Business Law Prof Blog

North Dakota Energy Law Symposium: Nov. 3

The North Dakota Law Review is hosting an Energy Law Symposium this Thursday, November 3, 2011. The symposium will feature a variety of perspectives, including insight from speakers representing the practicing bar, education (legal and otherwise), and government.  The panelists will be discussing the economic, regulatory, environmental, and social issues facing the current energy boom, with a particular (though definitely not exclusive) emphasis on North Dakota and the western United States. Here's the agenda, including the list of distinguished speakers (plus me):

The North Dakota Energy Law Symposium is free and open to the public.  It has been approved for 4 hours of CLE credit in North Dakota and 3.75 hours of CLE credit in Minnesota.  

Schedule of Symposium Events

9:00 a.m. Welcome 
Kathryn Rand, Dean, UND School of Law

9:05 a.m. Introduction to the Energy Law Symposium

9:15 a.m. Hydraulic Fracturing in North Dakota: The Environment and the Economy: Hydraulic Fracturing as the Intersection of Sustainability

 - Professor Joshua Fershee
Moderator: Nate Martindale
Presentation followed by 15 minutes of Q & A

9:55 a.m. Practicing Energy Law in North Dakota 
 - Brian Bjella
 - Joshua Swanson
Moderator: Rob Carolin – Alumni Relations
Presentation followed by 20 minutes of Q & A

11:10 a.m. Break

11:25 a.m. New Energy Development
 - Marcilynn Burke
Moderator: Lindsay Harris
Presentation followed by 15 minutes of Q & A

12:15 p.m. Break

1:15 p.m. Energy Extraction on Federal and Native American Land 
 - Professor LeRoy Paddock
 - Professor Raymond Cross
Moderator: Joshua Fershee – Associate Dean
Presentation followed by 20 minutes of Q & A

2:35 p.m. Environmental Protections on Energy Extraction 
 - Heather Ash
 - Professor John Nagle
Moderator Dr. Steve Benson – Director of Petroleum Eng. Dept., UND
Presentation followed by 20 minutes of Q & A

--JPF

Nudge Pt. 2

At the beginning of the month I included my reading list and asked for recommendations from your own (still waiting on those dear sweet readers...). Included in my list was Cass Sunstein and Richard Thaler's Nudge.  I am prone to fits of enthusiasm, but don't let that take anything away from the following statement: I LOVE THIS BOOK!  It is informative, interesting, easy to read, and the best part is that you start seeing examples of the "nudge" provided by smart choice architecture in the world beyond the book.

One particularly interesting "story" from the book relates to energy usage.  A study of 300 households in California tracked whether the energy consumption was above-average, below-average, or neutral. Once informed of their status, something interesting happened:  "In the following weeks, the above-average energy users insignificantly decreased their energy use; the below-average energy users significantly INCREASED their energy use."    The book goes on to call the energy consumption increase among the conservative users the "boomerang effect".  The book cautions "[i]f you want to nudge people into socially desirable behavior, do not, by any means, let them know that their current actions are better than the social norm."  

The same households were then given the same report regarding usage-- above-average, below-average, or neutral but this time with a supporting social cue in the form of a happy face for below-average users and a frown for above-average users.  

Unsurprisingly, the above-average users showed an even larger decrease in consumption when given the information plus the social cue.  "The most important finding was that when below-average energy users received the happy emotion, the boomerang effect completely disappeared!"  When the consumption information was combined with the emotional "nudge" they didn't adjust their usage upward.  

This is one of many well-researched, relevant, and interesting examples provided in the book.  Whether you've read the book or not, the Nudge Blog is an excellent resource for current articles on and examples of choice architecture.  

--Anne Tucker (ps. Happy Halloween!)

Welcome Guest Blogger Elizabeth Pollman

We here at the BLPB are very pleased to welcome Elizabeth Pollman on board for a month of guest blogging.  Elizabeth Pollman is a fellow at the Rock Center for Corporate Governance at Stanford University.  Before joining Stanford Law School as a fellow, Elizabeth was an associate at Latham & Watkins where she worked on a variety of corporate transactional and litigation matters. She also clerked for the Honorable Raymond C. Fisher of the Ninth Circuit Court of Appeals.  Elizabeth’s recent scholarship includes Reconceiving Corporate Personhood, Utah L. Rev. (forthcoming 2011), and Citizens Not United: The Lack of Stockholder Voluntariness in Corporate Political Speech, 119 Yale L.J. Online 53 (2009).  We're all very much looking forward to her posts, and thank her for taking the time the guest-blog with us.

