Thursday, May 21, 2015
My former research assistant Sam Moultrie and his colleague Andrea Schoch Brooks have authored a short article entitled "Defining a Proper Purpose for Books and Records Actions in Delaware."
The article unpacks two recent Delaware books and records cases: AbbVie and Citigroup. Worthwhile reading for those who wish to stay current on this area of the law.
Monday, May 18, 2015
You may recall my blog post this fall about the Delaware Chancery Court opinion in In Re Nine Systems Corporation Shareholders Litigation. That case discusses what happens when a self-dealing transaction results in a fair price, thus causing no damage to the corporation, but the process followed was fair. The court held that the plaintiff could still recover attorneys' fees and costs. I noted that the only people likely to be satisfied with that result were plaintiffs' attorneys. (It makes no difference to the plaintiffs in the case because they had a contingent fee agreement with their attorneys-no recovery, no attorneys' fees to be paid.)
The Chancery Court just entered its order awarding plaintiffs' counsel, Jones Day, $2 million dollars in attorneys' fees and expenses. That's right, the attorneys get $2 million even though, as the Vice Chancellor notes, "the quantifiable benefit obtained in this litigation was $0." Thus, the defendants have to pay $2 million to counsel for helping the court determine that nothing they did harmed the corporation or its shareholders.
It could have been worse; plaintiffs' counsel asked for $11 million.
I'm afraid that this opinion will give plaintiffs' attorneys an incentive to search for problems with the process in conflict-of-interest cases just so they can get in on the Nine-Systems action and collect attorneys' fees. No harm to the corporation? No problem!
Friday, May 15, 2015
Low pay, however, is only one of many problems facing low-wage earners.
After hearing Charlotte Alexander (Georgia State) present on this co-authored paper - Stabilizing Low-Wage Work: Legal Remedies for Unpredictable Work Hours and Income Instability – I have become convinced that unpredictable work hours is a significant issue. The article is well worth reading.
Unpredictable work hours can be problematic for many people – attorneys in BigLaw for example – but low-wage earners do not have disposable income to throw at the problem. Childcare and transportation, for example, become even more of a challenge when work hours are not stable and not set in advance. Unpredictable, inconsistent work hours also hamper economic mobility by making it difficult or impossible to take classes or get a second job.
For more on this issue, listen to MIT Operations Management Professor Zeynep Ton’s talk at the Aspen Institute. Her discussion of Mercadona, a low-cost supermarket based in Spain (discussion starts at 14:50), and QuickTrip, a convenience store with gas stations (discussion starts at 17:30) was quite interesting. Corporate social responsibility often seems dominated by high-end companies like Patagonia and Whole Foods. It is easier to be socially responsible when you are charging $700 for a jacket or 39% more on certain food items (according to one study in Boston). Mercadona, however, offers some of the lowest prices in Spain. Mercadona employees receive their schedules one month in advance and have stable schedules. Mercadona also pays almost double the minimum wage (plus a bonus). As a result, Mercadona’s turnover is an extremely low 3.4%. Likewise, QuickTrip seems to compete well on price, but also appears to take relatively good care of its employees.
Individual firms could and should address this issue of unpredictable work hours voluntarily, but the market may prove ineffective in this area and legislative action may be needed.
Friday, May 8, 2015
On May 12, 2015, I will present at a breakout session of the Center for Nonprofit Management's 8th Annual Bridge to Excellence Nonprofit Conference. My talk will focus on the legal issues facing entities with multiple bottom lines.
If interested, you can register here.
As you can tell from the conference description, this conference is designed for nonprofit and community leaders. From the conference schedule, it appears that I will be the only professor presenter. While I enjoy academic conferences, and find them useful, I also think it is important for professors to engage with practitioners. Professors should share the knowledge they have uncovered and should also listen to the current, practical concerns.
