Sunday, October 19, 2014
SEC: "This marks the first high frequency trading manipulation case." http://t.co/TZVPtpTsgi— Stefan Padfield (@ProfPadfield) October 16, 2014
"SEC Announces Date for Annual Government-Business Forum on Small Business Capital Formation" http://t.co/jeUmFirCok— Stefan Padfield (@ProfPadfield) October 16, 2014
Brief: law firm "inappropriately represented...both [corporation] and the individual director and officer defendants” http://t.co/4PWixxGU1y— Stefan Padfield (@ProfPadfield) October 18, 2014
Sunday, October 12, 2014
"The Theory of the Transnational Corporation at 50+"; "J.M. Keynes, F.A. Hayek and the Common Reader" & other papers http://t.co/WfoxmsVudx— Stefan Padfield (@ProfPadfield) October 6, 2014
Factors leading to the "disconnect between the financial sector and the real economy" include: http://t.co/nfX4ecgrgt— Stefan Padfield (@ProfPadfield) October 9, 2014
"the creation of the SEC caused boards to become significantly less independent" http://t.co/dha69KiAEh— Stefan Padfield (@ProfPadfield) October 9, 2014
Are "markets and regulatory systems ... rigged to favor the few at the expense of the many"? http://t.co/q72j6vGF0T— Stefan Padfield (@ProfPadfield) October 9, 2014
"Investor Advisory Committee Offers Recommendations on Accredited Investor Definition and Proxy Vote Disclosure" http://t.co/PBZk2MWHb6— Stefan Padfield (@ProfPadfield) October 11, 2014
Sunday, October 5, 2014
"whether the 'fiduciary duty' element of securities fraud is to be defined by...state law or...federal common law" http://t.co/5x5O0QJtsf— Stefan Padfield (@ProfPadfield) September 30, 2014
[Todd Zywicki] Israel Kirzner for the Nobel Prize in Economics?: So predicts Thomson Reuters in its annual pre... http://t.co/bxbdPc45UW— Volokh Conspiracy (@VolokhC) September 29, 2014
"Perhaps ... the interests of capital and labour coincide. All would benefit from higher wages." http://t.co/YW4NFfohGy— Stefan Padfield (@ProfPadfield) October 4, 2014
Sunday, September 28, 2014
"Six years after the government saved Wall Street from the brink of collapse, the lawsuit is coming to trial" http://t.co/GqcrgCKSdo— Stefan Padfield (@ProfPadfield) September 24, 2014
"unsettled areas of the law governing ... disputes among co-owners of closely held business entities" http://t.co/An9ApnIeGV— Stefan Padfield (@ProfPadfield) September 25, 2014
Sunday, September 21, 2014
Frank Pasquale on “how masterful manipulation of the law has allowed tech and finance giants to grow incredibly fast”
Like many people I know, I am a huge fan of Frank Pasquale. Thus, I was very excited to read his Balkanization interview (available here) discussing his forthcoming book, “The Black Box Society.” The interview touches on a wide range of topics, so you should go read the whole thing, but here is an excerpt to tempt you in case you’re on the fence:
I think our academic culture is very good at analysis, but oft-adrift when it comes to synthesis. Specialization obscures the big picture. And law can succumb to this as easily [as] any other field. For example, in the case of internet companies, cyberlawyers too often confine themselves to saying: “Google and Facebook should win key copyright cases, and subsequent trademark cases, and antitrust cases, and get certain First Amendment immunities, and not be classified as a ‘consumer reporting agency’ under relevant privacy laws,” etc. They may well be correct in every particular case. But what happens when a critical mass of close cases combines with network effects to give a few firms incredible power over our information about (and even interpretation of) events?
Similarly, old banking laws may fit poorly with the new globalized financial landscape. Finance lawyers churn out position papers dismantling the logic of Dodd-Frank, Basel, Sarbanes-Oxley, etc. But if too-big-to-fail firms keep growing bigger, assured of state support, while everything else the government does is deemed contingent: what kind of social contract is that?
The lawyers of the Progressive Era and the New Deal dealt with similar challenges: massive firms that warped the fabric of economic, political, and even cultural life to their own advantage. They consulted the best of social science to recommend regulation—but they didn’t let some narrow field (like neoclassical economics) act as a straitjacket (as, say, antitrust lawyers of today are all too prone to do).
