Archive for the ‘Corporate Finance’ Category
UCLA Law Review Vol. 61, Discourse
posted by UCLA Law Review
Volume 61, Discourse
Discourse
| The New Investor Cliffhanger | Stephen M. Bainbridge | 2 |
| 2013 William Rutter Award Acceptance Speech | Patrick D. Goodman | 12 |
May 25, 2013 at 2:36 am
Posted in: Corporate Finance, Current Events, Education, Financial Institutions, Law Rev (UCLA), Technology
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Debating “The Shareholder Value Myth”
posted by Kelli Alces
Many thanks to Larry and the Concurring Opinions folks for inviting me to blog this month. This is my first time blogging and I’m glad to finally try it out.
On Wednesday, I attended an event promoting Lynn Stout’s book The Shareholder Value Myth, sponsored by the Federalist Society and the American Enterprise Institute. The event was structured as a debate of Stout’s thesis with Jonathan Macey (who wrote this review of the book) taking the opposing position. In her book, Stout argued that the widely accepted norm that corporations are owned by shareholders and exist to maximize shareholder wealth is a destructive myth. Instead, Stout claimed, corporations own themselves and in running corporations, managers can and should pursue any lawful purpose.
It is a real credit to Lynn that there was such a lively, thought-provoking debate about the topic. That corporate managers have an obligation to work on behalf of shareholders to maximize shareholder wealth may be the most basic tenet of corporate law and policy. Options theory aside, many think of shareholders as the “owners” of the corporation and even those who question whether shareholders technically own the corporation do not doubt that the corporation should be operated in such a way as to maximize shareholder value. This unwritten “norm” has dominated corporate law, policy, scholarship, and, indeed, management for a long time (for precisely how long, Stout and Macey disagreed). It is extremely impressive that Stout has been able to provoke a debate about the viability of this fundamental norm.
Wednesday’s debate was the second time I’d seen Stout present at a Federalist Society event. Both times, she began her presentation by arguing that hers was the truly conservative position. It seems an unlikely claim that surprises the audience given what her conclusions are, but I think it highlights what Stout does so well – she reaches her audience with their priors in mind in order to really draw them into her ideas where they might be tempted to dismiss her arguments out of hand. Her presentation was not about good corporate behavior or environmentalism, themes she touched upon in the book, but rather about how debunking the shareholder value myth would allow corporate law to favor state law over federal regulation, to prefer common law rules to statutory regulation, to enhance private ordering, and to honor the lessons of history.
May 3, 2013 at 3:48 pm
Posted in: Corporate Finance, Corporate Law, Uncategorized
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Today’s Stock Market Bubble: Mr. Market Is Alive and Still Unwell
posted by Lawrence Cunningham
The stock market rallies while recession continues to plague America. Chief executives worry, companies hoard cash, uncertainty haunts our banking system. Gas prices are up, GDP growth is down, unemployment is up, government debt and size are up and political leaders do not show the ability to come to grips with any of it.
Yet the Dow Jones Industrial Average, heading for 15,0000, exceeds levels not seen since October 2007, a few months before the current crisis showed up. Believers in the efficiency of stock markets will take this as a sign of good times ahead, believing that markets reveal better than anything else the truth about business fundamentals. Skeptics will plan to cite this as the first sign of a bubble. Which view is the more plausible?
Believers in stock market efficiency buy the revolutionary ideas, hatched during the past 50 years, called modern finance theory. This elaborate theory boils down to the notion that the best estimate of the value of a stock is its prevailing market price. The practical implication, of course, is that it is a waste of time to study individual investment opportunities in public securities. According to this view, you will do better by randomly selecting a group of stocks for a portfolio by throwing darts at the stock tables than by thinking about whether individual investment opportunities make sense.
Reverence for these ideas is not limited to ivory tower academics, but became standard dogma throughout financial America, from Wall Street to Main Street. Many professionals still believe that stock market prices always accurately reflect fundamental values, that the only risk that matters is the volatility of prices, and that the best way to manage that risk is to invest in a diversified group of stocks.