Thursday, May 7, 2015
I currently teach two classes that are on the bar exam—civil procedure and business associations. Many of my BA students are terrified of numbers and don’t know much about business and therefore likely would not take the course if it were not required. I know this because they admit that they take certain classes only because they are required or because they will be tested on the bar, and not because they genuinely have an interest in learning the subject. I went to Harvard for law school and although I had an outstanding education, I learned almost nothing that helped me for the NY, NJ, or FL bars (hopefully that has changed). I owe all of my bar passages to bar review courses so naturally (naively?), I think that almost any student can learn everything they need to know for the bar in a few short months assuming that they had some basic foundation in law school and have good study habits.
The pressure to ensure that my students pass the bar exam definitely informs the way I teach. Though there has only been one round of civil procedure testing on the multistate, this semester I found myself ensuring that I covered certain areas and glossed over others, even though I know having litigated for 20 years, that some subjects are more relevant in real life. Similarly, in BA, I had to make sure that I covered what will be on the Florida bar, while still ensuring that my students understand Delaware law and some basic finance and accounting, which isn't on the Florida bar, but which they need to know.
New York recently announced that it would join other states in adopting the uniform bar examination effective July 2016. The other states using the UBE include Alabama, Alaska, Arizona, Colorado, Idaho, Kansas, Minnesota, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Utah, Washington, and Wyoming. New York, as the largest adopter, hopes to inspire other states to do the same.
NY students would still have to take online courses and pass a 50-question test regarding specific NY laws, but the students would take the MBE, and MPT or multistate performance test. According to the National Conference of Bar Examiners, the two 90-minute MPT exercises are “designed to test an examinee’s ability to use fundamental lawyering skills in a realistic situation and complete a task that a beginning lawyer should be able to accomplish. The MPT is not a test of substantive knowledge. Rather, it is designed to evaluate certain fundamental skills lawyers are expected to demonstrate regardless of the area of law in which the skills arise.” The NY graduates will also no longer have to write on 6 NY-based essays, but will instead write the multistate essay examination. Students will have to write on topics including: Business Associations (Agency and Partnership; Corporations and Limited Liability Companies), Civil Procedure, Conflict of Laws, Constitutional Law, Contracts, Criminal Law and Procedure, Evidence, Family Law, Real Property, Torts, Trusts and Estates (Decedents' Estates; Trusts and Future Interests), and Uniform Commercial Code (Secured Transactions).
In adopting the change, New York officials explained, a “significant advantage of adopting the UBE is that passage of the test would produce a portable score that could be used by the bar applicant to gain admission in other UBE states, assuming the applicant satisfies any other jurisdiction-specific requirements. This portability is crucial in a legal marketplace that is increasingly mobile and requires more and more attorneys to engage in multi-jurisdictional practice.”
I think this is sound reasoning. Many of today’s graduates do not know where they will end up, and I personally know that the thought of taking yet another bar exam was a reason that I decided to stay in Florida when I was in private practice. But the better reason to move to the UBE is the testing of the practical skills that lawyers say recent graduates lack. It won’t solve the problem of the lack of legal work, but it will make it easier for students who want to try to find work in other states. I doubt that Florida, which wants to make it as difficult as possible for snowbirds to set up practice here, will ever adopt the UBE but it should. Many oppose the adoption because schools may not have the faculty or resources to prepare students for the new test. But I welcome the change. Despite the pressure to prep my students for the bar, I have ensured that my students work on drafting client memos, discovery plans, markups of poorly written documents, and even emails to partners and clients so that they can be ready for the world that awaits them. If Florida joins the UBE bandwagon, they will be ready for the MPT too.
This coming Monday, I will be presenting – virtually – at the above titled conference. My piece of the presentation will cover my recent research on benefit corporation reporting.
Further information is available here and reproduced below. Personally, I am looking forward to hearing from the many impressive speakers, including Sara Burgess, the Regulator of Community Interest Companies in the UK.
May 11, 2015
08:00 AM - 06:00 PM ET
Morgan Lewis, in conjunction with the Impact Investing Legal Working Group, invites you to join us for an exclusive all-day conference featuring panels of leading lawyers who work in the area of impact investing—in business, academia, government, multilateral development institutions, and nonprofit organizations and foundations.
Topics will include:
How are investors aggregating capital for impact investing?
What are the newest social finance innovations in impact investing?
How can we build a robust legal community of practice in impact investing?
How can we advance the development of regulatory regimes and government policies that promote impact investing?
