CALL FOR PAPERS

Fourth European Research Conference on Microfinance

1-3 June 2015

Geneva School of Economics and Management, University of Geneva

Geneva, Switzerland

Access to suitable and affordable finance is a precondition for meeting basic human needs in incomes and employment, health, education, work, housing, energy, water and transport. Microfinance – and more broadly, financial inclusion – will continue to be on the research and policy agenda. 2015 will be a special occasion to question received notions about the link between access to finance and welfare. In 2015 the Millennium Development Goals will make place for the Sustainable Development Goals. A broad debate and exchange on micro, macro and policy topics in financial inclusion will advance our knowledge and ultimately improve institutional performance and policy. This applies in particular to issues of financial market organization, but also patterns, diversity and trade-offs in institutional performance, scope for fiscal instruments, impact of technology on efficiency and outreach etc.

The European Research Conference on Microfinance is a unique platform of exchange for academics involved in microfinance research. The three former conferences organized by the Centre for European Research in Microfinance (CERMI) at the Université Libre de Bruxelles in 2009, by the University of Groningen in the Netherlands in 2011 and the University of Agder in Norway in 2013 brought together  several hundred researchers, as well as practitioners interested in applied research. The upcoming Fourth Conference is organized by the University of Geneva, in cooperation with the European Microfinance Platform (www.e-mfp.eu) and in association with the University of Zurich and the Graduate Institute of Geneva. 

To provide cutting-edge insights into current research work on microfinance and financial inclusion and to enrich the conference agenda we invite papers on the following topics:

  • Client-related issues: consumer behavior, client protection, financial education, household-enterprises and entrepreneurship
  • Financial products: credit, insurance, deposits, domestic and cross-border payments
  • Non-financial services
  • Microfinance adjacencies: Millennium Development Goals
  • Institutional issues: management, governance, legal form, transformation, growth, mission drift
  • Market: monopolies, competition, alliances and cooperation, mergers and acquisitions, crowding-in and crowding-out issues
  • Funding: subsidies (smart and other), investments (public and private) in microfinance institutions
  • Policy and regulatory issues
  • Impact
  • International governance

Papers will be selected for presentation at the conference by the Scientific Committee, based on criteria of academic quality.

Members of the Scientific Committee include, amongst others: Arvind Ashta (Burgundy School of Business), Bernd Balkenhol (U Geneva), Georges Gloukoviezoff (U Bordeaux and U College Dublin), Isabelle Guerin (IRD, Cessma), Begona Gutierrez-Nieto (U Zaragoza), Malcom Harper (Cranfield School of Management), Valentina Hartarska (U Auburn, USA), Marek Hudon and Ariane Szafarz (CERMI and Solvay School of Business Brussels), Susan Johnson (U Bath), Annette Krauss (U Zürich), Marc Labie (CERMI and University of Mons), Roy Mersland (U Agder), Christoph Pausch (European Microfinance Platform Luxembourg), Trond Randoy (U Agder), Daniel Rozas (European Microfinance Platform Luxembourg), Jean Michel Servet (Graduate Institute Geneva) and Adalbert Winkler (Frankfurt School of Finance and Management), Hans Dieter Seibel (U of Cologne).

Authors are invited to submit an abstract of their paper (not exceeding 2 pages) to bernd.balkenhol@unige.ch by December 20, 2014.  

The full paper needs to be sent in by March 31, 2015.

I have something of a follow-up to Haskell’s earlier post. 

While companies like Wal-Mart will be open on Thanksgiving – a decision that has garnered no small amount of public criticism– others have conspicuously declared that they will be closed, in order to allow their employees to spend time with their families.

Now, you can call this a sincere commitment to employees’ well-being if you like, but my cynical brain views this as a standard share value-maximizing decision – whether management has decided that adverse publicity would harm the brand, or that employees who get holidays off are less likely to agitate for higher wages, or that regulators are less likely to step in if the business makes some minimal concessions to employee welfare, it’s still a decision that’s about benefitting the bottom line.  If nothing else, it can be cast that way – which is precisely why, precisely as has been frequently argued on this blog, it’s difficult to understand why the separate concept of a benefit corporation is necessary, except to the extent it represents the ultimate in marketing commitment.  Or maybe some corporate directors just don’t want to have to come up with a shareholder-value-maximizing lie about the reasons for their decisions, even if it would be easy to do.

