With Marcia’s blessing, I am promoting a recently published transcript of a conference panel on which she and I presented last spring.  The title of the published transcript?  “Representing Entities: The Value of Teaching Students How to Draft Board Resolutions and Other Similar Documentation.”  Here’s the top line from the SSRN abstract:

This edited transcript comprises a panel presentation and related Q&A at “Educating the Transactional Lawyer of Tomorrow,” Emory University School of Law’s biennial transactional law conference held June 6-7, 2014. The transcript includes Professor Heminway’s talk and a separate presentation by Professor Marcia Narine on “How to Make Transactional Law Less Terrifying and a Bit More Interesting.” The panel, “Transactional Drafting: Beyond Contracts,” features approaches to teaching transactional business law courses. 

Enjoy!

At last month’s meeting of the Association of American Law Schools, the Section on Agency, Partnership, LLCs, and Unincorporated Associations sponsored a program on “Bringing Numbers into Basic and Advanced Business Associations Courses: How and Why to Teach Accounting, Finance, and Tax.”

I, like many business law professors, believe that at least some basic knowledge of accounting and finance is necessary to really understand business associations, securities regulation, and other business law courses. Unfortunately, many of my students have not had any accounting or finance, and many law students’ eyes glaze over whenever they see numbers.

The AALS panelists’ discussion of how to teach quantitative concepts to law students is excellent. The podcast is now available on the AALS web site, but, it’s password-protected, so only AALS members can access it. The audio is low quality, but it’s definitely worth listening to if you have access. (It’s not easy to work your way through the list of podcasts on the AALS site, but the program was on Sunday, January 4, at 10:30-12:15.)

The problem business law professors face is similar to that faced by undergraduate departments in dealing with underprepared high school students—those who have insufficient math or reading skills, for example. Like those undergraduate departments, we’re forced to offer remedial lessons to students who really aren’t adequately prepared for law school. And, as anyone in those undergraduate departments will tell you, the ideal solution is not remedial courses. The ideal solution is to make sure those students are adequately prepared in the first place.

The ideal solution to the law school “numbers problem” is at the undergraduate level. No student should come to law school without some basic exposure to accounting. And accounting and other quantitative courses aren’t the only areas where some law students are deficient. Every student going to law school should have taken at least one course in

  • American government;
  • Political philosophy;
  • Accounting;
  • Microeconomics; and
  • Logic (both inductive and deductive).

In addition, law students should have taken at least one course, and preferably several, that required them to do extensive writing. Finally, in this day of globalism, a strong case could be made that students should have taken at least two years of a foreign language, although that obviously wouldn’t be needed for most law school courses.

If students came to law school with a broad educational background like this, we could eliminate much of the remedial work. Law school courses could spend significantly less time on basic principles and much more time on legal applications and higher-level analysis.

In their new paper, Rating Agencies and Information Efficiency: Do Multiple Credit Ratings Pay Off?, Stefan Morkoetter, Roman Stebler, and Simone Westerfeld  study whether it benefits investors to have more than one rating agency rate a particular security.

They find that when multiple rating agencies rate a particular tranche of a mortgage-backed security, not only is the initial rating more accurate, but the agencies devote more efforts to ongoing surveillance, increasing the accuracy of the rating over the life of the tranche.  They conclude that the increased efforts are traceable to a healthy competition among agencies; as the authors put it, “Since their activities are directly bench-marked to their peers’, rating agencies are induced to show more effort with regard to their monitoring obligations than observed for single-rated tranches.”

One of the reasons the paper is interesting is because Dodd Frank and the SEC implementing regulations impose new restrictions on conflicts of interest within credit ratings agencies, basically forbidding anyone from the business side from having any involvement with the ratings themselves.  In light of Morkoetter et al’s conclusions, I do have to wonder whether at least some business-side involvement with the ratings process creates a healthy sort of competition.

Morkoetter, Stebler, and Westerfeld also find that of the three major ratings agencies, Moody’s was consistently the most conservative both at issuance and over a tranche’s lifetime (which, they conclude, may be why Moody’s has a very small market share of single-rated tranches).  That would certainly explain why S&P was first sued by DoJ (although Moody’s may be next), but it seems inconsistent with the allegation – offered by DoJ both in its complaint and in the stipulated facts in the S&P settlement – that S&P routinely relaxed its ratings criteria to be more like Moody’s. 

