Rasmussen Reports has the breakdown.
Rasmussen Reports has the breakdown.
What can a shareholder do if she disagrees with a corporate expenditure, whether on a particular busi- ness strategy or in support of a political position? The short answer is very little. Shareholders do not typically have any right to control or direct the use of capital they have invested in a corporation, whether publicly or privately owned. ...
Expenditures by corporations on politics do not typically generate heightened scrutiny, and shareholders cannot use derivative lawsuits to override decisions about such expenditures by boards. These facts about corporate law hold true even if (in an unrealistic hypothetical) shareholders were uniform in their political views, and uniformly opposed an expenditure approved by the corporate board. These facts are unquestionably true in a more typical situation where shareholders disagree among themselves about politics. Nor do shareholders have indirect means to accomplish this goal—such as selling shares or using votes—as explained next.
They go on to elaborate the point for 39 pages.
I agree with their characterization of corporate power. After all, who developed the director primacy model? (Well, Mike Dooley did, but that's beside the point.) So I'm glad to see such a select group of my fellow corporate law academics at least endorsing director primacy as a positive account of corporate law.
But where does that leave us? After all, their analysis of the limited powers of shareholders applies with equal force to virtually everything the board of directors do. (See Bainbridge, Stephen M., The Case for Limited Shareholder Voting Rights. UCLA Law Review, Vol. 53, pp. 601-636, 2006; UCLA School of Law, Law-Econ Research Paper No. 06-07. Available at SSRN: http://ssrn.com/abstract=887789.)
In fact, at this point, the amici's argument stops. On its face, the brief is mostly descriptive with the normative argument limited to the claim that "If the Court decides to give union non-members additional rights to refuse to contribute to union speech, the Court should not act on the erroneous belief that this will accord union non-members the same rights enjoyed by individual investors." (5)
But words have consequences. Normative arguments will be made on the basis of the foundation laid by the brief.
As I see it, there are three normative moves that follow logically from the strong positive account of director primacy offered in the brief. (1) One can accept the normative claims of director primacy, as well as the positive ones, and thus endorse the power of directors to run the corporation's political contributions in the same way they run everything else. See Bainbridge, Stephen M., Director Primacy: The Means and Ends of Corporate Governance (February 2002). UCLA, School of Law Research Paper No. 02-06. Available at SSRN: http://ssrn.com/abstract=300860. Obviously, this is the correct solution to the problem, but I see some names on the list of signatories that would reject this option out of hand.
(2) One can go in the exact opposite direction and endorse an expansive theory of shareholder empowerment that gives shareholders broad powers to overturn board decisions. Some of them already have, of course. Compare, e.g., Bainbridge, Stephen M., Director Primacy and Shareholder Disempowerment. Harvard Law Review, Vol. 119, 2006; UCLA School of Law, Law-Econ Research Paper No. 05-25. Available at SSRN: http://ssrn.com/abstract=808584 with Bebchuk, Lucian A., The Case for Increasing Shareholder Power. Harvard Law Review, Vol. 118, No. 3, pp. 833-914, January 2005; Harvard Law and Economics Discussion Paper No. 500. Available at SSRN: http://ssrn.com/abstract=387940. IMHO, I'm right and they're wrong, although YMMV.
(3) One can generally accept director primacy as a normative matter but can try to argue that political spending is special and that therefore it needs special rules. But I don't buy it:
Having said that, I am nevertheless willing to assume most academics that believe political contributions are special also believe there is there is a neutral principles-based account that supports their view. But even if that's true, their arguments will be used by those who think political contributions are special because they believe that corporate political contributions favor one political party over the other, while those folks support the purportedly disfavored party.
In sum, this is not some ideologically neutral academic debate being discussed by corporate law technocrats. It has implications for shareholder activism, which itself is an increasingly politicized phenomenon. More important, the academic debate is inextricably intertwined with the left's effort to defund the right. Those of us who participate in this debate as academics cannot close our eyes to this basic fact.
As both a proponent of director primacy and a man of the right, I thus come down against treating politics as special. As an academic, I'd like to see my colleagues be equally forthright about their take on the politics of the issue.
