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Sunday, July 31, 2016

ICYMI: Tweets From the Week (July 31, 2016)

By Stefan J. Padfield

July 31, 2016 in Stefan J. Padfield | Permalink | Comments (0)

Saturday, July 30, 2016

A Tale of Two 80s Business Movies

By Ann Lipton

For reasons that don’t need exploring at this juncture, I was in the mood to rewatch two big business movies of the 1980s: The Secret of My Success (dir. Herbert Ross, 1987) and Working Girl (dir. Mike Nichols, 1988). 

Eighties business movies are something of their own minigenre – see, e.g., Trading Places, Wall Street, and Baby Boom – but the reason Secret of My Success and Working Girl are worth comparing is that they basically tell the same story, but with the genders flipped.

Both films are about young business naïfs (Michael J. Fox and Melanie Griffith, respectively), who have jobs at the bottom of the corporate ladder (mail room, secretary).  Frustrated that their talents and skills are being overlooked, both impersonate corporate executives, colonizing vacant offices and aggressively pursuing their innovative business strategies.  There is plenty of farce as they juggle their dual identities, and both enter into conflicted romances with executives who have been taken in by the charade.  Ultimately, their identities are revealed but their talents recognized, and they are rewarded with the jobs (and love interests) they deserve.

But despite the nearly mirror-image plots, the two could not be more different in social message.

In The Secret of My Success, Michael J. Fox plays a young college graduate, raised in farm country and new to the big city.  He’s been hired for a junior executive position but when he arrives on his first day, he finds his job has disappeared in a wave of layoffs.  He can’t find new work because of his lack of experience, and because employers are only interested in hiring minority women, not white men.

His parents suggest he seek a job from a distant uncle, who just happens to head a multinational conglomerate.  The uncle puts him in the mailroom – an indignity not to be borne – which is what prompts Fox to embark on his grand ruse.  It turns out that he has greater insight, smarts, and diligence than any of his colleagues. 

In other words, according to this movie, even though Fox is just out of college with no work experience, he is entitled to a management job on the strength of nepotism, and it is the height of injustice that he’s expected to work his way up through corporate ranks. 

In Working Girl, by contrast, Melanie Griffith plays a girl from the wrong side of the tracks (Staten Island), who has been trying to climb the corporate ladder for years.  She fought through night school to get her degree; since then, she’s struggled at a variety of low-status business jobs, trying to learn whatever she could along the way.  What’s held her back, explicitly, is sexism and classism.  When she ultimately snaps and begins her ruse, it’s because the game is stacked against her – as she puts it at the end of the film: “You can bend the rules plenty once you get upstairs but not while you’re trying to get there, and if you’re someone like me, you can’t get there without bending the rules.”  Notably, she’s talented and insightful, but the movie revolves around the fact that she has one particular good idea – unlike Fox, who essentially is ready to restructure the company after a couple of months. 

Working Girl, then, is about forcing open the doors of the business world to people who have historically been locked out; Secret of My Success is about how, well, people who look like Michael J Fox are just naturally entitled to great jobs. 

I’m not saying the politics of Working Girl are above reproach – Sigourney Weaver’s evil-businesswoman character ultimately bears the brunt of the film’s criticism, blunting the feminist message – but the movie goes out of its way to indict the business world for excluding people who don’t begin life with privilege.  Secret of My Success does the other thing.

July 30, 2016 in Ann Lipton | Permalink | Comments (8)

Friday, July 29, 2016

Western Michigan University Business Law Professor Position

By Haskell Murray

Western Michigan University (Haworth College of Business) has an opening for a tenure-track assistant professor of business law. Details below the break.

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July 29, 2016 in Business School, Haskell Murray, Jobs | Permalink | Comments (0)

Business Law Professor Openings

By Haskell Murray

As in past years, I will maintain lists of law professor openings in the business areas (excluding commercial law-only posts) and legal studies professor openings outside of law schools. If your school has an opening that you would like posted, feel free to contact me. 

The law professor openings list uses the PrawfsBlawg spreadsheet, if an alternate link is not provided. Positions added after today will include the date added.

Law School Professor Positions (Business Law Areas)

Legal Studies Professor Positions (Outside of Law Schools, Mostly in Business Schools)

July 29, 2016 in Business School, Haskell Murray, Jobs, Law School | Permalink | Comments (2)

Thursday, July 28, 2016

The University of Tennessee College of Law is Hiring Business Law Faculty!

By joanheminway

The position notice setting forth the details is set forth below.  Please feel free to email me with any questions you may have.  I will be serving on the Appointments Committee for these searches.

+++++

POSITION NOTICE

FACULTY POSITIONS

The University of Tennessee
College of Law

THE UNIVERSITY OF TENNESSEE COLLEGE OF LAW invites applications from both entry-level and lateral candidates for two full-time, tenure-track faculty positions to commence in the 2017 Fall Semester.  Candidates should have a particular interest in either business law teaching, including business associations and contracts, or transactional clinical teaching in business, taxation, intellectual property, community economic development, or health care that offers students transferable legal skills.  

