Wednesday, May 23, 2018
"Supreme Court sides with employers in class action arbitration cases ... Justice Neil Gorsuch delivered the opinion for the 5-4 majority ... The case ... pitted two federal laws against each other." https://t.co/5fMJ6Oci9Q #corpgov— Stefan Padfield (@ProfPadfield) May 21, 2018
"Commodity Futures Trading Commission (CFTC) .. & North American Securities Administrators Association (NASAA) .. signed .. agreement to establish a closer .. relationship between the federal commodity regulator & .. state securities agencies" https://t.co/l7otvBdOtl #corpgov— Stefan Padfield (@ProfPadfield) May 22, 2018
"the history of just price reminds us that prices are more than signals; that they are also relationships and that price relationships can be coercive" Boyd, "Just Price, Public Utility, and the Long History of Economic Regulation in America" https://t.co/14q11cHPx8 #corpgov— Stefan Padfield (@ProfPadfield) May 22, 2018
"On June 20, 2014, the Texas Supreme Court's decision in Ritchie v. Rupe ... announced that no common law cause of action for oppression existed and that Texas courts had no power to order a buy-out under the statutory remedy for oppression." Tex. J. Bus. L., Winter 2017 #corpgov— Stefan Padfield (@ProfPadfield) May 22, 2018
Tuesday, May 22, 2018
I was browsing through some recent veil piercing cases (because that's how I roll), and I came across this gem:
[I]t is unclear that merely using a corporation to limit personal liability rises to the level of fraud required to pierce the corporate veil.
Indagro SA v. Nilva, No. 16-3226, 2018 WL 2068660, at *3 (3d Cir. May 3, 2018). Given that limited liability is one of the primary benefits of incorporation, I think it is at least implied that using a corporation to limit personal liability is not fraud at all.
Moreover, the corporation at issue was a New Jersey corporation, and the state law provides:
N.J. Stat. Ann. § 14A:5-30 (West). This is pretty unequivocal. I get that fraud may be one of the acts that could give rise to personal liability, but the use of an entity to limit personal liability, when that is a core facet of the entity, is some pretty serious attempted bootstrapping.
The case gets it right, in the end, but still, I had to point this out. To imply that it could be fraud to use a corporation for the purpose of limiting personal liability, without anything more, is simply incorrect.
Monday, May 21, 2018
Call for Papers
AALS Section on Transactional Law and Skills
Transactional Law and Finance: Challenges and Opportunities
for Teaching and Research
2019 AALS Annual Meeting
New Orleans, Louisiana
The AALS Section on Transactional Law and Skills is proud to announce a call for papers for its program, “Transactional Law and Finance: Challenges and Opportunities for Teaching and Research.” This session will examine the role of finance in business transactions from various perspectives with the goal of inspiring more deliberate consideration of finance in law school teaching and legal scholarship.From structured finance to real estate, from mergers & acquisitions to capital markets, finance plays an important and fundamental role in transactional law. The intersection of transactional law and finance is dynamic, providing academics, practitioners, and the judiciary with both challenges and opportunities. For example, financial product innovation and new funding sources for entrepreneurs continue to expand. Meanwhile, the significant growth in merger appraisal litigation has cast a new spotlight on the ability to critically analyze financial models (with a critical issue being whether a particular model is appropriate for expert use to determine fair value in appraisal proceedings). At the same time, activist investors are impacting company boards and the way in which companies do business. Although these are just a few examples, they demonstrate the breadth and significance of finance in transactional law.
The Section on Transactional Law and Skills invites submissions from any full-time faculty member of an AALS member school who has written an unpublished paper, is working on a paper, or who is interested in writing a paper on this topic to submit a 1 or 2-page proposal to the Chair of the Section by August 31, 2018. Papers accepted for publication as of August 31, 2018 that will not yet be published as of the 2019 meeting are also encouraged. The Executive Committee will review all submissions and select proposals for presentation as part of our AALS 2019 Section Meeting. Please note that presenters who are selected are responsible for paying their own annual meeting registration fees and travel expenses.
