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Abstract:
It appears that our society has tacitly agreed to spare corporate directors any significant legal liability - which includes both financial and incarceration - for failing to perform their duties as board members. Thus, over the last twenty years, there has been a virtual elimination of legal liability - particularly in the form of financial penalties - for directors who breach their fiduciary duty of care. This is true despite the fact that we entrust directors with the awesome responsibility of monitoring all of America's corporations as well as the officers and agents within those corporations. More surprisingly, this tacit agreement against legal liability for directors has persisted even reform efforts designed to prevent corporate governance failures. Thus, while Sarbanes-Oxley imposes increased responsibilities on directors, that Act fails to impose any direct legal penalties on directors when they breach those responsibilities.

Most corporate scholars appear to support this failure, not only insisting that other extra-legal measures sufficiently ensure directors' compliance with their fiduciary duties, but also arguing that legal remedies are both costly and ineffective. This Article disagrees. Instead, this Article uses Sarbanes-Oxley and events which led to its enactment to demonstrate that most arguments rejecting director liability inappropriately assess the costs and benefits of legal penalties, while failing to appreciate the degree to which extra-legal market or reputational sanctions depend upon legal measures for their effectiveness. Thus, this Article concludes that legal sanctions represent a vital aspect of any system seeking to regulate director misconduct. As a consequence, this Article also concludes that many of our corporate governance reforms may be defective because they impose new and significant obligations on directors, but make no specific provisions for sanctioning directors' failure to fulfill such obligations.

directors, liability

Abstract:
The Bottom Line on Board Diversity: A Cost Benefit Analysis of the Business Rationales for Diversity on Corporate Boards critically examines the business rationales for diversity in order to determine whether they can or should be used to encourage greater diversity on the boards of major corporations. The Article acknowledges the validity of some of the business rationales for diversity within corporations more generally, but questions whether those rationales apply with as much force in the context of corporate boards and the obligations board members undertake. On this point, the Article concludes that such rationales promise more, and in some cases significantly more, than directors of color can realistically deliver. The Article also concludes that while there may be practical reasons for relying on business rationales to encourage corporations to diversify, many diversity advocates have failed to analyze and appreciate the costs associated with adopting business rationales. In fact, these individual and societal costs, including the costs of marginalization and commodification, may outweigh the benefits of using market and economic rationales to justify board diversity.

corporations, corporate governance, directors, board diversity

Abstract:
Post Enron has witnessed renewed concern regarding corporations' failure to behave responsibly, both in terms of their ethical responsibility and in terms of their responsibilities to advance issues beyond financial matters, such as those that impact employees, customers, and the broader community. Many scholars, legislators, and members of the business community have struggled to find strategies for restoring corporate responsibility. This Article argues that a corporation's own words or rhetoric may be useful in solving its behavioral defects. In fact, the vast majority of corporations issue statements or otherwise engage in rhetoric that suggest a commitment to issues and concerns beyond financial matters. Most people dismiss this rhetoric as meaningless speech, and as a result there has been very little attempt to analyze its relevance to corporate conduct. This Article insists that such dismissals are shortsighted. First, by critically examining the available empirical evidence, this Article demonstrates that corporate rhetoric has a greater connection to corporate behavior than most would presume. Second, this Article draws on social psychology literature to illuminate how corporate rhetoric on responsibility can be used strategically to increase the likelihood that corporations will engage in behavior consistent with that rhetoric. By highlighting the behavioral significance of corporate rhetoric, this Article offers a unique and novel solution to the problem of corporate irresponsibility.

corporate responsibility

Abstract:
As one might expect, there are many similarities between the circumstances of women directors and directors of color, which includes African Americans, Latinos, and Asian Americans. Indeed, both groups began appearing on corporate boards in significant numbers during the same period - right after the Civil Rights Movement pursuant to which the push for racial equality throughout society precipitated efforts to achieve greater representation of people of color as well as women on corporate boards. Moreover, while women and people of color have experienced some increase in board representation over the last few decades, both groups also have encountered significant barriers to their success on corporate boards. However, people of color appear to have experienced more significant barriers than women, while women of color appear to be experiencing the most formidable of such barriers.