Sunday, September 14, 2014
This coming Tuesday, I am scheduled to provide a brief overview of the corporate law/theory aspects of Hobby Lobby as part of the University of Akron’s Supreme Court Roundup. What follows are the seven key quotes from the opinion that I plan to focus on (time permitting) in order to highlight what I see as the key relevant issues raised by the opinion. Comments are appreciated.
Issue 1: Did corporate theory play a role in Hobby Lobby?
While I believe the majority made a pitch for applying a pragmatic, anti-theoretical approach (“When rights, whether constitutional or statutory, are extended to corporations, the purpose is to protect the rights of … people.” Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751, 2768 (2014)), the following quote strikes me as conveying an underlying aggregate view of corporations:
In holding that Conestoga, as a “secular, for-profit corporation,” lacks RFRA protection, the Third Circuit wrote as follows: “General business corporations do not, separate and apart from the actions or belief systems of their individual owners or employees, exercise religion. They do not pray, worship, observe sacraments or take other religiously-motivated actions separate and apart from the intention and direction of their individual actors.” 724 F.3d, at 385 (emphasis added). All of this is true—but quite beside the point. Corporations, “separate and apart from” the human beings who own, run, and are employed by them, cannot do anything at all.
134 S. Ct. at 2768.
September 14, 2014 in Business Associations, Constitutional Law, Corporate Governance, Corporate Personality, Corporations, Current Affairs, Religion, Social Enterprise, Stefan J. Padfield, Unincorporated Entities | Permalink | Comments (2)
Sunday, September 7, 2014
"At some point, almost all regulation must rely on the ethics of those within financial services organizations." http://t.co/sZ4UUWkaJ2— Stefan Padfield (@ProfPadfield) September 3, 2014
"Free-marketeers decry 'big government' yet ... big business benefit hugely from the state" http://t.co/Mdk69mjZpw— Stefan Padfield (@ProfPadfield) September 4, 2014
"Why exactly must the states respect federal Bill of Rights protections that apply to corporations?" http://t.co/gr4zDH6Eru— Stefan Padfield (@ProfPadfield) September 4, 2014
"the assumption that unethical workplace behavior is the product of a few bad apples has blinded many organizations" http://t.co/IdyQLFch2y— Stefan Padfield (@ProfPadfield) September 5, 2014
Sunday, August 31, 2014
"business is...so in thrall to finance, that capital accumulation is their primary goal, rather than value creation" http://t.co/J9yA0hkJTs— Stefan Padfield (@ProfPadfield) August 31, 2014
“we now have more business income in non-C-corporate form than we do in C-corporate form.” http://t.co/TwbimVCxcB— Frank Pasquale (@FrankPasquale) August 30, 2014
"Litigation filed in federal court is associated with a significantly higher takeover premium" http://t.co/SKyT3MXvwW— Stefan Padfield (@ProfPadfield) August 29, 2014
This is huge: 9th Cir. Court rules FedEx drivers in California are employees, not contractors: http://t.co/0nI4K53cON— Paul M. Secunda (@psecundaWrkProf) August 28, 2014
"China and India are moving towards mandatory, not voluntary, CSR [corporate social responsibility] regimes" http://t.co/eDTYGdypW8— Stefan Padfield (@ProfPadfield) August 26, 2014
Sunday, August 24, 2014
'The government is asking for the public's input about how narrowly to define a "closely held" corporation' ... http://t.co/dyxD74c2qt— Brian JM Quinn (@bjmquinn) August 22, 2014
“millennials collectively favor companies that embrace the values of good citizenship” http://t.co/6UANthEZH9— Frank Pasquale (@FrankPasquale) August 18, 2014
Sunday, August 17, 2014
"free-market fundamentalism plays a largely unacknowledged role in the phenomenon of modern narcissism" http://t.co/F1o7jUR4DA— Frank Pasquale (@FrankPasquale) August 16, 2014
"Call for papers: Special issue on Gender, Business Ethics, and Corporate Social Responsibility" http://t.co/p9GrTsHHwK— Stefan Padfield (@ProfPadfield) August 11, 2014
Business schools aren't producing ethical graduates: http://t.co/Rvwb5AcoJY— Businessweek (@BW) August 7, 2014
Sunday, August 10, 2014
The following paragraph is an excerpt from Micro-Symposium on Competing Theories of Corporate Governance, 62 UCLA L. Rev. Disc. 66, which can be found online (here) and is also available via Westlaw.
