Wednesday, January 17, 2018

Call for Papers From The NYU Stern Center for Business and Human Rights and the Global Business and Human Rights Scholars Association

Call for Papers

The NYU Stern Center for Business and Human Rights and the Global Business and Human Rights Scholars Association invite you to submit papers: 4th Annual Conference of the Global Business and Human Rights Scholars Association at New York University, New York City, on September 14-15, 2018. Scholars from all disciplines are invited to apply, and we invite contributions that reflect the interdisciplinary character of BHR in theory and in practice.

We will also consider applications to participate as observers and discussants. Anyone interested in this possibility should submit their application in a few sentences to the email address below. Doctoral candidates are not eligible to present their research at this workshop, but they are welcome to attend. To discuss their work, PhD students may apply to the Young Researchers Summit (https://bhr.stern.nyu.edu/youngresearchers/). This is a workshop to discuss research-in-progress; papers must be unpublished at the time of presentation.

In addition to presenting a paper at the conference, participants are expected to read and be prepared to comment on and discuss the papers of other participants. The conference will be organized around three parallel working groups. Please indicate in your application to which of the three broad tracks you would like to contribute: (1) preventing, managing, and measuring BHR; (2) human rights in global supply chains and specific industry settings; or (3) conceptual approaches to BHR.

To apply, please submit an abstract of no more than 250 words to bhrnyu2018@gmail.com with the subject line Business & Human Rights Conference Proposal. Please include your name, affiliation, contact information, workshop theme preference, and short curriculum vitae. The proposals will be assessed by an organizing committee comprised of Dorothée Baumann-Pauly (NYU Stern, Program Chair and head of the committee), Justine Nolan (University of New South Wales), Penelope Simons (University of Ottawa), Kish Parella (Washington & Lee School of Law), Karin Buhmann (Copenhagen Business School), Merryl Lawry-White (Debevoise & Plimpton LLP), César González Cantón (CUNEF, Madrid), Humberto Cantú Rivera (University of Monterrey), Stephen Park (University of Connecticut), Michael Santoro (University of Santa Clara, President of the Global Business and Human Rights Scholars Association) and Anita Ramasastry (University of Washington School of Law, Vice-President of the Global Business and Human Rights Scholars Association).

The deadline for submission of abstracts is March 1, 2018. Scholars whose submissions are selected for the symposium will be notified no later than March 15. Full papers must be submitted by August 1.

About the Global BHR Scholars’ Association The Global Business and Human Rights Scholars’ Association is a non-profit, non-partisan membership association dedicated to bringing together a global and interdisciplinary group of scholars with an interest in the area of business and human rights, raising awareness of the human rights and other potentially harmful impacts of business activity, and promoting respect for international human rights among states, business enterprises, and other organizations. Membership is free and open to business and human rights scholars from every country and region of the world. More information about the Association and membership is available on our website: www.bhrscholarsassociation.org

January 17, 2018 in Call for Papers, Conferences, CSR, Human Rights, Marcia Narine Weldon | Permalink | Comments (0)

Tuesday, January 16, 2018

A Look Back on LLCs: Ribstein Had It Right

I have had reason to look back on some foundational scholarship in LLCs recently, and one article really stood out for me. Larry Ribstein's The Deregulation of Limited Liability and the Death of Partnership. It's another snow day with kids, so I haven't had a lot of time to delve into the thoughts this raised for me, so I'll let Larry's words speak for themselves.  Keep in mind this is from 1992:  

The popularity of the partnership form of business1 indicates that an organizational form in which some owners can be held personally liable for the firm's debts is efficient for many firms. This could be because, for many firms, individual liability reduces the firm's credit costs more than it increases owners' risk-bearing, monitoring, or other costs. This Article, however, suggests an alternative explanation: the partnership form is attractive for many firms on the margin only because of the regulatory costs of limited liability, including double corporate taxation and limitations on organizational form.

Recent developments provide a valuable opportunity to test this explanation. Many lawyers and legislators have become interested in a new limited liability business form, the "limited liability company" (LLC), that lets firms adopt limited liability without many of the tax and other costs that once attended limited liability. If this Article's regulatory explanation of partnership is correct, the partnership form of business will greatly diminish in importance. After a transitional period, partnership will survive, if at all, as a residual form for firms that have no customized agreement.

January 16, 2018 in Joshua P. Fershee, LLCs | Permalink | Comments (0)

Monday, January 15, 2018

William Morris Endeavor and the Wahlberg/Williams Pay Disparity: A Role for Agency Law in Equality and Justice?

“Injustice anywhere is a threat to justice everywhere.”

Martin Luther King, Jr., Letter from Birmingham Jail, Alabama, 16 April 1963, in Atlantic Monthly August 1963

I had wanted to post a tribute to Dr. King here early on Monday.  However, after posting the Emory conference announcement, I moved on to other work, and that work filled up the available time in the day.  So, this late post including the quote above will have to suffice.

As I read meaningful quotes from Dr. King on social media and elsewhere all day on Monday, I found myself thinking of examples of inequality and injustice.  Many are compelling; many are meaningful.  Some are current events; and some of those involve business law questions.

