Month: April 2016

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The Agency Problem of Lehman Brothers’ Board of Directors

By: Young Ah Kim

Introduction

Lehman Brothers is often cited as an example of corporate governance failure largely due to poor oversight by the board.[1] Richard Fuld, former CEO of Lehman Brothers during its bankruptcy in 2008, still does not agree with this general evaluation. Seven years later in 2015, he gave a speech at a conference in New York.[2] Fuld spoke about Lehman’s risk management, as quoted in The Wall Street Journal: “Regardless of what you heard about Lehman’s risk management, we had 27,000 risk managers because they all had a piece of the firm.”[3] The problem, however, remains that Lehman’s employees owned a very small portion of the company stock, which did not solve its agency problem.

Lehman Brothers had a high-leverage, high-risk-taking business strategy supported by limited equity.[4] For instance, it took its leverage ratio up to 30 times its equity.[5]… Read the rest

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Lifting the Injunctions: The end of “the trial of the century” in sovereign debt

By: Luis F. Gomez-Alfaro                                                                                                   

Introduction

The newly-elected government of Argentina has offered to pay all the holders of its sovereign debt.[1] This proposal is a striking reversal of Argentina’s decade-long position of only making payments to the holders of it restructured debt (“exchanged creditors”), but not to those that had refused to exchange their bonds at a 65% loss (“holdout creditors”).[2]  If the negotiations are successful, and the injunctions against Argentina are lifted, these developments will bring an end to the so called “trial of the century in sovereign debt restructuring,” [3] and cement a remarkable empowerment of holdout creditors in sovereign debt restructuring processes.

Argentina’s newly elected President, Mauricio Macri, has vowed to regain access to the sovereign debt markets.[4] Currently a series of judgments and injunctions[5] have rendered Argentina unable to make payments only to the exchanged creditors, and has effectively forced the South … Read the rest

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Foul or Dive? Outlining the United States Women’s National Soccer Team’s Pay for Play Lawsuit

By: Alexander Karl

American women have been constantly fighting to have their voices heard and to achieve equal rights. It took until 1920 for women to receive the right to vote.[1] But it goes beyond voting as they sought to establish representation. For decades, women in the workforce have been underpaid to work in hazardous conditions. Eventually they began to strike, and in 1920, formed the U.S. Department of Labor Women’s Bureau aimed at representing the needs of wage-earning women in public policy.[2] Ultimately, laws such as the Equal Pay Act were put into place to “prohibit discrimination on account of sex in the payment of wages by employers engaged in commerce or in the production of goods for commerce.”[3] Nearly a century since the formation of the Bureau and decades since the passing of the Equal Pay Act, women are still fighting for fair compensation today.… Read the rest

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Chipotle and the Need for HR Oversight In Settlement Avoidance Strategies

By: Matthew Lowe

Introduction

When litigation looms for large corporations, settlement becomes a key part of the strategy discussion. In order to avoid the costliness associated with, and reputational damage from, lengthy trials, it is not unexpected for a company to dip into its litigation budget and pay a premium to avoid the hassle. Some companies, however, adopt the opposite strategy: settlement avoidance. If a company is to adopt such a strategy, it will also need to adopt proper defensive measures, such as the implementation of adequate Human Resources (“HR”) oversight, in order to effectively ride out the storm of the trial.

Background

Following Chipotle Mexican Grill, Inc. (“Chipotle”) going public in January of 2006, it came to be known as an “industry darling”.[1] Recognized for its transparency and its commitment to utilizing farm-fresh, high-quality ingredients, Chipotle was a trendsetter and leader in the fast-casual movement in dining.[2]… Read the rest

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It’s a Bird . . . It’s a Plane . . . It’s a Drone! State and Local Drone Applications in Law Enforcement

By: Steven Wittenberg

Introduction

Drone technology is here to stay. They are the Obama administration’s instrument of choice for high-level officials to execute “lawful . . . lethal operations in a foreign country” aimed at enemy combatants (who can be U.S. citizens) who happen to be an “operational leader.”[1][2] To qualify, there must be an “imminent threat,” capture must not practical, and the slaying must be consistent with the laws of war. “Imminent” is a self-defense term, which demands that the official must “know, in a detailed manner, who poses such a threat, in what circumstances, and how and when such persons can be targeted.”[3] At the intersection of intelligence gathering and the decision to strike are the so-called “kill lists,”[4] which are maintained to ensure the targets satisfy all the conditions of a lawful targeted killing.

As a vestige of President Obama’s grand strategy to … Read the rest

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A Fiduciary Duty Requirement for Financial Professionals is Great, in Theory

By: Joe Zender

On April 6, the Department of Labor released a new regulation pertaining to the duties owed by financial advisors to their clients.[1] The new regulation, which is scheduled to go into effect on January 1, 2018, transforms fundamental aspects of the financial services industry.[2]  The new rule, called a fiduciary duty rule, requires financial professionals to act in the best interest of their clients.[3] While a savvy investor or an ethical advisor may have already required this as part of their relationships, many retail investors do not know the ramifications of such a duty. The new rule forces this type of duty.  Opponents of the rule argue that the new regulation will increase costs across the financial services industry, which could force small budget investors out of the advising market, during a time when they could use it. At the same time, those who … Read the rest