Monday, April 16, 2018
I learned earlier this afternoon that Lynn Stout, author of The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations and the Public (2012), lost her battle with cancer today. Appropriate words are hard to come by. She was among the nation's scholarly leaders in the legal aspects of corporate governance. Regardless of whether you agree with her on the substance, you would likely find her work enlightening and her presence powerful. She was persistent in argument, yet generous with mentoring and other professional support.
I know we each will miss her in our own way. She and I had a bit of an unfinished conversation last June at the National Business Law Scholars Conference about my Washington & Lee Law Review article, "Shareholder Wealth Maximization as a Function of Statutes, Decisional Law, and Organic Documents." I am sorry we never completed that chat.
Her vast body of work is among her great legacies. I have my Advanced Business Associations students read "A Team Production Theory of Corporate Law" (coauthored with Margaret Blair) every year. Other articles that I have enjoyed and used in teaching or research include: "Why We Should Stop Teaching Dodge v. Ford" (although I enjoy teaching the case and interrogating it nevertheless), "The Investor Confidence Game," "The Mythical Benefits of Shareholder Control," and "On the Proper Motives of Corporate Directors (or, Why You Don't Want to Invite Homo Economicus to Join Your Board)." Feel free to add your memories and favorite works in the comments.
Thank you, Lynn, for all you have done for all of us. May you rest in total peace, free of your earthly burdens. Amen.
Tuesday, April 10, 2018
Last week, the Neel Corporate Governance Center at UT Knoxville hosted one of UT Knoxville's alums, Ron Ford, as a featured speaker. He gave a great talk on boards of directors, from his unique vantage point--that of a CFO. In the course of his remarks, he mentioned a public company corporate gpvernance policy that I had not earlier heard of: a CEO limit or prohibition on outside board service (other than local, small nonprofit board service). A 2017 study found that:
Only 22% of S&P 500 boards set a specific limit in their corporate governance guidelines on the CEO’s outside board service; 65% of those boards limit CEOs to two outside boards, and 32% set the limit at one outside board. One board does not allow the company CEO to serve on any outside corporate boards, and two boards allow their CEO to serve on three outside corporate boards.
This may be why I had not heard about governance policies limiting board service; it seems these policies may be relatively uncommon. I know from experience that CEOs do serve on outside boards and often consider that service an important way to learn valuable things that can be implemented at the firm that enjoys them.
What is the ostensible purpose of a policy restricting the outside board service of a firm's CEO? Perhaps it is obvious. It seems that most firms imposing this kind of restriction on CEOs desire to prevent the CEO from spending significant time on his or her service as a board member of another firm to the detriment of the firm by which he or she is employed as chief executive. An online article succinctly captures the capacity for distraction.
. . . CEOs must weigh . . . the potential disadvantage of having to navigate a crisis. David Larcker, a professor at Stanford Law School and senior faculty at the university’s corporate governance center, says that while most CEOs would say that serving on an outside board is highly valuable, everything changes if either company comes up against a big challenge.
“Where it gets really complicated for a sitting CEO is if something happens,” Larcker says. “You’re a takeover target. You have a big restatement. You’re replacing a CEO. That’s harder to predict and takes up a lot of time.”
Are there CEOs who have experienced this kind of distraction? Yes. A Forbes contributor offers a well-known example in an article entitled "All Operating Executives Should Never Serve On Any Outside Boards":
A good poster child of outside board distractions was Meg Whitman in her final 2 years at the helm of eBay (EBAY). During this time, she joined the boards of Proctor & Gamble and DreamWorks Animation. EBay flew Meg around to Cincinnati and LA board meetings on their private jet. EBay's stock sank. Meg bought Skype. It didn't help.
The same article also calls out two Yahoo! CEOs as further examples. And there are others. See also, e.g., here.
Monday, April 2, 2018
This timely post comes to us from Jeremy R. McClane, Associate Professor of Law and Cornelius J. Scanlon Research Scholar at the University of Connecticut School of Law. Jeremy can be reached at firstname.lastname@example.org.
Spotify, the Swedish music streaming company known for disrupting the music market might do the same thing this week to the equity capital markets. On April 3, Spotify plans to go public but in an unusual way. Instead of issuing new stock and enlisting an underwriter to build a book of orders and provide liquidity, Spotify plans to cut out the middleman and list stock held by existing shareholders directly on the New York Stock Exchange.
This will be an interesting experiment that will test some prevailing assumptions that about how firms must raise capital from the public.
The Importance of Bookbuilding. First, we will see just how important bookbuilding is to ensuring a successful IPO. When most companies go public, they hire an underwriter to market the shares in what is known as a “firm commitment” underwriting. The investment banks commit to finding buyers for all of the shares, or purchasing any unsold shares themselves if they cannot find buyers (an occurrence which never happens in practice). The process involves visiting institutional investors and building a book of orders, which are then used to gauge demand and set a price at which to float the stock. The benefit of this process is risk management – the issuing company and its underwriters try to ensure that the offering will be a success (and the price won’t plummet or experience volatile ups and downs) by setting a price at a level that they know market demand will bear, and ensuring that there are orders for all of the shares even before they are sold into the market.
Without underwriters or bookbuilding, Spotify is taking a risk that its share price will be set at the wrong level and become unstable. In Spotify’s case, however there is already relatively active trading of shares in private transactions, which gives the company some indication of what the right price should be. Nonetheless, that indication of price is volatile, in part because the securities laws limit the market for its shares by restricting the number of pre-IPO shareholders to 2,000, at least in the US. In 2017 for example, the price of Spotify’s shares traded in private transactions ranging from $37.50 to $125.00, according to the company’s Form F-1 registration statement.
In recent weeks, the Tennessee General Assembly has been wrestling with a bill (house and senate versions here and here) that changes the governing board of The University of Tennessee (UT), where I teach. Non-controversially, the UT FOCUS Act, as it is commonly called (Focusing on Campus and University Success at UT), decreases the size of UT's board of trustees. Currently, the board of trustees comprises 27 members--five ex officio members and 22 appointed members. Tenn. Code Ann. § 49-9-202. Most would agree that 27--or even 22--is a relatively unmanageable number of board members, without good cause, for most governing boards. But the composition requirements for the board (with this newly reduced number of trustees) are where the rubber hits the road.
