List of Possible Corporate Reform Strategies
(from June 2005 DC Roundtable Meeting

Top Choices of DC Working Group

1. Redirect purpose of corporation
2. Make corporations public institutions
3. New operating models
4. Corporate structures
5. Workers as frame
6. Build countervailing power

Corporate Reform Strategies

Grassroots Initiatives

• Denying the recognition of corporate constitutional rights through local ordinances
   
• Challenging Corporate Personhood status in law suits
   
• Code for Corporate Responsibility (CA, MN, ME) (amending state law to force directors to not make profit-based decisions at expense of stakeholder interests)
   
• Charter Revocation efforts
   
• Three Strikes Legislation

Other Strategies

• Redefining Ultra Vires doctrine
   
• Limiting Limited Liability
  • end corporate "shapeshifting" around global liability)
  • end/limit arbitration clauses
  
   
• Eliminating Internal Affairs doctrine
  Corporation can choose applicable law no matter where it actually operates. Consequence is that state can put condition on a corporation that is an external control, but doesn't allow a state to condition the internal governance of the corporation chartered elsewhere, usually DE. E.g. MA can't force an internal audit committee on board of a corporation that is based in MA but incorporated in Delaware. This is totally opposite to general conflicts of law doctrine, and it is neither constitutional nor statutory, but based on judge-made rule of conflicts of law.
   
• Federalizing corporate charters
   
• Redirect Purpose of the Corporation
  • redefining Business Judgment Rule
  • Fiduciary duty of care/include due diligence process of looking at effects of decisions on stakeholders Compensation structure
  • Expand disclosure (illegal to lie to employees, not just consumers and shareholders)
  • "Protect us from ourselves"-end s/h primacy
  
   
• Restructuring boards to allow employee and/or stakeholder perspectives on boards
   
• Challenge jurisprudence supporting concept of corporation as private interest v. public interest; Challenge "ownership" ideology-corporation as public institution
   
• Redefine materiality
  • Change accounting to internalize costs
  
   
• New Restraints on Size (antitrust)
  • Rigorous scrutiny of specific sectors (energy, banks, retail, media, retail, ag, pharm)
  • Ban on mergers above $20M
  
   
• Restraints on Corporate Speech
  • Commercial
  • Political
  
   
• Workers as Frame
  • Stakeholder empowerment
  • Workers as investors/shareholders
  • Privacy rights
  • Equal protection against discrimination
  • Whistleblowers
  
   
• New Framework for Capital Controls/New Operating Models driven by concerns about outsourcing/trade deficit
  • National health care plan
  • Nationalize key sectors (tobacco)
  • Ban monopoly patents
  • Govt' created enterprises (energy efficient technologies)
  • Non-prof assn's (LINUX)
  • Worker-owned cooperatives
  
   
• Social Audits
   
• Build Countervailing Power (unions, community groups, universities, ngos)

Notes from the Center for Corporate Policy Roundtable GWU Law School, Washington DC, June 14, 2005
(Distilled from notes taken by various participants. Compiled by Charlie Cray)

1. Mapping the Corporate Reform Movement
(Sociological & political analysis; not including peace or global justice movements)

4 different types of activist groups

1. Traditional single-issue-based groups.
   • Labor, environmental, consumer, others (media reform, etc.).
   • Regulatory focus; look at organizing;
   • Recognizing that the private sector makes more decisions than the public sector, increasingly turning to corporate campaigns (Business Ethics Network: shareholder resolutions and market campaigns that attack specific corporations whose brand is vulnerable to public, consumer pressures.)
   • Usually don't cross issue "silos" or look for structural changes, rather changes in behavior and policy.
   • Could consider deeper challenges e.g. to constitutional rights (e.g. media reform activists are beginning to look at media and 1st Amendment questions).
   
    
2. Corporate Social Responsibility Movement
   • Socially responsible investment groups, Co-op America; Corporate Sunshine Working Group, etc.
   • Work primarily on disclosure, reporting and transparency; some ties to shareholder activism (e.g. CERES, SRI groups); and some interest in corporate governance (e.g. the Corporate Library, Corporation 2020).
   • Directed principally at reforming the corporate system from within, rather than challenging it.
   
