Tuesday, February 13, 2018
I suspect click-bait headline tactics don't work for business law topics, but I guess now we will see. This post is really just to announce that I have a new paper out in Transactions: The Tennessee Journal of Business Law related to our First Annual (I hope) Business Law Prof Blog Conference co-blogger Joan Heminway discussed here. The paper, The End of Responsible Growth and Governance?: The Risks Posed by Social Enterprise Enabling Statutes and the Demise of Director Primacy, is now available here.
To be clear, my argument is not that I don't like social enterprise. My argument is that as well-intentioned as social enterprise entity types are, they are not likely to facilitate social enterprise, and they may actually get in the way of social-enterprise goals. I have been blogging about this specifically since at least 2014 (and more generally before that), and last year I made this very argument on a much smaller scale. Anyway, I hope you'll forgive the self-promotion and give the paper a look. Here's the abstract:
The emergence of social enterprise enabling statutes and the demise of director primacy run the risk of derailing large-scale socially responsible business decisions. This could have the parallel impacts of limiting business leader creativity and risk taking. In addition to reducing socially responsible business activities, this could also serve to limit economic growth. Now that many states have alternative social enterprise entity structures, there is an increased risk that traditional entities will be viewed (by both courts and directors) as pure profit vehicles, eliminating directors’ ability to make choices with the public benefit in mind, even where the public benefit is also good for business (at least in the long term). Narrowing directors’ decision making in this way limits the options for innovation, building goodwill, and maintaining an engaged workforce, all to the detriment of employees, society, and, yes, shareholders.
The potential harm from social benefit entities and eroding director primacy is not inevitable, and the challenges are not insurmountable. This essay is designed to highlight and explain these risks with the hope that identifying and explaining the risks will help courts avoid them. This essay first discusses the role and purpose of limited liability entities and explains the foundational concept of director primacy and the risks associated with eroding that norm. Next, the essay describes the emergence of social benefit entities and describes how the mere existence of such entities can serve to further erode director primacy and limit business leader discretion, leading to lost social benefit and reduced profit making. Finally, the essay makes a recommendation about how courts can help avoid these harms.
February 13, 2018 in Business Associations, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Delaware, Joshua P. Fershee, Law and Economics, Lawyering, Legislation, LLCs, Management, Research/Scholarhip, Shareholders, Social Enterprise, Unincorporated Entities | Permalink | Comments (0)
Monday, February 12, 2018
Just a quick post today about a teaching technique I have been using that offers significant opportunities for exploration, especially in small class environments.
I am again teaching Advanced Business Associations this semester. The course allows students to review and expand their knowledge of business firm management and control issues in various contexts (public corporations, closely held corporations, benefit corporations, and unincorporated business entities), mergers and acquisitions, and corporate and securities litigation. I have reported on this course in the past, including in this post and this one.
At the conclusion of each unit, I have students locate (go off on a treasure hunt, of sorts) and post on the course management website (I use TWEN) a practice document related to the matters covered in that unit. Today we concluded our unit on benefit corporations. Each student (I only have five this semester) was required to, among other things, post the actual corporate charter (not a template or form) of a benefit corporation. Although the Advanced Business Associations course features training presentations by representatives of Lexis/Nexis, Westlaw, and Bloomberg that include locating precedent documents of various kinds, the students have not yet had this training.
In our discussions about this part of today's assignment, we learned a number of things. Here are a few:
- New articles, blog posts, and other secondary materials can be a good starting place in locating firms with particular attributes.
- The word "charter" can mean different things to different people.
- Journalists do not understand the difference between a benefit corporation and a B corporation.
- In research geared toward locating precedents for planning and drafting, googling descriptive terms is likely to yield yield fewer targeted results than googling the terms used an actual exemplar document.
- Corporate charters for privately held firms can be difficult to find--especially in certain specific jurisdictions, even when you know the firm's name and other identifying attributes.
- "If at first you don't succeed, try, try, again." Three of the five students posted more than one document before they found an appropriate example.
- The corporate charters the students posted include exculpation and indemnification.
- Patagonia's charter is pretty cool. It has a detailed, specific benefit purpose, a prohibition on redemptions, and a right of first offer. It also requires a unanimous vote on certain fundamental/basic corporate changes, redemptions, and bylaw amendments.
- There is a law firm in California that is a professional corporation organized as a benefit corporation "to pursue the specific public benefit of promoting the principles and practices of conscious capitalism through the practice of law." Also pretty cool.
The discussion was rich. The students accomplished the required task and reflected responsibly and valuably on their individual search experiences during our class meeting. They learned from each other as well as from me; benefit corporations seemed to come alive for them as we spoke. We accomplished a lot in 75 minutes!
Do any of you use a similar teaching technique? Have you adapted it for use in a large-class (over 50 students) environment? If so, let me know. I would like to evolve my "treasure hunt" for business law drafting precedents for use in a larger class setting.