A J.D. or equivalent law degree is required.  Successful applicants must have a strong academic background, expertise and experience relevant to the position, and a strong commitment to excellence in teaching, scholarship, and service.

In furtherance of the University’s and the College’s fundamental commitment to diversity among our faculty, student body, and staff, we strongly encourage applications from people of color, persons with disabilities, women, and others whose background, experience, and viewpoints would contribute to a diverse law school environment.

The Faculty Appointments Committee will interview applicants who are registered in the 2016 Faculty Appointments Register of the Association of American Law Schools at the AALS Faculty Recruitment Conference in Washington, D.C. Applicants who are not registered in the AALS Faculty Appointments Register are advised to send a letter of intent, resume, and the names and contact information of three references by September 30, 2016 to:

Sean Gunter
On behalf of Michael Higdon, Chair, Faculty Appointments Committee
The University of Tennessee College of Law
1505 W. Cumberland Avenue
Knoxville, TN 37996-1810

All qualified applicants will receive equal consideration for employment and admissions without regard to race, color, national origin, religion, sex, pregnancy, marital status, sexual orientation, gender identity, age, physical or mental disability, or covered veteran status. Eligibility and other terms and conditions of employment benefits at The University of Tennessee are governed by laws and regulations of the State of Tennessee, and this non-discrimination statement is intended to be consistent with those laws and regulations. In accordance with the requirements of Title VI of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, Section 504 of the Rehabilitation Act of 1973, and the Americans with Disabilities Act of 1990, The University of Tennessee affirmatively states that it does not discriminate on the basis of race, sex, or disability in its education programs and activities, and this policy extends to employment by the University. Inquiries and charges of violation of Title VI (race, color, and national origin), Title IX (sex), Section 504 (disability), ADA (disability), Age Discrimination in Employment Act (age), sexual orientation, or veteran status should be directed to the Office of Equity and Diversity (OED), 1840 Melrose Avenue, Knoxville, TN  37996-3560, telephone (865) 974-2498.  Requests for accommodation of a disability should be directed to the ADA Coordinator at the Office of Equity and Diversity.

July 28, 2016 | Permalink | Comments (0)

Business Basics for Beginners

By Marcia Narine Weldon

BA is a required 4-credit class where I teach. Our school has a social mission and many of the students want to work in criminal defense, family law, immigration, human rights, or anything other than business. I shudder to think of how many (few) students would take the course if the school didn’t force them.

Before the course begins, I send a survey to get an idea of whether they have any business knowledge or experience, and what they hope to learn from the course. Throughout the semester I send them short YouTube videos by law firms and entrepreneurs so that they can understand some of the basics (from what is a stock to what is Reg A+). These videos were produced for lay people and I want my students to learn how to explain complex concepts in plain English- a key asset for any lawyer. To give them extra help and also see what they have learned, I have one extra credit assignment that requires them to write on a television show or movie that addresses business issues and spot what the show gets legally wrong.

Prior to the start of the semester, I also send a list of helpful tips (which they are free to ignore) so they can get used to the language of business. Below are some of my suggestions:


1) Watch CNBC, Bloomberg Business or Fox Business. Once we get into publicly-traded companies, we start watching clips from CNBC at the beginning of every class in the "BA in the News" section.
2) Read/skim the Wall Street Journal, NY Times Business Section or Daily Business Review.
3) Subscribe to the Investopedia word of the day- it's free. You can also download the free app.
4) Watch Shark Tank or The Profit (both are a little unrealistic but helpful).
5) Watch the show American Greed if you're going to work for the SEC, DOJ or will be a defense lawyer dealing with securities fraud.

6) ) Listen to The Start Up podcast available onITunes
7) Watch Silicon Valley or Billions
8) Read anything by Michael Lewis related to business
9) Watch anything on 60 Minutes related to the financial crisis

10) Watch the Oscar-winning documentary "Inside Job."
11) Listen to Planet Money on NPR on the weekends
12) Listen to Marketplace on NPR (it's on weekday evenings around 6 pm)
13) Read Inc, Entrepreneur, or Fast Company magazines.

14) Follow certain companies that you care about (or hate) or government agencies on Twitter. Key agencies include the IRS, SEC, DOJ, FCC, FTC etc. If you have certain passions such as social enterprise try #socent; for corporate social responsibility try #csr; for human rights and business try #bizhumanrights; for entrepreneurs try #startups. If you’re interested in corporate governance use #corpgov.
14) Join LinkedIn and find groups related to companies or business areas that interest you and monitor the discussions so that you can keep current on breaking issues.

15) Start reading blogs on topics that interest you. Many are written by law firms, professors, non-profits, and business leaders.

Any tips that you have that I missed? Please share them below so that I can add them to my list for the first day of class. I'm happy to say that I manage to "convert" a few skeptics every year into actually enjoying business and even changing career paths. More gratifying is that most years, a self-described "terrified" student who knows nothing about business scores the highest grade in the class, so some of these tips must be working. 