For a number of days now (since before MLK Day) we have been showered with news stories relating to the compensation disparity between Mark Wahlberg and Michelle Williams for reshooting scenes from All the Money in the World in the wake of Kevin Spacey's replacement in the film resulting from allegations of sexual misconduct.  (See here, among other places.)  Most folks who follow Hollywood business issues know that gender discrimination is common.  My sister, a visual effects producer (her current movie is Downsizing, which I enjoyed and recommend), has suffered the effects.

But I found myself focusing on the role of William Morris Endeavor Entertainment LLC (WME), the talent agency that represented both Wahlberg and Williams.  Talent agents are regulated by guilds and unions as well as under California law (as represented here).  But they also have fiduciary duties.  Why did Wahlberg's contract not include a reshoot covenant (giving him the leverage to negotiate an outsized reshoot fee) while Williams's contract did?  Did WME fail to act in a manner consistent with any applicable duty of care--or maybe loyalty--as an experienced agent representing both actors--with knowledge of an overall gender pay gap?  Of course, there are many other possible explanations for the difference, and we are not privy to the terms of the two actors' talent contracts with WME (including any enforceable private ordering around agency law rules or confidentiality or privacy clauses).  But the related questions seem worth asking.  

Specifically, we might ask whether there is a question of WME's care, competence, or diligence under Section 8.08 of the Restatement (Third) of Agency.  And, among other things, Section 8.11 of the Restatement (Third) of Agency imposes a duty of candor on agents that may be applicable here.  And were there differences in the benefits that WME got out of each agreement that may have affected the firm's ability to act loyally for the principal's benefit under Section 8.01 of the Restatement (Third) of Agency?  We may never know.

Intermediation likely cannot cure the evils of inequality and injustice.  But where intermediaries are agents or otherwise owe fiduciary duties to their clients, those fiduciary duties may cause--or at least incentivize--the intermediaries to use their experience and knowledge to correct gender, racial, and other inequities where they exist.  This is something I will continue to ponder.

January 15, 2018 in Agency, Current Affairs, Joan Heminway | Permalink | Comments (2)

2018 Emory Transactional Law & Skills Conference - Call for Papers

Sixth Biennial Conference:
To Teach is to Learn Twice: Fostering Excellence in Transactional Law and Skills Education

June 1-2, 2018 • Atlanta

Emory’s Center for Transactional Law and Practice is delighted to announce its sixth biennial conference on the teaching of transactional law and skills.  The conference, entitled “To Teach is to Learn Twice:  Fostering Excellence in Transactional Law and Skills Education,” will be held at Emory Law, beginning at 1:00 p.m. on Friday, June 1, 2018, and ending at 3:45 p.m. on Saturday, June 2, 2018. 

Four New and Different Things about the Conference: 

  • Presentation of the inaugural Tina L. Stark Award for Excellence in the Teaching of Transactional Law and Skills.  Note:  For information about how to nominate yourself or someone else for this award, please visit http://bit.ly/2C1HdMW.
  • New 45-minute “Try-This” time slots for individual presenters to demonstrate in-class activities.   
  • Reduced registration fee for new transactional law and skills educators.
  • Reduced registration fee for adjunct professors.  

CALL FOR PROPOSALS

We are accepting proposals immediately, but in no event later than 5 p.m. on Monday, February 16, 2018. 

We welcome you to present on any aspect of transactional law and skills education as long as you view it through the lens of our theme.  We expect to receive proposals about theories, programs, curricula, courses, approaches, methods, and specific assignments or exercises that foster excellence in transactional law and skills education.  In other words, what works best (excellence in teaching) to achieve particular student outcomes (excellence in learning)?  If it’s true that “to teach is to learn twice,” what wisdom can you impart to others who may want to replicate or imitate what you are doing?  How have you made yourself a better teacher?  And how have you assured that you are achieving the best student outcomes?  

Try-This Sessions.  Each Friday afternoon “Try-This Session” will be 45-minutes long and will feature one classroom activity and one individual presenter.  

Panels.  Each Saturday session will be approximately 90 minutes long and feature a panel presenting two or more topics grouped together for synergy. 

Please submit the proposal form electronically via the Emory Law website at http://bit.ly/2BTD7pr before 5 p.m. on February 16, 2018. 

PUBLICATION OF SELECTED MATERIALS

As in prior years, some of the conference proceedings as well as the materials distributed by the speakers will be published in Transactions:  The Tennessee Journal of Business Law, a publication of the Clayton Center for Entrepreneurial Law of The University of Tennessee, a co-sponsor of the conference.

CONFERENCE REGISTRATION

Both attendees and presenters must register for the Conference and pay the appropriate registration fee:  $220 (general); $200 (adjunct professor); or $185 (new teacher).  Note: A new teacher is someone in their first three years of teaching.

The registration fee includes a pre-conference lunch beginning at 11:30 a.m., snacks, and a reception on June 1, and breakfast, lunch, and snacks on June 2. We are planning an optional dinner for attendees and presenters on Friday evening, June 1, at an additional cost of $50 per person. 

Registration is now open for the Conference and the optional Friday night dinner at our Emory Law website at http://bit.ly/2BpTQVc.

