Friday, February 20, 2015

Did Wal-Mart Prove Me Wrong? Do Boycotts Work?

I have just finished a draft of an article arguing that disclosures don’t work because consumers and investors don’t read them, can’t understand them, don't take any real action when they do pay attention to them, and fail to change corporate behavior when they do threaten boycott. I specifically pointed out the relative lack of success of consumer protests over the years. I also noted that Wal-Mart continues to get bad press for how it treats its employees despite the fact the Norwegian Pension Fund divested hundreds of millions of dollars due to the company’s labor practices, prompting other governments and cities to follow. My thesis—it takes a lot more than divestment and threats of boycott to change company behavior. But perhaps I’m wrong. Yesterday, Wal-Mart CEO Doug McMillon announced a significant wage increase declaring:

We’re strengthening investments in our people to engage and inspire them to deliver superior customer experiences… We will earn the trust of all Walmart stakeholders by operating great retail businesses, ensuring world-class compliance, and doing good in the world through social and environmental programs in our communities.

The letter to Wal-Mart associates is here. I don’t know which was more striking, the $1 billion dollar move to $9 and then eventually $10 per hour or the fact that he used the word “stakeholders.” Wal-Mart also announced changes that would affect health insurance and shift scheduling, but the main headline concerned the wage hike. Main Street may be happy but Wall Street was not, and the stock price fell after the announcement. Others pointed out that the pay raise is still not enough to pull workers out of poverty.

Does this move mean that boycotts and advocacy really do work and that we will see more of them? Do I have to edit my article or will this be an anomaly? Will other big retailers or fast food chains follow? Will socially responsible investors reinvest in Wal-Mart? Is Wal-Mart trying to pre-empt government regulation on the minimum wage? Is Wal-Mart signaling to regulators in foreign countries that it cares about workers so should be allowed to operate there more freely? 

I will be teaching a course in transnational business and international human rights in the Fall and Wal-Mart will be a case study. A few years ago, I used the company’s CSR report in my corporate governance, compliance, and social responsibility seminar.  I asked the students to consider why Wal-Mart’s report looked and felt so different from Target’s, which essentially has many of the same labor issues. I wanted them to think about the marketing behind CSR from a reputational and regulatory perspective. I posited that Wal-Mart’s CSR report was written for regulators. Two weeks later, the company announced its massive and still ongoing bribery investigation. I’m happy for the workers but a bit curious as to what caused the company to make this announcement now. In the meantime, I will be watching the reaction from advocates, the markets, and other companies closely.  

February 20, 2015 in Corporate Governance, Corporations, CSR, Current Affairs, Ethics, Financial Markets, International Business, Marcia Narine, Teaching | Permalink | Comments (3)

Moultrie on Legal Employment

Joan Heminway and I must be thinking similar thoughts because before I even saw her helpful post on business law jobs, I asked my former research assistant Samuel Moultrie to share his thoughts and advice on finding legal employment in this economic environment.

Sam is one of the hardest workers I know and took his job search seriously. He also took a big risk by going beyond the typical employers we had recruiting on campus when we were at Regent Law – mostly non-profits, government agencies, and a few VA and NC law firms. Sam wanted to practice in the state that has the greatest influence on U.S. corporate law and has made it happen. His journey was not and is not easy, but I thought his story might be inspiring. Recently, Sam was also selected as a 2015 Leadership Delaware Fellow. Sam’s thoughts on finding legal employment are reproduced below. 

-----------------------------------

By: Samuel L. Moultrie

The job market for recent law school graduates is, without a doubt, miserable.  While the statistics seem to vary, I think it is safe to say that the supply of new law school graduates exceeds the number of legal job openings.  Nevertheless, graduates should not lose all hope.  Any law school graduate can find a job, if they are motivated, willing to work hard, and take steps to distinguish themselves. 

[More after the break]

Continue reading

February 20, 2015 in Business Associations, Delaware, Haskell Murray, Jobs | Permalink | Comments (0)

Wednesday, February 18, 2015

Updated Social Enterprise Map

My colleague at Georgia State, Cass Brewer, posted on SOCENT (social enterprise) Law, an update to his incredibly useful social enterprise map.  On this blog and in other fora, I have discussed with many of you teaching BA whether you cover social enterprises and, if so, to what extent.  This is a great resource if you do anything in the area.  

How cool is this?