Update: I suppose that there is a non-corporate governance move available, as well: One can argue that the law should treat union members and shareholders the same. But I'm not convinced that shareholders and union members are similarly situated. On this issue, however, I'm going to tag in folks like Brad Smith and Paul Atkins, who know more about the law governing unions than yours truly.
Update 2: One of the brief authors pointed out that "You might acknowledge that corporate law academics might agree on the descriptive points in the brief while disagreeing about whether those facts are good or bad from a normative perspective, and so to say we should be 'forthright' about those normative views would be impossible, yet the descriptive facts are important — and something SCOTUS has consistently gotten wrong."
Fair enough. But looking beyond this brief to the larger debate in the academic literature, I still think scholars on both sides of the issue need to acknowledge that their arguments have important real world consequences for the functioning of our political system and be transparent about whether they have skin in the political game.
Update 3: I've been going back and forth with the professor mention in the previous update. My last word on the subject was:
Jonathan Adler takes on an issue that I have long believed; namely, that campaign finance reforms have contributed in a huge way to political dysfunction by weakening political parties:
Congressional dysfunction may have hit an all time high (or is it low?). Despite sizable legislative majorities, Republicans are unable to pass basic legislation or even organize their caucus. Political polarization may be part of the reason (although not necessarily in the way some might expect). Good government reforms intended to make politicans more responsive to the people may have contributed to legislative dysfunction as well. ...
Were limits on campaign contributions less stringent (or even nonexistent), members of Congress could raise the amount of money necessary for their campaigns in far less time, leaving far more time for them to actually do their jobs, develop a meaningful understanding of policy issues and develop the relationships upon which successful legislative initiatives are built.
Kindly go read the whole thing.
Justice Robert Jackson once observed that:
Those who begin coercive elimination of dissent soon find themselves exterminating dissenters. Compulsory unification of opinion achieves only the unanimity of the graveyard.
I was reminded of that quote when I read this NY Post story:
For nearly two decades, “South Park” has lambasted . . . everything. The cartoon’s raw satire offends left, right and center; all races and religions — and atheists, too. But some are just too dense to get it.
This week’s season premiere slapped “social-justice warriors” — extremists out to police every word for bias.
“PC Principal” takes over the school attended by Kyle, Stan, Kenny and Cartman, the four kids at the show’s heart.
Kyle gets two weeks’ detention for daring to tell a fourth-grader, “I don’t think Caitlyn Jenner is a hero” — which the principal calls “transphobic and bigoted hate speech.”
Later, PC Principal beats Cartman within an inch of his life for not falling into line.
I suppose Kenny ended up in the "the unanimity of the graveyard."
The many ways Obama officials have ducked public accountability http://t.co/swZ8kuLEs4 King Barack I channels his inner Nixon— Stephen Bainbridge (@ProfBainbridge) September 1, 2015
I have often argued that divestment campaigns are fundamentally misguided. They're typically motivated by bad political ideologies, usually are ineffectual, and are bad for investors. Now there's yet more proof I'm right:
Large divestment campaigns are undertaken in part to depress share prices of firms that investors see as engaged in harmful activities. We show that, if successful, investors who divest earn lower and riskier returns than those that do not, leading them to control a decreasing share of wealth over time. Divestment therefore has only a temporary price impact. Further, we show that, for standard managerial compensation schemes, divestment campaigns actually provide an incentive for executives to increase, not reduce, the harm that they create. Therefore, divestment is both counter-productive in the short run, and self-defeating in the long run.
Davies, Shaun William and Van Wesep, Edward Dickersin, The Unintended Consequences of Divestment (August 19, 2015). Available at SSRN: http://ssrn.com/abstract=2647729
As for my work on it:
Aug 2, 2004 ... My latest TCS Daily column The Presbyterian Church (USA)'s General Assembly recently adopted a resolution calling for divestment of ...
This story bugs me to no end:
Just hours after Hillary Clinton unveiled her presidential campaign's push to solve global warming through an aggressive carbon-cutting plan, she sauntered up the steps of a 19-seat private jet in Des Moines, Iowa.
The aircraft, a Dassault model Falcon 900B, burns 347 gallons of fuel per hour.
