ProfessorBainbridge.com

Should Christian businesses reincorporate as B Corps? If they did, would they have a stronger case against the Obamacare mandate?

Keith Paul Bishop raises an issue I've been pondering:

Steve Hazen alerted me to the fact that California Attorney General Kamala D. Harris has filed an amicus brief in Sebelius v. Hobby Lobby Stores, Inc., U.S. Supreme Court Docket No. 13-354.  The question presented in that case is:

The Religious Freedom Restoration Act of 1993 (RFRA), 42 U.S.C. 2000bb et seq., provides that the government “shall not substantially burden a person’s exercise of religion” unless that burden is the least restrictive means to further a compelling governmental interest. 42 U.S.C. 2000bb-1(a) and (b). The question presented is whether RFRA allows a for-profit corporation to deny its employees the health coverage of contraceptives to which the employees are otherwise entitled by federal law, based on the religious objections of the corporation’s owners.

Among other arguments, Attorney General Harris argues that the “the notion that a corporation may exercise religion would pose a number of challenges to federal and state governments and courts.”  This argument is plainly false because it assumes that corporations don’t already exercise religion.  In fact, California has a law that expressly authorizes the formation of corporations “primarily or exclusively for any religious purposes” – The Nonprofit Religious Corporation Law, Cal. Corp. Code § 9110 et seq.  This law has been on the books for over three decades.  It is clear, therefore, that California has no real problem with the idea that a corporation may have a religious purpose.

The Religious Corporation Law is one of California’s nonprofit laws.  Thus, a religious corporation must not be organized for the gain of any person.  Cal. Corp. Code § 9130(b).  The question presented is whether the RFRA allows for-profit corporations to deny coverage of contraceptives.  Here’s where California’s Corporate Flexibility Act of 2011, Cal. Corp. Code § 2500 et seq., might create an opportunity for some religiously motivated shareholders to pursue both a religious purpose (for the benefit of the community and society) and a profit.  It remains to be seen whether this can or will be done.

I wonder what Haskell Murray makes of all this?

When it comes to Bishop versus Coates, I'm with the former

Keith Paul Bishop blogs:

Harvard Law School Professor John C. Coates recently published this post accusing the Securities and Exchange Commission of making policy and political mistakes in taking disclosure off of the “SEC’s agenda”.  I beg to differ.

• Political disclosure was never on the SEC’s agenda.  Technically, it was on what is known as the Unified Agenda of Federal Regulatory and Deregulatory Actions.  This is a semiannual compilation of information about regulations under development by federal agencies, published in the spring and fall.  See SEC Includes Disclosure Of Corporate Political Spending Rule In Unified Agenda – What Does It Mean?  I agree with Broc Romanek’s assessment of the significance of placement on the Unified Agenda:

Apparently, some folks didn’t get the memo and continue to make the Reg Flex Agenda a newsworthy item after being completely ignored for decades.

•  600,000 + investors did not write to the SEC “personally”.  First of all, I don’t know on what basis Professor Coates determined that all letters were sent by actual investors.  The SEC received 285,000 letters which it categorized as “Type A“.   This form of letter does not indicate whether the writer is an investor.  The fact that these are form letters belies any claim that these are “personally” written letters.
• The SEC should not be playing politics.   Although it is debatable whether the SEC is truly an independent agency, most people assume that it is.  In any event, the raison d’être of the SEC is not to play politics, but to be an expert agency focused on the administration and enforcement of the securities laws.  Indeed, the adoption of a political spending disclosure rule would likely weaken the SEC by politicizing it and immersing it further in areas outside its core competency.
• Let the market decide.  Professor Coates argues that numerous academic studies demonstrate “the relevance of political activity to shareholder interests”.  Relevance is a extraordinarily weak criterion for regulatory action.  The reality is that shareholders do not pass political spending proposals.  It is this failure at the ballot box that has led proponents of political spending disclosure to lobby the SEC for a new rule.  The SEC should not be a vehicle for forced subsidization of special interest groups.

Can Corporate Law Make Companies "More Sustainable" (or Whatever)?

Marcia Narine blogs:

On December 5th and 6th I attended and presented at the third annual Sustainable Companies Project Conference at the University of Oslo.  The project, led by Beate Sjafjell began in 2010 and attempts to seek concrete solutions to the following problem:

Taking companies’ substantial contributions to climate change as a given fact, companies have to be addressed more effectively when designing strategies to mitigate climate change. A fundamental assumption is that traditional external regulation of companies, e.g. through environmental law, is not sufficient. Our hypothesis is that environmental sustainability in the operation of companies cannot be effectively achieved unless the objective is properly integrated into company law and thereby into the internal workings of the company.

