Corporations

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Justice Scalia’s sudden passing has generated a tidal wave of media and academic attention on the future of the Supreme Court.   As a corporate law scholar, I have to admit to a tinge of jealousy to be seemingly outside of this controversy, the hand wringing, and the political equivalent of Dungeons and Dragons that has ensued as people examine the various maneuverers available to our elected politicians and those vying-to be elected.

My solution? I searched for pending corporate cases hanging in the balance of the new, and indeterminate, vacancy on the Supreme Court.  I wanted to know if there were any cases pending  that would likely be decided differently in a post-Scalia court, or at least hang in a 4-4 split and thus uphold the lower court ruling.  There isn’t a big juicy corporate law case pending, or at least one that I readily identified.

Not to be deterred, however, there is a case worth highlighting. Americold Realty Trust v. ConAgra Foods, Inc., was argued on January 19th before the Supreme Court (transcript available here).  The issue before the Supreme Court in Americold was how to establish the citizenship of a real estate trust for purposes…

Bernard Sharfman, in his new article on SSRN, The Tension Between hedge Fund Activism and Corporate Law, argues that hedge fund activism for control of a publicly traded corporation is a positive corrective measure in corporate governance.  After asserting that hedge fund activism should be permitted, Sharfman, argues, controversially, that courts should depart from traditional deference to a corporate board’s decision making authority under the business judgment rule.  Alternatively, Sharfman urges courts to adopt a heightened standard of scrutiny when reviewing defensive board actions against hedge funds.

[Hedge Fund Activism] has a role to play as a corrective mechanism in corporate governance and it is up to the courts to find a way to make sure it continues to have a significant impact despite the courts’ inclination to yield to Board authority. In practice, this means that when the plaintiff is an activist hedge fund and the standard of review is the Unocal test because issues of control are present, a less permissive approach needs to be applied, requiring the courts to exercise restraint in interpreting the actions of activist hedge funds as an attempt to gain control. 

If there are no issues of control, then Board independence and reasonable investigation still needs to be the focus. That is, before the business

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Starting on the first day of my Advanced Business Associations course, I attempt to tease out the policy underpinnings and theoretical conceptions of entity law and, in particular, corporate law.  This turns out to be a somewhat difficult task, since most students in the course, to the extent that they remember anything at all from their experience in the foundational Business Associations course, are more focused on what a corporation is and does than why we might have one in the first place.  As the semester proceeds and the readings unfold, the students get more comfortable talking about the rationale for certain aspects of the corporate form and why corporate law structures and operating rules promise to achieve the goals of those organizing a firm as a corporation.  But it’s a slow process.

I have to believe that some of my fellow law professors face similar challenges with their students.  I also believe that instructors in other educational settings face analogous difficulties when they incorporate abstract notions into the teaching of more “black letter” (for want of a better term at this point in my day) concepts.  My approach has been to assign readings of primary and secondary material and use classroom discussion…

For the past four weeks I have been experimenting with a new class called Transnational Business and Human Rights. My students include law students, graduate students, journalists, and accountants. Only half have taken a business class and the other half have never taken a human rights class. This is a challenge, albeit, a fun one. During our first week, we discussed CSR, starting off with Milton Friedman. We then used a business school case study from Copenhagen and the students acted as the public relations executive for a Danish company that learned that its medical product was being used in the death penalty cocktail in the United States. This required students to consider the company’s corporate responsibility profile and commitments and provide advice to the CEO based on a number of factors that many hadn’t considered- the role of investors, consumer reactions, the pressure from NGOs, and the potential effect on the stock price for the Danish company based on its decisions. During the first three weeks the students have focused on the corporate perspective learning the language of the supply chain and enterprise risk management world.

This week they are playing the role of the state and critiquing and…

Laurence Fink, CEO of BlackRock, the largest asset manager in the U.S., wrote a letter to the CEO’s of S&P 500 Companies urging reforms aimed at fostering long-term valuation creation and curbing a myopic focus on near-term profits.  Fink has long been a public advocate of long-term valuation creation for the health of American companies and the wealth of society (for an example see this April 2015 letter on the “gambling nature” of the economy”).  His message has been consistent:  long term, long term, long term. 

Citing to increased dividends and buyback programs as evidence of corrosive short-termism, Fink laid out a modest play for action.  He asks every CEO to publish an annual strategic plan signed off on by the board.  The CEO strategic plan should communicate the vision for the company and how such long-term growth can be achieved.  

[P]erspective on the future, however, is what investors and all stakeholders truly need, including, for example, how the company is navigating the competitive landscape, how it is innovating, how it is adapting to technological disruption or geopolitical events, where it is investing and how it is developing its talent. As part of this effort, companies should work to develop financial metrics, suitable for

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In December, 2015, Dow Chemicals Co. and DuPont announced a proposed merger between their two companies.  Under the proposed deal, and with the approval of stockholders and regulators, the two agro/chemical giants will merger their companies in 2016 to create DowDuPont, with an estimated $130 billion value.  Within 18-24 months of closing, DowDuPont will be split into three independent, publicly traded companies .

The proposed “merger of equals” is structured to share power equally between Dow and DuPont and its leadership in the new company.  Dow and DuPont stockholders will each own roughly half of DowDuPont.  There will be 16 members on the new DowDuPont board of directors:  8 from each company.  The roles of Chairman and CEO will be split with Andrew Liveris (Dow) serving as Chairman and Edward Breen (DuPont) as CEO.

Questions of equality and perceived power imbalance arise when we examine the relationships between  (1) corporate boards and activist investors; (2) various shareholders (hedge funds vs. institutional investors vs. retail investors, etc.), and (3) possibly, CEO’s.  

