Monday, October 16, 2017

Blockchain-Based Token Sales, Initial Coin Offerings, and the Democratization of Public Capital Markets. Oh, My!

My UT Law colleague Jonathan Rohr has coauthored (with Aaron Wright) an important piece of scholarship on an of-the-moment topic--financial instrument offerings using distributed ledger technology.  Even more fun?  He and his co-author are interested in aspects of this topic at its intersection with the regulation of securities offerings.  Totally cool.

Here is the extended abstract.  I cannot wait to dig into this one.  Can you?  As of the time I authored this post, the article already had almost 700 downloads . . . .  Join the crowd!

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Blockchain-Based Token Sales, Initial Coin Offerings, and the Democratization of Public Capital Markets

Jonathan Rohr & Aaron Wright

Best known for their role in the creation of cryptocurrencies like bitcoin, blockchains are revolutionizing the way tech entrepreneurs are financing their business enterprises. In 2017 alone, over $2.2 billion has been raised through the sale of blockchain-based digital tokens in what some are calling initial coin offerings or “ICOs,” with some sales lasting mere seconds. In a token sale, organizers of a project sell digital tokens to members of the public to finance the development of future technology. An active secondary market for tokens has emerged, with tokens being bought and sold on cryptocurrency exchanges scattered across the globe, with often wild price fluctuations.

The recent explosion of token sales could mark the beginning of a broader shift in public capital markets—one similar to the shift in media distribution that started several decades ago. Blockchains drastically reduce the cost of exchanging value and enable anyone to transmit digitized assets around the globe in a highly trusted manner, stoking dreams of truly global capital markets that leverage the power of a blockchain and the Internet to facilitate capital formation.

The spectacular growth of tokens sales has caused some to argue that these sales simply serve as new tools for hucksters and unscrupulous charlatans to fleece consumers, raising the attention of regulators across the globe. A more careful analysis, however, reveals that blockchain-based tokens represent a wide variety of assets that take a variety of forms. Some are obvious investment vehicles and entitle their holders to economic rights like a share of any profits generated by the project. Others carry with them the right to use and govern the technology that is being developed with funds generated by the token sale and may represent the beginning of a new way to build and fund powerful technological platforms.

Lacking homogeneity, the status of tokens under U.S. securities laws is anything but clear. The test under which security status is assessed—the Howey test—has uncertain application to blockchain-based tokens, particularly those that entitle the holder to use a particular technological service, because they also present the possibility of making a profit by selling the token on a secondary market. Although the SEC recently issued a Report of Investigation in which it found that one type of token qualified as a security, confusion surrounds the boundaries between the types of tokens that will be deemed securities and those that will not.

Blockchain-based tokens exhibit disparate features and have characteristics that make current registration exemptions a poor fit for token sales. In addition to including requirements that do not fit squarely with blockchain-based systems, the transfer restrictions that apply to the most popular exemptions would have the perverse effect of restricting the ability of U.S. consumers to access a new generation of digital technology. The result is an uncertain regulatory environment in which token sellers do not have a sensible path to compliance.

In this Article, we argue that the SEC and Congress should provide token sellers and the exchanges that facilitate token sales with additional certainty. Specifically, we propose that the SEC provide guidance on how it will apply the Howey test to digital tokens, particularly those that mix aspects of consumption and use with the potential for a profit. We also propose that lawmakers adopt both a compliance-driven safe harbor for online exchanges that list tokens with a reasonable belief that the public sale of such tokens is not a violation of Section 5 as well as an exemption to the Section 5 registration requirement that has been tailored to digital tokens.

October 16, 2017 in Corporate Finance, Current Affairs, Entrepreneurship, Joan Heminway, Research/Scholarhip, Securities Regulation, Web/Tech | Permalink | Comments (0)

Monday, October 9, 2017

Call for Papers: 2018 National Business Law Scholars Conference

National Business Law Scholars Conference
Thursday & Friday, June 21-22, 2018

Call for Papers

The National Business Law Scholars Conference (NBLSC) will be held on Thursday and Friday, June 21-22, 2018, at the University of Georgia School of Law in Athens, Georgia.  A vibrant college town, Athens is readily accessible from the Atlanta airport by vans that depart hourly. Information about transportation, hotels, and other conference-related matters can be found on the conference website.

This is the ninth meeting of the NBLSC, an annual conference that draws legal scholars from across the United States and around the world.  We welcome all scholarly submissions relating to business law. Junior scholars and those considering entering the legal academy are especially encouraged to participate. If you are thinking about entering the academy and would like to receive informal mentoring and learn more about job market dynamics, please let us know when you make your submission.

To submit a presentation, email Professor Eric C. Chaffee at eric.chaffee@utoledo.edu with an abstract or paper by February 16, 2018.  Please title the email “NBLSC Submission – {Your Name}.”  If you would like to attend, but not present, email Professor Chaffee with an email entitled “NBLSC Attendance.”  Please specify in your email whether you are willing to serve as a panel moderator.  We will respond to submissions with notifications of acceptance shortly after the submission deadline. We anticipate circulating the conference schedule in May.

Keynote Speakers:

Paul G. Mahoney
David and Mary Harrison Distinguished Professor of Law
University of Virginia School of Law

Cindy A. Schipani
Merwin H. Waterman Collegiate Professor of Business Administration
Professor of Business Law
University of Michigan Ross School of Business

Featured Panels:

The Criminal Side of Business in 2018

Miriam Baer, Professor of Law, Brooklyn Law School
José A. Cabranes, U.S. Circuit Judge, U.S. Court of Appeals for the Second Circuit
Peter J. Henning, Professor of Law, Wayne State University School of Law
Kate Stith, Lafayette S. Foster Professor of Law, Yale Law School
Larry D. Thompson, John A. Sibley Professor in Corporate and Business Law, University of Georgia School of Law

A Wild Decade in Finance: 2008-18

William W. Bratton, Nicholas F. Gallicchio Professor of Law, University of Pennsylvania Law School
Giles T. Cohen, Attorney, Securities & Exchange Commission
Lisa M. Fairfax, Leroy Sorenson Merrifield Research Professor of Law, George Washington University Law School
James Park, Professor of Law, UCLA School of Law
Roberta Romano, Sterling Professor of Law, Yale Law School
Veronica Root, Associate Professor of Law, Notre Dame Law School

Conference Organizers:

