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, Merger & Acquisitions | 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, Merger & Acquisitions | 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)

Wednesday, July 30, 2014

Recent U.S./Foreign Mergers Motivated by Tax Incentives

There is a new face on an old problem — American companies “moving” overseas in part to avoid U.S. taxes — that has increased in popularity in the last several years and recently gained political attention. Last week President Obama and Treasury Secretary Jacob J. Lew called for tax reform to encourage economic patriotism and to deter corporate defectors, calling the overseas moves legal, but immoral.

Two structural features of the U.S. tax code incentivize corporations to move abroad. The U.S. corporate tax rate, at 35 percent, is high compared to the average Organization for Economic Cooperation and Development (OECD) rate of 25 percent, and the average European Union rate of 21 percent. Many corporations effectively pay much less than 35 percent, after factoring in loopholes and deductions, policies that cost approximately $150 billion in untaxed revenue last year. But the reported tax rate is high compared to other jurisdictions and the complexity required to reduce that rate in practice also is a deterrent.

Second, other countries like the United Kingdom become attractive foreign tax locations because they operate under a territorial system that does not tax profits earned outside of the home country. Under the U.S. system, however, returning foreign-earned corporate profits home is a taxable event at high corporate tax rates. As a result, it is estimated that $2 trillion in foreign-earned profits of U.S. corporations sit in foreign bank accounts unavailable for use absent paying taxes.

There are two main ways to achieve an overseas move. A transaction called an inversion where a U.S. company reincorporates overseas becoming, say, a Bermuda corporation, which was popular in the 2000s. Inversions also can happen when a U.S. company forms an overseas affiliate and the original company becomes a subsidiary of the foreign affiliate. The 2004 American Jobs Creation Act prevented companies pursuing inversions from reaping tax benefits of the transactions if the original stockholders retained 80 percent or more of the new company or if there was not substantial business operation in the new location. Treasury regulations have defined “substantial business operations” as meaning 25 percent of corporate activity thus effectively stopping these so-called “naked” inversions as a means to transfer corporate profits overseas.

Another vehicle to move a U.S. company overseas is through a merger with a foreign company, and this is where the recent uptick has occurred. If a larger foreign company buys the U.S. one then both profits and control effectively move overseas in the newly combined company. If, however, a larger U.S. company buys a smaller overseas one, then control may stay effectively in the United States, with only the profits moved overseas. 

For example, in 2012 Cleveland-based Eaton purchased Cooper Industries PLC in an $11.8 billion merger. After the merger, the new company Eaton Corporation PLC, incorporated in Ireland and headquartered in Cleveland, projected savings of $160 million a year as a result of not being subject to U.S. corporate taxes. So far this year, there have been more than a dozen of similar tax-motivated foreign mergers announced including companies like Chiquita, Pfizer and even some interest behind the drug-store chain Walgreens moving to the United Kingdom. 

See the following discussion of foreign mergers in the DealBook earlier this month following the announcement of two multibillion dollar health care mergers:

“With a[n]…. offer worth $53 billion, AbbVie, a big Chicago-based pharmaceutical company, has succeeded in winning tentative approval to buy the Irish drug maker Shire . If completed, it would be the biggest deal of the year. Also on Monday, Mylan Laboratories, based in Canonsburg, Pa., said it would acquire the international generic drug business from Abbott Laboratories in an all-stock deal valued at $5.3 billion and reincorporate in the Netherlands.”

Solutions to curb corporate flight include lowering corporate taxes to a more competitive rate, decreasing the ownership thresholds for inversions from 80 percent to 50 percent, and excluding tax benefits for foreign-based mergers. Congressional Democrats have circulated several proposals, but Republicans have not expressed interest without comprehensive tax reform. Obama included proposals targeted at foreign mergers in his proposed 2015 budget, which includes decreasing the corporate tax rate, decreasing the ownership threshold for inversions and closing some corporate tax loopholes. While congressional action before the end of the year is unlikely, the strong rhetoric of economic patriotism and corporate defectors has the issue primed for the 2014 election debates.

For a great summary on the issue, see the following report issued earlier this summer by the congressional research service.

