Friday, August 29, 2014
BPLB's own Joshua Fershee, Professor of Law with the Center for Energy and Sustainable Development at West Virginia University College of Law, was quoted in a Greenwire story on the Kinder Morgan deal. You can read an excerpt below
Kinder Morgan deal leaves questions for investors
Mike Lee, E&E reporter Published: Thursday, August 28, 2014
Kinder Morgan Inc. may have to do more to convince its investors that its proposed $44 billion merger with its subsidiaries is in their best interest.
The company -- the nation's biggest operator of oil and gas pipelines -- took a series of steps to ensure there were no conflicts of interest during the negotiations, and the subsidiaries negotiated for a higher bid from the parent, Kinder Morgan said in a filing<http://www.sec.gov/Archives/edgar/data/1506307/000104746914007230/a2221196zs-4.htm>intended to persuade investors to vote for the merger.
The question will be: Did the company go far enough? Kinder Morgan faced similar questions when it went private in 2007 and when it bought El Paso Corp. in 2011.
The market's reaction -- prices for all three companies have risen since the deal was announced -- shows that investors are willing to overlook a temporary downside if a company has a long-term plan, said Joshua Fershee, a law professor at West Virginia University.
Kinder Morgan's CEO "knows what he's doing, and he's articulated a plan that says upfront, 'Here's where we're going to take the hit,'" Fershee said.
Tuesday, August 26, 2014
West Virginia is the latest jurisdiction to adopt benefit corporations – the text of our legislation can be found here. As with all benefit corporation legislation, the thrust of West Virginia’s statute is to provide a different standard of conduct for the directors of an otherwise for-profit corporation that holds itself out as being formed, at least in part, for a public benefit. (Current and pending state legislation for benefit corporations can be found here.)
As WVU Law has two members of the ProfBlog family in its ranks (Prof. Josh Fershee (on the Business Law Prof Blog) and Prof. Elaine Waterhouse Wilson (on the Nonprofit Law Prof Blog)), we combined forces to evaluate benefit corporations from both the nonprofit and the for-profit sides. For those of you on the Business Prof blog, some of the information to come on the Business Judgment Rule may be old hat; similarly, the tax discussion for those on the Nonprofit Blog will probably not be earth-shaking. Hopefully, this series will address something you didn’t know from the other side of the discussion!
Part I: The Benefit Corporation: What It’s Not: Before going into the details of West Virginia’s legislation (which is similar to statutes in other jurisdictions), however, a little background and clarification is in order for those new to the social enterprise world. A benefit corporation is different than a B Corporation (or B Corp). B Lab, which states that it is a “501(c)(3) nonprofit” on its website, essentially evaluates business entities in order to brand them as “Certified B Corps.”
It wants to be the Good Housekeeping seal of approval for social enterprise organizations. In order to be a Certified B Corp, organizations must pass performance and legal requirements that demonstrate that it meets certain standards regarding “social and environmental performance, accountability, and transparency.” Thus, a business organized as a benefit corporation could seek certification by B Lab as a B Corp, but a business is not automatically a B Corp because it’s a state-sanctioned benefit corporation – nor is it necessary to be a benefit corporation to be certified by B Labs.
In fact, it’s not even necessary to be a corporation to be one of the 1000+ Certified B Corps by B Lab. As Haskell Murray has explained,
I have told a number of folks at B Lab that "certified B corporation" is an inappropriate name, given that they certify limited liability companies, among other entity types, but they do not seem bothered by that technicality. I am guessing my fellow blogger Professor Josh Fershee would share my concern. [He was right.]
A benefit corporation is similar to, although different from, the low-profit limited liability company (or L3C), which West Virginia has not yet adopted. (An interesting side note: North Carolina abolished its 2010 L3C law as of January 1, 2014.) The primary difference, of course, is that a benefit corporation is a corporation and an L3C is a limited liability company. As both the benefit corporation and the L3C are generally not going to be tax-exempt for federal income tax purposes, the state law distinction makes a pretty big difference to the IRS. The benefit corporation is presumably going to be taxed as a C Corporation, unless it qualifies and makes the election to be an S Corp (and there’s nothing in the legislation that leads us to believe that it couldn’t qualify as an S Corp as a matter of law). By contrast, the L3C, by default will be taxed as a partnership, although again we see nothing that would prevent it from checking the box to be treated as a C Corp (and even then making an S election). The choice of entity determination presumably would be made, in part, based upon the planning needs of the individual equity holders and the potential for venture capital or an IPO in the future (both very for-profit type considerations, by the way). The benefit corporation and the L3C also approach the issue of social enterprise in a very different way, which raises serious operational issues – but more on that later.
Finally, let’s be clear – a benefit corporation is not a nonprofit corporation. A benefit corporation is organized at least, in some part, to profit to its owners. The “nondistribution constraint” famously identified by Prof. Henry Hansmann (The Role of Nonprofit Enterprise, 89 Yale Law Journal 5 (1980), p. 835, 838 – JSTOR link here) as the hallmark of a nonprofit entity does not apply to the benefit corporation. Rather, the shareholders of a benefit corporation intend to get something out of the entity other than warm and fuzzy do-gooder feelings – and that something usually involves cash.
In the next installments:
Part II – The Benefit Corporation: What It Is.
Part III – So Why Bother? Isn’t the Business Judgment Rule Alive and Well?
Part IV – So Why Bother, Redux? Maybe It’s a Tax Thing?
Part V - Random Thoughts and Conclusions
EWW & JPF
Tuesday, August 19, 2014
At West Virginia University College of Law, we started classes yesterday, and I taught my first classes of the year: Energy Law in the morning and Business Organizations in the afternoon. As I do with a new year coming, I updated and revised my Business Organizations course for the fall. Last year, I moved over to using Unicorporated Business Entities, of which I am a co-author. I have my own corporations materials that I use to supplement the book so that I cover the full scope of agency, partnerships, LLCs, and corporations. So far, it's worked pretty well. I spent several years with Klein, Ramseyer and Bainbridge's Business Associations, Cases and Materials on Agency, Partnerships, and Corporations (KRB), which is a great casebook, in its own right.
I did not make the change merely (or even mostly) because I am a co-author. I made the change because I like the structure we use in our book. I had been trying to work with KRB in my structure, but this book is designed to teach in with the organization I prefer, which is more topical than entity by entity. I'll note that a little while ago, my co-blogger Steve Bradford asked, "Are We Teaching Business Associations Backwards?" Steve Bainbridge said, "No." He explained,
I've tried that approach twice. Once, when I was very young, using photocopied materials I cut and pasted from casebook drafts the authors kindly allowed me to use. Once by jumping around Klein, Ramseyer, and Bainbridge. Both times it was a disaster. Students found it very confusing (and boy did my evaluations show it!). It actually took more time than the entity by entity approach, because I ended up having to do a lot of review (e.g., "you'll remember from 2 weeks ago when we discussed LLCs most recently that ...."). There actually isn't all that much topic overlap. Among corporations, for example, you've got the business judgment rule, derivative suits, "duty" of good faith, executive compensation, the special rules for close corporations, proxies, and so on, most of which either don't apply to LLCs etc.... or don't deserve duplicative treatment.
