The SEC’s report on what happened with GameStop and other meme stocks earlier this year is available here now. It’s a fantastic breakdown of what happened and a real resource for explaining market structure.
Roe on Dodge v. Ford
Mark Roe has posted “Dodge v. Ford: What Happened and Why?” on SSRN (here). The first half of the abstract is excerpted below. My initial reaction to the abstract (I have not read the paper) is that lying in this context is similar to breaking the law when it comes to the business judgment rule. IOW, just like a business decision to break the law is not protected by the BJR even if that decision otherwise maximizes shareholder value, so too should deceit be unprotected. This obviously has implications for our current stakeholder governance debate, given that this “noble lie” defense is one of the justifications given for greenwashing / woke-washing.
Behind Henry Ford’s business decisions that led to the widely taught, famous-in-law-school Dodge v. Ford shareholder primacy decision were three relevant industrial organization structures that put Ford in a difficult business position. First, Ford Motor had a highly profitable monopoly. Second, to stymie union organizers and to motivate his new assembly line workers, Henry Ford raised worker pay greatly; Ford could not maintain his monopoly without sufficient worker acquiescence. And, third, if Ford pursued monopoly profit in an obvious and explicit way, the Ford brand would have
Viewpoint Diversity Shareholder Proposals – A Commentary
Earlier this year, Transactions: The Tennessee Journal of Business Law, published papers presented at the 2020 Connecting the Threads IV symposium, held on Zoom just about a year ago. Back in July, I wrote about my coauthored piece from the 2020 symposium. That was my primary contribution to the event and the published output.
However, I also had the privilege of commenting on two papers at the symposium last year, and my comments were published in the Transactions symposium volume. I have been wanting to post about those published commentaries for a number of months, but other news just seemed more important. Given the recent completion of this year’s Connecting the Threads V symposium, it seems like a good time to make those posts. I start with the first of the two here.
This post covers my commentary on Stefan Padfield’s paper, An Introduction to Viewpoint Diversity Shareholder Proposals. It was a fascinating read for me. I was unaware of this genre of shareholder proposal before I picked up Stefan’s draft. If you also are in the dark about these shareholder proposals, his article offers a great introduction. Essentially, viewpoint diversity shareholder proposals are shareholder-initiated matters
Yet Another Controlling Shareholder Opinion
This week, I continue in my series of posts about controlling shareholders (prior posts here, here, here, here, here, here, here, here, here, and here) to call your attention to Patel v. Duncan, decided September 30.
Talos was a company backed by two private equity sponsors: Apollo and Riverstone. Apollo had 35% of the shares; Riverstone had 27%; and the rest were publicly traded. Talos had a 10 member board, and Apollo and Riverstone had a shareholder agreement that guaranteed each would appoint 2 members, a fifth member would be jointly agreed upon, and the sixth member would be Talos’s CEO. Of course, because their combined voting power exceeded 50%, there was no doubt their nominees would be included on the board. As a result, the company’s SEC filings identified Talos as a “controlled company” for the purposes of NYSE rules; as the company put it, “We are controlled by Apollo Funds and Riverstone Funds. The interests of Apollo Funds and Riverstone Funds may differ from the interests of our other stockholders…. Through their ownership of a majority of our voting power and the provisions set forth in our
Meme Stocks, Hypermateriality, and Insider Trading
Can “hypermaterial” public information about a stock render the company’s (once material) nonpublic internal data immaterial? Consider the following scenario involving social-media-driven trading in a meme stock:
XYZ Corporation’s stock price had been falling over the last month (from a high of $12 down to $10), due to a short-sale attack by a small group of hedge funds. In the past week, a group of individuals in a social media chatroom have attempted a now well-publicized short squeeze, motivated by a desire to punish what they view as predatory behavior by the hedge funds. As a result, the stock price has been driven up to $300, significantly above where the stock was trading before the short-sale attack. The company’s nonpublic data (earnings, etc.) that will be reported next week reflects the “true” price of the company’s shares should be $8. With knowledge of the above public and nonpblic information, XYZ and some of its insiders issue/sell XYZ shares.
Has XYZ and its insiders committed insider trading in violation of the antifraud provisions of Section 10(b) of the Securities Exchange Act?
Insider trading liability arises under the classical theory when the issuer, its employee, or an affiliate seeks to benefit from
New CPMI-IOSCO Consultative Report Focused on Stablecoins
For BLPB readers interested in financial market infrastructures (FMIs), there’s something new and exciting to put on your fall reading list! Don’t wait too long. Comments on the new CPMI-IOSCO Consultative report: Application of the Principles for Financial Market Infrastructures to stablecoin arrangements are due by December 1, 2021.
