Our Continuing Struggle With the Idea That For-Profit Corporations Seek Profit

*            Leo E. Strine, Jr. is Chancellor of the Delaware Court of Chancery; Austin Wakeman Scott Lecturer on Law and Senior Fellow, Program on Corporate Governance, Harvard Law School; Adjunct Professor of Law, University of Pennsylvania Law School and Vanderbilt University Law School; Special Judicial Consultant to the Corporate Laws Committee of the American Bar Association; Henry Crown Fellow, Aspen Institute.  This Essay was adapted from The Beattie Family Lecture in Business Law, delivered at the University of Western Ontario on March 8, 2011.  The original title of the speech was “Bailed Out Bankers, Oil Spills, Online Classifieds, Dairy Milk, and Potash: Our Continuing Struggle with the Idea that For-Profit Firms Seek Profit.”

   [1].           After being criticized for a tepid response toward BP in the wake of the spill, President Obama came out strong against BP as the oil spill neared its third month. See Mail Foreign Service, ‘Furious’ Obama Blasts BP Again as Tony Hayward Gets Set to Shell Out Billions to Investors, Mail Online (June 5, 2010), http://www.dailymail.co.uk/news/worldnews/article-1283959/Furious
-Barack-Obama-BP-felt-anger-Gulf-Mexico-oil-disaster.html (reporting that Obama, when asked whether he was “angry at BP,” responded that he was “furious at this entire situation because this is an example where somebody didn’t think through the consequences of their actions”).  Other U.S. politicians of both parties also skewered BP’s embattled then-CEO, Tony Hayward, and other BP executives in the weeks that followed the spill.  See Rep. Cau Suggests BP Exec Commit ‘Hara-Kiri’ Over Spill, FoxNews.com (June 16, 2010), http://www.foxnews.com/politics/2010/06/16/rep‑cao‑suggests‑bp‑exec‑commit‑hari-kari-spill/ (quoting Louisiana Republican House Representative Joseph Cao as telling BP America President Lamar McKay that “in the Asian culture, we do things differently.  During the Samurai days, we’d just give you the knife and ask you to commit hara-kiri . . . .”); Kim Landers, US Congressional Panel Roasts BP Chief, ABC News (June 18, 2010), http://www.abc.net.au/news
/stories/2010/06/18/2930221.htm (quoting Michigan Democratic House Representative Bart Stupak) (“Mr. Hayward I’m sure you’ll get your life back and with a golden parachute back to England, but we in America are left with the terrible consequences of BP’s reckless disregard for safety . . . .”); Holbrook Mohr, et al., BP’s Gulf Oil Spill Response Plan Lists the Walrus as a Local Species. Louisiana Gov. Bobby Jindal is Furious, Christian Sci. Monitor (June 9, 2010), http://www.csmonitor.com/From-the-news-wires/2010/0609/BP-s-gulf
-oil-spill-response-plan-lists-the-walrus-as-a-local-species.-Louisiana-Gov.-Bobby-Jindal-is-furious (“Look, it’s obvious to everybody in south Louisiana that they didn’t have a plan, they didn’t have an adequate plan to deal with this spill. . . . They didn’t anticipate the BOP [(blowout preventer)] failure.  They didn’t anticipate this much oil hitting our coast.  From the very first days, they kept telling us, ‘Don’t worry, the oil’s not going to make it to your coast.’” (quoting Louisiana Republican Governor Bobby Jindal)).

   [2].           My use of the word “reliable” here seems measured in light of public reports about the plans BP apparently had in place to deal with an oil spill in the Gulf.  See Mohr, supra note 1 (noting that BP’s 2009 response plan for a Gulf of Mexico oil spill—among numerous other material deficiencies and inaccuracies—included the contact information of a national wildlife expert, Professor Peter Lutz, who died in 2005, and included, under a heading entitled “sensitive biological resources,” marine mammals such as walruses, sea otters, sea lions, and seals, “[n]one of which lives anywhere near the Gulf”).

   [3].           Daniel Bates, Oil Worker ‘Alerted BP About Rig Fault’—But Bosses Feared Cost of Halting Production, He Says, Mail Online (June 25, 2010), http://www.dailymail.co.uk/news/worldnews/article‑1288242/Gulf‑oil‑spill‑BP‑told-faulty-drill-safety-equipment-weeks-disaster.html (recounting the story of a BP rig worker who claims he told managers that a key blowout preventer was improperly leaking fluid but was ignored, purportedly because it would cost too much to shut down production to deal with the problem); Ian Urbina, Documents Show Earlier Fears About Safety of Wells, N.Y. Times, May 30, 2010, at N1, N18 (noting that internal BP emails and inspection reports show that the blowout preventer and casing had several problems that would have limited their effectiveness in the event of an actual blowout).

   [4].           See Little Spent on Oil Spill Cleanup Technology, ABC Action News (June 26, 2010), http://www.abcactionnews.com/dpp/news/state/little-spent-on
-oil-spill-cleanup-technology (reporting that BP spent $29 million on safer drilling operations research in the prior three years while BP and four other major oil drilling companies in the United States spent $33.8 billion on oil exploration over the same time period).

   [5].           See, e.g., Henry N. Butler & Jonathan R. Macey, Externalities and the Matching Principle: The Case for Reallocating Environmental Regulatory Authority, 14 Yale L. & Pol’y Rev. 23, 29 (1996) (noting that the “goal of government regulation of pollution is to force polluters to bear the full costs of their activities,” rather than allowing those costs, or “externalities,” to be borne by society at large); Margaret Tortorella, Will the Commerce Clause “Pull the Plug” on Minnesota’s Quantification of the Environmental Externalities of Electricity Production?, 79 Minn. L. Rev. 1547, 1549 n.15 (1995) (“Economic theory provides insight into the need for governmental regulation of externalities . . . [in the energy industry because w]hen economic activity affects the external environment, the market mechanism fails to reach the social optim[al allocation of resources] because society, rather than the economic actor, bears the cost of production.” (citing Wilfred Beckerman, Pricing For Pollution 24, 25 (2d ed. 1990)).

   [6].           This phenomenon is perhaps most easily observed at crowded American fast-food drive-thru lanes where Big Macs are, in comparison to those who frequently order and consume them, not so big at all.

   [7].           John M. Broder, Coal Industry Spending to Sway Next Congress, N.Y. Times, Oct. 29, 2010, at A12 (reporting that the coal industry is spending millions of dollars in lobbying and campaign donations to influence the makeup of the next Congress in an effort to stave off tightened health and safety regulations); Dan Eggen & Kimberly Kindy, Three of Every Four Oil and Gas Lobbyists Worked for Federal Government, Wash. Post, July 22, 2010, at A1 (“With more than 600 registered lobbyists, the [oil and gas] industry has among the biggest and most powerful contingents in Washington.”); Anne C. Mulkern, Obama’s SOTU Nod Unleashes Lobbying on Clean-Power Goal, N.Y. Times Greenwire (Jan. 26, 2011), http://www.nytimes.com/gwire/2011/01/26
/26greenwire‑obamas‑sotu‑nod‑unleashes‑lobbying‑on‑clean‑pow‑3140.html?pagewanted=1 (reporting that the American Coalition for Clean Coal Electricity’s lobbying efforts have focused on stopping the U.S. EPA from regulating greenhouse gas emissions); see also Lobbying: Oil and Gas Industry Profile, Opensecrets.org, http://www.opensecrets.org/lobby/indusclient.php?lname
=E01&year=a (last updated Dec. 11, 2011) (reporting, based on publicly available information from the Senate Office of Public Records, that oil and gas lobbyists spent a mere $146,296,424 on lobbying efforts in 2010, down from nearly $175 million in 2009).

