Burdens are a complicated topic on which I am no expert. But it seems that in other civil litigation, burdens of [...]]]> I’m generally a big fan of Delaware corporate law, but something is unclear to me: Why do Delaware judges talk so much about burdens of proof and burden-shifting schemes in their opinions? When I teach cases involving burden shifts to my corporations class, I find that (with few exceptions) we spend little or no time on burdens and far more time on the applicable standard of review – e.g., business judgment rule vs. entire fairness. Students have asked me what to make of all the burdens talk, and I in turn have asked other corporate law professors, who have confessed to wondering the same thing.

Burdens are a complicated topic on which I am no expert. But it seems that in other civil litigation, burdens of persuasion matter because there are “arguments/decisions from ignorance” due to a lack of evidence, non-expert juries, and so forth. So we need to know who wins when it’s unclear whether the standard of persuasion (e.g. preponderance of the evidence) has been met. But in Delaware corporate law, expert judges replace juries, so there should be less uncertainty. Further, because burdens in corporate law bounce around based on the judge’s view of the facts, it is not known who has the burden until a decision is actually rendered. Therefore, both sides must put forth their evidence. Which leaves me curious, what purposes are burdens serving in corporate law? Some thoughts after the jump…

If I’m being provocative, I’d ask Delaware judges if burdens are really doing much at all, or whether burden-shifting schemes serve other purposes such as making Delaware law more difficult for other states to copy (see Ehud Kamar etc. on Delaware’s indeterminacy). In actuality it’s the standard of review that does the heavy lifting in corporate law. While a burden shift appears to give one side an advantage, the real question is whether the standard of review also shifts. For example, if a self-dealing director removes the taint of disloyalty through disclosure plus disinterested director approval, the burden shifts to the plaintiff, but more importantly, the standard of review shifts from fairness to business judgment. It’s business judgment rule protection, not the burden shift, that explains why the directors win. On the other hand, maybe this is no different than other areas – e.g. isn’t reasonable doubt as a standard for guilt more important than who must (dis)prove it?

Interesting cases lie where the burden shifts but the standard of review does not. E.g. in cash-out mergers, special committee or majority-of-the-minority shareholder approval shifts the burden of proving fair price to plaintiffs, but the standard of review remains fairness. So what good does the burden shift really do directors? If the standard remains fairness, the outcome will still come down to a battle of the experts over price. There are two possible reasons the burden assignment still matters. First, perhaps fair price isn’t a fixed number but a range, and not having the burden buys directors some leeway within that range. Charles Yablon has made this argument in one of the few scholarly discussions on this topic. Charles M. Yablon, On the Allocation of Burdens of Proof in Corporate Law: An Essay on Fairness and Fuzzy Sets, 13 Cardozo L. Rev. 497 (1991) (no SSRN link). Second, it could be that burdens matter a lot in the pre-trial stages. Maybe plaintiff shareholders don’t have or take advantage of discovery options under DGCL § 220 and production really is a problem?

I’m interested in your views on whether Delaware corporate law is disproportionately burden-heavy in its rhetoric compared to other areas of law, and whether burdens in this context are mostly rhetoric or meaningful to litigation outcomes.

Economic theory holds that money is fungible: any unit of money is an adequate substitute for another. But my research on entrepreneurial finance, which analyzes and compares different sources of financial capital available to high-tech start-ups, suggests that this isn’t always the case. In my new article Financing the Next Silicon Valley, I show that differences in financing options may explain why we don’t have more Silicon Valley-like regions in the U.S. With our other economic engines (manufacturing, financial services) in rapid decline, a competitive economic strategy for our nation must include more tech-driven innovation. Entrepreneurial finance is a huge part of [...]]]> (I seem to have the blogging bug today, so I’ll take the advice on my last post and blog shamelessly about my new article!)