My co-blogger Anne Tucker inspired me with her useful conference list this week, and led me to create a list of my own.

Just in time for law review submission season, below are links to the submission webpages for the top-15 “Corporations and Association” specialty law journals as ranked by Washington & Lee University. The starred journals were not included in the “Corporations and Associations” dropdown ranking, but I found them in the full list and placed them in their respective spots (according to the overall rankings). I am not sure Yale Journal on Regulation belongs in this grouping, but I will leave it in since W&L includes it. 

  1. Yale Journal on Regulation
  2. Harvard Business Law Review       
  3. The Journal of Corporation Law
  4. American Business Law Journal
  5. Delaware Journal of Corporate Law
  6. Columbia Business Law Review
  7. Berkeley Business Law Journal*
  8. University of Pennsylvania Journal of Business Law*
  9. Stanford Journal of Law, Business & Finance*
  10. Virginia Law & Business Review*
  11. The Hastings Business Law Journal*
  12. The Business Lawyer
  13. Fordham Journal of Corporate & Financial Law
  14. New York University Journal of Law & Business*
  15. Northwestern Journal of International Law & Business*

For what it is worth, I am not sold on the W&L law journal rankings. The list is included mainly for the links to the submission webpages, not for the ranking (though you may want to use the W&L rankings as one reference point since some schools consider it).

Hopefully these submission webpage links will be useful to some readers. I know not everyone has access to ExpressO (especially in business schools) and some of these journals do not follow the typical submission windows, so you will want to check the links if you are interested in these journals. For example, NYU Journal of Law & Business’ spring submission window closes February 15, whereas many journals stay open deep in to March or April in the spring.  

Many corporate governance professionals have been scratching their heads lately. In November, a federal judge in Delaware ruled that Wal-Mart had wrongfully excluded a shareholder proposal by Trinity Wall Street Church regarding the sale of guns and other products. Specifically, the proposal requested amendment of one of the Board Committee Charters to:

27. Provid[e] oversight concerning the formulation and implementation of, and the public reporting of the formulation and implementation of, policies and standards that determine whether or not the Company [i.e., Wal-Mart] should sell a product that:

1) especially endangers public safety and wellbeing;

2) has the substantial potential to impair the reputation of the Company; and/or

3) would reasonably be considered by many offensive to the family and community values integral to the Company’s promotion of its brand. 

Wal-Mart filed with the SEC under Rule 14a-8 indicating that it planned to exclude the proposal under the ordinary business operations exclusion. The SEC agreed that there was a basis for exclusion under 14a-8(i)(7), but the District Court thought otherwise because the proposal related to a “sufficiently significant social policy.” In mid-January Wal-Mart appealed to the Third Circuit arguing among other things that the district court should have deferred to the SEC’s precedents and guidance over the past forty years on these issues.

In an unrelated but relevant matter in December 2014, the SEC issued a no action letter to Whole Foods stating:

You represent that matters to be voted on at the upcoming stockholders’ meeting include a proposal sponsored by Whole Foods Market to amend Whole Foods Market’s bylaws to allow any shareholder owning 9% or more of Whole Foods Market’s common stock for five years to nominate candidates for election to the board and require Whole Foods Market to list such nominees with the board’s nominees in Whole Foods Market’s proxy statement. You indicate that the proposal and the proposal sponsored by Whole Foods Market directly conflict. You also indicate that inclusion of both proposals would present alternative and conflicting decisions for the stockholders and would create the potential for inconsistent and ambiguous results. Accordingly, we will not recommend enforcement action to the Commission if Whole Foods Market omits the proposal from its proxy materials in reliance on rule 14a-8(i)(9).

In a startling turn of events, the SEC withdrew its no action letter on January 16, 2015 after a January 9th letter from the Council of Institutional Investors questioning the reasoning in the Whole Foods and similar no action letters. The withdrawal of the no action letter came on the same day as the release an official SEC statement declining “to express a view on the application of Rule 14a-8(i)(9) during the current proxy season” due to questions about the scope and application of the rule.

