August 18, 2008
The News from Oregon
Posted by Rob Illig

Ok – it’s the first day of classes and my first blog. What a nightmare to start so early, but what a pleasure to be invited to blog. Thanks, Gordon.

Since I’m writing from Oregon, I thought I’d start with a quick note on two unique aspects of Oregon business law that may be of interest. Although they aren’t fast-breaking news, I think they’re relevant to larger events currently unfolding in society.

First, a few months ago Oregon revised its corporate code (based mostly on the 1984 MBCA) to permit newly formed corporations to include in their charters “A provision authorizing or directing the corporation to conduct the business of the corporation in a manner that is environmentally and socially responsible.” As best as I can tell, Oregon is the first and only state to adopt such a provision, although I recall that England revised its Companies Act in a similar manner about two years ago.

Second, back in the 1970s (?) Oregon drew urban growth boundaries around several of its larger (note that I don’t say large) metropolitan areas. The idea is to prohibit or severely restrict new building outside of the boundaries and thus to force developers to renovate or replace existing buildings inside the boundaries.

What I like about these two reforms, and what I think ties them together and makes them important, is that they both seem partisan but really aren’t. Instead, they’re just sensible.

It would be easy to dismiss the first as a left-leaning attempt to chip away at the shareholder wealth maximization norm. In truth, however, it offers to create clarity and transparency. If a corporation’s founders would prefer to reject the norm and pursue a larger agenda, then they can now say so explicitly and put investors on notice of their intent. Likewise, if they would prefer to limit the board’s discretion to pursue goals other than shareholder value, they can omit such an authorization from their charter. By implication, their failure to affirmatively grant such authority (under circumstances where such a grant is expressly permitted) would appear to indicate that no such authority exists and that the directors of Oregon corporations are not permitted to privilege societal interests over profits. As a result, what seems on its face to be the product of a narrowly tailored progressive agenda may actually serve a much broader range of interests. Rather than waste energy debating the range of activities that are permitted within the BJR, we can now proceed with clarity and transparency regarding the board’s duties.

So it is with urban growth boundaries as well. Undoubtedly, these were first created with the liberal goals of reinvigorating the urban core and protecting the environment. However, they have more recently achieved conservative goals in addition. Although it’s difficult to be certain, every developer I have spoken to has said that (a) Oregon has largely avoided the mortgage and housing price crisis that has erupted in places like Miami, LA, Chicago and Phoenix, and (b) this is largely the result of the existence of the boundaries. Oregon, in other words, has promoted personal responsibility and fiscal prudence by regulating against sprawl. Without exurbs and other invitations to over-development, there appears to have been relatively little in the way of a housing bubble (although, admittedly, the crisis is still unfolding).

Note that I'm not trying to shill for Oregon.  We have our problems, including a tragic failure to properly fund our schools and universities.  Instead, I find myself seeking solutions to problems that aren't tied up in a lot of ideology.  I didn't join the legal academy merely to fight for my side and I have no interest in reliving some old battle that I wasn't a part of.  Maybe it's my generation (or maybe I just like to please everyone), but I love it when I can find solutions that combine the best thinking from all sides.  That's why I love hedge funds, something I'll blog about on Wednesday.  They seem to me like a free market, deregulatory answer to liberal business critics.  Progressivism in conservative sheep's clothing.  Stay tuned (and thanks for listening) ...

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