The Thanksgiving-holiday debate also fascinates me because of the way in which it calls to mind Hillary Sale’s concept of corporate “publicness” – the idea that corporations, as large and powerful actors in society, are viewed as public institutions, and suffer when they fail to conduct their affairs with that understanding.  The corporations that have  declared that they will not be open on Thanksgiving seem to be responding to this “publicness” concept.

But that just raises the question, how much does “publicness” represent anything different than the types of pressures that have always existed to force corporations to behave as better corporate “citizens”?  Corporations have always had to fear that customers or employees would turn against them, or regulators would try to control them, if they did not behave appropriately; why are today’s corporations any different?

Perhaps it’s simply because modern corporations are too powerful to regulate via traditional mechanisms. Public shaming and appeals to (certian classes of) shareholders appear to be the only levers of control available – or, at the very least, in a world where it is expected that regulation is unnecessary, scrutiny of corporations as public actors is a natural response.  Mariana Pargendler argues that corporate governance has only arisen as an important issue in corporate theorizing as a result of the deregulatory bent of modern America – because there is no political appetite for direct regulation, people who would prefer direct regulation instead turn to corporate governance arguments as a second-best solution for controlling corporate behavior.

I suspect this is accurate.  Once upon a time, if we were concerned that workers were being unfairly pressured to work over the holidays, we might consider using direct regulation to remedy the problem.  Today, the idea seems extremely remote, if not utterly impossible.  Public shaming seems the only viable alternative, in hopes that either shareholders or customers will display enough distaste for corporate policies that managers decide to voluntarily reform.

 

I just booked my hotel for Sunday and Monday for a mini-writing retreat before the Thanksgiving holiday.  This has been an effective (although intimidating) format for me in the past to tackle big writing projects (and deadlines).  The idea is that you block 24-48 hours, remove yourself from your normal world and responsibilities and dig into the big thinking to make progress.  This is a popular format at Georgia State, and I know several colleagues who book a writing weekend by themselves or with a good friend.  This is my first solo endeavor, and I sorely wish I had my normal writing companion heading into battle with me.  No one likes to stress-eat chocolate covered almonds and wear sweat pants alone.  It feels indulgent and fun with someone else; desperate when you are alone.

My current confusion and lack of direction on how to write this article (is it a short piece? a full article? a response piece?) has lead to my postponing its writing since June (!!!) and is creating a considerable amount of anxiety.  I don’t know what I fear most at this point:  the tailspin that will inevitably happen in that hotel room around midnight on Sunday or how shattered I’ll feel if I emerge with nothing to show.  

As a final ploy of procrastination, I turn the question to you:  have you effectively used a writing retreat to get through a big project and/or do you have any writing/brainstorming tips that help you when you find yourself at a similar crossroads?

-Anne Tucker

PP

Whole Foods recently launched its first national advertising campaign around the theme “Values Matter.” Some outlets claim that the campaign is a response to weak comparable store sales. Supposedly, Whole Foods is spending between $15 million and $20 million on this campaign in an attempt to convince customers that “value and values go hand in hand.” You can see some of the videos here.

Whole Foods has long been known for its high prices and healthy food. Whole Foods has been actively fighting the high price reputation, but at least in the places I have lived, Whole Foods is usually close to the richest neighborhoods, is entirely absent in less affluent areas, and still seems to have higher prices than most competitors. Whole Foods seems to use a premium product, sold mostly to the upper-class, to fund its commitment to employees, its purchasing from smaller local vendors, and its care for the environment.

Whole Foods seems to focus on impacting society and the environment mostly through the process by which they sell their products and distribute the profits to stakeholders.

Walmart seems to have a very different model. Walmart seems to care much more about low prices than about treating their non-customer stakeholders well. Walmart’s extreme pressuring of suppliers, often contentious relationships with the communities around its stores, and low wages/limited benefits for many of its employees [updated] has been widely reported. Walmart seems to be trying to fight its reputation, and it has certainly engaged in some positive activities for society, but its reputation remains.

In contrast to Whole Foods, Walmarts can be found in rural and less affluent areas, and Super-Walmarts are bringing fresh produce to former food deserts at prices that appear to be more affordable. Walmart could argue that it makes a positive impact on society through its low prices.