The Bill Summary for the measure, as reported on the Tennessee General Assembly website, succinctly describes the current board composition, which is established by statute. I include the relevant text from the Bill Summary here.
The ex officio members are: the governor, the commissioner of education, the commissioner of agriculture, and the president of the university, who are voting members; and the executive director of the Tennessee higher education commission (THEC), who is a nonvoting member. Of the 22 additional members: one must be appointed from each congressional district (presently there are nine congressional districts); two additional members each must reside in Knox and Shelby counties; one additional member each must reside in Weakley, Hamilton, and Davidson counties; one additional member must reside in Anderson, Bedford, Coffee, Franklin, Lincoln, Moore or Warren County; one additional member is a non-Tennessee resident; two additional members, one voting and one non-voting, must be members of the faculty of the University of Tennessee who served as faculty senate president, or the equivalent, at a University of Tennessee institution during the academic year immediately preceding appointment as a trustee, appointed according to a sequence detailed in present law; and two additional members who are students at a UT institution, one voting and one nonvoting, appointed from the various institutions on a rotating basis pursuant to present law.
Present law requires that at least one third of the appointive members be members of the principal minority political party in the state and that at least one third of the appointive members must be alumni of the University of Tennessee. All appointive members are appointed by the governor subject to confirmation by the senate, but appointments are effective until adversely acted upon by the senate. In making appointments to the board of trustees, the governor must strive to ensure that at least one person appointed to serve on the board is 60 years of age or older, and that at least one person appointed to serve on the board is a member of a racial minority. Present law requires that the membership of the board reflect the percentage of females in the population generally. Appointive members serve terms of six years beginning June 1 of the year of appointment, and members are eligible to succeed themselves.
(emphasis added) Of particular importance for purposes of this post are the italicized portions of the description. The UT FOCUS Act calls for no faculty or students--no state employees altogether--on the board as voting or non-voting members. I am concerned about this aspect of the bill because of its effect on the expertise of UT's board. No amount of board orientation can imbue board members with the knowledge that faculty and students have.
The apparent tension here is between the value of that expertise--boots-on-the-ground knowledge of shared governance, curriculum design and execution, the role of co-curricular and extra-curricular programming, faculty/staff/student relations, and other matters unique to current participation in the university's campus communities--and a perceived conflict of interest (since faculty and students would be effectively governing themselves).
The Association of Governing Boards of Universities and Colleges (AGB) and the American Association of University Professors (AAUP) agree that university governing boards generally lack knowledge of faculty affairs. A 2017 publication of the AGB notes in this regard:
Participants in all three categories in our listening sessions (board members, presidents, and faculty) acknowledged—and indeed emphasized—that there is a huge information gap between boards and faculty. They noted that board members often have very little— if any—understanding of the nature of faculty work, of the nature of academic culture, of the real meaning of academic freedom, and of the history and importance of faculty self-governance and the faculty role in shared governance. . . .
The AAUP website features a report on a 2012 Cornell University study of faculty trustees that includes a related observation.
Discussions of “best practices” for governing boards consistently cite improved relationships with the faculty as one of the characteristics of highly effective boards. We are in an era of increasingly “activist” boards, leading to significant mutual distrust between boards and faculty members and creating an impetus for improving faculty-board relations.
As a former faculty senate president at UT Knoxville, I understand and appreciate all of this.
Monday, March 26, 2018
I am committed to introducing my business law students to business law doctrine and policy both domestically and internationally. The Business Associations text that I coauthored has comparative legal observations in most chapters. I have taught Cross-Border Mergers & Acquisitions with a group of colleagues and will soon be publishing a book we have coauthored. And I taught comparative business law courses for four years in study abroad programs in Brazil and the UK.
In the study abroad programs, I struggled in finding suitable texts, cobbling together several relatively small paperbacks and adding some web-available materials. The result was suboptimal. I yearned for a single suitable text. In my view, texts for study abroad courses should be paperback and cover all of the basics in the field in a succinct fashion, allowing for easy portability and both healthy discussion to fill gaps and customization, as needed, to suit the instructor's teaching and learning objectives.
And so it was with some excitement--but also some healthy natural skepticism--that I requested a review copy of Corporations: A Comparative Perspective (International Edition), coauthored by my long-time friend Marco Ventoruzzo (Bocconi and Penn State) and five others (all scholars from outside the United States), and published by West Academic Publishing. I am pleased to say that if/when I teach international and comparative corporate governance and finance (especially in Europe) in the future, I will/would assign this book. It is a paperback text that, despite its 530 pages, is both reasonably comprehensive and manageable.
The book is divided into ten chapters, starting with basic "building blocks" of comparative corporate law and ending (before some brief final thoughts) with unsolicited business combinations. U.S. law is, for the most part, the centerpiece of the chapters, which consist principally of original text, cases, statutes, law journal article excerpts, and (in certain circumstances) helpful diagrams. The methodological introduction, which I found quite helpful and user-friendly, notes that the coauthors "often (not always) start our analysis with the U.S. perspective." (xxvi) Yet, despite the anchoring use of U.S. law throughout the book, it somehow has a very European feel. The coauthors note the emphasis on "U.S., U.K., major European continental civil law systems (France, Germany, Italy) and European Union law, and Japan," (id.) but my observation is that the words and phrasing also have a European flair. Of course, this is unsurprising, given that all but one of the coauthors hail from European universities. I note this without praise or criticism, but I mention it so others can assess its impact in their own teaching environments.
I recommend that those teaching in study abroad (or other courses focusing on comparative corporate law) review a copy of this book. I will look forward to teaching from it the next time I need an international or comparative law teaching text for use in or outside the United States.
March 26, 2018 in Business Associations, Comparative Law, Corporate Finance, Corporate Governance, Corporations, International Business, International Law, Joan Heminway, Teaching | Permalink | Comments (0)
Monday, March 19, 2018
As you may recall, I posted back in January on Emory Law's upcoming biennial conference on transactional law and skills, “To Teach is to Learn Twice: Fostering Excellence in Transactional Law and Skills Education.” The conference is scheduled for Friday, June 1, 2018 and Saturday, June 2, 2018.
I learned earlier today that the conference organizers are offering one last chance for interested transactional law and skills instructors to submit a proposal and have extended the proposal deadline through Friday, March 30, 2018. They do ask that folks submit proposals as soon as possible. Even if you do not submit a proposal, you can register for the conference now.