Sorry, but I don't buy it. The best thing I ever read on the subject (and an article I desperately wish I had written) is Gordon Smith's essay The Dystopian Potential of Corporate Law:

The community of corporate law scholars in the United States is fragmented. One group, heavily influenced by economic analysis of corporations, is exploring the merits of increasing shareholder power vis-a-vis directors. Another group, animated by concern for social justice, is challenging the traditional, shareholder-centric view of corporate law, arguing instead for a model of stakeholder governance. The current disagreement within corporate law is as fundamental as in any area of law, and the debate is more heated than at any time since the New Deal. 

This paper is part of a debate on the audacious question, Can Corporate Law Save the World? In the first part of the debate, Professor Kent Greenfield builds on his book, THE FAILURE OF CORPORATE LAW: FUNDAMENTAL FLAWS AND PROGRESSIVE POSSIBILITIES, offering a provocative critique of the status quo and arguing that corporate law matters to issues like the environment, human rights, and the labor question. 

In response, Professor Smith contends that corporate law does not matter in the way Professor Greenfield claims. Corporate law is the set of rules that defines the decision making structure of corporations, and reformers like Professor Greenfield have only two options for changing corporate decision making: changing the decision maker or changing the decision rule. More specifically, he focuses on board composition and shareholder primacy. Professor Smith argues that changes in corporate law cannot eradicate poverty or materially change existing distributions of wealth, except by impairing the creation of wealth. Changes in corporate law will not clean the environment. And changes in corporate law will not solve the labor question. Indeed, the only changes in corporate law that will have a substantial effect on such issues are changes that make the world worse, not better.

Smith's case strikes this observer as irrefutable. But decide for your self.

Chateau Gruaud Larose (St Julien) 1982

At age 31, the 82 Gruaud Larose was brilliant. The fill was still in the neck (although just barely). Decanted 30 minutes before dinner. It's a medium-deep ruby with just a bit of brick at the rim. It offers a huge bouquet, which suggests dried currants, blackberry, prunes, leather, tobacco, and cedar. Much the same on the palate. Long finish. A wonderful match for rack of lamb. Grade: A++

"The Global War on Christians" by John Allen

From the WSJ:

"Christians today," writes John L. Allen Jr. , "indisputably are the most persecuted religious body on the planet." So widespread and systematic are the attacks, he explains, that they amount to a global war, which he proclaims "the transcendent human rights concern" in the modern world.

Mr. Allen is by no means the first writer to address this phenomenon, but he may be the best qualified. He has through the years established himself as among the best-informed commentators on the Vatican and the state of the Roman Catholic Church, and hearing so many contacts recount stories of persecution and discrimination has naturally sensitized him to anti-Christian campaigns, and by no means only those directed against Catholics.

The range of stories he tells is staggering and offers a compendium of modern-day heroes equal to anything in the church's long history. We are awed by the story of Catholic Archbishop Christophe Munzihirwa, who died in 1998 trying to safeguard his flock from the mounting carnage in the wars engulfing Congo and Rwanda. Time and again, he stood face to face with oppressors, dictators and genocidaires, until finally some soldiers shot him in the streets.

Mr. Allen's main point, though, is less to report the persecutions than to ask in bafflement why the West seems to care so little about them. Yes, the American media report individual attacks, provided they cause some critical minimum number of fatalities—20, say—but they offer no sense of generalized mayhem, any awareness that the same groups and denominations are being victimized in India and Sudan, in Indonesia and Kenya. Would such silence prevail in the face of a global campaign against any other group, ethnic or religious?

For an example of such silence, look immediately below. Back to the book, from Amazon:

From Iraq and Egypt to Sudan and Nigeria, from Indonesia to the Indian subcontinent, Christians in the early 21st century are the world's most persecuted religious group. According to the secular International Society for Human Rights, 80 percent of violations of religious freedom in the world today are directed against Christians. In effect, our era is witnessing the rise of a new generation of martyrs. Underlying the global war on Christians is the demographic reality that more than two-thirds of the world's 2.3 billion Christians now live outside the West, often as a beleaguered minority up against a hostile majority-- whether it's Islamic fundamentalism in the Middle East and parts of Africa and Asia, Hindu radicalism in India, or state-imposed atheism in China and North Korea. In Europe and North America, Christians face political and legal challenges to religious freedom. Allen exposes the deadly threats and offers investigative insight into what is and can be done to stop these atrocities.

Related articles

Book review: 'The Global War on Christians'

The Global War on Christians

Juan Williams: Forget the War on Christmas ...