I have great respect for Prof. Bainbridge, and his writing has influenced me greatly, but (not surprisingly), I come out more closely aligned with my perception of Larry Ribstein on such issues, and with Jeff Lipshaw, who commented,
I disagree about the lack of topic overlap, and suspect Larry Ribstein is raging about this in BA Heaven right now. . . .
This may reflect differences among student populations, but the traditional corporate law course, focusing primarily on public corporations, is less pertinent in many schools where students are unlikely to be doing that kind of work when they graduate. It's far more likely that they'll need to be able to explain to a client why the appropriate business form is a corporation or an LLC, and what the topical differences between them are.
I completely agree, and I would go another step to say that I find the duplication to be a valuable reinforcement mechanism that is worth (what I have seen as limited) extra time. I am teaching a 4-credit course, though, which gives me time I never had in my prior institution's 3-credit version.
One thing I am doing differently this year is my first assignment, which seeks to build on what I see as a need for students here. That is, I think many of them will need to be able to explain entity differences and help clients select the right option.
I had my students fill out the form for a West Virginia Limited Liability Company (PDF here). I had a few goals. First, I don't like to have students leave any of my classes without handling at least some of the forms or other documents they are likely to encounter in practice. Second, I did it without any instruction this time (I have used similar forms later in the course) because I thought it would help me tee up an introduction to all this issues I want them thinking about with regard to entity choice. (It did.) Finally, I like getting students to see the connection between the form and the statute. We can link though and see why the form requires certain issues, discuss waivable and nonwaivable provisions, and talk about things like entity purpose, freedom of contract, and the limits of limited liability.
If nothing else, the change kept things fresh for me. I welcome any comments and suggestions on any of this, and I wish everyone a great new academic year.
Tuesday, August 12, 2014
Kinder Morgan, a leading U.S. energy company, has proposed consolidating its Master Limited Partnerships (MLPs) under its parent company. If it happens, it would be the second largest energy merger in history (the Exxon and Mobil merger in 1998, estimated to be $110.1 billion in 2014 dollars, is still the top dog).
Motley Fool details the deal this way:
Terms of the deal
The $71 billion deal is composed of $40 billion in Kinder Morgan Inc shares, $4 billion in cash, $27 billion in assumed debt.
Existing shareholders of Kinder Morgan's MLPs will receive the following premiums for their units (based on friday's closing price):
- Kinder Morgan Energy Partners: 12%
- Kinder Morgan Management: 16.5%
- El Paso Pipeline Partners: 15.4%Existing unit holders of Kinder Morgan Energy Partners and El Paso Pipeline Partners are allowed to choose to receive payment in both cash and Kinder Morgan Inc shares or all cash.
The most important man in the American Energy Boom wears brown slacks and a checkered shirt and sits in a modest corner office with unexceptional views of downtown Houston and some forgettable art on the wall. You would expect to at least see a big map showing pipelines stretching from coast to coast. Nope. “We don’t have sports tickets, we don’t have corporate jets,” growls Richard Kinder, 68, CEO of Kinder Morgan, America’s third-largest energy firm. “We don’t have stadiums named after us.”
August 12, 2014 in Business Associations, Corporate Finance, Corporate Governance, Corporations, Current Affairs, Financial Markets, Joshua P. Fershee, Merger & Acquisitions, Partnership, Teaching, Unincorporated Entities | Permalink | Comments (0) | TrackBack (0)
Tuesday, August 5, 2014
This doesn't have a lot to do with Business Law, though I would submit there's a lot to be learned from reading outside the field. Now that I live in West Virginia, and my wife suggested I read it, I propose: Bill Bryson, A Walk in the Woods: Rediscovering America on the Appalachian Trail, which seemed appropriate for a summer read. She was right. So far, it's great. I recommend it, and to support my claim, here's a few quotes to tease you:
“I know a man who drives 600 yards to work. I know a woman who gets in her car to go a quarter of a mile to a college gymnasium to walk on a treadmill, then complains passionately about the difficulty of finding a parking space. When I asked her once why she didn't walk to the gym and do five minutes less on the treadmill, she looked at me as if I were being willfully provocative. 'Because I have a program for the treadmill,' she explained. 'It records my distance and speed, and I can adjust it for degree of difficulty.' It hadn't occurred to me how thoughtlessly deficient nature is in this regard.”
“Black bears rarely attack. But here's the thing. Sometimes they do. All bears are agile, cunning and immensely strong, and they are always hungry. If they want to kill you and eat you, they can, and pretty much whenever they want. That doesn't happen often, but - and here is the absolutely salient point - once would be enough.”
Thursday, July 31, 2014
Warning- do not click on the first link if you do not want to see nudity.
Dov Charney founded retailer American Apparel in 1998 and it became an instant sensation with its 20-something year old consumer base. He mixed a "made in America- sweatshop free" CSR focus with a very sexy/sexual set of ads (hence the warning- - when I first created the link, the slideshow went from a topless “Eugenia in disco pants in menthe” (seriously) to a shot of adorable children’s clothing in about 10 seconds). No wonder my 18-year old son, who leaves for art school in two weeks, appreciates the ad campaigns. Most of his friends do too- both the males and females. In fact, he indicated that although they all know about the “sweatshop free” ethos, because “it’s in your face when you walk in the stores,” that’s not what draws them to the clothes. As a person who blogs and writes about human rights and supply chains, I almost wish he had lied to me. But he’s no different than many consumers who over-report their interest in ethical sourcing, but then tend to buy based on quality, price and convenience. I am still researching this issue for my upcoming article on CSR, disclosure regimes and human rights but see here, here, here and here for some sources I have used in the past. My son’s friends--the retailer’s target demographic-- appreciate that the clothes are “sweatshop free” but don’t make their buying decisions because of it. They buy because of the clothes and to a lesser extent, the ads.
The first time I ever really thought about the store was after a 2005 20/20 expose about Charney, who was accused of, among other things, sexually harassing and intimidating numerous employees. At the time I was a management-side employment lawyer and corporate compliance officer and thought to myself “what a nightmare for whomever has to defend him.” It’s pretty hard to shock an employment lawyer, but the allegations, which continued until his ouster last month, were pretty egregious. After over 10 years of lawsuits, the company terminated him for breaching his fiduciary duty, violating company policy, and misusing corporate assets.
