ProfessorBainbridge.com

Is there a future for a conservatism skeptical of capitalism as practiced in Silicon Valley?

In a WaPo article, Greg Jaffe takes note of tech billionaires worried about the future of capitalism:

For decades, Democrats and Republicans have hailed America’s business elite, especially in Silicon Valley, as the country’s salvation. The government might be gridlocked, the electorate angry and divided, but America’s innovators seemed to promise a relatively pain-free way out of the mess. Their companies produced an endless series of products that kept the U.S. economy churning and its gross domestic product climbing. Their philanthropic efforts were aimed at fixing some of the country’s most vexing problems. Government’s role was to stay out of the way.

Now that consensus is shattering. For the first time in decades, capitalism’s future is a subject of debate among presidential hopefuls and a source of growing angst for America’s business elite. In places such as Silicon Valley, the slopes of Davos, Switzerland, and the halls of Harvard Business School, there is a sense that the kind of capitalism that once made America an economic envy is responsible for the growing inequality and anger that is tearing the country apart.

Predictably, Jaffe made no effort to talk to conservatives. Instead, he spoke to a Democratic Congressman (Ro Khanna), talked about Democrats (Warren, Sanders, etc....), and focused on Silicon Valley tycoons who tend to run liberal or libertarian in their politics.

Any serious consideration of the state of capitalism in this country, however, is going to have to confront the long tradition of conservative skepticism about capitalism. In my essay, Conservative Critiques of Capitalism, I reviewed Peter Kolozi's book, Conservatives Against Capitalism: From the Industrial Revolution to Globalization, which discusses the long tradition of skepticism about—and sometimes outright hostility to—capitalism among important strains of American conservative thought. Kolozi takes a chronological approach focusing on key thinkers representative of the prevailing conservative school of thought in each of six periods: John C. Calhoun, James Henry Hammond, and George Fitzhugh representing the antebellum defenders of slavery; Brook Adams and Theodore Roosevelt of the Progressive Era; the Southern Agrarians; post-war traditionalists such as Russell Kirk and Robert Nisbet; Reagan-Bush era neoconservatives; and paleoconservatives such as Patrick Buchanan and Samuel Francis.

In it, I argue that:

In endorsing the need to “humanize the economy,” Russell Kirk cited with approval Orestes Brownson’s view that Catholic social thought could “work within and through the established political institutions of the United States” to do so. Kirk’s political economy in fact had much in common with G. K. Chesterton’s distributism, which in turn was rooted in Catholic social teaching.

Likewise, Southern Agrarian political economy and Catholic social thought both supported private property and markets, while opposing the rise of a global market in which “human relations themselves are treated as commodities.” Indeed, there was much commonality between the views of the Southern Agrarians (especially in the mid-1930s) and Catholic social thought at the time with respect to issues of economics and social justice.

The point is not that conservatives need to embrace Catholic social thought unmodified, even if they could. There are serious conflicts between Catholic social thought and the post-Trump populist base upon which the conservative movement seemingly must rest. To cite but the most obvious of examples, the Tea Party and paleoconservatives have been consistently hostile to immigration and the so-called undeserving poor.

The point is simply that conservatives must begin breathing new life into the traditions to which Kolozi has so usefully drawn their attention. The search for a practical and achievable economic order that balances productivity, growth, community, tradition, and human decency needs to continue.

Assume a Theranos director knew what was going on, what should they have done?

DGCL § 141(b) provides that:

Each director shall hold office until such director’s successor is elected and qualified or until such director’s earlier resignation or removal. Any director may resign at any time upon notice given in writing or by electronic transmission to the corporation. A resignation is effective when the resignation is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events.

The American Bar Association’s authoritative Corporate Director’s Guidebook recommends that:

If, after a thorough discussion, a director disagrees with any significant action the board is taking, the director should consider abstaining or voting against the proposal. The director should also consider requesting that the abstention or dissent be recorded in the meeting’s minutes. Except in unusual circumstances, taking such a position should not cause a director to consider resigning. Resignations should be considered if a director believes that management is not dealing with the directors, the shareholders, or the public in good faith or that the information being disclosed by the corporation is inadequate, incomplete, or incorrect and the director is unable to convince the board to take action. Directors may also consider resigning when they feel their point of view is being disregarded entirely. Public corporations are required to disclose director resignations in an SEC filing, and this disclosure, like others, should be done in consultation with legal advisors.[1]

An earlier edition of the Guidebook stated that:

