Corporate Personality

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Last week Kent Greenfield and Adam Winkler published “The U.S. Supreme Court’s Cultivation of Corporate Personhood,” in the Atlantic discussing two recent Supreme Court opinions.  Greenfield and Winkler covered the ruling in Horne v. Department of Agriculture  where the Court held  “a federal program requiring raisin growers to set aside a percentage of their crops for government redistribution was an unconstitutional ‘taking’ under the Fifth Amendment.”  The second case addressed was Los Angeles v. Patel where the Court extended Fourth Amendment privacy protections “invalidating a city ordinance (similar to laws around the country) allowing police to search [hotel] guest registries without a warrant.”

While they distinguish certain rights, like political speech, that are “more appropriate for people than for corporations,” Greenfield and Winkler acknowledge that some constitutional protections should be extended to corporations.  

“A corporate right to be free from government takings, for example, makes sense both as a matter of constitutional law and of economics. Government overreach is problematic whether the raisin grower is a family farm or a business corporation. And corporations left exposed to government expropriation would find investors reluctant to take that risk, undermining the basic social purpose of the corporation,

In my final post on the subject of “respectability” of lawyers (the first four can be found here, here, here and here), I’d like to tie my thoughts together, discussing what the various parties can do to make Bird and Orozco’s thesis of assimilation of lawyers into corporate business teams the “new normal”.  This should give lawyers more career opportunities in the future, slow the loss of influence of the legal profession in businesses, and make legal education a more attractive choice.  Much of the discussion in academia has ignored the in-house counsel approach as being a viable option for the woes of the legal industry.  Below the fold, this post will discuss the roles that academia, in-house counsel, and business firms each may play in increasing the potential for success of a new model for business lawyers.

Apparently, there is a split of opinion on what some people believe God wants the world to do about the climate. On one side, Senator Jim Inhofe does not believe the man is responsible for climate change. He has publicly stated that, “[T]he Genesis 8:22 that I use in there is that ‘as long as the earth remains there will be seed time and harvest, cold and heat, winter and summer, day and night.’ My point is, God’s still up there. The arrogance of people to think that we, human beings, would be able to change what He is doing in the climate is to me outrageous.” When I mentioned this quote to a European audience at a conference on climate change and business in 2013, there was an audible gasp. He also wrote a 2012 book, The Greatest Hoax: How the Global Warming Conspiracy Threatens Your Future. His position did not change after the 2013 Intergovernmental Commission on Climate Change Report definitively declared that climate change was largely man made. This would all be irrelevant if Senator Inhofe wasn’t the Chair of the Senate committee that oversees the environment. Inhofe was the keynote speaker last week at the…

Last week, I attended the National Business Law Scholars Conference at Seton Hall University School of Law in Newark, NJ.  It was a great conference, featuring (among others) BLPB co-blogger Josh Fershee (who presented a paper on the business judgment rule and moderated a panel on business entity design) and BLPB guest blogger Todd Haugh (who presented a paper on Sarbanes-Oxley and over criminalization).  I presented a paper on curation in crowdfunding intermediation and moderated a panel on insider trading.  It was a full two days of business law immersion.

The keynote lunch speaker the second day of the conference was Kent Greenfield.  He compellingly argued for the promotion of corporate personhood, following up on comments he has made elsewhere (including here and here) in recent years.  In his remarks, he causally mentioned B corporations and social enterprise more generally.  I want to pick up on that thread to make a limited point here that follows up somewhat on my post on shareholder primacy and wealth maximization from last week.

Last week, I looked lovingly at a picture of a Starbucks old-fashioned grilled cheese sandwich. It had 580 calories. I thought about getting the sandwich and then reconsidered and made another more “virtuous” choice. These calorie disclosures, while annoying, are effective for people like me. I see the disclosure, make a choice (sometimes the “wrong” one), and move on.

Regular readers of this blog know that I spend a lot of time thinking about human rights from a corporate governance perspective. I thought about that uneaten sandwich as I consulted with a client last week about the California Transparency in Supply Chains Act. The law went into effect in 2012 and requires retailers, sellers, and manufacturers that exceed $100 million in global revenue that do business in California to publicly disclose the degree to which they verify, audit, and certify their direct suppliers as it relates to human trafficking and slavery. Companies must also disclose whether or not they maintain internal accountability standards, and provide training on the issue in their direct supply chains. The disclosure must appear prominently on a company’s website, but apparently many companies, undeterred by the threat of injunctive action by the state Attorney…

Thanks to faithful BLPB reader Scott Killingsworth for the tip about this new article appearing in the New Yorker detailing the scholarship and advocacy of renowned Harvard constitutional law professor Laurence Tribe.  The article raises questions about conflicts of interest between scholarship and advocacy.

