I'm certainly enjoying Day 1 of our Hobby Lobby symposium, and am working on a post to contribute. In advance of that, I thought I'd report this gem of a line from The Daily Show. It probably shows that I'm of a certain age, but Judy Blume humor strikes a chord.
Home from teaching bar prep, I've just finished the Burwell v. Hobby Lobby opinion. What does the opinion teach those highly stressed would-be attorneys about corporate law--or at least, the justices view of it? Let's see, shall we?
Justice Alito's majority opinion:
Entity theory rejected--anyone for a nexus-of-humans theory?:
A corporation is simply a form of organization used by human beings to achieve desired ends. An established body of law specifies the rights and obligations of the people (including shareholders, officers, and employees) who are associated with a corporation in one way or another. When rights, whether constitutional or statutory, are extended to corporations, the purpose is to protect the rights of these people. For example, extending Fourth Amendment protection to corporations protects the privacy interests of employees and others associated with the company. When rights, whether constitutional or statutory, are extended to corporations, the purpose is to protect the rights of these people...Corporations, “separate and apart from” the human beings who own, run, and are employed by them, cannot do anything at all.
(UR: this sounds like my first day of BA speech, where I reassure the humanities majors that "business law is all about relationships, relationships between people and groups of people).
Shareholder wealth maximization vs. corporate social responsibility:
Some lower court judges have suggested that RFRA does not protect for-profit corporations because the purpose of such corporations is simply to make money. This argument flies in the face of modern corporate law. “Each American jurisdiction today either expressly or by implication authorizes corporations to be formed under its general corporation act for any lawful purpose or business.” 1 J. Cox & T. Hazen, Treatise of the Law of Corporations §4:1, p. 224 (3d ed. 2010) (emphasis added); see 1A W. Fletcher,Cyclopedia of the Law of Corporations §102 (rev. ed. 2010). While it is certainly true that a central objective of for-profit corporations is to make money, modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so. For-profit corporations, with ownership approval support a wide variety of charitable causes, and it is not at all uncommon for such corporations to further humanitarian and other altruistic objectives. Many examples come readily to mind. So long as its owners agree, a for-profit corporation may take costly pollution-control and energy-conservation measures that go beyond what the law requires. A for-profit corporation that operates facilities in other countries may exceed the requirements of local law regarding working conditions and benefits. If for-profit corporations may pursue such worthy objectives, there is no apparent reason why they may not further religious objectives as well.
(UR: Kumbaya, my friends! Shareholder wealth maximization does not rule with the majority, that's for sure. Milton Friedman be damned, CSR is alive and well on the Supreme Court.
Tax is always with us:
For example, organizations with religious and charitable aims might organize as for-profit corporations because of the potential advantages of that corporate form, such as the freedom to participate in lobbying for legislation or campaigning for political candidates who promote their religious or charitable goals.
(UR: those pesky IRS 501(c)(3) restrictions! I always stress the importance of tax in BA.)
New corporate forms:
In fact, recognizing the inherent compatibility between establishing a for-profit corporation and pursuing nonprofit goals, States have increasingly adopted laws formally recognizing hybrid corporate forms. Over half of the States, for instance, now recognize the “benefit corporation,” a dual-purpose entity that seeks to achieve both a benefit for the public and a profit for its owners.
(UR: I was wondering if the Court would mention benefit corps. Kind of surprised the majority does, because one could see the existence of a hybrid form as undermining the Hobby Lobby/Conestoga argument, i.e., if you were serious about your religion, why didn't you pick a different form? I'm looking at you, Haskell Murray.)
General incorporation statutes, internal affairs doctrine, and ultra vires:
In any event, the objectives that may properly be pursued by the companies in these cases are governed by the laws of the States in which they were incorporated—Pennsylvania and Oklahoma—and the laws of those States permit for-profit corporations to pursue “any lawful purpose” or “act,” including the pursuit of profit in conformity with the owners’ religious principles. 15 Pa. Cons. Stat. §1301 (2001) (“Corporations may be incorporated under this subpart for any lawful purpose or purposes”);Okla. Stat., Tit. 18, §§1002, 1005 (West 2012) (“[E]very corporation, whether profit or not for profit” may “be incorporated or organized . . . to conduct or promote any lawful business or purposes”); see also §1006(A)(3); Brief for State of Oklahoma as Amicus Curiae in No. 13–354.