July 28, 2016 | Permalink | Comments (0)

Wednesday, July 27, 2016

Fiduciary Duty Waiver in Delaware Alternative Entities

By Anne Tucker

Just in case you haven't gotten the message yet:  Delaware law means fiduciary duty freedom of contract for alternative entities.  In May 2016, the Delaware Chancery Court upheld a waiver of fiduciary duties in a master limited partnership.  In Employees Retirement System of the City of St. Louis v. TC Pipelines GP, Inc., Vice Chancellor Glasscock upheld challenges to an interested transaction (sale of a pipeline asset to an affiliated entity) that was reviewed, according to the partnership agreement, by a special committee and found to be fair and reasonable.  The waiver has been described as "ironclad" to give you a sense of how straight forward this decision was. No close call here.  

Vice Chancellor Glasscock's letter opinion starts:

Delaware alternative entity law is explicitly contractual;1 it allows parties to eschew a corporate-style suite of fiduciary duties and rights, and instead to provide for modified versions of such duties and rights—or none at all—by contract. This custom approach can be value enhancing, but only if the parties are held to their bargain. Where equity holders in such entities have provided for such a custom menu of rights and duties by unambiguous contract language, that language must control judicial review of entity transactions, subject only to the cautious application of the implied covenant of good faith and fair dealing. Such is the case in the instant matter, which involves a master limited partnership (“MLP”) created with interested transactions involving the general partner as part of its business model.....

The Defendants point out that the [transaction] was approved by a special committee (the “Conflicts Committee”), which approval, in accordance with the partnership agreement, creates a conclusive presumption that the transaction is fair and reasonable to the Partnership. I find that the Conflicts Committee’s approval, in these circumstances, precludes judicial scrutiny of the substance of the transaction and grant the Defendants’ Motion.

Importantly, the contractual safe harbor for interested transactions established a process which, if followed, created a fair and reasonable transaction outside of judicial scrutiny and without recourse by the other partners.  The court found that the partnership agreement precluded a good faith analysis of the Conflicts Committee's review and limited the court's review purely to matters of process.

The relevant portions of the Special Approval provision, importantly, are silent as to good faith.....According to the contractual language, the Special Approval of a duly constituted and fully informed Conflicts Committee is conclusive evidence that such transaction is fair and reasonable, and such approval is, therefore, preclusive of further judicial review. The Plaintiff does not allege that the Conflicts Committee was not duly constituted—that is, directors who are neither security holders nor employees or officers of the General Partner or its affiliates. Nor does the Plaintiff allege that the Conflicts Committee was not fully informed. Thus, the approval here is conclusive that the [transaction] is “fair and reasonable” to TCP. According to the explicit language of the LPA, when a conflicted transaction is deemed “fair and reasonable” by the terms of the agreement, such conflicted transaction is incapable of breaching the LPA.

Get the message? LOUD and CLEAR!

The opinion contains more analysis and excerpts of the relevant portions of partnership agreement.  Look for an excerpt on this case in my ChartaCourse (electronic platform) Business Organizations casebook. 

-Anne Tucker

July 27, 2016 in Anne Tucker, Business Associations, Delaware, Litigation, LLCs, Partnership, Unincorporated Entities | Permalink | Comments (0)

Tuesday, July 26, 2016

Slow Down on the Reverse Veil Piercing of LLCs (Which Are STILL Not Corporations)

By Joshua Fershee

Anyone who reads this blog knows that I have issues with how people mess up the distinction between LLCs (limited liability companies) and corporations. In some instances, it is a subtle, likely careless, mistake.  Other cases seem to be trolling me.  Today, I present you such a case: Sky Cable, LLC v. Coley, 2016 WL 3926492 (W.D.Va., July 18, 2016).  H/T: Jay D. Adkisson. The case describes the proceedings as follows: 

DIRECTV asks the court to reverse-pierce the corporate veil and declare that Randy Coley is the alter ego of his three limited liability companies, such that the assets held by those LLCs are subject to the judgment in this case.

Okay, so claiming to pierce the "corporate veil" of an LLC is wrong (it doesn't have a "corporate" anything), but it's also exceedingly common for lawyers and courts to make such an assertion. This case takes the improper designation to the next level.  

First, the court describes the LLCs in questios as "the Corporate Entities."  It then goes on to discuss "Coley's limited liability companies."  Ugh.  The court further relates, "DIRECTV stated that in a forthcoming motion, it would ask the court to reverse-pierce the corporate veil given Coley's abuse of the corporate form."  No such form, but perhaps we can now blame DIRECTV's counsel, in part, for this hot mess.  

