Business Law Prof Blog

Advice for the New Business Law Prof – Part V: A Potpourri

I don’t have enough material for another focused post on advice for new business law professors (see posts I, II, III, and IV).  However, I do have a smattering of additional thoughts that I wanted to share in hopes that new professors, and potentially others, might find them helpful.  So, in no particular order:

• As in much of life, less is generally more. Specifically, in prepping a new class, in your excitement, you might initially want to try to cover almost all of the casebook.  Just say no!  For example, given my research interests, I always wanted to cover derivatives etc. in my Banking and Financial Institutions Law course.  However, I finally learned that in a three-hour course without prerequisites, I only had time to cover how banks (and some bank-like financial institutions) were structured, regulated, and handled when in trouble. 

 

• I think it’s helpful to add syllabus language (and note it to students) along the lines of the following: “In practice, the learning experience of each course is unique. I reserve the right to modify the scheduled readings or material to be covered to promote the best educational experience for students.” I certainly don’t recommend wholesale changes mid-course to the syllabus.  However, I do think, as fellow co-bloggers have aptly pointed out, that clearly setting expectations early on is critical.  Hence, it is helpful to set the expectation that there might be some variation in the assignments over the course of the semester to match the pace of the class.

 

• The professor sets the energy level of each class. This is particularly important to remember if one is teaching at 8am, right after lunch, or in the evening!

 

• When possible, be encouraging! We all love to receive encouragement!  Let’s do our best to distribute it too!  For example, if a student’s answer to a question is wrong, is there something positive you can say about their response, and then steer the class to the right answer?      

 

• Our words, even if only casual remarks, often carry great weight with our students.

 

• Where possible, I find it helpful to use in-class examples students can relate to, and occasionally to share recent news stories relevant to the material we’re studying.

 

• In some courses, I’ve found it helpful to begin each class by summarizing at a very high level what we’ve already covered, what we’ll be covering that day, and what we are going to cover in the near future. Many students appreciate a reminder of the big picture.

Ok experienced professor-readers, is there something we’ve yet to mention that you think important to share with new business law professors?  If so, please help us out with a comment!    

 

M&A Sleuth in Sintra . . .

Greetings from sunny Portugal.   I am enjoying some vacation time here after attending and presenting at the European Academy of Management conference in Lisbon this past week.   I will have more to say about that conference in a later post.   But for today, I offer some light thoughts and an Internet "treasure hunt" relating to mergers and acquisitions.

I arrived at my hotel in Sintra earlier today to find a notice in the room stating that "[o]n the 30th June 2019, the Hotel Tivoli Sintra will be changing the legal business entity which will be reflected in future invoices."  The notice went on to ask that, "to avoid possible delays relating to the billing" each guest pay up his or her bill to date on June 30th "in a partial invoice," noting that "[t]he remaining services will be invoiced at the departure time with the new entity."  Apologies were made for "the inconvenience" and thanks were offered for "the understanding."

Of course, as an M&A practitioner and instructor, I wanted to know what led to this change in "legal business entity."  I suspected a merger or acquisition transaction.  Was it an asset transaction in which the hotel brand was being changed?  That's what I suspected.  Since I ask my advanced business law students to try to identify the nature of business combination transactions from news reports and public filings, I thought I would see what I could find out by doing a bot of Internet research.  Here's what I learned.

Minor Hotels "completed the acquisition of the entire Tivoli portfolio in early 2016."  I read this in the Minor International Public Company Limited 2016 Annual Report.  See also here.  The Tivoli Hotel Sintra was part of this final stage in acquiring the Tivoli hotels.  See here.  Minor International (known as MINT) is registered under the laws of the Kingdom of Thailand.

In the fall of 2018, MINT launched a compulsory tender offer for shares of NH Hotel Group SA.  The tender offer was commenced as a result of MINT's acquisition of a >30% equity stake in NH Hotel Group in a series of transactions earlier in the year.  A news report reveals that MINT's significant stock acquisitions were part of an initial unsolicited bid for NH Hotel Group, which Hyatt Hotels & Resorts also desired to acquire.  (Spain has a compulsory tender offer law that kicks in when control of a public company--which includes the direct or indirect acquisition of 30% or more of the public company's voting rights--changes.  See here.)  By the end of October, MINT had acquired sufficient additional shares of NH Hotel Group's common stock to bring its equity stake in NH Hotel Group to over 94%.  See here and here and here.  A subsequent news report indicates that "NH Hotels and Minor Hotels are seeking to further integrate their brands."  The same posting noted that "[p]lans are already underway in Brazil and Portugal to rebrand some Minor Hotels as NH Hotels, with 15 hotels in the two countries undergoing the transformation."

Accordingly, it seems that I may be among the last hotel guests to stay at the Tivoli Hotel Sintra as a Tivoli branded hotel.  At least that's my guess based on what I have read.  Although I was not correct in my original guess as to the nature of the transaction that led to the change in "legal business entity" of my Sintra hotel, if my assessment is correct, I wasn't far off.  An asset acquisition was involved at the outset, but the posited rebranding happened later and was more the result of a series of stock acquisitions in a hostile, competitive takeover environment.  Not a bad day's work in M&A sleuthing.  Just call me Nancy Drew, right, Ann?  

Some musings about the Blue Bell case

Last week, the Delaware Supreme Court issued an opinion, Marchand v. Barnhill, which is notable for two reasons.  First, it furthers the Court’s project of reinvigorating director independence standards, and second, it is one of the very few decisions to find that the plaintiffs properly pled a claim for Caremark violations.

The facts are these.  Blue Bell Creameries suffered a listeria outbreak in 2015 that killed three people and nearly bankrupted the company, and shareholders brought a derivative lawsuit alleging that the directors failed to oversee corporate compliance with FDA and other requirements.  First, they alleged that the CEO Paul Kruse, and the VP of Operations Greg Bridges, actually received notification from various agencies of the company’s lack of compliance and took no remedial action.  In so doing, Kruse and Bridges violated their fiduciary duties to the company, and a litigation demand on the board would be futile because of their close ties to the board members.

Second, plaintiffs alleged that the Board violated its Caremark duties by failing to institute a system for monitoring the company’s compliance.

Chancery dismissed both claims, and the Delaware Supreme Court reversed.

Starting with the issue of director independence, as Delaware-watchers are well-aware, in the past few years, the law has undergone something of a revolution.  Once upon a time, only clear financial ties or the equivalent of blood relations would be sufficient to show that one director lacked independence from another, but more recently, Delaware has begun to recognize how less concrete social and business ties, traveling in similar circles, ongoing professional and personal contacts, and so forth, can collectively create feelings of obligation that prevent one director from making an objective decision about whether to sue another.

Thus, in Marchand, the Court held that a particular director was likely biased in favor of Kruse because the Kruse family – not Paul Kruse personally – had mentored him throughout his business career, going so far as to make a sizeable donation to a local college that somehow ended up with the director in question getting a facility named after him.  Significantly, the Court emphasized that “independence” may vary depending on the type of decision at issue – directors may be willing to vote against close friends on some matters, but that’s a far cry from being willing to sue the friend for breach of duty, and judges need to be sensitive to the difference.

