Photo of Stefan J. Padfield

Director of the NCPPR's Free Enterprise Project. Prior experience includes 15+ years as a law professor, two federal judicial clerkships, private practice at Cravath, Swaine & Moore, LLP, and 6 years enlisted active duty (US Army). Immigrant (naturalized).

I recently came across a letter sent by Kentucky State Treasurer Allison Ball to S&P Global Ratings back in June 2022 and thought the contents might be of interest to any of our readers who missed the letter when it was originally sent.  Below is an excerpt.  You can find the full letter here.

On behalf of the Commonwealth of Kentucky and those we serve, we firmly and collectively object to S&P Global Ratings’ (S&P) new plan to include ESG credit indicators in its credit ratings for states and state subdivisions….

These ESG credit indicators inject unnecessarily subjective and political judgments into a rating system that should be solely pecuniary in nature. Earlier this year, S&P wrote, “having a social mission and strong ESG characteristics does not necessarily correlate with strong credit worthiness and vice versa,” making it abundantly clear these factors are not relevant for determining state credit calculations. We thus agree with our friends in Utah who admonished these new scoring standards and exposed them as an exercise in political subjugation when they noted the following in a recent letter signed by every Utah statewide official and their entire federal delegation:

[there are] two layers of indeterminacy that make ESG an exercise in servitude: 1)

Two recent posts that might be related:

On Tuesday, Vivek Ramaswamy posted The ESG Fiduciary Gap on The Harvard Law School Forum on Corporate Governance.  In that post, he noted that:

BlackRock is currently under investigation for antitrust violations precisely because of its coordinated ESG activism through groups like Climate Action 100+, Net Zero Asset Managers, and Glasgow Financial Alliance for Net Zero. Vanguard and State Street are members of many of the same groups. In fact, until recently, as Arizona’s Attorney General has observed, “Wall Street banks and money managers [were] bragging about their coordinated efforts to choke off investment in energy.” U.S. antitrust statutes are broad by design. They forbid competitors from entering into any agreement with the purpose or likely effect of reducing supply in a relevant market. Here, through these groups, BlackRock is cooperating with its competitors to make concerted efforts to decrease marketwide output in fossil fuels. That is no secret; it is the very purpose of these organizations. Net Zero Asset Managers, for example, makes clear that it has an “expectation of signatories” like BlackRock to force a “rapid phase out of fossil fuel[s],” including by, for example, refusing to finance new coal projects. If the

I recently had a chance to listen to an episode of the Institutionalized podcast discussing efforts by the American Civil Rights Project to combat the embrace of neo-racism by corporate America. (Cf. "In his new book, Woke Racism: How a New Religion Has Betrayed Black America, Professor John McWhorter argues that a neoracism, disguised as antiracism, is hurting Black communities in this country.")  In the course of that podcast, Dan Morenoff, Executive Director of the American Civil Rights Project, discussed a relevant recent litigation filing against Starbucks. A copy of the complaint can be found in the ACRP press release here, and here is an excerpt from that release:

Yesterday [8/30/22], for the National Center for Public Policy Research, a longtime Starbucks shareholder, the American Civil Rights Project sued Starbucks’ officers and directors. That suit – NCPPR v. Schultz et al. – seeks both to bar those officers and directors from continuing to implement racially discriminatory policies and to hold them responsible for the harms those policies have done to shareholders. This step follows the parties’ exchange of letters.  In March, the ACR Project wrote the defendants and Starbucks demanding the immediate retraction of seven

Randall Thomas, Robert Thompson, and Harwell Wells have posted Delaware's Shifting Judicial Role in Business Governance on SSRN (here). The abstract is below, but I thought it worth highlighting the following two quotes from the paper:

  • For 2021, 28 percent of Delaware’s state budget was estimated to be provided by corporate franchise tax and business entity fees deriving from corporations, LLCs, LPs, and other business entities organized under its laws.
  • LLCs now provide Delaware almost thirty percent of its budgetary income from entity chartering, up from the low single digits twenty years ago.

Abstract

This Article examines the changing nature of judicial review of governance in American businesses. Drawing on a detailed study of all cases filed in 2018 in Delaware, the country’s dominant jurisdiction for corporate law, and a previous study of such litigation at the turn of the century, it reveals fundamental changes in corporate law issues brought to court in the twenty-first century. Twenty years ago, the chief task of the Delaware Court of Chancery, the nation’s preeminent business court (and the Delaware Supreme Court that hears all appeals from that court), was to apply fiduciary duties to resolve disputes over the governance of publicly

One of my Westlaw alerts this morning included: Robert T. Miller, How Would Directors Make Business Decisions Under A Stakeholder Model?, 77 Bus. Law. 773 (2022). Here is the abstract:

