Chris got a unanimous vote, so good news. The Wall Street Journal on the state of the nominations of the two law professors here.
I'm not sure whether to call it the power of regulation, the fact that investors like being deluded about the value of assets they hold, or the existence of an implicit government guarantee. But as OFR notes, investors are getting out of funds with gates and floating asset values, and getting into funds with fixed asset values (even if they also have feeds and gates). Not sure what to make of it, but the change is marked, and surely attributable to regulation.
It's not the last word or anything, but I found this survey of entry level classes of City of London banks to be interesting (I'm in the UK for the semester). Less than half Brits, and 14% Italian, more than any European country/ethnicity/whatever, including Germany and France if you like your countries big, Spain if you like your countries poor, and Ireland if you like your countries English speaking. This anonymous banker thinks it is because Italians are desperate and charming. Your mileage may vary!
The Harvard Law School Program on Corporate Governance invites applications for the position of Executive Director. Together with the Faculty Director and others, the Executive Director of the Program works on building, developing, and managing the full range of activities of the Program. Under the Faculty Director’s oversight, the Executive Director manages the wide range of the Program’s operations; collaborates with major corporations, law firms, investors, advisers, and other organizations; participates in developing and directing conferences and other events for the Program; and manages the administration and personnel of the program, including fellows, research assistants, and staff. The Executive Director also collaborates with constituent groups and other professionals; participates in fundraising activities; interacts with donors and visitors; and takes on other management roles within the Program as needed. The Executive Director is involved in overseeing the Program’s website and other media outreach efforts, as well as the Program’s blog, the Harvard Law School Forum on Corporate Governance and Financial Regulation.
Applications will be considered on a rolling basis. Candidates should have a J.D. or another graduate degree in law, policy, or social science, and 3+ years of experience in a relevant field of law or policy. This is a full-time term appointment. Start date is flexible. Additional information on the Executive Director position, as well as detailed instructions on how to apply, is available through ASPIRE.
The Harvard Law School Program on Corporate Governance invites applications for Post-Graduate Academic Fellows. Candidates should be interested in spending two or three years at Harvard Law School in preparation for a career in academia or policy research, and should have a J.D., LL.M. or S.J.D. from a U.S. law school (or expect to have completed most of the requirements for such a degree by the time they commence their fellowship). During the term of their appointment, Post-Graduate Academic Fellows work on research and corporate governance activities of the Program, depending on their interests and Program needs. Fellows may also work on their own research and publishing, and some former Fellows of the Program now teach in leading law schools in the U.S. and abroad.
Applications are considered on a rolling basis. Interested candidates should submit a CV, list of references, law school grades, and a writing sample and cover letter to the coordinator of the Program, Ms. Jordan Figueroa, at email@example.com. The cover letter should describe the candidate’s experience, reasons for seeking the position, career plans, and the kinds of Program projects and activities in which they would like to be involved. The position includes Harvard University benefits and a competitive fellowship salary. Start date is flexible.
[Long time, no blog. Since May 1, co-blogger Gordon has been the dean of BYU Law School, and I have had the enormous pleasure to be an associate dean. This leaves little time for blogging or much else. However, yesterday's Wells Fargo news was too interesting to let slide.]
Yesterday, the Consumer Financial Protection Bureau announced that Wells Fargo will pay a $185 million fine to the CFPB, the city of Los Angeles and the OCC. Apparently, the commissions that the bank paid to employees for setting up new checking, savings and credit card accounts incentivized those employees to set up fake accounts using customer information without the customers' permission. These secret, unauthorized accounts sometimes resulted in customers paying fees but always resulted in the employees receiving bonuses. (Disclaimer: I am a WF customer, and yes, even the very awesome and helpful employees at the BYU branch try to cross-sell new products pretty regularly. Maybe all banks do as well.) Since 2011, over 5000 employees have been fired.
But, this is probably not the end of the story. (At least) Two other legal actions could transpire. First, shareholders could sue the board of directors in a derivative action for breach of the duty of oversight, a duty to monitor situated within the duty of loyalty. Second, shareholders could sue in a securities fraud action of language in disclosure or other documents seemed to hide or downplay the severity of this problem as it was known to the board. Neither avenues are particularly well-suited for these types of cases. For a securities fraud case, one would need to find a company statement that was factual and false: "Our incentive compensation systems for bank employees reward and properly incentivize good customer service." "We have systems in place to ensure that customer data is never used by employees to their advantage." Only in rare cases will general statements about good business practices give rise to passing the motion to dismiss stage in a federal securities Rule 10b-5 action (see Countrywide).