 

-Anne Tucker

February 18, 2015 in Business Associations, Anne Tucker, Social Enterprise | Permalink | Comments (0)

GSU Low Income Taxpayer Clinic Faculty Recruitment

Georgia State University College of Law located in Atlanta, Georgia is recruiting for a new faculty member to join the Phillip C. Cook Low Income Taxpayer Clinic.    As leadership in the clinic are looking to transition the new hire will likely serve as the Director of the clinic given the experience level of the candidate.  The clinic is funded by the IRS, private donors and the university so it is a secure job line.  We are posting this announcement out of cycle and the position will remain open until filled which means that recruitment may likely extend through next fall. The Committee is interested in lateral applicants, those pursuing training in clinical education and individuals with significant tax practice experience who may be new to clinical teaching.  The job posting is available here

-Anne Tucker

February 18, 2015 | Permalink | Comments (0)

Tuesday, February 17, 2015

Look it Up: The Value of Google (or Bing or Yahoo)

The internet age has brought tremendous access to information.  As kids, many of us were used to the familiar refrain from our parents, "Go look it up."  That meant getting out a dictionary or the Encyclopedia Britannica (volumes of books) to see if we could figure out unique facts about the Tasmanian Devil (my fourth-grade report subject), which is "the world's largest carnivorous marsupial."   Things have changed.

Today, telling someone to look it up means a trip to the computer, and probably Google, Bing, Yahoo or some other search engine.  Maybe it could mean a news service like the New York Times, and of course Westlaw, LexisNexis, or Bloomberg for legal issues. If I needed any evidence things have changed for all of us, I recently asked my nine-year-old son to put the "word book" he got out to help with his homework. He looked at me and asked, "You mean the dictionary?"  Um, yeah.  

Anyway, with all this information at our fingertips, I am regularly amazed how often I could tell people to, "Look it up."  Students regularly ask me questions that they could easily look up themselves, and it happens with colleagues or vendors, too. I have always liked finding the answers to questions, so it usually doesn't bother me much. I like to be the source of information.  But when it's really easy to find -- as in "What's the population of  West Virginia?" -- it's a little disappointing. 

In a time where people are often looking for an edge to make themselves more valuable to their employer, I suggest that people should be more inclined to look things up.  Try to save questions for times when you really need the help.   

February 17, 2015 in Joshua P. Fershee, Teaching | Permalink | Comments (2)

Monday, February 16, 2015

So . . . You Think You Want a Business Law Job . . . .

It may just be my students, but it seems there is a renewed interest in business law careers among law students.  Several of my students this year who had originally started down a path toward a career in another area of law have happily and passionately settled, somewhat late in the game, on being business lawyers.  Somehow, after taking Business Associations and other foundational business law courses, they've been bit by the business law bug.  And they are incredibly talented students--high up in their class in terms of rank and well worthy of employment in a firm or business or government.  One is my research assistant.

We have been working together and with the folks in our Career Center to identify relevant geographical and employer markets.  But I am seemingly engaged in a continuous struggle to help each of them (a) to enhance his resume to reflect his new-found business law passion (given that each already had accepted a second summer job somewhat or totally outside the business law area when he refocused on business law as a career path) and (b) to make the new connections that he needs to make in order to successfully pursue his revised career path.  How can a middle-aged academic almost 15 years out of practice help a 3L business law job-seeker to make his resume more relevant, his contact list deeper, and his interviews more effective?

Continue reading

February 16, 2015 in Business Associations, Joan Heminway, Jobs, Law School, Teaching | Permalink | Comments (6)

Two Quotes for Presidents' Day

Happy Presidents’ Day.

Sometimes, this holiday gets overlooked. In fact, it’s not even treated as a holiday by my university. Originally the Washington’s Birthday holiday, it was renamed and broadened to include other Presidents, primarily Lincoln, who also has a February birthday. This isn’t business law, but I think it’s important to remember the greatness of those two men. Compared to many of today’s politicians, their intelligence and integrity is astounding. Their voices remain relevant today.

