In his new book, Outsourcing the Board: How Board Service Providers Can Improve Corporate Governance (Cambridge University Press), he and UCLA School of Law Professor Stephen M. Bainbridge propose giving corporations the option of hiring a new kind of firm, a Board Service Provider (BSP), to serve as their boards. Today, corporations hire law firms, accounting firms, and consulting firms to give them the expertise needed to run their highly complicated businesses. So why not a corporate governance firm?
“There is a whole literature that precedes us advocating for professional board members with standards and education,” Henderson said. “But even that plan has shortcomings because it focuses on the individual rather than on the entity. If there were firms that provided board services and that had employees with expertise in all the areas these corporations need, that would be much more efficient than 12 part-time people. The firm could hire all the experts they need and have them down the hall when information is needed.”
“Right now, all that most boards have time for is oversight, but a BSP could spend time on other things because it would be a deeper entity, it would employ all the people it needs, and therefore, could be in compliance at a lower cost,” Henderson observed.
He also explained that BSPs, with their teams of experts, could overcome other corporate problems, such as having to make decisions without full information from management.
Congratulations to my colleague Adam Winkler, whose book We the Corporations has made the National Book Foundation Longlist for Nonfiction for 2018.
A work that is both engrossing and surprising….As we await the Supreme Court’s decision in the critical case of whether a business can decline to serve a customer based on its distaste for same-sex marriages, all citizens would do well to pick up a copy of We the Corporations to understand the full implications of what it decides. — Jonathan A. Knee (New York Times)
Much of the value of Winkler’s book lies in his elegant stitching together of 400 years of diverse cases, allowing us to feel the sweep and flow of history and the constantly shifting legal approaches to understanding this unusual entity — Blackstone’s ‘artificial person.’ Four hundred years is a lot of time, and Winkler does a wonderful job of finding illustrative details without drowning in them, and of giving each case enough attention to make it come alive…By nailing down the absurdities of the past, Winkler allows us to see how the future becomes more open. — Zephyr Teachout (New York Times Book Review)
Winkler’s deeply engaging legal history, authoritative but accessible to non-lawyers, takes readers inside courtrooms, judges’ chambers and corporate offices… The book offers new takes on familiar stories…as well as fascinating insights from largely forgotten moments… [A] meticulous, educational and thoroughly enjoyable retelling of our nation’s past. — Benjamin C. Waterhouse (Washington Post)
'Are corporations people?' That’s the provocative question Winkler poses at the outset of his impressive, engaging new book. . . . [Winkler] begins in Colonial America and provides a forceful and highly readable account of what he convincingly describes as a 'long, and long overlooked, corporate rights movement.' — The National Book Review
An eye-opening account of how corporations became ‘persons’ entitled to constitutional rights and used those rights to impede efforts to regulate them in the interests of real people. — David Cole, author of Engines of Liberty: The Power of Citizen Activists to Make Constitutional Law
An incisive account of the unlikely rise of an idea that has nearly turned American politics upside down. — Jill Lepore, author of The Secret History of Wonder Woman
This is a brilliant, beautifully written book on a topic affecting almost every area of law: how did corporations come to have rights under the Constitution? Professor Winkler carefully details this history from English law to the present, and the book is filled with new insights and information. Any future discussion of rights for corporations will be shaped by this wonderful book. — Erwin Chemerinsky, dean and Raymond Pryke Professor of First Amendment Law, University of California, Irvine School of Law
Impressively thorough and wide-ranging. . . . Winkler employs an evocative, fast-paced storytelling style, making for an entertaining and enlightening book that will likely complicate the views of partisans on both sides of the issue. — Publishers Weekly, starred review
A chronicle of the steady, willful process by which corporations became people—until, that is, you try to sue them. . . . Maddening for those who care about matters constitutional and an important document in the ongoing struggle to undo Citizens United. — Kirkus Reviews
[A] timely, exciting book . . . . Constitutional law professor and legal commentator Winkler examines the history of the relationship between corporations and the Constitution, providing a field guide to the legal issues and an overview of a long-term corporate civil rights movement that employs techniques familiar from social justice movements. . . . Along the way, he presents a wide range of vividly drawn historical figures, bringing their philosophies, tactics, debates, and shenanigans to life while allowing readers to assess the ethics and implications of their work. — Sara Jorgensen (Booklist)
German scholar Thilo Kuntz has published a fairly lengthy essay reviewing my book with Todd Henderson, Limited Liability: A Legal and Economic Analysis. See Thilo Kuntz, Asset Partitioning, Limited Liability and Veil Piercing: Review Essay on Bainbridge/Henderson, Limited Liability. 19 European Business Organization Law Review 439-463 (2018), which unfortunately is not open access and is available to non-subscribers as a preview only.
