Business Law Prof Blog

ICYMI: Tweets From the Week (Jan. 31, 2016)

Is it possible for the Constitution to be "neutral" as to choice of business entity? 101 Iowa L. Rev. 499 #corpgov

— Stefan Padfield (@ProfPadfield) January 25, 2016

"In recent years investor-state arbitration has become ubiquitous." https://t.co/K4eaeprr4F #corpgov

— Stefan Padfield (@ProfPadfield) January 26, 2016

"California ... disfavors allowing even sophisticated parties ... to contract away liability for fraud" https://t.co/Z7rffcttPN #corpgov

— Stefan Padfield (@ProfPadfield) January 26, 2016

books and records: "making exculpation a threshold issue in a Section 220 inspection case" https://t.co/ffs38puQZP #corpgov

— Stefan Padfield (@ProfPadfield) January 26, 2016

"'IBGYBG'—'I’ll be gone, you’ll be gone.'..deals that brought in big fees up front..losses in the future.” https://t.co/6TVdaXrDnf #corpgov

— Stefan Padfield (@ProfPadfield) January 26, 2016

IPOs and Camouflage of Shareholder-Unfriendly Governance Provisions

This piece in the Wall Street Journal reports on a recent article by David F. Benson, James C. Brau, James Cicon, Stephen P. Ferris regarding the language used in charters and bylaws of companies going public.  As described in the WSJ, they conclude that companies with shareholder-unfriendly provisions – such as, for example, staggered boards or supermajority voting – are inclined to “camouflage” this fact by using more obscure, harder-to-parse language.  And this effect is more pronounced for companies that can expect they won’t be caught – such as, companies with a smaller analyst following and fewer institutional investors.  They also find that companies that use camouflage reap benefits in the form of higher pricing.  I was intrigued by the description in the WSJ, and thought the findings might be a useful point of discussion in my Sec Reg class, so I tracked down the actual study.  But I found myself a bit confused by the evidence offered to support their conclusions.

[More under the cut]

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Legal and Ethical Problems in Sports

Sports have had some well-publicized legal and ethical problems over the past few months.

• "IAAF knew of Russian doping scandal, corruption" 1/14/16 (track and field)
• "The Tennis Files: Have top players been paid to lose?" (1/18/16) (tennis)
• "New FIFA indictment is bigger than the first one, and the DOJ isn't done yet" (12/3/15) (soccer)

I hope to look into these scandals more deeply in coming months, but it seems unchecked power and/or loose oversight are at least part of the problem.

As with many of the recent business scandals, I wonder if punishments need to be more severe to curb these problems, or if there is another, more effective, solution waiting to be uncovered.

Villanova Law Professor Position and Updated Job Lists

From the Faculty Lounge: "Villanova University - Charles Widger School of Law seeks an outstanding lawyer/educator/scholar to teach business law and entrepreneurship courses, broadly defined, and to serve as the Faculty Director for The John F. Scarpa Center for Law and Entrepreneurship." More information available here.

Updated Law Professor (Business Areas) Position List.

Updated Legal Studies Professor Position List (Mostly Business Schools).

At this point in the year, I imagine that some, if not many, of the positions on the list may be filled.

Dow DuPont Merger of "Equals" Raises Several Equality Questions

In December, 2015, Dow Chemicals Co. and DuPont announced a proposed merger between their two companies.  Under the proposed deal, and with the approval of stockholders and regulators, the two agro/chemical giants will merger their companies in 2016 to create DowDuPont, with an estimated $130 billion value.  Within 18-24 months of closing, DowDuPont will be split into three independent, publicly traded companies .

The proposed "merger of equals" is structured to share power equally between Dow and DuPont and its leadership in the new company.  Dow and DuPont stockholders will each own roughly half of DowDuPont.  There will be 16 members on the new DowDuPont board of directors:  8 from each company.  The roles of Chairman and CEO will be split with Andrew Liveris (Dow) serving as Chairman and Edward Breen (DuPont) as CEO.

Questions of equality and perceived power imbalance arise when we examine the relationships between  (1) corporate boards and activist investors; (2) various shareholders (hedge funds vs. institutional investors vs. retail investors, etc.), and (3) possibly, CEO's.  

