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Shareholder Value(s): Index Fund ESG Activism and the New Millennial Corporate Governance
Get PDFMajor index fund operators have been criticized as ineffective stewards of the firms in which they are now the largest shareholders. While scholars debate whether this passivity is a serious problem, index funds’ generally docile approach to ownership is broadly acknowledged./= / \u3e/= / \u3eHowever, this Article argues that the notion that index funds are passive owners overlooks an important dimension in which index funds have demonstrated outspoken, confrontational, and effective stewardship. Specifically, we document that index funds have taken a leading role in challenging management and voting/= / \u3eagainst directors in order to advance board diversity and corporate sustainability. We show that index funds have engaged in a pattern of competitive escalation in their policies on ESG issues. Index funds’ confrontational and competitive activism on ESG is hard to square with their passive approach to more conventional corporate governance questions./= / \u3e/= / \u3eTo explain this dichotomy in approaches, we argue that index funds are locked in a fierce contest to win the soon-to-accumulate assets of the millennial generation, who place a significant premium on social issues in their economic lives. With fee competition exhausted and returns irrelevant for index investors, signaling a commitment to social issues is one of the few dimensions on which index funds can differentiate themselves and avoid commoditization. For index funds, the threat of millennial migration to another fund is more significant than the threat of management retaliation. Furthermore, managers themselves, we argue, face intense pressure from their millennial employees and customers to respond to their social preferences. This three dimensional millennial effect—as investors, customers and employees—we argue, is an important development with the potential to provide a counterweight to the wealth-maximization paradigm of corporate governance./= / \u3e/= / \u3eWe marshal evidence for this new dynamic, situate it within the existing literature, and consider the implications for the debate over index funds as shareholders and corporate law generally
Crisis? Whose Crisis?
Get PDFEvery moment in human history can be characterized by someone as “socially and politically charged.” For a large portion of the population of the United States, nearly the entire history of the country has been socially and politically charged, first because they were enslaved and then because they were subjected to discriminatory laws and unequal treatment under what became known as “Jim Crow.” The history of the United States has also been a period of social and political upheaval for American Indians, the people who occupied the territory that became the United States before European settlement. Although both African-Americans and American Indians often turned to the federal courts for help, by and large, the Supreme Court of the United States turned them away, refusing their pleas for protection from the sources of their political and social difficulties. The law, as exemplified in Supreme Court decisions, carried on in politically and socially charged times as if nothing was the matter
Automation: A Guide for Policymakers
No full textAdvancing technologies are increasingly able to fully or partially automate job tasks. These technologies range from robotics to machine learning and other forms of artificial intelligence, and are being adopted across many sectors of the economy. Applications range from selecting job applicants for interviewing, picking orders in a warehouse, interpreting X-rays to diagnose disease, and automated customer service. These developments have raised concern that workers are being displaced by advancing automation technology. Indeed, over 18 recent studies predict job losses from new automation technologies, including some predictions of massive job losses (Winick 2018). A large literature on worker displacement [1] suggests that the effects of such developments could be dire: individual workers subject to plant closings and mass layoffs experience reduced employment probabilities and wage reductions, leading to long-term earnings losses, as well as reductions in consumption and worse health outcomes. Concerns about these effects of automation have led some commentators to call for policies to directly combat mass unemployment, such as a Universal Basic Income.
But is this right? At a time when many firms are investing in automation, the unemployment rate is at historic lows. Low unemployment might seem hard to reconcile with apocalyptic predictions about mass unemployment. This paper reviews the evidence from recent studies and reports on a new paper we have written, “Automatic Reaction: What happens to workers at firms that automate” (Bessen et al. 2019). This paper is the first to take a look at what actually happens to those workers. We build on some of the findings in order to draw the implications for policy.
The evidence suggests that the apocalyptic predictions may have it wrong, at least for the next several decades. But that does not mean that automation is not highly disruptive. The challenge of automation in the near future may not be mass unemployment, but, instead, a greater level of worker transitions. Workers need to switch jobs, often learning new skills, changing occupations and industries, and moving to new locations. These transitions often involve temporary unemployment spells and a loss of income. Automation thus places a burden on workers even if, in the end, they do not permanently lose employment. Moreover, inefficient transitions can slow the productivity-enhancing promise of new technology.