Economic theory holds that money is fungible: any unit of money is an adequate substitute for another. But my research on entrepreneurial finance, which analyzes and compares different sources of financial capital available to high-tech start-ups, suggests that this isn’t always the case. In my new article Financing the Next Silicon Valley, I show that differences in financing options may explain why we don’t have more Silicon Valley-like regions in the U.S. With our other economic engines (manufacturing, financial services) in rapid decline, a competitive economic strategy for our nation must include more tech-driven innovation. Entrepreneurial finance is a huge part of that (after all, what do start-ups lack: money!), and not all money is created equal.

My article compares three major financing sources for start-ups: private venture capital, state-sponsored venture capital, and angel investor groups. Private VC is smart money – the dollars also come with the VC’s expertise on start-up development and networking benefits. (Case in point: eBay went with the Silicon Valley VC Benchmark Capital primarily for the VC’s connections, which led to Meg Whitman taking on the CEO position.) But on the downside, private VC is heavily concentrated in existing tech regions like Silicon Valley, and also not available to the early-stage start-ups that need it most. In step the states, which set up their own VC funds with taxpayer dollars to try and fill the financing void for their neglected, home-grown start-ups. But the states, without any expertise in this area, just muck it up with their inability to pick the best start-ups ex ante or help them develop ex post. A new solution, the angel investor group, offers more hope for the future. Like private VC, angel groups are private actors who offer smart money; like state VC, that money is spread out to more regions and available to early-stage start-ups. It’s the best of both worlds.

In short, comparative entrepreneurial finance is important, both theoretically and practically. This sort of money, contrary to popular economic thinking, is not all fungible.

Even thinking beyond tenure [...]]]> The advice I’ve gotten as a junior professor is to stick with articles and put off scholarly books until post-tenure. It’s an interesting question, especially when your work begins to show some consistent themes that would lend themselves to systematic treatment in a book. Therefore I wonder: Is the advice to put off books until post-tenure good advice? I can think of a couple of reasons that it might be. First, tenure committees might not be as familiar with how to count books, if they count them at all. Second, a good book needs some fresh content to supplement the revamping of articles past, and the opportunity cost of that fresh content might be two or three new articles.

Even thinking beyond tenure considerations, are books really worth it for most of us (i.e., the non-Cass Sunsteins of the academic world)? Royalties can’t be enough of a financial incentive in most cases, and citation counts might on average be lower (although I haven’t empirically tested this) because articles are more accessible to other scholars through electronic databases. So what are the relative benefits of books and articles, and does the equation change pre- or post-tenure?

Which got me thinking: Do all law professors secretly yearn to return [...]]]> I assume that many of us are following the list of lateral faculty moves over at The Faculty Lounge and are eagerly anticipating Larry Solum’s list of entry-level hires. The laterals list includes Mark Janis’s move from Iowa to Indiana. Now I don’t know Professor Janis or his work, but I’m always interested in finding new scholarship to explore. In reviewing Professor Janis’s bio, I noticed something: He graduated from Indiana Law, the place to which he is now returning. Professor Janis is not alone – for example, several years ago my friend Bob Lawless returned to Illinois, from which he holds his JD. And these are just a couple of potentially numerous examples.

Which got me thinking: Do all law professors secretly yearn to return to the schools from which they graduated? There are reasons to think many do. First, while there are surely exceptions, those of us who became professors probably really enjoyed our law school experiences (if not we’d be far away from the hallowed halls). Second, we likely held those professors who taught us in the highest regard, and the chance to become their colleague has an allure that an unfamiliar school might not be able to match. Third, we may have family in the geographic area or just generally prefer it (after all, we chose to go there in the first place). And finally, our home school may have been especially supportive when we were trying to enter academia and since.

Perhaps this inquiry is largely theoretical since most law professors graduated from the very top schools where few wind up. But just for fun, if you graduated from Stanford would you pick it over Harvard if you had the choice? Do you secretly yearn to return home to the school that started this whole experience for you? Due to the sensitive nature of the inquiry, my guess is that the “anon”s will dominate any comments. But I thought it would be fun to ask…

Now [...]]]> While the blogosphere talk has been of cutting back on workshops, at Wisconsin we’re actually going in the opposite direction. Coming this fall, I’m starting a new corporate governance workshop series. Don’t get me wrong, my state and school are not immune from the financial crisis. In fact, it’s because our base workshop series has finite resources (and space) that I’ve had to get a little creative to bring in more corporate speakers. I tied the series to a seminar class (my models: the Larry Ribstein course at Illinois & Steve Bainbridge course at UCLA). To facilitate higher-level discussions, only students who have taken my business organizations II course are eligible for the class. And of course, faculty will be invited and encouraged to attend.