Our friends at Emory Law desire to reach far and wide to embrace the whole community of transactional law and skills educators, so please pass this on and encourage your colleagues–including new teachers and adjunct professors (both able to participate at reduced registration fees)–to attend. I plan to be there again, although I can only attend the first day of the conference this year. I always learn something at these conferences. They attract a great, thoughtful community of teachers and scholars.
Monday, March 12, 2018
As I read recent news reports (starting a bit over a week ago and exemplified by stories here, here, here, and here--with the original story featured here) about Carl Icahn's well-timed sale of Manitowoc Company, Inc. stock, I could not help but associate the Icahn/Manitowoc intrigue with the Stewart/ImClone affair from back in the early days of the new millennium--more than 15 years ago. As many of you know, I spent a fair bit of time researching and writing on Martha Stewart's legal troubles relating to her December 2001 sale of ImClone Systems, Inc. stock. Eventually, I coauthored and edited a law teaching text focusing on some of the key issues. A bit of my Martha Stewart work is featured in that book; much of the rest can be found on my SSRN author page. For those who may not recall or know about the Stewart/ImClone matter, the SEC's press release relating to its insider trading enforcement action against Stewart is here, and it supplies some relevant background. (Btw, ImClone apparently is now a privately held subsidiary of Eli Lilly and Company organized as an LLC.)
In reading about Icahn's Manitowoc stock sale, my thoughts drifted back to Stewart's ImClone stock sale because of salient parallels in the early public revelations. Just as Icahn had personal and professional connections with U.S. government officials who were aware of material nonpublic information regarding the later-announced imposition of steel tariffs, Martha Stewart had personal and professional connections with at least one member of ImClone management who was aware of impending negative news from the U.S. Food and Drug Administration regarding ImClone's flagship product. We know from the law itself and Stewart/ImClone fiasco not to jump to conclusions about insider trading liability from such scant facts. Stewart's insider trading case ended up being settled. (No, that's not why she went to jail . . . .) And I have argued in a book chapter (Chapter 4 of this book) that the facts associated with Stewart's stock sale may well have revealed that she did not violate U.S. insider trading prohibitions under Section 10(b) of, and Rule 10b-5 under, the Securities Exchange Act of 1934, as amended.
The Supreme Court's decisions in Dirks v. SEC and Salman v. United States advise us that a tippee trading while in possession of material nonpublic information only violates U.S. insider trading prohibitions under Section 10(b) and Rule 10b-5 if:
- disclosure of the material nonpublic information in the tippee's possession breached a duty of trust and confidence because it was shared (directly or indirectly) with the tippee improperly--typically (although perhaps not always--as I note and argue in a forthcoming essay) because the duty-bearing tipper benefitted in some way from disclosure of the information; and
- the tippee knew or should have known that the tipper breached his or her duty of trust and confidence.
See, e.g., Dirks v. SEC, 463 U.S. 646, 660 (1983).
Thus, there is much more to tease out in terms of the facts of the Icahn/Manitowoc scenario before we can even begin to assert potential insider trading liability. Among the unanswered questions:
- what Icahn knew and when he knew it;
- whether any information disclosed to Icahn was material and nonpublic;
- who disclosed the information to Icahn and whether anyone directly or indirectly making disclosures to him had a fiduciary or fiduciary-like duty of trust and confidence;
- whether any disclosures directly or indirectly made to Icahn were inappropriate and, therefore, breached the tipper's fiduciary or fiduciary-like duty of trust and confidence; and
- whether Icahn knew or should have known that the information he received was disclosed in breach of a fiduciary or fiduciary-like duty of trust and confidence.
Icahn denies having any information about the Trump administration's imposition of tariffs on the steel industry. (See, e.g., here.) And the nature of the duties of trust and confidence owed by government officials is somewhat contended (although Donna Nagy's work in this area holds great sway with me). Regardless, it is simply too soon to tell whether Icahn has any U.S. insider trading liability exposure based on current news reports. I assume ongoing inquiries will result in more facts being adduced and made public. This post may serve as a guide for the digestion of those additoonal facts as they are revealed. In the mean time, feel free to leave your observations and questions in the comments.
Monday, February 26, 2018
Professional Responsibility in an Age of Alternative Entities, Alternative Finance, and Alternative Facts
Like my fellow editors here at the BLPB, I enjoyed the first Business Law Prof Blog conference hosted by The University of Tennessee College of Law back in the fall. They have begun to post their recently published work presented at that event over the past few weeks. See, e.g., here and here (one of several newly posted Padfield pieces) and here. I am adding mine to the pile: Professional Responsibility in an Age of Alternative Entities, Alternative Finance, and Alternative Facts. The SSRN abstract reads as follows:
Business lawyers in the United States find little in the way of robust, tailored guidance in most applicable bodies of rules governing their professional conduct. The relative lack of professional responsibility and ethics guidance for these lawyers is particularly troubling in light of two formidable challenges in business law: legal change and complexity. Change and complexity arise from exciting developments in the industry that invite—even entice—the participation of business lawyers.
This essay offers current examples from three different areas of business law practice that involve change and complexity. They are labeled: “Alternative Entities,” “Alternative Finance,” and “Alternative Facts.” Each area is described, together with significant attendant professional responsibility and ethics challenges. The essay concludes by offering general prescriptions for addressing these and other professional responsibility and ethics challenges faced by business lawyers in an age of legal change and complexity.
I do not often write on professional responsibility issues. However, I do feel an obligation every once in a while to add to the literature in that area addressing issues arising in transactional business law. In essence, it's service through scholarship.
I hope you read the essay and, if you do, I hope you enjoy it. I also can recommend the commentary on it published by my UT Law faculty colleague George Kuney and my student Claire Tuley. Both comments will be available electronically in the coming months. I will try to remember to post links . . . .
Monday, February 19, 2018
Mark your calendars!
March 1, 2018 is the deadline for nominations for the inaugural award of the Grunin Prize.
The Grunin Prize has been created to recognize the variety and impact of lawyers’ participation in the ways in which business, whether for-profit or not-for-profit, is increasingly advancing the goals of sustainability and human development.
Lawyers, legal educators, policymakers, in-house counsel, or legal teams that recently have developed innovative, scalable, and social entrepreneurial solutions using existing law, legal education, or the development of new legal structures or metrics are eligible for nomination. And self-nominations are encouraged!