 -Anne Tucker 

 

July 30, 2014 in Anne Tucker, Corporations, Current Affairs, Merger & Acquisitions | Permalink | Comments (1)

Wednesday, July 23, 2014

Antitrust as a Question of Power, Not Competition

Steven Davidoff Solomon, a professor of law at the University of California, Berkeley, has an interesting article on antitrust in the DealBook today:  Changing Old Antitrust Thinking for a New Gilded Age. Professor Solomon argues that a new wave of mergers in the tech and telecommunications industries mirror the consolidation wave of the Gilded Age a century ago which lead to our current antitrust laws.  These mergers leave competition in tact, albeit among a few huge companies, and therefore facially meet the competition requirements under antitrust law.  He argues that "[t]his calculus, however, excludes the political and other power that a concentrated industry can wield with government and regulators."  Citing to industry-based nonprofits and the ability to participate in political spending in a post-Citizens United world, professor Solomon concludes that antitrust may become a question of power, not just competition. 

"[R]ight now there is simply no real government ability to review the industry consolidation that is occurring today in which industries become dominated by a handful of major players. Yet it is becoming increasingly apparent that size and industry concentration affect American society even if competition still exists."

I think that this is an interesting lens through which to view, and teach, current market trends in mergers and acquisitions and related questions of antitrust law.

-Anne Tucker

July 23, 2014 in Business Associations, Anne Tucker, Corporations, Current Affairs, Merger & Acquisitions | Permalink | Comments (0)

Wednesday, July 2, 2014

Summer Stresser

FOR ACADEMIC EYES ONLY (practicing readers may be deeply offended by my self-indulgence)

By my count we are in week 7 (out of 12) of "summer"--the time between graduation and when the fall semester resumes.  We are more than half-way through this shimmering mirage, this beacon of hopeful productivity, balance, and reprieve.  All year long, I think, THIS summer I will......  And now this THIS summer is here, I am feeling concerned about all that hasn't been tended to at work or at home. At least not yet.  (And it isn't for lack of trying--75 exams graded, 3 conferences attended, 1 article draft complete, 3 unexpected child illnesses, and 1 empirical study bogged down in the details.)

This is a common refrain of conversations had with fellow academics. It all goes by too quickly and with self-imposed pressure to make the most of it professionally (write two articles for August submission!) and personally (go on exotic travel adventure with family!).  By my personal count, I am failing on both fronts.   While this is a unique schedule for academics, I think that the promise of summer lures most people from all walks of life into an unrealistic vision of this time that is inevitably filled with the juggling act of travel and work and family and fun.  So with 5-6 weeks left, I am taking stock of my writing expectations (maybe that short piece won't get finished THIS summer) and re-prioritizing because I want to feel good when I walk back into the classroom on day 1. Mostly, I just want to avoid feeling like this:

Summer_Fun_Time-Blog

-Anne Tucker

July 2, 2014 in Anne Tucker, Law School | Permalink | Comments (3)

Monday, June 30, 2014

No clear lines in the sand

From Anne Tucker (who is off filming academic videos this afternon--whatever that means!):

Today’s Supreme Court decision in Burwell v. Hobby Lobby Stores Inc. et al. exempted closely held corporations from complying with the contraceptive mandate in the Affordable Care Act.  There is plenty to debate about the opinion—corporations are persons under RFRA and can exercise religion as well as a host of choice quotes from the SCOTUS about “modern corporate law”—and I will leave that fun for another time.  I want to highlight three initial reactions:    

