Business Organizations Law Commons^™

The Future Or Fancy? An Empirical Study Of Public Benefit Corporations, James Hicks, Michael B. Dorff, Steven Davidoff Solomon

Scholarship@WashULaw

The public benefit corporation (“PBC”) is one of the most hyped developments in corporate law, due to the PBC’s unique social purpose. Unlike the traditional corporation, directors of PBCs are required under their fiduciary duties to consider the impact of their decisions on a range of stakeholders and communities. This new form is hailed by many as a framework for a reformed capitalism. Critics, on the other hand, have assailed PBCs as unworkable—at best allowing corporations to “greenwash,” providing a thin disguise for ordinary corporate profit-seeking behavior.

What has been lacking in this debate is evidence about whether and how …

Validation Capital, Alon Brav, Dorothy S. Lund, Edward B. Rock

Faculty Scholarship

Although it is well understood that activist shareholders challenge management, they can also serve as a shield. This Article describes “validation capital,” which occurs when a bloc holder’s — and generally an activist hedge fund’s — presence protects management from shareholder interference and allows management’s pre-existing strategy to proceed uninterrupted. When a sophisticated bloc holder with a large investment and the ability to threaten management’s control chooses to vouch for management’s strategy after vetting it, this support can send a credible signal to the market that protects management from disruption. By protecting a value-creating management strategy that might otherwise be …

Discharging The Discharge-For-Value Defense, Eric L. Talley

Faculty Scholarship

Despite its massive size, the corporate debt market is often considered a sleepy refuge for the risk-averse. Yet, corporate debt contracts are often mind-numbingly detailed. That complexity – when coupled with the financial stakes in play – can be a recipe for calamity. And in late 2020, calamity struck in the form of an accidental $1 billion payoff sent to Revlon Inc.’s distressed creditors – not by Revlon itself but rather by Citibank, the administrative agent for the loan. When several lenders refused to return the cash, Citibank commenced what many reckoned would be a successful (if embarrassing) lawsuit to …

The Yin And Yang Of Corporations And Democracy, Franklin A. Gevurtz

McGeorge School of Law Scholarly Articles

These are perilous times for American democracy. Among the threats, many point to the power of corporations. This article examines that threat by considering a series of dualisms characterizing the relationship between corporations and democracy.

This begins with a look at the anti- as well as the pro-democratic impacts of the earliest corporations and the paradoxes with respect to democracy created during the evolution of corporate law. The article then looks at internal corporate governance (so-called “corporate” or “shareholder democracy”) to show how, on the one hand, it contains features addressing some of the greatest current threats to American democracy, …

Lawyers As Social Engineers: How Lawyers Should Use Their Social Capital To Achieve Economic Justice, Dana Thompson

Michigan Journal of Race and Law

The Michigan Business & Entrepreneurial Law Review (MBELR) has always strived to provide a platform for legal scholars, professionals, and students to publish business-related legal scholarship. Yet, little legal business scholarship focusing on the Black business community exists, despite the extraordinary impact that Black communities have in the U.S. business landscape. In a year of revolutionary social change, we are excited to feature in this special issue the work of Professor Dana Thompson, a Michigan Law alumna, in an effort to remedy this gap. Professor Thompson’s career, professional values, and day-to-day work demonstrate genuine, commanding, and inspiring commitment to social …

Public Benefit Corporations: There's No Public Benefit To Breaching Fiduciary Duties, Oderah Nwaeze

Emory Business Law Review

During the spring and summer of 2020, in the midst of the COVID-19 pandemic, the United States witnessed large, public protests and activism reminiscent of the 1950s and 60s. Following the death of George Floyd, a Black man, at the hands of Minneapolis police, the American public once again mobilized to fight the ills and inequities of racism and discrimination. A significant number of nonprofit organizations and government departments have been created to resolve the social and political issues that plague Americans. Even Corporate America has been called to act, given that seventy percent of consumers are interested in the …

The Doctrine Of Implied Honesty In Contract: Is Neither A Slippery Slope Nor A "New Vista" Of Contract Nullification That Should Concern Businesses Or Franchisors, John J. Jacko Iii

