On the Friday in the midst of a heated presidential season, I thought we could take a spin through some of the Presidential candidates' online stores and see what merchandise is on offer. After all, the Glom's motto is "Business|Law|Economics|Society." What crosses those boundaries better than the stuff that the candidates are selling?
One thing to note -- it looks like the candidates generally share the same software or web hosting services, as there are similar fonts and layouts at the various stores. And the items for sale fall into certain patterns: hats, T-Shirts, buttons, stickers, mugs. But certain items stand out in each of the stores.
(And a tech note: I'm not competent enough to adjust the sizes of the images. I tried to get the smallest ones possible, but I was often unsuccessful!)
Also available in other colors, including camo ($30):
There aren't that many other fun gifts, though -- just signs & shirts. But if you're having a Trump party, you may want to consider one of the rally packs, like this one (for $250):
Or these can cozies ($10), perfect for a gathering of young people!
The design on this T-shirt ($45) really doesn't work, I think (sorry Marc Jacobs):
And what is this, exactly? ($30) The description says: "Bringing a whole new meaning to casual Friday." I see.
The Hillary store also has the largest selection of gear for a specific group, such as these stickers ($5):
This reference on this hat ($25) is too layered, I think, for your average passer-by to understand:
Cruz also has a lot of camo gear, such as this "ladies camo hat" ($35):
Cruzball (4 for $20)?
And if this ($65) isn't worn by hipsters everywhere in December 2016, then they're missing an opportunity:
Of course, real hipsters are already shopping at the Bernie store, with a wide variety of "feel the Bern!" products. It should be noted that Bernie's store is not noticeably less expensive than the others. The Shep Fairey T-shirt ($35) is a little too ... hmmm ... what's the word ... Riefenstahl-y?
Whereas this one ($25 - sold out) would be very much at home at a 1920s Wobblies convention:
(Yes, I know -- it's based on a 1930 FDR poster for Social Security. But the shirt says "political revolution"!)
Finally, the John Kasich store perhaps reveals some of the difficulties facing his campaign. Are you familiar with this Kasich slogan?
I love the ". . . PERIOD!" And what exactly does this mean? Are we in for a wild ride, or does John Kasich just care about our automotive safety?
And you can apparently only buy a hat in blue, but this red one is advertised -- a little too close to the Donald's?
Okay, okay, one more item -- his candidacy may be suspended, but you can still buy this:
He's America's Bae?
Oh. And this.
Former NY Fed Chair, Secretary of Treasury, and tax scofflaw Timothy Geithner is in the news again. The now-president of Warburg Pincus has set up a line of credit from JP Morgan to invest in one of his firm's private equity funds. The move is fairly standard for both Morgan and private equity members looking to scale up their investment. In fact, it may be evidence that Geithner is relatively worse off, financially, than many of his private equity compadres -- he's been called "one of the least wealthy Treasury chiefs in recent history." But it comes in the wake of allegations that Senator Ted Cruz failed to properly disclose a loan from Goldman Sachs -- another instance of those with connections getting loans that most could never dream of. And it's a reminder of the chumminess between the feds and the Street that the whole Bernie Sanders revolution finds repugnant.
Timothy Geithner is something of a Rorschach inkblot for modern economic politics. You may see him as the son of microfinance advocate with an international upbringing who worked a series of modestly paid government jobs in service to a progressive economic agenda, ultimately saving the economy from complete collapse and worldwide depression. Or you may see him as the son of a wealthy Mayflower descendant who skated through the financial crisis, landed the top job at Treasury despite opposition across the political spectrum, and now sits as president of an established private equity firm. And this line of credit is in line with that duality. As Matt Yglesias describes it:
There's no evidence to believe Geithner did any special favors for Warburg Pincus in any of his government jobs, and little reason to believe that JPMorgan had anything other than a basic business interest in advancing this line of credit. From JPMorgan's perspective, it's a no-brainer move to make, and if one bank hadn't been willing to do it, another bank would have. There's no quid pro quo here, and by conventional standards there's no scandal.
But even if there's nothing technically wrong with this setup, it is exactly why Sanders's message is resonating. By conventional standards it's normal for the Democratic Party to appoint someone like Geithner: a Treasury secretary who is also the kind of person who could comfortably be a partner at a private equity firm and get a line of credit from a major global bank to paper over the fact that he's not as rich as those colleagues. It's not a scandal; it's just how the game is played.
And for many Sanders supporters, that is precisely what's wrong.
The Sanders perspective may not seem to matter much here -- after all, President Obama went out of his way to appoint Geithner, and that's a pretty good validation of progressive bona fides. But there is evidence that Sanders may not simply be a dismissable Socialist crank. (We'll find out more tonight.) If that's the case, Geithner may find himself as a pariah in the very party that ensconced him in power. Regardless, he's a symbolic personification of the Janus-faced fiscal and economic policies that the current Democratic Party represents.
The Rams are moving back to L.A. I think most of the country doesn't care or is vaguely happy for L.A., since the Rams were taken from Angelenos in 1995. They had a nice run in St. Louis, including "the Greatest Show on Turf" and a Super Bowl, but now they go back to their presumably rightful location. (But not Cleveland.) As a St. Louisan, my feelings are a bit more mixed, as the NFL put the local and state governments through a variety of hoops and then ended up disregarding what was actually a pretty generous stadium plan. (Too generous.) If you are interested in the local perspective with a big slice of outrage, you can read Bernie Miklasz here.
Coincidentally, Lawrence Phillips died in prison the day after the relocation decision. Phillips was the Rams' first-round pick in 1996 -- he was picked 6th overall after rushing for 165 yards and two touchdowns in the Fiesta Bowl for the national champion Nebraska Cornhuskers. Phillips had been suspended earlier that season after being arrested for assaulting his girlfriend, a player on the women's basketball team, when he allegedly dragged her down a flight of stairs by her hair. Phillips would have likely gone higher than sixth in the draft based on talent alone, as several teams cited his "off-field" troubles as a matter of concern. After trading Jerome Bettis to make way for Phillips, the Rams released him in the midst of his second season. He played for Miami for one year, played in the European League, and then played for the 49ers in 1999. San Francisco released him before the end of the season. Phillips was blamed for missing a block that led to a hit on Steve Young that rendered him unconscious. Young's concussion from that hit ultimately led him to retire from the NFL.
Phillips played for the AFL and CFL for a few subsequent years. He was released by one CFL team after charges of sexual assault were raised. In 2008 and 2009, he was tried and convicted for two separate sets of charges: driving his car at three teenagers after a pick-up football game and choking a former girlfriend into unconsciousness. He was sentenced to 31 years.
