June 2015

My recent scholarship (e.g., Outside Investor & Retirement Revolution) has focused on retirement and institutional investors. On the retirement investor side, I frequently address the impact that fees have on retirement investment returns, in part, as a critique of the opacity and lack of choice in the defined contribution plans (i.e., 401K and 457 plans). A focus on fee reduction (as well as simple diversification) has driven growth in the index and electronically-traded (ETF) funds, which charge lower fees because they are passively managed.  These simple lessons in finance are not just relevant to the individual investor.  Earlier this week, CalPERS announced that it would cut fund management fees by reducing (nearly in half) the number of active fund managers overseeing the investment of its over $300 billion in assets.  The New York Times reported that:

Eliminating some external managers will help Calpers shore up its investments by reducing fees. Last year, it paid $1.6 billion in management fees, $400 million of which was a one-time payment for its real estate managers, a Calpers spokesman said.

With larger pools of assets shifted to the remaining asset managers, CalPERS should have more leverage to demand lower fees and cost…

Exam time has come and gone and grades are filed. I have never had any trouble, as far as a I know, with cheating in my exams.  My expectation is that most problems arise from plagiarism in writing assignments.   There may be people trying to cheat on my exams, I suppose, but I am not sure it would prove helpful.   I change my exams and take steps to try to make the exam as fair possible, so that cheaters, should there be any, can’t get much of an advantage.  

I was interested to see the report that China took proctoring to new heights this week, according to a news report in The Guardian, China deploys drones to stamp out cheating in college entrance exams:

Authorities in China are employing surveillance drones in an effort to stamp out cheating in college entrance exams.

But this year officials have unleashed a six-propeller drone, flown over two testing centres in

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I was reading an article on securities crowdfunding in China and came across this description of Chinese practice:

Generally, in China, equity-based crowdfunding capital-seekers rely on the strength of experienced, leading investors to advise “follow-up” investors in locating investment projects. Leading investors are usually professionals with rich experience in private offerings and label themselves as holding innovative techniques in investment strategies and possessing sound insights. On the contrary, follow-up investors usually do not have even basic financial skills, but they do ordinarily control certain financial resources for investment. When a leading investor selects a target investment project through an equity-based crowdfunding platform, the leading investor usually invests personal funds into the project. Crowdfunding capital- seekers then take advantage of the leading investor’s funds to market the project to follow-up investors.

(This is from a recent article by Tianlong Hu and Dong Yang, The People’s Funding of China: Legal Developments of Equity Crowdfunding-Progress, Proposals, and Prospects, 83 U. CIN. L. REV. 445 (2014).)

This is not unique to China. Private offerings to accredited investors in the United States often follow a similar path. Smaller investors are more likely to commit once a well-known, sophisticated investor has made a commitment. But…

There have been a few recent articles in the news discussing diversity – or its lack – among lawyers.

First, Deborah Rhode writes in the Washington Post that law is one of the whitest professions.  People of color make up one fifth of law school grads but only 7 percent of law firm partners – and those numbers drop to 2 or 3 percent in BigLaw.  She argues that among other barriers, unconscious bias still plays a role in hindering the advancement of African American lawyers.  She also points out that women, as well, struggle to make partner – perhaps reflecting the difficulty that women have walking the tightrope of being aggressive enough to do their jobs, but not so aggressive that they come off as unfeminine.

Picking up on these themes, the American Lawyer recently published a report on how BigLaw is failing women.  Sometimes, these failures are attributed to demanding work schedules that make it difficult for women to shoulder responsibilities for childcare – which is why one law firm was recently profiled in the New York Times for hiring mainly women, and allowing them to adjust their schedules around their parenting responsibilities.  But flexible work schedules…

This week, while preparing for and attending the National Business Law Scholars Conference, I have had to deal with a Tennessee corporate law “brushfire” of sorts generated by a Nashville Business Journal (NBJ) article published earlier this week.  The article, written by a Nashville lawyer, took a somewhat alarmist–and substantively inaccurate–view of a recent addition to the Tennessee Business Corporation Act drafted by the Business Entity Study Committee (BESC) of the Tennessee Bar Association, of which I am a member (and about which I have written here in the past, including here, here, and here).  Specifically, the author asserted that Tennessee’s adoption of the text of Model Business Corporation Act Section 14.09 creates new liability for Tennessee corporate directors–especially directors of insolvent Tennessee corporations.  Somewhat predictably, calls and emails from directors, executives, and the Tennessee Secretary of State’s office (which, itself, received many calls) ensued.

