Friday, January 30, 2015
I recently purchased and read two Cass Sunstein (Harvard) books: Simpler: The Future of Government and Wiser: Getting Beyond GroupThink to Make Groups Smarter (with Reid Hastie (Chicago))
Cass Sunstein is a enjoyable writer to read, and Simpler was an easy, relatively short read (though he admits that his editor prompted the cutting of 30,000 words from the original manuscript). I may do a separate post on Wiser at a later date.
Simpler provides an inside look at Cass Sunstein's time at the head of the Office of Information and Regulatory Affairs ("OIRA") from 2009-2012. Supposedly, OIRA was created by the Paperwork Reduction Act in 1980. OIRA plays an important role in overseeing federal regulation.
A few random thoughts about Simpler:
- If you have read Sunstein's earlier work, Kahneman (Princeton), and Ariely (Duke) much of Simpler will be familiar behavioral economics;
- Sunstein's political confirmation process sounds absolutely awful. I wonder how many qualified potential civil servants are scared away by processes like this;
- The Food Plate (below) is much simpler than the Food Pyramid I grew up with;
- Sunstein reminded me that sometimes rule-makers (including professors - e.g. with our syllabi) can become experts in rule systems, and not realize how complex their rules may seem to outsiders;
- The impact of the complex regulation is felt by many, including by small businesses (and by all of us during tax season);
- Sunstein admits that there is a tenancy to regulate from hunches, anecdotes, and to please (or not upset) special interests, but he claims he tried to favor statistics, cost-benefit analysis, randomize controlled trials, and public comments;
- Government has a long way to go before it gets "simple." Sunstein's biggest challenge was explaining the ACA and Dodd-Frank in the context of this book; I don't think he rose to this challenge and he did not even try very hard. He pointed to a few simple parts of the complex laws, but then concluded by saying "Rome was not built in a day."
For those who are interested, Cass Sunstein's talk on Simpler at University of Chicago is here.
Thursday, January 22, 2015
I have just returned from Dublin, which may be one of my new favorite cities. For the fifth year in a row, I have had the pleasure of participating as a mentor in the LawWithoutWalls (“LWOW”) program run by University of Miami with sponsorship from the Eversheds law firm. LWOW describes itself as follows:
LawWithoutWalls, devised and led by Michele DeStefano, is a part-virtual, global, multi-disciplinary collaboratory that focuses on tackling the cutting edge issues at the intersection of law, business, technology, and innovation. LawWithoutWalls mission is to accelerate innovation in legal education and practice at the same time. We collaborate with 30 law and business schools and over 450 academics, students, technologists, venture capitalists, entrepreneurs, business professionals, and lawyers from around the world. We seek to change how today’s lawyers approach their practice and how tomorrow’s lawyers are educated and, in so doing, sharpen the skills needed to meet the challenges posed by the economic pressures, technologization, and globalization of the international legal market. We seek to create the future of law, today. Utilizing a blend of virtual and in-person techniques, LawWithoutWalls offers six initiatives: LWOW Student Offerings,LWOW Live, LWOW INC., and LWOW Xed.
I first joined the program as a practitioner mentor and have now served as an academic mentor for two years. Each team has students from law or business school who develop a project of worth addressing a problem in legal education or the legal profession. Mentors include an academic, a practitioner, an entrepreneur, and an LWOW alum.
In the LWOW Live version, the students and mentors meet for the first time in a foreign city (hence the trip to Dublin) and then never see each other in person again until the Conposium, a Shark-Tank like competition in April at the University of Miami, where they present their solution to a venture capitalist, academic, and practitioner in front of a live and virtual audience.
Over the period of a few months the students and mentors, who are all in different cities, work together and meet virtually. Students also attend mandatory weekly thought leader sessions. Past topics have included developments in legal practice around the world and the necessity of a business plan. For many law students, this brings what they learned in Professional Responsibility and Business Associations classes to life. At the Dublin kickoff, audience members watched actual live pitches to venture capitalists from three startups, learned about emotional intelligence and networking from internationally-renowned experts, and started brainstorming on mini projects of worth.
This year, I am coaching a virtual LWOW Compliance team working on a problem submitted by the Ethics Resource Center. My students attend school in London and Hamburg but hail from India and Singapore. My co-mentors include attorneys from Dentons and Holland and Knight. The winner of the LWOW Compliance competition will present their solution to the Ethics Resource Center in front of hundreds of compliance officers. In past years, I have had students in LWOW Live from Brazil, Israel, China, the US, South Africa, and Spain and mentees who served as in-house counsel or who were themselves start-up entrepreneurs or investors. Representatives from the firms that are disrupting the legal profession such as Legal Zoom serve as mentors to teams as well. In the past students have read books by Richard Susskind, who provides a somewhat pessimistic view of the future of the legal profession, but a view that students and mentors should hear.
As I sat through the conference, I remembered some of the takeaways from the AALS sessions in Washington in early January. The theme of that conference was “Legal Education at the Crossroads.” Speakers explained that firms and clients are telling the schools that they need graduates with skills and experience in project management, technology, international exposure, business acumen, emotional intelligence, leadership, and working in teams. Law schools on average don’t stress those skills but LWOW does. Just today, LWOW’s team members were described as "lawyers with solutions." I agree and I’m proud to be involved in shaping those solutions.
Monday, January 5, 2015
Last week, I gave you a list of the best fiction books I read in 2014. Here’s a list of the best non-law, non-fiction I read in 2014. I hope you find something that interests you. I read much more non-fiction than fiction, so this list is a little longer. As with my list of fiction, they’re in no particular order.
1. Rose George, Ninety Percent of Everything: Inside Shipping, the Invisible Industry that Puts Clothes on Your Back, Gas in Your Car, and Food on Your Plate. An extremely well-written look at the global shipping industry—not the FedEx and UPS type of shipping, but actual ships. The author traveled over 9,000 miles on a container ship. The book discusses that voyage, interlaced with a boatload of material (pun intended) about the history of shipping, the regulation of shipping, shipwrecks, piracy, and a number of other subjects.