Shareholder derivative actions have not been too successful lately, either. Even post-financial crisis, shareholders could not get a lot of traction in the Delaware courts in cases against Goldman Sachs and Citigroup for the board's failure to monitor employees who engaged in highly risky trading, leading to huge financial losses. (See The Duty to Manage Risk, by me.) In those cases, the courts reasoned that the quintessential Caremark claim involved a company having no system to monitor foreseeable, significant, illegal activity by employees. Reckless and stupid employee activity, if not illegal, is a hard basis for a Caremark claim, and even illegal activity needs to be widespread and not isolated to a few bad actors. Interestingly, the Delaware courts have found hardly any viable Caremark claims since the landmark case (in which the court approved a settlement for almost nothing because "those claims find no substantial evidentiary support in the record and quite likely were susceptible to a motion to dismiss in all events."). So what about here?
Well, the activity is illegal. I'm assuming here that using private customer information without authorization is illegal and violates banking law. And, these actions violated CFPB regulations. So, we have illegal activity. The activity also does not seem isolated -- over 5000 employees, possibly 2 million unauthorized accounts, over 500,000 unauthorized credit cards. However, the Caremark case involved the company paying civil damages of $250 million in 1995. Here, the fine is $185 million, which may be the largest fine levied by the brand-new CFPB, but isn't that big in the scheme of things. If more charges are brought, that would strengthen the claim. I'm not sure I would be confident in a Caremark claim here, even though the activity is illegal and seems to be widespread. As of this morning, I couldn't find any new litigation having been filed, but stay tuned!
Over in DealBook, I wrote about the the SEC's decision to end five years of litigation against Fannie's pre-crisis CEO with a $100,000 settlement. That's not much money, especially since, amusingly, Fannie agreed to pay it. To Treasury, which owns Fannie. Anyway, a taste of the article, do go click over there:
Five years of litigation in pursuit of $100,000 does not bespeak a particularly efficient allocation of law enforcement resources.
Mr. Mudd and Fannie settled cheaply because of a feature of financial crisis enforcement cases. Although the headline allegations of malfeasance can look straightforward, wading through the proof has been, for the government, much harder.
This dynamic might look surprising. The government should be happy to tell a simple story to a jury unlikely to be interested in accounting nuances. It leaves the defendant with the job of trying to win by raising the complications.
And let me know if you have thoughts...
Florida is hiring in our subject - the announcement is below:
The University of Florida Fredric G. Levin College of Law is a national law school at the flagship University of Florida. With the generous support of committed alumni, a new university president, and dean, we are hiring several entry-level and established faculty to join our community of top scholars and teachers.
The college seeks to fill at least two tenure- track and four tenured faculty positions with candidates committed to scholarship and teaching in at least one of the following areas: Corporations/Business Associations/Securities Regulation, Professional Responsibility/Legal Ethics, Taxation, Civil Procedure, and Evidence. Applicants for these positions should hold a J.D. or LL.B. degree from an accredited law school and have distinguished academic credentials, relevant legal experience, and a demonstrated commitment to outstanding research and scholarship. The anticipated starting date is the Fall Term of 2017. Rank and salary will be commensurate with qualifications and experience. Members of groups under‑represented in the legal profession are particularly encouraged to apply. The University of Florida is an equal opportunity employer.
Interested candidates should contact Appointments Committee Chair Elizabeth Rowe for further information: P.O. Box 117625; Gainesville, FL 32611 (firstname.lastname@example.org). Further information and applications for each of the positions is available at http://jobs.ufl.edu.
I'm finding this recently released money market fund monitor by the Office of Financial Research to be an interesting bit of new governance. It enables investors and academics to keep track of how the funds are doing, and in so doing, gives OFR some information about risk in the industry. I hope it takes off, so do give it a look. Rumor has it that there may be another monitor for hedge funds coming soon. This one is a pretty user friendly tool.
I'm putting together a conference with Peter Conti-Brown on the above subject in the spring of 2017, and we thought it might be useful to broaden the context with a call for papers. The call is below:
The Wharton School of the University of Pennsylvania will host an international conference, “Financial Regulation and the Rule of Law,” on April 7-8, 2017, and issues a call for papers to any scholars from any discipline—law, economics, political science, history, business, and beyond. The paper presenters—will include invited and competitive submissions—should be on any related topic. The conference will include a keynote address from Donald Kohn, former Vice Chair of the Board of Governors of the U.S. Federal Reserve System and current member of the Financial Policy Committee at the Bank of England. Reasonable travel expenses for selected presentations will be covered.