Recently, American Apparel’s employment practices liability insurance rose from $350,000 to $1 million, I can only assume, because of his actions and not due to the other 10,000 company employees. The company has been sued repeatedly by the EEOC and not just for sexual allegations. Purportedly, the company, which has never traded above $7.00 a share and today is a steal at $.97, could not get financing from some sources as long as Charney was at the helm.
My son and his friends did not know about the termination or the harassment allegations over the years, but he says that the nature of the allegations could have caused some of his friends to stop and think about whether they wanted to patronize the stores. I have some 30-something friends who refuse to shop there. Could this be why the store chose to add a female director? As I explained to a reporter last week, the company shouldn’t need a female perspective to realize that the founder is, to put it mildly, a risk. And in fact, as studies cited by my co-blogger Josh Fershee noted earlier this week, being the “woman’s voice” may minimize her perceived effectiveness. Yes, it’s true that American Apparel took more decisive action than the NFL last week, as Joan Heminway observed, but what took them so long? Is it too little too late? Where was the general counsel when Charney allegedly refused to take his sexual harassment training, which is required by law in California every two years? Where were the other board members who allowed the settlement of case after case involving Charney? I have often found that some of the most vigilant supporters of women in the workplace, especially in harassment matters, are older males who have daughters and wives and who know what it’s like for them. When did the board worry about whether the CEO's well-publicized alleged attacks on employees contradicted the heavy corporate responsibility branding? Did the board meet its Caremark duties?
Ironically, the company’s 10-K filed two months before his termination indicated that, “In particular, we believe we have benefited substantially from the leadership and strategic guidance of Dov Charney. The loss of Dov Charney would be particularly harmful as he is considered intimately connected to our brand identity and is the principal driving force behind our core concepts, designs and growth strategy.”
So at what point between April and June did Charney’s actions go off the scale on the enterprise risk management heat map? COSO, the standard bearer for ERM, encourages boards to focus on: what the firm is willing to accept as it pursues shareholder value; a knowledge of management’s risk management processes that have identified and assessed the most significant enterprise-wide risks; a review of the risk portfolio compared to the risk appetite; and whether management is properly responding to the most significant risks and apprising the board of those risks. Could such an objective risk assessment have even occurred with Charney (the risk) in the room? How could the company have the right tone at the top when the founder/CEO failed to comply with Code of Ethics Rule #2 --“service to the Company never should be subordinated to personal gain and advantage”? The stock price has been falling for years and the company has been struggling. Did the high rates to insure Charney’s conduct finally become too hot to handle? On the other hand, would the directors have made the same decision if the shares were trading at $97 instead of .97? Some shareholders are raising concerns too about why any of the original board members remain given the appalling financial performance.
The board now has a “suitability committee,” which will review the results of an independent investigation into Charney’s actions. Even if the report clears Charney and he’s brought back, the new independent directors will have a lot of questions to answer. The question of whether there is a woman on the board seems to be almost irrelevant given the history. For the record, even though the literature is mixed on the financial benefits of gender and racial diversity, I am a strong proponent of the diversity of viewpoints, particularly those that the underrepresented can bring to the table.
But this board needs to re-establish trust among its investors and funders and then focus on what any retailer should- potential supply chain disruptions, the impact of any immigration reform, currency fluctuations, and keeping their customer base happy and out of competitors H & M and Forever 21. The last thing they need to worry about is how to pay off the victims of their founder’s latest escapades.
Tuesday, July 29, 2014
This week, two of my co-bloggers shared some great insights on the revamped American Apparel board of directors. See Marcia Narine quoted in The Guardian article American Apparel adds its first woman to revamped board of directors; Joan Heminway, American Apparel 1, NFL 0. For those not following the American Apparel saga, the New York Times recently reported:
The founder and chief executive of American Apparel, Dov Charney, was fired this week because an internal investigation found that he had misused company money and had allowed an employee to post naked photographs of a former female employee who had sued him, according to a person with knowledge of the investigation.
Beyond the public relations problems surrounding Charney’s departure, American Apparel is struggling financially as sales have dropped dramatically. As an initial step in trying start a turnaround, the company announced four new board members, including the company’s first female director, Colleen Birdnow Brown, former chief executive of Fisher Communications.
When I opened the Guardian article quoting Marcia, I had another article open in the tab next to it from the Washington Post’s On Leadership section: For women and minorities, advocating for diversity has a downside. That article explained:
In corporate America, diversity is about as controversial as motherhood and apple pie. CEOs love to tout the number of women in their upper ranks. Human resource departments like to trumpet their diversity programs in glossy reports.
But a new study finds that for female and minority executives, being seen as an advocate for diversity could actually have a downside. The researchers behind the study, which will be presented at the Academy of Management's annual conference in early August, found that women and minorities who were rated by their peers as being good at managing diverse groups or respecting gender or racial differences also tended to get lower performance ratings. That's because they may be viewed as "selfishly advancing the social standing of their own low-status demographic groups," the researchers write, a no-no when it comes to rating good managers.
Please click below to read more.
Friday, July 25, 2014
This post started off as a comment to co-blogger Haskell Murray's post Modifying the Law Review Submission and Review Process, and is perhaps overkill, but at least a few of us, thanks in part to Steve Bradford's post, are finding the conversation fruitful, so here we go:
In response to my suspicion that widespread law review changes could impact promotion and tenure (P&T) processes, Haskell writes: "I am not sure why the expectations for P&T would have to change if law reviews instituted blind review. It seems that all blind review would do is make the selection process more fair."
Maybe he is right, but here's my thinking: I believe expectations for P&T would change because I believe that widespread blind review would increase the (already long) turnaround time for getting pieces accepted for publication. If I am right (an open question) that it would increase the review time, it would make it harder for some faculty to get their pieces accepted, which is often required for it to "count" in the review process. Perhaps this would be a good thing, but I would see it as a potentially significant change.
This could also impact higher ranked schools even more. That is, Haskell has noted, people visiting at higher-ranked schools often find that visiting submission to be their most successful submission. (I’ve never had a top-20 or even top-40 school with my name for a submission, so I can’t say for certain.) It is my sense that higher-ranked schools get a bump with law reviews, and that's not always (ever?) fair, but if that bias went away, it could make it even harder to get through the P&T process at those schools without some modifying my understanding of some assessment measures. This is where I agree with Steve Bradford that if schools are using law review rankings as a proxy for quality, they are shirking their duties, but I still think many schools (or at least some people in schools) do. Again, a change may lead to a good shift over all, but it would still be a shift.