2. Rich Cohen, Monsters: The 1985 Chicago Bears and the Wild Heart of Football. I’m neither a Chicago Bears fan nor a Mike Ditka fan, but this was an interesting book. For those who are young and familiar with the current Bears, yes, the Bears actually won back in 1985. Cohen covers more than just that 1985 team. The book looks at the history of the team back to the early days of the NFL and also the aftermath of the 1985 championship—what happened to the team and the players afterwards.
3. Adam Minter, Junkyard Planet: Travels in the Billion-Dollar Trash Trade. A look at trash and recycling. Recycling makes more sense economically than I thought; apparently, much of our recycled materials make their way to China for use in Chinese manufacturing. I never knew that trash could be so interesting.
4. William Easterly, The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor. Easterly, an economist at N.Y.U., discusses anti-poverty programs and their effect on the third world. He argues that the technical solutions proposed by experts haven’t worked and that the real key to development is bottom-up: giving poor people economic freedom. I previously recommended this book here. My co-blogger Haskell Murray reviews it here.
5. Jang Jin-Sung, Dear Leader: Poet, Spy, Escapee—A Look Inside North Korea. The author worked in the propaganda arm of the North Korean government and was honored by Kim Jong-Il for his epic poetry. This book is the story of his escape from North Korea, but also an account of life among the privileged in Pyongyang.
6. Louisa Lim, The People’s Republic of Amnesia: Tiananmen Revisited. An amazing account of how China has been able to recast, and even erase, from its history the events in Tiananmen Square in 1989. The scary part is how they have used nationalism to supplant the yearnings for freedom that prompted Tiananmen.
7. Mark Miodownik, Stuff Matters: Exploring the Marvelous Materials that Shape Our Man-Made World. An introduction to how materials are made and how they’re put together, down to the atomic level. He discusses for instance, why diamonds and graphite are so incredibly different, even though they’re both carbon-based. For those who have a heavy scientific background, there won’t be much new here, but he explains the science in ways that a non-scientist like me can understand.
8. Jenny Lawson, Let’s Pretend This Never Happened: A Mostly True Memoir. A hilarious autobiography of a Texas woman who now writes a blog at TheBloggess.com. Parts of it made my literally laugh at loud. I was constantly reading parts of the book to my wife.
9. Ben Macintyre, A Spy among Friends: Kim Philby and the Great Betrayal. The story of Kim Philby, perhaps the best-known Russian spy ever. An interesting look at the good-old-boys’ network that was British intelligence at the time and their unwillingness to believe that one of their own would actually betray them.
10. Steven Pinker, The Sense of Style: The Thinking Person’s Guide to Writing in the 21st Century. I tend to be a grammar prescriptivist; Pinker is not. I’m a big fan of Strunk & White; Pinker is not. But I nevertheless enjoyed this guide to grammar, punctuation, and sentence and paragraph structure. Pinker’s suggestions are sensible. He also explains why things should be written as he suggests and why grammar and structure matter.
11. Hampton Sides, In the Kingdom of Ice: The Grand and Terrible Polar Voyage of the U.S.S. Jeannette. An account of an attempt to sail to the North Pole from the Pacific Ocean and on to the Atlantic. At the time, many people thought that there was a great polar sea beyond the ice. The Jeannette was stuck in the ice for two years before it sank and the crew had to try to make their way through the ice and eventually overland through Russia.
12. Ian Leslie, Curious: The Desire to Know and Why Your Future Depends on It. I have already blogged about this one. See here.
13. Kim Zetter, Countdown to Zero Day: Stuxnet and the Launch of the World’s First Digital Weapon. The story of the Stuxnet computer worm which someone, apparently the U.S. government, used to disrupt Iran’s uranium enrichment program. Zetter tells the story primarily from the viewpoint of the computer experts who discovered and then unraveled the virus. He also discusses the ethical and practical implications. Among other things, what’s the risk to “us” now that we’ve unleashed this weapon on someone else?
Tuesday, December 30, 2014
This week I received the notice below from Professor Jason Gordon. Professor Gordon is a legal studies and management professor at Georgia Gwinnett College, School of Business. As explained below, he is offering copies of two entrepreneurship books that he thought might be useful to BLPB readers.
I recently published two texts entitled Business Plans for Growth-Based Ventures and Understanding Business Entities for Entrepreneurs and Managers. These books are designed for use by clinical law professors and as a supplement in entrepreneurship courses. The second text concerns entity selection considerations, but includes entity funding and conversion considerations and specific considerations for startup ventures.
The texts also contain supplemental electronic material available for free at TheBusinessProfessor.com.
If any of you would like a free copy of either text in Amazon e-book format, please send me your email address at jgordon10 [at] ggc [dot] edu.
A preview of the Business Plans E-Book is available here.
A preview of the Business Entities E-Book is available here.
Monday, December 29, 2014
Believe it or not, I and the other editors of the Business Law Prof Blog don't spend all of our time reading and thinking about business law. I assume none of you do, either, so I thought you might be interested in a list of the best non-law books I have run across this year.
I originally planned to put them all in a single post, but I read a number of very good books in 2014, so I decided to divide the list into two posts. Today, fiction. Next week, non-fiction.
I’m limiting both lists to books published relatively recently, so you don’t have to wade through a list of old science fiction or Thomas Hardy novels, no matter how excellent I thought they were when I reread them this year.
Except for the first book, they’re in no real order.
1. Anthony Doerr, All the Light We Cannot See. If you read only one book on this list, this should be it. This is the best new novel I have read in some time. It centers on a bright young German boy and a blind French girl in the period prior to and during World War II. It’s hard to explain the story in a few words, but I think it’s an absolutely brilliant book.