[I]t would also be foolish to ignore the inherent tension in searching for truth while also working for paying clients. The scholar-warrior may lapse into a far more contemptible figure: the scholar for hire, who sells his name and his title for cash. A subtler danger comes from the well-known and nearly unavoidable tendency lawyers have of identifying with their clients. 

The article also highlights his role in the current debate on corporate constitutional rights.

Tribe has taken a strong view of individual rights; his view of corporate rights is similar, and in this capacity he has at times advanced constitutional arguments that might invalidate great parts of the administrative state, in a manner recalling the Supreme Court’s jurisprudence of the nineteen-twenties and thirties. In that sense, the current condemnation of Tribe can be seen as part of a larger progressive backlash against the use of the Bill of Rights to serve corporate interests.

This…

It’s that time of year again where I have my business associations students pretend to be shareholders and draft proposals. I blogged about this topic last semester here. Most of this semester’s proposals related to environmental, social and governance factors. In the real world, a record 433 ESG proposals have been filed this year, and the breakdown as of mid-February was as follows according to As You Sow:

Environment/Climate Change- 27%

Political Activity- 26%

Human Rights/Labor-15%

Sustainability-12%

Diversity-9%

Animals-2%

Summaries of some of the student proposals are below (my apologies if my truncated descriptions make their proposals less clear): 

1) Netflix-follow the UN Guiding Principles on Business and Human Rights and the core standards of the International Labour Organization

2) Luxottica- separate Chair and CEO

3) DineEquity- issue quarterly reports on efforts to combat childhood obesity and the links to financial risks to the company

4) Starbucks- provide additional disclosure of risks related to declines in consumer spending and decreases in wages

5) Chipotle- issue executive compensation/pay disparity report

6) Citrix Systems-add board diversity

7) Dunkin Donuts- eliminate the use of Styrofoam cups

8) Campbell Soup- issue sustainability report

9) Shake Shack- issue sustainability report

10) Starbucks- separate…

Prof. Bainbridge yesterday posted about The Modern Corporation Statement on Company Law.  The statement has ten fundamental rules, of which number ten is:

Contrary to widespread belief, corporate directors generally are not under a legal obligation to maximise profits for their shareholders. This is reflected in the acceptance in nearly all jurisdictions of some version of the business judgment rule, under which disinterested and informed directors have the discretion to act in what they believe to be in the best long term interests of the company as a separate entity, even if this does not entail seeking to maximise short-term shareholder value. Where directors pursue the latter goal, it is usually a product not of legal obligation, but of the pressures imposed on them by financial markets, activist shareholders, the threat of a hostile takeover and/or stock-based compensation schemes.

Prof. Bainbridge is with Delaware Chief Justice Strine in that profit maximization is the only role (or at least only filter) for board members.  As he asserts, “The relationship between the shareholder wealth maximization norm and the business judgment rule, . . . explains why the business judgment rule is consistent with the director’s “legal obligation to maximise profits for…

The Fordham Journal of Corporate and Financial Law recently published a March 6, 2014, lecture from Former Delaware Supreme Court Chief Justice Myron T. Steele, Continuity and Change in Delaware Corporate Law Jurisprudence (available on Westlaw, but fee may apply).  As an aside, I’ll note that it appears to have taken a full calendar year for this to get published (at least on Westlaw), which seems crazy to me.  If there’s any question why legal blogs can fill such a critical role in providing timely commentary on legal issues, this is a big part of the answer.

In the lecture, Chief Justice Steele discusses three main areas: (1) multi-forum jurisdiction, (2) shareholder activism, and (3) the Nevada, Delaware, and North Dakota Debate (a “competition for charters”). 

As to multi-forum jurisdiction, he makes the unsurprising point that Delaware courts are of the view that first impressions of the Delaware General Corporation Law or other “internal affairs doctrine” issues should be handled in Delaware courts.  Of note, he explains that the Delaware constitution (art. IV, § 11(8)) now allows federal courts, the top court from any state, the SEC, and bankruptcy courts to certify questions directly to the Delaware…

Greetings from Dublin. Between the Guinness tour, the champagne afternoon tea, and the jet lag, I don’t have the mental energy to do the blog I planned to write with a deep analysis of the AALS conference in DC. I live tweeted for several days and here my top 25 tweets from the conference. I have also added some that I re-tweeted from sessions I did not attend. I apologize for any misspellings and for the potentially misleading title of this post:

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