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Ann Lipton

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Ann M. Lipton is Tulane Law School's Michael M. Fleishman Professor in Business Law and Entrepreneurship and an affiliate of Tulane's Murphy Institute.  An experienced securities and corporate litigator who has handled class actions involving some of the world’s largest companies, she joined the Tulane Law faculty in 2015 after two years as a visiting assistant professor at Duke University School of Law.

As a scholar, Lipton explores corporate governance, the relationships between corporations and investors, and the role of corporations in society. Read More

I was struck by this article recently published in the WSJ on the use of AI for investor relations:

Investor relations departments at companies such as shoe brand Skechers USA and networking-systems and software provider Ciena have begun using generative artificial-intelligence to help prepare their earnings commentary.

Some have used generative AI to predict the questions analysts might ask, for example, and to ready the best answers….

Executives at many companies are using AI to refine word choice in their prepared remarks, for instance, in deciding whether to say the quarter was “strong” or “solid,” said Dan Sandberg, head of quantitative research and solutions at S&P Global Market Intelligence. The firm’s tool recently preferred “strong,” based on the earnings metrics of other companies that used the word on their earnings calls, he said. 

Generative AI can also read the harmonics in executives’ prepared statements on earnings, assessing them as upbeat, gloomy or something more measured…

As any securities litigator knows, these are exactly the kinds of nuances of communication that – when they become the subject of a securities fraud lawsuit – are routinely dismissed by courts as “puffery,” i.e., conveying no material information to investors. For example, a very…

Bloomberg had a story this week on some new anti-ESG shareholder proposals put forth by the National Legal and Policy Center. The proposals ask McDonald’s and other companies to de-link executive pay from diversity goals, on the grounds that, among other things, DEI programs are now the subject of various lawsuits (I will leave it to the reader to imagine a picture of a guy in a hot dog suit).

I had a very mixed reaction to this news. My priors are, there are a lot of legitimate criticisms of DEI programs – they’re ineffective, they’re greenwashing, and the compensation measures are weak – but I worry that many of the current attacks are not grounded in concern that DEI programs are ineffective, but in concerns that they are effective in making workplaces and other spaces more welcoming to underrepresented groups, a position that I find morally objectionable.

Historically, though, anti-ESG proposals tend to fare very poorly at the ballot box, and even though activists like Robby Starbuck have been successful in intimidating companies into backing away from DEI efforts, it is not at all clear this is something shareholders support. Therefore, my original thinking was, I’m…

Well, the Fifth Circuit reached its decision in National Center for Public Policy Research et al. v. SEC, which I previously blogged about here and here. As I predicted, the panel chose to leave the SEC’s 14a-8 review process in place, but also as I suspected, Judge Jones – the only GOP appointee on the panel – dissented.

So I presume we’ll see a petition for rehearing en banc, and it wouldn’t surprise me at all if the full court took up the case, meaning, this may not the final word.

Recall, the claim was that the SEC engages in viewpoint discrimination when it issues no-action letters regarding companies’ attempts to exclude shareholder proposals from their proxy statements.  NCPPR claimed the SEC favors liberal proposals and disfavors conservative ones.  Separately, the National Association of Manufacturers intervened to argue that the entire 14a-8 system is unauthorized by the Exchange Act and is unconstitutional.

The SEC’s main argument was that no-action letters are not final orders subject to challenge.  The Democratic appointees on the panel agreed, but assuming Judge Jones’s dissent is a template for how the full Fifth Circuit would view the matter, it threatens to scramble the 14a-8…

Elon Musk is using his new quasi-official role with the federal government to threaten to preempt Delaware law with federal corporate governance standards, if the Delaware Supreme Court does not restore his Tesla pay package.

And another thing, on this week’s Shareholder Primacy podcast, Mike Levin talks with Matt Moscardi of Free Float Analytics about what shareholders should and do look for in director candidates, and how to use advanced data and modeling to identify good and bad directors. Available on Spotify, Apple, and Youtube.

One issue that I keep coming back to concerns the conflicts inherent in asset management.  Namely, mutual fund companies control lots of funds; each fund is its own entity, and presumably has its own interests; and yet historically, they’ve tended to be managed as a group, with – for example – all funds voting relatively in tandem, even if different funds might have different sets of interests (not always; sometimes there are legal reasons to separate them).

Anyway, it’s a subject I’ve written about in the past, and I’m always fascinated when a new empirical paper pops up illustrating the coordinated management of funds. Recently there have been a couple of interesting ones on the subject of ESG.  Previously, I blogged about this paper by Roni Michaely, Guillem Ordonez-Calafi, and Silvina Rubio, which finds that mutual fund families let their ESG funds vote separately in support of ESG issues only when those votes are unlikely to be the pivotal ones, because the proposal is widely supported or widely opposed.  When it’s a close vote, their ESG funds are reined in to the house view.

