Showing papers in "Washington and Lee Law Review in 2006"

An Empirical Analysis of CEO Employment Contracts: What Do Top Executives Bargain For?

Abstract: I. IntroductionWhat do chief executive officers (CEOs) bargain for in their employment contracts? If you read the labor law literature, you might think that these executives did not have contracts. Prominent legal academics have claimed that CEOs are at-will employees, just like rank-and-file workers.1 If instead you read the corporate law literature, you might think that CEOs get whatever they want in their contracts. Leading legal academics have argued that corporate boards are all too willing to give CEOs fat pay packages and generous severance agreements because the directors are in the CEOs' back pockets.2For all of the ink that has been spilled about CEO contracting processes and outcomes, however, no one has studied the contracts themselves. At the most basic level, do executives have contracts? If so, what are their common legal terms? Are they different from the employment arrangements of other corporate employees? Do these contracts reflect strong CEOs dictating to trembling directors whatever terms they want? Or are these agreements negotiated documents exhibiting provisions that serve both parties' interests well?To answer these questions, we examined the key legal characteristics of 375 employment contracts between some of the largest 1500 public corporations and their chief executive officers. We looked at the actual language of these contracts and asked whether and in what ways CEO contracts differ from standard employment contracts for other workers. Our data provide some empirical answers to several common assertions or speculations in the labor law literature about CEO contracts and shed light on corporate law questions about whether these contracts are negotiated solely to suit the preferences of CEOs or have provisions that also safeguard the employers' interests.We begin by giving an overview of the general characteristics of a CEO employment contract and the process by which one is negotiated. This discussion shows that while some terms of these agreements are boilerplate language, there are intense negotiations over other terms. This background helps put into context the empirical information gleaned from the contracts.Turning then to the contracts and the labor law issues surrounding them, we ask whether CEOs' employment contracts leave them as nothing more than glorified at-will employees. We focus on five contracting issues: (1) the term "just cause" that defines when an executive can be terminated involuntarily with penalties; (2) the "good reason" termination clauses in the contract that permit an executive to leave voluntarily without financial penalties; (3) the noncompetition clauses in the contract; (4) the use of arbitration clauses to resolve contractual disputes; and (5) the contractual restrictions, if any, on the CEO's selling stock options. We also discuss some of the lesser-known economic terms of these contracts, including their length and the level of perquisites given to CEOs.We find much evidence that CEOs are not generally at-will employees. First, with respect to termination provisions, we find that CEOs overwhelmingly contract around the at-will default standard of termination. Of 375 contracts in our sample, only twenty-five expressly declare the contract to be at-will. Thirteen contracts are in essence at-will as they give the CEO the same rights if dismissed with or without cause. Most of the remaining contracts (340) give the CEO greater rights if dismissed without cause. Even the expressly declared at-will contracts tend not to be so. Of those twenty-five contracts, twenty-four give the CEO greater rights for termination without cause. Furthermore, 86.93% of the contracts are for a definite term of years. This is quite different from the protections available to other workers, who are generally at-will employees without contracts.Examining the definition of "just cause" for terminating a CEO, we find that the most commonly listed reasons are willful misconduct, moral turpitude, failure to perform duties, breach of fiduciary duties, and gross misconduct. …

The Transplantation of the Legal Discourseon Corporate Personality Theories: FromGerman Codification to British PoliticalPluralism and American Big Business

Abstract: I. IntroductionThe debate on the nature of the legal personality of groups gathered momentum and focus in Germany after 1868, with the criticism mounted by Gierke on Savigny's theory of corporate personality and with the intensifying controversies over the drafting of the German Civil Code.1 This discourse was well-rooted in German jurisprudential traditions, German historical narratives and the German political context.2 Yet, somewhat unexpectedly, it was imported into the Anglo-American world in about 1900.3 The GermanGierkian real entity theory of the corporation journeyed through several contexts and discourses in Britain and the United States.4 It inspired numerous articles and books in English, French and German.5 Various scholars, counsel, politicians and judges used this and other corporate theories to advance different doctrinal and policy objectives.6 This was arguably the most intense legal discourse of the first quarter of the twentieth century. Around the mid192Os it abruptly subsided, leaving only traces for historians to follow. Arthur Machen, writing in a sarcastic style in 1911, at the heat of the debate, captured the flavor of the discourse: The followers of real entity theory "strive to exaggerate the importance of those questions, in order to pose as great reformers engaged in a gigantic task of emancipating the legal world from the thralldom of mediaeval superstition."7While all three venues of the discourse, Germany, Britain and the United States, have been thoroughly studied, the relationship among the three has been relatively neglected.8 I shall concentrate on this transnational aspect of the discourse. While every intellectual relationship is likely to be reciprocal, my interest is in the flows of influences from Germany to Britain and the United States. This was the main direction of the flow of ideas in this specific discourse because the discourse originated in Germany,9 which was at that time at the zenith of its legal-intellectual prestige. A study of the import of AngloAmerican influences to Germany is beyond the scope of this project.The discourse focused on three theories of corporate legal personality that were played against each other.10 The theories aimed to explain the rationale for the status of groups as entities bearing legal rights and duties. It was assumed that the nature of the rationale had bearing on the magnitude and range of these rights and duties. I will present them now in their developed archetypical form. In the next sections I will deal with their historical development and minute variations.The first theory to appear both in Germany and in the Anglo-American world was the state grant theory, also called the fictitious personality theory, the artificial personality theory, the concession theory or the hierarchical theory.11 Grant theory viewed groups as gaining legal status by way of incorporation. Incorporation was a monopoly of the state. Only the state could incorporate groups and grant them legal personality. The state attached rights and duties to the legal personality at its discretion. The corporate personality was created by the state in the realm of public law.12The second theory was the contract, aggregate, or partnership theory. Groups became legal entities by a voluntary and consensual undertaking of their members.13 This undertaking had constitutive status-creating consequences; namely, the birth of a new legal entity. This was a legal birth but one that took place in the realm of private, rather than public, law.14The third theory, whose formation in Germany and import into Britain and the United States initiated the discourse, is the real entity theory, also called the natural entity theory. '5 This theory holds that the real and social existence of a group makes it a legal person. The corporate entity is pre-legal or extra-legal. The law does not create it; it is bound to recognize and respect its real existence. …

Social Conceptions of the Corporation:Insights from the History ofShareholder Voting Rights

Abstract: I. Introduction1Power is distributed among the shareholders of today's corporations in a great variety of ways. Evidence of this diversity is readily apparent in shareholder voting rights, which, by their very nature, define relations of power among shareholders. A study of voting rights in 300 large European corporations in mid-2004, commissioned by the Association of British Insurers (ABI), found that more than one-third of these companies had something other than a one-vote-per-share voting rule.2 An official of the ABI, which advocates one-vote-per-share voting rules, summarized the "deviations" in these words:European companies use an extraordinary cocktail of devices to restrict the voting rights of their shareholders. For example, one in 20 imposes an ownership ceiling, limiting the stake of individual owners; one in 10 companies impose[s] a voting right ceiling limiting the right of individual holders to register their opinion by voting at annual meetings. Then there are priority shares, granting specific powers to their holders. A fifth of companies analyzed issue shares with multiple voting rights, which give additional rights to selected shareholders.3Deviations from one-vote-per-share have multiplied in the last two decades in the United States as well. For much of the twentieth century, the New York Stock Exchange refused to list the shares of companies that issued non-voting common stock, but it dropped this restriction in 1985, and dual-class shares have become increasingly common since then. Between 1994 and 2001, according to Marco Becht and J. Bradford DeLong, the number of listed firms with dual or multi-class shares more than doubled to 215. Typically, such firms issue one class of shares bearing one-vote-per-share and a second class bearing ten votes per share-the latter held by a small group of individuals, often family members, that do not circulate freely in the market. "The United States today," they observe, "is not exceptional in its rules. The law of many states allows corporations to issue shares with no voting rights, limited voting rights, contingent voting rights, or multiple voting rights."4 In the United States as well as Europe, in short, voting rights are used to apportion power among shareholders in a variety of ways.Current theories of the corporation have little to say about this diversity, no matter how one draws lines to distinguish among them.5 The contractarian model, which has dominated legal scholarship for the last couple of decades, envisions the corporation as a "nexus of contracts" and imagines the contracting parties (managers, shareholders, employees, suppliers, customers) as acting individually as equals in the bargaining process (aside from differences in information and other resoures). At most this may imply a pluralist distribution of power between bargaining parties, but it has little to say about what I call horizontal power relations: in this case, power relations within the category of shareholders. Other theories acknowledge vertical power relations within the corporation, both in the principal-agent relationship that links shareholders to managers and in the managerial hierarchies characteristic of the modern corporation. But here, too, shareholders are assumed to have identical interests-all cut from the same cloth, all intent on maximizing profits or share values. In Daniel Greenwood's phrase, they are "fictional shareholders," fundamentally alike and "fundamentally different from the human beings who ultimately stand behind the fiction."6 Although the interests of managers and shareholders, or of managers and employees, may diverge, no divergence of interest among shareholders is theoretically possible. The notion of power relations among shareholders, therefore, has little relevance.For insight into the significance of different ways of distributing power among shareholders, this essay turns to history and analyzes shareholder voting rights in political terms. …

Dividends as a Substitute for Corporate Law:The Separation of Ownership and Control inthe United Kingdom

Abstract: Brian R. Cheffins*I. IntroductionAs the twentieth century drew to a close, corporate law scholarship "found the market" as "contractarian" analysis became the dominant mode of analysis. A key underlying presumption of this economically oriented school of thought was that market dynamics define primarily how directors, shareholders, and others associated with companies interact. Corporate law, the thinking went, had only a supplementary and supportive role to play, namely facilitating efficient contracting. No sooner had legal academics started to push law to the margins when economists began to assert that the extent to which law provides protection for investors is a key determinant of the configuration of corporate governance structures around the world. The claim made was that the "quality" of corporate and securities law does much to determine whether a country will have strong securities markets and a corporate economy dominated by firms with widely dispersed share ownership.The "law matters" thesis economists have advanced has important normative implications because it suggests countries will not develop a robust stock market or escape from potentially backward family capitalism unless laws are in place that provide suitable protection for investors. Not surprisingly, the thesis has attracted much attention from legal academics.1 But is "investor friendly" corporate and securities law in fact a necessary condition for a country to develop strong securities markets and a corporate economy where large firms are generally widely held? The experience in the United Kingdom suggests not.Currently, Britain has an "outsider/arm's-length" system of ownership and control, so called because most U.K. public companies lack a shareholder owning a large block of equity, and those owning shares (typically institutional investors) generally refrain from taking a "hands-on" approach to the management of companies. This system became entrenched between the 1940s and the 1980s, as company founders and their heirs exited and institutional investors rose to prominence. By the end of this period, the widely held company so often identified as the hallmark of corporate arrangements in the United States had moved to the forefront in the United Kingdom. The law matters thesis implies that Britain should have had laws in place that were highly protective of shareholders as the transition occurred. In fact, from the perspective of investor protection, Britain had "mediocre" corporate and securities legislation during the relevant period.If corporate and securities law did not provide the foundation for the separation of ownership and control in U.K. public companies, what did? A number of possibilities have been canvassed in the literature, including regulation by the privately run London Stock Exchange, which supplemented the protection investors had under corporate and securities legislation, and takeover activity, which acted as a catalyst for the reconfiguration of existing ownership patterns.2 This paper identifies a new candidate: the dividend policy of publicly quoted firms.Essentially, dividends contributed to the unwinding of share ownership structures in U.K. public companies by mimicking the role that the law matters thesis attributes to corporate and securities law, namely, constraining corporate insiders and providing investors with information flow about companies with publicly traded shares. Regulation of dividend policy by corporate law was minimal in the United Kingdom as ownership separated from control. Hence, while economists have been stressing the importance of law as a determinant of corporate governance systems, at least in Britain, corporate behavior lightly constrained by legal rules played a significant role. The paper does not claim that the payment of dividends by U.K. public companies was a sufficient condition for a separation of ownership and control to occur because it was the norm for publicly traded firms to pay dividends in the decades before dispersed ownership became standard. …

