Law Commons^™

Corporate Law’S Threat To Human Rights: Why Human Rights Due Diligence Might Not Be Enough, Barnali Choudhury

Articles & Book Chapters

The take-up of mandatory human rights due diligence (HRDD) initiatives by states is continuously gaining momentum. There are now numerous states adopting some form of HRDD laws. While corporations being duly diligent in respecting human rights is a positive step towards addressing problems of business and human rights, these HRDD initiatives on their own may only be a form of window-dressing, that is, enabling states to put a smart spin on their efforts to address business and human rights issues without addressing some of the root causes of that predicament. As a result, HRDD laws are likely to be a …

The Public’S Companies, Andrew K. Jennings

Faculty Articles

This Essay uses a series of survey studies to consider how public understandings of public and private companies map into urgent debates over the role of the corporation in American society. Does a social-media company, for example, owe it to its users to follow the free-speech principles embodied in the First Amendment? May corporate managers pursue environmental, social, and governance (“ESG”) policies that could reduce short-term or long-term profits? How should companies respond to political pushback against their approaches to free expression or ESG?

The studies’ results are consistent with understandings that both public and private companies have greater public …

Woke Capital Revisited, Jennifer S. Fan

Articles

Inclusive corporate leadership is now at the forefront of discussions related to corporate governance. Two corporate theories help to explain the rise in prominence of diversity, equity, and inclusion (“DEI”) efforts in corporate leadership. First, an expanded definition of corporate purpose which elevated the idea of the importance of stakeholders, contributed to the momentum from business and legal quarters for broader corporate inclusion. Second, the increasing publicness of corporations—the social expectation of how large, typically public corporations should act given their position of power—also led to corporations becoming more active in the DEI space. It is against this backdrop that …

How Much Do Investors Care About Social Responsibility?, Scott Hirst, Kobi Kastiel, Tamar Kricheli-Katz

Faculty Scholarship

Perhaps the most important corporate law debate over the last several years concerns whether directors and executives should manage the corporation to maximize value for investors or also take into account the interests of other stakeholders and society. But, do investors themselves wish to maximize returns, or are they willing to forgo returns for social purposes? And more broadly, do market participants, such as investors and consumers, differ from donors in the ways in which they prioritize monetary gains and the promotion of social goals?

This project attempts to answer these questions with evidence from an experiment conducted with 279 …

Corporate Governance Gaming: The Collective Power Of Retail Investors, Sergio Alberto Gramitto Ricci, Christina M. Sautter

Faculty Works

The GameStop saga and meme stock frenzy have shown the pathway to the most disruptive revolution in corporate governance of the millennium. New generations of retail investors use technologies, online forums, and gaming dynamics to coordinate their actions and obtain unprecedented results. Signals indicate that these investors, whom we can dub wireless investors, are currently expanding their actions to corporate governance. Wireless investors’ generational characteristics suggest that they will use corporate governance to pursue social and environmental causes. In fact, wireless investors can set in motion a social movement able to bring business corporations to serve their original partly-private-partly-public purpose. …

The “Value” Of A Public Benefit Corporation, Jill E. Fisch, Steven Davidoff Solomon

All Faculty Scholarship

We examine the “value” a PBC form provides for publicly-traded corporations. We analyze the structure of the PBC form and find that other than requiring a designated social purpose it does not differ significantly in siting control and direction with shareholders. We also examine the purpose statements in the charters of the most economically significant PBCs. We find that, independent of structural limitations on accountability, these purpose statements are, in most cases, too vague and aspirational to be legally significant, or even to serve as a reliable checks on PBC behavior. We theorize, and provide evidence, that without a legal …

The History And Revival Of The Corporate Purpose Clause, Elizabeth Pollman

All Faculty Scholarship

The corporate purpose debate is experiencing a renaissance. The contours of the modern debate are relatively well developed and typically focus on whether corporations should pursue shareholder value maximization or broader social aims. A related subject that has received much less scholarly attention, however, is the formal legal mechanism by which a corporation expresses its purpose—the purpose clause of the corporate charter. This Article examines corporate purpose through the evolution of corporate charters. Starting with historic examples ranging from the Dutch East India Company to early American corporations and their modern 21st century parallels, the discussion illuminates how corporate purpose …

The Corporate Governance Machine, Dorothy S. Lund, Elizabeth Pollman

All Faculty Scholarship

The conventional view of corporate governance is that it is a neutral set of processes and practices that govern how a company is managed. We demonstrate that this view is profoundly mistaken: in the United States, corporate governance has become a “system” composed of an array of institutional players, with a powerful shareholderist orientation. Our original account of this “corporate governance machine” generates insights about the past, present, and future of corporate governance. As for the past, we show how the concept of corporate governance developed alongside the shareholder primacy movement. This relationship is reflected in the common refrain of …