This entire line of caselaw might be described as Strine’s revenge: it’s a direction he recommended with In re Oracle Corp. Derivative Litig., 824 A.2d 917 (Del. Ch. 2003) when he was on the Chancery court, and that the Delaware Supreme Court rejected in Beam v. Stewart, 845 A.2d 1040 (Del. 2004).  Now in the Chief Justice spot, Strine has apparently persuaded his colleagues as to the correctness of his views and is moving full steam ahead, going so far in Marchand as to cite his Oracle decision, thus retroactively making it authoritative. 

As to the Caremark issue, what’s striking here is not only the rarity with which Caremark claims make it past a motion to dismiss, but the fact that the Court accepted the plaintiffs’ claim that no monitoring system at all had been put into place.  The Court highlighted that despite various compliance problems that arose over the years, the Board had no committee in place to address these matters and Board minutes did not indicate any discussion of them.

By contrast, in the few cases where Caremark claims have had some success – think something like In re Massey Energy Co., 2011 WL 2176479 (Del. Ch. May 31, 2011), where the claim was properly pled but lost in a merger – plaintiffs demonstrated that the Board didn’t simply fail to monitor, but was actually complicit in the legal violations.  They knew of the red flags and either ignored them or directly encouraged the misbehavior.  They were, in Elizabeth Pollman’s framework, actually disobedient regarding their legal obligations. (And to give credit where credit is due, I’ll say that Elizabeth Pollman is the one who has observed that successful Caremark complaints tend to plead willful violations of the law, and the paper she eventually releases on the subject is something to stay tuned for).  But notwithstanding that general tendency, in Marchand, the Delaware Supreme Court did not hold that the Board was complicit, or that it had actual knowledge of potential legal violations; instead, it held that the Board simply had no monitoring system in place at all – a much harder claim since just about any monitoring system will do, and its design is within the directors’ business judgment.  The Marchand Court went so far as to point out that monitoring systems in place at the management level were insufficient to absolve the Board, because there was no indication that the Board was monitoring at all – even to make sure that management did its job.

The thing to note about this aspect of Marchand is that the Court did not have to go that way, because Paul Kruse and Greg Bridges – who actually knew about the various problems – were both directors themselves, and Kruse later became Chair of the Board.  That is, the Court could have said that the Board, via Kruse and Bridges, did have a monitoring system, and that, via Kruse and Bridges, the Board was aware of problems but refused to take action to remedy them.  Yet the Court chose not to go this route – it didn’t even mention that Kruse was a director throughout the period and Bridges was a director for most of it (you have to look at the Chancery decision for those tidbits), and only grudgingly indicated that Kruse eventually became Chair of the Board – a fact to which the Court attaches no significance (and indeed, he only became Chair just before the problem reached crisis point).  Instead, ignoring the fact that at least two members of the Board were part of management and directly received notice of compliance issues, the Court simply declared that no monitoring system was in place.

So the opinion seems, in a way, motivated.

That impression is reinforced by the types of compliance problems that the Court identifies to establish that that Blue Bell had longstanding sanitation issues.  The Court lists regulatory citations that Blue Bell factories received dating back to 2009, but – to my untutored eye – they all read like, well, flyspecking.  You know, periodically an agency inspects, and they always find a problem to write up, and it’s quickly resolved.  Now, just to be clear, I am not an expert in the regulation of food safety and I may very well be misreading this, but a handful of problems like “equipment left on the floor and a ceiling in disrepair in the container forming room” just don’t strike me as the kind of thing to suggest systemic noncompliance.  Matters only get serious when listeria is first detected in 2013, and after that, though listeria is identified several other times, nothing in the opinion indicates that the company was ignoring regulatory complaints or failing to attempt to remediate the problem before it issued a general recall in early 2015.

The point being, it almost seems as though the Court is going out of its way to justify a “failure to monitor” theory and seizes upon (again, to my untrained eye) fairly minor problems as evidence that the Board was not paying sufficient attention.

That said, I do have to highlight this aspect of the Court’s reasoning:

In answering the plaintiff’s argument, the Blue Bell directors also stress that management regularly reported to them on “operational issues.” This response is telling. In decisions dismissing Caremark claims, the plaintiffs usually lose because they must concede the existence of board-level systems of monitoring and oversight such as a relevant committee, a regular protocol requiring board-level reports about the relevant risks, or the board’s use of third-party monitors, auditors, or consultants…Here, the Blue Bell directors just argue that because Blue Bell management, in its discretion, discussed general operations with the board, a Caremark claim is not stated.

But if that were the case, then Caremark would be a chimera. At every board meeting of any company, it is likely that management will touch on some operational issue….

I admit, if defendants just argued that the Board discussed “operational issues,” that’s pretty damning.

Okay, so what do we make of all of this?

Well, I have to go back to an argument I’ve previously made in this space, namely, that with decisions like Corwin, Delaware has transformed itself into something like a mini-SEC.  Suddenly, instead of emphasizing a Board’s substantive obligations, courts are scouring disclosures to determine if a shareholder vote was fully informed.  Except, of course, we already have an SEC – we don’t need Delaware to do that job. (But see Reza Dibadj, Disclosure as Delaware’s New Frontier, 70 Hastings L.J. 689 (2019)).  A contextual, nuanced take on independence carves out a space for Delaware that the SEC can’t replicate – and perhaps the same might be said of a more muscular approach to Caremark.

New Paper - Reorganizing Health Care Bankruptcy

Arizona State's Laura N. Coordes has a new paper up making a powerful case for overhauling bankruptcy laws for health care.  Despite the soaring, and seemingly irrational medical costs paid by patients, health care bankruptcies have been on the rise.  Since 2010, health care bankruptcies have increased by 123% while bankruptcies across all sectors have declined by 58%. The problems are not evenly distributed.  Financial distress may be most concentrated in rural hospitals.  If these hospitals continue to fail and close because they cannot address financial problems through bankruptcy, many people will be left without access to basic medical care.  As the boomer population continues to age and require ever more medical care, these problems are likely to get worse and worse.

Coordes convinced me that health care organizations differ from other entities in need of bankruptcy relief.  These bankruptcy misfits have state and federal regulators and patient communities as key stakeholders, making it a challenge for bankruptcy courts charged with maximizing a bankruptcy estate's financial value to balance competing interests. 

Looking down the road, additional health care bankruptcies appear likely.  And as they mount, the need to put a solid, health-care-specific framework in place to address them will increase.  Hopefully, this is an area where we'll be able to get some reforms done before too many providers close.

