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.
Monday, June 9, 2014
The following comes to us from Maximilian Martin, Ph.D., the founder and global managing director of Impact Economy, an impact investment and strategy firm based in Lausanne, Switzerland, and the author of the report “Driving Innovation through Corporate Impact Venturing.”
In 2010, despite the then-recent economic downturn, an overwhelming majority of corporate CEOs in the UN Global Compact-Accenture CEO Study on Sustainability—93 percent—responded that sustainability will be critical to the future success of their companies. What’s more, they believed that a tipping point could be reached that fully meshes sustainability with core business within a decade, fundamentally transforming core business capabilities, processes, and systems throughout global supply chains and subsidiaries. Three years later, a new 2013 edition of the study argued that many corporate CEOs have found themselves stuck on the ascent towards sustainability.
Radical change in market structures and systems is needed, and a bolder path for industry transformation needs to be charted, at a time when the logic of value creation is changing. The days of traditional corporate social responsibility (CSR)—the bolt-on approach that is compliance driven, costs money, and produces limited reputational benefits—are fast coming to an end, because sustainability is now increasingly driving value creation itself. Assessing joint opportunities for financial and social returns is the way forward.
[CONTINUE AFTER THE BREAK]
Sunday, June 8, 2014
2dCir Curbs trial cts re SEC Settlements http://t.co/FiZEptejl6 DC Cir strikes down SEC when tough, 2d Cir reverses Rakoff when SEC weak— William K. Black (@WilliamKBlack) June 4, 2014
Stiglitz & Greenwald on "A New Approach to Growth ...." w/ commentary from Aghion, Woodford, Arrow & Solow http://t.co/rE3V7xn2tT— Stefan Padfield (@ProfPadfield) June 5, 2014
Sunday, June 1, 2014
We here at the BLPB are thrilled to have Joan Heminway, W.P. Toms Distinguished Professor of Law at the University of Tennessee College of Law, join our team of weekly contributing editors. For most of our readers, no introduction will really be necessary because Joan is one of the most highly regarded and visible members of the corporate law community. In fact, I still harbor some suspicions that she may actually have figured out a way to clone herself -- but that is likely just to make myself feel better when I review her productivity. Not only is she a tremendous scholar, but I know I am one of many who consider her a mentor, and her willingness to give of her time is truly inspirational. I will, as usual, leave the bulk of the introduction to her, but here is a brief excerpt from Prof. Heminway's bio (you can read the full bio here):
Professor Heminway brought nearly 15 years of corporate practice experience when she joined the faculty of the UT College of Law in 2000. She was an attorney in the Boston office of the firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1985 through 2000 working in the areas of public offerings, private placements, mergers, acquisitions, dispositions, and restructurings…. In her research and writing, Professor Heminway focuses most closely on disclosure regulation and policy under federal securities (including insider trading) law and state entity (especially corporate) law. She is best known for her recent work involving crowdfunding and, before that, for a series of articles relating to the insider trading and criminal securities fraud actions against Martha Stewart. She also has … coauthored a number of annotated merger and acquisition agreements and related ancillary documents for Transactions: The Tennessee Journal of Business Law. Professor Heminway is a member of the American Law Institute and is a Research Fellow of the UT Center for Corporate Governance, the UT Center for Business and Economic Research, and the UT Center for the Study of Social Justice.
