Wednesday, October 1, 2014
Yesterday, I shared with my faculty during our teaching conversations* my research and thinking on gender equality in the classroom. How do we handle gender in the classroom? My guess is that most of us teaching honestly strive to achieve and believe that we create a gender-neutral, or more accurately an equally-facilitative classroom environment. You can image the horror I felt when I received voluntary, anonymous student feedback last spring that said “you may not mean to or know you are doing this, but you treat men and women differently in class.” From whose perspective was this coming? How differently? And who gets the better treatment? I was baffled. As a female law professor, I was hoping that I got a pass on thinking critically about gender because I am female, right? Wrong.
This feedback launched my research into the area and a self-audit of the ways in which I may be explicitly treating students differently, implicitly reinforcing gender norms, and unintentionally creating a classroom environment that is different from my ideal.
Below are some observations and discoveries about my own behavior and a summary of some relevant research.
Tuesday, September 30, 2014
There is a growing drumbeat for banning laptops in the classroom, as a recent New Yorker article explained. The current case for banning laptops appeared on a Washington Post blog (among other places), in a piece written by Clay Shirky, who is a professor of media studies at New York University, and holds a joint appointment as an arts professor at NYU’s graduate Interactive Telecommunications Program in the Tisch School of the Arts, and as a Distinguished Writer in Residence in the journalism institute.
The piece makes a compelling case for banning laptops, and I agree there are a number of good reasons to do so. I’ll not recount the whole piece here (I recommend reading it), but here’s a key passage:
Anyone distracted in class doesn’t just lose out on the content of the discussion but creates a sense of permission that opting out is OK, and, worse, a haze of second-hand distraction for their peers. In an environment like this, students need support for the better angels of their nature (or at least the more intellectual angels), and they need defenses against the powerful short-term incentives to put off complex, frustrating tasks. That support and those defenses don’t just happen, and they are not limited to the individual’s choices. They are provided by social structure, and that structure is disproportionately provided by the professor, especially during the first weeks of class.
I am sympathetic to this line of thinking, and I am even more sympathetic to another point made in the article: that the laptop distractions can leak from one student engaging in social media or other non-classroom activities to those around them. That is a serious concern.
Still, I don’t ban laptops in my classes, though I have thought about it. I let students use them in my larger-enrollment classes: Business Organizations, which usually is near the cap of 70, and Energy Law, which is usually in the 34-55 range. There is no doubt the risk of distraction in those courses is higher than in others. Interestingly, in my last two seminar-style classes, I did not have a ban, either, but students rarely used laptops. They opted-in for the discussions (self-selection for certain topics can certainly help on that front).
I continue to think about how I want to proceed, but for now, I see value in allowing my students the option to choose how they wish to engage. There have been some other defenses of the idea of keeping laptops in the classroom (see, e.g., here), but my views are an amalgam of different styles and rationales.
First, part of learning, especially in becoming a life-long learner (which is what lawyers need to be), one must choose to engage. Law students are grown ups, and they must learn how they learn. They must decide. I won’t be there when they get to their job and they have to use the computer to actually do the work of a lawyer. They will, at some point, have to decide when to focus and when to play.
Second, I value diversity of styles in the classroom. That is, if most other professors are using open-book exams or take home exams, mine will probably be closed book, and closed note. I have taught using quizzes, blog posts, midterms, short papers, etc., to add some variety to the experience. Now that more classes, at least at my school, are without laptops, it actually gives me a reason to consider keeping them.
Finally, at least so far, allowing laptops is part of my deal with students. It’s part of how I connect and model for them my view and expectation that they are grown ups. I give them power, and I expect them to act appropriately. As my friend, former colleague, and teaching mentor Patti Alleva (recognized as one of the nation's best law teachers) explained in a recent National Law Journal piece, teaching is ultimately about respect and what she calls “intentionality.” She explains:
The simple fact is that teaching does not always produce learning, even if thoughtfully done. Creating that causal link between the two can be a mystifying challenge, especially given the infinite number of unknowable factors and forces that may reduce a teacher's effectiveness or a student's willingness or ability to learn.
. . . .