From the eXile Files: An Essay on Trading Justice for Peace

Abstract: I. IntroductionSince 1990, three different U.S. Presidents have accused Iraqi leader Saddam Hussein of committing grave breaches of the 1949 Geneva Conventions and acts of genocide.' Although the Geneva Conventions and the Genocide Convention require state parties to bring offenders to justice, on the eve of the 2003 invasion of Iraq, President George W. Bush offered to call off the attack if Saddam Hussein and his top lieutenants would agree to relinquish power and go into exile.2 This was no publicity stunt, as some have characterized it. Working through President Hosni Mubarak of Egypt, the United States actively pursued the matter with several Mideast countries, ultimately persuading Bahrain to agree to provide sanctuary to Hussein if he accepted the deal.3 When Hussein rejected the proposal, Bush promised that the Iraqi leader would be forced from power and prosecuted as a war criminal.4Admittedly, thousands of lives could have been spared if Hussein had accepted the deal. But at the risk of being accused of blindly embracing Kant's prescription that "justice must be done even should the heavens fall,"5 this Article argues that it was inappropriate for the Bush Administration even to make the offer, and that if implemented the exile-for-peace deal would have seriously undermined the Geneva Conventions and the Genocide Convention, which require prosecution of alleged offenders without exception.A few months after the invasion of Iraq, U.S. officials helped broker a deal whereby Liberian President Charles Taylor, who had been indicted for crimes against humanity by the Special Court for Sierra Leone, agreed to give up power and was allowed to flee to Nigeria, where he received asylum.6 At the time, forces opposed to Taylor, which had taken over most of the country, were on the verge of attacking the capital city Monrovia, and tens of thousands of civilian casualties were forecast. The exile deal averted the crisis and set the stage for insertion of a U.N. peacekeeping mission that stabilized the country and set it on a path to peace and democracy.7 In contrast to the Hussein case, the Taylor arrangement did not in any way violate international law. This Article explains why international law should treat the two situations differently, prohibiting exile and asylum for Saddam Hussein while permitting such a justice-for-peace exchange in the case of Charles Taylor.This is the first scholarly article in recent years to focus on the significant issue of exile. Scholarship on the analogous issue of amnesty has been written largely from the point of view of aggressive advocates of international justice, whose writing is based on the assumption that the widespread state practice favoring amnesties constitutes a violation of, rather than a reflection of, international law in this area.8 Before analyzing the relevant legal principles, the Article begins with an examination of the practical considerations that counsel for and against the practice of "trading justice for peace." Next, using the Saddam Hussein and Charles Taylor cases as a focal point, the Article analyzes the relevant international instruments which require prosecution under limited circumstances. This is followed by a critique of the popular view that customary international law and the principle of jus cogens broadly prohibit actions that prevent prosecution of crimes under international law. The Article establishes that there does not yet exist a customary international law rule requiring prosecution of war crimes in internal armed conflict or crimes against humanity, but that there is a duty to prosecute in the case of grave breaches of the Geneva Conventions, the crime of genocide, and torture. Where the duty to prosecute does apply, it is important that states and international organizations honor it, lest they signal disrespect for the important treaties from which the duty arises, potentially putting their own citizens at risk and generally undermining the rule of law. …

The Judgment-Proof Society

Abstract: "As the system currently operates, liability is, for wrongdoers ... voluntary."1I. Introduction: The Myth of Personal Tort LiabilityIn theory, tort law requires individual tortfeasors to compensate their victims for the wrongs they have negligently or intentionally inflicted. Negligent tortfeasors must pay damages from their own assets, unless they have purchased liability insurance in adequate amounts. Intentional tortfeasors do not have the option to insure because liability insurance almost always excludes intentional torts. Hence they must compensate their victims out of their personal resources.Supposedly, this system serves the twin objectives of deterring wrongdoing and doing justice. The threat of personal tort liability-or, at a minimum, of increased liability insurance premiums-induces potential tortfeasors to be more careful. When an accident does occur, corrective justice is accomplished by shifting the loss from the victim to the wrongdoer. And if the tortfeasor has liability insurance, the welfare loss is spread across the pool of liability insureds, rather than concentrated on the victim.Explicitly or implicitly, this account of how the tort system regulates the behavior of individuals is standard fare in torts scholarship and torts courses.2 The truth is dramatically different. Most people in our society face little or no threat of personal liability for any intentional or unintentional torts they might commit. Many tort claims are not large enough to be worth litigating in the first place. But even when it comes to larger, litigable claims, many Americans are "judgment-proof: They lack sufficient assets (or sufficient collectible assets) to pay the judgment in full (or even in substantial part).3Knowing that they can collect at best a fraction of the plaintiff s claim even if they litigate and win, plaintiffs' attorneys typically decline to litigate meritorious tort claims against uninsured or underinsured individuals. In the absence of liability insurance, plaintiffs are effectively barred from bringing suit unless the tortfeasor is an asset-rich corporation or an affluent individual who neglects to take elementary precautions to protect his or her assets from tort liability.4 And precisely because it is so easy to achieve judgment-proof status, individuals frequently fail to purchase adequate-or any-liability insurance.5Perhaps this description seems unremarkable. After all, everyone knows that plaintiffs' lawyers prefer to sue "deep pockets" such as liability insurers and big companies, and, at the other extreme, that it is pointless to sue persons living at the subsistence level. True, but what is not generally understood is that most Americans would have much deeper pockets were it not for a multitude of legal rules that shelter the lion's share of their income and assets from collection by tort plaintiffs (and other creditors). Most Americans are judgment-proof not because we are poor, but because state and federal laws entitle us to be judgment-proof. The paradoxical result is that contemporary America, one of the most affluent societies in human history, is simultaneously-and largely by operation of law-a judgment-proof society.This Article is about how our laws have made being judgment-proof the rule rather than the exception; about what this implies for the standard deterrence, corrective justice, and loss-spreading accounts of tort law; and about whether anything should be done to lower the legal barriers to enforcing and collecting tort judgments from individual tortfeasors. The Article proceeds as follows: Part Ð offers a preliminary overview of the judgment-proof problem, and of the principal legal barriers to collecting the personal income and wealth of American tortfeasors. The thrust of the argument is that these barriers greatly reduce the threat of personal tort liability-what tort lawyers call "blood money" liability6-for individuals across the spectrum of income and wealth. …

The Decision Maker Matters: An EmpiricalExamination of the Way the Role of the Judgeand the Jury Influence Death PenaltyDecision-Making

Abstract: Table of ContentsI. Legal Background 932II. Implications of Ring v. Arizona 935A. Competing Interpretations of Ring 940B. Juries as Conscience of the Community 946C. Juries as Responsible for the Defendant's Punishment 948III. The Capital Jury Project 950IV. Jurors Under Hybrid and Binding Capital Statutes 952A. Taking Responsibility for the Defendant's Punishment........9541. Statistical Data 9542. Narrative Accounts 9603. Overview 962B. Understanding Sentencing Instructions 9631. Statistical Data 9642. Narrative Accounts 9693. Overview 971C. Making the Punishment Decision 9721. Statistical Data 9732. Narrative Accounts 9773. Overview 980V. The Politics of Judging Capital cases Under Hybrid Statutes......981A. Appellate Judges and Death Penalty Politics 982B. Trial Judges and Death Penalty Politics Under Hybrid Statutes 985C. Jury and Judge Decision-Making in Life to Death Override cases 9911. The William Knotts case 9922. The clayton Flowers case 999VI. Conclusion 10021. Legal BackgroundWhen Gregg v. Georgia2 and companion cases3 endorsed this country's return to capital punishment in 1976, the United States Supreme Court accepted different approaches for guiding the exercise of sentencing discretion.4 Common to these new Gregg-approved post-Furman5 capital statutes was a two stage, or bifurcated trial at which the guilt and sentencing decisions were to be made separately and independently.6 Since then, all death penalty jurisdictions have had a two-phase proceeding in which a jury decides guilt in the first phase of the trial, and if they find the defendant guilty of capital murder, a second penalty phase of the trial is held to determine the punishment.States differed, however, in the sentencing responsibilities they gave judge and jury at the penalty stage of a capital trial. In 2002, before the Court's decision in Ring v. Arizona,7 twenty-nine of the thirty-eight death penalty states gave sentencing authority to the jury; the trial judge had little or no role in sentencing.8 Five states had judge only death penalty statutes that provided for judicial determinations of the factual foundation and the ultimate sentence without jury participation in the penalty phase of the trial.9 There were also four judge override states at that time that provided for a sentencing jury, but made the jury's sentencing decision advisory and gave the judge final sentencing authority.10Petitioners initially challenged the constitutionality of judge override and judge only sentencing without success. The Court gave mixed messages in the pivotal Gregg11 and Proffitt12 cases. In Gregg, the Court noted that juries were a significant and reliable objective index of contemporary values with respect to the imposition of the death penalty,13 yet in Proffitt it observed that it has never suggested that jury sentencing is "constitutionally required."14 The Court subsequently held in Spaziano v. Florida that judge override is not per se unconstitutional,15 and later, in Harris v. Alabama, that judges need not give "great weight" to jury sentencing recommendations.16 Concerning judge only sentencing, in Walton v. Arizona, the Court approved judge sentencing without the participation of a sentencing jury.17The tide then turned in Ring.18 The Supreme Court rejected judge only sentencing in capital cases. …