2. Chang-Rae Lee, On Such a Full Sea. The main character searches for the father of her unborn child in a dystopian future. The book has no real conclusion, and I usually don’t like that, but I’m willing to excuse that, given the excellent writing.
3. Rachel Joyce, Perfect. This brilliant novel has two alternating stories: one about a young boy who becomes obsessed when a friend tells him that two extra seconds will be added to clocks; the other about a disturbed 50-year-old supermarket worker. Keep reading: she eventually ties the two story lines together.
4. Andy Weir, The Martian. An astronaut is stranded on Mars without adequate supplies after his colleagues leave, thinking he’s dead. A solid piece of science fiction.
5. Karen Russell, Sleep Donation. A novella about a sickness that keeps people from sleeping. They use a machine to borrow sleep from sleep donors.
6. Joshua Ferris, To Rise Again at a Decent Hour. I’m not a huge Joshua Ferris fan, but I liked this one. A dentist discovers that someone is posting online in his name about a lost Middle Eastern group and a religion whose primary belief is a doubt that God exists.
7. Jo Walton, My Real Children. I really enjoy Jo Walton’s science fiction, and this book was not an exception. It’s about a woman with Alzheimer’s who remembers two very distinct lives—diverging when she said either “yes” or “no” to a marriage proposal.
8. Matthew Thomas, We are Not Ourselves. A bittersweet first novel about a woman and her families—the family she grew up with and, later, her husband and son. A story of regret and uncertainty, it's sad and depressing, but extremely good.
9. Bill Roorbach, The Remedy for Love. A fascinating love(?) story involving a small-town lawyer stuck in a tiny, isolated cabin with a disturbed woman during a once-a-century blizzard. A charming story, expertly told.
Monday, December 22, 2014
My co-blogger Haskell Murray had an interesting post last month on curiosity and obedience. He wrote about the natural curiosity of children: “As a professor, I wish I could bottle my son’s curiosity and feed it to my students.” But what exactly is curiosity and how exactly do we encourage it in law students?
I recently read an excellent book on curiosity: Curious: The Desire to Know and Why Your Future Depends on It, by Ian Leslie. The book has a lot of interesting things to say about education, parenting, life-long learning, creativity, and innovation. I couldn’t possibly do it justice here. But, if you’re interested in learning and education, legal or otherwise, I strongly recommend it.
Leslie makes a distinction between diversive curiosity and epistemic curiosity. Diversive curiosity is shallow—wanting to know a particular piece of information. When I check on IMDb for the name of the actress in the movie I’m watching, that’s diversive curiosity. Epistemic curiosity, what we really want to encourage in our kids and our students, is the quest for knowledge and understanding, the desire to address the mysteries that don’t have readily ascertainable answers.
Google is mostly about diversive curiosity, finding answers. Google is great at that, but not so good at promoting epistemic curiosity. In fact, Leslie believes that Google inhibits our epistemic curiosity, and thus stifles deep learning.
Why remember information, or teach students information, that we can easily look up on Google? The answer, according to Leslie, is that having those “mere facts” in our long-term memories promotes innovation and creativity. Creativity results from those various facts serendipitously bouncing into each other inside our heads. Instead of deadening curiosity, as many people argue, learning those facts actually promotes epistemic curiosity. The more we know, the more easily we can understand how it all fits together and (the essence of innovation) try to fit it together in different ways. Leslie argues that deep thinking is becoming a lost art as more and more people rely on their machines for information.
I'm still working through what all this means for my teaching, but the book is definitely worth reading.
Monday, November 3, 2014
On Monday, The University of Tennessee (UT) College of Law hosted Larry Cunningham to talk about his book, Berkshire Beyond Buffett: The Enduring Value of Values, which he previewed with us here on the BLPB a few months ago in a series of posts (here, here, and here). As you may recall, the book focuses on corporate culture and succession planning at Berkshire Hathaway. Joining Larry at the book session was UT College of Law alumnus James L. (Jim) Clayton, Chairman and principal shareholder of Clayton Bank and the founder of Clayton Homes, one of the Berkshire Hathaway subsidiaries featured in the book. The impromptu conversation between Larry and Jim was an incredible part of the event (although Larry's prepared presentation on the book also was great).
As part of the event, Larry and Jim answered a variety of audience questions. Included among them was a question from UT College of Law Dean Doug Blaze on the role of lawyers in management, transactions, and entrepreneurialism. As part of Jim Clayton's response, he noted the value of preventative lawyering--advising businesses to keep them out of trouble. I was so glad, as a business law advisor, to hear him say that!
Following on that, given that (a) Larry's book focuses on the factors influencing succession planning, (b) I am teaching the Disney case to my Business Associations students this week, and (c) the Disney case is about . . . well . . . failed succession and executive compensation, I asked about management compensation in the context of succession planning at Berkshire Hathaway. Both Larry and Jim (whose son Kevin is President and Chief Executive Officer of Clayton Homes) were clear that Warren Buffett is an exacting manager, but that he believes in paying his portfolio company managers well. Of course, the precise nature of the compensation arrangements of those portfolio firm executives (unlike Michael Ovitz's compensation arrangements at issue in the Disney case) are not a matter of public record. But given the markedly different contexts, I assume the arrangements are very different . . . .
As I approach discussing the Disney case once again in the classroom, I am (as always) looking for new angles, new insights to share with the class (in addition to the core fiduciary duty doctrine). One I will share this year is Jim Clayton's advice about preventative lawyering. What could lawyers have done to reduce the likelihood of controversy and litigation? I have some thoughts and will develop others in the next 24 hours. Leave your thoughts here, if you have any . . . .
Note to all legislators and regulators: don’t do anything until you’ve thought through all the consequences.