TRAVEL ARRANGEMENTS AND HOTEL ACCOMMODATIONS

Attendees and presenters are responsible for their own travel arrangements and hotel accommodations. Special hotel rates for conference participants are available at the Emory Conference Center Hotel, less than one mile from the conference site at Emory Law. Subject to availability, rates are $149 per night. Free shuttle transportation will be provided between the Emory Conference Center Hotel and Emory Law.

To make a reservation at the special conference rate, call the Emory Conference Center Hotel at 800.933.6679 and mention “The Emory Law Transactional Conference.” Note: The hotel’s special conference rate expires at the end of the day on May 18, 2018.  If you encounter any technical difficulties in submitting your proposal or in registering online, please contact Kelli Pittman, Program Coordinator, at kelli.pittman@emory.edu or 404.727.3382. 

We look forward to seeing you in June!

Sue Payne, Executive Director

Katherine Koops, Assistant Director

Kelli Pittman, Program Coordinator

January 15, 2018 in Call for Papers, Conferences, Joan Heminway, Teaching | Permalink | Comments (0)

Sunday, January 14, 2018

ICYMI: #corpgov Weekend Roundup (Jan. 14, 2017)

January 14, 2018 in Stefan J. Padfield | Permalink | Comments (0)

Are we all LLCs now?

Shu-Yi Oei and Diane Ring of Boston College Law School have posted Is New Code Section 199A Really Going to Turn Us All into Independent Contractors? to SSRN.  Here is the abstract:

There has been a lot of interest lately in new IRC Section 199A, the new qualified business income (QBI) deduction that grants passthroughs, including qualifying workers who are independent contractors (and not employees), a deduction equal to 20% of a specially calculated base amount of income. One of the important themes that has arisen is its effect on work and labor markets, and the notion that the new deduction creates an incentive for businesses to shift to independent contractor classification. A question that has been percolating in the press, blogs, and on social media is whether new Section 199A is going to create a big shift in the workplace and cause many workers to be reclassified as independent contractors.

Is this really going to happen? How large an effect will tax have on labor markets and arrangements? We think that predicting and assessing the impact of this new provision is a rather nuanced and complicated question. There is an intersection of incentives, disincentives and risks in play among various actors and across different legal fields, not just tax. Here, we provide an initial roadmap for approaching this analysis. We do so drawing on academic work we have done over the past few years on worker classification in tax and other legal fields.

 

January 14, 2018 | Permalink | Comments (0)

Saturday, January 13, 2018

A modest proposal about proposals

As Joan and Josh previously posted, Stefan organized an excellent AALS panel on Rule 14a-8. We covered a number of topics, including the appropriate role of retail and employee shareholders, the proper sphere of activity for shareholders vis a vis managers, the true audience for shareholder proposals, and how to construct Rule 14a-8 so that frivolous and improper proposals can be easily weeded out.

In my remarks, I focused on the fact that shareholder proposals are usually precatory, even when they don’t have to be.  For example, shareholders have the right to pass bylaws, but even the Boardroom Accountability Project typically sponsors proposals that merely request that directors use their power to craft proxy access bylaws.  (I assume that’s at least in part because a good bylaw must address administrative matters that shareholders are ill-equipped to manage – for example, see management’s response to Proposal Ten, for a majority-rule bylaw at Netflix).

Because shareholder proposals are precatory, their main function is informational: they allow shareholders to communicate with management, with each other, and with the market more generally.  I suspect that this function may become especially important as passive investing’s popularity increases; absent the ability to sell, votes – and votes on specific governance matters – may be the most effective ways for shareholders to signal their views to management.

Given that, I believe that one fairly easy way of enhancing that signal would be to require that companies with multi-class shares disclose the class vote breakdown on shareholder proposals – and other votes as well – when they disclose the vote totals.  I’d also potentially recommend a breakdown that distinguishes the votes of the management group from other shareholders.

Right now, unless a class vote is held separately, companies are only required to release the vote totals.  This can cause some misleading reports.  For example, when Google’s shareholders proposed elimination of the multi-class share structure in 2017 (as they have done in prior years), Google reported that there were 191,712,790 votes for, and 472,583,246 votes against the proposal.

This, of course, obscured the fact that the public shareholders apparently mostly favored the proposal; it was only defeated because Larry Page and Sergey Brin, with their high-vote shares, voted against it. 

Now, obviously, even without a clear disclosure of this type, clever analysts might be able to glean the approximate breakdown from publicly reported information – as the above linked article indicates – but depending on the class structure, it may not always be that obvious.  Moreover, as I recently posted, the SEC’s Investor as Owner Subcommittee of the Investor Advisor Committee thinks clearer disclosures regarding multi-class share structures would benefit the market, even when some of that information might be deducible from a close reading of SEC filings.

There is also evidence that management may intentionally exercise in-the-money options to vote against shareholder proposals that are in danger of passing; because of these and other close-vote scenarios, a vote breakdown would be helpful.

And I think this is useful information to have.  It may assist with pricing of the public shares, and it may assist with pricing of shares of other companies with multi-class structures.  It could also assist with companies and underwriters trying to decide whether to go public with multi-class share structures in the first place.