Please direct all submissions and questions to the Chair of the Section, Christina Sautter, at the following address:
Cynthia Felder Fayard Professor of Law
Byron R. Kantrow Professor of Law
Louisiana State University
Paul M. Hebert Law Center
1 East Campus Drive
Baton Rouge, LA 70803
Tel: +1 225-578-1306
Sunday, May 20, 2018
"a trope in gig-economy debates.... is a myth (putting it politely). If gig workers ... get reclassified as employees, that status will not require the firms to take away all the workers’ flexibility." https://t.co/1Oifa5o2BU #corpgov ht @AnnMLipton @OnLaborBlog— Stefan Padfield (@ProfPadfield) May 16, 2018
"If other countries adopt the Netherlands’ approach, then international arbitration tribunals hearing claims that investors bring against foreign governments may also scrutinize the investors’ CSR track record." https://t.co/l1Lfp3hBRY #corpgov— Stefan Padfield (@ProfPadfield) May 18, 2018
"The Vatican is denouncing offshore tax havens and financial instruments such as derivatives and credit default swaps as gravely immoral and unjust, calling them 'ticking time bombs' that hurt the world’s poor the most." https://t.co/5aToPX0tyX #corpgov— Stefan Padfield (@ProfPadfield) May 18, 2018
ICYMI: "Crafting Comment Letters: Teach Policy, Develop Skills, and Shape Pending Regulation" by @NicoleIannarone & @BenPEdwards "This essay unpacks the regulatory comment letter process and how to incorporate it into the law school curriculum." https://t.co/dYcKOIReGy #corpgov— Stefan Padfield (@ProfPadfield) May 19, 2018
Saturday, May 19, 2018
If you’re anything like me, you’ve spent the last few days procrastinating studying the drama unfolding at CBS. (If you’re not aware, here’s an article summarizing the state of play; the rest of this post assumes readers are familiar with the basic facts).
There’s a lot to chew on here, and I’m sure that as the case develops, there will be much more to say, but here are some off-the-cuff initial thoughts, in no particular order.
[More under the jump]
Friday, May 18, 2018
As a member of the Section on Women in Legal Education of the Association of American Law Schools, I was informed earlier this week about three openings at Emory Law, two of which are for business law folks. The message is included below.
I am pleased to serve on the Appointments committee at Emory Law for the 2018-2019 school year. We are conducting searches for exciting young scholars in three tenure-track positions: (1) Business law with a specialization in M&A and/or Securities Regulation, (2) General Business law (no specific specialization) with the ability to teach Business Associations/Corporations and Contracts, and (3) Criminal Procedure with the ability to also teach Evidence. We are only looking for junior laterals (no more than 3 years in a tenure-track position) and entry-level candidates. Please feel free to contact me if you are interested or know of others who might be interested.
Barbara Bennett Woodhouse
L. Q. C. Lamar Professor of Law
Emory University School of Law
1301 Clifton Road
Atlanta, GA. 30322
cell - 352-262-1854
I urge those who are interested to contact Barbara for more information. In any event, be on the lookout for the formal position notice(s).
Thursday, May 17, 2018
Deal Structure, a new paper by Cathy Hwang and Matthew Jennejohn, explains how sophisticated parties now structure increasingly complex contracts to achieve contracting’s various goals. The article does an excellent job of explaining how today's corporate contracts differ from the relatively straightforward contracts encountered in most contracts casebooks.
Hwang and Jennejohn explain that parties may be able to structure their deals to nudge courts toward adopting a preferred interpretative approach. Courts facing lengthy, complex contracts must decide whether they want to adopt a textual or contextual approach. Prior research has noted that when parties use standards, they nudge a court toward contextualism—looking outside of the four corners of the contract for interpretive clues. In contrast, rules signal to courts to use a textual approach to interpretation. That pairing—of standards with contextualism and rules with textualism—allows Hwang and Jennejohn to make a further argument: that for this pairing to work, parties need to pay attention to how they structure the provisions within their complex agreements. For instance, if parties intend to circumscribe judicial intervention in an issue with a rule-like provision, they must take care to isolate that provision from others in the agreement using a modular design. In that sense, the structure of a complex agreement can be used to strategically toggle between rules and standards to encourage courts to take a textual or contextual perspective on a dispute depending on the issue.
The article shines by focusing on how parties now structure these sophisticated contracts and how contract structure informs whether a court will take a particular approach. It’s also fun to see the integration of Hwang’s work (which focuses on overlooked aspects of real-world deal contracting, like ancillary agreements and term sheets) and Jennejohn’s work (empirical work on relational contracts, such as alliance agreements). Both have focused, in their individual work, on the front-end stage of contract design, and this collaboration has them taking a step in thinking about contract interpretation.