ICYMI: #corpgov Midweek Roundup (June 26, 2019)

"'It’s less harmful to piss off the government than piss off Google,' Mr. Abuhazim said. 'The government will hit me with a fine. But if Google suspends my listings, I’m out of a job. Google could make me homeless.'" #corpgov https://t.co/LisAipJZR5

— Stefan Padfield (@ProfPadfield) June 21, 2019

"we see labeling based on incomplete information, public shaming, and shunning wrapped in moral rhetoric preached with cold-hearted, self-righteous oblivion to the consequences, which ultimately fall on real people" #corpgov https://t.co/0FyB5LzRJN

— Stefan Padfield (@ProfPadfield) June 22, 2019

Is doctrinal change a response to "extra-legal factors, including interest group politics"? "Kershaw rejects this claim, offering other..accounts for the production of US corporate fiduciary law & for Delaware’s lead in attracting incorporations." https://t.co/HpFVmTDDkD #corpgov

— Stefan Padfield (@ProfPadfield) June 21, 2019

Study: "Personal values and cultural norms ... appear to dominate legal rules in shaping directors’ shareholderism stances." https://t.co/ufLNUM2AVN #corpgov

— Stefan Padfield (@ProfPadfield) June 25, 2019

"Many legal scholars do not readily associate executive search firms (ESFs) with corporate governance, yet they are intimately connected with a key mechanism of corporate governance — elite labor markets." https://t.co/yR7QEJqCIq #corpgov

— Stefan Padfield (@ProfPadfield) June 21, 2019

Respecting Time and (Sort of) Unplugging

I’m not great at unplugging. That’s a trait I suspect rings true with a lot of people, especially lawyers. I am working on it. Writing this post while on vacation is not a great example of that, though I’m writing this while I’m on a plane, and the kids are occupied with their own electronic flashy things. 

 

I have tried very hard to put most anything that can wait to the side during our travels. I’ve not always succeeded, but I’m doing better than I usually do, so that’s good. 

 

Setting work aside (especially cellphones/email) is something a lot of try to do on vacation, but I also know I need to do a better job of it on a daily basis. If I’m accessible to people all the time electronically, I am necessarily less available to those right in front of me. There are times when that’s a necessary balancing act, but not always. 

 

In some ways, that’s a lesson I learned a long time ago (though I continue to need reminders), and I have done better in certain settings, such as individual meetings with students and colleagues. But even for myself, when I am writing or reading, I often let the possible get in the way of the immediate task before me. I’m trying to set up some better habits so I can be more focused — more in — in whatever it is I am doing. 

 

I am also contemplating additional efforts to protect other people’s time. The main one I’m thinking about relates to communication timing. I’m someone who tends to be connected, so I’m also one who tends to both reply and initiate emails at all hours. That can imply to others an expectation of similar accessibility, even if that’s not the intent. 

 

At a minimum, I plan to make sure people know when I send an email during off hours if it’s actually urgent or if it’s just me catching up. It’s almost always the latter.  But I’m also thinking strongly about using delayed timing for non-urgent emails, so they send during regular business hours, even if they were written on the weekend or in the evening. 

 

The challenge with that is that some people would prefer to have emails during non-business hours. I’m one of them, as I often like to work through email early in the morning, so delayed emails might actually set me back a bit. And while I’d like people to unplug more, I’m not one to tell others how they should work or when. 

 

At a minimum, I’ll be thinking a lot more about ways to make sure what I ask of people is reasonable and ensure that people know what I actually expect. It is not just students who appreciate transparency. 

 

My first order of business is trying to let myself know what I expect of me. Fortunately, I’ve got just a little more time to sort that out.  

Advice for the New Business Law Prof – Part IV: First-Class Tips

One of the things that I obsessed over (alone and together with other new business law prof colleagues) as I began my teaching career was how to teach the first day of classes in my courses.  I was given some great advice by many folks.  Here are a few of the most valuable things people told me--advice that I use all the time, in my first-class sessions and, in some cases, beyond.

Have a solid class plan.  This may go without saying, but my obsession paid off in that I was prepared, and therefore more confident (although my legs were shaking behind the podium anyway . . . ).  I actually typed up my class notes for the first semester's worth of classes I taught.  (I learned that, while I can read class notes competently, I always extemporaneity anyway . . . .  I no longer read typewritten class notes, but many of my colleagues who are experienced and effective teachers still do.)  But typing up my notes helped to reinforce key parts of the material for me and identify course themes.

Use the first class as an opportunity to introduce the semester's task, including both substantive law coverage and other learning objectives.  I use a device in each doctrinal and experiential course to offer students a window on what we are covering and how that will be done.  I include a piece on my expectations (e.g., reading the syllabus, frequently checking the course management site, reading email, producing timely and thoughtful work).  Be as clear as possible about your expectations for your students.  (As Josh Fershee said, "it's important to be as clear as possible about the what and the why.")  Write them into your syllabus, of course; but also reinforce them verbally on the first day and at every logical juncture in the course where they may be relevant.

Consider using a motivating hypothetical or in-class project to help launch the course or illustrate coverage or themes.  In my Business Associations course, after using a PechaKucha presentation as a brief introduction, I assign a few students in key roles in a new business with each other, and we use the remaining class time to talk through their expectations and how the law might address them.  In my Corporate Finance course (which I teach as a planning and drafting seminar), we begin with a nebulous drafting assignment.  In my Securities Regulation course, we begin with the financing of a vaguely described business in which the students are invited to invest.  These three sample introductory sessions are just few among the many that could be used for these or related courses.  Use your knowledge of where your course is headed to construct something relevant to your materials and course plan.

Arrive at class ten minutes early.  Engage the students in an informal way as they arrive and get settled.  Ask about how they are, what they did last summer, compliment them genuinely on something, what kind of coffee they are enjoying, etc.  Anything that comes naturally in the way of light personal banter can work.  (Continue this in subsequent classes, by the way.  It's a great way to develop a deeper relationship and trust network with your students.  This can come in handy when you flub up on something--which you inevitably will do, based on my experience and the experiences of folks I know.)

I am sure there is more I could say, but these items are the key ones, from my vantage point.  What can you add?  Leave comments to help our new colleagues along a bit.

Seeking Applications: Estey Chair in Business Law, University of Saskatchewan College of Law

The Estey Chair in Business Law was established in 2014 through the generosity of the Estey Family as well as through the support of alumni and friends of the College of Law at the University of Saskatchewan. The Chair was created to honour the late Supreme Court of Canada Justice Willard “Bud” Estey, a proud alumnus of the College. The Chair has previously been held by Rod Wood and Cally Jordan.

We invite applications from outstanding scholars and practitioners in the field of business law, defined broadly as including domestic and international structures (including but not limited to regulatory and dispute resolution frameworks and institutions), governance, transactions, finance, securities, competition, taxation, insolvency and related areas.

The College is seeking candidates in two categories:

1. Those with a strong academic background and demonstrated academic leadership and teaching skills;

        OR

2. Senior and highly experienced legal professionals.

In either category, the role of the Chair is to engage with faculty colleagues, students and members of the local legal profession and generate enthusiasm about the College’s business law programming. The College of Law provides a stimulating, supportive and highly collegial environment in which the Chair can deploy his or her knowledge and skills to explore new areas of research and to engage with students, experienced academics and senior practitioners.

Term length will normally be for one year, but the College will consider terms of less than one year, particularly in the case of senior legal professionals who wish to spend a shorter time with the College. In the academic category, the successful candidate for the Chair will be an academic with an established reputation and record of scholarly achievement. He or she will be in residence at the College of Law and is expected to enrich and enhance the intellectual life of the College by pursuing a research program, teaching one course or seminar, delivering a public lecture and planning and hosting a conference or focused scholarly workshop. In the senior legal professional category, the successful candidate for the Chair will be a senior and highly experienced professional with a national and/or international reputation in their chosen area of practice. He or she will be in residence at the College of Law and is expected to enrich and enhance the teaching and learning environment of the school, and its business law reputation, by sharing his or her practical knowledge and expertise with students, Faculty and members of the local profession. He or she will be expected to teach a seminar and to organize a workshop on a current and topical issue in his or her established field of practice.

