 Thanks for coming, everyone. It's my pleasure to welcome you here to this year's Osler, the Boston and Parkour LLP Business Law Forum. I'd like to acknowledge and thank Oslers for the generosity in funding the forum, which makes this lecture possible. This is the 11th annual Osler lecture. And its purpose is to foster an exchange of ideas about business law within the community, within the law school community, and in the broader community. And our aim is to attract leading scholars in the business law field. And we've certainly been able to do that this year. We're pleased to welcome Professor Kent Greenfield. He's Professor of Law and Law School Fund Distinguished Scholar at Boston College Law School. Welcome to Dalhousie and to the Sheer Lake School of Law. Professor Greenfield, you mentioned getting here between whatever events, which I think is great and good timing for us in any event. And I hope for you, when you turn around, to head back. Professor Greenfield's lecture is entitled Corporate Citizenship, Friend or Foe. And I'm going to ask Professor Rahman to introduce him and to tell you just a little bit more about his research and his background. Welcome, everybody. I'm really pleased to introduce Kent Greenfield today. I have a pleasure of having held Kent for over 10 years. And I'm sure he has something really interesting and insightful, as he always does. But I'd like to say a little bit about him, just to give you some background context into his distinguished career. As Camille mentioned to you, Kent's title is Law Fund Research Scholar at Boston College Law School. He teaches and writes in the area of business law, constitutional law, decision-making theory, legal theory, and economic analysis of law. He clerked for Justice Souter in the US Supreme Court after clerking at the Federal Court of Appeal and has been teaching for the first circuit. Sorry, we don't have a circuit this year, so I get a little confused with that sometimes. I can beat that out. But he's been teaching at Boston College since 1995. He's also visited at a number of law schools, for example, the University of Connecticut School of Law 2002. He was the visiting Wallace S. Fujiyama Professor at the University of Hawaii, William S. Richardson School of Law in 2005, and a visiting professor of political science at Brown University in 2006. From 2007 to 2008, he was the distinguished faculty fellow at the Center on Corporations Law and Society at the Seattle University School of Law. And he's also a past chair of the section on business associations at the American Association of Law Schools. Kent is the author of two prominent books, The Myth of Choice, Personal Responsibility in a World of Limits, as well as the failure of corporate law, Fund of Flaws and Progressive Possibilities. He's also written numerous articles and various commentaries, editorials, essays, and law reviews, and newspapers. And we're fortunate to be able to get Kent here from what is often a very busy schedule. And he has, when he's lecturing, he's lectured in 36 states, nine countries, and at over 100 institutions. And now he can add that housing to that list. He's also written a number of op-eds in places like The New York Times, The Washington Post, The Boston Globe, The Atlantic, The Washington Monthly, American Prospect, Salon, and The Nation. And as I've said, I've had the pleasure of knowing Kent for more than 10 years. And we always have really interesting conversations. And he always seems to be working on something really new and intriguing. So I'm quite interested to hear his talk today, which as Camille has introduced, is called Corporate Citizenship, Trend, or Foe. And with that, I'd like to give a warm welcome to Kent Greenfield. Welcome, everybody. I will try to do, make this as informal as possible. We've got, I was asked to speak for about an hour. So, and I know that the average human takes about seven minutes to go to sleep. So if you start now, you can get like 60 good minutes of nap time in, but if you choose not to nap, I want to talk about a topic that I find to be, quite fascinating and important, the topic of corporate citizenship. But first, I should thank Dean Cameron for inviting me to come. My old friend, Dr. Rotman, for his hand in inviting me for his intellectual leadership in this way and in our field. So if, can you hear me if I'm here, rather than back there? So I'm a bit of an odd duck, even for a law professor, in that I have studied and written on both about constitutional law and the law of rights and obligations from a public law perspective and also about business law, which we think of as a private law field. So, and not many people do that, but it has given me an opportunity to see things from both sides of that divide, which I actually think is a false one, but it's one that pervades at least U.S. law. And so one of the things that, one of the areas in which that this is, that this divide seems to make a difference is in the area of corporate citizenship. For some people, corporate citizenship is a goal, something we should pursue. For other people, it seems to be the worst possible way to run a democracy, think of corporations as citizens. And so my talk today is to try to flesh this out, whether corporate citizenship is a goal or something we should oppose. Is it friend or foe? And I think this is both fascinating and important. It's fascinating because of this divide and this difference of opinion among scholars and activists, practitioners, public policy experts. And it's important. The rules that we use to govern large corporations are in some ways more important than the rules that we use to govern our states, our provinces, our localities, even our nation. Just one example, right, the Walmart, the big US based, you know, big box store, two over two million employees is charted in Delaware. Delaware has less than a million people in Delaware. So the rules that Delaware provides for the governance of Walmart are actually more impactful than the rules that Delaware provides for its own citizenry. So I think these things can be quite important. So here's what I'm gonna do. So I've got, I'm gonna tell you about, I have a talk today in four chapters. So chapter one is gonna be history. Chapter two is gonna be a bit of theory. Chapter three is gonna be gymnastics, intellectual gymnastics, ideological gymnastics, talking about a flip that has happened ideologically. And chapter four will be a defense of corporate personhood and corporate citizenship. So, and before I start, one other thing to say is that so because of who I am, most of my knowledge is from the US perspective, but I think the question, the issues are important for any constitutional democracy, including Canada. And one of the things that we can talk about when we talk together at the end of my talk is where are there differences between the US and Canada in this and other nations. So, chapter one. So in 1882, two trains collided in the Fourth Avenue Bridge, Fourth Avenue Tunnel in New York City. Killing two passengers and injuring hundreds. Now, many New Yorkers blamed this man, William Henry Vanderbilt, who owned the railroads, and said that he had skirted and had a short change safety measures in order to maximize his profit. And they accused him of being too profit-oriented. Now, at the time, Vanderbilt was among the most powerful people in the world. He was by his own account the richest man in the United States at the time. So this is 