In April 2015, Phillips's cellmate -- the cousin of an NFL player -- was found dead by strangulation in their cell. Phillips was charged with first-degree murder in September. The day before Phillips's death, he had been ordered to stand trial for the murder. The cause of his death has been characterized as a suicide.
Over the weekend Frank Sinatra would have turned 100. Although much of his act and image seem hopelessly -- often offensively -- anachronistic, his music endures in a way that few musicians' will. On Saturday This American Life reran their 1997 Sinatra tribute episode with new commentary, and you can hear host Ira Glass fighting through various of his feelings toward Sinatra, his banter, his persona, and his voice. Part of the TAL episode features Gay Talese reading from his iconic article, "Frank Sinatra Has a Cold", and if you haven't read it yet, there's no better time than the present. (And if you have read it, here's a nice behind-the-scenes piece on the article itself.) But enough talkin' -- where's the music? I've always enjoyed the breeziness of "Come Fly With Me." On the aforementioned TAL episode, Sarah Vowell makes a compelling case for "What Is This Thing Called Love?" A good friend of mine does a great karaoke version of "That's Life," while my wife and I always like to close out karaoke with "New York, New York." And then of course, there's "My Way." If this is all too much for you, you may enjoy the Sid Vicious version.
Hello! Many thanks to Christine for her warm welcome post, and thanks to all the bloggers at the Glom for letting me hop on board. I had a terrific time blogging at PrawfsBlawg, but it has been a while since I did much blogging on corporate and employment law subjects. There is a ton going on in business law right now, and I look forward to digging into these issues on a more regular basis.
And it's an auspicious day for me to begin blogging here, as Angus Deaton has just won the Nobel (Riksbank) Prize for Economics. Deaton is a professor at my alma mater, as well as the father of my classmate and friend Rebecca Deaton. It looks like the university had a nice celebration for him this afternoon.
You might expect that the choice of Deaton would be lauded by progressive scholars, as Deaton's recent work focuses on issues of poverty and inequality. And you'd be right. But Marginal Revolution's Tabarrok and Cowen also sing Deaton's praises. They highlight not only his earlier technical work, such as the Almost Ideal Demand System and the Deaton Paradox, but also his emphasis on careful empirical work in understanding and measuring world poverty. His work shows that investigating the scope and depth of global poverty is not just for wild-eyed leftists.
I've had Deaton's popular book "The Great Escape" in my nightstand pile for a while. Part of the point of Nobel recognition, I think, is that it will prompt a wider audience to take a look at his work. I look forward to reading it.
My previous blogposts (one, two, three, and four) introduced why conspiracy prosecutions should be used to reach wrongdoing by agents within a business organization. The same legal analysis applies to religious organizations.
We should have been able to charge Monsignor Lynn and the Archdiocese of Philadelphia that directed his actions to hide the sexual abuse by priests with criminal conspiracy. Instead, Pennsylvania charged Lynn with two things: child endangerment and conspiracy with the priests.
As international news outlets later reported, Lynn could not be guilty of child endangerment because the state’s statute could not apply to an administrative church official who did not directly supervise children.
Lynn could not be guilty of conspiracy with the priests because he did not share their “particular criminal intent.” As the jury understood, Lynn was not trying to help a predator priest get from parish to parish so that “he can continue to enjoy what he likes to do.” Lynn was trying to protect the reputation of his employer, the Archdiocese—if the priests benefitted, that was a side issue.
So why didn’t the prosecution charge Lynn and the Archdiocese with conspiracy? It was the Archdiocese that directly coordinated and profited from Lynn’s actions. The intracorporate conspiracy doctrine, as discussed before, would bar that prosecution. In Pennsylvania, it is “well-settled that a corporation cannot conspire with its subsidiary, its agents, or its employees.”
Finally, considering other options, Lynn could not have been charged with possible crimes such as obstruction of justice. Lynn was too good: Lynn and the Archdiocese were so successful at covering up the sexual abuse and silencing victims, there was no ongoing investigation to obstruct. “Aiding and abetting” the Archdiocese’s cover-up of the sex abuse would have been difficult to pursue (see more here) and is not allowed under RICO in the Third Circuit.
My next blogpost will demonstrate that the Monsignor Lynn case was also part of a pattern by the Roman Catholic Church in America to use the intracorporate conspiracy doctrine to hide the coordinated wrongdoing of its agents to cover-up sexual abuse by priests. Fifteen years before prosecutors attempted to try Monsignor Lynn, the silenced Connecticut sex-abuse case showed the Church how effective this defense could be.
Permalink | Agency Law| Business Ethics| Business Organizations| Businesses of Note| Corporate Governance| Corporate Law| Crime and Criminal Law| Current Affairs| Economics| Employees| Financial Crisis| Financial Institutions| Law & Economics| Law & Entrepreneurship| Law & Society| Management| Masters: Dodd-Frank| Masters: Dodd-Frank@1| Politics| Popular Culture| Roundtable: Corps/B.A.| Social Responsibility| White Collar Crime | Comments (0) | TrackBack (0) | Bookmark
It is a pleasure to be guest-blogging here at The Glom for the next two weeks. My name is Josephine Nelson, and I am an advisor for the Center for Entrepreneurial Studies at Stanford’s business school. Coming from a business school, I focus on practical applications at the intersection of corporate law and criminal law. I am interested in how legal rules affect ethical decisions within business organizations. Many thanks to Dave Zaring, Gordon Smith, and the other members of The Glom for allowing me to share some work that I have been doing. For easy reading, my posts will deliberately be short and cumulative.
In this blogpost, I raise the question of what is broken in our system of rules and enforcement that allows employees within business organizations to escape prosecution for ethical misconduct.
Public frustration with the ability of white-collar criminals to escape prosecution has been boiling over. Judge Rakoff of the S.D.N.Y. penned an unusual public op-ed in which he objected that “not a single high-level executive has been successfully prosecuted in connection with the recent financial crisis.” Professor Garett’s new book documents that, between 2001 and 2012, the U.S. Department of Justice (DOJ) failed to charge any individuals at all for crimes in sixty-five percent of the 255 cases it prosecuted.
Meanwhile, the typical debate over why white-collar criminals are treated so differently than other criminal suspects misses an important dimension to this problem. Yes, the law should provide more support for whistle-blowers. Yes, we should put more resources towards regulation. But also, white-collar defense counsel makes an excellent point that there were no convictions of bankers in the financial crisis for good reason: Prosecutors have been under public pressure to bring cases against executives, but those executives must have individually committed crimes that rise to the level of a triable case.