Maybe Bebchuk's anti-staggered board campaign was a bad idea after all

Countless US corporations have eliminated their staggered boards of directors in large part because of a campaign by activist shareholders abetted in large part by corporate governance academics, especially Lucian Bebchuk. (See this Dealbook article.) New research, however, suggests that Bebchuk's anti-staggered board arguments were misplaced:

This paper revisits the association between firm value (as proxied by Tobin’s Q) and whether the firm has a staggered board. As is well known, in the cross-section firms with a staggered board tend to have a lower value. Using a comprehensive sample for 1978-2011, we show an opposite result in the time series: firms that adopt a staggered board increase in firm value, while de-staggering is associated with a decrease in firm value. We further show that the decision to adopt a staggered board seems endogenous, and related to an ex ante lower firm value, which helps reconciling the existing cross-sectional results to our novel time series results. To explain our new results, we explore potential incentive problems in the shareholder-manager relationship. Short-term oriented shareholders may generate myopic incentives for the firm to underinvest in risky long-term projects. In this case, a staggered board may helpfully insulate the board from opportunistic shareholder pressure. Consistent with this, we find that the adoption of a staggered board has a stronger positive association with firm value for firms where such incentive problems are likely more severe: firms with more R&D, more intangible assets, more innovative and larger and thus likely more complex firms.

Cremers, Martijn and Litov, Lubomir P. and Sepe, Simone M., Staggered Boards and Firm Value, Revisited (December 5, 2013). Available at SSRN: http://ssrn.com/abstract=2364165

Cheffins: "The Corporate Governance Movement, Banks and the Financial Crisis"

Interesting new paper from Brian Cheffins:

This paper discusses why a "corporate governance movement" that commenced in the United States in the 1970s became an entrenched feature of American capitalism and describes how the chronology differed in a potentially crucial way for banks. The paper explains corporate governance’s emergence and staying power by reference to changing market conditions and a deregulation trend that provided executives with unprecedented managerial discretion as the 20th century drew to a close. With banking the historical pattern paralleled general trends in large measure. Still, while the "imperial" CEO who surged to prominence in the 1980s became outmoded for the most part after corporate scandals at the start of the 2000s, this was not the case with large financial companies. The continued boldness of "star" CEOs in the financial services industry plausibly contributed to the market turmoil of 2008 but the financial crisis emphatically ended this corporate governance "free pass" banks had enjoyed.

Cheffins, Brian R., The Corporate Governance Movement, Banks and the Financial Crisis (December 1, 2013). University of Cambridge Faculty of Law Research Paper No. 56/2013; ECGI - Law Working Paper Forthcoming. Available at SSRN: http://ssrn.com/abstract=2365738

"How the West was lost by the selfie president"

It’s official — the government of the United States of Obama consists of boobs and bores and is led by a narcissist. It is no consolation that Great Britain joins us in racing to the bottom.

President Obama’s flirting with Denmark’s prime minister would be shameful on any occasion. That it happened at the memorial for Nelson Mandela only adds to the embarrassment.

But the “selfie” episode also symbolizes the greater global calamity of Western decline. With British prime minister David Cameron playing the role of Obama’s giggling wingman, the “look at me” moment confirms we have unserious leaders in a dangerously serious time.

via nypost.com

Increasing shareholder power results in worse outcomes

Jillian Popadak:

Corporate governance affects firm value, capital productivity and economic growth. Given its economic importance, there has been an ongoing, nationwide movement to strengthen corporate governance over the past two decades. Yet details about the transmission mechanisms from governance to economic outcomes are not fully understood.  In “A Corporate Culture Channel: How Increased Shareholder Governance Reduces Firm Value,”  I examine whether increased governance affects firm value via its impact on intangible assets, and corporate culture in particular. I find that corporate culture is a significant transmission mechanism for the governance-value link, but in contrast to the paradigm that stronger governance is good, firm value declines 1.4% through this corporate culture channel. ...

Using novel text-based measures of corporate culture, I study increases in governance through shareholders’ legal power to act and through activist investors engaging management.  This process produced two major findings.  First, I show that stronger governance leads to significant increases in results-orientation but at the expense of customer-orientation, integrity, and collaboration. This suggests that following an increase in governance, managers implement processes that lead employees to believe that performance and achievement are the appropriate response to unforeseen contingencies even if this involves sacrificing honesty, quality, and teamwork.

Good Shepherd Catholic Church in Beverly Hills Turns 90

From the Beverly Hills Patch:

Founded Dec. 12, 1923 in a small nine-year old suburban community that would soon be synonymous worldwide with the rich and famous, the Church of the Good Shepherd has a long and rich history and holds a prominent place in the city’s ties to the entertainment industry. Film notables such as Loretta Young, Gene Kelly, Irene Dunne, Ricardo Montalbano and Bob Newhart as well as President John F. Kennedy have worshipped God within its walls.

Pastor Thomas Welbers, who's served the church for the last 4.5 years, told Patch Wednesday they look forward to having a strong religious presence in Beverly Hills for years to come.

"This is one of the first churches in Beverly Hills," he said. "It's is a very thriving and dynamic faith community."