Emory Business Law Review

In the fourteen years since the New York Law Journal published Franchising: LJL Transportation, Contract Nullification by Franchisor, the sky has not fallen nor has the concept of honesty in contract slipped down any slope that threatens contract law generally or franchise systems, specifically. Time has proven the critic, the criticism, and any consternation for the franchise termination opinion in LJL Transportation, Inc. v. Pilot Air Freight Corp. and the implied honesty in contract doctrine to be wrong. One franchise contracts treatise embraces and cites the LJL case for the proposition that “[h]iding revenue from the franchisor in order to …

How The Black Lives Matter Movement Enhanced Corporate Governance In 2020, Blair Johnson

Emory Business Law Review

The year 2020 brought the United States’ ongoing issues of racial injustice and police brutality to the forefront. With the deaths of Breonna Taylor, Ahmaud Arbery, George Floyd, and countless other people of color, the Black Lives Matter movement has focused on uprooting and dismantling systemic racism in the United States. During what may be “the largest movement in U.S. history,” individuals and organizations are asking themselves what actions they can take to combat systemic racism in the country. Many corporations have chosen to speak out and use their platform to raise awareness of the issues of racism in the …

Is There A Delaware Effect For Controlled Firms?, Edward Fox

Articles

The impact of Delaware incorporation on firm value remains a central question in corporate law. Despite the difficulty scholars have had in agreeing on an answer to this question, there is a consensus that Delaware has long enjoyed stable and important advantages in the expertise of its judiciary and its extensive case law. These advantages are believed to be particularly important for firms with a controlling shareholder. This Article attempts to empirically measure the effect of Delaware incorporation on these controlled firms and thus helps us understand the market value of Delaware’s judiciary and case law. It finds, surprisingly, that …

Corporate Commitment To International Law, Jay Butler

Faculty Publications

Corporations are increasingly important actors in international law. But vital questions underlying this development have long gone unanswered: How and why do corporations commit to international law?

This article constructs a general account of business interaction with international legal obligation and suggests that a gateway to demystifying this persistent puzzle lies in corporate opinio juris.

Corporate opinio juris describes a company's subscription to a rule of international law, even though the company is not technically bound by that rule. This subscription functions as a kind of pledge that, once made, has sway over the company and its peers and symbiotically …

A Most Ingenious Paradox: Competition Vs. Coordination In Mutual Fund Policy, Ann Lipton

Publications

No abstract provided.

Shareholder Primacy And The Moral Obligation Of Directors, Mark J. Loewenstein, Jay Geyer

Publications

One of the most written-about and important topics in corporate law is the fiduciary obligations of corporate directors. Increasingly, critics of American capitalism have urged that corporations, and implicitly, corporate directors, act in a more socially responsible fashion and thus eschew the notion that shareholder primacy is the exclusive guide to a director’s fiduciary duty. Under this view, directors must consider the effect of their actions on “stakeholders” other than shareholders and be guided by morality—doing the right thing—when making business judgments.

When directors move away from shareholder primacy, however, decision-making becomes more difficult and problematic. This article analyzes the …

Accountability For Employers Or Independence For Contractors? Accomplishing Ab5’S Labor Classification Goals In The Gig Economy, Chelsea Rauch

Seattle University Law Review

U.S. employment law traditionally classifies workers as either employees or independent contractors; each worker under this traditional legal rubric can only be classified as one or the other—there can be no ambiguity or overlap. An employee is generally defined as “a person hired for a regular, continuous period to perform work for an employer who maintains control over both the service details and the final product.” In contrast, an independent contractor is generally defined as “a worker who performs services for others, usually under contract, while at the same time retaining economic independence and complete control over both the method …

For Richer Or Poorer: Incentivizing Meaningful Investments In Qualified Opportunity Zones, Monica L. Keo

Seattle University Law Review

The wealth disparity in the United States is nothing new. Many have proposed wealth taxes and higher tax rates for large corporations to address income inequality; however, these proposals have been criticized as tax programs that are difficult to administer. Congress passed the Tax Cut and Jobs Act (TCJA) in 2017 and created a new investment vehicle known as the Qualified Opportunity Zone (QOZ). The QOZ program incentivizes private investors to invest their capital gains in exchange for a reduction in capital gains tax. The underlying idea of the QOZ program is to utilize a new tool designed to spur …