But a distinguished line of investors stretching back to Ben Graham and forward to Warren Buffett challenges such dogma by logic and experience. Graham preached, and Buffett has successfully practiced, a different approach. Graham, who taught at Columbia Business School in the 1950s and ran an investment partnership, wrote a number of classic works, including The Intelligent Investor. There Graham argued that price is what you pay and value is what you get. These two things are rarely identical, but most people rarely notice any difference, he believed.
April 19, 2013 at 11:56 am
Posted in: Corporate Finance
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Call for Papers: National Business Law Scholars Conference
posted by Lawrence Cunningham
I am delighted to pass along the following notice from the organizers of the National Business Law Scholars Conference. I’m also honored to report that they have asked me to deliver the keynote at this year’s conference, and I look forward to doing so.
Deadline Extended to May 31
We have recei
ved an enthusiastic response to the Call for Papers for the National Business Law Scholars Conference, scheduled for June 12-13, at The Ohio State University School of Law. We will have additional openings for anyone who would like to make a presentation but has not yet responded. Thus, we have extended the deadline to MAY 31st. See the Call for Papers, re-posted below with the extended deadline date, for details on how to submit:
National Business Law Scholars Conference: Call-for-Papers
The National Business Law Scholars Conference (NBLSC) will be held on Wednesday, June 12th and Thursday, June 13th at The Ohio State University Michael E. Moritz College of Law in Columbus, Ohio. This is the fourth annual meeting of the NBLSC, a conference which annually draws together dozens of legal scholars from across the United States and around the world. We welcome all on-topic submissions and will attempt to provide the opportunity for everyone to actively participate. Junior scholars and those considering entering the legal academy are especially encouraged to participate.
To submit a presentation, email Professor Eric C. Chaffee at echaffee1@udayton.edu with an abstract or paper by MAY 31, 2013. Please title the email “NBLSC Submission – {Name}”. If you would like to attend, but not present, email Professor Chaffee with an email entitled “NBLSC Attendance”. Please specify in your email whether you are willing to serve as a commentator or moderator. A conference schedule will be circulated in late May.
Conference Organizers:
Barbara Black (University of Cincinnati)
Eric C. Chaffee (University of Dayton)
Steven M. Davidoff (The Ohio State University)
April 17, 2013 at 9:56 am
Posted in: Accounting, Administrative Announcements, Conferences, Corporate Finance, Corporate Law, Securities, Securities Regulation
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Theseus’s Paradox – Form and Substance in Evolving Capital Markets
posted by Charles Whitehead
Living in Beijing underscores the importance of change and adaptation. There is a noticeable drop in the amount of processed sugar in foods, reflecting local (and healthier) tastes. Virtually every restaurant delivers, including McDonald’s (which raises the question, if you’re going to order delivery, why McDonald’s?). And, most particularly, I recently joined the thousands of Chinese students and pensioners who weave in-and-around traffic on electric battery-powered mopeds. It is a great way to get around the city (even if some of the pensioners have a tendency to cut you off).
The same focus on change arises in the capital markets. A person who owns or sells a security is presumed to own or sell the financial risk of that security. By selling shares, for example, the costs and benefits of those shares—the rise or fall in share price—are understood to run with the instruments being sold. Changes in the capital markets, however, have begun to call that presumption into question. Increasingly, market participants can use new trading methods to sell instruments to one person, but transfer their financial risk to someone else. The result is greater complexity and new challenges to regulation and the regulators.
To what extent should the securities laws adjust to reflect those changes? The answer largely turns on the question of “identity.” Moving from modern-day Chinato to ancient Greece, the Greek historian Plutarch identified the question in his story of Theseus, the mythical king of Athens. For many, Theseus is known for slaying the Minotaur, a half-man, half-bull monster that devoured children sent to Cretein tribute to King Minos. According to Plutarch, after Theseus returned to Greece, his boat remained in Athensharbor for centuries as a memorial to his bravery.
April 17, 2013 at 7:47 am
Posted in: Corporate Finance, International & Comparative Law, Legal Theory, Securities
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The Essays of Warren Buffett: Third Edition
posted by Lawrence Cunningham
It’s a pleasure to report that this weekend marks the release of the third edition of The Essays of Warren Buffett: Lessons for Corporate America. Originally published as the centerpiece of a symposium sponsored by Cardozo Law Review in 1997 at which Warren Buffett debated 20-some law professors (listed after the jump) on every important issue facing corporate America, this book is a thematic arrangement of Buffett’s annual letters to the shareholders of Berkshire Hathaway from 1977 to the present.
