Wednesday, July 15, 2015

Reading Recommendation: How Framing Shapes Our Conduct

Scott Killingsworth, a corporate attorney at Bryan Cave who specializes in compliance and technology matters and is a prolific writer (especially for one who still has billable hour constraints!) recently wrote a short and thought-provoking article: How Framing Shapes Our Conduct. The article focuses the link between framing business issues and our ethical choices and motivations noting the harm in thinking of hard choices as merely "business" decisions, viewing governing rules and regulations as a "game" or viewing business as "war."  Consider these poignant excerpts:

We know, for example, that merely framing an issue as a “business matter” can invoke narrow rules of decision that shove non-business considerations, including ethical concerns, out of the picture. Tragic examples of this 'strictly business' framing include Ford’s cost/benefit-driven decision to pay damages rather than recall explosion-prone Pintos, and the ill-fated launch of space shuttle Challenger after engineers’ safety objections were overruled with a simple 'We have to make a management decision.' (emphasis added)

Framing business as a game belittles the legitimacy of the rules, the gravity of the stakes, and the effect of violations on the lives of others. By minimizing these factors, the game metaphor takes the myopic “strictly business” framing a step further, into a domain of bendable rules, acceptable transgressions, and limited accountability. (emphasis added)

The war metaphor conditions our thinking in a way distinct from the game frame, but complementary to it. War is a matter of survival: the stakes are enormous, the mission urgent, and all’s fair. Exigent pressures grant us wide moral license, releasing us from adherence to everyday rules and justifying extreme tactics in pursuit of a higher goal; we must, after all, kill or be killed. If business is war, survival is at stake, and competitors, customers, suppliers, rivals or authorities are our enemies, then not only may we do whatever it takes to win, it’s our duty to do so. (emphasis added)

The full article is available here.

In light of the new ABA regulations on Learning Outcomes and Assessment, including the requirement that students have competency in exercising "proper professional and ethical responsibilities to clients and the legal system" this article seems like a great addition to a business organizations/corporations course line up.  I know that I will be including it in my corporate governance seminar this coming year.  And if I were responsible for new associate training, this would definitely merit inclusion in the materials.

-Anne Tucker

July 15, 2015 in Anne Tucker, Business Associations, Corporate Governance, Corporations, Ethics, Law School | Permalink | Comments (1)

Wednesday, July 8, 2015

Modern Independent Contractor vs. Agent Problem: UBER DRIVERS

For those of you who teach agency (and the related concept of independent contractors) the following recent case example will make for a fun and culturally relevant example for many of your students.  

In March, 2015, the California Labor Commissioner’s Office issued an opinion finding that a  driver for the ride-hailing service mobile app company, Uber, should be classified as an employee, not an independent contractor.  The opinion details the control Uber exercised over the driver including setting the payment rates and terms, quality controls, service platforms, user communications, liability insurance requirements, and background checks all the while maintaining that drivers are independent contractors.  Citing to S. G. Borello & Sons, Inc. v. Dep't of Indus. Relations, 48 Cal. 3d 341, 350-51, 769 P.2d 399 (1989), the Commission analyzed the following elements:

(a) whether the one performing services is engaged in a distinct occupation or business;

(b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;

(c) the skill required in the particular occupation;

(d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;

(e) the length of time for which the services are to be performed;

(f) the method of payment, whether by the time or by the job;

(g) whether or not the work is a part of the regular business of the principal; and

(h) whether or not the parties believe they are creating the relationship of employer-employee.  

The Commission explained its finding that Plaintiff was an employee (not an independent contractor) (Commission Opinion, Berwick v. Uber, at 8)  with the following:

By obtaining the clients in need of the service and providing the workers to conduct it, Defendants retained all necessary control over the operation as a whole.  The party seeking to avoid liability has the burden of proving that persons whose services he has retained are independent contractors rather than employees.  In other words, there is a presumption of employment…..The modern tendency is to find employment when the work being done is an integral part of the regular business of the employers, and when the worker, relative to the employer, does not furnish an independent business or professional service.

Id. at 8.

The Commission found that “Plaintiff’s work was integral to Defendants’ business…Without drivers such as Plaintiff, Defendants’ business would not exist.” Id.


Impact Discussion:

Many technology companies, like Uber, contend that their virtual marketplaces facilitate individuals acting as contractors, using their own possession to provide services for a personal profit. The argument is that this empowers workers giving them flexibility and freedom to set their own hours and success. A counter argument raised by labor activists and others is that this type of freelance work strips workers from certainty of wages and job status as well as other benefits of traditional employment such as health care, retirement and sick leave benefits. Opponents argue that what is being touted as good for individuals is just a means to minimize costs and increase corporate, not individual, profits. 

