Mark Roe

Fast casual restaurant Cosi sued the Small Business Administration on Tuesday, alleging it illegally denied its $3.7 million emergency loan request on grounds that the company is currently undergoing bankruptcy proceedings. The Charlestown, Massachusetts-based flatbread chain filed a lawsuit on Tuesday in the U.S. bankruptcy court for the District of Delaware, arguing that the company should be eligible, under the CARES Act, to apply for Paycheck Protection Program loans designed to help small businesses keep employees on payroll amid the novel coronavirus. In a five-count complaint, requesting that the court enjoin the SBA from excluding Cosi and other bankruptcy debtors from access to PPP funds, the food chain alleges that the exclusion is discriminatory, exceeds authority under the CARES Act, and is arbitrary and capricious...Harvard Law professor Mark Roe told Yahoo Finance that bankruptcy could “cut a couple of different ways” under the SBA’s language. “One, is companies that might be able to get out of bankruptcy with the PPP money can’t get it,” he said. “It also gives companies an incentive to not file, or at least not file right away, so that they can get the PPP money and hope that staves off of bankruptcy.” Cosi argues Roe’s first point: That the CARES Act exclusion compromises the company’s chances for emerging from Chapter 11 reorganization. But the main challenge for the SBA is parsing businesses struggling as a result of COVID-19 from businesses that happen to be struggling during COVID-19.

Business bankruptcy filings year-to-date are trending slightly higher compared with the same period last year, but industry experts warn the seemingly moderate escalation obscures the reality of a spike in fillings to come in the wake of the novel coronavirus pandemic...While the current filing numbers look benign on their face, there are several reasons filings have not already skyrocketed despite COVID-19’s shutdown of the U.S. economy since March. Harvard Law professor, Mark Roe, told Yahoo Finance that part of the delay is due to the fact that most companies, when hit with a shock, will exhaust cash sources first, and file for bankruptcy only when they have no other choice. Cash resources contributing to a delay could include the grants and loans made available to small and large businesses through the CARES Act, the $2.2 trillion coronavirus stimulus bill passed by Congress last month. “Even if a company isn't selling anything now, if it has some cash in the bank, or can draw on a bank line, or can somehow just push things along to kick the can down the road most companies will try to do that,” he said, adding that small businesses that have already entered bankruptcy are not eligible for the Act’s Payroll Protection Program. Roe estimated that if the economy continues on its current trend, a surge in bankruptcies should be expected around September or October. In addition, he said, historical correlations exist between increased claims for unemployment and business bankruptcy filings.

An article by Mark Roe: As the coronavirus pandemic shuts down the world’s economies, stock markets plummet, and unemployment rises, policymakers will be forced to figure out how to contain the outbreak while preventing financial and economic collapse. Most economic proposals in developed countries focus on cash payments to people, deferred tax payments, and business bailouts. But biomedicine is critical to saving the economy, and of the three major biomedical channels now in play, the least important medically is the one that could impede an economic Armageddon. It’s a test to check whether a person has had, recovered from, and thus become immune to COVID-19. Scientists say that low-symptom and symptomless cases exceed the symptomatic. When these asymptomatic people are over the infection, they could go to work – they will not infect those with whom they come into contact. But we need to know who they are.

Since the financial crisis, political figures, academics and financial industry participants increasingly decry the rise of “short-termism” in U.S. stock markets. Short-termism, as usually defined by its proponents, is an ongoing trend of corporate myopia. In which corporate managers, driven by investor demands, focus on near-term earnings and stock price maximization at the expense of long-term value creation. ... The case for short-termism, on its face, seems logical, if not compelling. But Mark J. Roe, the David Berg Professor of Law at Harvard University, is among many academic skeptics of the theory. In a 2018 paper, “Stock Market Short-Termism’s Impact,” Roe highlighted the five most valuable companies as of Sept. 19, 2018. ... And as the op-ed from Buffett and Dimon shows, corporate executives do believe that short-term pressures exist. Even Roe admitted in the interview that the aforementioned study of CFOs who focus on quarterly earnings was the “most convincing” data point in favor of the theory. “If CFOs are saying that they are focused on the short term, who are we to second-guess them?” he asked rhetorically.