As I explain in my Introduction, the central theme uniting Buffett’s essays is that the principles of fundamental business analysis, first formulated by his teachers Ben Graham and David Dodd, should guide investment practice. Linked to that theme are management principles that define the proper role of corporate managers as the stewards of invested capital, and the proper role of shareholders as the suppliers and owners of capital. Radiating from these main themes are practical and sensible lessons on the entire range of important business issues, from accounting to mergers to valuation.
The book has particular significance for devotees of behavioral economics who are skeptical of strong claims about market efficiency, as the book provides both the philosophical architecture of value investing and the intellectual defense of that practice, which distinguishes sharply between price and value.
UPDATE: Read the rest of this post »
March 14, 2013 at 6:00 am
Posted in: Accounting, Book Reviews, Corporate Finance, Corporate Law
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The New York Fed and the Rule of Law
posted by Lawrence Cunningham
In Sunday’s New York Times, business columnist Gretchen Morgenson reported a piece of investigative journalism that is transcendently important, but whose complexity may have obscured that. It concerns secret dealings of the Federal Reserve Bank of New York. Morgenson explains the importance of her topic in terms of the threatened erosion of social trust that can occur when central banking officials engage in dubious behavior.
I would add that her topic, dubious dealings of central bankers, is of vital importance because those who run the FRBNY have enormous power in the field of banking regulation. They oversee the largest banks and provide direct input into the Financial Stability Oversight Council, the interagency government organization created by the Dodd Frank Act to oversee the financial system. It is empowered to intervene when the next financial crisis occurs, which could be later this year or five years or ten or what have you.
As with the financial crisis of 2008, these government actors, dominated by the FRBNY, will call all the shots about which institutions to save, sell or seize, on the one hand, and which creditors and shareholders to pay, wipe out or shortchange, on the other. How they exercise these powers is thus a matter of the utmost national interest. How they exercised them in the 2008 crisis remains both obscure and questionable. Read the rest of this post »
March 5, 2013 at 10:52 am
Posted in: Administrative Law, Bankruptcy, Corporate Finance, Current Events, Financial Institutions
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Word Clouds of Buffett’s Letters
posted by Lawrence Cunningham
Here are word clouds I created to visualize words Warren Buffett used most frequently in two of his famous letters to Berkshire Hathaway shareholders, the first based on his newest letter (2012, released Friday) and the second based on his oldest (1977).
The word “billion” has (inevitably) replaced the word “million;” Charlie (Munger) has assumed a preeminent position; acquisitions matter greatly now but not then; insurance float matters more in 2012 while insurance underwriting mattered more in 1977; BNSF and GEICO are big today, along with newspapers, not the textile company or trading stamp business as was true back then. Quite a few other changes should be obvious as well. Among the similarities: the centrality of earnings to discussions of corporate performance (particularly as compared to cash flow or dividends).
Buffett 2012 Letter Word Cloud
Buffett 1977 Letter Word Cloud
March 3, 2013 at 3:19 pm
Posted in: Corporate Finance, Corporate Law, Current Events
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Volume 60, Issue 3 (February 2013)
posted by UCLA Law Review
Volume 60, Issue 3 (February 2013)
Articles
| Urban Bias, Rural Sexual Minorities, and the Courts | Luke A. Boso | 562 |
| Private Equity and Executive Compensation | Robert J. Jackson, Jr. | 638 |
| The New Investor | Tom C.W. Lin | 678 |
Comments
| The Fate of the Collateral Source Rule After Healthcare Reform | Ann S. Levin | 736 |
| A New Strategy for Neutralizing the Gay Panic Defense at Trial: Lessons From the Lawrence King Case | David Alan Perkiss | 778 |
February 27, 2013 at 10:25 pm
Posted in: Corporate Finance, Corporate Law, Criminal Law, Health Law, Law Rev (UCLA), LGBT, Race
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Buffett + Heinz = Classic Application of Classic Lessons
posted by Lawrence Cunningham
Today’s report that Berkshire Hathaway, Warren Buffett’s company, along with 3G, will acquire Heinz, the venerable food products concern, reflects the acquisition criteria that Buffett has articulated for 20 years. Essays explaining and outlining those criteria have appeared in my book, The Essays of Warren Buffett: Lessons for Corporate America, since its first publication in 1997. Some excerpts follow (as they will appear on pages 211-214 of the forthcoming third edition):
We believe most deals do damage to the shareholders of the acquiring company. Too often, the words from HMS Pinafore apply: “Things are seldom what they seem, skim milk masquerades as cream.” Specifically, sellers and their representatives invariably present financial projections having more entertainment value than educational value. In the production of rosy scenarios, Wall Street can hold its own against Washington.
