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 offers a $1,000 honorarium for successful completion of the program (from which attendees are expected to cover their own travel and incidental expenses).

To apply, please visit: https://cvent.me/av0LVv

If you have any questions, please contact our Program Assistant, Cristian Lopez at clopezfe@gmu.edu or 703.993.9962.

Terms & Conditions:

  1. NO TUITION
  2. HOTEL ROOMS: The LEC makes reservations and pays for room via direct bill.
  3. MEALS: The LEC provides group meals and breaks for all attendees.
  4. TRANSPORTATION: Attendees are responsible for their own travel arrangements and expenses.
  5. ATTENDANCE AND PARTICIPATION: Successful completion of the program requires attendees to (1) attend all sessions and group meals and (2) to be prepared and actively participate in the discussions.
  6. DEPOSIT: For each program, accepted applicants must make a $500 deposit or send proof of their airfare purchase bonding their attendance within 30 days of acceptance. For each program, the deposit is refunded within 30 days after successful completion of the program.
  7. HONORARIUM: The LEC will pay a $1,000 honorarium (from which attendees are expected to cover their own travel and incidental expenses) to each attendee within 30 days after successful completion of the program.
  8. ACCEPTANCE: The LEC will evaluate applications as they are received.

To apply, please visit: https://cvent.me/av0LVv

The LEC’s mission is to serve as a nexus for education and academic research that focuses on the timely and relevant economic analysis of legal and public policy issues. The LEC is committed to developing and assisting the development of original, high-quality law and economics research and educational programs to further enhance economic understanding and impact policy solutions by providing a consistent and rational voice that enhances relevant policy discussions.

For more information regarding this program or other initiatives of the LEC, please visit https://MasonLEC.org.

For prospective law teachers, “[t]he Illinois Academic Fellowship Program helps new legal academics place into tenure-stream positions at U.S. law schools.”  More specifically, the University of Illinois College of Law

 . . . is accepting applications for fellowship positions for the 2022-2023 academic year. Applicants should submit a cover letter, CV, and a research agenda at https://jobs.illinois.edu/academic-job-board/job-details?jobID=149338. Applicants may also submit up to three letters of reference.

Applicants are strongly encouraged to submit their materials by January 1, 2022. We expect interviews to take place starting in January 2022. No applications will be accepted after January 31, 2022. For assistance with the application process, please email lehigh@illinois.edu.

The full posting is available here.

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 fear of financial reprisal. The only finding that may indicate a positive relationship between a statement or action and stock price is when Elon Musk left the council after President Trump withdrew from the Paris Climate Agreement. Curiously, prior to the announcement, Tesla’s stock started rising on May 23; therefore, other *97 announcements or reasons could account for the upward trend. Nevertheless, as Tesla is an electric car company that seeks a zero-emission future, making a statement in opposition to the withdrawal is very much consistent with its values and core business, and a rise in stock price compared to its competitors is an interesting finding.

However, contrary to what was noted by Chatterji et al. in their work regarding corporate advocacy and the net positive of issuing statements, the overall results do not seem to translate to the context of shareholder value. Or rather, the data does not indicate a clear positive result for making statements consistent with core values nor a clear negative impact for remaining silent even when doing so appears to be inconsistent with core values. In other words, the data appears to indicate that the market absorbs corporate activism – and lack of activism – equally in that there is very little impact. Perhaps public opinion favors statements consistent with a corporation’s mission and values, but the market is indifferent.

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:

…

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)

…

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 you can’t split them up that easily.  Part of the claim has to do with how the different sides of the business are integrated, and part of it has to do with cash flows, namely, that the brown assets are funding the green ones.  As Matt Levine points out, though, investors themselves could do that if they wanted to – they could take the cash they make from the brown assets and plough it back into green investments:

Loeb’s basic mechanism here is: Take the cash flows from legacy oil drilling, give them to shareholders, and let the shareholders invest them in clean energy if they want. Van Beurden’s is: Take the cash flows from legacy oil drilling and let him invest them in clean energy. In a sense this is the most traditional of all activist conflicts: Should corporate managers be trusted to plan for the long term, or should they give money back to shareholders and let the shareholders invest it elsewhere for the long term? Traditionally this conflict is about the financial value of the managers’ long-term plans. Now it’s also about who — oil-company executives or hedge-fund managers — has a better plan for the world’s transition to clean energy.