The Grunin Prize will be presented on June 5, 2018 at the IILWG/Grunin Center conference. To learn more about the Grunin Prize and the nomination process, go to http://www.law.nyu.edu/centers/grunin-social-entrepreneurship/grunin-prize.
June 5-6, 2018 are the dates of the Impact Investing Legal Working Group (IILWG)/Grunin Center for Law and Social Entrepreneurship’s 2018 Conference on “Legal Issues in Social Entrepreneurship and Impact Investing – in the US and Beyond.” This year’s IILWG/Grunin Center’s annual conference will take place at NYU School of Law in New York City.
The themes of this year’s conference include:
· Embedding Impact into Deal Structures and Terms
· Policy and Regulation of Impact Investing and Social Entrepreneurship
· Blending and Scaling Capital for Impact
· Building Investment-Ready Social Enterprises
· Mainstreaming Impact
Last year over 250 lawyers and other stakeholders attended this groundbreaking conference for lawyers working in the fields of social entrepreneurship and impact investing. In a post-conference survey of these conference attendees, we learned that:
· Over 99% of survey respondents rated the conference as “excellent” (over 76%) or “very good” (23%);
· Over 84% of survey respondents were very likely to recommend attending this conference to others; and
· Over 64% of survey respondents made 6 or more new connections at this conference.
Come join this growing community of legal practice!
Conference registration will open in April. For more information about the conference, go to http://www.law.nyu.edu/centers/grunin-social-entrepreneurship.
June 7, 2018 is the date of the first Grunin Center Legal Scholars convening. This convening, which is scheduled to take place immediately after the IILWG/Grunin Center Annual Conference, is intended to advance legal scholarship in the fields of social entrepreneurship and impact investing by bringing together legal scholars who are writing and researching in these fields and introducing them to the legal/policy challenges and opportunities that legal practitioners are facing in these fields.
Law school faculty (fulltime and adjunct), other academic personnel working fulltime in law schools who are engaged in legal scholarship, practitioners who are engaging in legal scholarship, and professors who are teaching law in other schools yet are engaging in legal scholarship are invited to join this convening.
If you are interested in joining this community of legal scholars, please contact the Grunin Center (email@example.com) and we will send you more information about the June 7, 2018 Legal Scholars convening.
Helen Scott and Deborah Burand
Co-Directors, Grunin Center for Law and Social Entrepreneurship
New York University School of Law
245 Sullivan Street, 5th Floor
New York, NY 10012
Monday, February 12, 2018
Just a quick post today about a teaching technique I have been using that offers significant opportunities for exploration, especially in small class environments.
I am again teaching Advanced Business Associations this semester. The course allows students to review and expand their knowledge of business firm management and control issues in various contexts (public corporations, closely held corporations, benefit corporations, and unincorporated business entities), mergers and acquisitions, and corporate and securities litigation. I have reported on this course in the past, including in this post and this one.
At the conclusion of each unit, I have students locate (go off on a treasure hunt, of sorts) and post on the course management website (I use TWEN) a practice document related to the matters covered in that unit. Today we concluded our unit on benefit corporations. Each student (I only have five this semester) was required to, among other things, post the actual corporate charter (not a template or form) of a benefit corporation. Although the Advanced Business Associations course features training presentations by representatives of Lexis/Nexis, Westlaw, and Bloomberg that include locating precedent documents of various kinds, the students have not yet had this training.
In our discussions about this part of today's assignment, we learned a number of things. Here are a few:
- New articles, blog posts, and other secondary materials can be a good starting place in locating firms with particular attributes.
- The word "charter" can mean different things to different people.
- Journalists do not understand the difference between a benefit corporation and a B corporation.
- In research geared toward locating precedents for planning and drafting, googling descriptive terms is likely to yield yield fewer targeted results than googling the terms used an actual exemplar document.
- Corporate charters for privately held firms can be difficult to find--especially in certain specific jurisdictions, even when you know the firm's name and other identifying attributes.
- "If at first you don't succeed, try, try, again." Three of the five students posted more than one document before they found an appropriate example.
- The corporate charters the students posted include exculpation and indemnification.
- Patagonia's charter is pretty cool. It has a detailed, specific benefit purpose, a prohibition on redemptions, and a right of first offer. It also requires a unanimous vote on certain fundamental/basic corporate changes, redemptions, and bylaw amendments.
- There is a law firm in California that is a professional corporation organized as a benefit corporation "to pursue the specific public benefit of promoting the principles and practices of conscious capitalism through the practice of law." Also pretty cool.
The discussion was rich. The students accomplished the required task and reflected responsibly and valuably on their individual search experiences during our class meeting. They learned from each other as well as from me; benefit corporations seemed to come alive for them as we spoke. We accomplished a lot in 75 minutes!
Do any of you use a similar teaching technique? Have you adapted it for use in a large-class (over 50 students) environment? If so, let me know. I would like to evolve my "treasure hunt" for business law drafting precedents for use in a larger class setting.
Friday, February 9, 2018
As I watch the opening ceremonies of the 2018 Winter Olympic Games, I am struck by all of the design work that goes into the ceremony and the games. Who designs the vast opening and closing ceremony productions? Does the host country hire some or all the people who appear in the productions or are some or all volunteers? Who holds the intellectual property rights to the program elements and the recording of the program? The International Olympic Committee, I guess . . . . It strikes me that the Olympic Games have become big business, and intellectual property rights have become important to the value of that business. The World Intellectual Property Oganization notes that "[t]he Games are as much a celebration of innovation and creativity as they are of humanity, fair play and sporting excellence."
Perhaps most amusing to me in the run-up to the 2018 Winter Olympic Games has been the coverage of the U.S. opening ceremony outfits, designed by Ralph Lauren. Even for those of you who purport to know nothing about fashion design, you may recall that Ralph Lauren designs those shirts and shorts and sweaters with the little embroidered polo horse on the chest . . . . But trust me, he's an iconic American designer. Anyway, here is a critique of the American ensembles, ranking each item. The jacket is heated (!). But the large fringe suede gloves appear to be a particularly controversial fashion choice. As one critic noted:
These outfits have come in for a lot of criticism, particularly because they require the athlete to wear ludicrously large gloves that look as though they were designed for grilling by some sadist who then wants the grillers to go up in flames because the fringe of their large gloves has caught on fire.
