Whenever new corporate governance terms are developed that function to diminish shareholder power – like arbitration provisions, or forum selection, or loser-pays – concern develops among (at least some) investors that these terms will become the norm.  It’s not about one company that does or doesn’t adopt the term; it’s about the fear that several companies will adopt them, and eventually it will become standard, so that shareholders will not be able to exert discipline by avoiding companies with the disfavored provision.

In other words, companies will behave as though they’re in a cartel when selecting these terms, and they’ll be able to do it because they can easily coordinate with each other.  There are a limited set of underwriters and white shoe law firms that will advise them, and those entities will propagate the new development throughout the system.  Cf. Elisabeth de Fontenay, Law Firm Selection and the Value of Transactional Lawyering, 41 J. Corp. Law 393 (2015) (explaining the value-added by elite law firms – knowledge of the latest in deal technology); Roberta Romano & Sarath Sanga, The Private Ordering Solution to Multiforum Shareholder Litigation  (finding that law firm advice is behind the adoption of forum-selection clauses at the IPO stage).  Investors may prefer to coordinate with each other to boycott companies that adopt these terms, but investors are widely dispersed, and have no obvious coordination mechanism. 

Except it seems they do.  They have ISS, for one – which doesn’t help with buying, but does help with voting.  ISS, according to The Power of Proxy Advisors: Myth or Reality? 59 Emory L.J. 869 (2010), by Jill E. Fisch, Stephen J. Choi, Marcel Kahan, bases its recommendations very much on the preferences of its clients, more so than other advisory services.  In other words, ISS serves as a coordination point.

And now on the buying side, we have the indexes.

As I’m sure readers of this blog are aware, a couple of major indexes, under heavy pressure from investors, decided to exclude companies with certain multiple-class share structures.  The investors’ concern was that if these companies were included, indexed investors would have to buy them even if they didn’t want to.  And that’s an odd argument, of course, because nothing is stopping them from setting up their own index or buying according to a modified index, though we can agree that doing so would be at the very least impractical (though it’s fascinating to contemplate why).  That said, the exclusion is unusual, because index investors aren’t supposed to be actively picking stock characteristics, and – until now – the indexes did not make specific governance characteristics part of the criteria for inclusion.

So this latest move suggests that as passive investing gains more power, the indexes have become – or have the potential to become – a kind of cartel mechanism.  They are a means by which dispersed investors can coordinate their buying and thereby express preferences collectively. 

What happens, for example, if a company accepts Michael Piwowar’s invitation and tries to eliminate class actions via arbitration at the IPO stage?  Will we see investor pressure to keep those companies out of the index as well?  Time will tell, but recent events suggest this is another tool that investors can use to coordinate with each other.

In this post I will compiled legal studies professor positions (mostly in business schools) and law school positions that indicate a business law preference. I will not be listing adjunct positions. Please feel free to e-mail me with any additions. I will update the list from time to time.

Updated Sept. 21, 2017

Legal Studies Positions (Mostly Business Schools)

Law School Positions (Expressed Interest in Business Law)

 

From an e-mail I received this week:

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The UNIVERSITY OF NEBRASKA COLLEGE OF LAW invites applications for lateral candidates for a tenured faculty position to hold the Clayton K. Yeutter Chair at the College of Law. This chaired faculty position will be one of four faculty members to form the core of the newly-formed, interdisciplinary Clayton K. Yeutter Institute for International Trade and Finance. The Institute also will include the Duane Acklie Chair at the College of Business, the Michael Yanney Chair at the College of Agriculture and Natural Resources, and the Haggart/Works Professorship for International Trade at the College of Law. The Yeutter Chair, along with the other three professors, will be expected to support the work and objectives and ensure the success of the Yeutter Institute. The Yeutter Chair will teach courses at the College of Law, including International Finance. Other courses may include Corporate Finance and/or other classes related to business and finance. More on the Yeutter Institute can be found at http://news.unl.edu/free-tags/clayton-k-yeutter-institute-of-international-trade-and-finance/.

Minimum Required Qualifications: J.D Degree or Equivalent; Superior Academic Record; Outstanding Record of Scholarship in International Finance and/or other areas related to international business; and Receipt of Tenure at an Accredited Law School. General information about the Law College is available at http://law.unl.edu/. Please fill out the University application, which can be found at https://employment.unl.edu/postings/51633, and upload a CV, a cover letter, and a list of references. The University of Nebraska-Lincoln is committed to a pluralistic campus community through affirmative action, equal opportunity, work-life balance, and dual careers. See http://www.unl.edu/equity/notice-nondiscrimination. Review of applications will begin on September 15, 2017 and continue until the position is filled. If you have questions, please contact Associate Dean Eric Berger or Professor Matt Schaefer at lawappointments@unl.edu.

