Earlier I blogged (on the BLPB here and CLS Blue Sky Blog here) about my co-authored piece, Institutional Investing When Shareholders Are Not Supreme–a 30-year empirical and case review study analyzing institutional investors’ response to constituency statutes as one lens into the question of institutional capital available for alternative purpose firms, like benefit corporations.  On Monday, I wrote a short post on our article for the Harvard Law School Forum on Corporate Governance and Financial Reform, which is available here.  

-Anne Tucker

 

I just read an interesting essay on the debate about creating “practice-ready” graduates: Robert J. Condlin, “Practice Ready Graduates”: A Millennialist Fantasy, 31 TOURO L. REV. 75 (2014), available on SSRN here.

Condlin rejects the notion of making law school graduates practice-ready. He argues that the practice-ready movement is a mistaken response to the downturn in the market for lawyers and that law schools cannot and should not make law students practice-ready. Regardless of your position on this issue, Condlin’s article is definitely worth reading.

Non-lawyers think lawyers love to talk, that it’s almost impossible to get them to shut up. Unfortunately for those of us in legal education, that stereotype doesn’t fit most law students.

It is difficult to get many law students to talk in class. Discussions are often dominated by just a few students, known to their peers as “gunners.” Many law students, including some of the brightest, won’t participate in class unless you force them to.

I have struggled with this issue throughout my teaching career, fighting to get all of my students actively involved in class, because the research clearly shows that active participants learn more.

Jay Howard, a sociology professor and dean at Butler University, has just written a book I wish I’d had when I began teaching. The book, Discussion in the College Classroom: Getting Your Students Engaged and Participating in Person and Online, is aimed at professors teaching undergraduates, but much of what Howard has to say applies equally to law students.

According to Howard, the problem arises in part from a mismatch of norms—students and professors have different expectations.

  • Professors want students to pay attention. Students pay what Howard calls “civil attention,” showing external cues of attentiveness without fully engaging in the class.
  • Students see the instructor as a fount of wisdom, the “sage on the stage.” Professors want students actively involved in their own learning because “the one doing the most work is the one doing the learning.”
  • Professors want all students involved. Students follow the norm of “consolidation of responsibility,” allowing a few gunners to be responsible for carrying the discussion.

Howard discusses how to change classroom norms and get students more actively involved. His book is evidence-driven, not anecdotal. Howard backs up his suggestions with discussions of the relevant educational research. But the book is not a boring research tome. Its emphasis is practical and it’s a very easy read.

I only have one major complaint. I teach an online class and I was looking forward to seeing what Howard has to say about improving online discussion. But I thought that chapter was the weakest part of the book. Howard really doesn’t add anything to what books focused specifically on online teaching have already offered.

If you’re interested in improving the discussion in your classroom, I strongly recommend Dean Howard’s book. If your primary interest is online discussion, I suggest you look elsewhere.

Jay R. Howard, Discussion in the College Classroom: Getting Your Students Engaged and Participating in Person and Online (2015) [Jossey-Bass 224 pp. $38.00]

Disclaimer: I received a free review copy of this book, but that free copy was not conditioned in any way on publishing a review.

Section 10(b) of the Securities Exchange Act prohibits anyone from engaging in manipulative or deceptive activities in connection with a securities transaction.  Rule 10b-5, promulgated under Section 10(b), prohibits anyone from “mak[ing] any untrue statement of a material fact” or “omit[ting] to state a material fact necessary in order to make the statements made… not misleading” in connection with securities transactions.

Recently, several Section 10(b) lawsuits have been filed alleging that companies hired stock promoters to pen enthusiastic articles about the companies’ prospects.  The lawsuits were apparently inspired by an exposé published at Seeking Alpha regarding stock promoter practices.  The CEO of one of the companies involved was ultimately arrested on charges of criminal securities fraud, both for hiring promoters, and for more garden variety manipulative practices.

In all of these cases, the promotional articles did not disclose that they were paid promotions, nor did they accurately disclose their authorship.  Instead, they were either published under colorful pseudonyms like “Wonderful Wizard,” and “Equity Options Guru,” or under more mundane fictional attributions, such as “James Ratz.”  (A name certainly likely to inspire trust….). 

These cases raise a number of interesting technical questions regarding the scope of Section 10(b), not the least of which is, can the plaintiffs get around Janus?

[More under the jump]

Continue Reading Janus and the Stock Promoters

If you have been following my guest posts regarding white collar crime and how white collar offenders rationalize their conduct, you likely have noticed that the discussion thus far has been largely theoretical. In this post, I’d like to offer some more concrete uses of rationalization theory and discuss how it may (should?) impact lawmakers and business people.  

