Corporate Personhood and Limited Sovereignty

This Article, written for a symposium celebrating the work of Professor Margaret Blair, examines how corporate rights jurisprudence helped to shape the corporate form in the United States during the nineteenth century. It argues that as the corporate form became popular because of the way it facilitated capital lock-in, perpetual succession, and provided other favorable characteristics related to legal personality that separated the corporation from its participants, the Supreme Court provided crucial reinforcement of these entity features by recognizing corporations as rights-bearing legal persons separate from the government. Although the legal personality of corporations is a distinct concept from their constitutional treatment, the Court’s nineteenth-century rulings bolstered key features created by corporate law and simultaneously situated the corporation as subordinate to the state in a system of federalism. And, finally, the Article suggests that the balance of power struck in the first century of Supreme Court jurisprudence on corporate rights has been eroded in the modern era. The Supreme Court’s failure to develop a consistent approach to corporate rights questions and its tendency to reason based on views of corporations as associations of persons have exposed a significant flaw in the Court’s evolving corporate personhood jurisprudence: it lacks a limiting principle

Corporate Social Responsibility, ESG, and Compliance

In 2019, the CEO and chairperson of BlackRock, the world’s largest asset manager, called for corporate leaders to embrace corporate purpose and create value for stakeholders, and 181 CEOs of the Business Roundtable committed to lead their companies for the benefit of all stakeholders—customers, employees, suppliers, communities, and shareholders. The idea that corporations should engage in socially responsible business practices (“CSR”) or initiatives relating to environmental, social, and governance matters (“ESG”) is gaining prominence, but remains highly contested. Deeper examination reveals that these terms—CSR and ESG—each lack a singular meaning. From aligning shareholder and stakeholder interests for shared value and risk management, to going beyond compliance and profit-maximizing strategies, there is no consensus on what socially-responsible activity entails and the rationale for its pursuit. This chapter aims to illuminate the landscape of CSR, ESG, and their connection to compliance. Varying usage and mixed empirical research reveals that CSR and ESG lack a clearly defined connection to compliance. This indeterminacy extends to (1) whether CSR and ESG are correlated with or refer to greater levels of legal compliance, as well as (2) what it means for a corporation to “comply” with CSR or ESG goals in light of the proliferation of standards and metrics pertaining to sustainability and social impact. Exploring these topics through the U.S. perspective reflects that the business world is in a state of flux regarding how companies take account of their impact on stakeholders and the environment, and laws are evolving on issues such as sustainability disclosures that could help us better understand existing practices

The Supreme Court and the Pro-Business Paradox

One of the most notable trends of the Roberts Court is expanding corporate rights and narrowing liability or access to justice against corporate defendants. This Comment examines recent Supreme Court cases to highlight this “pro-business” pattern as well as its contradictory relationship with counter trends in corporate law and governance. From Citizens United to Americans for Prosperity, the Roberts Court’s jurisprudence could ironically lead to a situation in which it has protected corporate political spending based on a view of the corporation as an “association of citizens,” but allows constitutional scrutiny to block actual participants from getting information about corporate social and political activity. Further, as the Court has downplayed or ignored corporate decisionmaking structures in recent human rights cases such as Nestlé, by contrast, state corporate law cases have heightened attention on the board’s role in providing oversight to ensure legal compliance throughout the corporation’s operations. Bringing these threads together leads to the larger observation that the Court’s “pro-business” jurisprudence contributes to a dynamic that ultimately increases pressure on internal law and governance to create stronger constraints and processes to sort the various interests of its participants and stakeholders, as evidenced by growing calls for reform and the rising ESG movement

Line Drawing in Corporate Rights Determinations

This essay was written for the 21st Annual Clifford Symposium: The Supreme Court, Business, and Civil Justice. The essay argues that existing lines drawn between corporations may be a useful starting place for analyzing the rights of corporations, but caution must be used because the lines drawn in other areas were done for various policy reasons in different contexts that may not map onto the corporate rights determination. Attention should be paid to the specific characteristics of corporations that are relevant to the right at stake and the basis for extending protection. The key contribution of this essay is to advance the discussion by examining the utility of common lines that the law has already drawn between corporations: the for-profit/nonprofit line, the public/private line, and the closely held category

