Saturday, December 10, 2016

Saturday Television Blogging: Incorporated

As part of my ongoing effort to sample most pop cultural representations of corporate/business life, I’ve started watching SyFy’s Incorporated.  Incorporated envisions a dystopian future where, due to global warming and related environmental catastrophes, the world’s governments have become bankrupt, and in their place, “multinational corporations have risen in power and now control 90% of the globe.”

We learn in the first episode that formal governments still exist, but in almost vestigial form; as a practical matter, multinational corporations are in charge.  These corporations compete with each other for resources and market share.  They target each other with espionage and sabotage; when one’s stock price falls, the others’ stock prices rise.  Employees lead a comfortable life within the corporate compound, so long as they adhere to the rules set by their employers; outside of corporate compounds, life is poverty and anarchy.

I get where this show is coming from; I mean, fear of corporate control of government represents a particularly timely anxiety.  And there are lots of sly jokes about today’s political environment – a television news report, for example, tells us that the “Canadian Prime Minister is constructing a fence after 2073 became a record year for illegal immigation.  It is estimated that already 12 million US citizens live in Canada illegally.”  Ha, ha.  But the show perpetuates what I believe is the very damaging misconception that corporations can exist independent of government systems.

For example, it is clear that these corporations have shareholders, and that the shares trade publicly with prices that respond to new information.  So, what legal rights do these shareholders have?  How are they enforced?  What are the regulations that govern the market in which shares trade, and who enforces those regulations?  If corporate managers have that much power, why would anyone invest without fear of exploitation – and if there are limits on their power, so that investors are more confident, where do those limits come from?

The backstory of this universe – as described on the SyFy website – is that governments, under financial pressure, sold various police powers to corporations, and exempted them from taxation.  The implication must therefore be that the government either taxes everyone else to pay the corporations for their service, or allows the corporations to charge private citizens.  But by now, most people are unemployed and surviving as part of the underground economy; the U.S. government, at least, is unable to raise funds to pay for its operations.  Wouldn’t the US dollar have collapsed?  Wouldn’t it be replaced by corporate scrip?

And why are employees treated so well?  In a world where corporations rule, the constituents are the shareholders – not the employees – so that’s who I’d expect to live in luxury.  Certainly, today’s corporate theory would suggest that shareholder interests are somewhat adverse to those of employees, so that when shareholders are ascendant, employees suffer.  The world of Incorporated is obviously a world with excess labor; why would corporations expend so many resources on their workers? 

And who are the shareholders in this world, anyway?  Today’s shareholders are – in large part – employees, who have pooled their retirement funds in either defined benefit or defined contribution plans.  But with only a few multinational corporations – and the majority of the population shunted into the underground economy – that can’t be the system anymore.  If corporations are supplying their employees with all of their needs (healthcare, food, housing, presumably retirement plans), it doesn’t seem like there would be much of an insurance market, let alone a need for 401(k) plans, so those investors have been eliminated.

But I keep coming back to the central problem:  If corporations have supplanted governments, then at minimum, arbitration and trust and reputation and guilds must supplant regulation.  That’s a fascinating vision of the future, but nothing in the show even hints at this direction.  I realize that I’m now stealthily engaging relatively unoriginal debates about the nature of the corporation (artificial/concession, association, real) and the role of the state in constructing the corporate form, but the reality is that corporations are a product of their legal environment.  Without something like law emanating from some external source, there is no corporation.  To imagine corporations as independent of law fatally ignores the role of law in shaping the corporate form itself. 

As a result, I find Incorporated not merely irksome, but actively damaging.  It leads lay viewers to accept the current legal framework for the corporate form as baseline, or natural – instead of a set of affirmative set of regulatory choices.  I’m not talking about particular salient issues, such as political donations or tax policy; I’m talking about fundamental aspects about the form itself, such as limited liability, the role of the shareholder in the governance structure, and the transferability of ownership interests.  The form itself is inseparable from positive law, which means it is subject to change.  Incorporated obscures that fact, and thus – rather than presenting a critique of the status quo – ultimately reinforces it.

December 10, 2016 in Ann Lipton | Permalink | Comments (2)

Friday, December 9, 2016

Faith and Work in Business

Thursday, December 8, 2016

Trump as a Teaching Tool for Business Associations

A friend of mine is considering teaching his constitutional law seminar based almost entirely on current and future decisions by the President-elect. I would love to take that class. I thought of that when I saw this article about Mr. Trump’s creative use of Delaware LLCs for real estate and aircraft. Here in South Florida, we have a number of very wealthy residents, and my Business Associations students could value from learning about this real-life entity selection/jurisdictional exercise. Alas, I probably can’t squeeze a whole course out of his business interests. However, I am sure that using some examples from the headlines related to Trump and many of his appointees for key regulatory agencies will help bring some of the material to life.