Here, for your enjoyment, quotes from Washington and Lincoln:

George Washington:

If benefits have resulted to our country from these services, let it always be remembered to your praise, and as an instructive example in our annals, that under circumstances in which the passions, agitated in every direction, were liable to mislead, amidst appearances sometimes dubious, vicissitudes of fortune often discouraging, in situations in which not unfrequently want of success has countenanced the spirit of criticism, the constancy of your support was the essential prop of the efforts, and a guarantee of the plans by which they were effected. Profoundly penetrated with this idea, I shall carry it with me to my grave, as a strong incitement to unceasing vows that heaven may continue to you the choicest tokens of its beneficence; that your union and brotherly affection may be perpetual; that the free Constitution, which is the work of your hands, may be sacredly maintained; that its administration in every department may be stamped with wisdom and virtue; that, in fine, the happiness of the people of these States, under the auspices of liberty, may be made complete by so careful a preservation and so prudent a use of this blessing as will acquire to them the glory of recommending it to the applause, the affection, and adoption of every nation which is yet a stranger to it.

This is from Washington’s Farewell Address. The full text is available here.

Abraham Lincoln

The brave men, living and dead, who struggled here, have consecrated it, far above our poor power to add or detract. The world will little note, nor long remember what we say here, but it can never forget what they did here. It is for us the living, rather, to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced. It is rather for us to be here dedicated to the great task remaining before us -- that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion -- that we here highly resolve that these dead shall not have died in vain -- that this nation, under God, shall have a new birth of freedom -- and that government of the people, by the people, for the people, shall not perish from the earth.

This is from the Gettysburg Address. The full text (in its many versions) is available here.

February 16, 2015 in C. Steven Bradford | Permalink | Comments (1)

Sunday, February 15, 2015

ICYMI: Tweets From the Week (Feb. 15, 2015)

February 15, 2015 in Stefan J. Padfield | Permalink | Comments (0)

Saturday, February 14, 2015

Cynical Me

The news this week in shareholder rights is that GE joined the list of companies that have voluntarily enacted their own bylaws permitting large shareholders to nominate directors to be included on the company proxy.  

GE's action comes in the midst of a publicly-announced campaign by the New York City Comptroller to gather support for shareholder-enacted bylaws that would do roughly the same thing.  (And a very ugly battle over such bylaws at Whole Foods, as Marcia previously posted.)

In that context, GE’s move seems like something of a Trojan horse.  By enacting its own bylaw, GE preempts any attempts by shareholders to do so.  Meanwhile, because the bylaw is director-enacted, GE can yank it at any time – like, if it feels there’s a coherent movement that threatens the current board’s dominance.  In fact, this strategy was recently on display when Rupert Murdoch announced an unsolicited takeover of Time Warner.  The first thing Time Warner’s board did was to repeal a director-enacted bylaw that permitted shareholders to call special meetings.

As a result, I’m not quite yet ready to call this a great win for shareholder democracy.

February 14, 2015 in Ann Lipton | Permalink | Comments (1)

Friday, February 13, 2015

Law Schools and Employment Data

As one of Belmont University’s pre-law advisors, I have been getting an increasing number of e-mails from law school representatives across the country who are trying to recruit our students. One thing that I have been pushing for is better employment data. For the most part, the law school representatives simply send me the ABA required data, which I can already find on my own. 

The ABA required data is somewhat helpful to me as an advisor, but the data is insufficient. We really need better salary data and complete (or near complete) employer/job title lists. Longitudinal studies, though difficult to do well, might be interesting.  

The ABA required data tells us how many of a law school's graduates for a given year are employed in law firm jobs, judicial clerkships, government, public interest work, etc. The ABA data does not distinguish between an associate attorney position (~$160,000 + prestige + career mobility) and a staff attorney position (~$50,000 + no prestige + dead end, in most cases) at the same large firm - assuming both are full-time, long-term positions, which they can be. While I readily admit that salary is often not the most important part of a job, when prospective law students are considering taking out $100,000+ in loans, they do need to think about how they are going to pay it all back. 

On the job title side, a management track job in a bank is a good bit different than working as a teller at that same bank. On the employer side, some small law firms are prestigious boutiques and others are akin to hanging your own shingle; if you had the employer names, you could look them up and uncover the type of work they do and their reputation.  

I applaud The University of Michigan Law School for their employer list. According to the list, none of their graduates, over three years, opted out of the list. Only 7 out of over 1000 employment outcomes were unknown. Other schools have provided me with employer lists, but those lists are usually very incomplete, cherry-picked lists. I am not sure how Michigan pulled together this complete of a data set, but other law schools should ask and attempt to replicate.

Add more complete salary data--could we get 75+% reporting?--to an employer list like Michigan’s and prospective students would have a much better look at their likely employment outcomes. (Michigan actually does have over 75% reporting salaries, but many schools are well under 50% reporting). Law School Transparency has been pushing for and organizing some of this data, but we can all join in the attempt to obtain even better employment data so that prospective law students can make more informed decisions. 