At the request of the G7, G20, and FSB, the standard setting bodies have produced a “report [that] provides guidance on the application of the Principles for financial market infrastructures (PFMI) to systematically important stablecoin arrangements (SAs), including the entities integral to such arrangements.”
The Executive Summary notes that: “Notwithstanding the fact that the transfer function of SAs is considered an FMI function for the purpose of applying the PFMI, SAs may present some notable and novel features as compared with existing FMIs. These notable features relate to: (i) the potential use of settlement assets that are neither central bank money nor commercial bank money and carry additional financial risk; (ii) the interdependencies between multiple SA functions; (iii) the degree of decentralisation of operations and/or governance; and (iv) a potentially large-scale deployment of emerging technologies such as distributed ledger technology (DLT).”
The report’s guidance is summarized in Table 1 (p. 5-6)
Tenure-Track Position at the University of Miami Herbert Business School, Business Law Department
The University of Miami is accepting applications for a tenure-track faculty position within the Business Law Department at the Patti and Allan Herbert School of Business (MHBS) commencing August 15, 2022.
MHBS’s Business Law Department seeks applicants with experience and accomplishment in law scholarship, specifically in areas related to technology, data science, corporate governance, or sustainability. The position is open to those candidates with a law degree who have a strong research stream, or a well-developed relevant research agenda. A record of outstanding teaching or clear potential therefor is required.
The successful candidate will join a thriving Business Law department of 19 full-time regular faculty and instructors with varied scholarly interests, who teach a wide range of bachelors, masters, and executive level courses.
The University of Miami is a Carnegie comprehensive degree-granting research university with approximately 17,800 students and 16,400 faculty and staff. MHBS has approximately 4,000 total graduate and undergraduate students and is located on the University’s main campus in suburban Coral Gables, Florida.
Salary, benefits, and research support are competitive. Interested candidates should submit a letter of interest describing relevant qualifications and experience, detailed CV, as well as contact information for at least three academic and/or professional references
Open Assistant Professor Position in the Department of Business Law at California State University, Northridge
Dear BLPB Readers:
The Department of Business Law at California State University, Northridge, has an open faculty position:
“The Department of Business Law invites applications for a tenure-track position at the Assistant Professor level. J.D. or J.S.D. from an ABA-accredited law school and admission to the bar at time of appointment required. In addition, previous experience and proven excellence in teaching law, business ethics, or related courses at the university level, a history of scholarly research and publications, experience practicing law, and business experience are preferred. An LL.M., M.B.A. or other graduate degree in business or economics from an accredited college or university, law review membership, and experience as a law clerk at the appellate level are desirable. At time of appointment, the candidate must meet and must continue to maintain current AACSB International “Scholarly Academic” standards of qualification throughout their tenure.”
The complete job posting is here.
Guest Post by Itai Fiegenbaum: How Overturning Gentile Widens the Controlling Shareholder Enforcement Gap
The following is a guest post by Itai Fiegenbaum, Visiting Assistant Professor of Law at Willamette University College of Law:
Minority expropriation by a controlling shareholder manifests in a variety of forms. Controllers can cause the corporation to sell them an asset at a steep discount. Or purchase from them an asset for an inflated price. These self-dealing transactions share a common thread: Unfair pricing transfers value away from the corporation, and, by extension, from its minority shareholders, to the controller. An additional complication arises when the corporation’s stock is issued to the controller. In this case, a sweetheart deal dilutes the value of their relative voting and dividend rights.
Shareholder litigation is designed to keep transaction planners honest. Not all manner of minority expropriation, however, is subject to the same enforcement procedure. Long-standing corporate law principles distinguish between transactions that harm shareholders directly and transactions that harm them derivatively, through a reduction in their share price. Challenges against the former can proceed directly; challenges against the latter, by contrast, must overcome several procedural hurdles before a court will adjudicate a claim on its merits.
An unmodified application of the bifurcation framework would filter most self-dealing transactions between
Belmont University – Nashville, TN – Assistant Professor of Creative & Entertainment Industries (Law)
Apply to be my (across-campus) colleague.
Belmont University is hiring for a tenure track professor position in our Mike Curb College of Entertainment & Music Business. One of the main courses taught would be Entertainment Law and Licensing. I’ve lived in a half-dozen different cities and Nashville is my favorite by far. And Belmont has been a fabulous place to work. I am on the hiring committee, so feel free to reach out to me with questions.
Details here.