SJP

Live Blogging From the Central States Law Schools Association Annual Meeting

I'm blogging live from the Central States Law Schools Association Annual Meeting being held at the University of Toledo School of Law (we're currently on break for lunch).  You can find the schedule of panelists here.  So far I've attended the "Economics, Markets, & Wealth" panel, and the "Tax Law" panel.  Of the papers presented as part of the EMW panel, I was able to find Dustin Buehler's "Economic Evolution, Jurisdictional Revolution" on SSRN.  Here's the abstract:

In June 2011, the Supreme Court issued its first personal jurisdiction decision in two decades. In J. McIntyre Machinery, Ltd. v. Nicastro, the Court considered whether the placement of a product in the "stream of commerce" subjects a nonresident manufacturer to personal jurisdiction in states where the product is distributed. The Court issued a fractured opinion with no majority rule, with some justices expressing reluctance to "refashion basic jurisdictional rules" without additional information on "modern-day consequences." This Article explores the consequences of these rules by providing the first law-and-economics analysis of personal jurisdiction. A descriptive analysis initially demonstrates that jurisdictional rules significantly misalign litigation incentives. Unclear and restrictive personal jurisdiction rules increase the likelihood of procedural disputes, inflate litigation costs, and decrease the expected benefit of suit, making it less likely that plaintiffs will file lawsuits. This in turn skewers substantive law incentives - because jurisdictional rules make litigation less likely, many injurers escape liability and are inadequately deterred from engaging in wrongful conduct. Drawing on this descriptive analysis, the Article proceeds to a normative analysis of the stream of commerce theory. It argues that a broad version of the stream of commerce doctrine best aligns procedural and substantive law incentives, while protecting fundamental due process rights. Ultimately, this Article concludes that it is time for a procedural revolution: the Supreme Court should allow expansive personal jurisdiction over nonresident manufacturers in products liability cases.

SJP

 

Tulane Study Says SEC Estimate of Cost of Conflict Mineral Rules is 100x Too Low

Here's a follow-up on yesterday's post concerning the SEC's proposed conflict mineral rules.

The SEC estimated that the cost to implement the new requirements would be just over $70 million. As I indicated yesterday, the SBA's Office of Advocacy disputes the SEC's cost estimates. Now, a study out of Tulane University claims that the actual cost will be $7.93 billion, more than 100 times the SEC's estimate. The study is available here. I haven't reviewed the Tulane study carefully but, as I said yesterday, none of this bodes well for the SEC if it adopts the rule and it is challenged in the D.C. Circuit.

-Steve Bradford

Wall Street Speaks

A friend sent me the "We are Wall Street" email that's apparently been going viral.  Here's a taste:

Go ahead and continue to take us down, but you’re only going to hurt yourselves. What’s going to happen when we can’t find jobs on the Street anymore? Guess what: We’re going to take yours. We get up at 5am & work till 10pm or later. We’re used to not getting up to pee when we have a position. We don’t take an hour or more for a lunch break. We don’t demand a union. We don’t retire at 50 with a pension. We eat what we kill, and when the only thing left to eat is on your dinner plates, we’ll eat that.

You can read the full letter here.  My friend thought I'd hate it, but I think it's terrific.  The issue of whether capitalism is indeed the least worst system (or, perhaps more importantly, how to best leverage capitalism so as to lift the most ships and provide some floor of subsistence to distinguish us from barbarians, while at the same time incentivizing the "frontrunners" maximally) is a complicated one.  I am not inclined to dismiss the Occupy protesters because I believe they represent a meaningful discontentment with what many perceive to be a corrupt system rigged to benefit the few at the expense of the many.  At the same time, I'm not going to dismiss the ideas represented in this letter either because I believe there is a great deal of truth represented therein as well.

SJP

SBA Office of Advocacy Criticizes SEC Conflict Minerals Rulemaking

Here's something that doesn't happen every day: one federal government agency arguing that another federal goverment agency isn't complying with the law.