In any case, why potential buyers even look at projections prepared by sellers baffles me. We never give them a glance, but instead keep in mind the story of the man with an ailing horse. Visiting the vet, he said: “Can you help me? Sometimes my horse walks just fine and sometimes he limps.” The vet’s reply was pointed: “No problem—when he’s walking fine, sell him.” In the world of mergers and acquisitions, that horse would be peddled as Secretariat.
At Berkshire, we have all the difficulties in perceiving the future that other acquisition-minded companies do. Like [them] also, we face the inherent problem that the seller of a business practically always knows far more about it than the buyer and also picks the time of sale—a time when the business is likely to be walking “just fine.” Read the rest of this post »
February 15, 2013 at 8:40 am
Posted in: Corporate Finance, Current Events
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NBLSC Call-for-Papers
posted by Lawrence Cunningham
From our friends sponsoring the National Business Law Scholars Conference (NBLSC), scholars please take note of the following Call-for-Papers:
The NBLSC will be held on Wednesday, June 12th and Thursday, June 13th at The Ohio State University Michael E. Moritz College of Law in Columbus, Ohio. This is the fourth annual meeting of the NBLSC, a conference which annually draws together dozens of legal scholars from across the United States and around the world.
All on-topic submissions are welcome and the sponsors will attempt to provide the opportunity for everyone to actively participate. Junior scholars and those considering entering the legal academy are especially encouraged to participate.
To submit a presentation, email Professor Eric C. Chaffee at echaffee1@udayton.edu with an abstract or paper by April 15, 2013. Please title the email “NBLSC Submission – {Name}”. If you would like to attend, but not present, email Professor Chaffee with an email entitled “NBLSC Attendance”. Please specify in your email whether you are willing to serve as a commentator or moderator. A conference schedule will be circulated in late May.
Conference Organizers: Barbara Black (University of Cincinnati); Eric C. Chaffee (University of Dayton); Steven M. Davidoff (The Ohio State University).
December 11, 2012 at 12:01 pm
Posted in: Administrative Announcements, Corporate Finance, Corporate Law, Law School (Scholarship)
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Young Business Law Scholar Call for Papers
posted by Lawrence Cunningham
The Center for Law, Economics & Finance (C-LEAF) at The George Washington University Law School has announced its third annual Junior Faculty Business and Financial Law Workshop and Junior Faculty Scholarship Prizes. This year’s Workshop will be held on April 5-6, 2013 at GW in Washington.
The Workshop supports and recognizes the work of young legal scholars in accounting, banking, bankruptcy, corporations, economics, finance and securities, while promoting interaction among them and selected senior faculty. By providing a forum for the exchange of creative ideas in these areas, C-LEAF aims to encourage new and innovative scholarship.
I’ve participated in both previous Workshops and can attest that participants have benefited from the exchange of ideas and getting acquiainted with newer scholars. About 100 papers are submitted and the C-LEAF faculty select about 10 for presentaiton. At the Workshop, senior scholars comment on each paper, followed by a general discussion.