Monday, January 29, 2018
Indiana University legal studies professor Abbey Stemler sent along this description of an article she co-wrote with Harvard Business School Professor Ben Edelman. They recently posted the article to SSRN and would love any feedback you may have, in the comments or via e-mail.
Perhaps the most beloved twenty-six words in tech law, Section 230 of the Communications Decency Act of 1996 has been heralded as a “masterpiece” and the “law that gave us the modern Internet.” While it was originally designed to protect online companies from defamation claims for third-party speech (think message boards and AOL chat rooms), over the years Section 230 has been used to protect online firms from all kinds of regulation—including civil rights and consumer protection laws. As a result, it is now the first line of defense used by online marketplaces to shield them from state and local regulation.
In our article recently posted to SSRN, From the Digital to the Physical: Federal Limitations on Regulating Online Marketplaces, we challenge existing interpretations of Section 230 and highlight how it and other federal laws interfere with state and local government’s ability to regulate online marketplaces—particularly those that dramatically shape our physical realities such as Uber and Airbnb. We realize that the CDA is sacred to many, but as Congress pays renewed attention to this law, we hope our paper will support a richer discussion about what the CDA should and should not be expected to do.
Friday, December 29, 2017
We are at a time of year where schools are starting to make offers for professor position.
In business schools, the hiring process is more of a year-round affair than it is in law schools, but business schools have started to learn that they need to hire on the same schedule as law schools if they want to compete for the best legal academic talent. Also, a few business schools, such as the University of Georgia this year, have started to attend the AALS hiring conference.
As I explained a few years ago, working as a law professor in a business school can be a good bit different than working in a law school.
Business school legal studies positions have become more popular in recent years as law school hiring has diminished and as many law schools face financial difficulties. Personally, I have fielded dozens of calls from prospective academics and current law school professors, asking advice about getting a job teaching law in a business school.
The business school legal studies positions are quite diverse – vastly different pay scales, vastly different teaching loads, vastly different research expectations, and some are tenure-track and some are not. As such, I think it is smart to explore some of the following before accepting a legal studies professor position in a business school.
- What are the research expectations, especially how does the school view law reviews? (Some business schools disregard or heavily discount law reviews because they are not “peer-reviewed” in the traditional sense. There are peer-reviewed legal journals, like the American Business Law Journal, the Journal of Legal Studies Education, and the regional ALSB related journals, but there are relatively limited publication slots. Also, business schools may use metrics for scholarship not common among law schools, and you should attempt to uncover the formal and informal tenure requirements before accepting a job.)
- Does the business school provide WestLaw/Lexis access? (Most schools at least have Lexis, but they may or may not have access to all the law resources you need for your research.)
- Does the business school have an ExpressO and Scholistica accounts? If not, will they reimburse for your submissions?
- What is the teaching load/schedule? Ask not only about the number of hours, but also the number of courses, as business schools seem to have more 2-credit courses, especially at the MBA level than law schools. Also, business schools have night, weekend, and online classes, especially at the MBA level, more frequently than law schools.
- Are there other tenure-track legal studies faculty members? If so, those faculty members likely will have fought most of the research battles mentioned above, though standards do change over time and resources are cut, so it is still worth asking those questions. I am the only tenure-track legal studies faculty member at the Massey College of Business at Belmont University, and I do miss discussing my research with knowledgeable colleagues on my hall. That said, having a law school at Belmont and nearby Vanderbilt has helped some, though I don’t make it over to either school nearly enough.
- What is the policy on research stipends? (This varies significantly at business schools).
- What is the policy on travel? (If you do not have legal studies colleagues in the school or nearby, you will definitely want to travel to the various ALSB conferences for work-shopping your articles and for exchanging ideas with fellow legal academics).
- What administrative responsibilities will you have? At some schools, full-time legal studies professors are responsible for managing the legal studies adjuncts, which can take a considerable amount of time. (I do not). At some schools, legal studies professors serve as pre-law advisers to undergraduate business students. (I do, and I enjoy it, though it does mean quite a number of extra meetings and reference letters, especially in the late fall and early spring.)
- Does the school have a pre-law major or minor or certificate program? (If so, this may give you some additional job security and may allow you to teach a variety of courses, instead of section after section of Business Law/Legal Environment).
- Is the school AACSB accredited? There are multiple accrediting bodies in the business school space, but AACSB is clearly the best and most of the non-AACSB schools do have a bit of a second-class reputation. Also, I believe Business Law/Legal Environment is generally a required course at most (if not all) AACSB schools.
Always happy to discuss teaching law in a business school with those who have additional questions. Good luck to everyone on the market.
Friday, December 8, 2017
I have had an opportunity to read the oral argument transcript (112 pages) from Tuesday's oral argument in the Masterpiece Cakeshop case.