Here's the court's Legal Framework: 

Generally, corporations are recognized as entities that are separate and distinct from their officers and stockholders. [Author's note: THERE ARE NO SHAREHOLDERS IN LLCS!] "But this concept of separate entity is merely a legal theory, 'introduced for purposes of convenience and to subserve the ends of justice,' and the courts 'decline to recognize [it] whenever recognition of the corporate form would extend the principle of incorporation "beyond its legitimate purposes and [would] produce injustices or inequitable consequences.' "" DeWitt Truck Brokers, Inc. v. W. Ray Flemming Fruit Co., 540 F.2d 681, 683 (4th Cir. 1976) (citations omitted). When appropriate, and " 'in furtherance of the ends of justice,' " a court may pierce the corporate veil and treat the corporation and its shareholders as one, id. (quoting 18 Am. Jur. 2d at 559), if it finds a corporation and its shareholders have misused or disregarded the corporate form, United States v. Kolon Indus., Inc., 926 F. Supp. 2d 794, 815 (E.D. Va. 2013). This is often referred to as an "alter ego theory."

The court continues: "Delaware courts take the corporate form and corporate formalities very seriously.... " Case Fin., Inc. v. Alden, No. CIV. A. 1184-VCP, 2009 WL 2581873, at *4 (Del. Ch. Aug. 21, 2009)." The opinion then states that veil piercing concepts"apply equally to limited liability companies which, like corporations, have a legal existence separate and distinct from its members."  The concept may, but LLCs do not have to follow the same formalities as corporations to maintain separate existence.  Even if veil piercing were appropriate here, the entire case continues to misstate the law of veil piercing LLCs. Note: Delaware courts do hold some blame here: Westmeyer v. Flynn, 382 Ill. App. 3d 952, 960, 889 N.E.2d 671, 678 (2008) ("[U]nder Delaware law, just as with a corporation, the corporate veil of an LLC may be pierced, where appropriate.").

Based on the opinion, it does seems as though the defendant here was being shady, at best, and perhaps outright fraudulent.  I don't suggest that, based on the facts presented, the defendant shouldn't be held accountable for his debts. Still, in addition to the misstatements of the law, I am not sure veil piercing was necessary.  As the court notes, "veil piercing is an equitable remedy and an extraordinary one, exercised only in exceptional circumstances "when 'necessary to promote justice.'"  It seems to me, then, the court (and the plaintiff) should discuss other remedies first, relying only on veil piercing where "necessary." 

As such, I'd like to see a discussion of fraudulent or improper transfer before veil piercing -- did the defendant improperly move assets that should have been available to the plaintiff into an entity? Before veil piercing three entities, it seems to me the court should determine what should have been available to the plaintiff -- if the answer is "nothing" then no amount of shady behavior should support veil piercing.  If there should be assets, then the question should still be "which ones?"  If the answer is all of the assets in all of then entities, then okay.  But if the court is veil piercing three entities merely to ensure adequate recovery, that's an overreach, it seems to me.  In addition, how about reviewing if there was actual fraud in how the defendant acted?  That, too, could support recovery without the extraordinary veil piercing remedy.  

Ultimately, it's possible the court got the outcome right here.  But it clearly got the law wrong.  A lot.  

 

July 26, 2016 in Corporations, Delaware, Joshua P. Fershee, LLCs | Permalink | Comments (2)

Monday, July 25, 2016

Direct v. Derivative under the Tennessee Business Corporation Act

By joanheminway

In a recent decision of the Tennessee Supreme Court, Keller v. Estate of Edward Stephen McRedmond, Tennessee adopted Delaware's direct-versus-derivative litigation analysis from Tooley v. Donaldson, Lufkin, & Jenrette, Inc., 845 A.2d 1031 (Del. 2004), displacing a previously applicable test (that from Hadden v. City of Gatlinburg, 746 S.W.2d 687 (Tenn. 1988)).  Although this is certainly significant, I also find the case interesting as an example of the way that a court treats different types of claims that can arise in typical corporate governance controversies (especially in small family and other closely held businesses).  This post covers both matters briefly.

The Keller case involves a family business eventually organized as a for-profit corporation under Tennessee law ("MBI").  As is so often the case, after the children take over the business, a schism develops in the family that results in a deadlock under a pre-existing shareholders' agreement.  A court-ordered dissolution follows, and after a bidding process in which each warring side of the family bids, the trustee contracts to sell the assets of MBI to members of one of the two family factions as the higher bidder.  These acquiring family members organize their own corporation to hold the transferred MBI assets ("New MBI") and assign their rights under the MBI asset purchase agreement to New MBI

Prior to the closing, the losing bidder family member, Louie, then an officer and director of MBI who ran part of its business (its grease business), solicited customers and employees, starved the MBI grease business, diverted business opportunities from MBI's grease business to a corporation he already had established (on the MBI property) to compete with MBI in that business sector, and engaged in other behavior disloyal to MBI.  Louie's actions were alleged to have contravened a court order enforcing covenants in the MBI asset purchase agreement. They also were allegedly disloyal and constituted a breach of his fiduciary duty of loyalty to MBI.  Finally, they constituted an alleged interference with New MBI's business relations.  