If, after a thorough discussion, a director disagrees with any significant action proposed to be taken by the board, the director may vote against the proposal and request that the dissent be recorded in the meeting’s minutes. Except in unusual circumstances, taking such a position should not cause a director to consider resigning. However, if a director believes that information being disclosed by the corporation is inadequate, incomplete or incorrect, or that management is not dealing with the directors, the shareholders or the public in good faith, the director should first encourage that corrective action be taken. If that request is not satisfied or the problem continues, the director should encourage the board to replace management and, if such a change does not occur, the director should resign.[2]

In Shocking Technologies, Inc. v. Michael,[3]the court held that:

First, fair debate may be an important aspect of board performance. A board majority may not muzzle a minority board member simply because it does not like what she may be saying. Second, criticism of the conduct of a board majority does not necessarily equate with criticism of the corporation and its mission. The majority may be managing the business and affairs of the corporation, but a dissident board member has significant freedom to challenge the majority’s decisions and to share her concerns with other shareholders. On the other hand, internal disagreement will not generally allow a dissident to release confidential corporate information.

In Wechsler v. Squadron, Ellenoff, Plesent & Sheinfeld, LLP,[4]the court held that:

Can a director of a public corporation who believes that the company is engaged in ongoing securities fraud “blow the whistle” by disclosing to the SEC information protected by the company’s attorney-client privilege, where the company’s Board has not waived the privilege? As a matter of public policy, the Court holds that the answer is yes, although the company could sue the whistle-blowing director for breach of fiduciary duty if such disclosure were not in the company’s best interest.

What are the social functions of a stock market?

Merritt Fox offers an interesting primer.

Executive Compensation Trends

CLS Blue Sky Blog reprints ISS' annual analysis of executive compensation trends. Key findings:

• Compensation disclosures so far suggest continued increases in CEO pay across all market segments and almost all industries.
• The proportion of stock-based compensation as a percentage of total pay continues to increase, crossing the threshold of 50 percent of total pay for large companies for the first time this year.
• Performance-based equity compensation also continues to increase despite concerns of a potential reversal in the aftermath of the repeal of 162(m).
• CEO pay ratios remain relatively unchanged on aggregate, despite some fluctuations observed at individual companies.

Mark Lemley's Open Letter to the Harvard Law Review is an Amusing Lesson on Manners

Brian Leiter has it. Law professors will love it.

Bishop Barron on Notre Dame

I got a tax cut. You probably did too. The difference is that I knew I paid less.

According to the NYT, however, you probably don't:

The authors explain:

To a large degree, the gap between perception and reality on the tax cuts appears to flow from a sustained — and misleading — effort by liberal opponents of the law to brand it as a broad middle-class tax increase. ...

In convincing people that they would not benefit, “the Democrats did a very good job,” said Howard Gleckman, a senior fellow at the Tax Policy Center. “They were able to put that into the public perception, and the reality has been unable to break that perception.”

What's truly astonishing, of course, is that the NY Times published this article. You'd figure they'd want to hush it up.

The seriously flawed "metropolitan model" gains momentum as how the American Catholic Church will purport to hold Bishops accountable

From Crux:

During the February summit in Rome, Cardinal Blase Cupich of Chicago, one of the summit’s organizing committee members, gave a speech instead outlining “new legal structures of accountability,” which would utilize the metropolitan archbishop who oversees the dioceses within his particular province. 

Under the “metropolitan option,” as it has often been referred to, the metropolitan archbishop would be responsible for overseeing the investigation into bishops accused of abuse in conjunction with a local review board, unless there were compelling reasons to hand the case over either to the pope’s nuncio, or ambassador, in the country, or to the Vatican itself.

At a press conference during the Vatican summit, Cupich said his proposal was different from the original USCCB plan as it would become obligatory, whereas the original proposal gave bishops the ability to opt into it. He also said the proposal would give the plan a more local character necessary to follow up and communicate with victims.

DiNardo told Crux at the time that looking ahead to plans to vote on new measures, that “we have to tweak some things” regarding the original protocols and hinted that the final proposal he hoped to be put to a vote in June will likely “put the two together,” referring to the metropolitan model.

The metropolitan model is seriously flawed, for reasons I discussed in my Public Discourse article Lay Review With Teeth: What (Didn’t) Happen at the Vatican’s Sexual Abuse Summit:

Cardinal Cupich’s ... proposals are limited to developing new mechanisms for holding bishops accountable. This is a necessary but not sufficient reform. Instead, the Church should undertake major reforms of the rules governing sexual misconduct at all levels and by all Church personnel. ...