One of the first things that struck me was that it seemed pretty clear that most of the justices have already taken sides. This is not surprising, but it does sadden me.
I wish that judges, especially justices on the Supreme Court of the United States, were really trying to get the "correct" answer rather than reasoning backward from some predetermined outcome. Perhaps that is naive. Perhaps that is not possible. My former Constitutional Law professor warned of some of the political issues with the Supreme Court and recently wrote about the issues in his book Supreme Myths: Why the Supreme Court Is Not a Court and Its Justices Are Not Judges.
Only Justice Kennedy is thought to be "in play" in this case. All intelligent people of integrity, however, should be aware of their biases, open to the possibly that their initial thoughts are wrong, and open to persuasion based on the law and the facts. Maybe that is too much to ask. Or maybe on of the "reliably conservative" or "reliably liberal" justices will surprise us in this case. In any event, I am definitely looking forward to reading this opinion; it will undoubtedly bring significant consequences.
(As an aside, corporate law scholars may be interested in pages 96-98 regarding who is speaking - Masterpiece Cakeshops (the entity) or Jack Phillips (the individual)).
Sunday, November 12, 2017
I am putting together a panel or discussion group (depending on how many folks respond positively) for the SEALS conference for next summer, which is scheduled to be held August 5-11, 2018, at the Marriott Harbor Beach Resort & Spa in Fort Lauderdale, Florida (details here).
Here is the proposed title and a brief draft description (which may have to be shortened for the submission):
The Role of Corporate Personhood in Masterpiece Cakeshop
The United States Supreme Court is scheduled to hear arguments in the case of Masterpiece Cakeshop, Ltd. v. Colorado Civil Rights Commission on Dec. 5, 2017 (SCOTUSblog summary here). The issue presented in that case is: “Whether applying Colorado's public accommodations law to compel the petitioner to create expression that violates his sincerely held religious beliefs about marriage violates the free speech or free exercise clauses of the First Amendment.” A group of corporate law professors have filed an amicus brief in support to the CCRC (available here). One of the two arguments in that brief is: “Because Of The Separate Legal Personality Of Corporations And Shareholders, The Constitutional Interests Of Shareholders Should Not Be Projected Onto The Corporation.” This [panel] [discussion group] features [paper presentations] [a dialogue] on the pros and cons of this argument, together with related analysis and observations. Please note that the Supreme Court will likely have issued its opinion in the case by the time of the panel/discussion.
Please email me at firstname.lastname@example.org if you would like to participate in this program, letting me know if you are interested in presenting a paper, participating in a discussion, or both. Also, let me know if you know of anyone else who may want to participate—or just pass this on to others. I must file the proposal soon in order to ensure its consideration (the “best practices” deadline for submissions has already passed).
November 12, 2017 in Business Associations, Call for Papers, Conferences, Constitutional Law, Corporate Governance, Corporate Personality, Corporations, Current Affairs, Family Business, Stefan J. Padfield | Permalink | Comments (0)
Friday, November 10, 2017
After my daughter Allie's first stay at Vanderbilt Children’s hospital, with what we think was a virus that attacked her lungs, Allie seemed to return to normal for a couple weeks before having another episode. This time, we spent 4 days in the hospital. The praise I lavished on Vanderbilt last time was less deserved on this trip, mostly blamed, staff repeatedly claimed, on a new computer system. (Note: In a place like a hospital, don’t you think you should provide adequate training and work out the bugs before launching a new computer system?)
In any event, Allie is back home again, though we are still working with doctors to uncover the precise cause.
Obviously, my daughter’s health is much more important than work, but I do need to continue to work (if for no other reason than health insurance...we would be bankrupt without health insurance). Given that my focus has been diverted, I have had to push on quite a number of deadlines -- 4 writing assignments and 2 speaking engagements -- and have been slower than normal in returning graded work. Thankfully, students, editors, and colleagues have been quite understanding.
As a professor and a person, I am a big believer in meeting deadlines, so it has been difficult for me to ask for extensions. When asking for extensions, I do think students and professors can “cry wolf” too often, and then, when true emergencies do arise, it becomes harder for the other side to happily grant the extension. This situation has made me even more committed to hitting every deadline I can, so that when I do ask for an emergency extension, people know it is for a valid reason.
Also, this situation has reminded me of the need to create some margin in my life. This past month was going to be a busy one, even without my daughter’s situation. It was doable, but all time needed to be available and efficiently used. Without margin, many projects were impacted, in domino fashion. Now, this situation with my daughter was unexpected and extraordinary and difficult to plan for, and I am not suggesting that we all run at 50% capacity in case of an emergency, but I do think I could have benefited from having built a bit more flexibility into my schedule. (Note: As a law review adviser, I recommended that my students to build some of this margin into their publishing schedule for professors. For example, tell the professors you need the article about a month before you actually do because various issues almost invariably arise.)