Let's tackle the first (and tangentially the second) imbalance by talking about hedge funds.  Last year, Trian hedge fund targeted DuPont in a very expensive, public and close proxy contest.  DuPont defeated Trian, even with ISS recommendations to vote with Trian.  The DuPont defense was widely regarded as a model proxy contest defense strategy (see here, e.g.,) and even more enthusiastically as

"a victory not only for DuPont and its chief executive, Ellen Kullman, but for others in corporate America concerned that activist investors’ influence has grown too strong and that companies have capitulated to their demands too readily." WSJ May 13, 2015

By October, Ellen Kullman, the trimphant CEO of DuPont, however stepped down. By December DuPont announced the mega-merger with Dow. DuPont's role in the mega-merger with Dow is being cast as a reaction to and attempt to seek protection from activist investors, which are increasingly garnering ISS and institutional investor support. DuPont's success against Trian rested largely on their ability to convince its three largest shareholders—Vanguard Group, BlackRock Inc. and State Street Corp.—which all manage index funds to vote with it (and against ISS recommendations).  The inference here is that DuPont didn't want to roll the dice again and risk losing control in a future contest with Trian or another activist.

Dow Chemicals hasn't been immune to the hedge fund threat. Third Point LLC, Dan Loeb's hedge fund, has a 2% position in Dow and nearly pursued a proxy fight in 2015.  Third Point has been making noise about the continued roll of Andrew Liveris in DowDuPont demonstrating that the hall monitor is still on duty.

The gaining strength of hedge fund campaigns in 2015 and the increasingly alignment of hedge funds and indexed funds has many boards running scared.  The DealBook Deal Professor, Steven Davidoff Solomon, writes of the mega-merger:

The proposed combination of Dow Chemical and DuPont shows that in today’s markets, financial engineering prevails and that only activist shareholders matter....

This plan is one easily understood by a hedge fund activist or investment banker in a cubicle in Manhattan with an Excel spreadsheet. To them, it makes perfect sense to merge a company and then almost immediately split it in three.

Merger and acquisition volume was at a record high (too soon to say peak) in 2015 as companies sought, in part, to achieve paper returns and cost efficiencies in a slow-growth economy.  When large (and voting) shareholders are index and mutual funds with pressures to earn returns for their investors, it can produce corresponding pressure on operating companies for tactics, if not actions to produce those returns.  In the DuPont proxy fight, the large block of retail investors in the old-guard public company was a big barrier to Trian, but in companies with less percentage held by retail investors (e.g., newer companies), the hedge fund agenda can drive the company.

Finally, it is interesting to note the rise and fall of DuPont CEO Ellen Kullman in this story. She successfully warded off a proxy contest and seemed to have fended off hedge fund advances, but ultimately her fate and DuPont's were largely driven by Trian's agenda.  Reading about this merger reminded me of the spate of stories last year about how hedge funds disproportionately target companies with female CEO's. This is an issue that as a female law professor, I am particularly sensitive to, but that bias not withstanding, the story received quite a bit of play in the financial press last year: DealBook, Bloomberg, and here, and here.  

-Anne Tucker

 

Mindfulness and Legal Drafting for Business Lawyers (A Yoga Analogy)

As many of you know, I teach both traditional doctrinal and experiential learning courses in business law.  I bring experiential learning to the doctrinal courses, and I bring doctrine to the experiential learning courses.  I see the difference between doctrinal and experiential learning courses as a matter of emphasis.  Among other things, this post explores the intersection between traditional classroom-based law teaching and experiential law teaching by analogizing business law drafting to yoga practice principles.  This turned out to be harder than it "felt" when I first started to write it.  So, the post may be wholly or partially unsuccessful.  But I persevere . . . .

I begin by noting that we are, to some extent, in the midst of a critical juncture with respect to experiential learning in legal education.  Some observers, including both legal practitioners and faculty, criticize the lack of experiential learning, noting that legal education is too theoretical and policy-oriented, resulting in the graduation of students who are ill-prepared for legal practice.  Yet, other commentators note that too great an emphasis on experiential learning leaves students without the skills in theory and policy that they need to make useful interpretive judgments and novel arguments for their clients and to participate meaningfully in law reform efforts.  Of course, different law schools have different programs of legal education (something not noted well enough, or at all, in many treatments of legal education).  But even without taking that into account, many in and outside legal education (including, for example, in articles here and here) advise a law school curriculum that merges the two.  I think about and struggle with constructively effectuating this all merger the time.

Now, about the yoga . . . .  Most of you likely do not know that, in addition to teaching law, being a wife and mom, and other stuff, I enjoy an active yoga practice.  As I finished a yoga class on Sunday afternoon, I realized that yoga has something to say about integrating doctrinal and experiential learning, especially when it comes to instruction on legal drafting in the business law area.  Set forth below are the parallels that I observe between yoga and business law drafting.  They are not perfect analogs, but they are, in my view, instructive in a number of ways important to the teaching mission in business law.  The first two bullet points are, as I see it, especially important as expressions of the idea that law teaching is more complete and valuable when it holistically integrates doctrine, policy, theory, and skills.  The rest of the bullets principally offer other insights.