The Limits of the Olympian Court: Common Law Judging versus Error Correction in the Supreme Court

Abstract: I. IntroductionDocket control and the contraction of jurisdiction are consistent themes of Supreme Court history. The Court has struggled throughout its existence to control the flow of cases it decides on the merits. It has repeatedly and successfully lobbied Congress to reduce its mandatory jurisdiction. It has actively discouraged litigants from bringing cases that raise no more than a question about the correctness of lower court decisions. Only in the last ten years has the Court achieved a caseload that is consistently small enough to allow a new question: In its efforts to control its docket, are there ways in which the Court has gone too far? Are there types of cases that would benefit from the Court's involvement but that generally escape its review?Answering these questions must begin by examining the Supreme Court's current role. As part of the Court's long struggle to control its caseload and to avoid being (or being viewed as) a court whose primary role is to correct errors made by lower courts, it directs its attention to matters of particular national importance and, the focus of this Article, to maintaining uniformity in the law. The Court's primary mechanism for maintaining uniformity is to resolve "circuit splits"-areas of law in which different federal courts of appeals (and state supreme courts) disagree about what rule or standard governs. In resolving these circuit splits, the Court often announces rules and standards to be applied by the lower courts. The Court's mission to promote uniformity does not generally extend to examining how the lower courts apply those rules or standards, nor does the Court itself routinely apply the rules and standards it announces. Instead, the Court has cast itself in an "Olympian" roleannouncing rules and standards from on high.1In fact, however, applying legal standards sometimes can be even more difficult than pronouncing them. Nonetheless, Supreme Court Rule 10, which sets forth the Court's certiorari criteria, explicitly states that the Court is generally not interested in "the misapplication of a properly stated rule of law."2 Because the Court does not focus on application, it tolerates significant inconsistency and unpredictability, both between and within circuitsinconsistency that sometimes rises to a level that should be intolerable under the rule of law. As this Article will show, this aspect of the Court's practice is misguided, and the Court would better fulfill its role if it acknowledged and addressed the unpredictability and inconsistency arising from such misapplication of standards.Such unpredictability and inconsistency are more likely to be found in areas of law governed by standards than in areas of law governed by rules, simply because standards generally provide much more discretion to judges than do rules. Rules, such as mandatory sentences for certain crimes, are relatively easy to apply once the underlying facts are known. Standards, on the other hand, allow for greater flexibility, as they allow judges to take into account competing interests and a wider range of facts. An example of a standard-based area of law is a sentencing regime that provides the judge with sentencing ranges and factors to consider but grants discretion in determining the final sentence.3There is a longstanding debate over the relative advantages and disadvantages of rules and standards.4 Rather than enter into this debate, this Article argues that regardless of which type of legal regulation is preferable as a theoretical matter, the United States Supreme Court can and should sometimes calibrate its role to provide different types of guidance depending on whether an area of law is governed largely by rules or by standards.Specifically, this Article contends that the Court could more effectively promote consistency and uniformity in standard-governed areas of law if it returned to techniques of common law judging such as the explanatory power of analogy and the gradual process of closing in on a rule, or at least making a standard more specific or easier to apply. …

The Seductive Comparison of Shareholder and Civic Democracy

Abstract: I. Introduction"Democracy" is a powerful word in America. Perhaps that is why many commentators cannot resist comparing the workings of democracy within the corporation with those of democracy in the more familiar political realm. Colleen Dunlavy makes such comparisons in Social Conceptions of the Corporation: Insights from the History of Shareholder Voting Rights,1 shedding light on what a corporation's being more or less "democratic" might mean. She uses history to point out that it is not natural or obvious that votes should be allocated on the basis of share ownership.2 Indeed, in early corporate America, each shareholder (rather than each share) received a vote.3 This allocation, she implies, is more truly democratic than allocating one-vote-pershare.4This Comment briefly describes Dunlavy's treatment of democracy in the political and corporate worlds, and goes on to discuss how similar kinds of democracies exist in both spheres. It then focuses on one little-explored element of the political-world/corporate-world comparison by developing the striking parallel between the operations of the Electoral College in the national political setting and of boards of directors in the corporate world. The Comment then steps back from this subject and argues that comparisons between the corporate and civic polities, while intellectually tempting, ultimately falter because participation in a corporation fundamentally differs from participation in a nation. Shareholders are not citizens; their investments are voluntary and relatively liquid, and their proxy ballots lack the meaning and power of citizens' votes. The exploration of the Electoral College/board of directors analogy ultimately dead-ends because the board of directors, unlike the modern Electoral College, plays a real and useful role in governance. All of this confirms that Dunlavy's reflections are helpful and provocative. Their primary value, however, lies more in illuminating the role of the shareholder within the corporation than in raising a sustainable critique of corporate law's failure to protect "shareholder democracy" itself.II. Comparing Corporate and Political DemocracyShareholder democracy has many advocates today, most of whom take for granted the idea that this form of "democracy" means that each share of stock equals one vote. Dunlavy reminds us that there is nothing natural about such a division of voting power within a corporation and that, in fact, voting rules of the nineteenth century deviated from this now-familiar pattern.5 Dunlavy characterizes the current one-share-one-vote model of shareholder democracy as "plutocratic" because it allows the wealthier (or, at least, larger) shareholders to have more of a voice in governing the corporation.6 She contrasts this approach with the older, more truly "democratic" version of shareholder democracy, under which each shareholder was given equal voting power regardless of his or her level of share ownership-or at least there was a cap on the voting power that came with the ownership of large numbers of shares.7In examining the meaning of "democracy," Dunlavy draws a parallel between civic and corporate polities. Each involves a "body politic" (nation or corporation), and each must distribute power among its constituents.8 She is not interested in the vertical relationships so familiar to corporate law scholars-those between manager and employee, or manager and shareholder.9 Instead, she urges us to consider the horizontal shareholder-shareholder relationship.10 By virtue of the one-vote-per-share principle, larger shareholders inevitably have a greater say in corporate governance than do smaller shareholders. One might say that although all shareholders are theoretically equal, some are more equal than others-in striking contrast to the operation of our modern political system, which is built on the principle of "one person, one vote."11A. As Politics Democratized, Corporations Became PlutocraciesAs Dunlavy notes, the one-person-one-vote rule has not always dominated American political or corporate life. …

Personification in Three Legal Cultures: The Case of the Conception of the Corporate Unit

Abstract: Do ideas matter? Does history matter? Does the history of ideas matter? Ron Harris presents us with a paper that engages all three of these questions. Addressing a paper that deals with questions of such magnitude requires taking seriously the intellectual plane on which they are presented, while simultaneously avoiding becoming ensnared in the question of the legitimacy of such meta-questions. To engage the paper then, we must ask a seemingly simple set of questions about influence-why would (or, of course, why wouldn't) ideas, history, or, most appropriately, the history of ideas, have influence?Harris begins with the assumption that ideas have consequences. His paper, unsurprisingly, requires us to refine that assumption considerably. Looming above all other refinements is the issue of proportion: Do meta-ideas necessarily have meta-consequences? Do mid-level ideas necessarily have mid-level consequences?1 In Harris's case the meta- and mid-level ideas grow out of the seemingly political problem of intermediary associations, that is, the organized bodies that lie between the individual and the ultimate authority. The political problem is not a necessary problem of existence, of course, but a problem of intellect. In this case, it is the relentless logic of authority and power expanding until it is all-encompassing, tolerating no other organized body that might claim the allegiance, however partial, of the individual. Now, this problem is one of the intellect, and not a necessary problem of existence, because intermediary associations have always existed, and were certainly antecedent to the modern state.2The relentless logic of authority-the nature of sovereignty-is one that has long bewitched theoreticians and historians. Harris does not tackle the entire issue, but does take on one very powerful aspect of the intellectual problem: the evolution of the idea of personification of entities in nineteenth and twentieth century Germany, England, and the United States. Personification is, simply put, conceptualizing an organized body of individuals as a person, a legal person, or a legal entity, so that it might be treated at law as if it were an individual rather than an amalgamation of individuals akin to the sovereign state.3 This paper, then, is a kind of intellectual history. Harris tells three stories whose content is delimited by geography, argues that the stories are interwoven, and seeks to spell out the connections among them. The stories are intellectual history in the sense that he is concerned centrally with the ideas themselves, rather than their impact on the social, political, or economic milieu in which they operated. He does not attempt to assess, for example, whether personification increased the efficiency of an economic organization, the transparency or responsiveness of a civic body, or the power of any association. His method is not unlike an older school of literary criticism that sought to discover how one author or school influenced or begot another. Moreover, given that so few authors are involved in thinking about personification, the stories, especially to the extent that they are interwoven, take on a prosopographical quality. What Harris does, and does magnificently, is trace the timing of intellectual events. Having worked in the American sources for many years, I have wondered which theorist outside of the United States made which point and who might have been aware of such authorship. Harris provides such nuggets, suggesting in many cases the reasons why an insight was well-received by other theorists. Even if one puts aside for the moment the intractable difficulties of causation, such juxtapositions have a compelling quality.What level of idea is it that he traces through the alleys of western thought? If culture is a meta-idea, similar to authority or sovereignty, then personification is a mid-level idea. It derives meaning from larger concepts, but it has its own consequences. …

The Relevance of Corporate Theory to Corporate and Economic Development: Comment on the Transplantation of the Legal Discourse on Corporate Personality Theories

Abstract: The question posed by this conference is, what can history teach us about corporate law? The development of corporate law in the United States has been intensely practical, with courts and legislatures bowing to the changing needs of business in their regulation of corporate organization, management, and finance. As Professor Harris and others show us, positive and normative theories have appeared from time to time, typically, or so it would appear, in response to these changes.1 This reactive nature of corporate law and theory departs from the tighter, traditional, continental interrelationships of theory and practice and undoubtedly reflects historical, social, environmental and psychological differences as much as anything else.The differences are critically important to understanding the historical role of theory in corporate law and its impact on the present. I frankly admit that I find it difficult to approach Professor Harris's paper on its own terms for two different reasons. First, I approach the issue as a corporate scholar, not an intellectual historian, so I suppose my comments reflect the very pragmatic American approach to corporate law and theory in which I was raised and now work. Second, whatever troubles I might ordinarily encounter in evaluating theories about corporate law, Professor Harris's paper is not really about theory at all, nor, as he tells us, about corporate law, but instead it operates at an even higher level of abstraction as a theory about theory. The role of corporate theory in his paper is to serve as a case study for a broader story of the ways in which talk about corporate theories was conducted among Germans, Britons, and Americans over time and with effects across time. Professor Harris's central point appears to be that discourses, as well as theories, are historically constrained, and thus their doctrinal uses are also historically constrained.2 The tale of the real entity theory and its ultimate grounding in American corporate law demonstrate that our understanding of the corporation is contextual.It didn't take much to persuade me that our understanding of the corporation is contextual. My question about the paper is, what does the nature of discourse about corporate theory add to what seems to me to be a self-evident proposition? In keeping with the spirit of Professor Harris's thesis, I will develop this comment with keen sensitivity to context and will show and agree that context matters by telling a parallel story of the development of the American corporation. My comment places less emphasis on theory and more on the law, and it gives attention to economic developments as well.3 What I am left with in the end is a nagging question as to why theory matters, let alone theorizing about theory, at least outside of the sacred precincts of academia. And I am left with this question precisely because I believe that theory played very little role in the truly important developments of American corporate law. Theory might have legitimated what had already happened, but that is not Harris's point. And so I begin my tale with, perhaps, an intellectual "barbaric yawp."4Harris notes that the real personality theory was developed by Otto von Gierke more than three decades before it found its way into the American context.5 Gierke didn't care about the relationship between stockholders and creditors, nor did he care about managers or markets.6 He didn't care about solving practical business problems at all; rather he was "interested in the effects fellowships had on the ideas of the individual and on the spirit of the nation."7 Thus, Harris asks, why was the theory so popular as applied to business corporations in the United States where "legal personality discourse entered the context of business organization more than any other American context?"8 His answer appears to be that the theory permitted the corporation to enjoy a combination of constitutional rights and entity characteristics that would otherwise have been incompatible. …