I concede it’s possible that blind review could increase the quality of journals, but I think that would also need peer review to go along with it, which could, again, extend the reviewing timeframe. For the current system, I think one of the reasons we don’t have blind review is that the system is full of proxies. These proxies have perhaps been deemed desirable given that we have already ceded publication decisions to 2Ls and 3Ls, and open review gives those students more information. I do think it may be more desirable and more fair to use blind review, though I think there’s also more likely we’d be swapping one problem for another if we don't add more seasoned reviewers to the mix. In one of my earlier posts (linked in my recent one) other disciplines indicate peer review alone won't fix the problem, and I don't think just blind review will either.
I maintain that a faculty- and practitioner-assisted process (including blind reviews) would benefit law reviews and legal scholarship, but it means we’d all have to pitch in even more. (I support that, but it would need widespread buy in.) My sense is that law reviews are slowly responding to the concerns and that we will see a better process result. I think this whole discussion is a net positive, and I hope we’ll see more of an evolution. As I have noted in my other posts, though, because I see value in many parts of law reviews, I think the coming changes should be an evolution and not a revolution.
Wednesday, July 23, 2014
As someone who teaches and researches both business law and energy law, I often focus on the overlap of the two areas, which I find to be significant. One of my most recent projects has been to write a new casebook, Energy Law: A Context and Practice Casebook, which will be available for courses taught this fall. I wrote a detailed description of the book in a guest post at the Energy Law Professor blog, but here I wanted to highlight the business aspects of the book.
The second chapter of my book is titled The Business of Energy Law. That chapter begins with some key vocabulary, and I then provide students with a client issue to frame the reading for the chapter. The issue:
Your firm has just taken on a new client who is a large shareholder in many companies. She is particularly concerned about her holdings in Energex, Inc., a publicly traded energy company. Energex was founded in 1977 by a oil and gas man from Louisiana who is still the CEO and a member of the board of directors. The client is concerned that the CEO is taking opportunities for himself that she thinks belong to Energex. As you read the following sections, consider: (1) What are the potential conflicts of interest the CEO might have? (2) Is it a conflict of interest if the activity is permitted under the CEO’s employment contract? (3) What kind of documents might be publicly available for review and where would you find them? (4) If it goes to litigation, what other information might you seek? From whom?
The first part of the chapter covers Business Organizations and Employment Law as Energy Law, including derivative suit and executive compensation contracts. The chapter also has the following sections: Antitrust as Energy Law, Mergers and Acquisitions, and Entity Structure and Fiduciary Duties.
Over the years, as I have taught my Energy Law Survey course and Business Organizations (as I do again this fall), I found that I can help make sense of things for students in each class when I borrow examples from the other class. My book helps make the connection concrete, and I hope it will help students understand more of the "why "to go along with the "what." As I often tell (preach to?) students, understanding business organizations is critical to all aspects of practice, regadless of where you intend to focus, whether it's energy law, environmental law, criminal law, or even family law.
This fall should be fun. For me, at least.
Tuesday, July 22, 2014
Steve Bradford yesterday posted a thoughtful (as is usual for his posts) critique of law reviews. I had drafted a comment, but Steve suggested that I should post links to my prior posts separately, so here goes, along with (what has turned out to be a lot of) additional commentary.
I think Steve has some valid (and compelling) points. As I have written before, though, I can’t go as far as he does. I won’t rehash all that I have written before on this subject, but one of my earlier posts, Some Thoughts for Law Review Editors and Law Review Authors covers a lot of that ground. Please click below to read more:
Tuesday, July 15, 2014
The Hobby Lobby decision states:
No known understanding of the term "person" includes some but not all corporations. The term "person" sometimes encompasses artificial persons (as the Dictionary Act instructs), and it sometimes is limited to natural persons. But no conceivable definition of the term includes natural persons and nonprofit corporations, but not for-profit corporations. 20 Cf. Clark v. Martinez, 543 U. S. 371 , 378 (2005) ("To give th[e] same words a different meaning for each category would be to invent a statute rather than interpret one").
The decision continues:
Under the Dictionary Act, "the wor[d] 'person' . . . include[s] corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals." Ibid .; see FCC v. AT&T Inc., 562 U.S. ___, ___ (2011) (slip op., at 6) ("We have no doubt that 'person,' in a legal setting, often refers to artificial entities. The Dictionary Act makes that clear"). Thus, unless there is something about the RFRA context that "indicates otherwise," the Dictionary Act provides a quick, clear, and affirmative answer to the question whether the companies involved in these cases may be heard.
Thus, unless otherwise stated, any place a person can recover claims, so can “corporations, companies, associations, firms, partnerships, societies, and joint stock companies.” There are opinions that have distinguished the “fictional person” from the “natural person.” See, e.g., All Comp Const. Co., LLC v. Ford, 999 P.2d 1122, 1123 (Okla. App. Div. 1 2000) (stating that an LLC was a "fictional 'person' for legal purposes and thus any damages due to the LLCs would be "due to it as a fictional person," and thus certain damages were not recoverable because LLCs are not "capable of experiencing emotions such as mental stress and anguish"). RFRA, per Hobby Lobby, though, does not make such a distinction.
As such, it seems to me there are places where federal law uses the term person that might now extend potential recovery to entities for things like pain and suffering or mental anguish. Maybe I am missing something here. Any ideas come to mind? Maybe civil rights laws?
The ripples, it seems, are just beginning.
Tuesday, July 8, 2014
A recent article discussing the American Society of Civil Engineers' Report Card on U.S. infrastructure explains:
Without adequate investment on infrastructure the US could face a $2.4 trillion drop in consumer spending by 2020, a $1.1 trillion loss in total trade and experience the loss of 3.5 million jobs in 2020 alone.
This is just a sliver of the doom and gloom the American Society of Civil Engineers predicted this week with the release of their final report in the “Failure to Act” series that focuses on the impacts associated with continued infrastructure deterioration. The latest installment of the ASCE reports focuses on specifically on economic impacts.
Under current investment trends, only 60% of the investment funding required by 2020 will be secured and this underinvestment in infrastructure will have a “cascading impact on the nation’s economy” and culminate in a “gradual worsening of reliability over time,” Gregory E. DiLoreto, ASCE President told the participants on a conference call.
Back in 2007, I published an article titled, Misguided Energy: Why Recent Legislative, Regulatory, and Market Initiatives are Insufficient to Improve the U.S. Energy Infrastructure (here). In that article, I argued:
Soaring energy prices, natural gas supply shortages, and blackouts in major areas of the United States have led to a flurry of legislative and regulatory activity. Through this activity, lawmakers and regulators purport to resolve problems regarding natural gas and electricity supplies and service reliability. A major goal of these actions has been to address the overall energy crisis by increasing investment in the U.S. energy infrastructure. However, as is often the case with political remedies for difficult problems, what is being done and what legislators and policymakers claim is being done are two entirely different things. Recent legislative and regulatory policies are simply ill-equipped to have any substantial impact on the nation’s energy infrastructure in the foreseeable future. Although some of the policies provide long-term hope for increasing the amount and sources of capital available for investment, they are not adequate solutions to a current, and progressing, energy crisis.