The Chair is also expected to engage in outreach activities with the bar, judiciary and the wider community during their tenure. Appropriate administrative and financial supports will be provided, particularly with regard to the research and outreach obligations of the Chair. Salary will be commensurate with the experience and standing of the holder but it is anticipated that the Chair will be appointed at the level of Associate or Full Professor ranks. In the case of Associate Professor appointments, the successful candidate will be an emerging scholar with a growing reputation whose career trajectory would be enhanced by holding an endowed Chair appointment. The Salary range at the Associate Professor is $112,109 to $130,925; Professor $130,925 to $152,877, with a higher starting salary in rare and exceptional circumstances pursuant to Article 18.2.6.12 of the 2014-2017 USFA Collective Agreement (http://www.usaskfaculty.ca/?attachment_id=3298).

Applications will begin to be considered immediately. While the date for appointment is flexible, the ideal candidate would be available to occupy the Chair as of August 1, 2019. The College would also entertain applications from suitably qualified candidates who may wish to occupy the Chair in the 2019-20 or 2020-21 academic years.

This position includes a comprehensive benefits package which includes a dental, health and extended vision care plan; pension plan, life insurance (compulsory and voluntary), sick leave, travel insurance, death benefits, an employee assistance program, a professional expense allowance, and a flexible health and wellness spending program.

The College of Law is the oldest law school in western Canada, and has provided public service, innovative legal education and high-quality legal scholarship to the Province, Canada and beyond since 1912. We graduate leaders in a host of different areas with alumni holding judicial, political, academic, private and public sector positions at the highest levels in a number of different regions within the country and beyond. The law school is committed to providing its students with rich experiential learning opportunities. Our faculty members are award-winning teachers, recognized for their teaching innovation and effectiveness. The College has embraced the interdisciplinary opportunities presented by being part of a major research-intensive university. This fact is reflected in the value the law school attributes to the creation and dissemination of diverse forms of knowledge and the use of that knowledge to better the human condition.

Inquiries as well as letters of application, accompanied by a current curriculum vitae and an outline of the research plans of the candidate, should be directed to:

Professor Martin Phillipson Dean, College of Law
University of Saskatchewan
15 Campus Drive
Saskatoon, Saskatchewan
S7N 5A6
Telephone: (306) 966-5910
Fax: (306) 966-5900
Email: jean.der @usask.ca 

The University of Saskatchewan is strongly committed to a diverse and inclusive workplace that empowers all employees to reach their full potential. All members of the university community share a responsibility for developing and maintaining an environment in which differences are valued and inclusiveness is practiced. The university welcomes applications from those who will contribute to the diversity of our community. All qualified candidates are encouraged to apply; however, Canadian citizens and permanent residents will be given priority.

Clearing and Weighty Words

Those who follow developments in derivatives clearing know that the regulation of this area has frequently been a source of conflict among international regulators (see When Regulators Collide).  This past week, in the Financial Times article CFTC chair complains to European Commission over regulation jibe [subscription required], Philip Stafford and Jim Brunsden report that an EU official’s comments during a recent conference, which included the phrase “you fell for it,” in reference to a March agreement between the EU and the US, spurred CFTC Chairman Christopher Giancarlo to write EU Commissioner in charge of Financial Stability, Valdis Dombrovskies, to ask for a clarification of the comments.   For me, the article did double-duty: it updated me about happenings in one of my research areas and it reminded me of the importance of our words.      

Deadweight Loss or Utopian Benefit?

I am in Colorado attending the Law & Economics Center’s 34th Economics Institute for Law Professors. It’s a fantastic conference, and I highly encourage you to attend if you can. You can view this year’s agenda here. (If you have trouble with the links, try a different browser.  If that doesn't work, let me know.)

This past Wednesday, during the “Economics of Innovation and Dynamic Competition” class, Prof. John Yun discussed the difference between static and dynamic models of competition, and how this might impact our assessment of monopolists. One aspect of this discussion focused on the concept of “deadweight loss.” For those of you not familiar with this concept, go watch the following 3-minute video from “ACDC Econ”: https://youtu.be/YNcPxPz9fng .

The video provides the standard assessment that monopolies create “deadweight loss” and that this deadweight loss is inefficient. Consequently, the conventional wisdom is that government regulation/intervention is therefore justified. However, this analysis is based on comparing the expected behavior of a monopolist with a static model of perfect competition. One of the problems with using a static model is that it fails to take into account where we’ve been or where we’re actually likely to go. A more dynamic view might prompt questions such as, “If monopoly pricing power didn’t exist, would we ever get the innovation that creates monopoly power in the first place?” Or, “If perfect competition rarely, if ever, exists in the real world, why are we using it as a benchmark for regulation?” Put another way, does it really make sense to regulate away the incentive to innovate that is created by monopoly pricing power (and the accompanying consumer and producer surplus) merely because we theorize that if we lived in the magical world of perfect competition we’d have even more surplus?

The foregoing led me to ask whether it might not be better to use “utopian benefit” rather than “deadweight loss” to describe the difference between what we get with monopoly pricing as opposed to what we’d expect to get with perfect competition. It is natural to react to a “loss” of surplus as something that should be made up, corrected, or restored – but calls to put innovation at risk in order to pursue a “utopian benefit” might lead to more appropriate caution and humility when it comes to regulation.  Let's see if we can get "utopian benefit" to catch on as an alternative to "deadweight loss."

If only there were an agency tasked with developing uniform standards for reporting material information

SEC Commissioner Peirce recently delivered a speech to the American Enterprise Institute and there's a lot going on here.

First, though this wasn't the nominal topic of the speech, Commissioner Peirce took the opportunity to take some shots at proxy advisors, complaining that:

Proxy advisor Glass Lewis, for example, has only 360 employees, only about half of whom perform research, who cover more than 20,000 meetings per year in more than 100 countries.  Companies may not get an opportunity to correct underlying errors. According to one recent survey, companies’ requests for a meeting with a proxy advisory firm were denied 57 percent of the time.  Companies submitted over 130 supplemental proxy filings between 2016 and 2018 claiming that proxy advisors had made substantive mistakes, including dozens of factual errors.  Proxy advisors ISS and Glass Lewis provide companies some opportunity to contest such errors, but access is not uniform for all issuers, and the process may not provide adequate opportunity for issuers to respond before proxies are voted.  The ramifications for the affected companies can be dramatic, as investment advisers, unaware of the error, vote their proxies in accord with the recommendation.

I've previously posted about the SEC's new interest in regulating proxy advisors; the writing on the wall appears to be that whatever else the SEC does, it's likely to create some kind of formal process by which companies can contest proxy advisor recommendations - potentially before the recommendations are distributed to investors, which, depending on how the regulations are drafted, could wind up impeding proxy advisors' ability to distribute recommendations at all.  Glass Lewis recently began a pilot program to circulate companies' rebuttals to Glass Lewis's analyses; Glass Lewis says this is not about staving off regulation, which.  Sure, let's go with that.