Happy Grading!

December 8, 2016 in Business Associations, Corporate Governance, Corporate Personality, Corporations, Current Affairs, Delaware, LLCs, Marcia Narine Weldon, Teaching | Permalink | Comments (1)

"Show Me the Money!" - State Tax Issues Under the Pay-For-Play Model

If you’re a college football fan it’s hard to forget the beginning of the 2013 season when star quarterbacks Johnny Manziel (Texas A&M) and Tajh Boyd (Clemson) took the Internet by storm after rubbing their fingers together in the air - prompting “Show Me the Money!”, Jerry Maguire type hype across the nation - following touchdown plays.  That season Manziel even donned the cover of Time Magazine with the accompanied headline: “It’s Time to Pay College Athletes”.

Not six months later, Region 13 of the National Labor Relations Board (NLRB) held that Northwestern University football players qualified as employees and could unionize and bargain collectively.  Although the national level NLRB ultimately overturned this decision - denying players at private universities the ability to form unions - these highly-broadcast events reignited the historic debate about whether student-athletes should be paid to play.

As a tax aficionado and amateur sports fanatic, I can’t help but ponder the various tax consequences associated with paying student-athletes.  Such intrigue ultimately led to the first of three papers I’ve written thus far addressing the tax issues surrounding the pay-for-play model.  ‘Show Me the Money!’ – Analyzing the Potential State Tax Implications of Paying Student Athletes evaluates state tax issues surrounding pay-for-play and the ripple effect that such taxes could have on the world of college sports. 

Within this paper my co-author Adam Epstein and I created a theoretical analysis to illustrate several state tax considerations that should be considered, such as the immediate competitive recruiting advantage that athletic programs in states like Texas, Washington, and Florida – which have no state income tax – would have over programs located in high-tax jurisdictions like California (which boasts a 12.3% individual income tax rate!).  Realistically, just how much more cash or benefit incentives would schools like Southern Cal (currently ranked 9th in the CFP) or Stanford (ranked 18th) have to offer potential recruits in order to make their offers as attractive as those coming from the Huskies (ranked 4th), Seminoles (ranked 11th), and Gators (ranked 17th) - all located in states with no income tax?  While perhaps some wealthy programs could afford bargaining with additional “carrots”, what about those schools that can’t?  Could state tax rates ultimately affect the location of National Championship teams under the pay-for-play model?

Rather than promoting arguments for or against paying student-athletes, this article purposefully reserves a neutral tone and instead offers many thoughtful and candid tax points that should be included in the overall discussion about the future of pay-for-play.  With the prospect of paying student-athletes still just a hypothetical idea to ponder, I simply look forward to the next few weeks of bowl games, playoffs, and (perhaps!) a 2nd straight go-round for the Tigers at the National Championship!

December 8, 2016 | Permalink | Comments (2)

Wednesday, December 7, 2016

ICI 2016 Factbook

Do you love charts? Do you need/want a break from grading/procrastinating/writing frantically on a deadline real or self-imposed?  All of these things at once?  Welcome to the month of December-- the time of year that should be a break from our schedules, but which always (and I mean ALWAYS) is my busiest time when I try to fit 6 weeks of work into 2.  

My December gift to you?  The Investment Company Factbook.  The Investment Company Institute (ICI), is an association of regulated funds that collects and distributes data from its members.  The full text of the Factbook (an annual publication) is available here, and the charts (and underlying data) are available here.  I wept when I first discovered this source while writing years ago.  ICI information is widely used in legal research.  A quick search produced 3,265 law reviews and journal articles.  For critiques of ICI's information and framing, see John C. Bogle, Mutual Funds at the Millennium: Fund Directors and Fund Myths, at (May 15, 2000); John P. Freeman & Stewart L. Brown, Mutual Fund Advisory Fees: The Cost of Conflicts of Interest, 26 J. Corp. L. 609, 625/26 (2001); and yours truly in  Anne M. Tucker, Locked in: The Competitive Disadvantage of Citizen Shareholders, 125 Yale L.J. Forum 163 (2015).

Now back to writing/grading/procrastinating!