1885 or so, 1886. So this was an era where $1,000 a year was a decent wage. His investments spun off interest income of a million dollars a month. At the end of his life, he said he would not cross the street for another million dollars. He was that rich. But he knew what he was doing when it came to running a railroad. He wasn't a very good caretaker of his public image, though. So the week after the trains collided, killing two and injuring hundreds, an impertinent reporter got into his private business at Dining Car on one of his railroads as it was traveling from New York to Chicago. And he asked Vanderbilt whether, in his view, he managed his railroad with an eye toward public benefit. His response became famous because it encapsulated the view of the gilded age obligations of corporations. What he said, what he yelled at the reporter, was the public be damned. So he basically was giving the middle finger to the US public in this. And in fact, that phrase, the public be damned, showed up on the front pages of hundreds of US newspapers within 24 hours. A magazine ran this satirical cartoon of him soon thereafter. Leaning back, smoking a stogie with his foot on America with his lap dogs. You can't see it on one called Congress, one called legislature, but he was in control. And in fact, his statement, the public be damned, encapsulated the gilded age view of what corporations were for. They were not to be run for the public. And for the most part, the law was his ally. There was little regulatory protection during the gilded age for workers, for communities, for laborers, for the environment. And this protection of corporate prerogative even had in the US had a constitutional footing and constitutional basis. Because in 1905, the Supreme Court decided one of its most pivotal cases in a case called Lochner v. New York, where it struck down a New York statute limiting the number of hours that bakers could work. That sounds inconsequential, right? It was one of the early attempts by the early nascent progressive movement to protect employees and workers, mostly immigrants, in the baking industry. And it was a part of a broader range of progressive initiatives in the US. But the United States Supreme Court struck that law down on constitutional grounds, saying that the freedom of contract was a liberty protected by the 14th Amendment. 14th Amendment's protection of due process, substantive due process, saying that the freedom of contract was a fundamental right. And so what that did in 1905 was to instill the free market as a constitutional good, as a constitutional value. So the power and prerogative of business was constitutionally protected. So this age, this Lochner era age protected the prerogatives of business. Now we now know that the Supreme Court's assumptions about freedom of contract were misguided, right? The freedom is not just freedom from regulation. We now, the court ignored the coercion inherent to the market, the coercion inherent in the deadening crush of poverty and squalor. But what Lochner did was to move corporate issues, corporate prerogatives, corporate rights to the center of constitutional protections. Workers, employees, communities would have to protect themselves in the market without the assistance of law. So this Lochner era lasted for a generation or so in the US. But constitutional law was not the only problem. This same protection of corporate interest also attached in corporate law, in the private side of the divide. You had the public part of the divide, Lochner protecting corporate prerogatives by constitutional means and in corporate law they faced the same question. What obligations should corporations have in society? In effect, the courts answered it in the same way, although using different language and different principles, but came out the same way. Now the key case in the US on this had to do with Henry Ford and the Dodge Brothers. Now this is Henry Ford. Now, in the second decade of the 20th century, Henry Ford was making an incredible fortune of money. Ford Motor Company, the company in which he was the dominant shareholder was turning out the Model T, pictured there, and it was transforming the country. And he and his partners were amassing an incredible fortune of money. Now Ford Motor Company had been created with a capital of $100,000 in 1903. 13 years later, by 1916, it was valued at $60 million. So they'd transformed an investment of $100,000 into $60 million. The shareholders were making enough were making so much that they were getting a 100% return on their investment every month. They were making a lot of money. The company was also issuing and declaring special dividends, which was magnifying that those returns even more, as much as $11 million in 1914. Now, we know that Henry Ford is not such a good guy. We know he was an anti-Semite. He funded Hitler. He was an apologist for the Third Reich. But in the teens and 20s, he was actually a progressive hero. He cultivated, in contrast to Vanderbilt, Ford cultivated a benevolent image. He made headlines by paying his workers $5 a day, which was twice the market rate. And he said at the time that he did that because he wanted Ford Motor Company the purpose of Ford Motor Company to improve the lives of the working class. And he sounded radical indeed. Here's his quote. He was quoted in the New York Times, and here's his quote. I believe it is better for the nation and far better for humanity that between 20,000 and 30,000 people should be contented and well-fed than that a few millionaires should be made. So this played really well in the public, right? He was like the good businessman. And as I said, it made him somewhat of a hero among American political radicals. Now you guys are too young to remember this movie. There's this movie about journalist John Reed called Reds. Do you ever see Reds? Sure, Reds. So John Reed, who was this sort of famous communist journalist radical in the US, like he idolized Ford. So that's how left Ford seemed at the time. Now in 1916, Ford declared that the special dividends that the company had been clearing, he declared that those special dividends would come to an end. He needed the money to build a new factory that he wanted to be the largest in the world. And he claimed, brashly again, that his real purpose was to do social good for the company's employees and customers. And he argued that shareholder gain was a byproduct of a successful business, not its purpose. He thought that the satisfying the obligations of a robust social contract was what a business was about. Now this did not go over so well with the shareholders, the shareholders thought this was quite offensive. And two of its principal shareholders were the Dodge Brothers. Now they had invested $10,000 in Ford Motor Company at its initial founding. So they owned 10% of the company with $10,000. They had at this point made 40,000% back return on their $10,000 initial investment. But they were angry at Ford and sued in Michigan court to require Ford to issue these special dividends. Now in a way this was a crafty demand, it was a pretty sly. Why? Because Dodge, the Dodge Brothers, had started their own company. Dodge Chrysler, right, we now know it's Dodge Chrysler. And so by, if they could get the company, the court, to require Ford to pay them money, it would give them money to invest in their own factory and also take money out of Ford's coffers. So it was pretty crafty. And Henry Ford understood that. He had no reason to fill the Dodge Brothers' pockets and he had numerous solid business reasons to keep the money in house. And if he had said that, the court would have completely deferred to him, right? Courts do that. Courts deferred to rational business judgments. But he didn't say that. What he said was that he wanted to keep the money to benefit employees, customers, and the community. And the Dodge Brothers said wait, hey, we can't let that, the court, they said to the court, you can't let that happen. And it eventually did make it to the Michigan Supreme Court. And you'll remember this is a moment where socialism was on the rise in the US. The Russian Revolution had already begun. So these notions of sort of these radical, seemingly socialist words coming out of Ford's mouth could not be countenance by the court. And so there's this famous case that at least in the US case books, it's one of the first cases you read in the Basic Corporate Law. It's Dodge v. Ford. So there's Dodge v. Ford, all right? I'm more of a Ford person myself. But so Dodge v. Ford is one of the first cases that we read in the US. And it still is taken, even though it doesn't control in any meaningful sense. It's an old case, it's almost 100 years old. But the Black Letter Law is still often taken from the quote from Dodge v. Ford, which is this. A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. So the court ordered Ford to issue the dividend. And this case is still cited, like I said, as one of the most important cases defining the obligations of corporations. Now, just because most people don't do both corporate and constitutional law, rarely do you see Lochner and Dodge v. Ford put together. But they're part and parcel of the same era. Part and parcel of a sense that on both the private side and the public side, corporations are not citizens. They don't have public obligations. The public be damned was not just an epithet from a frustrated magnate, but it was the law's doctrinal touchstone on both the corporate and the constitutional side. Now, so this is one of the things I wanna talk about today, how these pendulums are swinging together, the constitutional sense of corporate citizenship and the private sense. So let me speed through some history. So this change on both the corporate side and the constitutional side around the New Deal in the US. I mean, the economic calamity that the New Deal posed showed that caused the Supreme Court to rethink its notion of what freedom was and what coercion was, and so it overturned Lochner. Meanwhile, in corporate law too, very important reconceptualizing of the corporation was happening. The most important and influential book in the history of corporate governance, the modern corporation and public property by Gardner Means and Adolf Burl, this is Adolf Burl. Someday I will have like such a dignified picture overlooking New York or something, but this is what law professors used to look like, I guess. But Burlian Means argued that because of the separation of ownership and control, shareholders had really lost their claim on the corporate side and what corporations should instead be managed to do was to take account of and with reference to the public good. He said that all publicly held business corporations were public trustees with powers to be exercised for the benefit of the community. So both on the corporate side and the constitutional side, the New Deal changed everything. Now in broad strokes, this was the rule on both the public and the private side for corporations for most of the 20th century in the United States. So you had the Lochner era, the Dodgy-Ford era, changed the New Deal and that lasted for some time. Now there were some, it fits and starts obviously, but that was pretty much the rule at least even through the 70s. Now the 1970s, 1970s had a lot of bad ideas in it. One piece leisure suits, the Bee Gees, the 70s were bad in a lot of ways. The 70s even, but in the law, it wasn't so bad. Like activists like Rachel Carson, authors like Rachel Carson and Ralph Nader raised awareness on how the political influence and unsustainable practices and the global reach of corporations posed dangers to society. On the regulatory side, environmental law, anti-discrimination law, anti-corruption law, consumer protection law expanded. And even on the corporate side, in the 70s, you had a rise in what's called in the US stakeholder statutes which claim to protect the ability of company managers to look after the interest of non-shareholder constituents. Then something really profound happened. Ronald Reagan was elected president, 1980. I think Ronald Reagan was a sea change in that he embodied a new zeitgeist for both the public and the private side. He railed against government regulation, took pride in breaking up unions, and ushered in an era where people were intended to feel good about making money. Now in contrast, FDR, Franklin Roosevelt, I had ushered in the New Deal saying, the test of our progress is not whether we add more to the abundance of those who have much, it is whether we provide enough for those who have too little. It's hard to imagine an American president saying that anymore. But that's what Franklin Roosevelt, who's elected four times said. Reagan, in contrast, said what I want to see above all is that this country remains a country where someone can always get rich. So that's a little bit of a change in terms of public mantra. And the most famous embodiment of this is the movie of Wall Street, right? With Michael Douglas, Charlie Sheen, where Gordon Gecko is quoted as saying, greed is good, greed is right, greed works. This also had an effect in the legal academy. And Dr. Rotman has written some about this to good effect. What we saw at least in the United States, and I think globally, during this period of time, the 80s, 90s, was the growth of the law and economics movement. Law and economics scholars applied a really simplistic libertarian, neoclassical view of economic thought to law. Arguing that individuals are rational, economic maximizers and act with free will, and that the grand purpose of law was to allow people to satisfy their preferences, primarily by empowering private agreements and otherwise standing aside. And law and economics became especially powerful and influential in corporate law. It became, the corporation was reconceptualized as a nexus of contracts, but the law called upon only to establish default rules, presumably efficient, that the parties could otherwise negotiate around. Corporate law should not dictate the details of the obligations among the parties because everybody could bargain for themselves, whether you're an employee or community or what have you. This academic reconceptualization went hand in hand with a shift among management, inside companies. Duties to the company cease to be seen as legal or professional obligations, but they were simply a function of the market and the best way to ensure that managers did what they were told and what they should do was to compensate them with mechanisms that had their compensation mimic the market. So in this is the era where you had the real change toward companies orienting their behavior toward maximization of share value and shareholder primacy. So corporate health became equated with share price with a positive movement from quarter to quarter and month to month and day to day and now nanosecond to nanosecond. So this was for about another generation starting