Photo of Marcia Narine Weldon

Marcia Narine Weldon

Subscribe to Marcia Narine Weldon's Posts

Professor Narine Weldon is the director of the Transactional Skills Program, Faculty Coordinator of the Business Compliance & Sustainability Concentration, Transactional Law Concentration, and a Lecturer in Law.

She earned her law degree, cum laude, from Harvard Law School, and her undergraduate degree, cum laude, in political science and psychology from Columbia University. After graduating, she worked as a law clerk to former Justice Marie Garibaldi of the Supreme Court of New Jersey, a commercial litigator with Cleary, Gottlieb, Steen and Hamilton in New York, an employment lawyer with Morgan, Lewis and Bockius in Miami, and as a Deputy General Counsel, VP of Global Compliance and Business Standards, and Chief Privacy Officer of Ryder, a Fortune 500 Company. In addition to her academic position, she serves as the general counsel of a startup and a nonprofit.  Read More

Follow:Marcia's Linkedin Profile

As noted over at the Family Law Prof Blog, Stanford Graduate School of Business recently issued a report, “Separation Anxiety: The Impact of CEO Divorce on Shareholders” (pdf),  in which a study considered the impact CEO divorces have on the CEO’s corporation.  The report indicates that recent events “suggest that shareholders should pay attention to matters involving the personal lives of CEOs and take this information into account when making investment decisions.” 

The study found that a CEO’s divorce has the potential to impact the corporation and shareholders in three primary ways. First, is a possible reduction in influence or control if a CEO as to sell or transfer stock in the company as part of the divorce settlement. Second, divorce can negatively impact “the productivity, concentration, and energy levels of the CEO” or even result in premature retirement.  Third, the sudden change in wealth because of the divorce could lead to a change in the CEO’s appetite for risk, making the CEO either more risk averse or more willing to take risks.  

The report argues that this matters because:

1. Divorce can impact the control, productivity, and economic incentives of an executive—and therefore corporate value.

…

Last week, I posted a response to the New York Times article criticizing law reviews.  A friend pointed me to a cover story from the Economist, How science goes wrong: Scientific research has changed the world. Now it needs to change itself.  It’s an interesting read.  This paragraph jumped out at me:

In order to safeguard their exclusivity, the leading journals impose high rejection rates: in excess of 90% of submitted manuscripts. The most striking findings have the greatest chance of making it onto the page. Little wonder that one in three researchers knows of a colleague who has pepped up a paper by, say, excluding inconvenient data from results “based on a gut feeling”. And as more research teams around the world work on a problem, the odds shorten that at least one will fall prey to an honest confusion between the sweet signal of a genuine discovery and a freak of the statistical noise. Such spurious correlations are often recorded in journals eager for startling papers. If they touch on drinking wine, going senile or letting children play video games, they may well command the front pages of newspapers, too.

 The article also calls for more acceptance…

Yesterday, the New York Times published what I consider a medicocre criticism of law reviews.  Not that some criticism isn’t valid.  It is.  I just think this one was poorly executed.  Consider, for example, these thoughtful responses from Orin Kerr and Will Baude.

As I have thought about it, one thing that struck me was about the Times article was the opening:

 “Would you want The
New England Journal of Medicine to be edited by medical students?” asked
Richard A. Wise, who teaches psychology at the University of North Dakota. 

Of course not. Then why are law reviews, the primary
repositories of legal scholarship, edited by law students?

I don’t disagree with the premise, but note how limiting it is.  First, it talks about one journal, one that is highly regarded.  I know some people hate all law reviews, but I humbly suggest that most people consider elite journals like the Yale Law Journal a little differently.  (It’s also true that some journals like the Yale Law Journal happen to use some forms of peer review in their process.) 

Second, the implication is that medical journals have it all figured out.  That’s apparently not true, either.  An article from…

I gave a talk
today about sustainable development, where I talked about the challenges of
trying to balance resource development with the need to preserve the
environment and deal with the social issues that come from increased
activity. 

One thing
came to mind: People matter.  Whether you work for EQT or the EPA, you’re a
person who has a job to do, which can have beneficial outcomes.   When we
discuss sustainable development, we also need to recognize the need for sustainable
conversation. Development doesn’t happen without conversation, which can lead to
compromise, which can lead to progress.  

Governments
and corporations are both made up of people.  Isolating either governments
or corporations as inherently evil entities is missing the point.  We can
disagree about the goals of either, but we need to be more careful about who we
vilify.  Negotiations don’t happen against governments or corporations,
they happen with people in governments or in corporations.  And we need to
remember that.

Professor Bainbridge takes issue with my analogy between shareholder activists and Congress.   I am pretty sure he’s missing my point, in part because I have not disagreed with the points he makes.  My point (or at least intended one) is not that shareholder rights should equal a strict democracy.  My point is that shareholder activists, sometimes with less than a majoity, say 20%, try to improperly impose their will on the currently elected (and properly empowered) board.  Further, they are seeking additional powers to further their influence.    

I figure we all agree that if a majority of shareholders agree, they can, at the proper time, make the changes they want.  In contrast, shareholder activists often try to make those changes before they have the votes — votes they may never have to support their views.  I happen to see at least some of the current Republican House in that same vein.  That’s my intended point.  I am sure lots of people disagree with that, too, but I just want to make clear that I am criticizing what I see as the abuse of a powerful minority messing with a regime that was properly elected and exercising that…

So the government shutdown has me troubled.  I think it’s reasonable for the House not
like Obamacare and to do everything they can to repeal the law.  However, it strikes me as different to force a
government shutdown because that’s the only way they can get leverage to make a
change the voters, at least at the last election, did not agree with.  

