Friday, December 5, 2014
An early, brief look at some of the social enterprise data I have been collecting with Kate Cooney (Yale School of Management), Justin Koushyar (Emory University, PHD student) and Matthew Lee (INSEAD, Singapore Campus), is up on the Stanford Social Innovation Review (SSIR).
The charts produced over at SSIR include the number of social enterprise statutes passed per year, total number of L3Cs and benefit corporations formed, and -- the most difficult data to track down -- the number of social enterprises formed by state.
We are still working to refine the state-by-state data, hope to continue to update it, and may use it for future empirical work.
I watch a lot of Shark Tank episodes. Like most “reality shows,” Shark Tank is somewhat artificial. The show does not purport to be an accurate portrayal of how entrepreneurs typically raise capital, but I still think the show can be instructive. From time to time, mostly in my undergraduate classes, I show clips from the show that are available online.
After the break I share some of the lessons I think entrepreneurs (and lawyers advising entrepreneurs) can learn from Shark Tank. After this first list of lessons, I share a second list -- things folks should not take from the show.
Thursday, December 4, 2014
I had planned to blog about the UN Forum on Business and Human Rights this week, but my head is overflowing with information about export credits, development financing, a possible international arbitration tribunal, remarks by the CEOs of Nestle and Unilever, and the polite rebuff to the remarks by the Ambassador of Qatar by a human rights activist in the plenary session. Next week, in between exam grading, I promise to blog about some of the new developments that will affect business lawyers and professors. FYI, I apparently was one of the top live tweeters of the Forum (#bizhumanrights #unforumwatch) and gained many valuable contacts and dozens of new followers.
In the meantime, I recommend reading this great piece from the Legal Skills Prof Blog. As I prepare to teach BA for the third time (which I hear is the charm), I plan to refine the techniques I already use and adopt others where appropriate. The link is below.
Tuesday, December 2, 2014
Readers following the benefit corporation movement may be interested to learn that Twitter co-founder, Christopher Isaac "Biz" Stone, reported on NPR's Marketplace on that he plans on making his new web app company, Jelly, a benefit corporation. You can listen to the December 2nd interview (which is only 5 minutes) here, with the last 90 seconds devoted to the benefit corporation issue.
Okay, so limited liability is probably not going away, though it appears that some would have it that way. "Eroding" is probably a better term, but that's less provocative.
In a piece at Forbes.com Jay Adkisson has posted his take on the Greenhunter case (pdf here), which I wrote about here. Mr. Adiksson is a knowledgeable person, and he knows his stuff, but he seems okay with the recent development of LLC veil piercing law in a way that I am not. For me, many recent cases similar to Greenhunter are off the mark, philosophically, economically, and equitably, in part because they run contrary to the legislation that created things like single-member LLCs.
One of my continuing problems with this case (as is often my problem with veil piercing cases), is that there are often other grounds for seeking payment other than veil piercing. Conflating veil piercing with other theories makes veil piercing and other doctrines murkier. More important, they make planning hard. Neither of these outcomes is productive.
In Greehunter, Adkisson notes the court’s determination of the “circumstances favoring veil piercing.” To begin:
+ There was a considerable overlap of the LLC’s and Greenhunter’s ownership, membership (which is really the same thing), and management. Plus, they used the same mailing address for invoices, and their accounting departments were the same folks.
Okay, first, a shared mailing address is a ridiculous test if we're going to allow subisidiaries at all. Sharing an address or even sharing an accounting department shouldn't really matter for veil piercing. This is really more of an enterprise liability-type issue, though the vertical nature of the entity relationship admittedly makes that harder. However, because an LLC doesn't have to follow formalities this is an absurd test. These facts also don’t, in any way, harm the plaintiffs. Make an agency claim or some other type of guarantor/reliance argument if there is one.
+ The LLC didn’t have any employees of its own, but instead relied upon Greenhunter’s employees to actually do things, including to pay creditors.
So what? Would this be true of a joint venture between partnerships? How about if there were just two LLC members – two people who never worked as employees the entity? Should veil piercing be okay then? No. If there is an agency claim, make that. If there is a guarantor claim, make that one. But this is not enough.
+ The LLC really didn’t have any revenue separate from Greenhunter, since the LLC simply passed through all the revenue to Greenhunter, and Greenhunter only kicked back enough money to the LLC to pay particular bills.
So the LLC would not have any money at all but for that which was put into it by the corporation. This was the structure at the time of deal and the set up at all times. If the creditor plaintiff were concerned, they should have raised that issue (and taken appropriate measures) earlier.
+ Although the LLC contracted with Western to procure services for the benefit of the wind farm, it was Greenhunter that claimed a $884,092 deduction for that project on its tax return.
This is how pass-through tax entities work. If pass-through taxation should not be allowed or single-member LLCs should not be allowed, then fine, but that’s a policy question to be raised with the legislature.
+ Greenhunter manipulated the assets and liabilities of the LLC so that Greenhunter got all the rewards and benefits (including tax breaks), but the LLC was stuck with the losses and liabilities.