in the 80s up through the early parts of this century, you had this period of contractarianism, I call it contractarianism, but basically it's three phenomenon, a fixation on share price, a dependence on the notion of contract as a conceptual centerpiece of law and third, a push for deregulation, both in financial markets, but also even using constitutional law as a force for deregulation. In a way, calling back to the Lochner era, corporations stopped were not able to use the same parts of the constitution that they were using in the Lochner era, but starting in the 90s primarily, corporations started to become using the First Amendment, our free speech clause, to get out of regulatory obligations, more on that in a bit. And in this era, citizenship had nothing to do with what corporations were about on either the public or the private side. The pendulums had swung back. All right, so that was about a century of intellectual history in 30 minutes or so. The next three chapters will not be that long, I promise. So let me talk some about theory. Now as these pendulums swing back and forth, one thing has been pretty constant and that's the level of theory. There's been a couple of schools of thought. On one side you have the view that corporations are primarily about the creation of wealth for shareholders. That's known as shareholder primacy. This encapsulates that notion. This has been associated with an ideologically conservative view of corporations. Corporations have one purpose and law and norm to channel the attention of management toward fulfilling that purpose. And as I mentioned from starting about 1980 or so, this has been the dominant theory in the United States and in many other jurisdictions of the world. So much so that two of our prominent scholars in the U.S. and corporate law said that we were at the end of history for corporate law and Dr. Rodman has written very critically about this assertion. So I think, and there's something to this theory, right? That the argument is that shareholder primacy works because that is a rule that best maximizes value over time. It's easy to monitor and we can say that there's, that over time the interest of other stakeholders coalesce with shareholders. Now a few words of critique before I go on. First of all, it's not true that the interests of shareholders are the same as the interests of society, right? Because of limited liability, shareholders don't share in the downside of many decisions that go wrong. Society as a whole though is not a limited liability society. Somebody has to pick up the downside as we all recognize now after the global financial crisis. The other quick critique is that the interests of shareholders and stakeholders do not in fact coalesce even in the long term. They're different. Sometimes they coalesce. Nobody's benefited from a company that fails. But just because shareholders win doesn't mean that everybody else wins without a mechanism for the company to internalize externalities or to share the profits with stakeholders. The trickle down is not inevitable. But that's critique. As a matter of description though, a conservative shareholder primacy sense or view of the corporation's caption in a few statements. So now let's get to some words, right? So this is the quote that I had from before, Dodgey Ford, business corporations organized and carried on primarily for the profit of stockholders. Another way to say this, the American Legal Institute, the principle of corporate governance, said this about a corporation a couple of decades ago. Corporations should have as an objective the conduct of business activities with the view of enhancing corporate profit and shareholder gain. Also the assumption is that shareholders are invested in the business corporation for purely economic reasons. So companies are about shareholders, shareholders are about money. Now the progressive view of corporations is different. Now there's been a minority of us, it's a vocal minority but still a minority that have said that corporations should be subject to a more robust set of obligations. That obligations should not just stop at shareholders but should run to stakeholders as well. Indeed we have advocated for one might call corporate citizenship. That corporations have a role to play in the public space that surpasses the financial gains for shareholders. We argue that this would make corporations better off over time and society as well. So one might say that the progressive view of corporations includes the notion that there's more that can be said about a corporation's benefit to society than just what appears on the balance sheet. Another iteration of this is that there's an increasing effort in the US, which I happen to be skeptical but we can get to that momentarily. But that among progressive corporate lawyers, progressive corporate scholars, that there's a new form of corporate organization called B Corpse that allow companies to say in their chartering documents that they're not just about profit but they have other goals as well. Patagonia is probably the most notable B Corp in America. Anybody wearing a Patagonia? So you're wearing a B Corp, B Corp. And that may be why they're all so much more expensive than everything else. But Patagonia is the most famous one in the US. Now it's not just the scholars that have been using this. So corporations themselves use the citizenship language to describe their efforts in the public space and the public square. You get corporate citizenship awards, you get known as the corporate citizens, etc, etc, etc. Now some of this might be window dressing, but it's not all window dressing. And at least the notion is that corporations who think of themselves or groups that think of corporations as broader than just shareholders use the word citizenship. That's how it's best described. So starting, so this was the minority view. And then something marvelous happened. The global financial crisis where the economy went into the ditch. Now of course it wasn't marvelous, it was horrible. People lost their jobs, people lost their homes. The reason I say it was marvelous is that it forced a lot of people to rethink what corporations were for. This assumption that the market fixed everything was proven false. Even Alan Greenspan, the former chair of our central bank was forced to admit that he didn't think that the free market worked so well. As those saying is there are few atheists and foxholes, there are few libertarians in a financial crisis or in a market crash. So the global financial crisis forced the pendulum to swing back a bit. So there was a growing sense that the stakeholder view of corporations were taking hold. You had the Harvard, such radical magazines as the Harvard Business Review saying that maximizing shareholder value is a failure. The Financial Times argued that companies need a bigger and better purpose than simply maximizing shareholder value. Forbes, a Forbes article called shareholder primacy, the dumbest idea in the world. You know, even Joe Nocera, who is a famous non-financial SAS in the New York Times, said it looks like we are in the dawn of a new movement. One aimed at overturning the gemini of shareholder value. So that's where we were at the end of the first decade of the 2000s. Okay, now chapter three. But then something really odd happened. There were two cases, both at the Supreme Court, that were game changers. One was called Citizens United versus Federal Election Commission. The