  1. There is no definition of closely held in today’s opinion.  Will we draw lines based on state corporate codes and elections to be S corp?  Will we rely upon the IRS definition of a closely held company?  It is unclear.  There is NOTHING in the opinion that prevents today’s ruling from applying to publically traded, closely held corporations like Wal-Mart.  The line drawing engaged by the SCOTUS in Hobby Lobby is not such a neatly drawn, tight circle, but is a wide net.  I discussed this briefly in a HuffPost Live segment earlier today—here.
  2. This is a statutory, not a constitutional ruling.  On its face.  Of course Congress could amend RFRA and exclude corporations, but there are exactly zero people holding out hope for that solution, at least in our present climate.  The language of the opinion, however, gives strong dicta supporting religious rights and identities of corporations, whether for profit or not.  [“Any suggestion that for-profit corporations are incapable of exercising religion because their purpose is simply to make money flies in the face of modern corporate law.”]
  3. Today, the Court weighed in on the moral dilemma of performing an “innocent” act (i.e., providing health care coverage) that enables an “immoral” act (i.e., using an IUD whether for family planning or medical reasons).  May companies object to coverage that includes screening for sexually transmitted diseases because unwed employees may use it ensure safe, premarital sex?  The answer would seem to be yes. Of course, we can imagine that the Court would find a compelling interest here like they did with contraceptives, but what about the least restrictive means?  In Hobby Lobby, the Court found the existing program for the government to pay for contraceptives (for exempted nonprofit entities) as evidence of a less restrictive alternative.  So the government pays for the thing that for-profit corporations don’t want to pay for.  In other words, we now subsidize corporate religious beliefs. And if you are a corporation do you want to pay for something that competitors don’t have to?  The sincerity of the belief might be an issue, but if corporate law teaches us one thing, it is how to build a record.

-Anne Tucker

Formatting changes/errors are all mine.

Great work, Anne!

June 30, 2014 in Business Associations, Anne Tucker, Corporate Governance, Corporations, Current Affairs, Religion | Permalink | Comments (3)

Wednesday, May 28, 2014

Law & Society Corporate Law Panels 2014

Tomorrow kicks off the 2014 Law & Society Annual meeting in Minneapolis, MN.  Law & Society is a big tent conference that includes legal scholars of all areas, anthropologists, sociologists, economists, and the list goes on and on.  A group of female corporate law scholars, of which I am a part, organizes several corporate-law panels. The result is that we have a mini- business law conference of our own each year.  Below is a preview of the schedule...please join us for any and all panels listed below.

 

Thursday 5/29

Friday 5/30

Saturday 5/31

8:15-10:00

 

0575 Corp Governance & Locus of Power

U. St. Thomas MSL 458

Participants: Tamara Belinfanti, Jayne Barnard, Megan Shaner, Elizabeth Noweiki, and Christina Sautter

 

10:15-12:00

 

1412 Empirical Examinations of Corporate Law

U. St. Thomas MSL 458

Participants: Elisabeth De Fontenay, Connie Wagner, Lynne Dallas, Diane Dick & Cathy Hwang

 

12:45-2:30

 

1468 Theorizing Corp. Law

U. St. Thomas MSL 458

Participants: Elizabeth Pollman, Sarah Haan, Marcia Narine, Charlotte Garden, and Christyne Vachon

1:00 Business Meeting Board Rm 3

2:45-4:30

Roundtable on SEC Authority

View Abstract 2967

Participants: Christyne Vachon, Elizabeth Pollman, Joan Heminway, Donna Nagy, Hilary Allen

1473 Emerging International Questions in Corp. Law

U. St. Thomas MSL 458

Participants:  Sarah Dadush, Melissa Durkee, Marleen O'Conner, Hilary Allen, and Kish Vinayagamoorthy

1479 Examining Market Actors

U. St. Thomas MSL 321

Participants:  Summer Kim, Anita Krug, Christina Sautter, Dana Brackman, and Anne Tucker

4:45-6:30

 

 

1474 Market Info. & Mandatory Disclosures

U. St. Thomas MSL 321

Participants: Donna Nagy, Joan Heminway, Wendy Couture, and Anne Tucker

 

     

May 28, 2014 in Anne Tucker, Corporate Governance, Financial Markets, Law School, Marcia Narine, Merger & Acquisitions, Securities Regulation | Permalink | Comments (0)

Wednesday, May 21, 2014

2014 Proxy Season

Proxy issues are an interesting gauge of current and emerging corporate governance issues.  Even if the proposals don't pass, they provide a tool to take investors' and companies' temperature on controversial issues.  Alliance Advisors issued a detailed report on 2014 proxy season trends and expectations, which is available for download here.  A few highlights are discussed below.