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2016 American Bar Association LLC Institute

At the request of Tom Rutledge, chair of the American Bar Association Section of Business Law's Committee on LLCs, Partnerships and Unincorporated Entities (that sure is a mouthful!),  I am passing on the following:

 

While the dates are still being resolved, this October, 2016, the Committee of LLCs, Partnerships and Unincorporated Entities will again be sponsoring a two-day LLC Institute in Arlington, Virginia. This program brings together more than 100 high-level practitioners and academics to review a variety of issues involving the law of unincorporated business organizations. In recent years presentations have been made by Joan Heminway, Carter Bishop, Dan Kleinberger, Colin Marks, Michelle Harner and Benjamin Means. I think each will vouch for the quality of the program.

We are actively soliciting proposals for panels. If you are working on something, or if there is something you would like to discuss before an audience that I can guarantee will be “hot”, please let me know.

Thanks.

Tom Rutledge
[email protected]

 

Indeed, I can vouch for the program, at which I have presented twice.  There typically is an opportunity presented to write a short piece for Business Law Today, if you are interested.  My contribution from the 2015 LLC Institute (a real page-turner--not) can be found here.

The Stock Market and Oil: What's in a Correlation?

The Wall Street Journal yesterday reported that oil and stocks are working together closer than they have in twenty-six years.

Oil and stock markets have moved in lockstep this year, a rare coupling that highlights fears about global economic growth.

As oil prices tumbled early in 2016, global equities recorded one of their worst-ever starts for a new year. On Monday, oil and stocks were lower again. The S&P 500 index was down 0.7% in midday New York trading, and Brent crude futures, the global benchmark, were down $1.37 a barrel, or 4.3%, to $30.81. That followed a joint rebound on Friday.

The correlation between the price of Brent and the S&P 500 stock index is at levels not seen in the past 26 years. January isn’t over yet, but over the past 20 trading days—an average month—the correlation is 0.97, higher than any calendar month since 1990 . . . .

And today, stocks rebounded with the 3.4% increased in the price of oil to $31.38 a barrel. And yeah, that's still low.   

The correlation may not be a strong as reports indicate, though.  Some reports suggest that the correlation is not nearly as close as it seems. As this analysis explains, "[e]ven if correlations between assets are trending higher that doesn’t mean that the outcomes have to be even remotely similar. While stocks are down around 8% this year, oil has fallen nearly 20%." 

There is some indication that oil and stocks now tend to correlate, even though for a long time, stocks and commodities seemed to operate independently. According to this 2012 study,

The changes in commodity price correlation and volatility have profound implications for a wide range of issues, from commodity producers’ hedging strategies and speculators’ investment strategies to many countries’ energy and food policies. We expect these effects to persist so long as index investment strategies remain popular among investors. 

It's hard to predict what this correlation can mean, or whether one is driving the other.  Certainly a spike in oil supply demand could cause an increase in oil prices, and that demand would like help support the stock market.  But oil prices could stay low, and we could still see the market go up if other indicators make investors happy.  

One correlation that it seems you can always count on: low oil prices means more car and truck sales.  And by that, it usually means SUV and truck sales.  

Sales of trucks and sport utility vehicles are rapidly outpacing sales of all other vehicle types in the U.S. as consumers ditch four-door sedans and flock to a seemingly endless selection of small, midsize and gargantuan SUVs. According to 2015 sales data released by the world’s top automakers on Tuesday, trucks and SUV sales dominated last year.

We'll see how long it lasts. As they say, the cure for low prices is low prices, and the cure for high prices is high prices.  For now oil and gas are low -- the market will fix that one way or another soon enough.   

 

Good Exams and Excellent Exams: Conveying Uncertainty

I was going to blog today about Usha Rodrigues’s article on section 12(g) of the Exchange Act, but my co-blogger Ann Lipton stole my thunder over the weekend. If you’re interested in securities law and you haven’t read Ann’s excellent post on section 12(g), you should. Ann discusses Usha Rodrigues’s article on the history and policy of section 12(g); if you haven’t read it, I strongly recommend it. It’s available here. (Even if you’re not interested in reading about section 12(g), I highly recommend Usha’s scholarship in general. I’ve read several of her articles and blog posts over the last few years; she has become one of the leading commentators on securities and corporate law. She blogs at The Conglomerate.)

