Judge Rakoff’s decision in In re Nine West LBO Securities Litigation, 2020 WL 7090277 (S.D.N.Y. Dec. 4, 2020) is all the rage these days.  The short version is that Nine West was taken private in a leveraged buyout by Sycamore; as part of the deal, allegedly the Sycamore buyers caused the company to sell the profitable subsidiaries to its own affiliates for less than they were worth, and the whole thing ended in Nine West’s bankruptcy.  In the wake of all of this, the debtholders (many of whom held debt that predated the sale), via the litigation trustee, sued Nine West’s former directors – the ones who had approved the sale – for violating their fiduciary duties by negotiating a deal that would result in the company’s bankruptcy.  Last year, Judge Rakoff refused to dismiss the claims, in a decision that spawned a thousand law firm updates about directors’ duties when selling the company.

But what I find interesting is how little anyone – including Judge Rakoff – seems to have interrogated the legal question of to whom the directors’ fiduciary duties were owed.

The classic Delaware formulation is that directors owe a duty to advance the…

Just posting to let everyone know that Tulane will be hosting a virtual Corporate and Securities Roundtable on March 13, featuring a Zoom discussion of works-in-progress by professors from across the country.   The full program is listed below; you can register for this (free) event by clicking here.  (Sorry, no CLE for this one; join us for the love of scholarship!)

In a prior post, I reflected on evidence that motives other than profit seeking may be driving some of the recent social-media-driven “meme” trading in stocks such as GameStop. Indeed, many of these traders have publicized that they are buying and holding their positions as a form of social, political, or aesthetic expression.

We typically classify retail traders as either investors or speculators. Investors are those who research a stock’s fundamentals and buy it with the expectation that it will perform well over time. Speculators are less concerned with a stock’s fundamentals than its potential for volatility in price (up or down). A speculator looks to anticipate how other traders in a stock will react to price movements or market events and trade accordingly, sometimes entering and exiting the same position in a single trading session. Though they employ different strategies, the principal goal for both the investor and the speculator is to profit from their trading.

The recent meme-trading phenomenon, however, suggests that a new category of retail trader has emerged, the “expressive trader.” An expressive trader is one who does not trade for profit, but rather to send a message or produce a social/aesthetic effect. Social media…

Four leading scholars (Jens Frankenreiter, Cathy Hwang, Yaron Nili, & Eric Talley) recently released a new paper, entitled Cleaning Corporate Governance.  This is the abstract:

Although empirical scholarship dominates the field of law and finance, much of it shares a common vulnerability: an abiding faith in the accuracy and integrity of a small, specialized collection of corporate governance data. In this paper, we unveil a novel collection of three decades’ worth of corporate charters for thousands of public companies, which shows that this faith is misplaced.

We make three principal contributions to the literature. First, we label our corpus for a variety of firm- and state-level governance features. Doing so reveals significant infirmities within the most well-known corporate governance datasets, including an error rate exceeding eighty percent in the G-Index, the most widely used proxy for “good governance” in law and finance. Correcting these errors substantially weakens one of the most well-known results in law and finance, which associates good governance with higher investment returns. Second, we make our corpus freely available to others, in hope of providing a long-overdue resource for traditional scholars as well as those exploring new frontiers in corporate governance,

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On Saturday, March 6, 2021, 1:00 pm – 4:00 pm (Eastern Time) the following presentations/discussions are scheduled as part of the next Society of Socio-Economists Meeting (Zoom link and additional information here).

1:00 – 1:30 Welcoming Remarks, Discussion of Pressing Social Issues and Future Meetings

1:30 – 2:25 Ethical Dimensions of Economic Analysis

Deirdre McCloskey (Economics, History and Communication, Emerita, Illinois-Chicago)

Shubha Ghosh (Law and Economics, Syracuse)

2:30 – 3:25 Modern Monetary Theory: Is Money Debt? Does it Matter? Who Decides When the Economy is at Full Capacity?

Rohan Gray (Law, Willamette)

William Black (Law and Economics, Missouri – Kansas City)

Philip Harvey (Law and Economics, Rutgers – Camden)

Nicolaus Tideman (Economics, Virginia Tech)

3:00 – 3:25 Continuation of Discussion of Pressing Social Issues and Future Meetings

3:30 – 3:50 For Whose Benefit Public Corporations?

Sergio Gramitto (Law, Monash) “The Corporate Governance Game”

3:50 – 4:00 Concluding Session.

Last week, I blogged about the dominance of Delaware organizational law and its implications for the laws of other states.  Which is why I was so interested to when Omari Scott Simmons posted his new paper, The Federal Option: Delaware as De Facto Agency, which takes a (sort of) different view.  He argues that Delaware has become de facto federal agency, delegated by the federal government the power to make corporate law nationally, and that this system works well for now, though there might be circumstances where federal chartering – and the structural oversight that would come with it – might be appropriate.  These could include situations where companies have received governmental bailouts, or where companies have committed significant wrongdoing and subject themselves to federal oversight as part of their settlement.

Of course, the concerns I’ve expressed in my posts are of a slightly different order – they’re about Delaware organizational law extending beyond the boundaries of internal affairs (and Delaware’s ability to define those boundaries in the first place) – but still, it’s an interesting holistic look at Delaware’s role in the corporate governance ecosystem.  Here is the abstract:

Despite over 200 years of deliberation and debate,

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Carliss Chatman and Najarian Peters recently posted The Soft-Shoe and Shuffle of Law School Hiring Committee Practices, which is forthcoming in the UCLA Law Review Discourse.  The piece presents their perspective on the hiring process for legal academics and how many students currently experience the academy.  Since it was posted, it has averaged well over a hundred downloads a day.

The abstract also captures attention:

“We have too many Black and Brown faculty,” said no one ever in any law school. Each year we sit in appointments discussions and hear the same things. The classics-oldies but goodies from appointments committees are:

“We can’t find any qualified Black candidates.”

“There weren’t any in the Faculty Appointments Register (FAR), we scoured websites and emailed our Black friend yet found no one.” One of our colleagues actually lifted a large binder filled with leaflets from the FAR from one year over her head with both hands and waved it side to side to punctuate this very point in a faculty meeting. Everyone around the room including the Brown and other non-white faculty shook their heads in agreement co-signing. Seeing this made one of us wonder whether the FAR binder was some kind

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