Practice What You Preach: How RestorativeJustice Could Solve the Judicial Problems inClergy Sexual Abuse Cases

Abstract: I. IntroductionThe molestation at the hands of my uncle, priest and namesake began on Thanksgiving Day 1953. I was 5 years old. . . . The abuse continued for approximately 9 years until I reached puberty at age 14. . . . He would often abuse me right in my parents' home. He would excuse us saying he was going to hear my confession and take me to my room where the abuse would occur. On February 7, 2000, I reported my bi-polar illness was the result of child sexual abuse . . . .1The case of Wells v. Janssen2 resulted in a million-dollar jury verdict for J. W., the above-quoted plaintiff, after a lengthy trial, an admission, and a later recantation by the offending priest. Many other victims of clergy sexual abuse fail to receive this level of compensation, however, because the court system prevents them from reaching the trial stage. The discrepancies in judicial treatment of victims in similar situations based solely on where they live have led victims around the country to demand an alternative that will treat them equally and provide a satisfactory remedy from the offending priest and the Catholic Church.3 When the Church and priest fail to satisfy a request for an apology, victims typically respond by filing lawsuits against the priests and the institution, and the Church becomes less cooperative as the threat of financial ruin looms.4 Though most lawsuits name both the Church and the individual offending priests as defendants, the Church is the defendant with financial resources and therefore faces the largest financial burden.5 This Note proposes that the best way to break this cycle would be for the Church and the offending priests to meet with the victims and settle the problems outside of the judicial system. Though victims could turn to any method of alternative dispute resolution, restorative justice could provide the most successful model. Restorative justice brings together the victims, the offenders, and the community to talk about the harm and to come to a mutually agreeable remedy, while focusing on compassion, rehabilitation, and equalization of the power imbalance among the parties. Thus, this Note suggests that victims and the Church should consider the benefits of applying a restorative justice approach to the particular problems of clergy sexual abuse.6To begin, Part II of this Note will detail the history of the crisis in the Catholic Church, including the cover-up perpetrated by Church officials. It will present the remedies developed by the Church and explain why those remedies have not sufficiently satisfied the victims. Part III will define restorative justice and its varying applications in both individual and institutional contexts. Part IV will then explain why this issue requires an alternative remedy like restorative justice by describing the current drawbacks of judicial remedies. It will detail the psychological underpinnings of litigation and demonstrate why victims may prefer a non-judicial remedy like restorative justice to encourage healing. It will also argue that statutes of limitations and the varying interpretations of the First Amendment's religion clauses may prevent some members of the Church "Body" from receiving a judicial remedy.7 Part V will explain a possible method for applying restorative justice and examine some potential complications with its application. After offering solutions to these difficulties, this Note concludes that restorative justice could serve the needs of all the parties involved including the Church, the priests, the victims, and the community, and lead to a more constructive and satisfactory resolution than those provided by the courts.8II. The Problems in the Catholic ChurchIn 1990, Frank Fitzpatrick, a victim of child sexual abuse at the hands of Father James Porter, decided to contact his abuser.9 When Frank asked him how many children he had molested, Father Porter replied, "I don't know. There could have been quite a few. …

Swilling hemlock: The legal ethics of defending a client who wishes to volunteer for execution

Abstract: There is but one truly serious philosophical problem, and that is suicide.Albert Camus1I. IntroductionLawyers are regularly called upon to make decisions with ethical consequences. In criminal cases, the client's freedom often depends upon the defense lawyer's decisions, and within the arena of capital punishment, the stakes are literally life-and-death. Death penalty representations are, accordingly, inherently fraught with some of the most difficult ethical choices that the lawyer can face. Among the most difficult of these choices is what to do when the death row client wishes to terminate his appeals and to volunteer for execution. The death row volunteer forces the capital attorney to make excruciating decisions about the goals of representation and the allocation of responsibility in legal decisionmaking and to weigh the relative merits of paternalism and autonomy.This Article advances in six Parts. The first, this introduction, summarizes the scope of the article and its key concepts. The second Part, entitled "Lawyers' Nightmares Do Come True: When the Client Volunteers for Execution," reviews three seminal Supreme Court cases that established the modern death penalty, describes the swelling ranks of death row in the United States and the commensurate need for death row representation, addresses the disorienting ethical universe of the capital volunteer, and analyzes a number of ethical approaches to lawyering.The third Part, entitled "Grasping at Straws: Competence As a Means of Avoiding the Volunteering Conundrum," describes the competence hearing as an illusory solution to the problem of the volunteer. It outlines the legal standards of competence, contrasts legal standards against medical standards, and concludes that competence assessments are ineffectual as checks on the volunteering client. While competence hearings may prevent the overtly psychotic defendant from committing state-assisted suicide by volunteering for execution, they cannot prevent the competent-but-severely-depressed defendant from doing so. This Part of the Article also analyzes Smith v. State.2The fourth Part, entitled "The Ethics of Killing Your Client," suggests that the ambiguities of the Model Rules allow lawyers to construe their obligations in whatever manner they wish. Because of these ambiguities, the Model Rules fail to provide meaningful guidance to the capital attorney. There are also difficulties in applying abstract Model Rules to concrete facts involving real clients.The fifth Part of the Article, entitled "Primum Non Nocere: Reasoning by Analogy," suggests that some meaningful ethical guidance might be available from outside the profession. It notes that medical professionals are often confronted with analogous decisions and concludes that medical ethics may shed valuable light on legal ethics. This Part of the Article contrasts the roles of physicians and attorneys, compares terminal illnesses and pending executions, and concludes that dealing with the volunteering death row client more resembles physician-assisted suicide than mere withdrawal of treatment. This Part of the Article also discusses Soering v. United Kingdom? describes the phenomenon of "death row syndrome," and considers the implications of death row syndrome on a defendant's waiver of appeals.The sixth Part of the Article, the conclusion, recapitulates the principal themes of the argument and concludes that the ethical lawyer should refuse to acquiesce to the volunteering client's wishes, not because the lawyer has paternalistically substituted his or her judgment for that of the client, but because it is impossible to distinguish the will of the client from the situational effects of death row syndrome.II. Lawyers' Nightmares Do Come True: When the Client Volunteers for ExecutionAbout 3500 individuals await execution in America.4 While a handful of these individuals live in the shadow of federal execution,5 ninety-nine percent of America's death row inmates face execution by the thirty-eight states that currently authorize capital punishment. …

The Irrepressible Myth of Celotex:Reconsidering Summary JudgmentBurdens Twenty YearsAfter the Trilogy

Abstract: I. IntroductionThis year marks the twentieth anniversary of three important cases on federal summary judgment. Known as the "trilogy,"1 Matsushita Electric Industries Co. v. Zenith Radio Corp.,2 Anderson v. Liberty Lobby, Inc.,3 and Celotex Corp. v. Catrett4 have had a profound impact on federal litigation. Federal courts have cited these three cases more than any other U.S. Supreme Court decisions.5 Collectively, the trilogy is viewed as a "celebration of summary judgment"6 and a mandate for federal courts to embrace the use of summary judgment to dispose of cases before trial. Among the trilogy, Celotex is widely perceived as the most significant. Martin Redish recently wrote "[o]f the three, Celotex most clearly altered well-established summary judgment practice, and in any event, Celotex, far more than the others, decisively opened the eyes of the federal courts to the propriety of summary judgment in certain cases."8Celotex dealt with the most common summary judgment scenario: when the defendant moves for summary judgment, seeking to win the case without having to endure a potentially costly and risky trial. Celotex'?, immediate impact was to expand the availability of summary judgment as a means for disposing of a plaintiff s claims prior to trial. In particular, Celotex recognized that a defendant could obtain summary judgment not only by putting forth affirmative evidence that the plaintiffs case was meritless, but also by showing that the plaintiff would lack evidence to prove some essential element of her claim.9 Celotex also spoke more generally to how burdens are allocated between the party seeking and the party opposing summary judgment and what materials may be considered in connection with these burdens.10 To this day, Celotex provides the Court's most current instructions on these important questions.Anniversaries are times for reflection.11 Celotex is a significant decision from both theoretical and practical standpoints. It impacts core questions of procedural fairness,12 the proper roles of judges and juries in the federal system,13 the increasing caseloads of the federal judiciary,14 and distributive justice in the federal court system.15 It also provides the blueprint for the basic mechanics of litigating and adjudicating summary judgment motions.16 Over the past two decades, Celotex has become the subject of sustained academic commentary,17 as well as a vital part of any first-year civil procedure course18 or federal courts treatise.19 While Celotex is a necessary authority and indispensable guide for the judges who must resolve summary judgment motions on a day-to-day basis, it remains the subject of conflicting interpretations by federal trial and appellate courts.20The twentieth anniversary of the trilogy provides an important opportunity to reconsider Celotex and its impact on summary judgment burdens. The recent passing of Chief Justice William Rehnquist, who authored the Celotex majority opinion as an Associate Justice, makes this a particularly appropriate time to revisit Celotex. If the empirical evidence is any indication, history will recognize Celotex as among his most significant contributions.21 Like many watershed cases, Celotex raised questions as well as answered them. Although Celotex appeared to establish an orderly sequence of burdens for the moving defendant and the nonmoving plaintiff, it left numerous ambiguities concerning the precise contours of these burdens and what materials may be used to satisfy them. These unanswered questions have given rise to competing myths about Celotex and summary judgment burdens. The justifications offered for the prevailing myths are principally each proponent's policy preferences about how summary judgment procedure ought to operate in the federal system.This Article treats Celotex not as an empty vessel for achieving optimal policy but rather as an object of interpretation. Thus, it takes a more traditional approach-long overdue in this area-that emphasizes what we customarily value when interpreting a decision. …

