Law Commons^™

Team Production Theory Across The Waves, Brian R. Cheffins, Richard Williams

Vanderbilt Law Review

Team production theory, which Margaret Blair developed in tandem with Lynn Stout, has had a major impact on corporate law scholarship. The team production model, however, has been applied sparingly outside the United States. This article, part of a symposium honoring Margaret Blair’s scholarship, serves as a partial corrective by drawing on team production theory to assess corporate arrangements in the United Kingdom. Even though Blair and Stout are dismissive of “shareholder primacy” and the U.K. is thought of as a “shareholder-friendly” jurisdiction, deploying team production theory sheds light on key corporate law topics such as directors’ duties and the …

Fiduciary Duties And Corporate Climate Responsibility, Cynthia A. Williams

Vanderbilt Law Review

Corporate-law scholarship for decades has been occupied with agency costs and how to mitigate them. But when I teach the basic business organizations class, starting with agency law and looking at the fiduciary duties of care, loyalty, and full disclosure of any agent to her principal, we explore both costs and benefits of agency relationships. I do so by introducing Ronald Coase’s theory of the firm. Using an example close to most second-year law students’ experience, that of buying a suit for interviews, I contrast Brooks Brothers establishing its own factories (the “make” decision) with Brooks Brothers using supply chains, …

Team Production Revisited, William W. Bratton

Vanderbilt Law Review

This Article reconsiders Margaret Blair and Lynn Stout’s team production model of corporate law, offering a favorable evaluation. The model explains both the legal corporate entity and corporate governance institutions in microeconomic terms as the means to the end of encouraging investment, situating corporations within markets and subject to market constraints but simultaneously insisting that productive success requires that corporations remain independent of markets. The model also integrates the inherited framework of corporate law into an economically derived model of production, constructing a microeconomic description of large enterprises firmly rooted in corporate doctrine but neither focused on nor limited by …

Why The Corporation Locks In Financial Capital But The Partnership Does Not, Richard Squire

Vanderbilt Law Review

Each partner in an at-will partnership can obtain a cash payout of his interest at any time. The corporation, by contrast, locks in shareholder capital, denying general payout rights to shareholders unless the charter states otherwise. What explains this difference? This Article argues that partner payout rights reduce the costs of two other characteristics of the partnership: the non-transferability of partner control rights, and the possibility for partnerships to be formed inadvertently. While these characteristics serve valuable functions, they can introduce a bilateral-monopoly problem and a special freezeout hazard unless each partner can force the firm to cash out his …

Worker Voice And Corporate Governance: Putting Words Into Actions, Thomas A. Kochan

Vanderbilt Law Review

Two decades ago, Margaret Blair and I edited a book focused on governance of modern corporations. At the time it was evident that the dominant paradigm governing corporate governance and behavior centered on maximizing shareholder value. This was a shift in practice that began in the 1980s and was endorsed in 1997 by the Business Roundtable, when it recanted on its 1990 statement that supported a broader stakeholder view of corporate responsibilities.

The effects of the shift from a stakeholder to a shareholder-maximizing set of practices have been devastating for American workers and the overall economy. It reinforced and accelerated …

Corporate Personhood And Limited Sovereignty, Elizabeth Pollman

Vanderbilt Law Review

This Article, written for a symposium celebrating the work of Professor Margaret Blair, examines how corporate rights jurisprudence helped to shape the corporate form in the United States during the nineteenth century. It argues that as the corporate form became popular because of the way it facilitated capital lock-in, perpetual succession, and provided other favorable characteristics related to legal personality that separated the corporation from its participants, the Supreme Court provided crucial reinforcement of these entity features by recognizing corporations as rights-bearing legal persons separate from the government. Although the legal personality of corporations is a distinct concept from their …

What Was The "Dartmouth College" Case Really About?, Charles R.T. O'Kelley

Vanderbilt Law Review

This Article is the first modern work of corporation law scholarship fully examining the Dartmouth College case as it was lived and understood at the time. Earlier scholars, the author of this Article included, have relied on the case to make doctrinal and theory-of-the firm arguments about Supreme Court precedents regarding the constitutional rights of corporations. Moreover, these earlier works have primarily focused on, and found talismanic meaning, in two sentences in Marshall’s opinion:

"A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties …

Dodge V. Ford: What Happened And Why?, Mark J. Roe

Vanderbilt Law Review

Behind Henry Ford’s business decisions that led to the widely taught, famous-in-law-school Dodge v. Ford shareholder primacy decision were three industrial organization structures that put Ford in a difficult business position. First, Ford Motor had a highly profitable monopoly and needed much cash for the just-begun construction of the River Rouge factory, which was said to be the world’s largest when completed. Second, to stymie union organizers and to motivate his new assembly-line workers, Henry Ford raised worker pay greatly; Ford could not maintain his monopoly without sufficient worker buy-in. And, third, if Ford explicitly justified his acts as in …