Shareholder Meetings And Freedom Rides: The Story Of Peck V. Greyhound, Harwell Wells

Seattle University Law Review

In 1947, civil rights pioneers James Peck and Bayard Rustin, members of the radical religious group, the Fellowship of Reconciliation, and its offshoot, the Congress of Racial Equality (CORE), prepared to embark on the Journey of Reconciliation, an interracial protest against segregated busing in the American South. But first, they did something else radical: they bought shares in a corporation. A year later, after their travels in the South had led to terror, death threats, beatings, and in Rustin’s case, a term on a chain gang, they brought their civil rights activism to a new site of protest—the shareholder meeting …

The Virginia Company To Chick-Fil-A: Christian Business In America, 1600–2000, Joseph P. Slaughter

Seattle University Law Review

This Article argues that the proprietors of what the author terms “Christian Business Enterprises” (CBEs) would strenuously disagree with Justice Ginsburg and assert that their express mission is to earn a profit while propagating their religious values. As such, they operate businesses “infused with religion,” where Christian values are interwoven into the very fabric of the company and how the firm relates to its stakeholders, employees, customers, suppliers, and communities.

This Article further demonstrates the rich heritage of religious for-profit businesses throughout American history by focusing on a series of Protestant CBEs that led to today’s CBE giants: Chick-fil-A and …

The Corporation As Trinity, David Skeel

Seattle University Law Review

This Symposium Article takes Adolf Berle's cue in several respects. Most importantly, it will look to Augustine for guidance in developing insights into the nature of the corporation—in particular, corporate personhood. Where Berle drew inspiration from The City of God, this Article looks to a different Augustinian masterpiece, The Trinity, which has played a pivotal role in Christians’ understanding of who God is. Christian theology, as brilliantly explicated in The Trinity, states that God consists of three different persons—the Father, the Son, and the Holy Spirit—but is a single divine being. This Article argues that corporate personhood has similar qualities …

Sacred Corporate Law, Giancarlo Anello, Mohamed Arafa, Sergio Alberto Gramitto Ricci

Seattle University Law Review

This Article investigates the sacred origins of the corporate form. It sheds light on the sacred rituals performed to establish Ancient Roman cities as legal entities. It discusses the role of the Roman Catholic Church in developing the corporate form and in giving birth to a systemized set of rules regulating corporations, which we commonly call corporate law. It analyzes the limitations to the use of the corporate form in Islamic law as well as the streams of Islamic law jurisprudence that recognize legal capacity to specific entities with religious, social, or charitable purposes. It surveys the characteristics of two …

#Metoo Innovators: Disrupting The Race And Gender Code By Asian Americans In The Tech Industry, Xuan-Thao Nguyen

Articles

This Article focuses on how Asian American women innovators of the #MeToo generation are disrupting the code of conduct in the tech industry. The code is hard-wired into the tech bro culture of mirrortocracy, resulting in hiring practices that perpetuate existing company demographics and statistics that show that Asian American women face 2.91 times the disadvantage compared to white women. In addition, of all gender and racial groups, Asian American female innovators are the least likely to become executives. This Article identifies and explains how these innovators are the disruptors on several fronts. Utilizing everything from judicial means to traditional …

Does Tax Matter? Evidence On Executive Compensation After 162(M)'S Repeal, Gregg Polsky, Brian Galle, Andrew Lund

Scholarly Works

As part of the most sweeping federal tax reform in a generation, the Tax Cuts and Jobs Act (“TCJA”) radically altered the tax treatment of compensation paid to senior executives of public companies. Prior to the TCJA, payment of such compensation in excess of one million dollars was non-deductible except to the extent the compensation was performance-based. The TCJA eliminated the exception so that all senior executive compensation above one million dollars is now non-deductible regardless of whether it is performance-based or not.

This reform provides a natural experiment to study the role of tax law in influencing managerial pay …