Last December, the SEC proposed rules to implement section 1502 of the Dodd-Frank Act. Section 1502 adds a new subsection 13(p) to the Securities Exchange Act; that section requires the SEC to adopt regulations requiring disclosure about so-called "conflict minerals" originating in the Democratic Republic of the Congo or adjoining countries. The Commission has yet to take action on the proposed rules.

On Tuesday, the Office of Advocacy of the Small Business Administration submitted this letter arguing that the proposed rule fails to comply with the Regulatory Flexibility Act. The Regulatory Flexibility Act requires proposed rules to include an initial regulatory flexibility analysis that includes, among other things: (1) a description and the estimated number of regulated small entities, and (2) a description and an estimate of the compliance requirements, broken down by different categories of small entities, if there will be any differential effects. The Office of Advocacy contends that the SEC has significantly underestimated both the cost of the proposed rule and the number of small businesses that will be affected. The SEC's proposal indicated that compliance costs "are likely insignificant," but the Office of Advocacy's letter quotes small business sources claiming that median compliance costs could be $65,000 or $170,000.

Administrative agencies often underestimate the cost of their proposed rules, but the SEC is still stinging from its recent loss in the Business Roundtable case. In that case, the D.C. Circuit held that the SEC’s adoption of its proxy access rule violated the Administrative Procedure Act because the SEC “inconsistently and opportunistically framed the costs and benefits of the rule; failed adequately to quantify the certain costs or to explain why those costs could not be quantified; neglected to support its predictive judgments; contradicted itself; and failed to respond to substantial problems raised by commenters." That decision follows on the heels of several other recent losses in the D.C. Circuit, some of which were also based on the SEC's failure to adequately consider the cost of its rules.

If the conflict minerals rule is challenged, it certainly won't help the SEC's case to have another federal agency arguing the plaintiff's case.

-Steve Bradford

WVU Fracking Conference: Drilling Down on Regulatory Challenges

Early tomorrow morning, I head east for an event at the West Virginia College of Law's Center for Energy and Sustainable Development.  The event announcement:

Drilling Down on Regulatory Challenges: Balancing Preservation and Profitability in the Development of Shale Gas Resources promises an unbiased and informative exploration of key topics that face the public, industry and policy makers across the nation regarding the responsible and practical regulation of shale gas production. 

The event has a lot of good speakers, plus me.  I will talking about the hydraulic fracturing experience in North Dakota. My talk is titled, The Environment and the Economy: Hydraulic Fracturing as the Intersection of Sustainability.    

Here are the topics to be covered:

Perspective of State Regulators in the Marcellus Region, including representatives from environmental protection agencies in New York, West Virginia, Pennsylvania and Ohio

Experience from Other Shale Regions, such as Barnett and Haynesville Shale

A Model Regulatory Framework for Hydraulic Fracturing, which is being developed by representatives from industry and environmental organizations.

Perspectives of Industry and Other Stakeholders, including representatives from industry, environmental organizations, community and public interest groups.

Local Regulation of Hydraulic Fracturing. Do local governments have a role in regulating hydraulic fracturing?.

The Economic Benefits of Hydraulic Fracturing, which will examine the economic benefits to a region and local communities associated with the development of shale gas resources

Points of view from across the spectrum will be shared by industry experts, regulators, policy makers, representatives of environmental groups, and concerned citizens in a thoughtful and inclusive discussion.

A reception, featuring U.S. Senator Joe Manchin, will be held Thursday evening, October 27, 2011 as part of the scheduled activities.

I'm looking forward to comparing notes with others close to the most recent energy boom. It should be fun.

--JPF

Bloomberg just blew my mind

I am blogging from Bloomberg Law training with my faculty.  Our law school has recently upgraded from the in-library terminal to individual Bloomberg Law accounts/access. As someone who teaches and writes in the business law area, the potential to integrate current events, legal issues, and financial information through a single database is pretty darn exciting.   To my eye it is like a traditional legal database, but one that is tailored to business law issues with embedded links to company financials, related dockets, sample transactional documents, and related news stories.  I will absolutely be using this as a resource in class.  As I think through how, I will share.  For now, though please let me know if you have used Bloomberg Law in class or have thoughts on how to do it.  The possibilities seem limited only by creativity.

Without any tailoring, see how basic business law information is organized as a default on the website!

News Search Image #1

Letter of Intent Delaware Chancery Search Image #2

 

Transactional Document/Resource Guide Image #3

Company Market Search Image #4

Anyone else excited about these possibilities?

