ProfessorBainbridge.com

Why you're not a fancy con law prof and neither am I

Jack Balkin is a very fancy professor of constitutional law at a very fancy law school. One of his blog posts today is a classic example of why neither you nor I am a fancy professor of constitutional law at a fancy law school. You see, at the end of his post, Balkin makes a very simple (and I think correct) point:

If for-profit corporations have free speech rights, it is not because corporations are persons. It is because it makes sense to give the people that control them (who are not necessarily their owners) the power to use the corporate form to amplify their voices. Conversely, to the extent that it makes sense to limit the speech of for-profit corporations, it is not because constitutional rights of corporations are violated; it is because the rights of the people who control the corporations should not extend so far.

Well, duh. This is not new information. Nor would it justify an appointment as a fancy professor of constitutional law at a fancy law school. Even us corporate law professors get it.

No, what makes one eligible to be a fancy professor of constitutional law at a fancy law school is how one gets to the right answer. Getting there the obvious way won't cut it. Instead, you've got to have some really braniac way of getting there that no one else would have thought of. Using Icelandic blood feuds to explain class action suits or invoking Wittgenstein to explain the UCC, and so on. Ideally, it should be abstract, erudite, and so off the wall it never would have occurred to anybody who actually works in the field. (BTW, telling us what Rawls or Dworkin would think about your subject is now incredibly passe. Even student notes at bottom tier law schools can do that these days.) 

In Balkin's case, it's the Thirteenth amendment and "the (in)famous 1830 case of State v. Mann, the North Carolina Supreme Court, in an opinion by Judge Ruffin, held that the owner of a slave had complete authority to use violence against a slave, even to take the slave's life." All of which, to him, "suggests an interesting perspective on the First Amendment rights of for-profit corporations."

To which my immediate reaction was, "WTF?" Followed by, "no, it doesn't."

But it's precisely the sort of thing that passes as top notch legal scholarship these days. Blow that idea up into a 35,000 word article and you too could be a fancy professor of constitutional law at a fancy law school. Except that it never would have occurred to you in the first place. But don't feel bad. It never would have occurred to me either.

Time to delete section 3 of article II of the constitution

Article II. Section 3 of the US Constitution requires that the President "shall from time to time give to the Congress Information of the State of the Union, and recommend to their Consideration such Measures as he shall judge necessary and expedient ...." Let's repeal it.

The State of the Union address has become an exercise in political theater. The President gets to give a political speech using the Supreme Court, Joint Chiefs, and his political opponents in Congress as stage props. The big question of the evening usually is whether the latter can keep their temper when the President takes them task, as this one is especially wont to do.

The political theater aspect is emphasized by the thought administrations put into issues like who gets to sit next to the First Lady in the Gallery. This year it is (drum roll here) Warren Buffett's secretary.

His secretary? Yes, really. 

Bold prediction: Obama will use her as a prop for taxing the 1% more heavily. After all, as Politico reminds us:

"Warren Buffett's secretary shouldn't pay a higher tax rate than Warren Buffett," President Obama said in September, when he unveiled his American Jobs Act proposal. It's a trope that Buffett himself has repeated, as he has campaigned for higher taxes on investment income.

In an election year, the SOTU is especially galling for those of who do not support the incumbent POTUS, because it amounts to millions of dollars worth of free advertising for the POTUS' reelection campaign.

It's theater. But not very good theater. Time for it to die.

Huge win for religious liberty

The NY Times is reporting that:

In what may be its most significant religious liberty decision in two decades, the Supreme Court on Wednesday for the first time recognized a “ministerial exception” to employment discrimination laws, saying that churches and other religious groups must be free to choose and dismiss their leaders without government interference.

I exaggerate only slightly to say that it was getting to the point in the lower courts in which a woman would be able to sue the Catholic Church for employment discrimination for barring her from the priesthood. Indeed, at oral argument, the Obama administration's assistant solicitor general told the court that it "should make no distinction between secular or religious employers," which would head in that extreme direction. So this is a big win for religious liberty.