-Anne Tucker


December 7, 2016 in Anne Tucker, Writing | Permalink | Comments (0)

Tuesday, December 6, 2016

Seeking Economic Prosperity and Social Justice: Getting Out of Our Own Way

The political discourse of this election cycle, and the respective postures of the two main political parties, suggest that social justice and economic prosperity are in opposition to one another. At times, it seems that some believe pursuing racial and gender equality are (at best) distractions from “real problems” like jobs and the economy. Others seem to think any form of business or industrial development is essentially sanctioning the destruction of the Earth and its people. Both are wrong.

Equity and fairness are not anathema to economic progress. In fact, in the big picture, they are essential. There is nothing inconsistent about being pro-business and supporting social justice. One can believe in social justice and still think there are too many regulations that hamper businesses. There are, for example, regulations that disproportionately keep women and minorities from opening their own businesses. And there are laws and regulations that create barriers to entry and help maintain market power businesses where competition is both warranted and necessary..

My colleague, Haskell Murray recently posted Faith and Work in Universities, which lists some resources related to religion and scholarly activity, particularly as it related to business. This is a worthwhile discussion, and far too often we see discussions of business and morality as separate areas – silos related to separate and competing goals. 

This is not unlike the separation in environmental law and energy law I discussed in a recent short piece about the changing role of natural gas in the clean energy movement where I noted:

Electricity generation for industrial and residential consumers was one of the major drivers behind environmental regulation, but despite this long-standing connection, environmental law and energy law have often operated in separate silos. This fact has led to disjointed and ineffective policy and a poor understanding of the full scope of legal, regulatory, and business issues in the energy sector. (footnote omitted)

This is true in the broader business and social justice realm, as well. As Haskell’s compilation shows, though, that business and social justice (including, but not limited to, religion) are interrelated is hardly novel.  When Pope Francis visited the U.S. Congress, he explained:

The right use of natural resources, the proper application of technology and the harnessing of the spirit of enterprise are essential elements of an economy which seeks to be modern, inclusive and sustainable. "Business is a noble vocation, directed to producing wealth and improving the world. It can be a fruitful source of prosperity for the area in which it operates, especially if it sees the creation of jobs as an essential part of its service to the common good" (Laudato Si', 129). 

Social justice and economic development are not either-or propositions, despite what recent election choices may have implied. There is, I think, a vast underrepresented center in America that cares both about pragmatic economic decisions and basic fairness and equity. This past election, I hope and believe, demonstrated more about the priorities of various voters rather than clear divides about the issues themselves.  To be sure, there are large numbers of people for whom this is not true -- there is some fundamental disagreement out there -- but I think the vast majority of people are decent caring people who have different ideas about the hierarchy of what is most important to move the country forward. 

This is not to ignore the repugnant behavior, language and acts, from some people before and since the election. There have been outrageous acts of violence and intimidation.  Shortly after the election, some of our law students were victims of such acts. As examples, one student was spit upon and racial epithets were shouted at another. There is no place hateful behavior, and it is unacceptable. A recent speaker invited to our campus said hateful and hurtful things about a valued faculty member. Free speech is a virtue, but this is simply not how we should treat each other, and it is shameful. And although racism, misogyny, anti-LGBT and anti-religious sentiment, and xenophobia have been part of virtually every government at some point, no government has found lasting peace or prosperity based on any of those things.

My point is not intended to suggest a Pollyanna-esque view of the world. I am not blindly asking, “Can’t we all just get along?”  I am asking whether we can agree to try.

It's going to take a lot of work, and there are no simple answers. But we must start somewhere. Here are three modest principles to get started moving forward together:

  1. Stop succumbing to base and visceral reactions. We need to stop assuming everyone is lying and cheating and taking something from us so that we notice those who really are lying and cheating and taking something from us.
  1. Be skeptical of uncompromising absolutists. There are some absolutes in this world, to sure, but not nearly as many as we have been led to believe. And this is not a conservative or liberal issue. It’s an issue. Anyone who thinks they are right all the time is wrong. 
  1. Reaffirm our nation’s founding principles and self-evident truths, that all people are “created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” I think it is right to say we have evolved from knowing such rights belong to men to know such rights belong to us all.

These principles require seeing compromise as valuable. Virtually all of us agree about that, because most of us have jobs and friends and loved ones. Compromise is a big reason why or we wouldn’t have those people in our lives. Compromise does not mean sacrificing one’s beliefs or values.  It means recognizing the value and autonomy of others. It means seeing the mutual value of others in the world around us.  But also, to be clear, compromise is not one side listening and being nice while the other side sits obstinately waiting to get what they want.  Compromise requires that both sides work and give up something. Compromise is not, and cannot be, unilateral disarmament.   