Corporate Finance For Social Good, Dorothy S. Lund

Faculty Scholarship

Corporations are under pressure to use their outsized power to benefit society, but this advocacy is unlikely to result in meaningful change because corporate law’s incentive structure rewards fiduciaries who maximize shareholder wealth. Therefore, this Essay proposes a way forward that works within the wealth-maximization framework and yet could result in dramatic social change. The idea is simple: Use private debt markets to provide incentives for public-interested corporate action. Specifically, individuals who value prosocial corporate decisions could finance them by contributing to corporate social responsibility (CSR) bonds that would offset the corporation’s implementation costs. To provide an incentive to depart …

The Corporate Governance Machine, Dorothy S. Lund, Elizabeth Pollman

Faculty Scholarship

The conventional view of corporate governance is that it is a neutral set of processes and practices that govern how a company is managed. We demonstrate that this view is profoundly mistaken: For public companies in the United States, corporate governance has become a “system” composed of an array of institutional players, with a powerful shareholderist orientation. Our original account of this “corporate governance machine” generates insights about the past, present, and future of corporate governance. As for the past, we show how the concept of corporate governance developed alongside the shareholder primacy movement. This relationship is reflected in the …

Stewardship 2021: The Centrality Of Institutional Investor Regulation To Restoring A Fair And Sustainable American Economy, Leo E. Strine Jr.

All Faculty Scholarship

In this essay, which formed the basis for the luncheon keynote speech at the Rethinking Stewardship online conference presented by the Ira M. Millstein Center for Global Markets and Corporate Ownership at Columbia Law School and ECGI, the European Corporate Governance Institute, the essential, but not sufficient, role of regulation to promote more effective stewardship by institutional investors is discussed. To frame specific policy recommendations that align the responsibilities of institutional investors with the best interests of their human investors in sustainable wealth creation, environmental responsibility, the respectful treatment of stakeholders, and, in particular, the fair pay and treatment of …

The United Postal Service—The One Word That Makes All The Difference, Jena Martin, Matthew Titolo

Law Faculty Scholarship

In recent months, the United States Postal Service (USPS) has taken center stage on a number of intersecting issues in our society: the pandemic; the upcoming election (through mail-in voting) and the controversy surrounding the appointment of Louis DeJoy to the position of Postmaster General. President Donald Trump has frequently made derogatory remarks regarding the Postal Service, calling it a “joke,” and has made repeated statements encouraging its privatization. However, President Trump’s rhetoric (as well as the rhetoric of others before him) obfuscates the critical mission of the USPS – to provide service to every American in the country; not …

De Facto Shareholder Primacy, Jeff Schwartz

Utah Law Faculty Scholarship

For generations, scholars have debated the purpose of corporations. Should they maximize shareholder value or balance shareholder interests against the corporation’s broader social and economic impact? A longstanding and fundamental premise of this debate is that, ultimately, it is up to corporations to decide. But this understanding is obsolete. Securities law robs corporations of this choice. Once corporations go public, the securities laws effectively require that they maximize share price at the expense of all other goals. This Article is the first to identify the profound impact that the securities laws have on the purpose of public firms — a …

Say On Purpose: Lessons From Chinese Corporate Charters, Li-Wen Lin

All Faculty Publications

No abstract provided.

Corporate Power Is Corporate Purpose Ii: An Encouragement For Future Consideration From Professors Johnson And Millon, Leo E. Strine Jr.

All Faculty Scholarship

This paper is the second in a series considering the argument that corporate laws that give only rights to stockholders somehow implicitly empower directors to regard other constituencies as equal ends in governance. This piece was written as part of a symposium honoring the outstanding work of Professors Lyman Johnson and David Millon, and it seeks to encourage Professors Johnson and Millon, as proponents of the view that corporations have no duty to make stockholder welfare the end of corporate law, to focus on the reality that corporate power translates into corporate purpose.

Drawing on examples of controlled companies that …

How Should We Talk About Corporations? The Languages Of Economics And Of Citizenship, James Boyd White

Articles

My immediate subject in this Comment is section 2.01 of the American Law Institute's proposed Principles of Corporate Governance (Tentative Draft No. 2), which defines in general terms the proper objectives and conduct of a business corporation. My larger subject has to do with the adequacy and inadequacy of various languages in which corporate pur­poses and limits might be expressed, and especially with the limits of the economic language used in the ALI Draft.