And now there’s ESG Favoritism in Mutual Fund Families, by Anna Zsofia Csiky…

Tulane Law School invites applications for its Forrester Fellowship and Visiting Assistant Professorship, both of which are designed for promising scholars who plan to apply for tenure-track law school positions. Both positions are full-time faculty in the law school and are encouraged to participate in all aspects of the intellectual life of the school. The law school provides significant support and mentorship, a professional travel budget, and opportunities to present works-in-progress in faculty workshops. 

Tulane’s Forrester Fellows teach legal writing in the first-year curriculum to first-year law students in a program coordinated by the Director of Legal Writing. Fellows are appointed to a one-year term with the possibility of a single one-year renewal. Applicants must have a JD from an ABA-accredited law school, outstanding academic credentials, and significant law-related practice and/or clerkship experience. If you have any questions about this position, please contact Erin Donelon at edonelon@tulane.edu.

Tulane’s visiting assistant professor position is supported by the Murphy Institute at Tulane (http://murphy.tulane.edu/home/), an interdisciplinary unit specializing in political economy that draws faculty from the university’s departments of economics, philosophy, history, and political science. The position is designed for scholars focusing on regulation of economic activity very broadly construed (including, for example, research with…

I previously posted about an anti-activist bylaw at a closed end fund, meant to head off Saba Capital. The bylaw provided that an activist who obtained more than 10% of the fund’s voting power would not be able to vote the excess, unless the remaining fund shareholders voted to permit it. The Second Circuit found that bylaw ran afoul of the Investment Company Act.

Eaton Vance came up with a new tactic. Funds, unlike operating companies, have a large retail shareholder base. And retail shareholders often don’t cast ballots at all.

For ordinary director elections, retail lack of participation isn’t a huge problem. The directors are elected by a plurality standard, so you don’t need a majority of shares to vote in favor. And that means when an activist like Saba comes along, Saba can defeat the sitting directors under a plurality standard.

So! Eaton Vance funds passed a bylaw that provided for majority – not plurality – voting, but only if a director election is contested. And further, the bylaw provided that if no candidate receives a majority, then the sitting directors get to maintain their seats as holdover directors.

Which functionally means that, in a contested election, the…

Hi, everyone – welcome to BLPB at the new place! As you can see, we’ve imported our old posts over here but in the process, the authors got scrambled for a lot of the older ones … we’ll work that out eventually. So! Moving on –

OpenAI’s been in the news, again, and there are some interesting things to talk about.

First, apparently both OpenAI, and Anthropic before it, have been raising funds through SPVs.  The SPV formally invests in the company; the SPV raises the funds from the real investors.

The purpose of that is the securities laws. If OpenAI/Anthropic have too many investors, they’ll have to make public filings.  But each SPV counts as a single investor.  So, by taking investment through SPVs, OpenAI and Anthropic can keep their formal investor count below the threshold of becoming a public company, while in fact raising capital from a dispersed group.

That said, it only works if OpenAI/Anthropic are not the ones organizing the SPVs. If they are, they’re evading the statutory limit on the number of investors a private company can take on.  The SEC’s view is that this trick only works if the SPVs are organized independently…

Yesterday, the Department of Justice unsealed indictments of several cryptocurrency exchange operators for various forms of market manipulation, in coordination with SEC complaints targeting the same conduct.  It turns out there was an elaborate FBI sting operation involved, whereby the FBI actually created a token for the targeted individuals to manipulate.  The FBI set up a website and everything – the website is actually hilarious, because it describes the token with every bit of crypto-futurish-gibberish you can imagine.  To wit:

It almost reads like it was written by AI as a parody, but I hope a real human person got to draft this.  They must be so proud.

Anyhoo, that’s not the only interesting thing.  Here’s what’s also interesting.

Often, when DOJ comes for crypto, it just charges wire fraud.  That way – unlike the SEC – it can avoid getting into a fight about whether a particular token was or was not a security.  But market manipulation, specifically, is a security-related offense.  And the DOJ wanted to get at market manipulation.  By creating its own token, DOJ could be sure that the token satisfied the definition of a “security.”  It designed it to be a security! 

For example…

This week, we got two denials of class certification in 10b-5 securities cases involving meme stocks.  The first concerned Bed Bath and Beyond, the second concerned a fintech called Rocket Companies, which is not one of your more famous meme stocks, but apparently met the definition for 2 days out of a 2-and-a-half month class period.  One case presented a refreshingly accurate application of current doctrine.  The other presented a clarifying illustration of the doctrinal mess created by the Supreme Court’s decision in Goldman Sachs v. Arkansas Teacher Retirement System and its subsequent interpretation by the Second Circuit.

[More under the jump]

Section 10(b), and Rule 10b-5, prohibit fraud in connection with securities transactions.  Among other things, they prohibit corporate executives from publicly lying about a company, which typically causes the stock price to go up – only to crash again when the truth is revealed.

But when a plaintiff tries to sue in these cases, she confronts a fundamental problem: Fraud claims require proof of reliance.  And most stock purchasers may have trouble proving they relied on any specific false statement.  Maybe the investor didn’t hear the statement personally; maybe they relied on analyst advice – or an…