Rand saw herself as a potential candidate or simply a gatekeeper for others.  Nathan sounded out a few of Goldwater’s political advisors, who told him that Rand’s atheism severely limited her prospects.  Abandoning that idea, Rand returned once again to intellectual pursuits.  She sent her attack on JFK to the head of the Republican National Committee to be used as needed in Republican publications.

Shaking off her lethargy, Rand now began paying attention to the new following she had gained through Atlas Shrugged.  The book was an instant best-seller despite the largely negative reviews it received.  As with The Fountainhead enormous quantities of enthusiastic fan mail poured in.  Although Rand could not respond personally to ever letter, she was interested in her readers, particularly those who wrote especially perceptive or ignorant letters.  Nathan often interposed himself between Rand and the most objectionable writers, but in the early 1960s it was entirely possible to send her a letter and receive a personal response.  Sometimes she even engaged in a lengthy correspondence with fans she had not met, although her more usual response was to refer the writer to work she had already published.

The Nathaniel Branden Institute both capitalized on and fostered Rand’s appeal.  Nathan used the addresses from her fan mail to build NBI’s mailing list and advertise new courses.  As the lectures expanded into new cities, he took out newspaper advertisements describing Objectivism as the philosophy of Ayn Rand.  In 1962 he and Barbara published a hagiographic biography, Who is Ayn Rand?, which included an essay by Nathan on the fundamentals of her philosophy.  Slowly public perception of Rand began to shift, establishing her as a philosopher, not just a novelist.  The NBI ads and lectures made Objectivism into a movement, a larger trend with Rand at the forefront.

Bob Geldof said it best back in 1979 with the hit “I Don’t Like Mondays.” My staff know better than to approach me too early on Mondays. My crankiness can sometimes last well into the afternoon. Yesterday, however, was an exception to the rule. I love it each year when the Nobel Prizes are announced. And yesterday two Oxford authors were recognized by the Nobel committee for their work in Economics. Congratulations go out to Elinor Ostrom, co-author of The Samaritan’s Dilemma: The Political Economy of Development Aid (OUP, 2005) and Oliver Williamson, author of The Mechanisms of Governance (OUP, 1999), Organization Theory: From Chester Barnard to the Present and Beyond, 2nd Edition (OUP, 1995), and The Nature of the Firm: Origins, Evolution, and Development (OUP, 1993).

While I have not had the great good pleasure to work with Ostrum and Williamson, there is still a sense of pride in working for the publisher that recognized their genius and contributions to Economics long ago. We might not see too many celebrity authors (thankfully), or New York Times bestsellers (unfortunately) here at OUP, but we do have a long list of authors who are Nobel laureates, Pulitzer recipients, and National Book Award winners (fortunately). And to the sage Nobel Economics committee in Oslo I say, “Thanks for making my Monday a little sweeter. Keep up the good work. I look forward to next year’s recipients.”

By Edward Zelinsky

Few governmental agencies are as widely criticized as the IRS. Some of this criticism is inevitable resentment towards the tax collector. It is, Edmund Burke famously observed, as impossible “to tax and to please” as it is “to love and be wise.” The IRS rarely pleases and is never loved.

Moreover, the IRS has become a particularly tempting target for opportunistic politicians. Rather than engage in the difficult work of controlling public expenditures and rationalizing the tax law, it is easier for elected officials to engage in faux populist bashing of the IRS for its enforcement of tax laws for which Congress and the President are responsible.

However, a substantial portion of contemporary criticism of the IRS is justified. It is, for example, troubling that the IRS consistently attacks as unreasonable the compensation paid to owners of closely-held corporations while acquiescing to the tax deductibility of far larger salary payments to the executives of publicly-traded firms.

It is, in the final analysis, critical to the operation of a modern society that taxes be collected fairly and efficiently. It is accordingly important for those of us who have criticized the IRS (and expect to do so in the future) to speak up when the IRS gets something right.