An op-ed by Mark Roe: Back in August, the Business Roundtable, which comprises the chief executive officers of America’s largest companies – with combined annual revenues of more than $7 trillion – updated its long-standing statement regarding corporate purpose. It’s not just about shareholders, the CEOs say; their firms must be committed to all stakeholders, including customers, employees, suppliers, communities, and the environment. In fact, shareholders came in last on the CEOs’ new list. And the statement’s principal author, in his apparent exhilaration, is reported to have said that he felt like Thomas Jefferson drafting the Declaration of Independence. The August announcement generated three main strands of reaction. First, some liberal commentators applauded US business leaders for finally getting the message. They criticized not the goals, but the lack of a proposal for how stakeholders can hold CEOs directly accountable. More skeptical observers said that the statement differed little from previous Business Roundtable pronouncements on corporate purpose: boards and executives need, or at least want, discretion to balance the interests of various stakeholders other than the company’s owners. For these critics, this latest declaration offered nothing new, but was a restated manifesto of CEO and board discretion and power to run their companies as they see fit.

Purdue Pharma, the company that made billions selling the prescription painkiller OxyContin, filed for bankruptcy days after reaching a tentative settlement with many of the state and local governments suing it over the toll of opioids. The filing late Sunday night in White Plains, New York, was anticipated before and after the tentative deal, which could be worth up to $12 billion over time, was announced last week. ... The bankruptcy means Purdue will likely be removed from the first federal opioid trial, scheduled to start in Cleveland on Oct. 21. According to Harvard Law Professor Mark Roe, an expert on corporate bankruptcy, anyone who wants money from Purdue will now have to go through the bankruptcy court.

Activist funds face an uphill effort getting the votes they need to effectuate change. That’s the view of Mark Roe, professor of Law at Harvard Law School. Roe spoke with The Deal for its Activist Investing Today podcast about why he thinks that observers should be wary about blaming activist hedge funds for perceived short-termism in the markets. “They [activists] have to have a really persuasive explanation for why something should change in their target company, enough so that index funds, pension funds and others, who initially are inclined to favor management, back their efforts,’ Roe said. In a wide-ranging conversation, Roe suggested that there is a widespread, possible misperception that the public stock markets are particularly short term, with hikes in buybacks and cuts in research creating problems in corporate America. However, Roe argues there is mixed data on the subject. He points out that capital expenditures are down everywhere in the developed world, but less so in the U.S. “There is something else going on,” he said. “Activist engagements are up over the past 10- or 15 years. R&D is up significantly over the past 10 or 15 years.”

An op-ed by Robert C. Pozen and Mark Roe. On August 17, President Trump waded into another complex area by a short tweet. He had apparently asked several top business leaders how to “make business (jobs) even better in the United States.” He then directed the Securities and Exchange Commission to study one business leader’s reply: “Stop quarterly reporting and go to a six-month system.” Trump’s tweet reflects the belief of many corporate executives and commentators that quarterly reporting pushes public companies away from attractive long-term investments. However, the long-term benefits of semi-annual reporting are doubtful, while its costs are significant.

An op-ed by Robert C. Pozen and Mark J. Roe. President Trump tweeted on Friday that he had directed the Securities and Exchange Commission to study a suggestion from a business leader, later revealed as outgoing Pepsi CEO Indra Nooyi : “Stop quarterly reporting & go to a six month system.” The popular theory is that quarterly reporting discourages firms from making long-term investments. But switching to semiannual reporting wouldn’t help. Find us CEOs with stockpiles of good, long-term projects that they are not pursuing—but that they would, if only they had three extra months to report earnings. Reporting every six months is nobody’s definition of “long term.” Besides, investors have waited patiently as Amazon, Netflix and many biotech firms have followed long-term strategies.

President Trump proposed Friday that public companies should report their financial results only twice a year instead of quarterly...“If companies report only every six months, then there could be more damage, not less,” says Mark Roe, a professor of corporate and business law at Harvard Law School. Without quarterly updates, “the stock price could drift even farther out of whack from fundamentals, and then the temptation for management to distort earnings could potentially be even greater.”