On Friday, April 11, and Saturday, April 12, 2014, the UCLA School of Law Lowell Milken Institute for Business Law and Policy sponsored a conference on competing theories of corporate governance…. This conference provided a venue for distinguished legal scholars to define the competing models, critique them, and explore their implications for various important legal doctrines. In addition to an oral presentation, each conference participant was invited to contribute a very brief essay of up to 750 words (inclusive of footnotes) on their topic to this micro-symposium being published by the UCLA Law Review’s online journal, Discourse. These essays provide a concise but powerful overview of the current state of corporate governance thinking….
The included essays:
- Stephen M. Bainbridge, An Abridged Case For Director Primacy
- George S. Georgiev, Shareholder vs. Investor Primacy in Federal Corporate Governance
- David Millon, Team Production Theory: A Critical Appreciation
- Usha Rodrigues, David and Director Primacy
- Stefan J. Padfield , Citizens United, Concession Theory and Corporate Social Responsibility (CSR)
- Christopher M. Bruner, Corporate Governance Theory and Review of Board Decisions
- Robert T. Miller, The Board Veto and Efficient Takeovers
- Lisa M. Fairfax, Toward a Theory of Shareholder Leverage
- Iman Anabtawi, Shadow Directors
- Michael D. Guttentag, Shareholder Primacy and the Misguided Call for Mandatory Political Spending Disclosure by Public Companies
- James J. Park, Averages or Anecdotes? Assessing Recent Evidence on Hedge Fund Activism
Shameless self-promotion excerpt:
In extremely truncated form, my argument proceeds as follows. While both director primacy and shareholder primacy differ in terms of who should control corporate decisionmaking, both identify shareholder wealth maximization as the positive and normative goal of corporate governance. In addition, while team production theory tempts advocates of CSR, in the end it also falls short of supporting mandatory CSR. As for the theories of corporate personality, both aggregate theory and real entity theory view the corporate entity as standing in the shoes of natural persons to some meaningful degree (typically the shareholders in the case of aggregate theory and the board of directors in the case of real entity theory), thereby providing corporations a basis for resisting government regulation. Only concession theory, which views the corporation as fundamentally a creature of the state created to serve public ends, can support mandatory CSR as a normative matter. Thus, the advocates of mandatory CSR should use concession theory, with its emphasis on the public roots of corporations, to provide the compelling narrative necessary to move our corporate law beyond its exclusive focus on shareholder wealth maximization.
Stefan J. Padfield , Citizens United, Concession Theory and Corporate Social Responsibility (CSR), 62 UCLA L. Rev. Disc. 84, 86 (2014).
Sunday, August 3, 2014
"focus of modern corporate law theory on the concerns of shareholders is historically and geographically contingent" http://t.co/9PRrmrWypW— Stefan Padfield (@ProfPadfield) July 29, 2014
NLRB "said..McDonald's..corporate operations can be lumped in with..thousands of franchises for liability purposes" http://t.co/I6PXg2cZb9— Stefan Padfield (@ProfPadfield) July 30, 2014
Blogged: the economic basis of virtue http://t.co/st156SyDpY in partial praise of ResPublica's report on banking— Chris Dillow (@CJFDillow) July 30, 2014
"Although..contracts are important..it is..important to acknowledge that the state..continues to be deeply involved." http://t.co/La4UUGIuio— Stefan Padfield (@ProfPadfield) August 1, 2014
Sunday, July 27, 2014
An Updated Draft of “Corporate Social Responsibility & Concession Theory” and Some Further Thoughts on Hobby Lobby
I have posted an updated draft of my latest piece, “Corporate Social Responsibility & Concession Theory” (forthcoming __ Wm. & Mary Bus. L. Rev. __) on SSRN (here). Here is the abstract:
This Essay examines three related propositions: (1) Voluntary corporate social responsibility (CSR) fails to effectively advance the agenda of a meaningful segment of CSR proponents; (2) None of the three dominant corporate governance theories – director primacy, shareholder primacy, or team production theory – support mandatory CSR as a normative matter; and, (3) Corporate personality theory, specifically concession theory, can be a meaningful source of leverage in advancing mandatory CSR in the face of opposition from the three primary corporate governance theories. In examining these propositions, this Essay makes the additional claims that Citizens United: (A) supports the proposition that corporate personality theory matters; (B) undermines one of the key supports of the shareholder wealth maximization norm; and (C) highlights the political nature of this debate. Finally, I note that the Supreme Court’s recent Hobby Lobby decision does not undermine my CSR claims, contrary to the suggestions of some commentators.