This implies something was improperly taken from the LLC, but that's not really explained. If there was an improper transfer of value out of the LLC that should have available for the creditors, then the corporation should have to put those funds (that value) back into the LLC for purposes of creditors. That’s not veil piercing. If there’s not some kind of value that could be transferred back, then the claim doesn’t make sense.
Mr. Adkisson continues:
If one looks a veil piercing law as fundamentally comprising two elements: (1) unity of ownership, and (2) the entity was used as a vehicle to commit some wrong, then the single-member LLC (and the sole shareholder corporation) starts out with one foot in the veil piercing grave.
This is exactly why single-member LLCs are fundamentally lousy asset protection vehicles, despite the gazillion ads appearing in sports pages and classifieds advertising “Form an LLC for Asset Protection!”
This doesn’t mean that single-member LLCs should never be used; to the contrary, they are frequently and properly used in a number of situations for reasons other than liability protection.
First, I suppose this would be right if the premise were accurate, but I don’t see it this way. I don't think a “unity of ownership” is the first element for veil piercing. The above explanation is thus incomplete, and if a court follows it, the court would be wrong because it would be skipping the actual first part of the veil-piercing test. The Greenhunter case explains the proper test:
The veil of a limited liability company may be pierced under exceptional circumstances when: (1) the limited liability company is not only owned, influenced and governed by its members, but the required separateness has ceased to exist due to misuse of the limited liability company; and (2) the facts are such that an adherence to the fiction of its separate existence would, under the particular circumstances, lead to injustice, fundamental unfairness, or inequity.
The Greenhunter court even quotes another recent Wyoming case in explaining the rule:
Before a corporation’s acts and obligations can be legally recognized as those of a particular person, and vice versa, it must be made to appear that the corporation is not only influenced and governed by that person, but that there is such a unity of interest and ownership that the individuality, or separateness, of such person and corporation has ceased, and that the facts are such that an adherence to the fiction of the separate existence of the corporation would, under the particular circumstances, sanction a fraud or promote injustice.
Ridgerunner, LLC v. Meisinger, 2013 WY 31, ¶ 14, 297 P.3d 110, 115 (Wyo. 2013) (quotation marks and citations omitted).
Thus, it is more than a unity of ownership. There needs to be no separate or individual nature for the entity to satisfy the first prong. It’s not in any way a simple ownership test.
Second, I agree that LLCs are hardly perfect for asset protection and I agree that LLCs or other separate entities can be useful for reasons other than liability protection. Still, I find the idea that an LLC – a limited liability company – should be used for something other than “liability protection” to be an odd assertion. One can more easily set up a general partnership or simply a division of an existing entity to accomplish goals of separateness, if that’s the only point. Thus, one may choose an LLC for more than just limited liability purposes, but there’s no reason limited-liability protection wouldn't be a reason to choose an LLC.
The outcome of this case is, frankly, far less concerning to me than the rationale being put forth both in the case and some of the following analysis. I have to admit much of Mr. Adkisson’s analysis is consistent with how many courts see it. I just continue to believe we can do better in the development of veil piercing doctrine, and if we did, we'd see less need for it.
Creditors working with limited liability entities need to treat those entities as such. Ask the parent entity (or an owner) for a guarantee, get a statement of guaranteed funding, or seek some other type of reassurance.
As for courts, if you plan to pierce the veil of an LLC, fine, but please justify the veil piercing using specific reasons through specific application of the facts to the law. It’s more than unity of ownership, and it’s more than an inability to pay. Steve Bainbridge once noted (citing Sea-Land Services, Inc. v. Pepper Source, 941 F.2d 519, 524 (7th Cir. 1991):
As one court opined, “some ‘wrong’ beyond a creditor’s inability to collect” must be shown before the veil will be pierced.
At least, that’s supposed to be the rule. I hope it still is.
Monday, December 1, 2014
Well, here we are at the end of another semester. I just finished teaching my last class in our new, three-credit-hour, basic Business Associations offering. (Next semester, I take my first shot at teaching a two-credit-hour advanced version of Business Associations. More to come on that at a later date.) The basic Business Associations course is intended to be an introduction to the doctrine and norms of business associations law--it is broad-based and designed to provide a foundation for practice (of whatever kind). I hope I didn't make hash out of everything in cutting back the material covered from the predecessor four-credit-hour version of Business Associations . . . .
I find teaching fiduciary duty in the corporations part of the basic Business Associations course more than a bit humbling. There is a lot there to offer, and one can only cover so much (whether in a three-credit-hour or four-credit-hour course format). Every year, I steel myself for the inevitable questions--in class, on the class website (TWEN), and in the post-term review session (scheduled for today at 5 PM)--about the law of fiduciary duty as it applies to directors. This past weekend, I received a question in that category on the course website. In pertinent part, it read as follows (as edited for fluency in some places):
I am having problems with understanding the duty of loyalty for directors.