    
3. New populism
   • Grass roots; fundamentalist attacks on corporation. Popular constitutionalism.
   • Groups like the Program on Corporations, Law and Democracy (www.poclad.org); Reclaim Democracy, Green Party, etc.
   • Source of the attack on corporate personhood doctrine, revival of attacks on corporate charters.
   • Popular constitutionalism: "We the People"
   • PA groups (w/CELDF) are most advanced in linking to an organizing praxis, building from ground up.
   
    
4. Progressive think tanks and legal foundations

   After Justice Powell wrote his memo for the Chamber of Commerce there was an explosion of activity on the Right, with Olin/Scaife/Bradley/Coors funded think tanks. (See, e.g. Oliver Houck article in 1984 Yale L. Rev.)

   Progressive side is weak counterbalance, where we need new energy.

   Progressive legal organizations:

   ACLU (defender of rights, not always with us on corporate rights question);
   Equal Justice Society,
   American Constitution Society,
   Public Citizen Litigation Research Group,
   Alliance for Justice
   Center for Justice & Democracy
   ATLA (tort reform).
   Center on Corporations, Law & Society;
   National Voting Rights Institute (1st Am.);

   Progressive Think Tanks:

   IPS
   Essential Information
   Public Citizen
   People for the American Way
   Center for American Progress
   Demos

2. "What will our victories look like in 15 years?" - Visioning

• The WalMart campaign led to popular attention to danger of corporate size and a new debate over antitrust. A cap on mergers above a certain size (e.g. $20 billion) and ban on mergers in certain sectors, including media, energy, and banking.
   
• New restrictions are placed on commercial speech. Tobacco and pharmaceutical advertising. Ads to children sparked outrage. The Supreme Court rules that there are no commercial speech rights.
   
• The labor movement continues to decline, leading to huge abuses, but the Bill of Rights is imported to workers within firms (speech, privacy rights, equal protection rights).
   
• The U.S. trade deficit intensifies. Outsourcing expands to medical field, Wall Street. Federal framework establishes authority for state & local governments to restrict capital transfer, plant removal.
   
• Some displacement of the traditional corporate form. National health care leads to abolition of private health insurance (15 % of economy). Despite reversal of commercial speech, tobacco corporations are viewed as too dangerous, so they are nationalized, after state alcohol model.
   
• Increased cost of pharmaceuticals leads to a ban on low-innocation monopoly patents, generics are automatically licensed, while innovators are rewarded out of a prize fund.
   
• Linux gains power against Microsoft, non-profit to develop software programmers.
   
• Increasing evidence of global warming and frustration with energy industry Leads to new government funding and program to disseminate energy-efficient technologies.

Rising concerns about corporate integrity lead to reversal of limited liability. Corporations forced to internalize costs, like small businesses.

History of U.S. is of who is and who is not a person. E.g. in 1776, 70% of pop was indentured or slaves. Corporations have more rights than people.

Responses:

The same issues were addressed in earlier periods in American history. E.g. between 1890 & 1914, all the same issues were already being talked about. History of railroads, patents viewed as part of the rise of the great trusts. Regulatory models - Bureau of Corporations (1901-1914). Campaign reforms, impact of immigration, role of labor movement were all part of the debate. Problem of debates over corporation is ahistoricity.

Victory would be the recognition that while 75% of the economy is not corporate, corporation dominate the economy. A large portion of our economy comes from other folk (fire fighters). We assume no other models available. Not be intimidated by argument that there are no alternatives to corporations. "What if Monsanto did pull out?"

Look INSIDE the corporation. Improve the status of workers by having them represented in corporate governance (stakeholder board). Don't give up on labor movement just yet. Challenge the dominance of Delaware as provider of corporate governance rules (go to either federal or other states to push the end of the internal affairs doctrine).

Force companies to do what they say they are doing - compliance and social responsibility beyond window dressing. "Interest convergence."