But before doing that, I have to explain, just for a moment, a bit more theory. One of the most fascinating things about rationalizations, in addition to how they operate, is where they come from. Researchers have concluded that rationalizations are not created in a vacuum; offenders do not invent them in the spur of the moment. Instead, offenders find their “vocabularies of motive” within their own environments. Donald Cressey suggested that rationalizations are “taken over” from “popular ideologies that sanction crime in our culture.” He pointed to commonplace sayings that suggest wrongdoing is acceptable in certain situations: “Honesty is the best policy, but business is business” and “All people steal when they get in a tight spot.”  (Warren Buffett once called the phrase “Everybody else is doing it,” which is a clear rationalization, the five most dangerous words in business.)  Once rationalizations such as these have been “assimilated and internalized by individuals,” they form powerful constructs that allow illegal behavior to go forward.

Building on this idea, two other criminologists, Gresham Sykes and David Matza, found that offender rationalizations originate from an even more specific location: the criminal law itself. According to Sykes and Matza, great “flexibility” exists in criminal law; even if a defendant commits a bad act, he may avoid punishment if he provides a legally valid justification or defense. Citing defenses to criminal liability such as necessity, insanity, and self-defense, Sykes and Matza viewed application of the criminal law as variable, a circumstance they found offenders incorporate into their psychological processes. Sykes and Matza determined that most unethical and illegal behavior was based on “what is essentially an unrecognized extension of [legal] defenses to crimes, in the form of justifications for deviance that are seen as valid by the delinquent but not by the legal system or society at large.” Put another way, would-be lawbreakers rationalize their behavior in order to fit it within a “defense” to the law that they deem valid, but that society or a court may not.

These finding have important implications for how we consider controlling unethical and criminal behavior in corporations. Our preferred model has been to pass legislation criminalizing conduct in reaction to corporate scandals, e.g., Sarbanes-Oxley after Enron and Dodd-Frank after the financial crisis.  As scandals continue to occur, we look for new ways to make the detection and prosecution of crime easier for the government. Unfortunately, this approach has led to overcriminalization in many spheres, including white collar crime.  There are now over 5,000 federal criminal statutes and as many as 300,000 federal regulatory provisions carrying criminal penalties. While certainly not all relate to white collar crime, many do. In fact, white collar crime underwent the biggest expansion of federal law during the 1970s and 1980s, and it likely took the lead again in the early 2000s. Along with that expansion came reduced mens rea requirements for many white collar crimes, as well as increased punishments, all of which has had the effect of shifting lawmaking and adjudicatory powers to prosecutors. What this means, as many have observed, is that white collar crime suffers from the same ills as other overcriminalized areas of the law—its “depth and breadth” has led to inconsistent enforcement and arbitrary adjudication. (A great example of this is the recent Supreme Court case Yates v. United States, which dealt with a commercial fisherman who was convicted under the anti-document shredding provision of Sarbanes-Oxley for throwing a crate of undersized fish overboard. Yates was subject to at least five partially overlapping obstruction statutes; the prosecutor charged him with the one carrying a 20-year maximum sentence. The Court overturned Yates’ conviction, based partly on concerns of overcriminalization.)

While the arbitrary enforcement of white collar criminal law is problematic for many reasons, the most profound harm it causes is that it makes the law more uncoordinated and illogical, thereby lessening the law’s overall legitimacy.  Why is the lessening of the legitimacy of the law so harmful? The answer comes from the interaction between the perceived illegitimacy of white collar criminal law and rationalizations.  As discussed above, rationalizations are drawn from the white collar offender’s environment, including the law governing his conduct. As would-be offenders increasingly believe those laws to be illegitimate, more space is created for them to rationalize their conduct. They see “defenses” to the law all around them, which they then internalize and incorporate into their own thought processes. Once this occurs, there is little stopping an offender’s future criminal conduct from going forward. Instead of deterring crime, then, adding more criminal statutes and regulations to an already overcriminalized area of the law fosters the very conduct sought to be eliminated. Put simply, more laws aimed at white collar crime may actually be creating more white collar criminal behavior.  (For a more complete discussion of this topic, please see here.)  Lawmakers considering the next round of white collar criminal statutes should be mindful of the role of rationalizations play, or they may be inadvertently creating the conduct they are trying to stop. 

In my final post, I’ll discuss how these same ideas impact corporate compliance efforts. 

Earlier this month, The Tennessean reported that the state of Tennessee approved $8 million of incentives for the fourth season of ABC’s show Nashville. The city of Nashville also plans to chip in about $500,000.  According to the article, the “show spends about $20 million each season on local labor.”