Trump says he wants to consider requiring companies to report their earnings every six months instead of every three. It would ultimately cut back on the amount of paperwork companies have to contend with, but it would also mean investors would get updated less often about how a company is doing. [Mark Roe] is a professor at Harvard Law School..."The problem is if the firm has gone dark for six months instead of three months, the chances of the stock market's expectations being out of line with what really happens increases."

...Indeed, markets often substantially overvalue the long term, argues Harvard law professor Mark Roe, as evidenced by the intermittent bubbles in technology and other industries...Roe argues the “doomsday version of the stock-market-driven short-termism argument” – firms forgoing the research and development they need and cutting back on capital expenditures so that they can instead support their stock price via expensive share buybacks – is not supported by evidence. Yes, buybacks have risen over the last decade, but companies did not do so by draining their cash reserves: they took advantage of historically low interest rates that allowed them to borrow [and buy back] nearly for free.

An op-ed by Mark Roe. Translated from the French: It’s commonly thought that the stock market forces firms toward excessively short-term strategies. This expected short-termism is often thought to be a source of a good part of our current economic problems, leading policymakers to consider laws . . . to reduce stockholders’ influence...Although some local observations that are consistent, the evidence of an economy-wide impact is thin . . . .R&D expenses [thought to be a victim of stock-markets] have been rising, not falling, even while stockholder influence is thought to be rising. And, contrary to the idea that short-termism is draining cash [for investment] from large American enterprises, corporate treasuries are more flush with cash than ever. Why the gap between received wisdom and the weak supporting evidence?

An op-ed by Mark Roe. The Business Roundtable, a prestigious organisation of the CEOs of the largest American companies, last week urged large public companies to stop telling investors what senior executives expect quarterly earnings will be. Their effort arises from the widespread belief that the scourge of market-driven short-termism is seriously damaging the American economy. Ending this quarterly earnings advice would help. Respected business leaders like Jamie Dimon and Warren Buffett have promoted the idea under the headline that “Short-Termism is Harming the Economy”.

The critics of short-termism have it wrong. The evidence doesn’t support the idea that the economy is suffering because shareholders focused on quarterly reports leads to myopic management...We can go beyond anecdotes. Harvard Law School professor Mark Roe points out in a forthcoming paper that there should be three effects, if short-termism really has spread from Wall Street to management. R&D should be lower, since it has costs today for uncertain benefits in the future; business investment should fall faster in the U.S. than countries less reliant on stock exchanges; and corporate cash should be lower as shareholders demand it back via buybacks and dividends.

An op-ed by Mark Roe. A decade after the global financial crisis, policymakers worldwide are still assessing how best to prevent bank failures from tanking the economy again. Two recent publications – one from the US Department of the Treasury, and another by Federal Reserve economists – provide an indication of where we are. The US Treasury report examined whether to replace the 2010 Dodd-Frank Act’s regulator-led process for resolving failed mega-banks – the Orderly Liquidation Authority (OLA) – with a solely court-based mechanism. The Treasury’s study was undertaken under instructions from President Donald Trump, who was responding to pressure from several Republican congressional leaders – such as Representative Jeb Hensarling of Texas, the chair of the House Financial Services Committee – who advocate replacing regulators with courts.

Twelve of the top 100 most-cited law professors of all time teach at Harvard Law School, according to the Social Science Research Network—and professors Lucian A. Bebchuk and Steven Shavell took the first two spots. An electronic service that aims to make research papers and scholarly articles easily accessible, the SSRN contains over 650,000 documents by more than 360,000 authors...“The rankings reflect the significant impact that the Harvard Law School faculty has on policy research and the legal academy,” Bebchuk wrote in an email. Law Professor Cass R. Sunstein ’75, who ranks in fourth place with 1,484 citations, said he thinks there is a significant benefit to publishing work on SSRN. “I think it’s a good thing if you have a paper that’s published and that could benefit from the comments and criticisms of others,” Sunstein said...The list also includes Law professors Louis Kaplow, Reinier H. Kraakman ’71, Mark J. Roe, Jesse M. Fried ’86, Alma Cohen, Allen Ferrell, John Coates IV, Oren Bar-Gill, and J. Mark Ramseyer.