July 2014

I’ve updated our business law professors on Twitter list here.  

Below are tweets from some of the new additions to the list.  

In last week’s post about the business of the World Cup, I indicated that I would review Christine Bader’s book, The Evolution of a Corporate Idealist: When Girl Meets Oil. I have changed my mind, largely because I don’t have much to add to the great reviews the book has already received. Instead I would like to talk about how lawyers, professors and students can use the advice, even if they have no desire to do corporate social responsibility work as Bader did, or worse, they think CSR and signing on to voluntary UN initiatives is really a form of “bluewashing.”

Bader earned an MBA and worked around the world on BP’s behalf on human rights initiatives. This role required her to work with indigenous peoples, government officials and her peers within BP convincing them of the merits of considering the human rights, social, and environmental impacts. She then worked with the UN and John Ruggie helping to develop the UN Guiding Principles on Business and Human Rights, a set of guidelines which outline the state duty to protect human rights, the corporate duty to respect human rights, and both the state and corporations’ duty to provide judicial…

Earlier this week, I did an interview for the Corporate Social Responsibility podcast with David Yosifon on the Hobby Lobby case.  We walk through the elements of the ruling and discuss the potential implications.  It may be a little long if you are deeply familiar with the opinion, but it may also be a good overview of the ruling if you are looking to catch up on the issues while giving your eyes a rest.

-Anne Tucker

If copying is the highest form of flattery then re-posting is the blogger’s equivalent.  I got caught up reading this morning and it has left little time for writing.  Here’s what I spent my morning reading. The first two are very powerful and the remainder are practical.

Happy Reading!

-Anne Tucker

A recent article discussing the American Society of Civil Engineers’ Report Card on U.S. infrastructure explains:

Without adequate investment on infrastructure the US could face a $2.4 trillion drop in consumer spending by 2020, a $1.1 trillion loss in total trade and experience the loss of 3.5 million jobs in 2020 alone.

This is just a sliver of the doom and gloom the American Society of Civil Engineers predicted this week with the release of their final report in the “Failure to Act” series that focuses on the impacts associated with continued infrastructure deterioration. The latest installment of the ASCE reports focuses on specifically on economic impacts.

Under current investment trends, only 60% of the investment funding required by 2020 will be secured and this underinvestment in infrastructure will have a “cascading impact on the nation’s economy” and culminate in a “gradual worsening of reliability over time,” Gregory E. DiLoreto, ASCE President told the participants on a conference call.

Back in 2007, I published an article titled, Misguided Energy: Why Recent Legislative, Regulatory, and Market Initiatives are Insufficient to Improve the U.S. Energy Infrastructure (here). In that article, I argued: 

Soaring energy prices, natural gas supply shortages, and blackouts

…

I just posted my latest crowdfunding article, Shooting the Messenger: The Liability of Crowdfunding Intermediaries for the Fraud of Others, on SSRN. Here’s the abstract:

The new federal crowdfunding exemption in section 4(a)(6) of the Securities Act requires that securities be sold only through regulated intermediaries—brokers and funding portals. Much of the information appearing on those crowdfunding intermediaries’ platforms will be provided by someone other than the intermediary. Crowdfunding intermediaries must post extensive disclosure provided by issuers of the securities being sold. Under the SEC’s proposed rules, they must also provide communication channels where prospective investors and others may post comments.

Neither the statute nor the proposed rules say much about the intermediary’s obligation to verify the information posted by others or its liability if that information is false or misleading. The result under the securities antifraud rules is unclear. Unless the law is clarified, crowdfunding intermediaries face a significant risk of liability that could make crowdfunded securities offerings unfeasible.

I argue that crowdfunding intermediaries should be liable for information provided by others in only three circumstances: (1) if they knew the posted information was false; (2) if they were aware of red flags that should have alerted them…

The Court’s Hobby Lobby decision, as noted in post-decision commentary (see, e.g., Sarah Hahn‘s guest post earlier this week), apparently relies in part on the fact that shareholders (and, potentially, employees and other relevant constituents of the firm) know that the firm has sincerely held religious beliefs and what those beliefs mean for business operations and legal compliance.  The Court does not directly address this in its opinion.  Rather, the opinion includes various references to owner engagement that imply buisness owner awareness.  The Court states:

  • For-profit corporations, with ownership approval, support a wide variety of charitable causes . . . . (Op. 23, emphasis added)

  • “So long as its owners agree, a for-profit corporation may take costly pollution-control and energy conservation measures that go beyond what the law requires.” (Op. 23, emphasis added)

In making these statements and reasoning through this part of the opinion, the Court relies on state corporate law principles and allusions.

Importantly, the Court also indicates its views on how the policy underlying the RFRA favors an interpretation that includes corporations as persons:

An established body of law specifies the rights and obligations of the people (including shareholders, officers, and employees) who are associated with a corporation in one way or another. When rights, whether constitutional or statutory, are extended to corporations, the purpose is to protect the rights of these people. For example, extending Fourth Amendment protection to corporations protects the  privacy interests of employees and others associated with the company. Protecting corporations from government seizure of their property without just compensation protects all those who have a stake in the corporations’ financial well-being. And protecting the free-exercise rights of corporations like Hobby Lobby, Conestoga, and Mardel protects the religious liberty of the humans who own and control those companies.

(Op. 18, emphasis in original)  Note how the last sentence reduces the protected category of persons under the RFRA to those who “own and control” the firm at issue.  This represents an interesting narrowing of constituency groups from the more inclusive treatment in the first sentence of the paragraph.  The reason for this narrowing may be (likely is) a practical one, evidencing judicial restraint.  The plaintiffs in the Hobby Lobby actions were those who owned or controlled the corporation, and the decision likely will be limited in its application accordingly.

Given these breadcrumbs from the Court’s opinion, should disclosure to shareholders or other constituencies be required, and if so, where would those disclosure rules reside as a matter of positive law?  A blog post may be the wrong place to begin to address this issue (which is admittedly complex and involves, potentially, areas of law somewhat unfamiliar to me).  But indulge me in a thought experiment here for a minute.

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: