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This experience has been rather remarkable, and I’m only two days in to the trip.  We covered a lot of miles today, and not all of it was related to the oil and gas business. I started the day with a run, at a misty 43 degrees, after a high of 85 yesterday.  This is not relevant, other than to saw I was a bit cold this morning.  

 Target Logistics Dunn County Lodge

A few visits of interest today: First:  Target Logistics Dunn County Lodge, which is a crew camp site.  These are often know as “man camps.” They prefer “workforce housing.” I’ll stick with crew camps. 

It was was an impressive site for quickly built housing. The facility provides housing that does not take away from the local community, and deals with parking, water, and utility issues, as well as other resource issues.  The site has about 600 beds, and costs about $8-$10 million to build. They plan about a 20-month payoff for the build, which they met. Impressive. 

Prices are geared to be market competitive. The average is about $120 per night, which includes all food and utilities, though companies negotiate their own deals.  The people who…

Today marked the first day of several meeting with people from North Dakota to discuss the oil boom and how it has impacted the state.  I lived in the state, and I loved it, so I think I am a little more connected than many to what’s happened here.  That said, I lived on the other side of the state from the oil boom, and I only spent five (largely great) years in North Dakota, so while I’m informed, I have hardly “lived the boom.”  I’ve just been watching and trying to pay attention. 

A few things I was told tonight struck me as significant: 

1. Housing costs are still a huge issue. Building a new house in Dickinson can run upwards of $250 per square foot. A one-bedroom apartment can easily run $1300.

2. In 1997, there were 698 hotel rooms in the city, largely for tourism jumping off for the North Dakota Badlands.  By 2004, that number was 754.  As of 2013, that number has increased to 1632. (The number is true of 2014, too.) 

3. In 2005, the average daily rate for a hotel room was $53.96

By 2008: $68.95

2009: $75.57

2010: $87.59

2011: $109.52

2012 :$124.03…

I’m currently flying at about 30,000 feet on my way to Dickinson, North Dakota.  Regular readers know I do much of my research in the energy sector and that the impacts of horizontal drilling and hydraulic fracturing have had on the local, regional, national, and global economies are an interest of mine.  This trip marks my first return to North Dakota since I left the University of North Dakota School of Law in the summer of 2012, and it will be my most extended trip to the Bakken oil patch in the western part of the state. 

I have the benefit of traveling with a group from West Virginia University, and we’re gathering information for a variety of applications, all of which I hope will help us plan for a more sustainable economic and environmentally viable energy future.  The trip is scheduled to include meetings with government officials (state and local), industry representatives, landowners, farmers, educators, and others.  I’m looking forward to this rare opportunity to hear so many different perspectives from people living in the heart of the U.S. oil boom. 

Over the last few years, I have written about the challenges and opportunities related to the shale oil and…

Behemoth proxy advisory firm Institutional Shareholder Services has released its 2015 Policy Survey.  I have listed some of the questions below:

Which of the following statements best reflects your organization’s view about the relationship between goal­setting and award values?

 Is there a threshold at which you consider that the magnitude of a CEO’scompensation should warrant concern even if the company’s absolute and relative performance have been positive, for example, outperforming the peer group?

With respect to evaluating the say­ on ­pay advisory vote, how does your organization view disclosed positive changes to the pay program that will be implemented in the succeeding year(s) when a company demonstrates pay­ for ­performance misalignment or other concerns based on the year in review?

If you chose either the first or second answer in the question above, should shareholders expect disclosure of specific details of such future positive changes (e.g., metrics, performance goals, award values, effective dates) in order for the changes to be considered as a potential mitigator for pay ­for ­performance or other concerns for the year in review?

Where a board adopts without shareholder approval a material bylaw amendment that diminishes shareholders’ rights, what approach should be used when evaluating board…

Last week, news of the proposed Burger King & Tim Horton’s merger fueled the already raging fire on corporate inversions as the Miami-based burger chain announced plans, through the merger, to possibly relocate to Canada.  As I have written about on this blog, here and here and in the Huffington Post, inversions may offer US companies tax savings.

Stephen E. Shay, a professor of practice at Harvard Law School, provides a short article (12 pages) describing the tax issues in corporate inversions and possible regulatory fixes.  This article is very helpful in taking the debate from the headlines into a more complex legal analysis illuminating the tax consequences and offering a better understanding of the legal remedies available.  Worth the read.

-Anne Tucker

At the New York Times Dealbook, Andrew Ross Sorkin notes that public pension funds have been lately silent on the issue of corporate inversions. (See co-blogger Anne Tucker on inversions here and here.) Sorkin writes, “Public pension funds may be so meek on the issue of inversions because they are conflicted.”

Maybe I am reading too much into his choice of words, but “meek” implies more to me than “moderate” or “mild” and instead conveys a value judgment that fund managers have an obligation to speak out. I am not pretty sure that’s not true.