By design, and (we believe) by effect, the statutory section at issue clarifies the duties of directors of dissolved Tennessee corporations and establishes a safe harbor from liability.  Accordingly, the drafting team from the BESC (me included) believed we had to jump in and correct the mischaracterizations in the…

The New Yorker recently ran an interesting article entitled Patagonia’s Anti-Growth Strategy. Patagonia is a certified B corporation and a California benefit corporation.

As a customer, Patagonia is my favorite company for casual/outdoor clothing, and one of my favorite companies in any industry. Initially, I thought Patagonia’s clothes were insanely expensive, but their clothes have been much cheaper on a “cost-per-wear” basis than any other clothes I have bought. In an age of cheap products and rampant consumerism, Patagonia is striking a chord with those who wish to buy fewer, quality products.

A taste of the article follows, but go read the entire thing.

The company’s anti-materialistic stance ramped up on Black Friday, 2011, with a memorable full-page advertisement in the Times that read, “Don’t Buy This Jacket.” The ad’s text broke down the environmental costs of the company’s top-selling R2 fleece sweater and asked consumers to think twice before buying it or any other product. The attention the ad received helped to bump Patagonia’s 2012 sales significantly. . . . Patagonia is trying second-hand-clothing sales at its shop in Portland, Oregon, and has made product repair and recycling a growing part of its business model. It recently invested

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Greetings from Havana. I spent 3 days last week with the Florida bar learning about the Cuban legal system and foreign investment from local and Canadian lawyers and a Cuban-based American reporter. I have spent the past several days looking at art from over 40 countries at the Biennal. My internet is spotty and I’m typing this on my phone so please excuse any spacing issues. Only 5 percent of people have internet access so a hotel lobby is prized real estate.
Over the next few months I will be researching about Cuba, foreign investment, and the human rights implications. I have a particular interest in this because for many years pre-academy I had to ensure that my former company and its subsidiaries did not violate the law by doing business with Cuba. Although the embargo is still in place, more and more US companies are applying every day for OFAC licenses to enter the Cuban market.
If you have any insight/opinions on the pros/cons of bilateral investment treaties (there are already dozens with Cuba), whether Cuba will follow the VietNam model for modernizing its economy, or whether foreign investment can spur human rights reforms or just perpetuate the status…

I just signed up for the SEALSB Annual Conference, which will be held in Atlanta, GA from November 12 through 14. I have attended and presented at the SEALSB Annual Conference each of the past two years. Both years we had a good group of professors.

The paper presentations are not limited by legal subject area, and the presentations in past years have covered issues in corporate governance, constitutional law, employment law, international law, sports and the law, franchise law, and other areas.

The conference is intended for “teachers and scholars in the fields of business law, legal environment, and law-related courses outside of professional law schools.” Most participants teach legal studies in business schools. I am told that those who interested in or exploring teaching legal studies outside of a law school are also welcome.

Conference registration information is available here. 

I just returned early Monday from this year’s Law and Society Association conference.  I presented my paper on LLC operating agreements as contracts–about which I later will blog here–on a panel as part of a CRN (Collaborative Research Network) on corporate and securities law.  I enjoyed the conference and being in Seattle (a city I rarely get a chance to visit).

I noticed something in a number of the sessions I attended, however, that I want to share here.  A number of scholars referenced, in their presentations or in comments to the presentations of others, “shareholder primacy.”  As I listened, it was clear these folks were referring to the prioritizing of shareholder interests–especially financial interests–ahead of the interests of other stakeholders in corporate decision-making, rather than the elements of corporate control (few as there are) enjoyed by shareholders.  As I began to recognize this, several things happened in rapid succession.

First, I remembered David Millon’s recent paper on this subject, which (among other things) tells a history of the use of the “shareholder primacy” term.  It’s well worth a read.  Or a re-read!

Second, I remembered Steve Bainbridge’s earlier work on this same topic. Ditto on that paper; read…