And why don’t the actions of executives at Bank of America, Citigroup, and J.P. Morgan meet the definition of triable crimes? Let’s look at Alayne Fleischmann’s experience at J.P. Morgan. Fleischmann is the so-called “$9 Billion Witness,” the woman whose testimony was so incriminating that J.P. Morgan paid one of the largest fines in U.S. history to keep her from talking. Fleischmann, a former quality-control officer, describes a process of intimidation to approve poor-quality loans within the bank that included an “edict against e-mails, the sabotaging of the diligence process,… bullying, [and] written warnings that were ignored.” At one point, the pressure from superiors became so ridiculous that a diligence officer caved to a sales executive to approve a batch of loans while shaking his head “no” even while saying yes.
None of those actions in the workplace sounds good, but are they triable crimes??? The selling of mislabeled securities is a crime, but notice how many steps a single person would have to take to reach that standard. Could a prosecutor prove that a single manager had mislabeled those securities, bundled them together, and resold them? Management at the bank delegated onto other people elements of what would have to be proven for a crime to have taken place. So, although cumulatively a crime took place, it may be true that no single executive at the bank committed a triable crime.
How should the incentives have been different? My next blogpost will suggest the return of a traditional solution to penalizing coordinated crimes: conspiracy prosecutions for the financial crisis.
Permalink | Agency Law| Business Ethics| Business Organizations| Businesses of Note| Corporate Governance| Corporate Law| Crime and Criminal Law| Current Affairs| Economics| Entrepreneurs| Entrepreneurship| Finance| Financial Crisis| Financial Institutions| Law & Entrepreneurship| Law & Society| Masters: Dodd-Frank| Masters: Dodd-Frank@1| Masters: Exec Comp| Politics| Popular Culture| Roundtable: Banking| Roundtable: Corp Fin| Roundtable: Corps/B.A.| Rules & Standards| Social Responsibility| White Collar Crime | Comments (0) | TrackBack (0) | Bookmark
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. . . .
I'm very grateful to Gordon for inviting me to post on the Conglomorate about the Hobby Lobby and Conestoga Wood cases--in particular, to summarize some of the arguments I've made about the cases over on Balkinization and SCOTUSblog. Links to my posts about various different aspects of the cases, and to some posts of others, are collected here. As for the issues of particular interest to Conglomorate readers . . . well, I'm afraid I think there's less there than meets the eye as to several of them.1. For example, it is widely believed that the central issue in the cases is whether corporations, or for-profit corporations in particular, can exercise religion, or have religious "consciences." But I don't think the Court needs to, or should, consider that broad question in the abstract. As I explained in one post, even if for-profit corporations can exercise religion in certain contexts, the particular religious claims in Hobby Lobby and Conestoga Wood cannot be asserted by the corporations themselves:
The Hobby Lobby and Conestoga Wood cases do not require the Court to decide, once and for all, whether and under what circumstances for-profit corporations can ever have religious beliefs or consciences; whether they can exercise religion; or whether they can be “persons” under RFRA.
Those formulations pitch the question at far too broad a level of generality, and one untethered from the facts of these particular cases. The issue in these cases is much narrower than that.
This is not a case about whether a particular corporation can "advance" a religious agenda, take steps to further a religious mission (such as by selling religious books), or promulgate religious doctrine; indeed, it's not a case in which the state is alleged to be preventing a corporation from doing anything at all. Therefore it bears no resemblance to, say, a law restricting for-profit religious bookstores from selling certain books. The particular burden being alleged here is that the HHS Preventive Services Rule allegedly coerces a violation of religious duties--thatis to say, rather than restricting a religious practice, HHS is alleged to be focring someone to act in a manner contrary to religiously inspired limitations. The federal government allegedly is putting someone to a choice between compliance with a civil obligation and adherence to a restrictive religious injunction (roughly speaking: “Thou Shalt Not Cooperate With Evil”).
If there is such a burden on religious exercise here, it is not one that is imposed on the corporations—on Hobby Lobby Stores, Inc., Mardel, Inc. (in the Hobby Lobby litigation) or on Conestoga Wood Specialties Corp. That's not because those corporations don’t have “consciences”—neither do churches—or because they cannot advance religious objectives (perhaps they can), but because they don’t have religious obligations. I’m not aware of any religion that imposes duties or injunctions on for-profit corporations. And, more to the point, the complaints in these cases make countless allegations about religious duties and how the government allegedly is compelling certain parties to violate those duties, but they nowhere allege that any of the three corporations here are subject to any religious obligations.
2. A conclusion that the HHS Rule does not substantially burden any religious exercise of these corporate plaintiffs, however, hardly resolves the cases. As you will see if you begin to peruse the plaintiffs' complaints and briefs, the crux of the alleged burden in these cases is not on the corporations’ alleged exercise of religion, but instead on the purported religious exercise of the individual plaintiffs—five members of the Green family in Hobby Lobby, and five members of the Hahn family in Conestoga Wood.
For starters, the federal legal obligations in these cases run against the corporations themselves, and/or their insurance plans, not against the shareholders. So the shareholders are not directly burdened by federal law. The question, then, is whether shareholders nevertheless can obtain relief for injuries that they allegedly suffer derivatively, by virtue of the state's regulation of the corporation, notwithstanding the black-letter law that corporations and their shareholders are distinct entities for purposes of liability and benefits.
Individuals typically form a corporation so that they will not be personally liable for any claims against the corporation--indeed, that's one of the principal reasons state law creates the corporate form. Does it follow that shareholders cannot complain about injuries they suffer derivatively when other actors, including the government, take action against the corporation? By accepting the “sweet” (limited liability), must shareholders also accept the “bitter,” in the form of abandonment of rights they otherwise might have had to recover for injuries they suffer by virtue of their ownership of the corporate shares? As Judge Matheson put the question in his separate concurrence in Hobby Lobby, should “[t]he structural barriers of corporate law give [one] pause about whether the plaintiffs can have their corporate veil and pierce it too”?
In response to this question, Professor Bainbridge published an article suggesting that the Court should make use of a corporate law doctrine called "insider reverse veil piercing" in order to allow the Greens and the Hahns to assert RFRA claims as shareholders notwithstanding the fact that they are generally immune from liability for any wrongs committed by their corporations--i.e., to allow them to reap the sweet and also avoid the bitter.
Subsequently, a group of 44 corporate and criminal law professors filed an amicus brief arguing that "reverse veil piercing" would be inappropriate here, and that the Court should not allow the plaintiffs to sue as shareholders.
Professor Bainbridge has now responded with a follow-up article critiquing the corporate law professors' brief. He argues again that the Court should use "insider reverse veil piercing," or "RVP-I," "to allow . . . shareholder standing to sue if the [C]ourt is unwilling to allow the corporation to do so."