Let’s debate vigorously the best way to achieve economic prosperity.  Let’s argue respectfully about how best to care for the nation’s poor and elderly.  But let’s value and respect each other. In short, let’s get out of our own way. We have work to do. 

December 6, 2016 in Current Affairs, Jobs, Joshua P. Fershee, Religion | Permalink | Comments (2)

U.S. Supreme Court Simply and Elegantly Affirms Dirks in Salman

In a relatively brief opinion released this morning, the U.S. Supreme Court affirmed the Ninth Circuit's judgment in Salman v. United States.  The decision of the Court was unanimous.  The big take-aways include:

  • doctrinally, the Court's complete, unquestioning reliance on the language in Dirks v. Sec's Exch. Comm'n, 463 U. S. 646 (1983), as to when the sharing of information through a tip is improper, and therefore a basis for insider trading liability (quoting from the text on page 662 of the Dirks opinion: “'[T]he test,' we explained, 'is whether the insider personally will benefit, directly or indirectly, from his disclosure.'”);
  • factually, the emphasis placed by the Court on the value proposition represented by the information-sharing between the close brothers, Maher and Michael--that information passed on with the knowledge that it will be traded on was effectively a substitute for a monetary gift ("In one of their tipper-tippee interactions, Michael asked Maher for a favor, declined Maher’s offer of money, and instead requested and received lucrative trading information."), noting "[a]s Salman’s counsel acknowledged at oral argument, Maher would have breached his duty had he personally traded on the information here himself then given the proceeds as a gift to his brother.";
  • constitutionally, the Court finding no vagueness ("Dirks created a simple and clear 'guiding principle' for determining tippee liability") and also rejecting on a similar basis application of the rule of lenity; and
  • procedurally, because of the Court's ruling on the merits, the Court finding the jury instructions entirely proper.

The opinion offers some clarity on the application of U.S. insider trading doctrine by unanimously affirming the "gift" language from Dirks in a solid way: "To the extent the Second Circuit held that the tipper must also receive something of a 'pecuniary or similarly valuable nature' in exchange for a gift to family or friends, . . . we agree with the Ninth Circuit that this requirement is inconsistent with Dirks."  Having said that, the Court also hints in several places that the facts in these cases do matter.  The following quote is particularly relevant in this respect:

Salman’s conduct is in the heartland of Dirks’s rule concerning gifts. It remains the case that “[d]etermining whether an insider personally benefits from a particular disclosure, a question of fact, will not always be easy for courts.” . . .  But there is no need for us to address those difficult cases today, because this case involves "precisely the ‘gift of confidential information to a trading relative’ that Dirks envisioned.”

In that context, the Court reminds us that "the disclosure of confidential information without personal benefit is not enough."  This, indeed, places continuing pressure on the nature of the relationship between the tipper and the tippee and other facts relevant to the transmission of the information, all of which must be ascertained and then proven at trial.  And so, it goes on . . . .

December 6, 2016 in Joan Heminway, Securities Regulation, White Collar Crime | Permalink | Comments (0)

Sunday, December 4, 2016

ICYMI: Tweets From the Week (Dec. 4, 2016)

December 4, 2016 in Stefan J. Padfield | Permalink | Comments (0)

Saturday, December 3, 2016

An object lesson in the perils of private enforcement

There are always policy questions about the degree to which public regulation should be enforced by government actors, by private actors, or by a combination of both.  In securities law, for example, striking the right balance is a perennial debate.

Which is why I read with interest this New York Times story about efforts to combat counterfeiting in China. 

China has a serious problem with counterfeit goods.  To some extent, that kind of problem can be addressed via government enforcement actions; however, China also suffers from what one might describe as an extreme case of regulatory capture – namely, corruption at the local level that compromises enforcement efforts.

So China has turned to private enforcement, by bolstering its consumer protection laws: consumers who purchase counterfeit goods can get damages equal to several times the value of the product.  And predictably, these laws have spawned a new profession: counterfeit hunting.

That by itself would not be so bad – why not let consumers, acting like private attorneys general, ferret out counterfeit goods?  The problem is, since damages are based on the number of products purchased, hunters purchase counterfeits in large numbers, filling warehouses with them.  They also target minor labeling errors as much as serious fraud. 