Instead of discussing section 12(g), I’m going to talk about exams. I finished grading my fall exams about a month ago and I’ve had time to reflect on them. The main reason students don’t do well on exams is that they don’t know or understand the material. But I’ve been reflecting on the difference between exams that are pretty good and exams that are excellent. Those students all know the material, so that’s not the difference.

One of the major differences between a good exam and an excellent exam is in how well students indicate the level of uncertainty in the law.
Sometimes, the law is clear and the answers to issues are certain. Sometimes, the answer is a little fuzzy, but the available authorities point strongly in a particular direction. Sometimes, the answer is completely unclear.

The best exam answers differentiate among those different possibilities and indicate the certainty of the author’s conclusion as to each issue. Bad answers don’t do that. They provide a definite “yes” or “no” to an issue when an unqualified answer is unwarranted. Or they go through a long list of arguments (“on the one hand, . . . ; on the other hand, . . . ) without reaching a conclusion or even indicating which side has the better argument and why.

I can always tell from reading exams which students I would want to consult as attorneys, and this is one of the clues.

ICYMI: Tweets From the Week (Jan. 24, 2016)

I usually limit myself to 5-6 tweets in this post, but for some reason I just couldn't bring myself to cut any of the below, so you will need to click "continue reading" at the bottom of this post if you want to see them all.

"Oppressed Minority Shareholders": "non-exhaustive list of alternatives to [judicial] dissolution" https://t.co/DFP9ipXucX #corpgov

— Stefan Padfield (@ProfPadfield) January 20, 2016

"thirtieth anniversaries of the Delaware Supreme Court's landmark decisions in Unocal and Revlon" https://t.co/uTcQW2V0qH #corpgov

— Stefan Padfield (@ProfPadfield) January 20, 2016

"institutional investors...opting out of federal securities class actions...to pursue individual actions" https://t.co/aeZ12yBCI5 #corpgov

— Stefan Padfield (@ProfPadfield) January 20, 2016

"little substantive argument has been offered publicly to justify the deal lawyers’ [appraisal] amendment" https://t.co/otAkWMDaMn #corpgov

— Stefan Padfield (@ProfPadfield) January 20, 2016

ICYMI: "Supreme Court takes up appeal that tests limits on insider trading prosecutions" https://t.co/2vuv5EI8xW #corpgov

— Stefan Padfield (@ProfPadfield) January 20, 2016

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Uber and Section 12(g)

Back in the heady days of 2011, everyone wanted Facebook shares, but Facebook was not yet publicly traded.   It was close to bumping up against the then-500 shareholder-of-record threshold, however, which would have triggered reporting requirements under Section 12(g) of the Exchange Act. As a result, Goldman Sachs developed a single investment vehicle to allow clients to invest in Facebook indirectly; the vehicle would purchase Facebook shares (and count as a single shareholder), and then Goldman clients would buy shares of the vehicle. Eventually Goldman ultimately was forced to modify its plan due to a different SEC rule, so its legality was never tested.

Fastforward to 2016. The JOBS Act has now upped the shareholder threshold to 2000 shareholders of record (or 500 unaccredited shareholders), and eliminated the rule that tripped up Goldman’s earlier efforts, so Morgan Stanley and Merrill Lynch are playing the game again with Uber shares. Accredited investors will have the opportunity to buy interests in New Riders LP, whose sole assets will be stock in Uber.  

(okay, different New Riders LP). 

The minimum price tag is $1 million through Merrill, or a paltry $250K through known-populist Morgan Stanley. The 290-page offering materials are heavy on risk disclosures, but fail to include any financial information about Uber; instead, investors are urged to trust Morgan Stanley’s and Merrill’s valuation.

[More under the jump]

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Washington and the Market

Washington, D.C. is about to be shut down by snow for a couple of days and the stock market's up 1%. Cause and effect? :)

CSR and Small Business-Part 2

Two weeks ago I posted about whether small businesses, start ups, and entrepreneurs should consider corporate social responsibility as part of their business (outside of the benefit corporation context). Definitions of CSR vary but for the purpose of this post, I will adopt the US government’s description as:

entail[ing] conduct consistent with applicable laws and internationally recognised standards. Based on the idea that you can do well while doing no harm … a broad concept that focuses on two aspects of the business-society relationship: 1) the positive contribution businesses can make to economic, environmental, and social progress with a view to achieving sustainable development, and 2) avoiding adverse impacts and addressing them when they do occur.