Continue reading

July 25, 2016 in Business Associations, Corporations, Delaware, Joan Heminway, Shareholders | Permalink | Comments (0)

Sunday, July 24, 2016

ICYMI: Tweets From the Week (July 24, 2016)

By Stefan J. Padfield

July 24, 2016 in Stefan J. Padfield | Permalink | Comments (4)

Saturday, July 23, 2016

Sixth Circuit Adopts Materialization of the Risk Standard for Loss Causation

By Ann Lipton

It looks like the Fifth Circuit is becoming increasingly isolated.

After the Supreme Court decided Dura Pharmaceuticals, Inc. v. Broudo, 544 US 336 (2005), a circuit split developed as to how plaintiffs can satisfy the element of loss causation in a Section 10(b) action.

All circuits agree that loss causation can be shown via “corrective disclosures” – some kind of explicit communication to the market that prior statements were false, followed by a drop in stock price.

However, as I’ve discussed before, there has been an alternative theory that plaintiffs can use to show loss causation, even without an explicit corrective disclosure.  The theory is usually described as “materialization of the risk.” It requires the plaintiff to show that the fraud concealed some condition or problem that, when revealed to the market, caused the stock price to drop, even if the market was not made aware that the losses were due to fraud.  For example, a company may report a slowdown in sales, causing its stock price to fall, while concealing the fact that the slowdown was due to an earlier period of channel stuffing.  By the time the channel stuffing is revealed, it may communicate no new information about the company’s prospects, so the stock price remains unmoved.  Under a materialization of the risk theory, the price drop upon disclosure of the fall in sales would be sufficient to allege loss causation.

The Fifth Circuit has rejected materialization of the risk theory, requiring some kind of communication to the market that the earlier statements were false.  The Ninth Circuit generally has done the same, but there’s enough wiggle room in its caselaw that it agreed to hear an interlocutory appeal in Mineworkers’ Pension Scheme, et al v. First Solar Incorporated, et al, No. 15-17282, to resolve the issue.

And this week, in Ohio Public Employees Ret. Sys. v. Federal Home Loan Mortgage Corporation et al. - the long-running crisis-era case alleging that Freddie Mac concealed its exposure to bad mortgage loans - the Sixth Circuit joined the vast majority of circuits in holding that materialization of the risk is sufficient to satisfy the element of loss causation (quietly glossing over earlier caselaw that had seemed to endorse the corrective disclosure standard). Among other things, the Sixth Circuit expressed concern that companies will easily be able to evade liability if liability is functionally predicated on a corporate confession of wrongdoing.  That’s a reasonable concern: as Barbara A. Bliss, Frank Partnoy, and Michael Furchtgott have found, in the wake of Dura, corporations have adopted disclosure strategies aimed at masking the cause of stock price reactions, allowing them to reduce litigation risk. (I blogged about an earlier version of the paper here).

July 23, 2016 in Ann Lipton | Permalink | Comments (0)

Friday, July 22, 2016

Crowdfunding for the Olympics

By Haskell Murray

As loyal readers may have noticed, I am excited about the upcoming Summer Olympic Games in Rio.

While the Olympics is sure to be heavily watched, the Games are not that lucrative for many of the participants. The average Olympian supposedly only makes around $20,000 a year from sponsorships and has significant travel, medical, and coaching costs.

On the GoFundMe website alone, there are over 140 campaigns in their "Athletes Competing in Rio" category. Collectively, the campaigns have raised over $680,000.

Here are a few stories about Olympic athletes using crowdfunding. (Inc., Forbes, USA Today).

For those who will be attending the SEALS Conference and are interested in crowdfunding, my co-blogger Joan Heminway is moderating a discussion group on "The Legal Aspects of Small Business Finance in the Crowdfunding Era" on Tuesday, August 9 from 9am-12pm, which promises to be interesting. Most of the Olympic athletes appear to be using gift-based crowdfunding, but in the SEALS discussion group, I will present on a proposal for firms to use equity crowdfunding in connection with building athletic communities that could include Olympic athletes.

July 22, 2016 in Crowdfunding, Haskell Murray, Sports | Permalink | Comments (2)

Thank You Letters

By Haskell Murray

Following on Joan's excellent post about networking letters, I wanted to share a few words about thank you letters.

Attorney Kyle Westaway organizes "thank yous" into four levels:

  • Level 1 — Email saying thanks for the time and insight.
  • Level 2 — Level 1 + this is how your insight impacted my life.
  • Level 3 — Handwritten thank you note.
  • Level 4 — Level 3 + a small gift.

This seems right, and Kyle's entire post is well worth reading at the link above.

A mere thank you e-mail usually isn't worth much, but it is better than nothing (unless the thank you is typo-riddled, and then it might be worse than nothing). The e-mail is worth more if the author recounts meaningful specifics from your conversation or picks up on a way that he/she might be of assistance.

The handwritten note has made a comeback after interviews, but I don't think it has had the same resurgence after networking/advice meetings. This is a shame because generally the interviewer is just doing his or her job, while the person who is honoring your networking/advice request is usually the one bestowing a true gift. Due to the relative rarity, I think handwritten notes are even more appreciated after a networking/advice meeting than after an interview. For handwritten notes, I think it is worth investing in personalized stationery and trying to remember to send the notes right away so that the delay is not elongated.  