   [8].           See, e.g., William Poole, Causes and Consequences of the Financial Crisis of 2007–2009, 33 Harv. J.L. & Pub. Pol’y 421, 424–26 (2010) (describing collateralized debt obligations backed by subprime mortgages as the leading cause of the financial crisis); see generally Atif Mian & Amir Sufi, The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis, 124 Q.J. Econ. 1449 (2009) (conducting an analysis of the mortgage default crisis in the United States by empirically examining subprime mortgages in the years leading up to the financial crisis, and observing the sharp increase in mortgage defaults in areas of the country that represent a disproportionately large share of subprime borrowers and that the period between 2002 and 2005 is the only time in the last eighteen years when income and mortgage credit growth were negatively correlated).  But see Lynn A. Stout, The Legal Origin of the 2008 Credit Crisis 24–25 (UCLA Sch. of Law, Working Paper No. 11-05, 2011), available at http://ssrn.com/abstract=1770082 (admitting that subprime mortgages often undergirded the derivatives whose value plummeted, but making the point that the value of all U.S. subprime mortgages was only slightly over $1 trillion and noting that it was the writing of speculative contracts worth many times that amount related to those mortgages that required the U.S. government to make emergency loans of over $3 trillion and to take other actions to alleviate some of the harm and economic dislocation arising when the value of those contracts plummeted).

   [9].           Cf. Giovanni Dell’Ariccia et al., Credit Booms and Lending Standards: Evidence from the Subprime Mortgage Market (Int’l Monetary Fund, Working Paper No. 08/106, 2008), available at http://papers.ssrn.com/sol3/papers.cfm
?abstract_id=1153728 (associating the rapid expansion in the subprime mortgage market predating the financial crisis with relaxed lending
standards and further observing that the areas hardest hit by the crisis were those where lending standards declined the most); Ken Kupchik, Regrets of a Subprime Mortgage Lender, Salon (Feb. 1, 2011), http://www.salon.com/news
/mortgage_crisis/?story=/mwt/pinched/2011/02/01/confessions_of_a_subprime_lender_open2011 (chronicling the author’s experience working for a subprime mortgage company and confessing that company policy was to make the sale, regardless of whether the loan put the borrower in a better financial position, which in the author’s opinion, it rarely did).

   [10].         See The Fin. Crisis Inquiry Comm’n, 111th Cong., The Financial Crisis Inquiry Report xxiii (2011) [hereinafter Fin. Crisis Report] (“Many mortgage lenders set the bar so low that lenders simply took eager borrowers’ qualifications on faith, often with a willful disregard for a borrower’s ability to pay.”) (emphasis added); id. (noting that in 2005, 68% of so-called “option ARM” loans (Adjustable Rate Mortgage) originated by Countrywide and Washington Mutual had “low- or no-documentation requirements”).

   [11].         See, e.g., William W. Bratton & Michael L. Wachter, The Case Against Shareholder Empowerment, 158 U. Pa. L. Rev. 653, 717 (2010) (observing that the burst of the housing bubble in 2007 exposed banks that were heavily invested in the residential mortgage sector to severe losses and that the initial reason for the banks’ decision to invest heavily in that market was the “assumption that the price of real estate securing the loans would continue to rise,” an assumption based in part on the “increasing demand for housing fueled by ever-riskier real estate financing”); Peter Grier, Commission: Three Reasons Why the Financial Crisis Happened, Christian Sci. Monitor (Jan. 14, 2010), http://www.csmonitor.com/USA/2010/0114/Commission‑three‑reasons‑why‑the‑financial-crisis-happened (noting that the financial industry in the United States, in the years leading up to the financial crisis, “did not consider that it was possible housing prices could decline”); Brent T. White,Underwater and Not Walking Away: Shame, Fear, and the Social Management of the Housing Crisis, 45 Wake Forest L. Rev. 971, 988 (2010) (arguing that homeowners in the years before the crisis suffered from “selective perception” that caused them to fail to see evidence that the value of their home was not rising but falling, and that “many homebuyers . . . ignore[d] signs of the impending housing-market collapse in the first place, and optimistic overconfidence may have caused many homeowners to take out interest-only adjustable-rate mortgages . . . in the misplaced belief that they . . . would refinance as their home’s value grew exponentially”).  But not everyone was drinking the home price Kool-Aid.  Indeed, some, years before the crisis, almost prophetically questioned the propriety of the assumption that housing prices would continue an upward climb indefinitely.  See, e.g., House Prices: After the Fall, The Economist, June 18, 2005, at 11 (observing that American and global house prices “have reached dangerous levels” and that a devastating drop in prices is inevitable that “could decide the course of the entire world economy over the next few years”).

   [12].         Private securitization, or structured finance securities, had two key benefits from both the standpoint of the financial institutions creating and selling them and the investors that bought them: pooling and tranching. Fin. Crisis Report, supra note 10, at 43.  By pooling many mortgage loans, a few defaults would have minimal effect.  By tranching the same loans, sellers of the securities could fine tune them to meet particular investor preferences based on the investor’s desired level of risk it wished to take on.  Id.  At the same time, however, pooling and tranching greatly reduced an investor’s ability to understand and price these securities because to do so required the calculation of the statistical probability that certain types of mortgages would default and the lost revenues attributable to those defaults.  Id.  This difficulty, according to the National Commission on the Causes of the Financial and Economic Crisis in the United States, brought the leading credit rating agencies—Standard & Poor’s, Moody’s, and Fitch—to prominence.  Id.  It became a common practice by the packagers of these mortgage-backed securities, i.e., financial institutions, to pay “handsome fees to the rating agencies to obtain the desired ratings.”  Id. at 44.

   [13].         See Stout, supra note 8, at 20–21 (observing that most of the OTC derivative trading in the years leading up to the financial crisis was “dominated by speculative trading,” not by investors seeking to hedge their market positions).

   [14].         “From 2000 to 2007, Moody’s rated nearly 45,000 mortgage-related securities as triple-A.  This compares with six private-sector companies in the United States that carried this coveted rating in early 2010.  In 2006 alone, Moody’s put its triple-A stamp of approval on 30 mortgage-backed securities every working day. . . . 83% of the mortgage securities rated triple-A that year ultimately were downgraded.”  Fin. Crisis Report, supra note 10, at xxv.  Of course, Moody’s and the rest of the ratings agencies made nice profits for their services.  In 2005, 2006, and 2007, for example, the rating of structured finance products made up nearly half of Moody’s rating revenues, representing a fourfold increase from levels in 2000.  Id. at 118.

   [15].         See John C. Coffee Jr., Gatekeepers: The Professions And Corporate Governance 303 (2006) (“[F]or over a century institutional investors have been found by courts to have satisfied their due diligence obligation as fiduciaries when they relied on ‘investment grade’ ratings from the ratings agencies.”).

