Wednesday, January 28, 2015

New Article Highlight: The (Un)Enforcement of Corporate Officers' Duties

New reading recommendation:  The (Un)Enforcement of Corporate Officers' Duties, by Megan Shaner at Univ. of Oklahoma COL, published in UC Davis Law Review, November 2015.

Abstract:  

Over the past few decades, officers have arguably become some of the most important individuals in the corporation. From the implosions of Enron and WorldCom, to the success of companies like Apple and Microsoft, to the Wall Street crisis that sunk the world into near global recession, corporate officers have played a role in each of these storylines and countless (albeit lesser known) others. In spite of the well-publicized scandals, officers continue to be given wide latitude to carry out their role of managing the day-to-day operations of their companies. The primary constraint on this power under state corporate law is the imposition of fiduciary obligations. Fiduciary duties thus play a vital role in checking the considerable power and authority of officers. Fiduciary duties will only affect officer behavior, however, if there is an effective enforcement scheme that holds officers accountable. This Article discusses how the development of corporate doctrine, coupled with the dynamic in today’s corporate management has created impediments and disincentives for the enforcement of officer fiduciary duties. In light of the problematic state of the current enforcement scheme, this Article evaluates possible changes that would alleviate deterrents in the enforcement process. This Article concludes that in order to regulate officer behavior with fiduciary duties, there must be a collective correction to the enforcement mechanisms in place for internal enforcers beginning with reevaluating stockholder derivative litigation burdens.

This is a great article for the arguments advanced and careful observations made.  It also provides such a thorough and useful discussion of officers that I plan to add it to a seminar reading list.  Professor Shaner's article also earned the top prize at the 2014 George Washington University C-LEAF Junior Faculty Workshop.

-Anne Tucker

 

Megan Shaner at the University of Oklahoma College of Law first workshoped this paper at George Washington's CLEAF Junior Faculty Workshop last spring.  

January 28, 2015 in Business Associations, Anne Tucker | Permalink | Comments (0)

Wednesday, January 21, 2015

Dark Pools

One week after the SEC levied the largest dark pool trading violation fine against USB, a group of nine banks (including Fidelity, JP Morgan, BlackRock, etc.) introduced a new dark pool platform, an independent venture called Luminex Trading & Analytics.  Dark trading pools are linked to the role of high frequency trading and the notion that certain buyers and sellers should not jump the queue and shouldn't be the first to buy or sell in the face of a large order. The financial backers of Luminex were quoted in a Bloomberg article describing it as a platform "where the original purpose of dark pools, letting investors buy and sell shares without showing their hand to others, will go on without interference."

The announcement raises public scrutiny about dark pools, but among financial circles (like those at ZeroHedge, it is being touted as a smart self-regulatory move by the major mutual funds to prevent the money leach to HFT's, which some seeing as the beginning of the end for HFTs. 

If you are looking for more resources on dark pools and HFTs-- there are two brand new SSRN postings on the subject:

-Anne Tucker

January 21, 2015 in Anne Tucker, Financial Markets, Securities Regulation, Technology, Web/Tech | Permalink | Comments (0)

Wednesday, January 7, 2015

BA/Corporations -- New Media Teaching Resources

I had very limited time at AALS this year (unfortunately) but I still walked away with some great ideas (and a chance to say hello to a few, but not enough, friendly faces).  I am borrowing from many ideas shared in the panel cited below, as well as a few of my own.  As many of you prepare to teach BA/Corporations for the spring (or making notes on how to do it next time), here are a few fun new resources to help illustrate common concepts:

