Saturday, November 13, 2021

Pollman on the Supreme Court’s “Pro-Business Paradox”

Elizabeth Pollman has a new Comment, published in the Harvard Law Review, on what she calls “The Supreme Court’s Pro-Business Paradox.”  She makes several very well-argued points.  First, that by weakening corporate regulation, the Supreme Court has put greater pressure on corporate governance to constrain antisocial corporate behavior; second, the Court’s rulings are arguably at odds with the preferences of corporate shareholders, whose interests the Court clams to be furthering; and third, that in its zeal to insulate corporations from liability, the Supreme Court has turned corporate governance concepts upside-down – by, for example, holding that the Alien Tort Statute makes corporations less responsible for the “decisionmaking” that occurs in boardrooms than for the actions of employee-agents lower down in the hierarchy.   There’s no abstract for me to quote, but here’s an excerpt from the Introduction:

This Comment makes two primary contributions. It first observes that cases from the recent Term reflect an important way in which the Roberts Court has earned its reputation: over the beginning of the twenty-first century, the Court has often expanded corporate rights while narrowing corporate liability or access to justice against corporate  defendants. Part I of this Comment sets forth this argument, using Americans for Prosperity, Ford, and Nestlé as case studies to show how the Court uses ill-fitting conceptions or overbroad generalizations to empower corporations and limit their accountability.

This trend gives rise to a paradox that Part II subsequently explores: the “pro-business” Court is often at odds with internal activity in corporate law and governance. Quite remarkably, as the Roberts Court has expanded corporate rights and narrowed pathways to liability, many shareholders and stakeholders have become vocal participants, putting pressure on corporations to rein in the use of their rights, to mitigate risks generated by their externalities, and to take account of environmental, social, and governance (ESG) concerns. The Court’s expansion of corporate rights not only disserves many corporate participants and spurs them to action but also might fuel challenges to new disclosure rules about corporate political activity or other ESG-related concerns that investors and others seek for effective participation in corporate governance. Further, as the Court has downplayed or ignored corporate decisionmaking structures in its jurisprudence expanding rights and narrowing liability, by contrast, in the world of corporate law and governance, we see that board oversight, monitoring, and compliance functions have grown in importance.

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