Let’s tackle the first (and tangentially the second) imbalance by talking about hedge funds.  Last year, Trian hedge fund targeted DuPont in a very expensive, public and close proxy…

Two weeks ago I posted about whether small businesses, start ups, and entrepreneurs should consider corporate social responsibility as part of their business (outside of the benefit corporation context). Definitions of CSR vary but for the purpose of this post, I will adopt the US government’s description as:

entail[ing] conduct consistent with applicable laws and internationally recognised standards. Based on the idea that you can do well while doing no harm … a broad concept that focuses on two aspects of the business-society relationship: 1) the positive contribution businesses can make to economic, environmental, and social progress with a view to achieving sustainable development, and 2) avoiding adverse impacts and addressing them when they do occur.

During my presentation at USASBE, I admitted my cynical thoughts about some aspects of CSR, discussed the halo effect, and pointed out some statistics from various sources about consumer attitudes. For example:

  • Over 66% of people say they will pay more for products from a company with “good values”
  • 66% of survey respondents indicated that their perception of company’s CEO affected their perception of the company
  • 90% of US consumers would switch brands to one associated with a cause, assuming comparable price

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I am taking a MOOC from University of Illinois and Coursera on digital marketing. I’ve been trying to take at least one course a semester. Both the underlying material, and the intricacies of online education have been interesting. I chose this course because I have family members in the digital marketing area, and I am taking (and discussing) this course with them.

Later, I may discuss some of  the substantive take-aways from the course — I have completed about 50% of the course so far — but in this post I want to discuss business/academic entanglement.

In this digital marketing class, an assignment on co-creation (by firms & their customers) consisted of creating an online account with Starbucks, submitting an idea for consideration, and reporting how the idea was received by commenters. This was a useful exercise and it made the concept come alive, but I couldn’t help wondering if Starbucks was somehow involved with University of Illinois and/or Coursera in creating this assignment. To be clear, I have no idea whether Starbucks was or was not involved.  But, in any event, with the thousands (and maybe 10s of thousands) of people who are taking this course, this assignment seemed like a win for Starbucks.  Well, actually, this idea…

In early January, the Second Circuit Court of Appeals ruled in Cent. Laborers’ Pension Fund v. Dimon to affirm the dismissal of purported shareholder derivative claims alleging that directors of JP Morgan Chase–the primary bankers of Bernard L. Madoff Investment Securities LLC (“BMIS”) for over 20 years–failed  to institute internal controls sufficient to detect Bernard Madoff’s Ponzi scheme.  The suit was dismissed for failures of demand excuse.  Plaintiffs contended that the District Court erred in requiring them to plead that defendants “utterly failed to implement any reporting or information system or controls,” and that instead, they should have been required to plead only defendants’ “utter failure to attempt to assure a reasonable information and reporting system exist[ed].” (emphasis added).  The Second Circuit declined, citing to In re General Motors Co. Derivative Litig., No. CV 9627-VCG, 2015 WL 3958724, at *14–15 (Del. Ch. June 26, 2015), a Chancery Court opinion from earlier this year that dismissed a Caremark/oversight liability claim.  In In re General Motors the Delaware Chancery Court, found that plaintiffs’ allegations that:

[T]he Board did not receive specific types of information do not establish that the Board utterly failed to attempt to assure a reasonable information and reporting system exists, particularly

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Development Studies Workshop
Organized by the
Banque Populaire Chair in Microfinance of the Burgundy School of Business (Dijon, France)
In collaboration with
BG Foundation (India)
With Support from
VLCC (India)

Theme: Spirituality, Organization and Development
Dates: 28th and 29th October, 2016
Venue: Gurgaon/Delhi (India)

At a time of terrorism, war, and general confusion on human values, there is increasing concern to develop the world in a more sustainable manner. Harmony with nature, ethics, morality and even spirituality is being sought at an individual level, at an organizational level and at the macro level, while continuing the focus on development and making life worth living for all our fellow human-beings. At this juncture, more and more academics and practitioners are turning towards religion to see if some spiritual lessons can be incorporated for an enhanced work-life. At the very least, understanding the spiritual culture of different persons is important to work in global corporations. It is even more important to understand large waves of immigrants and to mentally prepare for their differences in values. The theme of this workshop is therefore relevant to promote human understanding in a globalized world.

A research workshop’s primary aim is to help each other improve our papers so that we can publish in high ranked international journals and specialized books on a topic. For this, we would like to bring together a large diversity of researchers from different backgrounds to focus on a relevant and interesting theme, which is meaningful to the present moment.

Topics

While papers in any of these individual themes is welcome, papers combining two or more elements of spirituality, organization and economic development will be given preference.

Examples of possible topics combining two themes (not exclusive, not exhaustive) to spark your thoughts:

  1. Spiritual Development
    a. Yoga in the workplace
    b. Gandhism and sustainable development
    c. Organizing Ayurvedic health systems
  2. Organizational Development
    a. Organization Leadership and community development
    b. Corporate transformation through Islamic Finance
    c. Managing Conflicts through the Art of Living
  3. Economic Development
    a. Microfinance and Hinduism
    b. Confucianism and development of intellectual property rights
    c. Economics of Spiritual tourism of Christian holy places

Please send abstracts by April 15, 2016 to microfinancechair@escdijon.eu. 

Guidelines for Abstracts (150 to 300 words)

Title of the paper
Author Information: Names, designations and affiliations, current locations (city, country)
Research purpose
Theoretical Background
Research design/methodology/approach
Key results
Impact (on new research or on new practices, policies)
Value added/ Originality

Note

There will be no parallel sessions. A minimum of six and a maximum of fifteen working papers can be presented.
Abstracts will be selected based on conformity to the theme and diversity of origins.
A few people whose abstract is not accepted can opt for being discussants or participants, subject to place availability.

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