   [16].         See Margarita S. Brose & Bill Nichols, Toxic Assets: Untangling the Web, BYU Int’l L. & Mgmt. Rev., Winter 2009, at 1, 16 (“In a process that now looks to be a tragic combination of magic and wishful thinking, some of these tranches somehow ended up with AAA investment ratings and were marketed as high quality investments, which dramatically broadened the base of potential investors to include pension funds and asset managers.”); Charles W. Murdock, Why Not Tell the Truth?: Deceptive Practices and the Economic Meltdown, 41 Loy. U. Chi. L.J. 801, 868 (2010) (observing that many investors in mortgage-backed securities were “fiduciaries subject to fiduciary standards as to the instruments in which they could invest” and that therefore, “[t]he only way these investments could be sold was to receive the imprimatur [i.e. a triple AAA stamp] of the credit agencies”); Greg Farrell, SEC Slams Credit-Rating Agencies over Standards, USA Today, July 11, 2008, at 3B (“Because many institutional investors [and pension funds] can put money into only investment-grade bonds (i.e., bonds with a rating of ‘AAA’), investment banks scrambled to win the highest rating for the mortgage-backed securities they developed during the real estate bubble.”).

   [17].         The bill was named the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.  Pub. L. No. 09-8, 119 Stat. 23 (codified as amended in scattered sections of 11 U.S.C.).

   [18].         See, e.g., Kevin T. Jackson, The Scandal Beneath the Financial Crisis: Getting a View from a Moral-Cultural Mental Model, 33 Harv. J.L. & Pub. Pol’y 735, 762 (2010) (noting Countrywide Financial Corporation’s “practice of predatory lending, which involves entering into unsound secured loans for inappropriate purposes” through the use of “a bait-and-switch technique, advertising low interest rates for home refinancing[s]” that would tout a 1% or 1.5% interest rate but swap out an adjustable rate mortgage contract at closing that would allow the homeowner “to make interest-only payments, yet the interest charged is more than the amount of interest paid”); see also Mark Brown, Countrywide Wasn’t Really on Your Side, Chi. Sun-Times, June 26, 2008, at 8 (reporting that one of Countrywide’s most popular mortgage products was the “PayOption ARM,” an adjustable rate mortgage, that allowed consumers to “pay the monthly minimum on their credit cards as the balance owed g[ot] bigger and bigger and bigger” and that Countrywide, in selling these mortgages, was “indifferent to whether homeowners could afford to repay its loans,” often “ignoring the fact that the borrowers . . . didn’t make enough money to repay the loans, especially the higher payments that would later come due on adjustable rate mortgages”).

   [19].         Carol J. Loomis, AIG’s Wind-Down Has $1.6 Trillion Left, CNNMoney (Mar. 26, 2009), http://money.cnn.com/2009/03/25/news/companies/loomis_aig
.fortune/index.htm (noting that AIG’s exposure on derivatives was, at its height in 2008, $2.7 trillion); Rick Newman, 7 Surprises Buried Beneath AIG Bonuses, U.S. News & World Rep. (Mar. 20, 2009), http://money.usnews.com/money/blogs
/flowchart/2009/03/20/7-surprises-buried-beneath-the-aig-bonuses (noting that at its highest point before the bailout, AIG faced exposure on its derivatives in the amount of $2.7 trillion).  Interestingly, AIG’s public disclosures noted that AIG was on the hook for a shockingly large $527 billion.  Am. Int’l Grp., Inc., Annual Report (Form 10-K) (Dec. 31, 2007), available at http://www.sec.gov
/Archives/edgar/data/5272/000095012308002280/y44393e10vk.htm.

   [20].         See Stout, supra note 8, at 21 (noting that the value of all asset-backed securities and corporate bonds in the United States was $15 trillion in 2008 and yet there were $67 trillion in outstanding credit default swap (“CDS”) contracts written that were backed only by a small fraction of those bonds).

   [21].         See id. at 19–25 (arguing that reductions in legal regulations that limited the ability to use hedging contracts for the purpose of speculation fueled the huge increase in speculative trading in credit default swaps and other derivatives that resulted in the financial crisis).

   [22].         E.g., Elaine Lafferty, The Woman Who Predicted the Mortgage Crisis Goes on the Record About the Future, Women’s Voices For Change (Apr. 30, 2008), http://womensvoicesforchange.org/the-woman-who-predicted-the
-mortgage-crisis-goes-on-the-record-about-the-future.htm (reporting on Karen Weaver, a Wall Street analyst who voiced concern in 2005 about the artificial and unsustainable rise in home prices underlying many mortgage-backed securities); Cyrus Sanati, How Value Investing Paid Off in the Crisis, N.Y. Times Dealbook (Mar. 16, 2010), http://dealbook.nytimes.com/2010/03/16/how
-value-investing-paid-off-in-the-meltdown/ (reporting that Michael Burry of Scion Capital made $100 million by betting against mortgage-backed securities (i.e., purchasing credit default swaps on pools of mortgages), and that Burry did so because “he knew [subprime mortgage-backed securities] were troubled”).

   [23].         See, e.g., Stout, supra note 8, at 5 (“Neither the ‘buyer’ nor the ‘seller’ of a CDS contract on a particular corporate or mortgage-backed bond needs to actually own the underlying bond in question.” (citing Michael Lewis, The Big Short: Inside The Doomsday Machine 29 (2010)).

   [24].         See David Evans, Hedge Funds in Swaps Face Peril With Rising Junk Bond Defaults, Bloomberg (May 20, 2008), http://www.bloomberg.com/apps
/news?pid=newsarchive&sid=aCFGw7GYxY14 (noting that although hedge funds have provided 31% of all credit default swap protection, such protection is not likely to be of any value because few hedge funds have the cash available to meet bankers’ requests and the law does not require sellers of protection to set aside reserves).

   [25].         See Stout, supra note 8, at 19–25 (arguing that reductions in legal regulations that limited the ability to use hedging contracts for the purpose of speculation fueled the huge increase in speculative trading in credit default swaps and other derivatives that resulted in the financial crisis).

   [26].         As I observed in an earlier article dealing with activism by institutional shareholders:

Responsible commentators estimate hedge fund turnover at around 300 percent annually.  What is even more disturbing than hedge fund turnover is the gerbil-like trading activity of the mutual fund industry which is the primary investor of Americans’ 401(k) contributions.  The average portfolio turnover at actively managed mutual funds, for example, is approximately 100 percent a year. Median turnover is in the 65 percent range. . . . [The] annual[] turnover of stocks traded on the New York Stock Exchange [is] well over 100 percent, with turnover approaching 138 percent in 2008.  And . . . market capitalization data from the U.S. Statistical Abstract reveals that turnover across all U.S. exchanges reached approximately 311 percent in 2008.

Leo E. Strine, Jr., One Fundamental Corporate Governance Question We Face: Can Corporations Be Managed for the Long Term Unless Their Powerful Electorates Also Act and Think Long Term?, 66 Bus. Law. 1, 10–11 (2010) (footnotes omitted).

   [27].         See generally Bratton & Wachter, supra note 11, at 653–54, 720–21 (demonstrating that financial institutions that engaged in the speculation activities that triggered firm failures and the financial crisis had received a stock market premium over institutions that had not in the years before the crisis).

   [28].         Binyamin Appelbaum, Bailout Overseer Says Banks Misused TARP Funds, Wash. Post, July 20, 2009, at A6 (noting that according to a report from the special inspector general charged with overseeing the government’s financial rescue program, many banks that received federal TARP money that was supposed to be used for increased lending instead used a portion of that money to make new investments, repay debts, or buy other banks).