other one was called Burwell versus Hobby Lobby. So let me talk about both of these cases. Citizens United was 2010, Hobby Lobby 2014. Neither one was a corporate law case. Citizens United was a constitutional case. Hobby Lobby was a statutory case. But they both have very big implications for this conversation. Citizens United was the case in which the Supreme Court struck down limits on corporate expenditures in our campaigns. Saying that corporations, even for-profit corporations, have the same speech rights as human beings in the US. There had been limits on corporate spending in campaigns for about a century. But the court said that corporations are associations of citizens. And such associations should be able to speak and spend on politics as any natural person would. That's Citizens United. Hobby Lobby was a case about, Hobby Lobby is an arts and crafts store. Do you guys have Hobby Lobby here? It's a very Midwestern US company. It's owned by a very religious family from Oklahoma. And the Affordable Care Act, Obamacare, included in the regulations of pursuant to its enactment, a requirement that employers over a certain size give health insurance to their employees. And that health insurance would include contraceptive care. If you work for an employer, you gotta be able to go to the drug store and get a pill, get the pill, or an IUD. And Hobby Lobby said, we are owned by religious people. And our religion contraception is a sin. We should not have to be providing insurance that's contrary to our religious beliefs. This came up under a statute called the Religious Freedom Restoration Act, RFRA. But it turned on the notion that corporations could assert claims of religious conscience. So Citizens United was about free speech, Hobby Lobby was about religious conscience. Now both being raised by ideologically conservative groups, conservative companies. And in both cases, they turned on the assertion that corporations had rights of persons. And both cases were widely criticized, especially on the left, the ideological left, saying that the corporations are rewriting the constitution. They're occupying personhood status. The corporate personhood was squashing democracy. And this huge backlash, you know, in a way they have a point, right? These companies were using citizenship rights to undermine the citizenship rights, their citizenship obligations as a matter of corporate governance. But what's interesting about this ideologically is how it created a complete ideological flip in how people started talking about corporate obligations. Remember this, the conservative view, a corporation should have it as an objective, the conduct of business activities, with the view of enhancing, that's the conservative view of corporations. That was cited by John Paul Stevens, the most liberal person on the Supreme Court at the time, in dissent in Citizens United. So this in Citizens United was the progressive view of corporations. Corporations are about business, not about free speech, said Justice Stevens. Stevens also quoted Adam Winkler saying, shareholders are invested in the business corporation for purely economic reasons. So again, the old conservative view of shareholders, that they're only about money, was used as an argument to limit corporate speech rights. And that makes sense as an argument. Corporations are about money, they shouldn't be in the public square, we should keep them isolated. In the Hobby Lobby case, the court in the lower court that held against the company said that corporations are created to make money. You can't be about religion, you're about money. Of course, that was the conservative view of corporations before, but it was the progressive view in Hobby Lobby to try to keep corporations from asserting religious freedom rights. On the other hand, the conservative view in Hobby Lobby was that corporations should be about more than just money. We could be about religion too. In fact, when it got to the Supreme Court, again, here's another quote from the lower courts, citing benefit corporations. So the progressive idea of allowing corporations to be more than just about profit was being used in these cases as an argument for why they could be religious. I kept worrying that I was gonna be cited in one of these conservative opinions, holding in favor of, because these kinds of quotes are things that I've been writing for 20 years, but one of our, Lin Stout was actually quoted in one of the papers, which was, again, it was like we were all flipped on this. And once we got to the Supreme Court case in Hobby Lobby, you had Justice Alito, probably the most, or maybe the second most conservative justice on the Supreme Court now, saying that corporations don't have to be about profit all the time. They can be about other things. And again, citing the benefit corporation as an example of why corporations could be about other things. Meanwhile, the liberals in the US, those on the ideological left, are starting to champion shareholder rights, common calls. Big, really sort of left leaning group in the United States now has this project to strengthen shareholder rights. The Brennan Center for Justice is now advocating protection of shareholders. And you can see why, like this is an argument why Citizens United should be cabined or limited, but it's certainly weird, right? The world is upside down a bit. So what do we do? Chapter four, right on time. So what should we do? So here are a couple of things that we should not do. All right, and here for the next couple of slides, I wanna criticize my friends on the left in the US who have been opposing these two cases. What is the first thing you think about when I talk about Citizens United or Hobby Lobby, mostly Citizens United, what do people on the left say? Money is not speech, right? This argument may not be as prominent here, but certainly it is in the US. It's the number one sign on, if you're occupying Wall Street, this is sign number one or sign number two. Money is not speech. The argument is the Supreme Court should not have struck down limits on spending because spending is not speech. Limits on spending and politics do not violate the First Amendment because money is not speech. I believe that Citizens United was wrongly decided. They should not have struck down limits on spending in campaigns, but it is not because money is not speech. Of course money can be speech. Of course it can be, or at least it's enough speech that it should raise First Amendment issues. Imagine for a moment that a wild, wacky, despotic man becomes President of the United States. Imagine for a moment that that man has his own party in control of both of the houses of US Congress. Imagine for a moment such a counterfactual situation. Imagine that Congress passing a law saying that no one can contribute to Planned Parenthood. Would that violate the free speech rights of Americans who want to contribute to Planned Parenthood? Of course it would. We can't say the answer to that would not be, it doesn't restrict people's speech rights because money is not speech. Of course money can be speech. Now the reason why I think Citizens United is wrong is not because money is not speech, but because there are other compelling interests that weigh against those interests, especially in a campaign setting. We should not let people with so much more money dominate the airwaves, dominate the arguments, dominate the discussion. Skew the debate. But that's not about money