January 2016

I recently listened to a podcast on temptation bundling, featuring the work of Katherine Milkman (Wharton). 

Temptation bundling is explained here and here by Katherine Milkman, who (I believe) coined the term.

In short, temptation bundling is putting something you want to do together with something you should do. 

Temptation bundling can make both activities more enjoyable — you feel better about the want activity because you also accomplished a should activity, and the should activity is less difficult because it is married with a want activity. For example, temptation bundling is what I have been doing with podcast listening; I only listen to podcasts (want) when I workout (should).

Below are a few temptation bundles that might work for professors:

  • Drinking caffeinated drinks only while researching;
  • Listening to your favorite music only while grading; and
  • Eating chocolate only when in faculty meetings.

Tomorrow afternoon (as Anne promoted earlier today), I will participate in the annual Association of American Law Schools (“AALS”) panel discussion for the Section on Agency, Partnerships, LLCs and Unincorporated Associations.  The panel discussion this year is entitled “Contract is King, But Can It Govern Its Realm?” and focuses on the contractarian aspects of LLC law.  Here’s the panel description from the AALS annual meeting program:

This program will explore the role of contract in unincorporated associations, with particular emphasis on the LLC and limited partnership forms. In most jurisdictions, the sparse prescriptions in the default rules imply that the parties will draft an operating agreement that reflects the material points of their bargain. For example, Delaware emphasizes that its policy for LLCs and LPs is to give “maximum effect to the principle of freedom of contract.” Modern contract theory, however, raises significant questions about the extent to which any documentation of a transaction can be “complete,” even if sophisticated parties negotiate at arm’s length and attempt to fully reduce their expectations to writing. If complete contracts are indeed an ideal rather than the reality, can legislatures impose default rules (fiduciary or otherwise) to fill the gaps without…

The AALS Section on Business Associations and Law is honoring 13 exemplary mentors for their contributions to scholarship, teaching and the development of new business law scholars.  Those honored were nominated by fellow members of the AALS Section.  The mentors will be recognized at the conclusion of the AALS BA Section meeting on January 8th (1:30-3:15) at the Annual AALS meeting in New York.  Please join me in congratulating our colleagues and thanking them for their contributions to our field.

-Anne Tucker

The AALS Annual meeting starts today in New York.  The full program is available here, and listed below are two Section meeting announcements of particular interest to business law scholars:

Thursday, January 7th from 1:30 pm – 3:15 pm the SECTION ON AGENCY, PARTNERSHIP, LLC’S AND UNINCORPORATED ASSOCIATIONS, COSPONSORED BY TRANSACTIONAL LAW AND SKILLS will meet in the Murray Hill East, Second Floor, New York Hilton Midtown for a program titled:

“Contract is King, But Can It Govern Its Realm?”  

The program will be moderated by Benjamin Means, University of South Carolina School of Law.  Discussants include:

  • Joan M. Heminway, University of Tennessee College of Law
  • Lyman P.Q. Johnson, Washington and Lee University School of Law
  • Mark J. Loewenstein, University of Colorado School of Law
  • Mohsen Manesh, University of Oregon School of Law
  • Sandra K. Miller, Professor, Widener University School of Business Administration, Chester, PA

BLPB hosted an online micro-symposium in advance of the Contract is King meeting.  The wrap up from this robust discussion is available here.

Friday January 8th, from 1:30 pm – 3:15 pm join the SECTION ON BUSINESS ASSOCIATIONS AND LAW
AND ECONOMICS JOINT PROGRAM at the Sutton South, Second Floor, New York Hilton Midtown for a program titled:

 “The Corporate …

Kent Greenfield recently published a provocative article with Democracy on ending Delaware’s dominance over corporate law.  As is Greenfield’s way, he makes a familiar story sound fresh and raises an interesting question.  Is it democratic for a state with less than 1% of the country’s population to have its laws control more than half of the Fortune 500 companies?  Greenfield says no.

Power without accountability has no democratic legitimacy. If companies could choose which state’s environmental, employment, or anti-discrimination law applied to them, we’d be outraged. We should be similarly outraged about Delaware’s dominance in corporate law.

Greenfield suggests two alternative paths for ending Delaware’s dominance.  First:  states could amend their business organization statutes so that the law of the state of incorporation (Delaware) doesn’t govern the corporation, rather the law of the principal place of business would.   Second, and perhaps more radically, nationalize corporate law.  

The undemocratic critique is an astute observation. It takes the debate outside of the “race to the bottom” standard trope and into territory with perhaps more broad public appeal.  Leaving aside the state competition for headquarters, tax base and jobs with solution one and potential political friction with solution two, both solutions address

On Saturday, January 9, 2016, I will be spending the day at the AALS Section on Socio-Economics Annual Meeting at the Sheraton New York Times Square Hotel.  Among other things, I will be part of a panel discussion from 9:50 – 10:50 AM, Death of the Firm: Vulnerabilities and the Changing Structure of Employment.  My co-panelists will be June Carbone and Katherine Stone (I am very tempted to give up my 15 minutes and just sit back and listen to these two great scholars, but please don’t use the comments section to encourage me to do that).  As I understand it, the gist of the discussion will be that while firms once supported a significant part of the safety net that provided employee health and retirement benefits, they have recently abdicated more and more of these responsibilities.  At the same time, however, what may be described as subsidies granted by the state to firms — particularly corporations — as part of a social contract whereby these firms provided the aforementioned benefits, have not been correspondingly reduced.  In fact, the rights of corporations have been expanded by, for example, cases like Citizens United and Hobby Lobby — suggesting a possible windfall…

Some day, I may tire of calling out courts (and others) that refer to limited liability companies (LLCs) as “limited liability corporations, but today is not that day. Looking back on 2015, I thought I’d take a quick look to see who the worst offenders were, starting with the state courts.  I figured I’d start with Delaware.

As a state that is proud of its status as a leader as a key forum of choice for corporations, and Delaware has done well for uncorporations, as well, it seemed logical.  The book Why Corporations Choose Delaware, written by Lewis S. Black, Jr., and printed and distributed by the Delaware Department of State,  Division of Corporation, explains:

Delaware continues to be the favored state of incorporation for U.S. businesses. Delaware has been preeminent as the place for businesses to incorporate since the early 1900s, and its incorporation business, supplemented by the growth in numbers of such “alternative entities” as limited liability companies, limited partnerships and statutory trusts, continues to grow smartly.

And Delaware does have a generally well-informed and skilled judiciary.  Still, even Delaware is not above calling an LLC a “limited liability corporation.” Better than many jurisdictions, Westlaw reports that the state had just…

Assume you acquire some nonpublic information about a company that will have no predictable effect on the company’s stock price, but will affect the volatility of that stock price. Is that information material nonpublic information for purposes of the prohibition on insider trading?

That’s one of the issues addressed in an interesting article written by Lars Klöhn, a professor at Ludwig-Maximillian University in Munich, Germany. The article, Inside Information without an Incentive to Trade?, is available here. His answer (under European law)? It depends.

Here’s the scenario: one company is going to make a bid to acquire another company. The evidence shows that, on average, the shareholders of bidders earn no abnormal returns when the bid is announced. There’s a significant variation in returns across bids: some companies earn positive abnormal returns and some companies earn negative abnormal returns. But the average is zero. Of course, the identity of the target might affect the expected return, but to pose the problem in its most complex form, let’s assume that you don’t know the target, just that the bidder is planning to make a bid for some other company.

In that situation, the stock is just as likely to…