And recently the IRS has done something important right: cracking the secrecy of the Swiss banks which help affluent Americans to cheat on their U.S. taxes.

This is a simple matter of fairness. Middle and working class Americans, when they save outside their IRAs and 401(k) accounts, typically put cash into local banks and credit unions. From such institutions, these taxpayers receive Form 1099 annually and generally comply with the legal obligation to pay federal income tax on the interest credited to their bank and credit union accounts. Such middle and working class taxpayers may also be subject to back-up withholding under which the institutions paying them interest retain some of that interest and send it to the IRS.

In contrast, for years, a disturbingly large number of affluent Americans have knowingly cheated on their U.S. tax obligations by placing savings in foreign bank accounts which they do not report to the IRS, even though these citizens are legally obligated to disclose foreign accounts to the IRS and to pay U.S. income tax on the interest earned by such foreign accounts. The result has been something of a two-tier system under which, to paraphrase Leona Helmsley, only the little people pay taxes on bank account interest.

Central to the creation and promotion of this two-tier scheme have been the efforts of Swiss bankers with the active connivance of the Swiss government. Tax evasion and money laundering are major Swiss industries which Swiss bankers have conducted with the support of Switzerland’s bank secrecy laws. Those laws have assured high income U.S. taxpayers that they will not be caught if they violate U.S. law by putting savings into undisclosed Swiss bank accounts and failing to pay the federal income taxes owed on the interest paid on such accounts.

Recently, the IRS has begun to crack the wall of secrecy surrounding Swiss bank accounts by obtaining the names of U.S. citizens holding such accounts and enforcing the tax law against these individuals. Every American who has been paying his federal income taxes on his interest-bearing accounts should applaud this development.

This being the IRS, there are those who have criticized the IRS’s efforts as overdue and as obtaining the names of only a fraction of the U.S. citizens who have cheated on U.S. taxes via Swiss bank accounts. Others have faulted the IRS for giving American citizens an amnesty period during which such citizens will generally be spared the worst penalties if they now come forward and pay the back taxes owed on previously undisclosed Swiss bank accounts.

It would indeed be unfortunate if, having achieved impressive initial success, the IRS were to rest on its laurels, rather than continue its efforts to obtain more names of U.S. citizens with undisclosed Swiss bank deposits. Whatever the merits of the amnesty deployed by the IRS (it probably is a necessary evil), this should be a one-time offer to those who have cheated on U.S. taxes, an offer not to be repeated.

When I was in government, I invariably heard from persons who were unhappy with my performance but rarely received a word of commendation from those who favored my decisions. This always troubled me. So, as one who has not hesitated over the years to criticize the IRS, let me commend the IRS for its crackdown on Americans who have been cheating on U.S. taxes through Swiss bank accounts. On this one, the IRS is getting it right and deserves the support of all U.S. taxpayers.

Dennis Baron is Professor of English and Linguistics at the University of Illinois. His book, A BETTER PENCIL: Readers, Writers, and the Digital Revolution, looks at the evolution of communication technology, from pencils to pixels. In this post, originally from Baron’s personal blog The Web of Language, he looks at the Amazon sales rank numbers to see if he can figure out where he stacks up–and what those numbers mean, anyway.

My book “A Better Pencil” came out this month from Oxford University Press. It’s not my first book, but it’s the first one I’ve published since the internet went viral. Because my book is about the impact of computers and the ‘Net on how we read and write, I checked the World Wide Web to see how the book was doing.

Last week I was interviewed about “A Better Pencil” on Salon, and that interview, provocatively titled “Is the internet melting our brains?”, triggered 95 comments on the Salon.com site. The comments were both positive and negative, though many had nothing to do with the book or the interview but instead consisted of commenters attacking one another. This seems to be fairly normal for online comments, but while I really wanted to feel good about stimulating so much passionate discussion, those sidebar conversations only managed to make me feel irrelevant.