Fortunately, however, a working draft is available on SSRN: Kuntz, Thilo, Asset Partitioning, Limited Liability and Veil Piercing - Review Essay on Bainbridge/Henderson, Limited Liability (March 14, 2017). European Business Organization Law Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2949685
Here's the working draft's abstract:
One of the core features of modern corporate law is the partitioning of the corporation’s assets and the shareholders’ (private) assets affirmatively and defensively in the sense that the claims of a corporation’s creditors are prior to those of shareholders’ personal creditors with respect to corporate assets and that claims of the shareholders’ personal creditors have priority over those of corporate creditors with respect to shareholders’ private assets. The second principle is the rule of limited liability. What makes it special is that it may not be created by contract – or only under severe restrictions. Courts in many jurisdictions curtail the rule of limited liability by doctrines such as “piercing the corporate veil”, exposing shareholders to a creditor’s claim and therefore to personal liability for the corporation’s debts. The circumstances giving cause to such measures are not clear, however. Additionally, in historical perspective, combining business entities with defensive asset partitioning is not a self-evident maneuver; even modern scholars challenge the idea of limiting liability in general, at least vis-à-vis tort creditors. Stephen Bainbridge and M. Todd Henderson thus take up an important and timely topic with their book on limited liability and veil piercing. Considering the many aspects they discuss, their book provides a welcome chance not just to write a short review, but to take up some general issues of asset partitioning and veil piercing. This review essay, accepted for publication in the European Business Organization Law Review, runs the following course: After providing a historical perspective on limited liability in section II., section III. turns to its relationship with incorporation. Section IV. deals with the question why limited liability should be accepted at all, thus preparing the stage for a look at alternative approaches in section V.
And here's the conclusion from the final, as published version:
Bainbridge and Henderson’s book has a lot to offer for readers interested in limited liability and veil piercing. They provide a rich survey of the most important US literature in the field and add to the discussion by bringing new and interesting arguments to the table. Taking into account how long this debate has been going on and the sheer mass of contributions, this is by no means a small feat. Furthermore, that the authors try to provide a comparative view is a welcome and enriching move as it pushes the academic debate to a broader forum, showing the importance and fruitfulness of comparative approaches. Bainbridge and Henderson make a strong case for abolishing veil piercing, offering a whole package of arguments in favor of reform. Their treatment of veil piercing concepts, the work’s prime rib, is a rewarding read.
I am sure Todd will join me in thanking Professor Kuntz for providing such a detailed, thoughtful, and helpful analysis of our work.
I've posted to SSRN a new paper:Book Review Essay: Conservatives Against Capitalism: From the Industrial Revolution to Globalization by Peter Kolozi (July 2, 2018). American Affairs, Forthcoming; UCLA School of Law, Law-Econ Research Paper No. 18-06. Available at SSRN: https://ssrn.com/abstract=3206963
In Conservatives Against Capitalism, Peter Kolozi, an associate professor with the Department of Social Sciences at the City University of New York, 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.
I'm reading David's new book. And so should you.
I disagree with a lot of the normative conclusions @DavidYosifon reaches in his new book, Corporate Friction https://t.co/LWN5y9AH9h. But I commend him for his excellent analysis of the state of Delaware law on corporate purpose, which is extended, complete, and compelling.— Professor Bainbridge (@ProfBainbridge) July 4, 2018
In his book Corporate Friction https://t.co/LWN5y9AH9h @DavidYosifon cites something I wrote 21 years ago about corporations standing between people and the state. If I were writing it today, I'd slather on a bunch of qualifiers. But that's a future project. pic.twitter.com/hmBzfzALus— Professor Bainbridge (@ProfBainbridge) July 4, 2018
I am working on several projects that require me to grapple with the populist critique of capitalism in general and corporate governance in particular. So I read with great interest Frank Buckley's fascinating essay in Modern Age's Spring 2018 issue Conservatism: Beyond Trump.
Buckley's essay is a brilliant refutation of the conservative elite's disdain for Donald Trump's supporters (Kevin Williamson's multiple 2016 screeds sprang immediately to mind):
The four pillars of the Trump movement, themes that resonated with his supporters and that were largely ignored by conservative intellectuals, were mobility, jobs, religion, and nationalism. ...