  • HBO's The Newsroom.  A hostile takeover, negotiations with a white knight-- all sorts of corporate drama unfolded on HBO's Season 3 of The Newsroom.   I couldn't find clips on youtube, but episode recaps (like this) are available and provide a good reference point/story line/hypo/exam problem for class.
  • This American Life-- Wake Up Now Act 2 (Dec. 26, 2014).  This brief radio segment/podcast tells the story of two investors trying to reduce the pay of a company CEO.  The segment discusses board of director elections, board duties, board functions and set up some large questions about whether or not shareholders are the owners of the corporation and their profit maximization is the ultimate goal for a company.  This could be followed with Lynn Stout's 2012 NYT Dealbook article proposing the opposite view.
  • HBO's Silicon Valley.  For all things tech, start up, entrepreneurship and basic corporate formation, clips (you will want to find something without all of the swears, I suspect) and episode recaps from this popular show illustrate concepts and connect with students.  Again, great for discussion, hypos, and exam fact patterns.
  • The Shark Tank!.  I have to thank Christyne Vachon at UD for this idea.  There are tons of clips on youtube and most offer the opportunity to talk about investors bringing different things to the table, how to apportion control, etc.  Here is an episode involving patent issues. I think that I am going to open my experiential Unincorporated/Drafting class with a Shark Tank clip on Monday.  
  • Start Up Podcasts.  These 30-minute episodes cover a wide range of topics. Here is one podcast on how to value a small business.   At a minimum, I will post some of these to my course website this spring.  (Thank you Andrew Haile at Elon for this recommendation.).
  • Planet Money.  The podcasts are a great resource, but what I love is the Planet Money Twitter page because it is a great way to digest daily news, current events and topical developments that may be incorporated into your class.
  • Wall Street Journal--TWEETS.  (that felt like an oxymoron to write). Aside from the obvious, I find the Twitter feed to be the most useful way to use/monitor the WSJ.  I will admit it, I don't "read" it every day, but this is my proxy.

Special thanks to the participants in the Agency, Partnership & the Law's panel on Bringing Numbers into Basic and Advanced Business Associations Courses: How and Why to Teach Accounting, Finance, and Tax

Moderator: Jeffrey M. Lipshaw, Suffolk University Law School
Speakers:
Lawrence A. Cunningham, The George Washington University Law School
Andrew J. Haile, Elon University School of Law
Usha R. Rodrigues, University of Georgia School of Law
Christyne Vachon, University of North Dakota School of Law
Eric C. Chaffee, University of Toledo College of Law
Franklin A. Gevurtz, University of the Pacific, McGeorge School of Law

And Happy New Year BLPB Readers!

-AT

January 7, 2015 in Business Associations, Anne Tucker, Corporations, Current Affairs, Entrepreneurship, LLCs, M&A, Unincorporated Entities | Permalink | Comments (3)

Wednesday, December 31, 2014

The Cost of Long-term Investing in Mutual Funds

We are all familiar with a distinguishing features of investing in operating companies and investing in mutual funds: sale of stock in operating companies and redemption at NAV (net asset value) in mutual funds.  An interesting article (Mutual Fund Liquidity and Fiduciary Conflicts of Interest)1 was recently brought to my attention which argues that the liquidity costs of the redemption model disadvantages long-term investors-- those investors who stay in the fund.  

Redemption of mutual fund shares requires the fund to maintain liquidity (uninvested assets) in order to supply the NAV to any departing investor.  The required liquidity extracts a small cost on the fund for each exit.  This cost, small when evaluated for a single trade, becomes significant in the aggregate.  Trading and liquidity cost estimates range from $10-17 billion annually, costs that are born exclusively by the investors who stay in the fund. This means that long-term investors, particularly those investors who are relatively locked into their mutual funds such as retirement investors (a group I refer to in my scholarship as Citizen Shareholders) are subsidizing the dominance of the exit strategy for other retail investors.  This has deep implications for the arguments advanced by John Morley and Curtis Quinn in their 2010 article Taking Exit Rights Seriously,2  where they argue that exit is the dominant strategy over voting and litigation in mutual funds.  If exit is the dominant strategy for mutual fund investors, and there is a cost associated with that exit, who should bear the cost?  I have an essay forthcoming this spring that further addresses question of exit rights as they pertain to Citizen Shareholders.

One novel solution advanced by Sacks Equalization Model, Inc., is a patented algorithm that assigns a small liquidity cost to all selling investors and to all new investors to push the transaction cost on those investors engaging in the transaction, not the stable, long-term investors.

-Anne Tucker

[1] Miles Livingston and David Rakowski, Mutual Fund Liquidity and Conflicts of Interest, Journal of Applied Finance, Vol. 23, No. 2, pp 95-103 (2013).