Teachers, as fiduciaries of their students' educational experience, owe them compassionate deference, based on a benefit of the doubt, coupled with high but reasonable expectations for a meaningful learning collaboration.
. . . .
Ultimately, the best professors are themselves students who learn as much as they teach. And they seek, not to impose ideas on students, but to help equip them with the metacognitive tools to test those ideas and use them in service of problem-solving. Hopefully, students will develop their own senses of respect — for the legal profession, for themselves as aspiring lawyers and for the learning partnership we share. So, if years ago, in that tense seminar room, each of us left with respect for our disagreements and for the pedagogic processes that allowed us to critically and creatively examine, and grow from, those differences, then invaluable learning did take place that day with respect providing a bridge between teaching and learning when other things may have temporarily obscured the connection.
I hope that as teachers we can all appreciate that we, like our students, have different views on the best way to teach and to learn. Just because we choose different paths, it doesn't make any path wrong. As long as the path is thoughtfully chosen, with a purpose and a goal, there’s a good chance it’s right for that teacher, in that moment, for that class. And if it’s not, the key is not about dwelling on the mistake. It’s about learning, adjusting, and doing a better job next time, because the best teachers really are the ones who are trying to “learn as much as they teach.”
Monday, September 29, 2014
Today, the Supreme Court DIG'd (dismissed as improvidently granted) the cert petition in the Section 11 case of IndyMac, which means we will not, at least for now, get resolution on the issue of whether American Pipe tolling applies to statutes of repose.
To be honest, I'm really not surprised. The DIG was apparently in response to an announcement of a settlement of most of the IndyMac claims, but that's a bit odd, since the parties all agreed that the settlement left alive enough claims to render the case not moot (specifically, the plaintiffs' claims against Goldman Sachs would proceed if the plaintiffs prevailed before the Supreme Court).
But as I previously posted, I think IndyMac was in an awkward procedural posture to begin with. Not because the split wasn't real, but because the entire issue regarding the statute of repose was necessarily intertwined with prior unsettled issues regarding class action standing and the scope of Rule 15c. Frankly, I can't help but wonder if the Justices saw the settlement as an excuse to get rid of a bad grant, and they grabbed it.
Belmont University's School of Law in Nashville, TN has posted a tenure-track assistant professor opening here.
(Disclosure: I am a professor at Belmont University's business school and am teaching Business Associations in the law school this fall.)
In recent blog posts, two of my favorite bloggers, Keith Paul Bishop and Steve Bainbridge, have highlighted for our attention Delaware and California statutes providing (differently in each case) that an LLC and, at least in Delaware, its managers and members, are bound by the LLC's operating agreement even if they do not sign that agreement. Bishop notes in his post that the California "RULLCA creates an odd situation in which LLCs are bound by contracts that they did not execute and to which they seemingly are not parties." In his post Bainbridge cites to the Bishop post and another post by Francis Pileggi. Certainly, they all have a point. For students of contract law, the conclusion that a non-party is bound by a contract does not seem to be an obvious result . . . .
The flap in the blogosphere has its genesis in a recent Delaware Chancery Court decision, Seaport Village Ltd. v. Seaport Village Operating Company, LLC, et al. C.A. No. 8841-VCL. The limited liability company defendant in that case raised as its only defense that it was not a party to the limited liability company agreement and therefore was not bound. Unsurprisingly in light of applicable Delaware law, Chancellor Laster found the defense wanting as a matter of law.
This issue has more history than my brother bloggers point out, some of which is included in the brief Seaport Village opinion. I probably don't have all the details, but set forth below is some additional background information that may be useful in thinking about the binding nature of LLC operating agreements. Others may care to fill in any missing information by leaving comments to this post.
The Delaware Supreme Court has held that fairness review in duty of loyalty cases has two elements: fair dealing and fair price. Weinberger v. UOP, Inc., 457 A.2d 701 (1983). Fair dealing focuses on process: questions such as “when the transaction was timed, how it was initiated, structured, negotiated, disclosed to the directors, and how the approvals of the directors and the stockholders were obtained.” 457 A.2d at 711. Fair price focuses on the consideration paid or received in the transaction.
