Tuesday, April 9, 2019
A 2017 opinion related to successor liability just posted to Westlaw. The case is an EEOC claim "against the Hospital of St. Raphael School of Nurse Anesthesia (“HSR School”) and Anesthesia Associates of New Haven (“AANH”), alleging gender discrimination and retaliation in violation of Title VII of the Civil Rights Act of 1964 . . . ." The plaintiff was seeking to join Yale New Haven Hospital (“YNHH”). MARGARITE CONSOLMAGNO v. HOSPITAL OF ST. RAPHAEL SCHOOL OF NURSE ANESTHESIA and ANESTHESIA ASSOCIATES OF NEW HAVEN, P.C., 3:11CV109 (DJS), 2017 WL 10966446, at *1 (D. Conn. Mar. 27, 2017).
There is no evidence that the HSR School had an existence that was independent of AANH. In fact, the HSR School was going to cease operating due to the fact that AANH was going to cease operating. The HSR School was not a limited liability corporation (“LLC”), private corporation (“P.C.”), or other legal entity registered with the Connecticut Secretary of State. (Tr. 141-142). There is no evidence that the HSR School had its own assets, bank account, or tax identification number. There is no evidence that the HSR School itself (as opposed to AANH) ever paid anyone for rendering services to the HSR School. There is no evidence that anyone other than AANH had operated the HSR School. Consequently, the Court finds that the predecessor in interest, for the purpose of assessing successor liability, is AANH.
Friday, March 8, 2019
Received today from BLPB friends Beate Sjåfjell and María Jesús Muñoz Torres:
Happy International Women’s Day! We celebrate this day by issuing the call for papers for the 5th international workshop of Daughters of Themis: International Network of Female Business Scholars. The theme is Finance for Sustainability; a highly topical theme! The deadline is 26 March, and we hope that the brief window of opportunity will be large enough for all interested to respond.
We appreciate if you would circulate this call to any interested colleagues identifying as female business scholars, including junior scholars (PhD candidates) as well as colleagues in lower-income countries. Please note that we this year do have some, very limited, funds available so that we can contribute to the funding for one or two participants based on financial hardship.
Unfortunately, this workshop overlaps a bit with the Grunin Center's annual conference (which focuses in on "Legal Issues in Social Entrepreneurship and Impact Investing"). But if you are a business finance/law person who focuses on sustainability, you should be at one event or another!
Wednesday, February 13, 2019
Posted by request. Looks like a good event:
Law and Ethics of Big Data
Hosted and Sponsored by:
Washington and Lee University School of Law
Kenan Institute for Ethics, Duke University; The Virginia Tech Center for Business Intelligence Analytics; The
Department of Business Law and Ethics, Kelley School of Business, Indiana University Bloomington
Wednesday-Thursday, April 24-25, 2019
Abstract Submission Deadline: Friday, March 1, 2019
We are pleased to announce the annual research colloquium, “Law and Ethics of Big Data,” which will be held this
year at Washington and Lee University School of Law in Lexington, Virginia. This year’s colloquium is co-hosted
by Associate Professor Margaret Hu at Washington and Lee University School of Law and Kenan Visiting Professor
at Duke University’s Kenan Institute for Ethics, Associate Professor Angie Raymond of Indiana University, and
Professor Janine Hiller of Virginia Tech.
Due to the success of this multi-year event that now is in its sixth year, the colloquium will be expanded and we seek broad participation from multiple disciplines. Please consider submitting research that is ready for the discussion stage. Each paper will receive detailed constructive critique. We are targeting cross-discipline opportunities for colloquium participants.
Examples of topics appropriate for the colloquium include: Ethical Principles for the Internet of Things, Intellectual Property and Data Intelligence, Bribery and Algorithms, Ethical Use of Big Data, Health Privacy and Mental Health, Employment and Surveillance, National Security, Civil Rights, and Data, Algorithmic Discrimination, Smart Cities and Privacy, Cybersecurity and Big Data, and Data Regulation. The organizers have a special interest in papers focused on the law and ethics of Artificial Intelligence. We seek a wide variety of topics that reflects the broad ecosystem created by ubiquitous data collection and use, as well as its impacts on society.
TENTATIVE Colloquium Details:
• The colloquium begins at 9:00 am with breakfast on April 24 and concludes at ~1:00 pm at the conclusion of lunch on April 25. The University will host a research colloquium dinner on April 24. Breakfast and lunch will be provided at Washington and Lee University on April 24-25.
• Approximately 40 minutes is allotted for discussion of each paper presentation; 5-10 minutes for an introductory presentation by the discussant, followed by 30-35 minutes of group discussion. Authors will not present their own papers to the group; rather, a paper discussant presents the work and leads the group dialogue that follows.
• Manuscripts will be circulated among participants only.
