Monday, April 26, 2010
Robert Rhee has posted a Case Study of the Bank of America and Merrill Lynch Merger. It has a nice tick-tock of events and could be a useful teaching tool, bringing together questions of corporate law and ethics. I'd only quibble with one conclusion he draws that BAC's decision to acquire ML was not informed and thus a violation of the BAC board's duty of care. While there are issues with respect to the transaction, I don't think a care violation on the part of the BAC board is one of them. The courts are highly sensitive to facts and circumstances analysis. The process adopted when the world is in crisis is not going to be the same when directors believe they have all the time in the world. I doubt that a court would or should go so far as to pin care violation on the BAC board.
Abstract: This is a case study of the Bank of America and Merrill Lynch merger. It is based on the article, Fiduciary Exemption for Public Necessity: Shareholder Profit, Public Good, and the Hobson’s Choice during a National Crisis, 17 Geo. Mason L. Rev. 661 (2010). The case study analyzes the controversial events occurring between the merger signing and closing. It reviews in depth the circumstances under the federal government threatened to fire the board and management of Bank of America unless it consummated the Merrill Lynch acquisition. Among other issues, this case study raises the questions: (1) what is the role of a private firm during a public crisis? (2) what are the responsibilities of the board? (3) what is the role of government and how should it treat private firms? This case study can be used in corporate ethics classes in business schools, or business associations classes in law schools.