Boardroom Governance with Evan Epstein

Ann Lipton: "The Twitter v. Musk Case is both a Vindication and a Condemnation of Corporate Law."

Episode Summary

Welcome to the Boardroom Governance Podcast. I’m your host, Evan Epstein. In this episode, I talk with Ann Lipton, the Michael M. Fleishman Associate Professor in Business Law and Entrepreneurship, and Associate Dean for Faculty Research at Tulane University School of Law. An experienced securities and corporate litigator who has handled class actions involving some of the world’s largest companies, she joined the Tulane Law faculty in 2015 after two years as a visiting assistant professor at Duke University School of Law. As a scholar, Lipton explores corporate governance, the relationships between corporations and investors, and the role of corporations in society. In this podcast, we talk about take-aways from the Twitter v Musk case, the “trial of the century that wasn’t,” public benefit corporations and B-corps, the FTX and Sam Bankman-Fried legal proceedings, and litigation involving private venture-backed companies. We also address the latest findings in Delaware litigation involving SPACs, the McDonalds case involving duty of oversight for officers, and some of the latest issues involving ESG and anti-ESG trends. If you like this show, please consider subscribing, leaving a review or sharing this podcast on social media. You can find all the show notes on the website boardroom-governance.com and please feel free to subscribe to the Boardroom Governance Newsletter at evanepstein.substack.com

Episode Notes

0:00 -- Intro.

1:47 -- Start of interview.

2:19 -- Ann's "origin story".

4:10 -- Her background working with plaintiff law firms, and how that experienced has informed her scholarship.

7:02 -- Take-aways from the Twitter v Musk case, the "trial of the century that wasn't." "The broader lesson for me is that it's both a vindication and a condemnation of corporate law":

Vindication: The outcome should not have been in doubt (for any expert in that area of law). Musk's case was extremely weak. It's thus a vindication because even Elon Musk, the richest man in the world (at least at the time), cannot evade the law."
Condemnation: The take-over has been disastrous for everyone but for the shareholders. That's what corporate law is designed to do: maximize shareholder value. It's been a destructive force, and it is negative for society.

15:00 -- On tech layoffs, and Elon's massive layoffs at Twitter. "I don't think we have to accept the pain that he inflicts in order to get the benefits. That isn't necessary."

16:57 -- On private equity and take-private transactions. "It's unhealthy."

20:44 -- On public benefit corporations and B-corps. "They will solve nothing at all." "Some of the issues: 1) It's opt-in for shareholders, and 2) it does not have enforcement mechanisms that are remotely useful (duties are unenforceable)."

"The reasons that corporations advance shareholder wealth has very little to do with a duty of loyalty of the board and very much to do with the structure of corporations: who has voting rights -governance rights- and so forth."

28:57 -- On crypto, and the SEC v Sam Bankman-Fried case (FTX). "It's a story of defrauding investors in a private company." "The meta purpose of securities regulation is to make sure that capital is allocated efficiently throughout society. Good companies should get money, and bad companies should not get money, so that our economy can grow appropriately."

35:49 -- Litigation in private (venture-backed) companies. Questions on enforceability of information rights restrictions (Delaware section 220 books and records). "Silicon Valley operates under a degree of reputational capital." "[Generally, for these cases] to make it into court there would have to be 1) no arbitration agreement, 2) access to shareholder information rights, and 3) an employee (or other common stockholder) who thinks that there is enough money on the table [to offset] the reputation that they would get if they would sue (their employer or investors)."

41:29 -- Litigation in SPACs. "I think we have seen the end of SPACs." The Multiplan and Delman cases.

45:45 -- On the McDonald's case and the expansion of Caremark duties owed by officers. "What [the judge] hasn't decided is whether this is the board's decision to make a disciplinary decision or whether it should be instead decided by private lawsuits... now, if he changes the standard of when shareholders can sue -if he adopts a new kind of flexible standard- that would be significant, but we have no idea of whether he is going to do that."

49:46 -- On ESG, anti-ESG, and politicization of corporate governance.

56:15 -- On large asset managers passing-through voting power to beneficial owners.

59:02 - The books that have greatly influenced her life:

Make No Law: the Sullivan Case and the First Amendment, by Anthony Lewis (1991)
Gideon's Trumpet, by Anthony Lewis (1963)

59:45 - Her mentors, and what she learned from them.

In academia: Jim Cox, Shu-Yi Oei and Ernie Young at Duke Law School.
In practice: Bill Fredericks.

1:00:32 - Quotes she thinks of often or lives her life by. From Angel (1999 TV Series): "If nothing we do matters, all that matters is what we do.”

1:01:07 - An unusual habit or an absurd thing that he loves: free pizzas from Domino's (a measure of the economy!).

1:03:46 - The living person she most admires: her mom.

Ann M. Lipton is the Michael M. Fleishman Associate Professor in Business Law and Entrepreneurship, and Associate Dean for Faculty Research at Tulane University School of Law.

You can follow Ann on social media at:

Twitter: @AnnMLipton

You can follow Evan on social media at:

Twitter: @evanepstein

LinkedIn: https://www.linkedin.com/in/epsteinevan/

Substack: https://evanepstein.substack.com/

Music/Soundtrack (found via Free Music Archive): Seeing The Future by Dexter Britain is licensed under a Attribution-Noncommercial-Share Alike 3.0 United States License