[Note, I have included this, along with a host of other case updates and teaching materials, in my new Business Organizations electronic casebook, available through ChartaCourse starting fall 2015.]

Edited on 7/10/15 to add:  colleague, friend and fellow blogger Haskell Murray suggested this article (How Crowd Workers Became the Ghosts in the Digital Machine) from The Nation on crowd-workers and the thought-provoking discussion on whether minimum wage laws should apply to these workers.  Joan Hemminway, same credentials above, noted that the Wall Street Journal Blog is also commenting on the Uber case.

 

-Anne Tucker

July 8, 2015 in Anne Tucker, Business Associations, Corporations, Current Affairs, Unincorporated Entities | Permalink | Comments (3)

Wednesday, July 1, 2015

Greenfield & Winkler on Recent Supreme Court Cases & Corporate Personhood

Last week Kent Greenfield and Adam Winkler published "The U.S. Supreme Court's Cultivation of Corporate Personhood," in the Atlantic discussing two recent Supreme Court opinions.  Greenfield and Winkler covered the ruling in Horne v. Department of Agriculture  where the Court held  "a federal program requiring raisin growers to set aside a percentage of their crops for government redistribution was an unconstitutional 'taking' under the Fifth Amendment."  The second case addressed was Los Angeles v. Patel where the Court extended Fourth Amendment privacy protections "invalidating a city ordinance (similar to laws around the country) allowing police to search [hotel] guest registries without a warrant."

While they distinguish certain rights, like political speech, that are "more appropriate for people than for corporations," Greenfield and Winkler acknowledge that some constitutional protections should be extended to corporations.  

"A corporate right to be free from government takings, for example, makes sense both as a matter of constitutional law and of economics. Government overreach is problematic whether the raisin grower is a family farm or a business corporation. And corporations left exposed to government expropriation would find investors reluctant to take that risk, undermining the basic social purpose of the corporation, to make money." 

-Anne Tucker

July 1, 2015 in Anne Tucker, Business Associations, Constitutional Law, Corporate Personality | Permalink | Comments (0)

Wednesday, June 24, 2015

AALS 2016 Annual Meeting Business Law Section Call for Papers

The AALS Annual meeting will be held in NYC in January, 2016.  The Section on Business Associations will be co-hosting a program entitled The Corporate Law and Economics Revolution 40 Years Later: The Impact of Economics and Finance Scholarship on Modern Corporate Law.

Presenters will include Judge Frank Easterbrook, Professor Roberta Romano  (Yale) and Professor Kent Greenfield (Boston College).

 The full call for papers is available here:  Download AALS Call for Papers 2016-1The deadline for submitting an abstract (please send to Professor Usha Rodrigues at  rodrig@uga.eduis August 27, 2015

June 24, 2015 in Anne Tucker, Call for Papers, Corporations | Permalink | Comments (0)

Wednesday, June 10, 2015

Eroding Effects of Fees on Investment: Personal & Institutional

My recent scholarship (e.g., Outside Investor & Retirement Revolution) has focused on retirement and institutional investors. On the retirement investor side, I frequently address the impact that fees have on retirement investment returns, in part, as a critique of the opacity and lack of choice in the defined contribution plans (i.e., 401K and 457 plans). A focus on fee reduction (as well as simple diversification) has driven growth in the index and electronically-traded (ETF) funds, which charge lower fees because they are passively managed.  These simple lessons in finance are not just relevant to the individual investor.  Earlier this week, CalPERS announced that it would cut fund management fees by reducing (nearly in half) the number of active fund managers overseeing the investment of its over $300 billion in assets.  The New York Times reported that:

Eliminating some external managers will help Calpers shore up its investments by reducing fees. Last year, it paid $1.6 billion in management fees, $400 million of which was a one-time payment for its real estate managers, a Calpers spokesman said.

With larger pools of assets shifted to the remaining asset managers, CalPERS should have more leverage to demand lower fees and cost savings of the chosen few.  CalPERS, as a leader in the pension world, may pave the way to increased pressure on Wall Street fees by other pension funds.

Additional coverage on the shift is available at the Wall Street Journal and at NPR.   