   [29].         At its high point, U.S. unemployment reached 10.1% in October 2009.  As of December 2011, it remains at 8.5%, a figure that may be understated due to the way unemployment statistics are calculated. U.S. Bureau of Labor Statistics, http://data.bls.gov/timeseries/LNS14000000 (last visited Feb. 27, 2012); see alsoVincent Del Giudice & Thomas R. Keene, U.S. Unemployment Probably Higher Than Reported, Silvia Says, Bloomberg (Oct. 2, 2009), http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aYxjmA7Mh96Q (noting that the unemployment rate in the United States is probably higher than reported because many laid off people who have been out of work for a long period of time have given up the search for jobs and are therefore no longer factored in to the unemployment calculation).

   [30].         Dodge v. Ford Motor Co., 170 N.W. 668 (Mich. 1919).

   [31].         Id. at 683–84.

   [32].         Id. at 671; see also Thomas A. Edison, Henry Ford Explains Why He Gives Away $10,000,000, N.Y. Times, Jan. 11, 1914, § 5, at 3, available athttp://query.nytimes.com/mem/archive‑free/pdf?res=F2091EFE355D13738DDDA80994D9405B848DF1D3 (explaining that Henry Ford advocated for a more direct role for businesses to play in improving social welfare not by paying higher wages, but by “dividing profits with his employees”).  Ford is also quoted as having said that he “believe[s] it is better for the nation, and far better for humanity, that between 20,000 and 30,000 should be contented and well fed than that a few millionaires should be made.”  Id.  Of course, given that his litigation adversaries were the Dodge brothers, Ford’s desire to deny them dividends that could be used to fund their own eponymous car manufacturing operations might have also contributed to Henry Ford’s high-mindedness.

   [33].         Dodge, 170 N.W. at 684 (“A business corporation is organized and carried on primarily for the profit of the stockholders.  The powers of the directors are to be employed for that end.  The discretion of directors is to be exercised in the choice of the means to attain that end, and does not extend to a change in the end itself, to the reduction of profits, or to the non-distribution of profits among stockholders in order to devote them to other purposes.”); see also M. Todd Henderson,Everything Old Is New Again: Lessons from Dodge v. Ford Motor Company, in Corporate Law Stories 37, 66 (J. Mark Ramseyer ed., 2009) (noting that the Michigan Supreme Court’s concern in Dodge was that a majority stockholder might use his control to “divert[] resources [of the corporation] to self-serving ends”).

   [34].         It is, of course, accepted that a corporation may take steps, such as giving charitable contributions or paying higher wages, that do not maximize corporate profits currently.  They may do so, however, because such activities are rationalized as producing greater profits over the long-term.  See, e.g., Shlensky v. Wrigley, 237 N.E. 776, 780 (Ill. App. Ct. 1968) (rejecting a plaintiff shareholder’s allegation of mismanagement against the corporation’s directors for their refusal to install lights at Wrigley Field because the court was “not satisfied that the motives assigned [to the directors] are contrary to the best interests of the corporation and the stockholders” when adding lights for night baseball games might have reduced surrounding property values and that the “the long run interest of the corporation in its property value at Wrigley Field might demand all efforts to keep the neighborhood from deteriorating”); Melvin Aron Eisenberg, Corporate Conduct That Does Not Maximize Shareholder Gain: Legal Conduct, Ethical Conduct, The Penumbra Effect, Reciprocity, The Prisoner’s Dilemma, Sheep’s Clothing, Social Conduct, and Disclosure, 28 Stetson L. Rev. 1, 14–15 (1998) (explaining that sometimes business decisions that appear to be profit-nonmaximizing, such as charitable donations, can in fact be justified on a “straight maximizing basis” and in fact, “frequently a corporation can earn greater profits by appearing to be philanthropic than by appearing to maximize [profits]”); Ian B. Lee, Efficiency and Ethics in the Debate About Shareholder Primacy, 31 Del. J. Corp. L. 533, 555–56 (2006) (“Similarly, few would disagree . . . with the claim that eliminating . . . discretion [to make profit-sacrificing decisions] would be counterproductive even from the standpoint of shareholder profit-maximization.”).  The Delaware Supreme Court’s contrasting treatment of the consideration directors can give to other constituencies in its famous Unocal andRevlon decisions makes this point.  When a corporation is ongoing, it may consider the interests of other constituencies in pursuing a long-term course to maximize profits.  Unocal v. Mesa Petroleum Co., 493 A.2d 946, 955 (Del. 1985) (holding that a board, in considering a threat that a hostile bid poses to the corporation, may consider “the nature of the takeover bid and its effect on the corporate enterprise” which entails, among other things, an analysis of “the inadequacy of the price offered, [the] nature and timing of the offer, questions of illegality, the impact on ‘constituencies’ other than shareholders (i.e., creditors, customers, employees, and perhaps even the community generally), the risk of nonconsummation, and the quality of securities being offered in the exchange”).  But when there is no long-term, as when a sale is inevitable, directors must maximize value for the stockholders immediately.  Revlon Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173, 182 (Del. 1986) (“A board may have regard for various constituencies in discharging its responsibilities, provided there are rationally related benefits accruing to the stockholders.  However, such concern for non-stockholder interests is inappropriate when an auction among active bidders is in progress, and the object no longer is to protect or maintain the corporate enterprise but to sell it to the highest bidder.”) (emphasis added) (internal citation omitted).  These cases, when read together, mean stockholders’ best interest must always, within legal limits, be the end.  Other constituencies may be considered only instrumentally to advance that end.

   [35].         Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984) (“[The business judgment rule] is a presumption that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.”); see also Sinclair Oil Corp. v. Levien, 280 A.2d 717, 720 (Del. 1971) (“A board of directors enjoys a presumption of sound business judgment, and its decisions will not be disturbed if they can be attributed to any rational business purpose.  A court under such circumstances will not substitute its own notions of what is or is not sound business judgment.”).

   [36].         See, e.g., Kelli A. Alces, Revisiting Berle and Rethinking the Corporate Structure, 33 Seattle U. L. Rev. 787, 792 (2010) (“[In Delaware, a] strong business judgment rule is coupled with strong, though rarely enforced, fiduciary rhetoric to try to keep managers faithful to shareholder wealth maximization . . . .”); Steven L. Schwarcz, Fiduciaries With Conflicting Obligations, 94 Minn. L. Rev. 1867, 1909 (2010) (“In the corporate decisionmaking process, the business judgment rule encourages qualified directors to serve by limiting liability risk, [and] encourages inherently risky but value-maximizing transactions . . . .”); see also Revlon, 506 A.2d at 182 (“A board may have regard for various constituencies in discharging its responsibilities, provided there are rationally related benefits accruing to the stockholders.” (emphasis added) (citing Unocal, 493 A.2d at 955)).

   [37].         In reaching its conclusion, the Michigan Supreme Court observed the “attitude and . . . expressions of Mr. Henry Ford,” quoting part of Ford’s testimony: “My ambition . . . is to employ still more men; to spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their homes.  To do this we are putting the greatest share of our profits back in the business.”  Dodge, 170 N.W. at 683.

   [38].         eBay Domestic Holdings, Inc. v. Newmark, 16 A.3d 1 (Del. Ch. 2010).