• Participants agree to read and be prepared to participate in the discussion of all papers. Each author may be asked to lead discussion of one other submitted paper.
• A limited number of participants will be provided with lodging, and all participants will be provided meals during the colloquium. Travel and all other expenses will be individually assumed by each participant.
Submissions: To be considered, please submit an abstract of 500-750 words to Margaret Hu at firstname.lastname@example.org no later than Friday, March 1, 2019. Abstracts will be evaluated based upon the quality of the abstract and the topic’s fit with the theme of the colloquium and other presentations. Questions may be directed to Margaret Hu (email@example.com), Angie Raymond (firstname.lastname@example.org), or Janine Hiller (email@example.com). If you are interested in being a discussant, but do not have a paper to present, please send a statement of interest to the same.
Authors will be informed of the decision by Friday, March 8, 2019. If accepted, the author agrees to submit a discussion paper by Friday, April 12, 2019. While papers need not be in finished form, drafts must contain enough information and structure to facilitate a robust discussion of the topic and paper thesis. Formatting can be either APA or Bluebook. In the case of papers with multiple authors, only one author may present at the colloquium.
Tuesday, January 22, 2019
In Business Organizations, I am in the early part of teaching agency and partnership. In my last class, we discussed Cargill, which is a fairly typical case to open agency discussions. I like Cargill, and I think it is a helpful teaching tool, but I think one needs to go beyond the case and facts to give a full picture of agency.
Of note, the case deals only with "actual agency" -- for whatever reason, the plaintiffs did not argue "apparent agency" or estoppel in the alternative. A. Gay Jenson Farms Co. v. Cargill, Inc., 309 N.W.2d 285, 290 n.6 (Minn. 1981) (“At trial, plaintiffs sought to establish actual agency by Cargill's course of dealing between 1973 and 1977 rather than 'apparent' agency or agency by estoppel, so that the only issue in this case is one of actual agency. ”). I think this explains a lot about how the case turns out. That is, the court recognized that to find for the farmer, there had to be an actual agency relationship.
I don't love this outcome because one of the hallmarks of an agency relationship is its reciprocal nature. That is, once we find an agency relationship, the principal is bound to the third party and the third party is bound to the principal. In contrast, in a case of estoppel, the principal may be bound (estopped from claiming there is not an agency relationship), but that finding only runs one way. The principal still cannot bind the third party.
This is a problem for me in Cargill. That is, I don't see a scenario where a court would bind the farmers to Cargill on similar facts. (I know I am not the first to make this observation, but it seemed worth exploring a bit.) As such, I don't think it can rightly be deemed an agency relationship.
Assume the facts from the case to show agency, but suppose instead Cargill was suing the farmers because the grain prices had increased dramatically and that the farmers had a contract with Warren (the purported agent) to deliver grain at $5/bushel. However, spot prices were now $15/bushel. Warren had not paid the farmers for a prior shipment and did not have the ability to pay now. If the contract is with Warren, the farmers should be able to now sell that grain in the market and take the extra $10/bushel for themselves. However, if Cargill were really the principal on that contract, Cargill would have a right to buy it at $5/bushel. I just don't see a court making such a ruling on these facts.
For what it's worth, I do think there is an estoppel argument here, and I think the Cargill court had ample facts to support finding Cargill a guarantor through other actions (promises to pay, name on checks, etc.), some of which might support an apparent authority argument, too. But because I don't see this relationship as an agency relationship as a two-way street, I don't think it can be an "actual agency" relationship.
Incidentally, I see this reciprocal nature test as proper for partnerships, too. That is, unless a court, on similar facts, would be willing to find a partnership where it works to the detriment of the plaintiffs, one cannot find a partnership. Think, for example, of another classic case, Martin v. Peyton, 246 N.Y. 213 (N.Y. 1927). There, creditors of the financial firm KNK sued KNK, as well as Peyton, Perkins, and Freeman (PPF) who had loaned KNK money. The claim was that PPF was not a mere lender, but had instead become partners of KNK because of the amount of control and profit sharing included in the loan arrangement. If PPF were deemed partners of KNK, of course, PPF would be liable to the KNK creditors. Here, the court determines that no partnership exists.
While a reasonably close call, I think this is right. I don't think, based on a similar set of facts, that a court would find for PPF if the dispute were such that finding a partnership between PPF and KNK would reduce the amount KNK would pay its investors. If it can't run both ways, the partnership cannot exist. I appreciate that in some cases, there simply is not a good analog to test the reciprocal nature of the relationship. But where it's possible, I think this is a good test to determine whether there really is an agency or partnership relationship or if, instead, what we really have is a sympathetic plaintiff.
