Friday, 26 February 2010

A late reply to Lord Mance

Yesterday, I attended one of the Current Legal Problem lectures at UCL in London. The event was chaired by Lord Mance, Justice of the UK Supreme Court. Afterwards, Lord Mance and a group of legal academics went for dinner. Lord Mance tried to keep the conversation flowing by asking the question whether there had been any recent Supreme Court decision that we regarded as flawed. It didn’t really work, and I wanted to say something but managed to keep my mouth shut. What was it? Well, today, UK-based legal academics have become increasingly interested in research done in neighbouring fields, such as economics, politics, sociology, psychology etc. This affiliation with other fields of research has had many positive effects on the quality of legal scholarship but also the, not necessarily negative, side effect that we have lost our interest in court decisions. Sure, we read about politically important decisions in the newspapers and teach the core case law in undergraduate lectures, but I think I am right to say that few legal academic are still regular readers of the current law reports – leading to the general question what role law professors should play today.

Monday, 15 February 2010

Blogging about religion?

Well, not really, since that’s something I’d like to keep private. But I would still like to share a link: Belief-O-Matic lists 27 faiths “in order of how much they have in common with your professed beliefs”. Often a number of faiths have the same rank: in my list that’s the case for Baha'i Faith, the Church of Jesus Christ of Latter-Day Saints, and Hinduism (I won’t disclose the rank), Eastern Orthodox and Roman Catholic (I won’t disclose the rank), and Islam and Orthodox Judaism (again, not disclosing my rank). A coincidence?

Monday, 8 February 2010

Citizens United: of interest for a non-US company lawyer?

The US Supreme Court decision in Citzens United has been heavily discussed in the blogsphere in the last few weeks. I look at it opportunistically: as a non-US company lawyer I’m not interested in the core question of the case, namely whether US public law can differentiate between natural and legal persons. However, there are also a number of interesting general statements on the nature and functioning of corporations. In this lengthy post I copy/paste the most interesting parts for further use (highlights in bold).

Kennedy J. for the majority:

p. 46: The Government contends further that corporate independent expenditures can be limited because of its interest in protecting dissenting shareholders from being compelled to fund corporate political speech. .... There is [furthermore] little evidence of abuse that cannot be corrected by shareholders “through the procedures of corporate democracy.” Bellotti, 435 U. S., at 794; see id., at 794, n. 34.

p. 55: Shareholder objections raised through the procedures of corporate democracy, see Bellotti, supra, at 794, and n. 34, can be more effective today because modern technology makes disclosures rapid and informative. ....With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters. Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits ...

Stevens for the minority:

pp. 36-38: The individualized charter mode of incorporation reflected the “cloud of disfavor under which corporations labored” in the early years of this Nation. ... Thomas Jefferson famously fretted that corporations would subvert the Republic. 54 General incorporation statutes, and widespread acceptance of business corporations as socially useful actors, did not emerge until the 1800’s. ... Shelledy, Autonomy, Debate, and Corporate Speech, 18 Hastings Const. L. Q. 541, 578 (1991); cf. Trustees of Dartmouth College v. Woodward, 4 Wheat. 518, 636 (1819) (Marshall, C. J.) (“A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it”) ...

pp. 75-80: The fact that corporations are different from human beings might seem to need no elaboration, except that the majority opinion almost completely elides it. Austin set forth some of the basic differences. Unlike natural persons, corporations have “limited liability” for their owners and managers, “perpetual life,” separation of ownership and control, “and favorable treatment of the accumulation and distribution of assets . . . that enhance their ability to attract capital and to deploy their resources in ways that maximize the return on their shareholders’ investments.” 494 U. S., at 658–659. ... Unlike other interest groups, business corporations have been “effectively delegated responsibility for ensuring society’s economic welfare”;71 they inescapably structure the life of every citizen. ... It might also be added that corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help structure and facilitate the activities of human beings, to be sure, and their “personhood” often serves as a useful legal fiction.... It is an interesting question “who” is even speaking when a business corporation places an advertisement that endorses or attacks a particular candidate. Presumably it is not the customers or employees, who typically have no say in such matters. It cannot realistically be said to be the shareholders, who tend to be far removed from the day-to-day decisions of the firm and whose political preferences may be opaque to management. Perhaps the officers or directors of the corporation have the best claim to be the ones speaking, except their fiduciary duties generally prohibit them from using corporate funds for personal ends..... The legal structure of corporations allows them to amass and deploy financial resources on a scale few natural persons can match.... see also ALI, Principles of Corporate Governance: Analysis and Recommendations §2.01(a), p. 55 (1992) (“[A] corporation . . . should have as its objective the conduct of business activities with a view to enhancing corporate profit and shareholder gain”).
pp. 86-89: When corporations use general treasury funds to praise or attack a particular candidate for office, it is the shareholders, as the residual claimants, who are effectively footing the bill. Those shareholders who disagree with the corporation’s electoral message may find their financial investments being used to undermine their political convictions.... The Court dismisses this interest on the ground that abuses of shareholder money can be corrected “through the procedures of corporate democracy,” ante, at 46 (internal quotation marks omitted), and, it seems, through Internet-based disclosures, ante, at 55.76 I fail to understand how this addresses the concerns of dissenting union members, who will also be affected by today’s ruling, and I fail to understand why the Court is so confident in these mechanisms. By “corporate democracy,” presumably the Court means the rights of shareholders to vote and to bring derivative suits for breach of fiduciary duty. In practice, however, many corporate lawyers will tell you that “these rights are so limited as to be almost nonexistent,” given the internal authority wielded by boards and managers and the expansive protections afforded by the business judgment rule. Blair & Stout 320; see also id., at 298–315; Winkler, 32 Loyola (LA) L. Rev., at 165–166, 199–200. Modern technology may help make it easier to track corporate activity, including electoral advocacy, but it is utopian to believe that it solves the problem. Most American households that own stock do so through intermediaries such as mutual funds and pension plans, see Evans, A Requiem for the Retail Investor? 95 Va. L. Rev.1105 (2009), which makes it more difficult both to monitor and to alter particular holdings. Studies show that a majority of individual investors make no trades at all during a given year. Id., at 1117.... If and when shareholders learn that a corporation has been spending general treasury money on objectionable electioneering, they can divest. Even assuming that they reliably learn as much, however, this solution is only partial. The injury to the shareholders’ expressive rights has already occurred; they might have preferred to keep that corporation’s stock in their portfolio for any number of economic reasons; and they may incur a capital gains tax or other penalty from selling their shares, changing their pension plan, or the like....