Little has changed, but Congress's lack of focus remains. So here's the suggestion, for both energy infrastructure and business regulation: If we're going to add new rules or policies, let's make them clear, transparent, and focused. No 700-page laws or convoluted regulations. If we want to reduce fossil fuel consumption, add a carbon tax. If we want to get transmission infrastructure sited, give federal eminent domain authority for siting.
For now, from the SEC to FERC, let's just give it a try. Otherwise, we don't tend to facilitate markets, we tend to create carve outs that entrench existing powers. And we know how well that works.
Monday, June 30, 2014
Rather than try to rehash what is now done, I will pose a different question: How does one reconcile this religious exercise with the profit-seeking mandate that the Delaware court imposes from time to time. As Chancellor Chandler noted in eBay v. Newmark (more here):
The corporate form in which craigslist operates, however, is not an appropriate vehicle for purely philanthropic ends, at least not when there are other stockholders interested in realizing a return on their investment.
Note that “purely” is not an entirely accurate modifier here. Craigslist made a profit and had some ventures that raised money. They just did not monetize the majority of the endeavors
So what about an entity that operates for purely religious ends? Hobby Lobby and those similarly situated seem to be saying that religion trumps profit (see, e.g., Chik_Fil-A closing on Sundays). This is not the argument that our business model is stronger because of our choices, which I have argued before should be protected, but this is saying we choose religion over profit.
As Chancellor Chandler noted in eBay, if there are no shareholders to complain, then perhaps it is not an issue. Still, as soon as a shareholder disagrees, will decisions such as limiting healthcare options (thus limiting the talent pool for employees) or closing on Sunday? It seems to me the Hobby Lobby decision has opened the door for several fiduciary duty fights down the road.
Can a corporation now choose to give a majority of its funds to a church, even if it harms the entity? I think no, but I hope, for the sake of businesses everywhere, the Court did not just create a First Amendment out to such fiduciary duties.
Tuesday, June 24, 2014
The WVU College of Law's Center for Energy and Sustainable Development is seeking a fellow for 2014-16, and the details are below. As I have written before, the Future of Business is the Future of Energy. Just today, the New York Times Dealbook has an article, Norway’s Sovereign Wealth Fund Ramps Up Investment Plans, which notes:
Norway’s giant sovereign wealth fund said on Tuesday that it would manage its $884 billion portfolio more aggressively over the next three years, taking larger stakes in companies and increasing its real estate portfolio.
. . . .
The fund’s investments have grown increasingly sophisticated under Yngve Slyngstad, the chief executive of Norges Bank Investment Management, who came to the fund in 1998 to build an equity portfolio and became C.E.O. in 2008. Since the end of 2007, equities have increased as a percentage of the portfolio to about 61 percent from 42 percent.
Mr. Slyngstad has also diversified the holdings into smaller companies and into emerging markets, but the stock investments remain concentrated in Europe and North America. The fund’s largest equity holdings are all companies based in Europe, including Nestlé, Novartis, HSBC Holdings, the Vodafone Groupand Royal Dutch Shell.
The fund has been under pressure from environmental groups and some political parties in Norway to shed investments in oil and natural gas and coal companies and to increase its green investments. The government has so far largely resisted. It created a panel of experts this year to study the issue.
Understanding the interplay between energy, finance, and the environment is becoming more and more critical to businesses (and their lawyers). Please share this opportunity with anyone you know who might have an interest in exploring this area.
ENERGY AND SUSTAINABLE DEVELOPMENT LAW
Accepting Applications Until June 30, 2014
West Virginia University College of Law’s Center for Energy and Sustainable Development is now accepting applications for a Fellowship in Energy and Sustainable Development. The fellowship combines the opportunity to work with attorneys, faculty and students at the Center for Energy and Sustainable Development with the opportunity to obtain the WVU Law LL.M. degree in Energy and Sustainable Development Law. The LL.M. program provides a uniquely deep and balanced curriculum in perhaps the nation’s richest natural resource region. The fellowship position involves policy and legal research and writing, and assisting with organizing projects such as conferences and workshops.
The Center for Energy and Sustainable Development
The Center is an energy and environmental public policy and research organization at the WVU College of Law. The Center conducts objective, unbiased research and policy analyses, and focuses on promoting practices that will balance the continuing demand for energy resources—and the associated economic benefits—alongside the need to reduce the environmental impacts of developing the earth’s natural resources. One mission of the Center is to train the next generation of energy and environmental attorneys. The Center benefits from being located on the campus of a major research institution, with expanded opportunities for inter-disciplinary research and an integral role for the Center in providing the policy, legal and regulatory analyses to support the technical research being conducted across the WVU campus.
LL.M. in Energy and Sustainable Development Law
The WVU College of Law LL.M. in Energy and Sustainable Development Law is the only LL.M. program in the United States that provides a balanced curriculum in both energy law and the law of sustainable development. Working with WVUCollege of Law’s Center for Energy and Sustainable Development, LL.M. students will develop the expertise to advise clients and provide leadership on matters covering the full range of energy, environmental and sustainable development law. The LL.M. in Energy and Sustainable Development Law provides a broad and deep offering of courses, experiential learning opportunities, and practical training for every part of the energy sector. Our broad spectrum of courses allows our students to prepare to be lawyers serving energy companies, investors, environmental organizations, landowners, utilities, manufacturing companies, lawmakers, policymakers, regulators and land use professionals.
Energy and Sustainable Development Law Fellow
This fellowship is a part-time (at least twenty hours per week), two-year position from August 2014 through July 2016. The Fellow will receive an annual stipend of $20,000 and tuition remission for the LL.M. program. The Fellow would take 6-7 credits per semester allowing time for part-time work at the Center. The Fellow will further the work of the Center by pursuing research on issues relating to energy and sustainable development law and policy, under the direction of the Center’s Director and the WVU Law faculty associated with the Center. The Fellow will be expected to generate policy-oriented written work to be published through the Center and other venues such as law journals. The Fellow will also assist with projects relating to the Center’s programs, including organizing conferences and other events, and public education and outreach efforts. Efforts will be made to match project assignments with the Fellow’s interest.
Candidates should possess a J.D.; a strong academic record; excellent analytical and writing skills; a demonstrated interest and background in energy, sustainability or environmental law and policy; and admission to the LL.M. program at West Virginia University College of Law (application for LL.M. admission can occur concurrently with the fellowship application).