Cluster of political countervailing powers instead of alliances.
• Limited corporate influence on lawmaking.
• End of internal affairs doctrine.
• Limits on lobbying, not just contributions.
• Redefine corporate purpose to, e.g., employees' welfare.
• Externally, market regulation.

Put political speech at the center of the discussion.
Problem is not just that money = speech.
The use of economic power in political realm prevents government from doing much. So political speech is key. Even if Supreme Court decision doesn't happen, can do much to curb economic power in the political sphere.

Conception of limited liability must account for global nature of corporations, Capital mobility. Money accrues to the parent corporation. Claim rests in host nation. No ATCA in Canada. (Need to get at global shape-shifting nature of corporations.)

"Interest convergence" brings unlikely allies together.
Use corporate credo to hold them accountable.
E.g. Johnson & Johnson statement, obligations to various stakeholders.

Three recent eras when debate about corporations was pivotal; need to learn from what worked, what didn't and why.
1890s (trust-busting),
1930s (New Deal),
1970s (ITT antitrust and Watergate, Lockheed bribery scandals; Infant formula campaign; Church Committee hearings).

Al Gore's 2000 convention speech reflected populist sentiments, singled out 5 types: big oil, pharma, insurance etc.

Post-Enron "moment" lasted 8.5 months until debate shifted to Iraq war.

BP exec explained they want reform, "protect me from myself," but hard for them to advocate it.

Borders of corporation are porous.
Credo has power because it resonates with the public.
Post-Enron moment S-Ox.
Effects in South, no accountability in the North.
Converging interests like the international bribery convention.

Proposals come in two directions:
1. Reduce corporate power from the outside. "Small is beautiful." Conscious structure of markets and regulation. The Jacksonian model of antitrust is more a question of too much political power, rather than just an effort to get lowest possible price for consumers. There can be downsides to a small is beautiful approach.
2. Reconceive the purpose of the corporation. Internal (get powers outside to redirect the corporation). Make it so workers not perceived as costs. (I.e. make it easier for corporations to increase compensation to employees or become more socially responsible).
Still achieved in external sphere, by countervailing powers (e.g. unions).