Friday, December 7, 2018
In Hexion Specialty Chemicals, Inc. v. Huntsman Corp., 965 A.2d 715, 730 (Del. Ch. 2008) – a case I worked on as a judicial clerk – the court wrote, “[m]any commentators have noted that Delaware courts have never found a material adverse effect to have occurred in the context of a merger agreement.”
That statement is no longer true.
Today--in a 3 page opinion--the Delaware Supreme Court affirmed the 240+ page opinion by Vice Chancellor Travis Laster in Akorn, Inc. v. Fresenius Kabi, AG, et al., which held that Akorn triggered the Material Adverse Effect ("MAE") clause of the merger agreement at issue.
As the Chancery Daily reports, and as is clear looking at the recent opinions, the Delaware Supreme Court opinion does not provide much reasoning for its decision to affirm, but the Court of Chancery opinion does provide plenty of guidance. In the first few pages, the Court of Chancery notes that Akorn experienced a "dramatic, unexpected, and company-specific downturn in...business that began in the quarter after signing." The Court of Chancery also notes the importance of whistleblower letters and issues with Akron and the FDA.
Also of interest, the court notes that this was an expedited case -- a real benefit of the Delaware Court of Chancery. The parties only had 11 weeks leading up to the trial. At the five day trial, there were 54 depositions transcripts lodged, 1,892 exhibits introduced into evidence, and 16 live witnesses (including 7 experts). Those poor lawyers -- and judicial clerks!
Friday, November 9, 2018
My fellow BLPB editor Joan Heminway and I both have chapters in the book, along with many others.
The introduction is posted on SSRN, for those who are interested. Also, editor Ben Means has many talents, as he did the cover artwork below as well.
Sunday, October 21, 2018
5th Conference of the French Academy of Legal Studies in Business (Association Française Droit et Management)
June 20 and 21, 2019 – emlyon - Paris Campus
CALL FOR PAPERS 2019 Social Issues in Firms
Social issues and fundamental rights occupy an increasingly important space in the governance of today’s companies. Private enterprises assume an increasingly active role not only in a given economy but also in society as a whole. Firms become themselves citizens. They recognize and support civic engagement by the men and women who work for them. Historically, the role of the modern firm that resulted from the Industrial Revolution has been torn between two opposing viewpoints.
[More information under the break.]
October 21, 2018 in Business Associations, Business School, Call for Papers, Conferences, Corporate Governance, Corporations, Ethics, Haskell Murray, International Business, International Law, Management, Research/Scholarhip | Permalink | Comments (0)
Monday, October 8, 2018
BLPB reader Tom N. sent me a link to this article last week by email. The article covers Elon Musk's taunting of the U.S Securities and Exchange Commission (SEC) in a post on Twitter. The post followed on the SEC's settlement with Musk and Tesla, Inc. of a legal action relating to a prior Twitter post. The title of Tom N.'s message? "Musk Pokes the Bear in the Eye." Exactly what I was thinking (and I told him so) when I had read the same article earlier that day! This post is dedicated to Tom N. (and the rest of you who have been following the Musk affair).
Last week, I wrote about scienter issues in the securities fraud allegations against Elon Musk, following on Ann Lipton's earlier post on materiality in the same context. This week, I want to focus on state corporate law--specifically, fiduciary duty law. The idea for this post arises from a quotation in the article Tom N. and I read last week. The quotation relates to an order from the judge in the SEC's action against Musk and Tesla, Alison Nathan, that the parties jointly explain and justify the fairness and reasonableness of their settlement and why the settlement would not hurt the public interest. Friend and Michigan Law colleague Adam Pritchard offered (as quoted in the article): “She may want to know why Tesla is paying a fine because the CEO doesn’t know when to shut up.” Yes, Adam. I agree.
What about that? According to the article, the SEC settlement with Musk and Tesla "prevents Musk from denying wrongdoing or suggesting that the regulator’s allegations were untrue." The taunting tweet does not exactly deny wrongdoing or suggest that the SEC's allegations against him were untrue. Yet, it comes close by mocking the SEC's enforcement activities against Musk and Tesla. Musk's action in tweeting negatively about the SEC is seemingly--in the eyes of a reasonable observer--an intentional action that may have the propensity to damage Tesla.
At the very least, the tweet appears to be contrary to the best interests of the firm. But is it a manifestation of bad faith that constitutes a breach of the duty of loyalty under Delaware law? As most of us well know,
[b]ad faith has been defined as authorizing a transaction "for some purpose other than a genuine attempt to advance corporate welfare or [when the transaction] is known to constitute a violation of applicable positive law." In other words, an action taken with the intent to harm the corporation is a disloyal act in bad faith. . . . [B]ad faith (or lack of good faith) is when a director acts in a manner "unrelated to a pursuit of the corporation's best interests." It makes no difference the reason why the director intentionally fails to pursue the best interests of the corporation.