First, . . . I don't think I know which transactions are breaches of loyalty. Do they include interested director transactions, competition, officer's compensation, and not acting in good faith? Second, do care, good faith, and loyalty all require that the directors be grossly negligent? I think I am just confused on the standard to determine whether a director has breached the duty of loyalty and/or care.
I recently read a very interesting article on legal education, The MIT School of Law? A Perspective on Legal Education in the 21st Century, by Daniel Martin Katz, scheduled to appear in the 2014 U. Ill. L. Rev.
Katz, an associate professor at Michigan State, considers the impact of the information revolution and changes in the market for legal services on legal education. He considers how a hypothetical law school might market itself and its students. The key, according to Katz, “is to stop trying to be the ‘50th or 100th best Harvard and Yale’ and instead to concentrate on outflanking these and other institutions by becoming leaders in law’s major emerging employment sectors.” Rather than consider how to incrementally change existing law schools, Katz tries to work backward from what he thinks the future market for lawyers will be like to how a law school should be structured to serve that market. Not surprisingly, Katz concludes that knowledge of technology, math, engineering and science will be important for future lawyers—thus, the MIT School of Law in the article’s title.
I’m a little late getting to this, but it’s a very interesting, provocative article—well worth reading. Katz’s article is part of the Illinois Law Review's tribute to Larry Ribstein. That entire issue is worth a close look when it is available.
Sunday, November 30, 2014
What’s a CEO Really Worth? Too Many Companies Simply Don’t Know http://t.co/92Vt2o6LfY— Richard Leblanc (@DrRLeblanc) November 22, 2014
"New website uses crowdfunding to finance lawsuits" http://t.co/h8gav7j3kn— Stefan Padfield (@ProfPadfield) November 25, 2014
"fraud-on-the-market’s evolution..has been driven..by a..series of contributions by Judge Easterbrook, Judge Posner" http://t.co/zlFYtwwkZ2— Stefan Padfield (@ProfPadfield) November 26, 2014
Saturday, November 29, 2014
When commenters look back at the financial crisis, many blame the ratings agencies, at least in part - and in particular, the dominance of a small number of firms (Moody's, S&P, and - distantly - Fitch). This is why, for example, the SEC has been criticized for erecting barriers that prevent other agencies from earning the coveted NRSRO label.
Which is why I found this story regarding an apparent effort by Moody's to eliminate a competitor so fascinating. According to the WSJ:
Moody’s Corp. doesn’t often give away its thoughts free of charge.
But the ratings firm made an exception recently, issuing an unsolicited credit rating to National Penn Bancshares Inc., a small community bank it had never assessed before.
Moody’s grade was lower than one issued just weeks earlier by Kroll Bond Rating Agency Inc., which the bank had hired to rate a new bond.
Kroll contends Moody’s deliberately lowballed its rating—a move that could have ripple effects through the market for National Penn’s bonds—to scare other small banks into hiring it for future deals.
“It seems this was nothing less than intimidation,” said Kroll President Jim Nadler. “Investors and issuers are worried that Moody’s, if it’s not paid their ransom, will continue doing this until they bully their way into the market.”
A Moody’s spokesman said the firm’s unsolicited rating for National Penn was due to the relatively large size of the debt deal for a regional bank. “We thought our opinion would be helpful to market participants,” he said....
Moody’s never met with National Penn senior management. Instead, Moody’s analysts sifted through public disclosures, listened to earnings calls and read news articles, Mr. Tischler said. These types of situations, with no participation from the rated issuer, are “definitely the minority,” he added.
Moody’s hadn’t rated a U.S. bank with assets under $10 billion all year. In its eight-paragraph rating rationale from Oct. 31, Moody’s said National Penn’s “acquisition appetite” for troubled banks “poses risks for creditors,” calling into question the management’s strategy. Few detailed financials were mentioned in the initial Moody’s rating.
Now, this is not the first time Moody's has been accused of this kind of behavior. In Jefferson County School District No. R-1 v. Moody’s Investor’s Services, Inc., 175 F.3d 848 (10th Cir. 1999), for example, the plaintiff alleged that Moody's publicized an unsolicited low-ball rating as punishment to an issuer for failing to hire Moody's to rate the deal. In that case, the Tenth Circuit held that ratings are opinions subject to First Amendment protection, and dismissed state law tort claims as well as federal antitrust claims.
It raises really interesting questions, because on the one hand, many observers believe that "ratings shopping" - the practice of one issuer going to different agencies until it receives the rating it wants - corrupts ratings and contributed to the financial crisis. So we want to encourage agencies to rate securities even when an issuer has chosen a different agency - which necessarily means protecting them from lawsuits by disgruntled issuers. On the other hand, the last thing we want is for agencies to use ratings as a means to exclude competitors from the market.
The reality is, the best system would be one in which the issuer itself did not get to choose the agency (or, more creatively, perhaps one in which the rater itself was forced to invest in the securities it rates) - but despite proposals, we haven't been able to adopt a workable system to make that happen (as demonstrated by the fact that investors will sue the agencies for issuing unreliable ratings even as they continue to rely on them as a cornerstone of their investment policy).