She goes on to say the following:
The gloves have also come in for criticism because they have a Southwestern, Native American–meets–Route 66 truck stop, tchotchke vibe to them. The Olympic rings and the American flag are beaded. Between the fringe and the beading, there have been some claims and concerns about appropriation. I hear those. However, I do think that, in the long view, we want the American Olympic team outfits to be referencing a broader set of cultural influences on American life.
Wow. Who knew the business of deigning for the Olympic Games was so complex and fraught with peril?
In truth, the relationship between the U.S. Olympic Committee and Ralph Lauren is just one example of a designer collaboration seen frequently in fashion design in recent years. Target, H&M, and many others have entered into successful collaborations with major designers. See, e.g., here, here and here. These collaborations involve contracts addressing the fusion of the applicable intellectual property rights, among other legal and business issues. See, e.g., here and here. This is undoubtedly an interesting aspect of fashion law.
But back to the Olympic outfits . . . . Bustle is running a series of articles on the team uniforms and their designers. Here is the first installment. And if you want to know how much it will cost you to buy parts of the Team U.S.A. opening ceremony outfits, you can read about that here. They're pricey; be prepared . . . .
Monday, February 5, 2018
WOMEN’S LEADERSHIP IN ACADEMIA CONFERENCE
Advancing women professors, librarians, and clinicians in leadership positions in the academy.
Thursday & Friday July 19-20, 2018
University of Georgia School of Law
Call for Proposals!
DEADLINE: Thursday, March 15, 2018
Monday, January 29, 2018
At The University of Tennessee College of Law, we have a four-credit-hour, four-module course called Representing Enterprises that is one of three capstone course offerings in our Concentration in Business Transactions. In Representing Enterprises, each course module focuses on a different aspect of transactional business law, often a specific transaction or task. We try to both ask the enrolled students to apply law that they have learned in other courses (doctrinal and experiential) and also introduce the students to applied practice in areas of law to which they have not or may not yet have been exposed.
I have been teaching the first module over the past few weeks. We finish up tomorrow. My module focuses on disclosure regulation. I have five class meetings, two hours for each meeting, to cover this topic. Each class engages students with a hypothetical that raises disclosure questions.
The first class focused on general rule identification regarding the applicable laws governing disclosure in connection with the purchase of limited liability membership interests. Specifically, our client had bought out his fellow members of a member-managed Tennessee limited liability company at a nominal price and without giving them full information about a reality television opportunity our client had with his wife. As things turned out, the television show was picked up and popularized the brand name of the limited liability company, making the husband and wife, over the next few years, significant income. Now, of course, the former limited liability company members are contending that, had they known the complete facts, they would have demanded a higher price for their limited liability membership interests from our client. The students did some nice, creative thinking here in identifying applicable legal rules, pointing to Tennessee limited liability company fiduciary duty law (although they missed our closely held limited liability company doctrine), federal and state securities law, business torts, potential contract law issues, etc.
Subsequent class meetings broke disclosure law down into component pieces commonly seen in a business transactional law context. The second class centered on work for another client, a Delaware corporation, concerning fiduciary duty disclosure issues under Delaware corporate law in connection with a merger. The third class focused on a client's obligations under mandatory disclosure and antifraud elements of the federal securities laws. The fourth class involved a hypothetical that raises specialized disclosure regulation questions for a talent agency that is an indirect subsidiary of a New York Stock Exchange ("NYSE") listed company. I may post later about the fifth class meeting, which will take place tomorrow. It involves Uber's recently publicized data security breach and related disclosure matters.
I want to focus today on the fourth class meeting. In that class, one of the things the students had to wrestle with was determining how the parent's status and regulation as a NYSE-listed firm might impact or be impacted by disclosure compliance at the subsidiary level. The NYSE Listed Company Manual provides, e.g.,
The market activity of a company's securities should be closely watched at a time when consideration is being given to significant corporate matters. If rumors or unusual market activity indicate that information on impending developments has leaked out, a frank and explicit announcement is clearly required. If rumors are in fact false or inaccurate, they should be promptly denied or clarified. A statement to the effect that the company knows of no corporate developments to account for the unusual market activity can have a salutary effect. It is obvious that if such a public statement is contemplated, management should be checked prior to any public comment so as to avoid any embarrassment or potential criticism. If rumors are correct or there are developments, an immediate candid statement to the public as to the state of negotiations or of development of corporate plans in the rumored area must be made directly and openly. Such statements are essential despite the business inconvenience which may be caused and even though the matter may not as yet have been presented to the company's Board of Directors for consideration. . . .
Having identified this and other related rules, we posited situations in which operations or activities at the subsidiary level might require disclosure by the parent company under the NYSE listed company rules. We dug in most specifically on what might lead to market rumors or cause unusual market activity. Having just discussed in the prior class meeting disclosure standards under the federal securities laws, the students understood that materiality was a distinct, separate disclosure-triggering standard and that the parent firm might have different--even conflicting--disclosure obligations under the federal securities laws and the NYSE listed company rules. With these observations as a foundation, I asked the students what types of conduct or information at the subsidiary level might generate market rumors or unusual market activity.
Given that the firm was a talent agency, I was not surprised when one of the first answers referenced the allegations against Harvey Weinstein. The disparate pay issues relating to the Mark Wahlberg/Michelle Williams affair that I wrote about in a different context a few weeks ago (w/r/t which the same talent agency advised both actors) also came up. In each case we tried to envision what the subsidiary should be disclosing to the parent, and when, to enable the parent to satisfy its NYSE obligations. Among other things, we discussed the financial and non-financial impacts of the facts we were generating on the trading price and volume of parent's stock. It was a great brainstorming session, imv. By the end of class, we could see that a communication-oriented compliance plan for the subsidiary seemed to be in order.
Interestingly, the Steve Wynn story then broke the next day. I was pleased in the aftermath to see this article in The New York Times that validated the nature of our discussion and the complexity involved in assessing market risk in these kinds of situations.
The question, though, is what specifically investors are now pricing in. One risk is that regulators make it difficult for Wynn Resorts to expand. The Massachusetts gaming watchdog said on Friday that it would review plans for a new casino in Boston.
The threat of parting ways with an influential executive, until now a reasonable steward of shareholder value, is also potent. Over the past decade, Wynn Resorts’ average 10.5 percent shareholder return is a shade higher than that of the Standard & Poor’s 500-stock index — despite a slump in 2014 after China toughened rules on holiday gamblers.