Convergence areas where politics might be practical:
1. Maintaining legal liability. Arbitration replaces "democratic norms" with "private power." Tort law necessary to internalize externalities. Bankruptcy as an escape from long term contracts (pensions, medical care, environmental liability). Grand jury indictment can work with activists and plaintiffs lawyers, uses states right and anti-government rhetoric of the right wing.
2. Health care, pensions and global warning are areas where managers might support being regulated.
3. Both democracy (collective governance/stakeholder representation in internal corporate governance) and private/individual rights against the corporation might have mass appeal.
4. Minimum wage regulations, esp. if binding on corporation extra-territorially in the manner of the anti-bribery regulations, would help on keeping jobs home and improving them too. "High road" to development.
5. Corporate speech also has a "big antlers" aspect: businesses might be happy to have regulation if it restricted their competitors too, kept the cost of lobbying down.
6. CEO salary regulation might get some investor support (although high CEO salaries are basically good for shareholders, they are getting so large that that might not be true anymore. NYSE, airlines-entire profit going to CEO). Compensation structures create incentives. At CEO level, not allowing the gap to get too big for democratic/republican reasons. At sales level, not rewarding for breaking law/ethics (e.g., pay for sales even if made by misrepresentations; pyramid sales)
7. Ombudsmen can help managers control the corporation, individuals to function in the firm, firm to stay law abiding. Could be good management
8. "Public" corporation - change in rhetoric shifts the meaning of regulation; no one opposes regulating the state.
9. Disclosure - isn't transparency always good? Labeling allows consumer market to pressure firms. Effect of labeling for transfats was dramatic-could we label for wages, locality, global warming impact?
10. Outside regulations: for specific problems, sometimes it needs to be outside the firm altogether. Eg, the quickest way to harness corporations to reduce global warming is simply to raise the price of oil so that alternatives become profitable. Or to understand why the US RR industry failed.
11. Corporate welfare: on many levels, but starting with Wal-Mart-disclosure of how much they take in direct subsidy, tax breaks, welfare/medicaid/unemployment/uninsured hospital costs for underpaid employees, infra-structure costs, increased use of gas/pollution generation. And perhaps impact on the community in some broader sense (reduction in local business and local business support for local business, culture and charity).
12. Representatives of employees on the board. Using the rhetoric of democracy and also arguing that adding employee input will make the corporation more responsive, more effective in innovation, etc.
13. Business school and rhetorical changes: teaching execs, their lawyers and bankers to see corporate citizenship not as a constraint but a goal.
14. Institutional shareholder refocus: closet indexers need to think about the economy as a whole and good management rather than stock selection. Are they capable of this? Are they appropriate institutions to do this (why would you want people trained as stock analysts running companies??)
15. Thinking about alternative finance methods: Europe and Japan finance largely through institutions (banks) rather than the stock market. This makes a space for longer term thinking but is even more elite based and closed than our own system. Would encouraging a larger bank sector here in addition to the stock market be useful or not? Should taxes encourage retained earnings as a financing method (by taxing dividends and interest more than capital gains) that increases the power/autonomy of the firm, frees it from the stock market's short term pressure, increases management authority to fail or succeed?
16. Reducing cynicism. How to profit maximize is usually indeterminate and unknown; Wall St has fads where it sees one solution for all companies (reduce pay, increase CEO pay, cut R&D, conglomerate or deconglomerate). What is morally wrong is often easier to determine; execs often use immorality as a heuristic for profitability. We need serious education in the "doing good to do well" mode so that decision-makers see that sometimes they need not choose between the two. Pollution is waste, global warning will end profits, diversity is good for the corporation, treating employees/customers badly is not only low road but attracts bad attention,(Costco v. Walmarts). Sometimes good is profitable. Exxon could make a lot of money if it gets to switch us to hydrogen. Profit motive isn't everything-non-profits often run roughshod over their neighbors too. Many of the role problems are problems of bureaucracy or conflicting values, not specifically of publicly traded corporations.
17. Creating responsiveness inside the institutions as a substitute for nationalization (which has the problem of putting regulator and promoter in the same institution).
18. Corporate law is medieval: creates a dictatorship without rights. Need both representation for majority and rights for minority against the government. Democratic republicanism in the workplace. Privacy of employees. Privacy of customers. Private property in computers. Need a GSA, investigative arm, parliamentary question period. We don't run our governmental bureaucracy this way; the difference between business and governmental bureaucracy is overrated.
19. Dismantling Delaware.
20. Institutionalizing other values-internal ombudsmen, social audit, etc.
21. Role based morality. Is the job of a professional to maximize profit or something broader? How is efficiency defined? How do you measure the other values.
22. Every managers knows that to get the team to work you need to persuade them they are a team, playing the same game; but at the same time they need to be prepared to betray the team when it is expedient. Can that kind of cynical game work? Wouldn't a more honest policy be more successful?

History of resistance, cycles.

Corporate power is more unchallenged now than ever before; control over all 3 branches of government, media. Possible flaw in Framers' separation of powers.

• There has been a basic reform movement every 30 years or so. Jacksonian, trust-busters, anti-federalists, etc.

• Now ahistoric - no political entity is consolidating opposition esp. as political parties.

Proposal: use independence of Grand Jury, so as to reassert original conception as the 4th Branch.
Independent of prosecutors, esp. when corporate behavior crosses line to criminality.
• Prosecutorial discretion used to avoid bringing the tough questions.
• Permits community to bring its concerns directly to GJ, not through prosecutor.
• History: "Runaway grand jury" prosecuted Boss Tweed. Active model until 20th century.
• No major corporation has survived an indictment.
• In some states, constitutional right of citizens to present evidence to grand jury still exists. Texas, Tn, WVa etc. allow citizens to bring issues directly to state grand juries.

Wide open at federal level. Federal Rules of Criminal Procedure: wrote presentment out of the system. Are the rules constitutional? Bring a test case.

• Earlier point about worker concerns can bring all issues ("symptoms") together, even envt'l etc.
• Democracy issues (looking at earlier suggestions.)
• None of the strategies are exclusive.
• Three states are talking about a "code of corporate responsibility" ... what would that do to internal affairs doctrine?
• Litigation is by definition symptomatic ... how do we bring about structural reforms?

