As a percentage matter, the share of corporate giving has remained roughly constant over the last 4 decades at 6-7%:

The forms corporate philanthropy takes varies from company to company, but the three most common are:

1. Corporate Grants & Sponsorships: Direct philanthropic contributions given to 501(c)(3) organizations or community foundations to support specific initiatives.

2. Employee Matching Gifts: The most common form of workplace giving, where companies match charitable donations made by their employees, often at a 1:1 ratio.

3. Volunteer Grants & Paid Time Off: Corporate programs that provide hourly grants to nonprofits where employees regularly volunteer.

Educational institutions tend to be the most common recipient of corporate gifts, with community funds (e.g., United Way), disaster relief, and health also being major recipient categories.

All of which raises two corporate law and governance questions:

• Why do we care about corporate philanthropy?

• What are the legal constraints on corporate philanthropy?

• Should we strengthen the regulations on corporate giving?

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Reaffirms that artificial persons created under state law possess only those powers that are necessary or convenient to carry out lawful purposes, and that those powers do not include the power to spend money or contribute anything of value to influence elections or ballot measures. Authorizes the Attorney General and the Director of Commerce and Consumer Affairs to impose certain penalties for violations.

Regular readers will recall that I wrote two articles about a similar initiative pending in Montana. In the first post, I discussed the state power to define the rights and powers of corporations and expressed some skepticism about the constitutionality of such laws, specifically focusing on whether the state can condition the grant of powers on giving up constitutional rights:

In the second post, I discussed the extent to which Montana (and now Hawaii) can its limits on corporate powers extraterritorially to what out of state corporations do outside of Montana. I concluded that it cannot do so. Hawaii cannot tell a Delaware corporation—even one based in Hawaii—what powers it can wield in states other than Hawaii.

I also discussed the extent to which a state like Hawaii or Montana can regulate the activities of out-of-state corporations in the adopting state, concluding that they may do so.

If this topic is of interest, I would encourage you to check out my posts on Citizens United:

It may be that living in Hollywood for the last three decades has influenced my thinking, but I love learning about the backstory to cases. I had the good fortune of contributing chapters to two collections of corporate law backstories:

• Corporate Law Stories (Foundation Press 2009) (AMAZON LINK), to which I contributed a chapter on Smith v. Van Gorkom.

• The Iconic Cases in Corporate Law (West Publishing 2008) (AMAZON LINK), to which I contributed a chapter on the US Supreme Court’s leading insider trading cases.

In my book, The Profit Motive: Defending Shareholder Value Maximization (AMAZON LINK), I had occasion to discuss the backstories to two leading cases on corporate social responsibility: Barlow and Dodge v. Ford Motor Co., cases that most Business Associations students have encountered at some point in corporate law studies.

I’ve written about Dodge here before:

But Barlow in many ways is an even more fascinating case with a much more interesting backstory.

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But not everybody does. One opposition comment that attracted a lot of attention purportedly came from /r/wallstreetbets, of which it has been said:

The subreddit, describing itself through the tagline "Like 4chan found a Bloomberg terminal",is known for its aggressive trading strategies, which primarily revolve around highly speculative, leveraged options trading. Members of the subreddit are often young retail traders and investors who ignore fundamental investment practices and risk management techniques, so their activities are often considered gambling.

Their argument about semi-annual reporting is that it will supposedly make their gambling more chancy:

There’s a lot of misinformation in that comment:

1. “Quarterly reports are the single most important leveling mechanism between retail and institutional investors in U.S. equity markets. Institutional investors have expert networks, channel checks, alternative data, satellite imagery of retailer parking lots, credit card panel data, and direct management access through conferences and one-on-one meetings that cost more than most of our portfolios. We have the 10-Q. We have the 10-Q, and we have a Discord server, and we have each other. Take away the 10-Q and you have not eliminated the information.”

   1. B.S. US stock markets are highly efficient. By the time a retail investor gets their hands on a Form 10-Q the information in that report will already have been impounded into the company’s market price. Indeed, according to one study, the information in quarterly earnings announcements is fully impounded in the market price in about five second. The information in the 10-Q therefore has zero value to the retail investor. They cannot profit off it. So there is no levelling.