As to small gifts, those obviously would not be appropriate after an interview, but might be a really nice touch after a networking/advice meeting. If any readers have good thoughts on appropriate small gifts, please share in the comments or over email. I have always had a hard time thinking of these kinds of gifts. Wine seems like a common choice, but it could be risky unless you know the person drinks alcohol.

Finally, this recent article in the Harvard Business Review entitled Stop Making Gratitude All About You struck a chord. The author suggests praising the recipient rather than just describing how the recipient benefited you or made you felt. Of course, praise should be sincere and can be overdone, but I think the author is onto something.

July 22, 2016 in Business School, Haskell Murray, Joan Heminway, Jobs | Permalink | Comments (2)

Thursday, July 21, 2016

Is Good Corporate Governance Just a Matter of Common Sense?

By Marcia Narine Weldon

Jamie Dimon (JP Morgan Chase), Warren Buffet (Berkshire Hathaway), Mary Barra (General Motors), Jeff Immet (GE), Larry Fink (Blackrock) and other executives think so and have published a set of "Commonsense Principles of Corporate Governance" for public companies. There are more specifics in the Principles, but the key points cribbed from the front page of the new website are as follows:

Truly independent corporate boards are vital to effective governance, so no board should be beholden to the CEO or management. Every board should meet regularly without the CEO present, and every board should have active and direct engagement with executives below the CEO level;

■ Diverse boards make better decisions, so every board should have members with complementary and diverse skills, backgrounds and experiences. It’s also important to balance wisdom and judgment that accompany experience and tenure with the need for fresh thinking and perspectives of new board members;

■ Every board needs a strong leader who is independent of management. The board’s independent directors usually are in the best position to evaluate whether the roles of chairman and CEO should be separate or combined; and if the board decides on a combined role, it is essential that the board have a strong lead independent director with clearly defined authorities and responsibilities;

■ Our financial markets have become too obsessed with quarterly earnings forecasts. Companies should not feel obligated to provide earnings guidance — and should do so only if they believe that providing such guidance is beneficial to shareholders;

■ A common accounting standard is critical for corporate transparency, so while companies may use non-Generally Accepted Accounting Principles (“GAAP”) to explain and clarify their results, they never should do so in such a way as to obscure GAAP-reported results; and in particular, since stock- or options-based compensation is plainly a cost of doing business, it always should be reflected in non-GAAP measurements of earnings; and

■ Effective governance requires constructive engagement between a company and its shareholders. So the company’s institutional investors making decisions on proxy issues important to long-term value creation should have access to the company, its management and, in some circumstances, the board; similarly, a company, its management and board should have access to institutional investors’ ultimate decision makers on those issues.

I expect that shareholder activists, proxy advisory firms, and corporate governance nerds like myself will scrutinize the specifics against what the signatories’ companies are actually doing. Nonetheless, I commend these business leaders for at least starting a dialogue (even if a lot of the recommendations are basic common sense) and will be following this closely.

July 21, 2016 in Compliance, Corporate Governance, Corporations, Current Affairs, Financial Markets, Management, Marcia Narine Weldon, Securities Regulation, Shareholders | Permalink | Comments (3)

Benefit Corporation Articles in the ABA's Business Law Today

By Haskell Murray

There are a number of short articles on benefit corporations in today's issue of the ABA's Business Law Today, including one on benefit corporation reporting by me.

My contribution is based on my 2015 West Virginia Law Review article, An Early Report on Benefit Reports, which showed under 10% compliance with benefit corporation reporting, noted problems with the statutory framework, and suggested statutory amendments.

July 21, 2016 in Business Associations, Haskell Murray, Social Enterprise | Permalink | Comments (2)

Wednesday, July 20, 2016

Observations from Writing a Book that May Help You Finish Your Next Article

By Anne Tucker

Last week on the blog I featured the smart book Empire of the Fund by sharing excerpts from a conversation with author, Professor William Birdthistle.  In discussing the book, he shared with me some insights on writing a book:  its process, genesis and use in the classroom.  I am fascinated by other's people writing process in the continual effort to improve my own.

writing a book...

[W]riting a book was more of a challenge than I expected, even though I told myself it was simply a collection of law review articles.  It turns out that the blinking cursor on an empty screen is more taunting when you're obliged to fill hundreds of pages.  Brief stints of productivity need to be repeated again and again and, until it all exists, nothing really exists.  I developed a convoluted system of drafting notes, then sitting down with a research assistant to record a chat about those notes, then working that recording into an outline.  That process still left me with plenty of writing to do, but I found it much easier to expand, polish, and revise those outlines than to fight the demon blank page.

Talking through your ideas forces you to synthesize the materials. It also retains the humanity behind the arguments.  This method makes a lot of sense when you read Professor Birdthistle's book because it feels like he is talking to you— just in a way that is smarter, better organized and more pithy than most of us can muster in the average conversation.  His book doesn't read like the belabored, bloated, and laborious sections that all too often find their way in law review articles (my own included).

genesis for the book...