Reconceiving Corporate Personhood

Why is a corporation a “person” for purposes of the Constitution? This old question has become new again with public outrage over Citizens United, the recent campaign finance case which expanded corporate constitutional speech rights. This Article traces the historical and jurisprudential developments of corporate personhood and concludes that the doctrine’s origins had the limited purview of protecting individuals’ property and contract interests. Over time, the Supreme Court expanded the doctrine without a coherent explanation or consistent approach. The Court has relied on the older cases that were decided in different contexts and on various flawed conceptions of the corporation. This Article argues that the doctrine of corporate personhood should be understood as only the recognition of a corporation’s ability to hold rights in order to protect the individuals behind it. Properly understood, corporate personhood is only a starting point for analysis and not a justification for granting or denying rights to corporations. Further, the Article suggests an alternative approach for determining the scope of corporate rights. Corporations should hold a constitutional right only when the objective behind the particular right is furthered by providing the corporation, and thereby the people underlying the corporation, with such right

Private Company Lies

Rule 10b-5’s antifraud catch-all is one of the most consequential pieces of American administrative law and most highly developed areas of judicially-created federal law. Although the rule broadly prohibits securities fraud in both public and private company stock, the vast majority of jurisprudence, and the voluminous academic literature that accompanies it, has developed through a public company lens. This Article illuminates how the explosive growth of private markets has left huge portions of U.S. capital markets with relatively light securities fraud scrutiny and enforcement. Some of the largest private companies by valuation grow in an environment of extreme information asymmetry and with the pressure, opportunity, and rationalizing culture that can foster misconduct and deception. Many investors in the private markets are sophisticated and can bear high levels of risk and significant losses from securities fraud. It is increasingly evident, however, that private company lies can harm a broader range of shareholders and stakeholders as well as the efficiency of allocating billions of dollars for innovation and new business. In response to this underappreciated problem, this Article explores a range of mechanisms to improve accountability in the private markets and ultimately argues for greater public oversight and enforcement

A Corporate Right to Privacy

The debate over the scope of constitutional protections for corporations has exploded with commentary on recent or pending Supreme Court cases, but scholars have left unexplored some of the hardest questions for the future, and the ones that offer the greatest potential for better understanding the nature of corporate rights. This Article analyzes one of those questions — whether corporations have, or should have, a constitutional right to privacy. First, the Article examines the contours of the question in Supreme Court jurisprudence and provides the first scholarly treatment of the growing body of conflicting law in the lower courts on this unresolved issue. Second, the Article examines approaches to determining the scope of corporate constitutional rights and argues that corporate privacy rights should be evaluated not by reference to the corporate form itself or a notion of corporate personhood, but rather by reference to the privacy interests of the various people involved in the corporation and their relationship to the corporation. Further, because corporations exist along an associational spectrum — from large, publicly traded corporations constituted purely for business purposes to smaller organizations with social, political, or religious purposes — the existence of a corporate privacy right will and should vary

Corporate Oversight and Disobedience

This Article explores the public-regarding purpose of the obedience and oversight duties in corporate law and provides a descriptive account of how they are applied in practice. The Article argues that the fidelity to external law required by the duty of good faith largely serves a legitimizing role for corporate law. Expressing obligations of legal compliance and oversight within corporate law acknowledges societal interests in the rule of law and preserves the ability of courts to flexibly respond to particularly salient and egregious violations of public trust, should they arise, without upending case law developed over decades. Further, this Article examines the body of Delaware law concerning the oversight and obedience aspects of the duty of good faith and argues that they have become functionally linked. In practice to date, Delaware courts have prioritized giving directors broad latitude to take business risk by drawing a line at legal risk, despite the possibility that both types of activity could create social value or harm depending on the circumstances. Under current Delaware case law, courts have allowed Caremark claims to proceed where evidence exists to infer that the board utterly failed to implement a compliance monitoring system or that the directors engaged in disobedience by consciously flouting, violating, or ignoring the law. Bringing together these threads of discussion, this Article concludes that corporate law’s public regarding commitment to the rule of law supports accountability in these instances of disobedience as well as more broadly when fiduciaries act with willful ignorance or an awareness that their efforts at compliance are insufficient

Line Drawing in Corporate Rights Determinations

This essay was written for the 21st Annual Clifford Symposium: The Supreme Court, Business, and Civil Justice. The essay argues that existing lines drawn between corporations may be a useful starting place for analyzing the rights of corporations, but caution must be used because the lines drawn in other areas were done for various policy reasons in different contexts that may not map onto the corporate rights determination. Attention should be paid to the specific characteristics of corporations that are relevant to the right at stake and the basis for extending protection. The key contribution of this essay is to advance the discussion by examining the utility of common lines that the law has already drawn between corporations: the for-profit/nonprofit line, the public/private line, and the closely held category