[2] John Morley & Quinn Curtis, Taking Exit Rights Seriously: Why Governance and Fee Litigation Don’t Work in Mutual Funds, 120 Yale L.J. 84 (2010).

 

December 31, 2014 in Anne Tucker, Business School | Permalink | Comments (0)

Tuesday, December 16, 2014

Yale/Stanford/Harvard 16th Junior Faculty Forum--Request for Submissions

Yale, Stanford, and Harvard Law Schools announce the 16th session of the Yale/Stanford/Harvard Junior Faculty Forum to be held at Harvard Law School on June 16-17, 2015 and seek submissions for its meeting.  The request for submissions is available at this link: Download JFF final call for submissions.

-AT

 

 

December 16, 2014 in Anne Tucker, Conferences | Permalink | Comments (0)

Wednesday, November 26, 2014

Writing (and grading) Exam Questions

This is the time of year when we craft exam questions and grading grids in anticipation of exams.

Aside from Teaching Law by Design (a fabulous resource that I recommend for all new teachers as a great continuing resource for even those grizzled from years in the trenches), I have used few formal resources to guide my exam writing and grading process. Fortunately, I work with creative, collaborative and generous colleagues who all shared lots of samples and tips when I first started writing exams.  Before committing myself to my Corporations exam this year, I decided to see what is out there to guide exam construction and grading. Finding little that was useful on SSRN or Westlaw, I turned to a broader search, which brought me to a general test instruction guideline produced by Indiana University, aptly titled: How to Write Better Tests.  It had the following information regarding essay exams that serve as a useful reminder about why we are so meticulous in constructing our grading rubrics and creating grading schemes that, to the greatest extent possible, reduce our individual biases.

Consider the limitations of the limitations of essay questions:

1. Because of the time required to answer each question, essay items sample less of the content.

2. They require a long time to read and score.

3. They are difficult to score objectively and reliably. Research shows that a number of factors can bias the scoring:

A) Different scores may be assigned by different readers or by the same reader at different times

B) A context effect may operate; an essay preceded by a top quality essay receives     lower marks than when preceded by a poor quality essay.

C) The higher the essay is in the stack of papers, the higher the score assigned.

D) Papers that have strong answers to items appearing early in the test and weaker answers later will fare better than papers with the weaker answers appearing first.

To combat these common issues the guidelines recommend:

  • anonymous grading (check)
  • grading all responses to question 1 before moving on to question 2, and so on (check)
  • reorganizing the order of exams between questions (check)
  • deciding in advance how to handle ambiguous issues (check, thanks to my grading rubric)
  • be on the alert for bluffing (CHECK!)

If anyone has found a particularly useful resource regarding exam construction and grading, please share in the comments. I am sure everyone would benefit.

Happy Thanksgiving BLPB readers!

-AT

November 26, 2014 in Business Associations, Anne Tucker, Law School, Teaching | Permalink | Comments (3)

Wednesday, November 19, 2014

Stock Drop Cases, ERISA & Securities Laws

In June 2014, the Supreme Court decided Fifth Third Bancorp v. Dudenhoeffer holding that fiduciaries of a retirement plan with required company stock holdings (an ESOP) are not entitled to any prudence presumption when deciding not to dispose of the plan’s employer stock.  The presumption in question was referred to as the Moench presumption and had been adopted in several circuits.  You may have heard of these cases as the stock drop cases, as in the company stock price crashed and the employee/investors sue the retirement plan fiduciaries for not selling the stock.  The Supreme Court opinion didn’t throw open the courthouse doors for all jilted retirement investors, and limited recovery to complaints (1) alleging that the mispricing was based on something more than publically available information, and also (2) identifying an alternative action that the fiduciary could have taken without violating insider trading laws and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it.

The Supreme Court in Fifth Third recognized the required interplay between ERISA and securities laws stating:

 [W]here a complaint faults fiduciaries for failing to decide, based on negative inside information, to refrain from making additional stock purchases or for failing to publicly disclose that information so that the stock would no longer be overvalued, courts should consider the extent to which imposing an ERISA-based obligation either to refrain from making a planned trade or to disclose inside information to the public could conflict with the complex insider trading and corporate disclosure requirements set forth by the federal securities laws or with the objectives of those laws.