I expect to have at least one more meaningful round of edits, so all comments are welcome and appreciated.
As to the last point of the abstract, let me explain why I don’t think Hobby Lobby has meaningfully expanded the ability of corporations to pursue socially responsible actions lacking in any colorable shareholder wealth justification, which, in light of the business judgment rule, is where I believe much of the interesting CSR action is taking place. I’ll first briefly go through my understanding of what the Court held in Hobby Lobby, and then see if anything new is added to our understanding of corporations’ ability to pursue CSR activities. My analysis proceeds roughly as follows:
1. Are corporations capable of exercising religion?
As a matter of statutory construction, determining whether corporations can exercise religion for purposes of the RFRA requires looking to the Dictionary Act, which includes corporations under the definition of "person" unless the context indicates otherwise. I agree with Justice Ginsburg that the context of exercising religion is one that properly excludes corporations. In addition, due to my view of the corporation as being fundamentally a creature of the state, I have Establishment Clause concerns about allowing the recipients of the state’s corporate subsidy to further religious ends via that grant. (I address some of the related unconstitutional conditions arguments here.) But in the end, the Court said corporations can exercise religion, so that’s likely the final word till a Justice retires.
2. Is the exercise of religion by corporations ultra vires?
Given that the Court has deemed corporations capable of exercising religion, the next question is whether they have been granted the power to do so by the state legislatures that created them. In other words, is the exercise of religion ultra vires? When Justice Alito says that “the laws … permit for-profit corporations to pursue ‘any lawful purpose’ or ‘act,’ including the pursuit of profit in conformity with the owners' religious principles,” I believe he is best understood as affirming that religious exercise, like charitable giving, is not ultra vires, nothing more.
3. Can corporations sacrifice shareholder wealth to further religious exercise?
So, corporations have the ability to exercise religion and it is not ultra vires for them to do so. None of that, however, should change the fact that if the religious exercise does not somehow advance shareholder wealth and any shareholder legitimately complains, then a viable waste or fiduciary duty claim has been asserted. Alito seems to recognize this point when he qualifies his conclusion about the viability of abandoning profit-maximization with: “So long as its owners agree ….” As Jay Brown put it (here), “this is a rule of unanimity…. it doesn't actually alter the board's legal duties.” In other words, I agree with my co-blogger Josh Fershee when he argues (here) that Hobby Lobby should not be read to create some new First Amendment defense for controlling shareholders or directors facing viable claims of waste of corporate assets or duty of loyalty violations.
Assuming all the foregoing is correct, I don’t see anything new in Hobby Lobby vis-à-vis a corporation’s ability to engage in CSR activities. Obviously, it doesn’t take much to satisfy the business judgment rule, but that’s not the issue. If there is any new ground here it should arguably create a defense where no rational business purpose is asserted (I don’t believe Hobby Lobby has redefined “business” for purposes of the waste doctrine). That’s precisely what makes benefit corporations special and necessary – they provide such a defense for corporations pursuing activities with a public benefit but open to the challenge that there is no concomitant shareholder wealth benefit. As Robert T. Esposito & Shawn Pelsinger put it (here), “the principal argument for social enterprise forms rests on the assumption that corporate law and its duty to maximize shareholder wealth could not accommodate for-profit, mission-driven entities.”
So, has Hobby Lobby somehow meaningfully shifted the playing field when it comes to CSR? I don’t think so.
Sunday, July 20, 2014
All of us here at the Business Law Prof Blog join all those inside and outside the legal blogging community who are today mourning the loss of Dan Markel. Our thoughts and prayers go out to all the loved ones he left behind.
From PrawfsBlawg (here):
We Have Lost Our Beloved Friend, Dan Markel
We write this together, all of us, as a community. Our friend Dan Markel has been taken from us, suddenly and terribly. His law school, the Florida State University College of Law, will issue an announcement in due time. We do not have all the details, but our understanding is that Dan was shot and killed. Painful as it is to say that, and as little as we know, the early news reports left enough room for speculation that it seemed necessary to say that much. The terrible, senseless nature of his loss makes it all the harder to bear.
All of us here on Prawfsblawg live in different places and come from different backgrounds. What we have in common, with many others, is Dan. His network of friends and loved ones--and he had a great deal of love for all his many friends, as we did and do for him--is enormous. His boundless energy was at the center of this community; it made it run, it gave it life. We are stunned and bereaved by his loss, and our thoughts go to his two little boys, who were precious to him, and to his family. Many, many people loved him and are grieving today. Baruch dayan emet.
