Confronting the Peppercorn Settlement in Merger Litigation: An Empirical Analysis and a Proposal for Reform

Shareholder litigation challenging corporate mergers is ubiquitous, with the likelihood of a shareholder suit exceeding 90%. The value of this litigation, however, is questionable. The vast majority of merger cases settle for nothing more than supplemental disclosures in the merger proxy statement. The attorneys that bring these lawsuits are compensated for their efforts with a court-awarded fee. This leads critics to charge that merger litigation benefits only the lawyers who bring the claims, not the shareholders they represent. In response, defenders of merger litigation argue that the lawsuits serve a useful oversight function and that the improved disclosures that result are beneficial to shareholders. This Article offers a new approach to assessing the value of these claims by empirically testing the relationship between merger litigation and shareholder voting on the merger. If the supplemental disclosures produced by the settlement of merger litigation are valuable, they should affect shareholder voting behavior. Specifically, supplemental disclosures that are, in effect, “compelled” by settlement should produce new and unfavorable information about the merger and lead to a lower percentage of shares voted in favor of it. Applying this hypothesis to a hand-collected sample of 453 large public company mergers from 2005-2012, we find no such effect. We find no significant evidence that disclosure-only settlements affect shareholder voting. These findings warrant a reconsideration of Delaware merger law. Specifically, under current law, supplemental disclosures are viewed by courts as providing a substantial benefit to the shareholder class. In turn, this substantial benefit entitles the plaintiffs’ lawyers to an award of attorneys’ fees. Our evidence suggests that this legal analysis is misguided and that supplemental disclosures do not in fact constitute a substantial benefit. As a result, and in light of the substantial costs generated by public company merger litigation, we argue that courts should reject disclosure settlements as a basis for attorney fee awards. Our approach responds to critiques of merger litigation as excessive and frivolous by reducing the incentive for plaintiffs’ lawyers to bring weak cases, but it would have an additional benefit. Current practice drags state court judges into the task of indirectly promulgating disclosure standards in connection with the approval of fee awards. We argue, instead, for a more efficient specialization between state and federal courts in the regulation of mergers: public company merger disclosure should be policed by the federal securities laws while state corporate law focuses on substantive fairness

Confronting the Peppercorn Settlement in Merger Litigation: An Empirical Analysis and a Proposal for Reform

Shareholder litigation challenging corporate mergers is ubiquitous, with the likelihood of a shareholder suit exceeding 90%. The value of this litigation, however, is questionable. The vast majority of merger cases settle for nothing more than supplemental disclosures in the merger proxy statement. The attorneys that bring these lawsuits are compensated for their efforts with a court-awarded fee. This leads critics to charge that merger litigation benefits only the lawyers who bring the claims, not the shareholders they represent. In response, defenders of merger litigation argue that the lawsuits serve a useful oversight function and that the improved disclosures that result are beneficial to shareholders. This Article offers a new approach to assessing the value of these claims by empirically testing the relationship between merger litigation and shareholder voting on the merger. If the supplemental disclosures produced by the settlement of merger litigation are valuable, they should affect shareholder voting behavior. Specifically, supplemental disclosures that are, in effect, “compelled” by settlement should produce new and unfavorable information about the merger and lead to a lower percentage of shares voted in favor of it. Applying this hypothesis to a hand-collected sample of 453 large public company mergers from 2005-2012, we find no such effect. We find no significant evidence that disclosure-only settlements affect shareholder voting. These findings warrant a reconsideration of Delaware merger law. Specifically, under current law, supplemental disclosures are viewed by courts as providing a substantial benefit to the shareholder class. In turn, this substantial benefit entitles the plaintiffs’ lawyers to an award of attorneys’ fees. Our evidence suggests that this legal analysis is misguided and that supplemental disclosures do not in fact constitute a substantial benefit. As a result, and in light of the substantial costs generated by public company merger litigation, we argue that courts should reject disclosure settlements as a basis for attorney fee awards. Our approach responds to critiques of merger litigation as excessive and frivolous by reducing the incentive for plaintiffs’ lawyers to bring weak cases, but it would have an additional benefit. Current practice drags state court judges into the task of indirectly promulgating disclosure standards in connection with the approval of fee awards. We argue, instead, for a more efficient specialization between state and federal courts in the regulation of mergers: public company merger disclosure should be policed by the federal securities laws while state corporate law focuses on substantive fairness