Closely-held vs. public corps.
These cases, however, do not involve publicly traded corporations, and it seems unlikely that the sort of corporate giants to which HHS refers will often assert RFRA claims. HHS has not pointed to any example of a publicly traded corporation asserting RFRA rights, and numerous practical restraints would likely prevent that from occurring. For example, the idea that unrelated shareholders—including institutional investors with their own set ofstakeholders—would agree to run a corporation under the same religious beliefs seems improbable. In any event, we have no occasion in these cases to consider RFRA’s applicability to such companies. The companies in the cases before us are closely held corporations, each owned and controlled by members of a single family, and no one has disputed the sincerity of their religious beliefs.
(UR2: One limitation for closely-held is Section 12(g) of the Exchange Act--which requires companies to make public filings when they reach 2000 investors (I'm omitting a lot, but that's the gist). Look for me for more on this topic soon).
The certificate of incorporation governs the corporation:
The owners of closely held corporations may—and sometimes do— disagree about the conduct of business. 1 Treatise of the Law of Corporations §14:11. And even if RFRA did not exist, the owners of a company might well have a dispute relating to religion. For example, some might want a company’s stores to remain open on the Sabbath in order to make more money, and others might want the stores to close for religious reasons. State corporate law provides a ready means for resolving any conflicts by, for example, dictating how a corporation can establish its governing structure. See, e.g., ibid; id., §3:2; Del. Code Ann., Tit. 8, §351 (2011) (providing that certificate of incorporation may provide how “the business of the corporation shall be managed”). Courts will turn to that structure and the underlying state law in resolving disputes.
(UR: Alito is dead right about this--if you want to change the default rules, don't settle for a puny bylaw--get it in the charter).
Now we move to Justice Ginsburg's dissent. She doesn't talk about the corporate form or corporate law as much--except to distinguish nonprofits from for-profits (if only she'd cited me!). I'll give one highlight:
By incorporating a business ,however, an individual separates herself from the entity and escapes personal responsibility for the entity’s obligations. One might ask why the separation should hold only when it serves the interest of those who control the corporation.
I also note that while the conservative majority moves to embrace progressive CSR-style rhetoric, Justice Ginsburg resists the counter-move that for-profit corporations exist to maximize profit or shareholder wealth.
Over the past 2 weeks I've mulled over several blogposts, but whenever I actually felt like pulling the trigger Typepad was beset with a denial of service attack--or something. I'm sure our readers are finding these just as frustrating as we are! Much of my blogging are riffs on something in the news, and if I can't blog for a day or two, it starts to feel stale. Unfortunately none of those imagined posts seem particularly topical now. Around-the-clock availability seems like a sine qua non for the bloghosting business, so it will be interesting to see how Typepad fares if these attacks continue.
Just presume for my sake that those unwritten blogposts were incisive and witty, 'kay?
Today's WSJ on Wall Street's reaction to the Fed's suggestion that it's contemplating ending its bond-buying program: "The market reacted as an addict might to the threat of losing drugs--it broke into shakes and a cold sweat."
I learned a lot from yesterday's C. Everett Koop obituary yesterday. Koop, the U.S. surgeon general from 1981-89 was a figure I dimly remembered from high school, and the WSJ painted a sympathetic portrait of an evangelical Christian who used his bully pulpit to address social issues like AIDS and smoking in ways that dismayed some of his conservative supporters.
One paragraph stood out, however, and I think for the full effect you need to see the newsprint, so I've taken a picture. Unfortunately it's split across columns. The paragraph begins thusly:
"Before becoming the nation's chief doctor, Dr. Koop was famed for separating conjoined twins at Children's Hospital of
And now for a little law professor inside baseball. For personal reasons I have found myself enveloped in the August submission cycle, which is a little more mysterious than the spring. Be that as it may, I have been quite pleased with the offers that have come in, and should reach a final decision soon.
