13 Hastings Business Law Journal, Issue 3

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Article

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THE BOARD'S RESPONSIBILITY FOR CRISIS GOVERNANCE
Lawrence J. Trautman, 13 Hastings Bus. L. J. 275 (2017)

A clear strategy and implementation plan for reasonably foreseeable industry disasters--- before they take place, helps to prevent mistakes made under conditions of severe stress. Survival- threatening disasters such as the BP Gulf of Mexico oil spill or natural disasters such as hurricanes, fires, or the March 11, 2011 Japanese earthquake and tsunami, constitute any board’s worse nightmare. I have attempted to draw upon lessons from each of these disasters and explore how they may be applied more generally across all industries when crisis strikes. While effective risk management is perhaps the topic highest on every board's agenda, it is imperative that thought be given to crisis management and what a board might expect to confront when a corporate disaster strikes.

History shows that efforts of management to focus on industrial safety has produced mixed results. Nuclear energy and the extractive industries such as oil and gas or coal mining appear to be inherently dangerous over long periods of time such that fatal accidents are an unfortunate fact of life. We know from experience that human error or natural disasters will continue to place some of these companies in crisis. Therefore, every board should consider what actions they will take when the foreseeable crisis happens. 

 

Student Notes

DAILY FANTASY SPORTS: A CALL FOR CLEAR GUIDELINES
Paul Suh , 13 Hastings Bus. L. J. 351 (2017)

Professional sports are no longer what they used to be. Imagine rooting for a “fantasy” team that consists of professional athletes, who may or may not have ties to your hometown, from different teams within the same amateur or professional organization. You question whether the countless hours of research spent in drafting your fantasy team were sufficient to win money from other contestants or participants by accruing “fantasy points” based on the statistical performances of individual athletes on a yearly or daily basis. 

 

FROM SPORT STADIUMS TO THE STOCK EXCHANGE:  THE ECONOMIC AGENCY COSTS OF FANTEX'S INCOME-SHARE AGREEMENTS WITH PROFESSIONAL ATHLETES
Nicole Medeiros, 13 Hastings Bus. L. J. 373 (2017)

With the advent of Yahoo! Fantasy Sports, FanDuel, and DraftKings, and other online platforms, sports enthusiasts can not only cheer for their favorite teams, but they can also draft a team of professional athletes, regularly monitor their players’ performances through detailed analytics, and even place friendly wagers. The recent launch of Fantex, a brand marketing and acquisition company, has taken fan engagement to the stock exchange by providing investors an opportunity to purchase stocks linked to their favorite athletes’ earnings. While income-share agreements are not entirely novel, Fantex is the first company to create and securitize income-share agreements with professional athletes. Though existing scholarship has explored important public policy and regulatory considerations regarding income- share agreements, one of the issues not yet explored are the internal agency costs of income-share agreements.

This Note examines the economic agency costs of Fantex’s income-share agreements with professional athletes. Specifically, this Note describes the recent proliferation of income-share agreements, highlights the unique features of Fantex’s brand contracts, and identifies and analyzes possible moral hazards resulting from asymmetric information between Fantex and its contracting athletes. This Note suggests that Fantex and contracting athletes may mitigate those agency costs by incorporating earnout provisions in the agreements. Ultimately, this Note seeks to spark dialogue about Fantex’s innovative model in order to equip stakeholders and affiliated professional athletes with additional insights that will improve the long-term efficacy of the agreements for both parties.