What (if anything) should the Court make of this corporate law dispute about RVP-I?
a. First of all, it's not clear that these cases are even about injuries to the individuals in their capacities as shareholders. Indeed, it appears that the individual plaintiffs in Hobby Lobby, members of the Green family, are not shareholders of Hobby Lobby and Mardel, the two corporate plaintiffs in that case; they are, instead, trustees of a management trust that owns the companies. The Greens do not allege that they own the companies; and unless I've missed something, their complaint does not allege any way in which their funds would be used to "pay for" contraception. As I explained in a recent post, Hobby Lobby's brief confirms that the case is not fundamentally about coercing the Greens to pay forcontraception, or about the Greens' religious exercise in their capacity as shareholders. The Greens' fundamental complaint, instead, is that federal law coerces them to violate a religious obligation in their capacities as corporate directors, i.e., decision-makers. "[T]he precise religious [religious] exercise at issue here," the brief explains, is that "the Greens cannot in good conscience direct their corporations to provide insurance coverage for the four drugs and devices at issue because doing so would 'facilitat[e] harms against human beings.'”
A decision by the Court limited to shareholder rights, therefore, would not resolve Hobby Lobby.
That leaves the Conestoga Wood case. The individual plaintiffs in that case, members of the Hahn family, also primarily complain about federal law burdening them in their capacity as corporate directors, or decision-makers. In addition, however, paragraph 11 of their complaint alleges that the Hahns are collectively the “principal” owners of the shares of Conestoga Wood. So perhaps the RVP-I question does arise vis-a-vis the Hahns, whose shareholder funds presumably would be used, not to pay for contraception reimbursement directly, but instead to pay for part of the overall premiums to the plan insurance carrier. (Remarkably, the Conestoga Wood complaint does not specify whether CW has a self-insured employee health insurance plan or a plan issued through an independent insurer. But in its Supreme Court brief, it refers to its (unidentified) "issuer" as having "inserted coverage of the contraceptives into its plan over Petitioners’ objection" after the district court denied a preliminary injunction.) So, in some very attenuated sense, the Hahns' shareholder funds are subsidizing the plan's reimbursement for employees' use of contraception . . . and the complaint might be read to suggest that this use of the Hahns' funds would make the Hahns complicit in their employees' use of so-called "abortifacients" in the rare case (if any) in which use of certain contraceptive methods prevented a fertilized egg from implanting in the uterine wall.
b. But even if the "shareholders' complicity" issue is teed up in Conestoga Wood . . . Honestly?
Can it really be the case that the Supreme Court of the United States ought to decide Conestoga Wood based upon the assumption that the corporate law "RVP-I doctrine" would apply in this unprecedented context? This is a state law question, the answer to which depends upon the legal relationship between a corporation and its principal shareholders . . . presumably under Pennsylvania law.
Professor Bainbridge cites as his primary authorities two 30-year-old state-law cases--one from Minnesota, the other from Michigan--both involving questions far-flung from the RFRA context in Conestoga Wood. To be sure, he also cites one Pennsylvania case--Barium Steel Corp. v. Wiley, 108 A.2d 336(1954). But in that case, which was decided 60 years ago, the Pennsylvania Supreme Court split 3-3 on what we (well, what corporations law professors) would today apparently call an "insider reverse veil piercing" theory, in a case that has almost nothing in common with Conestoga Wood. And the three Pennsylvania Justices who would not have recognized the RVP-I in Barium Steel wrote this: "The decisions in this State will be searched in vain for a single instance where a piercing of the corporate veil has been judicially sanctioned in order to confer a benefit upon the ones responsible for the presence of the veil. Certainly, the opinion for this court in the instant case cites no such decision."
That exhausts my knowledge of how Pennsylvania law treats insider reverse veil-piercing. Perhaps Professor Bainbridge is right that Pennsylvania (and other state) courts would or should "reverse-pierce" the veil in this RFRA context, in which a federal statute is implicated. Perhaps he's wrong. But how should the Supreme Court of the United States resolve that question?
Bainbridge argues that courts have historically "pierced the corporate veil" in 13.41% of RVP cases, and that the Court should decide whether Conestoga Wood should be among that number based upon the simple test of whether piercing here would advance a "significant public policy." But he does not cite any other Pennsylvania authority in support of this view, or any case at all involving RVP and RFRA, or RVP and shareholders' religious exercise more broadly, from any jurisdiction.
This absence of precedent ought to be a serious problem for his RVP-I argument, particularly in light of the principal case cited in the corporate professors' brief (and in the government's brief), Domino's Pizza, Inc. v. McDonald, 546 U.S. 470 (2006).
McDonald was the sole shareholder of a Nevada corporation. He alleged that Domino's had broken contracts with that corporation because of racial animus toward him, in violation of 42 U.S.C. § 1981. The Court held that section 1981 offers relief to a plaintiff when racial discrimination impairs an existing contractual relationship, so long as the plaintiff himself has or would have rights under the existing or proposed contractual relationship. Of course, the contracts themselves, between corporations, did not afford McDonald any rights, because he was merely a shareholder. Citing some of the same Minnesota cases Professor Bainbridge cites, however, McDonald argued that "under state law shareholders are at times permitted to disregard the existence of the intermediate corporate entity where failing to do so would impair full enforcement of important . . . statutes." Resp. Br at 32 n.34.
At oral argument, Justice Kennedy identified this claim as "kind of an inverse corporate veil piercing," and asked: "[A]re there any cases where we pierced the corporate veil in order to help the shareholder?" (The answer, of course, is that the Court has never done so.)
Not surprisingly, the Court unanimously rejected McDonald's inverse veil piercing claim. Justice Scalia's opinion for the Court explained that "it is fundamental corporation and agency law—indeed, it can be said to be the whole purpose of corporation and agency law—that the shareholder and contracting officer of a corporation has no rights and is exposed to no liability under the corporation's contracts."
The Court presumably was able to issue such a categorical interpretation of state law because it had been offered no examples, in any jurisdiction, of reverse veil piercing to vindicate shareholder contract rights. To be sure, Conestoga Wood does not involve shareholders' contract rights, so McDonald does not directly resolve the RVP-I question here. But the Hahns have the burden to show a RFRA burden, and neither they nor Professor Bainbridge have cited any case, from Pennsylvania or elsewhere, in which shareholders have been permitted to use RVP-I to allege harms to their religious exercise, under a state or local RFRA, resulting from a law that has an impact on corporate funds. The Court presumably should, therefore, treat the RVP-I argument here the way in which it treated the equally unsupported and unprecedented argument in Domino's--i.e., summarily reject it.