8:00 - 8:30 AM | Registration
8:30 - 6:00 PM | Program
6:00 PM | Networking reception
CLE credit in CA (1.25 hours), FL, IL, MA, NY, NJ, PA, VA, and TX is currently pending approval.
For more information/registration
Please contact Gail Sobha Lynes at +1.617.951.8607 or email@example.com.
Wednesday, May 6, 2015
Monday, I had the privilege of moderating a discussion on structuring merger and acquisition transactions that I had organized as part of a continuing legal education program for the Tennessee Bar Association. Rather than doing the typical comparison/contrast of different business combination structures (with charts, etc.), I organized the hour-long discussion around the banter that corporate/securities and tax folks have in structuring a transaction. We used the terms of a proposed transaction (an LLC business being acquired by a public corporation) as a jumping-off point.
The idea for the format came from a water cooler conversation--literally--among me (in the role of a corporate/securities lawyer), one of my property lawyer colleagues, and one of my tax lawyer colleagues. The conversation started with a question my property law colleague had about the conveyance of assets in a merger. I told him that mergers are not asset conveyance transactions but, rather, statutory transactions that have the effects provided for in the statute, which include a vesting of assets in the surviving corporation. I told him that I call this "merger magic." I showed him Section 259(a) of the Delaware General Corporation Law:
When any merger or consolidation shall have become effective under this chapter, . . . all property, real, personal and mixed, and all debts due to any of said constituent corporations on whatever account, as well for stock subscriptions as all other things in action or belonging to each of such corporations shall be vested in the corporation surviving or resulting from such merger or consolidation . . . .
We discussed the possibility of an assignment/transfer of assets by operation of law under that provision and more generally under Delaware law in connection with different types of mergers, including recent case law regarding reverse triangular mergers. Ultimately, my property law colleague decided that a direct merger involved an asset sale by the target entity and a purchase transaction by the surviving corporation, as a matter of property law, notwithstanding my "merger magic" explanation I was forwarding as a descriptor under state corporate law.
The tax guy thought all this (both descriptions of a merger) was balderdash. These descriptions were too complex and stilted for his taste. Not to be outdone, he offered that all merger and acquisition transactions are either asset sales or sales of equity. At least, he allowed, that's how federal income tax law looks at them . . . . I told him that asset and equity sale transactions are joined by mergers (direct, reverse triangular, and forward triangular) and share exchange transactions (which are also statutory transactions, available in Tennessee and other Model Business Corporation Act states, but not available in Delaware) in the corporate lawyer's business combination toolkit. I also noted that federal securities law voting and reporting requirements work off these different corporate law descriptors.
Fascinating! Three lawyers, three different conceptions of business combination transactions. The moderated discussion on Monday was, in effect, an attempt by me to recreate, albeit in a different form, parts of that conversation. The discussion was, in my view, decently successful in achieving its limited purpose in the program. Nevertheless, I really wish I had a transcription of that original conversation by the water cooler. That was truly priceless . . . .
This article builds on Ben's previous, extensive and well-regarded research on family businesses. Ben's analysis of the relationship between family businesses and wealth inequality is carefully done and thought-provoking. The abstract is posted below, and I recommend reading the entire article.
Wealth inequality endangers democratic values and calls for a public response. This Article contends that family businesses merit special scrutiny because they control vast amounts of private wealth and combine two of society’s most important economic institutions: family and business. Accordingly, family businesses implicate concerns regarding both inherited wealth and the concentration of economic power made possible by the corporate form.
Despite their economic significance, little has been done to investigate whether family businesses contribute to wealth inequality. This Article offers the first legal, and one of the only academic, treatments of the topic and shows that family businesses play a double role. On the one hand, family businesses reinforce existing disparities in wealth and opportunity. Heirs, after all, stand to benefit from the hard work of previous generations. On the other hand, family businesses can be a powerful antidote to inequality, disrupting entrenched class hierarchies and creating opportunities for individuals, families, and ethnic communities.