There's been blogosphere buzz about a new entrant to the submissions business, long dominated by ExpressO. Being old enough to remember the pain of submitting articles via snail mail (mail merge, anyone?), I have found ExpressO a pure delight, offering easy quick electronic service at negligible cost. The new kid on the block is Scholastica, and it scored a coup by nabbing the California Law Review and the Chicago Law Review as early adopters. See blog posts from Dan Filler at the Faculty Lounge,Gerard Magliocca at ConOp, and Jesse Hill at Prawfs. In a comment to the last post, a founder of Scholastica writes:
Scholastica provides powerful software that goes beyond ExpressO's submission/distribution service, all at no additional charge to the journal – so journals of all sizes/rankings can easily have software to make the start-to-finish journal management process easier.
Journals using Scholastica get more than just article submission; they get an entire platform for efficiently running their journal, from submissions to reviews to decisions to copyediting to publishing – again, at no charge to the journal. We also give law reviews flexibility to be part of the standard law review submission pool or they can operate as a standalone single/double blind peer reviewed journal. They can also publish open-access content online with just a few clicks.
Hmm, appealing to the law reviews as a kind of one-stop shop? It will be interesting to see how this market shake-up plays out. I offer but one small insight from a new customer.
Professors who play the game know that myriad rejections are one price of admission. Even articles that wind up at the likes of Harvard Law Review garner, through the natural course of things, dozens of rejection emails. The wording of these emails varies, but they share a few points in common:
1. Thank you for your submission.
2. Each year we receive thousands of articles and can only select a few for publication.
3. After careful consideration, we have decided we cannot accept your article.
4. We hope you will consider us for submissions in the future.
Here was the email I received from the Chicago Law Review via Scholastica:
Think of the roller coaster of emotions. First, the email's subject line creates a sense of anticipation: oooo, a decision has been reached! What will it be? And then, upon opening the email in question, harsh reality, in 2 terse, bolded words. Decision: Reject.
What do you think? Admirably to-the-point? Unduly harsh for the tender of ego, particularly the young assistant prof or prof-wannabe?
The more I look at the email the funnier it gets.
Res ipsa loquitur ...
Back from one trip and headed to SEALS tomorrow, I can't find the time to blog about the incredible business stories unfolding this July. So I'll let America's Finest News Source do it for me.
If you're at SEALS, do stop by our blogging panel Friday morning. Dan Markel will be there, as will Dave Fagundes and Lesley Wexler. Also check out the happy hour the night before. Let's party like it's August 1.
I haven't been able to follow the News Corp. saga as closely I'd like, but I was surprised by the tone of yesterday's Wall Street Journal editorial. For those not in the know, News Corp. owns Dow Jones, publisher of the WSJ. Here's the ed page's assessment of Dow Jones' acquisition by Murdoch:
The Bancrofts were admirable owners in many ways, but at the end of their ownership their appetite for dividends meant that little cash remained to invest in journalism. We shudder to think what the Journal would look like today without the sale to News Corp.
I'm on record bemoaning the decline of the WSJ in the post-Murdoch era. Maybe the Bancrofts were money-hungry capitalist owners, but it was a better paper then. Really.
Wow. Just finished Pierre Schlag's The Faculty Workshop (H/T Dan Markel). It's definitely legal academia inside-baseball, but it certainly makes a nice break from grading/writing drudgery. Here's my favorite bit:
Of course, it's not just the non-verbal cues that matter. The actual questions asked are important as well. But you already know the standard questions. As a gentle reminder here, I will simply list them as rapidly as possible in a single paragraph. Please do read as quickly as you can. Here goes: the rules v. standards question, the institutional competence question, the this-bit-of-history is against you question, the have you considered… question, the on page 18 you say…. and yet in footnote 262, you say… question, the capillary trench warfare question, the I've actually worked on this as a lawyer question, the real law/real politick question, the rational utility maximizer would have done otherwise question, the cognitive error/bias of your choice question, the where's your empirical support question, the in terrorem effects question, the perverse incentives question, the institutional design question, the but you have not dealt with…. question, the how would you deal with…. question, the somewhat nastier, wouldn't you have done better arguing that… question, and, of course, the ubiquitous what should the courts do question.