Bad faith can be the result of "any emotion [that] may cause a director to [intentionally] place his own interests, preferences or appetites before the welfare of the corporation," including greed, "hatred, lust, envy, revenge, . . . shame or pride."
In Re Walt Disney Co. Derivative Litigation, 907 A.2d 693, 753-54 (Del. Ch. 2005). Of course, Musk was not authorizing a transaction--or even clearly acting for or on behalf of Tesla--in making his taunting tweet. But he is identified strongly with Tesla, and his tweet was intentional and inconsistent with the best interests of the firm. Did he intend to harm Tesla in posting his tweet? Perhaps not. Did he act in a manner "unrelated to a pursuit of the corporation's best interests?" Perhaps. The tweet is certainly an imprudent (and likely grossly negligent or reckless) action that appears to result from Musk intentionally placing his own hatred or revenge ahead of the interests of Tesla.
"To act in good faith, a director must act at all times with an honesty of purpose and in the best interests and welfare of the corporation." Id. at 755. Yet, it is unclear how far that goes in a Twitter-happy world in which the personal blends into the professional. Musk was (in all likelihood) not taking action as a director or officer of Tesla when he tweeted his taunt. Yet, he was undoubtedly cognizant that he occupied those roles and that his actions likely had an effect on the firm. Should his fiduciary duties extend to this type of conduct?
And what about the Tesla board's duty to monitor? Does it extend to monitoring Musk's personal tweeting? E.g., the argument made in the Chancery Court's opinion in Beam Ex Rel. Martha Stewart Living Omnimedia, Inc. v. Stewart. Even of not mandated by fiduciary duty law, the SEC clearly wants the board to have that monitoring responsibility. The settlement with the SEC reportedly provides for "Tesla’s board to implement procedures for reviewing Musk’s communications with investors, which include tweets." More for us all to think about when we think about Elon Musk and Tesla . . . . It's always best not to poke the bear.
Wednesday, September 19, 2018
I may update this list from time to time; feel free to e-mail me with additions. Looks like a pretty strong hiring season for business law. Updated 12/04/18.
Law School Professor Positions – Business Specialty Sought
- Barry University
- Belmont University
- Campbell University
- Case Western University
- Duke University
- Drake University (Director of the Entrepreneurial/Transactional Law Clinic)
- Drake University (Assistant, Associate, or Professor of Law)
- Drexel University
- Emory University
- Florida A&M University
- Louisiana State University
- Mercer University
- Pennsylvania State University, University Park
- Saint John’s University
- Seton Hall University
- Southern Illinois University Carbondale (Professor of Practice) (9/17/18 deadline or until filled)
- University of Alabama
- University of Arizona (International Business Law Focus) (Review begins 9/28/18)
- University of Arkansas, Fayetteville
- University of Buffalo
- University of California, Berkeley (initial review 8/15/18; accepted through 3/1/19)
- University of California, Davis
- University of California, Irvine
- University of Connecticut
- University of Kentucky
- University of Louisville
- University of Miami
- University of Nebraska
- University of New Mexico (Oil & Gas Focus)
- University of North Texas at Dallas
- University of Oregon (Business Law Clinic)
- University of Pittsburgh
- University of Richmond
- University of Saint Thomas (Miami)
- University of South Carolina
- University of Wyoming
- Washington & Lee University
- Washington University (St. Louis)
- Willamette University
Legal Studies Professor Positions (Mostly Business Schools)
- Angelo State University
- California State Polytechnic University, Pomona (10/1/18 first consideration)
- California Polytechnic State University, San Luis Obispo (9/17/18 review begins)
- College of Charleston
- Community College of Philadelphia
- Contra Costa Community College (1/24/19 review closes)
- Dutchess Community College
- James Madison University
- Kean University (Wenzhou, China) (posted 11/26/18)
- Indiana University, Bloomington (10/18/18 best consideration date) (and non-tenure track)
- Los Angeles Film School (Entertainment Business/Law Instructor)
- Mercy College (Director of Legal Studies)
- Morgan State University (opens 10/31/18 - closes 1/31/19)
- New Mexico University
- Prairie View A&M University
- Princeton University (Fellowships) (11/14/18 deadline)
- Quinnipiac University
- Saint Joseph's University (Visiting Instructor)
- Saint Joseph's University (Assistant Professor)
- Santa Monica College
- State University of New York at Oswego (Instructor) (11/1/18 review begins)
- SUNY-Oswego (Instructor)
- Tulane University (Lecturers) and (Professors of Practice)
- University of the Bahamas (PHD in Law required)
- University of Georgia
- University of Michigan (10/15/18 guaranteed consideration)
- University of South Florida (Instructor) (JD/LLM or JD/PHD only)
- Virginia Tech (Instructor)
- Western Carolina University (10/1/18 review begins)
Tuesday, August 28, 2018
Are corporations (and other business associations) political actors? Of course. Some of Marcia's posts here on the BLPB have raised, for example, questions about the use of boycotts as firm political activity. See, e.g., here. Marcia also pointed out here that National Football League teams (typically owned by and operated through some form of business association) have been caught up in political activity surrounding the players-kneeling-during-the-national-anthem controversy.