Friday, November 28, 2014
Earlier this week, I watched Ivory Tower: Is College Worth the Cost? on CNN, which was a somewhat depressing documentary for someone who hopes to spend the next 30+ years in higher education.
One of the things the documentary decries is the construction of more and more extravagant buildings and amenities on college campuses.
While the extent and type of building that should occur can be reasonably debated – and my own institution has almost doubled the number of buildings on campus in the past decade – I want to make a relatively modest claim here: aesthetics matter in higher education.
(Photo of a Belmont University building and fountain from my iPhone).
Perhaps some schools have gone overboard in creating beautiful campuses. However, at institutions that exist to illuminate for students something much more important than mere financial returns, I think it is fitting to invest in beautiful campuses, for their own sake.
Again, perhaps most schools do not need student recreation centers than costs hundreds of millions of dollars, but there is something inspiring about going to a school, and teaching at a school, that is breathtakingly beautiful.
This post may surprise some people who know me because I tend to be a pretty practical person, and I still believe that campus buildings should be functional over fancy, if you have to choose. But I think we need to widen the lens when we look at the benefits college and graduate school experiences provide. Yes, the financial benefits are quite important, and most schools need to be actively looking at increasing the financial benefits and/or reducing the financial costs.
Hopefully, however, college is about much more than just paying money now for an opportunity to earn more money later. Hopefully, college is about building relationships, learning independence, learning to think critically, being inspired, being mentored, creating and appreciating beauty. Maybe this is wishful thinking from a professor, but I do regularly see students who seem to capture much more from college than just better job prospects. Granted, many students do not take full advantage of the meaningful opportunities available, but those meaningful opportunities exist and they are hard to capture on a balance sheet.
I don’t know what a beautiful building is worth. I guess we could measure its worth by counting the number of additional students it attracts to the school, but that seems cynical and narrow. Beautiful buildings may inspire. Inspiration is tough to quantify, but, nonetheless, I think it has value. Personally, I am thankful I work on a beautiful campus, and hope the campus inspires our students not only while they study here, but after they leave as well.
Thursday, November 27, 2014
As regular readers know, I research and write on business and human rights. For this reason, I really enjoyed the post about corporate citizenship on Thanksgiving by Ann Lipton, and Haskell Murray’s post about the social enterprise and strategic considerations behind a “values” message for Whole Foods, in contrast to the low price mantra for Wal-Mart. Both posts garnered a number of insightful comments.
As I write this on Thanksgiving Day, I’m working on a law review article, refining final exam questions, and meeting with students who have finals starting next week (being on campus is a great way to avoid holiday cooking, by the way). Fortunately, I gladly do all of this without complaint, but many workers are in stores setting up for “door-buster” sales that now start at Wal-Mart, JC Penney, Best Buy, and Toys R Us shortly after families clear the table on Thanksgiving, if not before. As Ann pointed out, a number of protestors have targeted these purportedly “anti-family” businesses and touted the “values” of those businesses that plan to stick to the now “normal” crack of dawn opening time on Friday (which of course requires workers to arrive in the middle of the night). The United Auto Workers plans to hold a series of protests at Wal-Mart in solidarity with the workers, and more are planned around the country.
I’m not sure what effect these protests will have on the bottom line, and I hope that someone does some good empirical research on this issue. On the one hand, boycotts can be a powerful motivator for firms to change behavior. Consumer boycotts have become an American tradition, dating back to the Boston Tea Party. But while boycotts can garner attention, my initial research reveals that most boycotts fail to have any noticeable impact for companies, although admittedly the negative media coverage that boycotts generate often makes it harder for a companies to control the messages they send out to the public. In order for boycotts to succeed there needs to be widespread support and consumers must be passionate about the issue.
In this age of “hashtag activism” or “slacktivism,” I’m not sure that a large number of people will sustain these boycotts. Furthermore, even when consumers vocalize their passion, it has not always translated to impact to lower revenue. For example, the CEO of Chick-Fil-A’s comments on gay marriage triggered a consumer boycott that opened up a platform to further political and social goals, although it did little to hurt the company’s bottom line and in fact led proponents of the CEO’s views to develop a campaign to counteract the boycott.
Similarly, I’m also not sure of the effect that socially responsible investors can have as it relates to these labor issues. In 2006, the Norwegian Pension Fund divested its $400 million position (over 14 million shares in the US and Mexico operations) in Wal-Mart. In fact, Wal-Mart constitutes two of the three companies excluded for “serious of systematic” human rights violations. Pension funds in Sweden and the Netherlands followed the Fund’s lead after determining that Wal-Mart had not done enough to change after meetings on its labor practices. In a similar decision, Portland has become the first major city to divest its Wal-Mart holdings. City Commissioner Steve Novick cited the company’s labor, wage and hour practices, and recent bribery scandal as significant factors in the decision. Yet, the allegations about Wal-Mart’s labor practices persist, notwithstanding a strong corporate social responsibility campaign to blunt the effects of the bad publicity. Perhaps more important to the Walton family, the company is doing just fine financially, trading near its 52-week high as of the time of this writing.