February 13, 2015 in Haskell Murray, Jobs, Law School | Permalink | Comments (0)

Thursday, February 12, 2015

“We Just Can’t Get Enough of Business Associations”

My seventy business associations students work in law firms on group projects. Law students, unlike business students, don’t particularly like group work at first, even though it requires them to use the skills they will need most as lawyers—the abilities to negotiate, influence, listen, and compromise. Today, as they were doing their group work on buy-sell agreements for an LLC, I started drafting today’s blog post in which I intended to comment on co-blogger Joan Heminway’s post earlier this week about our presentation at Emory on teaching transactional law.

While I was drafting the post, I saw, ironically, an article featuring Professor Michelle Harner, the author of the very exercise that my students were working on. The article discussed various law school programs that were attempting to instill business skills in today’s law students. Most of the schools were training “practice ready” lawyers for big law firms and corporations. I have a different goal. My students will be like most US law school graduates and will work in firms of ten lawyers or less. If they do transactional work, it will likely be for small businesses.  Accordingly, despite my BigLaw and in-house background, I try to focus a lot of the class discussion and group work on what they will see in their real world.

I realized midway through the time allotted in today’s class that the students were spending so much time parsing through the Delaware LLC statute and arguing about proposed changes to the operating agreement in the exercise that they would never finish in time. I announced to the class that they could leave 10 minutes early because they would need to spend at least another hour over the next day finishing their work. Instead most of the class stayed well past the end of class time arguing about provisions, thinking about negotiation tactics with the various members of the LLC, and figuring out which rules were mandatory and which were default. When I told them that they actually needed to vacate the room so another class could enter, a student said, “we just can’t get enough of business associations.” While this comment was meant to be a joke, I couldn’t help but be gratified by the passion that the students displayed while doing this in-class project.  I have always believed that students learn best by doing something related to the statutes rather than reading the dry words crafted by legislators.  My civil procedure students have told me that they feel “advanced” now that they have drafted complaints, answers, and client memos about Rule 15 amendments.

I am certainly no expert on how to engage law students, but I do recommend reading the article that Joan posted, and indeed the whole journal (15 Transactions: Tenn. J. Bus. L. 547 (2014). Finally, please share any ideas you have on keeping students interested in the classroom and prepared for the clients that await them. 

 

February 12, 2015 in Business Associations, Business School, Conferences, Corporations, Delaware, Joan Heminway, Law School, LLCs, Marcia Narine, Negotiation, Teaching, Unincorporated Entities | Permalink | Comments (1)

Wednesday, February 11, 2015

Proxy Season: A Gendered View & A Book Recommendation

Andrew Ross Sorkin at the DealBook in his column, Do Activist Investors Target Women C.E.O.'s?, asked earlier this week  if the gender of the CEO influences the target of activist shareholders.  

Only 23 women lead companies in the Standard & Poor’s 500-stock index. Yet at least a quarter of them have fallen into the cross hairs of activist investors.

The article references Patricia Sellers observations in Fortune last month regarding corporate raider Nelson Peltz and his targeted attacks on PepsiCo lead by Indra Nooyi and Mondelez International lead by CEO Irene Rosenfeld as well as his current demands on DuPont, with Ellen Kullman as chairman and CEO.

In the absence of correlating data about female CEO's and weaker company performance, the question lingers is there something besides performance that prompts the targeting of these companies?  To explain the question the article references several studies that report perception differences in competence, risk and performance based solely on gender, with, women on the losing end of these perception biases.

As I think is a common tendency, I gravitate towards information that relates to what I am personally thinking about, experiencing or interested in at the moment.  Earlier on this blog, I wrote about gender issues in the classroom.  On my current reading list, is the book What Works for Women at Work written by Joan Williams and Rachel Dempsey, that (1) reviews the existing literature about pervasive gender bias, (2) articulates how unconscious bias influences outcomes (acknowledging that for the most part society has moved past explicit and overt gender discrimination), (3) identifies four patterns where these biases consistently emerge based in part on her interviews with 127 "successful" women, and (4) discusses how the workplace (meaning men and women) can move beyond the limitations of these implicit biases.  Several colleagues and friends are reading this book along with me as well.  And the best part:  not everyone reading the book is (and not everyone should be) a women.  