Applicants should apply to Samatha.Stefanov@mail.wvu.edu. Please submit a letter discussing qualifications and interests, a resume, a law school transcript, a recent writing sample and contact information for three references.
We are now accepting applications. The application deadline is June 30, 2014(concurrent with the deadline for admission to the LL.M. program) or until the post is filled.
Visit our website at http://energy.law.wvu.edu/ for more information about our programs.
West Virginia University College of Law is an equal opportunity employer and has a special interest in enriching its intellectual environment through further diversifying the range of perspectives represented by its faculty and teaching staff.
Tuesday, June 17, 2014
A new poll, conducted by Greenberg Quinlan Rosner Research, suggests that the desire for new Wall Street regulations has not been maximized by candidates for political office. Here are some of the poll's key findings. The release about the poll states:
A strong, bipartisan majority of likely 2014 voters support stricter federal regulations on the way banks and other financial institutions conduct their business. Voters want accountability and do not want Wall Street pretending to police themselves: they want real cops back on the Wall Street beat enforcing the law.
As evidence, the release notes that David Brat's upset win over Eric Cantor in the Virginia 7th District Republican primary, may have been related to Brat's attack on Wall Street, sharing Brat's words from a radio interview: "The crooks up on Wall Street and some of the big banks — I'm pro-business, I'm just talking about the crooks — they didn't go to jail, they are on Eric's Rolodex."
The poll found that voters consider Wall Street and the large banks as "bad actors," with 64% saying, “the stock market is rigged for insiders and people who know how to manipulate the system.” Another 60% want “stricter regulation on the way banks and other financial institutions conduct their business.” Finally,
Voters believe another crash is likely and that regulation can help prevent another disaster. An 83 percent majority of voters believe another crash is likely within the next 10 years, and 43 percent very likely. Another 55 percent, however, agree “Stronger rules on Wall Street and big financial institutions by the federal government will help prevent another financial collapse.”
I don't doubt that voters believe this, but I also don't think this poll data will lead to much (if any) significant change. I concede the poll shows that the issue resonates with voters, but I think Brat's quote shows where the wiggle room is (and perhaps how other astute Republicans, particularly, may use the issue in their races). That is, I think the majority of Americans are "pro-business" and anti-crooks. That's not news. When it comes time to vote on new regulation, though, I expected Mr. Brat (should he win the election) would find that the proposals before him would only "hurt business" and "not punish crooks."
I could be wrong, of course, but I doubt it. Like "energy independence" and "good schools," I think this poll shows us another one of those issues where voters care more about hearing that the system needs to be fixed rather than an issue where voters will be keeping score to see if progress is made.
Tuesday, June 10, 2014
A few weeks ago, Tim Carney wrote a piece in the Washington Examiner that is stuck in my mind. The piece titled Conservatives, big government and the duty to care for the poor discusses what Carney sees as a shift in the rhetoric conservatives are using in reference to the poor and other vulnerable populations. Carney notes tha Senate Minority Leader Mitch McConnell (R-KY) recently referenced a “shared responsibility for the weak.” Carney continues:
Step away from policy debates and think about that phrase. Do you have a responsibility to help the weak? Do you have a responsibility to feed the hungry? To aid the poor?
I think I do. I think everyone does. The Catholic Church teaches us we do.
Conservatives sometimes shy away from this idea, though. One reason is a strong (and overblown) distaste to "helping the lazy." Another reason is that conservatives fear it implies the Left’s answer: big federal programs.
But, in fact, you can grant that you have a duty to the poor and the weak, and then have a really good debate:
Is that duty individual, or some sort of a communal duty?
Does the government have the legitimate right to transfer wealth to satisfy that duty, or is it solely an individual responsibility to fulfill that duty.
If aiding the poor is a legitimate government role, at what level is the aid appropriately delivered — local, state, federal?
I really don't see this as a new debate, but I agree it is a shift from the poverty debate I have seen over the past decade or so. This shift, though, goes back (at least) to the debates of what I remember in the 1980s and early 1990s. The question then, as I recall my vigorous (sometimes informed) college and early career discussions, was not whether the poor needed help. The question was how best to provide that help. (I'll note that even then, conservatives were likely to call me liberal, and liberals often called me conservative. Some things remain the same, I guess.)
Carney frames the conversation appropriately, and asks the right questions because it starts with the right assumption: that helping the poor is required. He notes:
Then there’s plenty of very practical debates: Are federal programs inevitably too bloated and inflexible? Or alternatively, maybe only the federal government has the economies of scale (and ability to make its own money) needed to run a safety net, particularly in economic downturns.
So, what does this have to do with business law? Well, in part, if we agree there is a duty, we must talk about whose duty it is. Is it individual? Is it a communal governmental duty? A communal non-governmental duty? Is it a duty of all people, including corporate persons? To what extent?
Further, the role of government in protecting the weak extends beyond poverty programs. It applies to securities regulation, environmental regulation, and tax policy, all of which are directly, or at least very closely, related to business law. In all of these cases, I think the question of the poverty debate carries through: how do we carry out, as Sen. McConnell put it, our “shared responsibility for the weak?”
The conversation that follows that question is a good one because it does not reduce all arguments to some version of "caveat emptor" or only the "government/market will fix it." Instead, the questions can be, for example: Does less regulation increase risks to vulnerable parties or increase access to opportunities for such parties? If the answer is both, as it often is, how do we balance those risks and opportunities?
The market is often the best solution, but one still needs to explain why that's true, rather than blindly relying on some amorphous, all-knowing "market." And as those of us who work closely with regulated industries know, we need to acknowledge that all markets have rules (public and/or private), and those rules impact how effective that market will be and for whom. As such, the poverty debate is also largely a regulatory debate. In all cases, if we start in the right place, better policy is likely to follow.
Tuesday, June 3, 2014
The Louisiana Supreme Court recently denied the state's attempt to collect sales tax on the sale of an RV to a Montana LLC. Thomas v. Bridges, No. 2013-C-1855 (La. 2014). The LLC was formed for the sole purpose of avoiding RV sales tax (saving the buyer as much as $47,000). The state argued that the LLC veil should be pierced and the tax should be assessed to the LLC's sole member claiming fraud. The court disagreed, explaining that "taking actions to avoid sales tax does not constitute fraud. Although tax evasion is illegal, tax avoidance is not."
There were problems with the state's attempt from the outset. First, the sale occurred in Louisiana, but the RV was housed in Mississippi. Even if the LLC were to be disregarded, Mississippi, it seems to me, would be the state that should be asserting the claim. Second, the state attempted to collect from the LLC's member before ever trying to collect from the LLC. Thus, the veil-piercing claim was being used as a post hoc justification for the attempt to recover from the LLC's member and was not properly raised below.
