In Memory: Kenneth Scott, Stanford University Law Professor

By Sharon Driscoll/Stanford News Service:

When Kenneth Scott was recruited to the Stanford Law faculty by Dean Bayless Manning in 1968, he brought with him critical law firm and government experience—particularly in banking regulation—that would help build the law and business program.

After earning an AB in economics in 1949 from William and Mary, an MA in political science from Princeton in 1953, and an LLB from Stanford Law School in 1956, Scott practiced law at Sullivan and Cromwell in New York and then at Musick, Peeler and Garrett in Los Angeles. He had been active in politics, serving as a field secretary in LA for Pat Brown’s 1962 gubernatorial campaign against Nixon. In 1961, Scott became chief deputy savings and loan commissioner of California, a position he held until 1963 when he was appointed general counsel of the Federal Home Loan Bank Board (FHLBB) in Washington, D.C. During his five years at FHLBB, he drafted and lobbied hard for passage of the Financial Institutions Supervisory Act of 1966.

“There was a need to beef up the oversight and enforcement power of the FHLBB, so I spent two years drafting and selling the Financial Institutions Supervisory Act, getting the banking agencies behind it,” Scott said in a 2012 interview for the project 60+ Moments in the History of Stanford Law School. “We got the federal administration behind it—and it became part of the program of the President. It changed the regulatory enforcement authority of all banking regulatory agencies.”

Stanford Law had just launched its first joint degree program when Scott arrived from FHLBB in 1968—making it the first four-year program in the nation leading to a joint degree of Juris Doctor-Master of Business Administration. Scott served as an adviser and mentor to JD/MBA students for many years and taught banking regulation, corporations, securities law, and administrative law as part of a growing law and economics faculty that helped to catapult Stanford Law from a regional school to one recognized nationally and internationally. In 1983, he was appointed the first Parsons Professor of Law and Business, the chair the first endowed professorship combining law and business at any major American law school.

“Ken’s ambition was to glean insights from academic understanding of economics, finance, and politics, and to bring them to bear on pressing policy questions, such as the design of financial regulation. The influence of his work illustrates the meaningful contributions that a scholar can make when he combines deep learning with a capacity to contribute to important policy debates,” says M. Elizabeth Magill, Dean and Richard E. Lang Professor of Law. “Ken was also an inspiring model of commitment to the life of the mind. He retired 26 years ago, but he continued to write important and influential work, often collaborating with colleagues, and to participate in the intellectual life of Stanford Law School. We will miss him.”

“Ken was one of the first modern legal scholars of banking and bank regulation,” says Michael Klausner, the Nancy and Charles Munger Professor of Business at Stanford Law School. “As economics was gaining influence in other areas of legal academics in the 1970s and 1980s, Ken applied economic concepts to banking. He was one of the first scholars, and perhaps the first legal scholar, to do so. And he continued until today, publishing a book with Hoover Institution colleagues just a few months ago. Ken remained one of the few legal academics with a mastery of the bank regulatory field.”

Scott passed away on Sunday, June 19, 2016 at his home in Stanford at the age of 87. He is survived by his wife Sunny Scott; his son Jeff and wife Linda Scott and their children Kenneth, Christopher and Nicole; his daughter Linda and husband Maury Furness and their children Maura and Ellie Furness; his son Clifton Scott; and his stepdaughter Shaler and her husband Bob Barnes and their three children Zoe, Brody and Dillen. A memorial service is planned for late July, date to be confirmed.

Scott retired from teaching in 1995, but remained a very active scholar, in recent years writing and editing influential papers and books about the financial crisis, comparative corporate governance, and financial regulation. Scott was a member of the Working Group on Economic Policy at the Hoover Institution. In the wake of the financial crisis, the group established the “Resolution Project” in 2009. Scott chaired the project, bringing together legal scholars, economists and market practitioners who he recruited from around the US and the UK. He worked closely with former Secretary of State George Shultz and Stanford Professor John Taylor—the three co-editing Ending Government Bailouts As We Know Them, which was published by early 2010.

“Ken founded and was the driving force behind the Resolution Project, its goal to design legal and economic reforms to prevent bailouts and spillovers of failed financial institutions, problems which grew severe following the 2008 financial crisis,” says Taylor, the Mary and Robert Raymond Professor, the George P. Shultz Senior Fellow in Economics at the Hoover Institution, and chair of the Economic Policy Working Group at Hoover. “Under Ken’s leadership, the Resolution Project developed the very influential ‘Chapter 14’ bankruptcy reform proposal, which is now written into legislation that has passed the House of Representatives. In a short span of time he edited three books on this subject. Without Ken’s dedication, rigorous thinking, insistence on excellence and genuine good-nature, these scholarly and practical contributions would have been impossible.”

“The financial crisis had a strong impact on Ken’s most recent scholarship,” says Joseph A. Grundfest, JD ’78, William A. Franke Professor of Law and Business and Senior Faculty, Rock Center for Corporate Governance. “Ken was one of the country’s leading experts in understanding the ‘failure process’ for large banking institutions. He was active in suggesting reforms that would, at once, reduce the risk of failure, and make it easier for society to navigate through those failures if they unfortunately occurred. Ken was a great scholar, teacher, and friend. We’ve lost one of the most creative and constructive thinkers on a public policy problem that’s remarkably important for the future of the global financial system.”

While colleagues remember Scott for his intellectual contributions—they also remember his good nature.
“Ken Scott was a man of remarkably broad interests, curiosity, and insight. Whether the subject was the role of the Federal Reserve, the latest decision of the Supreme Court, the details of Dodd-Frank, or the legal issues swirling around Obamacare, Ken would spot the anomaly or pose the question that penetrated to the heart of the matter. And always with humor and logical clarity,” says Michael W. McConnell, Richard and Frances Mallery Professor of Law, director of the Constitutional Law Center, and senior fellow at the Hoover Institution who worked with Scott on The Regulation and the Rule of Law Initiative at the Hoover Institution. “He gave much to this intellectual community.”

“Ken had a highly analytical mind and could quickly discern any weaknesses in anyone’s argument,” says A. Mitchell Polinsky, Josephine Scott Crocker Professor of Law and Economics. “His questions were invariably among the hardest posed to seminar speakers, and one could tell from the lilt in his voice that he wasn’t really asking a question as much as making a devastating point. His post retirement continuing commitment to the life of the mind made him a role model for emeriti professors. Ken was known for his wry sense of humor, and he retained this even as he suffered through a series of medical setbacks during the past two years.”

Scott is the author of five books: Making Failure Feasible: How Bankruptcy Reform Can End “Too Big To Fail”(Hoover Institution Press, 2015), edited with John Taylor and Tom Jackson; Bankruptcy Not Bailout (Hoover Institution Press, 2012), edited with John Taylor; Ending Government Bailouts As We Know Them (Hoover Institution Press, 2010), edited with George Shultz and John Taylor; Economics of Corporation Law and Securities Regulation (1980), edited with Richard Posner; and Retail Banking in the Electronic Age: The Law and Economics of Electronic Funds Transfer (1977), with William Baxter and Paul Cootner. Recent articles include “The Financial Crisis: Causes and Lessons,” Journal of Applied Corporate Finance 22 (2010): 22, and (with Theo. Baums) “Taking Shareholder Protection Seriously? Corporate Governance in the US and Germany,” American Journal of Comparative Law 53 (2005): 31.

--From Stanford Lawyer