Anthony J. Casey (The University of Chicago Law School)
Eric C. Chaffee (The University of Toledo College of Law)
Steven Davidoff Solomon (University of California, Berkeley School of Law)
Joan MacLeod Heminway (The University of Tennessee College of Law)
Kristin N. Johnson (Seton Hall University School of Law)
Elizabeth Pollman (Loyola Law School, Los Angeles)
Margaret V. Sachs (University of Georgia School of Law)
Jeff Schwartz (University of Utah S.J. Quinney College of Law)

October 9, 2017 in Call for Papers, Conferences, Joan Heminway | Permalink | Comments (0)

Monday, October 2, 2017

Fitbit and Publicness

As some of our BLPB readers know, I am a habitual 12,000-step-a-day walker.  I monitor my progress on steps, stairs, and sometimes sleep using a Fitbit "One" that I have had since Christmas Day 2012.  Fitbit recently announced that it is discontinuing the One.  So, if my existing One dies off, I will have to switch trackers.  And, sadly, I am likely to have to switch suppliers.  While Fitbit has been good to me, the rest of its trackers are not at all interesting or suitable for my desired uses.  They are almost all wrist models, and the one clip-on tracker Fitbit sells is relatively bulky and antiquated.

I am not the only one who is unhappy about the discontinuation of the One tracker.  Fitbit has discussion boards for members of its "community."  The discussion board titled "Is Fitbit One being discontinued?" (which was started over the summer) has lit up over the past week.  As of the time of this post, there were 519 posts in the Fitbit forum.  

I have been impressed by the passion of the folks who have posted comments and responses.  Many posted reviews of other Fitbit products and competitor products that might be adequate substitutes for the One for some users.  But I have been fascinated by the nature of several posts, including a number that focus on corporate governance and finance matters.  Community members were motivated to check into and comment on Fitbit's published financial statements, litigation profile, and trends in the mix of product sales.  Some encouraged calling either Fitbit's customer service line or mutual funds that hold Fitbit shares (and they named the funds) to express concerns.  One member of the community posted that he is worried about Fitbit's employees, customers, and shareholders in the event Fitbit's business goes South.  

The comments made on the Fitbit community discussion board reminded me of Hillary Sale's work on publicness, including her article entitled Public Governance.  In that article, she observes:

Publicness is both a process and an outcome. When corporate actors lose sight of the fact that the companies they run and decisions they make impact society more generally, and not just shareholders, they are subjected to publicness. Outside actors like the media, bloggers, and Congress demand reform and become involved in the debate. Decisions about governance move from Wall Street to Main Street.

Hillary A. Sale, Public Governance, 81 Geo. Wash. L. Rev. 1012, 1013 (2013).  She later echoes that thought in a slightly different way:
 
Key to an understanding of publicness . . . is that the group demanding governance is larger than the stated partners (i.e., shareholders, directors, and officers) and includes outside actors. Employing a crabbed definition of this group is actually part of the problem. Those “outsiders” scrutinize decisionmaking and incentives. They monitor failures of internal governance, press for more external governance, and then publicness grows.
 
Id. at 1034.  The users of Fitbit's discussion board are digesting and reporting on Fitbit's operations and seeking governance changes in a public forum.  They are seeking ways to be heard by management.  Moderators occasionally post commentary and promise to pass on comments to Fitbit's management.  This is publicness--feedback loops that enhance public scrutiny and sway over the firm.
 
I doubt any of this will save the Fitbit One.  It seems that the firm is moving on with new products, notwithstanding significant customer demand.  So, once my rechargeable battery dies, I will be in the market for a new tracker.   I am accepting recommendations . . . .

October 2, 2017 in Corporate Governance, Joan Heminway, Marketing, Technology | Permalink | Comments (1)

Monday, September 25, 2017

Rocky Top at 50

 RockyTopPride

A recent Knoxville New Sentinel article (as well as articles and other press coverage, including stories on local television outlets like this one) noted the golden anniversary of The University of Tennessee's unofficial* fight song (also a Tennessee state song), Rocky Top.  Any of you who have been to Neyland Stadium--or to Thompson-Boling Arena or any other venue at which the Vols are accompanied by the Pride of the Southland Marching Band or one of the pep bands--are familiar with the tune.  Many of our opponents just despise it.  It's catchy, and it's country.

And it has led to merch in which The University of Tennessee has an interest.  Rocky Top hats, t-shirts, etc. abound.  Lyrics from the song (especially "Home sweet home to me") adorn the same.  That little song has become a big (read: commercially successful) deal.

But it also has been involved in some recent intellectual property law controversies involving a town just North of us here in Knoxville--a town formerly known as Lake City, Tennessee and now known as (you guessed it) Rocky Top, Tennessee.  It will take me two posts to cover this without boring you all, but I will start with the article written by my colleague Brian Krumm and one of our alums, Liz Natal.  In Good Ole Rocky Top: Rocky Top Tennessee, Brian and Liz lay out the details of how our beloved song (which co-blogger Doug Moll says periodically rings in his head from a football game long ago . . .) became the name of a town despite a trademark suit over the affair.  The details are in the article.  For those interested in trademarks, the article lays out the controversy and offers some interesting observations.

But Brian and Liz's piece just tells the early part of the story.  There's more to say about the intellectual property ramifications of this name change.  Another of my colleagues, Gary Pulsinelli, is working on a piece along those lines now.  I will share it with you once he's got at least a draft posted somewhere.  But I have heard presentations on this work, and it's also quite interesting--even if Rocky Top is not your thing.  Stay tuned! 

RockTopTownSign

* The word "unofficial" was added to this post on September 28 in response to a reader's comment, reflected below.  The official fight song of The University of Tennessee, Knoxville is "Down the Field," also known as "Here's to Old Tennessee."

September 25, 2017 in Intellectual Property, Joan Heminway, Sports | Permalink | Comments (3)

Wednesday, September 20, 2017

Dean Search Announcement - Washburn School of Law

This from friend-of-the-BLPB Andrea Boyack, Professor of Law and Co-Director of Business & Transactional Law Center at the Washburn University School of Law:

POSITION ANNOUNCEMENT – DEAN, SCHOOL OF LAW

Washburn University invites applications and nominations for the position of Dean of the Washburn University School of Law. The Law School is recognized for its outstanding teaching and faculty scholarship and its commitment to public service. It has a highly favorable student/faculty ratio, with an excellent student body drawn from a national pool.

One of only two law schools in the state of Kansas, Washburn University School of Law is located in Topeka, the state capital. It was established in 1903 and has built a long tradition and legacy of providing an outstanding legal education. Washburn Law offers a broad-based curriculum in national and international law to students enrolled in the J.D., LL.M., and M.S.L. programs. It features six centers for excellence, nine certificate programs, and four dual degree programs. The thirty-two full-time faculty members, along with a strong cohort of adjunct professors, teach and conduct scholarship across a wide array of legal specializations. The Law School enjoys a dedicated staff and strong support from the community.