Cupich’s model has a number of disadvantages. First, in modern times, the role of a metropolitan has been reduced to a virtual irrelevancy. Many Church members have never even heard of a metropolitan. The metropolitan model therefore may not do much to restore confidence in the Church.

Second, although the metropolitan model purportedly contemplates lay participation, it appears that the laity’s role would be limited to experts who will act as assistants to the metropolitan. In other words, the laity will continue to be denied a decision-making role in the accountability process. Cardinal Cupich’s proposal leaves decision-making power in the hands of those authorities that Church members trust least: the bishops and the Vatican hierarchy.

Assigning primary responsibility for investigated claims against a bishop to that bishop’s metropolitan is especially problematic, as Charles Collins of the Catholic news website Crux has observed, because “metropolitan archbishops often have a lot of say in who becomes bishops in their province.” Church members likely will lack confidence in the metropolitan’s ability to be objective with respect to someone who may be regarded as a protégé, friend, or ally of the metropolitan.

The relationship between a metropolitan and his suffragan bishops becomes even more problematic when it is the metropolitan himself who is the accused.

Kindly go read the whole thing. See also my article Restoring Confidence in the Roman Catholic Church: Corporate Governance Analogies, which is available at SSRN: https://ssrn.com/abstract=3249236. Here's the abstract:

Abstract. Events of the Summer 2018 brought the long running sexual abuse crisis in the Roman Catholic Church back onto the front pages, highlighting the role of diocesan bishops in covering up the scandal and enabling abusers. In response to these developments, the Church is again considering reforms to protect victims and punish abusers and enablers. This article proposes that the Church create a system for laity to anonymously report allegations, enact strong protections for whistleblowers, and impose a mandatory whistleblowing requirement on priests. As a 2018 Pennsylvania grand jury report demonstrates, however, the laity was reporting the abuse to the Church but the hierarchy buried those reports in secret files. The ultimate problem thus is not so much the lack of reporting, as it was the lack of action after the report. Accordingly, the article’s principal proposal is the creation of both diocesan and national disciplinary bodies led by expert lay members as the ultimate authorities in sex abuse cases. The proposal draws an analogy between these bodies and corporate audit committees and argues that a number of aspects of how audit committees function can be usefully adapted to the proposed review bodies.

This version of the article has been revised to take into account developments at the February 2019 Vatican summit on the sex abuse scandal. Those developments do not change the recommendations made herein.

At the core of the sex abuse scandal is abuse of clerical and episcopal power. The voice of the laity must be heard. Concerned Catholics need to reach out to their bishops and implore them adopt meaningful reforms rather than a misbegotten metropolitan model that won't work, won't inspire confidence, and won't stop people from leaving the Church.

Should the law regard corporations as a “person”? Why or why not?

The titular question was brought to my attention on Quora, which elicited this response from yours truly:

The idea that a corporation is a legal person with constitutional rights is, of course, a controversial one. Some commentators argue that it's bad policy. In my view, however, it is a well-settled principle of US constitutional law and justifiably so.

On the one hand, the courts have never empowered corporations with "privileges of citizenship." The second clause of the 14th Amendment - the so-called Privileges and Immunities - states that: "No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States." But it is settled that the Privileges and Immunities Clause does not protect corporations, because corporations are not deemed citizens for purposes of the 14th Amendment. Western and Southern Life Ins. Co. v. State Bd. of Equalization of California, 451 U.S. 648, 656 (1981). Conversely, however, "It is well established that a corporation is a 'person' within the meaning of the Fourteenth Amendment." Metropolitan Life Ins. Co. v. Ward, 470 U.S. 869, 881 (1985).

The common law had long recognized the legal personality of corporate bodies. See Book I, Chapter 18 of Blackstone, Commentaries on the Laws of England (1765-1769). But what of the Constitution?

The key case for constitutional law purposes is Santa Clara County v. Southern Pacific Railroad, 118 U.S. 394 (1886). Curiously, if one carefully reads Justice Harlan's decision in that case, one will find neither a clear statement nor a citation of authority concerning whether corporations are "persons." That point, instead, is made in the syllabus by the Reporter, who related that at oral argument the Chief Justice had stated that:

The court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of the opinion that it does.

Despite it's somewhat odd parentage, the principle is sound.