Domino's appears to be the one and only occasion in which the Supreme Court has specifically considered the relationship between the "RVP" doctrine and a federal statute. You'd think, therefore, that Professor Bainbridge would devote serious attention to the case. His analysis of Domino's is relegated to a footnote, however. And his efforts to distinguish the holding in that case are unpersuasive. For example, he notes that the shareholder in Domino's raised "only" contractual and statutory rights. ButConestoga Wood's claim here (the only claim with any traction, anyway) is based on a federal statute (RFRA), just as McDonald's was. Bainbridge's suggestion that the federal statutory right established by RFRA is more "fundamental" than the federal statutory right against race discrimination established by section 1981--indeed, so much more "fundamental" that it ought to result in an about-face on the Court's RVP-I holding--is so implausible that it doesn't warrant a response.
His principal argument fares no better. He insists that Domino's is a "weak precedential reed" because the Court in that case "made no effort to analyze the issues raised by RVP, but simply dismissed it out of hand," without addressing "any of the points made [by Prof. Bainbridge] in defense of the doctrine." In other words, Bainbridge thinks that the Court should ignore its unanimous holding in Domino's because the Court did not do its homework in that case, even after Justice Kennedy had specifically teed up the question as whether the Court should recognize a claim of "inverse corporate veil piercing." Suffice it to say that that argument is unlikely to have any traction with the Court. Moreover, it misses the point: The Court rejected the RVP-I claim in Domino's because the plaintiff there gave the Court absolutely no basis for concluding that state law would recognize such an exception to the default "fundamental corporation and agency law" principle that a corporate shareholder has no rights and is exposed to no liability under the corporation's contracts. The same thing is true in this case: Neither the Hahns nor Professor Bainbridge has offered the Court any authority at all in support of the proposition that the Pennsylvania Supreme Court -- or other state courts, for that matter -- would recognize an RVP-I claim in a case involving RFRA.
Moreover, even if the Court were somehow able to answer the RVP-I question as a matter of Pennsylvania law (after certifying it to the Pennsylvania Supreme Court, perhaps?), that state-law-based judgment would not govern similar cases arising in the other 49 states and the District of Columbia, and therefore would hardly be a satisfactory resolution of the question on which the Court granted certiorari in Conestoga Wood. (And it wouldn't have any impact on a non-shareholder case such as Hobby Lobby.)
* * * *
In the absence of any indication that Pennsylvania law would allow RVP-I in this novel context, the more appropriate approach for the Court would be to follow its example in Domino's, and simply move on from a shareholder-injury inquiry to address the principal question raised both in Conestoga Wood and in Hobby Lobby--namely, whether federal law coerces the individual plaintiffs (the Hahns and the Greens) to violate religious injunctions in their capacities as decision-makers, or directors, of the three corporations in question in these two cases. In an earlier post, I discuss why I think the plaintiffs have failed to adequately plead facts to support such a claim.
4. Finally, and most importantly, in posts at both SCOTUSblog and Balkinization, I've tried to explain that, wholly apart from the questions regarding corporations and shareholders, a broad ruling in favor of Hobby Lobby and Conestoga Wood could mark a sea-change in the way the Court has traditionally resolved claims for religious exemptions in the commercial sector, with potentially dramatic ramifications for an array of laws involving taxes, wages and hours, antidiscrimination norms, etc. This is so because, when it comes to regulation of commercial activities, the Supreme Court—and virtually every other court and legislature, for that matter—has consistently construed the Free Exercise Clause and religious accommodation statutes not to require religious exemptions from generally applicable regulations. The Supreme Court, in particular, has rejected such claims in at least nine cases, from 1944 through 1990--and has almost always done so without a dissenting vote.
This long line of consistent denials of exemptions to actors in the commercial sphere reflects the view of Justice Jackson in the first such case (Prince v. Massachusetts), in which he wrote in his concurrence that “money-raising activities on a public scale are, I think, Caesar's affairs, and may be regulated by the state so long as it does not discriminate against one because he is doing them for a religious purpose and the regulation is not arbitrary and capricious, in violation of other provisions of the Constitution.”
A unanimous Court put the point this way in U.S. v. Lee, in 1982: “When followers of a particular sect enter into commercial activity as a matter of choice, the limits they accept on their own conduct as a matter of conscience and faith are not to be superimposed on the statutory schemes which are binding on others in that activity,” at least where “[g]ranting an exemption . . . to an employer operates to impose the employer’s religious faith on the employees.”
Whether or not this was a stand-alone “holding” in Lee, there is no doubt that the statement did—and continues to—fairly reflect the Court’s unbroken line of decisions over many decades. (The singular exception to the rule is Hosanna-Tabor, which, unlike Hobby Lobby, involved the right of nonprofit, specifically religious organizations to determine the “ministers” who speak on their behalf.)
And the Lee statement further points to the principal reason for this uniform treatment of religious exemption claims in the commercial sphere—namely, that in such cases it is virtually always the case that conferral of an exemption would require third parties (customers, employees, competitors) to bear significant burdens in the service of another’s religion, something the Court has understandably been loath to sanction. As I wrote on SCOTUSblog,
Contrary to the views of some, I think it overstates matters to say that such a significant third-party burden invariably renders a permissive religious accommodation unconstitutional. The Court’s jurisprudence in the area of permissive accommodations is not so unequivocal. But this much is clear: Such a significant third-party burden at a minimum raises profound constitutional concerns. For that reason, as Chip Lupu and Bob Tuttle explain, the Court has regularly construed permissive accommodation statutes – using the avoidance canon either expressly or implicitly – to recognize a compelling government interest in avoiding the imposition of significant third-party harms.
The Court’s decision in Hobby Lobby is likely to have a profound effect upon how other courts treat state and federal RFRA claims in the commercial sector going forward. If the Court were to hold that RFRA requires an exemption in these cases—and were to hold, in particular, in the case brought by a very large for-profit employer, that the law substantially burdens plaintiffs’ religious exercise and that the government lacks a compelling interest in denying religious exemptions—that would be a groundbreaking departure from the judiciary’s (and Congress’s) historical practice, one that could pave the way for claims for “myriad exceptions flowing from a wide variety of religious beliefs” (Lee) by commercial enterprises with respect to many other statutes, including nondiscrimination requirements, zoning regulations, taxes, and so on.
Before returning to the legal boundaries of monetary policy, I wanted to briefly highlight some interesting contract and regulatory issues lurking just beneath the surface of an unusual Kansas state court order declaring a sperm donor to be the legal father of a child, against the wishes of all persons involved.
In 2009, a Topeka man answered a Craigslist ad soliciting sperm donations. The ad was placed by a lesbian couple, Jennifer Schreiner and Angela Bauer. The man supplied a donation. Schreiner became pregnant and delivered a baby. Schreiner began receiving Kansas welfare benefits for the child. Seeking child support payments, the state sued the sperm donor to establish paternity. The state argued that the donor—who lacks any relationship with the child or the couple (now estranged) beyond supplying the donation—was the child’s legal father, and therefore must pay child support.