The Ninth Circuit decided Harris v. Amgen in October based upon the Fifth Third decision. In Harris, the plaintiffs’ claim alleged a breach of fiduciary duty based on the failure to stop buying additional stock in the ESOP based on non-public information.  The Ninth Circuit found that plaintiffs alleged sufficient facts to withstand a motion to dismiss that defendant fiduciaries were aware (1) of non-public information, which would have affected the market price of the company stock and (2) the stock price was inflated.  These same facts supported a simultaneously-filed securities class action case.

To understand the interplay between securities laws and ERISA fiduciary rules, as established in Fifth Third, one ERISA consulting firm observed that

The Ninth Circuit appeared to reach the conclusion that, if ‘regular investors’ can bring an action under the securities laws based on the failure to disclose material information, then ‘ERISA investors’ in an ERISA-covered plan may, based on the same facts, bring an action under ERISA:

"If the alleged misrepresentations and omissions, scienter, and resulting decline in share price ... were sufficient to state a claim that defendants violated their duties under [applicable federal securities laws], the alleged misrepresentations and omissions, scienter, and resulting decline in share price in this case are sufficient to state a claim that defendants violated their more stringent duty of care under ERISA." 

The Harris opinion invokes a sort of chicken and egg problem.  If the plan had dumped the stock it would have signaled to the market and pushed the share prices lower.  In addressing this concern, however, the Ninth Circuit stated that:

Based on the allegations in the complaint, it is at least plausible that defendants could have removed the Amgen Stock Fund from the list of investment options available to the plans without causing undue harm to plan participants. 

. . . The efficient market hypothesis ordinarily applied in stock fraud cases suggests that the ultimate decline in price would have been no more than the amount by which the price was artificially inflated. Further, once the Fund was removed as an investment option, plan participants would have been protected from making additional purchases of the Fund while the price of Amgen shares remained artificially inflated. Finally, the defendants' fiduciary obligation to remove the Fund as an investment option was triggered as soon as they knew or should have known that Amgen's share price was artificially inflated. That is, defendants began violating their fiduciary duties under ERISA by continuing to authorize purchases of Amgen shares at more or less the same time some of the defendants began violating the federal securities laws.

The argument, in part, is that if Amgen had stopped the ESOP stock purchases it would have signaled to the market regarding price inflation and perhaps prevented the basis for the securities fraud violations harm alleged in the separate suit.

For those who follow securities litigation, there is a potential for investors purchasing in an ESOP to have a secondary and perhaps superior claim for fiduciary duty violations based upon the same facts giving rise to company stock mispricing arising under securities laws.

This raises the question, as one ERISA consulting firm noted,

Are an issuer/plan fiduciary's disclosure obligations to participants greater than its disclosure obligations to mere shareholders? Isn't that letting the ERISA-disclosure tail wag the securities law-disclosure dog – will it not result in the announcement of market-moving material information to plan participants first, before it is announced to securities buyers-and-sellers generally?

I have long been interested in how what happens in the defined contribution (DC) context intersects with what we think of traditional corporate law and how, as the pool of DC investors grows, there will be an ever increasing influence of the DC investor in the corporate law arena.

-AT

November 19, 2014 in Anne Tucker, Corporations, Financial Markets, Law School, Securities Regulation | Permalink | Comments (2)

Wednesday, October 22, 2014

Corporate Law Professors Comment on Proposed HHS Definition of "Eligible Organization" for Hobby Lobby Accommodation

In response to the Department of Health and Human Services' Proposed Regulation and Request for Comments regarding the definition of "eligible organization" (see earlier post here) at least two groups of law professors have weighed in on the issue.

