July 2014

The blogosphere has been a-twitter with commentary on Jamie Dimon’s revelation earlier this week that he has throat cancer and will be undergoing treatments in the hope of eradicating it.  From the public news, his prognosis sounds good.  For that, I am sure all are grateful.

As some of you may know, my interest in issues relating to disclosures of facts from executives’ private lives stems from my fascination, starting about 12 years ago, with the Martha Stewart disclosure cases (about which I wrote in law journals and in several chapters of a book that I edited).  After co-writing the book about the basic concerns in Stewart’s insider trading, misstatements/omissions securities fraud, and derivative fiduciary duty actions, I focused in additional articles on some finer points relating to her case.  Two of these works covered the disclosure of private facts.  Among the types of private facts covered are those relating to executive health concerns.

The title of this post refers to the thought-provoking book by former BP executive, Christine Bader, The Evolution of a Corporate Idealist: When Girl Meets Oil. I will save a review for next week in Part 2 of this post. Briefly, Bader discusses the internal and external struggles that she and other “corporate idealists” face when trying to provide practical, culturally appropriate, innovative ways to implement corporate social responsibility and human rights programs around the world. Much of what she said resonated with me based upon my years as a compliance and ethics officer for a multinational corporation and as a current consultant on these issues.

Like comedian/TV commentator John Oliver, I am torn about the World Cup and the significant power that soccer/futbol’s international governing body FIFA has over both Brazil and its residents. His hilarious but educational rant is worth a close watch, and I experienced the conflict he describes firsthand during my two recent trips to Salvador, Brazil. I went to watch what the rest of the world calls “the beautiful game” in a country where soccer is a religion. That’s not an exaggeration by the way– I bought a statuette of a monk holding a…

Building on Elizabeth Pollman’s list, I have compiled post-opinion posts on Burwell v. Hobby Lobby by corporate law professors.  I imagine this list is incomplete and am happy to update the list.

Stephen Bainbridge (UCLA) (here, here, and here)

Lawrence Cunningham (George Washington) (here and here)

John Fershee (West Virginia)

Kent Greenfield (Boston College)

Sarah Hahn (Idaho)

Joan Heminway (Tennessee)

Lyman Johnson (W&L and St. Thomas-MN)

Elizabeth Pollman (Loyola-Los Angeles)

Brian Quinn (Boston College)

Usha Rodrigues (Georgia)

Anne Tucker (Georgia State)

Thanks to all for the interesting posts.  I am sure there will be more to come, followed by a flurry of articles in the fall and spring cycles.  Looking forward to reading more. 

Earlier this week I asked Professor Lyman Johnson if he would care to share his thoughts on the Hobby Lobby case with us because I had so enjoyed his thoughtful posts on the Conglomerate before the decision was issued (see here and here).  Professor Johnson’s contribution is below.

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             I thank the good folks here at the Business Law Prof Blog for inviting me to share some thoughts about the Supreme Court’s decision in the high-profile Hobby Lobby cases.  The Court held that a closely-held business corporation was a “person” under the Religious Freedom Restoration Act (RFRA), that such a for-profit corporation could indeed “exercise religion” under that Act, and that as applied to closely-held corporations the contraceptive mandate promulgated under the Affordable Care Act violated RFRA.  Two days after the controversial decision, the sky has not fallen, although dire forecasts to that effect still abound.  My post today makes a simple but basic point:  quite apart from the decision’s implications for religious liberty in the corporate realm – no small thing, to be sure – and notwithstanding the still unfolding legal and political fallout, Hobby Lobby immediately became a landmark decision in which the Supreme Court spoke in…

FOR ACADEMIC EYES ONLY (practicing readers may be deeply offended by my self-indulgence)

By my count we are in week 7 (out of 12) of “summer”–the time between graduation and when the fall semester resumes.  We are more than half-way through this shimmering mirage, this beacon of hopeful productivity, balance, and reprieve.  All year long, I think, THIS summer I will……  And now this THIS summer is here, I am feeling concerned about all that hasn’t been tended to at work or at home. At least not yet.  (And it isn’t for lack of trying–75 exams graded, 3 conferences attended, 1 article draft complete, 3 unexpected child illnesses, and 1 empirical study bogged down in the details.)