In other words, I think this is a pretty cheap intervention, and one that would provide real informational benefits.

January 13, 2018 in Ann Lipton | Permalink | Comments (0)

Friday, January 12, 2018

Overnighters - Purpose, Priorities, and Process

The-overnighters

Over the break, I watched the documentary Overnighters on Netflix. 

In short, the documentary chronicles the story of a pastor who opens the church to migrant workers in North Dakota during the energy boom in that state. The pastor faces pushback from his congregation, neighbors, and city officials who do not appreciate having these men - some with criminal records - housed so close. 

In my opinion, the pastor is right, and the congregants are wrong, about the purpose of a church. The church should be in a community to serve, especially its needy neighbors. That said, the logistics of how to serve may be up for debate. Also, it is at least arguable that by serving the migrant workers the church strayed from serving its congregation. It would have been helpful if the church had a clear statement on its purpose and priorities. Many social enterprises have extremely vague purpose statements, which I do not think are very helpful. Benefit corporations are often required by statue to "benefit society and the environment." A purpose statement like that would not have helped the church in Overnighters much at all. A statement that showed that those in need would be prioritized over the comfort of the congregants (or vice-versa) would have been more helpful.  

The more valid complaint from the congregation, is the claim that an appropriate process for initiating the housing program was not followed. Sometimes even if stakeholders agree on the ultimate action taken by the organization, the stakeholders will still be upset if they are not included, or listened to, in the decision making process. I think this complaint is likely also found in businesses. Assuring the proper processes are set forth and followed can be quite important for businesses, especially in closely-held and family run businesses, where the stakeholders are deeply invested. 

The documentary is depressing and does not paint a pretty picture of human nature, but I do think things would have worked out a bit better for most of those involved if purpose, priorities, and process were paid more attention.  Of course, that is much easier written than done. 

January 12, 2018 in Corporate Governance, Current Affairs, Haskell Murray, Real Property, Social Enterprise | Permalink | Comments (0)

Thursday, January 11, 2018

Another Billion Dollar Ponzi Scheme

Ponzi schemes recur with an astounding regularity.  The latest comes from the Woodbridge group of companies.  The $1.2 billion scheme ran for about five years.  It took advantage of about 8,400 investors, many of them elderly. 

Like many other Ponzi schemes, commission-hungry sales agents brought fresh infusions of capital to the scheme.  Interestingly, the scheme allowed sales agents to pick how much they would receive in commissions:

The sales agents were paid well. According to the SEC complaint, "Woodbridge offered its [mortgage] product to its external sales agents at a 9% wholesale rate, and the agents in turn offered the [mortgage notes] to their investor clients at 5% to 8% annual interest — the external sales agent received a commission equivalent to the difference," the SEC asserted.

In total, Woodbridge may have paid out over $64 million in commissions to sales agents.  Some of these sales agents had been kicked out of the securities industry.  The Investment News details some of the sales claims that enabled the scheme:

For example, one insurance salesman and former broker, James H. Gilchrist, promoted the loans at dinners in Jensen Beach. The invitation encouraged potential attendees to "learn how to earn 6% fixed interest" a year, touting "monthly income checks" and "no market risk" along with an entree of chicken alfredo, salmon or shrimp scampi. "How to make your retirement savings CRASH PROOF," the invitation declared. Mr. Gilchrist did not return calls for comment.

Any registered brokerage firms that sold these investments may have a problem on their hands.  Brokerage firms have an obligation to do some diligence on the product to make sure that there is some reasonable basis for believing the product to be suitable for some customers. FINRA's guidance provides that:

(a) The reasonable-basis obligation requires a member or associated person to have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors. In general, what constitutes reasonable diligence will vary depending on, among other things, the complexity of and risks associated with the security or investment strategy and the member's or associated person's familiarity with the security or investment strategy. A member's or associated person's reasonable diligence must provide the member or associated person with an understanding of the potential risks and rewards associated with the recommended security or strategy. The lack of such an understanding when recommending a security or strategy violates the suitability rule.

From what I've seen, I'm not sure how these products would have passed careful scrutiny.  

 

 

 

January 11, 2018 | Permalink | Comments (3)

Wednesday, January 10, 2018

H & M Misses The Mark With An Ad Campaign, But Do Wall Street and Consumers Care?

Article-h-m2-0108

Swedish clothing giant H & M caused a huge stir this week with an ad campaign depicting a young black boy in a sweatshirt that proclaimed him the "Coolest Monkey In the Jungle."  The company's misstep is surprising given the public condemnations of the use of the word "monkey" in Europe over the past few years when soccer fans have used it as a slur against black players. Notwithstanding H & M's many apologies, several megastars have denounced the company and some have even pulled their fashion collaborations. As usual, several have called for boycotts of the retailer. But will all of this really matter? The sweatshirt was still for sale in the UK days for days after the controversy erupted, and the Weeknd, one of the megastars who vowed to never work with H & M, still has his 18-piece H & M collection available online and available for purchase on the store's  U.S. portal.

