November 2017

SEC Commissioner Jay Clayton recently gave a speech where he remarked:

I have become increasingly concerned that the voices of long-term retail investors may be underrepresented or selectively represented in corporate governance. For instance, the SEC staff estimates that over 66% of the Russell 1000 companies are owned by Main Street investors, either directly or indirectly through mutual funds, pension or other employer-sponsored funds, or accounts with investment advisers… And, if foreign ownership is excluded, that percentage approaches approximately 79%.

… A question I have is: are voting decisions maximizing the funds’ value for those shareholders?

In situations where the voting power is held by or passed through to Main Street investors, it is noteworthy that non-participation rates in the proxy process are high. … This may be a signal that our proxy process is too cumbersome for retail investors and needs updating.

What’s interesting is that there are two different ideas here.  One concerns the voting power of mutual funds and pension funds; the other concerns the votes of retail shareholders themselves.

As for retail votes, Jill Fisch has an article on this very subject forthcoming in the Minnesota Law Review.  She recommends that retail shareholders be given…

After my daughter Allie’s first stay at Vanderbilt Children’s hospital, with what we think was a virus that attacked her lungs, Allie seemed to return to normal for a couple weeks before having another episode. This time, we spent 4 days in the hospital. The praise I lavished on Vanderbilt last time was less deserved on this trip, mostly blamed, staff repeatedly claimed, on a new computer system. (Note: In a place like a hospital, don’t you think you should provide adequate training and work out the bugs before launching a new computer system?)

In any event, Allie is back home again, though we are still working with doctors to uncover the precise cause.

Obviously, my daughter’s health is much more important than work, but I do need to continue to work (if for no other reason than health insurance…we would be bankrupt without health insurance). Given that my focus has been diverted, I have had to push on quite a number of deadlines — 4 writing assignments and 2 speaking engagements — and have been slower than normal in returning graded work. Thankfully, students, editors, and colleagues have been quite understanding.

As a professor and a person…

Last week, I posted about the Trump Administration’s hypocritical policy toward Cuba and how the U.S. embargo hurts American businesses (not to mention the Cuban people). The embargo, among other things, focuses on preventing human rights violators in Cuba from profiting from Americans. Wednesday, the Administration significantly rolled back some of the Obama-era changes making it much harder for Americans to travel and making it certain that even fewer U.S. airlines will try to make their fledgling Cuba itineraries work.

Ironically, the Administration released the new regulations while the President is in China and within days of his meeting with the President of Russia in Communist Vietnam. Both China and Russia have a significant number of state-owned enterprises and very few restrictions on U.S. firms conducting business with them. The new policy, which goes into effect Thursday, once again requires people under U.S. jurisdiction to travel under the OFAC  license of U.S. tour groups. As anyone who has traveled to Cuba before the Obama liberalization knows, this significantly increases the cost of the trip. The Trump Administration may not realize that those U.S. tour companies have no choice but to work with the Cuban government, which controls the tourism industry, so…

My friend and colleague at West Virginia University, Jena Martin, has posted her new paper, Hiding in the Light: The Misuse of Disclosure to Advance a Business and Human Rights Agenda. The paper is forthcoming in the Columbia Journal of Transnational Law and can be accessed at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3028826 

It’s worth a read. Here’s the abstract:

In June 2017, Waitrose, a top UK supermarket, pulled its cans of corned beef off the shelves after an investigation revealed that the meat might have been produced with slave labor. At the time of the recall, Waitrose was in compliance with the UK Modern Slavery Act (MSA), a 2015 law enacted to prevent human trafficking and modern-day slavery. Under the MSA, corporations are required to file annual reports disclosing what action they had taken to eradicate slavery and human trafficking in their supply chains. The Modern Slavery Act, in turn, was a much-lauded law that is part of the growing trend of States to move the international business and human rights agenda forward. A key component of that agenda involves disseminating the UN’s Protect, Respect and Remedy Framework and implementing the UN Guiding Principles, which have been praised by States around the

…

The Harvard Law School Program on Corporate Governance and Financial Regulation is pleased to announce the availability of positions of Post-Graduate Academic Fellows in the areas of corporate governance and law and finance. Qualified candidates who are interested in working with the Program as Post-Graduate Academic Fellows may apply at any time and the start date is flexible.

Candidates should be interested in spending two to three years at Harvard Law School (longer periods may be possible). Candidates should have a J.D., LL.M., or S.J.D. from a U.S. law school, or a Ph.D. in economics, finance, or related areas by the time they commence their fellowship. Candidates still pursuing an S.J.D. or Ph.D. are eligible so long as they will have completed their program’s coursework requirements by the time they start. During the term of their appointment, Post-Graduate Academic Fellows work on research and corporate governance activities of the Program, depending on their skills, interests, and Program needs. Fellows may also work on their own research and publishing in preparation for a career in academia or policy research. Former Fellows of the Program now teach in leading law schools in the U.S. and abroad.

Interested candidates should submit a CV, …

I had the privilege of being invited again this year to present at the 2017 LLC Institute, an annual program produced by the LLC, Partnership and Unincorporated Entities Committee of the American Bar Association’s Business Law Section.  As part of a panel discussion on LLC fiduciary duties (with friend-of-the-BLPB Mohsen Manesh and others), I sang a few bars of Rocky Top (!) and talked about the fiduciary duty waiver issue that we faced in Tennessee in revamping our limited partnership law this past year.  But that was far from the highlight of the program!  

Luckily, friend-of-the-BLPB Tom Rutledge–a leader in (and former chair of) the LLC, Partnership and Unincorporated Entities Committee–has captured the essence of the two-day event in blog posts here and here.  He notes in sum:

Over the last two days we have . . . , by means exceptional panels, considered and informed the participants on the broadest range of issues materially important to our shared area of interest and practice.  That is the mission of the LLC Institute, and hopefully it has again delivered on its objective.  The materials are posted and available for anyone, and in a few weeks the audio recordings will…

The GOP unveiled its tax bill this week.  Below are a collection of links to commentary that I found interesting (taking a page from Stefan’s book, some are in the form of embedded tweets):

A lot to like and a lot to dislike in the Republican tax bill: “The tax bill aggressively takes on deductions in the individual income tax code, and channels the proceeds towards across-the-board cuts in income tax.  Unfortunately, that good work is undone by expensive giveaways to the owners of firms, and unnecessary windfalls to the heirs of the rich.”

Tax Bill May Deal a Body Blow to LBOs: “The legislation includes a provision that would cap interest deductibility at 30 percent of adjusted taxable income, a dramatic shift from the 100 percent allowed now.”

Sports Stadiums Would Lose Access to Tax-Exempt Bonds Under House Tax Plan: “Lawmakers of both parties have long sought to limit the use of municipal bonds to benefit sports teams.”

Apple Among Giants Due for Foreign Tax Bill Under House Plan: “Earnings held in cash would be taxed at 12 percent while profits invested in less liquid assets like factories and equipment face a 5 percent rate.”…

I don’t have time for a substantive post today, but thought I would direct you to a post I wrote for the Miler Method online magazine, available here. The post focuses on competition and community.

I think the discussion in that post is relevant to law school, as so much emphasis is put on class rank and thus the competition can become especially fierce, potentially destroying community. Competition can certainly be a good thing, and can lead to progress and accomplishment, but competition does need to be contained at times.