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The new semester is upon us, and AALS (as it tends to) ran right into the new semester.  Joan Heminway provided a nice overview of some of her activities, including her recognition as an outstanding mentor by the Section on Business Associations, and it was a pleasure to see her recognized for her tireless and consistent efforts to make all of us better.  Congratulations, Joan, and thank you! 

I, too, had a busy conference, with most of it condensed to Friday and Saturday. (As a side note, it was pretty great to run along the water in 55-65 degree weather. As much as I love New York and appreciate San Francisco and DC, I’d be quite content with AALS moving between San Diego and New Orleans.)  I spoke on a panel with my co-bloggers, as Joan noted, about shareholder proposals, and I spoke on a panel about the green economy and sustainability, which was also fun.  It’s nice when I am able to spend some time with a focus on my two main areas of research. 

As to our panel on shareholder proposals, I thought I’d share a few of my thoughts.  First, as I have explained in the past…

AALS2018(SHProposalPanel)

Last week, I had the privilege of attending and participating in the 2018 annual meeting of the Association of American Law Schools (#aals2018).  I saw many of you there.  It was a full four days for me.  The conference concluded on Saturday with the program captured in the photo above–four of us BLPB co-bloggers (Stefan, me, Josh, and Ann) jawing about shareholder proposals–as among ourselves and with our engaged audience members (who provided excellent questions and insights).  Thanks to Stefan for organizing the session and inspiring our work with his article, The Inclusive Capitalism Shareholder Proposal.  I learned a lot in preparing for and participating in this part of the program.

Earlier that day, BLPB co-blogger Anne Tucker and I co-moderated (really, Anne did the lion’s share of the work) a discussion group entitled “A New Era for Business Regulation?” on current and future regulatory and de-regulatory initiatives.  In some part, this session stemmed from posts that Anne and I wrote for the BLPB here, here, and here.  I earlier posted a call for participation in this session.  The conversation was wide-ranging and fascinating.  I took notes for two essays I am writing this…

A recent case in Washington state introduced me to some interesting facets of Washington’s recreational marijuana law.  The case came to my attention because it is part of my daily search for cases (incorrectly) referring to limited liability companies (LLCs) as “limited liability corporations.”  The case opens: 

In 2012, Washington voters approved Initiative Measure 502. LAWS OF 2013, ch. 3, codified as part of chapter 69.50 RCW. Initiative 502 legalizes the possession and sale of marijuana and creates a system for the distribution and sale of recreational marijuana. Under RCW 69.50.325(3)(a), a retail marijuana license shall be issued only in the name of the applicant. No retail marijuana license shall be issued to a limited liability corporation unless all members are qualified to obtain a license. RCW 69.50.331(1)(b)(iii). The true party of interest of a limited liability company is “[a]ll members and their spouses.”1 Under RCW 69.50.331(1)(a), the Washington State Liquor and Cannabis Board (WSLCB) considers prior criminal conduct of the applicant.2

LIBBY HAINES-MARCHEL & ROCK ISLAND CHRONICS, LLC, Dba CHRONICS, Appellants, v. WASHINGTON STATE LIQUOR & CANNABIS BOARD, an Agency of the State of Washington, Respondent., No. 75669-9-I, 2017 WL 6427358, at *1 (Wash. Ct. App.

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Two weeks ago, I asked whether companies were wasting time on harassment training given the flood of accusations, resignations, and terminations over the past few weeks. Having served as a defense lawyer on these kinds of claims and conducted hundreds of trainings, I know that most men generally know right from wrong before the training (and some still do wrong). I also know that in many cases, people look the other way when they see or hear about the complaints, particularly if the accused is a superstar or highly ranked employee. Although most men do not have the power and connections to develop an alleged Harvey Weinstein-type “complicity machine” to manage payoffs and silence accusers, some members of management play a similar role when they ignore complaints or rumors of inappropriate or illegal behavior. 

The head in the sand attitude that executives and board members have displayed in the Weinstein matter has led to a lawsuit arguing that Disney knew or should have known of Weinstein’s behavior. We may see more of these lawsuits now that women have less fear of speaking out and Time honored the “Silence Breakers” as the Person of the Year. As I…

Earlier this week, I had the pleasure of hearing a talk about universal proxies from Scott Hirst, Research Director of Harvard’s Program on Institutional Investors.

By way of background, last Fall under the Obama Administration, the SEC proposed a requirement for universal proxies noting:

Today’s proposal recognizes that few shareholders can dedicate the time and resources necessary to attend a company’s meeting in person and that, in the modern marketplace, most voting is done by proxy.  This proposal requires a modest change to address this reality.  As proposed, each party in a contest still would bear the costs associated with filing its own proxy statement, and with conducting its own independent solicitation.  The main difference would be in the form of the proxy card attached to the proxy statement.  Subject to certain notice, filing, form, and content requirements, today’s proposal would require each side in a contest for the first time to provide a universal proxy card listing all the candidates up for election.

The Council of Institutional Investors favors their use explaining, “”Universal” proxy cards would let shareowners vote for the nominees they wish to represent them on corporate boards. This is vitally important in proxy contests, when…

Yesterday, I listened to How I Built This‘ podcast on Gary Hirshberg of Stonyfield Yogurt.