Size matters. Things that are bigger need to be more accountable. Market do a better job at regulating smaller businesses. Reification: Not "us v. them." But "us and them" v. "it." Need to work with people inside, not make them into criminals. Most people don't blow the whistle because it's not part of our culture. But most people inside are against corporate bad behavior, too ... so don't alienate them Isn't matter of structure; it's a matter of purpose. Don't force them but motivate them.

• Works with Interface (billion-dollar carpet firm) that seeks to make sustainability part of the corporate purpose. Need to add social values to environmental values.

Q is, how do we spread this to rest of corporate community? Responsibility to shareholders inhibits them. They want to go to WalMart and say that it's ruining the environment. GE greenwash.

Herbal supplement makers - under siege from corporate competitors. Ephedra is more effective, more tested than Sudafed, but falls outside intellectual property model of Big Pharma. FDA put enormous resources into trying to close these down. Uses restrictions on commercial speech to close down small guys. Can't make health claims. Tried to ban the word "organic."

Populism is "trans-partisan."

CEO Compensation issues have not been fully addressed.

Eclectic approach, don't restrict to internal corporate law.
Purposely started my presentation with outside stuff.
Do everything (no silver bullet).
Need labor as contrary power.
Size Q is important, capital control issue (mobility) is a core problem in global economy that needs some thought.
New operating models: coop is already in discussion; but Linux is completely different way of thinking about business and is the major threat to Microsoft (in its perception);
These are genuine alternatives.

Link CEO compensation to stakeholder theory, credo.
Build stakeholder idea with changing purpose of the corporation together with compensation on senior levels, way to tie our goals to senior management.
Credo tied to bonuses, even when part of the specific act is bad for the immediate bottom line.
Corporations are not content with limited liability; continuously seeking new forms of immunity, e.g. through arbitration clauses, so that can avoid class actions.

Vocabulary is key: maybe not "workers" because Americans think of themselves as future rich people - maybe use of "investor."

Reminded of reframing arguments outlined by George Lakoff in his book, "Don't Think of an Elephant" Economics is one of 6 primary motivators.

Labor and consumers used to be on the same side.
The Consumer movement is gone in broader sense, too. Now it's just interested in getting lowest prices; if so, then Wal-Mart can claim it's pro-consumer.
For Interface sustainability is much more important.
All Interface voting stock owned by founder, although it's a billion-plus business and a public company, and he thinks only business can solve problem; business should stop fouling its own nest.
So the approach there is to: reorient corporations for the public purpose ... otherwise there'll be train wreck, which is another way or achieving a solution.

Corporations are "porous" from outside in and inside out.
E.g. corporate colonization of public sphere.
Finds it troubling that every progressive constituency is increasingly focused on internal corporate policies, etc. (e.g. shareholder resolutions).
That means we've lost the public sphere. "Civics" and "citizen" as archaic notions.
We should be reinvigorating democracy.
If that's the goal, then it's ceding too much to start in the corporate system.
We need to establish the broader societal framework and then outline a framework for defining the corporation as a public institution.

Workers are suing as shareholders to influence the corporations, demanding directors increase compliance, etc.
An example where the board complied with demand rather than declining to act. Specific demand letters asking boards to conduct internal audits, protect whistleblowers, etc.
That's another way of changing corporate culture.

Framing issue: Lakoff talks about the Left using caring parent approach, and Right using the disciplining parent. Maybe we should speak about disciplining parent. Earlier comment about corporations as public institutions ... but some corps may have e.g. technology that has no public worth ... then what?

Disclosure (based on earlier comment)
E.g. disclose hourly wages of employees and of suppliers.

First Conversation Topic - Disclosure

Has been focus of previous efforts, including Stakeholder Alliance (leading to Corporate Sunshine Working Group - www.corporatesunshine.org).

Disclosure in campaign finance is necessary but not sufficient.
(Too much info becomes suffocating. Need to do something with that information.)

Disclosure can solve communication but can also hurt - e.g. disclosure of CEO salaries fed the spiral upward.