Sunday, May 25, 2014
"The Role of Tort Law in Disrupting Corporate Manipulation of Societal Cognition" http://t.co/CTvp4iwKEd— Stefan Padfield (@ProfPadfield) May 19, 2014
"This paper..argues that the self-regulation of investment bankers offers no credible deterrence against misconduct." http://t.co/mueTlSRi8d— Stefan Padfield (@ProfPadfield) May 22, 2014
Rebellious Economics Students Have a Point : The New Yorker - http://t.co/XlSi12MelE— Pavlina R Tcherneva (@ptcherneva) May 15, 2014
Sunday, May 18, 2014
DC Court of Appeals Denies Emergency Stay of Conflict Minerals Rule: The DC Court of Appeals denied the motion... http://t.co/mqBkLtE2Ym— TheRacetotheBottom (@RTTBCorpGov) May 16, 2014
"Why is the UK still in the minority of EU countries that has no ... right of employees to vote for directors ...?" http://t.co/4xKn7vRv9f— Stefan Padfield (@ProfPadfield) May 16, 2014
"legal personhood does a better job of explaining..firms..than..nexuses of contracts..principal-agent relationships" http://t.co/LgFdQqZ67o— Stefan Padfield (@ProfPadfield) May 15, 2014
Sunday, May 11, 2014
"The SEC is in the midst of what could be a sweeping reform of its disclosure regime." http://t.co/vBvm6JeeIE— Stefan Padfield (@ProfPadfield) May 11, 2014
"One in 5 college grads now gets a degree in the [business] field." http://t.co/7nFdapLQO3— Stefan Padfield (@ProfPadfield) May 10, 2014
"Corporate Directors, Institutional Investors Remain Divided Over Current State of Executive Pay" https://t.co/lDa09KWTxe— Stefan Padfield (@ProfPadfield) May 10, 2014
Does Brewing Beer Positively Impact Society And The Environment? | The National Law Review http://t.co/siFrjG3QPq— Alicia Plerhoples (@aplerhoples) May 5, 2014
Geithner acknowledges a bias "that the U.S. financial sector was more capable and ethical than it really was.” http://t.co/nhSu8p3T17— Aaron Lucchetti (@AaronLucchetti) May 8, 2014
Sunday, May 4, 2014
"Schools Try Philosophy to Get B-School Students Thinking Beyond the Bottom Line" http://t.co/umFzkKP3vF— Stefan Padfield (@ProfPadfield) May 1, 2014
May 4, 2014 in Business School, Corporate Finance, Corporate Governance, Corporations, Current Affairs, Financial Markets, Securities Regulation, Social Enterprise, Stefan J. Padfield, Teaching | Permalink | Comments (0)
Sunday, April 27, 2014
[The following post comes to us from Lawrence E. Mitchell, Joseph C. Hostetler - Baker & Hostetler Professor of Law at Case Western Reserve University School of Law. All formatting errors should be attributed to me, Stefan Padfield.]
The March 5, 2014 oral argument in Halliburton Co. v. Erica P. John Fund, Inc.1 made clear that one of the issues being considered by the Supreme Court is whether to supplant the "market efficiency" analysis currently required at the class certification stage in securities fraud class action cases with a "price impact" analysis instead. Our purpose is not to debate the relative merits of that potential change. Rather, it is to identify a critical point that seemed to get lost in the argument: neither the Justices nor the advocates addressed what a price impact analysis would look like in the context of the most common securities fraud scenario—the making of false statements designed to mask bad news. While some of the briefing before the Court touches on the issue, the authors of a working paper cited by proponents of both sides have supplemented their views with a recent blog post that, while brief, discusses potential approaches to measuring the "price impact" of such fraudulent statements more comprehensively than anything the parties or their amici filed with the Court. The author-bloggers are law professors, but they are not the same law professors whose amicus brief dominated the questioning at the oral argument itself.
"The Law Professors' Brief"
Given the large number of amicus briefs filed in Halliburton—ten for petitioners, twelve for respondent, and one ostensibly in support of neither party—a disproportionally large portion of the oral argument was focused on the brief Professors Adam C. Pritchard of the University of Michigan Law School and M. Todd Henderson of the University of Chicago Law School filed in support of petitioner Halliburton. Their operating premise is that the "efficient capital markets hypothesis is not necessary to the use of the fraud on the market theory—whenever the market incorporates fraudulent information into the price, a 'fraud on the market' has occurred, whether the market is efficient or not."2 They argue in favor of eliminating one of the current requirements that securities fraud class action plaintiffs must establish to invoke the fraud-on-the-market presumption at the class certification stage, namely the requirement that "the market" in which the security at issue trades be shown to be "efficient." Instead, in determining reliance, they support using event studies to examine whether an alleged misrepresentation caused a movement in the price of the stock.