   [39].         Id. at 8.

   [40].         Id. at 15–16.

   [41].         Id. at 32.

   [42].         Id. at 35.

   [43].         See Jay Coen Gilbert, What eBay’s Court Fight With Craigslist Reveals, Forbes (Sept. 21, 2010, 10:56 AM), http://www.forbes.com/sites/csr/2010/09/21
/what-ebays-court-fight-with-craigslist-reveals/ (“If you want to maintain the social mission of your company, don’t incorporate in Delaware.”).

   [44].         Id.  Although he believes that “in general, a shareholder invests in a for-profit Corporation for the purpose of maximizing their returns,” Maxwell S. Kennerly, a liberal commentator and lawyer, believes that that general principle must be “considered in light of the specifics of each company.”  Maxwell S. Kennerly, eBay v. Newmark: Al Franken Was Right, Corporations Are Legally Required To Maximize Profits, Litig. & Trial (Sept. 13, 2010), http://www.litigationandtrial.com/2010/09/articles/the‑law/for‑lawyers/ebay‑v‑newmark‑al‑franken‑was‑right‑corporations‑are‑legally‑required‑to‑maximize‑profits/.  In that vein, Kennerly believes that because eBay bought its shares in Craigslist in an arms-length transaction and knew that Craigslist, for better or worse, had a “tangibly different idea of ‘for-profit,’” eBay should not be able to complain that Jim and Craig had no “sound business reasons for their decision to protect the highly successful, if idiosyncratic, corporate culture at craigslist, and that decision should be protected by the business judgment rule.”  Id.  See also Joshua P. Fershee, The Wake of the eBay Decision: Is Ben & Jerry’s Next?, Bus. L. Prof Blog (Dec. 6, 2010), http://lawprofessors.typepad.com/business
_law/2010/12/the-wake-of-the-ebay-decision-is-ben-jerrys-next-.html (“I still find myself troubled by the determination that, by embracing its ‘community service mission,’ craigslist was being run improperly as [a] corporate entity.”).

   [45].         The new B Corporation movement is an interesting attempt to address constituency concerns within corporate law.  The idea is that the B Corporation would have a charter that would permit or even require the directors to consider interests, such as the public interest or more specific constituency concerns, and not just the interests of stockholders.  Legal Requirement, Certified B Corp., http://www.bcorporation.net/become/legal (last visited Feb. 27, 2012).  The problem with the B Corporation, though, is that the only stakeholders with a vote would continue to be the stockholders, who by electing a new board who supported a change, could presumably change the charter. See, e.g., Del. Code Ann. tit. 8, § 242(a) (2010) (allowing corporation to amend its certificate of incorporation in any manner which would have been lawful in the first instance); id. § 242(b)(1) (setting forth procedural requirements for amending the certificate of incorporation and requiring, in addition to a stockholder vote, a resolution adopted by the board of directors setting forth the amendment and declaring its advisability).  Moreover, it is not clear to what extent the B Corporation concept is designed to give standing to other constituencies to sue to enforce the directors’ duty to them.  The weight to be given to other constituencies would seem to be a matter entrusted to the judgment of the directors (albeit a calculus not so easily called a “business judgment”) and would be difficult for courts to second guess.  This reality, of course, is reflected in a long-standing concern that by permitting directors to justify their actions by reference to virtually everything, they will not be accountable to any constituency for anything.  Adolf A. Berle, Jr., For Whom Corporate Managers Are Trustees: A Note, 45 Harv. L. Rev. 1365, 1367 (1932).

   [46].         See Berle, supra note 45, at 1367 (“When the fiduciary obligation of the corporate management and ‘control’ to stockholders is weakened or eliminated, the management and ‘control’ become for all practical purposes absolute.”).  Berle was not entirely against a corporate governance regime in which corporate managers could consider the interests of a larger polity outside the stockholders, but was steadfast in arguing that until a sensible system emerges—one that prudently monitors and constrains managers, even while they balance a wider host of interests—we must not deviate lightly from the status quo.  See id. at 1372 (“Unchecked by present legal balances, a social-economic absolutism of corporate administrators, even if benevolent, might be unsafe; and in any case it hardly affords the soundest base on which to construct the economic commonwealth which industrialism seems to require.  Meanwhile, as lawyers, we had best be protecting the interests we know, being no less swift to provide for the new interests as they successively appear.” (emphasis added)).

   [47].         The “practical consequence” of an adherence to the so-called “property model” of the corporation is that the board of directors will, when faced with a conflict among the corporation’s stockholders and other corporate constituencies, almost always favor the stockholders’ interests because “in the intra-corporate republic, only capital has the right to vote!”  Leo E. Strine, Jr., The Social Responsibility of Boards of Directors and Stockholders in Charge of Control Transactions: Is There Any “There” There?, 75 S. Cal. L. Rev. 1169, 1186–87 (2002).

   [48].         Kennerly, supra note 44.  As recounted by Kennerly, Professor Todd Henderson argued that although “the duty to maximize shareholder value may be a useful shorthand for a corporate manager to think about how to act on a day-to-day basis, this is not legally required or enforceable.”  Id. (quoting Todd Henderson, The Shareholder Wealth Maximization Myth, Truth on the Market (July 27, 2010), http://truthonthemarket.com/2010/07/27/the
-shareholder-wealth-maximization-myth/).  Professor Stephen Bainbridge agreed, positing that “[t]he fact that corporate law does not intend to promote corporate social responsibility, but merely allows it to exist behind the shield of the business judgment rule, becomes rather significant in—and is confirmed by—cases where the business judgment rule does not apply.”  Stephen Bainbridge, Al Franken, Shareholder Wealth Maximization, and the Business Judgment Rule, ProfessorBainbridge.com (July 27, 2010), http://www.professorbainbridge.com/professorbainbridgecom/2010/07/shareholder-wealth-maximization-and-the-business-judgment-rule.html#tp.  Finally, Professor Larry Ribstein was also quick to contest Franken’s comment: “The Franken misconception is widely espoused by those in the radical anti-corporate camp. . . . This is why the corporate social responsibility debate is largely empty.  While many corporate social responsibility proponents argue for giving managers more legal freedom to serve society’s needs, managers already have that freedom.”  Larry Ribstein, The Shareholder Maximization Canard, Truth on the Market (July 28, 2010), http://truthonthemarket.com/2010/07/28/the
-shareholder-maximization-canard/.  Kennerly attributed this dismissal of Franken’s views to an underappreciation of what he describes as a legal requirement that corporations, even if allowed to engage in certain philanthropic efforts, undertake to maximize profits.  See Kennerly, supra note 44 (“[T]he duty to maximize profits isn’t, as Henderson said, a ‘canard.’  It’s an enforceable . . . legal doctrine, and it was just enforced against craigslist.”).

   [49].         This sense comes from the conservative response discussed supra in note 48, in which the commentators appear to argue that corporations already enjoy the prerogative to pursue philanthropic ends to the extent that those who would argue, as Al Franken does, that corporations are legally required to maximize profits, underemphasize the wide latitude managers already enjoy under the business judgment rule.