Comparing Religions, Legally

Abstract: I. IntroductionReligion and law, in some form, seem to exist in every society. Each, broadly understood, offers explanations for life on earth and how it ought properly to be lived. Sometimes religion and law compete for power but more often they share and influence each other's notions about what it means to be a human being and what it means to live with other human beings in the world. For example, although religion looks very independent in modern societies-free, as we say-the choices of religious individuals and religious communities with respect to their religious practices are profoundly limited by secular laws governing zoning, crime, tax, labor, families, etc., as well as the overarching ethos and ideology of the modern "rule of law." In many cases today it is law, rather than religion, that tells us who we are and what we may do. But... while modern law itself looks deeply self-contained, all-powerful and secular, we know that it was profoundly shaped by religion in its origins and continues to depend in fundamental ways on religious understandings of the nature of the human person and of society. This interdependence of law and religion is hard for us to see because we have been taught to believe in the effectiveness and necessity of disestablishment... but if we look carefully, it is there.I will talk this afternoon about one aspect of this interdependence. I will talk specifically about the kinds of words that legislators and judges and lawyers use when they talk about religion-in statutes, in courtrooms, and in legal decisions ... and I will talk only about the modern Anglo-American context, although there are interesting ways in which this linguistic interdependence reveals itself across space and time in human history. I am going to talk about some contemporary British cases-and use those cases as examples to help us to think more broadly about the relationship between law and religion in the modern West.Historically speaking, the conditions of this relationship of law and religion changed significantly in the early modern period when law began to be separated from religion and religion became an object of law ... and once the new nation-states of Europe began acknowledging the religious fragmentation and diversity of their populations. At one time, the Roman Church had mostly acted as legal spokesperson for Christians. When the Roman Church lost its monopoly after the Reformation and modern states developed independently of the churches, it was no longer sufficient to leave that language about religion to the churches. Modern societies then needed to develop a working legal language about religion to allow them to effectively and persuasively regulate religion-now that it had been separated. This new language was necessary for the purpose of protecting religious freedom, for the purpose of preserving the neutrality of government, and for the simple purpose of managing the religious lives of a country's residents. People of Europe began to think of religious identity as separate from political identity and citizenship. In most cases, this new language was largely borrowed from the dominant religious tradition: As a simple example, the synonyms for religion in the west, "faith" and "belief are largely derived from a Christian theological understanding of the proper relationship of individuals to their god and often makes a poor descriptor for other religious ways of being. Law has also borrowed from other languages about religion, languages developed by philosophers, anthropologists, sociologists, and those who study comparative religions.We do not have time this afternoon to trace this entire history, although it is arguably at the heart of the modern relationship and remains fundamentally unresolved today. We will move quickly to twentieth century Britain and look at how the later results of these changes are still working themselves out. My argument in the larger project, of which this is a part, will be that the way in which lawyers and legislators and judges talk about religion is a function of its church/state arrangements. …

Kmart and Beyond: A "Critical" Look atCritical Vendor Orders and theDoctrine of Necessity

Abstract: I. IntroductionPhone calls like the one following take place on a regular basis between unsecured vendors and debtor's counsel in large Chapter 11 reorganizations."Are we on the list?""No.""Will you put us on the list?""No.""What can we do to be put on the list?""Maybe if you would stop calling!"The unsecured vendors are asking the debtor's counsel to place them on the "critical vendor" list.1 Pending court approval, the critical vendors will receive either partial or full payment of their pre-petition claims against the debtor in exchange for an agreement to continue to sell to the debtor on standard credit terms.2 The other unsecured creditors will likely be paid a fraction of the value of their claims-around 5% to 10% in a typical case.3Critical vendor orders have been attacked on several grounds including a perceived lack of legal authority for such court orders.4 In In re Kmart Corp.,5 the Seventh Circuit shocked the bankruptcy world by nearly undoing the statutory framework supporting critical vendor orders.6 The Seventh Circuit held that section 105(a)7 of the Bankruptcy Code and the doctrine of necessity8 did not provide the necessary authority for critical vendor orders. The court suggested that section 363(b) might be sufficient to authorize the practice, though it explicitly declined to answer that question because the evidentiary record was incomplete.9 The Supreme Court declined to hear the case,10 leaving the circuits in disagreement over whether the Code currently authorizes critical vendor orders.11Before Kmart, courts that were willing to authorize critical vendor orders often relied on the doctrine of necessity.12 The doctrine of necessity allows a trustee or debtor-in-possession to pay the pre-petition debts of certain vendors who threaten to disrupt the debtor's reorganization by withholding critical goods and services until paid their pre-petition debts.13 The doctrine of necessity grew out of the necessity of payment rule, a common law doctrine predating both the Bankruptcy Act of 1898 and the Bankruptcy Code of 1978.14 Courts have disagreed whether the doctrine survived both enactments and, if so, in what form.15 To authorize critical vendor orders, bankruptcy courts have also relied on their general equitable powers under section 105,16 in addition to Sections 363(b), 364, and 549(a).17 After the Seventh Circuit dealt a blow to Section 105 in Kmart, section 363(b) emerged as the strongest candidate to replace section 105 as statutory authority for critical vendor orders.18Once a rare phenomenon, critical vendor orders have increasingly become standard operating procedure in large Chapter 11 cases.19 Aside from the question of their legality, courts and commentators have also criticized critical vendor orders for being overused and for unfairly favoring "critical" unsecured vendors at the expense of the noncritical unsecured vendors.20 Additionally, critical vendor orders have been attacked as impinging on the "due process" rights of affected creditors.21 Some commentators have called for a blanket prohibition against critical vendor orders.22 Equally adamant, proponents of the practice maintain that detractors do not understand the "practical implications" that would flow if critical vendor orders were denied altogether.23The scope and purpose of this Note is a bit unusual and needs to be explained. Ultimately, this Note does not stake out a position on whether section 363 is sufficient to authorize critical vendor orders, but instead weighs the arguments for and against that section.24 Recognizing, however, that critical vendor orders are currently permitted in several jurisdictions, it seeks to provide guidance to courts and practitioners regarding the limited circumstances under which such orders should be issued-at least until the Supreme Court or Congress speaks otherwise. This Note argues that the adoption of a heightened evidentiary standard by courts currently approving critical vendor orders will reduce at least some of the unfairness associated with such orders. …

Take It Slow: A Novel Concept in the Life ofSarbanes-Oxley

Abstract: Table of ContentsI. Introduction 1186II. The Background of the Sarbanes-Oxley Act 1187A. The Stock Market Bubbles and Bursts 1187B. The Birth of the Sarbanes-Oxley Act 1191C. The Sarbanes-Oxley Act 11941. The Act at a Glance 11942. Section 404 1196III. The Aftermath of section 404 1197A. Unexpected Costs 1198B. The sec Responds to the Small Business Community 1199IV. The Small Business Question: To Comply or Not to Comply? 1200A. The Small Business Argument 12011. Voluntary Compliance 12032. Exemptions from Compliance 12063. Tailor the Requirements of section 404 1209B. Saving Small Businesses from Themselves 12101. Rapidly Declining Costs of Compliance 12112. Regulation Will Not Destroy the Benefits of Being Public 2143. Strong Internal Controls Achieve Their Purposes 1215V. Conclusion 1216I. IntroductionIn the late 1990s American equity markets surged to new heights. Investors, enjoying an unprecedented period of economic growth, flooded the markets with capital. However, this dream would quickly turn into a nightmare. In a matter of months many individual investors found their portfolios and retirement accounts decimated as the market collapsed. Dismayed investors lost trillions of dollars of net worth, seemingly overnight.This dismay turned quickly to anger as the deceptions of company executives and their advisors proved to be the root of the market collapse. An overwhelming public outcry for reform, or vengeance, arose from the ashes of these scandals. Congress reacted swiftly, instituting sweeping corporate reforms, drastically changing the corporate regulatory environment with the passage of the Sarbanes-Oxley Act of 2002.1Critics quickly denounced the Sarbanes-Oxley Act as "a nightmare for company executives," truly "a telling example of the law of unintended consequences."2 Immediately commentators recommended repealing or modifying the Sarbanes-Oxley Act. Critics have since focused their attacks upon section 404 of the Sarbanes-Oxley Act (section 404), the section which requires reports on a company's internal controls by management and their external auditors.3 However, these critics still call for relief from this misunderstood and much maligned reform.This Note argues that while Congress passed the Sarbanes-Oxley Act without the proper study and contemplation typically given to such sweeping legislation, current efforts to exempt smaller companies from section 404 are similarly misguided. Instead, this Note proposes a staggered implementation process for smaller companies that have yet to comply with section 404. In addition, this proposal provides temporary relief from the onerous requirement of auditing internal controls to smaller companies already in compliance with section 404. The "take it slow" approach of this proposal would ease the burdens of compliance for companies, while providing the necessary protection to investors. This slower approach would also allow regulators and companies to understand both the drawbacks and benefits of the Sarbanes-Oxley Act better. Only when these parties fully understand all of the ramifications of the Sarbanes-Oxley Act can constructive dialogue about reform and relief begin.Part II of this Note examines the factors in the equity markets that led to the broad public support for regulatory action and briefly looks at the SarbanesOxley Act. Part III highlights the unexpected negative effects arising from implementing the Sarbanes-Oxley Act and briefly describes the actions the securities and Exchange Commission (sec) took to address the small business community's concerns about these negative effects. …

Academic Freedom on the Rack: StretchingAcademic Freedom Beyond Its ConstitutionalLimits in FAIR v. Rumsfeld