Except there’s actually more going on.

For starters, I just have to note that Loeb’s letter repeatedly mentions making Shell better for “all stakeholders,” and rapidly achieving decarbonization, which is apparently an attempt to appeal to ESG strategists and possibly take a leaf out of Engine No. 1’s playbook, but that’s actually not the strategy at all.  Loeb is in no way trying to make energy “greener.”

What he is doing, though, is regulatory arbitrage.  As he points out, Shell is getting demands to be greener from governments and the public generally.  As he says:

Some governments want Shell to decarbonize as rapidly as possible. Other governments want it to continue to invest in oil and gas to keep energy prices affordable for consumers. Europe paradoxically wants both!…

Shell has ended up with unhappy shareholders who have been starved of returns and an unhappy society that wants to see Shell do more to decarbonize.

(emphasis added)

Spinning off the brown assets shouldn’t alleviate that pressure – the pressure should just shift to the brown assets – but Loeb knows it won’t.  Because. I strongly suspect, the brown company would be private, or be taken private, or would sell a lot of assets to private vehicles, where there would be a lot fewer disclosure obligations and a lot less regulatory and public scrutiny, and the brown company would be able to market itself to a smaller group of equity investors who are perfectly happy to drill baby drill as long as it keeps the cash flows coming. 

This is why lots of public companies, under pressure from ESG activists, are just transferring brown assets to private companies where they get a lot less flak.

And that’s why BlackRock, for example, has argued that even private companies should be required to disclose climate information.  As I previously quoted BlackRock’s letter to the SEC, “To avoid regulatory arbitrage between public and private market climate-related disclosures, we believe that climate-related disclosure mandates should not be limited to public issuers.”

But there’s a deeper subtext here.  As I’ve previously written a book chapter about and posted about, ESG investing has different meanings.  Sometimes, it’s a theory of shareholder value – companies will be more profitable in the long run if they are more socially responsible – and sometimes, it’s a theory that even if it’s bad for the companies individually, they should be socially responsible, because that’s what investors want.  And investors might want oil companies not to maximize wealth because they are people who have to live on the planet and breathe air and not drown, or they might want it because the “bad” oil company is contributing to climate change that harms the rest of the portfolio, so that from a purely wealth maximizing perspective at the portfolio level, some companies should individually take a hit.

Anyhoo, Loeb’s attack on Shell is a test of these theories.  Because if ESG is about value at the company level, you’d expect investors to rally behind him – split Shell, let everyone pursue the projects they think are most valuable.  But if ESG is about stopping companies from doing bad but profitable things, investors should oppose his plan, because if the brown assets are hived off (likely into an opaque private vehicle) then ESG investors won’t be able to influence them. 

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 opportunity in the challenges facing legal education.

Candidates should demonstrate the capacity to lead a program of legal education, cultivate external funding, and in keeping with the mission of Mississippi College, be a committed Christian and a person of integrity.

Specific responsibilities are to ensure that the academic needs of students are met; recruit faculty, and recommend faculty appointments, reappointments, and promotions; and oversee curriculum development in shared governance with the faculty; support alumni relations, and cultivate external funding sources; construct and manage budgets for MC Law; see to the general administration of the law school; and interface effectively with the university, professionals in legal education, members of the bar and the state judiciary, and civic communities.

Dear BLPB Readers:

“The Kelley School of Business at Indiana University seeks applications for a full-time, non-tenure-track lecturer position or positions in the Department of Business Law and Ethics, effective fall 2022. The candidate(s) selected will join a well-established department of 28 full-time faculty members who teach a variety of residential and online courses on legal topics, business ethics, and critical thinking at the undergraduate and graduate levels. Lecturers have teaching and service responsibilities but are not expected to engage in research activities. 