Now for the real question: How to do something like this on a budget of $3000 or less? Here’s what we came up with: 1) invite speakers every other week for a total of six speakers over the course of the semester; in the week before the speaker’s visit, the students and I will read and discuss foundational works on corporate governance related to the upcoming speaker’s paper; 2) invite nearby speakers to facilitate driving over flying and lunch over dinner where possible (this is easier in some parts of the country than others); and 3) shoulder some of the costs myself. On the last point, I committed to pay half of the expenses out of my annual research allotment, so the school’s commitment was $1,500 max. How can your deans turn you down for $1,500 for something that has all sorts of benefits to both the faculty member and school?

Of course, others might not want to use their allotments for this. But for me, I tend not to hire many RAs (cost-saving tip here: why not structure the work as an independent study for credit if it will be a true learning experience for the student?) or, with a couple of exceptions, attend conferences where my costs aren’t covered by the host. So why not spend some of the allotment to enrich my intellectual life? I won’t be able to invite everyone I want to, even limiting invitations to those at nearby schools, but I’m really looking forward to seeing where this goes. It seems that with a little initiative and creativity schools could expand their workshop offerings rather than cut them, even in tough economic times.

But perhaps even better is the faculty workshop – where ideas wrestled with in private find their way into the public. Whether I’m the presenter [...]]]> Law professors find intellectual stimulation in many places – the classroom, writing amicus briefs, chatting about current events, and producing new scholarship. Of course the writing process can be solitary and tortured. My wife knows that for every new paper there is at least one time I will throw up my hands, declare myself a fraud and my ideas worthless, only to be followed by similarly passionate declarations that I’ve seen the light, overcome the hurdles, and am in the process of producing groundbreaking legal scholarship. (Neither is really accurate.) Tortured as the writing process is, I do enjoy it so.

But perhaps even better is the faculty workshop – where ideas wrestled with in private find their way into the public. Whether I’m the presenter or a participant, the chance to engage on cutting-edge scholarship is probably my greatest professional delight. There’s nothing better than a long day where ideas are bantered around and fires glow in the eyes of all involved. I know some who see multiple workshops a week – e.g. the base faculty workshop series supplemented by specialty series in law and economics, law and humanities, legal history – as a burden. I see them as the best thing about going to work.

Over at Conglomerate, Christine Hurt asks whether workshops will be on the chopping block in these tough economic times, or perhaps change to an online format. While the online format can work — look no further than Christine’s junior scholars workshop on the Glom each summer — I certainly hope (and think Christine hopes) that this remains the exception rather than the rule. Am I alone? Would you miss the workshop in its present form as much I would? What floats your intellectual boat?

Yesterday’s WSJ contained what I’ll generously call a waste-of-space op-ed from Gary Wilson, a Yahoo director, on the need to separate the Chairman and CEO functions to avoid undue influence from “Imperial CEOs.” First, this isn’t exactly a new idea. Second, it doesn’t come from the most reputable voice on corporate governance these days considering the Yahoo board’s lackluster performance on the Microsoft offer. Yahoo’s Chairman and CEO functions are separate, as Wilson boasts, yet CEO [...]]]> In response to Glom guest blogger Usha Rodrigues’s excellent post slamming Rupert Murdoch’s changes at the Wall Street Journal, I chimed in with a comment on how much better the Financial Times is as a business-oriented newspaper. Editorials appearing in both papers over the last two days confirm my preference.