Abstract: Table of ContentsI. Introduction 1132II. Overview of Academic Freedom 1138A. Historical Academic Freedom 1138B. Professional Academic Freedom 1139C. Why Academic Freedom Matters 1141III. Constitutional Academic Freedom 1145A. The Teacher 1145B. The Student 1148C. The University 1152D. Understanding Academic Freedom 1154IV. Academic Freedom and the Law Schools 1158A. Setting the Stage 1158B. What May Be Taught 1159C. How It Shall Be Taught 1160D. University Autonomy 1162V. Stretching Academic Freedom 1163A. Academic Freedom & Public Policy 1163B. First Amendment Principles 1166C. Academic Freedom case Law 11681. The Public-Private Distinction 11682. The Essential Freedoms of a University 11713. The Academic Environment 11734. Deference 11765. Academic Freedom of the Student 1178D. Summary of Arguments 1181VI. Conclusion 1182I. IntroductionAcademic freedom and religious freedom have one root in common: both are based upon the freedom of conscience, hence neither can flourish in a community that has no respect for human individuality.2In 1990, the Association of American Law Schools (AALS) added sexual orientation to its nondiscrimination policy, setting the stage for a battle between America's law schools and the United States military.3 Members of AALS must conform to this nondiscrimination policy, which prohibits law schools from assisting recruiters who screen student applicants by their sexual orientation.4 The military's "Don't Ask Don't Tell Policy" brings Judge Advocate General (JAG) recruiters under this ban.5 Alarmed by law schools' attempts to deny JAG officers access to the career services offered to other legal employers, Congress passed legislation, known as the Solomon Amendment, to remedy this perceived discrimination against military recruiters.6The Solomon Amendment denies federal funds to universities that refuse to provide military recruiters the same access to students and career services that they grant to other employers.7 Covering funding from a wide range of government entities, the Solomon Amendment may cost universities a significant amount of federal money.8 Agencies covered by the Solomon Amendment include the Departments of Defense, Labor, Health and Human Services, Education, Homeland security, and Transportation.9 If any part of a university, such as a law school, fails to provide military recruiters the access and services it provides to other employers, the entire university becomes ineligible to receive these federal funds. …

Shareholders as Proxies: The Contours of Shareholder Democracy

Abstract: "All the stockholders act like a flock of sheep."We put a man on the moon, but we can't manage the consequences of shareholder democracy."2I. IntroductionOn March 31, 2006, just as the spring annual meeting season began, The Corporate Library released a study of eleven of the largest U.S. companies revealing that "compensation committees authorized a total of $865 million in pay to CEOs who presided over an aggregate loss of $640 billion in shareholder value."3 Around the country, corporate directors and executives felt, some for the first time, the wrath of organized, discontented shareholders who demanded more say about director elections and executive compensation. In the annual meetings that followed, shareholders considered proposals to limit or, at the least, monitor directors' and executives' compensation, as well as proposals to permit shareholders to withhold votes from directors (especially those serving on compensation committees) as a means of requiring them to resign. In some companies, shareholders were even asked to vote on proposals that would require a director to gain a majority of "yes" votes to be elected.4 As one commentator put it: "There is a whiff of revolution in the air. America's shareholders are growing restless, and the bosses of the companies they own seem increasingly nervous as they peer out from behind their boardroom curtains."5Some might celebrate this new (or renewed) shareholder activism as an important milestone in empowering shareholders to negotiate corporate governance structures that would benefit them and other investors.6 Others might caution against giving shareholders too much power.7 And many will agree that despite these developments, there is no reason to believe that the way corporations, their directors, or their executives behave would dramatically change in the absence of financial incentives that require them to do so.8 In this respect, a pointed comment in The Economist a couple of years ago rings true: "America is the world's most prominent democracy, and its most successful exponent of shareholder capitalism. But when it comes to shareholder democracy, America has barely moved beyond the corporate equivalent of the rotten borough."9 In this Article I turn to history to explore why.I should emphasize at the start that I do not attempt to evaluate whether the active participation of shareholders will improve how corporations are run. Nor do I engage in the debate as to whether shareholder democracy is a useful concept in characterizing the relationship between shareholders, their directors, and their corporations. My goal is limited to exploring the historical roots of current discussions about the shareholders' role in publicly held corporations.Proponents of shareholder democracy might want to fault those who caution against it for the fact that meaningful shareholder participation in corporate affairs, independent of financial incentives, seems to remain out of our reach. But, as I argue, the reality of the shareholder's role in public corporations is a product of a broader phenomenon-a century-long suspicion of the individual shareholder-participant and a corresponding ambivalence toward shareholder (participatory) democracy. History shows that attempts that appeared to foster shareholder democracy, independent of financial demands, were never really about promoting the shareholders' active involvement in managing the affairs of their corporations. Rather, reformers used the rhetoric of shareholder democracy to promote broader goals and visions. In the process, they gradually made shareholder (participatory) democracy much talk about, well, nothing.Currently, the ability of shareholders to affect corporate change is limited. First, the individual vote in large public corporations makes little if any difference. At least in part, this is why most shareholders vote for what the incumbent board wants (or why most proxy solicitations by the board are successful). …

The Collision of the Takings and State Sovereign Immunity Doctrines

Abstract: I. IntroductionAmong the Rehnquist Court's more striking accomplishments are the invigorated takings and state sovereign immunity doctrines. At first glance, these developments might be characterized as conservative jurisprudence in line with other recent decisions. Expanded takings doctrine, after all, champions property rights and restrains government from burdening landowners with the cost of regulation. Eleventh Amendment sovereign immunity,1 like the Court's other federalism decisions, protects the states' dignity and curtails the federal government's power. From a broad level of generality, these doctrines seem part of a common judicial project.And yet, though they are products of the same Court, there is reason to think that takings and state sovereign immunity cases are fundamentally incompatible with each other. On the one hand, the Court's recent takings cases often expand the instances in which a property owner can sue the government to recover just compensation for a taking of property. On the other hand, the state sovereign immunity cases make it easier for state governments to rely on sovereign immunity to shield them from suit. Of course, this rough characterization misses terrific doctrinal complexities but, at their core, these two doctrines do not mesh easily.Curiously, despite the Court's recent attention to these areas, little has been made of the seeming incompatibility of such robust takings and sovereign immunity precedents. In recent memory, the Supreme Court has acknowledged the paradox rarely, most famously in 1987, in a footnote in First English Evangelical Lutheran Church of Glendale v. County of Los Angeles,2 in which the Court offhandedly asserted that the Just Compensation Clause trumps sovereign immunity.3 This First English footnote might, in fact, have it right, but the issue requires greater exploration. First, the footnote is dictum, because the plaintiffs in First English sued the county, not the state. Second, state and lower federal courts are split on the question, and many decisions have neglected to cite, let alone follow, the footnote.4 Third, both areas of law have changed significantly since 1987. Fourth, even if correct, the footnote is terse and does not wrestle with the issue's real complexities. Indeed, the conflict exposes deep tensions in our constitutional framework worthy of sustained analysis. Fifth, the doctrinal collision raises important, if more abstract, methodological questions about how to arbitrate between competing constitutional provisions.It is interesting that the problem has received so little attention. The Court itself might have addressed it as recently as 2001 in Palazzolo v. Rhode Island,5 but it declined to answer an amicus briefs argument that Rhode Island was a sovereign state immune from suit even in takings cases.6 Admittedly, the Court is understandably reluctant to address newly presented arguments appearing only in amicus briefs. But quite possibly, the Court also recognized that squaring the two doctrines would be no small task, so it chose not to expose a snag in its case law. After all, addressing the doctrinal train wreck might have encouraged the Court to scale back one area to make room for the other, an outcome that, though perhaps logically more sound, was not required, given that both doctrinal lines had consistently commanded five votes.7 Whatever the reason, the current Court has avoided the issue to date.8This Article explores the paradoxes arising from the collision of the Court's recent takings and state sovereign immunity doctrines. More specifically, it examines whether the Takings Clause is self-executing9 and therefore can, by its own force, abrogate-or strip-the state of the sovereign immunity it would otherwise enjoy in actions for damages. If not, states would retain their sovereign immunity in takings cases unless Congress abrogated that immunity pursuant to its Fourteenth Amendment Section 5 power. …

Tipping the Scales: Seeking Death ThroughComparative Value Argumentst

Abstract: I. IntroductionIn describing to the jurors of a capital trial the type of analysis that the law requires them to use during sentencing deliberations, one prosecutor stated:Why do we have the death penalty? The reason we have the death penalty ... comes down to one basic thing. Whose life is more important to you? Whose life has more value? The Defendant's or [the victim's]?1Is this the type of analysis that the law requires jurors to use? Most likely, it is not.2 Arguments of this nature, known as "comparative value arguments,"3 are widely used by prosecutors throughout the United States. These arguments have been described as the most effective tool a prosecutor has to obtain a death verdict.4 It is uncertain, however, whether these arguments are constitutionally permissible.This Note examines the constitutional validity of these arguments, which remains unaddressed in most capital sentencing jurisdictions. Part II begins with a discussion of a change in the legal landscape that eventually led to the use of comparative value arguments-namely, the Supreme Court's decision to permit presentation of victim impact evidence.5 Part II also discusses the aftermath of the Supreme Court's decision and describes and defines as one of its results the use of comparative value arguments.6 Part III explores the constitutional duties of prosecutors, including the duty to refrain from arguments that mislead jurors on the law.7 This limitation on the powers of prosecutors is discussed in relation to precedent under both the Eighth Amendment and the Due Process Clauses.8 Part IV argues that comparative value arguments mislead jurors in several ways, thereby violating both constitutional doctrines.9 Finally, this Note concludes that, in the event a challenge to the use of comparative value arguments reaches the Supreme Court, the Court should hold these arguments unconstitutional.10II. The Rise of Comparative Value ArgumentsTo understand the significance of comparative value arguments, some context is necessary. Comparative value arguments have emerged as one of the uses of victim impact evidence.11 Victim impact evidence is evidence that is said to inform the capital sentencing jury of the victim's "uniqueness as an individual human being."12 This evidence is presented to inform jurors of the full impact of the crime on the victim, the victim's loved ones, and the victim's community.13 This Part discusses the development of victim impact evidence, the push for its admission into criminal trials, its limitations, and its uses. Then, this Part explores at length one of its evolved uses-comparative value arguments.A. The Development of Victim Impact EvidenceThe push for the admission of victim impact evidence into criminal trials originated within the victims' rights movement of the 1960s and 1970s.14 This movement formed "based on the idea that the criminal justice system has generally ignored the needs and interests of victims of crime and should become more responsive to these concerns."15 Numerous nationwide victims' rights groups formed to further this goal.16 They lobbied for an "increased role for crime victims in the criminal justice process,"17 and were largely successful.18 The admission of victim impact evidence into criminal trials is described as the most "prominent and controversial" change to occur as a result of the victims' rights movement.19The admission of victim impact evidence into criminal trials only recently gained the Supreme Court's approval.20 This approval represents a major change in the Supreme Court's treatment of this evidence. In 1987, the Court first addressed the constitutionality of victim impact evidence in Booth v. Maryland,21 holding introduction of this evidence into capital sentencing hearings unconstitutional.22 Two years later the Court reinforced its position, holding both evidentiary presentations and related prosecutorial arguments unconstitutional. …

Broadening Executive Power in the Wake ofAvena: An American Interpretation of PactaSunt Servanda

