Business Organizations Law Commons^™

Social Enterprise And Investment Professionals: Sacrificing Financial Interests?, J. Haskell Murray

Seattle University Law Review

Over the past decade, more than three dozen jurisdictions in the United States passed some form of social enterprise legislation. Social enterprise statutes allow for the formation of for-profit entities that expressly require directors to consider the interests of corporate constituents beyond merely shareholders. Proponents of these social enterprise statutes argue that such statutes are needed because traditional corporate law prevents sacrificing the financial interests of shareholders in the interest of a broader social good, or in the interest of other stakeholders. Recently, social enterprises have started exploring public markets and showing up on the radar of investment professionals, including …

Berle Viii: Benefit Corporations And The Firm Commitment Universe, Bart Houlahan, Andrew Kassoy, Jay Coen Gilbert

Seattle University Law Review

Benefit corporation law is a critical tool to allow private capital to be invested in a manner that creates shared and durable value for everyone. But a tool is only as good as the person who uses it. As highlighted in Rick Alexander’s essay, shareholders must understand the value of firm commitment, and, more importantly, the ultimate source of wealth for universal investors, which is thriving financial markets and a healthy, peaceful, and prosperous planet. These goals can only be attained and maintained for the long term if private capital is allocated and invested in a manner that creates value …

Saving Investors From Themselves: How Stockholder Primacy Harms Everyone, Frederick H. Alexander

Seattle University Law Review

We face many tough issues including poverty, climate change, social and economic inequality, the cost and quality of education and healthcare, stagnant wages, financial market instability, disease, and food security. Despite the existential threat that these concerns may raise, there is no consensus on whether or how to address them through regulation, taxation, or other government policy tools. Private enterprise, however, has tremendous potential to address these issues through technology, wages, supply chain maintenance, green operations, efficient delivery of goods and services, and a myriad of other outputs and outcomes. In the U.S., the potential of the private sector to …

The Rights And Wrongs Of Shareholder Rights, Will Hutton, Colin Mayer, Philippe Schneider

Seattle University Law Review

The company is a legal structure designed to bring together the different parties of a firm—its employees, investors, customers, and suppliers—in the delivery of its corporate purpose. Corporations were established as institutions with autonomous lives—self-standing, legal entities independent of those who worked, financed, and managed them. They were devices to ensure long-term commitment to shared goals and risks, with reciprocal obligations on those engaged in them. A company had to declare its purpose before earning a licence to trade. For example, the East India Company, England’s earliest public company, to issue shares to the public as permanent capital, was given …

A Necessary Social Evil: The Indispensability Of The Shareholder Value Corporation, Marc T. Moore

Seattle University Law Review

This symposium article critically evaluates the developing Post-Shareholder-Value (PSV) paradigm in corporate governance scholarship and practice with particular reference to Professor Colin Mayer’s influential theory of the corporation as a unique, long-term “commitment device.” The article’s positive claim is that, while evolving PSV institutional mechanisms such as benefit corporations and dual-class share structures are generally encouraging from a social perspective, there is cause for skepticism about their capacity to become anything more than a niche or peripheral feature of the U.S. public corporations landscape. This is because such measures, despite their apparent reformist potential, are still ultimately quasi-contractual and thus …

Repricing Limited Liability And Separate Entity Status, William H. Clark Jr., D. Alicia Hickok

Seattle University Law Review

In this Article we discuss how U.S. entity law has evolved in recent decades so that (i) limited liability has become available to the owners of any form of business organization, and (ii) all forms of business organizations are now seen as having the status of entities separate from their owners. Those changes have occurred without significant consideration of their consequences or what they mean for the public policies underlying entity law. At the same time, there is an increasing awareness by businesses that promotion of social benefits and/or reduction of externalities is in the firm’s best interests. There has …

Assessing The Assessment: B Lab’S Effort To Measure Companies’ Benevolence, Michael B. Dorff

Seattle University Law Review

For benefit corporations to persuade their various audiences that they are as beneficial for society as they claim, they need reliable assessments of their social performance. Even if assessments were not required by most states’ benefit corporation statutes, it is difficult to imagine the benefit corporation form could gain credibility without them. Creating measurement tools for these assessments poses the twin challenges of balancing simplicity against validity and weighing vision against inclusiveness. This article examines how B Lab’s popular assessment tool engages these challenges.