Back in the Soviet Union certain major streets had a ZIL Lane:
ZiL lanes (also sometimes called "Chaika lanes") are lanes on some principal roads in Moscow dedicated to vehicles carrying senior government officials. Known officially in Russian as rezervniye polosy ("reserved lanes"), they took their nickname from the black limousines produced by ZiL and the luxury Chaika cars that were used by officials of the Soviet Union as their official vehicles. ... The ZiL lanes and restricted routes caused considerable disruption to Moscow's traffic because of the absolute priority given to their users.
Our liberal leadership increasingly is living a ZIL Lane Life. They expect the rest of us to cut our carbon footprint, while they get to keep using private jets, massive motorcades, and a host of other luxuries that are spewing carbon into the air.
I'm reminded of Leona Helmsley's crack that paying taxes is for little people. I suppose our leaders will tell us that saving the planet is for little people.
She has a checkered, to put it charitably (failed, to put it more bluntly), business career and no political career whatsoever, having lost her previous run for elective office. It is the height of chutzpah to imagine that she is remotely qualified to be president. Or, since it’s the more likely endgame, for vice president either.
I would have serious qualms about any candidate who seeks the presidency without government experience, no matter how much value he or she produced for shareholders.
Which raises several questions. When Jesse Jackson ran for POTUS in 1984, 1988, and 2000, he had no government experience to speak of. Will Marcus confirm that he wasn't "remotely qualified to be president"? How about Wes Clark and Al Sharpton when they ran in 2004. If Clark's army experience counts, why not Fiorina's business experience?
Just to remind you I'm still an unreconstructed Burkean. These days, however, that side mostly expresses itself on twitter:
Iran’s Negotiating Triumph Over Obama and America http://t.co/sJfGnNUsUj Obama's legacy will be a much more dangerous world— Stephen Bainbridge (@ProfBainbridge) April 4, 2015
The Campus Climate Crusade http://t.co/bqA4Rb28W4 The purge continues.— Stephen Bainbridge (@ProfBainbridge) April 4, 2015
Liberal Intolerance, Round II http://t.co/C8ZYhQCXnf To stamp out cultural dissent, the left is willing to stomp on religious liberty— Stephen Bainbridge (@ProfBainbridge) April 4, 2015
From today's WSJ:
Recent statistics released by the U.S. Census Bureau show the following: The two fastest-growing areas of the U.S.? Number one is North Dakota at 9.7%. Number two is the District of Columbia at 8.9%. Consider. North Dakota’s growth consists of entrepreneurial middle-class Americans working in an industry that’s saving other Americans billions in reduced energy costs. The growth in D.C. consists of more bureaucrats conjuring up ideas to capture those billions so they can reinvest it for you. Fellow Americans, would you rather “invest” or spend the energy savings yourself or have the bureaucrats in Washington do it for you?
Seth Mnookin, a journalist who's chronicled the anti-vaccination movement, observed a few years ago that you only had to go visit a Whole Foods to find anti-vaxxers.
Now, it doesn't seem that anyone's actually done the science on that one, but Mnookin's point here is obvious — the anti-vaccination movement is fueled by an over-privileged group of rich people grouped together who swear they won't put any chemicals in their kids (food or vaccines or whatever else), either because it's trendy to be all-natural or they don't understand or accept the science of vaccinations. Their science denying has been propelled further by celebrities, like Jenny McCarthy, Robert F. Kennedy, Jr. and actress Mayim Bialik, who is also a neuroscientist and even plays one on TV.
My guess is that the anti-vaccination crowd leans way left. Among other things, they tend to cluster in far-left areas:
Researchers analyzing records for about 55,000 children born in 13 northern California counties between 2010 and 2012 found five geographic clusters of 3-year-olds with significantly higher rates of vaccine refusal. These included East Bay (10.2 percent refusal rate); Marin and southwest Sonoma counties (6.6 percent refusal); northeastern San Francisco (7.4 percent); northeastern Sacramento County and Roseville (5.5 percent); and south of Sacramento (13.5 percent). By comparison, the vaccine refusal rate outside these clusters is 2.6 percent, according to the study published in the journal Pediatrics. ...
The communities where anti-vaxxers cluster are also among the most liberal. Marin County, San Francsico County and Alameda County all voted overwhelmingly for Obama in 2008. In Marin, 78 percent of the vote went to Obama. In San Francisco, it was 84 percent. And in Alameda, it was 79 percent. That's all higher than what Obama got in his own home county of Cook County, Illinois.