In any event, I am quite appreciative to all those who have been so understanding, and I am catching up. Barring any future issues, I think I will be back in the grove and on schedule in about 10 days or so, just in time to gear up for finals.
Friday, October 27, 2017
A former student brought this fundraising website to my attention: To the Stars Academy of Arts and Sciences ("TTS Academy). (Image above from a Creative Commons search).
This article describes TTS Academy as follows: "Former Blink-182 singer and guitarist Tom DeLonge is taking his fascination with/conspiracy theories about UFOs to their logical conclusion point: He's partnering with former government officials on a public benefit corporation studying 'exotic technologies' from Unidentified Aerial Phenomenon (UAP) that the consortium says can 'revolutionize the human experience.'"
Remember the Blink-182 song Aliens Exist?
I couldn't make this up. And I did spend some time trying to determine if it was a joke, but TTS Academy's 63-page offering circular suggests that it is no joke. And TTS Academy appears to have already raised over $500,000.
According to the organization's website, Tom DeLonge of Blink-182 fame is in fact the CEO and President. Supposedly, DeLonge has teamed with former Department of Defense official Luis Elizondo who confirmed to HuffPost that the TTS Academy is planning to "provide never before released footage from real US Government systems...not blurry, amateur photos, but real data and real videos." Rolling Stone reports that "DeLonge has long been interested in UFO and extraterrestrial research. After parting ways with Blink-182 in 2015, he delved deeper into the subject, releasing the book Sekret Machines: Gods earlier this year and he's also working on a movie that is related to those interests called Strange Times." TTS Academy is a Public Benefit Corporation, formed in Delaware.
The TTS Academy website states: "To The Stars Academy is a Public Benefit Corporation (PBC), which means our public benefit purpose is a core founding principle of our corporate charter alongside the traditional goal of maximizing profit for shareholders." Hmm... How does one pursue a public benefit purpose and seek to maximize profit for shareholders? A main point of benefit corporations is liberate companies from the perceived restrictions of shareholder wealth maximization.
The website continues: "Our public purpose: Education - Community - Sustainability - Transparency. PBCs have enjoyed a surge in popularity as the public becomes more interested in corporate responsibility, transparency, and more recently, the concept of impact investing.* It’s clear that an expanding portion of the general population is looking to make an impact on the world around them, not only through volunteering, or speaking out on social media, but through financial decision making.** We believe raising resources through Regulation A+ crowdfunding will allow us to expedite expansion of TTS Academy’s PBC initiatives, like promoting citizen science, enhancing traditional education with science, engineering and art-related programming, supporting veterans and their families, and promoting underrepresented people in film." Color me skeptical.
As Professor Christine Hurt noted way back in 2014/15, the crowdfunding and social enterprise circles may overlap significantly. Professor Hurt wrote, "for-profit social entrepreneurship may find equity crowdfunding both appealing and available. For-profit social entrepreneurs may be able to use the crowdfunding vehicle to brand themselves as pro-social, attracting individual and institutional cause investors who may operate outside of traditional capital markets and may look for intangible returns. Just as charitable crowdfunders rebut the conventional wisdom that donors expect tax-deductibility, prosocial equity crowdfunders may rebut the conventional wisdom that early equity investors expect high returns or an exit mechanism." Not sure if she, or any of us, predicted exactly this type of company.
Friday, October 20, 2017
Below the line is a call for papers that I just received.
The Atlantic Law Journal is a double-blind peer-reviewed law journal, and it is one of the regional publications of the Academy of Legal Studies in Business.
The Atlantic Law Journal is now open for submissions and is soliciting papers for its upcoming Volume 20 with an expected publication date in summer 2018. The Atlantic Law Journal is listed in Cabell's, fully searchable in Thomson-Reuters Westlaw, and listed by Washington & Lee. The journal is a double-blind peer-reviewed publication of the Mid-Atlantic Academy of Legal Studies in Business (MAALSB). Acceptance rates are at or less than 25%, and have been for all our recent history. We publish articles that explore the intersection of business and law, as well as pedagogical topics. Please see our website at http://www.atlanticlawjournal.org/submissions.html for the submission guidelines, the review timeline, and more information regarding how to submit. Submissions or questions can be sent to Managing Editor, Evan Peterson, at petersea [at] udmercy.edu.
The Harvard Law School Forum on Corporate Governance and Financial Regulation recently contained a notice about the Delaware Corporate Law Resource Center, which I thought might interest our readers as well. The post is reproduced below the line.
The oral histories of iconic Delaware cases are the most interesting, and useful, part of the website to me, though some of the cases do not appear to have materials yet. In addition to the cases, there is an oral history on 102(b)(7) to which my judge (VC Stephen Lamb) and others contributed. I hope the existing materials will be added to and expanded over time.