Three papers receive Junior Faculty Scholarship Prizes of $3,000, $2,000, and $1,000, respectively. All prize winners will be invited to become Fellows of C-LEAF. C-LEAF makes no publication commitment, but chosen papers are featured on its website as part of the C-LEAF Working Paper series. Read the rest of this post »
September 11, 2012 at 8:06 am
Posted in: Accounting, Administrative Announcements, Corporate Finance, Corporate Law, Financial Institutions
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Amazing New Corporate Law & Econ Book
posted by Lawrence Cunningham
If you are interested in corporate law, especially economic analysis of it, you likely will enjoy an impressive new book collecting original pieces by 30 prominent corporate law scholars. Edited by Claire Hill and Brett McDonnell of the University of Minnesota, the book canvases every important topic in corporate law.
After an overview that traces the history of the economic analysis of corporate law, the book addresses corporate constituencies, governance, gatekeepers, government oversight and a few other hot topics not classified.
Within constituencies, topics consider the directors’ role, the roles of other corporate actors, including shareholders, creditors, employees, and other stakeholders along with broader notions of the public interest.
Internal governance looks at fiduciary duties, shareholder litigation, outside directors, shareholder activism and executive compensation.
Gatekeeper pieces address lawyers and auditors, as well as rating agencies, research analysts, D&O insurers and investment banks.
Jurisdiction looks at both domestic federalism as well as comparative perspective.
Unclassified topics address self-dealing, behavioral economics, and market efficiency.
The scholars are the following professors:
Ahdieh, Atanasov, Bainbridge, Black, Blair, Bodie, Ciccotello, Clarke, Cunningham, Darbellay, Davidoff, Fairfax, Ferri, Fisch, Frankel, Gilson, Griffith, Hill, Kraakman, Langevoort, Lee, McDonnell, Painter, Partnoy, Smith, Thomas, Thompson, Walker, and Whitehead.
The table of contents to this impressive volume follows. Get it while it’s hot!!
August 30, 2012 at 5:02 pm
Posted in: Book Reviews, Corporate Finance, Corporate Law
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The Corporate University: Recent Developments
posted by Frank Pasquale
There are many memorable images in Rob Nixon’s book Slow Violence and the Environmentalism of the Poor. Describing the “risk relocation” that is a prime function of the global economy, he offers this vision of Nigeria:
Often, as a community contends with attritional assaults on its ecological networks, it isn’t granted equitable access (or any access at all) to modernity’s basic infrastructural networks . . . . Like those Niger Delta villages where children for decades had no access to electricity for studying at night, while above their communities Shell’s gas flares created toxic nocturnal illumination. Too dark for education, too bright for sleep: modernity’s false dawn. (42)
Exxon is now “a corporation so large and powerful — operating in some 200 nations and territories — that it really has its own foreign policy.” As Steve Coll observes, the US “gives Chad only a few millions dollars a year in aid, while Exxon’s taxes and royalties can be worth as much as $500 million.” Had Exxon directed only 10% of its 2008 profits to political expenditures that year, it would have spent “more than every candidate for President and every candidate for Senate spent at the last election.” In a surprising number of contexts, corporations enjoy far more freedom of action, and secrecy, than states.
Is it any wonder, then, that universities are beginning to shift allegiance, to pursue the agenda of corporate donors instead of public values? Conferences like EduFactory have chronicled the long history of the corporate university; Philip Mirowski has critiqued it in books and edited collections. But it feels like we are on the verge of a phase change, an irreversible acceleration of dynamics once muted and slowed by the ancient cultural identity of the university. Consider these developments:
1) Martha McCluskey has described “economics scholars simultaneously acting as academic experts on the public interest and as sellers of this expertise to the highest private bidder.” She has chronicled a number of troubling aspects of a recent report on fracking issued by the “Shale Resources and Society Institute” (SRSI) of SUNY Buffalo:
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June 17, 2012 at 10:32 am
Posted in: Corporate Finance, Current Events, Economic Analysis of Law, Education
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Stanford Law Review, 64.4 (2012)
posted by Stanford Law Review
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Volume 64 • Issue 4 • April 2012 |
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Articles “They Saw a Protest”: Constitutional Design in the Ancient World The Copyright-Innovation Tradeoff: Notes Derivatives Clearinghouses and Systemic Risk: |
May 23, 2012 at 8:35 pm
Posted in: Behavioral Law and Economics, Constitutional Law, Corporate Finance, Courts, Economic Analysis of Law, Financial Institutions, First Amendment, Innovation, Intellectual Property, Law Rev (Stanford), Law Rev Contents
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Stanford Law Review, 64.3 (2012)
posted by Stanford Law Review
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Volume 64 • Issue 3 • March 2012 |
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Articles From Multiculturalism to Technique: Fragmentation Nodes: Note Comment |
April 20, 2012 at 1:36 pm
Posted in: Constitutional Law, Corporate Finance, Courts, Criminal Law, Criminal Procedure, Culture, Current Events, Financial Institutions, Law Rev (Stanford), Law Rev Contents, Tort Law
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The Material Foundations of Corporate Culture: Goldman’s Lessons for Silicon Valley
posted by Frank Pasquale
Two resignation letters rocked Wall Street and Silicon Valley this week. Greg Smith elegized a once-great Goldman Sachs, now reduced to “ripping eyeballs out” of clients. (The industry sure has changed since the 90s, when the goal was to rip off the whole face of the client. I guess Dodd-Frank is working.)
