Robbing the Piggy Bank? Moving from mutual to stock form at Friendly Savings Bank

A Q&A with Harvard Law School Professor Holger Spamann

by: Lisa Brem

Corporations and corporate finance courses typically spend the majority of their time talking about the stock form of corporate organization, which makes sense, given that this is the dominant form used by businesses in capitalist economies.  However, Harvard Law School Professor Holger Spamann spent his last Corporations class of the semester teaching a case study about something quite different: the mutual form. Yes, this is the organizational form memorialized in the classic film “It’s a Wonderful Life” in which Jimmy Stewart famously played the part of small community bank champion George Bailey.  Why spend time in a corporations course talking about a mutual bank?  We asked Professor Spamann about Friendly Savings Bank and why he and his co-author Stanley Ragalevsky created this case study.

Lisa Brem (LB): Why did you choose to create this case study for your course?

Holger Spamann (HS): I wanted something to engage broader questions about corporate organization and purpose. The mutual form presents a counter model to the shareholder(-value) driven corporate form, and it is successful at least in a limited realm. It is, therefore, a good launch pad for discussion. The case also raises questions about the role of the lawyer, particularly if one comes to believe that the management is essentially “robbing the bank” in this case.

LB: What challenges and opportunities did teaching the case study present?

HS: We try to draw students into the case by putting them in charge: they lead and present at the hearing. The risk is that you get off track, or rather off timing. It requires setting a strict timetable and reminding the students of it periodically.

LB: What are the major takeaways that students will learn by reading and discussing this case study?

HS: At a minimum, they will be aware that it is possible, at least in a limited realm, to have successful commercial entities that are not controlled by, and operated for, investors. Perhaps they will come to think that these entities have advantages in certain areas, and they may think that the bank lawyers in this case were operating in questionable territory. But that all depends on the view they end up taking on the merits of this case.

LB: How did the students react to the case study?

HS: Generally favorably. Some didn’t get the connection to the big question about entity structuring, which I will make sure to emphasize more next time.

LB: What would you tell (advice you would give) other faculty looking to use this case study?

HS: Watch the clock!

Learn more about the Friendly Savings Bank and download it for free on our website.

Quick facts on Friendly Savings Bank:

Case Study length: 39 pages including attachments.

Format:  Can be taught in an 80 or 90-minute class discussion or taught as a role play simulation in a 2-hour class session.  The simulation has three roles: lawyers for the Regulators, Bank Management, and Dissidents; the Management and Dissident groups take turns presenting their arguments to the Regulators, who make a final determination as to whether Friendly Savings Bank can convert from mutual to stock form.

Teaching Note available for free download to qualified educators on Harvard Law School | The Case Studies website. Note that you must be logged in as a registered educator on our site to download teaching notes.


This entry was posted in Case Study Program Blog Posts. Bookmark the permalink.