January 2016

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

[More under the cut]

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

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

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

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

Updated Law Professor (Business Areas) Position List.

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

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

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

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

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

Let’s tackle the first (and tangentially the second) imbalance by talking about hedge funds.  Last year, Trian hedge fund targeted DuPont in a very expensive, public and close proxy…

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

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

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

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

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

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

Thanks.

Tom Rutledge
Thomas.rutledge@skofirm.com

Indeed, I can vouch for the program, at which I have presented twice.  There typically is an opportunity presented to write a short piece for Business Law Today, if you are interested.  My contribution from the

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

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

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

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

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

The correlation may not be a strong as reports indicate, though.  Some reports suggest that the correlation is not nearly as close as it seems. As…

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

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

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