The Vanderbilt Law Review has recently published an essay on the political corporation written by a Dream Team of sorts--two friends who are married to each other--at the University of South Carolina School of Law, Susan Kuo and Ben Means. Susan teaches advocacy and dispute resolution courses (currently focusing on criminal law and procedure, conflicts, and social justice issues) and is the Associate Dean for Diversity and Inclusion. Ben is likely known to many BLPB readers as a business law guy (with a special focus on small and family owned busnesses). He's been a member of the executive committee for the Association of American Law Schools (AALS) Section on Business Associations and is past chair of the AALS Section on Agency, Partnership, LLCs, and Unincorporated Business Associations. They bring their individual and collective talents to this essay, entitled The Political Economy of Corporate Exit. Here is the SSRN abstract.
Corporate political activity is understood to include financial contributions, lobbying efforts, participation in trade groups, and political advertising, all of which give corporations a “voice” in public decisionmaking. This Essay contends that the accepted definition of corporate political activity overlooks the importance of “exit.” Corporations do not need to spend money to exert political influence; when faced with objectionable laws, they can threaten to take their business elsewhere. From the “grab your wallet” campaign to the fight for LGBT rights in states such as Georgia, Indiana, and North Carolina, corporate exit has played a significant role in recent political controversies.
This Essay offers the first account of corporate exit as a form of political activity and identifies two basic rationales: (1) attaching economic consequences to public choices, and (2) avoiding complicity with laws that violate a corporation’s values. This Essay also shows how citizens can harness corporate economic power when conventional political channels are inaccessible. In an era of hashtag activism and boycotts sustained via social media, corporations cannot afford to ignore consumers, employees, investors, and other stakeholders.
I communicated with Ben about this piece a while back and was excited about it then. I am looking forward to getting into it in short order. Looks like a relevant, insightful read.
Assistant Professor of Business Law.
Ross School of Business, University of Michigan.
The Stephen M. Ross School of Business at the University of Michigan seeks applicants for a tenure-track position at the assistant professor level in the Business Law Area starting in the Fall 2019 term. The selected candidate’s primary teaching responsibilities will be to teach business law in the undergraduate (BBA) program but may be required to teach in any of the school’s degree programs. The candidate will be expected to produce high-quality research published in leading law reviews and/or business journals.
Qualified candidates must have earned a J.D. from an ABA accredited law school. The candidate must have an excellent academic record and demonstrate a strong interest, and ability, in conducting high-quality, scholarly research in an area relevant to business. Examples of such fields include, but are not limited to, corporate law, contract law, employment law, financial regulation, securities law, intellectual property, and international trade. A qualified candidate must also demonstrate excellence in university teaching or the potential to be an outstanding teacher in business law.
The review of applications will begin immediately. All applications received before October 15, 2018, will receive full consideration. However, applications received after the deadline may be considered until the position is filled.
For additional information and a complete position announcement, please visit http://careers.umich.edu/job_detail/162128/assistant_professor_of_business_law
Please contact Jen Mason, Area Administrator, via email with questions at firstname.lastname@example.org
Applicants are required to submit their applications electronically by visiting the website: http://www.bus.umich.edu/FacultyRecruiting and uploading the following:
- A cover letter that includes a description of the candidate’s experience and interest in academic research and teaching.
- A curriculum vitae that includes three references
The University of Michigan is an equal opportunity/affirmative action employer.
Sunday, August 19, 2018
The following comes to us from Sergio Alberto Gramitto Ricci, Visiting Assistant Professor of Law and Assistant Director, Clarke Program on Corporations & Society, Cornell Law School. I had the pleasure of listening to Sergio discuss this project at our recent SEALS discussion group on Masterpiece Cakeshop, and I found particularly interesting his conclusion that "Roman slaves could not own property, but ius naturale provided them with the right to exercise religion. To the contrary, Roman corporations could contract, own assets and bear liabilities, but they had no exercise rights as religion liberties were typical of personae—physically sound humans." The concept of robo-directors is also fascinating, and adds another layer to my ongoing dystopian (utopian?) novel plot wherein corporations are allowed to run for seats in Congress directly (as opposed to what some would argue is the current system wherein we get: "The Senator from [X], sponsored by Big Pharma Corp."). You can download the full draft via SSRN here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3232816.