Economic incentives seem to be increasingly common, but this arrangement is interesting for a few reasons. First, this is an arrangement that not only brings jobs to town, but also brings publicity and tourists. Second, the lion share of the incentives appear to be coming from the state, but the lion share of the benefits seem to be directed at the city of Nashville – causing some in other parts of the state to complain. 

Some businesses, like the Bluebird Cafe, are featured regularly on the show, and I wonder whether they pay for that privilege. I don’t think they do, but have not been able to find out for sure. 

My wife and I watch the show, if only because we like seeing our city on TV. Nashville is a wonderful place, has been called an “it city” and the “south’s red hot town.” Even the New York Times did a glowing article on the city Nashville during the tenure of ABC’s show. The job market and real estate are both booming in Nashville.

I don’t know how much of this success, if any, is due to the show about Nashville, but things do seem to be going well here…except for the increasing traffic. Product placement has been on the rise in media for some time now; perhaps we will see more city, state, and business placement over time.  

Last month, Ovul Sezer, Francesca Gino, and Michael I. Norton of  Harvard Business School posted Humblebragging: A Distinct – And Ineffective – Self-Presentation Strategy to SSRN (available here).  

Here is the full article abstract: 

Humblebragging – bragging masked by a complaint – is a distinct and, given the rise of social media, increasingly ubiquitous form of self-promotion. We show that although people often choose to humblebrag when motivated to make a good impression, it is an ineffective self-promotional strategy. Five studies offer both correlational and causal evidence that humblebragging has both global costs – reducing liking and perceived sincerity – and specific costs: it is even ineffective in signaling the specific trait that that a person wants to promote. Moreover, humblebragging is less effective than simply complaining, because complainers are at least seen as sincere. Despite people’s belief that combining bragging and complaining confers the benefits of both self-promotion strategies, humblebragging fails to pay off.

Although the authors accurately explain that humblebragging is “bragging masked by a complaint,”  I am partial to the Urban Dictionary definition:

Subtly letting others now about how fantastic your life is while undercutting it with a bit of self-effacing humor or “woe is me” gloss.
 
Uggggh just ate about fifteen piece of chocolate gotta learn to control myself when flying first class or they’ll cancel my modelling [sic] contract LOL :p #humblebrag

I think most of us know someone who is a user of the humblebrag.  I used to think it was just a fairly common technique among lawyers and academics, though I am now more of the mind that it is a “people” thing, with lawyers and academics perhaps leading the way.  I’m rather glad to see an article that shows that humblebragging is empirically ineffective in its goals.  In my experience, I have also found that it’s also not especially effective in getting people to like the humblebragger, either.  

Now, if only blatant, unrepressed, old-school bragging weren’t so effective in some circles. we could make some real progress.  

As a semi-closeted (now “out,” I guess) foodie* and as a lover of “things Brazilian” (including Havaianas flip-flops and Veja sneakers, as well as churrascarias and caipirinhas), I read with interest a recent electronic newsletter headline about a thriving Brazilian chef.  I clicked through to the article.  I loved it even more than I had thought I would.

The article tells the story of an emergent Brazilian chef and restauranteur, Rodrigo Oliveira, and his flagship establishment (Mocotó), as promised.  That was great.  But that was not all.  The piece also told the story of a business run using a “holistic business model.”

Today, Oliveira focuses on his employees as much as his customers. . . .  Oliveira pays for his employees’ part-time education. And their kids’ health care. And daily jiujitsu and yoga classes in the room he built upstairs. It’s a rarely encountered, holistic business model that contributes to his restaurant’s roaring success. . . .

 . . . 

Beneath the street level they’re boring out new dormitories for employees, for a quick nap and shower between jiujitsu, work and class. . . .

He also seems to be attentive to the greater local community beyond his customers and employees, preferring (to date) to expand his business locally rather than into larger metropolitan areas.  Good business?  Yes!  But it seems like more than that.  This business appears to have more than one bottom line!

Perhaps this is not a remarkable story, in the end.  Regardless, I wanted to share it.  Another Brazilian social enterprise, Ashoka, gets a lot of attention.**  But it’s now clear to me that we can and should look beyond larger, storied examples of social entrepreneurship for other manifestations of social enterprise in action in Brazil.

 

*Yes, Steve Bainbridge, I do read  your wonderful posts on food and beverage pairings, including this one on my birthday earlier this month.

**Actually, much to my surprise, Ashoka is a U.S. organization that networks social enterprises across the globe.  So, it’s not even Brazilian!  Having been in Rio teaching for a few summers and known of its presence there, I  assumed it was a Brazilian organization.  Please forgive the error.  Hat tip to co-blogger Haskell Murray for pointing it out to me.