   [50].         To this extent, this position echoes the “just trust the business leaders” approach of Merrick Dodd, in his debate with Adolph Berle.  E. Merrick Dodd, Jr.,For Whom Are Corporate Managers Trustees?, 45 Harv. L. Rev. 1145, 1153 (1932) (“If, however, as much recent writing suggests, we are undergoing a substantial change in our public opinion with regard to the obligations of business to the community, it is natural to expect that this change of opinion will have some effect upon the attitude of those who manage business.  If, therefore, the managers of modern businesses were also its owners, the development of a public opinion to the effect that business has responsibilities to its employees and its customers would, quite apart from any legal compulsion, tend to affect the conduct of the better type of business man.  The principal object of legal compulsion might then be to keep those who failed to catch the new spirit up to the standards which their more enlightened competitors would desire to adopt voluntarily.  Business might then become a profession of public service, not primarily because the law had made it such but because a public opinion shared in by business men themselves had brought about a professional attitude.”).  By contrast, Berle believed that corporate managers needed to be subject to regulation in the public interest.  See, e.g., Berle, supra note 45, at 1368 (“Either you have a system based on individual ownership of property or you do not.  If not—and there are at the moment plenty of reasons why capitalism does not seem ideal—it becomes necessary to present a system (none has been presented) of law or government, or both, by which responsibility for control of national wealth and income is so apportioned and enforced that the community as a whole, or at least the great bulk of it, is properly taken care of.  Otherwise the economic power now mobilized and massed under the corporate form, in the hands of a few thousand directors, and the few hundred individuals holding ‘control,’ is simply handed over, weakly, to the present administrators with a pious wish that something nice will come out of it all.” (internal citations omitted)).

   [51].         See Strine, supra note 47, at 1187 (observing that in the “intra-corporate republic,” only stockholders have the right to vote); see also Franklin Balotti & Jesse A. Finkelstein, Delaware Law Of Corporations & Business Organizations § 13.11 (3d ed. 2009) (“Thus, a plaintiff who is not a stockholder, or who ceases to be a stockholder during the pendency of his [derivative] suit, loses standing to maintain a derivative action.”); 5 William Mead Fletcher et al., Fletcher Cyclopedia of the Law of Corporations § 2025 (perm. ed., rev. vol. 2009) (“Generally, the right to vote is a right that is inherent in and incidental to the ownership of corporate stock . . . .”); cf. J. Travis Laster, Goodbye to the Contemporary Ownership Requirement, 33 Del. J. Corp. L. 673, 681 (2008) (“[B]ecause the selling stockholder no longer has stockholder status, the right to sue [derivatively] with respect to those shares is extinguished by the sale.”).

   [52].         See, e.g., Strine, supra note 47, at 1187 n.35 (“‘I’m gonna take two weeks, gonna have a fine vacation/I’m gonna take my problem to the United Nations/Well I called my congressman and he said, quote/’I’d love to help you, son, but you’re too young to vote.’” (quoting Eddie Cochran, Summertime Blues (Liberty Records 1958))).

   [53].         See, e.g., Marcel Kahan & Edward B. Rock, How I Learned To Stop Worrying and Love the Pill: Adaptive Responses to Takeover Law, 69 U. Chi. L. Rev. 871, 909 (2002) (citing statistics which show takeover activity in the United States has actually increased over time); Robert E. Spatt, The Four Ring Circus–Round Twelve: A Further Updated View of the Mating Dance Among Announced Merger Partners and an Unsolicited Second or Third Bidder, Simpson Thacher & Bartlett LLP 1 (Mar. 24, 2008), http://www.simpsonthacher.com/content/publications/pub698.pdf (cataloging numerous instances of “deal jumping” in which additional bids are made for a target by third parties after the signing of a merger agreement, and noting that such instances have “become a standard execution risk of getting a deal done, and tend[] to reflect the ebb and flow of hostile acquisition activity”).

   [54].         Take Chick-fil-A, for example.  Its founder, Truett Cathy, has closed all of its restaurants on Sundays since he opened the first restaurant in 1946 to enable its employees to attend church.  Melissa Lee, Chick-fil-A Does Business with Religious Conviction, CNBC (Dec. 6, 2007), http://www.cnbc.com/id
/22114420/Chick_Fil_A_Does_Business_With_Religious_Conviction.  Recently, there has been concern about the company’s subsidy of groups that believe that homosexuality is immoral.  Alex Pareene, Koch Brothers, Christian Chicken-Sellers Besieged by Thuggish Liberal Criticism, Salon (Feb. 3, 2011), http://www.salon.com/news/first_amendment/?story=/politics/war_room/2011/02/03/koch_chick_fil_a_liberals.

   [55].         See, e.g., William T. Allen, Our Schizophrenic Conception of the Business Corporation, 14 Cardozo L. Rev. 261, 275 (1992) (“[M]any people would find . . . disturbing [the proposition] that directors know what is better for shareholder[s] than they themselves do. . . . May [directors] act to protect others (and themselves) from claims of shareholder exploitation?”); Stephen M. Bainbridge, In Defense of the Shareholder Wealth Maximization Norm: A Reply to Professor Green, 50 Wash. & Lee L. Rev. 1423, 1445 (1993) (arguing against displacing the shareholder wealth maximization model with a model that allows corporate managers to consider various nonshareholder interests in line with their own ethical preferences because of the “very real risk that some corporate directors and officers will use nonshareholder interests as a cloak for actions taken to advance their own interests”); Milton Friedman, The Social Responsibility of Business is to Increase Its Profits, N.Y. Times Mag., Sept. 13, 1970, at 33 (arguing that the notion that corporations have a “social responsibility” impermissibly displaces the democratic political process with a doctrine that permits minorities to effect extra-political changes that may or may not be the best policies); Mark E. Van Der Weide, Against Fiduciary Duties to Corporate Stakeholders, 21 Del. J. Corp. L. 27, 54–55, 69–70 (1996) (arguing against displacing the shareholder wealth maximization norm with one that allows more leeway to corporate directors, whose ability to redistribute wealth between different social groups is “doubtful,” and that the ability to consider and balance a host of nonstockholder constituencies and personal views of the good would, among other undesired results, create a system where protection from managerial self-interest would “dissolve” because managers could in effect “reallocate the costs of the duty of loyalty among stakeholders groups”); cf. City Capital Assocs. Ltd. P’ship v. Interco Inc., 551 A.2d 787, 796 (Del. Ch. 1988) (“[H]uman nature may incline even one acting in subjective good faith to rationalize as right that which is merely personally beneficial.”).

   [56].         Paramount Commc’ns, Inc. v. Time Inc., 571 A.2d 1140, 1154 (Del. Ch. 1989) (“Delaware law confers the management of the corporate enterprise to the stockholders’ duly elected board representatives.  The fiduciary duty to manage a corporate enterprise includes the selection of a time frame for achievement of corporate goals. . . . Directors are not obliged to abandon a deliberately conceived corporate plan for a short-term shareholder profit unless there is clearly no basis to sustain the corporate strategy.” (internal citations omitted)).

   [57].         See Strine, supra note 26, at 16–17 (citing various sources); Leo E. Strine, Jr., Toward Common Sense and Common Ground? Reflections on the Shared Interests of Managers and Labor in a More Rational System of Corporate Governance, 33 J. Corp. L. 1, 15 (2007) [hereinafter Strine, Toward Common Sense]; Leo E. Strine, Jr., Why Excessive Risk-Taking is Not Unexpected, N.Y. Times Dealbook (Oct. 5, 2009), http://dealbook.nytimes.com
/2009/10/05/dealbook-dialogue-leo-strine/ [hereinafter Strine, Risk-Taking].