Call for Papers (DEADLINE: August 24, 2017)

AALS Section on Business Associations

Institutional Investors and Corporate Governance

AALS Annual Meeting, January 5, 2018

The AALS Section on Business Associations is pleased to announce a Call for Papers for a joint program to be held on Friday, January 5, 2018 at the 2018 AALS Annual Meeting in San Diego, California.  The topic of the program is “Institutional Investors and Corporate Governance.”

In thinking through the difficulty of agency costs within the public corporation, corporate law academics have turned repeatedly to institutional investors as a potential solution.  The agglomeration of shares within a large investing firm, together with ongoing cooperation amongst a large set of such investors, could overcome the rational apathy the average shareholder has towards participation in corporate governance.  Alternatively, activist investors could exert specific pressure on isolated companies that have been singled out—like the weakest animals in the herd—for extended scrutiny and pressure.  In these examples, the institutionalization of investing offers a counterbalance to the power of management and arguably provides a systematized way of reorienting corporate governance.  These institutional-investor archetypes have, in fact, come to life since the 1970s and have disrupted the stereotype of the passive investor.  But have we achieved a new and stable corporate governance equilibrium?  Or have we instead ended up with an additional set of agency costs – the separation of ownership from ownership from control?  This program seeks to explore these questions and assess the developments in the field since the beginning of the new century. 

The program is cosponsored by the Section on Securities Regulation.

Form and length of submission

Eligible law faculty are invited to submit manuscripts or abstracts that address any of the foregoing topics. Abstracts should be comprehensive enough to allow the review committee to meaningfully evaluate the aims and likely content of final manuscripts.  Any unpublished manuscripts (including unpublished manuscripts already accepted for publication) may be submitted for consideration.  Untenured faculty members are particularly encouraged to submit manuscripts or abstracts.

The initial review of the papers will be blind.  Accordingly, the author should submit a cover letter with the paper.  However, the paper itself, including the title page and footnotes must not contain any references identifying the author or the author’s school.  The submitting author is responsible for taking any steps necessary to redact self-identifying text or footnotes. 

 

Deadline and submission method

To be considered, manuscripts or abstracts must be submitted electronically to Professor Matthew Bodie, Chair-Elect of the Section on Business Associations, at  mbodie@slu.edu.  Please use the subject line: “Submission: AALS BA CFP.”  The deadline for submission is Thursday, August 24, 2017.  Papers will be selected after review by members of the Executive Committee of the Section on Business Associations.  The authors of the selected papers will be notified by Thursday, September 28, 2017.

 

Eligibility

Full-time faculty members of AALS member law schools are eligible to submit papers.  The following are ineligible to submit: foreign, visiting (without a full-time position at an AALS member law school) and adjunct faculty members; graduate students; fellows; non-law school faculty; and faculty at fee-paid non-member schools. Papers co-authored with a person ineligible to submit on their own may be submitted by the eligible co-author.

The Call for Paper participants will be responsible for paying their annual meeting registration fee and travel expenses.

TaxProf Blog has been passing along the news of law schools choosing to allow applicants to substitute the GRE in place of the LSAT. The most recent post: Georgetown Is Fourth Law School To Accept GRE For Admissions, Finds It Is Just As Accurate As LSAT In Predicting 1L Grades; LSAC Disagrees, Says ‘The Rest Of The Top 14 Will Go Like Lemmings Off The Cliff’.

As to the substance of the matter, I don’t feel too strongly.  It is my suspicion that combining grade point average with any standardized test (including GMAT and MCAT, along with GRE and LSAT) would do a reasonably good job of predicting success in law school. Sure, the MCAT  would likely be less on target, but probably not that much, especially when we’re talking about highly selective schools like Georgetown and Northwestern.  

The value of competition in the testing marketplace does seem valuable to me in a few ways..  For one thing, the LSAT is still administered like it is 1989 (as Christine Hurt noted a while back). There would be value in making the LSAT more accessible, and it is is at least plausible that the highly limited access to the LSAT is negatively impacting the number of students choosing to apply to law school.  LSAC would be well served to catch up with the other tests (that are now offered with more regular testing dates and sometimes online) to give prospective law students more options. 

In addition, I think there is value in letting students have options.  I know there are some concerns that students taking the GRE might apply to law school without really thinking it through because it’s easy, but I think that risk is limited.  For one thing, just taking the LSAT doesn’t mean someone thought that hard about law school. It just means that planned ahead.  A little. There would be flaky GRE-taking law students, but there’d be highly motivated GRE-taking students who were thinking about a master’s degree but would be great law students.

One thing some schools might be missing, though, is that the GRE thing swings both way. That is, if the GRE is acceptable for law school applications, students planning on law school might now choose to take the GRE and end up considering other kinds of graduate programs.  Schools looking to expand their pool may be creating competition in places that did not exist before (or was much milder).  