-Anne Tucker

June 10, 2015 in Anne Tucker, Corporate Finance | Permalink | Comments (0)

Wednesday, June 3, 2015

Hedge Fund Defense Playbook

Yesterday Martin Lipton, of Wachtell, Lipton, Rosen & Katz, posted "Dealing with Activist Hedge Funds" at the Harvard Law School Forum on Corporate Governance and Financial Reform. This is more like a checklist included at the end of a treatise than a typical blog post and it promises many different uses from new associate training to inclusion in a corporate governance seminar syllabus  (CHECK!), to helping clients understand the landscape of activist hedge funds.  The post summarized common activist attack methods like proxy fights, withhold votes, proxy resolutions, and PR campaigns, etc.  It also provides a company/target defense checklist addressing major categories of action such as:

  • Creating designated corporate teams
  • Shareholder relations
  • Board of Director management strategies
  • Stock & financial monitoring

Additionally, the post categorizes, in some detail, the various response options available to targets as well as documents the shifting landscape of hedge fund activism: 

Many major activist attacks involve a network of activist investors (“wolf pack”) which supports the lead activist hedge fund, but attempts to avoid the disclosure and other laws and regulations that would hinder or prevent the attack if they were, or were deemed to be, a “group” that is acting in concert. Not infrequently, at the fringe of the wolf pack are some of the leading institutional investors, not actively joining in the attack, but letting the leader of the pack know that it can count on them in a proxy fight. The outcome of a proxy contest at most of the larger public companies is often, as a practical matter, determined by the votes of the three major passive investors: BlackRock, State Street and Vanguard. Major investment banks, law firms, proxy solicitors, and public relations advisors are now representing activist hedge funds and eagerly soliciting their business.

No question is this making my corporate governance seminar syllabus. I am so excited by this post that I am sharing it wholesale and encourage you to do so some productive procrastination or downtime between tasks by reading this article.

-Anne Tucker

June 3, 2015 in Anne Tucker, Corporate Governance | Permalink | Comments (0)

Tuesday, June 2, 2015

Institutional Investing When Shareholders Are Not Supreme

Earlier I blogged (on the BLPB here and CLS Blue Sky Blog here) about my co-authored piece, Institutional Investing When Shareholders Are Not Supreme--a 30-year empirical and case review study analyzing institutional investors' response to constituency statutes as one lens into the question of institutional capital available for alternative purpose firms, like benefit corporations.  On Monday, I wrote a short post on our article for the Harvard Law School Forum on Corporate Governance and Financial Reform, which is available here.  

-Anne Tucker

 

June 2, 2015 in Anne Tucker, Corporate Finance, Corporate Governance | Permalink | Comments (0)

Wednesday, May 27, 2015

Hedge Funds as Heroes & The Role of Reputation in Markets

This week I have found myself reading the co-authored, empirical piece by C.N.V. Krishnan, Frank Partnoy, and Randall Thomas titled, Top Hedge Funds and Shareholder Activism.  Through their sample they observe that top hedge funds have repetitional capital in that the market responds more positively to announcements by certain hedge funds with certain features, like a longer track record, larger assets under management and management participation through board of director seats.  Its an interesting and insightful article on the role, and value, of hedge funds. The authors conclude that 

The market appears to anticipate the superior performance of these top hedge funds even before announcement of intervention. Moreover, post-intervention target-firm operating performance associated with these top hedge funds is significantly superior to that of other hedge fund activists.

The focus on reputation reminded of Elisabeth de Fontenay's good work on reputation in private equity.  Her article, Private Equity Firms as Gatekeepers, 33 Review of Banking & Financial Law 115-189 (2014).  de Fontenay argues in her piece that: 

private equity firms act as gatekeepers in the debt markets. As repeat players, private equity firms use their reputations with creditors to mitigate the problems of borrower adverse selection and moral hazard in the companies that they manage, thereby reducing creditors’ costs of lending to these companies. Private equity-owned companies are thus able to borrow money on more favorable terms than standalone companies, all else being equal. By acting as gatekeepers, private equity firms render the debt markets more efficient and provide their portfolio companies with an increasingly valuable borrowing advantage.

Updated to add:  Frank Partnoy informed me that he and Elisabeth presented these 2 papers collaboratively to the Duke law faculty with each commenting on the other.  This either proves once again that I have no original ideas OR this validates my insights about the overlapping observations in these papers.

-Anne Tucker 

May 27, 2015 in Anne Tucker, Corporate Finance, Corporate Governance, Corporations, Financial Markets | Permalink | Comments (0)

Upcoming Corporate/Securities Sessions at Law & Society Assoc. Annual Meeting May 28-30th

CRN: #46  Corporate and Securities Law in Society

 LSA 2015 Schedule

 

THURSDAY, MAY 28

 

 

 

2:45 PM - 4:30 PM

3319—Roundtable: Shareholders, Stewardship & Accountability

Room: Mercer 

 

 

 

 

FRIDAY, MAY 29

 

 

 

9:30 AM - 11:15 AM

3321—Corporations and Their Constituencies: Employees, Customers, Creditors, and the Public

Room: Adams

1:30 PM - 3:15 PM

3322—Banking, Securities, and Beyond: Evaluating Financial Regulation in Varied Contexts