For more than a century, Washburn Law has demonstrated its commitment to academic excellence, innovation, and diversity. Students choose from nearly 150 courses, including a variety of seminars and clinical offerings. From the first year through graduation, the comprehensive curriculum and innovative programs prepare students for success in the legal profession. For over forty years, Washburn’s Law Clinic has functioned as an in-house general practice law firm, providing students the opportunity to represent actual clients in eight practice areas.

Washburn University School of Law has excelled in the categories most important to our students and alumni: a high-quality curriculum; an exceptional faculty; outstanding library resources; favorable graduation statistics, bar passage rates, and employment outcomes; and affordability. Among other accolades, Washburn University School of Law is ranked #2 in the nation for Government Law and is one of twenty law schools recognized by National Jurist as "Top Law Schools for Government Jobs." Washburn Law is also among the top seventeen law schools in the country for Business and Corporate Law programs. Washburn Law’s Trial Advocacy program is ranked in the top sixteen programs this year.

Washburn Law’s six signature programs – the Center for Law and Government, the Center for Excellence in Advocacy, the Business and Transactional Law Center, the Children and Family Law Center, the Oil and Gas Law Center, and the International and Comparative Law Center – establish an extensive learning network for law students and experienced professionals.

Our Legal Analysis, Research, and Writing program is consistently recognized as a top program by U.S. News & World Report, ranked 15th in the nation in the current edition. We are one of only a few law schools in the country with full-time, tenured and tenure-track legal writing professors who are involved in service and scholarship in the national legal writing community.

WashLaw, initiated in 1991 by the Washburn Law Library, is a legal research portal that provides users with links to significant sites of law-related materials on the Internet. It is one of the premier legal internet research services available to a worldwide audience of practicing and academic legal experts. WashLaw also hosts a large number of law-related discussion groups.

Washburn University seeks an exceptional candidate who has the vision, strategic acumen, entrepreneurial spirit, character, and presence to enhance the school’s existing strengths while moving the School of Law forward to a higher level of distinction. The Dean serves as the academic, fiscal, and administrative leader for the School of Law.

The School of Law is seeking a Dean who will work with the School of Law community to articulate a strategic vision to enhance its reputation, strengthen its fiscal position, and lead its efforts to meet the challenges of the changing landscape for legal education. The successful applicant must have a J.D. degree and demonstrate critical thinking and an ability to adapt to the changing market while moving the School of Law forward successfully.

The successful candidate will have a record of experience commensurate with appointment as a Professor of Law; a passion for academic excellence and intellectual inquiry; a recognized dedication to teaching excellence; a demonstrated commitment to institutional and community service; a thorough and current understanding of the legal environment; effective interpersonal and communication skills; and the ability to develop strong relationships with all of the law school’s constituencies thereby growing private financial support for the School of Law. Candidates must possess a collaborative work style, well-developed organizational skills, a commitment to diversity and inclusion, and the highest degree of integrity and professionalism. A record of progressively responsible leadership experience in administration is required.

To be considered, submit electronically in pdf format a cover letter, resume, and at least three references to Joan Bayens at joan.bayens@washburn.edu. A search committee will begin to review candidate materials by October 27, 2017, and will continue until interviews are scheduled. Employment at Washburn University will be conditioned upon satisfactory completion of a background check. The successful candidate will submit official transcripts prior to hire. Washburn University is an Equal Opportunity Employer. To enrich education through diversity, candidates from underrepresented groups are encouraged to apply.

September 20, 2017 in Joan Heminway, Jobs, Law School | Permalink | Comments (0)

Monday, September 18, 2017

The New Yale Law School Entrepreneurial Law Clinic Needs a Director . . . .

Yale Law School invites applications for an inaugural, full time faculty director for its new Entrepreneurship Clinic. The position, which will be at the rank of Clinical Associate Professor or Clinical Professor of Law, will begin on July 1, 2018.

A key ambition of Yale University is “to provide an unsurpassed campus learning environment that cultivates innovators, leaders, pioneers, creators, and entrepreneurs in all fields and for all sectors of society.” Yale Law School is contributing to that goal by forming a new Entrepreneurship Clinic, which will provide transactional services and related legal advice to individuals or entities seeking to start or expand their own ventures. The Entrepreneurship Clinic is expected to become a central component of the Yale University student innovation ecosystem, which encompasses both curricular programs (such as the Yale School of Management Programs on Entrepreneurship and Social Enterprise), as well as independent, cross disciplinary centers (such as the Tsai Center for Innovative Thinking at Yale). Although it is envisioned that clients for the Entrepreneurship Clinic will come primarily from these programs, there may be opportunities for creating partnerships with the Office of Cooperative Research (which focuses on faculty ventures) and with the greater New Haven entrepreneurial community.

In addition to being a central component of the Yale University student innovation ecosystem, the Entrepreneurship Clinic will become an integral part of the business law programs at Yale Law School. Yale Law School has a rich tradition in corporate law (http://ccl.yale.edu/history-business-law-yale) and has two Centers devoted to corporate and commercial law, the Center for the Study of Corporate Law (http://ccl.yale.edu/) and the Center for Private Law (https://law.yale.edu/centers-workshops/yale-law-school-center-private-law). The Centers sponsor lectures, panels, and symposia, which bring together academics, policymakers, and members of the bar and business communities. There is also a large and vibrant student group, the Yale Law & Business Society. In addition, Yale Law School has a strong partnership with the Yale School of Management, as evinced by the joint J.D./M.B.A. program, which students can complete on an accelerated track in three years, as well as in the more conventional four years.

As the inaugural director and a member of the full time law faculty, the director will shape the future of the Entrepreneurship Clinic. The responsibilities of the position include:

  • designing the curriculum for the seminar component of the Clinic, which may cover, among other things: pre venture counseling; entity selection and tax planning; entity formation or entry into joint ventures or strategic alliances; intellectual property; licensing and regulatory compliance; employee management; non-profit ventures; and start-up financing, and teaching the seminar;
  • arranging the fieldwork component of the Clinic and supervising law student representation of clients, including transactional drafting, review, or negotiation, as appropriate, of organizational documents, founder 2 agreements, non- disclosure agreements, employment agreements and accompanying equity compensation agreements, independent contractor agreements, supplier or other vendor agreements, debt documents, and venture investment term sheets;
  • building and maintaining relationships between the Clinic and the Yale student innovation programs; and
  • participating in the intellectual life of Yale Law School, including interaction with academic and clinical faculty and Centers or Workshops that may touch upon substantive aspects of entrepreneurship.

