Rasmussen Reports has the breakdown.
Rasmussen Reports has the breakdown.
An important new paper argues that:
The prerogative of boards of directors to nominate the members of the board for election by the shareholders is now challenged by institutional investors determined to acquire the right, under certain conditions, to nominate their own candidates. This challenge to a board prerogative is called proxy access by shareholders to the director nomination process.
As a result of amendments to the existing regulations in the United States, there has been a flood of proposals from shareholders to institute rules granting them access to the nominating process. In Canada, a form of access is already provided for by the Canadian Business Corporations Act (CBCA), but the conditions of this access are not perceived – by institutional investors, in particular – as sufficiently congenial because, among other factors, of the differential treatment for candidates put forward by shareholders.
Several plausible arguments may be marshalled in support of access to the nominating process by shareholders, such as the enhanced legitimacy of the directors sitting on the board. However, this proposal also raises a host of issues related to the logistics of its application and the potential adverse effects on governance and board dynamics. After an in depth analysis of the arguments for and against proxy access, IGOPP concludes that any process that would grant shareholders the right to put forward candidates for election to the board, whether such a process arises from new regulations or spontaneous proposals from shareholders, is unwise and likely to create serious dysfunctions in corporate governance.
We do recommend however that the nomination committee of the board implement a robust consultation process with the corporation’s significant shareholders and report in the annual Management Information Circular on the process and criteria adopted for nominating any new director.
Given the popularity of proxy access proposals among institutional shareholders, this policy position includes an appendix outlining the typical features, conditions and mechanics proposed for this shareholder access to the director nominating process. All these aspects of the proxy access initiative raise difficult questions to which we unfortunately find few satisfactory answers.
Allaire, Yvan and Dauphin, Francois, Who Should Pick Board Members? Proxy Access by Shareholders to the Director Nomination Process (October 30, 2015). Available at SSRN: http://ssrn.com/abstract=2685790
Francis S. Levien, a New York lawyer-industrialist who specialized in the creation of corporate conglomerates, died on Thursday at Mount Sinai Hospital. A resident of Palm Beach, Fla., he was 90 and had lived in Manhattan and Stamford, Conn.
Mr. Levien (pronounced leh-vee-EN) struck it rich in the late 1930's, when he and a partner won a Delaware case that resulted in the forming of what is now Pepsico.
He went on to become a wealthy industrialist. But the interesting thing is that his firm Levien, Singer & Neuburger was counsel for the plaintiff in Guth v. Loft, Inc., the classic corporate opportunity case.
I've said it time and time again: this PC crap has gotten way out of hand. But now even a liberal talking head as far left as Chait gets it:
That these activists have been able to prevail, even in the face of frequently harsh national publicity highlighting the blunt illiberalism of their methods, confirms that these incidents reflect something deeper than a series of one-off episodes. They are carrying out the ideals of a movement that regards the delegitimization of dissent as a first-order goal. People on the left need to stop evading the question of political correctness — by laughing it off as college goofs, or interrogating the motives of p.c. critics, or ignoring it — and make a decision on whether they agree with it.
Go read whole thing.
What can a shareholder do if she disagrees with a corporate expenditure, whether on a particular busi- ness strategy or in support of a political position? The short answer is very little. Shareholders do not typically have any right to control or direct the use of capital they have invested in a corporation, whether publicly or privately owned. ...
Expenditures by corporations on politics do not typically generate heightened scrutiny, and shareholders cannot use derivative lawsuits to override decisions about such expenditures by boards. These facts about corporate law hold true even if (in an unrealistic hypothetical) shareholders were uniform in their political views, and uniformly opposed an expenditure approved by the corporate board. These facts are unquestionably true in a more typical situation where shareholders disagree among themselves about politics. Nor do shareholders have indirect means to accomplish this goal—such as selling shares or using votes—as explained next.
They go on to elaborate the point for 39 pages.
I agree with their characterization of corporate power. After all, who developed the director primacy model? (Well, Mike Dooley did, but that's beside the point.) So I'm glad to see such a select group of my fellow corporate law academics at least endorsing director primacy as a positive account of corporate law.
But where does that leave us? After all, their analysis of the limited powers of shareholders applies with equal force to virtually everything the board of directors do. (See Bainbridge, Stephen M., The Case for Limited Shareholder Voting Rights. UCLA Law Review, Vol. 53, pp. 601-636, 2006; UCLA School of Law, Law-Econ Research Paper No. 06-07. Available at SSRN: http://ssrn.com/abstract=887789.)