Googling told me that the Salon interview had also been reposted and retweeted on 100 or more websites. Some of them, like boingboing and techdirt, are fairly influential. Hoping that the interview would stimulate sales, I decided to track my Amazon Sales Rank, the number that the world’s largest bookseller assigns to every book to indicate how much it’s selling relative to all the other books on Amazon.

On Wednesday night my Amazon Sales Rank was 4,913 (that’s supposed to be pretty good — low ASR numbers mean higher sales, and only 4,912 books were outselling mine). In one subcategory, culture, my book was even a “bestseller” in 9th place. I faced stiff competition: number 6 in the “culture” list was The Cannabis Grow Bible, but in another subcategory I was outselling Storey’s Guide to Raising Chickens.

By the next morning, my overall Amazon Sales Rank had jumped to 2,981 (remember, low numbers are good), and “A Better Pencil” had climbed from 9 to 4 in “culture,” just below Stuff White People Like, a book I’d actually heard of. Figuring this meant that my book was going off the charts, I googled “Amazon sales rank” only to find that a rank of 3,000 means Amazon is selling about 20 copies a week. At that rate, it will take more than three years to exhaust the publisher’s inventory.

Two hours later, my ASR had dipped to 3,356, and I began to feel like I was watching the Dow. Readers had clearly lost confidence in me, and all of a sudden my book was being eclipsed in “culture” by The Mammoth Book of Tattoos. Really, if tattoos are more important than computers to readers — I’m talking about readers, not bikers — then maybe I got the whole internet thing wrong anyway.

Checking with my publisher lifted my spirits: the numbers on Amazon do suggest that people are buying my book, and that there may have been a Salon bump in sales. But it also confirmed my feeling that the Amazon Sales Rank, which is computed hourly using a top-secret proprietary algorithm, doesn’t reveal anything useful about the actual numbers of books sold.

Even so, I’m happy that in the past hour I’ve sold more than Marshall McLuhan’s The Medium is the Massage (subcategory: communication), which I read when it was first published in 1967, though in “history of technology” I’m being soundly trounced by Sun Tzu’s Art of War. To be fair, that book had a significant head start — it was written in the 6th century BCE. Also, I’m not quite sure what Sun Tzu has to do with the history of technology, though I see that in addition to hard copy, a digital version of The Art of War is available for the Kindle, Amazon’s e-book reader.

Fifteen years ago, in the fairy-tale age before Amazon and its author-mesmerizing Sales Rank, I was attending a conference where another book I had just published was on display in the book exhibits. I watched from a few tables away while browsers approached the display, fingered a copy of the book, looked inside, then put it down and moved on. I think a few copies of the book did sell at the conference, and I still get a royalty check in the low single figures for it. But I’m not sure whether that “analog” experience of watching my book being studiously ignored by readers who were clearly not bikers was better or worse than digitally tracking my Amazon Sales Rank. Maybe authors should avoid both ways of monitoring sales and wait patiently for their annual publisher’s statements. But my experience with Amazon is that, like watching a traffic accident, it’s just impossible for any writer to turn away.

Arthur B. Markman is the Annabel Irion Worsham Centennial Professor of Psychology and Marketing at the University of Texas at Austin. His new book, with Kristin L. Wood, is Tools For Innovation which looks at the practical methods that support innovation and creative design, from different ways of thinking and conceptualizing to computer-based tools. In the post below, which originally appeared on Markman’s Psychology Today blog, we learn about how goals drive behavior.

Business magazines like Forbes, newspapers like the Wall Street Journal, and economic forecasters are united in their belief that economic growth in the US will be driven by innovation. That is, the US and other major economic players will not grow by developing new products and key refinements of existing products that will drive new consumption. This is not news, really. Bringing new ideas to market has long been a centerpiece of economic growth. And that means that Psychology is crucial to the economy.

That’s right. Psychology.

Innovation is driven by new ideas. That means that creativity is at the heart of innovation, and so creativity will drive the economy.

Creativity seems mysterious. We love stories about mad geniuses striving alone in dark labs. We create myths about flashes of superhuman insight that lead to the solutions to difficult problems. We give credit for inventions to single individuals like Edison, Bell, and Marconi.

If creativity is mysterious, then we should be worried about the state of the economy. How can we count on creativity to create growth if it is mysterious and requires heroic figures to occur?

Happily, creativity is not a mystery. The creation of new ideas results from basic psychological mechanisms. Because those mechanisms are well-studied by psychologists, there is much that we can do to teach others how to become more creative. In addition, this knowledge provides us with ways to create tools to support that creativity.

In July of 2009, the book Tools for Innovation came out. I edited this book with my colleague Kris Wood, who is a mechanical engineer. We brought together psychologists, engineers, computer scientists, and people in business to write chapters about basic research that helps us to understand creativity and the tools that can be developed based on that research. In the next few posts, I’ll describe a few of the lessons from this book.

The first lesson comes from a chapter by Robert Weisberg from Temple University. He analyzes a number of examples of creativity, such as Edison’s creation of the kinetoscope (a precursor to the movie projector), Picasso’s creation of the painting Guernica, and the Wright brother’s development of the airplane. He uses these examples to break down a number of myths about innovation.
For example, we tend to give credit to a single individual for an invention. We all know, for example, that the Wright brothers invented the airplane. However, they were working within a larger world community of people who were all working on flying machines. They took note of other people’s failures, such as the death of inventor Otto Lilienthal, who was killed when his flying machine was caught in a gust of wind. This failure led the Wrights to assume that the pilot needed to be able to control the flight of the airplane.

The Wrights were bicycle makers before they started to make airplanes. So they had extensive experience with complicated mechanical devices. This expertise was important as they began to put together an actual device for flying.

Finally, the Wrights looked to the world around them for help in developing the control system for the airplane. Many groups focused on using what was known about steering boats to help steer a plane (that is why the fin on the back of a plane is called a ‘rudder’), but the Wrights read extensively about what was known about bird flight. They decided to have the control system of the plane warp the wings by analogy to what was known about the way that birds fly.

So, the Wright brothers were smart, and persistent, and diligent. They tested their designs carefully. Their invention helped pave the way toward a multibillion dollar industry. But this innovation did not come about because they did things that were beyond the grasp of mere mortals…

Douglas E. Phillips is author of The Software License Unveiled: How Legislation by License Controls Software Access, which reframes the debate between proprietary and free software to ask whether “legislation by license” should control either kind of software access.  In the article below he looks at Google’s new Chrome operating system.

Google recently announced plans for a new PC operating system, the Chrome OS. Within minutes, the media reported an OS war and began telling us who loses and who wins. The Chrome OS will smash Windows! Or else Chrome is actually good for Microsoft and (despite running on a Linux kernel) threatens Linux! Who knows? We might actually have to wait until the new OS comes out, which Google says won’t happen for another year.

Whatever becomes of the Chrome OS, though, Google’s decision about how to license it tells us something about where the software license itself is going. And that’s worth looking at now, given that how software is licensed shapes how it’s created and used.

Google promises open source licensing, which points to an approach the company already uses for the Chrome browser. This approach combines a royalty-free source code license to developers with proprietary end user terms. Expect to see more of this hybrid model across the software industry in the years to come.

Source code for the browser is available under the BSD license, which is short, sweet, and (in licensing jargon) permissive. You can use BSD-licensed code in a new work and distribute the new work any way you choose.

The separate terms of service for the browser’s executable version don’t impose a fee, but they do authorize Google to deliver targeted advertising when you use it. So the browser – and most of Google’s other services – are free, but only in the sense that broadcast television is free (or was free, before cable and satellite found a way to charge for it). You pay (some would say dearly) for broadcast TV, not by sending money to ABC, CBS, NBC, or Fox, but by tolerating a high-fat diet of ads we hate.

You pay Google in more or less the same way, except that the advertisements usually tend to be more relevant. In return, you get access to content that compares to network TV, in scope and depth, as the Pacific Ocean compares to a puddle (taking into account that the Pacific Ocean also has its shallow parts and sharks). Most people seem to like this bargain. It works, however, only if you agree to let Google keep track of what you’re looking for online and serve ads in response. Without this proprietary element, there would be no Google as we know it and, among other things, no Chrome browser or Chrome OS. The hybrid license lets all this happen.

The main objection to permissive and hybrid licensing comes not from the Microsofts of the world, but from advocates of the GNU General Public License. You can borrow source code from a GPL-licensed work and include the code, royalty-free, in a new work. But if you want to share the new work with others, then the GPL requires that you also license the new work – including the parts that weren’t borrowed – under the GPL. In the GPL philosophy, protecting software freedom means denying the freedom to mix free code with any code that is subject to proprietary licensing terms.

According to Google, the Chrome OS will consist of the Chrome browser “running within a new windowing system on top of a Linux kernel.” Because the Linux kernel is GPL-licensed, Google will have to provide that part under the GPL. The GPL’s “copyleft” condition applies, however, only if the new work is a “derivative work” as a matter of copyright law. The Chrome browser clearly is a separate work, and the new windowing system apparently will be as well (as is the existing X11 windowing system, which is often used with Linux but not licensed under the GPL).

Google’s not likely to license the non-Linux parts of the Chrome OS under the GPL, and for good reason. Consider the Web itself. Tim Berners-Lee, who invented the Web, at first wanted the Web software to be licensed under the GPL. He changed his mind after people told him that the strings attached by the GPL could severely limit the Web’s reach. So he arranged instead to have the Web software dedicated to the public domain. The Mosaic graphical browser included parts of the original Web software, which meant that avoiding the GPL was key to making Mosaic something on which for-profit companies could build. Without the freedom to monetize Web technologies, the private investment that helped the World Wide Web live up to its name almost certainly never would have occurred. That’s why a combined open source and proprietary licensing model probably makes sense for the Chrome OS. It’s also why your next software license, like your next car, may well be a hybrid.

Chris Mallin is Professor of Corporate Governance and Finance & Director of the Centre for Corporate Governance Research at the University of Birmingham. She is the author of Corporate Governance and she blogs with fellow OUP author Bob Tricker at Corporate Governance. The below post is an adapted version of one found on that blog, and is about the important of votes in corporate governance. Her previous OUP posts can be found here and here.

Voting ones’ shares is seen as one of the main tools of corporate governance. In recent times, votes have been cast against adoption of the annual report and accounts, against the appointment, or re-appointment, of certain directors, and against certain proposed strategies. Votes can also be used via the ‘say on pay’ to signal displeasure at executive remuneration packages. Although the ‘say on pay’ is an advisory vote, it may nonetheless be quite effective at making boards think twice about the proposed pay packages for executive directors.

However companies do not always take as much notice of the votes cast as one would like. For example, the recent annual general meeting of Marks and Spencer is a case in point as regards the use of voting as a (vociferous) voice. Andrea Felsted and Samantha Pearson in their article ‘M&S chief defiant amid revolt by investors’ highlight that nearly 38% of votes cast backed a resolution seeking the appointment of an independent chairman within the next year. Sir Stuart Rose, who has been the centre of much criticism since taking on the roles of both chairman and chief executive, did not seem overly bothered by the investors’ views on this matter. There was also much shareholder dissent over the re-election of the chairman of the remuneration committee and over the adoption of the remuneration committee report.