Yale Law School is open to director candidates at varying stages of their career. If not currently a member, admission to the State Bar of Connecticut will be required before the end of the first year of full time appointment. Salary is commensurate with experience.

Applicants should have a J.D. degree and a minimum of three plus years of relevant transactional experience, concentrating on startups or venture capital, or transactional experience in related areas, such as mergers and acquisitions, private equity, capital markets (especially initial public offerings), or intellectual property. A strong candidate will have excellent supervisory and communication skills, the ability to work effectively with students and clients, and an interest in developing clinical experiences for students within a community that supports interdisciplinary collaboration and innovative, passionate teaching.

To apply, please submit a letter of interest, resume, and list of three references to Professor Roberta Romano, Chair, Entrepreneurship Clinic Appointments Committee, at roberta.romano@yale.edu. Please write “Entrepreneurship Clinic Application” in the subject line of the email. Review of applications will begin on October 15, 2017 and will continue until the position is filled.

Information about clinical and experiential legal education at Yale Law School can be found at: https://law.yale.edu/studying-law-yale/clinical-and-experiential-learning; additional information about corporate and commercial Law at Yale Law School can be found at: https://law.yale.edu/studying-law-yale/areas-interest/corporate-commercial-law.

Yale University considers applicants for employment without regard to, and does not discriminate on the basis of, an individual's sex, race, color, religion, age, disability, status as a veteran, or national or ethnic origin; nor does Yale discriminate on the basis of sexual orientation or gender identity or expression.

September 18, 2017 in Clinical Education, Joan Heminway, Jobs | Permalink | Comments (0)

Sunday, September 17, 2017

The Business Law Prof Bloggers ROCK Knoxville!

BLPBConferenceLogo

As I earlier reported, on Saturday, The University of Tennessee College of Law hosted "Business Law: Connecting the Threads", a conference and continuing legal education program featuring most of us here at the BLPB--Josh, me, Ann, Doug, Haskell, Stefan, and Marcia.  These stalwart bloggers, law profs, and scholars survived two hurricanes (Harvey for Doug and Irma for Marcia) and put aside their personal and private lives for a day or two to travel to Knoxville to share their work and their winning personalities with my faculty and bar colleagues and our students.  It was truly wonderful for me to see so many of my favorite people in one place together enjoying and learning from each other.

Interestingly (although maybe not surprisingly), in many of the presentations (and likely the essays and articles that come from them), we cite to each other's work.  I think that's wonderful.  Who would have known that all of this would come from our decision over time to blog together here?  But we have learned a lot more about each other and each other's work by editing this blog together over the past few years.  As a result, the whole conference was pure joy for me.  And the participants from UT Law (faculty, students, and alums) truly enjoyed themselves.  Papers by the presenters and discussants are being published in a forthcoming volume of Transactions: The Tennessee Journal of Business Law.

My presentation at the conference focused on the professional responsibility and ethics challenges posed by complexity and rapid change in business law.  I will post on my related article at a later date.  But if you have any thoughts you want to share on the topic, please let me know.  A picture of me delivering my talk, courtesy of Haskell, is included below.  (Thank you, Haskell!)  So, now you at least know the title, in addition to the topic . . . .  :>)  Also pictured are my two discussants, my UT Law faculty colleague George Kuney and UT Law 3L Claire Tuley.

Heminway(BLPBConf2017)

September 17, 2017 in Ann Lipton, Conferences, Haskell Murray, Joan Heminway, Joshua P. Fershee, Marcia Narine Weldon, Stefan J. Padfield | Permalink | Comments (0)

Monday, September 11, 2017

A Public Company With Mandatory Disclosure Obligations Has A Duty To Disclose

Last Thursday, Jay Brown filed an amicus brief with the U.S. Supreme Court coauthored by him, me, Jim Cox, and Lyman Johnson.  The brief was filed in Leidos, Inc., fka SAIC, Inc., Petitioners, v. Indiana Public Retirement System, Indiana State Teachers’ Retirement Fund, and Indiana Public Employees’ Retirement Fund, an omission case brought under Section 10(b) of and Rule 10b-5 under the Securities Exchange Act of 1934, as amended.   An abstract of the brief follows.

This Amicus Brief was filed with the U.S. Supreme Court on behalf of nearly 50 law and business faculty in the United States and Canada who have a common interest in ensuring a proper interpretation of the statutory securities regulation framework put in place by the U.S. Congress. Specifically, all amici agree that Item 303 of the Securities and Exchange Commission's Regulation S-K creates a duty to disclose for purposes of Rule 10b-5(b) under the Securities Exchange Act of 1934.

The Court’s affirmation of a duty to disclose would have little effect on existing practice. Under the current state of the law, investors can and do bring fraud claims for nondisclosure of required information by public companies. Thus, affirming the existence of a duty to disclose will not significantly alter existing practices or create a new avenue for litigants that will lead to “massive liability” or widespread enforcement of “technical reporting violations.”

At the same time, the failure to find a duty to disclose in these circumstances will hinder enforcement of the system of mandatory reporting applicable to public companies and weaken compliance. Reversal of the lower court would reduce incentives to comply with the requirements mandated by the system of periodic reporting. Enforcement under Section 10(b) of and Rule 10b-5(b) under the Securities Exchange Act of 1934 by investors in the case of nondisclosure will effectively be eliminated. Reversal would likewise reduce the tools available to the Securities and Exchange Commission to ensure compliance with the system of periodic reporting. In an environment of diminished enforcement, reporting companies could perceive their disclosure obligations less as a mandate than as a series of options. Required disclosure would more often become a matter of strategy, with issuers weighing the obligation to disclose against the likelihood of detection and the reduced risk of enforcement.

Under this approach, investors would not make investment decisions on the basis of “true and accurate corporate reporting. . . .” They would operate under the “predictable inference” that reports included the disclosure mandated by the rules and regulations of the Securities and Exchange Commission. Particularly where officers certified the accuracy and completeness of the information provided in the reports, investors would have an explicit basis for the assumption. They would therefore believe that omitted transactions, uncertainties, and trends otherwise required to be disclosed had not occurred or did not exist. Trust in the integrity of the public disclosure system would decline.

The lower court correctly recognized that the mandatory disclosure requirements contained in Item 303 gave rise to a duty to disclose and that the omission of material trends and uncertainties could mislead investors. The decision below should be affirmed.