In other words, they exhibit all of the problems inherent in private enforcement: failure to exercise discretion over where to direct resources, arbitraging claims/creating injuries (and failing to mitigate damage) in order to support a lawsuit.  These are precisely the accusations that have been leveled at, for example, stockholder plaintiffs and appraisal arbitrageurs. 

China is apparently considering a new law that would ban counterfeit hunting as a commercial activity – akin to PSLRA provisions that prohibit so-called professional plaintiffs.  But given the unreliability of government enforcement in China, it strikes me that to do so would throw the baby out with the bathwater.  Yet absent such measures, China’s left with an extreme version of a common problem: private plaintiffs don’t draw distinctions between serious problems and minor ones if the monetary payout is the same.  That distinction is one that has to be drawn in the substantive law.  

We do that in securities by, for example, imposing standing, reliance, and loss causation requirements on private plaintiffs that government does not have to satisfy, and allowing government to bring claims based on an expanded set of violations (e.g., aiding and abetting).  And we've done that, in a roundabout way, with state law fiduciary claims: there is no government enforcement in that arena, which has led to increasing limitations on private liability (exculpatory provisions, demand requirements) with no corresponding expansion of state enforcement.  But that regulatory gap has been rapidly filled at the federal level with fiduciary-like requirements (independent director requirements, books and records requirements, and so forth) that can only be enforced by regulators.

It's an imperfect system, of course; it'll be interesting to see how China grapples with the same problem.

December 3, 2016 in Ann Lipton | Permalink | Comments (0)

Friday, December 2, 2016

Faith and Work in Universities

Earlier, I focused on the faith and work movement in churches, and I plan to add to that post over coming weeks. In this post, I will start aggregating information on faith and work in universities. I plan to list university initiatives, scholarly articles and books, and professor presentations.

University Initiatives

Articles and Books


December 2, 2016 in Business School, Haskell Murray, Law School, Religion, Research/Scholarhip | Permalink | Comments (2)

See you next week

I'm in the midst of grading 110 exams while traveling on an ill-timed but worthwhile weekend trip to an orphanage in Haiti. I'm sure you can feel my pain. I'll see you next week with some possible reflections on corporate interests in developing countries. 

December 2, 2016 | Permalink | Comments (0)

Thursday, December 1, 2016

Taxing Operation Gold

Many thanks to Haskell Murray and the Business Law Prof Blog editorial crew for inviting me to serve as a guest blogger during the final countdown to 2017.  For the next few weeks, I’d like to share some of my research in the areas of amateur sports and tax.

Like many, I am an avid enthusiast of the Olympics.  During the 2012 Summer Games in London which highlighted extraordinary athletic prowess from the likes of Michael Phelps, Usain Bolt, and the all-impressive gold medal beach volleyball duo Ross and Kessy, Marco Rubio introduced Bill S.3471 (The Olympic Tax Elimination Act (OTEA)) which proposed to exclude from U.S. Olympic athletes’ gross income the value of any prizes or awards won during the Games.  

This bill piqued my interest in exploring the tax issues facing U.S. Olympic medal-winning athletes.  In 2013, my Central Michigan sports law colleague Adam Epstein and I published Taxing Missy: Operation Gold and the 2012 Proposed Olympic Tax Elimination Act, which explores general tax issues within sports, investigates the U.S. Olympic Committee’s (USOC) Operation Gold program (awarding $25K for gold, $15K for silver, and $10K for bronze medals won at the Olympics by U.S. athletes), analyzes the purpose of the OTEA, and proposes ways to reduce or eliminate federal income tax on athletes’ Operation Gold earnings.

Fast forward to 2016 – this past October President Obama signed into law the Appreciation for Olympians and Paralympians Act of 2016 that exempts from Olympic and Paralympic athletes’ income the value of medals awarded and prize money received from the USOC.  While this exclusion won’t benefit the likes of Phelps, whose adjusted gross incomes exceeds $1 million, or Joseph Schooling who trains in the U.S. but represented Singapore in 2016 when he won gold in the 100 Fly (resulting in a $1M Singapore dollar cash prize), it’s a definitely a big WIN for most of the U.S.’ top athletes.

December 1, 2016 | Permalink | Comments (0)

Wednesday, November 30, 2016

Call for Papers--Wharton Conference on Business Law & Ethics

Wharton’s Legal Studies & Business Ethics Department invites submissions for its inaugural Conference on Business Law and Ethics, to take place March 31-April 1, 2017.