On the West Coast, James Whittaker explains “Why I Left Google.” His complaints are more measured than Smith’s: “The old Google made a fortune on ads because they had good content. It was like TV used to be: make the best show and you get the most ad revenue from commercials. The new Google seems more focused on the commercials themselves.” Whittaker laments that the company has become obsessed, Ahab-like, with the social web’s whale, Facebook.
On one level, it’s not fair to compare the companies: the engineers at Google have contributed far more to society than finance’s “money-massagers.” Goldman represents the terminal phase of a liquidationist capitalism unmoored from social value. But its culture did not rot overnight. Rather, legal and material factors accelerated decay. Silicon Valley’s managers and regulators should take notice: the same process could happen there.
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March 15, 2012 at 6:18 pm
Posted in: Corporate Finance, Corporate Law, Financial Institutions, Google & Search Engines, Law and Inequality, Privacy
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Stanford Law Review, 64.2 (2012)
posted by Stanford Law Review
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Volume 64 • Issue 2 • February 2012 |
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Articles Incriminating Thoughts Elective Shareholder Liability Note Comment |
March 6, 2012 at 3:51 am
Posted in: Civil Procedure, Constitutional Law, Corporate Finance, Corporate Law, Courts, Criminal Law, Criminal Procedure, Law Rev (Stanford), Law Rev Contents, Privacy (Law Enforcement), Technology
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Veil Piercing Is Probably Not the Most Litigated Issue in Corporate Law
posted by Dave Hoffman
I was reading through Bob Thompson’s excellent year-in-review list of corporate law scholarship, and was struck the number of articles discussing veil piercing. With a few exceptions, each of those articles claims, based on Bob’s opus, that veil piercing is the “most litigated issue in corporate law.” Heck, even Wikipedia’s page on the veil makes that assertion.
In Disputing Limited Liability,* Christy Boyd and I disagree that veil piercing is really dominates corporate litigation. As we noted:
“[Robert] Thompson [in his Cornell Law Review Article] compared the incidence of the term “veil piercing” in opinions to the incidence of terms like “hostile takeover,” declining to broaden the search to more common terms like “fiduciary duty” Id. at 1036 n.1. But, as this Article will show, “litigated” cases begin with complaints. Westlaw‘s pleadings database contains 2071 federal and state complaints potentially making veil piercing allegations between 2000 and 2005. A similar search for “(loyalty disloyalty) /s (director* officer)” returned 2405 complaints.”
Now, as Bob kindly wrote me in response, our argument is somewhat unfair. After all,we’re counting different things, at different times, before different courts. But still, I don’t think there’s much evidence at all that the veil is really the most litigated issue in cases that generally deal with corporate law problems. (I say “generally” because a truly narrow definition of “corporate law” would, in my view, be limited to problems that the internal affairs doctrine covers, and in some states would consequently would exclude veil piercing altogether). On the other hand, I don’t think Christy and I have made the case that classic loyalty claims are the most commonly litigated issue either. The problem of generalizing to find the “most litigated issue” turns out to be complex.
