Law Commons^™

Solving The "King Lear Problem", Benjamin Means

Faculty Publications

In Shakespeare’s play, King Lear, an aging ruler relinquished control to two of his three daughters. The succession failed miserably, destroying his family and destabilizing his kingdom. King Lear shows why few family businesses survive beyond three generations. Understanding Lear’s failure is crucial to avoiding Lear’s fate, whether the family business in question is a monarchy, a media empire, or a hardware store. The conventional wisdom is that Lear gave away his kingdom too soon and left himself vulnerable to predatory heirs. This has been referred to as the “King Lear Problem.”

The conventional wisdom is wrong. Lear’s succession plan …

Climate Change Compliance, Susan S. Kuo, Benjamin Means

Faculty Publications

Unless corporations prioritize climate change mitigation, efforts to control global warming will fail. Yet, the strategies that have been proposed for enlisting corporations are insufficient to the task. In our era of political polarization, a comprehensive “Green New Deal” to transition the U.S. economy away from fossil fuels is a nonstarter. Nor can we expect corporate risk management or social responsibility to fill the gap; there are practical limits to how far corporate managers can depart from strategies designed to maximize profits for investors.

This Article contends that climate change is a compliance issue. Scholars have overlooked compliance as a …

A Duty To Diversify, Anat Alon-Beck, Darren Rosenblum, Michal Agmon-Gonnen

Faculty Publications

Fiduciary duties reflect the central role of leaders in corporate governance. Those with the most responsibility benefit the most from corporate success, but also bear commensurate fiduciary responsibilities. Equality, diversity, and inclusion may seem an odd fit among other fiduciary duties. However, fiduciary duties are where governance imposes the burden of “doing the right thing.” Fiduciary duties involve normatively good behavior that proves essential to ensuring responsible decision-making and achieving positive outcomes for firms.

Corporate law allows, encourages and perhaps, today, even mandates, corporate leaders to do the right thing. Not only does it seem appropriate to ask corporate leaders, …

Moby-Dick As Corporate Catastrophe: Law, Ethics, And Redemption, David Yosifon

Faculty Publications

Herman Melville’s Moby-Dick serves here as a vehicle through which to interrogate core features of American corporate law and excavate some of the deeper lessons about the human soul that lurk behind the pasteboard mask of the law’s black letter. The inquiry yields an illuminating vantage on the ethical consequences of corporate capital structure, the law of corporate purpose, the meaning of voluntarism, the ethical stakes of corporate fiduciary obligations, and the role of lawyers in preventing or facilitating corporate catastrophe. No prior familiarity with the novel or corporate law is required.

Managerial Fixation And The Limitations Of Shareholder Oversight, Emily R. Winston

Faculty Publications

BlackRock’s recent public letters to the CEOs of the companies in which it invests have drawn substantial attention from stock market actors and observers for their conspicuous call on corporate CEOs to focus on sustainability and social impacts on non-shareholder stakeholders. This Article explores the market changes that propelled BlackRock into a position to make such a call, and whether institutional shareholders can be effective monitors of these broad social goals. It argues that while corporate attention to non-shareholder stakeholders can improve firm value, shareholder oversight of these stakeholder relationships will not succeed in having this effect.

In the past …

Investment Bankers As Underwriters: Barbarians Or Gatekeepers? A Response To Brent Horton On Direct Listings, Anat Alon-Beck, Robert N. Rapp, John Livingstone

Faculty Publications

Direct listing clearly has the potential to meaningfully disrupt the IPO process. Changes to permit primary offerings via direct listing will help private companies to overcome some of the obstacles imposed by our securities laws and listing rules. Primary offerings by direct listing would allow for a dramatic increase in efficiency in public offerings, providing further incentive for private companies to finally provide liquidity to their shareholders while saving on the tremendous cost associated with a more traditional IPO by eliminating the need for underwriters.