The University of Pennsylvania Law School Institute for Law and Economics (ILE) is pleased to announce the creation and public availability of a new website devoted to resources relating to the development of the Delaware General Corporation Law and related case law. This website (the Delaware Corporation Law Resource Center) has two principal components. The first is a compilation of resources relating to the Delaware General Corporation Law itself, including a link to the text of the statute, and links to the bills to amend the statute since its general revision in 1967. This portion of the website also includes links to annual commentaries on those amendments, the reports and minutes generated in the 1967 revision process, and memoranda disseminated by the Council of the Delaware State Bar Association Corporation Law Section describing some of the more significant and controversial amendments to the statute.
The second component of the website is a repository for materials constituting oral histories of iconic corporate law decisions of the Delaware courts since 1980, dealing with the director’s fiduciary duty of care, duties in takeovers, and freezeouts by controlling stockholders. This portion of the website is a work in progress, but for some of the cases it already contains the opinions in the case, briefs, selected transcripts of oral arguments, and selected key documents from the record. Most notably, the oral history compilation includes high quality videotaped interviews of lawyers and judges involved in the case, who describe the back story of the case with details not available through review of the courts’ opinions.
The oral history portion of the website also includes the first in a series of composite videos setting forth the background of each case. That premiere video describes the background of Smith v. Van Gorkom and presents, in narrative fashion, selected excerpts from the video interviews of the participants.
ILE hopes and expects that this website, which is freely available to the public, will prove to be a valuable resource for the teaching and development of Delaware corporate law. ILE welcomes suggestions for ways in which the website can be made even more useful to those interested in its subject.
The new website is available here.
Tuesday, October 17, 2017
The information below the line is from an e-mail I received about the SEALSB Conference. The SEALSB conference is the southeastern regional conference for law professors in business schools, but we have had practicing lawyers (especially those hoping to break into academia) and law school professors participate in the past.
The conference rotates locations in the southeast, and this year the conference will be held in Atlanta, GA from November 9-11.
SEALSB Conference 2017
The deadline to upload papers for inclusion in the conference materials has been extended to this Friday, October 20th. You may upload your paper by clicking on the following link: Paper Upload. Otherwise, please bring 25 copies to the meeting.
Friday, October 20th is also the conference registration deadline, so if you are planning to attend the conference but have not yet registered please make sure you do so sometime this week!
Additional information is available on the Conference Website. We look forward to seeing you at the Georgian Terrace!
Friday, October 13, 2017
Earlier this week, my two-year old daughter was in the pediatric ICU with a virus that attacked her lungs. We spent two nights at The Monroe Carell Jr. Children's Hospital at Vanderbilt (“Vanderbilt Children’s). Thankfully, she was released Wednesday afternoon and is doing well. Unfortunately, many of the children on her floor had been in the hospital for weeks or months and were not afforded such a quick recovery. There cannot be many places more sad than the pediatric ICU.
Since returning home, I confirmed that Vanderbilt Children’s is a nonprofit organization, as I suspected. I do wonder whether the hospital would be operated the same if it were a benefit corporation or as a traditional corporation.
Some of the decisions made at the hospital seems like they would have been indefensible from a shareholder perspective, if the hospital had been for-profit. Vanderbilt Children’s has a captive market, with no serious competitors that I know of in the immediate area. Yet, the hospital doesn’t charge for parking. If they did, I don’t think it would impact anyone’s decision to choose them because, again, there aren’t really other options, and the care is the important part anyway. The food court was pretty reasonably priced, and they probably could have charged double without seriously impacting demand; the people at the hospital valued time with their children more than a few dollars. The hospital was beautifully decorated with art aimed at children – for example, with a big duck on the elevator ceiling, which my daughter absolutely loved. There were stars on the ceiling of the hospital rooms, cartoons on TVs in every room, etc. All of this presumably cost more than a drab room, and perhaps it was all donated, but assuming it actually cost more, I am not sure those things would result in any financial return on investment.
As we have discussed many times on this blog, even in the traditional for-profit setting, the business judgment rule likely protects the decisions of the board of directors, even if the promised ROI seems poor. But at what point – especially when the board knows there will be no return on the investment at all - is it waste? (Note: Question sparked by a discussion that Stefan Padfied, Josh Fershee, and I had in Knoxville after a session at the UTK business law conference this year). And, in any event, the Dodge and eBay cases may lead to some doubt in the way a case may play out. And even if the law is highly unlikely to enforce shareholder wealth maximization, the norm in traditional for-profit corporations may lead to directorial decisions that we find problematic as a society, especially in a hospital setting.
Now, maybe the Hippocratic Oath, community expectations, and various regulations make it so nonprofit and forprofit hospitals operate similarly. As a father of a patient, however, even as a free market inclined professor, I would prefer hospitals to be nonprofit and clearly focused on care first. Also, some forprofit hospitals are supposedly considering going the benefit corporation route, which may be a step in the right direction – at least they have an obligation to consider various stakeholders (even if, currently, the statutory enforcement mechanisms are extremely weak) and at least there are some reporting requirements (even if , currently, reporting compliance is miserable low in the states I have examined and the statutory language is painfully vague).