This is where the case gets interesting as a matter of private ordering and trade regulation.
Prior to the donation, all persons involved—the donor and both members of the couple—signed a non-paternity agreement in which the donor waived his parental rights and was released from his parental obligations.
Both mothers opposed the state’s campaign to declare the donor the child's legal father.
Nevertheless, the court granted the state’s paternity petition, which means it can now seek to compel the donor to provide child support. The paternity finding also appears to give the donor a good shot at asserting parental rights (though he seems unlikely to try).
Justifying its decision to ignore the wishes of both parents and the donor, the court intoned:
A parent may not terminate parental rights by contract, however, even when the parties have consented.
Well, maybe this case is a morality tale about those who would seek a father for their child on Craigslist. A warning from a heartland state to those who would selfishly try to contract around their sacred parental obligations. A sign that courts place the welfare of the child above all else. Right?
Haha, of course not!
Kansas law makes it easy to conclusively terminate the parental rights and obligations of sperm donors by contract. Care to guess what you need to do, besides sign a contract?
Pay a doctor.
The court explained:
Through K.S.A. 23-2208(f) [PDF], the Kansas legislature has afforded a woman a statutory vehicle for obtaining semen for [artificial insemination] in a manner that protects her and her child from a later claim of paternity by the donor. Similarly, the legislature has provided a man with a statutory vehicle for donating semen to a woman in a manner that precludes later liability for child support. The limitation on the application of these statutory vehicles, however, is that the semen must be “provided to a licensed physician." [FN1] (emphasis added)
The parties failed to do this.
So, the upshot is that you are free to find a father for your child on Craigslist—and you can even count on the State of Kansas to keep him out of your child’s life in the future—so long as you hire a doctor to do the procedure. Similarly, you can spend your free time fathering children on Craigslist without losing sleep over child support suits—as long as you kick some of the action upstairs to an M.D.
It’s not just Kansas; California, Illinois, and as many as 10 other states [FN2] follow the same law, the Uniform Parentage Act of 1973.
I’m not a family law expert, but it seems to me that a complete list of legitimate and unique public policy concerns that are implicated when a couple and a third-party sperm donor settle their parental obligations by contract looks something like this:
- Ensuring that the state can identify who can be held legally responsible for supporting the child.
Nevertheless, let’s assume there are also truly compelling public health reasons to involve a physician in artificial insemination. After speaking with a few doctors, I’m skeptical that this is the case, but even if it were here are ten points that I think are worth considering:
- Should a mother who became pregnant by artificial insemination be forced to share parental rights with a stranger who donated sperm simply because she decided not to hire a doctor for the procedure?
- Conversely, should the scope of a sperm donor’s rights and responsibilities as a father turn on the decision whether to enlist a doctor to oversee the procedure?
- Should the adequacy of a child support scheme turn on whether couples using sperm donors choose to hire a doctor?
- There are sound public policy reasons to be concerned about voluntariness in agreements that waive paternity. But if this case is really about ensuring voluntariness, why is enlisting doctors the solution? Establishing consent during contract formation is not some novel problem. Hiring a doctor is a novel solution, but as an evidentiary device it is not very probative.
- Hiring doctors for artificial insemination is not cheap. A single attempt through a physician’s office costs about $3,000, and sometimes multiple attempts are necessary. Unsurprisingly, the American Fertility Association (a trade group for the fertility industry) applauded the court’s decision.
- This rule looks even more like an attempt to extract rents when you consider that for many people, the price of artificial insemination without physician assistance may be zero.
- If the state interest in the use of doctor-assisted artificial insemination is so compelling, maybe the law should simply require it on penalty of criminal sanction. I have never even heard this idea floated, probably because it would be perceived (rightly) as an excessive intrusion on various important freedoms…
- …yet while they do not provide criminal sanctions, about 13 states are willing to provide unbelievably harsh "family-law sanctions." If a woman declines to hire a doctor, she is placing herself and her child in eternal jeopardy; at any time, the donor or the state can move to declare the donor to be the legal father, which would put the donor in a position to seek full parental rights—even if he is a stranger. (The same is true in reverse re: child support.) It is unsurprising that both mothers opposed the state’s petition.
- Although facially neutral, this rule is almost certainly discriminatory in practice. It means that lesbian couples must either hire a doctor or adopt—there is no other way they can safely preclude the donor from being granted parental rights. And of course this is just one of many unofficial taxes gays and lesbians must pay, especially in states like Kansas that do not allow them to marry. It seems to me that there’s a good argument the law should fail rational basis or equal protection review, but I will leave that brief to the con law scholars.
- Finally, beyond any constitutional infirmity, this law should serve as a reminder that protectionist regulations—which often take the form of onerous occupational licensing restrictions and NIMBY zoning rules—frequently have regressive distributional consequences, because they tend to favor powerful incumbents. And although probably not the case here, such laws can harm the broader economy as well by stifling innovation.
I welcome your comments. And I hope my doctor friends still talk to me.
* * * *
[FN1] It should be noted that under the letter of the statute as well as a 2007 Kansas Supreme Court decision (PDF) on this issue, the court did not have an obvious alternative to finding for the state. The problem, such as there is one, is with the statute.
[FN2] An accurate count is not possible without doing a full 50-state survey. As I have written about previously, the Uniform Law Commission’s Enactment Status Maps are often unreliable or imprecise (see FNs 163 & 188).
The Bitcoin exchange Mt. Gox appeared to be undergoing more convulsions Tuesday [February 25], as its website became unavailable and trading there appeared to have stopped, signaling a new stage in troubles that have dented the image of the virtual currency. . . .
Investors have been unable to withdraw funds from Mt. Gox since the beginning of this month. The exchange has said that a flaw in the bitcoin software allowed transaction records to be altered, potentially making possible fraudulent withdrawals. No allegations have been made of wrongdoing by the exchange, but the potential for theft has raised concern that the exchange wouldn't be able to meet its obligations.
The apparent collapse of Mt. Gox is just the latest shock to hit Bitcoin, the price of which is now off more than 50% from its December 2013 peak:
For those better acquainted with the dead-tree/dead-president variety of money, Bitcoin is a virtual currency not backed by any government. Rather than being printed or minted by a central bank, Bitcoins are created by a computer algorithm in a process known as "mining" and are stored online or on your computer. They are bought and sold on various exchanges, including until recently Mt. Gox (whose troubles have been reported for a few weeks now).
There are many reasons, some of them even lawful. Bitcoins can be regarded as a medium of exchange, an investment, a political statement...or a way of avoiding capital controls and other pesky laws like bans on drug trafficking and human smuggling.