To submit a paper, please include an unpublished manuscript not exceeding 20,000 words and a CV to conference organizers Peter Conti-Brown and David Zaring, by October 1, 2016. Selected presenters will be notified by email by October 31, 2016.
Call for Papers – Joint Program with the AALS Section on Business Associations and the AALS Section on Comparative Law
The AALS Section on Business Associations and the AALS Section on Comparative Law are pleased to announce a Call for Papers for a joint program to be held on January 5, 2017, at the AALS 2017 Annual Meeting in San Francisco. The topic of the program is “Business Law in the Global Gig Economy: Legal Theory, Doctrine, and Innovations in the Context of Startups, Scaleups, and Unicorns.”
Startups and entrepreneurs have long played an important role in the U.S. economy. From Henry Ford to Mark Zuckerberg, entrepreneurs have revolutionized the ways in which their customers receive products and services. As Phil Libin, CEO of Evernote, has explained, “There’s lots of bad reasons to start a company. But there’s only one good, legitimate reason, and I think you know what it is: it’s to change the world.”
That philosophy continues today as entrepreneurs disrupt markets and challenge business and legal norms. Traditional notions of the firm, fiduciary duties, contractual bargains, and optimal capital structures may not aptly fit entrepreneurial approaches. Indeed, entrepreneurs’ business models, financing needs, and operational objectives require lawyers and scholars to rethink governance, capital structures, and regulatory schemes that may limit or impede further innovation, both nationally and transnationally.
This program will examine the current and potential role of business, contract, and related laws on entrepreneurs and their business ventures. We hope to create a robust conversation that maps the past and future of legal theory and doctrine related to entrepreneurship—defining that concept broadly in terms of industry and size. Legal entrepreneurs also fit this model as they introduce contractual innovations and disrupt the field of business law itself. Taking a cue from entrepreneurs, the program welcomes all ideas, including those that may disrupt conventional norms.
Form and length of submission
Eligible law faculty are invited to submit manuscripts or abstracts that address any of the foregoing topics. Abstracts should be comprehensive enough to allow the review committee to meaningfully evaluate the aims and likely content of final manuscripts. Manuscripts may be accepted for publication but must not be published prior to the Annual Meeting. Untenured faculty members are particularly encouraged to submit manuscripts or abstracts.
The initial review of the papers will be blind. Accordingly, the author should submit a cover letter with the paper. However, the paper itself, including the title page and footnotes must not contain any references identifying the author or the author’s school. The submitting author is responsible for taking any steps necessary to redact self-identifying text or footnotes.
Deadline and submission method
To be considered, manuscripts or abstracts must be submitted electronically to Professor Michelle Harner, Chair-Elect of the Section on Business Associations, at email@example.com. The deadline for submission is August 24, 2016. Papers will be selected after review by members of the Executive Committees of the Sections. The authors of the selected papers will be notified by September 26, 2016.
Papers will have the opportunity to publish in the William and Mary Business Law Journal.
Full-time faculty members of AALS member law schools are eligible to submit papers. The following are ineligible to submit: foreign, visiting (without a full-time position at an AALS member law school) and adjunct faculty members, graduate students, fellows, non-law school faculty, and faculty at fee-paid non-member schools. Papers co-authored with a person ineligible to submit on their own may be submitted by the eligible co-author.
The Call for Paper participants will be responsible for paying their annual meeting registration fee and travel expenses.
THE UNIVERSITY OF ALABAMA SCHOOL OF LAW seeks to fill entry-level/junior-lateral tenure-track positions for the 2017-2018 academic year. Candidates must have outstanding academic credentials, including a J.D. from an accredited law school or an equivalent degree (such as a Ph.D. in a related field). Entry-level candidates should demonstrate potential for strong teaching and scholarship; junior-lateral candidates should have an established record of excellent teaching and distinguished scholarship. Although positions are not necessarily limited by subject, applications from those who study and teach commercial law (including contracts and sales) or torts (including products liability) are especially welcome; business law, family law, and insurance law are also areas of interest. We welcome applications from candidates who approach scholarship from a variety of perspectives and methods (including quantitative or qualitative empiricism, formal mode ling, or historical or philosophical analysis). The University of Alabama embraces diversity in its faculty, students, and staff, and we welcome applications from those who would add to the diversity of our academic community. Salary, benefits, and research support will be nationally competitive. All applications are confidential to the extent permitted by state and federal law, and interested applicants should apply at facultyjobs.ua.edu; the positions remain open until filled. Questions should be directed to Professor Heather Elliott, Chair of the Faculty Appointments Committee (firstname.lastname@example.org). The University of Alabama is an Equal Employment/Equal Educational Opportunity Institution. All qualified applicants will receive consideration for employment without regard to race, color, religion, national origin, sex, sexual orientation, gender identity, gender expression, age, genetic information, disability, or protected veteran status, and will not be discriminated against because of their protected status. Applicants to and employees of this institution are protected under federal law from discrimination on several bases. Follow this link to find out more: “EEO is the Law” www1.eeoc.gov/employers/upload/eeoc_self_print_poster.pdf.