I'm headed out of the country tomorrow and in my quest for a new sweater, I glanced in the H & M store in my local mall earlier today. The store was packed and likely with fans of the artists who called for a boycott. No one was walking with picket signs outside. But as I have written about herehereherehere and at other times on this blog, I'm not sure that young American consumers--H & M's fast fashion demographic--have the staying power to sustain a boycott. Perhaps the star power behind this boycott will make a difference (but I doubt it).Wall Street hasn't punished the store either. The stock did not take a major hit. Moreover, CNBC has reported that in December, the company reported its biggest quarterly drop in ten years. This means that H & M's pre-existing financial woes will make it even more difficult to determine whether a boycott actually affected the bottom line. 

Time will tell regarding the success of this latest boycott effort but in the age of hashtag activism, I don't have much confidence in this latest boycott effort.

 

 

January 10, 2018 in Corporations, CSR, Current Affairs, Marcia Narine Weldon, Marketing, Shareholders | Permalink | Comments (1)

Tuesday, January 9, 2018

Back to Reality and (Mostly) Staying the Course on Shareholder Proposals

The new semester is upon us, and AALS (as it tends to) ran right into the new semester.  Joan Heminway provided a nice overview of some of her activities, including her recognition as an outstanding mentor by the Section on Business Associations, and it was a pleasure to see her recognized for her tireless and consistent efforts to make all of us better.  Congratulations, Joan, and thank you! 

I, too, had a busy conference, with most of it condensed to Friday and Saturday. (As a side note, it was pretty great to run along the water in 55-65 degree weather. As much as I love New York and appreciate San Francisco and DC, I'd be quite content with AALS moving between San Diego and New Orleans.)  I spoke on a panel with my co-bloggers, as Joan noted, about shareholder proposals, and I spoke on a panel about the green economy and sustainability, which was also fun.  It's nice when I am able to spend some time with a focus on my two main areas of research. 

As to our panel on shareholder proposals, I thought I'd share a few of my thoughts.  First, as I have explained in the past, I am not anti-activist investor, even though I often think their proposals are wrong headed. I think shareholder (and hedge fund) activist can add value, even when they are wrong, as long as directors continue to exercise their judgment and lead the firm appropriately.   

Second, although I tend to have a bias for staying the course and leaving many laws and regulations alone, I am open to some changes for shareholder proposals. The value of the current system (especially one that has been in place for some time) is that everyone knows the rules, which means there is some level of efficiency for all the players.  

That said, the threshold for shareholder proposals has been in places since the 1950s.  The Financial Choice Act looks to move the proxy threshold from $2,000 and one-year holdings to a 1%/three-year hurdle.  That is a pretty big move. Updating the $2,000 threshold from 1960 would mean raising the threshold to around $16,000, so a move to what can be millions may be too much.  But $16,000 (basically updating for inflation), would make some sense to me, too.  Anyway, just a few simple thoughts to start the year. Hope your classes are starting well.  

January 9, 2018 in Corporations, Financial Markets, Joan Heminway, Joshua P. Fershee, Securities Regulation, Shareholders | Permalink | Comments (2)

Monday, January 8, 2018

AALS 2018 Wrap-Up

AALS2018(SHProposalPanel)

Last week, I had the privilege of attending and participating in the 2018 annual meeting of the Association of American Law Schools (#aals2018).  I saw many of you there.  It was a full four days for me.  The conference concluded on Saturday with the program captured in the photo above--four of us BLPB co-bloggers (Stefan, me, Josh, and Ann) jawing about shareholder proposals--as among ourselves and with our engaged audience members (who provided excellent questions and insights).  Thanks to Stefan for organizing the session and inspiring our work with his article, The Inclusive Capitalism Shareholder Proposal.  I learned a lot in preparing for and participating in this part of the program.

Earlier that day, BLPB co-blogger Anne Tucker and I co-moderated (really, Anne did the lion's share of the work) a discussion group entitled "A New Era for Business Regulation?" on current and future regulatory and de-regulatory initiatives.  In some part, this session stemmed from posts that Anne and I wrote for the BLPB here, here, and here.  I earlier posted a call for participation in this session.  The conversation was wide-ranging and fascinating.  I took notes for two essays I am writing this year.  A photo is included below.  Regrettably, it does not capture everyone.  But you get the idea . . . .

  AALS2018(Regulation)
In between, I had the honor of introducing Tamar Frankel, this year's recipient of the Ruth Bader Ginsburg Lifetime Achievement Award, at the Section for Women in Legal Education luncheon.  Unfortunately, the Boston storm activity conspired to keep Tamar at home.  But she did deliver remarks by video.  A photo (props to Hari Osofsky for getting this shot--I hope she doesn't mind me using it here) of Tamar's video remarks is included below.

Tamar(Video-HariO)

Tamar has been a great mentor to me and so many others.  She plans to continue writing after her retirement at the end of the semester.  I plan to post more on her at a later time.

On Friday, I was recognized by the Section on Business Associations for my mentoring activities.  On Thursday, I had the opportunity to comment (with Jeff Schwartz) on Summer Kim's draft paper on South Korean private equity fund regulation.  And on Wednesday, I started the conference with a discussion group entitled "What is Fraud Anyway?," co-moderated by John Anderson and David Kwok.  My short paper for that discussion group focused on the importance of remembering the requirement of manipulative or deceptive conduct if/as we continue to regulate securities fraud in major part under Section 10(b) of, and Rule 10b-5 under, the Securities Exchange Act of 1934, as amended.

