Larry Cunningham – Hot Topics 2015 to 2016: A New Year Note

What an eventful 2015! Thanks to you, my friends and colleagues in media, business, investing, and academia, for engaging conversations, publications, and gatherings on a range of topics. These include Berkshire Hathaway, shareholder activism, the AIG case, celebrity contract disputes, and many more. During 2016, I’ll continue to offer insights, interviews, and commentary and lecture widely on the vital business stories of the day. As we move into the New Year, herewith a forecast of hot topics in 2016 I’ve been following, gratefully along with many of you, in 2015:

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  1. Shareholder Activism: The Next Generation. A subject of ascending importance, I'm especially interested in the activist personalities and target cultures, and in 2015 commented for a profile of Carl Icahn in the San Jose Mercury News (by Michelle Quinn) and of Nelson Peltz in the Wilmington News Journal (Maureen Milford & Jeff Wordock) as well as the case of DuPont Company on WDEL Radio (Frank Geravce). Expect to see more of the younger generation of activists—even younger than Bill Ackman and with fewer resources—as this approach to governance cements as mainstream. I am directly involved in a few of these efforts, including as a director nominee.
  1. Conglomerates: Google the Vanguard. As a cross-current against activism, I foresee continued restoration of the conglomerate business model. In 2015, I endorsed Google's move in that direction, as noted in stories in The Omaha World-Herald (Steve Jordan), Quartz (Max Nisen), and MarketWatch (Tim Mullaney). I expect to see more conglomerates, even as many shareholder activists oppose them, and predict that the clash will be resolved by switching from a general aversion to gloms to the specific question of the model's suitability for particular personalities, ownership structures, and corporate cultures.
  1. Berkshire's Culture. I continue to believe that Berkshire corporate culture is special and full of lessons. In 2015, I was grateful to many editorial page editors for printing my op-eds on this theme. These addressed corporate culture and leadership in The Wall Street Journal (thanks Mark Lasswell & Paul Gigot); what's so instructive about Berkshire in The Omaha World-Herald (thanks Deb Shanahan & Steve Jordan); and numerous aspects of Berkshire and Buffett in the Dealbook of The New York Times (thanks Jeff Cane & Peter Henning, Wayne State U.). More to come in 2016 as the company continues to both evolve and stay the same, as thoughtfully put in various stories in which I'm quoted, including in Fortune (Roger Lowenstein) and Reuters (Luciana Lopez).

 

4.Berkshire Beyond Buffett. I continue to analyze Berkshire in order to monitor the thesis put forth in my 2014 book, Berkshire Beyond Buffett: The Enduring Value of Values, that Berkshire will endure long after Buffett leaves the scene. Media treated the book well, into 2015, with reviews early in the year in The Economist and Strategy & Business (Theodore Kissi) capping off dozens in late 2014, including in The Financial Times (Steve Foley) and Wall Street Journal (Preeta Das). I was especially heartened by The Library Journal listing the book as a top-10 seller last academic year, and The Washington Post, for naming it a top 10 read for the summer (thanks David Kass, U. Maryland). A new edition will most likely be warranted around 2018.