2. “The architecture of federal securities regulation is built on the premise that mandatory periodic disclosure narrows that gap.”

   1. If the redditors had bothered to learn any history, they would have learned that the SEC did not begin mandating semi-annual reporting until 1955. Twenty one years after passage of the Securities Exchange Act of 1934. They also would have learned that the SEC did not require quarterly reporting until 1970. Yet, the market muddled along quite fine.

   2. They also might have learned that the UK did not switch from semi-annual to quarterly reporting until 2007. They also might have learned that the UK switched back to semi-annual reporting just seven years later.

Beyond these basic factual errors, however, their comment raises a more fundamental question:

The Commission has spent 90 years making it easier for people like us to participate in public markets on something approaching fair terms. We are asking the Commission not to spend this rulemaking making it harder.

Should the SEC be in the business of facilitating retail investors? Or should SEC policy be designed to push retail investors towards passively managed index funds?

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Share Bainbridge on Corporations

Student: “I want to be a human rights lawyer. I want to make the world a better place.”

Advisor: “Who will you work for?”

Student: “Dunno. Some sort of NGO I guess.”

Advisor: “So you don’t mind working unpaid?”

Student: “I guess corporate restructuring also kinda makes the world a better place, doesn’t it?”

I suspect Marc has his tongue firmly in cheek.

But reading his post reminded me of my essay Reflections on Twenty Years of Law Teaching: Remarks at the Rutter Award Ceremony (April 2008), which is available at SSRN: https://ssrn.com/abstract=1122577.

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But if we must have some shareholder democracy, why does it have to be through precatory proposals under Rule 14a-8?

We have frequently recounted the many problems with Rule 14a-8 in these pages, but just to refresh your recollection they include:

• Gadflies with little skin in the game spam dozens of company proxy statements every year.

• The 14a-8(i)(5) and (i)(7) exclusions allow proposals that have supposed social or ethical significance onto the proxy statement even when they have virtually no economic materiality to the company.

• Few proposals receive majority support, indicating that the vast majority of proposals are pet projects of a small minority and do not reflect the desires of the bulk of investors.

• There is no empirical data suggesting that the shareholder proposal rule results in better firm performance.

• Shareholders generally lack the information necessary to make complex business decisions.

In order of preference, my reform proposals have been: Repeal > Private ordering,

But today I offer a third option: Relocation.

If we must have a shareholder democracy project, let’s move that project from Rule 14a-8 to 14a-4. I speak, of course, of the so-called zero slate proxy contest.

Faculty and Student Discount

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Larry scared the crap out of me the first few times I met him. I often thought he was a dead ringer for Mephistopheles. But it was his mind that was really scary. He was wicked smart with a rapier wit. Giving a talk or presentation when he was in the audience meant you were in for a rough time.

Yet, as I got to know him, I discovered a kind, generous, giving person. He became one of my intellectual heroes, a mentor, and a friend. When he passed away, I mourned. I still do.

What, you may be asking, does all that have to do with Citizens United?1 You will recall that, prompted by a rash of recent tweets about that perennially controversial decision, I decided to revisit it.

Bainbridge on Corporations

Looking Back at Citizens United Part 1: The Case

I was browsing over at X.com, as is my wont (I tweet using the handle @PrawfBainbridge), and was surprised to see a rash of recent posts about the Supreme Court’s decision in Citizens United v. FEC…

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a month ago · 1 like · Stephen Bainbridge

Larry Ribstein was uniquely qualified to opine on Citizens United. In addition to being a top flight corporate law scholar, he had thought deeply about how the constitution treated—and should treat—corporations. Along with his coauthor Henry Butler, he produced what is still IMHO the best book on the corporation and the constitution, titled—logically enough—The Corporation and the Constitution (AMAZON LINK).

So today’s post looks back to Larry’s iconoclastic article, The First Amendment and Corporate Governance.2 In the next post, I will put a personal twist on the discussion by comparing Larry’s approach to my director primacy model of corporate governance.3

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Plaintiff Thomas DiNapoli is the New York State Comptroller and, as such, Administrator of the New York State and Local Retirement System and Trustee of the New York State Common Retirement Fund (“Fund”).