-Anne Tucker

February 11, 2015 in Anne Tucker, Corporate Governance, Corporations, Current Affairs | Permalink | Comments (2)

Tuesday, February 10, 2015

The Regulatory State: Fracking Bans and Proper Exercise of Local Control

Business law is filled with a wide range of regulation and regulatory issues, and one of the main areas of business law for my research is energy law.  Regulation impacts energy businesses at many levels. Energy companies have to deal land use regulations, air and water quality regulations, work place regulations, and (often) securities regulations.  

On the land use and permitting side of things, oil and gas law has long been considered primarily a state issue, making such regulations relatively local (i.e., not federal).  In recent years, with the increased use of high-volume hydraulic fracturing, many local governments have decided to restrict the process in their localities, splitting from state regulatory regimes that would allow the process. Interesting cases related to fracking bans from New York, Colorado, and Pennsylvania provide good examples of this process. 

Texas Professor David B. Spence’s article about local hydraulic fracturing bans: The Political Economy of Local Vetoes, 93 Texas L. Rev. 351 (2015), discusses the debate about whether local governments should be ale to overrule the state law on oil and gas operations.  Here's the abstract:

As the controversy over fracking continues to sweep the nation, many local communities have enacted ordinances banning the practice, creating conflicts between these ordinances and statewide regulation schemes. This has given rise to state–local preemption challenges within state courts. In this Article, Professor Spence analyzes these conflicts, focusing on the best way to distribute the costs and benefits of fracking and how courts have attempted to address these distributional concerns. He begins by describing the conflicts between state law and local ordinances and the court decisions that have resolved these preemption issues. He next discusses how future takings claims would affect the distribution of the costs and benefits of fracking.

I think Prof. Spence is right on a lot of the issues, though I have come to believe that, at least for most oil and gas issues, as long as state-level regulation is the primary regulation in the sector, whether localities have the ability to ban hydraulic fracturing in their jurisdictions is irrelevant.  That is, I see oil and gas as a state-level issue, and if state's have or wish to grant counties or municipalities local control, then great.  If the state chooses to maintain control, that's fine, too.  

My main concern is that legislators and regulators, and courts who review their decisions, seek sufficient information to balance the costs and benefits of oil and gas operations.  This is not an outcome driven analysis. That is, decision makers can, in my view, properly assess the costs and benefits of the hydraulic fracturing process and have different outcomes (such as one court upholding a ban and another striking a ban).  But one must gather information and assess the broader range of issues raised by oil and gas operations, which are not that different from many other industrial operations, as I have argued previously, here.

I'll close with a shameless plug for my response to Prof. Spence's article, which appears in Texas Law Review See Also, along with responses from two outstanding scholars: Alexandra Klass  (Fracking and the Public Trust Doctrine: A Response to Spence) and Hannah Wiseman  (Governing Fracking from the Ground Up).  I highly recommend these three pieces, and if you want more, you can check out mine.  

Here's my abstract for How Local is Local?: A Response to Professor David B. Spence's the Political Economy of Local Vetoes:

Abstract:      

Professor Fershee responds to Professor David B. Spence’s article about local hydraulic fracturing bans: The Political Economy of Local Vetoes, 93 Texas L. Rev. 351 (2015). Professor Spence notes that the shale oil and gas debate provides an example of “an age-old political problem that the law is called upon to solve: the conflict between an intensely held minority viewpoint and a less intense, contrary view held by the majority.” In resolving such conflicts, Spence suggests that courts should resolve such “conflicts in ways that encourage states and local governments to regulate in ways that weigh both the costs and the benefits of shale oil and gas production fairly and fully.” 

This Response suggests the Professor Spence’s test for local control is a sound, but adds another factor contributing to local control. As noted above, another way of considering local control over oil and gas operations is to view local control as state-level control. This Response proceeds under the premise that each state should decide whether it wishes to allow its municipalities to exercise oil and gas related vetoes. In analyzing whether local vetoes are efficient under Professor Spence’s test, this article analyzes recent decisions in New York, Pennsylvania, and Colorado. 

This Response concludes that as long as state-level regulation is the primary basis for oil and gas regulation, Professor Spence’s overarching rule that state and local governments pursue regulations seeking to balance the costs and the benefits of shale oil and gas production “fairly and fully” is a foundation for good regulation. In this sense, local (meaning state or smaller subdivisions) vetoes are critical, but how “local” the vetoes are is less important. The key, then, is ensuring that courts and regulators are actually balancing costs and benefits.