Justice Kennedy posed specific questions about the "position" or "theory" of "the law professors" to counsel for both sides, Justice Scalia asked about the effect of the professors' "Basic writ small" approach on the provisions of the Private Securities Litigation Reform Act, and Justice Kagan sought from the Solicitor General's Office the government's view "if the law professors' position were adopted."3 More broadly, four of the Justices (Roberts, Kennedy, Breyer, and Alito) asked questions specifically containing the terms "event study" or "event studies."4
The Halliburton Oral Argument Did Not Contemplate The Typical Securities Fraud Case
The vast majority of securities fraud cases do not involve alleged false statements of positive news that might be expected to increase the value of the stock price. Rather, in a typical securities fraud class action, the false statement is one that conceals a development adversely affecting the issuing corporation. Under those circumstances, there is little or no "impact" on the stock at the time the false statement is made; the false statement minimizes or prevents the decline that would otherwise have occurred had investors been given the opportunity to fully consider the negative development and reassess the value of their investments. A measurable "impact" on the stock price in such circumstances would not be seen until a "corrective disclosure" occurs, which could be substantially after the fraudulent statement is made.
However, to the extent the Justices dabbled in hypotheticals from the bench, they contemplated false statements that were accompanied by stock price increases. Justice Alito appeared to suggest that a stock price increase at the time of the misrepresentation is a necessary prerequisite for fraud, although the question could equally be taken as addressing an "inefficient" market where there is a time lag until new information was absorbed. He asked:
to say that false representation affects the market price is quite different from saying that it affects the market price almost immediately, and it's hard to see how the Basic theory can be sustained unless it does affect the market price almost immediately in what Basic described as an efficient market. Isn't that true? Why should someone who purchased the stock on the day, shortly you know, an hour or two after the disclosure, be entitled to recovery if in that particular market there is some lag time in incorporating the new information?5
The Other Law Professors
The amicus brief of Professors Pritchard and Henderson makes passing reference in a footnote to the fact that the impact of a misrepresentation may occur when corrective information is disseminated to the market.6 Two other law professors, Lucian Bebchuk and Allen Ferrell of Harvard Law School, also touch on the issue in a 2013 working paper, and although their paper was cited by petitioner and in one of respondent's amicus briefs, the citations were in support of other propositions.7 In a post-argument blog entry, Professors Bebchuk and Ferrell expand on their working paper, noting that "[w]hile event studies at the time of misrepresentation are an important tool, it is crucial to emphasize that the tools available for implementing a fraudulent distortion approach are not limited to event studies at the time of misrepresentation. A fraudulent distortion approach should not be generally implemented by conducting an event study at the time of misrepresentation."8 As further explained in their blog post:
there are reasons to expect that event studies at the time of misrepresentation would fail to identify a fraudulent distortion in some cases in which it exists. This would be the case when the misstatement was a so-called confirmatory lie—that is, a misstatement made so as to meet market expectations. In such a case, failure to document a price reaction to it would not be expected even assuming the misstatement had a fraudulent impact. In such a fact situation, the confirmatory lie might prevent a stock price drop that would have occurred had the truth been told.9
Professors Bebchuk and Ferrell go on to discuss "event studies at the time of corrective disclosure" and "[a]nother potential analytical tool, with a long tradition in the finance and accounting literature [called] forward-casting."10 They conclude that "the determination of fraudulent distortion would not always be best done by conducting an event study at the time of the misrepresentation."11
* * * *
Should the Supreme Court opt to change the rules of the road by adopting a "price impact" approach, the only rule that would make sense is one that recognizes that the impact can occur not only when a false statement is made, but alternatively (and indeed more often) when the truth is revealed. A rule in which the false statement must cause a measurable "impact" on the price of a company's stock at the time the statement is made would not legitimately incorporate the "price impact" approach as a workable test.
 No. 13-317 (S. Ct.).
 Brief of Law Professors as Amici Curiae in Support of Petitioners at 2 Halliburton Co. v. Erica P. John Fund, Inc., (No. 13-317), 2014 WL 60721 at *2.
 See Oral Argument at 17:10-18; 29:15-17; 34:11-13; 41:11-13, 48:2-11 Halliburton Co. v. Erica P. John Fund, Inc. (No. 13-317), available at http://www.supremecourt.gov/oral_arguments/argument_transcripts.aspx.
 See id. at 17:10-18, 18:7-12; 20:3-9, 21:3-6; 22:8-9, 24:8-14; 29:15-17; 34:11-13; 45:1-4; 52:22 -53:4.
 Id. at 32:1-11 (emphasis added). See also, id. at 21:19-25 (hypothetical by Justice Breyer in which “everybody . . . bought on the New York Stock Exchange and our theory of this case is that the stock exchange did absorb the information and the price went up and then went down.”) (emphasis added).
