A Little Birdie Said: How Twitter is Disrupting Shareholder Activism

Shareholders are organizing and mobilizing on new social media platforms like Twitter. This changes the dynamics of shareholder proxy contests in ways that favor shareholders over management. Disruptive technology may bring about a shareholder revolution, which may not be in shareholders’ best interests, at least from the perspective of shareholder wealth maximization, and it also has powerful implications for the future of corporate social responsibility

Distance Education in the Time of Coronavirus: Quick and Easy Strategies for Professors

This essay, written by a law professor and a student teaching assistant, shares suggestions intended to increase student engagement and improve learning outcomes by creating and using digital teaching assets effectively. The essay briefly summarizes the literature on traditional and online law school pedagogy and then explains the Hybrid Corporation class we taught during the Spring 2020 COVID-19 emergency. We report on what worked well in our real-world classroom environment and what worked when we had to shift totally to an online delivery format. We found that good videos are critical, and we explain why and how we created what the students found to be effective instructional videos. We also explain how to juxtapose videos and other passive learning content with active digital teaching assets such as quizzes, essay tests, reflective journals, and discussion boards, all intended to enhance student learning and engage students in our virtual classroom. Following the essay we have appended a case brief template to serve as a resource for law teachers who want to use the case law method online and for students who want a more structured approach to reading cases

Bridgefunding Crowdfunding and the Market for Entrepreneurial Finance

This Article explores the business environment of entrepreneurial finance through the lens of securities regulations. It finds that regulators should be more concerned with protecting investors from startup failure than from crowdfunding fraud. It recommends an amendment to Regula- tion Crowdfunding that may enable startup success: the limit on fun- draising should be raised from $1 to$5 million

Democratizing Startups

President Obama signed the Jumpstart Our Business Startups (“JOBS Act”) of 2012 into law to “help entrepreneurs raise the capital they need to put Americans back to work and create an economy that’s built to last.” The goal is to “democratize startups” by making capital available to diverse entrepreneurs in new geographies. Yet the net effect of securities regulations and market conditions is the opposite. Startup companies are encouraged to stay private so capital is consolidating in large, mature firms instead of recycling into new startups. Evidence of consolidation is that once-rare “Unicorns” (billion-dollar startups) now number at least 170. More money is going into huge private companies, yet total venture capital investment is flat, so less is going to new startups. This could stall out the innovation economy. Democratizing startups requires safe-harbor exemptions from securities regulations for both original issuance and resale of stock, but securities regulations do not permit resale on exchanges. This Article proposes “Rule 144B,” a regulatory provision that could be enacted without an act of Congress, to permit transparent web-based venture exchanges with fraud-prevention intermediaries termed “independent analysts.” This Article answers the SEC’s call for rulemaking comments and informs Congress’s new work on JOBS Act 2.0

A Place of Their Own Crowds in the New Market for Equit Crowdfunding

[Excerpt] Is small better than large? When it comes to normative business law policy, many seem to think so. Many scholars attribute the 2007–08 financial crisis to mis-regulation of large banks. Many others attribute the subsequent economic recovery to jobs created by small businesses. While the “99%” protested big banks on Wall Street, the “Startup America” grassroots campaign for small business garnered political support for corporate-finance legislation. Within a two-year period, Congress passed the JOBS Act—which tripled private company shareholder limits, authorized federal equity crowdfunding, and created the “mini-IPO” Regulation A+— and the Dodd-Frank Act—which seeks to end “too big to fail” by imposing a multitude of requirements on large firms.6 In other words, policymakers seem to be trying to encourage the smallest firms while discouraging the biggest ones. But this policy decision seems to ignore the fact that all large firms were once startups that have elected to “go public” because the benefits of being public outweighed the costs of public-company regulations. The nature of corporate and securities regulation forces startups to stay small and private in order to avoid onerous public-company regulations, which actually limits the government’s ability to protect investors

Hyperfunding Regulating Financial Innovations

Innovations in corporate finance are driven by frustrations with present regulations and fueled by the internet and social media. Hyperfunding is one such example: Tesla paved the way for an electric vehicle revolution by preselling hundreds of thousands of its Model 3 EV direct to consumers. Unwary consumers may not have realized that they were underwriting Tesla’s bold strategy to transform multiple product markets. Risks were not disclosed. Rewards proved illusory. Investors would have been entitled to disclosures and colorable claims of fraud when Tesla missed milestones and deadlines. But consumers can only get their $1000 deposit back, without interest, if Tesla has the financial and reputational capital to refund consumers. What happens when an undercapitalized or fraudulent firm uses the same technique and fails to deliver? Are cryptocurrency promoters and “initial coin offerings” already Hyperfunding, pumping, and dumping vaporware? This Article explores challenges with regulating novel techniques in corporate finance and discusses an initial framework for protecting investors while promoting innovation

Social Media and Democracy

[Excerpt] Lately, people have been finding giant pet goldfish in lakes across America. You may see these tiny fish swimming in bowls at the county fair, but left alone in a lake or large pond, where they are dropped perhaps by a well-meaning child, they can grow to 20 pounds or more— and destroy ecosystems. The goldfish is a cautionary tale that has been told time and again in different forms, like Pandora’s box

Encouraging Entrepreneurship and Innovation through Regulatory Democratization

[Excerpt] Entrepreneurship provides a path to prosperity for many people. In particular, women and minorities prefer entrepreneurship as their path to achieve the American Dream. In their striving, their startups and small businesses benefit our entire society. Entrepreneurial innovation has a positive impact on social welfare. For these reasons, the federal government has implemented numerous policies designed to support small businesses and promote startup innovation

A Little Birdie Said

Shareholders are organizing and mobilizing on new social media platforms like Twitter. This changes the dynamics of shareholder proxy contests in ways that favor shareholders over management. Disruptive technology may bring about a shareholder revolution, which may not be in shareholders’ best interests, at least from the perspective of shareholder wealth maximization, and it also has powerful implications for the future of corporate social responsibility

Encouraging Entrepreneurship and Innovation Through Regulatory Democratization

Law and economics scholars agree that business regulations have a disproportionately negative impact on entrepreneurship and innovation. It would be a significant problem indeed if the very nature of regulation inhibits this kind of growth and creativity. This view of the problem suggests that the only way to increase innovation would be to decrease regulation. Yet this view is too general. When examined more closely, all regulations are not created equal. Regulations can be formulated as rules or standards, and they can be simple or complex. Moreover, some rules are easily understood by computers and are thus suitable for automated processes. Different types of rules have different impacts on entrepreneurship and innovation. This Article is based on interviews with over one hundred startups regarding the impact of regulation on innovation. It identifies six cases of startups that invented ways to make certain kinds of regulations relatively affordable for many small businesses to comply with. These new uses of technology are examples of “regulatory democratization” because they open access to regulated industries for small business. Regulatory democratization increases competition and levels the playing field between small and large firms in highly regulated industries. Regulatory democratization sheds new light on other proposals that are intended to spur entrepreneurial innovation. Regulatory sandboxes—where regulators give select companies the freedom to operate beyond regulatory boundaries—may counterintuitively inhibit innovation by preferencing large firms over small ones. Tax credits for entrepreneurs, on the other hand, can be designed to drive innovation. The key takeaway is that regulations can be smarter and more compatible with entrepreneurial innovation