Corporate Purpose And Litigation Risk In Publicly Held U.S. Benefit Corporations, Joan Macleod Heminway

Seattle University Law Review

With the likely prospect of publicly held U.S. benefit corporations in mind, this Article engages in a thought experiment. Specifically, the Article views the publicly held U.S. benefit corporation from the perspective of litigation risk. It first situates, in Part I, the U.S. benefit corporation in its structural and governance context as an incorporated business association. Corporate purpose and the attendant managerial authority, responsibilities, and fiduciary duties are the key points of reference. Then, in Part II, the Article seeks to identify and describe the salient, unique litigation risks that may be associated with publicly held corporations with the structural …

A Critical Canadian Perspective On The Benefit Corporation, Carol Liao

Seattle University Law Review

Part I of this Article provides a brief background and description of the American benefit corporation. Part II then delineates the Canadian model of corporate law and governance as it currently stands in the statutes, common law, and in practice. Part III applies the information gathered from the previous two sections to explain why the legal features in the American benefit corporation model are largely redundant to existing Canadian corporate laws. It also addresses how the implementation of the benefit corporation in Canada would conflate incorrect assumptions on Canada’s model of governance and potentially impede the progressive development of Canada’s …

Benefit Corporations And Public Markets: First Experiments And Next Steps, Brett H. Mcdonnell

Seattle University Law Review

Part I begins by considering the leading benefits and costs for a benefit corporation that chooses to go public. It starts there both to begin gaining an understanding of the challenges public companies will face and also to consider whether going public is likely to actually be an attractive option at all for some set of social enterprises. Some of the benefits and costs of going public are the same for benefit corporations as for ordinary corporations—access to new sources of capital and new accountability mechanisms are benefits, but legal compliance and pressures from shareholders to show quick results are …

Financing The Benefit Corporation, Dana Brakman Reiser, Steven A. Dean

Seattle University Law Review

The hybrid organizational forms designed with social enterprises in mind have proven to be hothouse flowers. Flourishing in state legislatures, even those with the most distinguished pedigrees—such as Delaware’s public benefit corporation—have so far failed to thrive in the marketplace. Fortunately, hybrid financial instruments offer a source of strength and stability that can help social enterprise to take root. This Article examines the valuable role that financial instruments can play in providing social enterprises with the capital they need to grow. Debt with equity features and equity with debt characteristics constitute the lion’s share of such financial tools. More exotic …

Redefining Corporate Purpose: An International Perspective, Afra Afsharipour

Seattle University Law Review

This comparative analysis of India’s move toward redefining corporate purpose proceeds as follow. Part I presents an overview of global debates over corporate purpose, drawing principally from the move toward the ESV model in the U.K. and benefit corporations in the U.S. This section briefly recounts the debates in both jurisdictions about whether the changes they have experienced will engender more socially responsible corporations. Part II then provides a condensed history of corporate law reforms in India and an overview of the legislative changes undertaken in the past decade. In Part II, this Article takes a broad approach toward analyzing …

A Conversation With B Lab, Larry Hamermesh, Bart Houlahan, Rick Alexander, Dan Osusky

Seattle University Law Review

This is the panel of people who have been associated with B Lab for various lengths of time, but who really can put practical vision and facts before us in a way that the papers we’ve heard so far, while all really interesting, can’t quite do. All of these papers converge on this subject: what actually happens and what’s happened so far. So what I’m going to do is try to lead us through what could be an oral history, if it’s appropriately recorded, of B Lab. And thanks in large part to Rick Alexander, who knows the inside story …

In Pursuit Of Good & Gold: Data Observations Of Employee Ownership & Impact Investment, Christopher Geczy, Jessica S. Jeffers, David K. Musto, Anne M. Tucker

Seattle University Law Review

A startup’s path to self-sustaining profitability is risky and hard, and most do not make it. Venture capital (VC) investors try to improve these odds with contractual terms that focus and sharpen employees’ incentives to pursue gold. If the employees and investors expect the startup to balance the goal of profitability with another goal—the goal of good—the risks are likely to both grow and multiply. They grow to the extent that profits are threatened, and they multiply to the extent that balancing competing goals adds a dimension to the incentive problem. In this Article, we explore contracting terms specific to …

Balancing The Governance Of Financial Institutions, David Min

Seattle University Law Review

Part I briefly describes the traditional agency–cost approach to corporate governance and the rationale that is offered for elevating the agency–cost concerns of shareholders over those of other stakeholders (especially creditors). But as Part I goes on to argue, even if this justification for shareholder primacy is convincing in corporate governance generally (and there are many who do not find it so), several unique characteristics of banks obviate the reasoning behind shareholder primacy. Banks are highly leveraged, which exacerbates creditor–shareholder agency conflicts and places greater importance on the interests of creditors. Banks enjoy government guarantees, and thus their corporate governance …

Intermediate Scrutiny For Corporate Political Contributions, Joseph K. Leahy

Florida State University Law Review

A corporation contributes to a Super PAC that supports a candidate for public office. A shareholder sues, alleging that management breached its duty of loyalty by making the contribution to promote its own political views rather than to serve the corporation’s best interests—i.e., by acting in bad faith. What standard will a Delaware court apply when reviewing management’s decision to cause the corporation to make the contribution?