Managing Police Use of Force: Policy and Training Issues for Administrators

The purpose of this paper was to conduct an examination of the information on police and use of force related issues. After outlining the research questions and methodology used in this research, the examination began with an extensive review of the literature regarding: the role and purpose of the police as an agency authorized to use coercive force; the ethical dilemmas of policing a democratic society; the dynamics if police-citizen encounters; and the use of force by police in America. By exploring the debate regarding the police role, and using the knowledge gained from research that has already been conducted in the field, this in-depth literature review provides the reader with a more comprehensive understanding of the problems associated with policing in America. The second part of this examination included a review of the laws and liability issues related to the use of force by police; an investigation of court cases that have been decided on municipal liability, use of force, and police training; and an analysis of the Michigan Force Continuum. This examination provided the foundation for suggestions to administrators regarding use-of-force policy and training issues.Master'sCollege of Arts and Sciences: Public AdministrationUniversity of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/117752/1/Solomon.pd

Limits of Disclosure

Disclosure has its limits. One big focus of attention, criticism, and proposals for reform in the aftermath of the 2008 financial crisis has been securities disclosure. But most of the criticisms of disclosure relate to retail investors. The securities at issue in the crisis were mostly sold to sophisticated institutions. Whatever retail investors’ shortcomings may be, we would expect sophisticated investors to make well-informed investment decisions. But many sophisticated investors appear to have made investment decisions without making much use of the disclosure. We discuss another example where disclosure did not work as intended: executive compensation. The theory behind more expansive executive compensation disclosures was that shareholders might react to the disclosures with outrage and action, and companies, anticipating shareholder reaction, would curtail their compensation pre-emptively. But it was apparently not the reality and instead compensation spiraled higher. The two examples, taken together, serve to elucidate our broader point: underlying the rationale for disclosure are common sense views about how people make decisions — views that turn out to be importantly incomplete. This does not argue for making considerably less use of disclosure. But it does sound some cautionary notes. The strong allure of the disclosure solution is unfortunate, although perhaps unavoidable. The admittedly nebulous bottom line is this: disclosure is too often a convenient path for policymakers and many others looking to take action and hold onto comforting beliefs in the face of a bad outcome. Disclosure’s limits reveal yet again the need for a nuanced view of human nature that can better inform policy decisions

Tectonic evolution of Lavinia Planitia, Venus

High resolution radar images from the Magellan spacecraft have revealed the first details of the morphology of the Lavinia Planitia region of Venus. Lavinia is a broad lowland over 2000 km across, centered at about 45 deg S latitude, 345 deg E longitude. Herein, the tectonic evolution of Lavinia is discussed, and its possible relationship to processes operating in the planet's interior. The discussion is restricted to the region from 37.3 to 52.6 deg S latitude and from about 340 to 0 deg E longitude. One of the most interesting characteristics of Lavinia is that the entire region possesses a regional tectonic framework of striking regularity. Lavinia is also transected by a complex pattern of belts of intense tectonic deformation known as ridge belts. Despite the gross topographic similarity of all of the ridge belts in Lavinia, they exhibit two rather distinct styles of near surface deformation. One is composed of sets of broad, arch-like ridges rising above the surrounding plains. In the other type, obvious fold-like ridges are rare to absent in the radar images. Both type show evidence for small amounts of shear distributed across the belts