not being speech. That's about the other norms and other values that you put in the balance. What is another thing that you hear on the left in the US? You hear that corporations are not people. You should have constitutional rights for people, not corporations. Again, this comes from a good place, but it's wrong. Of course corporations should have constitutional rights. Of course corporations should have a role in the public square, at least some of the time. Of course as I've mentioned corporations have economic interests and ideological biases that do not always correlate with a public interest, but their voice in fact matters. Some time, at least some of the time. The New York Times is a for-profit company with shareholders. Of course the New York Times has first-member rights. Of course. And in fact, even as perhaps especially in a Trump era, corporations might provide a break on the political pendulum's rightward swing. So corporations have to be more diverse, have to be more globally focused, have to be think about the long-term in ways that the homogeneous, distressed, insular tribes that voted for Trump are not. Case in point, right, the new cover girl? Where's the hijab? Have you seen this commercial for Amazon where the priest and the mom have tea by each other, knee pads? The Coca-Cola commercial, the Render and the Super Bowl? Had people singing America the Beautiful in a diverse range of languages? This is, this provides a counterpoint in these eras and this era that we need. And it's not just on marketing. Corporations such as American Airlines and Apple are among the most vocal opponents of the anti-transgender law that we have in North Carolina now. A group of leading businesses like General Electric and American Express filed a brief last year in the United States Supreme Court in favor of affirmative action. Walmart spoke out against a religious freedom law that was being adopted in Arkansas, where it's based that would allow companies to discriminate against gays and lesbians. Now this is not to say that companies should have the same rights as humans, but it is to say that the real worry is not that the corporations speak, but for whom they speak. And that is a function of corporate law, not constitutional law. So here's an idea. If we were to improve corporate personhood and corporate citizenship as a matter of corporate law, we would need to worry less about corporate citizenship and personhood as a matter of constitutional law. And ironically the language of Citizens United might show us the way. What the court said in Citizens United was that corporations are associations of citizens. Now there's nothing in corporate law that makes that real. Justice Kennedy just doesn't know much about the way businesses actually work. But what if we took that as a way to move forward? If companies were more like associations of citizens, then we would worry less about them being engaged in the public square. We can broaden fiduciary duties to make managers care more, require them to care more about non-shareholders, stakeholders. We could institute a system of real enforceable fiduciary duties that would make them care. We could change how corporations are governed. The structure of corporate governance to include stakeholder interest. We could have companies look more like companies in Europe. I didn't know this when I was in law school that companies in Germany, for example, you have half the board of directors being elected by the employees. BMW as half the board of directors, employee elected. Mercedes-Benz, Siemens. These are not like fly-by-night companies they're gonna fail at any moment, right? And actually what that does when you have a company that sees itself as being more than just about shareholder gain, they're managed differently. They're managed with a more of a long-term view. And in an odd way, and as I close here, as an odd way this would make corporations more like people. If corporations were more like people, we would worry about them less. What do I mean by that? Human beings routinely manage a multitude of interests. I'm a parent, I'm a spouse, I'm a teacher, I'm a writer, I'm a son, I'm a brother, I'm a friend. I've gotta do all that well. Only the rare oddball acts as if only one thing matters. And only the rarest of oddballs acts as if that one thing is money. We might, you know, I might have known maybe one person in my entire life that acted that way. And it was a weirdo. People don't act that way, humans have consciences. Now corporations obviously do not, and corporate law does not require that of them. Left to themselves, they will end up acting like that one oddball, where money is the only thing that's important. The best way to constrain corporations, in my view, is to make them act more like people, to require them to sign on to a more robust social contract and govern themselves more pluralistically, to take seriously stakeholder theory. If we can mimic the traits of humanity within the corporate form, we would all be better off. So corporations are people too. They can be, we can ask them to do more. They can take on broader obligations of citizenship. And if they look more democratic internally, their involvement in the public space will be much less problematic. It might even do some good. Corporations are people too. They should act like it. Thank you very much. So I'm happy to take questions or comments or we can all go have a beer. Or both, please. How do you get your interests? You will get something like Tesla or Patagonia where they don't take more of a short term interest profit profit, right? And they try and do something that builds their brand out to help others and that essentially builds their profit. So it's more of an expanded something interested in the line for other stakeholders. How do you see that sort of function? Yeah, I think that's a great point. So one of the things that happens, right? When you have shareholder primacy is that shareholders, especially these days, are really short term investors. In the U.S., the turnover is about typical turnover for public trade companies is four times a year. So each share is bought and sold four times a year and for smaller companies is even more. So if you're a shareholder, six months from now is a really long time. Now if you work for Patagonia, six months is not that long, right? And so if once you, my view on this is once you import the views of employees, communities into the governance fabric, the company transforms into a company that thinks more in the long term. The problem with that obviously is that in the marketplace, if they're the only ones doing it, they're competing at a detriment in the short term against companies that are competing only in the short term, especially in the capital markets. So that's one of the reasons why I'm skeptical of the B Corp form because unless every company is forced to look at the short term, there's going to be a short term disadvantage for those looking at the long term. So that's why I think this should be done more broad-based and not just voluntarily like the B Corp form allows it to. Yeah. I have a question. You go to changing of the same corporations that governments do. I say that because of the roles corporations have taken on, let's say, the past 30 years, they're doing so many things that governments have traditionally done. And I wonder if that's, I mean, think of the word power, right? I think the power corporations have. I'm wondering