   [58].         See, e.g., Strine, Toward Common Sense, supra note 57, at 15; Strine, supra note 26, at 18–19; Strine, Risk-Taking, supra note 57.

   [59].         Cadbury’s signature product, Dairy Milk, is made from 26% cocoa solids, which qualifies it to be called “Milk Chocolate” in the European Union, but not “Chocolate.”  See Products, Cadbury, http://www.cadbury.com.au
/Products/Blocks-of-Chocolate/Dairy-Milk-Block/Dairy-Milk-Ingredients.aspx (last visited Feb. 27, 2012); Council Directive 2000/36, Annex I, 2000 O.J. (L 197) 19, 22 (requiring that “Milk Chocolate” contain at least 25% cocoa solids and “Chocolate” contain at least 35% of the same).  But, the name “Dairy Milk” long pre-dates the European Union’s naming convention, having been used since the bars were introduced in 1905 as a testament to the fact that there has “always [been] a glass and a half of fresh, natural milk in each half pound of chocolate.”  Cadbury Dairy Brands, Kraft Foods, http://www.kraftfoodscompany.com/brands/featured-brands/dairy_milk.aspx (last visited Feb. 27, 2012).

   [60].         See Amy Wilson & James Quinn, Kraft Moves Fast to Silence the Doubters, The Telegraph, Jan. 23, 2010, at 8 (reporting that even before the purchase of Cadbury, Kraft employed about 1500 workers in the United Kingdom).

   [61].         See, e.g., Press Release, Kraft Foods, Kraft Foods Makes Dow Jones Sustainability Index Sixth Year in a Row (Sept. 9, 2010), available athttp://phx.corporate-ir.net/phoenix.zhtml?c=129070&p=irol-newsArticle&ID=1469308&highlight= (noting that Kraft Foods was named to the Dow Jones Sustainability Index for the sixth year in a row, received the food industry’s leading scores in operational eco-efficiency for the third year in a row, and received leading scores in corporate citizenship/philanthropy).

   [62].         See Roger Carr, Chairman, Cadbury, Distinguished Speaker Seminar at Said Business School at University of Oxford (Feb. 9, 2010) [hereinafter Carr Speech], available at http://mediastore1.sbs.ox.ac.uk/visiting_speakers/090210
_1845_NMLT_Roger_Carr.mp3 (noting that some of Cadbury’s “most recent and material manufacturing investments” in the years before the Kraft acquisition had been in Poland with an eye towards replacing U.K. production); Cadbury Factory Closure by Kraft “Despicable”, BBC (Feb. 10, 2010), http://news.bbc.co.uk/2/hi/8507780.stm (“Plans to close the Keynsham plant, at the cost of 400 jobs, were announced by Cadbury in 2007.  Kraft said it had only become aware of how advanced plans for the new Poland factory were after the takeover deal had been agreed.”).

   [63].         A&W Root Beer was founded as an American company in 1919 by founder Roy Allen.  A&W History, A&W Root Beer, http://www.rootbeer.com
/history/ (last visited Feb. 27, 2012).  The name A&W comes from Allen’s business partner, Frank Wright, with whom Allen partnered in 1922.  Id.

   [64].         In 1986, Cadbury Schweppes, plc, purchased Canada Dry from RJR Nabisco, Inc.  Richard Stevenson, Cadbury Will Buy RJR Nabisco Units, N.Y. Times, June 3, 1986, at D4, available at http://www.nytimes.com/1986/06/03
/business/cadbury-will-buy-rjr-nabisco-units.html.

   [65].         Carr Speech, supra note 62 (“In the final analysis, it was the shift in the register that lost the battle for Cadbury—the owners were progressively not long-term stewards of the business but financially motivated investors, judged solely on their own quarterly financial performance.  At the end of the day, there were simply not enough shareholders prepared to take a long term view of Cadbury and prepared to forego short term gain for longer term prosperity. . . . At the end of the day, individuals controlling shares which they had held for only a few days or weeks determined the destiny of a company that had been built over almost 200 years.”).  Others in the U.K. political establishment in place at the time of the Kraft-Cadbury acquisition were also upset by short-termism’s alleged evils.  See Blanaid Clarke,Directors’ Duties during an Offer Period—Lessons from the Cadbury Plc Takeover 5–6 (UCD Working Papers in Law, Criminology & Socio-Legal Studies, Research Paper No. 44/2011), available at http://ssrn.com/abstract=1759953 (quoting Lord Mandelson, Sec’y of State for Bus., Innovation and Skills, Speech at the Trade and Indus. Dinner, Guildhall, the Mansion House, London (Mar. 1, 2010))  (“Lord Mandelson, the Business Secretary at the time of the [Kraft] takeover complained that ‘In the case of Cadbury and Kraft it is hard to ignore the fact that the fate of a company with a long history and many tens of thousands of employees was decided by people who had not owned the company a few weeks earlier, and probably had no intention of owning it a few weeks later.’”); id. at 6 (“Vince Cable[, the current Business Secretary,] subsequently referred to ‘short term investors and financial gamblers [who] value a quick buck above all else.’” (quoting Press Release, Dep’t of Bus., Innovation, and Skills (Sept. 22, 2010))).

   [66].         Our Story, Cadbury, http://www.cadbury.co.uk/cadburyandchocolate
/ourstory/Pages/ourstoryFlash.aspx (last visited Feb. 27, 2012).

   [67].         After Anheuser-Busch was sold to Belgian-based InBev in 2008, Boston Beer Co., the makers of Sam Adams, became the largest, independent, publicly traded brewery in the United States.  Beth Kowitt, Meet the New King of Beers, CNN Money (Aug. 8, 2008), http://money.cnn.com/2008/08/07/magazines
/fortune/beer_koch.fortune/index.htm.

   [68].         In 1984, “Better Beer” Did Not Exist, Samuel Adams, http://www.samueladams.com/discover-craft/history-sam-adams.aspx (last visited Feb. 27, 2012).  Larger American beer companies, like Anheuser-Busch and Miller Brewing Company, are now owned by foreign companies.  Clementine Fletcher, SABMiller Spurning Femsa Means Higher Foster’s Price: Real M&A, Bloomberg (Feb. 24, 2011), http://www.bloomberg.com/news/2011
-02-24/sabmiller-spurning-femsa-means-increased-price-for-foster-s-beer-real-m-a.html (noting that South African Breweries Plc, a South African company, purchased Miller Brewing Company in 2002); William Spain & Steve Goldstein, Anheuser-Busch Accepts $52 Billion InBev Offer, Wall St. J. Marketwatch (July 14, 2008), http://www.marketwatch.com/story/anheuser-busch-accepts-52
-billion.

   [69].         City Code on Takeovers and Mergers r. 21 (Panel on Takeovers & Mergers 2011) [hereinafter Takeover Code], available athttp://www.thetakeoverpanel.org.uk/wp-content/uploads/2008/11/code.pdf.

   [70].         Cf. Panel on Takeovers & Mergers, The European Directive on Takeover Bids 2 (2005) (lamenting the fact that the United Kingdom was unable to secure passage of an EU directive that would have required EU member states to adopt a nonfrustration provision in their takeover codes like Rule 21 of the U.K.’s Takeover Code).