One of the most important things I learned as a student of public policy was the difference between static and dynamic analysis. Static analysis looks only at the immediate consequences of a change. Dynamic analysis looks at the long-term consequences of a change, taking into account how people will adjust to that change.
If I tell my students they must write a 50-page paper by Friday or fail, most of them will at least try to write the 50-page paper. That’s the static effect. But no one will ever take my Business Associations class again. That’s the dynamic effect.
For some people today, including an increasing number of politicians on both sides of the aisle, neither static nor dynamic effects matter. It’s enough just to have good intentions. “Don’t you care?”, those people ask. “We need to do something.”
Even when policy makers do consider the effects of their policy choices, many of them consider only the immediate effects—static analysis—and don’t think about the long-term consequences. That’s unfortunate, because legislation and regulation often have unintended consequences.
That’s the point of Thomas E. Hall’s new book, Aftermath: The Unintended Consequences of Public Policies. Hall, a professor of economics at Miami (Ohio), looks at the unintended consequences of four policies: (1) the federal income tax; (2) cigarette taxes; (3) minimum wage laws; and (4) Prohibition.
None of the evidence Hall lays out will surprise anyone familiar with these four policies, and the results are predictable to anyone familiar with economics. But the book is a great introduction to the idea of unintended consequences, and an illustration of the need for dynamic analysis (although Hall doesn’t use that term).
The book is short; it won’t take you long to read it. And Hall writes well, using non-technical language, so the book won’t put you to sleep. I recommend it to anyone interested in public policy—which should cover most of the readers of this blog.
Monday, October 27, 2014
A few weeks ago, I suggested the book Is Administrative Law Unlawful, by Philip Hamburger. I have now finished reading the book. It’s a tough read but, if you’re interested in constitutional history as it relates to administrative law, I strongly recommend it.
I was especially struck by the following argument about the connection between popular sovereignty and the growth of administrative rule:
The growth of administrative power in America has followed the expansion of suffrage—an expansion that increasingly has opened up voting to all the people. It therefore is necessary to consider whether there is a connection.
It would appear that the new, cosmopolitan, or knowledge class embraced popular suffrage with a profound caveat. They tended to favor popular participation in voting, but they also tended to support the removal of much legislative power from legislatures. The almost paradoxical result has been to agonize over voting rights while blithely shifting legislative power to unelected administrators.
. . . Throughout the nineteenth and twentieth centuries, reformers struggled for the people to have equal representation and thus to enjoy the power to govern themselves. The reformers told themselves that, if only the people had power, reasonable and righteous government would prevail. When the people gradually acquired this power, however, the results were disappointing for the knowledge class. The members of this class had established their status, influence, and sense of self-worth through their assiduous pursuit of rationality and specialized knowledge, and they were troubled that popularly elected legislatures did not operate in line with the qualities they so admired in themselves. . . . Administrative power . . . was one of the avenues for power by and on behalf of a class that understood authority not merely in terms of the equal rights of all the people, but more deeply in terms of their own rationality and specialized knowledge.
Democracies often make stupid choices. But I will take democracy over technocracy any day. Bureaucrats also make stupid choices, and bureaucrats are much less likely than democratic majorities to admit their mistakes and move on.
Friday, October 24, 2014
I used to joke that my alma mater Columbia University’s core curriculum, which required students to study the history of art, music, literature, and philosophy (among other things) was designed solely to make sure that graduates could distinguish a Manet from a Monet and not embarrass the university at cocktail parties for wealthy donors. I have since tortured my son by dragging him through museums and ruins all over the world pointing spouting what I remember about chiaroscuro and Doric columns. He’s now a freshman at San Francisco Art Institute, and I’m sure that my now-fond memories of class helped to spark a love of art in him. I must confess though that as a college freshman I was less fond of Contemporary Civilization class, (“CC”) which took us through Plato, Aristotle, Herodotus, Hume, Hegel, and all of the usual suspects. At the time I thought it was boring and too high level for a student who planned to work in the gritty city counseling abused children and rape survivors.
Fast forward twenty years or so, and my job as a Compliance and Ethics Officer for a Fortune 500 company immersed me in many of the principles we discussed in CC, although we never spoke in the lofty terms that our teaching assistant used when we looked at bribery, money- laundering, conflicts of interest, terrorism threats, data protection, SEC regulations, discrimination, and other issues that keep ethics officers awake at night. We did speak of values versus rules based ethics and how to motivate people to "do the right thing."
Now that I am in academia I have chosen to research on the issues I dealt with in private life. Although I am brand new to the field of normative business ethics, I was pleased to have my paper accepted for a November workshop at Wharton's Zicklin Center for Business Ethics Research. Each session has two presenters who listen to and respond to feedback from attendees, who have read their papers in advance. Dr. Wayne Buck, who teaches business ethics at Eastern Connecticut State University, presented two weeks ago. He entitled his paper “Naming Names,” and using a case study on the BP Oil spill argued that the role of business ethics is not merely to promulgate norms around conduct, but also to judge individual businesspeople on moral grounds. Professor John Hasnas of Georgetown’s McDonough School of Business also presented his working paper “Why Don't Corporations Have the Right to Vote?” He argued that if we accept a theory of corporate moral agency, then that commits us to extending them the right to vote. (For the record, my understanding of his paper is that he doesn’t believe corporations should have the right.) Attendees from Johns Hopkins, the University of Connecticut, Pace and of course Wharton brought me right back to my days at Columbia with references to Rawls and Kant. My comments were probably less theoretical and more related to practical application, but that’s still my bent as a junior scholar.
