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Christopher Bruner recently posted a book chapter entitled The Corporation’s Intrinsic Attributes. I try to read everything Christopher writes, including his excellent Cambridge University Press book, Corporate Governance in the Common Law World, and I am looking forward to reading this new book chapter over spring break next week. The book chapter’s abstract is reproduced below for interested readers:

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Numerous treatises, casebooks, and other resources commonly present concise lists of attributes said to be intrinsic to the modern corporation and/or essential to its economic utility. Such descriptions of the corporate form often constitute introductory matter, conditioning how students, professionals, and public officials alike approach corporate law by presenting a straightforward framework to distinguish the corporate form from other types of business entities. There are two significant problems with such frameworks, however, from a pedagogic perspective. First, these frameworks describe the corporation by reference to purportedly fixed intrinsic attributes, conflicting sharply with the flux and dynamism that have in fact characterized the history of corporate law. Second, these frameworks differ markedly from each other in how they characterize the corporation’s attributes, each embodying a contestable perspective on the nature of the corporate form.

The diversity of perspectives that such inquiry…

Presidential candidate Donald Trump has repeatedly stated that he never plans to eat Oreo cookies again because the Nabisco plant is closing and moving to Mexico. Trump, who has starred in an Oreo commercial in the past, is actually wrong about the nature of Nabisco’s move, and it’s unlikely that he will affect Nabisco’s sales notwithstanding his tremendous popularity among some in the electorate right now. Mr. Trump has also urged a boycott of Apple over how that company has handled the FBI’s request over the San Bernardino terrorist’s cell phone.

Strangely, I haven’t heard a call for a boycott of Apple products following shareholders’ rejection of a proposal to diversify the board last week. I would think that Reverend and former candidate Al Sharpton, who called for the boycott of the Oscars due to lack of diversity would call for a boycott of all things Apple. But alas, for now Trump seems to be the lone voice calling for such a move (and not because of diversity). In fact, I’ve never walked past an Apple Store without thinking that there must be a 50% off sale on the merchandise. There are times when the lines are literally…

Having just taught a corporate governance seminar class on the proxy process (from a company’s perspective), proxy advisory services, and institutional voting, I have the upcoming proxy season on my mind.  There are a great collection of resources available for those interested for academic or practice-related reasons.  My students found many of these summaries to be a good distillation of the issues and introduction to the nuts and bolts of proxy access.  I have provided my list of resources below, in addition to a quick summary of the major governance issues likely to be on the table in 2016.

Major Governance Issues:

2016 Proxy Season Resources:

I am looking forward to presenting at this conference next month. Looks like a great group of academics and practitioners.

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University of Cincinnati College of Law

The 29th Annual Corporate Law Center Symposium – Corporate Social Responsibility and the Modern Enterprise

March 18, 2016

8:45 a.m. – 3:30 p.m.

Hilton Netherland Plaza

Pavilion Ballroom

This event is free. CLE: 5.0 hours, pending approval.

Presented by the University of Cincinnati College of Law’s Corporate Law Center and Law Review.

Symposium materials will be available on March 14 at: law.uc.edu/corporate-law-center/2016-symposium

Please register by contacting Lori Strait: email Lori.Stait@uc.edu; fax 513-556-1236; or phone 513-556-0117

Introduction, 8:45 a.m.

Keynote, 9:00 a.m.

Clare Iery, The Procter & Gamble Company

Social Enterprises and Changing Legal Forms, 9:30 a.m.

Mark Loewenstein, University of Colorado Law School

William H. Clark, Jr., Drinker Biddle & Reath LLP

Haskell Murray, Belmont University College of Business

Russell Menyhart, Taft Stettinius & Hollister LLP

Sourcing Dilemmas in a Globalized World, 11:00 a.m.

Steve Slezak, University of Cincinnati College of Business

Marsha A. Dickson, University of Delaware Department of Fashion & Apparel Studies

Tianlong Hu, Renmin University of China Law School

Anita Ramasastry, University of Washington School of Law

CSR …

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

…

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…

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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On Saturday, January 9, 2016, I will be spending the day at the AALS Section on Socio-Economics Annual Meeting at the Sheraton New York Times Square Hotel.  Among other things, I will be part of a panel discussion from 9:50 – 10:50 AM, Death of the Firm: Vulnerabilities and the Changing Structure of Employment.  My co-panelists will be June Carbone and Katherine Stone (I am very tempted to give up my 15 minutes and just sit back and listen to these two great scholars, but please don’t use the comments section to encourage me to do that).  As I understand it, the gist of the discussion will be that while firms once supported a significant part of the safety net that provided employee health and retirement benefits, they have recently abdicated more and more of these responsibilities.  At the same time, however, what may be described as subsidies granted by the state to firms — particularly corporations — as part of a social contract whereby these firms provided the aforementioned benefits, have not been correspondingly reduced.  In fact, the rights of corporations have been expanded by, for example, cases like Citizens United and Hobby Lobby — suggesting a possible windfall…

The Pep Boys – Manny, Moe & Jack (NYSE:  PBY) merger triangle with Bridgestone Retail Operations LLC and Icahn Enterprises LP is proving to be an exciting bidding war.  The price and the pace of competing bids has been escalating since the proposed Pep Boys/Bridgestone agreement was announced on October 16, 2015.  Pep Boys stock had been trading around $12/share. Pursuant to the agreement, Bridgestone commenced a tender offer in November for all outstanding shares at $15.  

Icahn Enterprises controls Auto Plus, a competitor of Pep Boys, the nation’s leading automotive aftermarket service and retail chain.  Icahn disclosed an approximately 12% stake in Pep Boys earlier in December and entered into a bidding war with Bridgestone over Pep Boys.  The price climbed to $15.50 on December 11th, then $17.00 on December 24th. Icahn Enterprises holds the current winning bid at $18.50/share, which the Pep Boys Board of Directors determined is a superior offer.  In the SEC filings, Icahn Enterprises indicated a willingness to increase the bid, but not if Pep Boys agreed to Bridgestone’s increased termination fee (from $35M to 39.5M) triggered by actions such as perior proposals by third parties.  Icahn challenged such a fee as a serious threat to…

Andrew Schwartz, a professor at the University of Colorado, has recently published an interesting article discussing how crowdfunding deals with the fundamental problems of startup finance: uncertainty, information asymmetry, and agency costs. His article, The Digital Shareholder, 100 MINN. L. REV. 609 (2015), is available here.

Here’s the abstract:

Crowdfunding, a new Internet-based securities market, was recently authorized by federal and state law in order to create a vibrant, diverse, and inclusive system of entrepreneurial finance. But will people really send their money to strangers on the Internet in exchange for unregistered securities in speculative startups? Many are doubtful, but this Article looks to first principles and finds reason for optimism.

Well-established theory teaches that all forms of startup finance must confront and overcome three fundamental challenges: uncertainty, information asymmetry, and agency costs. This Article systematically examines this “trio of problems” and potential solutions in the context of crowdfunding. It begins by considering whether known solutions used in traditional forms of entrepreneurial finance—venture capital, angel investing, and public companies—can be borrowed by crowdfunding. Unfortunately, these methods, especially the most powerful among them, will not translate well to crowdfunding.

Finding traditional solutions inert, this Article presents five novel solutions…