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Steven Davidoff Solomon, a professor of law at the University of California, Berkeley, has an interesting article on antitrust in the DealBook today:  Changing Old Antitrust Thinking for a New Gilded Age. Professor Solomon argues that a new wave of mergers in the tech and telecommunications industries mirror the consolidation wave of the Gilded Age a century ago which lead to our current antitrust laws.  These mergers leave competition in tact, albeit among a few huge companies, and therefore facially meet the competition requirements under antitrust law.  He argues that “[t]his calculus, however, excludes the political and other power that a concentrated industry can wield with government and regulators.”  Citing to industry-based nonprofits and the ability to participate in political spending in a post-Citizens United world, professor Solomon concludes that antitrust may become a question of power, not just competition. 

“[R]ight now there is simply no real government ability to review the industry consolidation that is occurring today in which industries become dominated by a handful of major players. Yet it is becoming increasingly apparent that size and industry concentration affect American society even if competition still exists.”

I think that this is an interesting lens through which…

Amazon BBB Book Cover
You may think of Warren Buffett as a savvy stock picker but his greater accomplishment is in configuring an exceptionally strong corporation that defies widespread conceptions of effective corproate governance.  

Since early in his career, Buffett adopted what he calls the double-barreled approach to capital allocation, meaning both stock picking and business buying. He gained prominence primarily as an investor in stocks, championing a contrarian investment philosophy.

Attracting three generations of devoted followers to a school of thought called “value investing,” he doubted the market’s efficiency and deftly exploited it. Buffett bought stocks of good companies at a fair price, assembling a concentrated portfolio of large stakes in a small number of firms. Today, nearly three-fourths of Berkshire’s stock portfolio consists of just seven stocks.     

But late in his career, beginning around 2000, Buffett shot more often through the other half of his double-barreled approach: buying 100 percent of companies run by trusted managers given great autonomy. True, Berkshire early on bought all the stock of companies such as Buffalo News and See’s Candies. But, through the 1990s, the first barrel dominated, with Berkshire consisting 80 percent of stocks and 20 percent owned companies. That mix gradually reversed and recently flipped, making subsidiary ownership the defining characteristic of today’s Berkshire.

Owning primarily subsidiaries rather than merely stocks gives Berkshire a different shape compared to its previous character as the holding company of a famed investor. After all, even for a buy-and-hold investor, stocks come and go. Berkshire has sold the stocks of many once-fine companies, including Freddie Mac, McDonald’s, and The Walt Disney Company.

In contrast, aside from a few Berkshire subsidiaries that it acquired from the Buffett Partnership in the 1970s, Berkshire has never sold a subsidiary and vows to retain them through thick and thin.  Despite their variety, moreover, Berkshire companies are remarkably similar when it comes to corporate culture, which is the central discovery I document and elaborate in my upcoming book, Berkshire Beyond Buffett: The Enduring Value of Values.

When Berkshire consisted mostly of the stock portfolio of a famed stock picker, you could expect that, once that investor departed, the portfolio would naturally be unwound and the company dissolved. Now, however, with Berkshire made of companies not stocks, its life expectancy stretches out in multiple decades, not mere years. It certainly goes beyond the stock picker who founded it.  That’s not an accident either, as the dominant cultural motif at Berkshire and its subsidiaries is a sense of permanence–the longest possible time horizon imaginable.   

As I promised on Friday, I am posting a question and answer segment with Larry Cunningham, author of the forthcoming book: Berkshire Beyond Buffett: The Enduring Value of Values.  Larry will be guest blogging with us this week to talk more about the interesting findings he shares in the book and their implications for business and the research, teaching, and practice of business law.

Q:  Why did you write this book and what did you find?

A:  Widespread praise for Warren Buffett has become paradoxical: Buffett set out to build a permanent institution at Berkshire Hathaway and yet even great admirers, such as Steven Davidoff, doubt that the company can survive without him. I found that viewpoint intriguing since companies who are identified with iconic founders often have trouble after a succession, as Tom Lin has written.  I wanted to investigate how the situation will look for Berkshire after Buffett leaves the scene, collapse and breakup or prosperity coupled with continued expansion? What I found was a culture so distinctive and strong, that the company’s future is bright well beyond Buffett.