That summary does not, of course, include the sessions at which I was merely in the audience.  Many of the business law sessions were on Friday and Saturday.  They were all quite good.  But I already am likely overstaying my welcome for the day.  Stay tuned here for any BLPB-reated sessions for next year's conference.  And in between, there's Law and Society, National Business Law Scholars, and SEALS, all of which will have robust business law programs.

Good luck in starting the new semester.  Some of you, I know, are already back in the classroom.  I will be Wednesday morning.  I know it will be a busy 14 weeks of teaching!

January 8, 2018 in Ann Lipton, Anne Tucker, Conferences, Corporate Governance, Joan Heminway, Joshua P. Fershee, Securities Regulation, Shareholders, Stefan J. Padfield | Permalink | Comments (0)

Sunday, January 7, 2018

ICYMI: #corpgov Weekend Roundup (Jan. 7, 2017)

January 7, 2018 in Stefan J. Padfield | Permalink | Comments (0)

Saturday, January 6, 2018

Saturday Movie Blogging: Molly's Game and The Greatest Showman

Over the holidays, I saw The Greatest Showman and Molly’s Game.  You wouldn’t have thought they’d be all that similar, but in fact, they’re both stories about nontraditional entrepreneurs who build unusual businesses from scratch. Molly’s Game understands that; sadly, Greatest Showman does not.  As a result, Molly’s Game is the more successful film.

The bulk of Molly’s Game is spent on building a business.  She learns the field, she identifies prospects, she finances and markets her game, she maintains her position and handles competition.  This is the heart of the movie and much of its appeal lies in the illustration of her ingenuity and expertise.

Those are also the best parts of The Greatest Showman, yet - and I rarely say this about a movie - the film was too short (1.5 hours). Too short because it quickly moves away from that theme to focus on a different story, namely, something about inclusion and acceptance for people who don't fit society’s mold.  As one review put it, “it doesn’t really tell Barnum’s story. Rather, it appropriates his name for a pop-culture sermon on inclusion that lets us know, just in case we didn’t realize, that 500-pound men and bearded ladies are not just perfectly valid citizens but ‘glorious.’”

Now that’s a problematic theme for Barnum, and it’s more problematic when the whole idea is filtered through able-bodied, gorgeous, and white Hugh Jackman for the grownups and Zac Efron for the kids, but also, it gets away from what Barnum is famous for - what the title of the movie suggests - namely, his marketing genius.

Barnum is sometimes known as the Shakespeare of advertising for developing PR techniques that are still in use today.  He was skilled at writing punchy, eye-catching copy, spinning a yarn – which the movie tells us but only barely demonstrates, most prominently in a single, early moment when he enchants his daughters with an improvised tale to distract from his inability to afford a birthday gift.

(Sidebar:  The X-Files episode “Humbug” features a gem of a scene in which the curator of a local museum of circus oddities illustrates, in delightfully understated fashion, the type of storytelling power for which Barnum is remembered.  You can see it online here, just jump to the 21:14 mark - at least until someone sends a takedown notice.)

Anyhoo, given Greatest Showman’s short runtime, way more space could have, and should have, been devoted Barnum’s publicity stunts, his advertising skills, the efforts it took to build his brand, and his own ethical line (which didn’t, umm, necessarily match the law’s) between salestalk and fraud.  If the movie understood itself better, it could have highlighted those aspects of the character, and it wouldn’t even have had to sacrifice the feel-good-be-yourself message to do it.

So in the end, Greatest Showman didn’t live up to its own hype (Barnum would have been appalled). Molly’s Game, though, was a master class in salesmanship and business savvy.

January 6, 2018 in Ann Lipton | Permalink | Comments (0)

Friday, January 5, 2018

New Year’s Resolutions: 2018

As I have written about in past posts (see, e.g., here and here), I fall among those who do New Year’s resolutions.

In 2017, I was 25 out of 34 (73.5%). (Yes, I set 34 resolutions; I may be crazy).

The biggest realization I had this year was that I struggled with resolutions that required daily/weekly tracking. A daily/weekly resolution has at least three issues: (1) if screw up once, you’ve blown the resolution for the year, (2) just tracking the resolution takes habit formation and daily/weekly time, and (3) creating a daily/weekly habit is generally difficult.

So, instead of a resolution to run 5x a week, I had better luck with an achievement goal like “run a mile under 5 minutes by the end of the year.” If the achievement goal was tough enough to require roughly 5x a week running then the achievement goal could get you to basically the same place as the weekly goal without the meticulous tracking requirement and with allowing occasional time off. The bigger achievement goals, however, may need to be broken into smaller steps.

My toughest resolution for 2018, and I “only” have 22 resolutions this year, will probably be “at least 15 minutes of quiet/reflection/prayer before any screens (computer, TV, phone, etc.)” I think I had to structure this one as a daily goal, as its importance is tied up in getting each day off to a good start. We will see how it goes - so far so go, but we are only 5 days deep in 2018. It is possible that I will not do this every day, but the “stick” is that I don’t get any internet use that day either. 