Sunday, July 13, 2014
"How Hobby Lobby Undermined The Very Idea of a Corporation" http://t.co/Rq4F6LKpCr— Ian Bogost (@ibogost) July 5, 2014
"how the common law has personified the state and how those personifications affect ... state responsibility" http://t.co/faAgRTY8cR— Stefan Padfield (@ProfPadfield) July 10, 2014
ICYMI: "Hosanna-Tabor..appears to [=] religious groups are different from secular groups for constitutional purposes" http://t.co/rydH7PM1zr— Stefan Padfield (@ProfPadfield) July 10, 2014
"a corporation has no purposes..separate from those of the people who own and control it" & the state that created it http://t.co/J157qm2PTK— Stefan Padfield (@ProfPadfield) July 11, 2014
Sunday, July 6, 2014
Let me start by publicly announcing a forthcoming panel discussion at this year’s AALS Annual Meeting, tentatively titled “The Role of Corporate Personality Theory in Corporate Regulation.” As the organizer of this panel, I am extremely grateful to Stephen Bainbridge, Margaret Blair, Lisa Fairfax, and Elizabeth Pollman for agreeing to participate in what promises to be a thoroughly enjoyable discussion. For those of you who like to plan ahead, the panel is scheduled for Monday, Jan. 5, from 2:10 to 3:10 (part of the Section on Socio-Economics Annual Meeting program).
Given Stephen Bainbridge’s pending participation, I was interested to read a couple of his posts from a few weeks ago wherein he asked (here), “When was the last time anybody said anything new about corporate personhood?” and concluded (here), “I struggle to come up with anything new to say about the issue, when people have been correctly disposing of the legal fiction of corporate personality for at least 126 years!”
While I understand that asserting there is nothing new to say on a topic is not necessarily the same thing as saying it is not worth talking about, I still find myself motivated to explain why I think talking about corporate personality theory continues to constitute valuable scholarly activity (and, yes, I will connect all this to Hobby Lobby).
First of all, some qualifiers: (1) I distinguish corporate personality theory from corporate personhood because a thumbs up on corporate personhood (i.e., acknowledging that corporations can sue and be sued, etc.) still leaves a number of important questions regarding the nature of this “person,” which I believe theories of corporate personality (typically: artificial entity theory, real-entity theory, or aggregate theory) are well-positioned to answer. (2) While theories of corporate governance (typically: shareholder primacy, director primacy, or team-production theory) are distinct from theories of corporate personality, I believe there are at least some legal issues that are profitably analyzed by viewing both sets of theories as constituting a pool from which to choose an answer. With those introductory propositions in place, here are three reasons why I believe corporate personality theory still matters:
Thursday, July 3, 2014
The following comes to us from guest blogger Tamara Belinfanti, with commentary to follow:
[Due to copyright concerns, I've replaced the image with a link at least for the time being.]
Sunday, June 29, 2014
I'm currently on a road trip, so I'll keep this short. Here's a cartoon our readers may enjoy that went just a tiny bit viral on Twitter this past week (ht @nminow):
"I, too, hate being a greedy bastard, but we have a responsibility to our shareholders." pic.twitter.com/eQao6bDOaj— Stefan Padfield (@ProfPadfield) June 22, 2014
Sunday, June 22, 2014
Sunday, June 15, 2014
We here at the BLPB are very excited to be able to welcome back Prof. Tamara Belinfanti for a second month of guest blogging. You can find a couple of her prior posts here and here. The following bio comes from her New York Law School profile page, which you can find here. Welcome back, Tamara!
Professor Belinfanti joined the faculty in fall 2009 and teaches Corporations, Contracts, and a corporate transactional skills seminar. Professor Belinfanti’s scholarly interests include general corporate governance matters, executive compensation, the proxy advisory industry, shareholder activism, and law, culture and identity. Prior to joining academia, Professor Belinfanti was a corporate attorney at Cleary Gottlieb Steen & Hamilton LLP, where she counseled domestic and international clients on general corporate and U.S. securities regulation matters, and was co-editor of the securities law treatise, U.S. Regulation of the International Securities and Derivatives Market (Aspen, 2003). Professor Belinfanti received her Juris Doctor, cum laude, from Harvard Law School in 2000.