Shareholder groups have used to change definition of "materiality" to expand SEC's social and environmental disclosure requirements. "What matters is what is measured."
Good example is the Toxic Release Inventory, established after Bhopal under the Community Right-to-Know Act. Community groups used it to pressure corporations from the outside (e.g. www.scorecard.org); some middle-level managers used it to find was to save money (waste is inefficiency). (example of convergence?)

Value of disclosure not just to stakeholders, but causes corporations to reexamine itself.

At some point there needs to be enforcement and empower political shift in standards. Otherwise they are just used as benchmarks. In Canada board directors have obligation to inform themselves about environmental issues, personal liability for failure to have environmental audit procedures in place. Very effective.

Disclosure may not affect anyone. E.g. if Boeing has to put disclosure of wage on the door, consumers still can't choose if fly on Boeing or Airbus. Consumers must care and have alternatives.

Need a federal law that makes it material misrepresentation to lie to employees about a condition of work, just as it's illegal to lie to shareholders (material misstatement). E.g. when GM announced it was going to cut 25,000 workers, they 'hoped" it wouldn't come through layoffs. This is a lie that would be actionable if it were made to shareholders.

Affect of disclosure of compensation to CEO depends on how evaluate. Compensation committees set the numbers for executives. What are the factors they are looking at?

Companies lie to shareholders in their proxy materials, not just shareholders, e.g. saying that lawsuits are meritless because they are model companies on race, etc. Not enforced as actionable.

In area of compensation, we have a market of experts which insulates you from liability under Delaware law. Thanks to Delaware, the deliberations aren't disclosed.
Boards protect themselves with the use of experts, so there's an industry whose job is to defend rising compensation.

UK: Global Reporting Initiative Most of framework we discuss is securities law (definitions of "materiality").
Could also use other means, e.g. government contract requirements to force disclosure.

CATO and others agree that corporate subsidies should be disclosed.

Disclosure required in Canada starting this year re: environmental & human rights.

Other topics

Redirect purpose of corporation Make corporation "public" institution
New Operating Models
Corporate structures
Constitutional rights for workers
Build countervailing power

Not in list (and in no order)
Grand jury as 4th branch
Challenge immunity
Social audits
Change market structure
New restraints on size
Restraints on corporate speech
New framework for capital controls
Personhood & corporate "rights"
Framing discourse

Second Discussion Topic: Redirect the purpose of corporation

Compensation structure (incentives)
Fiduciary duty
Empower stakeholders
Expand disclosure
"Protect us from ourselves"

Think about who the corporation is answerable to? (Wall Street and market?) Who should it be answerable to? Corps are plutocracy and dictatorial, not democracy.
Fiduciary duty: what do we tell the managers they are supposed to be doing (maximizing s/h profits?)
Regulation: the extent that the government gives external guidance to the corporation.

Publicly traded corporation is answerable to Wall St. and bottom line.
Many managers do not want to be this narrowly focused, would rather have other standards imposed. "Liberating" the corporation from the profit motive.

Discourse about corporations existing only to make money for shareholders is fairly recent.
Before the 1980s, corporations "made products and provided services."
Misconception that Dodge v. Ford (Mich. 1919) was that shareholders were plaintiffs. Dodge brothers. Context changes meaning of case.

Just over 50% of Americans are investors ("opinion-makers"); generally through mutual funds and pensions.
So we're all Wall Street - need to reorient investors to realize their role as consumers, etc.

Yet almost half of value of stock market is still held by just 2%.

Ask Wal-Mart for worker representatives to boards.
Germany example.
Give stakeholders a say in the process. "Critical mass" of workers.

Frame social responsibility as a fiduciary duty, so there's convergence between doing best for shareholders and social responsibility. Texas attorney bringing pre-suit demands. Liberates managers to pay attention to more than bottom line, but not clear if it will be significant in the long term.

Workers and managers together on same side of price-line, but not consumers. Ways to be branded as good guys: "organic" - market reward for moving in right direction.
Need to change "purpose"- through internal culture that is purposeful and positive, via public expectations and public demands. Corporate execs don't see themselves as agents of "huge monolithic tanks charging down the road and destroying everything." Need some carrots for them to do the right thing.