I am not sure I have ever been in a situation where I would have paid everything I had, and had no other good options for the immediate need, and yet I still did not feel taken advantage of by the organization. There is much more that could be said on these issues, but I do wonder whether organizational form was important here. And, if so, what is the solution? Require hospitals to be nonprofits (or at least benefit corporations, if those statutes were amended to add more teeth)?
Friday, October 6, 2017
I assume most readers are familiar with Stonyfield Yogurt, and perhaps a bit of its story, but I think the podcast goes far beyond what is generally known.
The main thing that stuck out in the podcast was how many struggles Stonyfield faced. Most of the companies featured on How I Built This struggle for a few months or even a few years, but Stonyfield seemed to face more than its share of challenges for well over a decade. The yogurt seemed pretty popular early on, but production, distribution, and cash flow problems haunted them. Stonyfield also had a tough time sticking with their organic commitment, abandoning organic for a few years when they outsourced production and couldn't convince the farmers to follow their practices. With friends and family members' patient investing (including Gary's mother and mother-in-law), Stonyfield finally found financial success after raising money for its own production facility, readopting organic, and finding broader distribution.
After about 20 years, Stonyfield sold the vast majority of the company to large multinational Group Danone. Gary explained that some investors were looking for liquidity and that he felt it was time to pay them back for their commitment. Gary was able to negotiate some control rights for himself (unspecified in the podcast) and stayed on as chairman. While this sale was a big payday for investors, it is unclear how much of the original commitment to the environment and community remained. Also, the podcast did not mention that Danone announced, a few months ago, that it would sell Stonyfield.
Personally, I am a fan of Stonyfield's yogurt and it will be interesting to follow their story under new ownership. I also think students and faculty members could benefit from listening to stories like this to remind us that success is rarely easy and quick.
Friday, September 29, 2017
I recently finished Elizabeth Pollman and Jordan Barry's article entitled Regulatory Entrepreneurship. The article is thoughtfully written and timely. I highly recommend it.
This Article examines what we term “regulatory entrepreneurship” — pursuing a line of business in which changing the law is a significant part of the business plan. Regulatory entrepreneurship is not new, but it has become increasingly salient in recent years as companies from Airbnb to Tesla, and from DraftKings to Uber, have become agents of legal change. We document the tactics that companies have employed, including operating in legal gray areas, growing “too big to ban,” and mobilizing users for political support. Further, we theorize the business and law-related factors that foster regulatory entrepreneurship. Well-funded, scalable, and highly connected startup businesses with mass appeal have advantages, especially when they target state and local laws and litigate them in the political sphere instead of in court.
Finally, we predict that regulatory entrepreneurship will increase, driven by significant state and local policy issues, strong institutional support for startup companies, and continued technological progress that facilitates political mobilization. We explore how this could catalyze new coalitions, lower the cost of political participation, and improve policymaking. However, it could also lead to negative consequences when companies’ interests diverge from the public interest.
Tuesday, September 26, 2017
Belmont University's College of Law is hiring for two professor position. I am in Belmont's College of Business, and have taught in our College of Law, so I selfishly hope they make some great hires across campus. My family loves Nashville and Belmont University is a great place to work.
The Belmont University College of Law, located in vibrant Nashville, Tennessee, invites applications from entry-level and experienced candidates for two anticipated tenure-track faculty positions to begin in 2018-2019. For the first tenure-track position, our primary areas of recruiting interest include business associations, secured transactions and family law. The second tenure-track position is in Belmont’s legal writing, research and advocacy program. Belmont is an EOE/AA employer under all applicable civil rights laws. Women and minorities are encouraged to apply.
Applicants for both positions must have an exemplary academic record and possess a J.D. or equivalent degree. They should demonstrate outstanding achievement or potential in teaching and scholarship, and also share the University’s values and support its mission and vision of promoting Christian values by example. Our goal is to recruit dynamic, bright, and highly motivated individuals who are interested in making significant contributions to our law school and its students. Practice experience is preferred, and teaching experience is desirable. To apply, please contact email@example.com.
The Belmont University College of Law is an ABA accredited law school with approximately 275 students in the heart of Nashville, one of the fastest growing and most culturally rich cities in the country. The Belmont faculty is dedicated to teaching, service to the community, and an active engagement in scholarship. Professors at the College of Law have published in top academic journals, written scholarly books and treatises, and addressed academic conferences across the country. The median LSAT and GPA for the 112 students who entered the law school in August 2017 were 155 and 3.47 (75th percentile: 158 and 3.70; 25thpercentile: 152 and 3.16). The two-year average pass rate (90.5%) for graduates of the College of Law on the Tennessee Bar Examination was the highest among Tennessee law schools. The employment statistic reported to the ABA for the class of 2016 is 94.2%. For more information about the College of Law, please visit our website at www.belmont.edu/law.