It was very small community in 1923, Welbers said, and the chracter of the Church of the Good Shepherd has changed over the years as the parish grew. He said the demographics have changed from once having mostly a movie star demographic to now young adult professionals in the entertainment industry. 

Plus a law professor and his retired wife.

Ridge Monte Bello (Santa Cruz Mountains) 1995

Although my 55th birthday actually was on Wednesday, we ended up having to delay celebrating because my dear wife took a tumble and busted her tibia. Now that things have settled down, however, we decided to celebrate tonight. I did a roast beef tenderloin with Bearnaise sauce, potatoes au gratin, and sauteed mushrooms. Yum. (Tomorrow night I plan to have a rack of lamb and mushroom risotto for my birthday dinner part 2. If the warden ever asks me what I want for my last meal, it's going to be tough to decide between these two.)

I poured the 1995 Ridge Monte Bello,which is a blend of 69% Cabernet Sauvignon, 18% Merlot, 10% Petit Verdot, and 3% Cabernet Franc. According to Robert Parker's 1998 review, Ridge winemaker "Paul Draper feels it is the biggest, brawniest, and most muscular Monte Bello of the 1990s, and in need of 10-15 more years of cellaring." I've been sitting on a half case since 2000 and finally opened one tonight, since it's now had the requisite 15 years of additional cellaring. Candidly, I think Draper underestimated the wine's need for time.

Although this bottle had thrown a lot of sediment, the wine remained a deep purple at the center fading to deep ruby at the rim (when the glass is tilted for viewing). No signs of being 18 years old (other than the cork crumbling when I tried removing it with a Screwpull, such that I ended up needing to use my butler's friend opener). Decanting and breathing for a half hour helped the bouquet open up, but it also was surprisingly youthful. Lots of black and red fruit associations, but few markers of maturity. Ditto the palate, which was also dominated by red and black fruit flavor associations. And tannins! It's still pretty brawny in that regard. So the rest of my bottles go to the back of the cellar for a couple more years. Indeed, I think I'll wait three more years until this wine is of legal drinking age.

Grade tonight: A- (with potential to rise)

Now for a Dunhill Peravia and a Dow 20 year old tawny port.

Free exercise run amok: Polygamy ban violates First Amendment

You have got to be fraking kidding me, but Jonathan Turley reports that:

It is with a great pleasure this evening to announce that decision of United States District Court judge Clarke Waddoups striking down key portions of the Utah polygamy law as unconstitutional. The Brown family and counsel have spent years in both the criminal phase of this case and then our challenge to the law itself in federal court. Despite the public statements of professors and experts that we could not prevail in this case, the court has shown that it is the rule of law that governs in this country. As I have previously written, plural families present the same privacy and due process concerns faced by gay and lesbian community over criminalization. With this decision, families like the Browns can now be both plural and legal in the state of Utah.  The Court struck down the provision as violating both the free exercise clause of the first amendment as well as the due process clause.   The court specifically struck down language criminalizing cohabitation — the provision that is used to prosecute polygamists.  The opinion is over 90 pages and constitutes a major constitutional ruling in protection of individual rights.

Next stop on the slippery slope express, I assume, will be consensual adult incest marriages.

Robert Bork was right. We are Slouching Towards Gomorrah. http://t.co/2iKwuALTBB

— Stephen Bainbridge (@ProfBainbridge) December 14, 2013

Related articles

Federal Court Strikes Down Polygamy Law In Utah

'Sister Wives' family wins ruling in bigamy suit

My blushes….

After having taken quite a few Business Law classes, Ive come 2 the conclusion that @ProfBainbridge is the definitive authority on evrything

— Bryan Jacoutot (@BryanJacoutot) December 13, 2013

Walter Olson on: Med-mal meets Culture War: ACLU sues bishops over abortion policy"

“The American Civil Liberties Union has filed a federal action against the U.S. Conference of Catholic Bishops, alleging that its ethical guidelines given to Catholic hospitals resulted in negligent care for a miscarrying woman.” The suit, in the name of a Muskegon, Mich. woman who allegedly experienced pain and suffering by not being advised at once to abort a doomed fetus, also names as defendants three individuals who have chaired a church-affiliated body by the name of Catholic Health Ministries. The suit does not however name as a defendant Mercy Health Partners, where plaintiff Tamesha Means was treated, nor does either the Bishops’ Conference nor CHM own Mercy. So what’s the legal theory? Well, the bishops issued ethical guidelines they expected Catholic-affiliated hospitals to follow, and CHM acted as Mercy’s “Catholic sponsor” vouching for its compliance with those guidelines. So maybe the theory consists of “incitement to commit malpractice.” Is it rude to point out that the law recognizes no tort of that sort? [ABA Journal, MLive, Alex Stein/Bill of Health (background on Michigan med-mal law)]

via overlawyered.com

Today I hit the speed limit

A moderately momentous birthday:

Now, on to 70!