This Article concludes that whether family businesses produce net social costs or benefits depends crucially on two principal factors. First, to the extent there is a lack of public investment in social mobility, family businesses can increase the distribution of wealth by providing needed investments in human capital. Second, to the extent the rewards of capitalism are not widely shared, family businesses can offer a source of opportunity, not just for family members, but also for employees and the communities in which family businesses operate. Thus, family businesses should not be viewed in isolation; a comprehensive response to the problem of wealth inequality must involve the state, the family, and the market.
Friday, May 1, 2015
Almost three years ago, I helped organize a conference on social enterprise law. (The law review members, especially Rachel Bauer and Sam Moultrie, were responsible for most of the organizing and did an excellent job).
My co-bloggers Joan Heminway and Marcia Narine were among the speakers.
Also joining us was Michael Pirron of Impact Makers, one of the first certified B corporations in Virginia. While Impact Makers was a certified B corporation at the time of the conference, it was organized as a Virginia nonstock corporation; now Impact Makers is organized as a benefit corporation. Michael did an excellent job serving as a panelist and the keynote speaker.
Recently, I saw Michael back in the news. He transferred ownership of his company (valued at approximately $11.5 million) to two foundations. As Michael mentioned to me over e-mail, this was not a radical departure from his previous business model for Impact Makers. Previously, Impact Makers donated 100% of its profits to area charities, so this move just formalized their previous commitment. Impact Makers has given away approximately $1 million to date.
At the University of Connecticut social enterprise and entrepreneurship conference I attended and presented at last week, Mike Brady (Greyston Bakery) and Jeff Brown (Newman's Own) presented. Jeff called Newman's Own a "grandfather of social enterprise" Both companies started business in 1982, well before heavy use of the term "social enterprise."
Also, both Greyston Bakery and Newman's Own appear to have adopted a structure where a foundation owns the stock of their for-profit company. You can learn a bit more about the structure of Newman's Own here. Greyston Bakery's annual reports are here and you can view a video about Greyston Bakery (and their client Ben & Jerry's).
From a legal perspective, Greyston Bakery and Impact Makers are benefit corporations, under New York and Virginia law respectively (in addition to being certified B corporations.) Newman's Own, however, is a traditional c-corporation. With foundations owning 100% of the stock, the benefits of using the benefit corporation form are likely limited. There still may be some branding value and most benefit corporation statutes require consideration of a broad group of stakeholders, which might prevent the foundation from focusing on a smaller subset of stakeholders. That said, shareholders are the one expected to bring lawsuits to enforce this consideration requirement in the benefit corporation statutes, so as a practical matter, the benefit corporation and c-corporation forms may operate similarly when wholly-owned by one or more foundations.
Wednesday, April 29, 2015
OK. So, Tennessee is not Delaware. But the Tennessee legislature and Supreme Court have been busy bees this spring on business law matters. Here's the brief report.
In the last week of the legislative term, the Tennessee Senate and House adopted the For-Profit Benefit Corporation Act, about which I earlier blogged here, here, and here. Although I remain skeptical of the legislation, it looks like the governor will sign the bill. So, we will have benefit corporations in Tennessee. We'll see where things go from there . . . .
The Tennessee legislature also passed a technical corrections bill for the Tennessee Business Corporation Act. The bill was drafted by the Tennessee Bar Association's Business Entity Study Committee (on which I serve and to which I have referred in the past), a joint project of the Tennessee Bar Association's Business Law Section and Tax Law Section. The governor has already signed this bill into law.
Separately, in a bit of a stealth move (!), the Tennessee Supreme Court recently announced the establishment of a business court, an institution many other jurisdictions already have. The court is being introduced as a pilot project in Davidson County (where Nashville resides)--but only, as I understand it, to iron the kinks out before introducing the court on a permanent basis. Interestingly, the Tennessee Bar Association Business Law Section Executive Council was not informed about the new court project until its public announcement in the middle of March. Although we found that a bit odd, the "radio silence" is apparently attributable to the excitement of the Tennessee Supreme Court to get the project started effective as of May 1 and the deemed lack of need for a study on the subject before proceeding. Regardless, I think it's safe to say that the bar welcomes the introduction of a court that specializes in business law cases as a matter of principle. Again, we'll see where it goes from here.
A few reflections on all this follow.