Friend-of-the-blog Stephen Bainbridge might be feeling left out of Donald Trump's team of economic advisors, which is almost half "Steves." However, he might feel lonely there as an academic, as there is only one other professor in the group. Some commentators have expressed concern about the lack of economic expertise -- see, e.g., AEI's Kevin Hassett ("Most campaigns tend to balance academics with business folks."). But more problematically, the group is all men, and they also seem to be white (although advisor Tom Barrack's grandparents were Lebanese immigrants). I bring this up because it demonstrates a pattern consistent with his list of eleven potential Supreme Court nominees, who were all white and mostly men. As I said when those folks were announced , the lack of diversity is a statement by the Trump campaign. Trump's vision for American leadership is literally an old-boy network.
Trump's economic team also seems to be strangely at odds with his policy proposals. He attacks Clinton for her connections to billionaire Wall Streeters, but his team has several of them. To the extent his advisors have taken policy positions on trade, they mostly seem to be in favor of free trade. Just a few months ago, Club for Growth founder Stephen Moore wrote this editorial in favor of free trade -- one of the Club's core philosophies. These appointments present an extremely muddle message. One of Trump's key issues is that America needs to be more protectionist in its manufacturing and labor markets. However, Peter Navarro of UC Irvine -- the one academic in the group -- has advocated against free trade, particularly with respect to China. You can check out a trailer for Death by China, a documentary he produced, here.
UPDATE: Greg Mankiw, Abby McCloskey, and Justin Wolfers have some juicy quotes here.
Donald Trump's interview with George Stephanopoulos has been getting a lot of play, for a variety of reasons. I wanted to focus on one aspect of his comments that is actually a fairly common turn of phrase but that nevertheless is deeply wrongheaded, in my view. When asked about the sacrifices he has made for his country, Trump said this:
I think I've made a lot of sacrifices. I work very, very hard. I've created thousands and thousands of jobs, tens of thousands of jobs, built great structures. I've had tremendous success. I think I've done a lot.
While many have objected to this notion of "sacrifice," Trump's claim to have "created thousands and thousands of jobs, tens of thousands of jobs" is also objectionable. First of all, a job is a relationship: it's a position that works to the advantage of both the employer and the employee. And since "employers" are generally companies, it's better to envision a company as a group of people--equity contributors and labor contributors--working together on a joint business enterprise. Thus, a job is not "created" any more than one person "creates" a marriage by asking another person to get married. Trump's companies may have employed ten of thousands of people, but the companies did not "create" those jobs--they instead asked workers to join in the group effort to carry on the joint enterprise at hand.
Second, just because Donald J. Trump is the head of various "Trump" organizations does not mean that "he" is those companies. Perhaps he was instrumental in legally creating those companies and getting their businesses off the ground. But "he" did not employ tens of thousands -- the companies did. He's not a sole proprietor!
Third, Trump is actually a poor exemplar of the creator-capitalist, because his business model is to use his family "brand' to work with other companies to actually develop ongoing businesses. The company puts the Trump name of the project, and then other companies generally do the work. As a result, the Trump brand appears to be much more extensive than its actual reach. As Forbes Magazine described his approach:
Over his roller-coaster career, a core part of Trump’s decision-making process can be summarized in four words: Trump always comes first. Whatever the deal, Trump must be the star. He routinely values two things above all, even over making money: being the boss and gaining publicity. No one values the Trump brand higher than Trump himself.
Trump may have managed his brand very well, as the proliferation of Trump hotels, golf courses, and resorts would indicate. But his company often leaves the heaving lifting to other companies as a way of leveraging the brand name while keeping the Trump organization fairly lean (i.e., fewer employees).
Trump's claim that "I alone can fix it" is symptomatic of his approach to his businesses and, presumably, his potential government service. He doesn't see the legions of others who have worked with him to make his businesses and brand into successes. As Alchian & Demsetz explained, businesses are team productions -- not solo efforts. Trump has not created jobs, out of thin air, in service to others. He instead has worked with tens of thousands of other people to make their joint enterprises into successes. That deserves credit. But his claim to be an economic Zeus, calling forth employment from the primordial ooze of the economy, deserves skepticism instead.