But the real topic of the speech was ESG investing, which she likened to a scarlet letter used to shame companies based on dubious metrics with little connection to financial value.  As she put it:

It is true that ESG issues may well be relevant to a company’s long-term financial value. At a recent hearing before the Senate Banking Committee, John Streur of Calvert Research and Management testified that it is a “misconception” that using ESG investment strategies results in the investor sacrificing returns.  In fact, he said, research has found that “firms in the top quintile of performance on financially material ESG issues significantly outperformed those in the bottom quintile.” Why, then, must the word “ESG” must be used at all? Of course, firms in the top quintile of performance on financially material issues outperform those on the bottom. If ESG disclosures mean disclosing what is financially material, there is little controversy, but the ESG tent seems to house a shifting set of trendy issues of the day...

There is, for example, a growing group of self-identified ESG experts that produce ESG ratings. ESG scorers come in many varieties, but it is a lucrative business for the successful ones. The business is a good one because the nature of ESG is so amorphous and the demand for metrics is so strong. ESG is broad enough to mean just about anything to anyone. The ambiguity and breadth of ESG allows ESG experts great latitude to impose their own judgments, which may be rooted in nothing at all other than their own preferences. Not surprisingly then, there are many different scorecards and standards out there, each of which embodies the maker’s judgments about any issues it chooses to classify as ESG.  The analysis can appear arbitrary as it may treat similarly situated companies differently and may even treat the same company differently over time for no clear reason. Putting aside the analysis that produces the final score, some ESG scores are grounded in inaccurate information....

Even if the rating is not wrong on its own terms, the different ratings available can vary so widely, and provide such bizarre results that it is difficult to see how they can effectively guide investment decisions....

People are free to invest their money as they wish, but they can only do so if the peddlers of ESG products and philosophies are honest about the limitations of those products. The collection of issues that gets dropped into the ESG bucket is diverse, but many of them simply cannot be reduced to a single, standardizable score. ... We ought to be wary of shrill cries from a crowd of self-appointed, self-righteous authorities, even when all they are crying for is a label.

Now, I completely agree that often the call for ESG investing conflates the idea of investing based on moral/ethical considerations, and the idea of investing based on nonfinancial metrics which have a moral cast but are in fact part of financial analysis.   And I agree that there is a proliferation of untested, vague standards, as well as a wide variety of funds that market themselves as "ESG" without being anything of the sort.

Which probably explains why Cynthia Williams and Jill Fisch petitioned the SEC for formal rulemaking on the disclosure of ESG information.  It also explains why the SEC's Investor Advisory Committee asked the SEC to consider modernizing the framework for reporting on human capital management.  So, maybe if there's a demonstrated investor demand for reliable, consistent, comparable information about public companies, there's something the SEC could do to help them out besides warning them to "be wary"?

2019 National Business Law Scholars - A Masterful Jill Fisch Keynote

Today, the 10th annual National Business Law Scholars Conference concluded.  Jill Fisch gave today's keynote lecture at lunchtime.  She masterfully (really) tied together the scholarship of the far-and-away vast majority of the business law scholars attending the conference by weaving together corporate purpose, private ordering, and choice of entity.  In tying these themes together, she encouraged us all to use our scholarship to serve multiple audiences--including the judiciary, the law practice community, and industry.

This talk resonated with me from start to finish.  I was riveted.  I knew Jill was talking directly to me and so many others in the room who have plumbed the core of corporate governance and tried to address multiple audiences with our work.  She validated, and encouraged us to continue (and expand), our work in these somewhat unsettled (and sometimes unsettling!) areas of business law.

Take me for example (since I know myself best . . . ).  As Jill talked about corporate purpose, I heard her to be validating part of my article on Corporate Purpose and Litigation Risk in Publicly Held U.S. Benefit Corporations.  When she addressed private ordering, I understood her to be endorsing my observations on that subject (as well as corporate purpose!) in Shareholder Wealth Maximization as a Function of Statutes, Decisional Law, and Organic Documents.  And when she extolled the virtues of scholarship on choice of entity, I realized she was supporting work like mine in Let's Not Give Up on Traditional For-Profit Corporations for Sustainable Social Enterprise.  In each of those pieces, I was talking to audiences that include those outside the business law academy.  I have recently focused more direct attention on these additional audiences in essays like Why Can't We Be Friends? A Business Finance Lawyer's Plaintive Plea to Entrepreneurs and Professional Responsibility in an Age of Alternative Entities, Alternative Finance, and Alternative Facts.  I know that others in the audience saw similar reflections of Jill's words in their own work.

Mike Guttentag observed in summary that Jill's words represented both a "call to action" and a celebration.  I could not have summed Jill's talk up any better than that.  (And she seemed pleased by that summary--indicating that if she had achieved those objectives, she had done the job she set out to do.)

I left the keynote program uplifted and, frankly, jazzed up about what I have done, am doing, and plan to continue to do.  The great comments I got on my insider trading project in the session right after her talk were icing on this beautiful cake.  Thank you, Jill, for your rousing endorsement of business law scholarship.

ICYMI: #corpgov Midweek Roundup (June 19, 2019)

Report: "61 percent of the costs of merger and acquisition securities litigation went to lawyers .... shareholders received nothing in 85 percent of settled merger objection claims in the past five years" https://t.co/mzUMtF5VUk #corpgov

— Stefan Padfield (@ProfPadfield) June 14, 2019

"Staying out of the investments for 16 years had cost the fund more than $3.5 billion, a fund consultant calculated. After a debate, the board not only kept the ban but expanded it to cover investments made by external managers." https://t.co/0ENG4p9gEf #corpgov

— Stefan Padfield (@ProfPadfield) June 17, 2019

"The intracorporate communications doctrine provides an absolute defense to a defamation claim.... by deeming communications among members of the entity, under the appropriate circumstances, simply ... not published." https://t.co/oazK5OH6tW #corpgov

— Stefan Padfield (@ProfPadfield) June 14, 2019

The SEC "today charged KPMG LLP with altering past audit work after receiving stolen information about inspections of the firm that would be conducted by the Public Company Accounting Oversight Board (PCAOB)." https://t.co/k1wvCWRbKh #corpgov

— Stefan Padfield (@ProfPadfield) June 17, 2019

"a statement can be shown to be false by the materialization of a risk that was concealed by the company .. Although this materialization doctrine is well established, it is the thesis here that its ultimate effect is to over-compensate investors" https://t.co/syTEr5cPbL #corpgov

— Stefan Padfield (@ProfPadfield) June 14, 2019

Advice for the New Business Law Prof – Part III: Defining Your Role

My colleagues started this series off well with Part I and Part II in the series, and I will try to build on their thoughts. There are so many decisions to make when you get started, including what book to use, what style you will use in the classroom, and what form or forms of assessment you will use.  To start, I will echo Joan Heminway's advice because I think it is so critical: First, be yourself. 

It's easy to to think of teachers you liked and think you need to teach like them to be effective. While we can all learn a lot from our best teachers, if you look closely, I think you'll find that the thing best ones have in common (in addition to being prepared) is that they are true to themselves. That is not to say that every person is the same in classroom as they are outside.  Some people need to be actors -- they take on a persona when they hit the classroom.  Others wear their hearts on their sleeves. Others are clinical, and still others are relaxed and casual. 