To be qualified, a lecturer candidate must have a J.D. degree with an excellent academic record and must demonstrate the potential to be an outstanding teacher, as well as the ability to contribute positively to a multicultural campus. We welcome candidates with all levels of professional experience. We value applicants who have a broad and diverse range of interests and experience and a commitment to teaching classes in both the legal environment of business and practical/applied business ethics. We would be especially pleased to hear from applicants who would contribute to the diversity of our department and help advance the Kelley School’s equity and inclusion initiatives and programs, particularly those whose interests or experiences intersect with issues of racial, ethnic, and gender diversity and equity in corporate and work environments.”

The full job posting is here.

Dear BLPB Readers:

The World Federation of Exchanges (WFE) has published a call for papers for its Clearing and Derivatives Conference 2022:

“The World Federation of Exchanges is organising its 39th Annual Clearing and Derivatives Conference, hosted by the Malta Stock Exchange, to be held in Valetta, Malta on April 27-29, 2022.

We invite the submission of theoretical, empirical, and policy research papers on issues related to the conference topics. Papers accepted will be considered for a special issue of the Journal of Financial Markets Infrastructures (JFMI).” 

The complete call for papers is here: Download WFE 2022 Call for papers

As I have noted previously, LLCs (also known as limited liability companies) are generally required to be represented by counsel in court proceedings.  This is unremarkable, as entities, like corporations and LLCs are deemed, by law, to be separate from their owners. They are often known as “fictional people.” Because they are not natural persons, they cannot (usually) represent themselves pro se and shareholder/member/owners cannot do so for them.

A recent case from the Eastern District of Wisconsin agrees with the well-established principal. Unfortunately, it also follows suit with a less productive prior practice, calling an LLC a limited liability corporation. An LLC, again, is a limited liability company, and it is a separate and distinct entity from a corporation, with its own statute and everything.  Here’s an excerpt:

Leszczynski is representing himself in the case, which he has a statutory right to do. 28 U.S.C. § 1654 (“In all courts of the United States the parties may plead and conduct their own cases personally or by counsel as, by the rules of such courts, respectively, are permitted to manage and conduct causes therein.”). But even though he is president of Rustic Retreats Log Homes, Inc., Leszczynski cannot represent that corporate defendant. “Corporations unlike human beings are not permitted to litigate pro se.” In re IFC Credit Corp., 663 F.3d 315, 318 (7th Cir. 2011) (citations omitted). “A corporation is not permitted to litigate in federal court unless it is represented by a lawyer licensed to practice in that court.” United States v. Hagerman, 545 F.3d 579, 581 (7th Cir. 2008) (citations omitted). That is true even if the corporation is a limited liability corporation. Id. at 582. “[T]he right to conduct business in [the form of a limited liability corporation] carries with it obligations one of which is to hire a lawyer if you want to sue or defend on behalf of the entity.” Id. at 581-82.

Leszczynski may represent himself, but he may not represent Rustic Retreat Log Homes, LLC. The corporate entity must be represented by a lawyer admitted to practice in the federal court for the Eastern District of Wisconsin. The corporation cannot file any documents in federal court—including any answer or response to the complaint—unless it does so through an attorney licensed to practice in this court.

PIONEER LOG HOMES OF BRITISH COLUMBIA, LTD., Plaintiff, v. RUSTIC RETREATS LOG HOMES, INC., & JOHN LESZCZYNSKI, Defendants., No. 21-CV-1029-PP, 2021 WL 4902169, at *3–4 (E.D. Wis. Oct. 21, 2021).

So, this is generally pretty standard fare. Wrong, but standard, though this one has a rather interesting wrinkle. The court here notes that “corporate” defendants must be represented by a lawyer.  It repeats other authority to support this, then attempts to draw a distinction between a corporation and an LLC, but incorrectly calling the LLC a limited liability corporation.  Twice.  But that, unfortunately, is not weird. It happens far to often. 

What’s weird here is that the case caption refers to Rustic Retreat Log Homes, Inc., as does the earlier part of the opinion.  Yet, down near the end, we have the vague LLC references, and an explicit reference to Rustic Retreat Log Homes, LLC.  But where does it come from? 