In a few weeks, I present on my theory of the social contract as it relates to business and human rights. In brief, I argue that multinational corporations enter into social contracts with the states in which they operate (in large part to avoid regulation) and with stakeholders around them (the "social license to operate", as Professor John Ruggie describes it). Typically these contracts consist of the corporate social responsibility reports, voluntary codes of conduct, industry initiatives, and other public statements that dictate how they choose to act in society, such as the UN Global Compact. Many nations have voluntary and mandatory disclosure regimes, which have the side benefit of providing consumers and investors with the kinds of information that will help them determine whether the firm has “breached” the social contract by not living up to its promise. The majority of these proposals and disclosure regimes (such as Dodd-Frank conflict minerals) rest on the premise that armed with certain information, consumers and investors (other than socially responsible investors) will pressure corporations to change their behavior by either rewarding “ethical” behavior or by punishing firms who act unethically via a boycott or divestment.
I contend in my article that: (1) corporations generally respond to incentives and penalties, which can cause them to act “morally;” (2) states refuse to enter into a binding UN treaty on business and human rights and often do not uniformly enforce the laws, much less the social contracts; (3) consumers over-report their desire to buy goods and services from “ethical” companies; and (4) disclosure for the sake of transparency, without more, will not lead to meaningful change in the human rights arena. Instead, I prefer to focus on the kinds of questions that the board members, consumers, and investors who purport to care about these things should ask. I try to move past the fuzzy concept of corporate social responsibility to a stronger corporate accountability framework, at least where firms have the ability to directly or indirectly impact human rights.
As a compliance officer, I did not use terms like “deontological” and “teleological” principles, but some heavy hitters such as Norway's Government Pension Fund, with over five billion Kronos under management, do. The 2003 report that helped establish the Fund’s recommendations on ethical guidelines state in part:
One group of ethical theories asserts that we should primarily be concerned with the consequences of the choices we make. These theories are in other words forward-looking, focusing on the consequences of an action. The choice that is ethically correct influences the world in the best possible way, i.e. has the most favourable consequences. Every choice generates an infinite number of consequences and the decisive question is of course which of the consequences we should focus on. Again, a number of answers are possible. Some would assert that we should focus on individual welfare, and that the action that has the most favourable consequences for individual welfare is the best one. Others would claim that access to resources or the opportunities or rights of the individual are most important. However, common to all these answers is the view that the desire to influence the world in a favourable direction should govern our choices.
Another group of ethical theories focuses on avoiding breaching obligations by avoiding doing evil and fulfilling obligations by doing good. Whether the results are good or evil, and whether the cost of doing good is high, are in principle of no significance. This is often known as deontological ethics.
In relation to the Petroleum Fund, these two approaches will primarily influence choice in that deontological ethics will dictate that certain investments must be avoided under any circumstances, while teleological ethics will lead to the avoidance of investments that have less favourable consequences and the promotion of investments that have more favourable consequences.
Recently, NGOs have pressured firms to speak on out human rights abuses at mega-events and have published their responses. The US government has made a number of efforts, some unsuccessful, to push companies toward more proactive human rights initiatives. These issues are here to stay. As I formulate my recommendations, I am looking at the pension fund, some work by ethicists researching marketing principles, writings by political and business philosophers, and of course, my old friends Locke, Rousseau, Rawls and Kant for inspiration. If you have ideas of articles or authors I should consult, feel free to comment below or to email me at firstname.lastname@example.org. And if you will be in Philadelphia on November 14th, register for the session at Wharton and give me your feedback in person.
October 24, 2014 in Books, Business School, Call for Papers, Conferences, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Ethics, Financial Markets, Marcia Narine Weldon, Securities Regulation | Permalink | Comments (0)
Sunday, September 21, 2014
Frank Pasquale on “how masterful manipulation of the law has allowed tech and finance giants to grow incredibly fast”
Like many people I know, I am a huge fan of Frank Pasquale. Thus, I was very excited to read his Balkanization interview (available here) discussing his forthcoming book, “The Black Box Society.” The interview touches on a wide range of topics, so you should go read the whole thing, but here is an excerpt to tempt you in case you’re on the fence:
I think our academic culture is very good at analysis, but oft-adrift when it comes to synthesis. Specialization obscures the big picture. And law can succumb to this as easily [as] any other field. For example, in the case of internet companies, cyberlawyers too often confine themselves to saying: “Google and Facebook should win key copyright cases, and subsequent trademark cases, and antitrust cases, and get certain First Amendment immunities, and not be classified as a ‘consumer reporting agency’ under relevant privacy laws,” etc. They may well be correct in every particular case. But what happens when a critical mass of close cases combines with network effects to give a few firms incredible power over our information about (and even interpretation of) events?
Similarly, old banking laws may fit poorly with the new globalized financial landscape. Finance lawyers churn out position papers dismantling the logic of Dodd-Frank, Basel, Sarbanes-Oxley, etc. But if too-big-to-fail firms keep growing bigger, assured of state support, while everything else the government does is deemed contingent: what kind of social contract is that?
The lawyers of the Progressive Era and the New Deal dealt with similar challenges: massive firms that warped the fabric of economic, political, and even cultural life to their own advantage. They consulted the best of social science to recommend regulation—but they didn’t let some narrow field (like neoclassical economics) act as a straitjacket (as, say, antitrust lawyers of today are all too prone to do).
Friday, September 19, 2014
I am passing on the English translation of a call for book chapters issued by a friend and colleague in Dijon, France. The book is international and has a broad business management focus.
As the editor of a forthcoming book, it is my greatest pleasure to invite you to submit articles as chapters. The tentative title is: Strategic Managerial Approaches to Crowdfunding Online. The book will be published by IGI Global publishers in the USA, within the series “Advances in Business Strategy and Competitive Advantage (ABSCA).”
Please read carefully the following guidelines for submission:
The emerging crowdfunding phenomenon is a collective effort by individuals who network and pool their money together, usually via the internet and without any specific conventional financial intermediation, in order to invest in and support for-profit, artistic, and cultural ventures initiative undertaken by other people or organizations. The spontaneous interactions and transactions between individuals allow relatively considerable fund raisings by drawing on small contributions from a relatively large number of individuals using the Internet, without standard financial intermediaries.