I definitely don’t like companies heading offshore for mild gains, and I don’t think I would support such a choice, but as a director, I’d sure analyze the option before deciding. Fund managers, too, have obligations to look out for their stakeholders, and unless I had a clear charge on this front or thought the inverting company was clearly wrong, I’d probably stay quiet, too.

Although the meek may inherit the earth, at least at this point, I might substitute “meek” with “cautious” or even “prudent.”  But that’s just me.

Larry Cunningham has a further post on his forthcoming book, Berkshire Beyond Buffett: The Enduring Value of Values, over at Concurring Opinions.  The post includes an excerpt from Chapter 8 of the book, Autonomy, and links to the full text of the chapter, available on SSRN for free (!) download.  Larry’s and my earlier posts on the book here on the BLPB can be found here, here, here, and here.

Here’s a slice of the excerpt included in the Concurring Opinions post:

. . . Berkshire corporate policy strikes a balance between autonomy and authority. Buffett issues written instructions every two years that reflect the balance. The missive states the mandates Berkshire places on subsidiary CEOs: (1) guard Berkshire’s reputation; (2) report bad news early; (3) confer about post-retirement benefit changes and large capital expenditures (including acquisitions, which are encouraged); (4) adopt a fifty-year time horizon; (5) refer any opportunities for a Berkshire acquisition to Omaha; and (6) submit written successor recommendations. Otherwise, Berkshire stresses that managers were chosen because of their excellence and are urged to act on that excellence. 

Cool stuff . . . .

On Friday, Bill Haslam, the Governor of the State of Tennessee, spoke at a session sponsored by the C. Warren Neel Corporate Governance Center on The University of Tennessee’s Knoxville campus.  He is our former city mayor and a hometown favorite for many.  I always enjoy his talks.

His talk on Friday focused on how Tennessee is attracting businesses and jobs and how education–including higher education–plays a role.  But before he honed in on that topic, he asked an intriguing, albeit basic, question that operates on theoretical, political, and practical planes.  That question: How is government similar to and different from private enterprise?  He wanted audience participation.  I waited to see how everyone would react.  He got lots of good answers that cut across economics, management, finance, and governance.

Provocatively (at least for me), he characterized his gubernatorial role as akin to the role of a chief executive officer in a corporation.  He has served as a corporate manager (president of his family’s firm and the CEO of a division of another firm), and his vision of the state gubernatorial role is clearly framed by that experience.  He actually called the legislature his “board of directors” in his role as governor. 

Well, after that analogy, I just had to contribute to the discussion with a comment.  I endorsed the governor’s view of his position, but I also noted that the executive, as the head of a separate branch of a government of three branches, has power independent of the power afforded to the legislature.  That is when things got interesting, at least for me.

Thanks for your informative post, Anne.  I started drafting this post as a comment to yours, and then I realized it was its own post.   [sigh]

It seems to me that the U.S. Department of HHS and any commentators must grapple with what has been a difficult, fact-based question in determining how to define “closely held” to effectuate the Supreme Court’s intent in as expressed in the Hobby Lobby opinion.  That question?  What “control” means in this context.

The Court said in the Hobby Lobby opinion:  “The companies in the cases before us are closely held corporations, each owned and controlled by members of a single family, and no one has disputed the sincerity of their religious beliefs.”  More specifically, the Court notes that the Hahns (owners of shares in Conestoga) “control its board of directors and hold all of its voting shares” and notes that Hobby Lobby and Mardel “remain closely held, and David, Barbara, and their children retain exclusive control of both companies.”  [Emphasis has been added by me in each quote.]

The definition of “control” primarily has been a question of fact in business law, making the task of defining it here somewhat difficult.  Some questions and considerations to grapple with are set forth below the fold.  I am sure that others can come up with more.  I am posting these as a way of getting the collective juices flowing.

As I have pointed out in earlier posts on this blog, the June decision in Hobby Lobby failed to define closely-held business for purposes of the religious exemption.  On August 22nd, the U.S. Department of Health and Human Services (HHS) issued proposed rules, open for comments for 60 days, that include a definition of closely-held under one of two approaches borrowed from state law definitions like with S corporations and from IRS regulations.

In common understanding, a closely held corporation – a term often used interchangeably with a “close” or “closed” corporation – is a corporation the stock of which is owned by a small number of persons and for which no active trading market exists. ….Under the first proposed approach, a qualifying closely held for-profit entity would be an entity where none of the ownership interests in the entity is publicly traded and where the entity has fewer than a specified number of shareholders or owners….

Under a second, alternative approach, a qualifying closely held entity would be a forprofit entity in which the ownership interests are not publicly traded, and in which a specified fraction of the ownership interest is concentrated in a limited and specified number of owners.

HHS invites…