Room: Adams

3:30 PM - 5:15 PM

3325—Business Decisionmaking and Business Law: Exploring Implications for Constituencies and Communities

Room: Adams 

5:30 PM - 7:15 PM

3326—New Insights on Law and Regulation’s Evolution and Efficacy

Room: Adams

 

 

SATURDAY, MAY 30

 

 

 

8:15 AM - 10:00 AM

3320—Ownership and Control: New Considerations on Litigation, Governance Structures, and Shareholder Activism

Room: Adams

May 27, 2015 in Anne Tucker, Conferences, Corporations, Securities Regulation | Permalink | Comments (0)

Wednesday, May 20, 2015

Take Over Defenses: Vive La France!

Professor  Steven Davidoff Solomon posted this article to the DealBook yesterday highlighting France's new 2-votes for long-term shareholders law:  The Florange Law.  

The centerpiece of the Florange Law is a mandate that French companies give two votes to any share held for longer than two years. This goes against the historical one-vote-for-every-share system that most countries have. The law allows an opt-out if two-thirds of shareholders approve one by March 31, 2016.

ISS issued a guide (Download Impact-of-florange-act-france) opposing the law and encouraging investors to pressure directors to opt out of the law (through amendments to corporate bylaws) before the deadline.  

Professor Davidoff Solomon questions the strength of the one-share-one-vote corporate democracy in the U.S., noting that recent IPOs, like Facebook, went public with two classes of stock as a anti-takeover measure.  There is also the related question of what impact a law like this would have given the turnover rates of many institutional investors. 

-Anne Tucker

May 20, 2015 in Anne Tucker, Corporations, M&A | Permalink | Comments (0)

Call for Papers: The Current State of Cybersecurity (Chapman Law Review)

From the industrious editors at Chapman Law Review soliciting papers for their 2016 Symposium on Cybesecurity:

Cybersecurity has become a critical national security and corporate security problem in the last fifteen years. Examples include hackings of the Pentagon, SONY, Target, JPMorgan Chase, Home Depot, various universities, and hospitals. A lively debate is now raging in Congress, academia, and in the corporate world over what steps should be taken. Attorneys are at the forefront of the problem in advising clients and securing confidential information. What duties do attorneys and corporations have to prevent a cyberattack? What duties do attorneys and corporations owe to their clientele? What actions should attorneys and corporations take to mitigate a cyberattack once it occurs? What measures can businesses take to respond in the future? What steps should the U.S. Government take to protect its public and private entities? How can the U.S. Government respond to attacks on private entities? What domestic law governs cyberattacks and their responses? 

The Chapman Law Review will explore these and other questions at our next symposium on January 29, 2016, to be held at the Dale E. Fowler School of Law at Chapman University.  We invite interested scholars and practitioners to submit abstracts for papers to present at the symposium on the topic of cybersecurity, focusing on cyberattacks, corporate hackings, available government responses, and attorneys’ corresponding ethical duties.

Submission Information

We are looking for papers between 10,000 and 15,000 words. If you would like to apply to participate in the Symposium, please submit an abstract of no more than 500 words by June 22, 2015. The deadline for the completed paper will likely be in October 2015.  Selected papers will be published in a special issue of the Chapman Law Review in approximately April 2016, and the authors will participate in the 2016 Chapman Law Review Symposium on Friday, January 29, 2016.

If you have questions about the Symposium, please contact Alexa Stephenson, Senior Symposium Editor, at steph156@mail.chapman.edu

May 20, 2015 in Anne Tucker, Call for Papers | Permalink | Comments (0)

Tuesday, May 12, 2015

Reposting: Insight into the on-campus interview for academic job seekers

Karen Kelsey at the Professor Is In wrote an insightful post about the on-campus interview portion of academic jobs.  Having come to academia straight from practice, I would have loved to read something like this before going on the market.  As as someone who has served on search committees  5 out of the last 6 years, I wish that all candidates had this level of awareness about the role and purpose of the on-campus interview.  

Candidates have to demonstrate that they are excellent scholars, excellent teachers, and good departmental colleagues. Beyond that, they must show that their scholarship, teaching, and service are suited to the particular campus, department, and job. And they have to convey that they [are] engaging and pleasant to be around. 

While most of the BLPB readers are gainfully employed academics and lawyers so this article isn't relevant to you directly, but it may be a good resource as we mentor folks interested in academic careers or any professional job with extensive interviewing.

-Anne Tucker

May 12, 2015 in Anne Tucker | Permalink | Comments (0)

Friday, May 8, 2015

Scholarship & Advocacy Conflicts + Corporate Constitutional Rights

Thanks to faithful BLPB reader Scott Killingsworth for the tip about this new article appearing in the New Yorker detailing the scholarship and advocacy of renowned Harvard constitutional law professor Laurence Tribe.  The article raises questions about conflicts of interest between scholarship and advocacy.