You've probably seen the headlines: the Germans are coming! The Germans are coming!
I must admit that news of Deutche Börse's takeover of the NYSE stuck a nationalist chord in me that took me by surprise. Followers of the Big Board's organizational history know that it was a nonprofit until 2005. In terms of my analysis in Entity and Identity, as the exchange grew bigger and seats became more of a commodity and less about individual relationships, the NYSE became less of an identity organization, and thus the nonprofit form made less and less sense for it. In the increasingly competitive world exchange market merging might be inevitable, but something still seems wrong with a NYSE that's not majority-owned by U.S. shareholders.
For your amusement, here are some possible names (some serious, some funny) for the new exchange, courtesy of the WSJ:
• Borsa Americana
• Euro-American Stock Exchange, or EASE
• The Exchange
• Big Börse
• Denyex, short for DEutscheNewYorkEuropeaneXchange
• New York Frankfuerter Börse, or NYFB
• Global Bourse, or GloBo
• The Haus
And the totally humorous ones:
• Stocks and Schnitzel
• New York Borscht
I like the Big Börse.
According to The Onion. My favorite: "CFO Charles Noski has had to have the concept of interest explained to him eight times since being hired."
For those seeking even more offbeat humor, try this. You'll never look at DGCL 102(a)(3) the same again.
Monday's Financial Times struck a chord with my own domestic life. Author Lucy Kellaway treated readers to an extended comparison of toddlers and CEOs. A sample:
Both groups tend to swagger round with a wide-legged gait. Both say "mine" a lot and are exceedingly bad at sharing. Both have short attention spans. Both lack common sense and have issues with listening. CEOs and toddlers are also hazy about the existence of other human beings, tending to view them as objects. They both inspire fear in the hearts of their handlers. And anyone who has observed how toddlers behave on aircraft will realise why it is a good idea for CEOs to travel in private jets.
But a reader pointed out some good toddler/CEO traits:
- Toddlers are fully of energy and enthusiasm. You can't beat a toddler who is really into something and going for it 100 per cent.
- Toddlers are natural risk-takers. They throw themselves into climbing down the banisters in the boldest, bravest fashion.
- Toddlers are persistent. When told not to smear jam on a DVD, they will wait a couple of minutes and then do it again.
- Toddlers are inquisitive. They will not be fobbed off with a stock reply but go on asking "why? why? why?"
Kallaway adds more qualities: that two-year-olds are "assertive and jolly good at saying no. They are not hamstrung by inhibitions...They are good at making decisions."
How funny is this to those of you without toddlers? To me it's hilarious. But it also speaks to a dilemma my husband and I have discussed more than once. Our parental role, as I understand it, is to socialize our children. Teach them to share, play nicely, don't shout, don't run, be careful. Listen to me. Because I said so.
But it seems like CEOs and similar high fliers don't heed these lessons. They're stubbornly convinced that they're right all the time--that's what leads them to take risks no sane person would ever take. You get the feeling it would be exhausting and frustrating to live with Steve Jobs, let alone work for him. Try telling him he's wrong or needs to listen. You think a little time-out is going to change his mind? Did his parents even try? Should they have? By trying to socialize our children are we also squelching them? Does discipline doom our daughters to a life of paycheck toil rather than multimillion-dollar bonus bliss?
I don't know. We're still teaching our daughters to share and clean up after themselves. They can learn to be self-absorbed and stubborn after they leave the nest. Isn't that what college is for?
OK, I'm throwing in the towel--the Disney insider trading story is just too good. Here's the letter sent to various hedge fund managers:
Hi, I have access to Disney's (DIS) quarterly earnings report before its release on 05/03/10 [sic]. I am willing to share this information for a fee that we can determine later. I am sorry but I can't disclose my identity for confidentiality reasons but we can correspond by email if you would like to discuss it. My email is email@example.com. I count on your discretion as you can count on mine. Thank you and I look forward to talking to you.
I'm honestly at a loss as to what to say. Maybe you can supply the punchline.