I will be thinking of these issues as I head to Geneva on Saturday for the third annual UN Forum on Business and Human Rights, which had over 1700 companies, NGOs, academics, state representatives, and civil society organizations in attendance last year. I am particularly interested in the sessions on the financial sector and human rights, where banking executives and others will discuss incorporation of the UN Guiding Principles on Business and Human Rights into the human rights policies of major banks, as well as the role of the socially responsible investing community. Another panel that I will attend with interest relates to the human rights impacts in supply chains. A group of large law firm partners and professors will also present on a proposal for an international tribunal to adjudicate business and human rights issues. I will blog about these panels and others that may be of interest to the business community next Thursday. Until then enjoy your holiday and if you participate in or see any protests, send me a picture.
November 27, 2014 in Ann Lipton, Conferences, Corporate Finance, Corporate Governance, Corporations, CSR, Current Affairs, Ethics, Financial Markets, Haskell Murray, International Business, Marcia Narine, Securities Regulation, Social Enterprise | Permalink | Comments (0)
Wednesday, November 26, 2014
This is the time of year when we craft exam questions and grading grids in anticipation of exams.
Aside from Teaching Law by Design (a fabulous resource that I recommend for all new teachers as a great continuing resource for even those grizzled from years in the trenches), I have used few formal resources to guide my exam writing and grading process. Fortunately, I work with creative, collaborative and generous colleagues who all shared lots of samples and tips when I first started writing exams. Before committing myself to my Corporations exam this year, I decided to see what is out there to guide exam construction and grading. Finding little that was useful on SSRN or Westlaw, I turned to a broader search, which brought me to a general test instruction guideline produced by Indiana University, aptly titled: How to Write Better Tests. It had the following information regarding essay exams that serve as a useful reminder about why we are so meticulous in constructing our grading rubrics and creating grading schemes that, to the greatest extent possible, reduce our individual biases.
Consider the limitations of the limitations of essay questions:
1. Because of the time required to answer each question, essay items sample less of the content.
2. They require a long time to read and score.
3. They are difficult to score objectively and reliably. Research shows that a number of factors can bias the scoring:
A) Different scores may be assigned by different readers or by the same reader at different times
B) A context effect may operate; an essay preceded by a top quality essay receives lower marks than when preceded by a poor quality essay.
C) The higher the essay is in the stack of papers, the higher the score assigned.
D) Papers that have strong answers to items appearing early in the test and weaker answers later will fare better than papers with the weaker answers appearing first.
To combat these common issues the guidelines recommend:
- anonymous grading (check)
- grading all responses to question 1 before moving on to question 2, and so on (check)
- reorganizing the order of exams between questions (check)
- deciding in advance how to handle ambiguous issues (check, thanks to my grading rubric)
- be on the alert for bluffing (CHECK!)
If anyone has found a particularly useful resource regarding exam construction and grading, please share in the comments. I am sure everyone would benefit.
Happy Thanksgiving BLPB readers!
Tuesday, November 25, 2014
We want the best for both of our kids, and we are working to help them learn as much as they can about being good people and successful people. We're fortunate that we have a (relatively) stable life, we've had good health, and we're able to provide our children a lot of opportunities. For my daughter, as I have noted before, I do worry about institutional limits that are placed on her in many contexts.
She's in first grade, but expectations are already being set. On her homework last week: a little boy in her reading comprehension story builds a tower with sticks and bricks and stones. Next story: a little girl gets fancy bows in her hair instead of her usual ponytails. I wish I were making this up.
This is more pervasive than I think many people appreciate. Take, for example, the Barbie computer science book that had people raising their eyebrows (and cursing). NPR has a report explaining the basic issues here. The basics:
A book called Barbie: I Can Be A Computer Engineer was originally published in 2010. Author and Disney screenwriter Pamela Ribon discovered the book at a friend's house and was initially excited at the book's prospects, she tells guest host Tess Vigeland.
But then she continued reading.
"It starts so promising; Barbie is designing a game to show kids how computers work," Ribon says. "She's going to make a robot puppy do cute tricks by matching up colored blocks."
But then Barbie's friend Skipper asks if she can play it, and the book continues:
" 'I'm only creating the design ideas,' Barbie says, laughing. 'I'll need Steven's and Brian's help to turn it into a real game.' "
Harvard Business Review recently published a piece, Research: How Female CEOs Actually Get to the Top, that offers some insights. It's a good read, and is shows that success at the highest levels is often limited to women pursuing a different path and in companies with a particular culture. At a minimum, the article suggest that the advice we give women about how to get ahead may not be useful. (Not shocking given that the advice is often coming from men.) Here's an excerpt with my biggest takeaways, but I recommend the whole things (it's a short read):
The consistent theme in the data is that steady focus wins the day. The median long stint for these women CEOs is 23 years spent at a single company in one stretch before becoming the CEO. To understand whether this was the norm, we pulled a random sample of their male Fortune 500 CEO counterparts. For the men in the sample, the median long stint is 15 years. This means that for women, the long climb is over 50% longer than for their male peers. Moreover, 71% of the female CEOs were promoted as long-term insiders versus only 48% of the male CEOs. This doesn’t leave a lot of time for hopscotch early in women’s careers.
