Washington and Lee law professor Christopher Bruner presented his recent work on corporate fiduciary duties at the 2013 Fiduciary Law Workshop hosted by Notre Dame Law School on March 8th.
The Workshop, which included scholars from the United States and Canada, featured papers examining the application of fiduciary principles to a number of legal fields and explored the potential for a distinct, overarching field of “fiduciary law.” Professor Bruner’s paper questioned whether the duty of care owed by corporate directors ought to be conceptualized as “fiduciary” in nature, contrasting the U.S. approach with that of other common-law countries such as Australia, Canada, and the United Kingdom, which tend to describe the duty of loyalty as the sole duty truly unique to fiduciaries.
Washington and Lee law professor Christopher Bruner recently participated in a roundtable discussion at the Wharton School (University of Pennsylvania) titled Rethinking Shareholder Value and Purpose(s) of the Firm III. Sponsored by the Carol and Lawrence Zicklin Center for Business Ethics Research and the Initiative for Global Environmental Leadership at the Wharton School, together with the Aspen Institute Business & Society Program, the roundtable was the third in a series of Aspen-sponsored discussions bringing together law faculty, business faculty, and business/investment practitioners with a variety of backgrounds and perspectives on the purpose and social impact of the modern business corporation. It is the second Aspen-sponsored discussion in which Professor Bruner has participated (click here for prior event).
Professor Bruner served as a “provocateur,” leading a discussion on “Populism and Corporate Purpose” that examined the state of the social contract between corporations and society, as well as the distribution of rewards and risks associated with corporate activity. A written version of Professor Bruner’s remarks has been posted at The Exchange (A Yahoo!Finance Blog) and the Governance Center Blog of the Conference Board, an independent global business membership and research association.
Christopher Bruner joined Washington and Lee as an Associate Professor in 2009. His teaching and scholarship focus on corporate law and securities regulation, including international and comparative dimensions of these subjects.
The following post comes from W&L Law professor Christopher Bruner. Bruner’s teaching and scholarship focuses on corporate law and securities regulation, including international and comparative dimensions of these subjects. Below, Bruner details his recent trip to Russia as part a team of corporate law experts to discuss corporate and securities law with lawyers and government representatives of the Russian Federation.
During the week of September 10, I traveled to Russia with a delegation of corporate law experts to participate in events hosted by the Supreme Commercial Court of the Russian Federation. The delegation also included Justice Henry duPont Ridgely of the Supreme Court of Delaware (the jurisdiction of incorporation for most U.S. public companies), as well as Roger Magnuson, a partner and Head of the National Strategic Litigation Group at Dorsey & Whitney, and Matthew Elkin, a corporate transactional partner at Morgan, Lewis & Bockius with substantial experience in cross-border investment. The trip was sponsored by the U.S. Russia Foundation for Economic Advancement and the Rule of Law (USRF), a foundation funded by the U.S. government to promote Russia’s transition to a market economy. This was my second USRF-sponsored trip to Russia (having traveled to Moscow and Rostov-on-Don in the same capacity in 2010), and my first trip around the world in a single week. While circumnavigating the globe in eight days on five airlines is not a sustainable travel schedule, I wouldn’t trade the experience for anything.
We began in Moscow, where we met with practicing corporate and securities lawyers to discuss their experiences with the commercial court system and their perceptions of Russian corporate law reform. We then traveled to Vladivostok, the largest city in far eastern Russia and the country’s principal Pacific port,located approximately 40 miles from China and 80 miles from North Korea. The city had recently hosted the Asia-Pacific Economic Cooperation (APEC) meeting, and the scope of infrastructural investment made in anticipation of APEC’s arrival was impressive, including a modernized airport and reconstructed highway connecting it to the city;new bridges,one of which connecting the city to nearby Russky Island now boasts the longest suspended section of any bridge in the world; a new university campus on Russky Island where APEC met, and which Russia’s Far Eastern Federal University will soon inhabit; and a natural gas pipeline from Sakhalin to fuel further growth. It is eminently clear that Russia is turning its eyes to the Pacific – particularly having achieved its long-sought membership in the World Trade Organization in August – and that economic development in and around Vladivostok figures centrally in Russia’s larger strategic goals.
While in Vladivostok we met with U.S. Consul General Sylvia Reed Curran to discuss business conditions in Russia’s far east, and toured the 5th Appellate Commercial Court. While burdensome bureaucracy and official corruption in Russia remain widespread, and a substantial impediment to foreign investment, our hosts at the 5th Appellate Commercial Court took great, and justifiable, pride in the development of new technological capabilities and procedures that will genuinely improve the efficiency and transparency of their commercial court system.
We then participated in two events at the invitation of the Supreme Commercial Court. The first, hosted by the 5th Appellate Commercial Court, was a corporate law seminar for commercial court judges. The seminar included judges from the Supreme Commercial Court, as well as the 5th Appellate Commercial Court and the Commercial Court for the Primorsky Region. At this seminar we focused on topics requested by our Russian counterparts, mainly relating to investor remedies for wrongdoing by corporate managers and controlling shareholders. I spoke about U.S. shareholders’ access to, and statutory right to demand, information relating to a corporation’s business activities – a topic of substantial interest to our counterparts in Russia, where abuse of minority shareholders in privately held companies remains widespread and legal protections continue to take shape.
The next day we participated in an “Asia-Pacific Region Forum,” an event hosted annually by the Supreme Commercial Court since 2007 “to share experience,study the novelties in the legal and economic systems of the countries of the region and to discuss vital issues of the judicial protection of rights”. Titled “Corporate Law: Best Practices for Regulation and Resolution of Disputes,”the Forum included judges from the Supreme Commercial Court of the Russian Federation, the Supreme People’s Court of the People’s Republic of China,the Supreme Court of the Republic of Kazakhstan, and the Supreme Court of Singapore;representatives from the European Bank for Reconstruction and Development and the Corporate Affairs Division of the Organisation for Economic Co-operation and Development (OECD); as well as practitioners and scholars from a number of countries.
At the Forum I presented my recent scholarship on post-crisis U.S. corporate governance reforms, describing the on-going challenges we face here in America in seeking to identify and implement corporate governance structures properly calibrating financial risk incentives, and emphasizing how corporate governance dynamics differ in financial firms due to greater concerns about risk-taking. I then moderated a panel on cross-border corporate relations, which emphasized dynamics of regulatory competition among countries. This is a complex topic of substantial interest to our Russian counterparts, who genuinely value exposure to foreign regulatory models as they seek to improve their own corporate governance system, yet, like other countries, face the challenge of maintaining regulatory autonomy in an age of increasingly mobile investment capital.
My involvement with USRF and acquaintance with judges and other representatives of Russia’s Supreme Commercial Court remain fascinating and deeply rewarding. In evaluating Russia’s corporate legal system it is critical to remind ourselves that, until the 1990s, this was a centrally planned economy with a strongly authoritarian governmental structure. While the challenges faced by Russia’s corporate law reformers remain substantial, I continue to be deeply impressed with their creativity and genuine openness to new ideas – to which I attribute the extraordinary progress they have made in laying the groundwork for a functional market economy in the historically brief post-Soviet period.
Several new papers by W&L faculty are available for download from SSRN, including articles by professors Benjamin Spencer, Christopher Seaman, Christopher Bruner and Joshua Fairfield. Titles and abstracts are below:
Avatar Experimentation: Human Subjects Research in Virtual Worlds
Tue, 07 Aug 2012 | Joshua A.T. Fairfield
Researchers love virtual worlds. They are drawn to virtual worlds because of the opportunity to study real populations and real behavior in shared simulated environments. The growing number of virtual worlds and population growth within virtual worlds has led to a sizeable increase in the number of human subjects experiments taking place in such worlds. Virtual world users care deeply about their avatars, their virtual property, their privacy, their relationships, their community, and their accounts. People within virtual worlds act much as they would in the physical world because the experience of the virtual world is “real” to them. The very characteristics that make virtual worlds attractive to researchers complicate ethical and lawful research design. The same principles govern research in virtual worlds and the physical world. However, the change in context can cause researchers to lose sight of the fact that virtual world research subjects may suffer very real harm to property, reputation, or community as the result of flawed experimental design. Virtual world research methodologies that fail to consider the validity of users’ experiences risk harm to research subjects. This Article argues that researchers who put subjects’ interests in danger run the risk of violating basic human subjects research principles. Although hundreds of articles and studies examine virtual worlds, none have addressed the interplay between the law and best practices of human subjects research in those worlds. This Article fills that gap. Virtual worlds are valuable research environments precisely because the relationships and responses of users are measurably real. This Article concludes that human subjects researchers must protect the very real interests of virtual worlds inhabitants in their property, community, privacy, and reputations.