The advent of crowdfunding coincides with the democratization of information technologies that enable people to contact, interact, collaborate and exchange at lowest costs, if not for free. In fact, information technologies have allowed the drastic reduction of transaction costs and by the same the revival of ancient forms of transactions such as auctions, barter, tenders, recycling, and direct transactions between individuals.
Many platforms encourage crowdfunding such as Kiva, Babyloan, MyC4 in lending to the poor entrepreneurs, Prosper, Kapipal and Zopa in P2P social lending, Kickstarter, MyMajorCompany in entrepreneurial projects, SellaBand in music, etc.
Monday, September 1, 2014
Larry Cunningham has a further post on his forthcoming book, Berkshire Beyond Buffett: The Enduring Value of Values, over at Concurring Opinions. The post includes an excerpt from Chapter 8 of the book, Autonomy, and links to the full text of the chapter, available on SSRN for free (!) download. Larry's and my earlier posts on the book here on the BLPB can be found here, here, here, and here.
Here's a slice of the excerpt included in the Concurring Opinions post:
. . . Berkshire corporate policy strikes a balance between autonomy and authority. Buffett issues written instructions every two years that reflect the balance. The missive states the mandates Berkshire places on subsidiary CEOs: (1) guard Berkshire’s reputation; (2) report bad news early; (3) confer about post-retirement benefit changes and large capital expenditures (including acquisitions, which are encouraged); (4) adopt a fifty-year time horizon; (5) refer any opportunities for a Berkshire acquisition to Omaha; and (6) submit written successor recommendations. Otherwise, Berkshire stresses that managers were chosen because of their excellence and are urged to act on that excellence.
Cool stuff . . . .
Monday, August 11, 2014
Underhill recently released a book, The Emergency Sasquatch Ordinance. The book is a collection of silly, weird, and humorous laws, with commentary by Underhill. The title comes from an ordinance adopted by the board of commissioners of Skamania County, Washington that made it illegal to slay Bigfoot. Apparently, the threat was serious because the county commissioners designated it as an emergency ordinance so it could become immediately effective.
Both Underhill’s selection of laws and his commentary are a little uneven. Some of the laws he features are not that interesting (or funny). And Underhill’s commentary on the laws, while often quite funny, sometimes falls flat. I also wish Underhill would have provided more legislative history. He sometimes does, but not always, and it would be interesting to know what motivated some of these strange laws. But the book contains some real gems, and that alone makes it worth reading.
Some of the laws are funny because of their clear unconstitutionality. In 2011, for example, the Gould, Arkansas city council passed a law that (1) requires city council approval for the mayor or council members to participate in a meeting of any organization; (2) bans the Gould Citizens Advisory Council from doing business in the city; and (3) requires city council approval for any new organization in the city.
Some of them are just weird. A California law, for example, provides that
It is unlawful for any person to immerse or soak the carcass of any slaughtered rabbit in water for a period longer than necessary to eliminate the natural animal heat in the carcass and in no event for a period longer than 2 ½ hours.
Many of them make you wonder whether the legislative body didn’t have more important things to do. One Arkansas law, for instance, specifies how to pronounce Arkansas and another specifies the possessive form of Arkansas. (In case you were wondering, it’s pronounced “By Texas” and the possessive form is “Our’n.”) A Massachusetts statute that I’m sure my wife the law librarian will love makes it illegal to disturb people in a public library by making noise.
But my favorite law from the Underhill book confirms my view of tax law and tax lawyers. According to an Australian law, the tax commissioner may
- Treat a particular event that actually happened as not having happened;
- Treat a particular event that did not actually happen as having happened and, if appropriate, treat the event as having happened at a particular time and having involved particular action by a particular entity; or
- Treat a particular event that actually happened as having happened at a time different from the time it actually happened, or having involved particular action by a particular entity (whether or not the event actually involved any action by that entity).
The Emergency Sasquatch Ordinance is an easy read and each law is in a separate chapter, so it’s easy to pick and choose. It’s worth a look.
Friday, August 8, 2014
Maybe having a suitcase that has more books in it than clothes is a sign that I need to follow Steve Bradford's lead and get an e-reader.
This week I am in Seattle for the 2014 ALSB conference, which I may blog about when I return. In my suitcase, in addition to a few clothes, are:
- Bain, What the Best College Teachers Do
- Bainbridge, Corporate Governance after the Financial Crisis
- Bruner, Corporate Governance in the Common-Law World
- Edmondson, Ice Cream Social: The Struggle for the Soul of Ben & Jerry's
- Klein, et al., Business Organization and Finance
- O'Hara and Ribstein, The Law Market
- Subramanian, Dealmaking: The New Strategy of Negoti-Auctions
Some of these, like Bainbridge, Klein, and O'Hara's books, I have already read, but I thought they would be worth revisiting while I wait on some new books I recently ordered.
Tuesday, August 5, 2014
This doesn't have a lot to do with Business Law, though I would submit there's a lot to be learned from reading outside the field. Now that I live in West Virginia, and my wife suggested I read it, I propose: Bill Bryson, A Walk in the Woods: Rediscovering America on the Appalachian Trail, which seemed appropriate for a summer read. She was right. So far, it's great. I recommend it, and to support my claim, here's a few quotes to tease you:
“I know a man who drives 600 yards to work. I know a woman who gets in her car to go a quarter of a mile to a college gymnasium to walk on a treadmill, then complains passionately about the difficulty of finding a parking space. When I asked her once why she didn't walk to the gym and do five minutes less on the treadmill, she looked at me as if I were being willfully provocative. 'Because I have a program for the treadmill,' she explained. 'It records my distance and speed, and I can adjust it for degree of difficulty.' It hadn't occurred to me how thoughtlessly deficient nature is in this regard.”