More information about the case (including the parties' briefs and all of the amicus briefs) can be found here.  The link to our brief is not yet posted there but likely will be available in the next few days.  Also, I commend to you Ann Lipton's earlier post here about the circuit split on the duty to disclose issue up for review in Leidos.  

Imv, this is a great case for discussion in a Securities Regulation course.  It involves mandatory disclosure rules, fraud liability, and class action gatekeeping.  As such, it allows for an exploration of core regulatory and enforcement tools of federal securities regulation.

September 11, 2017 in Ann Lipton, Joan Heminway, Litigation, Securities Regulation | Permalink | Comments (1)

Remembering 9-11-2001

My family has been touched by terrorism.  My cousin, Scott Marsh Cory, died on Pan Am Flight 103--the Lockerbie flight--on December 21, 1988.  He was a Syracuse University student coming home from a semester abroad in England.  Every December 21, with Christmas and grading on my mind, I stop for a moment to remember him.  I think of him at various other times, too.  My son Scott is named after him.

The events of September 11, 2001 are irrevocably connected in my mind to all that.  I taught that morning after both World Trade Center towers had been hit.  I gave students permission to come and go in my class that day.  But I felt that I had to teach that class.  I vowed that I was not going to let terrorists have power over me and rule my life--which is, after all, what they want to do.  I did not teach my afternoon class.  I had learned after my morning class that my brother was scheduled to be down near the World Trade Center towers that morning--and we could not reach him.  I was too emotional to be able to teach, and almost everyone had cancelled their classes at that point.  Luckily, my brother and a colleague got stuck in the traffic trying to get into Manhattan from New Jersey that morning, and they were turned back after the bridges and tunnels were closed.

I paused at the beginning of both of my classes today to reflect on that day 16 years ago.  I gave my students permission to come and go, as I had that morning.  Some of them were quite young when the September 11 attacks occurred.  I cannot imagine what they remember of that day.  No doubt some remember little, if anything; but some may have been deeply affected by the violence of that day.

Today, many of us, each in our own way, stop to remember.  I wanted to take a minute to do that here, too.

September 11, 2017 in Current Affairs, Joan Heminway | Permalink | Comments (1)

Monday, September 4, 2017

This Labor Day, I Am Thinking About Those Affected By Hurricane Harvey . . . .

Screenshot 2017-09-03 19.09.35

Now that Hurricane Harvey's threat to the United States has dissipated, we can begin to fully appreciate the damage it has caused to person, property, and business.  It's staggering.  The screenshot included above was captured from the Houston Chronicle's website yesterday.  Although I am not sure how one calculates such things, Wikipedia notes that, "[b]ased on current damage estimates made by multiple agencies, Hurricane Harvey is likely to be at least the second-most costly natural disaster in U.S. history, behind only Hurricane Katrina in 2005."  I am heartbroken for all those who have lost so much, yet grateful for those who survived such a wicked storm, including the BLPB's own Doug Moll.

I am confident that too many folks are using this holiday weekend--one they had hoped to spend enjoying last-of-summer moments with family and friends--mourning the loss of life and digging out from the mess at their homes or workplaces.  The damage in Tennessee from the related rain and winds was significant but pales in comparison to what the folks have suffered and continue to contend with in Houston and the surrounding areas.  Luckily, the storm threw very little at Knoxville, since the heart of it passed to the West of us.  West and middle Tennessee were hit harder.

Many of us give to local and national charities at times like this, not knowing what else we might have to offer from afar.  Certainly, financial support directed to the right paces is always a good idea.  But there's more we, as licensed attorneys, can do.  As you may have heard, the Texas Supreme Court has entered an order to permit the practice of Texas law by out-of-state licensed attorneys.  Our dean informed us about a helpful information page on the ABA website that you may want to check out that includes related and other information about how attorneys can help through and outside the ABA.  And there are many other websites with valuable information that we can either pass on or use to help.  Among others, on Labor Day, I might recommend the Department of Labor's website, which has a webpage dedicated to recovery efforts.

I know it's early for Thanksgiving, but let's all take a moment to be grateful for what we have this Labor Day.  For me, having a job that I love that enables me to help others while working with really intelligent and kind people is something to be grateful for every day.  Labor Day is a good day to remember that, so I have chosen an image to honor that sentiment below.  But let's also take a moment to reflect on those whose lives and homes and work have been destroyed or disrupted by Hurricane Harvey and consider how we can play a role in the recovery.  Happy Labor Day, y'all.

  LaborDay2017(Poster)

 

September 4, 2017 in Joan Heminway | Permalink | Comments (0)

Monday, August 28, 2017

"Business Law: Connecting the Threads" - The First (Annual?) BLPB Conference

I am excited and proud to make the following announcement about a cool (!) upcoming program being held on Saturday, September 16 at UT Law in Knoxville:

The University of Tennessee College of Law will host a conference and CLE program that will focus on trends in business law. Discussions will take place throughout the day featuring panel discussions that center upon business law scholarship, teaching and law practice.

Topics will include business transaction diagramming; risks posed by social enterprise enabling statutes; fiduciary obligations and mutual fund voting; judicial dissolution in LLCs; Tennessee for-profit benefit corporation law and reporting; corporate personality theory in determining the shareholder wealth maximization norm; and professional responsibility issues for business lawyers in the current, evolving business environment.

The presenters for the program panels are . . . well . . . us!  All of the BLPB editors and contributing editors, except Anne Tucker (we'll miss you, Anne!), are coming to Knoxville to share current work with each other and conference attendees.  Each editor will anchor a panel that also will include a faculty and student discussant.  The BLPB blogger papers and the discussants' written commentaries will all be published in a future issue of our business law journal, Transactions: The Tennessee Journal of Business Law.  We also have secured one of our former visiting professors as a lunch-time speaker.

UT Law looks forward to hosting this event.  For more information, you can look here.  I expect some of us will post on the conference and the conference papers at a later date.

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August 28, 2017 in Ann Lipton, Conferences, Haskell Murray, Joan Heminway, Joshua P. Fershee, Marcia Narine Weldon, Stefan J. Padfield | Permalink | Comments (0)

Friday, August 25, 2017

Washburn Law Tenured/Tenure-Track Opening: Commercial Law

From Friend-of-the-BLPB Andrea Boyack:

WASHBURN UNIVERSITY SCHOOL OF LAW invites applications for one or possibly two tenure-track faculty positions commencing in the 2018-19 academic year.  We are particularly interested in secured transactions, payment systems, and other commercial law courses.  We would also be interested in candidates who could also expand our tax law offerings, in addition to those commercial law courses.The Washburn campus is located in the heart of Topeka, Kansas, blocks from the state capitol.  Topeka has been named a Top Ten City in Kiplinger’s magazine.  Topeka features affordable housing with beautiful, historic neighborhoods filled with well-maintained parks, and is the home of the Brown v. Board of Education historical site.