This is the first meeting of what will be a recurring conference: we aim to gather together each year the most cutting-edge work on law, ethics and business. Papers are invited from scholars both senior and junior, and from diverse disciplines, on the theme of “The Ethical Lives of Corporations.” Submit an abstract of an unpublished paper to Phil Nichols ( ) and Gwendolyn Gordon ( The deadline for abstract submissions is January 6th, 2017.

November 30, 2016 in Anne Tucker, Call for Papers | Permalink | Comments (0)

Tuesday, November 29, 2016

Note to Trump and the New Congress: Play Conservative and Leave It Alone

When it comes to regulations and economic policy, I am quite conservative.  Not a Republican-type conservative (probably more Libertarian in a political sense), but in the sense that I often advocate for less regulation, and even more often, for less changes to laws and regulations. People need to be able to count on a system and work within it. As such, whether it is related to securities law, energy and environmental law, or other areas of the law, I find myself advocating for staying the course rather than adding new laws and regulations.  

For example, a while back, co-blogger Joan Heminway quoted one of my comments about securities law, where I noted "my ever-growing sense that maybe we should just take a break from tweaking securities laws and focus on enforcing rules and sniffing out fraud. A constantly changing securities regime is increasingly costly, complex, and potentially counterproductive." 

After the BP oil blowout of the Deepwater Horizon well in the Gulf of Mexico, I similarly argued that we should approach new laws with caution, and that we might be better served with existing law, rather than seeking new laws and regulation in a hasty manner. I explained, 

[T]here are times when new laws and regulations are necessary to handle new ways of perpetrating a fraud or to address new information about what was previously viewed as acceptable conduct. But often, new laws and regulations are not a reaction to new information or technology; they are a reaction to a unique and unfortunate set of facts that is more likely related to timing or circumstances than an emerging trend. Other times, it is a lack of enforcement of existing protections meaning the problem is not the law itself; it is the enforcement of the law that is the problem.

Choosing a Better Path: The Misguided Appeal of Increased Criminal Liability After Deepwater Horizon, 36 Wm. & Mary Envt'l L & Pol. Rev. 1, 19 (2011) (footnotes omitted). More recently, I have taken the same view with regard to hydraulic fracturing regulations:

There may well be a need for new regulations to improve oversight of hydraulic fracturing and other industries that pose environmental risks, but new regulations do not necessary lead to better oversight. . . . There is a strong argument that the problems related to hydraulic fracturing (and, for that matter, coal extraction, chemical storage, and hazardous waste operations) are more linked to a lack of enforcement and not a lack of regulation.

Facts, Fiction, and Perception in Hydraulic Fracturing: Illuminating Act 13 and Robinson Township v. Commonwealth of Pennsylvania, 116 W. Va. L. Rev. 819, 847 (2014). 

I swear I have a point, beyond just quoting myself.  Here it is: I'd like to urge the President-Elect and the 115th Congress to sit back and stay the course for a little bit to see where things are headed. I have a strong suspicion things are headed in the right direction from an economic perspective. This is not to suggest that there are not holes in the economy or people in desperate need of jobs, training, and education (there are -- I live in West Virginia. I know.). But with a White House and a Congress controlled by the same party, the GOP play should be simply: we're in charge now, and the economy is ready to move ahead.  

We have already seen it -- the stock market is up and economic indicators look better.  And there has been no new legislation or regulation (or repeals of either).  It's just consumers believing the economy will get better.  And consumer confidence is key to expansion.  Who cares that it started before the election?  What matters is whether we're going in the right direction.  And it seems we are. The Financial Times reported today

A gauge of US consumer sentiment has hit a post-recession high, painting a positive outlook ahead of the key holiday shopping season as recent data point to a strengthening US economy.

The Conference Board’s consumer confidence index climbed to 107.1 in November from 100.8 in October, the highest since July 2007 and above analysts’ forecast of 101.5.

Most of the survey was conducted before the presidential election on November 8. But “it appears from the small sample of post-election responses that consumers’ optimism was not impacted by the outcome,” said Lynn Franco, director of economic indicators at the Conference Board. “With the holiday season upon us, a more confident consumer should be welcome news for retailers.”


And, just to reinforce that is not a post-election position, I have been making this argument on this blog since at least 2010, when I wrote, How to Fix the "Broken" Financial System: Stop Trying to Fix It

So, let's stay the course for a bit and see how people respond to a little stability. Let's see what a surge in consumer confidence can do for the U.S. and world economies. Let's make sure it's broken (and if so, how), before anyone tries to fix it. And maybe, in the meantime, we can spend a little time treating each other better.