Abstract: Table of ContentsI. Introduction 1220II. The Avena Decision and the Unilateral Executive Responses.... 1224A. Avena 1224B. The Presidential Memorandum 1229C. Withdrawal from the Optional Protocol 1230D. Medellin v. Dretke 1233III. Incongruent Foreign Policy 1234A. The Presidential Memorandum: Policy Considerations...... 12341. United States Citizens Abroad 12352. The Effective Conduct of Foreign Relations 12383. The Rule of Law in the International Community......... 1241B. Withdrawal from the Optional Protocol: Adopting Incongruence 12431. Harming United States Citizens Abroad 12462. The Ineffective Conduct of Foreign Relations 12473. Abandoning the Rule of Law in the International Community 1247IV. Political Factors: Contributing to the Incongruence 1248A. The Battle over Foreign Affairs: Broadening Executive Power 12481. The Presidential Memorandum's Potential Effect......... 12492. Withdrawal from the Optional Protocol: Further Practice and Precedent 1251B. The Lack of Congressional Response 1252C. Judicial Reluctance 12531. Avoidance of the Key Issues in Medellin v. Dretke...... 12542. The Unanswered Treaty Withdrawal Question 1256V. Perhaps Legal, but Ultimately Unconstitutional 1260A. Constitutionality and Legality 1260B. "Can Do" Lawyers Within the Executive Branch 1262C. Abandoning the Constitutional Scheme 1264VI. Conclusion 1268I. IntroductionNoting the sparse constitutional text articulating foreign affairs control,2 many scholars believe the Framers preferred a system in which the Legislative and Executive branches struggle for control of foreign relations.3 Nevertheless, Supreme Court rulings during the post-Vietnam era have increasingly accepted the broadening of presidential foreign policy-making power.4 Given this fact, it is not surprising that Presidents steadily attempt to amass foreign policy-making power through unilateral executive action.5 In the wake of the International Court of Justice's (ICJ) final judgment in case Concerning Avena and Other Mexican Nationals (Avena),6 President George W. Bush asserted unprecedented control over foreign affairs through dual unilateral executive actions.7In Avena, the ICJ held that the United States must afford fifty-one convicted Mexican nationals "review and reconsideration" because of Vienna Convention on Consular Relations (VCCR)8 violations.9 The Supreme Court intended to review the ICJ's finding in Medellin v. Drefke;10 however, before the Court could rule, President Bush took dual unilateral actions that caused a divided Court to dismiss the case.11 First, President Bush issued a Memorandum to Attorney General Alberto Gonzalez announcing that the states should comply with the ICJ's ruling in only those cases implicated in Avena.12 second, Bush directed secretary of State Condoleezza Rice to send a letter to the United Nations secretary-General Kofi Annan stating that the United States withdrew from the Optional Protocol to the VCCR.13 By taking these unilateral steps, the Executive Branch created a number of separation of powers conflicts. Specifically, the Memorandum violates principles of federalism and creates conflict between the Executive Branch and the states.14 The Memorandum also engenders conflict between the Executive and Judicial Branches because it purports to mandate judicial compliance with the A vena judgment. …

The Bulls and Bears ofLaw Teaching

Abstract: I. Introduction[Y]ou eat a bull, and a bear eats you.1As a rule, the terms "bull market" and "bear market" refer to conditions on Wall Street. Bulls are good, bears are bad. But things other than stocks can be in a bull market or a bear market, too; there has been a bull market in absurdity, for example, for as long as anybody can remember.2 If something-call it χ^sup 3^-were in a bull market, we might say that χ is rallying; that χ is hot; that the smart money is liquidating everything and plowing its assets4 into χ. If, by contrast, χ were in a bear market, then it might be time to avoid investing in ? and perhaps to invest in its opposite, "not χ." The trick, of course, is knowing whether one is running with the bulls or the bears. Still, because life is cyclical, almost everything may be observed to have bull markets and bear markets. This Essay seeks to demonstrate that law teaching is no exception.To generate the data that lies at the heart of this Essay, I catalogued (by subject) almost every Article, Book Review, Book Note, Comment, Essay, Note, Recent case, Recent Publication, and Recent Statute published in the Harvard Law Review between and including the years 1946 and 2003. I performed this Herculean labor in search of a relationship between the subjects on which faculty chose to write and the subjects on which students chose to write. I suspected that such a relationship existed, and what is more, I suspected that the relationship would be an interesting one-even a predictive one. But I wanted proof.I found it.II. MethodologyThere are three kinds of lies: lies, damned lies and statistics.5A. Developing the ThesisAs a junior scholar of intellectual property law (and in particular, copyright and trademark law), I long have imagined that while senior scholars were busy churning out articles on such rarified subjects as constitutional jurisprudence, their students were exploring education law, election law, health law, and yes, intellectual property law-what I imagined to be the waves of the future. If the laws of economics applied to law schools,6 one would expect that if students were increasingly interested in, say, intellectual property law, then faculties would "wise up" and seek to hire professors qualified to teach intellectual property law.8 That is, if student demand for intellectual property law exceeded faculty supply of intellectual property law, faculties would hire in the area until the gap between supply and demand had narrowed or disappeared.9 In Wall Street terms, there would be a bull market in intellectual property law. This would be useful information for people who thought they might wish to become law professors in the foreseeable future. If, for example, one knew that there were a bull market in intellectual property law, but a bear market in, say, admiralty law, she could direct her studies or her law practice accordingly, thus increasing her chances of being hired on the tenure track. She could, in Wall Street terminology, go "long" intellectual property while "shorting" admiralty.When I began to think of how one might prove this thesis, so as to offer this public service, I reflected on the number of students who plead with me each year to advise them as they write their Notes on issues of copyright or trademark law. Add to this number the students who wish to engage in research, for credit, on issues of copyright or trademark law, and the sum is more than one untenured professor can reasonably absorb.10 A colleague of mine teaches and writes in the area of patent law; she too faces the pleading, the pressure to say "yes"-the only differences being that: (a) she has tenure; and (b) her supplicants have science and engineering degrees. When it comes to intellectual property law (at Emory, at least), student demand for faculty "attention" far exceeds the available supply.11 Anecdotal evidence (i.e., "I hear tell") suggests that Emory is not the only law school facing such a shortage. …

Individual Rights and Investor Protections in a Trade Regime: NAFTA and CAFTA

Abstract: Table of ContentsI. Introduction 1058II. Foreign Investment Under NAFTA: Chapter 11 1059A. NAFTA Chapter 11 1059B. The Development of Chapter 11 1064III. Criticisms of NAFTA's Investment Provision 1066A. Greater Rights for Foreign Investors 1067B. Hindrances to U.S. Sovereignty 1071C. Cost to Taxpayers 1074D. Absence of an Appeals Mechanism 1077E. Lack of Transparency 1079IV. Foreign Investment Under CAFTA: Chapter 10 1083V. CAFTA's Response to Specific NAFTA Criticisms 1084A. Greater Rights for Foreign Investors 1085B. Hindrances to U.S. Sovereignty 1086C. Cost to Taxpayers 1087D. Absence of an Appeals Mechanism 1088E. Lack of Transparency 1090VI. Conclusion 1092I. IntroductionOnce established as a shield that would level the playing field and protect foreign investors, the North American Free Trade Agreement's investor-state regime (Chapter 11) is increasingly referenced as a sword that attacks state sovereignty, favors foreign investors, and costs taxpayers billions of dollars.1 Nevertheless, when President George W. Bush signed the Dominican Republic-Central American Free Trade Agreement in 2005, it too included an investment provision with an investor-state dispute resolution mechanism (Chapter 10).2 The persistence of these sorts of investment provisions leads one to wonder: Are the critics mistaken? Is there a place for investor protection and citizenstate litigation in international law after all?This Note argues that there is still a place for investor protection and citizen-state litigation in international law. Part II examines the layout of the North American Free Trade Agreement (NAFTA) Chapter 11, and the impetus behind its creation. Part III then outlines the most common criticisms of Chapter 11, particularly those issues recently addressed in the Dominican Republic-Central American Free Trade Agreement (CAFTA). It explores claims that Chapter 11 unfairly favors foreign investors, hinders U.S. sovereignty, and costs taxpayers exorbitant amounts of money. It also addresses the absence of an appeals mechanism and the lack of transparency under NAFTA Chapter 11. It then concludes that generally these concerns and criticisms are exaggerated and, hence, the problems posed by an investor-state mechanism are not as daunting as critics suggest.Part IV moves into a discussion of CAFTA Chapter 10. Part V parallels Part IH's criticisms, but from the perspective of CAFTA-exploring the text of CAFTA and summarizing how CAFTA addresses each of these issues. An examination of CAFTA illustrates that, even if the criticisms of NAFTA were not overblown, CAFTA effectively addresses them. The improvements adopted by CAFTA demonstrate that, to the extent that it is problematic, the investor-state mechanism can adapt and become an effective method of investor protection and dispute resolution. Finally, Part VI concludes that investor protection and citizen-state litigation still have a place in international law.Investment provisions raise a number of issues, but this Note does not attempt to address all of them. Specifically, this Note is written from the perspective of the United States Government and U.S. investors. It does not speak to the benefits or detriments of the investment provisions from the perspective of foreign governments or foreign investors.II. Foreign Investment Under NAFTA: Chapter 11A. NAFTA Chapter 11NAFTA's Chapter 11 establishes rules to protect investors who wish to invest in a foreign member-State. …

Comment: Corporate Governance andthe "D-Word"

Abstract: After some seventy years, most corporate law academics have come to agree with Berle and Means' famous descriptive argument that corporate decisionmaking power is denied to shareholders and is instead heavily concentrated in the board of directors and upper management1 As with most issues in corporate law academia, the normative discourse about this concentration of power consists mainly of debating whether this arrangement is "economically efficient" That is, "corporate democracy" is both descriptively inaccurate and normatively marginalized Outside the ivory tower, however, the law continues to use the concept both descriptively and normatively The Delaware Supreme Court, for example, has invoked the term in a number of prominent cases2 The United States Supreme Court has treated some corporate political spending as protected political speech on the theory that such spending is the product of "the procedures of corporate democracy"3 Many reformers who disagree with this rosy descriptive view call for increased shareholder power in order to make corporate governance more "democratic"4Dalia Tsuk Mitchell's contribution to this Symposium, Shareholders as Proxies: The Contours of Shareholder Democracy,5 is an intellectual history of the changing views of regulators, reformers and scholars as to the meaning of "corporate democracy" Tsuk Mitchell identifies three theories that reformers have invoked to justify increased shareholder participation in corporate governance These theories make varying assumptions about the relationship between corporations' role in society (in Tsuk Mitchell's terminology, "corporate power") and the allocation of control rights between shareholders and management ("corporate hierarchy") First, Tsuk Mitchell argues, Progressive Era reformers believed that reforming hierarchy to increase shareholder participation would enable shareholders to tame corporate power for the benefit of society6 Second, Tsuk Mitchell contends that the primary concern, from the New Deal Era through the 1970s, was protecting the rights of the individual shareholder against potential abuses of power by management7 Third, neoclassical economists since the 1970s have argued that shareholder participation empowers shareholders to "shape their own economic (and political) destinies"8 In sum, she argues, the focus of analysis has shifted from corporate power in society to internal corporate hierarchies to the market9Although I have a different view of the Progressives' approach, I otherwise agree with Tsuk Mitchell's insightful intellectual history In this Comment, I would like to expand upon the normative implications of her account After the Progressive Era, as Tsuk Mitchell argues, the corporate problem was redefined as corporate hierarchy rather than corporate power10 The focus on this problem, and the ostensible solutions to it, played an important role in legitimating corporate power by portraying it as the result of a "democratic" process Today, the neoclassical economic model assumes that all outcomes are the voluntary result of market mechanisms I agree with Tsuk Mitchell's conclusion that the law has come to see the market as "democracy's sustaining and legitimating force"11 Most corporate law academics, however, have been relatively frank about their narrow focus on "efficiency" and their lack of interest in "democracy" as a normative value To the extent that the nonacademic discourse about corporations remains interested in democracy, academics' efficiency-minded analyses of corporate governance have limited relevance Policymakers and corporate reformers must resist the temptation to conflate "democracy" with either that old favorite, shareholder power, or the current academic darling, the marketIn the late 1800s and early 1900s, the "corporations problem" was the emerging potential of large businesses to affect social conditions such as prices and wages, primarily through the formation of trusts …