Investors’ strong response to the reports is now the problem of Wynn Resorts’ 10-person board, which contains just one woman. Others surely will learn from how the Wynn board responds.
My students did identify regulatory risk (and the rest of the class was spent talking about California and New York laws regulating talent agencies, which are regulated and require licensure) and the risks associated with an iconic founder or chief executive at the heart of a controversy. I love it when current events dovetail with classroom activities!
Have any of you taught a course or course component like this before? I would be interested to know. I found it hard to teach the securities regulation issues to the students who were not interested in securities regulation work. I tried to break the legal foundations down into relatively small policy and doctrinal chunks, and I told them that every business lawyer needs to know a little bit about securities regulation, whether advising or litigating in connection with business transactions. But those who had not taken and were not taking our Securities Regulation course (a majority of the class) seemed to mentally almost shut down. Some of that may be 3L-itis. But I am rethinking how to engage students more happily with this part of the course. I will be asking the students for help on this. But any thoughts you have from your own experience (or otherwise) would be a great help to me as I think this through.
Monday, January 22, 2018
Just over a month ago, I published a post on meal delivery kits, describing the nature of the service and noting a few points about the market, including some information about legal claims. In that post, I promised more--specifically, a review of the kits themselves. That review will come in two parts. This is the first. Today, I want to note some of the advantages and disadvantages of using meal kits, from my perspective.
First, the advantages:
- delivery to your doorstep
- the convenience of food and recipe in one box
- little food waste (tailored quantities of food and fixings)
- exposure to new recipes
- introduction to new ingredients (most recently for us, spaghetti squash)
- the chance to learn new cooking techniques
- recipe cards that
- lay out sequential steps
- include helpful pictures and tips
- have a glossy finish and wipe clean
- fit in a magazine rack or storage unit
Now, the disadvantages:
- undue packaging waste? (box, internal containers, cold packs)
- uneven quality instructions (e.g., herbs divided . . . how--by type or by volume?)
- expense (depending on what your household would do instead)
As for the cost, here's what we pay for each:
Hello Fresh (4 people, 3 meals) - $129, including shipping
Plated (3 people, 2 meals) - $59.70 + $7.95 shipping
In a third post, I will say more about the relative merits of the individual services. My husband orders Blue Apron for us from time to time, and I also will try to get some information from him for my next post. Feel free to post observations or ask questions in the comments.
Monday, January 15, 2018
William Morris Endeavor and the Wahlberg/Williams Pay Disparity: A Role for Agency Law in Equality and Justice?
“Injustice anywhere is a threat to justice everywhere.”
Martin Luther King, Jr., Letter from Birmingham Jail, Alabama, 16 April 1963, in Atlantic Monthly August 1963
I had wanted to post a tribute to Dr. King here early on Monday. However, after posting the Emory conference announcement, I moved on to other work, and that work filled up the available time in the day. So, this late post including the quote above will have to suffice.
As I read meaningful quotes from Dr. King on social media and elsewhere all day on Monday, I found myself thinking of examples of inequality and injustice. Many are compelling; many are meaningful. Some are current events; and some of those involve business law questions.
For a number of days now (since before MLK Day) we have been showered with news stories relating to the compensation disparity between Mark Wahlberg and Michelle Williams for reshooting scenes from All the Money in the World in the wake of Kevin Spacey's replacement in the film resulting from allegations of sexual misconduct. (See here, among other places.) Most folks who follow Hollywood business issues know that gender discrimination is common. My sister, a visual effects producer (her current movie is Downsizing, which I enjoyed and recommend), has suffered the effects.
But I found myself focusing on the role of William Morris Endeavor Entertainment LLC (WME), the talent agency that represented both Wahlberg and Williams. Talent agents are regulated by guilds and unions as well as under California law (as represented here). But they also have fiduciary duties. Why did Wahlberg's contract not include a reshoot covenant (giving him the leverage to negotiate an outsized reshoot fee) while Williams's contract did? Did WME fail to act in a manner consistent with any applicable duty of care--or maybe loyalty--as an experienced agent representing both actors--with knowledge of an overall gender pay gap? Of course, there are many other possible explanations for the difference, and we are not privy to the terms of the two actors' talent contracts with WME (including any enforceable private ordering around agency law rules or confidentiality or privacy clauses). But the related questions seem worth asking.
Specifically, we might ask whether there is a question of WME's care, competence, or diligence under Section 8.08 of the Restatement (Third) of Agency. And, among other things, Section 8.11 of the Restatement (Third) of Agency imposes a duty of candor on agents that may be applicable here. And were there differences in the benefits that WME got out of each agreement that may have affected the firm's ability to act loyally for the principal's benefit under Section 8.01 of the Restatement (Third) of Agency? We may never know.
Intermediation likely cannot cure the evils of inequality and injustice. But where intermediaries are agents or otherwise owe fiduciary duties to their clients, those fiduciary duties may cause--or at least incentivize--the intermediaries to use their experience and knowledge to correct gender, racial, and other inequities where they exist. This is something I will continue to ponder.
Sixth Biennial Conference:
To Teach is to Learn Twice: Fostering Excellence in Transactional Law and Skills Education
June 1-2, 2018 • Atlanta
Emory’s Center for Transactional Law and Practice is delighted to announce its sixth biennial conference on the teaching of transactional law and skills. The conference, entitled “To Teach is to Learn Twice: Fostering Excellence in Transactional Law and Skills Education,” will be held at Emory Law, beginning at 1:00 p.m. on Friday, June 1, 2018, and ending at 3:45 p.m. on Saturday, June 2, 2018.
Four New and Different Things about the Conference:
- Presentation of the inaugural Tina L. Stark Award for Excellence in the Teaching of Transactional Law and Skills. Note: For information about how to nominate yourself or someone else for this award, please visit http://bit.ly/2C1HdMW.
- New 45-minute “Try-This” time slots for individual presenters to demonstrate in-class activities.
- Reduced registration fee for new transactional law and skills educators.
- Reduced registration fee for adjunct professors.
CALL FOR PROPOSALS
We are accepting proposals immediately, but in no event later than 5 p.m. on Monday, February 16, 2018.