[I]t would also be foolish to ignore the inherent tension in searching for truth while also working for paying clients. The scholar-warrior may lapse into a far more contemptible figure: the scholar for hire, who sells his name and his title for cash. A subtler danger comes from the well-known and nearly unavoidable tendency lawyers have of identifying with their clients. 

The article also highlights his role in the current debate on corporate constitutional rights.

Tribe has taken a strong view of individual rights; his view of corporate rights is similar, and in this capacity he has at times advanced constitutional arguments that might invalidate great parts of the administrative state, in a manner recalling the Supreme Court’s jurisprudence of the nineteen-twenties and thirties. In that sense, the current condemnation of Tribe can be seen as part of a larger progressive backlash against the use of the Bill of Rights to serve corporate interests.

This short article is absolutely worth making your Friday procrastination list or your weekend "catch-up" reading list.

-Anne Tucker

May 8, 2015 in Anne Tucker, Constitutional Law, Corporate Personality, Corporations, Ethics, Law School | Permalink | Comments (0)

Thursday, May 7, 2015

Call for Papers – AALS Sections on Business Associations and Law & Economics

The AALS Sections on Business Associations and Law & Economics are pleased to announce a Call for Papers for a joint program to be held on Friday, January 8, 2016 at the AALS 2016 Annual Meeting in New York City.  The topic of the program is “The Corporate Law and Economics Revolution 40 Years Later: The Impact of Economics and Finance Scholarship on Modern Corporate Law.”

Corporate law scholarship continues to engage in a dialogue with the wave of law and economics scholarship that exploded in the 1980s.  The law and economics revolution dramatically shifted the way that scholars, courts, practitioners, and business leaders see the relationship between management and shareholders. 

Modern corporate law theories owe much to literature in economics and finance, such as Jensen and Meckling’s 1976 article on agency costs within the firm and Eugene Fama’s work on efficient capital markets.  By the 1980s, many ambitious legal scholars were applying insights from economics and finance literature to corporate law and the capital markets.   They explored such ideas as the market for corporate control, the market for corporate law, the need for systematic corporate disclosure, the role of the board, and the role of shareholders in corporate governance. Of course, these issues live on.

Later generations questioned the assumptions of the first wave of corporate law and economics scholarship.  Critics questioned the agency cost framework, argued that the law and economics movement had created perverse incentives for managers, insisted that stakeholders other than shareholders held an important place in corporate law, and advanced critiques from behavioral economics and behavioral finance. 

Forty years since the Jensen and Meckling article, the time seems ripe to take stock of the impact of law and economics on corporate law: where has it been, where is it now, and where is it going?  How will economics and finance scholarship shape the next decade of corporate law scholarship and the next generation of corporate law scholars?  Taking stock also means asking some difficult questions: what is the comparative advantage of legal scholars compared to their colleagues in economics and finance departments when it comes to interpreting complex financial institutions?  What are the costs and benefits of the growing empirical movement in corporate law scholarship?  What is the next big idea? Or are all the big ideas already on the table?  Have we again reached “the end of corporate law?” 

Form and length of submission

Eligible law faculty are invited to submit manuscripts or abstracts that address any of the foregoing topics. Abstracts should be comprehensive enough to allow the review committee to meaningfully evaluate the aims and likely content of final manuscripts.   Manuscripts may be accepted for publication but must not be published prior to the Annual Meeting.  Untenured faculty members are particularly encouraged to submit manuscripts or abstracts.  

The initial review of the papers will be blind.  Accordingly, the author should submit a cover letter with the paper.  However, the paper itself, including the title page and footnotes must not contain any references identifying the author or the author’s school.  The submitting author is responsible for taking any steps necessary to redact self-identifying text or footnotes. 

Deadline and submission method

To be considered, manuscripts or abstracts must be submitted electronically to Professor Usha Rodrigues, Chair-Elect of the Section on Business Associations, at  rodrig@uga.edu.  The deadline for submission is  Tuesday, August 27, 2015.  Papers will be selected after review by members of the Executive Committees of the Section on Business Associations and the Section on Law & Economics.  The authors of the selected papers will be notified by Thursday, September 24, 2015.

Eligibility

Full-time faculty members of AALS member law schools are eligible to submit papers.  The following are ineligible to submit: foreign, visiting (without a full-time position at an AALS member law school) and adjunct faculty members, graduate students, fellows, non-law school faculty, and faculty at fee-paid non-member schools. Papers co-authored with a person ineligible to submit on their own may be submitted by the eligible co-author.

