Stakeholders

Question 1

Theories of the Corporation

Answer 1

(1) Berle- Means (DOMINATE IDEA)
(2) Nexus of Contracts
(3) Political Product
(4) Team Production

Question 2

Berle-Means

Answer 2

corporations are unique because they separate the ownership of the entity (shareholders), from the control of the entity (directors/executives/officers)

Question 3

Nexus of Contract

Answer 3

All relationships between shareholders and managers are more private and contractual.

Corporations make the deal they want.

Question 4

Political Product

Answer 4

The way the corporation behaves and the roll of the public (and shareholders) is shaped by politics and regulations.

Question 5

Team Production

Answer 5

Corporations need input from a lot of people.

Corporations give up control to board so that they can decide the hierarchy’s and make efficient decisions.

Question 6

Board Centric

Answer 6

Board needs to be in charge and that is the end of it.

Question 7

Corporate Purpose Debate:

Answer 7

Private Property: Something people owned and can do what it wants.
vs.
Social Institution: Have obligations to the larger state.

Question 8

Dodge v. Ford (MI 1919): Ford did not want to pay dividends; Dodge brothers were large stockholders and challenged decision.

Answer 8

Dividend Policy: Corporation is organized and carried on primarily for the profit of the stockholders.
- Shareholder Wealth Maximization Doctrine.

(H) Ford had to pay special dividend; BJR for Vertical integration plan where Ford wants to start buying into supply chain for manufacturing.

Question 9

Shareholder Wealth Maximization Doctrine

Answer 9

Primary/Real purpose of the corporation is to make money for its shareholders.

Question 10

Ebay Domestic Holdings v. Newmark (DE Ch. 2010): Conflicts between founders of Craigslist and minority shareholder, eBay.

Answer 10

(F) Founders of Craigslist owned majority of shares and controlled board. Founders wanted eBay holders to sell back shares. Founders adopted poison pill/rights plan. Ebay sue, claiming board violated shareholder primacy doctrine.

(R) Shareholder Primacy Doctrine standards include acting to promote the value of the corporation for the benefit of it’s stockholders.

DE and CA do not have constituency statutes that require consideration of other stakeholders outside of stockholders.

Question 11

Corporate Personhood Views

Answer 11

(1) Creature of State Law: Corporation is an artificial entity created by state law, which can broadly regulate its creation and concessions.
(2) Real Entity: corporation itself is a speaker; corporate person has autonomy and appropriately speaks through management, subject to oversight by shareholders.
(3) Private Voluntary Association: Corporation is an aggregate of its participants who understand management will speak on behalf of their collective interests. Shareholders who do not like this can invest money elsewhere.

Question 12

Citizens United v. FEC: Law prohibits using general treasury funds to make independent expenditures.

Answer 12

Corporate Democracy: Corporate expenditure might not reflect views of shareholders, but does of management.

(R) Corporations have right of freedom of political speech and government cannot restrict independent political expenditures based on speakers corporate identity.

Law requires disclosure and disclaimer for independent contributions.
- Cannot constitutionally restrict independent expenditures by corporations to support or oppose a political candidate.

Question 13

Independent Expenditure:

Answer 13

Communication about the election or defeat of candidate, not made in cooperation/concert/confirmation with the candidates campaign.

Question 14

Political Action Committee:

Answer 14

Receives voluntary contributions from people with ties to the corporation, not from corporation’s treasury funds (segregated funds).

Question 15

DGCL: Specific Powers

Answer 15

Corporation created under this chapter shall have power to:
(1) Purchase and own property;
(2) Conduct its business;
(3) Transact any lawful business;
(4) Make Contracts;
(5) Lend Money.

Question 16

Corporate Externality:

Answer 16

Shifted cost to person outside corporation; Corporation acts through it’s agents.

Question 17

State v. Christy Pontiac-GMC: Backdating of Rebates

Answer 17

Corporations can have criminal intent:
(1) Agent acting within course and scope of agent’s employment, with authority to act for corporation with respect to particular corporate business that was conducted criminally;
(2) Agent, at least in part, acts in furtherance of corporations business interest; AND
(3) Criminal acts were authorized, tolerated, or ratified by corporate management.

Corporation can be dissolved by judicial decision of criminality.

Question 18

4 Different Corporate Purpose Debates:

Answer 18

(1) Shareholder Primacy
(2) Corporate Social Responsibility
(3) Shareholder Wealth Maximization
(4) Environmental, Social, and Governance Investing

Question 19

Theodora Holding Corp. v. Henderson (DE Ch. 1969):

Answer 19

Corporations have power to make charitable and education donations that are REASONABLE in AMOUTN AND PURPOSE.

Internal Revenue Code limits federal tax deduction for corporate charitable donations to 10% and provides helpful guide for REASONABLENESS.

Charitable nominations approved by independent directors are subject to BJR.

Must be reasonable considering total income.

Question 20

MCBA: B Lab’s

Answer 20

Certified Business Corporation is a 3rd party certification by B Lab for meeting standards.

Question 21

Benefit Corporation

Answer 21

(1) Dual mission of profits and public benefit
(2) Requires public benefit stated in articles of incorporation
(3) Mandates board to consider in their decision making for corporation - the impact on non-shareholder interests.
(4) Benefit report published, provided to shareholders, and provided to State Filing/Reporting

Question 22

ESG:

Answer 22

Mainstream concept and investing in business management as well as focal point for regulatory developments around the world.

Examples: Climate change, human rights, workplace health and safety, human capital management, board diversity, anti-corruption.