In fact, at this point, the amici's argument stops. On its face, the brief is mostly descriptive with the normative argument limited to the claim that "If the Court decides to give union non-members additional rights to refuse to contribute to union speech, the Court should not act on the erroneous belief that this will accord union non-members the same rights enjoyed by individual investors." (5)
But words have consequences. Normative arguments will be made on the basis of the foundation laid by the brief.
As I see it, there are three normative moves that follow logically from the strong positive account of director primacy offered in the brief. (1) One can accept the normative claims of director primacy, as well as the positive ones, and thus endorse the power of directors to run the corporation's political contributions in the same way they run everything else. See Bainbridge, Stephen M., Director Primacy: The Means and Ends of Corporate Governance (February 2002). UCLA, School of Law Research Paper No. 02-06. Available at SSRN: http://ssrn.com/abstract=300860. Obviously, this is the correct solution to the problem, but I see some names on the list of signatories that would reject this option out of hand.
(2) One can go in the exact opposite direction and endorse an expansive theory of shareholder empowerment that gives shareholders broad powers to overturn board decisions. Some of them already have, of course. Compare, e.g., Bainbridge, Stephen M., Director Primacy and Shareholder Disempowerment. Harvard Law Review, Vol. 119, 2006; UCLA School of Law, Law-Econ Research Paper No. 05-25. Available at SSRN: http://ssrn.com/abstract=808584 with Bebchuk, Lucian A., The Case for Increasing Shareholder Power. Harvard Law Review, Vol. 118, No. 3, pp. 833-914, January 2005; Harvard Law and Economics Discussion Paper No. 500. Available at SSRN: http://ssrn.com/abstract=387940. IMHO, I'm right and they're wrong, although YMMV.
(3) One can generally accept director primacy as a normative matter but can try to argue that political spending is special and that therefore it needs special rules. But I don't buy it:
Having said that, I am nevertheless willing to assume most academics that believe political contributions are special also believe there is there is a neutral principles-based account that supports their view. But even if that's true, their arguments will be used by those who think political contributions are special because they believe that corporate political contributions favor one political party over the other, while those folks support the purportedly disfavored party.
In sum, this is not some ideologically neutral academic debate being discussed by corporate law technocrats. It has implications for shareholder activism, which itself is an increasingly politicized phenomenon. More important, the academic debate is inextricably intertwined with the left's effort to defund the right. Those of us who participate in this debate as academics cannot close our eyes to this basic fact.
As both a proponent of director primacy and a man of the right, I thus come down against treating politics as special. As an academic, I'd like to see my colleagues be equally forthright about their take on the politics of the issue.
Update: I suppose that there is a non-corporate governance move available, as well: One can argue that the law should treat union members and shareholders the same. But I'm not convinced that shareholders and union members are similarly situated. On this issue, however, I'm going to tag in folks like Brad Smith and Paul Atkins, who know more about the law governing unions than yours truly.
Update 2: One of the brief authors pointed out that "You might acknowledge that corporate law academics might agree on the descriptive points in the brief while disagreeing about whether those facts are good or bad from a normative perspective, and so to say we should be 'forthright' about those normative views would be impossible, yet the descriptive facts are important — and something SCOTUS has consistently gotten wrong."
Fair enough. But looking beyond this brief to the larger debate in the academic literature, I still think scholars on both sides of the issue need to acknowledge that their arguments have important real world consequences for the functioning of our political system and be transparent about whether they have skin in the political game.
Update 3: I've been going back and forth with the professor mention in the previous update. My last word on the subject was:
Deep purple despite having thrown a substantial amount of light sediment (decanting required). Nice berry bouquet although not terribly complex. On the palate, lots of intense berry flavor associations--raspberry, blackberry, blueberry, as well as star anise and a dash of pepper. Well balanced with smooth tannins. Likely will improve for a few more years. Sadly, however, this was my last bottle. Grade: 88
I marinated/brined a pork tenderloin for 8 hours in a mixture of 1 cup Wild Turkey bourbon, 2 tablespoons sherry vinegar, 2 tablespoons Stubbs original BBQ sauce, 1 ½ tablespoons kosher salt, ¼ cup olive oil, 1 tablespoon Lea & Perrins Worcestershire sauce, ½ tablespoon smoked paprika, ½ tablespoon Cajun spice, and 1 teaspoon @ garlic and onion powder. I roasted the tenderloin at 425° for 15 minutes, turning once, and then basted it with Stubbs BBQ sauce several times, while turning it several times for 10 more minutes. Once it hit an internal temperature of 140°, I pulled it from the oven, basted it one last time, and let it rest for 10 minutes. I served it with Zatarain's Dirty Rice to which I had added tomatoes, finely diced carrots, and green onions.