Ultimately, I support creating more options for students so that they can make better decisions about their future.  As long as the testing option (LSAT, GRE, etc.) serves as a reasonably good predictor of law school and bar passage success (and I think that is still an open question), I am okay with it.  I hope schools that chose to accept the GRE are doing so with an expectation that the admitted students will do well, and I hope schools monitor their students so that adjustments can be made if success rates are not as anticipated.  That, to me, is the biggest issue: whatever we do, we need to make sure we’re delivering on our educational promises, regardless of how we assess our potential students’ likelihood of success.  

 

Yesterday, on the last morning of the 2017 Southeastern Association of Law Schools (SEALS) conference, Matt Lyon, the Associate Dean at Lincoln Memorial University – Duncan School of Law (UT Law’s Knoxville neighbor) convened a discussion group on “Corporate and Financial Reform in the Trump Administration.” I was grateful to be asked to participate.  In addition to me, BLPB co-bloggers Josh Fershee and Marcia Narine Weldon, my UT Law coworker Brian Krumm, Securities Law Prof Blog editor Eric Chaffee, and University of Houston Law Center colleague Darren Bush were among the discussants.

SEALS2017(RegReformDiscGrp-1)

Each of us came with issues and questions for discussion.  Each of us offered reflections.  Recently made, currently proposed, and possible future changes to business regulation were all on the table.  I wish this session had been held earlier in the program, since many had left before the Sunday morning sessions (and we were competing with, among other enticing alternatives, a discussion session on marijuana regulation). However, we honestly had more than enough to discuss as among the seven of us, in any case.

I had to leave the session early to attend the SEALS board meeting.  But before I left, I took some notes on topics relating to my interest in and potential future work on regulatory reform.  I continue, for example, to be interested in the best approaches to reducing and streamlining regulation.  (See my posts here and here.)  A few additional outtakes follow.

Continue Reading SEALS 2017 – Business Regulatory Reform

The following comes from the University of Akron School of Law:

The University of Akron School of Law anticipates hiring a tenure-track or tenured faculty member with a focus in the area of international and comparative law to begin teaching in Fall 2018.  We seek a candidate demonstrating general international law expertise with a preference for private international law, including but not limited to international business transactions, international trade, and/or international commercial arbitration.  Both entry-level and lateral candidates are encouraged to apply.  The appointment may include opportunities for administrative leadership overseeing study abroad programs, programs for foreign lawyers, and other international programs.  The committee is interested in candidates with scholarly distinction or great promise as demonstrated by strong early scholarship and a thoughtful agenda for future work, as well as a commitment to excellence in teaching.

The University of Akron School of Law is a public, mid-size law school of approximately 500 students located in the Akron/Cleveland metropolitan area.  With a new building, a new dean, and strong enrollments, Akron Law provides an energized community and faculty environment.  The School of Law has a strong tradition of teaching and offers students low tuition, a commitment to student success, strong job placement, award-winning clinical programs, a national trial team program, and unique mentorship with the local and regional bars.  It has research centers in Intellectual Property, Constitutional Law, and Professional Responsibility.  Akron Law has recently enhanced its international initiatives including new collaborative relationships with universities in Asia, an accelerated juris doctor program for international students, visiting international scholars, and a four-week, three-city, two-country study abroad program in Japan and South Korea.  In addition, the larger University has been expanding international initiatives and programming.  The University of Akron is a public research university of 25,000 students, with a national reputation in polymer science, engineering, and business in addition to law.  It is centered in Akron, Ohio, a city with a population of 200,000, known for its low cost of living and high quality of life, its surrounding natural beauty including the Cuyahoga Valley National Park, its history of industrial innovation, and its multitude of cultural, artistic, athletic, and recreational opportunities.

Continue Reading University of Akron School of Law International Law Faculty Position

My latest paper, The Inclusive Capitalism Shareholder Proposal, 17 U.C. Davis Bus. L.J. 147 (2017), is now available on Westlaw. Here is the abstract:

When it comes to the long-term well being of our society, it is difficult to overstate the importance of addressing poverty and economic inequality. In Capital in the Twenty-First Century, Thomas Piketty famously argued that growing economic inequality is inherent in capitalist systems because the return to capital inevitably exceeds the national growth rate. Proponents of “Inclusive Capitalism” can be understood to respond to this issue by advocating for broadening the distribution of the acquisition of capital with the earnings of capital. This paper advances the relevant discussion by explaining how shareholder proposals may be used to increase understanding of Inclusive Capitalism, and thereby further the likelihood that Inclusive Capitalism will be implemented. In addition, even if the suggested proposals are rejected, the shareholder proposal process can be expected to facilitate a better understanding of the strengths and weaknesses of Inclusive Capitalism, as well as foster useful new lines of communication for addressing both poverty and economic inequality.