Corporate social responsibility (CSR) is typically assumed as a voluntary initiative rather than a legal mandate. Yet, in recent years, a growing number of countries have adopted laws that explicitly require corporations to undertake CSR. When it comes to CSR legislation, most scholars focus on mandatory disclosure. This article presents emergent varieties of CSR legislation other than mandatory disclosure and investigates the experiences of representative adopting countries. It compares and evaluates the motivation, nature, implementation, function and potential diffusion patterns of the emerging types of CSR legislation. This article shows that while the new legislative methods appear progressive, politics and the open-ended notion of CSR significantly weaken the compulsory nature of the laws. The major function of the CSR laws as they currently stand appears mostly expressive. At best, the explicit recognition of CSR in the laws may send signals about appropriate corporate behavior and reconstruct business norms that exclusively focus on profits. At worst, the laws may be political greenwashing through which politicians give symbolic importance to CSR. This article offers policy lessons and possible directions for future reform.
The foundation of the modern corporation is built upon the separation of labor and capital. These entities were anathema to most Indigenous peoples when the Virginia Company was chartered in 1606 for the purpose of settling American lands. Over centuries of colonization federal law worked to assimilate Native Americans. Tribes were encouraged, even forced, to create their own corporate entities. Indelibly, consistent with their inherent sovereignty, Indigenous groups fused autochthonous legal principles into these corporate structures. Today, in the shadow of the #BLM movement and societal demands that corporations become more responsive to their communities and to the environment, shareholder primacy has reached its nadir. As corporate governance seeks to replace it with something stakeholder centered autochthonous principles gleaned from Indigenous corporations offer a way forward. These proposed reforms are as varied as the chthonic law they are built upon and range from making nature itself a corporate shareholder to issuing shares that gain voting rights only after they have been held to maturity.
Every state authorizes shareholder derivative litigation, and the vast majority extend this remedy to LLCs and limited partnerships. As the availability and incidence of derivative litigation has expanded over time, a number of procedural hurdles have evolved in an effort to limit nuisance or strike suits. The theory is that these strike suits are brought by small shareholders, and the need to post a bond may deter these shareholders from bringing these suits. As part of this effort, some states have enacted “security for expense” provisions, requiring owners to post a bond to cover the defendants’ expenses before they can proceed with their suit. A few state have also enacted such provisions for derivative suit by LLC members and/or limited partners. In the context of whether and how to bring a derivative suit, the challenges facing shareholders, LLC members and limited partners can be quite similar, yet the states’ treatment of who and how to post a bond before filing a derivative suits is uneven and inconsistent. This Article focuses on security for expense provisions applicable to LLCs and limited partnerships, providing an analysis and evaluation of the rights of and requirements facing these owners who, like their shareholder brethren, seek to hold those who manage their entities accountable for managerial neglect or malfeasance through the mechanism of derivative litigation. This Article identifies the inconsistencies in states’ approaches to the rights of LLC owners and limited partners seeking to sue derivatively, specifically exploring whether such owners are required to post a bond as security for the litigation expenses, what effect this might have on the utility of derivative litigation generally, and whether the mechanism of security for expense provisions is adding value to the process writ large. The Article examines the existing corporate security for expense statutes requiring bond posting by shareholders, and then compares this corporate statutory landscape with the security for expense statutes applicable to LLC members and to limited partners as part of a broader evaluation of the usefulness of the bond posting statute as an effective gatekeeper in derivative litigation across the three forms of business generally.
International trade policy in the United States until 1934 was determined by a Congress that represented the interests of diverse and changing domestic production. Southern agriculture pursued free trade policies to enable access to foreign markets for their goods, while Northern industry sought protection against imports that would stymie their nascent development. By 1934, it became clear that trade policy needed to be streamlined and accelerated to address the rapidly changing trade landscape. Congress delegated on a temporary basis its power to regulate trade, giving the President an opportunity to manage trade policy. Since the first delegation, Presidents used this power to pursue more open trade, leading to phenomenal domestic economic growth, vast expansion of global trade, and a more peaceful world. This policy has been turned on its head since 2018 when the Trump Administration began using this delegated authority not in the pursuit of free trade and democracy, but rather to solicit political support from certain domestic industries and to punish countries that he believes are behaving unfairly. Much of this new approach to trade is founded upon the national security exception present in U.S. trade law. In this paper, I argue that the national security exception created by the 1962 Trade Expansion Act, during the Cold War, is meant to be extraordinarily narrow and rarely used and that any broad application of this exception would likely compromise the world trade system altogether. I suggest that Congress, where trade policy power lies, should reassert control over trade policy and guide the President’s hand in the pursuit of beneficial economic goals for the United States as a whole. I will begin this paper with a historical exploration of trade policy through the lens of protective tariffs. I will then emphasize the development of the national security exception in domestic trade law, paying special attention to the most recent iteration of this exception being applied today. I will then compare this national security exception in domestic law to the essential security exception found in international trade law to better understand its meaning and application on a global scale. Finally, I will review domestic case-law and legislation related to the delegation of trade policy-making authority to the President and argue how this power is being abused by the Trump Administration and what should be done to change that.