Myriad scholars have opined that the court will apply the standard of review for ordinary business decisions: the management-friendly business judgment rule. Unfortunately for our shareholder plaintiff, this rule presumes that management acts …

A Quest To Increase Women In Corporate Board Leadership: Comparing The Law In Norway And The U.S., Angela R. Foster

Washington International Law Journal

Gender imbalance is a persistent problem on corporate boards the world over. Women are severely underrepresented in these important leadership positions within public companies. Norway took a big swing at inequality in 2003 by enacting a quota law requiring at least 40% representation of each gender on boards of directors of public companies. Norway now has the highest percentage of women serving on corporate boards. Through Securities and Exchange Commission regulations, the United States enacted a diversity disclosure rule that requires public companies to divulge their policy regarding gender in board hiring. The disclosure rule has proven ineffectual, and at …

Finance And Growth: The Legal And Regulatory Implications Of The Role Of The Public Equity Market In The United States, Ezra Wasserman Mitchell

Michigan Business & Entrepreneurial Law Review

The important study of the relationship between finance and economic growth has exploded over the past two decades. One of the most significant open questions is the role of the public equity market in stimulating growth and the channels it follows if it does. This paper examines that question from an economic, legal, and historical perspective, especially with regard to its regulatory and corporate governance implications. The US market is my focus.

In contrast to most studies, I follow both economic history and the actual flow of funds in addition to empirics and theory to conclude that the public equity …

Perspectives - Jonathan Denham And Paul Wolf Of Denham Wolf Real Estate Services, James Hagy, Kelly Padden

Rooftops Project

In a conversation with Kelly Padden and Professor James Hagy of The Rooftops Project, Jon Denham and Paul Wolf reflect on their experiences with not-for-profit projects across mission types to draw lessons about creativity in locating and securing permanent space in one of the world’s most expensive real estate markets.

Perspectives - Bms Building Management Systems, James Hagy, Frank Loffreno

Rooftops Project

How can not-for-profit organizations better prepare themselves to launch and sustain effective relationships with their outside janitorial, security, and maintenance service providers? Mike Doherty, President and CEO of BMS Building Management Services, and members of his New York City team consider these themes with Frank Loffreno and Professor James Hagy of The Rooftops Project.

Perspectives - Wework, James Hagy, Stephen Caracappa

Rooftops Project

While the concept of executive office suites has existed for decades, in recent years innovations have emerged seeking to provide a broader range of services and a sense of community combined with affordability and flexibility. Stephen Caracappa and Professor James Hagy of The Rooftops Project talk with WeWork executives David Fano and Mark Lapidus (Class of 2012) about the company’s business model, space concept and design, and the applications for not-for-profit organizations.

Perspectives - David Samuels And Themes Karalis Of Duval & Stachenfeld Llp, James Hagy, Jordan Moss

Rooftops Project

Federal and state law can impose compliance requirements affecting both disposing of and transacting in real estate by not-for-profit organizations. In a dialogue with The Rooftop Project’s Jordan Moss and Professor James Hagy, David Samuels and Themes Karalis of the law firm Duval & Stachenfeld illustrate situations, including some unique to New York law and regulation, in which compliance and care are warranted.

Profiles - Rosie's Theater Kids, James Hagy, Frank Loffreno

Rooftops Project

What started out as a single dance and song class in a borrowed New York City public school lunchroom has evolved into programming that touches the lives of students across all five New York City boroughs in a dedicated building near the heart of the Broadway theater district. The Rooftops Project’s Frank Loffreno and Professor James Hagy visit with Rosie’s Theater Kids cofounder and Artistic and Executive Director Lori Klinger and Director of Advancement Lindsay Miserandino at the Maravel Arts Center in New York’s Midtown West neighborhood.

Profiles - The Sammons Center, James Hagy, Brenda Alejo

Rooftops Project

A historic but disused water pumping station, sited between active freeways, became an early and enduringly successful innovator in mission-centered notfor- profit supportive space for the arts. Brenda Alejo and Professor James Hagy of The Rooftops Project talk with Joanna St. Angelo, Executive Director of the Sammons Center for the Arts in Dallas, Texas.

Profiles - Barrier Free Living, James Hagy, Christopher Whalen

Rooftops Project

What if you were homeless, a victim of domestic violence, and perhaps were also struggling with physical or mental disabilities? Where would you go? Christopher Whalen and Professor James Hagy of The Rooftops Project visit with Paul Feuerstein, founder, President, and CEO of Barrier Free Living, which has served these needs in New York City through a unique program established almost 40 years ago.

Perspectives - 120 Wall Street, James Hagy, Alison Snyder

Rooftops Project

Through a decades-long collaboration with the city and state, not-for-profit tenants occupy office space in a landmarked structure in the heart of Wall Street with the unusual advantage of no real estate taxes. The Rooftop Project’s Alison Snyder and Professor James Hagy interview Jeremy Moss and Camille McGratty of Silverstein Properties at the iconic 120 Wall Street building in lower Manhattan.

Purposive Loyalty, Andrew S. Gold

Faculty Scholarship

No abstract provided.

The Next Iteration Of Progressive Corporate Law, Matthew T. Bodie

Washington and Lee Law Review

No abstract provided.

Religious Conceptions Of Corporate Purpose, Ronald J. Colombo

Washington and Lee Law Review

No abstract provided.

Lyman Johnson’S Invaluable Contribution To Delaware Corporate Jurisprudence, Lawrence A. Hamermesh, Jack B. Jacobs

Washington and Lee Law Review

No abstract provided.