The NeverTrumper had assumed that the white working class had lost its jobs because it smoked Oxy, because of moral poverty. But there’s another explanation. Maybe they smoked Oxy because they had lost their jobs. Maybe it was really about jobs after all and not a sudden loss of virtue.
Buckley envisions a new conservatism, which posits that "the best inducement to moral living is a good job."
But then Buckley makes an interesting move:
It was inevitable ... that Trump would be called a populist. You should never give your opponents the right to label you, but even some of Trump’s supporters have been willing to call themselves populists. They should know better. Trump is an America First nationalist, not a populist.
It’s true that, like most populists, Trump thinks that tariff walls that keep foreign goods out of the country might help American workers. But then Abraham Lincoln and William McKinley thought so too, and they weren’t populists. It’s also true that, like most populists, Trump championed an underclass unjustly held back by an aristocracy of wealth. But then Karl Marx and socialist Eugene V. Debs thought they were doing this, and they weren’t populists. We must also admit that, like most populists, Trump decried the influence of money in politics. But then so did Hillary Clinton and Elizabeth Warren, and nobody called them populists.
Why is Buckley so adamant in rejecting the populist label? He argues that:
Populism was one of the nastiest of American political movements. ... The accusation of populism should thus be understood as a smear meant to link one to out-and-out racists such as “Pitchfork Ben” Tillman, a South Carolina senator at the beginning of the twentieth century and one of the vilest people in American political history.
It is certainly true that many strains of American populism have highly unsavory views on key social issues. The Southern agrarians, in particular, held highly retrograde opinions on issues of race and, albeit to a lesser extent, class.
But does that mean that we should ignore everything else the populists had to say? The modern campus left, of course, seems to believe that holding one impermissible view is enough to justify silencing a speaker, but is that the model conservatives should follow? Or, for that matter, that anybody committed to the life of the mind should follow?
I think it is worth acknowledging that the Southern agrarians were, for the most part, racists (not to mention Utopians and various other flaws), but then going on to ask whether some of their ideas made (or even still make) sense. Otherwise, we might as well have a Ministry of Truth constantly rewriting history to eliminate anything that might offend modern sensibilities.
Which brings me back to Buckley's essay. Like Buckley, the Southern agrarians knew that work humanizes. “Since the most significant feature of our experience is the way we make a living, the economic basis of life is the soil out of which all the forms, good or bad, of our experience must come.” Tate, Allen. Reason in Madness: Critical Essays. Salem New Hampshire: Ayer Company, 1988, 230. Their critique of corporate capitalism thus speaks to the modern era, offering a way of thinking about the economy that--shorn of its worst features--provides an alternative political economy that may be more humane than the present model.
Just finished: A Mad Catastrophe by Geoffrey Wawro https://t.co/cxIWaroJWg The guns of August 1914 from an Austro-Hungarian perspective. Excellent review of how Hapsburg stumbled incompetently into war, but very repetitive. Needed a hard edit. Sill, recommended.— Professor Bainbridge (@ProfBainbridge) April 9, 2018
Just bought/haven't yet read: Vibrant Paradoxes: The Both/And of Catholicism by Robert Barron for https://t.co/XJOFE3Cu8j— Professor Bainbridge (@ProfBainbridge) April 9, 2018
For Americans, 1864 is famous mainly for being the penultimate year of our Civil War. But that's not all that happened that year.
As long term readers know, I am something of a military history buff. Indeed, I would have loved to be a military historian were it not for the fact that the pay stinks and most universities won't touch you with a 10 foot pole.
All of which is to explain how I came to read 1864: The Forgotten War That Shaped Modern Europe by Danish journalist and historian Tom Buk-Swienty. It's an excellent telling of the Second Schleswig War. (You did know there had been First Schleswig War, didn't you?)
Briefly, Schleswig and Holstein are two states at the bottom of the neck that connects Denmark to Germany. They were strategically important in the mid-1800s because control of them would give a rapidly expanding Prussia access to the Baltic via Kiel and to the North Sea via the planned Kiel Canal. An 1852 London Protocol (the British were fantastic busybodies in the 19th Century, sticking their noses into everything) had assigned them to Denmark, but in a constitutionally awkward manner. In 1863, Denmark amended its constitution to clarify their status, but Prussia and Austria claimed that the amendments violated the 1852 Protocol. The two German states seized upon the amendments as a casus belli and declared war.
