The Situationist

Posts Tagged ‘shareholder primacy’

Corporate Aid to Governmental Authority – Abstract

Posted by The Situationist Staff on June 23, 2013

Corporate America

Situationist Contributor David Yosifon recently posted another thoughtful and provocative article on corporate law.  The article, titled “Corporate Aid to Governmental Authority: History and Analysis of an Obscure Power in Delaware Corporate Law” (forthcoming in University of St. Thomas Law Journal) can be downloaded for free on SSRN.  Here’s the abstract.

The Delaware General Corporation Law contains an obscure provision stating that all corporations have the power to “[t]ransact any lawful business which the corporation’s board of directors shall find to be in aid of governmental authority.” 8 DGCL §122(12). This oddly worded provision has never been applied, analyzed, or interpreted by any court. It has received almost no treatment by corporate law scholars. This lack of attention is surprising, given that by its own terms the provision seems to bear on fundamental corporate law themes, such as the purpose of corporations, the scope of directors’ fiduciary obligations and discretion, and the relationship between corporate law and corporate social responsibility. In this Article, I examine the history behind this strange provision and analyze its applicability to pressing social policy questions surrounding corporate law.

My analysis leads both to narrow and broad policy conclusions. The narrow conclusion is that §122 of the Delaware corporate code is a textual mess that should be amended at least for coherence and clarity. The broad conclusion is that the analysis herein contributes to the case for reforming corporate governance law to require directors to actively attend to the interests of multiple stakeholders, not just shareholders.

Download the article for free here.  See Yosifon’s SSRN page here.

Related Situationist posts:

Posted in Abstracts, Deep Capture, Law, Legal Theory | Tagged: , , , , | Leave a Comment »

Corporations, Cars, the U.S.A., and Us

Posted by The Situationist Staff on June 1, 2012

Benjamin Levin just posted his excellent article “Made in the USA: Corporate Responsibility and Collective Identity in the American Automotive Industry” (forthcoming Boston College Law Review, Vol. 53, No. 3, p. 821, 2012) on SSRN.  Here’s the abstract:

This Article seeks to challenge the corporate-constructed image of American business and American industry. By focusing on the automotive industry and particularly on the tenuous relationship between the rhetoric of automotive industry advertising and the realities of doctrinal corporate law, I hope to examine the ways that we as social actors, legal actors, and (perhaps above all) consumers understand what it means for a corporation or a corporation’s product to be American. In a global economy where labor, profits, and environmental effects are spread across national borders, what does it mean for a corporation to present the impression of national citizenship? Considering the recent bail-out of the major American automotive corporations, the automotive industry today becomes a powerful vehicle for problematizing the conflicted private/public nature of the corporate form and for examining what it means for a corporation to be American and what duties and benefits such an identity confers.

By examining the ways in which consumable myths of the American corporation interact with the institutions and legal regimes that govern American corporations, I argue that the advertised image of the national in the global economy serves as a broad corporate veil, a way of obscuring the consumer’s understanding of corporate identity and corporate accountability. With these overarching issues and questions as a guide, this Article will historically situate the identification of corporate nationality within a broader framework of debates on corporate social responsibility and interrogate the way that we conceive of the American corporation and corporate decision making.

Download the article for free here.

Related Situationist posts:

Posted in Deep Capture, History, Ideology, Law, Marketing, Politics | Tagged: , , , , , , | Leave a Comment »

Our Stake in Corporate Behavior

Posted by The Situationist Staff on January 23, 2010

Situationist Contributor David Yosifon published a thoughtful and timely op-ed,  in yesterday’s San Francisco Chronicle. Here are some excerpts.

* * *

Corporations are crucial institutions in our society. Consumers rely on them for everything from the basic provisions of food and clothing to the more dispensable delights of computers and cell phones. Workers rely on them for jobs. Communities need them for a tax base. Shareholders rely on them for profits that fund retirement, or entrepreneurial activity.

We all have a stake in effective corporate operations. Yet corporate directors are not required, indeed are not allowed, to put the interests of any party above shareholders in their decision making.

Now the Supreme Court has declared that the First Amendment forbids us from restricting corporate spending on political campaigns. If we cannot restrain corporations from influencing our democracy, then we must have more democracy in the management of our corporations. Directors of publicly traded corporations should be required to become informed about and to deliberate on the interests of all corporate stakeholders, not just shareholders.

The idea that we all have a stake in corporate behavior might seem at odds with the current “shareholder primacy” rule in corporate governance. But it could make sense. Most shareholders are highly diversified, with small investments in a large number of funds or corporations spread across the country and the world. The profit-maximization rule provides shareholders sufficient repose to invest their money at such a distance and with so little say in corporate decisions. Workers, on the other hand, can negotiate and monitor their wages and working conditions directly, or through unions. Consumers can manage their corporate interests at the cash register – they can buy at the offered price or walk away.

But corporations are often more powerful than workers or consumers. Firms can skimp on safety, for example, in ways that are difficult to observe – think asbestos in the factory or trans fats in the fries. Sure, sometimes the socially responsible corporate policy is also the most profitable – as when safer products attract more consumers. But it is naive to think that shareholder interests are always aligned with the rest of society. For a long time policymakers have argued that even where society is vulnerable to corporate overreaching, corporate boards should still focus on shareholder interests. We should rely, the story goes, on external government regulation – such as workplace safety, consumer protection or antipollution statutes – to safeguard social interests.

This approach assumes that government will be capable of developing regulations sufficient to constrain corporate misconduct. But corporations have the incentive and power to stunt such efforts. Firms accomplish this in part through lobbying, donations and direct spending in support of candidates. Because of their wealth, corporations can routinely best other constituencies in the competition for regulatory favor. This problem will only intensify with the new Supreme Court ruling.

* * *

You can read the op-ed in its entirety here.

For a sample of related Situationist posts, see “Taking the Situation of Consumers Seriously,” “Against Freedom of Commercial Expression – Abstract,” “Merchants of Discontent – Abstract,” “The Changing Face of Marketing?,” Reclaiming Corporate Law in a New Gilded Age – Abstract,” “The Situation of Illusion,” “Hey Dove! Talk to YOUR parent!,” “The Situation of Our Food – Part II,” The Situation of Our Food – Part III,” “The Changing Face of Marketing?,” “The Illusion of Wall Street Reform,” “Reclaiming Corporate Law in a New Gilded Age – Abstract,” “Deep Capture – Part VI,” and “Deep Capture – Part VII.”

Posted in Deep Capture, Politics, Public Policy, Situationist Contributors | Tagged: , , | 1 Comment »

 
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