“Black bears rarely attack. But here's the thing. Sometimes they do. All bears are agile, cunning and immensely strong, and they are always hungry. If they want to kill you and eat you, they can, and pretty much whenever they want. That doesn't happen often, but - and here is the absolutely salient point - once would be enough.”
Friday, July 25, 2014
We welcome Eric Orts (Wharton) to the "blawgosphere." Professor Orts has begun blogging at Ortsian Thoughts and Theories. I have already added his blog to my favorites, and I am sure I will become a regular reader. His new book, Business Persons: A Legal Theory of the Firm should be in my mailbox soon, and I am looking forward to reading it as well. (H/T David Zaring at the Conglomerate).
One of my younger brothers is a PHD Candidate in Literature at University of Alabama. One of my younger sisters majored in English at the University of Georgia and is working in the media industry. (Yes, I am a proud older brother, prone to brag about my siblings' many accomplishments).
Both siblings recently encouraged me to expand my summer reading beyond books about law. Due to the tall stack of legal books in my "need to read" pile, I usually don’t devote much time to "pleasure reading."
This summer, however, I am trying to read legal books and, at least some books, which have no noticeable connection to law. Rick Bragg’s All Over But the Shoutin’ falls into the latter category. I will let interested readers follow the link for a description of the book, but I only mention it here to say that Bragg writes beautifully. I finished the 329-page book in two, long, sittings.
Writer Pat Conroy said the following of the book and its author:
Rick Bragg writes like a man on fire. And All Over But the Shoutin' is a work of art. I thought of Melville, I thought of Faulkner. Because I love the English language, I knew I was reading one of the best books I've ever read.
My English-major sister recently used that phrase – “because I love the English language” – but in a different, law-related context. She told me that reading her employment contract made her cry, because she loves the English language. Presumably, the attorney managed to draft a contract that was painful to read.
Likewise, most of us in legal academia can slip into what Steve Bradford recently called “the usual turgid law-review prose.” Reading Bragg’s book has inspired me to strive for writing that is both clear and engaging.
Tuesday, July 22, 2014
You may think of Warren Buffett as a savvy stock picker but his greater accomplishment is in configuring an exceptionally strong corporation that defies widespread conceptions of effective corproate governance.
Since early in his career, Buffett adopted what he calls the double-barreled approach to capital allocation, meaning both stock picking and business buying. He gained prominence primarily as an investor in stocks, championing a contrarian investment philosophy.
Attracting three generations of devoted followers to a school of thought called “value investing,” he doubted the market’s efficiency and deftly exploited it. Buffett bought stocks of good companies at a fair price, assembling a concentrated portfolio of large stakes in a small number of firms. Today, nearly three-fourths of Berkshire’s stock portfolio consists of just seven stocks.
But late in his career, beginning around 2000, Buffett shot more often through the other half of his double-barreled approach: buying 100 percent of companies run by trusted managers given great autonomy. True, Berkshire early on bought all the stock of companies such as Buffalo News and See’s Candies. But, through the 1990s, the first barrel dominated, with Berkshire consisting 80 percent of stocks and 20 percent owned companies. That mix gradually reversed and recently flipped, making subsidiary ownership the defining characteristic of today’s Berkshire.
Owning primarily subsidiaries rather than merely stocks gives Berkshire a different shape compared to its previous character as the holding company of a famed investor. After all, even for a buy-and-hold investor, stocks come and go. Berkshire has sold the stocks of many once-fine companies, including Freddie Mac, McDonald’s, and The Walt Disney Company.
In contrast, aside from a few Berkshire subsidiaries that it acquired from the Buffett Partnership in the 1970s, Berkshire has never sold a subsidiary and vows to retain them through thick and thin. Despite their variety, moreover, Berkshire companies are remarkably similar when it comes to corporate culture, which is the central discovery I document and elaborate in my upcoming book, Berkshire Beyond Buffett: The Enduring Value of Values.
When Berkshire consisted mostly of the stock portfolio of a famed stock picker, you could expect that, once that investor departed, the portfolio would naturally be unwound and the company dissolved. Now, however, with Berkshire made of companies not stocks, its life expectancy stretches out in multiple decades, not mere years. It certainly goes beyond the stock picker who founded it. That's not an accident either, as the dominant cultural motif at Berkshire and its subsidiaries is a sense of permanence--the longest possible time horizon imaginable.
Monday, July 21, 2014
As I promised on Friday, I am posting a question and answer segment with Larry Cunningham, author of the forthcoming book: Berkshire Beyond Buffett: The Enduring Value of Values. Larry will be guest blogging with us this week to talk more about the interesting findings he shares in the book and their implications for business and the research, teaching, and practice of business law.
Q: Why did you write this book and what did you find?
A: Widespread praise for Warren Buffett has become paradoxical: Buffett set out to build a permanent institution at Berkshire Hathaway and yet even great admirers, such as Steven Davidoff, doubt that the company can survive without him. I found that viewpoint intriguing since companies who are identified with iconic founders often have trouble after a succession, as Tom Lin has written. I wanted to investigate how the situation will look for Berkshire after Buffett leaves the scene, collapse and breakup or prosperity coupled with continued expansion? What I found was a culture so distinctive and strong, that the company’s future is bright well beyond Buffett.
Q: How did you reach that conclusion? What was your research method?
A: I focused on Berkshire’s fifty operating subsidiaries, which define the company today, representing 80 percent of its value. Incidentally, that is a flip from decades passed, when 80 percent of Berkshire’s value resided in minority stock investments. I began with Buffett’s historical statements about those subsidiaries and Berkshire’s corporate culture, research that in some ways dates to the 1997 Cardozo Law Review symposium I hosted on Buffett’s shareholder letters, which developed into my book, The Essays of Warren Buffett: Lessons for Corporate America. Still, for this project, focusing on the subsidiaries, I gathered and studied specific information about each—biographies, autobiographies, research reports, encyclopedic entries, press releases, public filings. Then, with Buffett’s permission, I surveyed all current Berkshire subsidiary chief executives and interviewed many, along with former managers and large shareholders of subsidiaries. In addition, I surveyed a large number of Berkshire shareholders to gain additional insight and to make sure I was asking the right questions.