Tuesday, April 28, 2015
Last week, the Deal Professor, Steven Davidoff Solomon, wrote an article titled, The Boardroom Strikes Back. In it, he recalls that shareholder activists won a number of surprising victories last year, and more were predicted for this year. That prediction made sense, as activists were able to elect directors 73% of the time in 2014. This year, though, despite some activist victories, boards are standing their grounds with more success.
I have no problem with shareholders seeking to impose their will on the board of the companies in which they hold stock. I don't see activist shareholder as an inherently bad thing. I do, however, think it's bad when boards succumb to the whims of activist shareholders just to make the problem go away. Boards are well served to review serious requests of all shareholders, but the board should be deciding how best to direct the company. It's why we call them directors.
As the Deal Professor notes, some heavy hitters are questioning the uptick in shareholder activism:
Some of the big institutional investors are starting to question the shareholder activism boom. Laurence D. Fink, chief executive of BlackRock, the world’s biggest asset manager, with $4 trillion, recently issued a well-publicized letter that criticized some of the strategies pushed by hedge funds, like share buybacks and dividends, as a “short-termist phenomenon.” T. Rowe Price, which has $750 billion under management, has also criticized shareholder activists’ strategies. They carry a big voice.
I am on record being critical of boards letting short-term planning be their primary filter, because I think it can hurt long-term value in many instances. I don't, however, think buybacks or dividends are inherently incorrect, either. Whether the idea comes from an activist shareholder or the board doesn't really matter to me. The board just needs to assess the idea and decide how to proceed.
[Please click below to read more.]
Monday, April 27, 2015
The following guest blog post on my recent article, Institutional Investing When Shareholders Are Not Supreme, is available at Columbia's Blue Sky Blog discussing institutional investors' attitudes towards alternative business forms and similar issues raised by Etsy's IPO.
Friday, April 24, 2015
These types of social impact funds seem to becoming more and more common. Social impact funds, however, vary greatly. Some social impact funds appear to be primarily focused on profits (while simply avoiding some "sin stocks"), others focus on serious social enterprises, and others fall somewhere in-between.
Wednesday, April 22, 2015
Marco Ventoruzzo (Penn State Law) alerts us to the upcoming international conference for the sixtieth anniversary of the Rivista delle società, which will be held in Venice, on San Giorgio Maggiore, on 13-14 November 2015. The title of the conference is "Rules for the Market and Market for Rules. Corporate Law and the Role of the Legislature." The program and information on how to register (and other logistics) can be found here. It looks like only an Italian version of the program is available on the website as of the time this is being posted, but I have an English version. So, please just contact me if you want one.
Marco notes that the conference, organized every ten years by the Rivista, is one of the major events for corporate law scholars and practitioners in Italy (and probably in Europe as a whole). He anticipates well over 300 participants from several European countries, the U.S., and elsewhere. He notes that, as an additional incentive to participate, the venue is probably one of the most spectacular that can be imagined. San Giorgio is a tiny island in the Venice lagoon, just in front of Saint Mark's Square, that overlooks the entire Venetian waterfront. On the island, inhabited since Roman times, the conference will be hosted in a monastery partially designed by Andrea Palladio in the XVI century.
Hat tip to Marco for this announcement.
Last week the New York Times hosted a debate about the Public Corporation's Duty to Shareholders. Contributors include corporate law professors Stephen Bainbridge, Tamara Belinfante, Lynn Stout, David Yosifan and Jean Rogers, CEO of Sustainability Accounting Standards Board.
This collection of essays is not only more interesting than anything that I could write, but it is also the type of short, assessable debate that would be a great starting point for discussion in a seminar or corporations class.
Friday, April 17, 2015
At the end of next week, I will be at the University of Connecticut School of Business and the Thomas J. Dodd Research Center for their Social Enterprise and Entrepreneurship Conference.