Without question, corporations have achieved better representation of women and people of color within their boardrooms in recent history. Further, if the historical patterns related to these groups' increase continue, we may expect that virtually every major corporation will have at least one woman or person of color on their board within the next two decades. However, women and people of color continue to be under represented, suggesting that they face barriers preventing them from translating their thirty percent and near fifty percent status in the labor force into similar numbers at the corporate board level. Part of those barriers stems from the difficulties women and people of color experience with advancing into executive positions at major corporations. Because corporations rely heavily on people who have held such positions, these difficulties have a negative impact on efforts to increase diversity on corporate boards. Of particular concern may be the plight of women of color. Indeed, studies suggest that women of color have achieved the least amount of success with regard to board representation, and that women of color experience the most significant barriers with regard to achieving success within corporate America. This is particularly daunting considering the disproportionate number of African American women in the workforce and student population as compared to African American men, which will make achieving more representative percentages of racial and ethnic diversity on the board significantly more difficult.

corporate boards, diversity

Abstract:
Form Over Substance?: Officer Certification and the Promise of Enhanced Personal Accountability under the Sarbanes-Oxley Act, 55 Rutgers L. Rev. 1 (2002), argues that the requirement under the Sarbanes-Oxley Act (the "Act") that particular officers certify the accuracy of the financial information contained in their company's periodic reports fails to alter significantly existing standards of liability for officers who signed or approved such reports prior to the Act's passage. This failure creates cause for concern about the Act's potential to meet its objectives. Indeed, the certification requirement represents one of the Act's principal symbols of officer personal accountability. By demonstrating that the requirement may only be symbolic, my article questions whether the Act can impact the behavior of corporate officers, or if the Act, as well as the certification requirement, is merely a form with no substance. This article was selected to be reprinted in the 2004 edition of the Securities Law Review (Donald Langevoort, ed.).

personal accountability, securities fraud, Sarbanes-Oxley Act

Abstract:
This Article argues that, instead of dramatically altering the responsibilities of corporate officers and directors, Sarbanes-Oxley confirms at least some case law and other recent articulations of management's fiduciary duty. At a minimum, recent allegations regarding corporate misconduct may suggest some degree of confusion on the pat of corporate officers and directors about the manner in which they should comply with their fiduciary duty. By requiring more exacting standards of conduct from these corporate agents, Sarbanes-Oxley may not only clear up that confusion, but also may represent a natural extension of recent pronouncements by Delaware courts, the SEC and other bodies regarding the need for more enhanced standards of conduct.

Sarbanes-Oxley Act, fiduciary duty, corporate responsibility

Abstract:
Shareholder democracy - efforts to increase shareholder power within the corporation - appears to have come of age, both within the United States and abroad. In the past few years, U.S. shareholders have worked to strengthen their voice within the corporation by seeking to remove perceived impediments to their voting authority. These impediments include classified boards, the plurality standard for board elections, and the inability to nominate directors on the corporation's ballot. Shareholders' efforts have also extended to seeking a voice on the compensation of corporate officers and directors. Advocates of shareholder democracy believe that such efforts are critical to buttressing shareholder value and curbing managerial abuses of authority. However, there are many who criticize shareholder democracy, claiming that it will undermine firm value and corporate governance. Opponents also insist that shareholder democracy will undermine corporate efforts to focus on non-shareholder constituents such as employees, customers, and communities. This Article examines these and other criticisms in the context of international efforts to increase shareholder democracy, and argues that the international experience with shareholder democracy undercuts the force of such critiques. Indeed, experiences in other countries suggest that shareholder democracy can achieve its desired result of enhancing financial returns and reducing corporate misconduct. In this way, the Article relies on international corporate governance trends to provide a novel, significant perspective to the ongoing debate over the propriety of shareholder democracy in the United States.