This is a common refrain of conversations had with fellow academics. It all goes by too quickly and with self-imposed pressure to make the most of it professionally (write two articles for August submission!) and personally (go on exotic travel adventure with family!).  By my personal count, I am failing on both fronts.   While this is a unique schedule for academics, I think that the promise of summer lures most people from all walks of life into an unrealistic vision of this time…

The following is a contribution from guest blogger Sarah Haan, Associate Professor of Law at the University of Idaho College of Law.

Business law professors no doubt felt relief yesterday when the news media corrected course and stopped distilling Hobby Lobby into a sound bite about “family-owned” corporations.  The three corporations challenging the Affordable Care Act in the case – Conestoga, Hobby Lobby, and Mardel – happen to be family-owned, but the majority opinion, penned by Justice Alito, was careful to articulate its holding as applying to “closely held” corporations, of which family-owned corporations are just a subset.

Commentators (like the Business Law Profs Blog’s Anne Tucker) have noted that the Court’s failure to define what it meant by “closely held” is significant.  By using the ambiguous phrase, and by suggesting that the opposite of a closely held corporation is a “publicly held corporation,” Justice Alito was opening the door to RFRA free exercise claims by a wide range of companies, the vast majority of which will bear no likeness to mom-and-pop businesses.  Generally, a “closely held” corporation is one that has a “small number” of shareholders (ALI Principles of Corporate Governance), or, under an alternate theory, one in which the identity of owners and managers is “substantially identical.”  Importantly, there is no consensus about how many shareholders a “closely held” corporation can have.  Under Delaware law, a statutory “close” corporation (a subset of closely-held corporations) can have as many as 30 shareholders.  Under Maryland law, there is no limit.  “’Closely held’ is not synonymous with ‘small,’” Justice Ginsberg rightly pointed out in her dissent.

But there is more to Justice Alito’s slight-of-hand than the murky distinction between a “closely held” corporation and a “family-owned” one.  The government argued that giving corporations free exercise rights under RFRA will lead to religious battles among shareholders that distract from the economic objectives of the corporation.  In a paragraph that echoed the majority’s discussion of the “mechanisms of corporate democracy” in Citizens United, Justice Alito explained why shareholders’ religious disagreements are little cause for concern:

The owners of closely held corporations may – and sometimes do – disagree about the conduct of business.  And even if RFRA did not exist, the owners of a company might well have a dispute about religion.  For example, some might want a company’s stores to remain open on the Sabbath in order to make more money, and others might want the stores to close for religious reasons.  State corporate law provides a ready means for resolving any conflicts by, for example, dictating how a corporation can establish its governing structure.  Courts will turn to that structure and the underlying state law in resolving disputes.

In this paragraph, the Court acknowledges that shareholders in a closely held corporation might not have the same religious views, but assumes that such a corporation can still exercise a religion under RFRA.  All shareholders at each of the three corporations in Hobby Lobby held the same set of religious views, but nowhere does the Court suggest that this is a requirement of RFRA personhood. To the contrary, this passage reveals that the Court does not mean to limit corporate religious exercise to only those closely held corporations whose shareholders all agree about religion.  In fact, the Court anticipates that shareholders of companies exercising a religion under RFRA will have religious disputes, and it views the mechanisms of state corporate law as the proper means for sorting out those disagreements.

And here’s the rub:  The most basic principles of state corporate law allow a controlling shareholder to, well, control the corporation.  So what the Court has really decided is that a single controlling shareholder, or a sub-group of shareholders with voting control, can make religious exercise decisions for the corporation, even over the objections of minority shareholders.  Because that is how state corporate law resolves intra-corporate disputes.

In other words, the sincerely-held religious beliefs of a closely held corporation may just be the sincerely-held religious beliefs of its controlling shareholder.