Withheld votes
Whilst the importance of the vote is universally accepted, let us consider what happens in the UK when a vote is withheld. A withheld vote may signal that an investor has reservations about a resolution, or it may be a stronger expression that an investor is unhappy about a resolution, whilst falling short of actually voting against the resolution. However when the ‘vote withheld box’ is ticked on proxy forms in the UK, the withheld votes are not counted as part of the votes cast. For example, after its annual general meeting in May 2009, Shell published the voting results on its website. On Resolution 1 : Adoption of Annual Report & Accounts, there were: ‘votes for’ 3,301,631,965, ‘ votes against’ 3,394,595, and ‘votes withheld’ 16,026,721. However when indicating the percentage split of the votes, ‘votes for’ are shown as 99.90% and ‘votes against’ as 0.10%. The votes withheld were nearly 5 times that of the votes against but nowhere are they reflected in the percentage totals of votes cast. Similarly, on Resolution 4 : Re-appointment of Lord Kerr of Kinlochard as a Director of the Company, there were ‘votes for’ 3,161,974,849, ‘votes against’ 77,443,311, and ‘votes withheld’ 77,876,289. The percentage allocation indicated 97.61% ‘votes for’ and 2.39% ‘votes against’. The ‘votes withheld’ which again exceeded the ‘votes against’ were not reflected at all in the percentage totals. It should be said that Shell does clearly state that “a ‘vote withheld’ is not a vote under English Law and is not counted in the calculation of the proportion of the votes ‘for’ and ‘against’ a resolution.”

The Combined Code on Corporate Governance (2008) under Code provision D.2.1, states that ‘For each resolution, proxy appointment forms should provide shareholders with the option to direct their proxy to vote either for or against the resolution or to withhold their vote. The proxy form and any announcement of the results of a vote should make it clear that a ’vote withheld’ is not a vote in law and will not be counted in the calculation of the proportion of the votes for and against the resolution. However it’s interesting to note that a decade ago, the Report of the Committee of Inquiry into UK Vote Execution (1999), published by the National Association of Pension Funds, stated that whilst it was initially attracted to the idea of adding a third box (being an ‘abstention’ or ‘vote withheld’ box), it then decided that there were several arguments against the inclusion of such a third box. Firstly it might provide investors with an ‘easy option’ so that rather than voting against, they withheld their votes; and secondly since withheld votes are not counted, and have no legal effect, then it could drive down the level of recorded votes.

However as we have seen, the Combined Code does advocate the inclusion of a ‘vote withheld’ box on the proxy form. Therefore, it could be that in practice the addition of a third box which allows a withheld vote but which is not counted, may lead to the understatement of the level of dissatisfaction with some resolutions. Given that institutional investors are coming under more and more pressure to be seen to be active owners of shares, it may be that a ‘vote withheld’ will increasingly become seen as sitting on the fence, rather than taking a decision to vote against. In the US, it would seem that abstentions do have a legal effect under a majority voting system. For example, in a director election if there were more votes withheld than were voted for the candidate, then the candidate would not be elected, hence the abstentions (votes withheld) would have a legal effect.

Broker votes
Turning to US issues, the SEC has recently made some important changes to proxy voting. Weil, Gotshal and Manges (2009) report that ‘the SEC approved a change to NYSE Rule 452, eliminating broker discretionary voting of uninstructed shares in uncontested director elections, which will have the effect of reducing the number of votes cast in favor of the board’s nominees in the election of directors and strengthen the influence of institutional investors and activist shareholders.’

Blank votes
However James McRitchie has brought to our attention the problem of blank proxy votes which go to management. He highlights that fact that the broker vote issue that the SEC took care of is ‘where retail shareowners don’t submit a proxy (or voter information form) at all. When that happens, the broker or bank can vote within 10 days of the meeting. The “blank vote” issue arises when the shareowner votes at least one item on their proxy but leaves some other items blank……..[the voting] platform for institutional investors doesn’t allow submission of blank votes, [but the] platform for retail holders does and the SEC allows them to fill in the blanks as instructed by brokers and banks (always with management)’. Furthermore he states that ‘As shareowners who believe in democracy, we have filed suggested amendments to take away that discretionary authority to change blank votes, or non-votes, as they might be termed. We believe that when voting fields are left blank on the proxy by the shareowner, they should be counted as abstentions.’