The Call for Paper participants will be responsible for paying their annual meeting registration fee and travel expenses.

May 7, 2015 in Anne Tucker, Call for Papers | Permalink | Comments (0)

Wednesday, May 6, 2015

Dow Chemicals: Investigation Questions CEO Conduct & Raises Fiduciary Duty Questions

Earlier today, Reuters published a fascinating investigative journalist piece by Joshua Schneyer & Brian Grow raising questions about Dow Chemical's CEO Andrew Liveris.  Drawing facts and allegations from internal auditor reports, filings in retaliation and employment suits, Dow documents regarding Liveris's nearly $720,000 reimbursement of improper spending, and documents related to an alleged pet charity in Greece create the backdrop for an interesting story that suggests officer wrong-doing and raises fiduciary duty concerns.  This may be an interesting story to watch unfold, or at least a great afternoon procrastination excuse.

-Anne Tucker

May 6, 2015 in Anne Tucker, Corporate Governance, Current Affairs | Permalink | Comments (0)

Friday, May 1, 2015

Nat'l Bus. Law Scholars Conf. Line up & Extended Deadline

National Business Law Scholars Conference

Thursday & Friday, June 4-5, 2015 (Seton Hall University School of Law, Newark, NJ)

The organizers have put together a great line up of speakers and this conference is becoming (has already become) an intellectual highlight for the summer.  Keynote speakers include:  SEC Commissioner Troy Paredes, and Boston College Law  Professor Kent Greenfield.

In addition to the call for papers, which has been extended to May 8th (email Eric Chaffee), the conference will feature a Plenary Panel on the Extraterritorial Application of Federal Financial Markets Regulations with the following participants: 

Colleen Baker (view bio)
Lecturer, University of Illinois, College of Business

Sean Griffith (view bio)
T.J. Maloney Chair in Business Law; Director, Fordham Corporate Law Center

Eric Pan (view bio)
Associate Director, Office of International Affairs, U.S. Securities & Exchange Commission

Joshua White (view bio)
University of Georgia, Terry College of Business

For those of you unfamiliar with the NBLSC, here's a conference description from the organizers: 

This is the sixth annual meeting of the NBLSC, a conference which annually draws together legal scholars from across the United States and around the world. We welcome all scholarly submissions relating to business law. Presentations should focus on research appropriate for publication in academic journals, law reviews, and should make a contribution to the existing scholarly literature. We will attempt to provide the opportunity for everyone to actively participate. Junior scholars and those considering entering the legal academy are especially encouraged to participate. For additional information, please email Professor Eric C. Chaffee at eric.chaffee@utoledo.edu.

-Anne Tucker

 

 

 

 

PLENARY PANEL - THE EXTRATERRITORIAL APPLICATION OF FEDERAL FINANCIAL MARKETS REGULATIONS


Colleen Baker
 (view bio)
Lecturer, University of Illinois, College of Business

Sean Griffith (view bio)
T.J. Maloney Chair in Business Law; Director, Fordham Corporate Law Center

Eric Pan (view bio)
Associate Director, Office of International Affairs, U.S. Securities & Exchange Commission

Joshua White (view bio)
University of Georgia, Terry College of Business

CALL FOR PAPERS (EXTENDED UNTIL MAY 8, 2015)

To submit a presentation, email Professor Eric C. Chaffee at eric.chaffee@utoledo.edu with an abstract or paper by May 8, 2015. Please title the email “NBLSC Submission – {Name}”. If you would like to attend, but not present, email Professor Chaffee with an email entitled “NBLSC Attendance.” Please specify in your email whether you are willing to serve as a commentator or moderator.

CONFERENCE ORGANIZERS

Barbara Black (The University of Cincinnati College of Law, Retired)
Eric C. Chaffee (The University of Toledo College of Law)
Steven M. Davidoff Solomon (The University of California Berkeley Law School)
Kristin N. Johnson (Seton Hall University School of Law)
Elizabeth Pollman (Loyola Law School, Los Angeles)
Margaret V. Sachs (University of Georgia Law)

HOTEL INFORMATION


Hilton Penn Station
 | Online Reservations Availalbe Here
Located one block from Seton Hall Law School

  • Located adjacent to Newark Penn Station (Amtrak and New Jersey Transit Rail Lines)
  • Four miles from Newark Liberty International Airport – Complimentary shuttle service
  • $209 + tax per night
  • Reservations may be made online here or by calling 973-622-5000
  • Reference: SETON HALL UNIVERSITY SCHOOL OF LAW
  • Location: Gateway Center – Raymond Boulevard, Newark, New Jersey
  • Hilton Penn Station will release rooms on May 13, 2015.


