{"id":1393,"date":"2017-12-20T09:51:06","date_gmt":"2017-12-20T14:51:06","guid":{"rendered":"https:\/\/www2.law.temple.edu\/10q\/?p=1393"},"modified":"2017-12-20T09:51:06","modified_gmt":"2017-12-20T14:51:06","slug":"opinion-practice-back-80s","status":"publish","type":"post","link":"https:\/\/law.temple.edu\/10q\/opinion-practice-back-80s\/","title":{"rendered":"Opinion Practice: Back to the 80s?"},"content":{"rendered":"

Occasionally, the editors of The 10-Q are inspired to share their opinions with our readers, and today is one of those occasions.\u00a0 We\u2019ve decided to make this a somewhat regular feature of The 10-Q, which we will call Opinion Practice<\/em>.<\/p>\n

\n

Back to the 80s?<\/h1>\n

The current efforts in Washington under the new Administration to rapidly \u201cunregulate\u201d various sectors of the economy, along with proposals for massive tax cuts specifically targeted at capital accretion in the environment of a rapidly rising stock market and the reemergence of the activist investor is a Back to the Future moment.<\/p>\n

Are we reentering the days of Ivan Boesky, Michael Milkin, the Bonfire of the Vanities<\/em> and the Den of Thieves<\/em> yet again?\u00a0 And if so, what does that portend for business lawyers?<\/p>\n

During the 1980s, the Reagan Administration vigorously followed up on the early deregulation forays of the Carter Administration in various industry sectors: transportation, energy, and telecommunications, to name a few.\u00a0 Perhaps most significantly, the EPA under Anne Gorsuch and Interior Department under James Watt sought to cut back rapidly on environmental and public land preservation efforts from the 70s.<\/p>\n

These efforts ultimately led to the Chevron<\/em> decision which vested great authority and imprinted judicial deference with and towards administrative agencies in construing their statutes, even if their interpretations appeared to be different from the original purposes of the legislation under which these regulations were promulgated.\u00a0 Similarly, the Reagan Administration in 1986 augured in an era of massive tax cuts.\u00a0 In this milieu, the late 80s were marked by leveraged buyouts, junk bonds, constant threats of take overs, mass layoffs and industry consolidation in many areas.<\/p>\n

Fast forward 30 years later and many of these themes appear to be repeating themselves in the early days of the Trump Administration.\u00a0 What can business lawyers learn from this history?<\/p>\n

First, like the 1986 tax bill, the current tax bill in Congress promises a field day for clever lawyers and accountants, as a whole number of new potential loop holes have been opened up.\u00a0 In particular, the idea of \u201cpass through\u201d income for S, partnership and other types of corporate entities will certainly create opportunities to shield ever more otherwise taxable income.<\/p>\n

Second, the financial windfall that corporations will receive under the proposed cut in rate is more likely to lead to stock buybacks and more consolidation.\u00a0 Some of the same characters from the 80s are back on the scene, like Carl Icahn and Wilbur Ross, who are well versed in this environment.<\/p>\n

Back in the late \u201880s and early \u201890s, one response was that a number of states changed their corporation statutes and modified the definition of \u201cfiduciary\u201d duty in efforts to protect employees and jobs (\u201cconstituencies\u201d) in their states.\u00a0 Using stock options to incentive \u201cpay for performance\u201d also took off in the 1980s. \u00a0If anything, the practice is even more common now, and may grow as a result of current policy.<\/p>\n

A good example<\/a> is what\u2019s going on with railroad CSX. \u00a0An activist investor installed Hunter Harrison as CEO at a time when CSX is enjoying historic profitability.\u00a0 However, rather than invest in infrastructure and hire more people, Harrison\u2014who passed away suddenly this weekend from undisclosed health issues\u2014caused the company to buy back stock, cut investment and lay off mass numbers of employees.\u00a0 Meanwhile, the stock price continues to creep up. \u00a0Top executives have substantial personal compensation tied to the price of the stock.\u00a0 Before his death, there were rumblings that he was looking to find a transcontinental merger partner.<\/p>\n

The short term result has been some well-publicized train accidents, a substantial degradation in service to customers, and (until recently) greater regulatory scrutiny in Washington. New federal policy changes could potentially \u201csupercharge\u201d these efforts at CSX as well as in many other industries.<\/p>\n

All of this is intended as food for thought for business practitioners to begin to plan for the enormous amount of work that may be generated as a result of these major changes in federal policy, along with the inevitable back lash that will come, creating even more issues and work.\u00a0 Regardless of your politics, it\u2019s a good time to be a corporate lawyer right now.<\/p>\n","protected":false},"excerpt":{"rendered":"

Temple 10-Q editor Jonathan Broder (LAW \u201983) discusses the impact of deregulation and tax cuts on business lawyers<\/p>\n","protected":false},"author":5,"featured_media":1394,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12,38,9],"tags":[485,486,487,488],"coauthors":[2,63],"class_list":["post-1393","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-alumni-authored","category-regulated-industries","category-tax","tag-executive-compensation","tag-regulation","tag-takeovers","tag-taxes","masonry-post","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"yoast_head":"\nOpinion Practice: Back to the 80s? - The Temple 10-Q<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/law.temple.edu\/10q\/opinion-practice-back-80s\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Opinion Practice: Back to the 80s? 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