Conceptions of Corporate Purpose in Post-Crisis Financial Firms
Wed, 01 Aug 2012 | Christopher M. Bruner
American “populism” has had a major impact on the development of U.S. corporate governance throughout its history. Specifically, appeals to the perceived interests of average working people have exerted enormous social and political influence over prevailing conceptions of corporate purpose – the aims toward which society expects corporate decision-making to be directed. This essay assesses the impact of American populism upon prevailing conceptions of corporate purpose – contrasting its unique expression in the context of financial firms with that arising in other contexts – and then examines its impact upon corporate governance reforms enacted in the wake of the financial and economic crisis that emerged in 2007. I first explore how populism has historically shaped conceptions of corporate purpose in the United States. While the “employee” conceptual category best encapsulates the perceived interests of average working people in the non-financial context, the “depositor” conceptual category best encapsulates their perceived interests in the financial context. Accordingly, American populism has long fostered strong emphasis on the interests of bank depositors, resulting in striking corporate architectural strategies aimed at reducing risk-taking to ensure firm sustainability – notably, imposing heightened fiduciary duties on directors and personal liability on shareholders. I then turn to the crisis, arguing that growing shareholder-centrism over recent decades goes a long way toward explaining excessive risk-taking in financial firms – a conclusion rendering post-crisis reforms aimed at further strengthening shareholders a surprising and alarming development. While populism has remained a powerful political force, it has expressed itself differently in this new environment, fueling a crisis narrative and corresponding corporate governance reforms that not only fail to acknowledge the role of equity market pressures toward excessive risk-taking in financial firms, but that effectively reinforce such pressures moving forward. I conclude that potential corporate governance reforms most worthy of consideration include those aimed at accomplishing precisely the opposite, which may require resurrecting corporate architectural strategies embraced in the past to reduce risk-taking in financial firms. As a threshold matter, however, we must first grapple effectively with a more fundamental and pressing social and political problem – the popular misconception that financial firms exist merely to maximize stock price for the short-term benefit of their shareholders.
Best Mode Trade Secrets
Fri, 27 Jul 2012 | Christopher B. Seaman
Trade secrecy and patent rights traditionally have been considered mutually exclusive. Trade secret rights are premised on secrecy. Patent rights, on the other hand, require public disclosure. Absent a sufficiently detailed description of the invention, patents are invalid. However, with the passage of the Leahy-Smith America Invents Act (“AIA”) last fall, this once black-and-white distinction may melt into something a little more gray. Now, an inventor’s failure to disclose in her patent the preferred method for carrying out the invention — the so-called “best mode” — will no longer invalidate her patent rights or otherwise render them unenforceable. In this Essay, we explain why it may become routine post-patent reform for patentees to attempt to assert both patent rights and trade secret rights for preferred embodiments of their invention in certain types of cases. We also consider potentially undesirable ramifications of this change and suggest one approach courts may use to limit claims of concurrent trade secret and patent protection when equity demands.
