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Monday, February 07, 2011

Applying SOX (or something like it) to law schools

comment that I saw on Steve Bainbridge's blog sounds like an interesting way to respond to the claim that law schools all too commonly mislead students about the schools' employment data:

[A]pply Sarbanes-Oxley to college admissions, bursar, and career placement offices, with university presidents having to certify the data.

Now, I'm not a university president, so I suppose it's easy for me to get behind this idea.  It has a lot of appeal to me, and not in the snarky way that it did to the commenter, whose full comment evinces glee at the idea of academics being hoisted by a (bad) law that they support being imposed on businesses.

Lots has been written recently about law school debt and declining job prospects for JDs.  Indiana (Bloomington) law Professor William Henderson was quoted as saying:

Enron-type accounting standards have become the norm.  Every time I look at this data, I feel dirty.

His solution?

Solving the J.D. overabundance problem, according to Professor Henderson, will have to involve one very drastic measure: a bunch of lower-tier law schools will need to close. But nobody inside of the legal establishment, he predicts, has the stomach for that. “Ultimately,” he says, “some public authority will have to step in because law schools and lawyers are incapable of policing themselves.”

I'm not sure this solution necessarily follows from the diagnosis.  If the problem is that there is a bunch of misleading information being put out there by law schools, including misleading or even false employment data, why isn't the more narrow solution to penalize dissemination of such false or misleading information?

Congress could presumably enact a law that requires law schools to provide accurate and detailed data about the employment prospects of their students (for the summers) and graduates, and to have those reports certified by the university president, chancellor, etc., with violations punishable by fines and other penalties.

By focusing on the quality of the data, this approach would, if successful, render law schools more accountable to the market.  No more sending survey letters to graduates that say, "if we don't hear from you by X date, we will assume that you have found fulltime employment" (not something that took place at the two institutions I've been employed by, but which I've heard about elsewhere).  No more lumping all non-law work with legal employment.  (To be sure, there may well be JDs who by their own choice take non-law-related work, but that's still useful information to law school applicants.)

If anything, it seems to me there's arguably a stronger call for enforcing these sorts of disclosure and accuracy provisions on law schools (and universities in general) than on corporations. After all, the cost of corporate malfeasance with regard to balance sheets and the like is diffused across a huge number of investors, who are presumably not taking out huge loans with which to invest in said corporate stock.  (I guess there are margin traders, but really, they seem a less sympathetic group for concern than poor students with huge education debt.)  The cost of law school malfeasance in terms of misleading or false employment data is visited upon a (relatively) small number of students who are saddled with $50,000 or more in student debt.  Shouldn't they be entitled to at least the same level of informational protection that stock investors now get?

Posted by Tung Yin on February 7, 2011 at 05:15 PM in Corporate, Life of Law Schools | Permalink

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Comments

An even better way to hit prospective students in the face with the odds they face would be for the federal student loan programs to aggressively underwrite.

Even the most unrealistically enthusiastic potential third or fourth tier matriculant would have to be sobered by the prospect of borrowing $25,000 for the first semester at 16% interest. Or the next $25,000 at 22% after earning grades in the lower half of the class.

Posted by: brad | Feb 7, 2011 11:12:41 PM

I found this post interesting enough that I analyze it at length over on Legally Sociable (http://legallysociable.com/2011/02/09/wsj-more-regulations-for-law-schools/). I'll summarize my argument here:

Like it or not, the U.S. government is heavily subsidizing legal education by providing students with access to virtually unlimited capital. One can argue whether or not this represents a prudent investment in the nation’s future or an impending boondoggle on the scale of Fannie Mae and Freddie Mac, but it seems clear to me that somebody should be requiring law schools to reveal the cold, hard facts on the value they are providing to their graduates.

As far as I see it, the tired free-market-vs.-regulation arguments don’t really work here. Law schools are not a free market; they’re a heavily subsidized one. Unless and until that changes, I for one think the government is perfectly (and prudently) within its rights as the subsidizer to require fair, full, and accurate employment disclosure from law schools.

Posted by: sagescape | Feb 9, 2011 1:21:15 PM

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