Washburn Law School is committed to diversity in its faculty and encourages applicants whose backgrounds will enrich the law school. Candidates should possess a JD degree from an ABA accredited law school; a distinguished academic record; and, a record of, or demonstrated potential for, scholarly production.

Review of applications will begin immediately, continuing until the position is filled.  (All faculty appointments are contingent upon funding.)  Interested candidates should send a resume, listing three references, and a cover letter.  Contact: Professor Mary Ramirez, Chair, Faculty Recruitment Committee, Washburn University School of Law, 1700 College Avenue, Topeka, Kansas, 66621.  E-mail: mary.ramirez@washburn.edu

August 25, 2017 in Joan Heminway, Jobs | Permalink | Comments (0)

Thursday, August 24, 2017

Tenured/Tenure-Track Position Announcement - Brooklyn Law

From Friend-of-the-BLPB Minor Myers (blue font emphasis added by me!):

BROOKLYN LAW SCHOOL seeks one or more full-time, tenure-track or tenured faculty members. We are interested in outstanding candidates in all fields, including, in particular, securities law and regulation and corporate law. Other areas of potential interest are civil procedure, constitutional law, labor law, antitrust, and torts. Applicants should have a strong academic record and demonstrated commitment to scholarly activity and publication. We are interested in both entry-level and lateral candidates, and we are especially interested in candidates who will enhance the diversity of our faculty. In addition, Brooklyn Law School plans to hire a proven, innovative leader for our academic success program. Entry-level candidates, and candidates who have been teaching in a tenure-track position for no more than two years, should apply via the Faculty Appointments Register or by email to Professor Minor Myers, Chair, Faculty Appointments Subcommittee (minor.myers@brooklaw.edu). Candidates who have been teaching in a tenure-track position for more than two years and candidates for the academic success position should apply via email to Professor Alex Stein, Chair, Lateral Faculty Appointments Subcommittee (alex.stein@brooklaw.edu).

August 24, 2017 in Joan Heminway, Jobs | Permalink | Comments (0)

Monday, August 21, 2017

Where Were You For Eclipse Day 2017?

Eclipse2017(totality)

So, it happened.  A total eclipse of the sun.  (And how many of you are still singing one of these songs in honor of the occasion?)  Where were you?  What did you see and do?  My best Android phone photo of totality is above.

I spent the day enjoying both the event and the charm of Charleston, South Carolina with my hubby, sister-in-law, brother-in-law, and nephew (a student at the College of Charleston)--as well as many others.  The photo below shows how dark it got on the ground for us during the total eclipse.  The street lights came on!

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A lot of people left the park we settled in for the eclipse soon after totality.  My husband and I stayed to watch the moon move away.  It all was so amazing.  Check out the little sliver of sun emerging from under the moon in the spot between the clouds in the photo below.  Yowza!  Here comes the sun!

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I am sure the business and business law stories from the total eclipse of 2017 will take some time to resolve themselves.  But I did note this WaPo article from earlier today reporting that the run-up to the eclipse, at least out in Oregon, may have predicted a better outcome for some businesses than they actually were able to achieve. Issues around the viewing glasses (counterfeiting, misrepresentations, scarcity) have been paramount in my neck of the woods.  I wonder whether there will be any related litigation . . . .  I guess the question is more of a "when" and "what," however, than a "whether" . . . .

And for those who just want an quick and amusing business-oriented angle on the eclipse, this short piece from the folks at Inc. may fit the bill.

Happy Eclipse Day 2017.  I hope it was all you wanted it to be.

August 21, 2017 in Joan Heminway | Permalink | Comments (4)

Thursday, August 17, 2017

AALS Section on Business Associations: Call for Nominations - Outstanding Mentors of 2017

The Executive Committee of the AALS Section on Business Associations seeks to recognize Section members who demonstrate exemplary mentoring qualities.  We seek nomination letters on behalf of a deserving colleague (please no self-nominations) on or before November 1, 2017, sent to Professor Anne Tucker at amtucker@gsu.edu.

Nominations should address personal experience with the mentor, and any additional information illustrative of the nominee’s dedication to mentoring including qualities such as:

  • Is eager to discuss others’ early ideas and contributes to the development and improvement of others’ work;
  • Promotes and encourages the success of junior scholars by reading and providing meaningful and useful feedback on drafts;
  • Promotes a supportive and rigorous environment for conference presentations;
  • Speaks frankly, provides useful professional and personal advice when asked;
  • Actively participates in a network of scholars;
  • Facilitates professional opportunities for junior scholars such as providing introductions to others in the field, and encouraging participation in the scholarly community through writing and speaking; 
  • Mentors those from underrepresented communities in academics and the study of law;
  • Actively/willingly participates in the promotion process for others by advising on tenure process, writing review letters, and providing useful guidance on career advancement.

Who May Nominate: Any member of the Section on Business Associations. 

Who is Eligible to Be Nominated: Members of the Section on Business Associations and others are eligible for nomination.  Nominees should have 10 years or more of law teaching.

Recognition: The Executive Committee will recognize all nominees at the AALS 2018 Annual Meeting and distribute the list to Section members.

In 2015, the Section recognized the following outstanding mentors:

Egon Guttman, Lynne L. Dallas, Claire Moore Dickerson, Christopher Drahozal, William A ("Bill") Klein, Donald C. Langevoort,  Juliet Moringiello, Marleen O'Connor, Charles (Chuck) O'Kelley, Terry O'Neill, Alysa Rollack, Roberta Romano & Gordon Smith

August 17, 2017 in Anne Tucker, Joan Heminway, Law School | Permalink | Comments (0)

Monday, August 14, 2017

Steve Bradford on Online Dispute Resolution for Crowdfunding Fraud

Former BLPB editor Steve Bradford has posted a new paper adding to his wonderful series of articles on crowdfunding (on which I and so many others rely in our crowdfunding work).  This article, entitled "Online Arbitration as a Remedy for Crowdfunding Fraud" (and forthcoming in the Florida State University Law Review), focuses on a hot topic in many areas of lawyering--online dispute resolution, or ODR.  Steve brings the discussion to bear on his crowdfunding work.  Specifically, he suggests online arbitration as an efficacious way of resolving allegations of fraud in crowdfunding.  Here's the abstract:

It is now legal to see securities to the general public in unregistered, crowdfunded offerings. But offerings pursuant to the new federal crowdfunding exemption pose a serious risk of fraud. The buyers will be mostly small, unsophisticated investors, the issuers will be mostly small startups about whom little is known, and crowdfunded offerings lack some of the protections available in registered offerings. Some of the requirements of the exemption may reduce the incidence of fraud, but there will undoubtedly be fraudulent offerings.