Courtyard Marriott Newark Downtown

Located in downtown Newark (ten minute walk)

  • Located in the heart of downtown Newark adjacent to the Prudential Center and easily accessible to all major transportation
  • Four miles from Newark Liberty International Airport – Complimentary shuttle service
  • $139 + tax per night
  • Reservations may be made by calling: 973-848-0070
  • Reference: SETON HALL LAW SCHOOL
  • Location: 858 Broad Street, Newark, New Jersey
  • Courtyard Newark Downtown will release rooms on May 13, 2015.

LOCAL ATTRACTIONS AND INFORMATION

Visit and explore Seton Hall Law and its surrounding area.

May 1, 2015 in Anne Tucker, Call for Papers, Law School, Teaching | Permalink | Comments (0)

Wednesday, April 29, 2015

What's in a Title?

Perhaps this post would have been timelier before the spring submission cycle, but hopefully it will be helpful in framing title options for pieces being developed this summer.  One of the many benefits of co-authorship is learning substantive and procedural knowledge from your collaborators.  On a recent article, I worked with three economists who have different skill sets, perspectives, and discipline standards.  When we were trying to finalize our title, we came up with several different categories or types of article titles—a framework that I will utilize again in the future and which I am sharing with you today.  We selected the “themed” based title for our article, Institutional Investing When Shareholders Are Not Supreme, and a play on words, Institutional Investors’ Appetite for Alternatives, for a shorter piece appearing on Columbia Blue Sky Blog.

 Title Framework:

SOBER: Institutional Investing after Constituency Statutes

QUESTION:  Does Changing Shareholder Value Maximization Standards Change Institutional Investors’ Behavior?

CONTRAST:  Institutional Investors Behavior Before and After Constituency Statutes

PLAY ON WORDS:  Appetite for Alternatives:  Institutional Investors’ Behavior in the Fact of Shareholder Value Maximization Pressures

FORWARD THINKING:  What Does Institutional Investors Behavior after Constituency Statutes Tell Us Regarding Benefit Corporations?

HISTORICAL:  The Changing Landscape of Directorial Duties: Constituency States to Alternative Purpose Firms

SLATE/OP-ED:  Who’s Afraid of Alternative Purpose Firms?

THEME:  Agency Investing When Shareholders Are Not Supreme

For those interested and perhaps to put the title options in perspective, here is a little background on our article, Institutional Investing When Shareholders Are Not Supreme.  In an earlier BLPB post, I linked to our short piece appearing in Columbia Blue Sky Blog.  Our article examines institutional investors’ response to corporate director duty changes embodied in constituency statutes and links our findings to current questions of institutional investors’ potential acceptance of alternative business entities. Our paper surveys the 30+ year literature debate on directors’ duties to maximize shareholder value, a case law analysis of constituency statute litigation, and an empirical study (utilizing a difference-in-differences approach) of institutional investors’ divestment of stock held in companies incorporated in constituency statute jurisdictions.  We first verified that courts enforced constituency statutes, or in other words, that constituency statutes represented at least a small change to directors’ legal duties. In our empirical section, we found no statistically significant departure of institutional investors after the passage of constituency statutes, focusing specifically on institutions with high fiduciary duties. If institutional investors had fled constituency statute investments, which are subject to lower director duties changes than with say benefit corporations, then there would be grounds to think that institutional investors would not invest in alternative purpose firms.  Finding no such negative reaction to constituency statutes does not conclusively indicate institutional investor’s acceptance of alternative purposes firms, especially given the greater deviation from shareholder value maximization by requiring (rather than permitting) directors to consider nonshareholder interests codified in benefit corporation statutes.  It does suggest, however, some latitude for institutional investors to consider alternative purpose firm investments without running afoul of fiduciary duties.  If I were explaining the results to a student, I would say that our study could have produced strong evidence shutting the door on this possibility, but instead the findings leave the door open. This paper is valuable in the absence of direct information on the question, and will certainly give way to findings utilizing empirical data directly on point with publicly-traded benefit corporations and/or B Corporations.

-Anne Tucker

April 29, 2015 in Anne Tucker, Corporate Finance | Permalink | Comments (4)

Monday, April 27, 2015

Columbia Blue Sky Blog: Institutional Investors’ Appetite for Alternatives

The following guest blog post on my recent article,  Institutional Investing When Shareholders Are Not Supreme, is available at Columbia's Blue Sky Blog discussing institutional investors' attitudes towards alternative business forms and similar issues raised by Etsy's IPO.