February 10, 2015 in Current Affairs, Joshua P. Fershee, Law and Economics | Permalink | Comments (0)

Monday, February 9, 2015

Hot Off the Press: Heminway and Narine on Teaching Business Law!

With Marcia's blessing, I am promoting a recently published transcript of a conference panel on which she and I presented last spring.  The title of the published transcript?  "Representing Entities: The Value of Teaching Students How to Draft Board Resolutions and Other Similar Documentation."  Here's the top line from the SSRN abstract:

This edited transcript comprises a panel presentation and related Q&A at "Educating the Transactional Lawyer of Tomorrow," Emory University School of Law's biennial transactional law conference held June 6-7, 2014. The transcript includes Professor Heminway's talk and a separate presentation by Professor Marcia Narine on "How to Make Transactional Law Less Terrifying and a Bit More Interesting." The panel, "Transactional Drafting: Beyond Contracts," features approaches to teaching transactional business law courses. 

Enjoy!

February 9, 2015 in Business Associations, Conferences, Corporate Governance, Corporations, Joan Heminway, Marcia Narine | Permalink | Comments (0)

Bringing Numbers into Business Law Courses

At last month’s meeting of the Association of American Law Schools, the Section on Agency, Partnership, LLCs, and Unincorporated Associations sponsored a program on “Bringing Numbers into Basic and Advanced Business Associations Courses: How and Why to Teach Accounting, Finance, and Tax.”

I, like many business law professors, believe that at least some basic knowledge of accounting and finance is necessary to really understand business associations, securities regulation, and other business law courses. Unfortunately, many of my students have not had any accounting or finance, and many law students’ eyes glaze over whenever they see numbers.

The AALS panelists’ discussion of how to teach quantitative concepts to law students is excellent. The podcast is now available on the AALS web site, but, it’s password-protected, so only AALS members can access it. The audio is low quality, but it’s definitely worth listening to if you have access. (It’s not easy to work your way through the list of podcasts on the AALS site, but the program was on Sunday, January 4, at 10:30-12:15.)

The problem business law professors face is similar to that faced by undergraduate departments in dealing with underprepared high school students—those who have insufficient math or reading skills, for example. Like those undergraduate departments, we’re forced to offer remedial lessons to students who really aren’t adequately prepared for law school. And, as anyone in those undergraduate departments will tell you, the ideal solution is not remedial courses. The ideal solution is to make sure those students are adequately prepared in the first place.

The ideal solution to the law school “numbers problem” is at the undergraduate level. No student should come to law school without some basic exposure to accounting. And accounting and other quantitative courses aren’t the only areas where some law students are deficient. Every student going to law school should have taken at least one course in

  • American government;
  • Political philosophy;
  • Accounting;
  • Microeconomics; and
  • Logic (both inductive and deductive).

In addition, law students should have taken at least one course, and preferably several, that required them to do extensive writing. Finally, in this day of globalism, a strong case could be made that students should have taken at least two years of a foreign language, although that obviously wouldn't be needed for most law school courses.

If students came to law school with a broad educational background like this, we could eliminate much of the remedial work. Law school courses could spend significantly less time on basic principles and much more time on legal applications and higher-level analysis.


February 9, 2015 | Permalink | Comments (1)

Sunday, February 8, 2015

ICYMI: Tweets From the Week (Feb. 8, 2015)

February 8, 2015 in Stefan J. Padfield | Permalink | Comments (0)

Saturday, February 7, 2015

Healthy Competition among Rating Agencies

In their new paper, Rating Agencies and Information Efficiency: Do Multiple Credit Ratings Pay Off?Stefan Morkoetter, Roman Stebler, and Simone Westerfeld  study whether it benefits investors to have more than one rating agency rate a particular security.

They find that when multiple rating agencies rate a particular tranche of a mortgage-backed security, not only is the initial rating more accurate, but the agencies devote more efforts to ongoing surveillance, increasing the accuracy of the rating over the life of the tranche.  They conclude that the increased efforts are traceable to a healthy competition among agencies; as the authors put it, “Since their activities are directly bench-marked to their peers’, rating agencies are induced to show more effort with regard to their monitoring obligations than observed for single-rated tranches.”

One of the reasons the paper is interesting is because Dodd Frank and the SEC implementing regulations impose new restrictions on conflicts of interest within credit ratings agencies, basically forbidding anyone from the business side from having any involvement with the ratings themselves.  In light of Morkoetter et al’s conclusions, I do have to wonder whether at least some business-side involvement with the ratings process creates a healthy sort of competition.