-Anne Tucker

Hovenkamp on Mergers

Herbert J. Hovenkamp has posted Markets in Merger Analysis on SSRN with the following abstract:

Antitrust merger policy suffers from a disconnect between its articulated concerns and the methodologies it employs. The Supreme Court has largely abandoned the field of horizontal merger analysis, leaving us with ancient decisions that have never been overruled but whose fundamental approach has been ignored or discredited. As a result the case law reflects the structuralism of a bygone era, focusing on industrial concentration and market shares, largely to the exclusion of other measures of competitive harm, including price increases. Only within the last generation has econometrics developed useful techniques for estimating the price impact of specific mergers in differentiated markets – so called “unilateral effects” analysis.

In Brown Shoe the Supreme Court equated the newly amended merger law’s phrases “line of commerce” and “section of the country” with relevant product and geographic markets. When it drafted those phrases, however, Congress almost certainly did not have technical definitions of relevant markets in mind. “Line of commerce” was commonly used to describe a particular “line” of business, such as clothing or groceries. A “line” could include complements as well as substitutes. The phrase “section of the country” was intended to create jurisdictional limits. Mainly, Congress wanted to make sure that the Clayton Act’s reach would be limited to mergers whose impact was felt in the United States rather than abroad.

While Brown Shoe required definition of a relevant market, its rationale was fundamentally at odds with the rationale for market definition in horizontal merger cases today. The Court was not thinking of a relevant market as a grouping of sales capable of being monopolized or cartelized. The perceived injury in Brown Shoe was not that the merger threatened higher prices from increased concentration in the shoe market – thus benefitting rivals but harming customers. Rather, the concern was that post-merger Brown Shoe would acquire a competitive advantage over its competitors. Indeed, Brown Shoe was a “unilateral effects” case in the sense that its concern was not with market wide collusion, but rather with the likelihood that the post-merger firm would be able to undersell other firms within the same market.

Viewed in historical perspective, Brown Shoe should serve to give antitrust policy makers far greater latitude to develop merger assessment methodologies that are not wed to traditional market definition concepts. Not only do they serve us poorly today, they are not what the Supreme Court had in mind in the first place.

-- Eric C. Chaffee

Murray on Subsidiaries

J. Haskell Murray has posted ‘Latchkey Corporations’: Fiduciary Duties in Wholly Owned, Financially Troubled Subsidiaries on SSRN with the following abstract:

The current state of the law fails to provide clear guidance to directors of wholly owned, financially troubled ("WOFT") subsidiaries regarding to whom their fiduciary duties run. Directors of solvent wholly owned subsidiaries can act in the best interests of their parent corporation with little fear of liability because the parent corporation is the only party that can sue derivatively on behalf of the subsidiary corporation and is also the subsidiary's only shareholder. However, when a subsidiary corporation becomes insolvent, or in some jurisdictions merely becomes financially troubled, most courts grant the creditors of the subsidiary corporation standing to sue derivatively on behalf of the subsidiary for breaches of fiduciary duty. This grant of standing to creditors traps directors of WOFT subsidiaries between the proverbial Scylla and Charybdis. If directors of a subsidiary favor their parent corporation, the directors will risk facing a fiduciary duty lawsuit from the creditors. On the other hand, favoring creditor interests could open directors of a subsidiary to fiduciary duty-based lawsuits from the parent corporation or lead to prompt removal of the directors by the parent corporation.

Outside of the wholly owned subsidiary context, this conflict between corporate stakeholders is of little practical importance, as directorial decisions are largely protected by the business judgment rule and exculpatory charter provisions. In the wholly owned subsidiary context, however, current law will often classify directors of WOFT subsidiaries as "interested directors" when dealing with their parent corporations. This classification strips directors of WOFT subsidiaries of their legal protections and leaves them vulnerable to creditor claims based on breaches of the fiduciary duty of loyalty. Accordingly, the current law encourages directors of WOFT subsidiaries to favor creditors. If directors of WOFT subsidiaries do begin to favor creditors and begin to challenge the instructions of their parent corporations, administrative costs will increase and wealth creation will decrease. Ultimately, owners of parent corporations may choose more flexible entity forms, such as limited liability companies, where the bounds of fiduciary duties can be better controlled.