In an era where legal persons hold wealth and power comparable to those of nation states, shedding light on the nature of the corporate form and on the rights of business corporations is crucial for defining the relations between the latter and humans. Recent decisions of the U.S. Supreme Court, including Masterpiece Cakeshop, Ltd. v. Colorado Civil Rights Commission and Burwell v. Hobby Lobby Stores, Inc., have called for a closer investigation of the role that corporate separateness plays in the business corporation formula. Moreover, legal personhood is a sophisticated legal technology, which employment can revolutionize the strategies to protect cultural heritage or natural features and can address emerging phenomena, including artificial intelligence and learning machines. This paper adopts archeology of corporate law to analyze three intertwining legal and organizational technologies based on legal personhood. Archeology of corporate law excavates ancient laws and language in order to solve salient issues in contemporary and future corporate debates. First, this paper sheds light on the origins and nature of legal personhood and on the rights of business corporations by analyzing laws and language that the Romans adopted when they invented the corporation. For example, excavating roman law shows how Roman slaves could not own property, but ius naturale provided them with the right to exercise religion. To the contrary, Roman corporations could contract, own assets and bear liabilities, but they had no exercise rights as religion liberties were typical of personae—physically sound humans. In sum, the Romans drew a line between the legal capacities of their corporations and the rights and liberties that persons possessed by virtue of being human. Second, this paper discusses the separation of ownership and control. It explains how the separation of ownership and control, together with legal personhood, constitutes the essential formula of the business corporation model. Last, this paper explores artificial intelligence in boardrooms to assist, integrate or replace human directors drawing a parallelism between robo-directors and Roman slaves appointed to run joint-enterprises. Barring the statutory restrictions that require for board directors to be natural persons and overcoming the moral concerns related to appointing robo-directors, the remaining issue that AI in boardrooms raises is that of accountability.
Thursday, August 16, 2018
On Tuesday, Elizabeth Warren penned an article in The Wall Street Journal entitled Companies Shouldn’t Be Accountable Only to Shareholders: My new bill would require corporations to answer to employees and other stakeholders as well.
The article announced and promoted her Accountable Capitalism Act. With Republicans in control of Congress and the White House, Warren’s bill almost certainly doesn’t stand a chance of passing in the short-term.
Yet, because the bill draws on benefit corporation governance, a main scholarly interest of mine, and because it may foreshadow moves by a Democrat-controlled Congress in the future, I decided to read the 28-page bill and report here briefly.
Portions of the bill summarized:
- As has been widely reported, the bill only applies to companies with more than $1 billion in revenue.
- The bill seeks to establish an “Office of United States Corporations” within the Department of Commerce, which will review, grant, and rescind charters for the large companies covered by the bill.
- The bill takes language from benefit corporation law and requires that U.S. Corporations must have a purpose to serve a “general public benefit” – “a material positive impact on society resulting from the business and operations of a United States corporation, when taken as a whole.” This purpose is in addition to any purpose in the company’s state filing.
- The governance requirements are a mix of the Model Benefit Corporation Legislation and Delaware version of benefit corporation law – requiring both that directors balance the “pecuniary interests of shareholders” with the "best interests of persons that are materially affected by the conduct of the United States corporation” (drawn from Delaware) and that directors consider a litany of stakeholders in their decisions (including shareholders, employees, customers, community, local and global environment - drawn from the Model). Only shareholders with 2%+ of the shares can sue derivatively.
- Employees must elect 40%+ of the board of directors.
- 75%+ of shareholders and 75%+ of directors must approve political spending of over $10,000 on a single candidate.
My brief thoughts:
- This is a lot of press for benefit corporations.
- The press may not be good for benefit corporation proponents who have been largely able to pitch to both sides of the political aisle in their state bills. B Lab co-founder Jay Coen Gilbert has already written an article trying to promote what he sees as the bipartisan nature of benefit corporations: Elizabeth Warren, Republicans, CEOs & BlackRock's Fink Unite Around 'Accountable Capitalism'
- I have noted in my scholarly work how the state benefit corporation laws fail to align the purported “general public benefit” corporate purpose with effective accountability mechanisms. This bill, however, takes one step toward aligning company purpose and accountability by requiring that employees elect 40%+ of the board. Of course, that still leaves out many other stakeholders that directors are supposed to consider, and shareholders are still the only stakeholders with the ability to sue derivatively. A better solution is to have stakeholder representatives who elect the entire board and also possess, collectively, the right to sue derivatively. This stakeholder representative framework, articulated in my 2017 American Business Law Journal article, has the benefit of keeping the board united on a common goal – instead of fighting on behalf of the single stakeholder group who elected them – while also being held to account by representatives of all major stakeholder groups, collectively.