You may not know immediately your full style or classroom voice, but in my experience you know pretty quickly what isn't your thing. My advice is to make sure you don't stick with something you know doesn't feel even a little bit right for you.  You can experiment and push yourself to try new things, and you should. Just don't continue down a path that makes you feel like you're going the wrong way. Your students will feel it, too. Every time. 

As for assessment, you'll need to decide: Will you use one big final exam? Will you have a participation grade?  How about writing assignments or exercises? Will your exam be open book or closed book?  There are lots of options, and none are inherently right or wrong, though some may be better than others, especially for you and/or your school.  Here are some guidelines I use in deciding what to do: 

(1) If there is a manageable way to incorporate more writing in to the class, do it.  That might mean graded assignments, but it might mean in-class writing where students exchange their thoughts and compare it against a model or example answer.  It might mean multiple small papers or a series of blog posts.  The more students write, the better they will get at is.  And it doesn't have to mean you will be grading 5 papers from 50 students in a semester. As long as their is some accountability -- that is, someone other than the student will read it -- I have found it valuable. Asking students to write for and assess themselves has value, too, but in my experience the participation rate for those assignments tends to be lower and with less commitment for many students. 

(2) If you're not sure what to choose, or you're agnostic, find out what your colleagues tend to do, and do something different.  For example, many of my colleagues have used open-book exams, so I chose to give a closed-book exam for Business Organizations.  This gives students a different experience, which I think is valuable.  If all my colleagues gave closed-book exams, I'd probably give an open-book one.  I have done both types, by the way, and both are fine, though I prefer the output I get from closed-book exams. Students tend to write what they know instead of searching for the "perfect" answer in the book. If no one gives take-home exams, maybe consider that (though I hated those as a student and I don't like them as a teacher, your mileage may vary).  Different assessment styles provide one way to give students an experience they need as professionals to work with different partners or judges or clients. Not every experience is the same, and the best lawyers are adaptable. 

(3) Whatever you choose for any of these things, be intentional.  Do it for a reason that is more than that's what my professor did or that's what people do here.  You may choose a path for both reasons, but make sure you have considered other options and then made a conscious decision to follow that path. Be honest and open with yourself about why you chose that path. It will give you some comfort in your decision, as well as make it easier to see why you might want to change course in the future if your goals are not being met. 

(4) Be open with your students about what you are doing.  For me, that means explaining my thought process and why my rules are as they are.  My students know why, for example, I am giving a closed-book exam, do or do not use participation points, will or will not be flexible on deadlines, or why they may not want to tell me the reason they are missing class. Note that this works even for professors who are notoriously Socratic and won't answer much of anything directly.  For the good ones, it is at least clear what they will not do.  That said, for me, it's important to be as clear as possible about the what and the why.  Here is an example: in my energy law seminar, I tend to be flexible with deadlines (within reason) on due dates for drafts and papers, especially with advance notice. This is because the dates are somewhat arbitrary and designed as guidelines so I can provide feedback and students have time to internalize and incorporate my feedback. So, my students know that. But when I taught first-year legal writing, deadlines were absolute (or nearly so) with penalties up to including a failing grade for being one minute late.  Why?  One of my teaching goals there was to teach about severe and irrevocable deadlines that can be linked to court filings, statutes of limitation, and the like.  

Anyway, that's a little about how I approach things. Good luck, and don't forget to give yourself a break. As hard as we try, not everything will go perfectly. And sometimes what seemed like the right path was wrong. Or it just went poorly.  Try to figure out why, whether it was the idea, the execution, or an external factor, so you can decide whether to scrap it or just try again.  Even the best teachers are not perfect. But they are careful, committed, and intentional. Start there, and good things will tend to follow. 

Grunin Center Conference 2019

Earlier this month, I attended and presented at the 2019 Legal Issues in Social Entrepreneurship and Impact Investing–in the US and Beyond conference co-organized by the Impact Investing Legal Working Group and the Grunin Center for Law and Social Entrepreneurship at the NYU School of Law.  My friends Deb Burand and Helen Scott (also my Corporations and Securities Regulation professor when I was at NYU Law) co-direct the Grunin Center.  They organized a super conference this year.  Each year, the conference draws more folks--and with good reason.

I presented as part of a panel that compared and contrasted the use of different forms of entity for social enterprise businesses.  My role was (perhaps predictably, given that I wrote this piece) to defend the use of traditional for-profit corporations for this purpose.  I got some love from the panel and the audience, but so did others with different views . . . .

One of the nifty features of this conference is the use of lunchtime slots for "table talks" (roundtable discussions) and workshops.  I attended a table talk entitled "Gender Lens Investing: A Year in Review and A Look Ahead" and a workshop on "Re-Designing Legal Education for Lawyers, Social Entrepreneurs, and Impact Investors in the US and Beyond."  (The latter, which involved a design-thinking exercise to work on a course plan/syllabus, has spawned an ongoing informal working group that met again earlier today on Zoom.)  The conference attracts both lawyers and folks from industry.

For me, a wonderful part of this conference--and the scholar convening that followed on the day after the conference--was the inspiration of a new ideas for research and writing.  In my view, a good conference routinely does that, without fanfare. I hope to report out on the details of some of those ideas in the future.

During the week before the Grunin Center conference, I was at the Law and Society Association Annual Meeting.  I presented my ongoing insider trading research at that meeting.  I will again be presenting that work (with some updates) at the National Business Law Scholars Conference later this week.  I hope to see many of our readers there and share my insider trading research in later posts.

The College Admissions Scandal and Adversity

The college admissions scandal has been on my mind a good bit since the story broke. (Listen to the podcast "Gangster Capitalism" if you need to catch up on the details of the scandal.)

One student, more than any other in the scandal, has been in the media’s crosshairs: Olivia Jade Giannulli. Olivia Jade - a social media influencer (whatever that means) - seems to be getting so much attention because of her famous parents (actress Lori Loughlin and fashion designer Mossimo Giannulli), and because of some unfortunate comments she made about college on YouTube. Olivia Jade said: "I don't know how much of school I'm going to attend but I'm going to go in and talk to my deans and everyone and hope I can try and balance it all. But I do want the experience of game day and partying, I don't really care about school. As you guys all know. " I don’t know much about Olivia Jade, but she comes across as spoiled, arrogant, selfish, entitled, obnoxious, and lacking self-awareness. In many ways, I hope my children and my students grow up to be her opposite. 

In contrast, three runners who I have met at the Music City Distance Carnival (“MCDC”) track meet over the past few years embody character traits that I hope my children and students develop. These traits include toughness, self-discipline, humility, and perseverance.

First is Gabe Grunewald. Gabe passed away earlier this week, after four bouts with cancer. She ran the 1500m at MCDC 2017, just days after a round of chemo. Gabe was tenacious, but also immediately likable, kind, and selfless. Much of her massive, worldwide impact, stemmed from the positivity and resolve with which she faced her grim diagnosis. Her sponsor, Brooks Running, made this moving documentary that features some of her last races and shows the depth of her relationships. After her death, running clubs across the country gathered to run in her honor, and many pro runners featured #bravelikegabe on their race bibs. Gabe’s foundation still funds research to find cures for rare cancers.