Q: What culture did you find, what common traits do the subsidiaries share?
A: That’s the striking discovery. As I profiled each subsidiary, a pattern emerged in which the same traits began to appear repeatedly, nine altogether, including budget-consciousness, earnestness, kinship, entrepreneurship, autonomy, and a sense of permanence. Not every subsidiary had all nine, but many did, and the vast majority manifested at least five or six of the nine. A portrait of Berkshire culture crystalized, one that is distinctive and durable. And that culture, I argue in the book, will allow the company to thrive even after Buffett’s departure.
The discovery is suggested by the book’s subtitle: The Enduring Value of Values. “Value of values” refers to how the traits that bind Berkshire’s subsidiaries all share a common feature: all are intangible virtues that managers transform into economic gain. The most general manifestation of the “value of values” occurs in business acquisitions when the exchange of economic values measured using traditional standards leaves a wide gap—a price higher or lower than economic value.
A salient example from Berkshire’s history concerns Bill Child, patriarch of his family home furnishings company, RC Willey. He sold the company to Berkshire for $175 million, declining rival offers as high as $200 million. Why? Because his family valued the managerial autonomy and sense of permanence that define Berkshire culture.
The book contains more than one hundred examples of myriad ways that Berkshire subsidiaries translate intangible qualities into economic value, whether in research & development, customer service, employee compensation and benefits, corporate finance, or internal policies and practices.
Q: What makes the value of values enduring?
A: By reaping returns on capital from intangible virtues, Berkshire practices a philosophy of capitalism that does well by doing good, is sensitive but unsentimental, lofty yet pragmatic, and public-spirited but profitable. This attitude is neither altruistic nor moralistic, but practical, economic, and long-term. It’s a way of doing business that matches today’s zeitgeist, with its sense of stewardship and fair play, and also has a timeless horizon, as business leaders from Robert Mondavi to John Mackey of Whole Foods champion variations on these themes.
Q: What is the audience for the book?
A: Everyone involved in shaping American business: managers, entrepreneurs, owners, shareholders, directors, policymakers, scholars of corporate stewardship—and business lawyers and business law professors, of course. It’s a broad audience because Berkshire’s approach is distinctive but not inimitable and valuable yet underappreciated.
Q: What surprises did you find?
A: Many, mostly concerning the various subsidiaries, but several rising to the level of Buffett and Berkshire. As a recent headline in USA Today put it, “New Book Rewrites Buffett Legacy in Three Ways.” The book explains why Buffett’s place in American history is even more significant than currently assumed. Besides being a “legendary investor,” as he is often identified by journalists, Buffett has built a formidable corporation, demonstrated unsung managerial prowess, and chartered a course for American capitalism that widens the meaning of “value investing.”
While everyone knows that Buffett owes a lot to Ben Graham, his investments teacher at Columbia Business School, this book also makes clear his debt on the management side to Tom Murphy, the legendary corporate icon and head of ABC who is now a Berkshire director. When I asked Buffett who should write the foreword to this book, he instantly suggested Tom, and I’m grateful that Tom accepted the invitation—his foreword alone is worth the price of the book!
Q: Care to give us a thumbnail sketch of the book’s outline?
A: Sure. The opening chapters cover Berkshire’s origins and foundations, with surprises even for those most familiar with this terrain, including rich connections between Berkshire’s early acquisitions and the conglomerate today. While Berkshire appears vast, diverse, and sprawling, this synthesis of corporate culture shows instead a close-knit organization linked by discrete values.
The middle chapters, the heart of the book, take a series of deep dives into fifty Berkshire subsidiaries to illuminate each of the traits and how they give Berkshire its identity and destiny. I was delighted that, when circulating the manuscript for comment among Berkshire devotees, even the most avid readers found new facts, fresh insights, and a whole new way of thinking not only about Berkshire but about Buffett.
The closing chapters reflect on what Berkshire’s corporate culture means for Buffett’s legacy. They explore the elaborate succession plan at Berkshire, which most people misunderstand, and identify challenges Berkshire will face. I also draw specific lessons for investors, managers, and entrepreneurs who can benefit from Berkshire’s distinctive approach—lessons that business lawyers and policymakers will want to learn as well.
Q: Can Berkshire Beyond Buffett be assigned for any university classes?
A: Yes, and I think it will be a good companion to The Essays of Warren Buffett, which has been adopted at many law and business schools for courses on corporate governance, investments (portfolio management), and mergers & acquisitions. This book would suit those courses as well as courses in business ethics and corporate social responsibility. I am planning a seminar next spring in which these two books will be on the reading list, along with other contemporary books offering fresh examinations of venerable themes, such as Eric Orts’ Business Persons; Lynn Stout’s Shareholder Value Myth; or Curtis Milhaupt & Katharine Pistor’s Law & Capitalism.
Q: Berkshire Beyond Buffett appears to be full of lessons and important principles. Which do you propose to explore for us during the coming week?
A: I’m looking forward to sharing insights on topics such as corporate governance, corporate purpose, and succession planning. Among the book’s many lessons, these will likely be of greatest interest to readers of the Business Law Prof Blog, and I thank you for the opportunity to introduce the book and these themes here this week.
Q: Thanks so much, Larry. Those certainly are all topics that interest me (and infuse my ongoing scholarship and teaching). I look forward to your posts this week.
A: You're welcome. I am grateful for the opportunity to share what I have learned.