Belmont University is a private, comprehensive university, focusing on academic excellence. The university is a student-centered teaching university, dedicated to providing students from diverse backgrounds an academically challenging education. It is located in a quiet area convenient to downtown Nashville and adjacent to Music Row. It is the second largest private university, and the largest Christian-centered university, in Tennessee. Belmont’s student body of over 8,000 includes students from every state and more than 25 countries. It offers seven baccalaureate degrees in over 50 areas of study, master’s degrees in Business Administration, Accountancy, English, Education (including Sports Administration), Music, Nursing and Occupational Therapy, and doctorates in Occupational Therapy, Physical Therapy, Nursing Practice, Pharmacy, and Law.
Wednesday, September 20, 2017
Friend of the blog and South Texas College of Law (Houston) Professor Joe Leahy sent over the following post he authored. It is cross-posted at UberLaw.Net and Medium. Embarrassingly, I had not heard about Loftium before reading this post, though at least I know of and have used Airbnb. Joe has some interesting thoughts, and I am happy to include his post on this blog.
Loftium will provide prospective homebuyers with up to $50,000 for a down payment, as long as they are willing to continuously list an extra bedroom on Airbnb for one to three years and share most of the income with Loftium over that time.
At first glance, the arrangement between Loftium and participating homebuyers might sound like a loan. (Indeed, the Times even describes it as such in an infographic.) But upon a closer look, the arrangement that Loftium contemplates with homebuyers clearly is not a loan. First of all, Loftium says it is not a loan; rather, according to Loftium, the down payment assistance it provides to homebuyers is “a part of a services agreement” lasting 12-36 months. Second, and more important, the arrangement between Loftium and homebuyers has none of the characteristics of a traditional (term) loan. There is no “principal” amount that the homebuyer is required to repay in a set period of time, and Loftium does not charge the homeowner any “interest.” In fact, the homebuyer is not required to make anypayments to Loftium in return for the company’s cash (unless the homeowner breaches the parties’ agreement and stops renting on Airbnb before the term expires).
All the homebuyer must do in exchange for Loftium’s money is (1) list her spare room on Airbnb continuously through the term of her agreement with Loftium, (2) be a decent host (i.e., “not be rude to guests”) and (3) split her Airbnb rental revenue with Loftium (with two-thirds going to the company.) If, at the end of the term, Loftium has not been repaid its initial investment, the homeowner is not required to repay Loftium’s initial contribution. Hence, if renting out the homeowner’s spare room is not profitable during the term of the parties’ agreement, “Loftium takes full responsibility for that loss.”
Of course, Loftium expects that the total income from renting out a homeowner’s spare room will greatly exceed the amount that it originally provided to the homebuyer, so that both will profit. If Loftium makes more in rental income than it pays towards the homeowner’s down payment, Loftium will make a profit.
Further, by all appearances, there is no cap on Loftium’s potential profit is its business arrangement with homebuyers. In fact, Loftium makes clear that it wants to maximize the income that it splits with homebuyers: Loftium promises that it will work with them “to increase monthly bookings as much as possible, so both sides can benefit from the additional income.” To that end, Loftium provides homebuyers with some start-up supplies for their spare bedroom (and a keyless entry lock), access to advice and know-how regarding how to rent an Airbnb room, and online tools to help maximize their rental income.
So, if the business arrangement between Loftium and homeowners is not a loan, what is it? It is almost certainly a general partnership for a term (i.e., a “joint venture”).
[Post continues after the page break]
Friday, September 8, 2017
Gabriel (“Gabe”) Azar and I graduated one year apart, from the same law school. He has an undergraduate degree in electrical engineering from Georgia Tech and started his legal career as an associate practicing patent law at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. He moved from Finnegan to Paul Hastings and from there to an in-house position with FIS. Currently, he is Senior Patent Counsel at Johnson & Johnson. I’ve admired, mostly from a distance (he lives in Jacksonville, FL now), how Gabe has balanced family, work, and health. We recently reconnected on Strava, and it has been inspiring to see a dedicated husband/father/attorney taking his fitness seriously.
The interview is below the page break.
Thursday, September 7, 2017
As previously mentioned, I am always looking for good podcasts. I listen to podcasts while mowing our lawn and on road trips.
StartUp is the latest podcast series that I have uncovered, thanks to a recommendation from my sister Anna who works for a media/marketing start up herself.
From what I have uncovered so far, StartUp seems to be quite like NPR's How I Built This, which I mentioned in a previous post. Hosts of both podcasts interview entrepreneurs about the founding of their businesses and the ups and downs thereafter. The biggest difference I see is that StartUp seems to focus on smaller companies (a number that I had never heard of), while How I Built This seems to focus on companies that are now quite large and successful. In early seasons of StartUp there appear to be a number of the podcasts that depart from the entrepreneur-interview model, but I haven't dug into the early seasons yet. I am mainly focused on the recent podcasts.