 See Brief of Law Professors as Amici Curiae in Support of Petitioners at 26 n.9 Halliburton Co. v. Erica P. John Fund, Inc., (No. 13-317), 2014 WL 60721 at *26.
 Lucian A. Bebchuk & Allen Ferrell, Rethinking Basic, Discussion Paper No. 764, Harvard Olin Ctr. for Law, Bus. & Econ. (Dec. 2013), revised April, 2014, available at, http://www.law.harvard.edu/programs/olin_center/papers/764_Bebchuk.php (cited in Brief of Petitioners at 39, Brief of Securities Law Scholars as Amici Curiae in Support of Respondent at 11, 13.
 Lucian Bebchuk and Allen Ferrell, Remarks on the Halliburton Oral Argument (2): Implementing a Fraudulent Distortion Approach, The Harvard Law School Forum on Corporate Governance and Financial Regulation (March 12, 2014, 9:10 AM), (Emphasis added). https://blogs.law.harvard.edu/corpgov/2014/03/12/remarks-on-the-halliburton-oral-argument-2-implementing-a-fraudulent-distortion-approach/.
Sunday, April 20, 2014
"Law & Economics Prof Blog" http://t.co/cB1A56VseC— Stefan Padfield (@ProfPadfield) April 19, 2014
An oldie but a goodie: J.W. Verret on the "Top Ten Books in Corporate Governance" http://t.co/DKtYxhvFTQ— Stefan Padfield (@ProfPadfield) April 17, 2014
"despite the ... importance of shareholder voting, none of the existing corporate law theories coherently justify it" http://t.co/no4frvaw12— Stefan Padfield (@ProfPadfield) April 16, 2014
"business interests have substantial ... impacts on U.S. government policy, while average citizens ... have little" http://t.co/5jgUTC7ZJK— Stefan Padfield (@ProfPadfield) April 16, 2014
Don't read too much into the conflict rules decision in NAM v. SEC http://t.co/EgRmKveXWE— Stephen Bainbridge (@ProfBainbridge) April 14, 2014
Sunday, April 6, 2014
Over at the Harvard LSFOCGAFR, Stephen Cooke, partner and head of the Mergers and Acquisitions practice at Slaughter and May, has posted a fascinating review of “10 Surprises for a US Bidder on a UK Takeover.” It’s a bit long for a blog post (16 printed pages on my end), but well worth the time if you have any interest at all in the subject matter. What follows is a very brief excerpt, which is really just a teaser in light of the excellent depth of treatment the post provides. Given my latest project, "Corporate Social Responsibility & Concession Theory," I find # 7 to be of particular interest.
Takeovers in the UK are in broad terms decided by the Target’s shareholders, with the Target Board rarely having decisive influence …. Unlike in the US, the Target Board is not the gatekeeper for offers. A Bidder may take its offer direct to shareholders and the Board has no power to block or delay an offer …. The Takeover Code (the “Code”) reflects this environment and, although changes were made post-Cadbury to reflect the interests of non-shareholder stakeholders, it remains a body of rules embodying the pre-eminence of shareholders….
1…. [I]n the UK: a potential Bidder may be publicly “outed” before it is ready to announce its offer; once outed, a potential Bidder is required to either announce a firm offer or withdraw (“put up or shut up”) within a specified period; and once a firm offer is made, there is a time limit within which the offer must succeed or fail….
2…. In the UK … you cannot combine … transaction structures and must either obtain 90% acceptances or proceed by way of the UK nearest equivalent to a merger…. There is no concept of statutory merger in the UK…. Therefore, any acquisition of a UK public company takes place through the acquisition of shares in the Target by the Bidder. This is effected either by a tender offer (referred to in the UK simply as “an offer”) or by the nearest UK analogue of a US-style merger, a “scheme of arrangement”.
3…. [I]n the UK … rules on equality of information require that any information or access to management provided by a Target to one Bidder or potential Bidder is made available on request to any other Bidder or bona fide potential Bidder, whether or not welcome….
4…. In … 2011, the Panel introduced a general prohibition on break fees (along with various other deal protection measures) in UK takeovers as part of its response to the demands from some quarters (following the Kraft/Cadbury takeover) that the balance of negotiation power be shifted away from Bidders and in favour of Targets….