During my presentation at USASBE, I admitted my cynical thoughts about some aspects of CSR, discussed the halo effect, and pointed out some statistics from various sources about consumer attitudes. For example:

• Over 66% of people say they will pay more for products from a company with “good values”
• 66% of survey respondents indicated that their perception of company’s CEO affected their perception of the company
• 90% of US consumers would switch brands to one associated with a cause, assuming comparable price and quality
• 26% want more eco-friendly products
• 10% purchased eco-friendly products
• 45% are influenced by commitment to the environment
• 43% are influenced by commitment to social values and community
• Those with incomes of 20k or less are 5% more willing to pay more than those with incomes of $50k or more
• Consumers in developed markets are less willing to pay more for sustainable products than those in Latin America, Asia, the Middle East, and Africa. The study’s author opined that those underdeveloped markets see the effects of poor labor and environmental practices first hand
• 75% of millennial respondents, 72% of generation Z (age 20 and younger) and 51% of Baby Boomers are willing to pay more for sustainable products
• More than one out of every six dollars under professional management in the United States—$6.57 trillion or more—is invested according to socially-responsible investment strategies.
• 64% of large companies increased corporate giving from between 2010 and 2013.
• Among large companies giving at least 10% more since 2010, median revenues increased by 11% while revenues fell 3% for all other companies

From marketing and recruiting perspectives, these are compelling statistics. But from a bottom line perspective, does a company with lean margins have the luxury to implement sustainable business practices? Next week I will post about CSR in larger companies and the role that small suppliers play in global value chains. This leaves some small businesses without a choice but to consider changing their practices. In addition, in some ways, using some CSR concepts factors into enterprise risk management, which companies of all size need to consider.

Business and Academic Entaglement

I am taking a MOOC from University of Illinois and Coursera on digital marketing. I've been trying to take at least one course a semester. Both the underlying material, and the intricacies of online education have been interesting. I chose this course because I have family members in the digital marketing area, and I am taking (and discussing) this course with them.

Later, I may discuss some of  the substantive take-aways from the course --- I have completed about 50% of the course so far --- but in this post I want to discuss business/academic entanglement.

In this digital marketing class, an assignment on co-creation (by firms & their customers) consisted of creating an online account with Starbucks, submitting an idea for consideration, and reporting how the idea was received by commenters. This was a useful exercise and it made the concept come alive, but I couldn't help wondering if Starbucks was somehow involved with University of Illinois and/or Coursera in creating this assignment. To be clear, I have no idea whether Starbucks was or was not involved.  But, in any event, with the thousands (and maybe 10s of thousands) of people who are taking this course, this assignment seemed like a win for Starbucks.  Well, actually, this idea submission portion of Starbucks' website was not functioning properly, leading to many, many complaints from the students on the course discussion boards, but the assignment could have been a big win for Starbucks. And eventually, a work-around was suggested, and I assume that many, many people still created online accounts with Starbucks when they might not have otherwise. The creation of those accounts, and the simple brand exposure, certainly has some value to Starbucks.   

Anyway, my question is this: Are course creators ethically obligated to disclose entanglement or abstain from entanglement between businesses and their educational institutions?

Even if there is no entanglement (I am thinking about direct or indirect payments for the assignment), how should potential benefits to the educational institution be treated? For example, what if the University of Illinois plans to pitch Starbucks CEO Howard Schultz on making a contribution toward a new campus building and plans to bring up this assignment? Again, I don't know if there was any entanglement here, and I assume it was just an innocent and useful assignment. But with the increasing corporatization of higher education, I wonder about the appropriate boundaries between businesses and universities.

Thoughts from our readers are welcomed.

More on the Cover Letter as an Important Link in the Law Placement Chain

Employers and hiring coordinators are busy people.  Like law review editorial boards, they get many more qualified submissions than they need for the openings they have.  One of our challenges in advising students in the job search game is making their submissions stand out.  Of course, personal connections and timing are very helpful in this regard.  But résumés and cover letters also are important and may make a real difference in obtaining interviews and getting desired offers of employment.  

As we settle into the new semester, my unemployed 3L students have begun to seek help from me in their quest to launch their careers post-graduation. One resource I highlight is the BLPB.  Co-blogger Haskell Murray earlier posted some super information about résumés and interviews.  I followed, at his suggestion, with a post on cover letters (and then one on following up with firms that have not initially extended an interview invitation).  This post adds some new details on cover letters that respond to common mistakes I see and questions I have been asked about my earlier post on that topic.

Specifically, I want to describe better the key personalized part of the cover letter--the body of the letter between the introductory and closing paragraphs.  This is the segment of the letter that, if everything else looks and sounds right, calls the applicant out on an individualized basis and holds the promise of positively distinguishing her or him from other applicants.  Here's what I said about this section of the cover letter in my original post:

The body of the letter is the most important as a matter of content. It is where you get to show that you have what the employer needs and wants for the position. You should rely on any position announcement you have to write this part of the letter. If there is no announcement or other position description, seek information about or rely on your knowledge of the position to identify the employer's needs and wants. Summarize for yourself from those needs and wants the specific skills and experience being sought by the employer. Then, demonstrate, preferably by example, how you fill these needs and satisfy these wants in a few (no more than three) short paragraphs. Avoid repeating what's on your resume and refrain from using characterizing adjectives and adverbs. Show the reader that you are a good fit and among the most qualified folks for the job. Don't just say it.

There's a lot in that passage!  Note also that the comments to that original post add a bit more on some of these (and other) matters.  Critical embedded messages in the quoted paragraph include the desirability of:

• presenting customized information that directly addressees the job requirements set forth in the position announcement (or any other manifestations of the prospective employer's needs and wants);
• demonstrating, rather than characterizing, the applicant's "fit" through the information provided;
• avoiding mere repetition of information included in your résumé; and
• avoiding the use of unnecessary adjectives and adverbs.

I address each in turn below.

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Second Circuit Affirms High Misconduct Standard for Caremark Claims in Cent. Laborers’ Pension Fund v. Dimon

In early January, the Second Circuit Court of Appeals ruled in Cent. Laborers’ Pension Fund v. Dimon to affirm the dismissal of purported shareholder derivative claims alleging that directors of JP Morgan Chase--the primary bankers of Bernard L. Madoff Investment Securities LLC (“BMIS”) for over 20 years--failed  to institute internal controls sufficient to detect Bernard Madoff’s Ponzi scheme.  The suit was dismissed for failures of demand excuse.  Plaintiffs contended that the District Court erred in requiring them to plead that defendants “utterly failed to implement any reporting or information system or controls,” and that instead, they should have been required to plead only defendants’ “utter failure to attempt to assure a reasonable information and reporting system exist[ed].” (emphasis added).  The Second Circuit declined, citing to In re General Motors Co. Derivative Litig., No. CV 9627-VCG, 2015 WL 3958724, at *14–15 (Del. Ch. June 26, 2015), a Chancery Court opinion from earlier this year that dismissed a Caremark/oversight liability claim.  In In re General Motors the Delaware Chancery Court, found that plaintiffs' allegations that:

[T]he Board did not receive specific types of information do not establish that the Board utterly failed to attempt to assure a reasonable information and reporting system exists, particularly in the case at hand where the Complaint not only fails to plead with particularity that [the defendant] lacked procedures to comply with its . . . reporting requirements, but actually concedes the existence of information and reporting systems. . . .

In other words, the Plaintiffs complain that [the defendant] could have, should have, had a better reporting system, but not that it had no such system.

The Second Circuit's opinion in Central Laborers' affirms that Caremark claims require allegations misconduct sufficient to satisfy a failure of good faith, and cannot rest solely on after-the-fact allegations of failed reasonableness of the corporate reporting system.  

-Anne Tucker

 

 

Rob Weber on Comprehensive Capital Analysis and Review at the CBSB

Rob Weber posted on the Columbia Law School Blue Sky Blog an article titled The Comprehensive Capital Analysis and Review and the New Contingency of Bank Dividends, highlighting his recent paper on the topic.

In both the post, and in greater detail in the paper, Rob highlights three aspects of the CCAR program:

[(1)] the significant practical implications of the CCAR for large U.S.-domiciled banks....[(2)] its reliance on discretionary judgments by regulators concerning a hypothetical, uncertain future... [and (3) the CCAR as a] “risk regulation” regime – a designation developed in the environmental, health, and safety (“EHS”) regulatory context that has been underappreciated, underutilized, and undertheorized in the financial regulatory context.

Focusing on this third aspect, Rob states that:

The risk regulation model ... confronts head-on the necessity of basing regulatory intervention into otherwise private activity on a discretionary assessment of an uncertain, hypothetical, and conjectural harm. It is no objection that the harm has not yet occurred. The uncertainty of the harm is a feature, not a bug, of the system. 

The post is available here, and the full paper is available here.

-Anne Tucker

The Business of Politics: Is Politics Commercial Activity or Just Plain Politics?

Section 2 of the Sherman Act provides: 

Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.