if looking at their role and the power that they have to enhance by virtue of their size and their resources, might get us anywhere else discussion. Just give you a quickly an example. The Australians, the Australian Commonwealth government that our government struck some years ago what they call the Commonwealth model of leadership was to govern the conduct of governments in litigation. The theory being that the government had a higher duty because of the power it took into the Corp when it was called litigation. And some tried to make the argument given how the world corporations have been shifting and that they are, in some ways, developments that perhaps it's on the same list as what I just be interested in. Yeah, so there's been some scholarship along that front in the sense that, in two ways. One is that, this is sort of a minor point and then a larger point. A minor point is that increasingly corporations are asked to do the things that governments used to do. So they're now in charge of prisons or they're now in charge of your school bus routes or what have you. And so once you have companies taking on the role or the behaviors or the activities of governments then it strikes me that it just follows that they should be asked to do more. No, but brilliant means, 80 years ago, their point was more a theoretical point which I think is what you're saying which is that once corporations become a certain size, they have public impact that rivals that of governments. And that was one of the things I started with this afternoon, that the power there is so great. And this is brilliant means that the power there is so great the invisible hand is not gonna work. So the argument for that there's public, there needs to be public oversight, public regulation is even more powerful. Another way to think about that is that the power of corporations are done by way of concession from the government. It goes back to the concession theory of corporations. The reason why I'm thinking about corporations as people just as a different riff on that is because of this notion that we want to push back against this notion that corporations are not people. I think we'd be better off if we thought of them as, because first of all, we're better off if we think of them as legal persons because it's easier to keep them, to hold them accountable for things if we can sue them and they can be sued. But secondly, I think it's easy for us to think about each of us individually of having multitude and multitude of obligations, but when it comes to corporations, we say, oh, that's impossible. Corporations can only have one thing. Otherwise, we won't know whether they're doing a good job. That's just false. Universities have more than one thing that they do and it's not impossible to tell whether a university is doing a good job or not. So that's why rhetorically, I'm focusing more on the corporations as people notion. So when you're speaking of the possibilities of corporations to contribute to sort of a wide variety of positive, deceiving, other causes, it seems to me that that's a pretty big category and within that category, there's some pretty simple things like after school programs and keeping highways, and then there's climate change, which is a lot more complicated. So in that sort of category of obligations, I'm wondering if you could speak to the idea of there'd be lots of corporations who are willing to do crimes that are closer to percent and not so willing to do things that are closer to percent. Yeah, what an interesting question, right? Because, and I'm starting to do some work on this actually, because, not to get too technical, but because of discount rates. And I'll, let me flag that as part of my answer, I'll come back to it. But you're absolutely right, that companies are much better at doing the simple things. You know, we want to contribute to our fundraiser. Yes, we can do that, right? You want to, my wife was just pointing out the other day that we were watching some show on TV, and it was General Electric, that was having this big commercial about prioritizing the interest of women scientists. And her, my wife's take was, wow, all these companies are rushing in to monetize the frustration and anger of the left. Like, okay, so, you know, that's good, you know. So, at least let's take it, well, we'll take it while we can get it. You know, the Audi commercial, Audi made some news with their commercial during the Super Bowl, where it was all about girl, this dad talking about his daughter, whether he's gonna be able to, have to tell his daughter that she's never gonna make as much as the boys in her class and all this kind of stuff. And that's Audi. But where it gets hard, right, is the long term stuff. Two things. First of all, it's hard because companies themselves are so short term oriented that they don't care. The present value, and this goes back to the discount rates, the present value of environmental calamity, 500 years from now, is zero from a financial perspective. Now we might care because we're gonna, you know, we hope to have descendants living then, but a company, if you do the normal discount rate, and even if it's like a gazillion, trillion, gazillion dollars, 500 years from now, like the present value of that, if you do the discount rate of 5% a year, it's less than the money you have in your pocket right now. So a company's not gonna care. So how do we get a company to care about that kind of thing? Even 25 years from now, or 50 years from now. My view is that the one way for them not to care is to tell them that the only thing that matters is share price. We'll guarantee that they won't care because they'll bury it in their balance sheets. Shareholders won't care because the shareholders are all oriented at the short term. But if we have a shot at it at all, it's gonna come by way of forcing the companies to listen to stakeholders other than shareholders. It may not be perfect, and it may be that, it may be that my idea will not solve everything. We might have to have regulation that overlays this, but I think it will do more than what we're doing now. But now the last point on that point, on that issue. There's a growing sense in the US that especially energy companies should be subject to suit for fraud over their disclosures about climate change. I think this is an interesting area of possible litigation for shareholder activists and other activists because it may be that Exxon, for example, has every interest in the world to be a climate change denier. Because they've got trillions of dollars of oil reserves still in the ground that plummet in value if climate change becomes a real worry. And they're carrying the value of those oil reserves on their balance sheets. So they don't want people to believe climate change because then their assets fall. And so it may be that they've been engaged, and so they're starting to become shareholder activist suits now, saying that Exxon denying climate change, or funding climate change deniers is actually engaging in fraudulent behavior in order to prop up the value of their assets. Please. Yeah, I think your proposal on a sort of more relationally-figured sense of rights for cooperation, I think that brings an interesting comparison to the US candidates, which is our relation to our shareholder constitutional space. But given the cooperation as a capacity, even in a positive sense, to just be an association of citizens, if those citizens can see their