“So what if corporations aren’t people?”

Walter Olson:

“Rights-bearing individuals do not forfeit those rights when they associate in groups” argue my Cato colleagues Ilya Shapiro and Caitlyn McCarthy in the John Marshall Law Review [SSRN via Cato at Liberty]:

Much of the criticism of Citizens United stems from the claim that the Constitution does not protect corporations because they are not “real” people. … This essay will demonstrate why the common argument that corporations lack rights because they aren’t people demonstrates a fundamental misunderstanding of both the nature of corporations and the First Amendment.

Corporate personhood is just a convenient legal fiction by which we operationalize this common sense idea.

Democrats want to strip corporations of constitutional protections

Senator Bernie Sanders (which should tell you something right there) and a handful of almost equally far left House members are pushing a constitutional amendment that would strip corporations of their rights under the US Constitution:

Section 1. The rights protected by the Constitution of the United States are the rights of natural persons and do not extend to for-profit corporations, limited liability companies, or other private entities established for business purposes or to promote business interests under the laws of any state, the United States, or any foreign state.

Section 2. Such corporate and other private entities established under law are subject to regulation by the people through the legislative process so long as such regulations are consistent with the powers of Congress and the States and do not limit the freedom of the press.

Doug Mataconis pays the proponents of the amendment the unwarranted compliment of taking the proposal seriously enough to offer a useful critique of the merits, including some of my writing on corporate personhood.

Eugene Volokh points out that the amendment would "Strip Pro-Business (But Not Anti-Business) Non-Profits of First Amendment Rights," making it a two-fer for Sanders and the rest of the socialist left. Volokh also argues that despite the amendment's fig leaf reference to freedom of the press, the amendment in fact would "Proposed Constitutional Amendment Would Ban Editorials About Candidates or Ballot Measures by Nearly All Newspapers." Oddly, however, <SARCASM>he says that as though it's a bad thing</SARCASM>.

Legal filings and free speech

The ABA Journal reports that:

A Minnesota lawyer is facing a possible sanction after she signed a legal memorandum written by her client calling a bankruptcy judge a "Catholic Knight Witch Hunter.”

The document signed by lawyer Rebekah Nett said the courts were "composed of a bunch of ignoramus, bigoted Catholic beasts that carry the sword of the church,” the St. Paul Pioneer Press reports. U.S. Bankruptcy Judge Nancy Dreher has issued an order to show cause why Nett and her client, Naomi Isaacson, shouldn’t each be fined $10,000.

I'm no First Amendment expert, but I can't help wondering why judges justify carving out an exception for themselves when the rest of us have to put up with offensive speech directed our way all the time (you should see of my student evaluations, for example). Perhaps my friend and colleague Eugene Volokh can explain it.

 

SCOTUS to rule on Obamacare ... and Freedom

The WSJ presents:

Nearly Everything You Need to Know About the Health Care Decision

But they miss the most basic question of all; namely, will we be a free people after this decision or subjects ruled by Congressional whims on everything except perhaps the "right" to kill the unborn?

Supreme Court agrees to hear question of corporate liability under the Alien Tort Statute

Tony Arend has the details

Rehabilitating the 10th Amendment

An interesting take on the prospects for restoring the federal government to its proper position as a government with limited and enumerated powers.

7-19

That's the Ninth Circuit's record in the last Supreme Court term. Seven affirmations versus 19 cases reversed or vacated:

It was another bruising year for the liberal judges of the U.S. 9th Circuit Court of Appeals as the Supreme Court overturned the majority of their decisions, at times sharply criticizing their legal reasoning.

Appeals from the nine Western states of the circuit dominated the high court's docket, as usual, supplying more than 30% of the 84 cases taken up by the justices during the term that ended last month. ...

In their reversals, the justices often expressed impatience with what they see as stubborn refusal by the lower court to follow Supreme Court precedent. One of the circuit's most renowned liberals, Judge Stephen Reinhardt, was seen by judicial analysts as the main target of the justices' pique.