The first comment letter, available here, was submitted by the U.C. Berkeley corporate law professors and encourages the Department to adopt a definition based upon the veil piercing theory.  "We ... propose that for purposes of defining an “[W]e ... suggest that shareholders of a corporation should have to certify that they and the corporation have a unity in identity and interests, and therefore the corporation should be viewed as the shareholders’ alter ego."  The comments argue that utilizing the veil-piercing theory avoids the consequences of a setting an arbitrary number of shareholders thus creating a rule that would be "seriously under-and-over-inclusive, capturing corporations that meet the numerical test but for which shareholders are not the alter egos of the corporation, as well as failing to capture corporations with a relatively large number of shareholders that are all united in their interests and are alter egos of one another."

The second comment letter on which I worked and was joined by some editors of this blog as signatories, is available here.  This comment letter, signed by 43 corporate law professors, was produced through the coordinating efforts of the The Public Rights / Private Conscience Project at Columbia Law School headed by  Katherine Franke, and the project's executive director,  Kara Loewentheil.   This letter too encourages the HHS to adopt an approach that requires an "identity of interests."  These comments suggest a blueprint for establishing an identity of interest, namely a focus on "entities (1) with a limited number of equity holders/owners, (2) that demonstrate religious commitment, and (3) submit evidence of unanimous consent of equity holders to seek an accommodation on an annual basis."  The comments provide additional criteria under each of these three elements to operationalize the holding in Hobby Lobby.

-Anne Tucker

October 22, 2014 in Anne Tucker, Constitutional Law, Corporate Governance, Current Affairs | Permalink | Comments (0)

Wednesday, October 8, 2014

Alibaba Presents "Current Events" Illustration of Corporate Law Principles

Alibaba dominated the September business press coverage with its record-breaking IPO last month, and news of its stock price, trading at a 30% premium, continues to dominate coverage.  I have been using the headline-hogging IPO in my corporations class to discuss raising capital, which I am sure many of you are doing as well.  Here are a few creative uses for the class-friendly headlines:

  • I used coverage of the IPO and its short-lived halo effect on other tech IPO's as a companion to the E-bay stock spinning case (taught under director fiduciary duties).  

As we move into securities next week,

Please add to the list of uses in the comments section if you have any new ideas or suggestions.

-Anne Tucker

October 8, 2014 in Business Associations, Anne Tucker, Corporate Finance, Corporations, Current Affairs, Securities Regulation | Permalink | Comments (1)

Wednesday, October 1, 2014

Gender in the Classroom

Yesterday, I shared with my faculty during our teaching conversations* my research and thinking on gender equality in the classroom.  How do we handle gender in the classroom?  My guess is that most of us teaching honestly strive to achieve and believe that we create a gender-neutral, or more accurately an equally-facilitative classroom environment.  You can image the horror I felt when I received voluntary, anonymous student feedback last spring that said “you may not mean to or know you are doing this, but you treat men and women differently in class.”  From whose perspective was this coming?  How differently? And who gets the better treatment?  I was baffled. As a female law professor, I was hoping that I got a pass on thinking critically about gender because I am female, right?  Wrong. 

This feedback launched my research into the area and a self-audit of the ways in which I may be explicitly treating students differently, implicitly reinforcing gender norms, and unintentionally creating a classroom environment that is different from my ideal.

Below are some observations and discoveries about my own behavior and a summary of some relevant research. 

Continue reading

October 1, 2014 in Business Associations, Anne Tucker, Law School, Teaching | Permalink | Comments (5)

Tuesday, September 23, 2014

Extension of Hobby Lobby: RFRA used to excuse testimony in child labor case

Citing to Hobby Lobby, a U.S. District Court Judge in Utah ruled that an individual may refuse to comply with a federal subpoena in a child labor investigation because naming church leaders would violate his religious freedoms protected under RFRA.   The court found that complying with the subpoena failed the least restrictive means prong under RFRA.  The full court opinion, Perez v. Paragon Contractors, Corp., 2:13CV00281-DS, 2014 WL 4628572 (D. Utah Sept. 11, 2014),  is available here and a a brief news summary is available here.

 
-Anne Tucker
 
 
 

September 23, 2014 in Anne Tucker | Permalink | Comments (0)

Wednesday, September 17, 2014

New Insider Trading SEC Enforcement Action Against Law Firm IT Employee

Practitioners and academics alike should be interested in yesterday's announcement by that the SEC that it is bringing an insider trading enforcement action against a law firm IT employee for allegedly trading based on the firm's merger work for clients.  The employee allegedly made over $300,000 in a several year scheme of trading based upon client information.  The U.S. Attorney's Office filed related criminal charges against the employee.