  • Majority Voting. A trend towards majority voting proposals with support from ISS and Vanguard means that many companies will be facing pressure to consider changes to director elections.
  • Declassified Boards.  While the Harvard Law School Shareholder Rights Project has been successful in obtaining declassification of 23 of 13 target companies, the academic and industry debate continues about the efficacy or harm of classified boards.  
  • Board Tenure & Diversity.  These initiatives seek to turn the tide against board compositions that are dominated by white men who hold director positions for extended periods of time.

"ISS’s fall policy survey revealed that 74% of investor respondents consider board service over 10 years to be problematic. Similarly, a recent academic study of S&P 1500 companies found that firm value peaks when average director tenure reaches nine years, and then drops off by as much as 10%.

***

According to a 2013 Catalyst Census of Fortune 500 companies, the percentage of board seats held by women remained flat between 2012 (16.6%) and 2013 (16.9%)."

  • Proxy Voting Mechanisms.  Shareholder activist John Chevedden is pushing proposals such as enhanced confidential voting and uniform vote reporting to reform the proxy process.
  • Social Issues.   Under this diverse category of issues, a few standouts have potential significance in the 2014 season.
    • Political Spending.  Shareholder proposals for disclosures of political spending will increase in the wake of the SEC's decision not to pursue these disclosures as a part of its upcoming agenda.  The Center for Political Accountability has 60 proposals pending and another coalition is sponsoring 48.
    • Human Rights.  In the wake of the SEC's attention to conflict mineral disclosures, additional shareholder proposals are expected on the issue. 
    • Climate Change.  Citing to the midterm elections and the flagging climate change reform occuring at the federal level, increased climiate change proposals are expected, many of which will employ creative strategies to apply pressure on corporations.

"As part of a broader climate strategy, social and environmental activists are challenging companies’ political activities on energy and climate change, particularly their involvement with certain trade associations and legislative groups whom the proponents feel are obstructing progress on climate-related legislation."

-Anne Tucker

 

May 21, 2014 in Anne Tucker, Corporate Governance | Permalink | Comments (0)

Wednesday, May 7, 2014

Other People's Houses--

I am generating my summer reading list--both business and pleasure. At the top of my list is Other People's Houses, by Jennifer Taub (Vermont Law School), which will be available from Yale Press on May 27th.   The official website for the book describes the project as:

Drawing on wide-ranging experience as a corporate lawyer, investment firm counsel, and scholar of business law and financial market regulation, Taub chronicles how government officials helped bankers inflate the toxic-mortgage-backed housing bubble, then after the bubble burst ignored the plight of millions of homeowners suddenly facing foreclosure.

Focusing new light on the similarities between the savings and loan debacle of the 1980s and the financial crisis in 2008, Taub reveals that in both cases the same reckless banks, operating under different names, received government bailouts, while the same lax regulators overlooked fraud and abuse. Furthermore, in 2013 the situation is essentially unchanged. The author asserts that the 2008 crisis was not just similar to the S&L scandal, it was a severe relapse of the same underlying disease. And despite modest regulatory reforms, the disease remains uncured: top banks remain too big to manage, too big to regulate, and too big to fail.

The following are a few excepts of the book review just posted on Kirkus:

Taub's narrative recounts a couple who "innocently" purchased a Dallas-area condo and were deemed “too small to save.” "Meanwhile, all the decision-makers who, in a dizzying series of transactions, fueled the Nobelman mortgage received government support, and very few suffered negative consequences."  With "5 million homes lost to foreclosure and another 10 million still left underwater," Taub "blisters the 'legal enablers' who, by their acts or omissions, failed to corral predatory practices and wild speculation."  The review concludes that Other People's Houses is "[m]eticulously argued and guaranteed to raise the blood pressure of the average American taxpayer."

That last line is the hook--guaranteed to raise my blood pressure?  Sign me up.  

Leave a comment if you have a book, business or pleasure, that is topping your list.  I would love to start a BLPB summer reading list... 

-Anne Tucker

May 7, 2014 in Anne Tucker, Books, Corporate Finance, Corporations, Current Affairs, Financial Markets | Permalink | Comments (2)

Wednesday, April 23, 2014

Racial Identities of Corporations

In March, the Fourth Circuit held in Carnell Construction Corp. v. Danville Redevelopment & Housing Authority, that racial identity can be imputed to a corporation for purposes of standing under Title VI, citing to case precedent from the several circuits allowing 1981 claims to be raised by corporations. 