Burkean Justice

In a 2004 post, I played with some ideas about what a Burkean theory of judicial review might lok like. In an essay this week, Adam White does a far better job of describing the ideal Burjean Justice, using Sam Alito as his template:

Justice Alito is uniquely attuned to the space that the Constitution preserves for local communities to defend the vulnerable and to protect traditional values. In these three new opinions, more than any others, he has emerged as the Court’s Burkean justice. ...

In November 1985, Samuel Alito ... wrote a letter laying out the roots of his conservatism:

When I first became interested in government and politics during the 1960s, the greatest influences on my views were the writings of William F. Buckley, Jr., the National Review, and Barry Goldwater’s 1964 campaign. In college, I developed a deep interest in constitutional law, motivated in large part by disagreement with Warren Court decisions, particularly in the areas of criminal procedure, the Establishment Clause, and reapportionment. I discovered the writings of Alexander Bickel advocating judicial restraint, and it was largely for this reason that I decided to go to Yale Law School.

And, Alito urged, “I believe very strongly” in “the legitimacy of a government role in protecting traditional values.” 

As a piece of advocacy, young Alito’s letter succeeded in convincing its audience. (He got the OLC job.) But 25 years later, it stands for much more, pointing the reader to at least three themes and influences that manifest themselves in Justice Alito’s opinions: government’s legitimate role in “protecting traditional values”; the thought of Yale professor Alexander Bickel, a Burkean conservative whose work was largely overshadowed by the emergence of modern “Originalist” jurisprudence; and the Warren Court’s reapportionment cases, which Alito’s father had the job of implementing in New Jersey. ...

... Alito believed then​—​and now, evidently​—​that the Constitution ultimately afforded government bodies some space to identify what their particular communities deemed to be “traditional values” and to preserve those values against the threat of outside attack. And from the rest of his letter, and his attempt to explain that letter decades later, it is clear that the government actors that Alito had in mind were, first and foremost, the state and local officials who grapple daily with difficult questions of right and duty, aggressor and victim.

Please go read the whole thing. It's a very informative and thoughtful piece.

CJ Roberts on Legal Scholarship, with comments on the PhD in law.

From the ACS blog:

Specifically Roberts claimed that legal scholarship is not relevant to the work of lawyers and judges, saying he is on the same page with Judge Harry T. Edwards of the U.S. Court of Appeals for the D.C. Circuit, who believes there is a great “disconnect between the academy and the profession.”

Roberts continued, “Pick up a copy of any law review that you see, and the first article is likely to be, you know, the influence of Immanuel Kant on evidentiary approaches in 18th Century Bulgaria, or something, which I’m sure was of great interest to the academic that wrote it, but isn’t of much help to the bar.”

As Glenn Reynolds put it, "It’s a fair cop, for the most part." But only for the most part.

When I sit down to write a new project, the reader I see in my mind's eye is one of the Delaware justices or chancellors who are engaged with corporate law scholarship. To use another metaphor, the bulls-eye of my target audience are jurists like Leo Strine, Jack Jacobs, Myron Steele, and so on. Corporate law academics make up the first ring, practicing lawyers the second ring, and everybody else is in the outermost ring.

I therefore adopted a style style that I hope is simple, direct, and reader-friendly. Even when dealing with complicated economic or financial issues, I try to make them readily accessible to legal audiences. At the same time, however, I have not shied away from bringing theory to bear on doctrine. Because the target audience of my scholarship includes not just academics but also judges and practicing lawyers, economic analysis is done solely qualitatively—no mathematical models or formal game theory—and kept as intuitive as possible. Even more important, economic analysis is never done for its own sake. In his well-known critique of modern legal scholarship, Judge Harry Edwards remarked: “Theory wholly divorced from cases has been of no use to me in practice.” My practice experience confirmed that criticism, at least as long as we put strong emphasis on the phrase “wholly divorced.” Theory brought to bear on specific legal issues often can be quite illuminating, as I hope to have illustrated at least from time to time.