Donna Nagy at Indiana University Maurer School of Law, in her article, Insider Trading and the Gradual Demise of Fiduciary Principles, explains the theory of liability which extends the insider trading scope to law firm employees:

Under the alternative “misappropriation” theory endorsed by the Court in United States v. O’Hagan, persons “outside” the issuing corporation can likewise violate Section 10(b) and Rule 10b-5.  Such a violation occurs when a fiduciary personally profits from a securities transaction through undisclosed use of a principal’s material nonpublic information. Thus, as the Court explained, whereas the classical theory “premis[es] liability on a fiduciary relationship between company insider and purchaser or seller of the company’s stock, the misappropriation theory premises liability on a fiduciary-turned-trader’s deception of those who entrusted him with access to confidential information.”

The SEC, in its release cautioned that "Insider trading by employees of law firms and other professional organizations is an important enforcement focus for us."

-Anne Tucker

September 17, 2014 in Anne Tucker, Securities Regulation | Permalink | Comments (0)

Tuesday, September 2, 2014

Corporate Inversion: Tax Spotlight for the Non-Tax Lawyer

Last week, news of the proposed Burger King & Tim Horton's merger fueled the already raging fire on corporate inversions as the Miami-based burger chain announced plans, through the merger, to possibly relocate to Canada.  As I have written about on this blog, here and here and in the Huffington Post, inversions may offer US companies tax savings.

Stephen E. Shay, a professor of practice at Harvard Law School, provides a short article (12 pages) describing the tax issues in corporate inversions and possible regulatory fixes.  This article is very helpful in taking the debate from the headlines into a more complex legal analysis illuminating the tax consequences and offering a better understanding of the legal remedies available.  Worth the read.

-Anne Tucker

September 2, 2014 in Anne Tucker, Corporations, Current Affairs, M&A | Permalink | Comments (0)

Wednesday, August 27, 2014

More on "Closely Held" in the Hobby Lobby Regulatory Context

Thanks for your informative post, Anne.  I started drafting this post as a comment to yours, and then I realized it was its own post.   [sigh]

It seems to me that the U.S. Department of HHS and any commentators must grapple with what has been a difficult, fact-based question in determining how to define “closely held” to effectuate the Supreme Court’s intent in as expressed in the Hobby Lobby opinion.  That question?  What "control" means in this context.

The Court said in the Hobby Lobby opinion:  “The companies in the cases before us are closely held corporations, each owned and controlled by members of a single family, and no one has disputed the sincerity of their religious beliefs.”  More specifically, the Court notes that the Hahns (owners of shares in Conestoga) “control its board of directors and hold all of its voting shares” and notes that Hobby Lobby and Mardel “remain closely held, and David, Barbara, and their children retain exclusive control of both companies.”  [Emphasis has been added by me in each quote.]

The definition of “control” primarily has been a question of fact in business law, making the task of defining it here somewhat difficult.  Some questions and considerations to grapple with are set forth below the fold.  I am sure that others can come up with more.  I am posting these as a way of getting the collective juices flowing.

Continue reading

August 27, 2014 in Business Associations, Anne Tucker, Corporate Governance, Corporations, Current Affairs, Joan Heminway, Securities Regulation | Permalink | Comments (0)

Tuesday, August 26, 2014

HHS Proposes Definition of Closely Held Entity in Rules for Hobby Lobby Exemption:

As I have pointed out in earlier posts on this blog, the June decision in Hobby Lobby failed to define closely-held business for purposes of the religious exemption.  On August 22nd, the U.S. Department of Health and Human Services (HHS) issued proposed rules, open for comments for 60 days, that include a definition of closely-held under one of two approaches borrowed from state law definitions like with S corporations and from IRS regulations.

