"The Prudent Investor Rule and Market Risk: An Empirical Analysis" Free Download
Northwestern Public Law Research Paper No. 15-16

MAX M. SCHANZENBACH, Northwestern University - School of Law
ROBERT H. SITKOFF, Harvard Law School

The prudent investor rule, enacted in every state over the last 30 years, is the centerpiece of fiduciary investment law. Repudiating the prior law's emphasis on avoiding risk, the rule reorients fiduciary investment toward risk management in accordance with modern portfolio theory. The rule directs trustees to implement an overall investment strategy having risk and return objectives reasonably suited to the trust. Using data from reports of bank trust holdings and fiduciary income tax returns, we examine trustee management of market risk before and after the reform. First, we find that the reform increased stock holdings only among banks with average trust account sizes above the 25th percentile. This result is consistent with sensitivity in asset allocation to beneficiary risk tolerance as proxied by account size. Second, we find that, although stockholdings increased after the reform, trust corpus did not become more correlated with the market. We explain this result in part with evidence of increased portfolio rebalancing after the reform. We conclude that the rule’s command to align market risk with beneficiary risk tolerance, and to manage market risk exposure on an ongoing basis, has largely been followed.

"Lobbying in the Shadows: Religious Interest Groups in the Legislative Process" Free Download
Emory Law Journal, Vol. 64, 2015

ZOE ROBINSON, DePaul University College of Law

The advent of the new religious institutionalism has brought the relationship between religion and the state to the fore once again. Yet, for all the talk of the appropriateness of religion-state interactions, scholars have yet to examine how it functions. This Article analyzes the critical, yet usually invisible, role of “religious interest groups? — lobby groups representing religious institutions or individuals — in shaping federal legislation. In recent years, religious interest groups have come to dominate political discourse. Groups such as Priests for Life, Friends Committee on National Legislation, Women’s Christian Temperance Union, and American Jewish Congress have entered the political fray to lobby for legislative change that is reflective of specific religious values. These religious interest groups collectively spend over $350 million every year attempting to entrench religious values into the law. These groups have become the primary mechanism for religious involvement in federal politics, but, surprisingly, the place and role of these groups has yet to be examined by legal scholars.

The Article shows that the key features of religious interest groups reflect significant tensions within the emerging project of religious institutionalism. In developing this claim, the Article identifies two benefits claimed to result from religious involvement in politics — protecting religious liberty and enhancing democratic participation — and demonstrates that in fact these benefits are unlikely to result from religious interest group politicking. Instead, the pursuit of religiously bound interests as a legislative end results in the religious interest being pursued as an end in and of itself, consequently imposing significant costs on the values of religious liberty and democracy. Ultimately, the Article claims that when considering the place of religion in the political process, it is incumbent on scholars to consider both the institutional design question of how religious participation in politics is operationalized, as well as take into account both the costs and benefits of that involvement.

"Better Late than Never: Incorporating LLCs into Section 4943" Free Download
Akron Law Review, Forthcoming

ELAINE WATERHOUSE WILSON, West Virginia University - College of Law

How much should charity and business intersect? Recent trends point toward a growing entanglement between the for-profit and nonprofit sectors, as evidenced by the growth of the social enterprise movement. The issue of the entanglement of business and charity is, however, not new; it was one of the primary concerns behind the enactment of the private foundation excise taxes in 1969, including the excess business holding excise tax of Code Section 4943.

While Code Section 4943 has changed little since its original enactment, the business and investment world has changed substantially, specifically including the introduction and growth of the LLC as a business entity. This Article looks at the current treatment of LLCs under Code Section 4943 and considers various options for incorporating LLCs into the statutory framework. It then evaluates these options in light of the original concerns about the interaction between business and charity voiced in the debate over the 1969 excise taxes and echoed today in the evaluation of social enterprise as a viable means of accomplishing charitable goals. The article concludes with a recommendation for change to Code Section 4943 that would incorporate LLCs specifically, provides administrative clarity, minimize the possibility of abuse, and allowing for modern investment practices and innovation.

"Professors as Corporate Fiduciaries: Implications for Law, Organizational Ethics, and Public Policy" Free Download

SALAR GHAHRAMANI, Penn State University

The Article envisions the possibility of a nonprofit university utilizing corporate and agency law principles in order to invoke a breach of fiduciary duty claim (or counterclaim) against a professor who engages in activities that the university deems disloyal — hence seeking termination and/or equitable relief consisting of compensation forfeiture and the revenue lost by the alleged fiduciary malfeasance — particularly activities that the professor believes would benefit her students but could be construed as detrimental to the university’s financial interests. Such potential allegations of disloyalty could arise out of advising students to take certain courses elsewhere due to cost considerations, encouraging transfer to another university altogether, or facilitating such transfer by serving as reference or through the utilization of the professor’s contacts at other institutions.

While this type of guidance may be considered protected speech under the First Amendment for faculty that teach at public universities, the present Article proposes that there are competing extraconstitutional factors and extralegal concepts that are also triggered by the aforementioned hypothetical. Thus, the Article proceeds by dissecting the doctrinal and theoretical schisms that render the fiduciary responsibilities of the university professor nuanced in both public and private institutions, generating vertical tensions between public and private law, horizontal frictions within private law itself, and also raising the question as to whether the corporate university is ultimately a nexus of contracts or something more: a creature of state law that encompasses a complex web of contending fiduciary relations and challenges corporate wealth maximization norms in favor of the stakeholder theory of the firm. After analyzing the legal, ethical, and public policy tensions that arise out of the above-noted scenario, the Article concludes by proposing a two-pronged judicial test that courts may employ in order to shield the professor who acts in good faith.


About this eJournal

This eJournal distributes working and accepted paper abstracts in the fields of nonprofit law and policy, philanthropy law and policy and related areas of scholarship. Thus, drafts and articles that concern nonprofit corporations, charities, charitable corporations, charitable organizations, charitable donations, charitable foundations, charitable fundraising, charitable solicitation, charitable trusts, philanthropy, private foundations, nongovernmental organizations, tax-exempt organizations, tax-exempt corporations, private clubs, membership clubs and similar topics are appropriate for this journal.


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Advisory Board

Nonprofit & Philanthropy Law eJournal

John E. Anderson Professor of Tax Law, Associate Dean for Academic Programs, Loyola Law School Los Angeles

Professor of Law, Chicago-Kent College of Law

Albert E. Jenner, Jr. Professor of Law, University of Illinois College of Law

University Professor of Philanthropy and the Law, Director - National Center on Philanthropy and the Law, New York University School of Law

Professor of Law, Stetson University College of Law

Professor of Law and Sociology, Vanderbilt University - Law School

Professor of Law Emeritus, University of California, Hastings College of the Law

Professor of Law, University of Florida - Fredric G. Levin College of Law