Weinberger says that the two elements of fairness must be considered together, that “the test for fairness is not a bifurcated one between fair dealing and fair price.” Id. But, of course, damages will be measured against a fair price. If that’s the case, I ask my students, does fair dealing really make any difference as long as the price is fair?
A Delaware Court of Chancery opinion, In Re Nine Systems Corporation Shareholders Litigation, (Del. Ch. Sept. 4, 2014), recently dealt with that issue. Vice Chancellor Noble concluded that the procedure followed by the company was unfair, so the element of fair dealing was not met. He decided that the price was fair but, considering the two elements together, decided that the burden of proving fairness had not been met.
Because of his finding that the price was fair, the Vice Chancellor rejected the plaintiffs’ claim for damages. However, he concluded that the court could require the defendants to pay certain of the plaintiffs' attorneys' fees and costs.
I now have an answer for my students. Even if the price is fair, fair dealing can still make a difference. Of course, I’m not sure anyone other than the plaintiffs’ attorneys will be terribly happy with the result.
Sunday, September 28, 2014
"Six years after the government saved Wall Street from the brink of collapse, the lawsuit is coming to trial" http://t.co/GqcrgCKSdo— Stefan Padfield (@ProfPadfield) September 24, 2014
"unsettled areas of the law governing ... disputes among co-owners of closely held business entities" http://t.co/An9ApnIeGV— Stefan Padfield (@ProfPadfield) September 25, 2014
Saturday, September 27, 2014
In the meantime, several companies have adopted such bylaws, although some early challenges to the bylaws ended up being settled before courts could rule on their validity. J Robert Brown at Race-to-the-Bottom blog reports that a company just went public with a fee shifting charter provision in place (the provision purports to cover securities claims as well as governance claims, but, as I previously posted, I don't think that's possible).
Most interestingly, Oklahoma recently passed a law requiring "loser pays" rules for all derivative litigation. Which certainly creates an opportunity for a natural experiment in the idea of the market for corporate charters - will companies flock to Oklahoma? Will investors pressure managers to stay out of Oklahoma (or to go to Oklahoma, if they doubt the value of derivative litigation)?
Stephen Bainbridge reports that the SEC's Investor Advisory Committee will be considering fee-shifting bylaws at its next meeting, and asks (via approving linkage to Keith Paul Bishop) why should the Investor Advisory Committee be conferring with the SEC on a state law contract question?
Well, my answer would be, because the corporate form - by definition - includes judicial oversight as part of the corporate "contract" (if you call it a contract). Judicial construction of "terms" (if you call them terms) is inherent in its nature, and an important part of ensuring that corporate managers do not exploit shareholders. Fee-shifting undermines that bargain, especially if applied to representative litigation (where the shareholder has only a small upside but a very large potential downside). For that reason, the Investor Advisory Committee and the SEC have an interest in making sure that investors "get" what they expect to get - a corporation, which includes judicial oversight as inherent in the organizational form.
And it's not like the SEC hasn't - under the guise of investor protection - policed matters of internal corporate governance before. For example, the NYSE (which acts under the SEC's direction) requires shareholder votes for certain large new stock issuances in terms of equity or voting power. The NYSE also forbids disparate reduction in common stock voting power. One could easily imagine that, even if the SEC doesn't act directly, the NYSE could adopt a rule requiring that listed companies not adopt fee-shifting bylaws.
Oklahoma, however, adds a new wrinkle - I imagine it's not home to many publicly traded corporations, but it's difficult to imagine the SEC relishing the idea of preempting Oklahoma law on this subject, or the NYSE categorically refusing to list Oklahoma corporations.
Friday, September 26, 2014
Joseph Yockey (Iowa) has posted a new paper on social enterprise. I have not read this one yet, but enjoyed his first article on the subject and have added this second one to my long "want to read" list. The abstract is below.