Risk of tokenism in appointing stakeholders without changing context.

Other ways to redirect include tax policy on compensation and shareholding (address short-term mentality by punishing short-term gains of speculators). Reduce Wall St.'s ability to pressure the company by reforming conflicted analyst (who rate corporations strictly on ability to meet quarterly earnings per share - "the number")
Hawley's thesis in "The Rise of Fiduciary Capitalism": Fiduciaries have self-interest in having corporations work for public good, holding stock and reforming companies.
Possible moments of intervention: WorldCom bankruptcy court appointed Richard Breeden as "public director" to board, he came up with 75 policy changes, including CEO pay cap.

How do you change people's perceived interests is the key question.

China-WalMart "doom scenario." Worst of corporate/government axis.

What the corporations do as opposed to what they say they do.

We're coming into a period of opportunity because the other guys have been in control for a long time. More excesses of behavior create more problems.
Break the paradigm of profit as fiduciary duty using things they say in depositions.
Enron happened because in 1996 Congress passed legislation getting rid of joint and severable liability for accounting firms (PSLRA) and Supreme Court did away with aider and abettor liability, setting them up to cheat, etc.

BSR, SVN and repurposing doesn't go far and they will better judge their own best interests. We can't do it from the outside. The notion that their purpose is to make profits is deeply engrained in society, not just responsibility of Wall St.
Interface is an exception proving the rule.
More compulsory stuff is more likely to have an impact than social pressure. (RICO for tobacco company, for ex would work)

Half of the room seems to think that internal changes (e.g. governance) way to focus. But problem is more fundamental, can't convince corporations not to externalize.
Other half says you gotta impose force on corporations.
But: can't think of any regulation in last 25 years that was successful. Regulations are never a clean victory for consumers, workers, etc., because government is so captured by corporations. Even to the point that government turns against us and tax dollars are used to help Wal-Mart. Once they get their charter, there should be no more subsidies from any level of government.

Litigation doesn't work wholesale change. Didn't work in antitrust until FTC in place.
Entire system of corporate governance is built on mistrust. Everything corporate law does assumes that unrestrained people will misbehave. Can't start from the perspective that these are bad people. The literature on question of trust suggests that people who believe they're mistrusted will misbehave. We're where we are because of normative change that came from Reagan's election. Current norms deprive work of any meaning. People could take pride in and value their work. If start with negative pressures, get negative results.

Premise is not bad people, but institutional and organizational incentives that change people. Power of rationalization is huge.
"Tyranny of the Bottom Line: Why Corporations Make Good People Do Bad Things" (Ralph Estes)

Skeptical of vocabulary that suggests that reconceiving internal goals of a board is the larger purpose of stakeholders. Interested in learning more about demand letters -- trying to change definition of fiduciary duty or due diligence - making it long-term survival of the company.

Framing of this discussion is key (e.g. "redirecting")
Different ways to redirect:
Regulations that redirect.
Incentives that redirect.
Internal discussions/processes
We need to be ready for the next crisis (e.g. with the "next Sarbanes-Oxley bill")

All corporations (even non-profits) have to make profit; but some make it a goal, not the defining purpose.
We're wrong that profit and good are always in conflict.
Non-profits can also do terrible things.

Third Discussion Topic: Making Corporations "Public" Institutions

Grounded in a theory of democracy ("We the People").

• Need to look at the history. Charters with direct limits (often for infrastructure);
• Dartmouth decision, Jacksonian period and transition to general incorporation.
• "Nexus of contracts"

Tie legal theory and organizing context together:

• Education
• Campaigns that push framework we want (e.g. Corp Three Strikes campaign in California - bill that proposed that corporate licenses be revoked if a corporation breaks the law repeatedly, grew out of Unocal campaign)
• Theory (academic work).
• Use precedents (e.g. Clinard's report for Justice Dept. (1979) included nationalization as sanction)

Delaware Challenge: 60% of Fortune 500 chartered there

• Federal chartering? (Teddy Roosevelt, Nader/Seligman/Green, "Taming the Giant Corporation"; examples of federal charters include Amtrak, Fannie Mae).
• Internal affairs doctrine.

