Many thanks to The Glom for allowing me to chime in here. As you might be able to tell from the number of comments I have left for others (too many, I fear), I have been fascinated by the range and depth of the posts so far. And thanks to co-bloggers Brett and Alan for mentions of my earlier Hobby Lobby post on disclosure issues over at the Business Law Prof Blog in their earlier posts here. FYI, I posted there again on this subject earlier this week. But (as Steve Bainbridge anticipated) I am not done yet . . . .
Since that post earlier this week, The Wall Street Journal published an article noting that the Obama administration clarified an employer's responsibility, under the Employee Retirement Income Security Act of 1974, to notify employees if they eliminate or change benefits. The Washington Post and others also carried the story; Jayne Barnard also mentions this in her post earlier today. The clarification comes in the form of an FAQ (which was not easy to find on the U.S. Department of Labor website). Senator Richard Durbin (D-IL), in a news release praising this executive branch action, notified the public that he was introducing legislation that apparently would compel for-profit employers to make similar disclosures to job applicants. A similar kind of bill has been introduced in the New York State legislature. So, it seems, employment-related disclosures are being addressed or discussed in a number of different venues. We'll have to see where all this ends up.
But what of the disclosure issues for shareholders and other investors? Is the materiality filter in federal securities law's mandatory disclosure (including gap-filling) and anti-fraud rules appropriately sensitive to the issues for these corporate constituents? And what about entities whose disclosure activities are not regulated under federal securities laws? What protections might state securities laws provide? Is fiduciary duty law enough to compel disclosures to shareholders or other investors in the absence of applicable disclosure rules under securities laws? Of course, when it comes to shareholders, I am worried here about the minority (non-controlling) holders (since the controlling shareholders are those protected by the Court's decision in Hobby Lobby). I see that other Glom symposium bloggers (here and here) have bemoaned the fact that the corporate entity itself has been lost in the Hobby Lobby shuffle, as it were. Among the constituencies that are forgotten with the loss of the entity in the Hobby Lobby analysis are the minority shareholders and the board of directors.
I am troubled that the final, broadly applicable disclosure analysis may reduce itself to fiduciary duty claims. In his symposium post, Haskell Murray notes the language in Justice Ginsberg's dissent observing that employees of for-profit corporations "commonly are not drawn from one religious community." Well, the non-controlling shareholders in a for-profit corporation also may have sincerely held religious beliefs that are different from those of the controlling shareholders. How, if at all, does the board give effect to the concerns of those minority shareholders in exercising its fiduciary duties? What does "good faith" and "in the best interests of the corporation [and its shareholders]" mean in this context?
Moreover, religious beliefs may change over time for some or all of the shareholders, given that they are beliefs of individuals with free will. But as long as those individual beliefs are shared by the controlling holders, it seems the Hobby Lobby Court would find them to be the beliefs of the corporation--without having given any consideration to the role of the board as the manager of the business and affairs of the corporation. Lyman Johnson's focus on corporate purpose (and Alan also mentioned it) therefore becomes important. But I want to make a different, yet related, point than the shareholder wealth maximization issue they raise. In the Hobby Lobby opinion, the Court appears to read a corporate purpose into the Hobby Lobby charter that provides a constraint on corporate action. (At least that's one plausible reading of the case.) Yet, there is no disclosure of this constraint anywhere.
Even assuming applicable disclosure responsibilities under Hobby Lobby based on securities or corporate law, the nature of those disclosures and the basis for them is somewhat elusive. I have a lot of questions. How do the controlling shareholders make their compliance-related sincerely held religious beliefs known to the board, assuming the board is not constituted solely or even primarily of those shareholders? How does the board ascertain that relevant beliefs are held by a group of shareholders that is controlling? Should a corporate board be required to take periodic surveys of shareholders to make sure everyone has/still has the same sincerely held religious beliefs, to the extent they impact corporate compliance with law? As someone who spent a number years advising corporate boards of directors in disclosure-oriented settings, I struggle with the Court's opinion in Hobby Lobby in a number of practice-oriented respects. These questions approach one area of concern. Public companies would have a standardized way to get at some of this information--through their transaction-related and annual Directors and Officers (D&O) Questionnaires. But (in my experience) private firms--the firms most likely to avail themselves of the RFRA-related ACA exemption at issue in the Hobby Lobby case--do not often use this type of compliance device, absent a regulatory or contractual reason to do so.
I may be making a disclosure mountain out of a molehill; I may just be the disclosure-lawyer hammer looking for the disclosure-topic nail. If so, feel free to tell me that. Even so, maybe there's something else of interest for someone to comment in this post. . . .
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