In common understanding, a closely held corporation – a term often used interchangeably with a “close” or “closed” corporation – is a corporation the stock of which is owned by a small number of persons and for which no active trading market exists. ....Under the first proposed approach, a qualifying closely held for-profit entity would be an entity where none of the ownership interests in the entity is publicly traded and where the entity has fewer than a specified number of shareholders or owners....

Under a second, alternative approach, a qualifying closely held entity would be a forprofit entity in which the ownership interests are not publicly traded, and in which a specified fraction of the ownership interest is concentrated in a limited and specified number of owners.

HHS invites comments on the proposed definitions, the preferred approach, and the threshold cut offs for ownership concentration or numbers of owners.

Importantly, and answering a question raised in several posts in the on line symposium at The Conglomerate, the proposed rules would require a valid corporate action, taken in accordance with state law, to assert that the owners' religious views form the basis of the entity's objection.   HHS also invites comments "on whether to require documentation of the decision-making process and disclosure of the decision."

-Anne Tucker

 

August 26, 2014 in Anne Tucker, Corporate Governance, Corporations, Current Affairs | Permalink | Comments (0)

Call for Papers - UNEP Research Convening on Design Options for a Sustainable Financial System (abstracts due Aug. 31)

Call for papers cosponsored by the United Nations Environment Programme (http://www.unep.org/) - abstract deadline is Aug. 31 with the event in Dec.  The emphasis is on empirical work with clear policy proposals. 

Exerpts:
"The event is a research symposium that the Canadian-based Centre for International Governance Innovation (CIGI) is co-hosting with the UNEP Inquiry into the Design of a Sustainable Financial System in early December. The Convening is intended to address key pertinent theoretical and empirical questions that support the broader applied, policy research agenda concerning the contours of a sustainable financial system.

....The symposium will be for a limited number of people, primarily those who have submitted papers. We will be in a position to provide some support to attend the symposium, which will take place from 1-3 December 2014 in Waterloo, Ontario."

Download CIGI - Inquiry - Research Convening_call_2014 

Anne Tucker

 

August 26, 2014 in Anne Tucker, Call for Papers | Permalink | Comments (0)

Friday, August 22, 2014

Corporate Constitutional Themes Pt.2

I love a good debate and appreciate the opportunity (provided by Professor Bainbridge’s thoughtful post yesterday) to engage a bit more deeply on the thesis of Wednesday’s post suggesting an approach for how to incorporate Citizens United and Hobby Lobby into the survey BA/Corporations course. 

By way of recap and ruthless summary, Stephen Bainbridge wants nothing to do with these issues (or other constitutional law questions) in his course because of the:

  1. Existing emphasis of public law over private law and resulting imbalance in law school curriculum;
  2. False impression that constitutional law is the holy grail of law teaching and practice;
  3. These cases present a hornet’s nest of controversial and divisive topics; and
  4. Coverage constraints.  The menu options of what we can (should) teach is already more ambitious than time allows.

And to no surprise to anyone, anywhere:  Stephen Bainbridge is right on the money with all of these points.

As a survey course and one that almost every student in my law school (Georgia State) takes, I feel a responsibility to provide context for the subject matter that we teach and to do my best to “hook” students who didn’t come to my class with an interest in corporate law. 

First, hear me now when I say that corporate law matters.  It matters to the business owners who form and operate a firm.  It matters to the individuals and other businesses who interact with the firm as a supplier or customer or creditor or employee.  These first two points are significantly incorporated into the traditional BA syllabus.  Corporate law also matters to general members of society because corporations wield tremendous power in elections, in lobbying (regulatory capture anyone?), in shaping retirement savings, in religious and reproductive rights debates and setting other cultural norms around issues like corruption, sustainability, living wage, etc.   Multi-national corporations with ubiquitous brand recognition aren’t the only powerful actors.  The Hobby Lobby ruling tells us that those creatures governed largely by private law—the closely held corporation—also play a major role.  To teach corporate law in a vacuum that ignores this broader context is to teach nuclear physics without discussing the atom bomb and its consequences (if I can use hyperbole).  Should the broader context be the focus of the class? Absolutely not.  Can it be woven into context setting discussions or used as a way to elicit student participation?  In my class at least.