Use Public/Private debate to evaluate specific corporations.

• Criteria: do they exist primarily through public subsidies, corporate welfare, publicly-funded research, government contracts, etc.?
• Do they externalize such a high cost that there is a legitimate public interest claim in reaching in to control or de-charter them? (Tobacco example.)
• Do they operate primarily upon public assets? (Broadcasting corporations?)

Attractive as framing approach but doesn't lead to only radical results.
Right had certain animating frameworks; could this work for progressives?

Looks like the personhood and speech arguments.
Good as a rhetorical too.
Once we think of corporation as a concession from the state, it may be too much because he state can overreach.
"Nexus of contracts" can be helpful as horizontal framework subject to state regulation.

Agree personhood lacks traction, but Public/Private is fundamental.
Government sometimes could put a limitation
We tend to fetishize private properties of corporations but there is governmental regulation on all forms of property. So why is the privacy of business particularly sacred?
Real questions is to what extent can we regulate a corporation?
The theories (concessional, entity, etc.) aren't going to help activists, and they're conclusory.
Start instead with concept that power begets responsibility (Woodrow Wilson) Corporations is public, NOT because of some theory, but because of its power over other people's lives. Public because its power implies a public responsibility. (Mundt v. Illinois.)

Does it move toward thinking about corporations being forms of government?

Government outsourced collecting data to avoid government regulations, so roll out the list of corps and what type of power/responsibility they have.

Corporation is emerging as successor institution for certain governmental obligations/
Comparable to when Americans said we don't like the way the King is running the country.

How does the corporate get managed/governed? Changing from repressive law to autonomous/bargaining law. Then moving to responsive law. Switching from representative democracy to participatory democracy.

Just as nation state succeeded the family state/monarchy, now we have corporations taking over state functions. How does that new structure get managed to do the functions in a responsible fashion? The nation state diminished after WWII; corporations more the leaders in accumulating and distributing wealth. Nationalization won't happen. Shape them, not overpower them, with regulation.

Internal affairs doctrine is an aberrational concept in conflicts of law. Only case where you can choose the law applicable to you without any democratic oversight from the state you operate in.

(State can put condition on a corporation that is an external control, but doesn't allow a state to condition the internal governance of the corporation chartered elsewhere, usually DE. E.g. MA can't force an internal audit committee on board of a corporation that is based in MA but incorporated in Delaware. Totally opposite to other conflicts of law.)

Not constitutional or statutory, but based on judge-made rule of conflicts of law.

Some states have mitigated it a bit. In 29 states, directors are permitted to take stakeholder interest into account; CT requires consideration of stakeholders. Other states trying to change duty of care to include other stakeholders.

Model Bus Corp Act, however, specifically adopts internal affairs doctrine (not NY or CA)
Rest. of Conflicts of Law acknowledges internal affairs doctrine as an exception that is changeable by legislatures.
Mentions NY exception to exception (disclosure).

Doesn't help litigation strategy that much because many states no better than Delaware and can't take into account outside stakeholders under those states' law when target of takeover.

Try to convince state legislators to protect stakeholders other than shareholders, and management will move corporation to Delaware.

It is a basic representative (democratic) issue: it's not fair that corporation in our state is beyond our reach just because it was chartered in Delaware.

So ask for right to ignore internal affairs doctrine.

Mount state constitutional challenge to internal affairs doctrine.

IAD is undemocratic and makes other changes impossible.
Have federal preemption or get rid of IAD. Link to stakeholder theory.
WalMart has 15x more employees than people live in Delaware. (map)

Sum:
1. Framing and language potential ability to counter Rights framing.
2. Impress upon activists dismantling of dominance of Delaware.
3. Issue of democracy - they are ours, not private.

Next Steps: Sept/Oct on West Coast

Next steps

Summarize Disclosure, Redirecting purpose of corporation, Making the corporation a public institution.

IAD: easy & good bill, don't think activists will be interested, but it'll happen.

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