Morkoetter, Stebler, and Westerfeld also find that of the three major ratings agencies, Moody’s was consistently the most conservative both at issuance and over a tranche’s lifetime (which, they conclude, may be why Moody's has a very small market share of single-rated tranches).  That would certainly explain why S&P was first sued by DoJ (although Moody’s may be next), but it seems inconsistent with the allegation – offered by DoJ both in its complaint and in the stipulated facts in the S&P settlement – that S&P routinely relaxed its ratings criteria to be more like Moody’s. 

February 7, 2015 in Ann Lipton | Permalink | Comments (0)

Friday, February 6, 2015

Business Specialty Journals: Submission Webpage Links

My co-blogger Anne Tucker inspired me with her useful conference list this week, and led me to create a list of my own.

Just in time for law review submission season, below are links to the submission webpages for the top-15 “Corporations and Association” specialty law journals as ranked by Washington & Lee University. The starred journals were not included in the “Corporations and Associations” dropdown ranking, but I found them in the full list and placed them in their respective spots (according to the overall rankings). I am not sure Yale Journal on Regulation belongs in this grouping, but I will leave it in since W&L includes it. 

  1. Yale Journal on Regulation
  2. Harvard Business Law Review       
  3. The Journal of Corporation Law
  4. American Business Law Journal
  5. Delaware Journal of Corporate Law
  6. Columbia Business Law Review
  7. Berkeley Business Law Journal*
  8. University of Pennsylvania Journal of Business Law*
  9. Stanford Journal of Law, Business & Finance*
  10. Virginia Law & Business Review*
  11. The Hastings Business Law Journal*
  12. The Business Lawyer
  13. Fordham Journal of Corporate & Financial Law
  14. New York University Journal of Law & Business*
  15. Northwestern Journal of International Law & Business*

For what it is worth, I am not sold on the W&L law journal rankings. The list is included mainly for the links to the submission webpages, not for the ranking (though you may want to use the W&L rankings as one reference point since some schools consider it).

Hopefully these submission webpage links will be useful to some readers. I know not everyone has access to ExpressO (especially in business schools) and some of these journals do not follow the typical submission windows, so you will want to check the links if you are interested in these journals. For example, NYU Journal of Law & Business' spring submission window closes February 15, whereas many journals stay open deep in to March or April in the spring.  

February 6, 2015 in Business Associations, Law Reviews, Haskell Murray | Permalink | Comments (0)

Thursday, February 5, 2015

The SEC's Inaction on No Action

Many corporate governance professionals have been scratching their heads lately. In November, a federal judge in Delaware ruled that Wal-Mart had wrongfully excluded a shareholder proposal by Trinity Wall Street Church regarding the sale of guns and other products. Specifically, the proposal requested amendment of one of the Board Committee Charters to:

27. Provid[e] oversight concerning the formulation and implementation of, and the public reporting of the formulation and implementation of, policies and standards that determine whether or not the Company [i.e., Wal-Mart] should sell a product that:

1) especially endangers public safety and wellbeing;

2) has the substantial potential to impair the reputation of the Company; and/or

3) would reasonably be considered by many offensive to the family and community values integral to the Company's promotion of its brand. 

Wal-Mart filed with the SEC under Rule 14a-8 indicating that it planned to exclude the proposal under the ordinary business operations exclusion. The SEC agreed that there was a basis for exclusion under 14a-8(i)(7), but the District Court thought otherwise because the proposal related to a “sufficiently significant social policy.” In mid-January Wal-Mart appealed to the Third Circuit arguing among other things that the district court should have deferred to the SEC’s precedents and guidance over the past forty years on these issues.

In an unrelated but relevant matter in December 2014, the SEC issued a no action letter to Whole Foods stating:

You represent that matters to be voted on at the upcoming stockholders' meeting include a proposal sponsored by Whole Foods Market to amend Whole Foods Market's bylaws to allow any shareholder owning 9% or more of Whole Foods Market's common stock for five years to nominate candidates for election to the board and require Whole Foods Market to list such nominees with the board's nominees in Whole Foods Market's proxy statement. You indicate that the proposal and the proposal sponsored by Whole Foods Market directly conflict. You also indicate that inclusion of both proposals would present alternative and conflicting decisions for the stockholders and would create the potential for inconsistent and ambiguous results. Accordingly, we will not recommend enforcement action to the Commission if Whole Foods Market omits the proposal from its proxy materials in reliance on rule 14a-8(i)(9).