Despite the positive impacts that direct listings will have on the IPO process, in their …

The Social Relations Of Consumption: Corporate Law And The Meaning Of Consumer Culture, David Yosifon

Faculty Publications

A mature assessment of the society we are making for ourselves, and the legacy we are leaving to the future, must come to terms with consumer culture. Theoretical discourse, as well as common experience, betray persistent ambiguity about what consumerism means to and says about us. In this Article, I argue that this ambiguity can in part be explained by examining the social relations of consumption in contemporary society. These involve, crucially, the relationship between producer and consumer that is dictated by corporate governance law, and embodied in the decision-making dynamics of the directors who command corporate operations. The enigmatic …

Is Corporate Patriotism A Virtue?, David Yosifon

Faculty Publications

American social and political discourse attests to widespread concern about whether domestic corporations can be counted on to serve the national interest. This issue is especially pressing in an era of international corporate operations, in which firms can send jobs and tax revenues overseas, devastating local communities even as they boost the prospects of workers in a foreign land, and the interests of capital spread across the globe. Firms founded in America can also disperse across the border productive resources that could otherwise be nationalized or made available to the homeland in times of crisis or war. Indeed, the shareholder …

Opting Out Of Shareholder Primacy: Is The Public Benefit Corporation Trivial?, David Yosifon

Faculty Publications

The central command of corporate governance law is that directors must serve the shareholder interest. Directors may not sacrifice shareholder value in favor of other corporate stakeholders or other interests. In this Article, I examine whether this rule of shareholder primacy is mandatory, or merely a default rule which can be altered through private ordering. I argue that Delaware’s corporate law, the most important corporate law in the United States, should be understood to have long-permitted privately-ordered deviation from shareholder primacy. This assessment, however, is at least complicated by the recent legislative creation of the Public Benefit Corporation (PBC). The …

The Law Of Corporate Purpose, David Yosifon

Faculty Publications

Delaware corporate law requires directors to manage firms for the benefit of the firm’s shareholders, and not for any other constituency. Delaware jurists have been clear about this is in their case law, and they are not coy about it in extra-judicial settings, such as in speeches directed at law students and practicing members of the corporate bar. Nevertheless, the reader of leading corporate law scholarship is continually exposed to the scholarly assertion that the law is ambiguous or ambivalent on this point, or even that case law affirmatively empowers directors to pursue non-shareholder interests. It is shocking, and troubling, …

Toward A Critical Corporate Law Pedagogy And Scholarship, André Ddouglas Pond Cummings, Steven A. Ramirez, Cheryl L. Wade

Faculty Publications

(Excerpt)

In recent years, the publicly held corporation has assumed a central position in both the economic and political spheres of American life. Economically, the public corporation has long acted as the key institution within American capitalism. Politically, the public corporation now can use its economic might to sway electoral outcomes as never before. Indeed, individuals who control public firms wield more economic power and political power today than ever before. These truths profoundly shape American society. The power, control, and role of the public corporation under law and regulation, therefore, hold more importance than ever before.

Even though corporate …

Corporate Aid To Governmental Authority: History And Analysis Of An Obscure Power In Delaware Corporate Law, David Yosifon

Faculty Publications

The Delaware General Corporation Law contains an obscure provision stating that all corporations have the power to “[t]ransact any lawful business which the corporation’s board of directors shall find to be in aid of governmental authority.” 8 DGCL §122(12). This oddly worded provision has never been applied, analyzed, or interpreted by any court. It has received almost no treatment by corporate law scholars. This lack of attention is surprising, given that by its own terms the provision seems to bear on fundamental corporate law themes, such as the purpose of corporations, the scope of directors’ fiduciary obligations and discretion, and …

Consumer Lock-In And The Theory Of The Firm, David Yosifon

Faculty Publications

When shareholders invest in a corporation they become “locked-in” to the prospects of that firm. A shareholder cannot force the firm to buy back her shares, nor can she force it to dissolve and turn over her pro rata share of its assets. She gets nothing for her capital unless the firm profits and pays dividends, or she finds someone else willing to buy her stock. Corporate law scholars have recognized that capital “lock-in” is both a corporate law solution that enables large-scale business to flourish, and a corporate law problem that threatens the growth and proper governance of big …