* * *
It may be that the playbook for advising young women with their sights set on leading large companies needs to be revised. Just as important, there is something inspiring for young women in the stories of these female CEOs: the notion that regardless of background, you can commit to a company, work hard, prove yourself in multiple roles, and ultimately ascend to top leadership. These female CEOs didn’t have to go to the best schools or get the most prestigious jobs. But they did have to find a good place to climb.
To be clear, I am thankful things have progressed to the point that my daughter really does have a legitimate shot at the same success as my son. Things are better than they were, and I see that. I'm just not satisfied that we're where we need to be, because her access to opportunities do not mean she has the same likelihood of success. We'll keep working on it, as I'd like to think we all should.
Monday, November 24, 2014
Happy Thanksgiving you all! With my co-blogger colleagues here on the BLPB writing various Thanksgiving posts on retail-related and other holiday-oriented business law issues (here and here), I find myself in a Thanksgiving-kind-of-mood. I honestly have so much to be thankful for, it's hard to know where to start . . . . But apropos of the business law focus of this blog, I am choosing today to be thankful for my students. They make my job really special.
This semester, I have been teaching Business Associations in a new three-credit-hour format (challenging and stressful, but I have wanted to teach Business Associations in this format for fifteen years) and Corporate Finance (which I teach as a planning and drafting seminar). I have 69 students in Business Associations and ten in Corporate Finance. I have two class meetings left in each course.
The 69 students in Business Associations have been among the most intellectually and doctrinally curious folks to which I have taught this material. I have talked to a lot of them after class about the law and its application in specific contexts. Two stayed after class the other day to discuss statutory interpretation rules with me in the context of some problems I gave them. This large group also includes a number of students who have great senses of humor, offering us some real fun on occasion in class meetings and on the class TWEN site. They are not always as prepared as I would like (and, in fact, some of the students have expressed to me their disappointment in their colleagues' lack of preparedness and participation), but they pick up after each other when one of them leaves a mess in his or her wake (volunteering to be "co-counsel" for a colleague--a concept I introduce in class early in the semester). I enjoy getting up on Monday mornings to teach them at 9:00 am.
Corporate Finance includes a more narrow self-selected group. Almost all of these students have or are actively seeking a job in transactional or advocacy-oriented business law. They handed in their principal planning and drafting projects a bit over a week ago, projects that they spend much of the semester working on. (These substantial written projects are described further in this transcribed presentation.) Now, each student is reviewing and commenting on a project drafted by a fellow student. Both the project and the review are constructed in a circumscribed format that I define. I am excited to read their work on these projects, given the great conversations I have had with a number of them over the course of the semester as they puzzled through financial covenants, indemnification provisions, antidilution adjustments, and the like. Great stuff. I teach this class from 1:00 pm to 2:15 pm two days a week--a time in the day when I generally am most sleepy/least enthusiastic to teach. But these folks ask good questions and seem to genuinely enjoy talking about corporate finance instruments and transactions, making the experience much more worthwhile.
So, I am very thankful for each and all of these 79 students. I may not feel that way after I finish all the grading I have to do, but for now, I am both grateful and content. And I didn't consume a single calorie getting there (which is more than I will be able to say Thursday night . . .). Just looking at the picture at the top of this post makes my stomach feel full and me feel heavier. Ugh.
The federal government has a limited amount of money available for student financial aid. Many people believe the size of that financial aid pot should be increased. That may be true but, until that happens, the government should try to allocate the limited funds it has as efficiently as possible. So I ask, should the government be giving that money to law students?
I have great respect for my profession. I think lawyers serve an extremely important function. I’m a strong believer in individual liberty and many of our personal liberties have been preserved through the law and the efforts of lawyers. But it’s hard to argue that the most important issue in the United States today is a shortage of lawyers.
We need more scientists, engineers, mathematicians, and primary care physicians. So why is the government paying for students to major in fields like political science, sociology, and law, just to name a few? Wouldn’t we be better off allocating more money to math and the hard sciences, to give students an incentive to move into those areas? (Or, since many students aren’t prepared to move into those areas, perhaps some of that money needs to be used to improve primary and secondary education in science and math.)
I admit that I financed both my undergraduate political science degree and my law degree in part with federal funds. (When I went to college, I discovered that what I had always considered a liability—my family’s lack of money—was suddenly a benefit.) I was able to pursue my dream with the federal government’s help. But perhaps the government should have encouraged me to be a scientist or engineer. Or, if I really wanted to be a lawyer, to finance that dream myself.