Wednesday, May 16, 2018
"U.S. Supreme Court declined Monday to hear the ... challenge to an Eleventh Circuit ruling that employers don't violate federal race discrimination laws when they treat workers differently based on 'mutable' characteristics, such as dreadlocks." https://t.co/BZmRfPPpds #corpgov— Stefan Padfield (@ProfPadfield) May 15, 2018
"if firms promote from w/in to inspire competition in lower ranks (tournament theory), then compensation should reflect the price needed to incentivize lower ranks to compete" Usha Rodrigues, Tournament of Managers: Lessons from the Academic ... Market, 43 J. Corp.L. 537 #corpgov— Stefan Padfield (@ProfPadfield) May 15, 2018
"whether the Constitution’s structure of separated powers prevents Congress from authorizing a single agency to charge a violation of law and then adjudicate the charge" https://t.co/wNOtDooSNk #corpgov— Stefan Padfield (@ProfPadfield) May 15, 2018
"Recent .. research purports to demonstrate that institutional investors’ 'common ownership' of small stakes in competing firms causes those firms to compete less aggressively ... This Article contends that the purported .. problem is overblown" https://t.co/4YfsPU7YtC #corpgov— Stefan Padfield (@ProfPadfield) May 15, 2018
Tuesday, May 15, 2018
The Goldens contend that the trial court erred by denying their motion for summary judgment as to negligence claims asserted against them personally. They assert that corporate law insulates them from liability and that, while a member of an [sic] limited liability corporation may be liable for torts in which he individually participated, Ugo Mattera has pointed to no evidence that the Goldens specifically directed a particular negligent act or participated or cooperated therein. We agree with the Goldens that they were entitled to summary judgment on Ugo Mattera's negligence claim.An officer of a corporation who takes part in the commission of a tort by the corporation is personally liable therefor, and an officer of a corporation who takes no part in the commission of a tort committed by the corporation is not personally liable unless he specifically directed the particular act to be done or participated or cooperated therein.Jennings v. Smith, 226 Ga. App. 765, 766 (1), 487 S.E.2d 362 (1997) (citation omitted). Thus, if Baja Properties was negligent in constructing the house, an officer of the corporation could be held personally liable for the negligent construction if he specifically directed the manner in which the house was constructed or participated or cooperated in its negligent construction. See Cherry v. Ward, 204 Ga. App. 833, 834 (1) (a), 420 S.E.2d 763 (1992).
(a) A person who is a member, manager, agent, or employee of a limited liability company is not liable, solely by reason of being a member, manager, agent, or employee of the limited liability company, under a judgment, decree, or order of a court, or in any other manner, for a debt, obligation, or liability of the limited liability company, including liabilities and obligations of the limited liability company to any member or assignee, whether arising in contract, tort, or otherwise, or for the acts or omissions of any other member, manager, agent, or employee of the limited liability company, whether arising in contract, tort, or otherwise.
Monday, May 14, 2018
I always have loved the game of tag, and I love a challenge. More importantly, I love a conversation about business law . . . .
Last week, Steve Bainbridge posted a follow-on to posts written by Ann and me on the application of fiduciary duties to the private lives of corporate executives. As Steve typically does in his posts, he raises some nice points that carry forward this discussion. In a subsequent Tweet, Steve appears to invite further conversation from one or both of us by linking to his post and writing "Tag. You're it."
. . . to what extent should a board have Caremark duties to monitor a CEO's private life. Personally, I think Caremark is not limited to law compliance programs. A board presented with red flags relating to serious misconduct--especially misconduct in a sphere of life directly related to the corporation's business (think Weinstein)--has a duty to investigate. But, again, does that mean the board should hire private investigators to track the CEO 24/7?
I agree that a board's duty to monitor is not limited to compliance programs. Stone v. Ritter makes it plain that the duty to monitor arises from a director's obligation of good faith, situated within the duty of loyalty. Assuming no "intent to violate applicable positive law" or an intentionally failure to act in the face of a known duty to act (demonstrating a conscious disregard for his duties)," however, under Disney, a failure to monitor in this context likely would not rise to the level of bad faith unless the board "intentionally acts with a purpose other than that of advancing the best interests of the corporation"--which seems unlikely (although someone with more time and creativity than I have at the moment may be able to spin out some relevant facts). Of course, the Delaware Supreme Court could add to the Disney list of actions not in good faith . . . . But absent any of that, it is unlikely that a board of directors' failure to monitor an executive's private life will result in liability for a breach of the duty of loyalty.