The legislative history of the Fourteenth Amendment suggests that Congress substituted the word ''person'' for the word ''citizen'' precisely so that the provisions so affected would protect not just natural persons but also legal persons, such as corporations, from oppressive legislation. We see this view further confirmed Roscoe Conkling's recounting of the relevant legislative history in Conkling's arguments in San Mateo County v. Southern Pac. R.R., 116 U.S. 138 (1885). Conkling had been a member of the Joint Congressional Committee that drafted the 14th amendment and in Southern Pacific argued to the Justices that it had been the intent of Congress for the word "person" to include "legal" persons (corporations) as well as "natural" persons within the protective scope of the due process and equal protection clauses of the amendment. The Court accepted Conkling's argument.

As Larry Ribstein argues, this development made policy sense:

... corporations are people – the owners and others the corporation represents in litigation. These people have speech rights, rights not to be discriminated against, and so forth. I’ve written on this ...:

The Constitutional Conception of the Corporation, 4 Supreme Court Economic Review 95 (1995); Corporate Political Speech, 49 Wash. & Lee L. Rev. 109 (1992) and in my book with Henry Butler, The Constitution and the Corporation (1995) ....

So the African-American owners of this SBA-certified minority-owned contractor shouldn't lose their civil rights because they chose to do business in the corporate form. They might be required to sue as a corporation, as in this case, because that’s a convenient way to handle litigation, but that doesn’t determine their individual rights.

But courts also should recognize that, by the same principle, people shouldn't lose their speech rights just because they exercise these rights though the corporation in which they have invested.

Germans want NATO to protect them, but they don't want to pay or fight for it ... Trump's got a point

From DW:

And from Pew:

And from the WaPo:

65 percent of Germans still believe that the United States would fulfill its NATO commitment by using military force to defend an ally threatened by Russia, while only 40 percent think their own country should.

If Germans don't want to pay their fair share or put their own troops on the line, why should the USA continue allowing them to hide behind our skirts? Why should our taxes and the lives of our troops go to defend such a feckless "ally"?

This is no time for Trump to go wobbly on China

Time reports:

The Trump Administration has put on hold a previously reported sale of jet fighters to Taiwan until the United States seals a trade deal with China, three Administration officials told TIME on Thursday.

That decision has contributed to concern among some in the Administration that the President may soon go soft on China in his desire to secure a trade deal. The draft trade agreement currently under negotiation would boost Trump’s political fortunes and ease the jittery stock market, but it is unlikely to address many of the issues at the core of the U.S.-China trade dispute, said the U.S. officials, who spoke anonymously because they aren’t authorized to discuss the matter publicly.

One must take anything Time says with a grain of salt, of course, but if true it's extremely disappointing. What's the point of throwing a trade dispute and getting nothing in return? The list of things China is doing that the US needs to push back against is long and growing:

• Intellectual property theft
• Unfair trading practices
• Subsidizing national champions
• Capturing third world countries in debt
• Illegally expanding its hold on the South China Sea
• Repression of Uighurs
• Repression in Tibet
• Repression of Christians and other minorities

And on and on. Taiwan is a vibrant democracy and deserves our support. Trump should sell them whatever they need and hold out for a true trade deal win with China that forces it to address our legitimate complaints.

Is identity politics just a cover for left-wing academics having accepted global capitalism?

I don't buy it, but Rod Dreher presents an interesting argument made by "an academic with an enviable position at a prestigious university" who is so scared of his leftist colleagues and students that he insisted on anonymity:

... he objects to the idea typically propagated by conservatives: that “leftism” is destroying universities. It’s not that; it’s something else. It’s not a “left” that the 1960s radicals would recognize, he says. In fact, despite the weirdness around “Sex Weeks” at universities, and gender ideology, campuses are actually becoming far more restrained places. In some places, you can’t even teach some of the important left-wing thinkers and artists of the recent past without running the risk that you’ll be reported to the administration for sexually harassing sensitive students, simply for bringing these people up in class and expecting students to engage with their work.

Yes, says Prof. Jones, this is the triumph of a strand of leftism, but not leftism in the historically significant manifestations of left-wing thought, the kind that has made such an important mark on Western civilization.

The thing to note, he says, is the way that these campuses, for all their wokeness, are completely prostrate before global capital. Anybody under the impression that US universities are places where old-fashioned left-wing class politics has any meaningful presence is out of his mind. Embracing identity politics is a way of disguising the fact that the contemporary left has made peace with global capitalism.

It's an interesting theory. But I see the modern campus left as being fellow travelers with the totalitarian left.