Clearly the area of voting is a complex one and changes are being brought in over time to remove barriers to voting and to help ensure that votes are cast in a way which fairly reflects the owners’ intentions. A decade ago it would have seemed highly unlikely that many institutional shareholders would publish their voting levels in individual companies and on individual resolutions but many institutional shareholders now do this. In the US a number of institutional shareholders have gone a stage further and disclose their voting intentions prior to a company’s AGM. Hopefully institutional shareholders in other countries will adopt this approach in future.

By Edward Zelinsky

The swine flu is back. Gerald Ford was president the last time Americans confronted the swine flu. In response to the current emergence of this disease, public health authorities advise us to take precautions including the avoidance of crowds and of unnecessary travel. For many Americans, the most significant exposure to the danger of communicable disease occurs at the workplace.

While this workplace-based exposure cannot be eliminated, it can be minimized. To combat swine flu, we should encourage employees to telecommute from their homes rather than travel to their employers’ offices with their attendant danger of communicable disease.

Modern technologies – the internet, email, cell phones, electronic data bases – enable many employees to work from their homes for at least part of the week. Telecommuting extends job opportunities to individuals for whom traditional commuting is difficult, for example, the disabled, parents of small children, persons who live far from major employment centers. Telecommuting is also good for the environment, reducing the carbon footprints of employees who spend some of their work days at home and need not physically commute to work on those days.

Now, telecommuting can achieve yet another important benefit by reducing individuals’ potential exposure to swine flu on the days they work at home rather than travel to their employers’ offices.

A major impediment to telecommuting is New York State’s extraterritorial taxation of nonresidents’ incomes. When a nonresident works at home for a New York employer, New York imposes income tax on the telecommuting nonresident for this out-of-state day even though the nonresident never sets foot in New York on that day and even though New York provides no public services to the nonresident telecommuter on his day working at his out-of-state home. The result of New York’s extraterritorial taxation is typically double income taxation of the nonresident for telecommuting from outside the Empire State, a classic confirmation that no good deed goes unpunished.

I am something of a poster boy for the irrationality of New York’s extraterritorial taxation of nonresident telecommuters. I am a law professor in Manhattan at the Benjamin N. Cardozo School of Law of Yeshiva University. I live in New Haven, Connecticut. When New York sought to impose its income tax on me for the days I wrote and researched at home in Connecticut, I challenged this extraterritorial tax on constitutional grounds. Virtually all independent legal commentators concluded that this challenge should have prevailed since the Due Process and Commerce Clauses of the U.S. Constitution prevent the states from taxing activity which occurs outside their respective borders.

Nevertheless, despite these constitutional principles, New York’s courts held that New York can tax me (and other telecommuters) on days worked at home outside the Empire State. New York’s Court of Appeals, that state’s highest court, specifically approved New York’s tax-based discouragement of nonresidents’ telecommuting from their out-of-state homes.

Enter the swine flu.

For the duration of swine flu problem, New York should encourage telecommuting or at least not impede it. In particular, New York Governor David Paterson should announce that, to stimulate telecommuting to combat potential exposure to the new swine flu, New York will suspend its extraterritorial income taxation of nonresidents for all days such nonresidents work at their out-of-state homes.

In any event, Congress should pass the Telecommuter Tax Fairness Act which, if enacted into law, would prevent states from taxing telecommuting nonresidents on the days they work at their out-of-state homes.

And who knows? After the swine flu danger is over, Governor Paterson and New York’s other policymakers may discover the long-term benefits to New York of reforming permanently New York’s extraterritorial (and unconstitutional) taxation of telecommuters like me.