Legal Ethics and Professional Responsibility Commons^™

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 …

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 …

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 …

The Ethics Of Representing Founders, Paul R. Tremblay

William & Mary Business Law Review

Lawyers assisting entrepreneurial startups frequently work with individual founders before any formal organizational client materializes. In advising founders about such legal matters as whether to establish an entity, and if so, which entity best fits the needs of the enterprise, as well as how to arrange the owners’ relationships within the business, the lawyer necessarily has an attorney-client relationship with someone. The prevailing scholarship about startup representation pays surprisingly little attention to the posture of the lawyer and her founder-clients in the pre-organization context. This Article investigates the lawyer’s responsibilities and commitments in depth.

A lawyer working with a solo …

Where The Cco Fits In The C-Suite: A Corporation's Moral Compass, Alexander Foster

American University Business Law Review

No abstract provided.

Redefining Roles And Duties Of The Transactional Lawyer: A Narrative Approach, Lori D. Johnson

Scholarly Works

Today’s transactional lawyers perform myriad tasks for their clients, including structuring, drafting, conceptualizing, negotiating, and executing the complex, risky, and often cutting-edge transactions their clients bring to the table. On the other side of that table, often sits another team of sophisticated transactional lawyers. These opposing counsel are armed for battle over every nuance, every word, every representation, every deliverable, and every obligation their client is poised to undertake or agree to. Therefore, modern transactional lawyers must behave as advocates and explore new modes of persuasion. As a response, scholars have begun to propose that transactional lawyers employ methods of …

Social Capital Of Directors And Corporate Governance: A Social Network Analysis, Zihan Niu, Christopher Chen

Brooklyn Journal of Corporate, Financial & Commercial Law

This Article examines how a director’s social capital might affect his or her behavior, the board’s performance, and corporate governance, as well as the potential normative implications of the director’s social network. We argue that the quality of board performance could be improved where the social network closure within the board is high and there are many non-redundant contacts beyond the board. Network closure can improve trust and collaboration within a board, while external contacts may benefit a company with more diverse sources of information. Moreover, different network positioning leads to the inequality of social capital for directors. With more …

Accountability In Corporate Governance In China And The Impact Of Guanxi As A Double-Edged Sword, Andrew Keay, Jingchen Zhao

Brooklyn Journal of Corporate, Financial & Commercial Law

Accountability is an essential aspect of corporate governance and it has been argued that the “wenze” system of accountability in China comes very close to the accountability systems developed in Anglo-American corporate governance. This Article examines the role of cultural factors, namely guanxi and its derivatives, in corporate governance in China to determine what effect, if any, these cultural factors have on the operation and development of the “wenze” system in large listed companies. The Article specifically considers whether the cultural elements affect accountability, and if so, how and to what extent. It also explores whether these cultural factors are …

Strategic Evidence Issues In Equal Employment Litigation, Marc Rosenblum

Touro Law Review

No abstract provided.

"Professionalism" As Pathology: The Aba's Latest Pollicy Debate On Nonlawyer Ownership Of Law Practice Entities, Ted Schneyer

Fordham Urban Law Journal

No abstract provided.

Remarks: The Declining Role Of Outside Counsel In Enhancing Ethical Conduct By Corporations, Jed S. Rakoff

Seattle University Law Review

Judge Rakoff’s remarks from the seventh annual Berle Symposium, held May 26–27, 2015 at Seattle University School of Law.

Wait, Wait, Don’T Tell Me: Accountability, Plausible Deniability, Model Rule 1.13, And The Role Of Corporate Counsel In An Age Of Enhanced Monitoring, Irma S. Russell

Faculty Works

No abstract provided.

Duties To Organizational Clients, William H. Simon

Faculty Scholarship

Loyalty to an organizational client means fidelity to the substantive legal structure that constitutes it. Although this principle is not controversial in the abstract, it is commonly ignored in professional discourse and doctrine. This article explains the basic notion of organizational loyalty and identifies some mistaken tendencies in discourse and doctrine, especially the "Managerialist Fallacy" that leads lawyers to conflate the client organization with its senior managers. The article then applies the basic notion to some hard cases, concluding with a critical appraisal of the rationale for confidentiality with organizational clients.

Panel Introduction

American University Business Law Review

No abstract provided.

The Attorney-Client Privilege As Applied To Corporate Clients, Elinore Marsh

Akron Law Review

After sixty-six years of struggle and controversy surrounding the application of the attorney-client privilege to corporate clients the United States Supreme Court has taken one step in laying many questions to rest. Upjohn Co. v. United States was accepted by the Court to resolve differences in the circuits as to how far the privilege extends horizontally and vertically within the corporate structure. This comment discusses the ramifications of extending the privilege to an entity which operates only through its agents, the history of the privilege, the effect of the Upjohn decision and the questions which remain as yet unsolved.

Law Firm Ownership Of Ancillary Businesses In Ohio - A New Era?, Stephen R. Ripps

Akron Law Review

The seeds of controversy about ancillary businesses were planted in 1983 when the American Bar Association's House of Delegates approved Model Rule 5.4 prohibiting non-lawyer participation in law firm businesses. Ohio has adopted the ABA Code of Professional Responsibility, not the Model Rules, but the Model Rules may nevertheless have an impact on the interpretation and development of ethical guidelines in Ohio and other Code states. In order to determine the status of ancillary businesses in Ohio today, analysis must proceed in this dual context.

Who Gets The Jewels When A Law Firm Dissolves? The Unfinished Business Doctrine And Hourly Matters, Peter W. Rogers

Northwestern University Law Review

No abstract provided.

Sac Capital: Firm Criminal Liability, Civil Fines, And The Insulated Ceo, Frances E. Chapman, Marianne Jennings, Lauren Tarasuk

American University Business Law Review

No abstract provided.

Discrimination Cases Of The 2002 Term, Eileen Kaufman

Touro Law Review

No abstract provided.