The main battle was fought at Dybbøl, which Wikipedia describes as "a small town with a population of 2,495 in the southeastern corner of South Jutland, Denmark." It reportedly "has had an enormous impact on this country’s self-perception and foreign politics ever since. It is a complex part of its history, which has always been associated with tensions and strong opinions."
Buk-Swienty takes a somewhat unique narrative approach, starting with the preliminaries to the Battle of Dybbøl, backtracking to cover the start of the war and the events leading up to it, before coming back to tell the story of the battle and its aftermath.
In addition to vivid descriptions of the battle, Buk-Swienty does an excellent job of concisely explaining the political constraints under which both Denmark and Prussia were operating and the incentives that led them to choose war.
Buk-Swienty writes well and the book reads quickly and enjoyably.
Criticisms? First, I think he oversells the idea that this war shaped modern Europe. Having said that, however, he does make a convincing case that this was the first modern European war. The role of railroads and battlefield medicine, in particular, are fully developed.
Second, he almost completely ignores Austria. We get no sense of what the Austrian government was thinking, what Austria's war aims were, how its army fought, and so on. In particular, he fails to lay the groundwork for understanding how the unsatisfactory (from the German perspective) result of the war lead to the Austro-Prussian war two years later. That issue, however, is well treated in Geoffrey Wawro's fine book The Austro-Prussian War: Austria's War with Prussia and Italy in 1866.
As previously explained, I've enrolled in the University of Notre Dame's Satellite Theological Education Program (STEP) to pursue their Certificate in Doctrine. I am currently taking my third of the required courses: Ecclesiology. I'm now in the fourth week, whose topic is "The Church in and for the World."
Our assignment this week is to discuss (in that annoyingly short space of ~250 words) the following question:
In different times and places, the Church and its mission have encountered a wide variety of receptions. Drawing on what you have learned about the Church’s relationship with the world, consider what might be the relative advantages and disadvantages of living as a Christian in a society that is positively disposed toward Christianity. How about in a society that is hostile to the faith?
I've actually been thinking a lot about the second part of that question recently. Last year I read Rod Dreher's immensely important book The Benedict Option and I've just started Archbishop Charles Chaput's book Strangers in a Strange Land: Living the Catholic Faith in a Post-Christian World.
The gist of both books is that modern liberalism is increasingly intolerant of religion in the public square, which seems self-evidently true. the late Cardinal George famously observed that ""I expect to die in bed, my successor will die in prison and his successor will die a martyr in the public square." On current trend lines, that seems about right.
Yet, we often forget that Cardinal George added this not of hope: "His successor will pick up the shards of a ruined society and slowly help rebuild civilization, as the church has done so often in human history." (A line that always brings A Canticle for Leibowitz to mind.)
The Benedict Option is offered up as one way of getting to Cardinal George's third successor. As Dreher explains:
The “Benedict Option” refers to Christians in the contemporary West who cease to identify the continuation of civility and moral community with the maintenance of American empire, and who therefore are keen to construct local forms of community as loci of Christian resistance against what the empire represents. ...
Most of the Ben Op communities that come to mind today are not radically isolated, in geography or otherwise, from the broader community. It’s simply nonsense to say that Ben Oppers want to hide from the world and live in some sort of fundamentalist enclave. ...
The term “Benedict Option” symbolizes a historically conscious, antimodernist return to roots, an undertaking that occurs with the awareness that Christians have to cultivate a sense of separation, of living as what Stanley Hauerwas and Will Willimon call “resident aliens” in a “Christian colony,” in order to be faithful to our calling.
I am sympathetic to The Benedict Option insofar as I yearn to be part of a local community that intentionally undertakes "a historically conscious, antimodernist return to roots." On the other hand, my instincts also call for one last great act of defiance (which will call to mind a classic 1960s/70s poster for readers of a certain age). As Dreher kindly wrote in The Benedict Option:
Delaware is the state of incorporation for almost two-thirds of the Fortune 500 companies, as well as more than half of all companies listed on the New York Stock Exchange, NASDAQ, and other major stock exchanges. This gives Delaware a seemingly unchallengeable position as the dominant producer of US corporate law. In recent years, however, some observers have suggested that Delaware's competitive position is eroding. Other states have long tried to chip away at Delaware's position, and recent Delaware legal developments may have strengthened the case for incorporating outside Delaware. More important, however, the federal government increasingly is preempting corporate governance law. The contributors to this volume are leading academics and practitioners with decades of experience in Delaware corporate law. They bring together a variety of perspectives that collectively provide the reader with a broad understanding of how Delaware achieved its dominant position and the threats it faces.