The problem, as always, turns on sample selection. Most state court dockets are plainly inaccessible - and state court opinions are collected in a much more biased way than federal opinions. As a Westlaw representative told me in 2009, they tend to collect non-Supreme state court opinions from urban centers, focusing on material that they believe will be of interest to lawyers, or when the court clerk has brought an opinion to their attention. The result is that our understanding of the practice of an individual state’s corporate law are biased by the black-sheep opinions we can see. Why would we think that drawing any inferences from that dataset could let us answer the question of “what is the most litigated corporate law issue”? I’d prefer to trust practice bulletins – trying to track what corporate lawyers believe to be common problems. In those materials, veil piercing is relatively rarely discussed. However, since practice bulletins may be dominated by the defense bar, one has to account for the fact that most veil piercing cases are actually brought against very small companies, who might not be represented, and certainly are unlikely to be represented by an attorney with sufficient time on her hands to contribute to a Bar newsletter. Thus, in general I think we can learn very little from veil piercing’s relative presence in opinions, or relative absence in the Bar literature.
An exception is Delaware, which has a robust docketing system, a court practice of writing opinions in almost every case, and thorough Westlaw coverage of both the Chancery’s and Supreme Court’s outputs. Now I’m not the most attentive reader of that stream of data, but my sense is that corporate litigation in Delaware is heavily biased toward fiduciary & M&A claims, while veil piercing almost never comes up. Here again we have to be careful about generalizing: Delaware, being notoriously hostile to veil piercing allegations, probably isn’t the place we’d want to go to know how most state courts act. But if Delaware & Nevada host the majority of corporations in this country which will generate corporate litigation (arguably, they do), and if both jurisdictions are veil friendly, I don’t see how it’s possible to conclude that veil piercing litigation is all that common. Or to put it another way: we have no idea what the most common litigated corporate law issue is, but it probably is not veil piercing.
Veil piercing cases are, however, highly colorful, which may explain the doctrine’s continuing attraction for scholars.
[Update: Steve Bainbridge writes about this post "A better question might be "who gives a sh*t?". Nice. Very nice. I suppose I care, mildly, because it might be that attention better spent on other issues in corporate law, like someone's ... nontraditional ... theories of director primacy, has instead been diverted to veil piercing on the theory that piercing is more practically important than it is. And because if if you search the web, you'll find dozens of companies puffing this exact claim to sell you their incorporation products and advice. Or it might be that the question is worth asking simply for love of the game.]
* DLL happens to be on Bob’s corporate law articles of 2011 list. In case you were wondering if I am trying to bias the electoral pool by blogging about the article, shame on you. I would never stoop so low.
February 15, 2012 at 1:55 pm
Posted in: Corporate Finance, Corporate Law
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Does the Secured Transactions Course Make Sense?
posted by Dave Hoffman
I’ve never taught Secured Transactions, so I’ll start by saying that the following is purely speculative and subject to correction.
We had a job candidate come through at some point this Fall who generally is interested in the field of commercial law. That person mentioned in passing that although they were more than willing to teach the traditional secured transactions course, in their opinion it wasn’t well structured. Why? Not, as the navel-gazer might imagine, because the field of commercial law is supposedly intellectually dead. Rather because the traditional secured transaction course is too narrowly conceived — it usually is limited in coverage to personal property security interests under Article 9. But many security interests that matter to lawyers aren’t held on movable property. Since secured is ordinarily the foundational course for the commercial curriculum, students are left starting on too narrow a footing in understanding bankruptcy and bank regulation. It’s even worse than having a corporations course that excludes LLCs. Because of its technicality, ST is traditionally so difficult to teach that many students are turned off to the idea of commercial law practice at all.
Again, I don’t know much about this area of law. I never took ST in law school, I haven’t taught it, and (worse) I haven’t even read a ST syllabus at my current institution. But it struck me as an interesting thought, at least worth airing. It’s related to concerns I have about the general corporate curriculum — is “corporations” really a subject that ought to be taught in a single course, or is it really a merger of too many (or too few) legal principles that have glommed together over time. It’s also related to concerns that one might have about continuing to use the increasingly outdated, purportedly uniform, UCC to teach when States’ adopted versions are moving ever-further-away from that ideal.
December 2, 2011 at 11:54 pm
Posted in: Bankruptcy, Contract Law & Beyond, Corporate Finance, Corporate Law, Law School (Teaching)
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