- Suggesting that benefit corporation law become mandatory will likely not be popular among many conservatives. See, e.g., this early response in the National Review: Elizabeth Warren’s Batty Plan to Nationalize . . . Everything. Currently, a fair response to conservative critics of state benefit corporation laws is "if businesses do not like the benefit corporation framework, they can just choose to be a traditional corporation." This bill attempts to remove that choice for large companies.
(My co-blogger Joshua Fershee may be horrified to learn that the bill purports to apply not only to corporations, but also to LLCs, even though they use the term "U.S. Corporations" throughout).
Friday, August 10, 2018
Wednesday, August 1, 2018
Wednesday, July 25, 2018
Details on another excellent business law professor position are posted below.
Entry-Level or Experienced Faculty Position
The UNIVERSITY OF NEBRASKA COLLEGE OF LAW invites applications for entry-level and lateral candidates for two tenure-track or tenured faculty positions.
Our primary areas of interest are Civil Procedure, Business Associations, and other business law courses, including, but not limited to, Corporate Finance, Securities Regulation, Corporate Governance, Non-Profit Organizations, and Transactional Drafting.
Other needs include courses related to
- Health Care (g., Federal Regulation of Health Care Providers, Health Care Finance, Administrative Law, Medical Malpractice, Privacy Law, Law and Medicine, Public Health Law, Bioethics and the Law, and the Law of Provider and Patient);
- Litigation Skills and Related Courses (g., Trial Advocacy, Civil Rights Litigation, Conflicts of Law, Remedies, Pretrial Litigation, and other litigation skills courses);
- Criminal Law (g., Federal Criminal Law, White Collar Crime, PostConviction Remedies, and Criminal Sentencing);
- Environmental Law (g., Environmental Law, Water Law, and Natural Resources Law);
- Family Law; and
- Election Law.
Minimum required qualifications include a J.D. Degree or equivalent, superior academic record, and a demonstrated interest in relevant substantive areas. The title of Assistant or Associate Professor will be based on the qualifications of the applicant.
To be considered, please complete the Faculty/Academic Administrative information form and attach a letter of interest, current vita, and names and contact information for three professional references at http://employment.unl.edu/postings/59925. Review of applications will begin on August 24, 2018, and continue until the position is filled. Contact Associate Dean Eric Berger, Chair, Faculty Appointments Committee, University of Nebraska College of Law, Lincoln, NE 68583-0902, or send an email to email@example.com. General information about the Law College is available at http://law.unl.edu/.
As an EO/AA employer, qualified applicants are considered for employment without regard to race, color, ethnicity, national origin, sex, pregnancy, sexual orientation, gender identity, religion, disability, age, genetic information, veteran status, marital status, and/or political affiliation. See http://www.unl.edu/equity/notice-nondiscrimination.
Thursday, May 10, 2018
Earlier today, I received this call for submissions from the American Business Law Journal ("ABLJ"). I published with the ABLJ in 2017 and had a fabulous experience. The manuscripts are blind/peer-reviewed, something we need more of in the legal academy, in my opinion. I found the substantive comments to be of a much higher quality than one gets from a typical law review, and, unlike the practice of some peer-reviewed journals, the ABLJ published my manuscript in a timely manner.
The American Business Law Journal is seeking submissions of manuscripts that advance the scholarly literature by comprehensively exploring and analyzing legal and ethical issues affecting businesses within the United States or the world. Manuscripts analyzing international business law topics are welcome but must include a comprehensive comparative analysis, especially with U.S. law.
As most of you know, the ABLJ is a triple-blind, peer-reviewed law journal published by the Academy. The ABLJ is available on Westlaw and Lexis, and ranks in the top 6% of all publications in the Washington & Lee Submissions and Ranking list by Impact Factor (2016) and in the top 1% of all peer-edited or refereed by Impact Factor (2016). The Washington & Lee list ranks the ABLJ as the Number One Refereed/peer-edited “Commercial Law” and “Corporations and Associations” journal.
Because of a physical page limit imposed by our publisher Wiley, we ask that manuscripts not exceed 18,000 – 20,000 words (including footnotes). Submissions in excess of 25,000 words (including footnotes) may be returned without review. We also require that manuscripts substantially comply with the Bluebook: A Uniform Method of Legal Citation, 20th ed. For more details, please review our Author Guidelines at: http://onlinelibrary.wiley.com/journal/10.1111/%28ISSN%291744-1714/homepage/ForAuthors.html
Because the peer-review process takes from four to six weeks to complete, we strongly suggest that you submit to the ABLJat least a few weeks prior to submitting to other journals. The peer-review process is not conducive to expedite requests (though we will attempt to honor them if possible), so if you give us a head start we will more likely be able to complete the review process.
While we gladly accept submissions through ExpressO and Scholastica, save yourself the submission fee and submit directly to the ABLJ at firstname.lastname@example.org.