Second, 50-year old, former Irish Olympian Shane Healy is still training and racing hard. At MCDC two weeks ago, Share broke the 50-54 year old world record in the mile (4:22), but he actually came in second to 53 year old Brad Barton who also broke the record in 4:19. I spoke to Shane the day after his race. He was gracious and thoughtful despite not claiming the record he flew across the Atlantic Ocean to secure. Shane's childhood (including time in an orphanage) and his adolescence (being bullied and facing financial difficulties) was rough, but seem to have helped build his resilience. He is currently in much better shape than the vast majority of people half his age, and is fiercely competitive, but I also sensed a kindness in him that is usually only found in people who have known deep pain.  

Third, Heather (Dorniden) Kampf is probably best known for her college 600m race where she fell, but got up and willed herself to the win. (The 600m is almost a sprint, so this is incredibly impressive). Heather, now known as “the queen of the road mile,” has had a good bit of success, but has finished 7th and 15th in the U.S. Olympic Trials, failing to make the team. She has battled through injuries and even penned an article titled Embracing the Struggle. I talked with Heather briefly at MCDC, and I could quickly tell that she has benefited from not being handed success. She is putting in the work to continue to improve. 

These runners are admirable, interesting, likable, and influential, in large part, because of their struggles, because of the way they faced adversity. Yet, the parents in the college admissions scandal, and "lawn mower parents" everywhere, seek to remove all adversity from the lives of their children. Professors now give more "As" than any other grade and the percentage of the top mark appears to be continually on the rise, even though I bet most professors would opine that the quality of student work product is declining overall. As a father of three young children and as a professor, I understand the urge to smooth the path--it is extremely difficult to watch people you care about struggle. Of course, there are times when we should step in and protect, but rather than shielding our children and students from all adversity, I believe we should teach them to deal with the inevitable struggles of life with integrity, humility, determination, and selflessness. As for Olivia Jade, I truly hope she takes her current adversity and uses it as a tool to shape positive character traits. 

Advice for the New Business Law Prof – Part II: Incorporating Dispute Resolution Exercises

Today’s blog is the second post (first here) about advice for new business law profs.  It is also the promised follow-on to last week’s post, particularly my response to co-blogger Haskell Murray’s comment.

I am an assistant professor at the University of Oklahoma’s Price College of Business, and I’ve also taught in law schools.  The advice I’ll share today is generally applicable in both business and law school environments.

“Negotiation and Dispute Resolution” is one of my absolute favorite courses to teach!  However, I came to the area by happenstance.  During my PhD studies at Wharton, I wanted to fulfill my TA responsibilities by assisting the securities law professor.  He didn’t need a TA.  Fortunately, Professor Ken Shropshire did for his negotiations courses.  And as they say, the rest is history.  I’ve now taught dispute resolution courses, mediated cases, am on FINRA’s arbitration roster, and recently wrote an arbitration-related article with my OU colleague Professor Dan Ostas.  So, likely the most important advice of this post that I often share with students and others is to be open to unexpected opportunities in life, especially when the door to the option you originally wanted is closed.

Ok, onto the teaching part…given my love of dispute resolution and the increasing emphasis on experiential and active learning, I now incorporate a few dispute resolution exercises into each of my business law courses at both the graduate and undergraduate levels.  In general, students really enjoy these exercises.  The Harvard Program on Negotiation (PON) and Northwestern’s Dispute Resolution Research Center offer an extensive amount of dispute resolution materials for a fee (the materials are copyrighted).  Professors can create an account at these institutions to preview the materials.  Many exercises have teaching notes, which is helpful (especially for newbies to the area!). 

I work with our copy center to have the materials printed, and then I hand the materials out in class to students (electronic options are available).  Each dispute resolution exercise will have different roles, so you’ll have to assign students to different roles.  If you don’t plan to do the exercise in the class in which you hand out the materials, you’ll need to plan ahead to make sure that students are present for the exercise as otherwise you might have missing roles.  Class participation is part of the final grade in my courses.  I assign participation points to each exercise, which students lose if absent (unless their absence is excused per policies outlined in the syllabus).  I’m happy for readers who want additional logistical details to reach out to me.

In Legal Environment of Business, the basic undergraduate business law course at OU, I use three dispute resolution exercises.  After we cover ADR, I have students negotiate Waltham Construction Supply Corp. v Foster Fuels, Inc. and, after debriefing the exercise, we watch PON’s related mediation video (negotiation materials come with video).  I also talk about ways in which arbitration of the dispute would be different.  After administrative law, we do Negotiated Rulemaking Electric Utilities, during which teams of students representing various interested constituencies negotiate the draft of a proposed administrative rule prior to its release for public comment.  Finally, after covering tort materials, we do Broken Benches, which can be negotiated, mediated, or arbitrated.  This exercise is a really nice transition from tort to contract materials.  You can emphasize that any mediated settlement agreements made are enforceable contracts. 

These exercises are also helpful for more advanced business law courses.  For example, both I (in Law of Business Organization) and my colleague Professor Traci Quick (in Commercial Transactions) have used PON’s Bankruptcy Multiparty Negotiation Simulation.  In this exercise, teams of students representing the typical stakeholders in a mass tort bankruptcy have 45 minutes to negotiate a reorganization plan.  The pressure is on because the value of the firm’s assets are rapidly deteriorating, and scheduled losses occur at different time intervals if agreement has yet to be reached.  Definitely a student (and professor) favorite!!

Tesla and the Case of the Missing Votes

It’s no secret that Tesla has weathered some … ahem … criticism of its governance structure, and in particular, the (lack of) board supervision over Elon Musk.  After Musk’s antics landed him in trouble with the SEC, the company proposed two charter amendments that would make the board more responsive to shareholders: first, to amend the charter so that future charter amendments will require only majority rather than 2/3 vote of the outstanding stock, and second, to amend the charter to reduce director terms from 3 years to 2. 

Management sponsored proposals – especially those that hand more power to shareholders – are usually kind of a done deal.  But this week, Tesla announced that even though the vast majority of voting shareholders favored the proposals, the proposals had failed to pass.  Now, to be sure, the proposals needed a 2/3 vote of the outstanding stock – that was, after all, one of the things sought to be amended! – but it was still a bit of a surprise to see that the threshold hadn’t been met, given the amendments’ popularity.

I know that I wasn’t the only one who suspected some kind of Musk-related shenanigans, like perhaps Musk got cold feet about relinquishing power at the last minute, and withheld votes on his approximately 21% stake.  The Wall Street Journal article reporting on the vote pointedly highlighted Musk’s ability to block changes he disliked.  Plus, when it was originally posted online, the article reported that a spokeswoman for Tesla did not answer a question about how Musk voted, though later the article was revised to say that the company claimed Musk did not withhold his votes.

But still, I was suspicious about how exactly the proposals managed to fail, so I tried to do some back of the envelope calculations once Tesla filed its 8-K disclosing the tally.

And here’s what I figure.  First, based on proxy disclosures and the 8-K, about 80% of the total voting shares made some kind of appearance at the meeting (in many cases, via broker non-votes).  That compares to about 83% last year, when there were about 4 million fewer shares eligible to vote.