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  1. Greenberg and AIG v. United States. During the first half of 2016, the cross-appeals of both sides in Hank Greenberg's case against the U.S. for its nationalization of AIG should be decided. I am on Greenberg's side, as I explained in reviewing the lower court's split ruling in the summer of 2015 inThe National Interest (thanks Jacob Heilbrrunn) and the Harvard Corporate Governance blog (thanks Lucian Bebchuk, Harvard U.). Greenberg and I laid out the basic argument of his case in our 2013 book, The AIG Story. There may be another book there in the future as well.
  1. Popular Contracts. The second edition of my book, Contracts in the Real World: Stories of Popular Contracts and Why They Matter, will be out in the spring of 2016 (Cambridge U. Press). I include some doozies from 2015, including one featuring Spelman College v. Bill Cosby, which was noted in The Atlanta Journal Constitution (Janel Davis). Another fascinating one involves the fight between Perella Weinberg and former partners that Bloomberg (Sonali Basak & Chris Dolmetsch) quoted me about this year. I spotlight celebrities in the “deal-breaking” news when their foibles turn out to be not only entertaining but educational.
  1. Quality Investing. My most recent book debuts next week—Quality Investing: Owning the Best Companies for the Long Term. Written with portfolio managers of London-based AKO Capital, we offer twenty case studies of great companies such as Diageo, Hermès, L'Oréal, and Unilever, to discern the patterns that signify high quality companies. We explain why they are worth paying an investment premium to own. A preview can be found on Value Walk (Rupert Hargreaves).
  1. Berkshire Annual Letter and Meeting. I'm sure Berkshire's 2016 letter and meeting will be as memorable as all others I've enjoyed over the past 20 years. I look forward to engaging friends on these topics again, which in 2015 included fun appearances with Betty Liu on Bloomberg TV and Liz Claman on Fox News plus op-eds in New York Times and The Omaha World-Herald and joining a panel of 30-plus experts collaborating on the Wall Street Journal's annotation of Buffett's letter (Preeta Das & Erik Holm). This year will unveil not only the 20th anniversary edition of The Essays of Warren Buffett: Lessons for Corporate America, but also a new annotated transcript of the 1996 symposium where we launched that book. This special publication will be illuminated by such notables as Bill Ackman (who attended the original symposium) and Robert Hagstrom.
  1. Berkshire Acquisitions. In August 2015, I spent many hours with journalists addressing Berkshire's $38 billion acquisition of Precision Cast Parts, including at WaPo, Bloomberg News, Bloomberg TV, and Oregon Public Radio. But the far more important acquisition of the year was Berkshire's $400 million purchase of Detlev Louis—for reasons I explain in the forthcoming issue of European Business Review in a piece called Warren Buffett Arrives in Europe: Seeking Quality Companies to Preserve and Protect. My thesis, in short: Berkshire's future will include a huge concentration of acquisitions across Europe, a mirror image of its past twenty years in the U.S.
  1. Berkshire's Blemishes. Despite achievements, Berkshire is not perfect. I detail the faults and suggest some cures in an article slated for publication in the Spring from Columbia University. This will complement the piece I published in December 2015, with Wake Forest University, Berkshire's Disintermediation: A Managerial Model for the Next Generation. The title of the forthcoming piece: Berkshire's Blemishes: The Visible Costs of Buffett's Unique Managerial Model, which I presented it at the Museum of American Finance symposium on Berkshire at Fifty, and which was the subject of thoughtful commentary on these articles in MarketWatch (by Elliot Smith). Thesis: a resounding referendum favoring Berkshire accompanied by some vital changes that should be made now or soon to sustain it.
  1. Private Equity. For that Museum event, I wrote a piece exploring Buffett's relationship with Wall Street, including private equity, subtitled “The Best of Frenimies.” Comparing Berkshire with private equity will be an increasingly hot topic, and has been the subject of my seminar at GW the past two year, as noted in Value Walk and Columbia U.'s Blue Sky Blog (thanks Kate Judge). The seminar and related research are providing the foundation for a book. The tentative thesis? That the future of private equity will draw on lessons from Berkshire Hathaway—and that Berkshire will evolve into a modified form of private equity.
  1. Expert Witness Work. During 2015 and into 2016, I served as an expert witness in two major cases, one involving corporate governance issues in the case of Boeing and its Russian co-venturer in the Sea Launch project, and the other an antitrust case alleging conspiracy effectuated through securities disclosures and analyst conference calls. My ability to comment on these at the early stages may be limited but I expect both subjects to be of continuing long-term interest.

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Larry is a professor of law at the George Washington University Law School. He joined the GW Law School faculty in 2007, having previously taught for 6 years at Boston College (where he served a 2-year term as Academic Dean) and for 8 years at Cardozo (where he served a 5-year term as Director of the Heyman Center on Corporate Governance). He also taught courses at many other schools in the US and abroad, including Central European University, Columbia University, Hebrew University, University of Navarra, and Vanderbilt University. Before entering academia, he practiced corporate law for 4 years at Cravath, Swaine & Moore. He earned his BA from University of Delaware and his JD magna cum laude from Cardozo. Larry writes extensively in corporate and securities law, with a special emphasis on law and accounting and investor perspectives. He teaches courses in those fields as well as Contracts. He has published a dozen books and 50 law review articles. His recent books include: Contracts in the Real World: Stories of Popular Contracts and Why They Matter (Cambridge University Press 2012), The AIG Story (Wiley 2013), The Essays of Warren Buffett: Lessons for Corporate America (Carolina Academic Press 2013), and Berkshire Hathaway’s Value of Values (Columbia University Press 2014). Areas of Interest: Accounting, Auditing, Contracts, Corporate Law, Finance, Investing, Legal Education, Securities Regulation