Yesterday’s WSJ contained what I’ll generously call a waste-of-space op-ed from Gary Wilson, a Yahoo director, on the need to separate the Chairman and CEO functions to avoid undue influence from “Imperial CEOs.” First, this isn’t exactly a new idea. Second, it doesn’t come from the most reputable voice on corporate governance these days considering the Yahoo board’s lackluster performance on the Microsoft offer. Yahoo’s Chairman and CEO functions are separate, as Wilson boasts, yet CEO Jerry Yang is beginning to look a lot like the Imperial CEO Wilson criticizes. Yang stubbornly refuses to sell to Microsoft, and the board (with its separate Chairman) continues to support him.

Today’s FT, by contrast, contains an editorial laying the blame for Yahoo’s problems on Yang’s doorstep and calling for his ouster. The right – and overdue – move, in my opinion, and one that Mr. Wilson and the other “non-dominated” Yahoo directors have been unwilling to make. Hopefully they won’t be long for the job after Carl Icahn’s proxy fight.

Doriot loved to teach and was one of HBS’s most popular professors. But he learned there can be too much of a good thing. The HBS Dean at the time (Wallace Donham) recognized Doriot’s talents in the classroom and asked [...]]]> I’m reading Spencer Ante’s interesting new biography of Georges Doriot, who founded the nation’s first venture capital firm, American Research and Development, in Boston in 1946. Doriot immigrated to the U.S. from France in 1921, when he was 21 years old, to attend MIT. On arrival in Cambridge Doriot met the President of Harvard, who convinced him that Harvard Business School was where he belonged, and Doriot promptly enrolled. By age 30, Doriot had become a full professor at HBS. Not bad for a decade’s work.

Doriot loved to teach and was one of HBS’s most popular professors. But he learned there can be too much of a good thing. The HBS Dean at the time (Wallace Donham) recognized Doriot’s talents in the classroom and asked him to take over courses where other professors had proved unpopular. In one passage, Ante writes:

The Dean…told Doroit that there was something amiss with the class on Business Policy, a required second-year, full-year course. Over the past few years, students had complained about several teachers, and had even taken to stamping their feet ‘during lectures they considered boring or irrelevant.’ Like he had done with the class on factory problems, Dean Donham told Doriot to take over the course and recast his Manufacturing lectures as a Business Policy course. Doriot accepted the assignment even though he did not want to teach a required course with an enormous enrollment. His boss was relying on him, and he had to come through.

In a subsequent letter to a friend, Doriot complained of the new arrangement:

I have started teaching. It takes an enormous amount of energy to teach 330 men. Trained teachers having for the past years made a mess of that course, I quite realize that the odds are against me. I shall do my best anyway even if I have to pass out doing it.

Channeling Larry’s post from last week, now that’s a lot of contact hours!

There also appears to be widespread agreement that measures aimed at existing energy sources (like carbon cap-and-trade systems) might be useful in the short term, but that innovations in clean tech are our best long-term solution. President Bush repeatedly mentioned the need for clean technologies in a recent speech on climate change, and Al Gore made headlines when he joined the leading venture capital firm of Kleiner Perkins [...]]]> It seems that everyone is going green these days, and venture capital is no exception. VCs are directing lots of money to start-ups developing more efficient solar panels, synthetic ethanols, and other clean technologies. Some see this sector as the next Internet. There is huge market potential and a favorable political climate on both sides of the aisle.

There also appears to be widespread agreement that measures aimed at existing energy sources (like carbon cap-and-trade systems) might be useful in the short term, but that innovations in clean tech are our best long-term solution. President Bush repeatedly mentioned the need for clean technologies in a recent speech on climate change, and Al Gore made headlines when he joined the leading venture capital firm of Kleiner Perkins last November. According to the Financial Times, KP just tripled its set aside for future clean tech investments.

Yet for all the VC dollars being funneled to clean tech, there is a healthy dose of skepticism about its market potential. Some think that the real story here is liberal, rich-enough VCs like KP’s John Doerr using their market power to direct investors’ money to serve an environmental cause regardless of whether the investments will turn a profit.