Best of luck to all in 2018, whether you choose to make resolutions for the year or not.

January 5, 2018 in Current Affairs, Haskell Murray, Wellness | Permalink | Comments (0)

Thursday, January 4, 2018

One of the Great Gravy Trains in Financial History

The New York Times recently covered the puzzling persistence of high mutual fund fees.  The article focuses on Baron Funds, a mutual fund family led by Ronald S. Baron. It points out that Baron's fees exceed the industry average by 54 percent.  Despite the high fees and finishing ahead of their indexes this year, the funds lag behind their benchmarks over a five year period. Baron argues that investors should take a broader view.  According to Baron, an investor that bought his flagship fund in 1994 would have roughly doubled the return otherwise obtainable from holding the S&P 500 over the same period. 

Notably, and not addressed by the Times, the content of Baron funds has changed since their launch.  Investors should not expect today's large Baron funds to replicate their early performance.  Although Baron funds once made concentrated bets on small companies, the funds have changed as they have grown.  One 2012 article, pointed out that Barons changed its investment policies after a large stake in Sotheby's imploded.  Baron changed the rules so that "no new investment can account for more than 10 percent of any of [the] funds."  

Mutual funds get away with high fees for a variety of reasons.  Selling an investment may have tax consequences. Ordinary investors also struggle to understand exactly how much they pay asset managers.  Many rely on commission-compensated financial advisers. Mutual funds frequently pay a financial adviser to sell fund shares and a trail commission while the assets remain with the fund.  Unsurprisingly, financial advisers may leave client assets in these higher-fee funds.    

Today's retail distribution channel also does a poor job of educating clients about fees.  Many clients fail to grasp even how their financial adviser gets paid.  One survey found that about a quarter of those over the age of fifty either incorrectly believe that their financial advisers give advice for free.  A sizable percentage know they pay something but don't understand how much they pay their advisers.  With so much confusion about how financial advisers get theirs, it's unsurprising that many investors lose track of mutual fund manager compensation.

In theory, a mutual fund's directors should look out for the interest of the fund's shareholders.  The Times called on Professor William Birdthistle to explain how mutual fund directors often identify more with the fund companies that pay them than shareholders.  Birdthistle also has an excellent book on the mutual fund industry that goes into much more detail about mutual fund governance issues.

January 4, 2018 | Permalink | Comments (0)

Wednesday, January 3, 2018

Sex and Succession Planning- A New Agenda Item for Boards?

At a time when many boards may be thinking of tax planning and possible M & A deals, they may have to start focusing more on the unseemly topic of their executives' sex lives because the flood of terminations and resignations due to sexual misconduct shows no signs of slowing down. One of the most shocking but underreported terminations in 2017 related to VISA. The CEO, one year into the role, chose to terminate one of his most valuable executives after an anonymous tip about sexual misconduct.  He wanted his employees to know that the corporate culture and values mattered. Board members should look closely at the VISA example.

We will continue to see the rise of the #MeToo movement spurred on in part by the messaging from a star-studded task force  formed to address Hollywood issues and the establishment of a multimillion-dollar legal defense fund to help blue-collar workers. Even Supreme Court Chief Justice Roberts addressed sexual harassment in the court system in his Year-End Report on the Federal Judiciary.  More people than ever may now choose to come forward with claims of harassment or assault. Whether companies choose to terminate wrongdoers or the accused choose to resign "to spend more time with their families," it's a new day. As I've written here, companies will need to re-evaluate policies and training to navigate these landmines.

Board members will need to step up too. Boards of any size institution (including nonprofits) need to take the job of CEO succession planning seriously because the chief executive could leave, retire, or die. Boards must not only consider the possibility of a harassment scandal in the C-Suite but they must also worry about their fellow board members. Unfortunately, a KPMG study revealed that only 14% of board members believe they have a detailed succession plan for themselves. Members of the C-suite will also need to think more clearly about succession planning in the lower ranks. HR may have to redouble efforts to ensure that high-potential employees have no skeletons in the closet that have been swept under the rug. 

In the meantime, I and other former members of the Department of Labor Whistleblower Protection Advisory Committee have written an op-ed in the Boston Globe. Even if I had not co-authored the piece, as a former defense-side employment lawyer and compliance officer, I would recommend that company leaders take a look at it. Some of our recommendations for strengthening corporate culture are below:

1) have a trustworthy, independent system, with multiple reporting mechanisms, staffed with the proper skills to conduct swift, full, and fair investigations and to carry them to a just resolution, observing principles of confidentiality and discretion, and including ongoing protection of those who report;

2) make sure that there is a clear, credible anti-retaliation policy that protects accusers and witnesses who come forward in good faith;

3) require strong accountability for all levels of management for reporting and responding to complaints;

4) implement specific policies that direct bonuses, raises, and other incentives and opportunities to those who, in addition to meeting business targets, actively prevent and respond appropriately to harassment, retaliation, and other compliance problems. Consider clawbacks if unsupportive behavior later comes to light. Call out injurious behavior (without necessarily naming names) and credit exemplary behaviors;

5) periodically assess the culture and require an independent outside entity to confidentially administer anonymous surveys and interviews. The best of these use benchmarked and validated questions that can provide insight into the effectiveness of the compliance program and whether employees trust the system; and

6) make sure to involve unions and other formal and informal employee groups in developing new policies.