Our analysis suggests that automation does indeed pose significant challenges for policymakers. But it is critical to respond to the real challenge, the challenge that workers are actually experiencing. This review of the evidence may be helpful toward that end
How SCOTUS Nominations Became All-Out War
No full textAlmost no event brings Washington to a halt like a Supreme Court nomination. This week, Mitch McConnell and the president are ignoring every other priority in Washington—including a much-needed trillion-dollar relief package—in the interest of quickly confirming Amy Coney Barrett, whose questioning began today. In 2016, McConnell did the opposite, blocking President Barack Obama’s court nomination because it happened to fall in an election year.
The Democrats, appalled by the Republicans’ naked exercise of power, are considering their own responses, including new Supreme Court term limits and altering the size of the nation’s highest court to stuff it with progressives. How did we get to this point, where the nomination of a single judge can eclipse all other national governing priorities—and both parties approach these moments as partisan power plays rather than what’s in the best interests of the country
Is Medicare for All the Answer? Assessing the Health Reform Gestalt as the ACA Turns 10
Get PDFAs presidential candidates debate health reform, the expression “Medicare for All” (“M4A”) is on repeat, yet few appear to understand precisely what Medicare is or what M4A would mean. Even more striking is that Americans are vigorously debating health reform when the ACA – President Obama’s signature legislation and a health reform effort on a scale not seen in decades – turns 10 on March 23.The ACA pioneered universal coverage, but it also ratcheted up health care complexity by building new scaffolding around an old foundation. This fragmented landscape has been exacerbated by a crazy quilt of implementation crafted in the wake of four trips to the U.S. Supreme Court in less than nine years. Even so, measured by the ACA\u27s central goal of universal coverage, studies show successes such as decreased uninsurance rates, improved access to care, reduced health disparities, decreased financial strain, and economic benefits for both states and health care providers – especially in states participating in Medicaid expansion. These findings make the health reform clamor even more notable: why does a broad cry for health reform exist? and what does the public want? This symposium asked whether M4A is the solution.To find an answer, this paper surveys current health reform bills and analyzes the constitutional queries they may face. Part I suggests lessons to be learned from the ACA’s enactment and implementation, contextualized by historic weak spots in American health policy. Part II surveys the structure and approach of each of the major federal health reform bills proposed in 2019, placing them on a spectrum of disruption relative to the current health care landscape and comparing a handful of key state reform efforts. This analysis exposes that most of the legislative energy is directed toward filling the gaps of the ACA by facilitating a new public insurance product, a “public option, and reveals that only one bill actually calls for one comprehensive, single-payer, government-provided public insurance program. The paper then exposes the distance between law and policy (and politics) by evaluating the constitutional implications of these major proposals. Finally, the paper considers whether existing proposals capture the health reform gestalt, which reflects broad desire for administrative simplification, fairness, and lower costs
Congressional Administration of Foreign Affairs
Get PDFLongstanding debates over the allocation of foreign affairs power between Congress and the President have reached a stalemate. Wherever the formal line between Congress and the President’s powers is drawn, it is well established that, as a functional matter, even in times of great discord between the two branches, the President wields immense power when he acts in the name of foreign policy or national security.
And yet, while scholarship focuses on the accretion of power in the presidency, presidential primacy is not the end of the story. The fact that the President usually “wins” in foreign affairs does not mean that the position the President ultimately chooses to take is preordained. Questions of foreign policy and national security engage diverse components of the executive branch bureaucracy, which have overlapping jurisdictions and often conflicting biases and priorities. And yet they must arrive at one executive branch position. Thus the process of decision making, the weight accorded the position of any given decision maker, and the context in which the decision is made together shape the ultimate position the President takes.
This Article explores and critiques the foreign policy role Congress can—and does—play in structuring and rearranging the relative powers of those internal actors and the processes they take to reach their decisions, in order to influence and even direct the President’s ultimate position. Having yielded much of the ground on substance, Congress has an opportunity for a second bite at the apple, and may influence the policy directions of the presidency by manipulating its internal workings. There are risks to deploying “process controls,” as I term these measures, in lieu of direct substantive engagement, but I argue that Congress can and should use these tools more instrumentally to influence the course of foreign policy in areas where it is otherwise unlikely to assert itself as a coequal branch and necessary check on presidential power
Border Babies — Medical Ethics and Human Rights in Immigrant Detention Centers
Get PDFProviding decent medical care for families in U.S. detention centers near the Mexican border has become exceedingly difficult over the past 2 years. Trauma was inflicted on migrants to deter others from attempting to enter the United States. A cornerstone of deterrence was the “zero tolerance” policy that forcibly separated children from their parents at the border. Photographs of children confined in cages horrified Americans, who demanded that the policy be rescinded. It was, but family separations continue and have been made even worse by the Migrant Protection Protocol (MPP) — which the U.S. Supreme Court will most likely review later this year — under which asylum seekers and their children are returned to Mexico to wait in makeshift camps for their applications to be reviewed. This practice has created yet another humanitarian crisis
Amicus Brief in Collins v. Mnuchin on Original Public Meaning of Presidential Removal and the \u27Decision of 1789\u27
Get PDFPetitioners and the en banc Court of Appeals below have rested their contention that the Constitution grants the President at-will removal authority over the head of the Federal Housing Finance Agency (FHFA) on historical claims about the first Congress’s ostensible “Decision of 1789.” In so doing, Petitioners are following Chief Justice Taft’s account in Myers v. United States, upon which this Court relied on in 2010 and again last term for an originalist interpretation of Article II. New historical research shows that Myers was incorrect. The “Decision of 1789” actually supports, rather than undermines, Congress’s power to limit presidential removal.
