July 18, 2011
Corporations/B.A. Roundtable: Teaching the Financial Crisis in the Basic BA Course?
Posted by Lisa Fairfax

As David and Erik's posts suggest, there are many different ways in which you can teach the basic BA/Corporations course, and deciding how, and to what extent, you incorporate the many different topics associated with such a course is always a challenge.  Which is why, from a teaching perspective, the financial crisis was a double-edged sword.  On the one hand, and especially at first glance, the financial crisis seemed like an ideal teaching moment, where you could grapple with issues ranging from the efficacy of the derivatives market to the impact of executive compensation on risk incentives.  More importantly, the financial crisis put issues related to corporate law, corporate governance and core economic concepts center-stage.  From a teaching perspective, this not only enhanced student interest in those issues, but also generated student expectation about coverage related to those issues.  On the other hand, particularly because many did not view the financial crisis as implicating corporate governance concerns, at least not to the same extent as the 2002 crisis, thinking about how best to incorporate the financial crisis into the core BA/Corporations class posed unique challenges--especially if that incorporation had to occur in four credit hours.  I think once you decide that you are going to incorporate the crisis into your basic course, then you must tackle at least three questions.

First, should you teach the crisis as a separate subject, or incorporate it into topics that you already cover?  It is likely that when the crisis initially began unfolding most of us simply taught it on a kind of ad-hoc basis.  I know I found myself taking an extra five (or ten or fifteen. . .) minutes before class talking about issues as they surfaced.  I can imagine others devoted an entire class or otherwise created an extra optional class to teach the issues that emerged during the crisis.  But not only did this prove time-consuming, it also made it very difficult to sufficiently cover other areas. Thus, after that first phase, I knew I needed to be more strategic.  To be sure, given the complexity associated with some of the issues related to the crisis I can well imagine some saying that it is best taught in an upper-level seminar, after students have been exposed to the fundamentals. Ultimately, I made the decision to try to incorporate aspects of the crisis into my basic course.  Of course any tactic you take involves trade-offs related to time and subject matter coverage--which gets to the second question.

On which subjects will you focus?  I decided to integrate the crisis into two areas--financial matters and shareholder rights/responsibilities.  With respect to financial matters, the traditional way in which I had been teaching this subject (consistent with the manner in which it was presented in the course book I used) was to talk about the basic difference between debt and equity, and then talk in greater detail about different types of equity shares as well as the rights associated with them.  Now I have significantly expanded the topic to talk about securitization, derivatives and all of the other financial instruments highlighted by the financial crisis.  I find that students really appreciate gaining an understanding of things like swaps and asset-backed securities, even if it is only for purposes of cocktail conversation!  Moreover, I am able to use transactional documents ranging from charters and by-laws to purchase and mortgage agreements to help explain various financial instruments.  To answer one of Erik-s questions, I at least try to teach my course from a transactional perspective, and teaching the crisis in this manner is ideal because it allows me not only to focus on transactions, but also to expose students to some basic transactional documents.   With respect to shareholders' rights, I discuss topics such as majority voting, proxy access, and say on pay, including how these issues were treated in connection with TARP and Dodd-Frank.  Because I already focused on these topics, incorporating how they emerged in the crisis did not involve that much of a change in my syllabus.

The third question is, what kind of teaching materials do you use?  I confess I need help with this one.  There are some good law review articles and even books out there that you can certainly assign.  And some course books do a better job than others of supplying materials that make certain aspects of the financial crisis teachable.  However, I find myself doing a lot of lecturing to explain the concepts, and then relying on original transactional documents to highlight those concepts, though I believe students enjoy looking at the documents of companies that have become household names like AIG and Lehman.  In any event, if others have found good teaching tools in this regard I welcome hearing about it.

In the end, I always feel like there are more subjects on which I could focus, but I am ever mindful of the need to teach the basics.  Moreover, I am mindful about the broader questions concerning student capacity and absorption.  That is, what do I want students to understand/take away, and how much can I expect them to absorb?  I try to think about these questions every time I re-visit my syllabus--though I am not sure I have come up with the right answers. . .

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