Social enterprises generate revenue to solve social, humanitarian, and ecological problems. Their products are not a means to the end of profits, but rather profits are a means to the end of their production. This dynamic presents many of the same corporate governance issues facing other for-profit firms, including legal compliance. I contend, however, that traditional strategies for corporate compliance are incongruent to the social enterprise’s unique normative framework. Specifically, traditional compliance theory, with its prioritization of shareholder interests, stands at odds with the social enterprise’s mission-driven purpose. Attention to this distinction is essential for developing effective compliance and enforcement policies in the future. Indeed, arguably the greatest feature of the social enterprise is its potential to harness organizational characteristics that inspire the values and culture most closely linked with ethical behavior — without resort to more costly or intrusive measures.
The below is from an e-mail I received earlier this week about an impact investment legal symposium on October 2, 2014 from 8:30 a.m. to noon (eastern):
Bingham, in conjunction with the International Transactions Clinic of the University of Michigan Law School, Aspen Network of Development Entrepreneurs (ANDE) Legal Working Group and Impact Investing Legal Working Group, is proud to present a legal symposium on Building a Legal Community of Practice to Add Still More Value to Impact Investments.
The symposium will be held at Bingham McCutchen LLP's New York offices at 339 Park Avenue or you can attend virtually by registering here.
Thursday, September 25, 2014
Professor Dionysia Katelouzou of Kings College, London has written an interesting empirical article on hedge fund activisim. The abstract is below:
In recent years, activist hedge funds have spread from the United States to other countries in Europe and Asia, but not as a duplicate of the American practice. Rather, there is a considerable diversity in the incidence and the nature of activist hedge fund campaigns around the world. What remains unclear, however, is what dictates how commonplace and multifaceted hedge fund activism will be in a particular country.
The Article addresses this issue by pioneering a new approach to understanding the underpinnings and the role of hedge fund activism, in which an activist hedge fund first selects a target company that presents high-value opportunities for engagement (entry stage), accumulates a nontrivial stake (trading stage), then determines and employs its activist strategy (disciplining stage), and finally exits (exit stage). The Article then identifies legal parameters for each activist stage and empirically examines why the incidence, objectives and strategies of activist hedge fund campaigns differ across countries. The analysis is based on 432 activist hedge fund campaigns during the period of 2000-2010 across 25 countries.
The findings suggest that the extent to which legal parameters matter depends on the stage that hedge fund activism has reached. Mandatory disclosure and rights bestowed on shareholders by corporate law are found to dictate how commonplace hedge fund activism will be in a particular country (entry stage). Moreover, the examination of the activist ownership stakes reveals that ownership disclosure rules have important ramifications for the trading stage of an activist campaign. At the disciplining stage, however, there is little support that the activist objectives and the employed strategies are a reflection of the shareholder protection regime of the country in which the target company is located.
September 25, 2014 in Business Associations, Corporate Finance, Corporate Governance, Corporations, Current Affairs, Financial Markets, Marcia Narine, Merger & Acquisitions, Securities Regulation | Permalink | Comments (0)
University of Central Florida is advertising for an associate or full professor in the area of legal studies, international law, and/or national security law.
The full listing is after the break and the position has been added to my legal studies position list.
Wednesday, September 24, 2014
Randall Thomas (Vanderbilt Law School) and Lawrence Van Horn (Owen Graduate School of Management, Vanderbilt University) have posted a new article entitled Are Football Coaches Overpaid? Evidence from Their Employment Contracts.
This is a rare article that appeals to both my academic interests and my interest in football. Rarely do these two set of interests overlap in my life, and the article has prompted me to think of ways I might incorporate my football knowledge into future academic articles.
The article's abstract reads:
The commentators and the media pay particular attention to the compensation of high profile individuals. Whether these are corporate CEOs, or college football coaches, many critics question whether their levels of remuneration are appropriate. In contrast, corporate governance scholarship has asserted that as long as the compensation is tied to shareholder interests, it is the employment contract and incentives therein which should be the source of scrutiny, not the absolute level of pay itself. We employ this logic to study the compensation contracts of Division I FBS college football coaches during the period 2005-2013. Our analysis finds many commonalities between the structure and incentives of the employment contracts of CEOs and these football coaches. These contracts’ features are consistent with what economic theory would predict. As such we find no evidence that the structure of college football coach contracts is misaligned, or that they are overpaid.
The world can rest easy; a policy debate has been resolved. Leonardo DiCaprio says climate change is real. I was waiting to see what Jennifer Lawrence and Ben Affleck have to say, but I guess Leonardo DiCaprio is good enough for me.