Vanguard, the largest fund family, is beginning to wield that power more aggressively. It has adopted a new approach to push for improvements to compensation practices, board construction, and other corporate issues, says Glenn Booraem, head of its corporate governance efforts.
Vanguard is now sifting through data, looking for companies that don't adhere to mainstream good-governance principles and then pressing the companies about its concerns.
My message to Glenn is: Stop it. Set aside the fact that shareholder activism is bad for corporate governance, the economy, and world peace. I buy index funds precisely because they are PASSIVE! I don't want index funds spending one dime more than necessary. I want my funds to keep costs as low as possible, because the evidence is clear that over time that's the best way to build wealth. So I don't want Vanguard paying multiple analysts 6-figure salaries to look for activism opportunities. If we must have shareholder activism, I want Vanguard to free ride on the efforts of others.
And if this nonsense keeps up, I will vote with my feet.
Fire.org reports that Yale Students Demand Resignations from Faculty Members Over Halloween Email:
Students called for the resignation of Associate Master of Silliman College Erika Christakis after she responded to an email from the school’s Intercultural Affairs Council asking students to be thoughtful about the cultural implications of their Halloween costumes. According to The Washington Post, students are also calling for the resignation of her husband, Master of Silliman College, Nicholas Christakis, who defended her statement. ...
Christakis drew on her experiences as a child development specialist to question whether a university should dictate what students should and shouldn’t wear on Halloween:
I don’t wish to trivialize genuine concerns about cultural and personal representation, and other challenges to our lived experience in a plural community. I know that many decent people have proposed guidelines on Halloween costumes from a spirit of avoiding hurt and offense. I laud those goals, in theory, as most of us do. But in practice, I wonder if we should reflect more transparently, as a community, on the consequences of an institutional (which is to say: bureaucratic and administrative) exercise of implied control over college students.
In addition to expressing concerns about how policing students’ costumes can limit the exercise of imagination, free speech, and free expression, Christakis asked:
Is there no room anymore for a child or young person to be a little bit obnoxious… a little bit inappropriate or provocative or, yes, offensive? American universities were once a safe space not only for maturation but also for a certain regressive, or even transgressive, experience; increasingly, it seems, they have become places of censure and prohibition.
The response to Christakis’ email was explosive. More than 740 Yale undergraduates, graduate students, alumni, faculty, and even students from other universities signed on to an open letter telling Christakis that her “offensive” email invalidates the voices of minority students on campus.
This PC crap is getting out of hand. Some days I want to do something really offensive just to give the PC idiots the finger. But I like my Dean too much to bring that sort of trouble on her head. So I watch what I say. But when I'm ready for retirement, look out....
A friend sent along this email comment:
Grynberg v. Kinder Morgan Energy Partners, L.P. concludes that a Master Limited Partnership, which is a publicly traded type of firm used in the oil and gas business, should be treated for purposes of federal diversity jurisdiction as a collection of individual investors (and "aggregate") rather than as an entity. That may be consistent with legal doctrine in your field but it defies common sense. The court offers the following argument:
"Second, even if we consider the MLP’s characteristics, they do not support treating an MLP like a corporation for diversity jurisdiction. MLPs and corporations are publicly traded, centrally managed, and have freely transferable interests. But the similarities end there. MLPs are formed as unincorporated entities under state law, and Carden reaffirmed the dichotomy between corporations and unincorporated entities."
This certainly deserves the famous observation, "I understand everything but the therefore."
