Monday, November 3, 2014
On Monday, The University of Tennessee (UT) College of Law hosted Larry Cunningham to talk about his book, Berkshire Beyond Buffett: The Enduring Value of Values, which he previewed with us here on the BLPB a few months ago in a series of posts (here, here, and here). As you may recall, the book focuses on corporate culture and succession planning at Berkshire Hathaway. Joining Larry at the book session was UT College of Law alumnus James L. (Jim) Clayton, Chairman and principal shareholder of Clayton Bank and the founder of Clayton Homes, one of the Berkshire Hathaway subsidiaries featured in the book. The impromptu conversation between Larry and Jim was an incredible part of the event (although Larry's prepared presentation on the book also was great).
As part of the event, Larry and Jim answered a variety of audience questions. Included among them was a question from UT College of Law Dean Doug Blaze on the role of lawyers in management, transactions, and entrepreneurialism. As part of Jim Clayton's response, he noted the value of preventative lawyering--advising businesses to keep them out of trouble. I was so glad, as a business law advisor, to hear him say that!
Following on that, given that (a) Larry's book focuses on the factors influencing succession planning, (b) I am teaching the Disney case to my Business Associations students this week, and (c) the Disney case is about . . . well . . . failed succession and executive compensation, I asked about management compensation in the context of succession planning at Berkshire Hathaway. Both Larry and Jim (whose son Kevin is President and Chief Executive Officer of Clayton Homes) were clear that Warren Buffett is an exacting manager, but that he believes in paying his portfolio company managers well. Of course, the precise nature of the compensation arrangements of those portfolio firm executives (unlike Michael Ovitz's compensation arrangements at issue in the Disney case) are not a matter of public record. But given the markedly different contexts, I assume the arrangements are very different . . . .
As I approach discussing the Disney case once again in the classroom, I am (as always) looking for new angles, new insights to share with the class (in addition to the core fiduciary duty doctrine). One I will share this year is Jim Clayton's advice about preventative lawyering. What could lawyers have done to reduce the likelihood of controversy and litigation? I have some thoughts and will develop others in the next 24 hours. Leave your thoughts here, if you have any . . . .