Along with the New York City Retirement System, the Fund is a very active player in the shareholder proposal game, having sponsored 30 proposals in 2024 and 17 in 2025. The vast majority of its proposals relate to social/political issues and environmental issues. Climate change is a major area of interest for the Fund as is DEI. The Fund’s proposals that make it to a shareholder vote rarely receive significant levels of support. In 2025, for example, 9 proposals made it to a vote. None got more than 25% of the vote:

In the present case, the Fund submitted an environmental proposal to BJ’s Wholesale Club:

RESOLVED: Shareholders request that BJ’s Wholesale Club Holdings, Inc. (“BJ’s” or “the Company”) conduct an assessment of risks of deforestation associated with its private-label brands within one year and provide a report summarizing the results. The report may, at management’s discretion, be updated annually and include an assessment of forest degradation within the supply chain; feasible, time-bound target setting; third-party monitoring and verification; and assessment of the financial and operational implications of the related risks.

Notice that the proposal is phrased as a request rather than as a mandate. This approach is driven by Rule 14a-8(i)(1), which provides that a proposal may be excluded from the company’s proxy statement if it relates to a matter that is not a proper subject of shareholder action. The SEC historically taken the position that such proposals must be excluded—assuming no other ground for exclusion exists—if they are phrased as a request or a recommendation.

As a mere request, the proposal is unlikely to have much of an impact on deforestation even if it passes.2 In addition to its status as a request, the proposal also gives BJ’s management essentially unbridled discretion, as Judge Sorokin pointed out:

All the granular considerations about how to conduct the assessment are left to BJ's discretion, including whether to assess the deforestation risks from a 40,000 foot view or on a microscopic level.

So why does the Fund bother? My theory is that the Fund and other ESG and corporate social responsibility proponents are driven by some combination of getting free advertising for their cause, performative virtue signalling, and a vague hope of shaming management into doing something about the subject of the proposal. Why the 75%+ of the shareholders who vote no on the Fund’s proposals should be required to pick up the tab for the Fund’s proposal remains something of a mystery.

In any case, BJ’s announced that it would exclude the proposal from its 2026 proxy statement in reliance on the exemption provided by Rule 14a-8(i)(7) for ordinary business matters. The Fund sued, seeking an injunction requiring inclusion of the proposal. In a somewhat muddled opinion, Judge Sorokin granted the injunction.3

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In any case, working on the prior post got me thinking about my work team production and sent me back to the old blog archives. So, let’s talk about the economics of team production.

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The Division, acting for the Commission pursuant to delegated authority, hereby grants exemptions from Exchange Act Rules 13e-4(f)(1) and 14e-1(a) and (b) to permit a tender offer for any class of equity security to remain open for a minimum offering period of 10 business days, so long as the following conditions are met ….

The order goes on to list 11 conditions that must be met.

Coates’ Question

This development prompted Harvard law professor John Coates to opine at LinkedIn:

- APA prior notice? None.
- Opportunity for public comment? None.
- Studies conducted? None.
- Investor views considered? None stated.
- Precedents cited? Debt tender offers and one Trump-era no-action letter where Indian law and US law conflicted.

Is dramatically changing the first and most important formally promulgated tender offer rule an "interpretative" rule exempt from the APA [i.e., the Administrative Procedure Act]?

Great question, as I noted in reposting his comment:

The memo uses the phrase "pursuant to delegated authority" three times in four pages (the last of which is barely a quarter-of-a-page), but never specifies the authorization in question. …

In the comments, Jeffrey Gordon opines that:

”Using ‘exemptive relief’ to effectuate the most significant change to the TO rules in a generation -- one that in interaction with applicable Delaware statutory and fiduciary law could bring back the Saturday Night special -- is textbook "arbitrary and capricious."

I'd encourage him to spell out the relevant statutory and fiduciary law and how it would bring back the Saturday Night Special?

FYI: A "Saturday Night Special" is an outdated term for a surprise, rapid hostile tender offer aimed at taking over a company before it can mount a defense. These offers were traditionally launched over a weekend to catch target management off guard. The Williams Act effectively banned them. And the new order does set a 10 day tender offer period.