Second, I want to pass on a further thought on the debate--one that is not my own. In an email message to me, co-blogger Stefan Padfield observed that corporate opportunity doctrine questions are fiduciary duty claims that extend into a fiduciary's private life--specifically, the fiduciary's usurpation of the opportunity for his or her private gain. He also noted that from there the leap is not as far as it may seem to conceptualizing other aspects of an executive's private conduct as being within the scope of his or her fiduciary duties to the corporation. This certainly provides more food for thought.
I want to thank Ann for stimulating all these ideas. Her original post raised a nice question--one that obviously provokes and has encouraged engagement in thoughtful conversation. While we have not yet resolved the issue, we have staked out some important ground that may be covered in extant or forthcoming cases. As Ann's and Steve's posts point out, there are a number of intriguing fact patterns at the intersection of executives' private lives and fiduciary duties that may force courts to wrestle some of this to the ground. I, for one, will be watching to see what happens.
Sunday, May 13, 2018
Benefit corporations: "The proper focus for directors should ... be to consider only how their actions ... advance the identified ... public benefit for which the corporation was formed, along with how shareholder interests would be affected." https://t.co/x7EKgVZWgK #corpgov— Stefan Padfield (@ProfPadfield) May 9, 2018
"the premise that founders expect to reacquire control if there is an IPO underlies the leading finance theory for why venture capital cannot thrive without a robust stock market" https://t.co/a58JtCGRcP #corpgov— Stefan Padfield (@ProfPadfield) May 9, 2018
"Our cross-sectional tests examine 2 potential mechanisms driving managers’ decisions to increase takeover defenses: protection of firm value via innovation versus self-serving protection of manager’ jobs. Our results support the former mechanism" https://t.co/4rSWFMW15f #corpgov— Stefan Padfield (@ProfPadfield) May 10, 2018
I am thrilled to announce the publication of my first book, Corporate Friction: How Corporate Law Impedes American Progress and What To Do About It. From Cambridge University Press, available on Amazon at https://t.co/aePYMoVhQk. Enjoy! #CorporateFriction pic.twitter.com/K9XtwpJDPD— David Yosifon (@DavidYosifon) May 10, 2018
Saturday, May 12, 2018
I've been hunkered down grading exams this week, so all I've got for you is this tale tail of a developing economy:
For the last five years or so, the campus of Colombia's Diversified Technical Education Institute of Monterrey Casanare has been home to a sweet black dog named Negro. There, he serves as a guardian of sorts, keeping watch over things as students go about their studies.
In return, Negro is cared for by the school's faculty, who provide him with food, water, attention and a safe place with them to pass the night.
But the dog has apparently decided that anything beyond that is up to him.
Early on in Negro's tenure at the school, he came to be aware of the little store on campus where students gather to buy things on their breaks; sometimes they'd buy him cookies sold there.
This, evidently, is where the dog first learned about commerce — and decided to try it out himself.
"He would go to the store and watch the children give money and receive something in exchange," teacher Angela Garcia Bernal told The Dodo. "Then one day, spontaneous, he appeared with a leaf in his mouth, wagging his tail and letting it be known that he wanted a cookie."
Negro had invented his own currency, but, of course, it was accepted.
He got a cookie — and it came with an epiphany.
Leaves can buy treats!
As you might expect, after the dog realized his money literally grows on trees, it's been a regular thing.
"He comes for cookies every day," Gladys Barreto, a longtime store attendant, told The Dodo. "He always pays with a leaf. It is his daily purchase."
Still more reliable than Bitcoin.
Thursday, May 10, 2018
Earlier today, I received this call for submissions from the American Business Law Journal ("ABLJ"). I published with the ABLJ in 2017 and had a fabulous experience. The manuscripts are blind/peer-reviewed, something we need more of in the legal academy, in my opinion. I found the substantive comments to be of a much higher quality than one gets from a typical law review, and, unlike the practice of some peer-reviewed journals, the ABLJ published my manuscript in a timely manner.
The American Business Law Journal is seeking submissions of manuscripts that advance the scholarly literature by comprehensively exploring and analyzing legal and ethical issues affecting businesses within the United States or the world. Manuscripts analyzing international business law topics are welcome but must include a comprehensive comparative analysis, especially with U.S. law.