This "legal loophole" (which is redundant because if it's a loophole, it's legal and if not, it's fraud), can be fixed by legislation, as Justice Guidry concurred,
While I concur in the majority analysis and result, I write additionally to encourage the legislature to revisit this area of the law on foreign limited liability corporations formed solely for the purpose of sales tax avoidance on purchases made in Louisiana. As the facts of this case suggest, the law may be susceptible to abuse.
Justice Clark's concurrence goes a step further:
Because I see no actual violation of the letter of the law in this matter, I concur with the result reached by the majority. However, I am concerned that the spirit of the law is not being protected. The potential for abuse in allowing the creation of sham entities to avoid the payment of taxes has policy implications that are worthy of the legislature’s attention.
I agree with Justice Guidry, but I think Justice Clark goes too far. I just don't see this as a sham entity. It does seem a bit shady, I admit, but shady does not equal a sham. The entity here is a tax avoidance vehicle, but the entity is real, and the entity was apparently properly formed. There was no allegation that the entity was not real, not disclosed, or otherwise used to perpetrate fraud. There are other ways to try to ensure taxes are paid in a state where the RV is housed. (As a side note, though, one should always be sure to make it very clear that one is signing for the entity and not in one's individual capacity.)
And like the competition for entity formation, states often compete for business in a variety of ways. Maine, for example, has long-term leasing for trailers, including 8-, 12-, 20- and 25-year terms, that latter of which requires registration of at least 30,000 trailers.
Other states choose to charge annual personal property taxes on vehicles like my home state of West Virginia. Similarly, the State of Virginia assesses personal property tax on vehicles kept by non-residents in the state, as long as the tax is paid somewhere:
Any person domiciled in another state, whose motor vehicle is principally garaged or parked in this Commonwealth during the tax year, shall not be subject to a personal property tax on such vehicle upon a showing of sufficient evidence that such person has paid a personal property tax on the vehicle in the state in which he is domiciled.
It seems Montana is using entity law to make a few dollars on state LLC formations, but that the benefit will likely be short lived. I would expect many states will respond to reduce the effectiveness of this behavior. The more interesting response, though, would be if Montana were to pass an annual RV property tax on entities (not individuals) that own such vehicles. Montana natural persons, of course, don't need entities to avoid RV sales tax, so the tax would only (or mostly) impact out-of-state individuals who would have to pay taxes for their Montana entity. Because these nonresidents can't vote in the state, it would be hard for these folks to raise too much of a ruckus.
Whether it is Montana or the location the RV is stored, the loopholes may start to close quickly. That, though, is a cost of doing business, even if the only business the entity tries to conduct is tax avoidance.
Tuesday, May 27, 2014
A New York Times article this weekend explained that many U.S. Supreme Court decisions are altered after they have been published, sometimes quickly and other times much later. Article author Adam Liptak explains:
The Supreme Court has been quietly revising its decisions years after they were issued, altering the law of the land without public notice. The revisions include “truly substantive changes in factual statements and legal reasoning,” said Richard J. Lazarus, a law professor at Harvard and the author of a new study examining the phenomenon.
The court can act quickly, as when Justice Antonin Scalia last month corrected an embarrassing error in a dissent in a case involving the Environmental Protection Agency.
But most changes are neither prompt nor publicized, and the court’s secretive editing process has led judges and law professors astray, causing them to rely on passages that were later scrubbed from the official record.
I have followed this particular change because of my interest in the EPA case, but I suspect this article is the first many people had heard of it. It makes some sense that articles would be fixed before going to final print, but the idea that opinions have been changed years later is rather remarkable to me, especially without some sort of formal notice. Now that we all know they can go back and fix opinions, though, I have one I’d like the court to revisit.
In 1992, the court heard Quill v. North Dakota, 504 U.S. 298, deciding that a state may not impose a tax collection obligation on a business that lacks a physical presence in the state. The court noted, though, that Congress could change that reality with legislation. In Quill, in declining to apply a bright-line rule, the court referred to an energy law case, Public Utils. Comm’n of R.I. v. Attleboro Steam & Elec. Co., 273 U.S. 83 (1927).
In Attleboro, that Court determined that a Rhode Island Commission order allowing an electricity seller to increase its price in a wholesale electric requirements contract between a Rhode Island utility (seller) and a Massachusetts utility (buyer) “place[d] a direct burden upon interstate commerce.” Id. at 84. The Court stated that neither state could regulate the interstate transaction because such regulation was only permissible at the federal level. This decision led Congress to pass the Federal Power Act (FPA), which was created (in part) to close what was dubbed the “Attleboro Gap.”
The U.S. Supreme Court has confirmed this more than once:
[T]he original FPA did a great deal more than close the gap in state power identified in Attleboro. The FPA authorized federal regulation not only of wholesale sales that had been beyond the reach of state power, but also the regulation of wholesale sales that had been previously subject to state regulation.”
New York v. FERC, 535 U.S. 1, 20-21 (2002) (citing Attleboro).
Similarly, in another case, the Court stated that the FPA
intended to “fill the gap”—the phrase is repeated many times in the hearings, congressional debates and contemporary literature—left by Attleboro in utility regulation. Congress interpreted that case as prohibiting state control of wholesale rates in interstate commerce for resale, and so armed the Federal Power Commission with precisely that power.
United States v. Public Utils. Comm’n of Cal., 345 U.S. 295, 307-08 (1953). (For a detailed description of Attleboro’s history, see Frank R. Lindh & Thomas W. Bone Jr.’s Energy Law Journal article, State Jurisdiction Over Distributed Generators (pdf here).
Returning to the Quill case, there Court stated:
Attleboro distinguished between state regulation of wholesale sales of electricity, which was constitutional as an "indirect" regulation of interstate commerce, and state regulation of retail sales of electricity, which was unconstitutional as a "direct regulation" of commerce.
Id. at 317. As I see it, this statement is wrong, though I admit I find this exerpt useful for getting students to discuss these concepts in Energy Law. Again, Attelboro held that direct regulation of retail sales was permissible, but that the regulation of interstate wholesale rates was not permissible by either state. As the cases above show, Quill did not change the state of the law, but Quill still mischaraterizes the law of Attleboro. So, this is my request: Should any Supreme Court Justices or their clerks (or others who can help) be reading the Business Law Prof Blog, please consider putting pen to paper and cleaning up Quill. Or, as Oscar Rogers likes to say, "Fix it!"
