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Yesterday, my weekly SSRN search on the keyword “derivatives” returned a fascinating article: Vincent S.J. Buccola, Jameson K. Mah, and Tai Zhang’s The Myth of Creditor Sabotage (forthcoming in the U. of Chi. L. Rev. 2020). For years now, as researchers in this area know, much speculation has existed about the role of net-short creditors – those creditors for whom “a derivative payoff [as a result of a debtor’s failure would be] more than sufficient to offset a loss on the underlying investment” – potentially play in a debtor’s demise.  Indeed, I’ve posted about Confining Lenders with CDS Positions.  Largely missing from such debates, however, has been discussion of other market participants’ incentives.  Indeed, as the authors state in their Introduction: “The problem with the sabotage story is not that it misapprehends net-short creditors’ incentives, but that it ignores everyone else’s.”  So basic, yet so right.  Thus far, legal scholarship has insufficiently focused on this critical consideration.  In hopes of helping to reverse this shortfall, I highly encourage readers to review this article.  It is posted on SSRN here and an abstract is below:

Since credit derivatives began to substantially influence financial markets a decade ago, rumors have circulated…

I watched the Netflix documentary American Factory, about the labor relationships at a Chinese-owned auto glass factory in Dayton, Ohio.  (For anyone unaware, the movie was produced by the Obamas).  It’s a fascinating film for anyone interested either in business or labor issues.

The movie begins when the old GM plant is closed in the midst of the financial crisis, throwing thousands of people out of work.  The plant is later purchased by Fuyao, a Chinese company.  They’re hiring, but at much lower wages than the old factory, and they openly state they do not want any unionization.  They are also sending over Chinese workers to work alongside the Americans.  Despite the pay cut, American workers in this economically-depressed area are happy for the job; we can see the transformation made in people’s lives.

At first, the American workers and the Chinese workers bond; the Americans invite the Chinese over to parties, enjoy introducing them to American culture, and so forth.  But the film then depicts something of a culture clash between the Americans and the Chinese. 

The Chinese expect far more obedience from their workforce, longer working hours, and they seem baffled by American regulations – everything from…

The PIABA Foundation just released a study examining the results of FINRA’s expungment processes.   FINRA’s expungement rules and dispute resolution process allow brokers to obtain arbitration awards recommending the removal of customer complaints and other information from their regulatory records.  The brokers can then take the awards to court and have them confirmed.  A state court order confirming the award results in the removal of unflattering information from the CRD database. 

As this happens more and more, you should trust FINRA’s BrokerCheck system less and less. In theory, BrokerCheck should allow the public to do meaningful due diligence on brokers by looking them up to see if customers have complained. Sadly, many of the complaints customers and state regulators need to evaluate brokers have been washed away through the expungement process. The PIABA Foundation study found that expungment rates have increased dramatically in recent years.  Brokers sought to expurgate 102 complaints in 2015.  The number rose to 300 in 2016 and rose again to 756 in 2017.  Last year, brokers sought to suppress 1,036 complaints. These requests are generally successful and brokers succeed in these efforts over 80% of the time.

I’ve written about how to see if complaints…

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Morgan State University has an open tenure-track position in the business law area.  A short blurb from the posting is below and a link to the posting here:

The Department of Business Administration in the Earl G. Graves School of Business and Management at Morgan State University invites applications for a full-time, tenure-track Assistant Professor appointment in
Business Law. The position will commence Spring/Fall 2020.

The School of Business and Management is AACSB accredited and housed in a beautiful new building with state of the art technology and a Capital Markets and Marketing Lab, as well as have growing programs that engage students and the local/business community. The School of Business and Management faculty are research-active. Therefore, the successful candidate must actively engage in research, as well as teach Business Law courses along with Life and Health Insurance, Real Estate, and Risk Management (as secondary interests).

Yesterday, two highly important events occurred in the sports world.  First, OU prevailed in the Red River Showdown.  Boomer Sooner!  But, that’s not what this post is about (so, stay w/me Texas Longhorns fans!).  Second, famed Kenyan marathoner Eliud Kipchoge broke the 2-hour marathon barrier.  Today’s post is my heartfelt way of paying tribute to Kipchoge’s historic moment. 