Don't Give Me That!: Tax Valuation of Gifts to Art Museums

Abstract: I. IntroductionImagine the following hypothetical: In 1959, Ms. Bums bequeathed to the Springfield Museum of Modern Art her collection of European Secessionist art from the early 1900s. In 1959, Springfield was a growing city that provided ample funding for its various culture and arts venues. Since that time, the economy of Springfield has become increasingly depressed, forcing the city to withdraw almost all funding for its museums and libraries. In the meantime, the value of Ms. Burns' art has skyrocketed and is the centerpiece of the museum's collection. The museum's operating budget barely meets basic operating expenses, leaving no funds for the restoration needed for some of the more valuable Secessionist pieces. As a result, many of the earliest and most valuable pieces are kept in storage to prevent further deterioration. In an effort to focus its collection and increase its public visibility, the museum would like to sell the later Secessionist pieces and use the proceeds to restore the earlier ones. If the sale occurs, the museum will have the most unified collection of early Secessionist art in the United States. The problem is that Ms. Burns' donation expressly restricted the sale of any of the works. According to the gift instrument, the Springfield Museum must hold the works in perpetuity. This scenario illustrates the problems facing both small and large museums across the country. Although it would not completely resolve the problem, the Internal Revenue Service (IRS) should address the problem in this situation by using deduction valuation procedures at the time of the original donation to discourage restrictions on the alienability of donations to museums.Most art museums' operate as either charitable trusts2 or nonprofit corporations.3 With either organizational structure, the museum has a duty to provide a social benefit to the public at large or a reasonably large class thereof. This Note concerns only publicly supported tax-exempt art museums organized as either charitable trusts or nonprofit corporations. These museums have been determined by the IRS to be tax-exempt under I.R.C. § 501(c)(3)4 and have demonstrated that they receive a substantial part of their support from governmental units and the general public.5 Funding for these museums comes from private donations, grants, and limited revenue-producing activities.6 Further, the collections of these museums are largely dependent on donations.7Like the hypothetical Springfield museum, many museums are rich in assets8 but struggle to meet basic financial needs for operational expenses.9 One way that museums deal with this problem is through deaccessioning10 either to acquire new assets or to meet operational expenses. Recent trends in the museum profession also lead museums to deaccession. Museums are generally becoming more focused in their collecting and are less likely to keep objects that are extraneous to their mission.11 In addition, because of increased knowledge and heightened regard for the importance of proper storage and conservation combined with the cost of those activities,12 museums are more likely to deaccession objects that are not clearly furthering the museum's mission.13 Two standards guide museum professionals in making deaccessioning decisions. First, the legal standard sets the floor by determining when deaccessioning is and is not allowed.14 Next, the professional ethics standard defines when deaccessioning should occur.15Museums may encounter a number of difficulties in trying to deaccession a donated work of art. The legal standard for permissible deaccessioning is generally determined with reference to the method of acquisition.16 If the pieces were acquired by gift and if the donor imposed a restriction on the alienability of the gift, either by requiring that the museum keep or display the piece in perpetuity or affirmatively denying the museum the right to sell the piece, the museum has a duty to abide by the donor's wishes. …

What Does Granholm v. Heald Mean for theFuture of the Twenty-First Amendment,the Three-Tier System, and EfficientAlcohol Distribution?

Abstract: Table of ContentsI. Introduction 1096II. Background on State Regulation of Alcohol 1100A. Early Twenty-First Amendment Interpretation 1102B. Contemporary Twenty-First Amendment Interpretation 1103III. Where Does Granholm Take the Court's Twenty-First Amendment Jurisprudence? 1104A. Complete Elimination of the Core Concerns Test 1106B. Partial Elimination of the Core Concerns Test 1108IV. Can Direct Shipment to Retailers Be Differentiated from Direct Shipment to Consumers? 1110V. The Future of Other Forms of State Alcohol Regulation 1116A. Franchise Laws 11181. Discriminatory Franchise Laws 11192. Nondiscriminatory Franchise Laws 1120VI. Conclusion 1128I. IntroductionIn recent years, several courts have evaluated the constitutionality of various state regulatory schemes governing the sale and distribution of alcohol.1 These cases have forced courts to examine the extent to which the Commerce Clause limits a state's ability to regulate alcohol under section 2 of the Twentyfirst Amendment.2 Although the Supreme Court has previously addressed the tension between the Twenty-first Amendment and the Commerce Clause, the rise of a national wine industry over the past three decades and the increasing use of Internet commerce have forced courts to address the conflict under new factual circumstances.3Over the past twenty-five years, the number of wineries in the United States has increased over 400%, with wineries now located in all fifty states.4 Annual wine sales in the United States now total approximately $18 billion.5 Similarly, wine consumption in the United States increased from 113 million cases in 1970 to 250 million cases by 2002, and some predict that the United States "will almost certainly become the largest [wine consuming nation] by the end of this decade."6Since the end of Prohibition, most states have regulated the alcohol industry through the use of a three-tier distribution system.7 This system typically permits manufacturers (tier one) to sell only to licensed wholesalers (tier two), who in turn can only sell to licensed retailers (tier three).8 Moreover, states generally prohibit "investment in more than one tier of the distribution system" by any one individual or corporation.9 These "tied house" restrictions prevent manufacturers from distributing their products at retail or wholesale.10 The original goal of this structured system was to "prevent organized crimewhich had run illegal liquor empires during Prohibition-from dominating the legalized liquor industry."" Additional justifications for the three-tier system included "ensuring] orderly markets" and "facilitating] state collection of tax revenues.As the American wine industry began to grow, however, states also began granting in-state wineries preferences under the three-tier system to encourage increased industry growth, employment, and tax revenue.I3 Many states began permitting direct shipment to private customers by in-state wineries, while preventing out-of-state wineries from doing the same.14 Wholesalers largely opposed these direct shipment laws and viewed them as a threat to their industry.15 In contrast, private consumers and out-of-state wineries, which were forbidden from transacting business directly with one another, argued that restrictions on an out-of-state winery's ability to sell directly to in-state consumers violated the dormant Commerce Clause.16In Granholm v. Heald,17 the Supreme Court concluded that states were free to regulate the direct shipment of wine as long as they treated in-state and out-of-state wineries equally.18 Despite Granholm, however, the Court did not entirely resolve the question of how much power the Twenty-first Amendment gives states to regulate alcohol within their borders. …

Shareholder Democracy and the Economic Purpose of the Corporation

Abstract: I. IntroductionInterdisciplinary scholars often speak at cross-purposes. At times, their efforts may elicit little more than bemused indifference. But scholars with an interest in the corporation clearly need to communicate across disciplinary boundaries. We will never have a complete understanding of the corporation as a social, political, and economic entity unless we understand it coherently in all its dimensions, and we will never understand it coherently in all its dimensions unless we examine it rigorously from all perspectives. History is a source from which scholars across the humanities and social sciences draw insight, and so a symposium on understanding corporate law through history provides a rare opportunity for scholars from various disciplines to exchange alternative points of view.Colleen Dunlavy has undertaken an extensive study of the governance mechanisms of nineteenth century corporations.1 As she has carefully documented, the common law rule of one-vote-per-shareholder persisted well into the nineteenth century.2 This is surprising because it seems to contradict the usual alignment of wealth and economic power in a market-based economy. Professor Dunlavy attributes the persistence of the one-vote-per-shareholder rule to the social conception of the corporation in early nineteenth century America as a "body politic" and to norms that treated shareholders more like citizens in an egalitarian polity than modern-day investors in a profit-making business venture.3There is no disputing Professor Dunlavy's facts-the one-vote-per-shareholder rule was much more prevalent at the start of the nineteenth century than it was at the end of it-but one might demur at her explanation. This Comment suggests an alternative view: The persistence of the one-vote-per-shareholder rule in the early nineteenth century and the transition to one-vote-per-share by the end of the nineteenth century may have had more to do with the economic purpose of the corporation than with the early nineteenth century social conception of the corporation as a body politic. Indeed, from this perspective the social conception of the nineteenth century corporation was bound up with its economic purpose, and it changed as the economic purpose and function of the corporation evolved.II. The Corporation as a Market InstitutionThe corporation is a market institution and, like all market institutions, it is a social construct with important social, political, and moral implications. Corporations make decisions that affect the allocation of scarce economic resources, the distribution of income, domestic political outcomes, and the scope of human rights. They decide, for instance, how much steel to buy, how many SUVs to produce, how to finance their employees' retirement plans, whether to outsource customer service operations, and whether to transact with suppliers that use child labor. In spite of all the important social and political implications, they do not make their decisions democratically, at least not as the term is commonly understood. Indeed, as Professor Dunlavy points out, under the one-vote-per-share rule that predominates in the United States today, decision-making power among the shareholders of the corporation is distributed quite plutocratically.4 In theory, a shareholder's voting power is in proportion to her property rights in the corporation; the larger her stake, the greater her influence.Of course, it is well known that in most public corporations today shareholders exercise little control over the directors and senior executives.6 Under state corporation statutes, responsibility for the management of the corporation is vested in the board of directors.7 In practice, the board of directors necessarily delegates many decisions to the senior executives and is usually dependent on the senior executives for most of the information that it uses in making any other decisions.8 Unless they happen to own a controlling stake, shareholders thus usually have little, if any, influence over the corporations in which they own shares. …