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It seems that in the wake of Donald Trump’s remarkable political ascent, a number of CEOs have developed their own political ambitions.

Facebook’s Mark Zuckerberg famously embarked on an anthropological tour of the United States, rubbing shoulders with the struggling common folk in Iowa, as well as in Wisconsin, Ohio, and South Carolina.  Disney’s Bob Iger says a lot of people are saying that he should run.  Starbucks’s Howard Schultz (okay, former CEO, still Executive Chair) visited the Houston victims of Hurricane Harvey, later explaining, “I wanted to see the aftereffects, but mostly I wanted to talk to people. And you learn a few things that are heartbreaking. You know, 40 percent of American households don’t have $400 of cash available to them….I think the country needs to become more compassionate, more empathetic. And we can’t speak about the promise of America and the American Dream and leave millions of people behind.”

Now, I suppose one could ask all kinds of questions about whether the Trump phenomenon should be interpreted to mean that America hungers for a closer relationship between corporations and politics, but my immediate reaction is, how do you square the fiduciary obligations associated with…

Readers of the blog know that a few months ago, the University of Tennessee hosted a BLPB symposium, with essays to be published in a forthcoming volume of Transactions: The Tennessee Journal of Business Law.  It was a terrific amount of fun, where we bloggers who usually just interact over the internet got a chance to see each other face to face (in some cases, for the first time!)

Anyhoo, I just posted my contribution to the symposium, Family Loyalty: Mutual Fund Voting and Fiduciary Obligation, to SSRN.  Here is the abstract:

In recent years, institutional investors have increasingly come to dominate the market for publicly-traded stock.  Mutual funds have become especially important, controlling trillions of dollars of corporate equity.

The SEC has made clear that it is the fiduciary responsibility of fund administrators to vote their shares in a manner that benefits investors in the fund.  Sponsoring companies have responded by creating centralized research offices that determine the voting policies across all of the funds they administer.  Though there may be some variation at the individual fund level, most fund families vote as a block.

The practice of centralized voting raises the question whether each fund

…

We’ve talked about Uber and its tribulations a few times here at BLPB, including what I feel is one of the remarkable aspects of the saga – the fact that a private company is being treated as public in the general imagination.

In keeping with that theme, Renee Jones just posted The Unicorn Governance Trap to SSRN, with the basic thesis that Uber and companies like it (Theranos, Zenefits, etc) are experiencing governance pathologies precisely because they inhabit a hybrid space between public and private.  (George Georgiev made an abbreviated version of the same argument in a column for The Hill several months ago.)  Jones contends that these unicorn companies feature the separation of ownership and control typical of a public company, but they are not subject to the same disciplining mechanisms from investors of voice (due to dual-class shares), exit (due to the limits on liquidity inherent in private status), and litigation (due to lack of public reporting obligations, and potential securities fraud claims – though on that last point, but see Theranos and Uber litigation).  She distinguishes private companies that grew large in an earlier era, where ownership and control are unified (typically, family-owned businesses).  She also…

Readers of this blog know about the case of Leidos, Inc. v. Indiana Public Retirement System, currently pending before the Supreme Court, which will decide whether an omission of required information can give rise to private liability under Rule 10b-5.  In Leidos, the corporate defendant engaged in a scheme of overbilling on a New York City contract, which ultimately resulted in a deferred prosecution agreement and significant monetary penalties.  The plaintiffs alleged that the company violated Rule 10b-5 by failing to disclose the conduct and associated potential penalties as a “known trend”  in its SEC filings, as required by Item 303.  The Second Circuit allowed the claim to proceed; Leidos now argues before the Supreme Court that its failure to disclose required information cannot satisfy the element of falsity in a private claim brought under Rule 10b-5.  In other words, the question is whether – assuming all the other elements of a fraud claim are established (materiality, scienter, loss causation, etc) – can the omission of required information count as a false statement?

Joan Heminway co-authored an amicus brief arguing that Rule 10b-5 does provide for omissions liability, and this is an issue I’ve blogged about a…