As most of you know, the ABLJ is a triple-blind, peer-reviewed law journal published by the Academy. The ABLJ is available on Westlaw and Lexis, and ranks in the top 6% of all publications in the Washington & Lee Submissions and Ranking list by Impact Factor (2016) and in the top 1% of all peer-edited or refereed by Impact Factor (2016). The Washington & Lee list ranks the ABLJ as the Number One Refereed/peer-edited “Commercial Law” and “Corporations and Associations” journal.
Because of a physical page limit imposed by our publisher Wiley, we ask that manuscripts not exceed 18,000 – 20,000 words (including footnotes). Submissions in excess of 25,000 words (including footnotes) may be returned without review. We also require that manuscripts substantially comply with the Bluebook: A Uniform Method of Legal Citation, 20th ed. For more details, please review our Author Guidelines at: http://onlinelibrary.wiley.com/journal/10.1111/%28ISSN%291744-1714/homepage/ForAuthors.html
Because the peer-review process takes from four to six weeks to complete, we strongly suggest that you submit to the ABLJat least a few weeks prior to submitting to other journals. The peer-review process is not conducive to expedite requests (though we will attempt to honor them if possible), so if you give us a head start we will more likely be able to complete the review process.
While we gladly accept submissions through ExpressO and Scholastica, save yourself the submission fee and submit directly to the ABLJ at firstname.lastname@example.org.
If you have any questions or need additional information, please contact the Managing Editor, Julie Manning Magid, at email@example.com.
Thank you and we look forward to reviewing your scholarly work.
Wednesday, May 9, 2018
Does "Volkswagen's 2015 emissions scandal provide a vehicle to critically assess the relationship between Germany's two-tiered board and an effective decision-making process"? 7 Mich. Bus. & Entrepreneurial L. Rev. 49 #corpgov— Stefan Padfield (@ProfPadfield) May 8, 2018
"If you are intent on saving the world from global warming or the nation from threats to democracy or workers from discrimination, ... you have to understand ... corporations." https://t.co/BoPedE6le4 #corpgov ht @AnnMLipton @DrewProf— Stefan Padfield (@ProfPadfield) May 8, 2018
"Bill Black ... developed the concept of 'control fraud' to describe the use of a legitimate entity by its executives as a weapon to commit fraud—something that occurs with alarming frequency." https://t.co/IM6IGfXw6L #corpgov— Stefan Padfield (@ProfPadfield) May 9, 2018
Tuesday, May 8, 2018
If I have learned anything over the years, it is that I should not expect any court to be immune from messing up entities. Delaware, as a leader in business law and the chosen origin for so many entities, though, seems like a place that should be better than most with regard to understanding, distinguishing, and describing entities. Sometimes they get things rights, as I argued here, and other times they don't. A recent case is another place where they got something significant incorrect.
The case starts off okay:
Plaintiffs brought this action under federal diversity jurisdiction, 28 U.S.C. § 1332(a)(1), asserting that complete diversity of citizenship exists among the parties. In Defendants’ Motion to Dismiss, however, they argue that complete diversity of the parties is lacking. Federal jurisdiction under § 1332(a)(1) requires complete diversity of citizenship, meaning that “no plaintiff can be a citizen of the same state as any of the defendants.” Midlantic Nat. Bank v. Hansen, 48 F.3d 693, 696 (3d Cir. 1995); Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553 (2005).
A natural person is a citizen of “the state where he is domiciled,”1 and a corporation is a citizen of the state where it maintains its principal place of business, as well as the state where it is incorporated. Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 418 (3d Cir. 2010). For purposes of § 1332, the citizenship of a limited liability corporation2 (“LLC”) is determined “by the citizenship of each of its members.” Id. Plaintiff Cliffs Natural Resources Inc. is incorporated in Ohio, and Plaintiff CLF Pinnoak LLC is incorporated3 in Delaware and maintains its principal place of business in Ohio. Third Am. Compl. ¶¶ 3–4, ECF No. 162. In moving to dismiss this action for lack of jurisdiction, Defendants assert that Seneca Coal Resources, LLC, a Delaware corporation,4 includes members who are Ohio citizens, thus destroying complete diversity as required for § 1332.