Yesterday, the Center for Capital Market Competitiveness (“CCMC”), an arm of the Chamber of Commerce, sent its own letter to Chair White lamenting the current state of affairs. An excerpt is below:

This announcement, a contradictory departure from a decision made just weeks earlier, benefits neither issuers nor investors and introduces an additional layer of uncertainty into an already complicated set of rules. The CCMC believes this reversal underscores why corporate governance policies must provide certainty for all stakeholders, not just to advance the goals of a small minority of special interest activists….[t]he January 16 announcement places many issuers in an untenable position, and presents them with a series of questions for which there may be no good answers. For those issuers wishing to present their own alternative proposal to shareholders for consideration, do they exclude a shareholder proposal in favor of their own and face the heightened risk of litigation with the proponent or the Commission? Do they risk shareholder confusion by including both their own proposal and a competing one from a proponent? Do they incur the added expense and distraction to management of seeking declaratory relief in federal district court? Are shareholders deprived of their right to include a proposal that is omitted because of the absence of SEC action? Far from encouraging private ordering, the recent announcement will only serve to stymie it.

The CCMC also recommends a review of the entire 14a-8 process because, as the letter claims,  “it is well-known that the shareholder proposal process has been dominated by a small group of special interest activists, including groups affiliated with organized labor, certain religious orders, social and public policy advocates, and a handful of serial activists. These special interests use the shareholder proposal process to pursue their own idiosyncratic agendas, often far removed from the mainstream, as evidenced by the overall low approval rates of many shareholder proposals that are put to a vote. Indeed, mainstream institutional investors account for only one percent of shareholder proposals at the Fortune 250.” 

Reasonable people may disagree on how the CCMC characterizes the motives behind the shareholder proposals, but there can be no disagreement that the current SEC silence doesn’t serve any constituency. Steve Bainbridge also has an informative post on this topic. Proxy season is coming up and shareholders and companies alike are awaiting a decision from the Third Circuit in the Wal-Mart action that could dramatically alter the landscape for shareholder proposals, possibly flooding the courts with expensive, protracted litigation. The timing couldn’t be worse for the SEC’s lack of action on no action letters.

 

 

 

 

I am a list maker.  I make daily to do lists, grocery lists, research plans, workout schedules (that quickly get jettisoned) and  complicated child care matrices necessary in two-career families.  How else am I supposed to remember and keep on my radar all of the things that I am supposed to be doing now, or doing when I have time, or things that I can’t forget to do in the future?  One area where I feel deficient is in planning my conference travel/attendance. It always feels either a little ad hoc (ohh I got an invitation and I never say no to those!) or a little out habit (once you have presented at a conference it is easier to be asked to participate in future panels). Rarely does it feel like a part of an intentional plan for the year where I set out to prioritize conference A or break into conference B.  

Realizing that this year there are 3 corporate law events within 10 days of each other is seriously making me reconsider my approach.  I need a conference list– a way to plan for the coming year, prioritize opportunities and frankly, schedule grandparent visits (read: child care) when I need to travel for more than a night or two.  

Below is my running list of annual or nearly annual events, but I know that I am missing big pieces of the conference puzzle.  Please contribute in the comments so we can create a list of some standard corporate law events (great for new teachers, great for those looking to expand their research circles, etc.).  Updated to reflect suggestions in comments & put in approximate order of timing.

 

-Anne Tucker

Last Wednesday, I reported on a New York Times story that, prior to Alibaba’s registered public offering this fall, a Chinese government agency secretly contacted Alibaba about allegedly illegal practices on its shopping web sites. Not surprisingly, the U.S. securities litigation industry has swung into action and filed a securities class action lawsuit against Alibaba. Details here. Welcome to America!

Anyone who has followed me on Twitter knows that I am a pretty regular runner. I try to run at least four times a week, and depending on the time of year, my schedule, and other variables, I have run as much as six times a week.

It was not always this way. I have asthma, which didn’t help much as a kid, but that problem has been controlled by medication for years. And although I was a soccer player, I was not much of a runner. Goalkeepers often aren’t.  In my older years, I was known to say from time to time, “I only run when being chased.”