The Washington Examiner, among other outlets, reports that President Obama and former Republican presidential candidate Mitt Romney are fighting a section 2 lawsuit together.  The lawsuit, filed by a group of  third-party political groups including the 2012 nominees for the Libertarian Party and the liberal Green Party, claims the Commission on Presidential Debates committed antitrust violations:

This action challenges a per se continuing illegal conspiracy or agreement between the RNC, the DNC, and the Commission, with the direction, assistance, and collusion, over the course of many years, of several co-conspirators and affiliated persons, including Fahrenkopf, McCurry, Obama, Romney, and other presidential candidates of the Republican and Democratic Parties. The conspiracy commenced prior to the formation of the Commission, and no Defendant has withdrawn or abandoned it. The overall objective was and continues to be the entrenchment market power in the presidential debates market, the presidential campaign market, and the electoral politics market of the two major political parties by exercising duopoly control over presidential and vice presidential debates in general election campaigns for the presidency. That objective was achieved in 2012 when the individual Plaintiffs were arbitrarily excluded substantially because of hostility towards their political viewpoints from presidential and vice presidential debates between the nominees of the two major parties organized and conducted by Defendants on October 3, 2012, October 11, 2012, October 16, 2012, and October 22, 2012, respectively.

Romney's brief responds:

Presidential debates are a quintessential political, non-commercial activity... .

The antitrust laws were not intended to regulate non-commercial markets like the 'marketplace of ideas' (even assuming such 'markets' exist as anything more that metaphors). Plaintiffs' claims therefore fail. . . . .

Soliciting votes is fundamentally different from selling widgets. The former implicates core constitutional values that are absent from the commercial arena. The First Amendment forbids Congress from telling political candidates where to go, what to do, what to say, or— crucially here—who they have to debate. Just as President Obama has an absolute right to refuse to debate every person who attacks his Administration, Governor Romney had an absolute right during the 2012 presidential campaign to refuse to debate Gary Johnson, Jill Stein, or any other candidate waging a long-shot bid for the presidency. The only possible sanction for that refusal is a political one.

I'm not an antitrust expert, but this case seems like a loser even if the concept of the claim is viable.  The Examiner piece quotes an expert, Geoffrey Manne, executive director of the nonpartisan think tank International Center for Law and Economics, who said the case was out of the ordinary, but not inconceivable: 

"The short answer is that it is not crazy... The commission is a private entity, not a government one, so it doesn't get immunity," he said, adding, "The question is whether the activity amounts to a restraint of trade." It was hard to tell how a court might come down on that, he said.

Manne knows his stuff, and I trust his point that the claim could have legs. I also agree a court might buy it.  Still, I think it ultimately fails in most courts. It seems to me that it is reasonable to have some limits on who participates in debates (do we all get stage time?), and because of that, plaintiffs would likely have to show that the current structure is an unreasonable restraint on trade. Then you start getting into where to draw those lines, and I think you have a problem with the marketplace. That is, not all speech is being shut out, and two people don't have to agree to share a platform with others.  

Furthermore, if people cared, CNN or FoxNews or TruTV or HBO, could have debates with the other candidates and invite all of them.  I'd argue they should.  But the fact that people don't vote with their eyeballs suggests the restraint isn't really as simple as the debate commission.  It's a lack of interest.  I'd like to see a broader discussion of ideas -- maybe a real platform of people who think government should be inclined to stay out of bedrooms and boardrooms, for example.  But I don't think the Commission on Presidential Debates is really responsible for the nation's inability to demand more information, more interaction, and more accountability.  

Maybe in 1976 or even 1986, but not in 2016. There's just too many options for the other candidates to get their word out if the people care.  People should care, but I don't think antitrust law was designed to make that happen, nor do I think it can. 

Legal Scholarship: Too Many Harpoons; Not Enough Whales

“Call me Ishmael.”

Legal scholarship is in many ways like whaling. We don’t use harpoons, except in especially contentious symposia. And most of the mammalian harm is emotional, rather than physical. But there are many similarities.

1. Whales, Once Abundant, Are Disappearing

In the early days of legal scholarship, novel ideas were abundant. Blackstone, Story, and Kent were out there as background, but there was much unexplored territory—both general theoretical work and summaries of the law. Whales were abundant. Today, the major theoretical positions have been staked out ad infinitum, summaries and restatements of the law are abundant, and the few remaining whales lie on the edges—inspired primarily by new developments in technology and markets.

Much of today’s scholarship merely applies old ideas to new marginal questions. (Witness the work of many late-arriving law-and-economics and critical-legal-studies scholars.) The number of truly novel ideas is dwindling; most of the whales are gone.