November 29, 2016 in Behavioral Economics, Current Affairs, Jobs, Joshua P. Fershee, Law and Economics, Legislation, Securities Regulation | Permalink | Comments (2)

Monday, November 28, 2016

Last Class? Coggins to the Rescue!

Today, I share a quick teaching tip/suggestion.

I taught my last classes of the semester earlier today.  For my Business Associations class, which met at 8:00 am, I was looking for a way to end the class meeting, tying things from the past few classes up in some way.  I settled on using the facts from a case that I used to cover in a former casebook that is not in my current course text:  Coggins  et al. v. New England Patriots Football Club, Inc., et al.  Here are the facts I presented:

  • New England Patriots Football Club, Inc. (“NEPFC”), the corporation that owns the New England Patriots, has both voting and nonvoting shares of stock outstanding.
  • The former president and owner of all of the voting shares of NEPFC, Sullivan, takes out a personal loan that only can be repaid if he owns all of the NEPFC stock outstanding.
  • The board and Sullivan vote to merge NEPFC with and into a new corporation in which Sullivan would own all the shares.
  • In the merger, holders of the nonvoting shares receive $15 per share for their common stock cashed out in the merger.

From this, I noted that three legal actions are common when shareholders are discontented with a cash-out merger transaction: appraisal actions, derivative actions for breach of fiduciary duty, and securities fraud actions.  Shareholders in NEPFC brought all three types of action.  (Footnote 9 of the Coggins case and the accompanying text explain that.)  

Having just covered business combinations, including approval and appraisal rights, and wanting to address some new information about the process of derivative litigation, the facts from the case worked well.  I am sure there are other cases or materials that also could have done the job.  (Feel free to leave suggestions in the comments.)  But adding a little football and conflicting interests to the last class seemed like the right idea . . . .



November 28, 2016 in Business Associations, Corporations, Joan Heminway, M&A, Teaching | Permalink | Comments (0)

Welcome to BLPB, Kathryn Kisska-Schulze!


For the next few weeks, we will be joined by Clemson University Legal Studies Professor Kathryn Kisska-Schulze. I met Professor Kisska-Schulze at the SEALSB Annual Conference earlier this month and enjoyed her presentation on the appropriate tax home for college athletes (if and when they are paid).

In addition to a JD, Professor Kisska-Schulze has an LLM in Taxation. She has published extensively in the tax law area, intersecting most frequently with sports law and environmental law. I look forward to her posts, and welcome her to the blog.

November 28, 2016 | Permalink | Comments (0)

Sunday, November 27, 2016

ICYMI: Tweets From the Week (Nov. 27, 2016)

November 27, 2016 in Stefan J. Padfield | Permalink | Comments (0)

Saturday, November 26, 2016

As God is my witness, I thought turkeys could fly

Okay, this post has nothing to do with the subject line; given the time of year, I just couldn’t resist.

(Maybe we’ll just characterize that episode of WKRP in Cincinnati as a demonstration of PR tactics gone wrong.  See?  There’s a business law hook).

Anyhoo, today I want to call attention to the phenomenon of the fake whistleblowing hotline. 

As compliance becomes an increasingly large part of corporate operations – and a de facto reconfiguration of corporate governance standards – it seems that companies are fond of creating “whisteblowing hotlines” to demonstrate their commitment to compliance with the law.  Public companies, in fact, are required to do so under Sarbanes-Oxley.

Which is why two recent news items are so disturbing.  First, in connection with the Wells Fargo fake account scandal – on which both Anne Tucker and Marcia Narine Weldon recently posted– it turns out that employees who offered tips on the Wells Fargo whistleblowing hotline were quickly fired; meaning that the hotline itself operated as a kind of reverse-ethics test to weed out employees most likely to object to Wells Fargo’s practices.

And it turns out that Wyndham Vacation Ownership did the same thing.  This company, which sells time shares using legally dubious tactics, also has an “integrity hotline” that it uses, apparently, to identify and fire salespeople who have integrity.

It strikes me that these incidents are particularly pernicious.  They represent traps to catch employees who might be troubled by the company's behavior, while faking compliance with the law - a false compliance that may not easily be detected.  And they imply a certain degree of premeditation: if you set up a hotline and then misuse it, presumably, you know what you're doing.  I realize that federal and state laws provide penalties for retaliation against whistleblowers; I do wonder if there can be especially tough scrutiny of adverse employment decisions in the wake of utilization of company-established compliance procedures - like, perhaps, a presumption that punitive damages should be awarded.  I’m not an expert in this area, though; does anything like this exist?  Could it?