There’s even less money available now than there was when I was a student, back in the days of Aristotle. (Not less in nominal dollars, but less as a percentage of the cost of a higher education.) Because of that, the need to allocate that financial aid money well is even stronger.
I’m a law professor, so even suggesting this is going against my own self-interest. But sometimes self-interest has to yield to national interest.
Sunday, November 23, 2014
"The first libertarian intellectual was Lao-tzu, the founder of Taoism." http://t.co/pKP1gAOPYe— Stefan Padfield (@ProfPadfield) November 18, 2014
"LLC Operating Agreements: Top 10 List of Material Terms" http://t.co/69BVC6RRZZ— Stefan Padfield (@ProfPadfield) November 18, 2014
Ex-Chief of Iceland Bank Sentenced to Jail for Role in 2008 Crisis http://t.co/AnGJBUE0UL— DealBook (@dealbook) November 19, 2014
Saturday, November 22, 2014
CALL FOR PAPERS
Fourth European Research Conference on Microfinance
1-3 June 2015
Geneva School of Economics and Management, University of Geneva
Access to suitable and affordable finance is a precondition for meeting basic human needs in incomes and employment, health, education, work, housing, energy, water and transport. Microfinance – and more broadly, financial inclusion – will continue to be on the research and policy agenda. 2015 will be a special occasion to question received notions about the link between access to finance and welfare. In 2015 the Millennium Development Goals will make place for the Sustainable Development Goals. A broad debate and exchange on micro, macro and policy topics in financial inclusion will advance our knowledge and ultimately improve institutional performance and policy. This applies in particular to issues of financial market organization, but also patterns, diversity and trade-offs in institutional performance, scope for fiscal instruments, impact of technology on efficiency and outreach etc.
The European Research Conference on Microfinance is a unique platform of exchange for academics involved in microfinance research. The three former conferences organized by the Centre for European Research in Microfinance (CERMI) at the Université Libre de Bruxelles in 2009, by the University of Groningen in the Netherlands in 2011 and the University of Agder in Norway in 2013 brought together several hundred researchers, as well as practitioners interested in applied research. The upcoming Fourth Conference is organized by the University of Geneva, in cooperation with the European Microfinance Platform (www.e-mfp.eu) and in association with the University of Zurich and the Graduate Institute of Geneva.
To provide cutting-edge insights into current research work on microfinance and financial inclusion and to enrich the conference agenda we invite papers on the following topics:
- Client-related issues: consumer behavior, client protection, financial education, household-enterprises and entrepreneurship
- Financial products: credit, insurance, deposits, domestic and cross-border payments
- Non-financial services
- Microfinance adjacencies: Millennium Development Goals
- Institutional issues: management, governance, legal form, transformation, growth, mission drift
- Market: monopolies, competition, alliances and cooperation, mergers and acquisitions, crowding-in and crowding-out issues
- Funding: subsidies (smart and other), investments (public and private) in microfinance institutions
- Policy and regulatory issues
- International governance
Papers will be selected for presentation at the conference by the Scientific Committee, based on criteria of academic quality.
Members of the Scientific Committee include, amongst others: Arvind Ashta (Burgundy School of Business), Bernd Balkenhol (U Geneva), Georges Gloukoviezoff (U Bordeaux and U College Dublin), Isabelle Guerin (IRD, Cessma), Begona Gutierrez-Nieto (U Zaragoza), Malcom Harper (Cranfield School of Management), Valentina Hartarska (U Auburn, USA), Marek Hudon and Ariane Szafarz (CERMI and Solvay School of Business Brussels), Susan Johnson (U Bath), Annette Krauss (U Zürich), Marc Labie (CERMI and University of Mons), Roy Mersland (U Agder), Christoph Pausch (European Microfinance Platform Luxembourg), Trond Randoy (U Agder), Daniel Rozas (European Microfinance Platform Luxembourg), Jean Michel Servet (Graduate Institute Geneva) and Adalbert Winkler (Frankfurt School of Finance and Management), Hans Dieter Seibel (U of Cologne).
Authors are invited to submit an abstract of their paper (not exceeding 2 pages) to email@example.com by December 20, 2014.
The full paper needs to be sent in by March 31, 2015.
I have something of a follow-up to Haskell's earlier post.
While companies like Wal-Mart will be open on Thanksgiving - a decision that has garnered no small amount of public criticism- others have conspicuously declared that they will be closed, in order to allow their employees to spend time with their families.
Now, you can call this a sincere commitment to employees' well-being if you like, but my cynical brain views this as a standard share value-maximizing decision - whether management has decided that adverse publicity would harm the brand, or that employees who get holidays off are less likely to agitate for higher wages, or that regulators are less likely to step in if the business makes some minimal concessions to employee welfare, it's still a decision that's about benefitting the bottom line. If nothing else, it can be cast that way - which is precisely why, precisely as has been frequently argued on this blog, it's difficult to understand why the separate concept of a benefit corporation is necessary, except to the extent it represents the ultimate in marketing commitment. Or maybe some corporate directors just don't want to have to come up with a shareholder-value-maximizing lie about the reasons for their decisions, even if it would be easy to do.