I wish all of our readers a happy and healthy new year. I wish board members and company executives good luck. 

January 3, 2018 in Compensation, Compliance, Corporate Governance, Corporations, CSR, Current Affairs, Employment Law, Ethics, Marcia Narine Weldon | Permalink | Comments (0)

Tuesday, January 2, 2018

Winning?: Incorrect References to "Limited Liability Corporations" Down to 1666 (from 1898) in 2017

I did my annual Westlaw check-up on the use of "limited liability corporation" in place of the correct “limited liability company.”  I did a similar review for 2015 and 2016 about this time, and revisiting the same search once again showed consistency (not in a good way). I keep hoping for major improvement, but some noticeable reductions in a few areas is a positive sign. 

Since January 1, 2017, Westlaw reports the following using the phrase "limited liability corporation":

Type

2017

2016

2015

Cases

352

363

381

Trial Court Orders

110

99

93

Administrative Decisions & Guidance

132

172

169

Secondary Sources

989

1116

1071

Proposed & Enacted Legislation

83

148

169

Modest improvement by courts (yay, judges and clerks!), a little worse showing for trial court orders in trial court orders (boo, judges and clerks!), and sizeable reductions showed up in administrative decisions and on the legislative front, and a modest reduction appeared in secondary sources. 

Hard to say what the cause of any of this is, and I am inclined to think that the legislative number is far more focused on the types of bills being proposed than anything else. That is, all of the other areas have recurring and consistent interest, in some sense, with entity type.  Legislation is more fickle.  (Side note: grammar suggestion is for “fickler,” but I can’t go there.)  

My prediction is that we will see a lot more references to “limited liability corporations” with the passage of the recent tax bill.  Why do I think this?  Let’s take a look at some recent news coverage. From Forbes, for example:

The change would allow real estate investors to take advantage of a new break that provides a 20 percent deduction on taxable income for pass-through companies. A pass-through is a special type of corporate structure, popular among small business owners.

Cue Bill the Cat: Ack! 

“A pass-through” is a tax status. The entity choosing pass-through taxation could be a “corporate structure,” most notably the S-corp (which is an entity I rather hate, but that’s for another day), but it is not necessarily so. LLCs and limited partnerships, for example, are not corporate structures.

 Mother Jones provides an example of how the tax bill might work, somewhat ironically in an article titled, Tax Lawyers Are Getting Ready to Exploit All the Mistakes in the GOP Tax Bill:

Take a New York law firm. Under the final bill, Kamin says, if a law firm lets their associates spin off into a separate limited liability corporation that provided services to the main firm, the associates’ company could then be considered a pass-through business. The associates’ firm could contract with their original firm, and as long as they restrict income to less than $157,500 for an individual and $315,000 for a married couple, the associates can take advantage of the pass-through deduction.

I will skip (for now) the merits of the example, but these kinds of misstatements are likely to be a recurring issue. 

Okay, I’ll leave it there for now.  I hope your 2018 has started well, and I wish you the very best, even if you’re a “limited liability corporation” offender.  I sincerely hope you’ll get on board and try to mend your ways, of course, but I nonetheless, wish you well. Happy New Year!

 

January 2, 2018 | Permalink | Comments (2)

Monday, January 1, 2018

Happy New Year!

I am laboring with what I hope is the tail end of the fourth cold I have had since the end of October--two in December alone.  Ugh.  So, I am afraid that my new year's day spirit is somewhat dulled by all the cold medicine.  (I get on a plane for San Diego tomorrow morning, so getting all the head congestion out of the way today is a primary goal!)

Nevertheless, since New Year's Day is commonly associated with resolutions, I thought I would offer one in the spirit of the BLPB.   It's not your typical new year's resolution.  But my co-bloggers and most of our readers will no doubt find it oddly familiar . . . .  Here goes.  (Oh, and happy new year!)

*          *          *

CONSENT OF SOLE NEW YEAR'S DAY BLPB BLOGGER

Monday, January 1, 2018

-------------

WHEREAS, our weblog is blessed by some of the best blog editors known to man (and woman and others); and

WHEREAS, our weblog has garnered over 1,045,000 page views; and

WHERAS, our readers are amazing, patient folks with interesting and diverse ideas, thoughts, and perspectives; and 

WHEREAS, all of the foregoing makes the undersigned very, very happy; now, therefore, it is

RESOLVED, that 2018 be the best year ever for the Business Law Prof Blog and bring health and happiness to bloggers and readers alike.

 

       /s/ Joan MacLeod Heminway         
      Joan MacLeod Heminway
      Sole New Year's Day BLPB Blogger

January 1, 2018 in Joan Heminway | Permalink | Comments (2)

Sunday, December 31, 2017

ICYMI: #corpgov Weekend Roundup (Dec. 31, 2017)

December 31, 2017 in Stefan J. Padfield | Permalink | Comments (0)