Seriously, why should anyone care what an actor or any other celebrity has to say about scientific issues? DiCaprio's position on climate change--yes or no--should have no effect on anyone's beliefs.
But, if you think opinions like this really do matter, here are some new law review articles that might change your views on business law issues:
Ryan Gosling, Director Primacy is Wrong: A Reply to Professor Bainbridge
Jennifer Lawrence, Rethinking General Solicitation in Private Placements
Hugh Jackman, Director Liability in Hostile Takeovers
And, finally, one you should really pay careful attention to:
Steve Bradford, Why String Theory is Wrong.
A study by the Center for Political Accountability finds that more public companies are voluntarily disclosing their political spending.
The survey this year looked at disclosure by the top 300 companies on the Standard & Poors 500 list, up from 200 firms surveyed last year. Of the firms studied, sixty percent disclosed at least some spending on behalf of candidates, parties and political committees. Nearly half described their membership or payments to politically active trade associations, such as the U.S. Chamber of Commerce.
Earlier this week, the Wall Street Journal ran an interesting op-ed titled The West’s Bruised Confidence in Capitalism. In the op-ed the author summarized the findings of the recently published Corporate Perception Indicator survey, which found that 36% of those surveyed reported that they viewed corporations as a source of “hope,” while 37% viewed corporations as a source of “fear.” Broken down by generation, 44% of respondents over the age of 65 view corporations as a source of “hope,” compared to 36% of millennials (defined as those aged 18-34 – darn it, I just missed the cut off!) who view corporations as a source of “fear” rather than “hope.” The survey was not limited to the U.S. and one of the more interesting findings was that 61% of all respondents wanted to hear more about the ways in which corporations help to address broader social issues. The op-ed concluded by offering this thought: “For business leaders, six years after the financial crisis and amid continuing economic uncertainty, the challenge is to show how they use their positions of power to contribute to the common good. The public world-wide wants corporations to promote shared values around growth and opportunity, even as they build shareholder value. Their long-term success depends on it.”
In two previous posts (available here and here) I have discussed potential models for businesses to leverage their “positions of power to contribute to the common good.” As I have discussed, one of the most compelling business frameworks is “Corporate Impact Venturing,” which was developed by Dr. Maximilian Martin and is part of the Impact Economy portfolio. The basic idea is to “achieve actual financial returns, greater effectiveness, and more leverage potential for both business and society by updating patterns of value creation in new and existing multi-trillion dollar markets.” Ultimately, this means applying the promise of impact investing to business innovation. Examples of emerging patterns of value creation in a new market would include the 540 billion dollar LOHAS market (Lifestyles of Health and Sustainability), while an example in an existing market would be the modernization of the welfare state.
For executives and corporations interested in meeting the challenge of using their “positions of power to contribute to the common good,” compelling business frameworks are obviously a must. However, because corporations operate as part of a larger ecosystem, other conditions need to exist if widespread success is to be achieved. In my mind, such conditions for success include, but are not limited to:
- Having shareholders who share this vision of marrying corporate potential with the common good. This can be achieved to some extent by cultivating shareholders who have the capacity for, and are interested in, stewardship – a process I refer to as Shareholder Cultivation.
- Having a regulatory environment that helps move the needle – in particular, one thing to consider is whether moving to something like an integrated reporting model of disclosure would be preferable to the SEC’s current financial disclosure model.
- Reframing the debate on the nature of corporations and corporate governance. For example, the concept of corporate governance in the West is captured by the OECD principles of corporate governance, which in many ways cast corporations as being separate and apart from society. This of course is in contrast to, let’s say, the King’s Code, which views corporations as being part of society.
So are corporations sources of “hope” and “good” or are they “bad” and worthy of “fear”? While the perception among a majority of survey respondents (some 51%) reflect the latter, I’d like to think that the reality is closer to the former. Corporations can and often do contribute to the common good. They are centers of enormous potential for value creation, but many are still laboring under an outdated model and operating norm.