Class Actions, Heightened Commonality, and Declining Access to Justice
Fri, 20 Jul 2012 | A. Benjamin Spencer
A prerequisite to being certified as a class under Rule 23 of the Federal Rules of Civil Procedure is that there are “questions of law or fact common to the class.” Although this “commonality” requirement had heretofore been regarded as something that was easily satisfied, in Wal-Mart Stores, Inc. v. Dukes the Supreme Court gave it new vitality by reading into it an obligation to identify among the class a common injury and common questions that are “central” to the dispute. Not only is such a reading of Rule 23’s commonality requirement unsupported by the text of the rule, but it also is at odds with the historical understanding of commonality in both the class action and joinder contexts. The Court’s articulation of a heightened commonality standard can be explained by a combination of its negative view of the merits of the discrimination claims at issue in Dukes, the conflation of the predominance requirement with commonality, and the Court’s apparent penchant for favoring restrictive interpretations of procedural rules that otherwise promote access. Although an unfortunate consequence of the Dukes Court’s heightening of the commonality standard will be the enlivening of challenges to class certifications that otherwise would never have been imagined, this Article urges the Court to reject heightened commonality and read Rule 23 in a manner that remains true to the language and history of the common question requirement.
Several Washington and Lee Law School faculty members presented last week at the annual meeting of the Southeastern Association of Law Schools (SEALS). In addition, David Millon, J. B. Stombock Professor of Law at Washington and Lee University School of Law, took the helm as President of SEALS for the 2012-13 term.
In addition to his duties with the organization during the conference, Millon also served as a panelist in a session on how recent Supreme Court decisions and congressional legislation are affecting business and regulatory issues and in a discussion group focused on teaching business law in a new economic environment. Other presentations by W&L faculty included:
- Johanna Bond, who participated in a discussion group on contemporary issues in gender and the law.
- Christopher Bruner, who presented a paper during a panel on recent developments in corporate governance.
- Mark Drumbl, who participated in a discussion group on the growing importance of international matters to legal education.
- Jill Fraley, who presented her research on maps as legal arguments in a new scholars panel.
- Brant Hellwig, who participated in a discussion group on tax reform in 2012.
- John Keyser and Todd Peppers, who participated in a panel on social science and the law.
- J.D. King, who participated in a panel on implicit racial bias in the criminal justice system.
- Joan Shaughnessy, who served as a moderator of a new scholars panel.
- Robin Wilson, who participated in a panel on cutting edge issues in family law.
Professor Christopher M. Bruner, Associate Professor of Law, recently participated in the Aspen Institute’s roundtable program, “Rethinking ‘Shareholder Value’ and the Purpose(s) of the Firm” at the NYU-Stern School of Business. The dialogue between business and legal scholars, as well as business executives, was a continuation of a discussion started in late September last year at the Aspen Institute.
The purpose of the dialogue was to discuss the purpose of the corporate firm and the role of “shareholder value” in corporate governance and evaluation of firm performance. The group addressed key questions that have profound consequences for both corporations and the long-term health of society. The representatives also discussed how broader conceptions of purpose influence how we think about leadership, strategy and accountability in business.
You can see the list of participants and agenda for the roundtable here.
Professor David Millon, the J. B. Stombock Professor of Law and Law Alumni Faculty Fellow at Washington and Lee University School of Law, was named president-elect of the Southeastern Association of Law Schools (SEALS) at its recent annual meeting. Millon will serve in this position during 2011-12 and will become president of the organization for the 2012-13 term.
Started in 1947, SEALS is comprised of 65 institutional member schools, 23 affiliate member schools and several foreign member schools. The primary activity of the organization is an annual legal conference held during the summer at a family-friendly venue. SEALS just completed its 64th annual meeting, which was attended by more than 500 scholars, the largest attendance in the history of the conference.
W&L Law faculty are very active within SEALS. This year Professors Christopher Bruner, Johanna Bond, Mark Drumbl, Jim Moliterno, Tim MacDonnell, Joshua Fairfield, and Robin Wilson all joined distinguished panels to present their research. In addition, John Keyser, Associate Dean for Administration and Technology, presented on teaching empirical methods, outcome measurement compliance and was also named chair of the conference technology committee.
The full press release can be found here.