We welcome you to present on any aspect of transactional law and skills education as long as you view it through the lens of our theme. We expect to receive proposals about theories, programs, curricula, courses, approaches, methods, and specific assignments or exercises that foster excellence in transactional law and skills education. In other words, what works best (excellence in teaching) to achieve particular student outcomes (excellence in learning)? If it’s true that “to teach is to learn twice,” what wisdom can you impart to others who may want to replicate or imitate what you are doing? How have you made yourself a better teacher? And how have you assured that you are achieving the best student outcomes?
Try-This Sessions. Each Friday afternoon “Try-This Session” will be 45-minutes long and will feature one classroom activity and one individual presenter.
Panels. Each Saturday session will be approximately 90 minutes long and feature a panel presenting two or more topics grouped together for synergy.
Please submit the proposal form electronically via the Emory Law website at http://bit.ly/2BTD7pr before 5 p.m. on February 16, 2018.
PUBLICATION OF SELECTED MATERIALS
As in prior years, some of the conference proceedings as well as the materials distributed by the speakers will be published in Transactions: The Tennessee Journal of Business Law, a publication of the Clayton Center for Entrepreneurial Law of The University of Tennessee, a co-sponsor of the conference.
Both attendees and presenters must register for the Conference and pay the appropriate registration fee: $220 (general); $200 (adjunct professor); or $185 (new teacher). Note: A new teacher is someone in their first three years of teaching.
The registration fee includes a pre-conference lunch beginning at 11:30 a.m., snacks, and a reception on June 1, and breakfast, lunch, and snacks on June 2. We are planning an optional dinner for attendees and presenters on Friday evening, June 1, at an additional cost of $50 per person.
Registration is now open for the Conference and the optional Friday night dinner at our Emory Law website at http://bit.ly/2BpTQVc.
TRAVEL ARRANGEMENTS AND HOTEL ACCOMMODATIONS
Attendees and presenters are responsible for their own travel arrangements and hotel accommodations. Special hotel rates for conference participants are available at the Emory Conference Center Hotel, less than one mile from the conference site at Emory Law. Subject to availability, rates are $149 per night. Free shuttle transportation will be provided between the Emory Conference Center Hotel and Emory Law.
To make a reservation at the special conference rate, call the Emory Conference Center Hotel at 800.933.6679 and mention “The Emory Law Transactional Conference.” Note: The hotel’s special conference rate expires at the end of the day on May 18, 2018. If you encounter any technical difficulties in submitting your proposal or in registering online, please contact Kelli Pittman, Program Coordinator, at firstname.lastname@example.org or 404.727.3382.
We look forward to seeing you in June!
Sue Payne, Executive Director
Kelli Pittman, Program Coordinator
Tuesday, January 9, 2018
The new semester is upon us, and AALS (as it tends to) ran right into the new semester. Joan Heminway provided a nice overview of some of her activities, including her recognition as an outstanding mentor by the Section on Business Associations, and it was a pleasure to see her recognized for her tireless and consistent efforts to make all of us better. Congratulations, Joan, and thank you!
I, too, had a busy conference, with most of it condensed to Friday and Saturday. (As a side note, it was pretty great to run along the water in 55-65 degree weather. As much as I love New York and appreciate San Francisco and DC, I'd be quite content with AALS moving between San Diego and New Orleans.) I spoke on a panel with my co-bloggers, as Joan noted, about shareholder proposals, and I spoke on a panel about the green economy and sustainability, which was also fun. It's nice when I am able to spend some time with a focus on my two main areas of research.
As to our panel on shareholder proposals, I thought I'd share a few of my thoughts. First, as I have explained in the past, I am not anti-activist investor, even though I often think their proposals are wrong headed. I think shareholder (and hedge fund) activist can add value, even when they are wrong, as long as directors continue to exercise their judgment and lead the firm appropriately.
Second, although I tend to have a bias for staying the course and leaving many laws and regulations alone, I am open to some changes for shareholder proposals. The value of the current system (especially one that has been in place for some time) is that everyone knows the rules, which means there is some level of efficiency for all the players.
That said, the threshold for shareholder proposals has been in places since the 1950s. The Financial Choice Act looks to move the proxy threshold from $2,000 and one-year holdings to a 1%/three-year hurdle. That is a pretty big move. Updating the $2,000 threshold from 1960 would mean raising the threshold to around $16,000, so a move to what can be millions may be too much. But $16,000 (basically updating for inflation), would make some sense to me, too. Anyway, just a few simple thoughts to start the year. Hope your classes are starting well.
Monday, January 8, 2018
Last week, I had the privilege of attending and participating in the 2018 annual meeting of the Association of American Law Schools (#aals2018). I saw many of you there. It was a full four days for me. The conference concluded on Saturday with the program captured in the photo above--four of us BLPB co-bloggers (Stefan, me, Josh, and Ann) jawing about shareholder proposals--as among ourselves and with our engaged audience members (who provided excellent questions and insights). Thanks to Stefan for organizing the session and inspiring our work with his article, The Inclusive Capitalism Shareholder Proposal. I learned a lot in preparing for and participating in this part of the program.
Earlier that day, BLPB co-blogger Anne Tucker and I co-moderated (really, Anne did the lion's share of the work) a discussion group entitled "A New Era for Business Regulation?" on current and future regulatory and de-regulatory initiatives. In some part, this session stemmed from posts that Anne and I wrote for the BLPB here, here, and here. I earlier posted a call for participation in this session. The conversation was wide-ranging and fascinating. I took notes for two essays I am writing this year. A photo is included below. Regrettably, it does not capture everyone. But you get the idea . . . .
In between, I had the honor of introducing Tamar Frankel, this year's recipient of the Ruth Bader Ginsburg Lifetime Achievement Award, at the Section for Women in Legal Education luncheon. Unfortunately, the Boston storm activity conspired to keep Tamar at home. But she did deliver remarks by video. A photo (props to Hari Osofsky for getting this shot--I hope she doesn't mind me using it here) of Tamar's video remarks is included below.
Tamar has been a great mentor to me and so many others. She plans to continue writing after her retirement at the end of the semester. I plan to post more on her at a later time.
On Friday, I was recognized by the Section on Business Associations for my mentoring activities. On Thursday, I had the opportunity to comment (with Jeff Schwartz) on Summer Kim's draft paper on South Korean private equity fund regulation. And on Wednesday, I started the conference with a discussion group entitled "What is Fraud Anyway?," co-moderated by John Anderson and David Kwok. My short paper for that discussion group focused on the importance of remembering the requirement of manipulative or deceptive conduct if/as we continue to regulate securities fraud in major part under Section 10(b) of, and Rule 10b-5 under, the Securities Exchange Act of 1934, as amended.