The “That is true even if the corporation is a limited liability corporation” language does suggest that perhaps there is another entity involved (an LLC in addition to the corporation), but this seems to be the only clue.  Clearly, this mystery needed to be solved, so I pulled the complaint.  In the complaint, it asserts, in paragraph 62, that “Leszczynski set up a successor company, Rustic Retreats WI, LLC, on June 25, 2021.”  That’s the only LLC reference in the complaint.  It seems likely, then that the court meant to say that both Rustic Retreat Log Homes, Inc. and Rustic Retreats WI, LLC needed to be represented by a lawyer in court.  But the opinion still seems kind of weird, and kind of wrong, in explaining what seems to be a rather simple (and correct) proposition.  Sigh.    

Last week, I posted about the first of my two published commentaries from the 2020 Business Law Prof Blog Symposium, Connecting the Threads IV.  That earlier post related to my comments on an article written by BLPB co-blogger Stefan Padfield.  The subject?  Public company shareholder proposals–specifically, viewpoint diversity shareholder proposals.

This week, I am posting on the second commentary, History, Hope, and Healthy Skepticism, 22 TRANSACTIONS: TENN. J. BUS. L. 223 (2021).  This commentary offers my observations on co-blogger J. Haskell Murray’s, The History and Hope of Social Enterprise Forms, 22 TRANSACTIONS: TENN. J. BUS. L. 207 (2021).  The main body of the abstract follows.

In this comment, I play the role of the two-year-old in the room. Two-year-old children are well known to ask “why,” and that is what I do here. Specifically, this comment asks “why” in two aspects. First, I ask why we do (or should) care about making modifications to existing social enterprise practices and laws, the subject of Professor Murray’s essay. Second, assuming we do (or should) care, I ask why the changes Professor Murray suggests make sense. My commentary is largely restricted to the benefit corporation form because corporate forms loom large in the debates relevant to Professor Murray’s essay and because the benefit corporation is acknowledged to be the most widely adopted corporate form as among the social enterprise forms of entity.

And so, Haskell and I are “at it again” over whether the benefit corporation is worth reforming/saving.  More precisely, I am (again) picking a bit of an academic fight with Haskell.  His good nature and patience in response to my continued questions and push-backs have been and are deeply appreciated.

Do/should we care about modifying benefit corporation practices and laws and, if so, do Professor Murray’s proposed reforms make sense?  [SPOILER ALERT!]  My bottom line:

I am satisfied—even if not wholly persuaded—that there is a reason to care. Benefit corporations may alter mindsets in a positive way, even if they do not positively or meaningfully alter applicable legal principles. And . . . I am convinced that Professor Murray generally has the right idea in calling for more accountability to a broader base of stakeholders—beyond just shareholders.

So, in the end, I was ready to call a limited truce–or really more of a detente. 

But I do maintain, as Haskell knows, a healthy doubt that the benefit corporation form has any broad-based value (making it hard to agree that amending the standard statutory framework or related practices has any merit).  And it looks like I have a new convert to this cause.  In his recent, provocative thought piece, Capitalism, heal thyself, Alan Palmiter avers as follows:

[W]e don’t really need benefit corporations, those corporations that have a hybrid profit and social/environmental purpose. All the companies that are doing big ESG — world-changing ESG — are your garden-variety for-profit (for-shareholder profit) companies. Maybe there are some benefit corporations, like my friend Patagonia, that like the label. But Patagonia didn’t have to be a benefit corporation to do what it’s doing.

That said, there’s a problem with fake benefit corporations, the ones pretending to do ESG. . . .

Alan, as you know, you are beating my drum–a drum I earlier have beaten here, here, and here, among other places, in various ways.  We shall see where it all goes.  But I remain a believer in the ability of the traditional for-profit corporation’s ability tio engage in effective, efficient social enterprise and (more broadly) ESG initiatives.

 

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 in ESG funds versus plain vanilla index funds where the management fees sometimes approach zero.