Myers asserted that the first Congress’s “Decision of 1789” declared that the Constitution assigned removal power to the President alone: “[T]here is not the slightest doubt, after an examination of the record, that the [Foreign Affairs] vote was, and was intended to be, a legislative declaration that the power to remove officers appointed by the President and the Senate vested in the President alone.” 272 U.S. 52, 117 (1926). New evidence calls for a re-examination of this record, raising more than just a doubt.
Originalism depends upon clear historical evidence of public meaning. Seila Law LLC v. Consumer Financial Protection Bureau noted that the first Congress’s view “provides contemporaneous and weighty evidence of the Constitution’s meaning.’” 140 S. Ct. 2183, 2197 (2020) (internal quotation omitted). Overlooked Senate records show no consensus in the first Congress to support Myers’s interpretation. To the contrary, this new evidence suggests a very different decision in 1789. The first Congress rejected “presidentialism,” the more general constitutional claim that the President alone can remove principal officers confirmed by the Senate, even the heads of the Departments of Foreign Affairs, War, and especially Treasury; and it rejected the more specific claim of exclusive or “indefeasible” presidential removal under Article II (a claim by the Petitioners here), that presidential removal is “at pleasure” or “at will.” Both positions rely on a claim that Article II establishes “unitary” or exclusive presidential removal, unchecked by other branches.
The most significant new evidence:1) Senator William Maclay’s diary reveals initial opposition to presidential removal (of any source) in the Senate, which is the most plausible explanation for Madison’s sudden retreat from a clear removal clause to an ambiguous one. Madison’s opponents and allies identified this shift as evasion or reconciliation with the Senate.
2) The first head-count of the House by constitutional categorization demonstrates that only about one third of the House supported the “presidential” interpretation, and a wide majority rejected it.3) New evidence from the Treasury debate and from a series of statutes reveal further rejection of exclusive presidential removal, especially in the domain of finance. Congress delegated removal power, even of the Secretary of Treasury, to the judiciary.4) This widespread opposition to presidentialism in 1789 prompts a re-reading of the Constitution’s text, the Convention, and the Ratification debates. New research on “vesting” shows that this text likely did not have a public meaning of “exclusive” or “indefeasible.”Myers was mistaken. The first Congress opposed this interpretation of Article II, forced the deletion of the clear removal language in the Foreign Affairs bill, and then enacted six anti-presidentialist removal clauses. It would be an error in terms of originalism to rely on the first Congress or the Executive Vesting Clause to invalidate the FHFA structure
A Public Health Law Path for Second Amendment Jurisprudence
Get PDFThe two landmark gun rights cases, District of Columbia v. Heller and McDonald v. City of Chicago, came down in 2008 and 2010, respectively. In the decade that has followed, two things have become abundantly clear. First, these cases provide little clarity about the nature and scope of Second Amendment rights, resulting in chaos and circuit splits in the lower courts. Second, growing empirical evidence has revealed that, in the background of the debate on individual constitutional rights, a serious gun violence epidemic is intensifying around the country. In one corner, gun rights advocates worry that increased firearm regulation will relegate the Second Amendment to a “second-class” right. In the other, gun control advocates are desperate for a solution to address this growing public health crisis. The role of history in addressing a modern problem intensifies the tension. But historically grounded solutions to this contemporary challenge exist in public health law. However, public health law precedent remains perplexingly unexplored by the courts. This Article considers a public health approach to prevention in the context of public health law jurisprudence and Second Amendment rights. It does so by making use of a well-established framework that allows courts to engage in a balanced analysis that accounts for the state’s interest in protecting public health and safety while still guarding individual rights. This novel approach bridges the gap between the empirical public health data and constitutional theory, offering clarity for the uncertainty currently plaguing academics, policymakers, and courts