-Anne Tucker

April 27, 2015 in Anne Tucker, Business Associations, Corporate Finance, Corporate Governance, Corporations, Financial Markets, Securities Regulation | Permalink | Comments (0)

Wednesday, April 22, 2015

Etsy IPO and the revival of the Shareholder Primacy Debate

Last week the New York Times hosted a debate about the Public Corporation's Duty to Shareholders.  Contributors include corporate law professors Stephen Bainbridge, Tamara BelinfanteLynn StoutDavid Yosifan and Jean Rogers, CEO of Sustainability Accounting Standards Board.

This collection of essays is not only more interesting than anything that I could write, but it is also the type of short, assessable debate that would be a great starting point for discussion in a seminar or corporations class.  

-Anne Tucker

April 22, 2015 in Anne Tucker, Business Associations, Corporate Governance, Corporations, Current Affairs, Delaware, Social Enterprise | Permalink | Comments (0)

Wednesday, April 15, 2015

"Best Interest Contracts"--Proposed DOL Regulation of Retirement Brokers

In an earlier BLPB post, I wrote about President Obama's call for greater regulation of retirement investment brokers.  The proposed reforms focused on elevating the current standard that brokers' investment advice must be "suitable" to something closer to an enforceable fiduciary duty to counter financial incentives for some brokers to channel investors into higher-fee investment options.  

Yesterday, the U.S. Department of Labor released new proposed rules (Proposed Rule), which would classify brokers as "fiduciaries" under ERISA but allow them to continue to receive brokerage commissions and fees (a practice that would otherwise violate ERISA conflict-of-interest rules) so long as the brokers and customers enter into a  "Best Interest Contract".

The exemption proposed in this notice (“the Best Interest Contract Exemption”) was developed to promote the provision of investment advice that is in the best interest of retail investors such as plan participants and beneficiaries, IRA owners, and small plans.  Proposed Rule at 4.

In 1975, the DOL issued rules defining investment advice for purposes of triggering fiduciary status under ERISA and the attended duties and conflict-of-interest prohibitions.  That 1975 definition is still in use, is narrow, and excludes much of paid-for investment advice, particularly that provided in the self-directed retirement space (i.e., 401(k) and IRA).  

The narrowness of the 1975 regulation allows advisers, brokers, consultants and valuation firms to play a central role in shaping plan investments, without ensuring the accountability ... [and] allows many advisers to avoid fiduciary status.... As a consequence, under ERISA and the Code, these advisers can steer customers to investments based on their own self-interest, give imprudent advice, and engage in transactions that would otherwise be prohibited by ERISA and the Code. Proposed Rule at 12.

The proposed rule expands the definition of investment advise (see Proposed Rule at 13) making brokers "fiduciaries" under ERISA, but then creates an exemption (which allows  for the continued collection of commissions and fees), requiring: 

the adviser and financial institution to contractually acknowledge fiduciary status, commit to adhere to basic standards of impartial conduct, warrant that they have adopted policies and procedures reasonably designed to mitigate any harmful impact of conflicts of interest, and disclose basic information on their conflicts of interest and on the cost of their advice. The adviser and firm must commit to fundamental obligations of fair dealing and fiduciary conduct – to give advice that is in the customer’s best interest; avoid misleading statements; receive no more than reasonable compensation; and comply with applicable federal and state laws governing advice. Proposed Rule at 6.

Under the proposed exemption, all participating financial institutions must provide notice to the U.S. DOL of their participation, as well as collect and report certain data. 

As justification for the proposed rules, the DOL asserted that:

In the absence of fiduciary status, the providers of investment advice are neither subject to ERISA’s fundamental fiduciary standards, nor accountable for imprudent, disloyal, or tainted advice under ERISA or the Code, no matter how egregious the misconduct or how substantial the losses. Retirement investors typically are not financial experts and consequently must rely on professional advice to make critical investment decisions. In the years since then, the significance of financial advice has become still greater with increased reliance on participant directed plans and IRAs for the provision of retirement benefits. Proposed Rule at 11.

Critics claim that these rules will limit small investors' access to sophisticated financial advice for investments, while proponents consider this a powerful tool against the eroding effects of high fees on long-term retirement savings.  

I think this is a symbolically important change.  It modernizes the regulatory framework to more closely reflect why many people invest in the stock market (as a tax incentivized alternative to pension plans), the purpose that these investments serves (long-term retirement savings) and the information asymmetries (born of financial illiteracy) confronting the average investor, as well as the changes to the financial services industry.  The enforcement mechanism is placed on the individual investor, who will have limited monitoring resources and and other disincentives to fiercely serve that role, which is why my initial reaction that this is a good "symbolic" measure that has potential to fulfill a more meaningful role.

-Anne Tucker

April 15, 2015 in Anne Tucker, Corporations, Financial Markets, Securities Regulation | Permalink | Comments (0)