Personally, I believe that's the right model. Law is applied science, not basic research. We're engineers, not theoretical physicists. Hence, I agree with Jason Mazzone's comment that:

Many new law professors hold a Ph.D. in some field other than law (philosophy, history, and economics are the most common). Such training is useful but it is no substitute for doctoral training in the actual field in which one labors.

Mazzone proposes that law schools should establish Ph.D. in law degree programs:

I have believed that law professors in the United States should hold a Ph.D. in law. That belief is even stronger today. One reason law professors should hold a Ph.D. in law is that doctoral training in law would improve the quality of legal scholarship. For example, much of the scholarship that is produced nowadays in my own field, Constitutional Law, is not especially good. There are likely a variety of reasons for this, including the inability of many authors to distinguish between writing an academic article and authoring a legal brief. Doctoral training, with a substantial dose of training in scholarly methods, would head off this and other problems.

I think it's a great idea.

Is the debt ceiling unconstitutional?

HuffPo:

Growing increasingly pessimistic about the prospects for a deal that would raise the debt ceiling, Democratic senators are revisiting a solution to the crisis that rests on a simple proposition: The debt ceiling itself is unconstitutional.

"The validity of the public debt of the United States, authorized by law... shall not be questioned," reads the 14th Amendment.

And they just now figured that out? Convenient timing.

I don't see why the quoted language would render the debt ceiling unconstitutional. The 14th amendment refers to the "public debt" as "authorized by law," which would seem to contemplate a law setting a limit on the amount of debt that is authorized. Next it says that the validity of the debt shall not be questioned. A default doesn't question the validity of the debt. To the contrary, a default acknowledges that the debt is valid, but can't be paid at the moment.

In any case, the article goes on to quote my friend and UCLAW colleague Adam Winkler at length:

Adam Winkler, a law professor at the University of California, Los Angeles, said that the 14th Amendment option has recently been much discussed in the field.

"Without any clear case law about the debt ceiling in particular, no one knows exactly how the courts would rule on that issue, about whether President Obama could ignore the debt ceiling," he said. "If he wanted to continue to service the public debt, he'd probably get away with it."

Which leads to a related question: Who's to stop him?

"To have standing to challenge a governmental action, you must show that you have suffered some injury from that action, and it's hard for someone to show such an injury," Winkler said. "If Congress acted as a unified body, and claims that the president has usurped their authority, then it may have some standing."

"But," he cautioned, "it would have to be a joint resolution. And this Senate would almost certainly block it."

Loss Causation in the SCOTUS

BNA Corporate Counsel Weekly reports that:

A unanimous U.S. Supreme Court ruled June 6 that securities fraud plaintiffs need not demonstrate loss causation in order to obtain class certification, reinstating investors' claims that Halliburton Inc. materially misrepresented the cost of asbestos litigation and the benefits of a merger (Erica P. John Fund Inc. v. Halliburton Co., U.S., No. 09-1403, 6/6/11).

In a decision authored by Chief Justice John G. Roberts, the court said that in light of its decision, it need not address other questions regarding its 1988 decision in Basic Inc. v. Levinson, 485 U.S. 224, the presumption of reliance afforded by that ruling, “or how and when it may be rebutted.” ...

In its would-be class securities fraud suit, plaintiff Archdiocese of Milwaukee Supporting Fund Inc., now known as Erica P. John Fund Inc., alleged that Halliburton made material misstatements regarding litigation expenses, changes to its accounting methodology, and the benefits of a merger. It sought to certify a class of investors who acquired Halliburton stock during the June 3, 1999, to Dec. 7, 2001 class period.

However, the district court declined to grant class certification, citing the plaintiff's failure to show loss causation with respect to any of the three issues. Affirming, the U.S. Court of Appeals for the Fifth Circuit said that to take advantage of the fraud-on-the-market presumption of reliance, the plaintiff must show loss causation at the class certification stage by a preponderance of the evidence. The justices agreed to review the controversy earlier this year, and the case was argued April 25 (26 CCW 129, 4/27/11).

