Author: Timothy Glynn

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Farewell and Thank You

I have really enjoyed my guest stint here at Concurring Opinions over the last month. Many thanks to my hosts for the invitation and your hospitality. And thanks to all of you for the lively and engaging discussion.

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Corporate Law “Reform” in Multiple Dimensions

In an earlier post, I discussed the U.S. Chamber of Commerce’s foray into the growing conflict over the corporate internal affairs doctrine and whether that doctrine rises to the level of a constitutional imperative. Of course, the Chamber’s efforts in this area are but one small piece of a much larger overall strategy in addressing the production and content of American corporate law. In an article in Sunday’s New York Times, other pieces of that strategy now have become apparent.

The Chamber and others reportedly will launch a campaign following the election in which they may seek to scale back requirements imposed under the Sarbanes-Oxley Act, limit liability of accounting firms, make it harder for prosecutors to bring cases against individuals and firms, limit what they view as overzealous state-level enforcement, eliminate the private right of action under Rule 10b-5, and require some investor claims to be arbitrated. According to the article, they intend to achieve most of these objectives though agency action rather than resorting to legislation.

Wow. The “post-post-Enron” backlash cometh. . . .

We will have to see how all of this plays out, but I will offer three tentative impressions.

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CEOs, Just Cause, and $$$$

With the Disney case and now Grasso grabbing headlines, disputes over large payouts to former corporate executives have garnered great attention of late. Last week, another such dispute boiled to the surface, this time in the form of an appeal from an arbitration award in favor of Robert J. O’Connell, the terminated former CEO of MassMutual Financial Group. Sample media accounts can be found here, here, and here.

According to these stories, MassMutual’s allegations of O’Connell’s wrongdoing included, among other things, having affairs with several female employees, making $23 million on questionable “shadow” stock trades, intervening to prevent disciplinary actions against family members who held senior positions, and buying a fancy company-owned condo at a below-market price. The arbitration panel found that MassMutual failed to prove some of these allegations, failed to adhere to procedures for termination set forth in O’Connell’s contract, and otherwise failed to demonstrate just cause as defined in that contract. The panel did find that the firm was entitled to a return of the $23 million. Nevertheless, it awarded O’Connell compensation under the agreement worth between $40 and $50 million. MassMutual is now seeking to overturn the award in a Massachusetts court.

Without more information, we can’t tell whether the arbitrators got it right or wrong, but let’s focus instead on the contract itself. Here is how one report described the substantive portion of the just cause provision:

According to O’Connell’s contract he signed in 1998 when he joined MassMutual, he could be fired for a criminal conviction, theft or embezzlement, as well as for “conduct that constitutes willful gross neglect or willful gross misconduct … resulting in material harm to the company.”

Assuming this description is accurate, the term smacks of board of director abandonment of core principles of corporate governance. While there are many just cause provisions in employment contracts that are not the least bit problematic, this is the CEO we are talking about, this is quite a just cause provision, and the compensation at stake is, well, large.

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Ideas on Sharing Ideas

Last weekend, Seton Hall Law School hosted its first annual Employment and Labor Law Scholars’ Forum. My sense (hopefully not over-influenced by optimism bias, one of the many topics discussed) is that the participants found it to be a great success. Part of this is attributable to the terrific and diverse working papers presented by Elizabeth Emens, Julie Chi-hye Suk, Noah Zatz, and Matthew Bodie. But I think the format and size also worked well. There were fourteen participants (including the authors) who collectively covered the waterfront of the labor and employment law fields. Each author presented for about fifteen minutes, with two commentators giving their thoughts for about ten minutes apiece. This set the stage for what was a terrific informal interchange for about an hour for each paper. Everyone learned a lot, in large part because the conversation began on such a high level, everybody had read the papers in advance, and the size of the group permitted all of us to participate in a meaningful way with each paper. Kudos to our colleague Kathleen Boozang for suggesting this kind of forum as a result of her participation in something similar in the health law area at St. Louis University.

Needless to say, despite the rise of electronic media and the seemingly endless number of ways for members of the academy to share information and ideas, sometimes there is no substitute for getting together to talk about scholarship. And, of course, it can be fun too.

So, I thought perhaps sharing ideas on how to share ideas might be a useful exercise. I am wondering what types of formats – whether characterized as a forum, workshop, roundtable, or conference – others have found to be particularly useful as a presenter, commenter, or participant. I am concerned here just about the beneficial exchange of ideas rather than other ways in which one might benefit from attendance (and I realize there are plenty of the latter). What, in your experience, has worked well? If anyone can speak to the “science” of this, that would also be helpful.

