NATALYA SHNITSER, Boston College - Law School
Email: natalya.shnitser@bc.edu

Workers in the United States depend on their employers for a host of benefits beyond wages and salary. From retirement benefits to health insurance, from student loan repayment to dependent-care spending plans, from disability benefits to family and medical leave, U.S. employers play a uniquely central role in the financial lives of their employees. Yet not all employers are equally willing or capable of serving as such financial intermediaries. Larger employers commonly offer more and better benefits than smaller employers. In recent years, so-called Professional Employer Organizations (PEOs) have pitched themselves as a private-sector solution to the challenges traditionally faced by smaller employers. PEOs have pioneered and marketed a “co-employment” model pursuant to which a business and the PEO agree to share certain employer rights and responsibilities, with the PEO taking on all of the human resources matters and the client-employer otherwise retaining control over the business.

While PEOs respond to long-standing challenges faced by smaller employers and have the potential to increase access to workplace benefits, this Article argues that they also introduce new and significant governance concerns that are not adequately addressed by the existing regulatory framework. Empirical evidence suggests that as currently structured, PEOs may not, in fact, provide “Fortune 500” benefits to employees at smaller companies and may instead lock participating employers into costly benefit bundles and expose them to the risk of unpaid employment taxes and health insurance claims. To protect participants in arrangements where PEOs provide key workplace benefits, this Article recommends strengthening and uniformly applying registration, disclosure and oversight requirements for all non-employer intermediaries, including PEOs. In the longer term, comprehensive retirement reform is needed to account for the transformation of workplace benefits in the United States.

MAX M. SCHANZENBACH, Northwestern University - Pritzker School of Law
Email: m-schanzenbach@law.northwestern.edu
ROBERT H. SITKOFF, Harvard University - Harvard Law School, European Corporate Governance Institute (ECGI)
Email: rsitkoff@law.harvard.edu

This chapter, prepared for the 2021 Annual Heckerling Institute on Estate Planning, examines the law and economics of environmental, social, and governance (ESG) investing by a trustee.

Trustees of pensions, charities, and personal trusts invest tens of trillions of dollars of other people’s money subject to a sacred trust known in the law as fiduciary duty. Recently, these trustees have come under increasing pressure to use ESG factors in making investment decisions. ESG investing is common among investors of all stripes, but many trustees have resisted its use on the grounds that doing so may violate the fiduciary duty of loyalty. Under the “sole interest rule” of trust fiduciary law, a trustee must consider only the interests of the beneficiary. Accordingly, a trustee’s use of ESG factors, if motivated by the trustee’s own sense of ethics or to obtain collateral benefits for third parties, violates the duty of loyalty. On the other hand, some academics and investment professionals have argued that ESG investing can provide superior risk-adjusted returns. On this basis, some have even argued that ESG investing is required by the fiduciary duty of prudence. Against this backdrop of uncertainty, this chapter examines the law and economics of ESG investing by a trustee. We differentiate “collateral benefits” ESG from “risk-return” ESG, and we provide a balanced assessment of the theory and evidence about the possibility of persistent, enhanced returns from risk-return ESG.

We show that ESG investing is permissible under American trust fiduciary law if two conditions are satisfied: (1) the trustee reasonably concludes that ESG investing will benefit the beneficiary directly by improving risk-adjusted return; and (2) the trustee’s exclusive motive for ESG investing is to obtain this direct benefit. In light of the current theory and evidence on ESG investing, we accept that these conditions could be satisfied under the right circumstances, but we reject the claim that the duty of prudence either does or should require trustees to use ESG factors. We also consider how the duty of loyalty should apply to ESG investing by a trustee if such investing is authorized by the terms of a trust or the beneficiaries, or is consistent with a charity’s purpose, clarifying with an analogy to whether a distribution would be permissible under similar circumstances. We conclude that applying the sole interest rule (as tempered by authorization and charitable purpose) to ESG investing is normatively sound.

The chapter is based on Max M. Schanzenbach and Robert H. Sitkoff, Reconciling Fiduciary Duty and Social Conscience: The Law and Economics of ESG Investing by a Trustee, 72 Stanford Law Review 381 (2020), available at https://ssrn.com/abstract=3244665.

SAMUEL L. BRAY, Notre Dame Law School
Email: sbray@nd.edu
PAUL B. MILLER, Notre Dame Law School
Email: paul.miller@nd.edu

In this chapter for the Oxford Handbook of Christianity and Law, we survey the line of development of equity from Aristotle to the chancellors of the English Court of Chancery. In between, we trace equity through Roman law, the New Testament, scholastic theology, canon law, and the Magisterial Reformation. We conclude by noting ways in which contemporary law still bears the imprint, even if faint, of classical and Christian sources of the equity tradition.

HANOCH DAGAN, Tel Aviv University - Buchmann Faculty of Law
Email: daganh@post.tau.ac.il
IRIT SAMET, King's College London, King's College London - The Dickson Poon School of Law
Email: irit.samet@kcl.ac.uk

This article argues that a liberal theory of property rights can help us resolve a century old debate about a foundational aspect of the trust, namely, the nature of the beneficiary’s interest. According to orthodoxy, the beneficiary has a (weak form) of proprietary right to the trust res. But proponents of this view found it hard to defend it from attacks by Maitland and his successors who argue that central aspects of the beneficiary’s right, like deferral to bona fides purchaser for value, or the lack of right of standing to sue tortfeasors, imply that the beneficiary’s rights should be classified as a personal right against the trustee. The reason for their failure, we argue, is the misguided picture of property rights, as essentially the right to exclude, which they share with proponents of the obligation theory. For liberal property theory, by contrast, divided ownership, of the kind exemplified by the trust, takes pride of place. Thus, when read through the right lens, orthodoxy is best placed to account for all aspects of the beneficiary’s right, including the shielding rule, which the obligation theory finds impossible to explain on a conceptual or normative levels.