This Article argues that fiduciary duty law should not punish directors when they choose one of the subsidiary's legitimate constituencies, such as its parent corporation, over another constituency, such as its creditors. As a solution to theoretical and practical problems stemming from potential fiduciary duty lawsuits by creditors against directors of WOFT subsidiaries, this Article proposes extending business judgment rule or statutory protections to cover directors of WOFT subsidiaries who, in good faith, favor their parent corporations.

-- Eric C. Chaffee

Are We Maximizing the Benefit of Our Securities Regulation Dollars?

The SEC, like every other government regulator, has limited funds. Its challenge is to use its limited budget to achieve the biggest bang for the buck. Or, to move the analysis one step back in time, Congress faces the same challenge in enacting the laws in the first place. The goal in either case should be to allocate those limited regulatory dollars to maximize the net benefit of the regulation.

Lately, I have been thinking about the regulatory tradeoffs our federal system of securities regulation makes. In particular, I have been wondering if we might be better off worrying less about the registration of securities offerings, the purview of the Securities Act of 1933, and more about fraud and industry regulation, the purview of the Securities Exchange Act of 1934.

The question is how to allocate regulation at the margin, but here’s a more extreme thought experiment: what would happen if we junked the Securities Act entirely and devoted all those dollars to antifraud enforcement?

This reallocation wouldn’t eliminate mandatory disclosure requirements. Public companies would still have to file the periodic disclosure required by the Exchange Act. And, as a practical matter, even non-public companies would have to release some information to investors on a voluntary basis or no one would buy their securities.

By itself, the elimination of Securities Act registration requirements would probably result in additional fraud, particularly by first-time issuers. But the enhanced enforcement activities made possible by the resulting reallocation of regulatory dollars would presumably reduce the amount of fraud. The net result is indeterminate.

This reallocation would also redistribute the regulatory costs incurred by businesses. The cost to all companies, honest and dishonest, of offering securities would decrease because of the elimination of the registration requirement. But increased antifraud enforcement would impose increased costs on those engaged in fraud. The net effect on the cost side would be a reallocation of costs from honest companies to dishonest companies.

Notice that this is not an argument about whether Securities Act registration is beneficial. In a world of limited regulatory dollars, one could believe that the Securities Act registration requirement is beneficial and still argue for its elimination if other ways of using the money are even more beneficial.

-Steve Bradford

Decision Fatigue: An Attorney's (And Law Prof's) Occupational Hazard

This New York Times report asks, Do You Suffer From Decision Fatigue?: 

The mental work of ruling on case after case, whatever the individual merits, wore [judges] down. This sort of decision fatigue can make quarterbacks prone to dubious choices late in the game and C.F.O.’s prone to disastrous dalliances late in the evening. It routinely warps the judgment of everyone, executive and nonexecutive, rich and poor — in fact, it can take a special toll on the poor. Yet few people are even aware of it, and researchers are only beginning to understand why it happens and how to counteract it.

Decision fatigue helps explain why ordinarily sensible people get angry at colleagues and families, splurge on clothes, buy junk food at the supermarket and can’t resist the dealer’s offer to rustproof their new car. No matter how rational and high-minded you try to be, you can’t make decision after decision without paying a biological price. It’s different from ordinary physical fatigue — you’re not consciously aware of being tired — but you’re low on mental energy. The more choices you make throughout the day, the harder each one becomes for your brain, and eventually it looks for shortcuts, usually in either of two very different ways. One shortcut is to become reckless: to act impulsively instead of expending the energy to first think through the consequences. (Sure, tweet that photo! What could go wrong?) The other shortcut is the ultimate energy saver: do nothing. Instead of agonizing over decisions, avoid any choice. Ducking a decision often creates bigger problems in the long run, but for the moment, it eases the mental strain. You start to resist any change, any potentially risky move — like releasing a prisoner who might commit a crime. So the fatigued judge on a parole board takes the easy way out, and the prisoner keeps doing time.

This is something to keep in mind in every facet of being an attorney, and being a law professor, too. I didn't necessarily know what to call it, but I know that over time there is a diminishing return to my continued work. It's why I grade exam questions in a different order, and it's why I try not to grade late into the night. I try to make sure that some portion of each student's work is viewed in a favorable time slot, to help ensure as equitable a review as possible.  