That summary does not, of course, include the sessions at which I was merely in the audience. Many of the business law sessions were on Friday and Saturday. They were all quite good. But I already am likely overstaying my welcome for the day. Stay tuned here for any BLPB-reated sessions for next year's conference. And in between, there's Law and Society, National Business Law Scholars, and SEALS, all of which will have robust business law programs.
Good luck in starting the new semester. Some of you, I know, are already back in the classroom. I will be Wednesday morning. I know it will be a busy 14 weeks of teaching!
Monday, January 1, 2018
I am laboring with what I hope is the tail end of the fourth cold I have had since the end of October--two in December alone. Ugh. So, I am afraid that my new year's day spirit is somewhat dulled by all the cold medicine. (I get on a plane for San Diego tomorrow morning, so getting all the head congestion out of the way today is a primary goal!)
Nevertheless, since New Year's Day is commonly associated with resolutions, I thought I would offer one in the spirit of the BLPB. It's not your typical new year's resolution. But my co-bloggers and most of our readers will no doubt find it oddly familiar . . . . Here goes. (Oh, and happy new year!)
* * *
CONSENT OF SOLE NEW YEAR'S DAY BLPB BLOGGER
Monday, January 1, 2018
WHEREAS, our weblog is blessed by some of the best blog editors known to man (and woman and others); and
WHEREAS, our weblog has garnered over 1,045,000 page views; and
WHERAS, our readers are amazing, patient folks with interesting and diverse ideas, thoughts, and perspectives; and
WHEREAS, all of the foregoing makes the undersigned very, very happy; now, therefore, it is
RESOLVED, that 2018 be the best year ever for the Business Law Prof Blog and bring health and happiness to bloggers and readers alike.
/s/ Joan MacLeod Heminway
Joan MacLeod Heminway
Sole New Year's Day BLPB Blogger
Monday, December 25, 2017
Merry Christmas to all celebrating today. I am enjoying a white Christmas in Pittsburgh, Pennsylvania with my dad and my brother and his husband, joined later today by my son and his fiancée (who had to work the night shift last night--she's a hospital nurse). For the first time in many, many years--I think since before I was married in 1985--I am separated from my husband this Christmas. He is back in Tennessee with my daughter, who celebrated her 26th birthday yesterday. Their work schedules didn't accommodate holiday travel this year. My daughter, in particular, worked yesterday and will work again tomorrow. The working world is a different place now during the holidays than it was when I was a child.
As I sit here with a blood orange mimosa on Christmas morning, that observation set me to thinking about blue laws and Christmas. (Ann and I are thinking along similar lines this week, it seems . . . .) A lot of folks save their shopping--including shopping for alcohol--until somewhat the last minute. This year, Christmas is on a Monday, meaning that Christmas Eve--a prime shopping day--was on a Sunday. I wondered whether any blue laws prevented stores from being open or alcohol from being sold yesterday (or today, for that matter) . . . .
Back in 2006, when Christmas also was on a Monday, National Public Radio's All Things Considered covered this story from a South Carolina perspective. Tennessee law, TCA § 57-3-406(e) (2016), provides as follows:
No retailer shall sell or give away any alcoholic beverage between eleven o'clock p.m. (11:00 p.m.) on Saturday and eight o'clock a.m. (8:00 a.m.) on Monday of each week. No retail store shall sell, give away or otherwise dispense alcoholic beverages except between the hours of eight o'clock a.m. (8:00 a.m.) and eleven o'clock p.m. (11:00 p.m.) on Monday through Saturday. The store may not be open to the general public except during regular business hours. Likewise, all retail liquor stores shall be closed for business on Thanksgiving Day and Christmas Day.
So, folks in Tennessee could not buy drinking alcohol yesterday from any store but can buy spirits today (absent applicable local ordinances to the contrary) from a retail store that is not a liquor store (if I am reading that correctly).
Massachusetts, my immediate former home state, has many exceptions to its blue laws, including allowing certain retail establishments to be open on Sundays, provided that rank-and-file (non-executive, non-administrative over a certain pay grade) retail employees are paid time-and-a-half if the business employs more than seven people. See MGL c. 136, § 6(50). This exception does not apply to any state-defined legal holiday (and to Christmas, when it is on a Sunday), but the exception does apply to the day following Christmas when Christmas occurs on a Sunday. The exception for alcohol sales is more detailed and includes:
The retail sale of alcoholic beverages not to be drunk on the premises on Sundays by retail establishments licensed under section 15 of chapter 138; provided, however, that notwithstanding this chapter, a municipality may prohibit the retail sale of alcoholic beverages on Sundays by licensees under section 15 by vote of the city council or board of selectmen; provided further, that there shall be no such sales prior to the hour of 10:00 a.m. or on Christmas Day if Christmas occurs on a Sunday; and provided further, that establishments operating under this clause which employ more than 7 persons shall compensate all employees for work performed on a Sunday at a rate of not less than one and one-half of the employee's regular rate. No employee shall be required to work on a Sunday and refusal to work on a Sunday shall not be grounds for discrimination, dismissal, discharge, deduction of hours or any other penalty.
Whoever on Sunday keeps open his shop, warehouse, factory or other place of business, or sells foodstuffs, goods, wares, merchandise or real estate, or does any manner of labor, business or work, except works of necessity and charity, shall be punished by a fine of not less than twenty dollars nor more than one hundred dollars for a first offense, and a fine of not less than fifty dollars nor more than two hundred dollars for each subsequent offense, and each unlawful act or sale shall constitute a separate offense.
Even where retail establishments may be open, states may regulate work on Christmas--and on other holidays, too--designated as legal holidays by the state. I grew up with a system of federal and state holidays that serve this purpose. But The Legal Genealogist tells us that Christmas has not been a government-designated holiday from work for very long. The Tennessee list for 2017 can be found here. The Massachusetts legal holiday list is here.
Anyway, lest I bore you with my holiday blue law musings, I will close now by wishing you a happy continuing holiday season from here in Pittsburgh. Enjoy time with and memories of family and friends. From my house to yours, this brings wishes for a lovely holiday week. Enjoy.