Further information about the conference is available here, a portion of which is reproduced below:
In October 2014, Connecticut joined a growing number of states that empower for-profit corporations to expand their core missions to expressly include human rights, environmental sustainability, and other social objectives. As a new legal class of businesses, these benefit corporations join a growing range of social entrepreneurship and enterprise models that have the potential to have positive social impacts on communities in Connecticut and around the world. Designed to evaluate and enhance this potential, SE2 will feature a critical examination of the various aspects of social entrepreneurship, as well as practical guidance on the challenges and opportunities presented by the newly adopted Connecticut Benefit Corporation Act and other forms of social enterprise.
Presenters at the academic symposium on April 23 are:
- Mystica Alexander, Bentley University
- Norman Bishara, University of Michigan
- Kate Cooney, Yale University
- Lucien Dhooge, Georgia Institute of Technology
- Gwendolyn Gordon, University of Pennsylvania
- Gil Lan, Ryerson University
- Diana Leyden, University of Connecticut
- Haskell Murray, Belmont University
- Inara Scott, Oregon State University
Presenters at the practitioner conference on April 24 are:
- Gregg Haddad, State Representative, Connecticut General Assembly (D-Mansfield)
- Spencer Curry & Kieran Foran, FRESH Farm Aquaponics
- Sophie Faris, Community Development, B-Lab
- James W. McLaughlin, Associate, Murtha Cullina LLP
- Michelle Cote, Managing Director, Connecticut Center for Entrepreneurship and Innovation
- Mike Brady, CEO, Greyston Bakery
- Jeff Brown, Executive Vice President, Newman’s Own Foundation
- Justin Nash, President, Veterans Construction Services, and Founder, Til Duty is Done
- Vishal Patel, CEO & Founder, Happy Life Coffee
- Anselm Doering, President & CEO, EcoLogic Solutions
- Dafna Alsheh, Production Operations Director, Ice Stone
- Tamara Brown, Director of Sustainable Development and Community Engagement, Praxair
On April 3, Delaware Governor Jack Markell signed the Delaware Rapid Arbitration Act (DRAA) into law. The DRAA becomes effective on May 4, 2015. The DRAA is a different take on the attempted Chancery Arbitration that the Third Circuit ruled unconstitutional in 2013.
Under the DRAA, all parties in the dispute must agree to the arbitration. The DRAA does not use sitting judges to arbitrate, as the Chancery Arbitration attempted to do, but the Delaware Court of Chancery will be “facilitating” the process under the DRAA. Among other things, the Delaware Court of Chancery can assist in appointing an arbitrator for the process, enter final judgments, and determine an arbitrator’s fees. The Delaware Supreme Court can hear appeals of awards.
The DRAA appears to be encouraging a relatively fast and cost effective dispute resolution process. The process is limited to 180 days – final award to be issued within 120 days of the arbitrator’s appointment and allowable extensions up to an additional 60 days.
Given the privacy and the apparent time and cost-savings, this may be an attractive alternative dispute resolution process for various businesses.
For more analysis see:
Wednesday, April 15, 2015
"Laws, like sausages, cease to inspire respect in proportion as we know how they are made." -- John Godfrey Saxe
This is a brief legislative update on the progress of Tennessee's current bills, introduced in the house (HB0767--amendment not yet filed) and senate (SB0972), to institute the benefit corporation as a distinct for-profit business corporation in the State of Tennessee. The links provided are to the current versions of the bill, which reflect a significant amendment, as described below.
As you may know from my prior posts (including here and here), I am a benefit corporation skeptic. Please read those posts for details. And within the Tennessee Bar Association (TBA) Business Law Section Executive Council and Business Entity Study Committee (our state bar committee that vets changes to Tennessee business associations and other business laws), I am not alone. We have rejected bills of this kind several times over the past few years when the matter has been put to us for review by the TBA. This year was no different. We opposed the benefit corporation bills that were introduced in Tennessee this year, too.
What was different this time around, was that the folks at B Lab had gotten the attention of the Chamber of Commerce and Industry in Tennessee, who appear(ed) to have some misunderstandings about the current state of Tennessee corporate governance law and came to push for adoption of the bill in committee in both houses of the legislature. Given that we were late to the party and that the members of our TBA Council and Committee are very busy lawyers, our efforts to re-educate members of the relevant committees were not as effective as we would have liked. But we ultimately were afforded two weeks to attempt to write an amended bill--one that better reflected Tennessee law and norms.