Of course, it's impossible to avoid decision fatigue if you're trying to work at a high rate and a strong output. That's just the way it is. But we can try to structure our days to be more productive. The close of the article explains it well:

“Even the wisest people won’t make good choices when they’re not rested and their glucose is low,” Baumeister points out. That’s why the truly wise don’t restructure the company at 4 p.m. They don’t make major commitments during the cocktail hour. And if a decision must be made late in the day, they know not to do it on an empty stomach. “The best decision makers,” Baumeister says, “are the ones who know when not to trust themselves.”

--JPF

More Readings on Capitalism

Steve recently put up a helpful list of "Readings on Capitalism."  Since I am agnostic when it comes to the assertion that capitalism is the least worst system possible, and because I believe that even if we all agreed on that point we'd still have much to debate about as to the details, I asked Frank Pasquale and Kent Greenfield for a quick list of books identifying some of the shortcomings of capitalism.  Here it is:

• 23 Things They Don't Tell You About Capitalism (Pasquale: "Ha-Joon Chang's LSE and RSA podcasts are on iTunes; highly recommended")

• The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too

• The Illusion of Free Markets: Punishment and the Myth of Natural Order

• The Fifteen Biggest Lies about the Economy: And Everything Else the Right Doesn't Want You to Know about Taxes, Jobs, and Corporate America

• Wealth and Democracy: A Political History of the American Rich

• The Spectre at the Feast: Capitalist Crisis and the Politics of Recession

• New Capitalism

• The Confiscation of American Prosperity: From Right-Wing Extremism and Economic Ideology to the Next Great Depression

• Zombie Economics: How Dead Ideas Still Walk among Us

• Business as Usual: The Roots of the Global Financial Meltdown (Possible Futures)

• Wall Street at War: The Secret Struggle for the Global Economy (Pasquale: "particularly valuable as a testament to the ways in which finance capital has undermined productive enterprise")

SJP

Reporting Back From the Ohio Securities Conference

Yesterday, I had the privilege of participating in a panel discussion at the 2011 Ohio Securities Conference entitled, "Dodd-Frank: One Year Later."  A complete list of the panelists, along with a link to related material follows:

Barbara Black: How to Improve Retail Investor Protection After the Dodd-Frank Wall Street Reform and Consumer Protection Act

Eric Chaffee: The Dodd-Frank Wall Street Reform and Consumer Protection Act: A Failed Vision for Increasing Consumer Protection and Heightening Corporate Responsibility in International Financial Transactions

Stefan Padfield: The Dodd-Frank Corporation: More than a Nexus of Contracts

Geoffrey Rapp (moderator): Legislative Proposals to Address the Negative Consequences of the Dodd-Frank Whistleblower Provisions: Written Testimony Submitted to the U.S. House Committee on Financial Services

SJP

The Need for Accounting Knowledge in Law Practice

Those of us who teach or practice business law understand the value of having at least some knowledge of accounting principles. But some of my students are skeptical about the need to understand accounting, particularly if they don’t intend to practice in the areas where accounting is obviously important—tax, corporate, and securities law.

I’m putting together a list of other practice areas where at least some basic knowledge of accounting would be beneficial. Here are some examples:

• Law practice: Running a law firm or supervising the administrators who do
• Law practice: Responding to audit inquiry letters
• Family law: Child support and alimony determinations
• Criminal law: Prosecuting or defending white collar crime
• Employment law: Dealing with the compensation of employees, particularly executives
• Labor law: Negotiating union contracts (Any NFL or NBA fan knows what I'm talking about.)
• Administrative law: Rate approvals for regulated industries.

I would appreciate any suggestions you might have for additions to the list. Again, I’m looking for examples in areas other than tax, securities, and corporate law.

-Steve Bradford

Coal is Here to Stay. Really.

In case there was any doubt, coal is not going anywhere as an energy source for the foreseeable future. Today it was reported that Peabody Energy, the American coal company, is inching closer to acquiring Australia's Macarthur Coal with a $4.9 billion takeover offer (the Peabody offer is backed by Macarthur's largest shareholder).

For all the discussion of banning coal-fired plants and endless restrictions to new coal plants, those who own the resources continue to have a market. And as restrictions rise in the United States, the market internationally for coal simply expands. I admit, I prefer other fuel sources in most instances, but the reality is that coal provides relatively cheap and abundant power.  "Clean coal," at least to date, is aspirational, not reality.  But cleaner coal is a reality, and we can be doing more with it.  