The contents, to a large extent, have actually come from the classroom -- as these materials serve as the syllabus for a seminar I've taught for a few years.  The seminar, called Investment Funds, is almost always popular: in a go-go market, all the students want to hear about private equity and hedge funds; then in downturns, I get a sober audience of students who want to know more about their 401(k)s. 

application to broader classes...

I often work this material in to my BusOrg and SecReg classes too: so, I emphasize the role of funds on topics like corporate purpose (does charitable giving look different if the corporate funds might otherwise go to 401(k) holders), proxy contests (in which mutual funds are major institutional investors but often conspicuously absent from these fights), shorting (where the securities are often borrowed from mutual funds and ETFs), and behavioral versus neoclassical theory (quoting heavily from a wonderful disagreement between Judges Easterbrook and Posner in Jones v. Harris before it went to the Supreme Court).  

Since almost all students will soon be figuring out their own 401(k) and mutual fund investments, I've found that it's easy to make business issues far more salient to their lives.  Even to the saints who'll soon have a 403(b).

the role of behavioral work...

Finally, I highlight Professor Birdthistle's observations about changes to the corporate law landscape made space for a book like his to contribute, in a serious way, to the academic and popular debate about the efficacy of the mutual fund market.

I've been struck by the change in our intellectual and academic disposition towards investing problems.  I've been in the academy for a decade now and, when I began, the rational investor model was so thoroughgoing that it was difficult to discuss problems of individual investing.  Many conversations -- and job talks -- required a first-principles exegesis about how this market might possibly be anything other than highly efficient.  But a tide of behavioral work in recent years has helped explain why investors might struggle, and a good deal of empirical work has concretely shown how they struggle.  So conversations today focus more upon solutions rather than on whether there is even a problem.

To this last point, I wonder what ideas and principles, which seem untouchable today, will give way to the next generation's breakthrough.  I think is a particularly heartening message for young scholars--not all of the work has been done! Keep at it!  And it is an important message for folks who aren't writing in the mainstream. For folks who are passionate about their work, but feeling like their ideas aren't garnering the right cache with the right audiences. This is where you persevere so long as the work is thorough and well researched.  Maybe you and your work are contributing to an important intellectual advancement.  You could be changing the tides in ways that in presently imperceptible, but significant nonetheless.  So as the August submission deadline looms and the summer hours threaten to languish, press on!

Because this post is a compilation of quotes, I now turn to Garrison Keeler to close:

Be well, do good work, and keep in touch.

Anne Tucker*

*Query:  Are the best motivational speeches are the ones you write for yourself?

July 20, 2016 in Anne Tucker, Behavioral Economics, Business Associations, Corporations, Financial Markets, Law School, Research/Scholarhip, Teaching, Writing | Permalink | Comments (0)

Tuesday, July 19, 2016

Wharton Professor Position in Business Ethics

By Haskell Murray

Untitled

David Zaring, who is a professor at Wharton, has the details over at the Conglomerate.

Wharton is open to JD-only, PHD-only, or JD/PHD candidates for this position.

Applications  can be submitted here and the application deadline is November 1, 2016.

July 19, 2016 in Business School, Ethics, Haskell Murray, Jobs | Permalink | Comments (0)

Central States Law Schools Association Conference: Registration is Open!

By joanheminway

Registration is now open for the Central States Law Schools Association 2016 Scholarship Conference, which will be held on Friday, September 23 and Saturday, September 24 at the University of North Dakota School of Law in Grand Forks, ND. We invite law faculty from across the country to submit proposals to present papers or works in progress.

CSLSA is an organization of law schools dedicated to providing a forum for conversation and collaboration among law school academics. The CSLSA Annual Conference is an opportunity for legal scholars, especially more junior scholars, to present on any law-related topic in a relaxed and supportive setting where junior and senior scholars from various disciplines are available to comment. More mature scholars have an opportunity to test new ideas in a less formal setting than is generally available for their work. Scholars from member and nonmember schools are invited to attend.

Please click here to register. The deadline for registration is September 2, 2016.

Hotel rooms are now available for pre-booking. The conference hotel is the Hilton Garden Inn in Grand Forks. The hotel phone number is (701) 775-6000. When booking, identify yourself as part of the “UND School of Law” block to receive a daily rate of $89. Please note that conference participants are responsible for all of their own travel expenses including hotel accommodations.

For more information about CSLSA and the 2016 Annual Conference please subscribe to our blog.

We look forward to seeing you in Grand Forks!

Sincerely,

The 2016 CSLSA Board
For more information about CSLSA, visit our website at http://cslsa.us/ or contact a board member.

July 19, 2016 in Conferences, Joan Heminway | Permalink | Comments (0)

Is Entity Type Material?

By Joshua Fershee

Today I will pose a simple question: Is Entity Type Material?  