Under the stakeholder model of corporate governance, directors may confer benefits on corporate constituencies other than shareholders without regard to whether doing so produces benefits for the shareholders even in the long run. Contrary to what advocates of stakeholder theory often say, stakeholder theory does not put all corporate constituencies on a par, letting directors give equal consideration to the interests of all constituencies. Rather, stakeholder theory uniquely disadvantages shareholders, allowing directors to transfer value from shareholders to other constituencies but never from other constituencies to shareholders. More importantly, although critics of the stakeholder model going back to Berle have complained that the model provides directors with no clear standard by which to make business decisions, this criticism grossly understates the problem. In fact, the stakeholder model says nothing at all about which interests of the various constituencies are legitimate interests, much less about how such interests should be balanced against each other. As a result, the model provides no normative criteria of any kind on the basis of

Mississippi College School of Law invites applications from entry-level candidates for multiple tenure-track faculty positions expected to begin in July 2023. Our search will focus primarily on candidates with an interest in teaching one or more of the following subject areas: Civil Law, Civil Procedure, Contracts, First Amendment, Commercial Law, Cyber Law/Law & Technology, Estates & Trusts, and Race and the Law. We seek candidates with a distinguished academic background (having earned a J.D. and/or Ph.D.), a commitment to excellence in teaching, and a demonstrated commitment to scholarly research and publication. We particularly encourage applications from candidates who will enrich the diversity of our faculty. We will consider candidates listed in the AALS-distributed FAR, as well as those who apply directly.

Applications should include a cover letter, curriculum vitae, a Mississippi College Faculty Application (found on this website), a scholarly research agenda, the names and contact information of three references, and teaching evaluations (if available).

Applications should be sent in a single PDF to Professor Jonathan Will, Chair, Faculty Appointments Committee, via email at will@mc.edu. Here's a link to the job posting.

Jason Brennan has posted Diversity for Justice vs. Diversity for Performance: Philosophical and Empirical Tensions on SSRN (here).  The abstract:

Many business ethicists, activists, analysts, and corporate leaders claim that businesses are obligated to promote diversity for the sake of justice. Many also say—good news!—that diversity promotes the bottom line. We … need not choose between social justice and profits. This paper splashes some cold water on the attempt to mate these two claims. On the contrary, I argue, there is philosophical tension between arguments which say diversity is a matter of justice and (empirically sound) arguments which say diversity promotes performance. Further, the kinds of interventions these distinct arguments suggest are different. Things get worse when we examine the theory and empirical evidence about how diversity affects group performance. The kind of diversity which promotes justice and the kind which promotes the bottom line are distinct—and the two can be at odds.

Back in March, I posted about a paper, "Censorship and Market Failure in the Marketplace of Ideas," that Professor Jeremy Kidd and I presented at a research roundtable on Capitalism and the Rule of Law hosted by the Law & Economics Center at George Mason University Antonin Scalia Law School. A complete version of that paper is now available here. Here is the abstract:

Use of the familiar metaphor of the exchange of ideas as a “marketplace” has historically presumed that free and uninhibited competition among ideas will reliably arrive at truth. But even the most fervent economic free-market advocates recognize the possibility of market failure. Market failure is a market characteristic (e.g., monopoly power) that precludes the maximization of consumer welfare.

The last few years have witnessed increased calls for censorship of speech and research pertaining to a variety of subjects (e.g., climate change; COVID-19 sources and treatments; and viewpoints concerning race, gender, and sexual orientation) across a variety of fora. The consistent refrain in favor of this censorship is that the spread of false or misleading information is preventing access to or distorting the truth and thereby inhibiting social progress: undermining democracy, fomenting bigotry, costing lives, and

Professor  Timothy D. Lytton, Associate Dean for Research and Faculty Development at Georgia State Univeristy, recently published his new article, Using Insurance to Regulate Food Safety: Field Notes from the Fresh Produce Sector, in the New Mexico Law Review. Here's the abstract:

Foodborne illness is a public health problem of pandemic proportions. In the United States alone, contaminated food sickens an estimated 48 million consumers annually, causing 128,000 hospitalizations and 3,000 deaths. Nowhere is this crisis more acute than in the fresh produce sector, where microbial contamination in growing fields and packing houses has been responsible for many of the nation’s largest and deadliest outbreaks. This Article examines emerging efforts by private insurance companies to regulate food safety on farms that grow fresh produce.

Previous studies of using insurance to regulate food safety rely on economic theories that yield competing conclusions. Optimists argue that insurance can promote efficient risk reduction. Skeptics counter that insufficient information regarding the root causes of contamination renders insurance impotent to reduce food safety risk. This Article adds a sociolegal perspective to this debate. Based on interviews with insurance professionals, the Article documents how, notwithstanding limited information, underwriters employ a variety of techniques to