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Law Teaching Interview Advice II

Last Friday, I posted the first half of my list of “dos” and “don’ts” for initial interviews and callbacks in the entry-level law teaching market. Here is the second half (the “don’ts”). Of course, the same disclaimers apply. . . .

6. Don’t Forget to Ask Good Questions. If you are given the chance to ask questions about the school with which you are interviewing and you have no questions, you have failed to heed the advice in #1 and #2 in my prior post, and your candidacy is in trouble. Let’s turn then to what types of questions you should ask. You have plenty of options, so try to craft questions that are somewhat original, appear somewhat particularized, and send the right message. For example, I suspect the most common question for hiring committees is something along these lines: “What kinds of scholarship support do you provide for new faculty members?” This was a fine question the first time it was asked, in 1983. It is not a particularly good question now, at least unless it’s packaged a bit differently or expanded. Admittedly, some variations on the same basic theme would be far worse (e.g., “How many days a week do I need to be on campus my first year?”). Still, it is not original and says nothing about you. Perhaps mix it up somewhat and add a little content: “As I mentioned earlier, my next project in area X will be an empirical study. I noticed that a number of your faculty members are doing interesting empirical work. What kinds of resources and support does your school provide for this kind of scholarship?”

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Law Teaching Interview Advice I

The entry-level hiring season for law faculty has now begun in earnest. The blogosphere has become a useful source of information on a host of relevant topics. Now that I have stepped down from an appointments committee and will not be an active participant in the process for the first time in a number of years, I thought I would add my two cents.

Since the hiring conference is just around the corner, my contribution consists of some basic “dos” and “don’ts” for initial interviews and callbacks. I will start with five “dos” today and add five “don’ts” on Monday. I am, of course, not the first person to post such advice, so be sure to check out the views of others, including Gordon Smith, Dan Solove, Brad Wendel, and various posters at Prawfsblawg (and these link to other helpful comments).

My suggestions reflect what I have seen and heard during the interview process over the years and are consistent with what I have heard from others. Oh, yeah, here are the disclaimers: the interview process is important, but only one small piece of the overall puzzle; my general comments do not account for individual variations in institutions and areas of substantive expertise; because the market is competitive, idiosyncratic, and otherwise imperfect, it is unpredictable; and my evidence is purely anecdotal. But this advice is free. . . .

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Hewlett-Packard, Privacy, and Consent

hewlett-packard.jpgThe recent scandal at Hewlett-Packard has had remarkable staying power. Like most others, I was taken aback by the investigatory methods HP officials used to find the source of boardroom leaks. They crossed the line, certainly as a normative matter, and, if the California indictments are any indication, as a legal one too.

Now let’s add a twist: What if members of HP’s Board of Directors had agreed in advance to be spied on? Say they had agreed when they were named to the board that HP could conduct unannounced investigations and surveillance of their personal contacts and communications – including access to personal phone and other records – if necessary to protect firm interests. And suppose this consent was “narrowly tailored” in the sense that such an investigation would occur only after HP officials determined that there had been a leak, it most likely had originated with a board member, and further leaks would potentially harm the legitimate interests of the corporation. I wonder whether such prior consent would change many individuals’ views of at least some of HP’s actions.

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Corporate Internal Affairs and the Constitution

Many thanks to Dan and the others at Co-Op for inviting me to visit for a few weeks.

Along with most everyone else, I have been waiting for months to see which cases the Supreme Court would review. One I have been watching is Moores v. Friese, No. 05-1590, a matter that has intrigued others, including Christine Hurt and Larry Ribstein.

Well, today the new term begins and . . . petition denied. Fair enough, but there is still a story here.

The case is a suit by a litigation trustee of Peregrine Systems, a Delaware corporation based in California, against various insiders under a California insider trading statute that allows the issuer to sue insiders and potentially recover treble damages. A central issue is whether the California provision applies because, under the “internal affairs doctrine,” the law of the state of incorporation normally governs internal conflicts among a corporation’s shareholders, directors, and officers. The California Court of Appeals, 36 Cal. Rptr. 3d 558 (Ct. App. 2005), reinstated these claims after concluding that this provision does not address internal affairs because it is more akin to blue sky (securities market) regulation. The California Supreme Court denied review.

The contours of the internal affairs doctrine under California law is fascinating stuff, but this is no reason for the U.S. Supreme Court to get involved. That is, of course, unless (1) this insider trading provision necessarily falls within the doctrine, and (2) California’s adherence to it is constitutionally mandated under the dormant commerce clause or due process clause. The cert petition presented this theory, and it was endorsed in an amici curiae brief filed by the U.S. Chamber of Commerce and others.

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