shareholder democracy, shareholders, corporate governance

Abstract:
Doing Well While Doing Good: Reassessing the Scope of Directors' Fiduciary Obligations in For-Profit Corporations with Non-Shareholder Beneficiaries, 59 Wash. & Lee L. Rev. 414 (2002), explores corporate fiduciary duties in the context of for-profit companies that operate in traditionally non-profit spheres. The rise in "privatization" - a conversion from certain businesses being operated by nonprofit and government entities to operation by for-profit companies - has sparked considerable opposition, particularly when it occurs within industries that deliver some societal good such as health care or education. Opponents claim that for-profit companies cannot pay heed to their social or charitable commitments because they must focus on generating profits. In a related debate, many corporate scholars disagree about the proper aim of the corporation - with some insisting that it should serve the interests of its shareholders only, and others contending that the corporation should serve the interests of all of the various constituents on which it impacts. By evaluating the extent to which corporate fiduciary law allows directors and officers of recently privatized firms to make decisions that benefit their public constituencies, even at the expense of shareholder profit, my article explores the corporate law debate through the prism of privatization. My article concludes that corporate law is more flexible than many experts suggest, and hence that it allows directors of newly privatized firms to advance the interests of their beneficiaries even with those interests are in conflict with shareholder concerns. This article was selected to be reprinted in the Corporate Practice Commentator (Robert B. Thompson, ed.).

fiduciary obligation, corporations

Abstract:
Achieving the Double Bottom Line: A Framework for Corporations Seeking to Deliver Profits and Public Services argues that many people who object to for-profit corporations that deliver public services, such as kindergarten through 12th grade education or foster care, have greatly exaggerated the extent to which the for-profit regime will compel such corporations to subordinate the delivery of those services to financial considerations. Because of this over-exaggeration, these opponents have not focused on designing a framework that would assist these entities in meeting their double bottom line—achieving profit for their shareholders while also delivering a high quality public service. The Article seeks to remedy this failure. The Article therefore proposes that double bottom line corporations be required to have an independent committee, similar to the audit committee, which would focus not on financial issues, but rather on issues pertaining to the attainment of the entities' public goals. By providing for both committees within the corporate framework, this proposal makes it more likely that double bottom line corporations actually achieve their dual objectives.

double bottom line, corporations, for-profit corporations

Abstract:
Commentators have argued that the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley" or the "Act") raises federalism concerns because it regulates the internal affairs of a corporation, including the composition of, and qualifications for, corporate boards, in a manner traditionally reserved to states. This Article responds to those claims, arguing that the Act reflects a relatively minimal intrusion into state law, particularly with regard to issues of director independence. This Article further argues that the Act's failure to disturb state law on these issues may impede its ability to tighten director independence standards and by extension may undermine its ability to improve the quality of directors' monitoring of corporate behavior.

Sarbanes-Oxley Act, federalism, corporate law

Abstract:
This article highlights the increase in affinity fraud - securities and investment fraud targeting members of a particular racial or ethnic group perpetrated either by a member of that group or someone claiming to advance the groups' interests. Affinity fraud differs from other forms of securities fraud because perpetrators establish their credibility and the credibility of their investment schemes by appealing to the trust that group members share, often promising that some of the invested funds will be used to assist the group's church or ethnic community. This reliance on group trust and sense of community persuades otherwise cautious people to participate in these fraudulent investment schemes. These schemes fleece people out of millions of dollars and have drawn the concern of state regulators around the country, causing such regulators to rank it among the top five most problematic securities schemes. This Article argues that the fact that these securities schemes prey on people's charitable impulses and sense of group trust justifies enhancing the punishment of those who commit affinity fraud.

securities fraud, investment fraud, affinity fraud

Abstract:
The Thin Line Between Love and Hate: Why Affinity-Based Securities and Investment Fraud Constitutes a Hate Crime, 36 U.C. Davis 1073 (2003) explores the parallels between the prototypical hate crime and affinity fraud - securities and investment fraud that targets identifiable religious, racial and ethnic groups - and asserts that those parallels justify treating affinity fraud as a hate crime.

securities fraud, investment fraud, hate crime