Now, any of you who have worked on a project like this before know that two weeks is not enough time to do a professionally responsible job in spotting and tracking down all of the issues that the introduction of a new business form routinely and naturally raises. Heck. We couldn't even get all the constituents around the table that we would want around the table to debate and review the legislation in two weeks! [It seems hardest to find a plaintiff's bar lawyer to sit in with us, but we found a great one for our recent work on the Tennessee Business Corporation Act (TBCA).] Our requests for more time to work on the proposed legislation were, however, rejected.
So, we set out to make a better sausage . . . .
Thursday, April 9, 2015
It’s that time of year again where I have my business associations students pretend to be shareholders and draft proposals. I blogged about this topic last semester here. Most of this semester’s proposals related to environmental, social and governance factors. In the real world, a record 433 ESG proposals have been filed this year, and the breakdown as of mid-February was as follows according to As You Sow:
Environment/Climate Change- 27%
Political Activity- 26%
Summaries of some of the student proposals are below (my apologies if my truncated descriptions make their proposals less clear):
1) Netflix-follow the UN Guiding Principles on Business and Human Rights and the core standards of the International Labour Organization
2) Luxottica- separate Chair and CEO
3) DineEquity- issue quarterly reports on efforts to combat childhood obesity and the links to financial risks to the company
4) Starbucks- provide additional disclosure of risks related to declines in consumer spending and decreases in wages
5) Chipotle- issue executive compensation/pay disparity report
6) Citrix Systems-add board diversity
7) Dunkin Donuts- eliminate the use of Styrofoam cups
8) Campbell Soup- issue sustainability report
9) Shake Shack- issue sustainability report
10) Starbucks- separate Chair and CEO
11) Hyatt Hotels- institute a tobacco-free workplace
12) Burger King- eliminate GMO in food
13) McDonalds- provide more transparency on menu changes
14) Google-disclose more on political expenditures
15) WWE- institute funding cap
One proposal that generated some discussion in class today related to a consumer products company. As I skimmed the first two lines of the proposal to end animal testing last night, I realized that one of my friends was in-house counsel at the company. I immediately reached out to her telling her that my students noted that the company used to be ”cruelty-free,” but now tested on animals in China. She responded that the Chinese government required animal testing on these products, and thus they were complying with applicable regulations. My students, however, believed that the company should, like their competitors, work with the Chinese government to change the law or should pull out of China. Are my students naïve? Do companies actually have the kind of leverage to cause the Chinese government to change their laws? Or would companies fail their shareholders by pulling out of a market with a billion potential customers? This led to a robust debate, which unfortunately we could not finish.
I look forward to Tuesday’s class when we will continue these discussions and I will show them the sobering statistics of how often these proposals tend to fail. Hopefully we can also touch on the Third Circuit decision, which may be out on the Wal-Mart/Trinity Church shareholder proposal issue.These are certainly exciting times to be teaching about business associations and corporate governance.
April 9, 2015 in Business Associations, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Ethics, Financial Markets, Law School, Marcia Narine, Securities Regulation, Teaching | Permalink | Comments (1)
Wednesday, April 8, 2015
For thirty years, I have had a pet peeve about the media's routine reporting on mergers and acquisitions. I have kept this to myself, for the most part, other than scattered comments to law practice colleagues and law students over the years. Today, I go public with this veritable thorn in my side.
From many press reports (which commonly characterize business combinations as mergers), you would think that every business combination is structured as a merger. I know I am being picky here (since there are both legal and non-legal common parlance definitions of the verb "merge"). But a merger, to a business lawyer, is a particular form of business combination, to be distinguished from a stock purchase, asset purchase, consolidation, or statutory share exchange transaction.
The distinction is meaningful to business lawyers for whom the implications of deal type are well known. However, imho, it also can be meaningful to others with an interest in the transaction, assuming the implications of the deal structure are understood by the journalist and conveyed accurately to readers. For instance, the existence (or lack) of shareholder approval requirements and appraisal rights, the need for contractual consents, permit or license transfers or applications, or regulatory approvals, the tax treatment, etc. may differ based on the transaction structure.