However, according to the justices, such a view “contravenes Basic's fundamental premise—that an investor presumptively relies on a misrepresentation so long as it was reflected in the market price at the time of his transaction. The fact that a subsequent loss may have been caused by factors other than the revelation of a misrepresentation has nothing to do with whether an investor relied on the misrepresentation in the first place, either directly or presumptively through the fraud-on-the-market theory. Loss causation has no logical connection to the facts necessary to establish the efficient market predicate to the fraud-on-the-market theory.”...

Vacating and remanding, the high court said the Fifth Circuit erred by requiring the fund to prove loss causation at the class certification stage.

This should not be especially controversial. All the court is really saying is that loss causation is not a predicate for invoking the fraud on the market presumption of reliance. Plaintiffs still have to prove loss causation. I also don't read this opinion as completely shutting the door to defense arguments that, in appropriate cases, the loss causation issue does not involve sufficiently common questions of law and fact to allow class certification. Those probably will be very rare cases, but the argument will still be out there I think.

Larry Ribstein:

Dan Fisher correctly notes that “the U.S. Supreme Court once again confounded critics who accuse it of a pro-business bias.”

But I don’t necessarily agree with him that “[t]he decision reaffirms the entire court’s approval of securities class actions as a method of compensating investors for stock-market losses.”  Nothing fundamental has changed since the Court tightened the loss causation requirement in Dura Pharmaceuticals or limited the foreign reach of the securities laws in Morrison vs. National Australia Bank.  All the Court did is discipline a misapplication of doctrine.  Any more basic fix here will have to be up to Congress.

Barbara Black:

The U.S. Supreme Court unanimously held, in Erica P. John Fund, Inc. v. Halliburton Co.(Download Halliburton), that securities fraud plaintiffs do not have to prove loss causation in order to obtain class certification.  In a 10 page opinion, Chief Justice Roberts concisely rejected the Fifth Circuit's requirement of loss causation at the class certification stage, as "not justified by Basic or its logic....Loss causation addresses a matter different from whether the investor relied on a misrepresentation...."  "Loss causation has no logical connection to the facts necessary to establish the efficient market predicate to the fraud-on-the market theory."

In fact, Halliburton conceded at the oral argument that the 5th Circuit was wrong to require plaintiffs to prove loss causation in order to invoke Basic's presumption of reliance and sought to revise the Fifth Circuit's analysis -- the court didn't mean "loss causation," it meant "price impact."  Justice Roberts made short work of this: "We do not accept Halliburton's wishful interpretation of the Court of Appeals' opinion.  As we have explained, loss causation is a familiar and distinct concept in securities law; it is not price impact."  "Whatever Halliburton thinks the Court of Appeals meant to say, what it said was loss causation....Based on those words, the decision below cannot stand."

The Court explicitly does not "address any other question about Basic, its presumption, or how and when it may be rebutted."

Additional commentary: Jim Hamilton (long and detailed, good read); Kevin LaCroix (ditto).

Shareholders and corporate political speech

Lucian Bebchuk's acolytes continue to spread the claim that shareholders ought to be actively involved in an ever-expanding array of corporate decisions. The latest case in point is Robert Jackson's post at the Harvard Forum, which asserts that the SEC should "give shareholders a greater role in corporate political speech decisions."

Jackson praises the SEC's recent shift in position on Rule 14a-8, which allows shareholders to include proposals on the company’s proxy ballot for a vote by shareholders. Formerly, the SEC took the position that proposals affected corporate political speech could be excluded from the company's proxy statement under rule 14a-8(i)(7) as ordinary business matters. Recently, however, the SEC has changed its position and has begun requiring companies to include such proposals. As Jackson explains:

This proxy season, a Home Depot shareholder, NorthStar Asset Management, asked the company to include on its ballot a proposal recommending, among other things, that the board disclose its policies on electioneering contributions—and give shareholders an advisory vote on those policies. Home Depot sought permission from the SEC to exclude the proposal from its ballot, arguing that the proposal related to Home Depot’s ordinary business operations. In a letter opposing Home Depot’s request, and citing our article, NorthStar argued that Rule 14a-8 required the proposal to be included.