Am I a clean tech believer or skeptic? Answer below the fold…

When I started paying attention to this issue, I was a skeptic. The model that worked for the Internet doesn’t seem to fit here. First, VCs must exit their investments and return profits to investors after 10-12 years, a pretty quick timeframe. Yet cost-competitiveness in clean tech may be 20-30 years away. Second, while the typical Internet investment may be $5-$10M, for clean tech it can be closer to $100M. This requires more money from investors and a higher price at exit to produce the same returns those investors have come to expect from the Internet. Finally, there may not be enough experienced entrepreneurs entering the clean tech sector. While engineers at IT companies left their jobs to form Internet start-ups, engineers at big energy companies may not be likely candidates to form clean tech start-ups.

On the other hand, some recent developments in the solar field are encouraging. Solar is the front line of clean tech. Until recently, its high costs and low efficiency have been significant impediments to competitiveness. However, Bloo Solar’s Larry Bawden recently told a group of Stanford entrepreneurship students that solar technology has rapidly progressed from silicon panels to thin film panels to super thin films that use 90% less material. Bawden also noted that in the US alone, five times more capital has been poured into solar in the past two years than in the past fifty. Due to great demand for solar panels, mostly from Germany, some solar stocks are performing very well. For instance, Phoenix-based First Solar sold shares for $20 in its 2006 IPO and is now trading at over $250. Also, if US regulations direct or encourage changes in current energy practice (a seemingly inevitable trend), we can expect to see more market opportunities and therefore more clean tech innovation.

Bottom line: While outcomes are uncertain, one thing is clear – VC investments in clean tech will only increase for the foreseeable future. It will be something to watch, with potentially major ramifications for us all.

I’ll start with something that has been a nice distraction from writing and conferences over the past month: Euro 2008, which is the world’s second most important soccer tournament (after the World Cup). It was a terrific tournament – the quality of play was outstanding and the matches were close and exciting. While Spain deservedly won yesterday’s final, the real story of the tournament was Turkey. Turkey is not a traditional soccer powerhouse, but in this tournament managed to pull off three amazing come-from-behind victories before eventually losing to Germany in a very close semifinal. I don’t [...]]]> Thanks to Dave for the introduction and to everyone at Co-Op for having me. I’m a regular reader, so I’m happy to be able to contribute a few thoughts.

I’ll start with something that has been a nice distraction from writing and conferences over the past month: Euro 2008, which is the world’s second most important soccer tournament (after the World Cup). It was a terrific tournament – the quality of play was outstanding and the matches were close and exciting. While Spain deservedly won yesterday’s final, the real story of the tournament was Turkey. Turkey is not a traditional soccer powerhouse, but in this tournament managed to pull off three amazing come-from-behind victories before eventually losing to Germany in a very close semifinal. I don’t know how many Americans watched the tournament, but on my way back from a conference, at least, I had to convince my fellow patrons at the O’Hare Chili’s that the last five minutes of Croatia-Turkey would make for better TV than some rerun on another channel. (I was vindicated when both teams scored – Turkey in the last seconds before winning on penalty kicks.)

An interest in soccer comes naturally for me given my family. My dad started the men’s soccer team at Clemson University in 1967 and had an amazing career before retiring in 1994. Needless to say there were some big expectations on me growing up. Turns out I was pretty terrible at soccer, but all was forgiven since I did well in school. My brother inherited the soccer genes and went on to play for Clemson after my dad retired.

Even though I couldn’t play, I did go to countless games and enjoy many conversations about the sport. The conventional wisdom is that Americans don’t like soccer because there’s not enough scoring, which makes it boring. I actually think the lack of scoring makes each goal that much more exciting, and that a bigger problem is the opaqueness of the teams’ strategies. In football you establish the run to open up the pass, in basketball you establish the inside game to open up the perimeter, but in soccer, it’s far from clear what the teams are doing. The announcers could help here, but it’s a fine line between initiating new viewers and not irritating seasoned viewers with five-minute discussions of the meaning of “offsides” (a problem with US soccer coverage in the past). Even with a better understanding of the game, I doubt soccer will ever become that popular as a spectator sport here (unless it’s watching your kids play), although more sports fans would surely have their interest piqued by tournaments as good as Euro 2008.