February 2024

The University of Cincinnati College of Law is currently undertaking a search for a new director of our Corporate Law Center. A description is below.  Hat tip to Kate Jackson.

About the Center

The Corporate Law Center at the University of Cincinnati College of Law was founded in 1987.  Its mission is to carry out  programs related to the education and training of students and others in the field of corporate law.  The Center has historically fulfilled its mission in a variety of ways, including the following: Awarding CLC fellowships to incoming law students, hosting an annual symposium devoted to trending topics in business law, supporting research, coursework, and other academic activities related to corporate law, sponsoring the student-led Business Law Society at the College of Law, supporting the Entrepreneurship and Community Development Clinic, which provides transactional legal services to start-ups, small businesses, and non-profit organizations; supporting the Patent & Trademark Clinic, which provides intellectual property legal services to individuals and businesses throughout the Cincinnati entrepreneurial ecosystem, and administering the Business Law Concentration for current law students.

Many of these activities continue to be enormously valuable. As part of the creation of a vision and strategic plan, the new

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Fights over advance notice bylaws are becoming more common; I previously posted about Paragon Technologies v. Cryan, and right after that, VC Will decided Kellner v. AIM Immunotech.  In both situations, boards were found to have been overly aggressive in drafting and enforcing their bylaws, and VC Will went case by case to determine which actions were permissible and which were not.  And since the dissidents had not fully complied with even the permissible bylaws, VC Will would not order that their nominees be permitted to stand for election.

This strikes me as such a difficult problem.  On the one hand, there are good reasons for these bylaws, as both the Paragon and AIM disputes make clear.  In Paragon, the dissident really was playing games about providing information regarding its plans; in AIM, the contest was a continuation of one spearheaded a year earlier by a convicted felon who tried to conceal his involvement.  So yeah, boards have really legitimate interests in ensuring that shareholders have full information.

On the other hand, the blue pencil approach – where the noncompliant bylaws are severed and the legitimate ones remain standing – strikes me as having the…

National Business Law Scholars Conference (NBLSC) 

June 24-25, 2024 

Call for Papers 

The National Business Law Scholars Conference (NBLSC) will be held on Monday and Tuesday, June 24-25, 2024, at The University of California, Davis School of Law. 

This is the fifteenth meeting of the NBLSC, an annual conference that draws legal scholars from across the United States and around the world. We welcome all scholarly submissions relating to business law. Junior scholars and those considering entering the academy are especially encouraged to participate. If you are thinking about entering the academy and would like to receive informal mentoring and learn more about job market dynamics, please let us know when you make your submission. 

Submission Guidelines: 

Please fill out this form to register and submit an abstract by Friday, March 15, 2024. Please be prepared to include in your submission the following information about you and your work: 

• Name 

• E-mail address 
• Institutional Affiliation & Title 
• Paper title 
• Paper description/abstract 
• Keywords (3-5 words) 
• Dietary restrictions 
• Mobility restrictions 

If you have any questions, concerns, or special requests…

Look, it’s not like I want to post about Elon Musk every week, it’s just that he keeps doing things that result in interesting corporate governance conundrums.  So this week’s post covers several things, only one of which is a Musk thing.

The Musk Thing

After Chancellor McCormick struck down his Musk’s 2018 pay package, one bit of speculation that floated about was whether Musk could sue Tesla to recover the package, on some kind of restitution/quantum meruit theory.  My suspicion is that such a claim would be unlikely to succeed because Musk’s own fiduciary breaches are what led to the original forfeiture, and he who comes into equity must do so with clean hands.  Or, as the famous jurist Leo Rosten put it, it would be like “a man who, having killed his mother and father, throws himself on the mercy of the court because he is an orphan.”

But despite the dubious merit such a claim would have, given the close ties McCormick identified between Tesla’s board and Elon Musk, there would be a risk that the board would take a dive and settle unnecessarily.