In March, the staff agreed with NorthStar, concluding that the proposal could not be excluded on the ground that it related to Home Depot’s ordinary business operations. Home Depot’s proxy statement, filed two weeks later, now includes the proposal on the ballot—along with management’s statement opposing the proposal.

One wonders why the SEC's shift in position on this issue doesn't raise the same sort of issues raised in the ADSCME v. AIG case. AFSCME's pension fund owned a substantial block of AIG stock, and advanced a shareholder proposal that would have amended the firm’s by-laws effectively to turn the firm’s proxy solicitation material into a ballot: the firm would be required to include in its proxy material not just the incumbent board’s slate, but also rival slates proposed by insurgents. AIG management asked the SEC whether it could exclude the proposal on the grounds that “relate[d] to an election” (Rule 14a-8(i)(8)). The SEC replied that it could (i.e., it issued a no-action letter), AIG excluded the proposal, and AFSCME sued.

The court held that AIG may not exclude the proposal.

Because the interpretation of Rule 14a-8(i)(8) that the SEC advances in its amicus brief-that the election exclusion applies to proxy access bylaw proposals-conflicts with the 1976 Statement, it does not merit the usual deference we would reserve for an agency’s interpretation of its own regulations. … The SEC has not provided, nor to our knowledge has it or the Division ever provided, reasons for its changed position regarding the excludability of proxy access bylaw proposals. Although the SEC has substantial discretion to adopt new interpretations of its own regulations in light of, for example, changes in the capital markets or even simply because of a shift in the Commission’s regulatory approach, it nevertheless has a “duty to explain its departure from prior norms.” Atchison, T. & S.F. Ry. Co. v. Wichita Bd. of Trade, 412 U.S. 800, 808, 93 S.Ct. 2367, 37 L.Ed.2d 350 (1973) (citing Sec. of Agric. v. United States, 347 U.S. 645, 652-53, 74 S.Ct. 826, 98 L.Ed. 1015 (1954))....

Why doesn't the same logic require an explanation here? Preferably by way of a formal rule making subject to APA checks and balances, with opportunity for comment by affected parties?

In any case, as is typical with Bebchuk and his acolytes, Jackson is not satisfied with this victory:

... under current corporate-law rules shareholders’ role in this area remains far too limited. For example, NorthStar’s proposal, consistent with Delaware law, merely recommends that the board disclose its policies on political spending and give shareholders a say on those policies. Even if shareholders overwhelmingly vote for NorthStar’s proposal, Home Depot will not be bound to follow it.

To the extent that the interests of directors and executives in corporate spending on politics diverge from those of shareholders, corporate-law rules should give shareholders meaningful authority with respect to those decisions.

One increasingly wonders if there is any issue Bebchuk and his acolytes think ought to be outside the scope of shareholder decision making.

State corporate law provides clearly that the corporation’s business and affairs are “managed by or under the direction of a board of directors.” The vast majority of corporate decisions accordingly are made by the board of directors acting alone, or by persons to whom the board has properly delegated authority. Shareholders have virtually no right to initiate corporate action and, moreover, are entitled to approve or disapprove only a very few board actions. The statutory decision-making model thus is one in which the board acts and shareholders, at most, react.

Shareholder voting thus is simply one of many corporate accountability mechanisms—and not a very important one at that. In theory, of course, shareholders could vote incompetent directors out of office. In the real world, however, so-called proxy contests are subject to numerous legal and practical impediments that render them largely untenable as a tool for disciplining managers. Accordingly, the product, capital, and employment markets are all far more important than voting as a constraint on agency costs. To the extent voting matters, it does so solely because it facilitates the market for corporate control. If agency costs get high enough, it will become profitable for some outsider to acquire a controlling block of shares and exercise their associated voting rights to oust the incumbent board.

