Monday, December 19, 2016

The Conflicting Interests of the POTUS through a Corporate Lawyer's Eyes

In her post on Saturday, co-blogger Ann Lipton offered observations about possible legal issues resulting from the President-Elect's tweets regarding public companies.  She ends her post with the following:

So, it's all a bit unsettled. Let's just say these and other novel legal questions regarding the Trump administration are sure to provide endless fodder for academic analysis in the coming years.

Probably right.

Today, I take on a somewhat related topic.  I briefly explore the President-Elect's conflicting interests through the lens of a corporate law advisor.  For the past few weeks, the media (see, e.g., here and here and here) and many folks I know have been concerned about the potential for conflict between the President-Elect's role as the POTUS, public investor and leader of the United States, and his role as "The Donald," private investor and leader of the Trump corporate empire.

The existence of a conflicting interest in an action or transaction is not, in and of itself, fatal or even necessarily problematic.  In a number of common situations, fiduciaries have interests in both sides of a transaction.  For example, a business founder who serves as a corporate director and officer may lease property she owns to the corporation.  What matters under corporate law is whether the fiduciary's participation in the transaction on both sides results in a deal made in a fully informed manner, in good faith, and in the bests interests of the corporation.  Conflicting interests raise a concern that the fiduciary is or may be acting for the benefit of himself, rather than for and in the best interest of the corporation. 

Corporate law generally provides several possible ways to overcome concerns that a fiduciary has breached her duty because of a conflicting interest in a particular action or transaction:

  • through good faith, fully informed approval of the action or transaction (e.g., after disclosure of information about the nature and extent of the conflicts) by either the corporation's shareholders or members of the board of directors who are not interested in the transaction; and
  • through approval of a transaction that is entirely fair--fair as to process and price. 

See, e.g., Delaware General Corporation Law Section 144.  Yet, if I believe what I read, no similar processes exist to combat concerns about actions or transactions in which the POTUS has or may have conflicting interests.  In particular, to the extent one does not already exist, should a disinterested body of monitors be identified or constituted to receive information about actual and potential conflicting interests of the POTUS and approve the action or transaction involving the conflicting interests?  Perhaps the Office of Government Ethics ("OGE") already has something like this in place . . . .  If it does, then both the public media and I are underinformed about it.  While there seems to be OGE guidance on the President-Elect's nominees for executive branch posts (see, and here) and on overall executive branch standards of conduct (see here), I have not found or read about anything applicable to the President-Elect or POTUS.

In making these observations, I recognize that our federal government is different in important ways from the corporation.  I also understand that the leadership of a country/nation is different from the leadership of a corporation.  Having said that, however, conflicting interests can have similar deleterious effects in both settings.  The analogy I raise here and this overall line of inquiry may be worth some more thought . . . .

Ann Lipton, Business Associations, Corporate Governance, Corporations, Current Affairs, Family Business, Joan Heminway | Permalink


Love the creative comparison. I've contemplated how the President-Elect is going to "wall off" his interests.

Posted by: Tom N. | Dec 20, 2016 7:27:35 AM

Hi Joan! It's interesting you say this because I think - totally from what I see in the news/blogs, not actually knowledge - there's something like that procedure in the Constitution, in that the foreign emoluments clause requires payments to be approved by Congress - the equivalent, I suppose, of director approval. The problem, of course, is that it's hard to say whether a GOP dominated Congress is disinterested.

According to this blog post ( and again, not an expert, just linking what I read, there's no comparable procedure under the domestic emoluments clause; that one is theoretically unwaivable. That said, assuming private persons can't enforce it, it has to be enforced by Congress - and Congress could set up a procedure whereby it would only be enforced for transactions not approved by a neutral body.

Posted by: Ann Lipton | Dec 20, 2016 7:33:40 AM

Foreign businesses might be tempted to give Trump good deals for favorable treatment. That 's bad. The correct approach is just to funnel the cash directly to the election campaigns and personal foundations. No conflicts of interest there.

Posted by: Frank Snyder | Dec 20, 2016 7:25:48 PM

Thanks for the comments, Tom, Ann, and Frank.

Ann, you are right that the foreign emoluments clause does provide for a congressional approval process, but it falls short of the corporate law cleansing process for the reason you identify (no guarantee of disinterestedness) and because the approval is not expressly conditioned on full disclosure and good faith action. And, as the article you linked to points out, the domestic emoluments clause is not similarly qualified by a congressional approval alternative. There also is some question about the nature of at least some of the benefits the President-Elect may receive as emoluments. See

And Tom and Frank, I want to note that (1) I am not the only person thinking about the corporate analogy and (2) legal prohibitions and processes regarding conflicts of interests are not the only implicated interests regarding the interweaving of the Trump family business with the business of government. Among other things, we may want to consider broader notions of ethics and the need for (or desirability of) anti-corruption structures and processes, as well as security costs related to the intertwined interests. A public policy article available through Knowledge@Wharton written last week approaches these matters--also raising a corporate comparison and covering some of the additional concerns we may want to consider. See

[Sorry that we cannot hyperlink in the comments. But at least you can copy and paste . . . .]

Again, thanks for responding.

Posted by: joanheminway | Dec 21, 2016 4:59:57 AM

One good thing about the Trump election is that people are now going to start paying attention to conflicts of interest and taking them seriously. When Russian corporations were plowing money to the Clintons while her department was involved in selling US uranium assets to Putin, I didn't see much attention paid by academics. I think we'll keep a closer watch on Trump, which IMO is a good thing. I also expect that if Exxon pays Melania $500,000 to give a speech while her husband is president, it will suddenly become a big issue in a way it hasn't been, and people will demand to know what she said.

Posted by: Frank Snyder | Dec 21, 2016 6:30:23 PM

Yes, Frank. I agree. More attention to conflicting interests is a good thing. We have, perhaps, been complacent . . . .

Posted by: joanheminway | Dec 21, 2016 6:33:13 PM

I took a somewhat similar tack in a post last month:

I agree that the corporate law analogies are worth exploring.

Posted by: Steve Bainbridge | Dec 22, 2016 10:16:27 AM

Thanks for the link, Steve. I agree with much of what you say there, and I appreciate the additional references you include in that post. Enhanced public disclosure is a bare minimum, and I like your idea of analyzing the business to identify the critical components and separate them from the non-essential bits. Something to watch, for sure.

Posted by: joanheminway | Dec 22, 2016 1:59:11 PM

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