6…. In the UK … financing conditions [are] prohibited (except in very limited circumstances) ….
7…. In the UK … a Bidder is required to disclose its intentions as regards the future of the Target’s business and the impact its bid may have on the Target’s employees in its offer document. In addition, the Bidder must make equivalent disclosures in respect of its own future business, employees and places of business where these are affected by the offer…. [T]he Panel has signalled a tougher approach to enforcement in this area and has stated that it expects to investigate complaints from any interested person, which would include trade unions, employee representatives and political representatives. It is also worth noting that breaches of this section of the Code can attract criminal liability as well as the more usual range of Panel disciplinary measures….
Sunday, March 30, 2014
In my article, “The Silent Role of Corporate Theory in the Supreme Court’s Campaign Finance Cases,” 15 U. Pa. J. Const. L. 831, I criticized the Supreme Court justices for failing to acknowledge the role of competing conceptualizations of the corporation in their corporate political speech cases. I noted, however, that former Chief Justice Rehnquist was arguably the lone modern justice to deserve at least some praise in this area.
Justice Rehnquist's stand-alone dissent in Bellotti provides arguably the sole example in these opinions of a Justice affirmatively adopting a theory of the corporation for purposes of determining the constitutional rights of corporations--though not via the express adoption of one of the traditionally recognized theories. Specifically, Justice Rehnquist relied on Justice Marshall's Dartmouth College opinion to conclude that: “Since it cannot be disputed that the mere creation of a corporation does not invest it with all the liberties enjoyed by natural persons . . . our inquiry must seek to determine which constitutional protections are ‘incidental to its very existence.”’ Thus, while it may be true that “a corporation's right of commercial speech . . . might be considered necessarily incidental to the business of a commercial corporation[, i]t cannot be so readily concluded that the right of political expression is equally necessary to carry out the functions of a corporation organized for commercial purposes.” I would argue that this is a formulation most aligned with concession theory because not only does Justice Rehnquist rely on Dartmouth College, but he also goes on to say: “I would think that any particular form of organization upon which the State confers special privileges or immunities different from those of natural persons would be subject to like regulation, whether the organization is a labor union, a partnership, a trade association, or a corporation.” Stefan J. Padfield, The Silent Role of Corporate Theory in the Supreme Court's Campaign Finance Cases, 15 U. Pa. J. Const. L. 831, 853 (2013) (quoting First Nat'l Bank of Bos. v. Bellotti, 435 U.S. 765 (1978)).
While this is only one data point, I think it suggests the former Chief Justice would have been hesitant to grant corporations any form of free exercise rights, since it is difficult to see how free exercise rights are more incidental to a corporation’s existence than political speech rights. Cf. Kent Greenawalt, Religion and the Rehnquist Court, 99 Nw. U. L. Rev. 145, 146 (2004) (“With limited qualifications, the Rehnquist Court has abandoned the possibility of constitutionally-required free exercise exemptions.”).
For more on concession theory, I shamelessly suggest my more recent article, “Rehabilitating Concession Theory,” 66 Okla. L. Rev. 327 (2014) (“the reports of concession theory's demise have been greatly exaggerated”). And if you find that of interest, you can check out my latest SSRN posting, “Corporate Social Responsibility & Concession Theory.”
Sunday, March 23, 2014
I'm trying out a new weekly blog post theme, "The Weekly BLT," wherein I highlight a few interesting business law tweets that I've come across in the past week that have not yet made it to the BLPB.
"The problem ... is that ... Kiobel ... ignore[s] the robust corporate identity [recognized in Citizens United]" http://t.co/RI0BefWUUr— Stefan Padfield (@ProfPadfield) March 18, 2014
"Only ... 10 percent of S&P 500 companies reported the number of environmental fines paid." http://t.co/rthzXPwy2w— Stefan Padfield (@ProfPadfield) March 17, 2014
John Cunningham: "one of the best discussions I’ve ever seen about the application of veil-piercing doctrine to LLCs" http://t.co/xJae7nGqQm— Stefan Padfield (@ProfPadfield) March 17, 2014
"traditional theory about shareholder voting..does not reflect recent fundamental changes as to who shareholders are" http://t.co/e9LsR4YUtp— Stefan Padfield (@ProfPadfield) March 17, 2014