As Sen. John McCain explained last week:

Many of those who are in opposition right now were not here
at the time and did not take part in that debate. The record is very clear of
one of the most hard fought, fair, in my view, debates that has taken place on
the floor of the Senate. That doesn’t mean that we give up our efforts to try to
replace and repair Obamacare, but it does mean that elections have
consequences. Those elections were clear in a significant majority that a
majority of the American people supported the president of the United States
and renewed his stewardship of this country.

The actions of the House right now remind me a lot of the
arguments put forth against shareholder activism.  That is, the complaints about rent-seeking actions…

Before I
went to law school, I had a career in public relations and brand
management. I had the pleasure of having a client that was among the best when
it comes to brand reputation, Nintendo, where I was responsible (with our
client and a solid team) for product launches like this, this, and this (PDF, p. 3).  A few years ago,
I even wrote an article combining my interest in branding and my interest in
entity law: The North Dakota Publicly
Trade Corporations Act: A Branding Initiative Without a (North Dakota) Brand. 

Anyway, when I
recently received my version of ERN Economics of Networks eJournal, (Vol. 5 No.
68), I took note of the paper, Corporate
Reputation and Social Media: A Game Theory Approach, which is available
here.  The paper states in the abstract,
“Corporate reputation is more and more the most valuable asset for a firm. In
this day and age, corporate reputation, although an intangible asset, is and
will grow as the most essential asset to publicize and also protect.”  My first thought:  as a general matter, can that possibly be
true? 

It appears not,
though it is obvious that reputation…

Over at the New York Times Dealbook,  the man responsible for a $6 billion hedge funds says just that in an article by Alexandra Stevenson: 

Mr. Spitznagel, the founder of Universa Investments, which has around $6 billion in assets under management, says the stock market is going to fall by at least 40 percent in one great market “purge.” Until then, he is paying for the option to short the market at just that point, losing money each time he does.

….

Mr. Spitznagel’s approach is unusual approach for a money manager: To invest with him, you’ve got to believe in a philosophy that is grounded in the Austrian school of economics (which originated in the early 20th century in Vienna). The Austrians don’t like government to meddle with any part of the economy and when it does, they argue, market distortions abound, creating opportunities for investors who can see them.

When those distortions are present, Austrian investors will position themselves to wait out any artificial effect on the market, ready to take advantage when prices readjust.

Apparently his primary reason for this coming purge, which he says is needed, is that the Fed will have to readjust its monetary…

Okay, so maybe I am overstating that a bit, but it’s only a
bit.  This is not exactly timely, as the
following case was decided in the December 2012, but I was recently reviewing
it as I taught these cases and helped update Unincorporated Business Entities (Ribstein, Lipshaw, Miller, and Fershee, 5th ed., LexisNexis). (semi-shameless plug).  Despite the passage of time, this case has, apparently, gotten me riled up
again.  So here we go . . .    

Synectic Ventures I, LLC v. EVI Corp., 294 P.3d 478 (Or.
2012):  several investment funds organized as LLCs (the Synectic LLCs or
LLCs).  The LLCs made a loan to the
defendant corporation, EVI Corp. The loan agreement was secured by EVI’s
assets, and provided that EVI would pay back $3 million in loans, plus 8%
interest by December 31, 2004.  The loan
agreement provided that if EVI obtained $1 million in additional financing by
December 31, 2004, the loan amount would be converted into equity (i.e., EVI
shares) and the security interest would be eliminated. If the money were not
raised by the deadline, the LLCs could foreclose on EVI’s assets (mostly IP in
medical devices). 

To make things interesting, the LLCs appointed Berkman the
manager of the LLCs (thus, they were manager-managed LLCs). “At all relevant
times, Berkman—the managing member of plaintiffs—was also the chairman of the
board and treasurer of defendant [EVI].” 
In mid-2003, the Synectic LLCs’ members sought to have Berkman removed, and Berkman signed
an agreement not to enter into new obligations for the LLCs without getting
member approval. 

For those who have followed
the shareholder activism debate between Harvard Professor Lucian Bebchuk
(see a recent op-ed
piece here), corporate lawyer Martin Lipton from Wachtell, Professor
Stephen Bainbridge of UCLA  (see here for
example) and others, a new article provides some additional data
points.  In their article,
Professors Paul Rose of Ohio State and Bernard Sharfman of Case Western use the
work of Kenneth Arrow as a basis to discuss offensive shareholder activism. The
abstract is below:

Under an Arrowian
framework, centralized authority and management provides for optimal decision
making in large organizations. However, Arrow also recognized that other
elements within the organization, outside the central authority, occasionally
may have superior information or decision making skills. In such cases, such
elements may act as a corrective mechanism within the organization. In the
context of public companies, this article finds that such a corrective
mechanism comes in the form of hedge fund activism, or more accurately,
offensive shareholder activism. 

Offensive shareholder activism exists in the market for corporate influence,
not control. Consistent with a theoretical framework where the value of
centralized authority must be protected and a legal framework in which
fiduciary responsibility rests with the board…