In June, co-blogger and fellow runner Haskell Murray wrote about inspirational runners exemplifying toughness, self-discipline, humility, and perseverance (here).  In July, I followed suit (here).  In reflecting upon the little I know of Kipchoge’s journey that led to smashing a barrier many thought impossible, it’s clear to me that he has these character traits in abundance.

In November 2016, Nike announced its Breaking2 project.  In a nutshell, it involved years of planning, the assembly of world-class scientists, trainers, runners, and even a new shoe, in the quest for a sub-two hour marathon.  In May 2017, after months of intense preparation, Kipchoge almost achieved this objective.  His time: 2:00:25 (a Nike/National Geographic documentary of the Breaking2 project is: here).  He’d given 100%, but ultimately failed to reach the goal.  Nevertheless, Kipchoge did not…

When I begin teaching my Business students about corporations, I always start with a little information about Delaware.  I tell them that Delaware has less than 0.3% of the U.S. population, it’s physically the second smallest state in the country, and it has more registered businesses than people, among other facts.

Which is why I very much enjoyed reading Omari Simmons’s paper, Chancery’s Greatest Decision: Historical Insights on Civil Rights and the Future of Shareholder Activism, which gave me a new appreciation for Delaware and its history.  I was entirely unaware that one of the cases involved in the Supreme Court’s famous Brown v. Board of Education decision was a ruling from Delaware Chancery.  The paper gives a fascinating background of racial relations in the state and the events that led to Chancellor Seitz’s ruling that Delaware’s racially-segregated school system impermissibly discriminated against African-Americans.  I’d had no idea of Delaware’s involvement in the civil rights movement and I was delighted to learn of it.  Here is the abstract:

This essay offers a historical account of the Delaware Court of Chancery’s greatest case, Belton v. Gebhart, a seminal civil rights decision. The circumstances surrounding the Belton case illuminate the limits

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Texas Senator Phil Gramm and his former aide-de-camp recently took to the Wall Street Journal’s opinion page to attack Senator Warren’s plan for accountable capitalism.  At base, her plan offers governance reforms that only the federal government may be able to deliver.  The reforms may increase the odds that corporations will behave responsibly in our society and limit the risk that they will use their enormous capital and clout to manipulate our political system for their own ends.

Senator Warren’s plan sounds similar to rhetoric coming from business leaders.  The Business Roundtable recently released its view on the purpose of a corporation.  These leading executives declared a shared, fundamental commitment to balancing important stakeholder interests.  Page after page of CEO signatories agree that corporations should deliver value to customers, invest in employees by providing fair compensation and benefits, deal fairly and ethically with suppliers, support communities, respect the environment, and generate long-term value for shareholders. 

Warren’s legislation offers a plan for putting the Business Roundtable’s vision into practice.  The Accountable Capitalism Act calls for federal charters for America’s largest corporations. It would allow employees to vote for a minority of corporate directors and require a supermajority of directors to…

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BLPB readers, the deadline (Oct 18, 2019) is fast approaching for what looks to be a very interesting conference on Fintech Startups and Incumbent Players: Policy Challenges and Opportunities, organized by the Oxford Business Law Blog and the Law, Finance & Technology project at the University of Hamburg. 

A brief description is below. Call for papers is here: Download Call-for-Papers-Fintech-Workshop-in-Oxford-27-03-2020

The potential of financial technology for innovation and growth is well-established by now. Yet startups often face many regulatory challenges in the early years, obstructing market access. Technology firms and incumbent financial institutions are experimenting with new solutions to this problem, often establishing co-operative linkages one with the other. At the same time, governments and regulators have introduced special frameworks that may facilitate the newcomers’ market entry. Among these are regulatory ‘sandboxes’, which provide for a safe experimentation space allowing new market participants to test their services in the real market with a reduced regulatory burden, but under close scrutiny of the supervisor. Governments are continuing to experiment with other formats to help new market entrants with the regulatory complexity, including through incubators and mentorship programmes.

The 4th Oxford Business Law Blog Conference, co-organized by the University of Oxford, the …