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As the followers of this blog well know, I’ve written a lot about controlling shareholders.  There have been blog posts here, here, here, here, here, here, here, here, here, here, and here, and an essay, After Corwin: Down the Controlling Shareholder Rabbit Hole.  So, I finally posted a whole new essay to SSRN on the subject, called The Three Faces of Control.  It’s very short; it’s kind of a follow-up/sequel/coda/friendly amendment to After Corwin. Here is the abstract:

Controlling shareholders are subject to distinct legal obligations under Delaware law, and thus Delaware courts are routinely called upon to distinguish “controlling shareholders” from other corporate actors.  That is an easy enough task when a person or entity has more than 50% of the corporate vote, but when a putative controller has less than 50% of the vote – and is nonetheless alleged to exercise control over corporate operations via other means – the law is shot through with inconsistency.

What is needed is a contextual approach that recognizes that the meaning of control may vary depending on the purpose of the inquiry.  Under Delaware doctrine, the

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More information about our dean search can be found here.  This is the ad if you’d like to come join me in fabulous Las Vegas:

The University of Nevada, Las Vegas, invites applications and nominations for the position of Dean of the William S. Boyd School of Law. This year, Boyd secured its position as one of the country’s top 30 public law schools for the 15th consecutive year. The school’s Lawyering Process Program ranked first among legal writing programs in the nation, its part-time program is rated among the top 20 in the country, and its Saltman Center for Conflict Resolution ranked fifth among the top dispute resolution programs, according to U.S. News & World Report’s 2022 rankings. Dedicated to serving both the city of Las Vegas and the state of Nevada as its only law school, Boyd is an integral component of one of the fastest growing and most diverse universities in the nation. Boyd is committed to nurturing a learning community of excellence and diversity, and strongly encourages applicants from a wide range of backgrounds to explore this exceptional opportunity.

Founded in 1957, UNLV is a thriving urban research institution of more than 31,000 students that

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Dear BLPB Readers:

Professor Peari has recently posted a new article on SSRN, An Assessment of the US Rules Which Determine the Relevant Law Applicable to Corporations: A Suggestion for Reform.  It will be published in the Delaware Journal of Corporate Law. 

Here’s the abstract:

“The article addresses one of the basic legal questions of corporations: which law governs disputes involving corporations? The US scholarship has not provided yet a comprehensive answer to this question. Which law, for example, applies to adjudicate a dispute between a Delaware corporation and a Nevada corporation, considering both usually conduct business in New York, California, Montana and Canada, with respect to delivery of goods in California? Through analyzing the external (i.e. aspects that relate to interactions between corporations and people/other corporations/bodies) and internal aspects of corporation (i.e. aspects related to the structure of corporate governance in terms of the relationship between corporate shareholders, directors, and officers), the article justifies some facets of current practices and makes key suggestions for reform. At a time when COVID-19 has caused economic disruption, corporations are inherently present in almost every aspect of our lives, and the volume of online commerce is escalating, the article tackles one of the…

The following comes to us from Jeff Smith, Associate Director, Henry G. Manne Program in Law & Economics Studies.

The Law & Economics Center is pleased to announce that we are now accepting applications to the Workshop for Law Professors on Public Choice Economics. This program will be held at the Resort at Squaw Creek in Squaw Valley, California with attendees arriving on Wednesday, January 5 and departing on Sunday, January 9.

The Workshop for Law Professors on Public Choice Economics will help the attending professors enhance their understanding of public choice, including interest group theory, rent-seeking, rent-extraction, agency capture, bureaucracy and constitutional economics, regulatory competition, the political theory of loopholes, Bootleggers and Baptists phenomena, and public choice of the judiciary, among other topics. The workshop will broaden the professor-attendees’ understanding of these concepts and sharpen their analytical tools, allowing them to introduce greater economic sophistication and policy relevance to their academic work. This workshop is aimed at professors interested in teaching and conducting research related to public choice, and it will include a session at the end expressly devoted to group discussion designed to brainstorm about developing research agendas around the topics covered at the Workshop.

The LEC…

Jehan El-Jourbagy has published Impact of Corporate Response to Controversial Presidential Statements or Policies in 18 DePaul Bus. & Com. L.J. 69. Below is an excerpt from the analysis section that may be of interest to BLPB readers. A version of the paper can be found on SSRN here.