In short, Whole Food’s strategy seems to be – proper process, high prices – while Walmart may allow a poor process to obtain low prices. 

Should corporate law, especially social enterprise law such as the recent benefit corporation law, encourage one strategy over the other?  The benefit corporation laws appear flexible enough to embrace either, though a more traditional understanding of social enterprise might exclude both on the ground that the companies’ primary purpose does not seem to be producing products that serve the disadvantaged. Social enterprise’s definition, however, has become much broader over time, though there is currently no consensus.    

This struggle with process and prices can be a difficult one, and I am just glad more companies are attempting to find appropriate solutions. 

The DC Circuit will once again rule on the conflicts minerals legislation. I have criticized the rule in an amicus brief, here, here, here, and here, and in other posts. I believe the rule is: (1) well-intentioned but inappropriate and impractical for the SEC to administer; (2) sets a bad example for other environmental, social, and governance disclosure legislation; and (3) has had little effect on the violence in the Democratic Republic of Congo. Indeed just two days ago, the UN warned of a human rights catastrophe in one of the most mineral-rich parts of the country, where more than 71,000 people have fled their homes in just the past three months.

The SEC and business groups will now argue before the court about the First Amendment ramifications of the “name and shame” rule that required (until the DC Circuit ruling earlier this year), that businesses state whether their products were “DRC-Conflict Free” based upon a lengthy and expensive due diligence process.

The court originally ruled that such a statement could force a company to proclaim that it has “blood on its hands.” Now, upon the request of the SEC and Amnesty International, the court will reconsider its ruling and seeks briefing on the following questions after its recent ruling in the American Meat case:

 (1) What effect, if any, does this court’s ruling in American Meat Institute v. U.S. Department of Agriculture …  have on the First Amendment issue in this case regarding the conflict mineral disclosure requirement?

(2) What is the meaning of “purely factual and uncontroversial information” as used in Zauderer v. Office of Disciplinary Counsel, …  and American Meat Institute v. U.S. Department of Agriculture?

(3) Is the determination of what is “uncontroversial information” a question of fact? 

Across the pond, the EU Parliament is facing increasing pressure from NGOs and some clergy in Congo to move away from voluntary self-certifications on conflict minerals, and began holding hearings earlier this month. Although the constitutional issues would not be relevant in the EU, legislators there have followed the developments of the US law with interest. I will report back on both the US case and the EU hearings.

In the meantime, I wonder how many parents shopping for video games for their kids over the holiday will take the time to read Nintendo’s conflict minerals policy.

 

 

In June 2014, the Supreme Court decided Fifth Third Bancorp v. Dudenhoeffer holding that fiduciaries of a retirement plan with required company stock holdings (an ESOP) are not entitled to any prudence presumption when deciding not to dispose of the plan’s employer stock.  The presumption in question was referred to as the Moench presumption and had been adopted in several circuits.  You may have heard of these cases as the stock drop cases, as in the company stock price crashed and the employee/investors sue the retirement plan fiduciaries for not selling the stock.  The Supreme Court opinion didn’t throw open the courthouse doors for all jilted retirement investors, and limited recovery to complaints (1) alleging that the mispricing was based on something more than publically available information, and also (2) identifying an alternative action that the fiduciary could have taken without violating insider trading laws and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it.

The Supreme Court in Fifth Third recognized the required interplay between ERISA and securities laws stating:

 [W]here a complaint faults fiduciaries for failing to decide, based on negative inside information, to refrain from making additional stock purchases or for failing to publicly disclose that information so that the stock would no longer be overvalued, courts should consider the extent to which imposing an ERISA-based obligation either to refrain from making a planned trade or to disclose inside information to the public could conflict with the complex insider trading and corporate disclosure requirements set forth by the federal securities laws or with the objectives of those laws.

The Ninth Circuit decided Harris v. Amgen in October based upon the Fifth Third decision. In Harris, the plaintiffs’ claim alleged a breach of fiduciary duty based on the failure to stop buying additional stock in the ESOP based on non-public information.  The Ninth Circuit found that plaintiffs alleged sufficient facts to withstand a motion to dismiss that defendant fiduciaries were aware (1) of non-public information, which would have affected the market price of the company stock and (2) the stock price was inflated.  These same facts supported a simultaneously-filed securities class action case.