To which I responded: It may be that the common law is an ass, but until UPA (1997) changed the law in this area, partnerships were regarded by PARTNERSHIP LAW itself as an aggregate not an entity. Hence, partnerships have long been viewed as a collection of the partners for purposes of diversity. The rule has been extended to LLCs, by the way:
Notwithstanding LLCs' corporate traits, however, every circuit that has addressed the question treats them like partnerships for the purposes of diversity jurisdiction. See Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114, 120 (4th Cir.2004); GMAC Commercial Credit LLC v. Dillard Dep't Stores, Inc., 357 F.3d 827, 828–29 (8th Cir.2004); Rolling Greens MHP, L.P. v. Comcast SCH Holdings LLC, 374 F.3d 1020, 1022 (11th Cir.2004); Handelsman v. Bedford Village Assocs. Ltd. P'ship, 213 F.3d 48, 51 (2d Cir.2000); Cosgrove v. Bartolotta, 150 F.3d 729, 731 (7th Cir.1998). This treatment accords with the Supreme Court's consistent refusal to extend the corporate citizenship rule to non-corporate entities, including those that share some of the characteristics of corporations. Carden, 494 U.S. at 189, 110 S.Ct. 1015 (treating a limited partnership as having the citizenship of all its members); Great S. Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 456–57, 20 S.Ct. 690, 44 L.Ed. 842 (1900) (refusing to extend the corporate citizenship rule to a “limited partnership association” although it possessed “some of the characteristics of a corporation”).
RUPA adopts the “entity” theory of partnership as opposed to the “aggregate” theory that the UPA espouse[d]. Under the aggregate theory, a partnership is characterized by the collection of its individual members, with the result being that if one of the partners dies or withdraws, the partnership ceases to exist. On the other hand, RUPA's entity theory allows for the partnership to continue even with the departure of a member because it views the partnership as “an entity distinct from its partners.”
Republic Properties Corp. v. Mission W. Properties, LP, 391 Md. 732, 744, 895 A.2d 1006, 1013 (2006). See UPA (1997) Section 201. Partnership as entity: "(a) A partnership is an entity distinct from its partners."
Here at PB.com we oppose divestment campaigns (even in those rare cases when we agree with the proponents about the issue at hand), so we were glad to see our friend Todd Henderson take on the issue in the Chicago student newspaper:
No matter what your views are on the climate change debate, no rational person should support divestment. There is no evidence to demonstrate it will do anything to help the climate, and it will ultimately cost the University hundreds of millions of dollars—Swarthmore estimates it would cost their endowment $200 million over 10 years to divest. This is money that could be spent on research, scholarships, or perhaps best of all for the cause, reducing the University’s carbon footprint.
Here is why divestment won’t work: A central tenet of corporate finance is that demand curves for individual stocks are approximately horizontal. For most things we buy, demand curves slope downward. This means if we demand less, less will be supplied and at lower prices, but stocks are not like other products. The stock price is merely an estimate of the cash flows that ownership of the stock will produce in the future, and therefore is not determined by a “demand” for the stock. Unless the sale of stock conveys information to the market about the future cash flows, no individual sale can move the price.
If the Office of Investments, which manages the University’s nearly $9 billion endowment, sells all of the shares it owns in ExxonMobil, the stock price of ExxonMobil should not change. Others will stand ready to buy the shares at the current market price, meaning supply and demand aren’t helpful ways to think about stock prices. Unless the money that ExxonMobil is expected to earn in the future goes down, the stock price will stay the same. And nothing about the decision of a few university endowments to sell the shares provides the market information about how much oil or coal will be sold at what prices tomorrow. Undervalued shares in the near term will be bought up until their price more or less reflects the expected gain from holding those shares. In an extreme case, ExxonMobil could simply go private, removing any need to rely on public markets for funding or valuation.
The fact that the stock price of divested companies will not fall means that these firms will not experience a higher cost of capital, and therefore nothing about their capital raising activities, project choice, or other decisions will be affected by divestment. Managers with stock-based compensation won’t be affected either nor will other shareholders of these firms. In short, the economic impact of the SJSF demands on the targets of their ire would be nearly zero.
Making matters worse, universities—or rather their employees and students—would bear large costs to achieve no benefits. The endowments already have to spend money defending their investment decisions, and, if it comes to it, will spend more selling shares and accepting lower returns than would otherwise be available. Taking profitable investments off the table also means lower returns for endowments. This means taking money out of the universities’ pockets and putting it into the hands of other people, all without actually imposing any cost on the alleged bad actors.
A new app is about to be introduced that’s specifically designed for the folks that are tired of hearing about the daily antics of Kylie and Kendall Jenner, or the latest product being hawked by the Kardashian sisters.
British viral marketer James Shamsi announced the app, called #KardBlock, this week. In an interview with The Daily Beast, 21-year-old Shamsi said that he created the app, which filters any mention of Kim, Kanye, Kris, Kendall, Khloe, Kourtney and Kylie from the user’s news feed, because he was tired of being bombarded by Kardashian/Jenner news.
I intend to try it immediately.