Gordon’s Blog Post

Professor Gordon elaborated on his comment today in a CLS Blue Sky Blog post. You really should go read the whole thing, but here’s a summary.

Gordon refers to the Division’s order as the biggest revision to the Tender Offer Rules in a generation. Most importantly he writes that it was done without an APA Notice & Comment process, no cost-benefit analysis, and no investor survey. As such, he contends that the SEC has acted arbitrarily and capriciously.

Gordon’s primary concern is that there are likely serious conflicts between the SEC’s Exemptive Order and § 251(h) of the Delaware General Corporation Law (“DGCL”)— the “Medium Form” merger statute. That section provides that a friendly acquiring corporation may avoid obtaining approval of a merger from the shareholders of the acquired corporation if the acquiring corporation obtains control over 50% of the acquired corporation’s voting stock in a tender offer and completes the merger after receiving those shares. Accordingly, Gordon argues, an all cash friendly acquisition can now be completed in approximately 12 calendar days rather than the current ~26.

As all students of Delaware corporate law know, Revlon requires the board of directors of a publicly traded corporation to seek maximum value for its shareholders when selling the company. But, having entered into a friendly deal, the target corporation’s board need not pause solely to allow another bidder to make an offer. In addition, under Corwin and Volcano, if a majority of shareholders approve a tender offer of sufficient size and with adequate disclosure regarding the expedited timeline—i.e., that it may preclude any additional bids—then that approval will release the directors from their fiduciary duties to consider alternative offers and they will have no duty to seek alternative offers. As such, boards of directors have essentially no fiduciary responsibility to reject a lower priced acquisition in favor of a higher price acquisition, so long as the lower price is approved by a majority of shareholders.1

Gordon also argues that the shorter offer period may encourage hostile offers and, because the shorter duration decreases the likelihood that competing bidders will emerge, Gordon expects a large number of these acquisitions to be consummated at depressed prices.

Finally, Gordon notes that the SEC’s Exemptive Order is defective on its face for two distinct reasons. (1) It is an important rulemaking effort masquerading as an exemptive order so as to circumvent the APA’s rulemaking requirements. (2) Under 17 CFR § 200.30-1(f)(16)(ii) (the SEC’s standing delegation rules), Corporate Finance may only grant requests for exemptions filed by parties seeking relief in specific cases, whereas here Corporate Finance issued an advance ruling granting a broad category of exemptions that had been requested by no one.

Bishop’s Response

Our friend and frequent interlocutor Keith Bishop responded to Coates’ question on his must-read California Corporate Law Substack.

Calcorporatelaw.com

A Response To Professor Coates' Cavil Concerning Commission's Exemptive Order

In 1979, the Securities and Exchange Commission adopted extensive regulations that imposed specific filing, delivery, and disclosure requirements with respect to certain tender offers. 44 FR 70326 (Dec. 6, 1979). One of those rules, Rule 14e-1 (17 C.F.R. § 240.14e-1) required that any tender offer remain open for a minimum number of business days from the date on which it is first published or sent or given to security holders. In adopting the 20-business day requirement, the Commission acknowledged that “there was no concensus as to what the length of the period should be”. The Commission found that 30 business days was “unnecessarily long” and it ultimately settled on 20 business days and that has been the rule until this month…

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a month ago · Keith Paul Bishop

As for the APA question, Bishop points out that:

The Administrative Procedure Act (”APA”) distinguishes between “legislative rules” and “interpretive rules”. One of the four key differences between “legislative rules” and “interpretive rules” is that federal agencies must, subject to certain exemptions, adopt “legislative rules” in accordance with the APA’s requirements of notice and comment. The APA specifically exempts interpretive rules from the APA’s notice and comment requirements. 5 U.S.C. § 553(b).

The rub, of course, is how do you tell the difference between these two types of rules? This is a question that is frequently litigated, including by the Commission.

Presumably Bishop contemplates an argument that this is an interpretative rule rather than a legislative rule.