Monday, May 7, 2018
I was fascinated by Ann Lipton's post on April 14. I started to type a comment, but it got too long. That's when I realized it was actually a responsive blog post.
Ann's post, which posits (among other things) that corporate chief executives might be required to comply with their fiduciary duties when they are acting in their capacity as private citizens, really made me think. I understand her concern. I do think it is different from the disclosure duty issues that I and others scope out in prior work. (Thanks for the shout-out on that, Ann.) Yet, I struggled to find a concise and effective response to Ann's post. Here is what I have come up with so far. It may be inadequate, but it's a start, at least.
Fiduciary duties are contextual. One can have fiduciary duties to more than one independent legal person at the same time, of course, proving this point. (Think of those overlapping directors, Arledge and Chitiea in Weinberger. They're a classic example!) What enables folks to know how to act in these situations is a proper identification of the circumstances in which the person is acting.
So, for example, an agent’s duty to a principal exists for actions taken within the scope of the agency relationship. The agency relationship is defined by the terms of the agreement between principal and agent as to the object of the agency. The principal controls the actions of the agent within those bounds based on that agreement.
Similarly, a director’s or officer's conduct is prescribed and proscribed within the four corners of the terms of their service to the corporation. They owe their duties to the corporation (and in Revlon-land or other direct-duty situations, also to the stockholders). The problem then becomes defining those terms of service. For directors, a quest for evidence of the parameters of their service should start with the statute and extend to any applicable provisions of the corporate charter, bylaws, and board policies and resolutions more generally. For officers, the statute typically doesn’t provide much content on the nature or extent of their services. The charter may not either. Typically, the bylaws and board policies and resolutions, as well as any employment or severance agreement (the validity of which is largely a matter outside the scope of corporate law), would define the scope of service of an officer.
I have trouble envisioning that the scope of service (and therefore, reach of fiduciary duties) for a typical director or officer would extend to, e.g., private ownership of other entities and decisions made in that capacity. Yet, even where there is no technical conflicting interest or breach of a duty of loyalty, there is a clear business interest in having corporate managers—especially highly visible ones—act in a manner that is consistent with corporate policy or values when they are not “on the job.” While voluntary corporate policy or private regulation may have a role in policing that kind of director or officer activity (through service qualifications or employment termination triggers, e.g.), I do not think it is or should be the job of corporate law—including fiduciary duty law—to take on that monitoring and enforcement role.
Nevertheless, I remain convinced that better (more accurate ad complete) disclosure of (at least) inherent conflicts of interest may be needed so investors and other stakeholders can evaluate the potential for undesirable conduct that may impact the nature or value of their investments in the firm. As Ann notes, significant privacy rights exist in this context, too. There's more work to be done here, imv.
Thanks for making me think, Ann. Perhaps you (or others) have a comment on this riposte? We shall see . . . .
Sunday, May 6, 2018
"U.S. Justice Department on Thursday disclosed the filing of criminal charges against former Volkswagen AG Chief Executive Martin Winterkorn, accusing him of conspiring to cover up the German automaker's diesel emissions cheating." https://t.co/yn6KqtEIve #corpgov— Stefan Padfield (@ProfPadfield) May 4, 2018
Facebook is in reputational hell. How lucky that regulators let it eliminate competitors by acquiring them! My column: https://t.co/uMsBqvU0AD— Joe Nocera (@opinion_joe) May 4, 2018
"Although eight years have passed since SpeechNow, the Supreme Court has not decided whether the Constitution guarantees the right to give unlimited funds to super PACs." 86 Fordham L. Rev. 2299 #corpgov— Stefan Padfield (@ProfPadfield) May 6, 2018
Saturday, May 5, 2018
Zohar Goshen and Sharon Hannes have just posted to SSRN an interesting paper, The Death of Corporate Law, arguing that markets and private ordering have begun to supplant adjudication as a mechanism for resolving corporate disputes because the increasing sophistication of investors has made private resolutions less costly.
There are many excellent insights in the piece, which furthers the taxonomy developed by Goshen and Richard Squire in Principal Costs: A New Theory for Corporate Law and Governance to add the costs of adjudication into the mix. Yet there may be some ways that the theory is incomplete. For example, the authors focus on the effect of shareholders’ rising “competence” – because of the concentration of investment in the hands of institutions – rather than on shareholders’ rising power, which (according to some) may not be accompanied by greater competence at all. Managers have acted to counteract that rising power (dual class stock regimes, delays in going public), which might represent an efficient bargain to which investors are agreeing (the authors’ view), or simply a forthcoming source of dispute.