The Problem of Sunsets

An increasing percentage of corporations are going public with dual class stock in which the shares owned by the founders or other corporate insiders have greater voting rights than the shares sold to public investors. Some commentators have criticized the dual class structure as unfair to public investors by reducing the accountability of insiders; others have defended the value of dual class in encouraging innovation by providing founders with insulation from market pressure that enables them to pursue their idiosyncratic vision. The debate over whether dual class structures increase or decrease corporate value is, to date, unresolved. Empirical studies have failed to provide conclusive evidence as to the effect of dual class structures, and calls for regulators or stock exchanges to adopt prohibitions banning dual class structures outright have been unsuccessful, although several index providers have banned dual class stock from major indexes such as the S&P 500. As a result, some commentators have advocated a compromise position permitting corporations to go public with dual class structures but requiring that they include mandatory time-based sunset provisions. The sunset provisions would automatically convert the dual class structure to a single share structure after the passage of a pre-determined period of time. The Council of Institutional Investors has asked the New York Stock Exchange and Nasdaq to refuse to list the shares of dual class firms unless they contain a time-based sunset provision that would convert within seven years. This Article does not take a position on whether dual class structures are value-enhancing, but it does challenge the proposition that time-based sunsets are an appropriate response to the debate over dual class structures and that they should be imposed through regulation or stock exchange rules. To the extent that dual class structures are problematic, sunsets do not solve that problem. Moreover, time-based sunsets are an arbitrary response to the concern that developments such as the decline in a founder’s economic interest or the transfer of high-vote shares to third parties may reduce the attractiveness of the dual class structure. In addition, time-based sunsets create potential moral hazard problems. Further, because of their problematic incentives, minority shareholders cannot address the limitations of time-based sunsets through a retention vote. This Article observes that event-based sunsets, which have received less attention, focus on the specific developments that are likely to erode the potential value of dual class structures, and calls for market participants to explore them further through private ordering. Nonetheless, it argues that, at the present time, investors and policymakers lack sufficient information about either dual class or sunsets to justify using regulation, index requirements, or stock exchange rules to force companies into adopting sunsets. Last, it argues that, rather than relying on compulsory sunsets to evade the difficult policy issues raised by dual class, the debate should encompass a more thorough framing of the role and importance of shareholder voting rights

Should Corporations Have a Purpose?

Corporate purpose is the hot topic in corporate governance. Critics are calling for corporations to shift their purpose away from shareholder value as a means of addressing climate change, equity and inclusion, and other social values. We argue that this debate has overlooked the critical predicate questions of whether a corporation should have a purpose at all and, if so, what role it serves. We start by exploring and rejecting historical, doctrinal, and theoretical bases for corporate purpose. We challenge the premise that purpose can serve a useful function either as a legal constraint on managerial discretion or as a tool to promote the interests of stakeholders over those of shareholders. Instead, we identify an instrumental function for corporate purpose. Because a corporation consists of a variety of constituencies with differing interests and objectives, an articulated, measurable, and enforceable corporate purpose enables those constituencies both to select those corporations with which they wish to identify and to navigate the terms of that association through contract or regulation. We highlight the role of purpose in enabling a corporation to commit to core policies of its business model and for which the corporation has a comparative advantage. Critically, our instrumental view highlights the role of purpose as a voluntary tool to facilitate the goals of corporate participants rather than a regulatory instrument to promote specific public policies

The “Value” of a Public Benefit Corporation

We examine the “value” a PBC form provides for publicly-traded corporations. We analyze the structure of the PBC form and find that other than requiring a designated social purpose it does not differ significantly in siting control and direction with shareholders. We also examine the purpose statements in the charters of the most economically significant PBCs. We find that, independent of structural limitations on accountability, these purpose statements are, in most cases, too vague and aspirational to be legally significant, or even to serve as a reliable checks on PBC behavior. We theorize, and provide evidence, that without a legal or structural tool for binding a PBC to specific social objectives, the operational decisions of the publicly traded PBC may be subject to change according to the vision and preferences of individual officers, directors and shareholders. Our conclusions provide support for a more defined and enforceable PBC purpose statement for publicly-traded PBCs. Otherwise, publicly-traded PBCs are likely to operate no differently than traditional, publicly-traded corporations

Fitting the Means to the Ends: One School’s Experience with Quantitative and Qualitative Methods in Curriculum Evaluation During Curriculum Change

Curriculum evaluation plays an important role in substantive curriculum change. The experience of the University of Texas Medical Branch (UTMB) with evaluation processes developed for the new Integrated Medical Curriculum (IMC) illustrates how evaluation methods may be chosen to match the goals of the curriculum evaluation process. Quantitative data such as ratings of courses or scores on external exams are useful for comparing courses or assessing whether standards have been met. Qualitative data such as students’ comments about aspects of courses are useful for eliciting explanations of observed phenomena and describing relationships between curriculum features and outcomes. The curriculum evaluation process designed for the IMC used both types of evaluation methods in a complementary fashion. Quantitative and qualitative methods have been used for formative evaluation of the new IMC courses. They are now being incorporated into processes to judge the IMC against its goals and objectives