In addition, however, Bishop also observes that:

A footnote to the exemptive order states:

“The Commission has authority under Exchange Act Sections 14(d)(5), 14(d)(8)(C) and 36(a) to provide exemptions from the tender offer provisions of Exchange Act Sections 13(e) and 14(d)(1) through 14(d)(7), Exchange Act Rule 13e-4, Regulation 14D, and Rule 14e-1 of Regulation 14E. The Commission has delegated this exemptive authority to the Division. See 17 CFR 200.30-1(f)(16).”

Each of Sections 14(d)(5), 14(d)(8)(C), and 36(a) refers the Commission acting by rule, regulation, or order. Thus, each of these statutes plainly contemplates “orders” as a category distinct from rules and regulations.

I take it that Bishop thus believes that the Corporate Finance Division may well have had delegated authority to issue the order in question. Unless, of course, “order” contemplates a response to a specific request for relief rather than a broad exemption.2

Finally, Bishop tackles the merits:

Importantly, times have changed dramatically since 1979 when the Commission imposed a 20 business day minimum. Then, both the Internet and EDGAR were still years in the future. In Bucher v. Shumway, 452 F. Supp. 1288 (S.D. N.Y. 1978), the court stated that the sole purpose of the Williams Act is to “provide information to the investor so that he may make a rational decision whether or not to tender all or part of his shares”. 452 F. Supp. at 1294 (citing H.R. Rep. No. 1711, 90th Cong., 2d Sess.). Information is disseminated to the market far more quickly than it was nearly a half century ago. By expressly authorizing the Commission to proceed by order, Congress presumably intended to authorize the Commission to act with greater celerity in response to changing conditions than rule making allows.

My Take

Let’s split the baby in two. First, is there a serious APA issue here? I’m not an administrative law expert. I’m barely an administrative law novice. I found Gordon’s post to be cogent and well thought out. But I think Bishop raises some very valid points. Accordingly, although I lean in Gordon’s direction, on this issue, I shall courageously duck the question.

Second, is the order unwise? I can see Gordon’s points and freely concede that his scenario could pan out occasionally. I think he spotted a serious problem. But I also thought Bishop’s point has merit. Information does move faster than ever and this has been reflected in many SEC rules (e.g., the shortened time periods for filing Schedule 13Ds and amendments thereto). So, on this one, I think I lean slightly towards Bishop’s side, but once again shall courageously equivocate.

In Want to Improve Your Golf Game? Play With a Political Ally, Lisa Ward reported that:

Professional golfers tend to perform better when they play with partners whose political leanings are similar to theirs.

So suggests a new study, the results of which could have implications for workplaces off the links, as well, according to the researchers. …

The study found that pro golfers tended to perform better when they played with another golfer whose political party affiliation was the same as theirs. Specifically, the researchers found that professional golfers had 0.2 fewer strokes a round when playing in politically homogeneous groups compared with politically heterogeneous groups.

…

The researchers believe their findings could apply to other workplace settings where people are engaged in tasks that require a lot of concentration. Although academic research shows that political diversity can be helpful when it comes to group collaboration and problem solving, another published paper by the researchers found that startup companies with politically diverse founding teams are more likely to shut down than startups with more politically homogeneous teams.

Much modern work is conducted by teams of employees working collaboratively to varying degrees. At the top of the corporate hierarchy is a team that needs to work collaboratively; i.e., the board of directors.

So. Does golf tell us anything about whether homogenous or heterogenous groups make between work teams or boards?

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I’ve written several Foundation Press Concepts and Insights texts on corporate and securities law subjects. These are marketed by Foundation mainly as study aids for students. But I’ve tried to write them so as to be useful to lawyers and judges as well.

So with no further ado:

Corporate Law (5th edition)

Many students find their Corporation Law class difficult because they do not understand the transactions giving rise to those cases. As with its predecessors, this fifth edition is intended to assist students by not only restating the law but also by putting the law into its business and financial context. The pedagogy is up-to-date, with a strong emphasis on the doctrinal issues taught in today's Corporations classes. The text is highly readable: The style is simple, direct, and reader-friendly. Even when dealing with complicated economic or financial issues, the text seeks to make those issues readily accessible.