But the other piece that’s missing, of course, is the role of securities law. Investors’ rising power and/or competence is not merely a function of markets; it’s a regulatory choice, due to everything from new CD&A disclosures and say-on-pay provisions to the expansion of Rule 14a-8 to permit its use for proxy access bylaws (and, heck, the existence of 14a-8 in the first place), to the loosening of restrictions of on investment in private funds. And what regulators giveth, regulators can taketh away. Thus, there are new efforts to, among other things, limit say-on-pay and shareholder proposals, and to regulate proxy advisors. There is even new Labor Department guidance meant to limit funds’ involvement in corporate governance (which I may or may not make the subject of another post).
At the same time, it's hard not to notice that we likely would be revisiting the old corporate disputes, but with respect to relationships between retail investors in funds and fund managers themselves, were it not for the fact that federal law occupies most of that space.
Point is, reports of corporate law’s death may be slightly, if not greatly, exaggerated. Perhaps another way of putting it is simply to note (as others have done) that the locus of regulation has shifted from flexible, ex post review to mandatory ex ante rulemaking.
Friday, May 4, 2018
Does CSR Really Exist in Latin America? Should Corporations be Treated as Persecutors Under Asylum Law? Is Labor an Extractive Industry? Buy This Book and Find Out
In 2015, I and several academics and other experts traveled to Guatemala as part of the Lat-Crit study space. The main goal of the program was to examine the effect of the extractive industries on indigenous peoples and the environment. During our visit, we met with indigenous peoples, government ministers, the chamber of commerce, labor leaders, activists (some who had received multiple death threats), and village elders.
Our labor of love, From Extraction to Emancipation Development Reimagined, edited by Raquel Aldana and Steve Bender, was released this week. My chapter "Corporate Social Responsibility in Latin America: Fact or Fiction" introduces the book. I first blogged about CSR in the region in 2015 in the context of a number of companies that had touted their records but in fact, had been implicated in environmental degradation and even murder. Over the past few years, one of the companies I blogged about, Tahoe Resources, has been sued in Canada for human rights violations, the Norwegian pension fund has divested, and shareholders have filed a class action based on allegations re: the rights of indigenous people.
Although the whole book should be of interest to business law professors and practitioners, chapters of particular interest include a discussion of the environment and financial institutions, the Central American experience with investor protections under CAFTA, whether corporations should be treated as persecutors under asylum law, climate adaptation and climate justice, the impact of mining on self-determination, environmental impact assessments, and labor as an extractive industry.
Other chapters that don't tie directly to business also deserve mention including my mentor Lauren Gilbert's closing chapter on gender violence, state actions, and power and control in the Northern Triangle, and other chapters on the right to water and sanitation in Central America, community-based biomonitoring, and managing deforestation.
We encourage you to buy the book and to invite the chapter authors to your institutions to present (shameless plug for panels, but we would love to share what we have learned).
Wednesday, May 2, 2018
"b/c charters & bylaws involve the state in ways that are at odds with private-ordering principles & ... entail only a limited form of 'consent,' an analysis of enforceability must account for the hybrid nature--public & private--of such terms" 93 Wash. L. Rev. 265 #corpgov— Stefan Padfield (@ProfPadfield) May 1, 2018
"best reality TV show in Australia right now is the televised hearings of the Royal Commission into Australian banks.... has uncovered a litany of wrongdoing including bribery & fraud rings, poor lending practices, & pervasive lying to regulators" https://t.co/6sKKJEI5UF #corpgov— Stefan Padfield (@ProfPadfield) May 1, 2018
"California workers & companies have a new test to determine whether someone should be classified as an employee or independent contractor .... 'It’s a bombshell,' Richard Reibstein, a partner at Locke Lord LLP in New York, told Bloomberg Law." https://t.co/ZbEQ3QnldR #corpgov— Stefan Padfield (@ProfPadfield) May 1, 2018
"Xerox ... said its CEO and most of its board will step down to settle a suit by activist shareholders Carl Icahn and Darwin Deason ... new management ... will reconsider a contentious deal with Fujifilm" https://t.co/S7Sqa4Vq9n #corpgov— Stefan Padfield (@ProfPadfield) May 2, 2018