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Next Friday, the George Washington Law Review will host a symposium on Women and Corporate Governance. Co-sponsored by Lisa Fairfax, the symposium features an impressive lineup–three former SEC Commissioners, regulators, professors, partners at leading law firms, and the BLPB’s own Joan Heminway.  The panels include discussions about women and corporate boards, women as regulators, women in the C-Suite, and women as gatekeepers.  This is the quick overview:

The Symposium will explore the role of women in a changing corporate environment, particularly in light of the 2008 financial crisis and its aftermath. Recent social, political, and economic events have brought renewed attention to the ways in which the corporate environment is impacted by, and responsive to, women. It is especially vital to further this discussion today, as corporations grapple with the under-representation of women on their boards, in their C-suites, and in a host of other managerial positions.

In place of the traditional individual keynote, we have the privilege of hosting a fireside chat featuring the three women who have served as Chair of the U.S. Securities and Exchange Commission – Mary Schapiro, Elisse Walter, and Mary Jo White, moderated by Professor Lisa Fairfax.

Congratulations to Professor Fairfax and the George Washington Law Review for getting so many…

Some business school professors recently posted new research on FINRA arbitration and came away with interesting findings.  They looked at about 9,000 different arbitration cases and found significant differences between arbitrators.  Some were more industry-friendly, meaning they gave lower awards to claimants.  Others were more client/customer-friendly, giving more awards to customers.  Unsurprisingly, industry-friendly arbitrators were 40% more likely to be selected for panels.  The authors found that industry firms were, on the whole, better at picking arbitrators than customers.

The FINRA arbitration process allows parties to influence arbitrator selection.  FINRA generates lists with arbitrators for the parties and then allows the parties to strike a certain number of arbitrators before ranking the remaining arbitrators.  FINRA appoints the highest-ranking remaining arbitrators to decide the case.

The study provides some support for a longstanding fear about the FINRA arbitration process.  Customers with cases before arbitrators are usually not repeat players in arbitration.  Once burned in a stock swindle, customers tend to become more cautious about trusting brokers. Arbitrators and firms, on the other hand, are repeat players.  If the arbitrator tags the industry with a large award and rules in favor of the customer, other industry members will likely strike that arbitrator…

Daniel Greenwood coined the term “fictional shareholders” to refer to courts’ tendency to base corporate law decisions on the preferences of a set of hypothetical investors, untethered to the real-world priorities of the actual shareholders who hold a company’s stock.  See Daniel J.H. Greenwood, Fictional Shareholders: “For Whom Are Corporate Managers Trustees,” Revisited, 69 S. Cal. L. Rev. 1021 (1996).  If ever there were an illustration of Greenwood’s point, it comes in VC Laster’s recent post-trial decision in In re PLX Stockholders Litigation.

And hey, this got really long, so more under the jump

If you follow this blog regularly, you’ve probably seen me rant about the myriad errors courts make when evaluating market and investor behavior in the context of securities litigation.  I finally did what I’d been threatening to do and compiled my complaints into a single Essay on the subject, which I presented at the Connecting the Threads symposim hosted by the University of Tennessee at Knoxville in September.  (The symposium featured all of the Business Law Prof bloggers, and Marcia posted a description of the full program here)

My Essay, along with pieces by my co-bloggers, will be published in Transactions: The Tennessee Journal of Business Law.  I’ve just posted a draft to SSRN, and – anyway, here’s Wonderwall:

Fact or Fiction: Flawed Approaches to Evaluating Market Behavior in Securities Litigation

Abstract: Courts entertaining class actions brought under Section 10(b) of the Securities Exchange Act are required to make numerous factual judgments about the economic effects of the alleged misconduct.  For example, they must determine whether and for how long publicly-available information has exerted an influence on security prices, and whether an alleged fraud caused economic harm to investors.  Judgments on these matters dictate whether

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SEC Commissioner Stein recently spoke at the Brookings Institution and called for more effective investor education as well as clearer and more effective disclosures.  One suggestion was to start designing curricula and providing investor education at much earlier ages.  She highlighted work done by  Nicole Iannarone and her students at Georgia State to put investor education information into nursery rhymes  My favorite is this bit from one about REITs set to My Little Teacup:

Non-traded REIT funds,

Have unique risks.

Illiquid value,

Harder to list.

Tempting for certain,

High dividend yields,

But higher up-front fees,

Could kill.

Admittedly, I might be unusual in my enthusiasm for poetry about the risks with non-traded REITs.  My attempts at crafting non-traded REIT rhymes veer toward unprintable, scatological rhymes.

Importantly, Commissioner Stein didn’t just call for putting all investor protection hopes into Investor Ed.  She recognized that it can only do so much and that more effective and useful disclosures would make a big difference as well.  She also called for disclosures to make it clear to investors exactly who they are paying and how much they pay.  

Fee confusion remains widespread.  One recent survey found that about 43% of investors just don’t know…

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With the SEC considering how to raise the standards for investment advice, it’s important to realize that more is at stake than just money.  If a retirement investor takes a large loss because of bad financial advice, the aftermath can be deadly.  A study recently published in the Journal of the American Medical association examined the impact of wealth shock on mortality.   Compared to persons that didn’t experience wealth shock, the persons that experienced wealth shock faced significantly higher mortality rates:

In a nationally representative sample of US adults aged 51 years or older, more than 25% of individuals experienced a negative wealth shock of 75% or more during a 20-year follow-up period, from 1994 through 2014. A negative wealth shock was associated with an HR of 1.50, a risk that was only slightly smaller than the risk associated with asset poverty, an established social determinant of mortality. Furthermore, the association between negative wealth shocks and mortality did not differ by initial levels of net worth; thus, wealth shock may represent a potential risk factor for mortality across the socioeconomic spectrum.

The wealth shock research is consistent with the FINRA Foundation‘s finding that financial fraud can lead to depression and…

This week, the Delaware Supreme Court decided Flood v. Synutra, and began to clear up some of the questions left open after its earlier decision in Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) (“MFW”).  Flood itself is relatively straightforward but, for me, it inevitably calls to mind some larger issues regarding the relationship between independent directors and controlling shareholders under Delaware law.

For many years, the regime in Delaware was that a controlling shareholder squeeze-out transaction would be reviewed for entire fairness, but the burden to prove lack of fairness would be placed on plaintiffs if the deal was approved by either a majority of the minority shareholders, or by a committee of independent directors who acted freely, without coercion, had the power to say no, etc. See Kahn v. Lynch Communication Systems, Inc., 638 A.2d 1110 (Del. 1994).

In MFW, the Delaware Supreme Court held that if a controlling shareholder employs both protections, and makes clear from the outset that any deal will be conditioned on their satisfaction, and there is no reason to think the protections were circumvented (i.e., the committee acted with care, was fully empowered, and so forth)…