(More under the cut)

My coauthor, SMU Law Professor James W. Coleman, recently posted a draft of our article, Metals Derivatives Markets and the Energy Transition, on SSRN.  It’s forthcoming in Transactions: The Tennessee Journal of Business Law, and was written in connection with Business Transactions: Connecting the Threads VII, the BLPB-related conference at the University of Tennessee Law School.  I had a wonderful time at the event, which has become one of my yearly favorites, and am truly grateful for UT Law School’s consistently outstanding hospitality! 

Here’s the abstract of our article:

Despite their escalating importance, thus far, there has been minimal legal scholarship on metals derivatives markets. Given the key role of these markets in the transition to a clean energy future, increased focus on them is imperative. Hence, it is not surprising that the agendas for the last four meetings of the Commodity Futures Trading Commission’s Energy and Environmental Markets Advisory Committee each dedicated a significant portion of the meeting to metals derivatives markets and their role in the transition to a clean energy future.

Fundamentally, the United States and the world are moving from their long-term dependence on the fossil fuels that built the modern world…

I had the opportunity to attend one of the sessions in the Interdisciplinary Workshop on Corporations, Private Ordering, and Corporate Law last week.  The program was co-hosted by Foundations of Law and Finance (Goethe University Frankfurt, Center for Advanced Studies) and Columbia Law School.  Luckily for me, the piece of the program I attended featured Nizan Geslevich Packin presenting a work-in-progress she is co-authoring with Anat Alon-Beck entitled Board Observers: Shadow Governance in the Era of Big Tech.

Although a draft of the paper is not yet posted, here is the SSRN abstract:

This Article examines the rise in corporate governance practice of appointing board observers, especially in the context of private equity, venture capital (VC), and corporate venture capital (CVC). Board observers are non-voting members attending board meetings to gain knowledge and insight. They arguably also provide valuable feedback, an outside perspective, and can even help ensure corporate operations. In recent years, board observer seats – a notion also existing in the nonprofit sector – have become increasingly popular in the for-profit business world, where investors have various market and business justifications for using board observers, including corporate governance considerations, minimizing litigation exposure, navigating antitrust issues, CFIUS regulation…

Given all the news about Governor Abbott’s pitch to create a business law infrastructure that will compete with Delaware, and Musk’s threat to decamp there, it’s worth pointing out that this is an amendment that was recently proposed to the Texas Business Organizations Code:

BURDEN OF PROOF IN CERTAIN DERIVATIVE PROCEEDINGS. Notwithstanding any other law, in a derivative proceeding by a shareholder that alleges an act or omission related to the improper consideration of environmental, social, and governance criteria in the performance of the act or omission, the burden of proof is on the corporation to prove the act or omission was in the best interest of the corporation.

In 2022, Texas legislators proposed amending its law to permit shareholders to bring a fiduciary duty claim against the managers of any public company that provided women employees with travel benefits for abortion care (though, to be fair, in that case, the proposal would have applied even to non-Texas organized companies).

Texas Attorney General Ken Paxton has been very vocal about his objections to ESG – he is among those suing to block a Department of Labor rule, among other things – and as Attorney General, he would, as I…

So, anything interesting happening in corporate law this week?

I kid, I kid. On Tuesday, Chancellor Kathaleen McCormick of the Delaware Court of Chancery issued her long-awaited opinion in Tornetta v. Musk, where she took the extraordinary step of holding that Elon Musk’s Tesla pay package from 2018 was not “entirely fair” to Tesla investors, and ordered that it be rescinded.  In practical effect, she ordered the cancelation of stock options worth about $51 billion, or, according to news reports, about a quarter of his current wealth.  Put that together with the Twitter purchase, the State of Delaware and Chancellor McCormick have cost Musk about $90 billion, give or take (though a contrary take would involve the words “actions” and “consequences”).

The legal standards

Normally, the decision of what to pay a corporate CEO – like any other business decision – is controlled by the board of directors, and not subject to second-guessing by a court.  But, like any other business decision, that changes if the executive pay package can be seen as self-dealing, namely, the decisionmakers have a financial interest in the arrangement.

In a normal company, that isn’t a problem; the corporate directors act at arm’s length…