President Judge James T. Vaughn, Jr. of the Delaware Superior Court has been nominated to the Delaware Supreme Court by Governor Jack Markell. Judge Vaughn has served on the Delaware Superior Court for 15 years.
News.Delaware.Gov has more here.
Tuesday, September 23, 2014
Citing to Hobby Lobby, a U.S. District Court Judge in Utah ruled that an individual may refuse to comply with a federal subpoena in a child labor investigation because naming church leaders would violate his religious freedoms protected under RFRA. The court found that complying with the subpoena failed the least restrictive means prong under RFRA. The full court opinion, Perez v. Paragon Contractors, Corp., 2:13CV00281-DS, 2014 WL 4628572 (D. Utah Sept. 11, 2014), is available here and a a brief news summary is available here.
March of the Benefit Corporation: So Why Bother? Isn’t the Business Judgment Rule Alive and Well? (Part III)
(Note: This is a cross-posted multiple part series from WVU Law Prof. Josh Fershee from the Business Law Prof Blog and Prof. Elaine Waterhouse Wilson from the Nonprofit Law Prof Blog, who combined forces to evaluate benefit corporations from both the nonprofit and the for-profit sides. The previous installments can be found here and here (NLPB) and here and here (BLPB).)
In prior posts we talked about what a benefit corporation is and is not. In this post, we’ll cover whether the benefit corporation is really necessary at all.
Under the Delaware General Corporation Code § 101(b), “[a] corporation may be incorporated or organized under this chapter to conduct or promote any lawful business or purposes . . . .” Certainly there is nothing there that indicates a company must maximize profits or take risks or “monetize” anything. (Delaware law warrants inclusion in any discussion of corporate law because the state's law is so influential, even where it is not binding.)
Back in 2010, Josh Fershee wrote a post questioning the need for such legislation shortly after Maryland passed the first benefit corporation legislation:
I am not sure what think about this benefit corporation legislation. I can understand how expressly stating such public benefits goals might have value and provide both guidance and cover for a board of directors. However, I am skeptical it was necessary.
Not to overstate its binding effects today, but we learned from Dodge v. Ford that if you have a traditional corporation, formed under a traditional certificate of incorporation and bylaws, you are restricted in your ability to “share the wealth” with the general public for purposes of “philanthropic and altruistic” goals. But that doesn't mean current law doesn't permit such actions in any situation, does it?
The idea that a corporation could choose to adopt any of a wide range of corporate philosophies is supported by multiple concepts, such as director primacy in carrying out shareholder wealth maximization, the business judgment rule, and the mandate that directors be the ones to lead the entity. Is it not reasonable for a group of directors to determine that the best way to create a long-term and profitable business is to build customer loyalty to the company via reasonable prices, high wages to employees, generous giving to charity, and thoughtful environmental stewardship? Suppose that directors even stated in their certificate that the board of directors, in carrying out their duties, must consider the corporate purpose as part of exercising their business judgment.
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Monday, September 22, 2014
Omnicare is back in court. This time, it is petitioning the Supreme Court for relief in a legal battle under Section 11 of the Securities Act of 1933, as amended. The question presented (as quoted from the cert petition) is:
For purposes of a Section 11 claim, may a plaintiff plead that a statement of opinion was “untrue” merely by alleging that the opinion itself was objectively wrong, as the Sixth Circuit has concluded, or must the plaintiff also allege that the statement was subjectively false—requiring allegations that the speaker’s actual opinion was different from the one expressed—as the Second, Third, and Ninth Circuits have held?
If this case sounds familiar to you, that may be because co-blogger Ann Lipton already has written about the case here on the BLPB. As it turns out, Ann and I each have signed onto amicus briefs in the case supporting the same side--the respondents. The brief that Ann is on can be found here. The question addressed in that brief is "[w]hether an objectively incorrect statement of opinion is actionable under Section 11 . . . only if it was subjectively disbelieved by the defendant." Jay Brown's brief, of which I am a named co-author (together with Lyman Johnson and Celia Taylor), is here. We address "[w]hether, for purposes of issuer liability under Section 11 . . . a statement in a registration statement attempting to characterize a verifiable, present fact about the legal validity of contracts as a 'belief' rather than a fact can shield an issuer from liability."