Tuesday, May 20, 2014
The New York Times ran two articles this week about administrator and executive pay that struck a chord with me. One piece was about a new report linking student debt and highly paid university leaders. The article discusses a study, “The One Percent at State U: How University Presidents Profit from Rising Student Debt and Low-Wage Faculty Labor.” The study reviewed “the relationship between executive pay, student debt and low-wage faculty labor at the 25 top-paying public universities.”
Then-Ohio State President E. Gordon Gee was the highest-paid public university president for the time period review. The study found that
Ohio State was No. 1 on the list of what it called the most unequal public universities. The report found that from fiscal 2010 to fiscal 2012, Ohio State paid Mr. Gee a total of $5.9 million. [$2.95 million per year.] During the same period, it said, the university hired 670 new administrators, 498 contingent and part-time faculty — and 45 permanent faculty members. Student debt at Ohio State grew 23 percent faster than the national average during that time, the report found.
[In the interest of full disclosure, I should note that President Gee is the president of my institution, for the second time, and he’s my neighbor. He also makes considerably less money here.]
The other article was about the health care industry, titled: Medicine’s Top Earners Are Not the M.D.s. That article reports that doctors, “the most highly trained members in the industry’s work force,” are in the middle of the pay scale for medical salaries. The article explains:
That is because the biggest bucks are currently earned not through the delivery of care, but from overseeing the business of medicine.
The base pay of insurance executives, hospital executives and even hospital administrators often far outstrips doctors’ salaries, according to an analysis performed for The New York Times by Compdata Surveys: $584,000 on average for an insurance chief executive officer, $386,000 for a hospital C.E.O. and $237,000 for a hospital administrator, compared with $306,000 for a surgeon and $185,000 for a general doctor.
And those numbers almost certainly understate the payment gap, since top executives frequently earn the bulk of their income in nonsalary compensation.
Is there a place where it isn't the case that administrators make more than those actually carrying out the endeavor? Maybe sports and entertainment, to a degree. There has been a significant change in those areas over the past 30 or so years. Owners (and production entities) often still make tons of money, but top player salaries often dwarf those of key executives, coaches, and managers. That was not always the case. Take the NBA for example. The average NBA salary in 1970 was $35,000 (equal to about $207,000 today.) Today’s average salary: $5 million. Actors and musicians take home a lot more than they used to, also, at least among those at the top.
I am not one to bash educational administrators. I have been one, so that may be part of it, but even before that, I appreciated that there are things that need to happen to deliver the full educational experience that are not part of the classroom. Still, it also seems that the number of people who are there to support the delivery of services, like education and medicine, continue to grow at an absurd rate. Even counting contingent and part-time faculty, Ohio State hired more than 1.23 new administrators for every new teacher in the test period.
Law faculty members can legitimately disagree about the best way to educate law students. But our goal should be to provide the best education we can, within the cost constraints we face. If professors at some law schools don’t take that responsibility seriously, we might lose students to schools focusing more on enrollment than education. If so, it’s sad for the profession, but at least we’ll go down fighting for what we know is right.
The same is true at the administrative level in law schools. We should commit to allocating resources to administrative support that supports the educational process of preparing students for practice and for ensuring students actually get to practice, if that is what they seek. This is often true for areas like career services, bar passage, and experiential learning. We should be educating students to be able to be good lawyers and sound professionals, but we also need to help ensure they have things they need to practice (e.g., bar admission) and the ability to practice (i.e., a job).
Sometimes that means new administrators in new or expanded roles, but that may mean reallocating resources from one area to another rather than adding new roles. The challenge, of course, is knowing whether the new administrative hires are delivering services that our students need or are they jobs that are serving the institution at the expense of our students. All institutions need to make a serious attempt to answer that question because it's not just about the number of administrators. It's also about what those administrators do.
Doing what’s right for our students is not always the same as doing what they want. Still, as faculty and administrators, we also need to be clear that doing what we want is often not the same as doing what is best for our students.
Wednesday, May 14, 2014
Before I went to law school, I worked in the video game industry, first for the industry trade association, the Interactive Digital Software Association (now known as the Entertainment Software Association). From there I moved to public relations for the public relations firm Golin/Harris in Los Angeles where my work was focused on product launches for Nintendo. (This was from 1998-2000.) In those jobs, I had the chance to work with some amazing people (and clients), and the experience has served me well, even as I went on to become a lawyer and professor.
One of those people was the managing director of the Los Angeles Golin/Harris office when I was hired, Fred Cook, who is now the CEO of Golin/Harris. Fred recently wrote a book that has caught the attention of the business world and is a top-25 book for corporate customers according to 800-CEO-READ. His book is Improvise: Unconventional Career Advice from an Unlikely CEO, and it’s worth a look.
Here’s an excerpt:
People entering the business world today are a commodity. They’ve gone to the same schools, taken the same courses, read the same books, and watched the same movies. Every summer they’ve dutifully worked at internships in their chosen field in hopes of landing the perfect job the day they graduate from college.
. . . .
While a college education is a prerequisite for most jobs, a life education should also be required. School delivers information. Life delivers ideas. Ideas that drive business. Twitter was an idea. Red Bull was an idea. South Park was an idea.
When I participate on industry panels, someone in the audience always asks what attributes make for a successful employee. My fellow panelists rightly answer that they’re looking for skilled writers, articulate communicators, and aggressive self-starters. My response? I would trade ten of the above for one person with a big idea. But brilliant ideas aren’t created in a vacuum. They’re formed by the experiences we have and the people we meet.
As usual, what Fred is talking about here is broader than just business or public relations. It applies to business lawyers, and non-business lawyers, and law professors, and pretty much everyone else who has a life to live and goals for a fulfilling career. We all have the chance to find our passion, if we’re willing to live, take chances, and find out what we are capable of doing.
Fred’s unique path to being a CEO is rather similar to my path to becoming a law professor in that it would be reasonable to call me an “unlikely law professor.” I was a mostly terrible undergraduate student at three major universities, and I did not go to a top-14 law school. I did well in law school (and practice) and that made it such that when I went on the job market a leading business law academic told me that my candidacy was “plausible.” And so it was. Fred is an unlikely CEO, perhaps, but he is most certainly an appropriate one. I like to think the same is true for me in my role.
My life experiences helped me in practice and helped me get my job as a law professor, and those experiences continue to help me as a lawyer, a scholar, and a teacher. By having had a career outside the law, I have additional experiences that inform my thinking about the law and the legal profession. I know (among other things) what it means to hire and fire people, make media calls, and schedule caterers for huge events. Of course, lawyers can do these things, too, but it’s different as a lawyer.
Beyond that, the people you meet along the way inform you, and guide you, and help you see the kind of person you want to be. I’m thankful for the large number of good people who have been a part of my work-life experience so far, and Fred is one of those people. I’m glad he has written a book that will share some of his insight with a much broader audience. Check it out.