Perhaps most interestingly, I recently listened to a podcast on StartUp about Mokhtar Alkhanshali and his specialty coffee. Mokhtar sources his coffee beans from war-torn Yemen and a cup of his coffee sells for $16 a cup. At first, this seemed like a ridiculous price for a cup of coffee, but after hearing how Mokhtar risked his life for his business in Yemen (bombings, escaping on a tiny boat, being captured, etc.) and listening to the specialty coffee to wine comparison, the pricing does make more sense. I might pay $16 once, just for the story, but I couldn't see a $16 cup of coffee becoming even a semi-regular purchase for me. That said, I know people who are getting increasingly serious about their coffee and perhaps it can be sustained in some cities.
Friday, August 25, 2017
From an e-mail I recently received:
The University of Alabama School of Law seeks to fill multiple entry-level/junior-lateral tenure-track positions for the 2018-19 academic year. Candidates must have outstanding academic credentials, including a J.D. from an accredited law school or an equivalent degree (such as a Ph.D. in a related field). Entry-level candidates should demonstrate potential for strong teaching and scholarship; junior-lateral candidates should have an established record of excellent teaching and distinguished scholarship. Positions are not necessarily limited by subject. However, there is a particular need for applicants who study and/or teach business law (corporate finance, mergers & acquisitions, and business planning are of particular interest); criminal law; insurance law; and torts (including products liability). Family law and labor/employment are also areas of interest. We welcome applications from candidates who approach scholarship from a variety of perspectives and methods (including quantitative or qualitative empiricism, formal modeling, or historical or philosophical analysis).
The University embraces diversity in its faculty, students, and staff, and we welcome applications from those who would add to the diversity of our academic community. Interested candidates should apply online at facultyjobs.ua.edu. Salary, benefits, and research support will be nationally competitive. All applications are confidential to the extent permitted by state and federal law; the positions remain open until filled. Questions should be directed to Professor William Brewbaker, Chair of the Faculty Appointments Committee (firstname.lastname@example.org).
Wednesday, August 16, 2017
Business leaders probably didn’t think the honeymoon would be over so fast. A CEO as President, a deregulation czar, billionaires in the cabinet- what could possibly go wrong?
When Ken Frazier, CEO of Merck, resigned from one of the President’s business advisory councils because he didn’t believe that President Trump had responded appropriately to the tragic events in Charlottesville, I really didn’t think it would have much of an impact. I had originally planned to blog about How (Not) To Teach a Class on Startups, and I will next week (unless there is other breaking news). But yesterday, I decided to blog about Frazier, and to connect his actions to a talk I gave to UM law students at orientation last week about how CEOs talk about corporate responsibility but it doesn’t always make a difference. I started drafting this post questioning how many people would actually run to their doctors asking to switch their medications to or from Merck products because of Frazier’s stance on Charlottesville. Then I thought perhaps, Frazier’s stance would have a bigger impact on the millennial employees who will make up almost 50% of the employee base in the next few years. Maybe he would get a standing ovation at the next shareholder meeting. Maybe he would get some recognition other than an angry tweet from the President and lots of news coverage.
By yesterday afternoon, Under Armour’s CEO had also stepped down from the President’s business advisory council. That made my draft post a little more interesting. Would those customers care more or less about the CEO's position? By this morning, still more CEOs chose to leave the council after President Trump’s lengthy and surprising press conference yesterday. By that time, the media and politicians of all stripes had excoriated the President. This afternoon, the President disbanded his two advisory councils after a call organized by the CEO of Blackstone with his peers to discuss whether to proceed. Although Trump “disbanded” the councils, they had already decided to dissolve earlier in the day.
I’m not teaching Business Associations this semester, but this is a teachable moment, and not just for Con Law professors. What are the corporate governance implications? Should the CEOs have stayed on these advisory councils so that they could advise this CEO President on much needed tax, health care, immigration, infrastructure, trade, investment, and other reform or do Trump’s personal and political views make that impossible? Many of the CEOs who originally stayed on the councils believed that they could do more for the country and their shareholders by working with the President. Did the CEOs who originally resigned do the right thing for their conscience but the wrong thing by their shareholders? Did those who stayed send the wrong message to their employees in light of the Google diversity controversy? Did they think about the temperament of their board members or of the shareholder proposals that they had received in the past or that they were expecting when thinking about whether to stay or go?
Many professors avoid politics in business classes, and that’s understandable because there are enough issues with coverage and these are sensitive issues. But if you do plan to address them, please comment below or send an email to email@example.com.
August 16, 2017 in Business Associations, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Ethics, Law School, Marcia Narine Weldon, Shareholders, Teaching | Permalink | Comments (1)