“[W]e observe that several other federal appellate courts have considered this question, and have declined to bar on prudential grounds race discrimination claims brought by minority-owned corporations that meet constitutional standing requirements.” 

The Fourth Circuit had to deal with the following language in Arlington Heights, 429 U.S. 252, 263 (1977): “As a corporation, MHDC has no racial identity and cannot be the direct target of the petitioners' alleged discrimination. In the ordinary case, a party is denied standing to assert the rights of third persons.” In Arlington Heights, the Supreme Court however did not need to “decide whether the circumstances of this case would justify departure from that prudential limitation and permit MHDC to assert the constitutional rights of its prospective minority tenants. For we have at least one individual plaintiff who has demonstrated standing to assert these rights as his own.” (citations omitted).  The dicta in Arlington Heights was not a barrier to imputing a racial identity to the corporation in the Fourth Circuit case.

In a clear statement, the Fourth Circuit concluded that:

“We agree with the Ninth Circuit that a minority-owned corporation may establish an “imputed racial identity” for purposes of demonstrating standing to bring a claim of race discrimination under federal law. We hold that a corporation that is minority-owned and has been properly certified as such under applicable law can be the direct object of discriminatory action and establish standing to bring an action based on such discrimination.”

Chief Justice Roberts was concerned about the connection of racial identities for corporations and corporate free exercise of religion as raised in the Hobby Lobby and related cases.   Note that fellow BLPB blogger Josh Fershee wrote about the racial identity of a corporation on BLPB here arguing why religious discrimination claims by corporations should be allowed and how the analysis would work.  Professor Bainbridge weighed in on the issue as well.

Here is my best response as to why holding that corporations can have a racial identity is not necessarily fatal to the claim that corporations cannot have a religious identity for purposes of free exercise under the 1st Amendment, and why religious discrimination cases for corporations may also be more difficult than racial discrimination cases.  

Line drawing.  In the Carnell case as well as in others, the corporations at issue had been certified as a minority/women owned business at the state level, which is treated as a form of pre-requisite for such standing to assert a racial discrimination claim.  There is no similar bright line test or religious entity process for a for-profit corporations.  Indeed the very process of such a certification may implicate other 1st Amendment protections for freedom of speech and association.

Third Parties & Equity. Second, imputing the racial identity to the corporation for purposes of a Title VI claim of racial discrimination upholds the minimum anti-discrimination standard against third parties.  So in the race cases, the identity of the owners is imputed to the corporation to prevent third parties from evading a legal standard.  In the corporate free exercise of religion context, the owners are requesting that their individual religious beliefs be imputed to the corporation to allow it to evade compliance with a law.  Anti-discrimination laws are applied generally and don’t allow a person to discriminate whether it is with an individual or through a corporation rather than exempting a corporation from a neutrally-applied, generally applicable law. 

This last points get to the debate, in part, about the relevance of reverse veil piercing (RVP) on which Professor Stephen Bainbridge has advocated as a framework to resolve the mandate issue in Hobby Lobby. The corporate veil is rejected in both CVP and RVP when equity requires and that is usually dependent upon a third party interest that is best protected by rejecting the legal fiction of a separate corporate form.  In the anti-discrimination/racial identity there is an equitable argument that the third party cannot discriminate against the corporation simply because it is owned by minorities.  What is the equitable argument in Hobby Lobby?  The fairness rationale is weakened here, especially in light of the interests of the 13.5K employees receiving health care coverage as a form of compensation for their work for the company.  Instead RVP, it must rest, if at all, on the public policy justification advanced by Professor Bainbridge.   But again, the public policy argument cuts both for and against RVP.  There is a public policy argument in protecting/promoting religious freedom as there is in facilitating access to health care, including forms of health care that Congress has determined to be necessary for women (and families) under the ACA.

 -Anne Tucker

April 23, 2014 in Business Associations, Anne Tucker, Constitutional Law, Corporations, Current Affairs, Joshua P. Fershee | Permalink | Comments (0)