Professor Christopher M. Bruner, Associate Professor of Law and Ethan Allen Faculty Fellow, recently published his article, Managing Corporate Federalism: The Least-Bad Approach to the Shareholder Bylaw Debate, 36 Del. J. Corp. L. 1 (2011) in Widner Law’s Delaware Journal of Corporate Law.
In the article, Professor Bruner discusses the usage and impact of corporate bylaws to augment shareholder power and limit board influence. He examines the contested nature of bylaws, the fundamental issues of corporate power and purpose that they implicate, and the differing ways in which state and federal lawmakers and regulators may impact the debate regarding the scope of the shareholders’ bylaw authority.
The paper first discusses various dimensions of corporate governance historically addressed in the bylaws, and the controversial uses to which bylaws have been put by shareholders seeking greater corporate governance power, focusing on Delaware – the jurisdiction of incorporation for most public companies. Prof. Bruner then turns to the ways in which rules of corporate governance are generated in our federal legal system, including the complex and evolving mechanisms through which state and federal lawmakers and regulators interact. He concludes that this process threatens to distort substantially the evaluation and evolution of the shareholders’ bylaw authority by presenting the Delaware Supreme Court with proposed bylaws to be assessed in the abstract – an awkward posture resulting in the sacrifice of important values reflected in the ripeness doctrine, and abandonment of the presumption of validity that ordinarily favors enacted bylaws.
Prof. Bruner then considers who ought to determine the scope of permissible shareholder bylaws, concluding that there is no perfect approach because no one of the relevant state or federal actors dominates with respect to both political legitimacy and relevant expertise – the SEC possessing neither, while Congress possesses the former and Delaware the latter. He argues, however, that the least-bad approach would be to remove the SEC from the process entirely, leaving these matters to Delaware in the first instance, subject to future intervention by Congress. This approach, he argues, would eliminate the distortion introduced by SEC certification of bylaw disputes directly to the Delaware Supreme Court, permitting resolution of the fundamental issues at stake in a more organic and better informed manner through traditional Delaware litigation.
Congratulations to Prof. Bruner on the publication of this article.
Professor Christopher M. Bruner, Associate Professor of Law and Ethan Allen Faculty Fellow, recently published his article, The Changing Face of Money, Boston University’s Review of Banking and Financial Law.
In this article, Professor Bruner argues that widespread failure to comprehend the intrinsic nature of modern money loomed large in the recent financial and economic crisis, and that broader comprehension of its meaning is a precondition for effective post-crisis reforms. Prof. Bruner begins by providing a brief history of money, emphasizing its gradual divergence from inherent value. He then considers the value of today’s dollar in economic, legal, and psychological terms, arguing that each perspective conveys a single over-arching lesson – that better comprehending our money requires better comprehending ourselves. He argues that the introspection of this exercise will reveal with unique clarity some of the critical lessons of the crisis and its aftermath.
You can find Prof. Bruner’s article on SSRN here.
Congratulations to Professor Bruner on this accomplishment.
Professor Christopher M. Bruner, Associate Professor of Law and Ethan Allen Faculty Fellow, recently published his article, Corporate Governance Reform in a Time of Crisis in the University of Iowa’s Journal of Corporation Law.
In this article, Professor Bruner argues that crisis-driven corporate governance reform efforts in the United States and the United Kingdom that aim to empower shareholders are misguided and offers an explanation of why policymakers in each country have reacted to the financial crisis as they have. He first discusses the risk incentives of shareholders and managers in financial firms and examines how excessive leverage and risk-taking in pursuit of short-term returns for shareholders led to the crisis. Prof. Bruner then describes the far greater power and centrality that U.K. shareholders have historically possessed relative to their U.S. counterparts and explores historical and cultural factors explaining this distinction. These differences, he argues, loom large in the observed crisis responses. The U.K. initiatives reflect reinforcement of the more shareholder-centric status quo while the U.S. initiatives reflect a populist backlash against managers, fueled by middle class anger and fear in a far less stable social welfare environment. The article concludes with a discussion of corporate governance challenges facing U.S. and U.K. policymakers following the crisis.
Many congratulations to Prof. Bruner. The full text of his article may be found at his SSRN page.