constitutional relationship with the relationship to the rights as hyper-individualized, more so than relational, in that they're a long expert in constitutional leadership in the US, but at least a structural sense that there's a more individualized relationship to your constitutional rights than a relational one. Does that traumatize how this proposal might operate in the US? Yes, interesting thought. Yeah, I'm not sure how to deal with that yet. You're right that in the US, constitutional rights are so individualized, and they operate as a, when they operate, they operate as a waiver of, obligation in a way. Like, I don't have to, I don't have to say the Pledge of Allegiance because I have a First Amendment right not to. Now, corporations are now saying, just like a school child doesn't have to stand up and say the Pledge of Allegiance because they have a First Amendment right to do it, the corporations are now saying, we don't have to print our warning labels on our cigarette packages because we have a First Amendment right not to say it. So you're right to raise those kinds of issues because, at least under the US, most of our rights are negative rights as opposed to positive rights. We don't have a constitutional right to healthcare. We don't have a constitutional right to water. We don't have a constitutional right to education. We have a right not to be treated unequally. We have a right not to be treated in ways that are contrary to our fundamental rights. So I see the issue and I think, in a way, because, just off the top of my head, because we have that kind of scheme of constitutional rights, I think it's even more important to get the corporate governance stuff right, correct? Because otherwise, corporations are gonna start to try to stand in the shoes of individuals and claiming these individualized rights for corporate entity in ways that don't seem to be right. This goes back to the previous question about Exxon. The Attorney General of Massachusetts is suing Exxon for fraud about their disclosures on climate change. Exxon has responded to the lawsuit saying they have a First Amendment right to not disclose their internal communications about climate change. So they're saying, we're like the school kid who doesn't want to say the play of allegiance. So I think that's the problem. I raise this because it's something that we've been talking about in our business associations class and I think it relates to your talk as well. And one of the problems we talked about is the coercion of corporations or trying to force corporations to act in different ways and that is always the negative side to the penalty enforced. So one thing that we were talking about was just actually co-incident but what we're talking about corporate personality, so your lecture is really time, which is great, is we talked a bit about the idea of finding a corporation or how can you punish a corporation when, for example, if you let that fine get internalized and pass down such that it doesn't harm a corporation really at all. And then there are other issues, certainly theoretical issues, that if you throw a director in jail for some kind of corporate offense, it runs a power of corporate theory when you're talking about separation between directors and the corporation as an entity. So we've started talking about it a little bit. We're going to continue talking about that as well, but how would you address that related to the topic that you're talking about, when you're talking about the ability of coercing corporations and maybe focusing a bit more on the negative side and some of the issues that might be there that maybe are still highly problematic in terms of trying to force or coercer it has to be? Yeah, so two answers. First, I think a lot can be done structurally. I think the best way to enforce a fiduciary duty that's more robust is to make the board look more like all the investors in the company. So when I say investors, I include employees, include communities. So if you had a stakeholder board, you wouldn't need to worry, you wouldn't have to worry so much about having strict fiduciary duties enforced by courts because it would take the marketplace and in effect import it into the board. I think, so there's structural protections. In terms of how do I make fiduciary, even if that were not to happen, how would I make fiduciary duties real? I think one of the big problems in the way U.S. law works is that we give such deference to the business judgment of directors. And the business judgment rule says that courts shouldn't upset the decisions of directors if they were well informed, even if they were negligent, even if they were grossly negligent. That makes no sense to me. We punish doctors who are grossly negligent, even negligent. We punish car designers who are negligent. They cause the roll over of cars. It's only in this area of business where we say courts don't have the expertise to know whether to hold a director liable. I had a debate with Frank Easterbrook last year. Frank Easterbrook's one of the iconic scholars who founded the law and economics movement. And he said judges shouldn't be adjudicating these claims. We don't know anything about business. He's a federal judge. He adjudicates claims about whether DNA strands are patentable or not. Like it's not that, most business decisions are not that complicated. And you can tell by taking evidence whether they've been done negligently or not. So I think that's a long-winded way of saying the key here is to adjudicate these claims in court like we adjudicate any other kind of claim. Was a person negligent? Were they reckless? That hold them accountable. So maybe what that means is these indemnity agreements are too protective of directors as well as the baseline business judgment rule. So it's kind of the same issue as the amount of people that just fund is operating for meetings. They don't want pay taxes, so they avoid it. Right, so I think the short answer is that aren't that, the U.S. is one of the most protective jurisdictions in the world of corporate management. One of the most, and of shareholder primacy. So there's not that many places that they could go. And the U.S. is the outlier in this respect for the most part. The other thing to say is that corporations, they might be able to move their paper but corporations aren't really willing to move their headquarters and their facilities. One of the anomalies of U.S. law is that there's literally a filing cabinet in Wilmington, Delaware, probably the size of this table, that is the headquarters of most of the Fortune 500. You know how many Fortune 500 companies are based in Delaware? One, because they can just, they can claim by filing a piece of paper in Delaware that their home is Delaware. That's total nonsense. They shouldn't be able to do that. That's not the rule in Europe. That's not the rule anywhere. So the longer answer to yours, the first answer is you're not gonna actually see many people flee. The second answer I believe is that if they start, I don't think if they start fleeing, there are some constraints on that. They're not gonna want to pick up their headquarters and thousands of employees and move them to Bermuda. I'd like to move to Bermuda, but they probably won't. Thanks to everybody for your attention and for your invitation to come. They're like wonderful and very provocative talk and again, thank you and a little token of her. Appreciate it. Thank you very much. Thank you.