According to the Energy Information Administration, "coal-fired plants contributed 43.3 percent of the power generated in the United States. Natural gas-fired plants contributed 23.4 percent, and nuclear plants contributed 18.8 percent."  Nearly half of our power comes from coal, and in many areas, a cost-effective and efficient fuel switch is not readily available.  We have already learned that over reliance on natural gas can be a disaster, as that fuel's price volatility is legendary.  

At some point, we need to start getting rid of the oldest coal plants offline.  There shouldn't be much argument about that. (Of course, sometimes there is.) Part of that plan should be to replace the worst old plants with far better new ones. New coal-fired plants aren't clean, but they are without question cleaner.  

If we're going to burn coal, we should be burning it as cleanly and efficiently as is possible. And as of today, I've got $4.9 billion more reasons why I'm sure we're going to burn it.  

--JPF

New Study Showing Public Disapproval of Corporate Political Spending

The University of New Hampshire Survey Center, an independent, non-partisan academic survey research organization, published a study earlier this month reporting on public opinion regarding elections, with several focused questions regarding corporate political spending, related disclosures, and corporate influence in government.  

The key findings related to corporations are listed below:

• Almost Two-thirds (61%) of likely New Hampshire Republican Primary voters strongly disagree with the Supreme Court decision that political spending by corporations and unions is a form of free speech protected under the First Amendment.

• Just under three-quarters of likely GOP New Hampshire Primary voters (73%) strongly support a law that would require corporations, unions, and non-profits to disclose their sources of spending when they participate in elections. 11 percent somewhat support such a law, 3 percent somewhat oppose it, 4 percent strongly oppose it, and 9 percent don’t know. 

• Seventy percent of likely New Hampshire Republican Primary voters would be more likely to support a candidate for President or Congress if the candidate supported a law that would require corporations, unions, and non-profits to disclose their sources of spending when they participate in elections. 6 percent would be less likely to support a candidate, 6 percent say it would have no effect on their support, and 18 percent don’t know. 

-Anne Tucker

The Dominance of Business Law Scholarship (affirming what we've long suspected)

Out of curiousity, I ran a search earlier today for the top legal scholars on SSRN and came up with the following results:

Four of the top ten legal scholars write in business and business-related areas.  Below are links to the most recent AND the most popular articles from each.

Lucien Bubchek (Rank #1)

• Most Recent:  Concentrated Corporate Ownership: Stock Pyramids, Cross-Ownership, and Dual Class Equity: The Mechanisms and Agency Costs of Separating COntrol from Cash-Flow Rights (co-authored book chapter; abstract unavailable)

• Most Downloaded: What Matters Most in Corporate Governance (co-authored article)

        Abstract (of the 2009 version): "We investigate the relative importance of the twenty-four       provisions followed by the Investor Responsibility Research Center (IRRC) and included in the Gompers, Ishii, and Metrick governance index (Gompers, Ishii, and Metrick 2003). We put forward an entrenchment index based on six provisions: staggered boards, limits to shareholder bylaw amendments, poison pills, golden parachutes, and supermajority requirements for mergers and       charter amendments. We find that increases in the index level are monotonically associated with       economically significant reductions in firm valuation as well as large negative abnormal returns       during the 1990-2003 period. The other eighteen IRRC provisions not in our entrenchment index       were uncorrelated with either reduced firm valuation or negative abnormal returns."

Bernard Black (Rank #5)

• Most Recent: Public Reporting of HAI Rates:  What We (Mostly Don't) Know  (posted 9/10/11)

        Abstract: "Health-care associated infections (HAIs) kill about 100,000 people annually; many are preventable. In response, 18 states currently require hospitals to publicly report their infection rates and national reporting is planned. Yet there is limited evidence on the effects of public reporting on HAI rates, and none on what elements of a reporting plan affect its impact on HAI rates. I review here what little we know, emphasizing my own case study of Pennsylvania."