But the criminal potential of Bitcoin is probably overstated. The Chinese have gotten wise to its use for avoiding capital controls. Using Bitcoin for criminal or fraudulent activity would be difficult at scale (PDF). The Walter White method is still far and away the best way to ensure your criminal proceeds retain their value and anonymity.
I don't share the utopian fervor for Bitcoin expressed in tech and libertarian circles (see, e.g., this supposedly non-utopian cri de coeur), but it may have some positive potential as a decentralized and lower-cost electronic payments system. We'll see if that ever gets off the ground.
In the meantime, the Mt. Gox collapse is pretty huge news for Bitcoinland. Unlike the NYSE (the failure of which would be hard even to imagine), Mt. Gox does not benefit from any systemic significance and thus is unlikely to receive a lot of official-sector help. The situation has some early adopters running for the Bitcoin exits, like this leading Bitcoin evangelist.
Despite (because of?) my agnosticism on the currency, I'll be writing more about Bitcoin soon. (Mainly, I wanted to stake a claim to being the first to write about Bitcoin on The Conglomerate.) If your Palo Alto cocktail party can't wait, however, this explainer (PDF) from the ever-impressive Chicago Fed should tide you over.
Permalink | Businesses of Note| Crime and Criminal Law| Current Affairs| Economics| Entrepreneurs| Entrepreneurship| Finance| Financial Institutions| Innovation| Internet| Investing| Securities| Technology | Comments (2) | TrackBack (0) | Bookmark
We have decided to convene a late summer forum of the Conglomerate Masters -- our roster of distinguished corporate and financial law professors -- to discuss the current state of corporate social responsibility. In particular, we wanted to address the controversy over Chick-fil-A's corporate stance against same sex marriage and to use this Economist blog post as a jumping off-point.
The Economist blogger contends that Chick-fil-A's culture is in fact a prime example of a firm embracing corporate social responsibility (or "CSR") - albeit not with the politics that one traditionally associates with that movement. The blogger concludes that the Chick-fil-A example demonstrates that matters of social policy should best be left to democratic institutions. He or she writes:
Matters of moral truth aside, what's the difference between buying a little social justice with your coffee and buying a little Christian traditionalism with your chicken? There is no difference. Which speaks to my proposition that CSR, when married to norms of ethical consumption, will inevitably incite bouts of culture-war strife. CSR with honest moral content, as opposed to anodyne public-relations campaigns about "values", is a recipe for the politicisation of production and sales. But if we also promote politicised consumption, we're asking consumers to punish companies whose ideas about social responsibility clash with our own. Or, to put it another way, CSR that takes moral disagreement and diversity seriously—that really isn't a way of using corporations as instruments for the enactment of progressive social change that voters can't be convinced to support—asks companies with controversial ideas about social responsibility to screw over their owners and creditors and employees for...what?
It is a provocative argument. Although one wonders if the author would have made this same series of arguments in the 1960s: would the author have encouraged civil rights protesters to abandon lunch-counter sit-ins and lobby state legislators instead?
Still, the Chick-fil-A example raises some disquieting questions for CSR, which our Masters may address. These include:
Is corporate law the most effective or legitimate tool for social change? If we are worried about environmental degradation, is the solution to broaden the stakeholders to whom a corporation must answer? Or shouldn't we look instead to environmental law?
Is CSR viewpoint neutral? When covering CSR in a Corporations course, I ask students whether social activists who are lobbying a corporation to change what they see as immoral employment practices, should be able to put their views to a shareholder vote? Then I ask whether the answer would or should change based on whether the activists are looking to end racial or gender discrimination or whether they are lobbying a company to stop offering benefits to partners in same sex couples.
At the same time, the current state of legal affairs raises some disquieting questions for opponents of CSR too. The conclusion in the Economist blog -- leave social policy to democratic institutions and public law -- has a long lineage. It harkens back to Milton Friedman's arguments that corporations and the states do and should exist in separate spheres; if citizens want to change corporate policy, the argument goes, they should act through the political process and push through public regulation.
But, the separate spheres argument looks more and more outdated, as corporations influence and permeate the sphere of government. Do arguments to leave regulating the public dimension of corporate behavior out of corporate law and governance -- and leave it to traditional legislative and regulatory bodies -- appear naive in a post-Citizens United (and post-public choice)world?
Also, do these same questions for proponents and critics of CSR apply in equal measure to the growing field of social entrepreneurship? Can entrepreneurs do well while doing good? Should we expect them too? Is social entrepreneurship a workable, stable, and viewpoint neutral concept? If so, what does it entail? Does/should CSR apply equally to small businesses and startups as to global corporations?
We look forward to hearing from our Masters...
Permalink | Administrative| Business Ethics| Business Organizations| Businesses of Note| Corporate Governance| Corporate Law| Current Affairs| Masters: CSR| Social Entrepreneurship| Social Responsibility | Comments (0) | TrackBack (0) | Bookmark
Like many alums (including Steve Bainbridge), I've been increasingly dismayed at the Board of Visitors summary firing of Theresa Sullivan in only her second year as president of the University of Virginia. I won't get into the merits, although I've recently written on a related topic in the context of for-profit boards, and I am kicking myself for not getting a draft up on SSRN. The Washington Post quotes Jane Batton, of the Batton family that is arguably the biggest donor in the school's history (clocking in at a cool $170 million): "There may be good reason to replace President Sullivan — I don’t know — but it was handled in the worst possible way that has caused damage to the university." That sounds about right.
On the meta-level, what's struck me is how different my experience of this controversy is compared to what it would have been 6 years ago. Back then, I would have been obsessively following the story, checking the Daily Progress, WaPo, the Richmond-Times Dispatch, and using Google searches to get the latest. Maybe I would have been cc'd on an email blast from a concerned alum.
Now, every morning I scroll through my friends' status updates (yes, I'm on Facebook. No, if you're a current student you cannot friend me) and get up to speed on what's happened. More than that, by commenting on others' status updates I've talked with people passionately interested in this topic, many of them strangers, engaging in a real back and forth of ideas and questions. Friends that I'd forgotten or never known had any connection with Virginia shared their thoughts and concerns and conspiracy theories. Facebook (and Larry Sabato's twitter feed) have connected me to events unfolding 500 miles away to a degree that I find hard to believe.
No, my point isn't just that social media can be transformative. Yes, I have heard of the Arab spring. But even in a non-repressive regime, Facebook has its uses. Facebook scorn is somewhat in vogue now. Bumbled IPO, no path to profit, who uses it anyway? Rich Karlaard of Forbes writes: "I have not visited my Facebook page in two months. Almost every professional person I talk to who is over 25 years old has grown bored with Facebook."