Q:  How did you reach that conclusion?  What was your research method?

A:  I focused on Berkshire’s fifty…

Cross-post alert!

At the risk of overdoing what may have been a good thing, I contributed a disclosure-oriented post to the Hobby Lobby symposium on The Conglomerate earlier today.  It includes new information about a U.S. Department of Labor Q&A posted yesterday, among other things.  Enjoy or not, as you so please . . . .

The Business Law Prof Blog is delighted to have as a guest blogger next week our friend and colleague Lawrence A. Cunningham (known to me as Larry!), of George Washington University Law School, who has just finished writing a new book being released in October called Berkshire Beyond Buffett: The Enduring Value of Values.  He will offer a few posts about aspects of the book during the week. We will kick it off Monday with some questions and answers.   

Larry is the Henry St. George Tucker III Research Professor at GW.  He teaches accounting, contracts, and corporate governance and has written extensively in all those areas.  He previously taught at Boston College Law School, where he served a term as Academic Dean, and Cardozo Law School, where he directed the Samuel and Ronnie Heyman Center on Corporate Governance.

Among his most cited articles are these scholarly jewels:

A Prescription to Retire the Rhetoric of “Principles-Based Systems” in Corporate Law, Securities Regulation and Accounting (Vanderbilt Law Review, 2007)

The Sarbanes-Oxley Yawn Heavy Rhetoric, Light Reform (And it Might Just Work) (Connecticut Law Review, 2003)

From Random Walks to Chaotic Crashes: The Linear Genealogy of the …

James Woulfe, who was involved in the legislative process around Connecticut benefit corporations, and I have had a number of interesting conversations about social enterprise law over the past few years.  Recently, I asked James to share his thoughts on the new Connecticut benefit corporation law for the blog.  His contribution is below.

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After two previous tries, Connecticut recently became the 24th state in the Union to pass benefit corporation legislation. While some may argue that the fact it took Connecticut so long to pass the bill is a sign of problems with the legislature, our state’s business climate, etc., coming a little late to the game was actually an asset. Waiting to pass the legislation gave lawmakers an opportunity to take a look at national and international trends in social enterprise legal structures, and experiment. As a result, Connecticut tweaked the “model” benefit corporation legislation passed in other states, and included an innovative first in the nation clause in Connecticut’s statute, called a “legacy preservation provision.”

Connecticut’s legacy preservation provision gives social entrepreneurs the opportunity to preserve their company’s status as a benefit corporation in perpetuity, despite changes in company leadership or ownership. In other words, the…

The Hobby Lobby decision states:

No known understanding of the term “person” includes some but not all corporations. The term “person” sometimes encompasses artificial persons (as the Dictionary Act instructs), and it sometimes is limited to natural persons. But no conceivable definition of the term includes natural persons and nonprofit corporations, but not for-profit corporations. 20 Cf. Clark v. Martinez, 543 U. S. 371 , 378 (2005) (“To give th[e] same words a different meaning for each category would be to invent a statute rather than interpret one”).

The decision continues:

Under the Dictionary Act, “the wor[d] ‘person’ . . . include[s] corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals.” Ibid .; see FCC v. AT&T Inc., 562 U.S. ___, ___ (2011) (slip op., at 6) (“We have no doubt that ‘person,’ in a legal setting, often refers to artificial entities. The Dictionary Act makes that clear”). Thus, unless there is something about the RFRA context that “indicates otherwise,” the Dictionary Act provides a quick, clear, and affirmative answer to the question whether the companies involved in these cases may be heard. 

Thus, unless otherwise stated, any place a person can recover claims…

My post last week spawned more commentary than usual–on the BLPB site and off.  So, I am regrouping on the same issue for my post today and plan to push forward a bit on some of the areas of commentary.  Also, since The Conglomerate is running a Hobby Lobby symposium this week, I thought it might be nice to offer some thoughts on disclosure up here and (maybe) later chime in at The Conglomerate on this or other issues relating to the Hobby Lobby case later in the week . . . .

I’ve updated our business law professors on Twitter list here.  

Below are tweets from some of the new additions to the list.