• Most Downloaded: Does Corporate Governance Predict Firms' Market Value? Evidence from Korea (co-authored article)

        Abstract: "We report strong OLS and instrumental variable evidence that an overall corporate governance index is an important and likely causal factor in explaining the market value of Korean public companies. We construct a corporate governance index (KCGI, 0~100) for 515 Korean companies based on a 2001 Korea Stock Exchange survey. In OLS, a worst-to-best change in KCGI  predicts a 0.47 increase in Tobin's q (about a 160% increase in share price). This effect is statistically strong (t = 6.12) and robust to choice of market value variable (Tobin's q, market/book, and market/sales), specification of the governance index, and inclusion of extensive control variables. We rely on unique features of Korean legal rules to construct an instrument for KCGI. Good instruments are not available in other comparable studies. Two-stage and three-stage least squares coefficients are larger than OLS coefficients and are highly significant. Thus, this article offers evidence consistent with a causal relationship between an overall governance index and higher share prices in emerging markets. We also find that Korean firms with 50% outside directors have 0.13 higher Tobin's q (roughly 40% higher share price), after controlling for the rest of KCGI. This effect, too, is likely causal. Thus, we report the first evidence consistent with greater board independence causally predicting higher share prices in emerging markets." 

Stephen Bainbridge (Rank #7)

• Most Recent: The Corporate Governance Provisions of Dodd-Frank (posted 10/28/10)

        Abstract: "This essay provides a brief overview of the seven principal corporate governance       provisions of The Wall Street Reform and Consumer Protection Act of 2010 (better known as “The       Dodd-Frank Act”)"

• Most Downloaded: Insider Trading: An Overview

        Abstract: "Insider trading is one of the most controversial aspects of securities regulation, even     among the law and economics community. One set of scholars favors deregulation of insider     trading, allowing corporations to set their own insider trading policies by contract. Another set of law and economics scholars, in contrast, contends that the property right to inside information should be assigned to the corporation and not subject to contractual reassignment. Deregulatory arguments are typically premised on the claims that insider trading promotes market efficiency or that assigning the property right to inside information to managers is an efficient compensation scheme. Public choice analysis is also a staple of the deregulatory literature, arguing that the insider trading prohibition benefits market professionals and managers rather than investors. The argument in favor of regulating insider trading traditionally was based on fairness issues, which predictably have had little traction in the law and economics community. Instead, the economic argument in favor of mandatory insider trading prohibitions has typically rested on some variant of the economics of property rights in information. A comprehensive bibliography is included."

Christopher Lewis Peterson (Rank #9)

• Most Recent & Most Downloaded: Two Faces: Demystifying the Mortgage Electronic Registration System's Land Title Theory (posted 9/19/10)

        Abstract: "Hundreds of thousands of home foreclosure lawsuits have focused judicial scrutiny on the Mortgage Electronic Registration System (“MERS”). This Article updates and expands upon an earlier piece by exploring the implications of state Supreme Court decisions holding that MERS is not a mortgagee in security agreements that list it as such. In particular this Article looks at: (1) the consequences on land title records of recording mortgages in the name of a purported mortgagee that is not actually mortgagee as a matter of law; (2) whether a security agreement that fails to name an actual mortgagee can successfully convey a property interest; and (3) whether county governments may be entitled to reimbursement of recording fees avoided through the use of false statements associated with the MERS system. This Article concludes with a discussion of steps needed to rebuild trustworthy real property ownership records."

 

 

The Legality of the Declaration of Independence--and How to Determine Legality

This is a little off the business law track, so please indulge me. American and British lawyers recently debated the legality of the U.S. Declaration of Independence. The BBC News story, which excerpts some of the arguments is here and a story in the Wall Street Journal’s Law Blog is here.

The Wall Street Journal concludes “A vote at the end of the debate, held at Benjamin Franklin Hall, reaffirmed the legality of the insurrection.” Two things strike me as wrong about that comment.

First, the debate was held in Philadelphia. It’s hardly surprising that an American audience supported the Declaration of Independence. For a slighlty less biased reaction, check out the comments to the BBC story. I like the comment which states that the Declaration was completely illegal and its signers were traitors, then concludes “and it was the most wonderful event which ever happened in the history of the New World Colonies and for the American people.”

But what really bothers me about the Journal’s conclusion is the idea that a popular vote can determine whether something is legal. I’ve noted a disturbing trend, particularly in discussions of constitutional law, to equate majority opinion with legality. One reason we have the rule of law is to protect the minority from majority rule. An action that violates the law does not become legal just because the public approves. And an action within the law does not become illegal just because the public disapproves.

The Declaration of Independence was a wonderful action and it may have been legal, but no popular vote can ever make it so. And I suspect the Founders would agree with me.

-Steve Bradford