Corporate Governance: The Swedish Solution, George W. Dent

Faculty Publications

Sweden has changed its corporate governance system by delegating the nomination of corporate directors (and thus, in effect, ultimate control) to committees typically comprising representatives of each company’s largest shareholders. This system gives shareholders a degree of power “that only the most daring corporate governance initiatives in the rest of the world could even imagine.” By all accounts the change has been successful; no one is complaining about it.

In the United States investors have long been kept weak in corporate governance for fear that giving them a major role would damage corporations in numerous ways. The Swedish experience seems …

Towards A Firm-Based Theory Of Consumption, David Yosifon

Faculty Publications

Corporate theory typically construes consumption activity as involving a series of arms-length, atomistic transactions in which consumers exchange money for discrete corporate goods or services. Canonical accounts expect satisfied consumers to engage in repeat transactions, but the transactions themselves are (implicitly or explicitly) assumed to be isolated, fully contained dealings with the firm. Such a view of consumption supports the inference that consumers can readily manage their own interests in corporate operations through serial decisions to “take it,” “leave it,” repeat, or refuse to repeat patronization of a firm. This assessment plays an important part in justifying American corporate governance …

Discourse Norms As Default Rules: Structuring Corporate Speech To Multiple Stakeholders, David Yosifon

Faculty Publications

This Article analyzes corporate speech problems through the framework of corporate law. The focus here is on the "discourse norms" that regulate corporate speech to various corporate stakehold-ers, including shareholders, workers, and consumers. I argue that these "discourse norms" should be understood as default terms in the "nexus-of-contracts" that comprises the corporation. Having reviewed the failure of corporate law as it bears on the interests of non-shareholding stakeholders such as workers and consumers, I urge the adoption of prescriptive discourse norms as an approach to reforming corporate governance in a socially useful manner.

Consumer Interest In Corporate Law, David Yosifon

Faculty Publications

This Article provides a comprehensive assessment of the consumer interest in dominant theories of the corporation and in the fundamental doctrines of corporate law. In so doing, the Article fills a void in contemporary corporate law scholarship, which has failed to give sustained attention to consumers in favor of exploring the interests of other corporate stakeholders, especially shareholders, creditors, and workers. Utilizing insights derived from the law and behavioralism movement, this Article examines, in particular, the limitations of the shareholder primacy norm at the heart of prevailing "nexus of contracts" and "team production" theories of the firm. The Article concludes …

Unconscious Bias And The Limits Of Director Independence, Antony Page

Faculty Publications

Corporate directors make difficult decisions: How much should we pay our CEO? Should we permit a lawsuit against a fellow director? Should we sell the company? Directors are legally obligated to decide in good faith based on the business merits of the issue rather than extraneous considerations and influences. Naturally, some directors may have preferences, or even biases: Our CEO, my colleague and friend, deserves a lot; The company should not sue my fellow board member; We should not sell, because after all, I would like to remain a board member. But the courts presume that independent directors either do …

A Voice-Based Framework For Evaluating Claims Of Minority Shareholder Oppression In The Close Corporation, Benjamin Means

Faculty Publications

No abstract provided.

Worker Ownership In Enron's Wake - Revisiting A Community Development Tactic, Peter R. Pitegoff

Faculty Publications

Worker ownership of business enterprise has long been touted as a vehicle for community economic development. Employee stock ownership plans in leveraged buy-outs, ESOPs and broad-based stock options in going concerns, and worker cooperatives in selected sectors - the experience has varied widely in goals, method, and outcome.

This Article reflects on the continued utility of worker ownership as a component of community development and calls attention to contrasts with conventional corporate governance and goals. Rather than an end in itself or just another way of doing business, worker ownership can be a vital element of a broader job creation, …