AMAZON LINK

Agency, Partnerships & LLCs (Fourth edition)

This thoroughly-updated edition provides a comprehensive guide to the law of agency relationships, partnerships, and limited liability companies. In addition to detailed treatment of the key legal issues, the text also provides balanced analyses of the policies underlying the law. The reader thus comes away not only with a knowledge of the law but also an understanding of why courts and legislatures chose those rules. The text incorporates frequent references to the most up-to-date sources of the law, including those most frequently encountered in law school courses, such as the Restatement (Third) of Agency, the Uniform Partnership Act, and the Uniform Limited Liability Company Act. In addition, to account for the increasing dominance of Delaware as the state in which limited liability companies are formed, the new edition pays considerable attention to the Delaware Limited Liability Company Act.

AMAZON LINK

Mergers and Acquisitions (4th edition)

This text provides a concise statement of the state corporate and federal securities laws governing mergers and acquisitions law. It is designed for law students taking advanced business law courses such as mergers and acquisitions or corporate finance, lawyers practicing in corporate takeovers, and judges faced with cases arising out of such transactions. This thoroughly updated fourth edition features a considerably expanded treatment of practical aspects, such as drafting merger agreements, preparing disclosure documents, and dealing with takeover defenses.

AMAZON LINK

Insider Trading Law and Policy (Second edition)

This thoroughly revised and updated text is for use in law school classes on insider trading, securities regulation, or business associations. In a thorough yet compact fashion, it offers a clear and direct exposition of the law and policy concerns raised by this important and high-profile area of the law. The author provides sufficient detail for a complete understanding of the subject without getting bogged down in minutiae. Faculty interested in teaching a short course on insider trading or making insider trading a major part of a course in securities or corporate law will find the text highly teachable, while students taking such a course using other materials will find it a useful study aid.

AMAZON LINK

Each stockholder of a corporation or joint-stock association shall be individually and personally liable for such proportion of all its debts and liabilities contracted or incurred, during the time he was a stockholder, as the amount of stock or shares owned by him bears to the whole of the subscribed capital stock, or shares of the corporation or association.”

He went on to note that:

That constitutional provision was repealed on November 4, 1930. See Kaysser v. McNaughton, 6 Cal. 2d 248 (1936)….

Limited liability may be entrenched today, but suprisingly the opposite rule was once true in California.

Actually, limited liability has been entrenched in most of the United States for a very long time. As Bishop notes, however, California joined the party very late.

The discussion below the line draws on Todd Henderson’s and my book, Limited Liability: A Legal and Economic Analysis (AMAZON LINK), which Northwestern Law Professor Stephen Presser called “one of the most important books on one of the most important contemporary legal issues, the liability of individual and corporate shareholders for corporate debts.”

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I also introduced a forthcoming Washington University Law Review article by Roy Shapira, Asaf Eckstein, and Ariel Shillo,1 which tackles a related—but, I think, seriously underappreciated governance problem; namely, that boards of directors are being asked to do far more than their structural capacity allows. They call this “board overload.”

I think they’ve spotted a real problem and advanced some useful ideas for addressing it. But while I like the article a lot, I have some quibbles and what I hope will be some friendly amendments.

The prior post set the stage by relating first principles, focusing on the question of why the statutory default model of corporate governance has a committee—i.e., the board of directors—at the apex of the corporate hierarchy rather than an individual autocrat. In this post, I use that background to develop my critique of Shapira et al.’s analysis.

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Some rating agencies urge clearly defined standards against over-boarding. ISS, for example, insists that directors who are not CEOs should not serve on more than six public company boards. (Directors who are CEOs are limited to three boards, including their own.) The rationale is that heavily committed directors cannot do a good job. Proponents believe the principle is so important that it ought to be a clear bright-line rule, even if doing so results in some over-inclusion and under-inclusion. For example, it stifles the fully retired but smart and energetic CEO who has no regular job but wants to serve on eight boards of fairly simple and unproblematic public companies, but it excuses the full-time professional who has an especially demanding job and also imagines he can effectively serve on the boards of three large, complicated, and troubled public companies.2

Over boarding concerns drove the NYSE to impose a disclosure requirement regarding audit committee membership, which provides that:

If an audit committee member simultaneously serves on the audit committees of more than three public companies, the board must determine that such simultaneous service would not impair the ability of such member to effectively serve on the listed company's audit committee and must disclose such determination either on or through the listed company's website or in its annual proxy statement or, if the listed company does not file an annual proxy statement, in its annual report on Form 10-K filed with the SEC. If this disclosure is made on or through the listed company’s website, the listed company must disclose that fact in its annual proxy statement or annual report, as applicable, and provide the website address.3

In addition, the commentary to that provision counsels that:

Because of the audit committee's demanding role and responsibilities, and the time commitment attendant to committee membership, each prospective audit committee member should evaluate carefully the existing demands on his or her time before accepting this important assignment.

A forthcoming Washington University Law Review article by Asaf Eckstein, Roy Shapira, and Ariel Shillo tackles a related—but, I think, seriously underappreciated governance problem; namely, that boards of directors are being asked to do far more than their structural capacity allows. Their insight is the subject of this commentary. At the risk of spoiling the end, I end up highly recommending it, while offering some friendly amendments.

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The Center for Law and the Economy will have two key missions. The first is to serve as a hub for work that fills major gaps in scholarship and policy research on the laws and tools that shape, structure, and govern economic activity. The center will bring expertise to advance work spanning public economic law, including in antitrust, administrative law, banking law, consumer protection, corporate governance, financial regulation, and tech policy, among other areas. Drawing on top government experience, the center’s fellows will focus on developing timely research that can move from scholarship into practice. The center’s Project on Public Economic Law will support students and scholars as they prepare for careers in legal academia, and it will host the Public Economic Law Colloquium to convene scholars and teach students pursuing this work.

The second part of the center’s mission is to educate, train, and support current students through its Law and Economy Student Network. Students from around the United States will have the opportunity to participate in events with leading scholars and policymakers; contribute to timely, original scholarship and policy projects; and submit work for annual awards. Through the network, the center will help train the next generation of legal and economic scholars and policy leaders and position them to advance careers in public service.

Or, as a cynic might say, to generate stovepipe law review articles and train aniother generation of progressive anti-business antitrust crusaders.

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Mega Bank Holding Co., Inc., a large and diversified financial services corporation providing, among other things, investment banking services, recently announced that it had reached a settlement with the U.S. Department of Justice and several other federal agencies of criminal and civil claims.1 The Department of Justice claimed that Mega had committed securities fraud and violated certain banking regulations in connection with Mega’s “packaging, marketing, sale, and issuance of residential mortgage-backed securities (RMBS).” In the settlement, Mega admitted having committed the alleged violations and further admitted that “in certain instances, loans that did not comply with underwriting guidelines were included in the RMBS sold and marketed to investors, but Mega did not disclose this to those investors.” Mega paid the government $1.7 billion to settle those claims.

Mega is a Delaware corporation. Its common stock is listed for trading on the NYSE. Its common stock and several classes of debt securities are registered with the SEC under § 12 of the Exchange Act. Mega is therefore a reporting company and at all relevant times was current in its reporting obligations.

Shareholders brought a number of derivative and class actions suits against Mega and its directors, which were combined for trial before Judge Helen Watkins of the U.S. District Court for the Southern District of New York. Among the many claims in the lawsuit is an allegation that the directors of Mega should be liable for violating Securities Exchange Act § 14(a) and SEC Rule 14a–9 thereunder because Mega’s proxy statements for the last two years were “materially false and misleading because they falsely stated that the Company’s Board of Directors maintained adequate and effective risk oversight over management and failed to disclose to the Company’s shareholders material deficiencies in the Board’s oversight of management and internal controls.”

1. If it were true that Mega’s board of directors failed to maintain “adequate and effective risk oversight over management,” would Mega’s shareholders have a state law claim against the directors? What would plaintiffs need to prove in order to prevail on such a claim, if any?

2. Mega’s directors have moved to dismissed the § 14(a) cause of action for failure to state a claim, citing Gaines v. Haughton.2 How should Judge Watkins rule?

3. Would your answer to Question 2 change if the directors’ fees paid to Mega’s board members varied with Mega’s stock price, so that higher profits and a resulting higher stock price meant the directors received higher compensation?

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