Jackson's complaint that Home Depot is not bound by the proposal thus ought to fall on deaf ears. As Delaware’s Chancellor William Allen observed, our “corporation law does not operate on the theory that directors, in exercising their powers to manage the firm, are obligated to follow the wishes of a majority of shares. In fact, directors, not shareholders, are charged with the duty to manage the firm.” Paramount Communications Inc. v. Time Inc., 1989 WL 79880 at *30 (Del. Ch. 1989), aff’d, 571 A.2d 1140 (Del. 1990).

Allen further recognized that the fact that many, “presumably most, shareholders” would have preferred the board to make a different decision “done does not . . . afford a basis to interfere with the effectuation of the board’s business judgment.” In short, corporations are not New England town meetings.

It's also worth remembering that the beneficiaries of Bebchuk's incessant pressing of ever expanding shareholder power and that of acolytes like Jackson is not going to benefit ordinary investors. Instead as Roberta Romano observed with respect to union and public pension fund sponsorship of shareholder proposals:

It is quite probable that private benefits accrue to some investors from sponsoring at least some shareholder proposals. The disparity in identity of sponsors—the predominance of public and union funds, which, in contrast to private sector funds, are not in competition for investor dollars—is strongly suggestive of their presence. Examples of potential benefits which would be disproportionately of interest to proposal sponsors are progress on labor rights desired by union fund managers and enhanced political reputations for public pension fund managers, as well as advancements in personal employment. … Because such career concerns—enhancement of political reputations or subsequent employment opportunities—do not provide a commensurate benefit to private fund managers, we do not find them engaging in investor activism.[1]

---

[1] Roberta Romano, Less Is More: Making Shareholder Activism A Valued Mechanism Of Corporate Governance, 18 Yale J. Reg. 174, 231-32 (2001).

I've dealt with these issues in greater length elsewhere, most notably The Case for Limited Shareholder Voting Rights, 53 UCLA Law Review 601-636 (2006), which explained that:

Recent years have seen a number of efforts to extend the shareholder franchise. These efforts implicate two fundamental issues for corporation law. First, why do shareholders - and only shareholders - have voting rights? Second, why are the voting rights of shareholders so limited? This essay proposes answers for those questions.

As for efforts to expand the limited shareholder voting rights currently provided by corporation law, the essay argues that the director primacy-based system of U.S. corporate governance has served investors and society well. This record of success occurred not in spite of the separation of ownership and control, but because of that separation. Before changing making further changes to the system of corporate law that has worked well for generations, it would be appropriate to give those changes already made time to work their way through the system. To the extent additional change or reform is thought desirable at this point, surely it should be in the nature of minor modifications to the newly adopted rules designed to enhance their performance, or rather than radical and unprecedented shifts in the system of corporate governance that has existed for decades.

And Director Primacy and Shareholder Disempowerment, 119 Harvard Law Review (2006), which was a response to Lucian Bebchuk's article The Case for Increasing Shareholder Power, 118 Harvard Law Review 833 (2005). In that article, Bebchuk put forward a set of proposals designed to allow shareholders to initiate and vote to adopt changes in the company's basic corporate governance arrangements.

In response, I made three principal claims:

First, if shareholder empowerment were as value-enhancing as Bebchuk claims, we should observe entrepreneurs taking a company public offering such rights either through appropriate provisions in the firm's organic documents or by lobbying state legislatures to provide such rights off the rack in the corporation code. Since we observe neither, we may reasonably conclude investors do not value these rights.

Second, invoking my director primacy model of corporate governance, I present a first principles alternative to Bebchuk's account of the place of shareholder voting in corporate governance. Specifically, I argue that the present regime of limited shareholder voting rights is the majoritarian default and therefore should be preserved as the statutory off-the-rack rule.

Finally, I suggest a number of reasons to be skeptical of Bebchuk's claim that shareholders would make effective use of his proposed regime. In particular, I argue that even institutional investors have strong incentives to remain passive.