The Thanksgiving-holiday debate also fascinates me because of the way in which it calls to mind Hillary Sale's concept of corporate "publicness" - the idea that corporations, as large and powerful actors in society, are viewed as public institutions, and suffer when they fail to conduct their affairs with that understanding. The corporations that have declared that they will not be open on Thanksgiving seem to be responding to this "publicness" concept.
But that just raises the question, how much does "publicness" represent anything different than the types of pressures that have always existed to force corporations to behave as better corporate "citizens"? Corporations have always had to fear that customers or employees would turn against them, or regulators would try to control them, if they did not behave appropriately; why are today's corporations any different?
Perhaps it's simply because modern corporations are too powerful to regulate via traditional mechanisms. Public shaming and appeals to (certian classes of) shareholders appear to be the only levers of control available - or, at the very least, in a world where it is expected that regulation is unnecessary, scrutiny of corporations as public actors is a natural response. Mariana Pargendler argues that corporate governance has only arisen as an important issue in corporate theorizing as a result of the deregulatory bent of modern America - because there is no political appetite for direct regulation, people who would prefer direct regulation instead turn to corporate governance arguments as a second-best solution for controlling corporate behavior.
I suspect this is accurate. Once upon a time, if we were concerned that workers were being unfairly pressured to work over the holidays, we might consider using direct regulation to remedy the problem. Today, the idea seems extremely remote, if not utterly impossible. Public shaming seems the only viable alternative, in hopes that either shareholders or customers will display enough distaste for corporate policies that managers decide to voluntarily reform.
Friday, November 21, 2014
I just booked my hotel for Sunday and Monday for a mini-writing retreat before the Thanksgiving holiday. This has been an effective (although intimidating) format for me in the past to tackle big writing projects (and deadlines). The idea is that you block 24-48 hours, remove yourself from your normal world and responsibilities and dig into the big thinking to make progress. This is a popular format at Georgia State, and I know several colleagues who book a writing weekend by themselves or with a good friend. This is my first solo endeavor, and I sorely wish I had my normal writing companion heading into battle with me. No one likes to stress-eat chocolate covered almonds and wear sweat pants alone. It feels indulgent and fun with someone else; desperate when you are alone.
My current confusion and lack of direction on how to write this article (is it a short piece? a full article? a response piece?) has lead to my postponing its writing since June (!!!) and is creating a considerable amount of anxiety. I don't know what I fear most at this point: the tailspin that will inevitably happen in that hotel room around midnight on Sunday or how shattered I'll feel if I emerge with nothing to show.
As a final ploy of procrastination, I turn the question to you: have you effectively used a writing retreat to get through a big project and/or do you have any writing/brainstorming tips that help you when you find yourself at a similar crossroads?
Whole Foods recently launched its first national advertising campaign around the theme “Values Matter.” Some outlets claim that the campaign is a response to weak comparable store sales. Supposedly, Whole Foods is spending between $15 million and $20 million on this campaign in an attempt to convince customers that “value and values go hand in hand.” You can see some of the videos here.
Whole Foods has long been known for its high prices and healthy food. Whole Foods has been actively fighting the high price reputation, but at least in the places I have lived, Whole Foods is usually close to the richest neighborhoods, is entirely absent in less affluent areas, and still seems to have higher prices than most competitors. Whole Foods seems to use a premium product, sold mostly to the upper-class, to fund its commitment to employees, its purchasing from smaller local vendors, and its care for the environment.
Whole Foods seems to focus on impacting society and the environment mostly through the process by which they sell their products and distribute the profits to stakeholders.
Walmart seems to have a very different model. Walmart seems to care much more about low prices than about treating their non-customer stakeholders well. Walmart’s extreme pressuring of suppliers, often contentious relationships with the communities around its stores, and low wages/limited benefits for many of its employees [updated] has been widely reported. Walmart seems to be trying to fight its reputation, and it has certainly engaged in some positive activities for society, but its reputation remains.
In contrast to Whole Foods, Walmarts can be found in rural and less affluent areas, and Super-Walmarts are bringing fresh produce to former food deserts at prices that appear to be more affordable. Walmart could argue that it makes a positive impact on society through its low prices.
In short, Whole Food’s strategy seems to be – proper process, high prices – while Walmart may allow a poor process to obtain low prices.
Should corporate law, especially social enterprise law such as the recent benefit corporation law, encourage one strategy over the other? The benefit corporation laws appear flexible enough to embrace either, though a more traditional understanding of social enterprise might exclude both on the ground that the companies’ primary purpose does not seem to be producing products that serve the disadvantaged. Social enterprise’s definition, however, has become much broader over time, though there is currently no consensus.
This struggle with process and prices can be a difficult one, and I am just glad more companies are attempting to find appropriate solutions.