Sometime in 2011, that changed. I started running three miles, most days.  I got a pair of the Nike Free Run Shoes, which may or may not have helped, but I was less sore then I was with the old, stable, and heavy, running shoes I would previously tried to run.  Not long after that I got the Nike+ running app, which tracked my runs and served as a motivator and something of a personal accountability measure, as I shared my run with friends.   

In a little more than three years, I ran 769 times and logged 2569 miles on the Nike+ running app.  Not bad. 

For me, it was figuring out that I didn’t have to commit to a marathon, or even a 10K.  I went for three-mile runs each time, and about a year ago I upped that run to about 3.5 miles each time out, and I never worry about a longer run.  I found what I could stick to, and the Nike+ app helped me see just how much I was accomplishing in relatively short, but regular, outings.  I recommend giving it a try, if you’d like to run, but it always seemed to hard. 

So, this is a long introduction to my breakup with Nike+.  Nike created a thing at the end of 2014 called the “Out Do You Challenge.” It made a nice (kind of goofy) little video that chronicled the year for some of my friends who have accomplished some impressive feats.  Things like marathons. That’s great, and a nice, if a bit cheesy reward for a year of effort. 

The site offers a place to click to see if you “made the cut for the challenge.”  I did not.  Okay, so it’s not that I deserve anything or that Nike kept something from me that I had a right to. Their site and app; their rules.  But it still seemed a little odd, given that I am a connected and regular user, who shared all his runs on social media, and had run as much as 200 miles more than others deemed “worthy.” 

Being the connected user that I am, I inquired.  The response from Nike was as follows: “We are sorry to hear that you weren’t selected for the Nike+ Outdo You Challenge. We selected our top Nike+ users who met the highest level of engagement and had complete profile information.” 

Again, they get to make the rules, but it’s hard to see how I wouldn’t make the grade based on how often I used the app. For some reason, this irked (and still irks) me, and I couldn’t figure out why.  Then it dawned on me: in my own stupid way, I felt betrayed. I was thinking: We had been in this together for 2,500 miles.  I had stuck with it when the app was not working and the only way to fix it was to email support for help.  I had run with Nike+ in Warsaw and Krakow and London and Spain and all over the United States.  We did it together. And now I was left out.

So, it occurred to me that I was being silly.  It is pretty silly, but it’s still how I felt.  And it’s also a lesson in how to keep people connected and engaged.  

If there had been a target or a message – “you need to run at least a half marathon” or “we need your home address” – that made clear what was required, then I can choose if I am in.  Instead, Nike decided to create a post hoc award for certain participants.  Again, their choice, but in doing so they excluded someone who thought they were part of the team.  And that undermines loyalty.

I’m not saying I won’t run in Nike shoes any more or that I’ll never use the Nike+ app.  I might.  But I am also auditioning others.  Currently, I am running with MapMyRun to see how I like that.  In addition to Nike, I will be trying some other options – maybe Brooks, Rebook, or Adidas – in my next trip to the running shop.

This is a good lesson in marketing, I think, but also in teaching.  The best teachers cultivate trust.  They have high expectations, and if they aren’t met, the students usually know.  I try to be transparent with my students about what I expect, and why, so that they know whether they are on track or not.  I am sure, though, that during my career, I have surprised some students who felt betrayed because they thought they were on track, yet their grade did not coincide with what they thought they put in. 

I know I am a lot better today about sharing and explaining those expectations today than I was when I started as a teacher, but it’s good to be reminded of just how critical it can be as transparent as possible with your expectations. So, thanks, Nike+, for the reminder.  Maybe I’ll be back.  Maybe not. 

 

On December 22 and again on January 9, I posted the first two installments of a three-part series featuring the wit and wisdom of my former student, Brandon Whiteley, who successfully organized a student group to draft, propose, and instigate passage of Invest Tennessee, a state crowdfunding bill in Tennessee.  The first post featured Brandon’s observations on the legislative process, and the second post addressed key influences on the bill-that-became-law.  This post, as earlier promised, includes Brandon’s description of the important role that communication played in the Invest Tennessee endeavor.  Here’s what he related to me in that regard (as before, slightly edited for republication here).

Continue Reading The Importance of Communication – Student-Initiated Intrastate “Crowdfunding” Legislation