There is ever-increasing investor interest in corporate social responsibility (CSR) generally and environmental social governance (ESG) in particular. Investors’ desires have triggered increased corporate ESG disclosures. As pressure for ESG-related disclosures continues to rise, there is increasing pressure on the SEC to support enhanced ESG disclosures.Notwithstanding many calls for mandatory ESG disclosures, the SEC has not implemented such a requirement. Instead ESG disclosures are voluntary. Voluntary ESG disclosures are common but to a large extent are marred by a lack of standardization in ESG data methodology. The increasing investor interest in ESG have led publicly held companies to take various approaches in framing their ESG disclosures. Many observers have asked the SEC to take a more active role with respect to ESG disclosures. Some observers call for mandatory ESG disclosures. To date, the SEC’s approach has been limited to providing guidance for companies electing to make ESG disclosures. This article analyzes the various ways in which the SEC could mandate or encourage better ESG disclosures. The article concludes that regardless of whether the SEC imposes mandatory disclosures or continues its voluntary approach, the SEC should a adopt a safe harbor rule. A safe harbor rule would encourage ESG disclosures while at the same time limiting but not eliminating the risk of liability for defective ESG-related disclosures.The article begins with a description of the current state of ESG disclosures. This is followed by a brief overview of the securities laws’ disclosure obligations. The article then explains materiality – a concept that is the lynchpin of the securities laws’ disclosure requirements. This is followed by exploration of the potential ways to enhance CSR and ESG disclosures including the advisability of mandating disclosure or taking additional steps to encourage voluntary disclosure. Specifically, the article suggests that a safe harbor rule would be an important step in improving ESG disclosures.
Technological advances have made it possible to scour vast arrays of data in the digital world with algorithms. Investors, in particular hedge funds, are spearheading this technology as means for investment research. In the discussion of this growing trend, the spectre of potential insider trading always looms large and is oft-cited, but seldom analysed in detail. This article looks closely, while trying to be mindful of real-world practices, at the state of play in insider trading doctrine with regard to investments made in reliance on scraped data. Additionally, the article clearly lays out the arguments for and against regulating data scraping via insider trading law – bringing to the forefront the policy concerns which may well be underlying future regulatory and judicial activity in this area –, focusing on incentive mechanisms. As for the outcome regarding current legal doctrine, utilizing scraped data for investment research will only rarely result in insider trading liability. On the policy side, the arguments against policing any and all data protection violations with insider trading doctrine win out. Bringing the heavy hammer of insider trading down on investors relying on scraped data is ill-suited for likely policy goals, would disincentivize progressive thinkers as well as fossilize market dominance of data giants, and impair the free market equilibrium the U.S. economy is built on. PhD, LL.B., Bucerius Law School; LL.M., Harvard Law School. The author would like to thank Holger Spamann and Manish K. Mittal, who piqued the author’s interest in this topic with their absorbing style of teaching the course “Hedge and Private Equity Funds: Law and Policy” at Harvard Law School in the Spring of 2019. The idea for this paper was born out of a deliverable for that course. 628 U. OF PENNSYLVANIA JOURNAL OF BUSINESS LAW [Vol. 22:3
Due to the #MeToo movement, awareness of sexual harassment and assault in the workplace is at an all-time high and the dividing line between the genders in the workplace may be at its greatest. Women, who were already at a significant disadvantage in corporate America prior to the movement now face increased exclusion by men in and outside the workplace. Worse yet, the harsh reaction to the movement may have caused men to become more skeptical of sexual harassment claims. One of the responses to the movement is an outpouring of literature, both academic and popular, centering on the difficulties women face in obtaining mentors, sponsors, and other forms of advocacy in the post-#MeToo era. Many articles focus on the need for men to take an active role in using their privilege and position to assist women in breaking these barriers. Although the importance of mentoring women cannot be overstated, and the emphasis on men mentoring women is critical given the gender inequality among senior management, largely absent from the analysis is a discussion of the benefits that women, men, and society as a whole receive when women mentor men. This manuscript explores this perspective, arguing that there should be a focus on providing opportunities for women to mentor men. It posits that women mentoring men may be essential for ultimately bridging the divide between the genders and helping to eliminate gender bias in corporate America. In addition, it addresses how the COVID-19 crisis demonstrates a need for female mentorship and provides an opportunity to redefine the mentoring relationship.