So the next time one of your liberal friends starts in on science denial, point them to this one. Unlike creationism or (at least in the short run) climate change, denying the science on vaccines can be leathal.
One of the most notable consequences of this election was the setback it dealt to public sector unions. Importantly, the losses came at hands of both parties. Republican Scott Walker was reelected in Wisconsin after rolling back the power of public sector unions. Gina Raimondo gained the governorship of Rhode Island despite using her position as that state’s Treasurer to restructure public pensions and thereby earning the enmity of public sector unions. In my own home state of Illinois, Governor Pat Quinn lost in state where the most important mainstay of his party is public sector unions, whose pensions and other exactions have made Illinois the state with one of the lowest credit ratings and worst business climates in the nation.
The decline in political power and legal privileges of public sector unions would be the single most salutary structural improvement in the states where they enjoy such privileges. The right of public sector unions to check off dues, to mandate collective bargaining, and/or to strike gives them unaccountable power in the delivery of public services. As a result such public services are often more expensive and less efficient. Worst of all public sector unions exercise this leverage to gain above-market, unfunded pensions that need to be financed later—at a time when those who have negotiated those pensions have left government.
It is mistake to analogize unions in the public sector to those in the private sector. In the private sector, negotiations over wages are genuinely two sided with management vigorously representing the interests of shareholders. By contrast, in the public sector the real party in interest—the citizens of the city or state—are generally not well represented at the bargaining table. The elected officials cannot be counted on to negotiate effectively because they want the campaign contributions and political muscle that unions can bring.
The recurring dilemma of democratic politics is that politicians often benefit by giving away benefits to such concentrated groups at the expense of the rest of us. Privileges for public sector unions exacerbate this fundamental problem rather than diminish it.
Kindly go read the whle thing.
The Economist reports that:
THE assertion that Jews “control” finance is commonplace among anti-Semites. A new academic study* finds that people who live in areas of Germany where persecution of Jews was most intense are less likely to invest in the stockmarket, even today.
The relationship has very strong historical roots. People who live in districts from which Jews were likeliest to be sent to concentration camps under the Nazis are 7.5% less likely to invest in stocks than other Germans; those who live in districts where pogroms occurred during the Black Death (back in the 14th century) are 12% less likely to do so. ...
The effect of this distrust is that German savers in such districts earn lower returns, because they have lower exposure to the stockmarket. “The legacy of Jewish persecution—distrust of finance—has hindered generations of Germans from accumulating financial wealth,” the authors argue. In other words, “Persecution of minorities reduces not only the long-term wealth of the persecuted, but of the persecutors as well.”
The good news, of course, is that haters don't get a free ride. They are paying a cost for indulging their hate.
The bad news, of course, is that haters apparently are willing to pay that cost in very large numbers and over a very long period. This raises serious questions about whether market forces can eradicate discrimination. Hence, even those of us who generally favor limited government should be open to the need for government intervention to prevent intentional discriminaton. (Which is not to say reasonable people cannot differ about the form government intervention ought to take.)
I was reminded of Reagan's famous quip that "The nine most terrifying words in the English language are, 'I'm from the government and I'm here to help'" when I read Daniel Henninger's column in today's WSJ:
Ebola, the Secret Service, Veterans Affairs, ObamaCare’s rollout, the Centers for Disease Control, the World Health Organization, the Federal Emergency Management Agency.
Behind all these names are federal bureaucracies that are supposed to protect people or help them. Instead they have been putting individuals at risk, or worse.
Ebola’s spread in West Africa was predicted. Government agencies responded late. Now it’s here. The Secret Service is so disorganized it can’t protect, of all things, the White House. Veterans died waiting for admission to VA hospitals. The CDC lost track of anthrax, smallpox and H5N1 bird-flu samples. At the State Department, no one seems to quite know why a U.S. ambassador died in Benghazi. The 9/11 Commission explained in detail how the attackers evaded the bureaucracies. Add to this list the Internal Revenue Service, an agency of extraordinary power that has forfeited the public’s trust.
Will liberals ever lose their faith in big government bureaucracies?