Of course, context matters, so here's where this is coming from: On July 1, 2016, Canterbury Park Holding Corporation filed an 8-K making the following announcement: 

SHAKOPEE, Minnesota (July 1, 2016) - Canterbury Park Holding Corporation, a Minnesota corporation (Nasdaq Global Market: CPHC) (the “Company”), today announced that it has completed its previously announced reorganization of the Company’s business into a holding company structure (the “Reorganization”), pursuant to which a recently-formed Minnesota corporation with the same name, Canterbury Park Holding Company (“New Canterbury”), has replaced the Company as the publicly held corporation owned by the Company’s shareholders. At the market open today, July 1, 2016, the shares of common stock of New Canterbury will commence trading on the Nasdaq Global Market under the ticker symbol “CPHC,” the same ticker symbol previously used by the Company.

As a result of the Reorganization, the Company has been merged into a limited liability company subsidiary, Canterbury Park Entertainment LLC. In addition, the Company’s shareholders have automatically become shareholders of New Canterbury on a one-for-one basis, holding the same number of New Canterbury shares and the same ownership percentage after the Reorganization as they held immediately prior to the Reorganization. The business operations, directors and executive officers of the company will not change as a result of the Reorganization.

The exhibits list, though, provides: 

Exhibit No.
Description
2.1
Agreement and Plan of Merger, dated March 1, 2016, among Canterbury Park Holding Corporation, a Minnesota corporation, New Canterbury Park Holding Corporation, a Minnesota corporation, Canterbury Park Entertainment LLC, a Minnesota limited liability corporation. (Incorporated by reference to Exhibit 2.1 to the Registration Statement on Form S-4 (File No. 333-210877) filed with the SEC on April 22, 2016.)

A what?  You probably guessed it: a "Minnesota limited liability corporation." No, it's a limited liability company, as properly noted in the press release. 

Okay, so I suspect it's not really material to the SEC or most other investors in the sense that this is a mistake, as long as the filing and exhibit are otherwise accurate. I looked at the May 27, 2016, DEF 14A, which did list the LLC correctly.  However, in searching that document I found this was part of the 14A:

GGCP Holdings is a Delaware limited liability corporation having its principal business office at 140 Greenwich Avenue, Greenwich, CT 06830.

Sigh.  Well, it may not matter to the SEC, but it's material to me.  

 

July 19, 2016 in Joshua P. Fershee, LLCs, Securities Regulation | Permalink | Comments (2)

Monday, July 18, 2016

The Networking Letter: Sibling of the Job-Seeking Cover Letter

By joanheminway

As an adjunct to my posts (here and here) on law placement cover letters, I commend to you this blog post on networking letters, correspondence that seeks to establish a career or job-related connection--maybe even a longer-term relationship--rather than apply for a specific position.  Truth be told, in some form or another, four of the five tips in the post also apply to job-seeking cover letters.  The outlier?  Tip #2: "Don't ask for an interview or a job."

My take on the relevance of the other four tips for job placement cover letters is as follows:

  1. Respect your reader's time.  Always a good idea when you are asking for anything.  Do not demand.  Ask graciously.  But also be careful not to fall over yourself in being respectful.  It's just not attractive.  It's usually sufficient to use a pair of sentences like these after making an "ask" to show your respect:  "I know that you have a busy schedule.  Accordingly, if this request is unduly burdensome, please just let me know."
  2. Sell your strengths.  This is important and seems obvious.  But folks still miss this prompt!  Why would someone want to meet with a person they don't know well or at all unless the person was interesting to them in some respect?  As readers may recall, I recommend using the PAR method in sharing professional and personal strengths--using a short, pointed narrative, rather than merely describing knowledge, experience, or skills with adjectives and adverbs.
  3. Consider the timing of your letter.  I just had a request from a student on this very issue--when to get back in touch with folks he had positive connections with last year who asked him to "stay in touch" about his permanent job search.  These questions (as to timing) are highly contextual and can be tough to navigate.  I recommend consulting with multiple people to get their views about particularly sticky timing questions.  For example, with respect to my student, the timing of/participation of the firms in on-campus interviews plays a role.  So, I recommended that he also consult with folks in our Career Services office.
  4. Stick to it.  The advice the blog post author (Miriam Salpeter) gives here is dead-on right.  Key sentence: "You don't want to stalk the person, but it's okay to touch base a few times before you consider the door closed."  Again, I advise using advisors from various "walks" to help determine what crosses the line.  It's very important to those consultations that the letter writer keep accurate and complete records of contacts with the proposed letter recipient and others in the same workplace that can be shared with the consultants so that they can best advise. 

As another interview season is on the horizon (although interviewing never seems to stop these days, does it?), some of this advice may come in handy for folks soon.  I also recommend in this regard, btw, Haskell Murray's great post on resumes and interviews.  I cite to it in my initial cover letter post, but I want to note its value again here.

Thanks to Jim Levy for this post on the Legal Skills Prof Blog that alerted me to the networking letter piece.

July 18, 2016 in Joan Heminway, Jobs | Permalink | Comments (2)

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