I'm not bored. When something's happening in a corner of the world I care about, Facebook delivers. On ordinary days there's certainly time-suckage, but I'm not the kind of worker that can go non-stop. I need breaks between substantive work.
And Facebook beats the heck out of my old standby, Minesweeper.
Thanks to Erik Gerding for the opportunity to share some of my ideas on corporate criminal liability, Dodd-Frank, corporate influences on individual behavior and educating today's law students only three months into my new academic career. I appreciate the thoughtful and encouraging emails I received from many of you. I even received a request for an interview from the Wall Street Journal after a reporter read my two blog posts on Dodd-Frank conflicts minerals governance disclosures. We had a lengthy conversation and although I only had one quote, he did link to the Conglomerate posts and for that I am very grateful.
I plan to make this site required reading for my seminar students, and look forward to continuing to learn from you all.
Best wishes for the holiday season and new year.
Law schools are under attack. Depending upon the source, between 20-50% of corporate counsel won’t pay for junior associate work at big firms. Practicing lawyers, academics, law students and members of the general public have weighed in publicly and vehemently about the perceived failure of America’s law schools to prepare students for the real world.
Admittedly, before I joined academia a few months ago, I held some of the same views about lack of preparedness. Having worked with law students and new graduates as outside and in house counsel, I was often unimpressed with the level of skills of these well-meaning, very bright new graduates. I didn’t expect them to know the details of every law, but I did want them to know how to research effectively, write clearly, and be able to influence the clients and me. The first two requirements aren’t too much to expect, and schools have greatly improved here. But many young attorneys still leave school without the ability to balance different points of view, articulate a position in plain English, and influence others.
To be fair, unlike MBAs, most law students don’t have a lot of work experience, and generally, very little experience in a legal environment before they graduate. Assuming they know the substantive area of the law, they don’t have any context as to what may be relevant to their clients.
How can law schools help?
First, regardless of the area in which a student believes s/he wants to specialize, schools should require them to take business associations, tax, and a basic finance or accounting course. No lawyer can be effective without understanding business, whether s/he wants to focus on mom and pop clients, estate planning, family law, nonprofit, government or corporate law. More important, students have no idea where they will end up after graduation or ten years later. Trying to learn finance when they already have a job wastes the graduate’s and the employer’s time.
Of course, many law schools already require tax and business organizations courses, but how many of those schools also show students an actual proxy statement or simulate a shareholder’s meeting to provide some real world flavor? Do students really understand what it means to be a fiducuiary?
Second and on a related point, in the core courses, students may not need to draft interrogatories in a basic civil procedure course, but they should at least read a complaint and a motion for summary judgment, and perhaps spend some time making the arguments to their brethren in the classroom on a current case on a docket. No one can learn effectively by simply reading appellate cases. Why not have students redraft contract clauses? When I co-taught professional responsibility this semester, students simulated client conversations, examined do-it-yourself legal service websites for violations of state law, and wrote client letters so that the work came alive.
When possible, schools should also re-evaluate their core requirements to see if they can add more clinicals (which are admittedly expensive) or labs for negotiation, client consultation or transactional drafting (like my employer UMKC offers). I’m not convinced that law school needs to last for three years, but I am convinced that more of the time needs to be spent marrying the doctrinal and theoretical work to practical skills into the current curriculum.
Third, schools can look to their communities. In addition to using adjuncts to bring practical experience to the classroom, schools, the public and private sector should develop partnerships where students can intern more frequently and easily for school credit in the area of their choice, including nonprofit work, local government, criminal law, in house work and of course, firm work of all sizes. Current Department of Labor rules unnecessarily complicate internship processes and those rules should change.
This broader range of opportunities will provide students with practical experience, a more realistic idea of the market, and will also help address access to justice issues affecting underserved communities, for example by allowing supervised students to draft by-laws for a 501(c)(3). I’ll leave the discussion of high student loans, misleading career statistics from law schools and the oversupply of lawyers to others who have spoken on these hot topics issues recently.
Fourth, law schools should integrate the cataclysmic changes that the legal profession is undergoing into as many classes as they can. Law professors actually need to learn this as well. How are we preparing students for the commoditization of legal services through the rise of technology, the calls for de-regulation, outsourcing, and the emerging competition from global firms who can integrate legal and other professional services in ways that the US won’t currently allow?
Finally and most important, what are we teaching students about managing and appreciating risk? While this may not be relevant in every class, it can certainly be part of the discussions in many. Perhaps students will learn more from using a combination of reading law school cases and using the business school case method.
If students don’t understand how to recognize, measure, monitor and mitigate risk, how will they advise their clients? If they plan to work in house, as I did, they serve an additional gatekeeper role and increasingly face SEC investigations and jail terms. As more general counsels start hiring people directly from law schools, junior lawyers will face these complexities even earlier in their careers. Even if they counsel external clients, understanding risk appetite is essential in an increasingly complex, litigious and regulated world.
When I teach my course on corporate governance, compliance and social responsibility next spring, my students will look at SEC comment letters, critically scrutinize corporate social responsibility reports, read blogs, draft board minutes, dissect legislation, compare international developments and role play as regulators, legislators, board members, labor organizations, NGOs and executives to understand all perspectives and practice influencing each other. Learning what Sarbanes-Oxley or Dodd-Frank says without understanding what it means in practice is useless.
The good news is that more schools are starting to look at those kinds of issues. The Carnegie Model of legal education “supports courses and curricula that integrate three sets of values or ‘apprenticeships’: knowledge, practice and professionalism.” Educating Tomorrow’s Lawyers is a growing consortium of law schools which recommends “an integrated, three-part curriculum: (1) the teaching of legal doctrine and analysis, which provides the basis for professional growth; (2) introduction to the several facets of practice included under the rubric of lawyering, leading to acting with responsibility for clients; and (3) exploration and assumption of the identity, values and dispositions consonant with the fundamental purposes of the legal profession.” The University of Miami’s innovative LawWithoutWalls program brings students, academics, entrepreneurs and practitioners from around the world together to examine the fundamental shifts in legal practice and education and develop viable solutions.
The problems facing the legal profession are huge, but not insurmountable. The question is whether more law schools and professors are able to leave their comfort zones, law students are able to think more globally and long term, and the popular press and public are willing to credit those who are already moving in the right direction. I’m no expert, but as a former consumer of these legal services, I’m ready to do my part.
Permalink | Business Organizations| Comparative Law| Contracts| Corporate Governance| Corporate Law| Current Affairs| Education| Fiduciary Law| Finance| Globalization/Trade| Innovation| Junior Scholars| Law Schools/Lawyering| Popular Culture| Small Business| Social Responsibility| Teaching | TrackBack (0) | Bookmark