Second, not every student in BA enrolled out of pure self-interest; not everyone has a business background.  I consider my course to be a great equalizer in law school:  we take the health sciences majors, the B-schoolers, the political science and the anthropology kids and at the end of the semester everyone can explain basic financial concepts, the different menu options of firms, proxy fights, and even poison pills. We do this best when we can engage all of the students, which sometimes means helping students see why it might matter to them and how the subject connects with the things that they care about.  For some that will be the clever ways you can use private agreements to shape outcomes and hedge against risk, for others it will be seeing why corporate law matters even if you don’t care about corporations (see paragraph above).

My last point is that being an effective classroom teacher generally requires a sense of self-awareness about your comfort zone, your strengths, and your weaknesses (among other things). I have lots of colleagues, at GSU and other institutions (many of them BLPB editors), whom I admire, but if I tried to teach class the way that they did, I would fall short of the mark.  We teach to our own strengths and infuse classes with a sense of our own personality and passion.  I don’t think I have convinced anyone not previously inclined to incorporate these materials; and I wonder if Stephen has caused any course corrections with his thoughts.  We may have just reinforced the positions that you already held.  Either way, happy teaching to all readers who have started or are preparing to start the new semester and the new school year.

-Anne Tucker

August 22, 2014 in Business Associations, Anne Tucker, Constitutional Law, Corporations, Law School, Teaching | Permalink | Comments (3)

Wednesday, August 13, 2014

SEC Investigates Alternative Mutual Funds

Alternative mutual funds, with assets under management reported from $300-500 billion, mimic riskier investment strategies employed by hedge funds such as investing in commodities, private debt, shorting assets and complex derivatives.  The trading strategies, as you can guess, are funded through higher fees charged to investors.  The funds are touted as a new way for mainstream investors to diversify their assets.  Forbes ran a great, short piece back in February describing the investment advantages and disadvantages of alternative mutual funds.

These alternative mutual funds are now in the cross hairs of the SEC and FINRA, the self-regulatory branch of the securities industries.  FINRA issued an Investor Alert on "alt" funds in June, available here.  The Wall Street Journal reported yesterday that the SEC will conduct a limited scope (15-20 funds) national sweep to identify fund oversight, ready assets, and disclosure of investment strategies.  Included in the funds sweep are large investment firms such as BlackRock and AQR Capital Management, as well smaller firms that are new market entrants.

For additional information on Alternative Funds, see the 2013 report issues by SEI, available here, compiling available data on these funds.

-Anne Tucker

August 13, 2014 in Anne Tucker, Financial Markets, Securities Regulation | Permalink | Comments (0)

Wednesday, August 6, 2014

Inversion Avoided: Walgreens/Boots Merger Announced Today, Staying in US

Last week on this blog, I wrote about the revived trend of corporate inversions where, through a merger transaction a US company re-domiciles outside of the US for business reasons, including the desire to avoid paying US corporate taxes.  Walgreens was rumored to be negotiating with Alliance Boots, a UK company in which the US drugstore chain already held 45%.  The merger announcement today, in a deal valued at $5.27 billion for the other 55% of Alliance Boots will keep the merged company's headquarters in Chicago.   Citing, in part to public reaction and the drug store's brand here in the US, "The company concluded it was not in the best long-term interest of our shareholders to attempt to re-domicile outside the U.S."

The full article in the DealBook is available here.

-Anne Tucker

August 6, 2014 in Anne Tucker, Corporations, Current Affairs, Financial Markets, M&A | Permalink | Comments (0)

Monday, August 4, 2014

The new face of legal services (and education)?

The New York Times spotlighted Michigan State's Reinvent Law Laboratory and Entrepreneurial Startup Competition in this article.

"[P]ushing its students to understand business and technology so that they can advise entrepreneurs in coming fields. The school wants them to think of themselves as potential founders of start-ups as well, and to operate fluidly in a legal environment that is being transformed by technology."

The article also highlights University of Colorado's Tech Lawyer Accelerator.

Fascinating stuff.  What is your school doing, if anything, on this front?

-Anne Tucker

August 4, 2014 in Anne Tucker, Entrepreneurship, Law School, Teaching, Web/Tech | Permalink | Comments (1)