November 26, 2016 in Ann Lipton | Permalink | Comments (2)

Friday, November 25, 2016

Patagonia, Black Friday, and Social Enterprise

It is not secret that Patagonia is one of the companies that I admire most; it may be my favorite company and is certainly in my top-five.

Patagonia's decision regarding its Black Friday sales adds to the reason I like the company. Patagonia will donate 100% of its Black Friday sales to grassroots environmental groups.

As I read it, the donations will be 100% of revenue, not profits, and the donations are estimated to be millions of dollars.

Patagonia is both a California benefit corporation and B corporation certified, but unlike many social enterprises, Patagonia often does things like the above that don't appear to be done just for the PR, and may actually hurt the company in the very short-term.

That said, Patagonia definitely has a good PR team and is probably getting millions of dollars of exposure out of this decision. And their apparel is quite expensive, so they may be able to afford to do things like this, based, in part, on the margins and goodwill built over time.  

November 25, 2016 in Business Associations, CSR, Haskell Murray, Social Enterprise | Permalink | Comments (0)

Thursday, November 24, 2016

Can "Doing Good" Pay Off for Carnival Cruise Line?

Happy Thanksgiving from the Dominican Republic. I'm blogging from the Fathom Adonia, Carnival's fledgling social impact cruise line. I've spent the past few days in Puerto Plata teaching English in schools and local communities. Other passengers worked on reforestation projects, built water filtration systems, installed concrete floors in homes, worked with women on cocoa farms, and learned how to recycle paper with local workers. Passengers can  also do typical excursions such as zip lining and snorkeling, or can lounge around in the $80 million dollar Amber Cove built up like a resort. But most people come on this cruise for the volunteer activities and don't expect frills (our bus got stuck in the mud and we needed pig farmers in a truck to help push us out on the way back from teaching English 75 minutes outside of town). Fathom has restaurants, a spa, dancing, bars, onboard activities such as wine and paint, extremely friendly staff, and enthusiastic, young "impact guides" but no Vegas-style shows and only carries approximately 700 passengers.

Carnival has banked on profiting from people's stated desire to do good in the world. Lots of surveys support this idea in theory. However, as regular readers of this blog know, I have written several posts skeptical of those who claim to care about corporate social responsibility, but choose to buy based on convenience, quality, and price. I have also repeatedly and publicly acknowledged that I am one of those people who selectively boycotts products and vendors. Although the idea of a social impact cruise line excited me, I wondered about whether It would succeed when I first heard of it because most people I know want to relax and not work on a vacation.

Unfortunately, it appears that Carnival's bet may not be paying off. Yesterday, the Miami Herald had an article discussing the future of the social impact product. Apparently, the Fathom, which also goes to Cuba, may stop doing these impact cruises, although Carnival promises that passengers will have "voluntourism" opportunities on its other cruise lines. Carnival also plans to continue its trips to Cuba on a different line starting next summer.

This change in direction, if true, does not surprise me. The Fathom trips to the Dominican Republic have never sold out, even at prices that are one third the price of the Cuba trip- my husband and I paid less than $1000 between the two of us for a seven day cruise, and were upgraded because they had capacity. We learned from one of Fathom's partners on the ground that there have been layoffs in Puerto Plata  because they don't have enough volunteers traveling on the ship. Fathom has even had to cancel some of the sailings altogether. 

Although the trips have not been popular with the masses, everyone that I have met on this trip has raved about their activities (particularly the English teaching) and the interactions with the warm Dominican people. Carnival may have hoped that word of mouth would suffice and that they wouldn't need heavy marketing. It's possible that Carnival believed all of the surveys of millennials who claim they want to change the world. Either way, it appears that there won't be a cruise line dedicated to social impact after next summer. That will be a huge loss for Puerto Plata and for those who want this kind of experience and are willing to pay to work with reputable, caring organizations.

I'm pulling for Fathom to survive in some form and for this idea to spread to other cruise lines. My husband and I both found that teaching English to 5th graders in a crowded classroom in a rain storm was the best Thanksgiving we have ever spent. When the students and volunteers spoke about the expeierence at the end of today's tutoring, there wasn't a dry eye in the house. That may not be profitable for Carnival, but it was priceless for those of us who experienced it. 

November 24, 2016 in Corporations, CSR, Marcia Narine Weldon, Social Enterprise, Travel | Permalink | Comments (0)