I assume most readers are familiar with Stonyfield Yogurt, and perhaps a bit of its story, but I think the podcast goes far beyond what is generally known. 

The main thing that stuck out in the podcast was how many struggles Stonyfield faced. Most of the companies featured on How I Built This struggle for a few months or even a few years, but Stonyfield seemed to face more than its share of challenges for well over a decade. The yogurt seemed pretty popular early on, but production, distribution, and cash flow problems haunted them. Stonyfield also had a tough time sticking with their organic commitment, abandoning organic for a few years when they outsourced production and couldn’t convince the farmers to follow their practices. With friends and family members’ patient investing (including Gary’s mother and mother-in-law), Stonyfield finally found financial success after raising money for its own production facility, readopting organic, and finding broader distribution.

After about 20 years, Stonyfield sold the vast majority of the company to large multinational Group Danone. Gary explained that some investors were looking for liquidity and…

Business leaders probably didn’t think the honeymoon would be over so fast. A CEO as President, a deregulation czar, billionaires in the cabinet- what could possibly go wrong?

When Ken Frazier, CEO of Merck, resigned from one of the President’s business advisory councils because he didn’t believe that President Trump had responded appropriately to the tragic events in Charlottesville, I really didn’t think it would have much of an impact. I had originally planned to blog about How (Not) To Teach a Class on Startups, and I will next week (unless there is other breaking news). But yesterday, I decided to blog about Frazier, and to connect his actions to a talk I gave to UM law students at orientation last week about how CEOs talk about corporate responsibility but it doesn’t always make a difference. I started drafting this post questioning how many people would actually run to their doctors asking to switch their medications to or from Merck products because of Frazier’s stance on Charlottesville. Then I thought perhaps, Frazier’s stance would have a bigger impact on the millennial employees who will make up almost 50% of the employee base in the next few years. Maybe he would…

Earlier this week, Professor Bainbridge posted California court completely bollixes up business law nomenclature, discussing Keith Paul Bishop’s post on Curci Investments, LLC v. Baldwin, Cal. Ct. App. Case No. G052764 (Aug. 10, 2017).  The good professor, noting (with approval) what he calls my possibly “Ahabian” obsession with courts and their LLC references, says that “misusing terminology leads to misapplied doctrine.”  Darn right.

To illustrate his point, let’s discuss a 2016 Colorado case that manages to highlight how both Colorado and Utah have it wrong. As is so often the case, the decision turns on incorrectly merging doctrine from one entity type (the corporation) into another (the LLC) without acknowledging or explaining why that makes sense.  To the court’s credit, they got the choice of law right, applying the internal affairs doctrine to use Utah law for veil piercing a Utah LLC, even though the case was in a Colorado court. 

After correctly deciding to use Utah law, the court then went down a doctrinally weak path.  Here we go:

Marquis is a Utah LLC. (ECF No. 1 ¶ 7.) Utah courts apply traditional corporate veil-piercing principles to LLCs. See, e.g., Lodges at Bear Hollow Condo. Homeowners Ass’n, Inc.

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My latest paper, The Inclusive Capitalism Shareholder Proposal, 17 U.C. Davis Bus. L.J. 147 (2017), is now available on Westlaw. Here is the abstract:

When it comes to the long-term well being of our society, it is difficult to overstate the importance of addressing poverty and economic inequality. In Capital in the Twenty-First Century, Thomas Piketty famously argued that growing economic inequality is inherent in capitalist systems because the return to capital inevitably exceeds the national growth rate. Proponents of “Inclusive Capitalism” can be understood to respond to this issue by advocating for broadening the distribution of the acquisition of capital with the earnings of capital. This paper advances the relevant discussion by explaining how shareholder proposals may be used to increase understanding of Inclusive Capitalism, and thereby further the likelihood that Inclusive Capitalism will be implemented. In addition, even if the suggested proposals are rejected, the shareholder proposal process can be expected to facilitate a better understanding of the strengths and weaknesses of Inclusive Capitalism, as well as foster useful new lines of communication for addressing both poverty and economic inequality.

My colleague, Joan Heminway, yesterday posted Democratic Norms and the Corporation: The Core Notion of Accountability. She raises some interesting points (as usual), and she argues: “In my view, more work can be done in corporate legal scholarship to push on the importance of accountability as a corporate norm and explore further analogies between political accountability and corporate accountability.”

I have not done a lot of reading in this area, but I am inclined to agree that it seems like an area that warrants more discussion and research.  The post opens with some thought-provoking writing by Daniel Greenwood, including this:  

Most fundamentally, corporate law and our major business corporations treat the people most analogous to the governed, those most concerned with corporate decisions, as mere helots. Employees in the American corporate law system have no political rights at all—not only no vote, but not even virtual representation in the boardroom legislature.
Joan correctly observes, “Whether you agree with Daniel or not on the substance, his views are transparent and his belief and energy are palpable.” Although I admit I have not spent a lot of time with his writing, but my initial take is that I do not

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