In a startling turn of events, the SEC withdrew its no action letter on January 16, 2015 after a January 9th letter from the Council of Institutional Investors questioning the reasoning in the Whole Foods and similar no action letters. The withdrawal of the no action letter came on the same day as the release an official SEC statement declining “to express a view on the application of Rule 14a-8(i)(9) during the current proxy season” due to questions about the scope and application of the rule.

Yesterday, the Center for Capital Market Competitiveness (“CCMC”), an arm of the Chamber of Commerce, sent its own letter to Chair White lamenting the current state of affairs. An excerpt is below:

This announcement, a contradictory departure from a decision made just weeks earlier, benefits neither issuers nor investors and introduces an additional layer of uncertainty into an already complicated set of rules. The CCMC believes this reversal underscores why corporate governance policies must provide certainty for all stakeholders, not just to advance the goals of a small minority of special interest activists….[t]he January 16 announcement places many issuers in an untenable position, and presents them with a series of questions for which there may be no good answers. For those issuers wishing to present their own alternative proposal to shareholders for consideration, do they exclude a shareholder proposal in favor of their own and face the heightened risk of litigation with the proponent or the Commission? Do they risk shareholder confusion by including both their own proposal and a competing one from a proponent? Do they incur the added expense and distraction to management of seeking declaratory relief in federal district court? Are shareholders deprived of their right to include a proposal that is omitted because of the absence of SEC action? Far from encouraging private ordering, the recent announcement will only serve to stymie it.

The CCMC also recommends a review of the entire 14a-8 process because, as the letter claims,  “it is well-known that the shareholder proposal process has been dominated by a small group of special interest activists, including groups affiliated with organized labor, certain religious orders, social and public policy advocates, and a handful of serial activists. These special interests use the shareholder proposal process to pursue their own idiosyncratic agendas, often far removed from the mainstream, as evidenced by the overall low approval rates of many shareholder proposals that are put to a vote. Indeed, mainstream institutional investors account for only one percent of shareholder proposals at the Fortune 250.” 

Reasonable people may disagree on how the CCMC characterizes the motives behind the shareholder proposals, but there can be no disagreement that the current SEC silence doesn't serve any constituency. Steve Bainbridge also has an informative post on this topic. Proxy season is coming up and shareholders and companies alike are awaiting a decision from the Third Circuit in the Wal-Mart action that could dramatically alter the landscape for shareholder proposals, possibly flooding the courts with expensive, protracted litigation. The timing couldn’t be worse for the SEC’s lack of action on no action letters.

 

 

 

 

February 5, 2015 in Corporate Finance, Corporate Governance, Corporations, Current Affairs, Delaware, Financial Markets, Marcia Narine, Securities Regulation, Social Enterprise | Permalink | Comments (0)

Wednesday, February 4, 2015

Conferences

I am a list maker.  I make daily to do lists, grocery lists, research plans, workout schedules (that quickly get jettisoned) and  complicated child care matrices necessary in two-career families.  How else am I supposed to remember and keep on my radar all of the things that I am supposed to be doing now, or doing when I have time, or things that I can't forget to do in the future?  One area where I feel deficient is in planning my conference travel/attendance. It always feels either a little ad hoc (ohh I got an invitation and I never say no to those!) or a little out habit (once you have presented at a conference it is easier to be asked to participate in future panels). Rarely does it feel like a part of an intentional plan for the year where I set out to prioritize conference A or break into conference B.  

Realizing that this year there are 3 corporate law events within 10 days of each other is seriously making me reconsider my approach.  I need a conference list-- a way to plan for the coming year, prioritize opportunities and frankly, schedule grandparent visits (read: child care) when I need to travel for more than a night or two.  

Below is my running list of annual or nearly annual events, but I know that I am missing big pieces of the conference puzzle.  Please contribute in the comments so we can create a list of some standard corporate law events (great for new teachers, great for those looking to expand their research circles, etc.).  Updated to reflect suggestions in comments & put in approximate order of timing.

 

-Anne Tucker

February 4, 2015 in Business Associations, Anne Tucker, Call for Papers, Conferences, Law and Economics, Securities Regulation, Teaching, Unincorporated Entities | Permalink | Comments (6)