If you have any questions or need additional information, please contact the Managing Editor, Julie Manning Magid, at email@example.com.
Thank you and we look forward to reviewing your scholarly work.
Monday, May 7, 2018
I was fascinated by Ann Lipton's post on April 14. I started to type a comment, but it got too long. That's when I realized it was actually a responsive blog post.
Ann's post, which posits (among other things) that corporate chief executives might be required to comply with their fiduciary duties when they are acting in their capacity as private citizens, really made me think. I understand her concern. I do think it is different from the disclosure duty issues that I and others scope out in prior work. (Thanks for the shout-out on that, Ann.) Yet, I struggled to find a concise and effective response to Ann's post. Here is what I have come up with so far. It may be inadequate, but it's a start, at least.
Fiduciary duties are contextual. One can have fiduciary duties to more than one independent legal person at the same time, of course, proving this point. (Think of those overlapping directors, Arledge and Chitiea in Weinberger. They're a classic example!) What enables folks to know how to act in these situations is a proper identification of the circumstances in which the person is acting.
So, for example, an agent’s duty to a principal exists for actions taken within the scope of the agency relationship. The agency relationship is defined by the terms of the agreement between principal and agent as to the object of the agency. The principal controls the actions of the agent within those bounds based on that agreement.
Similarly, a director’s or officer's conduct is prescribed and proscribed within the four corners of the terms of their service to the corporation. They owe their duties to the corporation (and in Revlon-land or other direct-duty situations, also to the stockholders). The problem then becomes defining those terms of service. For directors, a quest for evidence of the parameters of their service should start with the statute and extend to any applicable provisions of the corporate charter, bylaws, and board policies and resolutions more generally. For officers, the statute typically doesn’t provide much content on the nature or extent of their services. The charter may not either. Typically, the bylaws and board policies and resolutions, as well as any employment or severance agreement (the validity of which is largely a matter outside the scope of corporate law), would define the scope of service of an officer.
I have trouble envisioning that the scope of service (and therefore, reach of fiduciary duties) for a typical director or officer would extend to, e.g., private ownership of other entities and decisions made in that capacity. Yet, even where there is no technical conflicting interest or breach of a duty of loyalty, there is a clear business interest in having corporate managers—especially highly visible ones—act in a manner that is consistent with corporate policy or values when they are not “on the job.” While voluntary corporate policy or private regulation may have a role in policing that kind of director or officer activity (through service qualifications or employment termination triggers, e.g.), I do not think it is or should be the job of corporate law—including fiduciary duty law—to take on that monitoring and enforcement role.
Nevertheless, I remain convinced that better (more accurate ad complete) disclosure of (at least) inherent conflicts of interest may be needed so investors and other stakeholders can evaluate the potential for undesirable conduct that may impact the nature or value of their investments in the firm. As Ann notes, significant privacy rights exist in this context, too. There's more work to be done here, imv.
Thanks for making me think, Ann. Perhaps you (or others) have a comment on this riposte? We shall see . . . .
Monday, April 30, 2018
My essay on the use of traditional for-profit corporations as a choice of entity for sustainable social enterprise firms was recently published in volume 86 of the UMKC Law Review. I spoke on this topic at The Bryan Cave/Edward A. Smith Symposium: The Green Economy held at the UMKC School of Law back in October. The essay is entitled "Let's Not Give Up on Traditional For-Profit Corporations for Sustainable Social Enterprise," and the SSRN abstract is included below:
The past ten years have witnessed the birth of (among other legal business forms) the low-profit limited liability company (commonly known as the L3C), the social purpose corporation, and the benefit corporation. The benefit corporation has become a legal form of entity in over 30 states. The significant number of state legislative adoptions of new social enterprise forms of entity indicates that policy makers believe these alternative forms of entity serve a purpose (whether legal or extra legal).
The rise of specialty forms of entity for social enterprise, however, calls into question, for many, the continuing role of the traditional for-profit corporation (for the sake of brevity and convenience, denominated “TFPC” in this essay) in social enterprises, including green economy ventures. This essay argues that TFPCs continue to be a viable—and in many cases desirable or advisable choice of entity for sustainable social enterprise firms. The arguments presented are founded in legal doctrine, theory, and policy and include both legal and practical elements.
Somehow, I managed to cite to four BLPB co-bloggers in this single essay: Josh, Haskell, Stefan, and Anne. Evidence of a business law Vulcan mind meld? You decide . . . .
Regardless, comments, as always, are welcomed as I continue to think and write about this area of law and practice.
April 30, 2018 in Anne Tucker, Business Associations, Corporate Governance, Corporations, Haskell Murray, Joan Heminway, Joshua P. Fershee, Social Enterprise, Stefan J. Padfield | Permalink | Comments (2)