An effective antifraud remedy is needed to compensate investors and help deter wrongdoers. But, because of the small dollar amounts involved, neither individual litigation nor class actions will usually be feasible; the cost of suing will usually exceed the expected recovery. Federal and state securities regulators are also unlikely to focus their limited enforcement resources on small crowdfunding offerings. A more effective remedy is needed.

Arbitration is cheaper, but even ordinary arbitration will often be too expensive for the small amounts invested in crowdfunding. In this article, I attempt to design a simplified, cost-effective arbitration remedy to deal with crowdfunding fraud. The arbitration remedy should be unilateral; crowdfunding issuers should be obligated to arbitrate, but not investors. Crowdfunding arbitration should be online, with the parties limited to written submissions. But it should be public, and arbitrators should be required to publish their findings. The arbitrators should be experts on both crowdfunding and securities law, and they should take an active, inquisitorial role in developing the evidence. Finally, all of the investors in an offering should be able to consolidate their claims into an arbitration class action.

Although I haven't yet read the paper (which was just posted this morning, it seems), Steve's idea totally makes sense to me on so many levels.  Among other things, ODR has a history in e-commerce and social media, two front-runners and foundations of crowdfunding.  Also, the dispute resolution expense issue that Steve alludes to in the abstract is real.  It has been raised by a number of us, including by me in this draft paper, in which I assert, among other things:

Prosecutors and regulators may not be willing or able to devote financial and human resources to enforcement efforts absent statutory or regulatory incentives or extraordinary policy reasons for doing so . . . . Individual funders also are unlikely to bring private actions or even engage alternative dispute resolution since the cost of vindicating their rights easily could exceed their invested money and time, although the availability of treble damages (often a statutory right for willful violations of consumer protection statutes) or other extraordinary remedies may change the calculus somewhat.

 . . . [C]lass actions tend to be procedurally complex—difficult to get in front of a court—and may not be available in some jurisdictions. Moreover, the prospects for recovery are unknown and, based on recent information from U.S. securities class action litigation, financial compensation to individual members of the plaintiff class is likely to be relatively insignificant in dollar value and in relationship to losses suffered, even if the aggregate amount of damages paid by the defendant is relatively high . . . . Accordingly, class action litigation also may be of limited utility in bringing successful legal claims in the crowdfunding context.

This will be an area for much further thought as the crowdfunding adventure continues . . . .

August 14, 2017 in ADR, C. Steven Bradford, Crowdfunding, Joan Heminway, Lawyering, Technology, Web/Tech | Permalink | Comments (0)

Monday, August 7, 2017

SEALS 2017 - Business Regulatory Reform

Yesterday, on the last morning of the 2017 Southeastern Association of Law Schools (SEALS) conference, Matt Lyon, the Associate Dean at Lincoln Memorial University - Duncan School of Law (UT Law's Knoxville neighbor) convened a discussion group on "Corporate and Financial Reform in the Trump Administration." I was grateful to be asked to participate.  In addition to me, BLPB co-bloggers Josh Fershee and Marcia Narine Weldon, my UT Law coworker Brian Krumm, Securities Law Prof Blog editor Eric Chaffee, and University of Houston Law Center colleague Darren Bush were among the discussants.

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Each of us came with issues and questions for discussion.  Each of us offered reflections.  Recently made, currently proposed, and possible future changes to business regulation were all on the table.  I wish this session had been held earlier in the program, since many had left before the Sunday morning sessions (and we were competing with, among other enticing alternatives, a discussion session on marijuana regulation). However, we honestly had more than enough to discuss as among the seven of us, in any case.

I had to leave the session early to attend the SEALS board meeting.  But before I left, I took some notes on topics relating to my interest in and potential future work on regulatory reform.  I continue, for example, to be interested in the best approaches to reducing and streamlining regulation.  (See my posts here and here.)  A few additional outtakes follow.

Continue reading

August 7, 2017 in Conferences, Current Affairs, Joan Heminway | Permalink | Comments (0)

Saturday, August 5, 2017

SEALS 2017 - White Collar Crime Discussion Group

I have been at the Southeastern Association of Law Schools (SEALS) conference all week.  As usual, there have been too many program offerings important to my scholarship and teaching.  I have participated in and attended so many things.  I am exhausted.

But I know that all of this activity also energizes me.  Once I am back at home tomorrow night and get a good night's sleep, I will be ready to rock and roll into the new academic year (which starts for us at UT Law in a few weeks).  I use the SEALS conference as this bridge to the new year every summer.

One of my favorite discussion groups at the conference was the White Collar Crime discussion group that John Anderson and I organized.  A number of us focused on insider trading law this year.  John, for example, shared his preliminary draft of an insider trading statute.  I asked folks to ponder the result under U.S. insider trading law of a tipping case with the following general facts:

  • A person with a fiduciary duty of trust and confidence to a principal conveys material nonpublic information obtained through the fiduciary relationship to a third person;
  • The recipient of the information is someone with whom the fiduciary has no prior familial or friendship relationship;
  • The conveyance is made to the recipient by the fiduciary without the consent of the principal;
  • The conveyance is made to the recipient gratuitously;
  • The fiduciary’s purpose in conveying the information is to benefit the recipient;
  • Specifically, the fiduciary knows that the recipient has the ability and incentive to trade on the information or convey it to others who have the ability and incentive to trade; and
  • The fiduciary has clear knowledge and understanding of resulting detriment to the principal.

The question, of course, is whether the fiduciary has engaged in deception that constitutes a willful violation of insider trading proscriptions under Section 10(b) and Rule 10b-5.  The answer, based on what we now know under U.S. insider trading law, depends on whether the fiduciary's sharing of information is improper.  What do you think?  I shared my views and others in the group shared theirs.  I may have more to say on this problem and my related work in a later post.

August 5, 2017 in Joan Heminway, Securities Regulation, White Collar Crime | Permalink | Comments (0)

Tuesday, August 1, 2017

More on Corporations, Accountability, and the Proper Locus of Power

My colleague, Joan Heminway, yesterday posted Democratic Norms and the Corporation: The Core Notion of Accountability. She raises some interesting points (as usual), and she argues: "In my view, more work can be done in corporate legal scholarship to push on the importance of accountability as a corporate norm and explore further analogies between political accountability and corporate accountability."