Second, broker non-votes this year exceeded last year’s tally by 11 million – but even if all of those shares had voted in favor of the proposals, it wouldn’t have been enough to change the outcome given the 20% of shares that never made an appearance.

Why so many non-votes/nonappearances as compared to last year?  Well, I’m not sure if this means anything, but it also seems there was a lot higher volume of trading after the record date this year as compared to last year.  Now, Tesla sold 3 million new shares in early May, so I only looked at the first two weeks after the record date of 2018 as compared to 2019, but it seems there was double the amount of trading in 2019.  So, if I’m thinking about this correctly – and someone please feel free to weigh in if I’m getting this wrong, and disclaimer: I did not actually do a statistical analysis so I might be overstating the differences, but – it seems (1) the disparity in trading is not surprising given Tesla’s scandals this year and (2) the increased volume could potentially mean that otherwise-eligible voters sold their shares after the record date; so they didn’t bother to vote, and the new buyers weren’t able to do so.

So it’s definitely possible that all of this is just what it looks like: Tesla’s charter requires a high threshold to amend and the vagaries of public company voting made that threshold difficult to meet, even if most voting shareholders would prefer the amendment.  But what we we don’t have is rock solid certainty that there wasn’t some kind of last-minute management change-of-heart.

And that takes me back to my post last year about the need for disclosure of how insiders vote (holders of high vote shares, high ranking officers, directors).  We don’t have that now;  absent actual class voting, the votes are just disclosed as an undifferentiated block.  Which is what sent me on my bout of amateur sleuthing.

Now, not every company is Tesla and most of the time you can probably look at the vote total and, using other disclosures, figure out how insiders voted relative to other shareholders.  But my point is, I shouldn’t have to open my creaky copy of Excel and consult multiple SEC filings to suss this information out.  A clear statement, and separate totals, matter. They matter in terms of how the public understands the vote – reporting like this is downright misleading – and I think they probably matter in terms of how (some) shareholders understand their votes.  Voting isn’t like efficient markets; whether or not information is “priced in,” actual votes have to be cast with knowledge in mind.  Voters either understand the dynamics, or they don’t, and not everyone is going to do the math.  Shareholders should be able to clearly understand the impact of their votes before and after the ballots are cast.  Plus, I believe for certain kinds of close votes, insiders will be sensitive to how their ballots will be reported publicly, and that will affect their behavior.

Bottom line: Insider votes (and votes cast by high vote shares) should be broken out and reported separately.

Advice for the New Business Law Prof-Part I

With the thought that more than a few of you reading this post may be starting off in a law teaching job for the first time in just a few short months, several of us on the BLPB have decided to offer some tips and general advice to you as you prepare.  Since I have recently spoken to a few new folks who are still in the process of choosing textbooks, I will start there.  

Set forth below are my reflections on important matters related to choosing an appropriate textbook.  If anything I say here does not make sense to you (or, of course, if you have additional or different thoughts), please leave a comment.  And if you already have ordered your textbook and started planning your course, please don’t rethink everything because of this post!

First and foremost, it is important to know the institutional teaching objectives at your law school.  How does the business law course you are teaching contribute to the school’s program of legal education?  What attributes of your course may help build the law school's infrastructure for institutional success?

Then, consider the learning objectives you have for your students—taking care to meet institutional objectives, but adding more scaffolding.  Apart from what the institution needs, what do you want to make sure you effectively impart to your students?  Consider theory, policy, and skills, as well as the scope and depth of substantive legal doctrine.

Those general matters aside, I next work from the premise that one should teach from his or her strengths.  So, engage in self-assessment to pinpoint those strengths.  My core advice?  Do not try to be someone you are not through the choice of your textbook (or in any other aspect of your teaching, btw).  If you are not a law and economics expert or disciple, a casebook founded on economic theory is likely not a good choice for you . . . .  Be yourself.  Isolate factors to look for in textbooks that will help you to teach from your knowledge, experience, and overall comfort zone.

Consult with colleagues in and outside your law school. If you are teaching a course that others in your institution also teach, find out what books they use and why.  If you are teaching a course that is part of a sequence (e.g., Business Associations and Advanced Business Associations), find out what books are used by others in your institution who teach the other course(s) in the sequence.  Ask a number of folks what their recommendations are, but understand that you can go your own way (as long as you work with colleagues in your school to help ensure that transitions among related courses will be smooth).

Having ordered review copies of books that take into account information gained from the foregoing, pick up the books and read them. Not the whole of each, of course. I start with the table of contents, if I haven’t already looked at that online.  I then read the first chapter.  Does this chapter set the tone for myfirst class?  Does it establish the core values of my course?  Finally, I pick a few key chapters—maybe one that covers a weak point in my knowledge of the subject matter, one that covers a particularly difficult aspect of the doctrine, one that covers a favorite topic, etc.  I use these readings to find the book that has the best vibe, all in.

Then, make your choice!  Know that it is not irrevocable.  Sure, it is a pain in the neck to organize a syllabus around a book and then give all that up and draft a syllabus incorporating readings from a new book.  Students seem to know if I am teaching from a suboptimal book.  That distraction can affect the learning process as well as the overall student-teacher relationship.

However you choose your textbook, make sure you have at least one copy in hand in plenty of time to create your syllabus.  Generating a syllabus is an entirely different—but related—process.  Perhaps one of us will write about that in a future post . . . .

Future Business Law Professors Conference

When I decided to leave the law firm for a teaching fellowship in hopes that I might one day find a job as a law professor, I had no real clue what I was doing.  I struggled with the decision and the risk, but eventually just decided to go for it, even knowing that the entry-level hiring market was brutal.

One thing that would have helped enormously would have been something like this conference at Villanova.  They've put together an incredibly strong group of people to talk about how to do this.  Many of these folks would be great friends and mentors to get to know if you're going to join this field and community.  They have a registration link here if this is something you're interested in.

 

Future Business Law Professors Conference Presented by the John F. Scarpa Center for Law and Entrepreneurship Friday, September 6, 2019 9:00 a.m. - 3:00 p.m.  The John F. Scarpa Center for Law and Entrepreneurship will host the Future Business Law Professors Conference on Friday, September 6. All visiting assistant professors, fellows, researchers, law clerks, practitioners and others who are considering entering the higher education academic teaching market in business law – including business associations, securities regulation, corporate finance and business ethics – are invited to attend. Participants will learn more about the business law teaching market, receive advice on how to be a successful candidate and meet future colleagues. Attendees will have the opportunity to participate in mock interviews and get a sneak-peak into the hiring process from current business law faculty. Some will be able to present their job talk paper to leaders in the field and receive feedback. Appointments committee members from any law school potentially hiring in the business law field are also invited to attend. Senior faculty tentatively scheduled to attend include: ·                     Albert Choi (University of Michigan Law School) ·                     Jill Fisch (University of Pennsylvania Law School) ·                     Arthur Laby (Rutgers University Law School) ·                     Tom Lin (Temple University, Beasley School of Law) ·                     Andrew Lund (Villanova University, Charles Widger School of Law) ·                     Jennifer O’Hare (Villanova University, Charles Widger School of Law) ·                     Urska Velikonja (Georgetown University Law Center)