With the possible exception of Tesla and Under Armour responding to the Paris Climate Agreement withdrawal, the data demonstrates that statements, both direct and more nuanced, and silence in regard to Presidential communications have little to no impact on share price. Instead, there are more clear markers, such as when a corporation announces layoffs or a new product, that show a clear dip or rise, but the responses to Presidential communications had a minimal impact.

Diversity and inclusivity are generally universal values for corporations and issuing a statement in opposition to the travel ban could be viewed as consistent with those values. The data, however, does not indicate a correlation between a public statement and share price. Moreover, the data does not reveal any marked difference between companies who issued statements and who remained silent, perhaps suggesting that company leaders may feel free to support or oppose the President without…

As has been widely reported, Third Point/Dan Loeb is arguing that Shell should split its green assets from the brown assets, on the theory that the brown assets are currently undervalued by the market.   According to the Third Point letter:

We believe all stakeholders would benefit from a plan to:

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Match its business units with unique shareholder constituencies who may be interested in different things (return of capital vs. growth; legacy energy vs. energy transition)

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This should involve the creation of multiple standalone companies.  For example, a standalone legacy  energy  business  (upstream,  refining  and  chemicals)  could  slow  capex beyond what it has already promised, sell assets, and prioritize return of cash to shareholders (which can be reallocated by the market into low-carbon areas of the economy).  A standalone LNG/Renewables/Marketing business could combine modest cash returns with aggressive investment in renewables and other carbon reduction technologies (and this business would benefit from a much lower cost of capital).  Pursuing a bold strategy like  this  would  likely  lead  to  an  acceleration  of  CO2  reduction  as  well  as  significantly increased returns for shareholders, a win for all stakeholders.

Shell argues – and apparently some of its large investors agree – that…

After serving many years as our amazing leader, Dean Patricia Bennett has announced that she is stepping down as Dean of MC Law at the end of this academic year (May 2021). Dean Bennett has been a great friend and mentor, and she has shepherded our law school with a steady hand through many challenges. She will be leaving the law school in a great position!

MC is beginning its search for our next dean now, and I encourage interested applicants to submit their materials for consideration. The following is a brief description of the desired characteristics of applicants and the responsibilities of the position (and here is a link to more complete information about the position and a how to apply):

The dean must enthusiastically embrace the university’s historic mission and possess the personal qualities to inspire the faculty, students, and alumni to advance the academic program and reputation of MC Law. The dean of MC Law provides the vision to sustain and lead the school to prominence in teaching, scholarship, and service. The dean is responsible for strategic leadership, academic excellence, and administration of MC Law. The successful candidate will be a thoughtful, entrepreneurial, creative, and collaborative leader who sees…

Bernard Sharfman has posted an interesting op-ed on Insider (here).  Excerpt:

The idea behind ESG’s impact on climate change is that by moving money away from companies that spew fossil fuels, the funds can effectively make it cheaper for “clean” companies to raise money either through debt or equity offerings and more expensive for “dirty” companies. This sounds good in theory, but does not hold up in reality because the major effects of ESG funds are on the secondary market, where securities are traded but no new money is being raised. As explained by Fancy, investing in ESG funds does not provide new funding for those companies that would help mitigate climate change. “Instead, the money goes to the seller of the shares in the public market.” Basically, ESG products are buying stock in companies from other asset managers, not the underlying businesses, so they aren’t directly funding these firms at all….

If ESG funds do not mitigate climate change, what is the motivation for marketing these funds to investors? The simple answer is that the investment industry, which includes large investment advisers, rating agencies, index providers, and consultants, makes a lot more money when investors purchase shares…

No, not that SPAC.

Actually, I’m thinking about the SPAC I blogged about here, GigCapital3, which merged with Lightning Systems.  It’s the subject of a lawsuit in Delaware Chancery; the allegation is that the de-SPAC transaction was bad for the SPAC investors, and rushed through in order to benefit the sponsor, before the eighteen month deadline passed and the sponsor was forced to liquidate.

There are some claims that the proxy statement was misleading – I’ll get back to that – but one claim is that this was a bad deal, the SPAC shareholders would have been better off if the SPAC had simply liquidated, and it was approved and recommended by the board because they either benefitted personally or had ties to the sponsor. 

Ordinarily, if you claim that a conflicted board approved a bad deal, that claim is reviewed for entire fairness unless it’s cleansed.  And in this case, theoretically any board breaches were cleansed by the shareholder vote in favor of the merger.  To address that, the complaint claims that the SPAC sponsor was actually a controlling shareholder, suggesting that cleansing could only come via MFW protections.

The problem is, it’s really hard to transpose…