2. To a Desperate Whaler, Everything is a Whale

The whales are rare, but the demand for “cutting-edge” scholarship has not ceased. Tenure at most schools depends on it. And the number of legal writers has increased substantially since those early days. Fewer whales; more whalers.

Faced with this mismatch between expectations and possibilities, the tendency is to call anything one finds in the ocean—down to the smallest minnow—a whale. How many times have you read an introduction claiming to offer a significant contribution to the literature, only to find a relatively trivial point? And sometimes the conclusion is not just trivial, but clearly incorrect. Not even a fish or a whale; just an old shoe.

3. Chasing White Whales

“Towards thee I roll, thou all-destroying but unconquering whale; to the last I grapple with thee, for hell’s heart I stab at thee; for hate’s sake I spit my last breath at thee.”

Some scholars spend their entire careers chasing the elusive white whale—the profound insight that all their predecessors have missed that will rock the legal world. It sometimes happens, but only rarely. Most claims of white whales are wrong. And many of us toil on, wasting time on grand theories that ultimately prove unsuccessful, when we might have made useful contributions of a more pedestrian variety.

4. If You Do Catch a Whale, Spend the Rest of Your Life Talking About It

If Ahab had caught the white whale, he would have spent the rest of his life in front of the stove describing his conquest to anyone who would listen. (This is a familiar scene to those of you who know people who love to fish.) The same thing sometimes happens to the few legal scholars who do come up with a profound insight. They spend the rest of their careers applying that insight in marginally different ways.

5. If You Can’t Find a Whale, Talk About Whaling

Some people realize they’re not going to find a whale, so they spend much of their time talking about whaling—criticizing other people’s scholarship; writing about legal scholarship and the publication process. It’s much easier than actually trying to find a whale yourself. Mea culpa.

[The quotes, for those not familiar with the work, are from Herman Melville’s Moby Dick. And, if you’re not familiar with Moby Dick, why not? It’s a masterpiece.]

Development Studies Workshop - Organized by the Banque Populaire Chair in Microfinance of the Burgundy School of Business (Dijon, France)

 

Development Studies Workshop
Organized by the
Banque Populaire Chair in Microfinance of the Burgundy School of Business (Dijon, France)
In collaboration with
BG Foundation (India)
With Support from
VLCC (India)

Theme: Spirituality, Organization and Development
Dates: 28th and 29th October, 2016
Venue: Gurgaon/Delhi (India)

At a time of terrorism, war, and general confusion on human values, there is increasing concern to develop the world in a more sustainable manner. Harmony with nature, ethics, morality and even spirituality is being sought at an individual level, at an organizational level and at the macro level, while continuing the focus on development and making life worth living for all our fellow human-beings. At this juncture, more and more academics and practitioners are turning towards religion to see if some spiritual lessons can be incorporated for an enhanced work-life. At the very least, understanding the spiritual culture of different persons is important to work in global corporations. It is even more important to understand large waves of immigrants and to mentally prepare for their differences in values. The theme of this workshop is therefore relevant to promote human understanding in a globalized world.

A research workshop's primary aim is to help each other improve our papers so that we can publish in high ranked international journals and specialized books on a topic. For this, we would like to bring together a large diversity of researchers from different backgrounds to focus on a relevant and interesting theme, which is meaningful to the present moment.

Topics

While papers in any of these individual themes is welcome, papers combining two or more elements of spirituality, organization and economic development will be given preference.

Examples of possible topics combining two themes (not exclusive, not exhaustive) to spark your thoughts:

1. Spiritual Development
   a. Yoga in the workplace
   b. Gandhism and sustainable development
   c. Organizing Ayurvedic health systems
2. Organizational Development
   a. Organization Leadership and community development
   b. Corporate transformation through Islamic Finance
   c. Managing Conflicts through the Art of Living
3. Economic Development
   a. Microfinance and Hinduism
   b. Confucianism and development of intellectual property rights
   c. Economics of Spiritual tourism of Christian holy places

Please send abstracts by April 15, 2016 to [email protected]. 

Guidelines for Abstracts (150 to 300 words)

Title of the paper
Author Information: Names, designations and affiliations, current locations (city, country)
Research purpose
Theoretical Background
Research design/methodology/approach
Key results
Impact (on new research or on new practices, policies)
Value added/ Originality

Note

There will be no parallel sessions. A minimum of six and a maximum of fifteen working papers can be presented.
Abstracts will be selected based on conformity to the theme and diversity of origins.
A few people whose abstract is not accepted can opt for being discussants or participants, subject to place availability.

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