The paper grows out of two observed trends in corporation bankruptcy practice: first, reorganizations are increasingly structured by deals agreed to by insiders (including controlling creditors) before cases are filed, and bankruptcy courts have shown a willingness to adopt these deals within the chapter 11 process, despite concerns that the deals might not strictly comply with the Bankruptcy Code. But at the same time, there is a growing backlash – seen not only in academic writing, but also in appellate court decisions – against the flexible, deal culture that the bankruptcy courts have embraced.My paper shows that these opposing forces are not new. By looking at the long history of corporate bankruptcy – going back to the initial railroad insolvencies before the Civil War – I show how the story of American corporate reorganization law exhibits a distinctive pattern: a long, slow wave, drifting between flexibility and fairness. I argue that movements toward the extreme “fairness” pole are inherently unstable. In particular, because moves to extreme fairness tend to render reorganization systems unusable, the need for a functional reorganization system will inherently force a move back from fairness and toward flexibility.I conclude by arguing that changes to help the legitimate interests of small players getting crushed in the current system are worthwhile, but “reforms” that ultimately help distressed debt investors or other asset managers extract greater returns from bankrupt corporations are misguided at best. Moreover, as shown by an analysis of the prior reign of tremendous fairness – from about 1938 to 1978 – such a system is inherently unstable because the corporate reorganization system becomes unworkable. Rigidity increases the pressure for change. The best solution then is to scale back the extremes of the present ultra-flexible chapter system, without going so far as to thwart its very utility.
The impact of Delaware incorporation on firm value remains a central question in corporate law. Despite the difficulty scholars have had in agreeing on an answer to this question, there is a consensus that Delaware has long enjoyed stable and important advantages in the expertise of its judiciary and its extensive case law. These advantages are believed to be particularly important for firms with a controlling shareholder. This Article attempts to empirically measure the effect of Delaware incorporation on these controlled firms and thus help us understand the market value of Delaware’s judiciary and caselaw. It finds, surprisingly, that controlled Delaware firms are actually slightly less valuable than similar companies incorporated elsewhere. This suggests that (1) Delaware does not create much if any premium in market value for controlled firms or (2) “lower quality” controlled firms—which would be less valuable regardless of where they incorporate—disproportionately pick Delaware. Either explanation runs counter to conventional wisdom in this literature. Finally, the results cast new light on the long-term effects of Delaware’s recent decisions weakening the doctrinal protection of minority shareholders embodied in M&F Worldwide and Synutra
Exchange Traded Funds (ETF) are likely the most successful financial products since the 2008 global financial crisis (GFC). Despite numerous benefits, ETF’s success could be making some asset managers “too interconnected to fail.” Interconnection is a core element of systemic risk, and it played a material role in the transmission of economic shocks in the GFC. This article is the first, in a growing body of literature on ETFs, to provide a comprehensive inquiry into their systemic importance through the lens of interconnectivity. The article provides three unique contributions. First, it shows how ETFs are creating deep and complex interconnections between numerous market participants and service providers, extending to retail and institutional investors, and corporate behaviors and decisions. Second, it illustrates how ETF interconnection creates direct and indirect systemic risk transmission pathways, with unique factors not present in other managed asset products, like the reliance on key market-incentivized intermediaries in a crisis, crowd behaviors from correlated investment exposures, information cascades, runs, fire sales, and non-linear impacts. Finally, it shows how the effective monitoring of ETF systemic risk requires a cross-market analysis to assess the collective behaviors of numerous participants in a complex and interconnected operating ecosystem, and how both activity and entity-level oversight is prudent in this market. While ETF firms are distinct from banks and insurance companies, there’s merit in safeguarding large firm’s economic resilience given their centrality in a highly interconnected ecosystem. As such, ETFs illustrate the importance of considering financial markets as a “system” when designing supervisory frameworks.