To understand the interplay between securities laws and ERISA fiduciary rules, as established in Fifth Third, one ERISA consulting firm observed that

The Ninth Circuit appeared to reach the conclusion that, if ‘regular investors’ can bring an action under the securities laws based on the failure to disclose material information, then ‘ERISA investors’ in an ERISA-covered plan may, based on the same facts, bring an action under ERISA:

“If the alleged misrepresentations and omissions, scienter, and resulting decline in share price … were sufficient to state a claim that defendants violated their duties under [applicable federal securities laws], the alleged misrepresentations and omissions, scienter, and resulting decline in share price in this case are sufficient to state a claim that defendants violated their more stringent duty of care under ERISA.” 

The Harris opinion invokes a sort of chicken and egg problem.  If the plan had dumped the stock it would have signaled to the market and pushed the share prices lower.  In addressing this concern, however, the Ninth Circuit stated that:

Based on the allegations in the complaint, it is at least plausible that defendants could have removed the Amgen Stock Fund from the list of investment options available to the plans without causing undue harm to plan participants. 

. . . The efficient market hypothesis ordinarily applied in stock fraud cases suggests that the ultimate decline in price would have been no more than the amount by which the price was artificially inflated. Further, once the Fund was removed as an investment option, plan participants would have been protected from making additional purchases of the Fund while the price of Amgen shares remained artificially inflated. Finally, the defendants’ fiduciary obligation to remove the Fund as an investment option was triggered as soon as they knew or should have known that Amgen’s share price was artificially inflated. That is, defendants began violating their fiduciary duties under ERISA by continuing to authorize purchases of Amgen shares at more or less the same time some of the defendants began violating the federal securities laws.

The argument, in part, is that if Amgen had stopped the ESOP stock purchases it would have signaled to the market regarding price inflation and perhaps prevented the basis for the securities fraud violations harm alleged in the separate suit.

For those who follow securities litigation, there is a potential for investors purchasing in an ESOP to have a secondary and perhaps superior claim for fiduciary duty violations based upon the same facts giving rise to company stock mispricing arising under securities laws.

This raises the question, as one ERISA consulting firm noted,

Are an issuer/plan fiduciary’s disclosure obligations to participants greater than its disclosure obligations to mere shareholders? Isn’t that letting the ERISA-disclosure tail wag the securities law-disclosure dog – will it not result in the announcement of market-moving material information to plan participants first, before it is announced to securities buyers-and-sellers generally?

I have long been interested in how what happens in the defined contribution (DC) context intersects with what we think of traditional corporate law and how, as the pool of DC investors grows, there will be an ever increasing influence of the DC investor in the corporate law arena.

-AT

In my post yesterday on intellectual property law and The University of Tennessee’s rebranding exercise, I noted my opposition to the abandonment of the Lady Volunteer brand.  Some have questioned my stand on this issue as (although not using these words) old fashioned, anti-feminist, etc.  Even my husband questioned me on the matter, asking: “How would you have felt if, in playing field hockey at Brown, the team was referred to as the Lady Bears?”  Of course, some team names are not meant to “go with” the moniker “Lady,” in any event . . . .  :>)

Some do see this as a simple issue of shedding the “separate and unequal” status of women’s athletics at The University of Tennessee.  I can see how an outsider might see things that way.  But the merger of the Knoxville men’s and women’s athletic departments two years ago (I will spare you the details) was accomplished in a way that is seen by some as sweeping inequality under the rug through homogenization that falsely signals equality to the outside world.  Suffice it to say, I am not persuaded that the issue is this simple.

Others have contacted me on Facebook and in private communications to point out additional aspects of the rebranding matter that relate to the word “Lady” in the women’s athletics branding at The University of Tennessee.  On Sunday, Jack McElroy, the editor-in-chief of our local paper (whose son played soccer with my son back in the day) wrote an editorial [ed. note: this link is firewall protected and may only be available to subscribers] on this element of the branding controversy.  In the editorial, he traces the history of the word “lady” in reference to women–from a 25-year-old study finding its use demeaning to female athletes to its resurgence as “a comfortable term by which 21st-century women can address themselves” (citing to feminist writer Ann Friedman).  Today, I received an email noting this post by Bryan Garner, perhaps most well known to many of us as the editor of Black’s Law Dictionary, on the “increasingly problematic” nature of the word “lady.”  (Hat tip to Bryan Cave partner Scott Killingsworth for that reference.) These writings also do not point to a simple resolution of issues relating to the continued usage or abandonment of the Lady Volunteer moniker or brand.