I have not done a lot of reading in this area, but I am inclined to agree that it seems like an area that warrants more discussion and research.  The post opens with some thought-provoking writing by Daniel Greenwood, including this:  

Most fundamentally, corporate law and our major business corporations treat the people most analogous to the governed, those most concerned with corporate decisions, as mere helots. Employees in the American corporate law system have no political rights at all—not only no vote, but not even virtual representation in the boardroom legislature.
Joan correctly observes, "Whether you agree with Daniel or not on the substance, his views are transparent and his belief and energy are palpable." Although I admit I have not spent a lot of time with his writing, but my initial take is that I do not agree with his premise. That is, employees do have political rights, and they have them where they belong: in local, state, and federal elections.  Employees, in most instances, do not have political rights within their employment at all.  Whether you work for the government, a nonprofit, or a small sole proprietorship, you don't generally have political rights as to your employment.  You may have some say in an employee-owned entity, and you may have some votes via union membership, but even there, those votes aren't really as to your employment specifically. 
 
The idea of seeking democratic norms via the corporate entity itself strikes me as flawed.  If people don't like how corporations (or other entities) operate, then it would seem to me the political process can solve that via appropriate legislation or regulation. That is, make laws that allow entities to do more social good if they are so inclined. Or even require entities to do so, if that's the will of the people (this is not a recommendation, merely an observation).  Scholars like Greenwood and others continue to make assertions that entities cannot make socially responsible choices. He states, " The law bars [corporations], in the absence of unanimous consent, from making fundamental value choices, for example, from balancing the pursuit of profit against other potential corporate goals, such as quality products, interests of non-shareholder participants or even the actual financial interests of the real human beings who own the shares."  And judges and scholars, like Chancellor Chandler and Chief Justice Strine, have reinforced this view, which, I maintain, is wrong (or should be).  
 
Professor Bainbridge has explained, "The fact that corporate law does not intend to promote corporate social responsibility, but rather merely allows it to exist behind the shield of the business judgment rule becomes significant in -- and is confirmed by -- cases where the business judgment rule does not apply." Todd Henderson similarly argued, and I agree, 
Those on the right, like Milton Friedman, argue that the shareholder-wealth-maximization requirement prohibits firms from acting in ways that benefit, say, local communities or the environment, at the expense of the bottom line. Those on the left, like Franken, argue that the duty to shareholders makes corporations untrustworthy and dangerous. They are both wrong.
I don't disagree with Joan (or with Greenwood, for that matter), that accountability matters, but I do think we should frame accountability properly, and put accountability where it belongs.  That is political accountability and corporate accountability are different. As I see it, corporations are not directly accountable to citizens (employees or not) in this sense (they are in contract and tort, of course). Corporations are accountable to their shareholders, and to some degree to legislators and regulators who can modify the rules based on how corporations act.  Politicians, on the other hand, are accountable to the citizens.  If citizens are not happy with how entities behave, they can take that to their politicians, who can then choose to act (or not) on their behalf.  
 
I think entities should consider the needs of employees, and I believe entities would be well served to listen to their employees. I happen to think that is good business. But I think the idea that employees have a right to a formal voice at the highest levels within the entity is flawed, until such time as the business itself or legislators or regulators decide to make that the rule. (I do not, to be clear, think that would be a good rule for legislators or regulators to make for private entities.) The proper balance of laws and regulations is a separate question from this discussion, though. Here, the key is that accountability -- or, as Prof. Bainbridge says, "the power to decide" -- remains in the right place.  I am inclined to think the power structure is correct right now, and whether that power is being used correctly is an entirely different, and separate, issue.  

August 1, 2017 in Business Associations, Corporations, CSR, Delaware, Joan Heminway, Joshua P. Fershee, Legislation, Management, Research/Scholarhip, Shareholders, Social Enterprise | Permalink | Comments (1)

Monday, July 31, 2017

Democratic Norms and the Corporation: The Core Notion of Accountability

The corporate form has been compared and contrasted favorably and unfavorably with government.  The literature is broad and deep.  Having said that, there is, perhaps, no one who writes more passionately on this topic than Daniel Greenwood.  Set forth below are two examples of text from his work that illustrate my point.

We live in a democratic age, in which the sole legitimate source of political power is the consent of the governed. Yet our business corporations defy every norm of democracy.
 
Most fundamentally, corporate law and our major business corporations treat the people most analogous to the governed, those most concerned with corporate decisions, as mere helots. Employees in the American corporate law system have no political rights at all—not only no vote, but not even virtual representation in the boardroom legislature. Board members owe a fiduciary duty to the corporation, according to most of the statutes, and to the shareholders, according to the popular shareholder primacy narratives, but they owe no consideration at all to employees.
 
Daniel J.H. Greenwood, Essay: Telling Stories of Shareholder Supremacy, 2009 Mich. St. L. Rev. 1049, 1060 (2009).
 
The corporation as a state-within-the-state . . . cannot be justified under any democratic theory, because this state-like entity defies all democratic norms internally. No corporation operates by the principle of one person, one vote. All economically significant corporations disenfranchise a substantial portion of the affected populace, while even shareholders vote according to the number of shares they hold. Moreover, standard corporate law sharply limits the control that even the “voters” have over “their” entity. The law bars them, in the absence of unanimous consent, from making fundamental value choices, for example, from balancing the pursuit of profit against other potential corporate goals, such as quality products, interests of non-shareholder participants or even the actual financial interests of the real human beings who own the shares. Moreover, it even bars them from electing directors pledged to particular interests: directors, unlike ordinary politicians, are bound by law to pursue the interests of all (and only) shares, and courts will enforce this duty-subject to the often significant limitations of the business judgment rule-at the behest of any shareholder, regardless of election results. Theorists, therefore, usually resort to market-based explanations of why the corporation is unable to exert any power over its shareholders, employees and other participants.
 
Daniel J.H. Greenwood, Markets and Democracy: The Illegitimacy of Corporate Law, 74 UMKC L. Rev. 41, 54–55 (2005) (footnotes omitted).  Whether you agree with Daniel or not on the substance, his views are transparent and his belief and energy are palpable.
 
With politics in the news every day and corporations on my mind, I have been pondering certain elements of democracy as they play themselves out in corporate governance.  In particular, of late, I have focused in on accountability as a core democratic norm.  

Continue reading

July 31, 2017 in Corporate Governance, Corporations, Current Affairs, Joan Heminway | Permalink | Comments (2)