The branding issue is, in truth, complex, even in our post-Title IX world.  Some of the complexities involve legal issues or have legal ramifications (as noted in my post yesterday); some do not.  Among other things, branding involves psychological and emotional reactions that are contextual.  Business lawyers involved in branding efforts will be of the most use to their clients if they take this complexity and context into account in engaging legal analysis and offering advice.  How would you, for example, advise a firm like Airbnb about legal issues relating to its branding challenges? The possibility of legal claims emanating from the non-intellectual property aspects of branding is something I hadn’t earlier considered but now see as real.  I guess advising business clients on branding involves a lot more than trademark law . . . .

Steve Bainbridge at ProfessorBainbridge.com has posted a couple of discussions of fee-shifting bylaws.

As many of you know, last spring, in the ATP Tour case, the Delaware Supreme Court upheld a bylaw requiring the losing party in shareholder litigation to pay the other side’s attorneys’ fees. The case involved a non-stock membership corporation, but there’s no relevant distinction between non-stock corporations and ordinary corporations in either the opinion or the statute. A bill was introduced in the Delaware legislature to amend the statute to overturn the ATP Tour decision, but the legislature deferred any action pending further study.

Professor Bainbridge argues in favor of the ATP Tour result. His first post is here. The second post is here.

I’m starting to think that courts are playing the role of Lucy to my Charlie Brown, and proper description of LLCs is the football.  In follow up to my post last Friday, I went looking for a case that makes clear that an LLC’s status as a disregarded entity for IRS tax purposes is insufficient to support veil piercing.  And I found one.  The case explains:

Plaintiff . . . failed to provide any case law supporting his theory of attributing liability to Aegis LLC because of the existence of a pass-through tax structure of a disregarded entity. Pl.’s Opp’n. [50]. Between 2006 and 2008, when 100% of Aegis LLC’s shares were owned by Aegis UK, Aegis LLC was treated as a disregarded entity by the IRS and the taxable income earned by Aegis LLC was reflected in federal and District of Columbia tax returns filed by Aegis UK. Day Decl. Oct. 2012 [48–1] at ¶ 37. In the case of a limited liability corporation with only one owner, the limited liability corporation must be classified as a disregarded entity. 26 C.F.R. § 301.7701–2(c)(2). Instead of filing a separate tax return for the limited liability corporation, the owner would report the income of the disregarded entity directly on the owner’s tax return. Id. Moreover, determining whether corporate formalities have been disregarded requires more than just recognizing the tax arrangements between a corporation and its shareholders. See United States v. Acambaro Mexican Restaurant, Inc., 631 F.3d 880, 883 (8th Cir.2011). Given the above analysis, the undersigned finds that there is no unity of ownership and interest between Aegis UK and Aegis LLC.

Alkanani v. Aegis Def. Servs., LLC, 976 F. Supp. 2d 1, 9-10 (D.D.C. 2013).

 As Charlie Brown would say, “Aaugh!” 

So the case makes clear, as I was hoping, that it is not appropriate to use pass-through tax status to find a unity of interest and ownership in a way that will support veil piercing.  But the court then screws up the description of the very nature of LLCs.  This is not a “case of a limited liability corporation!” It’s a case of a limited liability company, which is a not a corporation. 

Moreover, to use the court’s language, while it is true that “determining whether corporate formalities have been disregarded requires more than just recognizing the tax arrangements between a corporation and its shareholders,” the premise of the case has to do with an LLC’s status. Thus, the court should, at a minimum, make clear it knows the difference.  The statement, then, would go something like this:  “Determining whether LLC formalities have been disregarded requires more than just recognizing the tax arrangements between an LLC and its members.” 

It’s worth noting the entity formalities for LLCs are significantly less that those of corporations, so the formalities portion of LLC veil piecing test should be minimal, but that’s a different issue.

Anyway, like Charlie Brown, I will keep kicking at that football, expecting, despite substantial evidence to the contrary, that one day it will be there for me to kick. At least I don’t have to go it alone.