   [71].         See, e.g., Paul Davies, Shareholder Value, Company Law and Securities Markets Law: A British View 22–24 (Oct. 2000) (unpublished manuscript),available at http://ssrn.com/abstract=250324 (observing that the U.S. takeover rules are “clearly less responsive to the conflicts of interest to which target boards are subject in hostile bids and more responsive to the argument that setting business strategy is the preserve of centralised management rather than of the shareholders” and questioning “whether the U.S. rules do more than permit the entrenchment of target management under the guise of protecting target shareholders against bidder opportunism or protecting the interests of non-shareholder groups”); see also John C. Coates, IV, M&A Break Fees: US Litigation vs. UK Regulation 30 (Harvard Law Sch. Public Law & Legal Theory Working Paper No. 09-57, 2009), available at http://ssrn.com/abstract=1475354 (“The UK’s regulatory approach exhibits clear benefits.  It generates little or no litigation, provides clear guidance for market participants, keeps fees low, and increases bid competition. . . . [I]t may make it harder for target fiduciaries to favor bidders for private benefits . . . .”).  But others disagree.  Lipton and Rowe point out that since 1985 and Delaware’s embrace of the poison pill, the volume of merger activity in the United States has increased.  Martin Lipton & Paul K. Rowe, Pills, Polls, and Professors: A Reply to Professor Gilson, 27 Del. J. Corp. L. 1, 20–21 (2002).  They also highlight two J.P. Morgan & Co. studies that show that “premiums paid to firms with pills were forty-two percent higher than the market price of the acquired firm’s shares five days prior to the initial offer, while companies that did not adopt pills received an average premium of only thirty percent[,]” and they reject as lacking empirical support the proposition that hostile takeovers “either increase aggregate returns to shareholders or effectively ‘discipline’ corporate management[.]”  Id.

   [72].         See, e.g., eBay Domestic Holdings, Inc. v. Newmark, 16 A.3d 1, 29 n.86 (Del. Ch. 2010) (citing Revlon Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986)) (noting that Delaware has recognized the propriety of a board’s adoption of a rights plan in order to counter the threat posed by a hostile takeover at a price that the board reasonably concludes is below the corporation’s intrinsic value).

   [73].         John Armour & David A. Skeel, Who Writes the Rules for Hostile Takeovers, and Why?, 96 Geo. L.J. 1727, 1729 (noting that in the U.K., poison pills and other defensive measures that “will have the effect of impeding target shareholders’ ability to decide on the merits of a takeover offer” are strictly forbidden).

   [74].         Cf. Stephen M. Bainbridge, Unocal at 20: Director Primacy in Corporate Takeovers, 31 Del. J. Corp. L. 769, 816 (2006) (rejecting the proposition that directors should be precluded from interfering with a stockholder’s desire to tender his stock because it would allow the bidder, instead of bargaining hard with the target board for a merger, to acquire stock at a “low-ball tender offer” at a premium to market price); Henry G. Manne, Mergers and the Market for Corporate Control, 73 J. Pol. Econ. 110, 118 (1965) (“The shareholders should ordinarily be willing to accept any offer of a tax-free exchange of new marketable shares worth more than their old shares.”); Guhan Subramanian, Bargaining in the Shadow of Takeover Defenses, 113 Yale L.J. 621, 643 (2003) (noting that in the absence of takeover defenses, stockholders will accept a bid at a premium to market price).

   [75].         See, e.g., Clegg Attacks Brown over RBS Funding for Cadbury Bid, BBC (Jan. 20, 2010), http://news.bbc.co.uk/2/hi/8470776.stm (noting that British politicians from the Labour Party and the Liberal Democrat Party expressed anger over Kraft’s acquisition of Cadbury and reporting former Business Secretary Lord Peter Mandelson’s declaration that the British government would mount a “huge opposition” to Kraft’s takeover of Cadbury); Sarah O’Grady, Famous Chocolate Factory Cadbury’s Gets Chop, Express (Jan. 15, 2011), http://www.express.co.uk/posts/view/223231/Famous-chocolate-factory
-Cadbury-s-gets-chop (noting Conservative Party member Jacob Rees-Mogg’s anger at the Kraft takeover and Kraft’s decision, despite its promises, to close a Cadbury production plant in Somerdale).

   [76].         See supra notes 60–61 and accompanying text.

   [77].         See Business, Innovation, and Skills Committee, Mergers, Acquisitions, and Takeovers: the Takeover of Cadbury by Kraft, 2009–10, H.C. 234.

   [78].         Robert Hutton, Cable Slams Finance Industry, Pledges Takeover Probe, Bloomberg Businessweek (Sept. 22, 2010), http://www.globe‑expert.eu
/quixplorer/filestorage/Interfocus/3‑Economie/31‑Europe/31‑SRCNL‑BusinessWeek_com_‑‑_Europe/201009/Cable_to_Continue_Finance_Attack_With_UK_Takeover_Pay_Probe.html (reporting that U.K. Business Secretary Vince Cable, a Liberal Democrat member of the governing coalition, announced an “inquiry into corporate-governance rules, with takeovers and pay both in the spotlight,” and denied that his outspoken stance against the finance industry had created a rift with his Tory colleagues in the coalition government).

   [79].         Roger Carr, the chairman of the Cadbury board of directors and one of the leading figures in the British corporate arena, made three key proposals in the wake of Kraft’s acquisition of Cadbury, all of which were rejected by the U.K. Takeover Panel, whose Code Committee conducted a review of certain provisions of the Takeover Code in late 2010.  First, Carr proposed that the threshold stock ownership that triggers a stockholder’s disclosure obligation under Rule 8.3 of the Takeover Code be reduced from 1% to 0.5%.  Carr Speech, supra note 62.  Rule 8.3(a) currently requires a stockholder owning 1% of the target company’s stock to publicly disclose such holdings following the commencement of the offer period (which begins after a “proposed or possible” offer is made by the hopeful acquirer).  Takeover Code, supra note 69, at r. 8.3(a).  Rule 8.3(b), in turn, requires a stockholder who owns, or comes to own during the offer period, 1% of the target company’s stock to disclose the details of any transaction involving the target company’s stock.  Id. r. 8.3(b).  Carr also proposed what even he called “a more radical move,” which was to raise the acceptance threshold from 50.1%, as currently required under Rule 9.2 of the Code, to 60% of the target corporation’s voting stock voting in favor of the proposed acquisition.  Carr Speech, supra note 62.  Finally, Carr suggested “an even more radical move”: disenfranchising stockholders who acquire their shares during the formal offer period in order to, in Carr’s words, “ensure short term money does not determine long term futures.”  Id.

   [80].         After receiving an “unprecedented number of responses” to its Consultation Paper (an official public request for commentary on suggested proposals), on October 21, 2010, the U.K. Takeover Panel Code Committee published its statement of the proposed changes to the Takeover Code it recommended.  Code Committee, Panel on Takeovers & Mergers, Review of Certain Aspects of the Regulation of Takeover Bids (Oct. 21, 2010) [hereinafter Committee Report], available athttp://www.thetakeoverpanel.org.uk/wp-content/uploads/2009/12/2010-221.pdf.

   [81].         Under the Takeover Code as it is now written, if a potential bidder announces an interest in making a bid to purchase the target company, but does not commit to doing so, the target company may go to the Takeover Panel and request that the Panel impose a deadline on the potential bidder, the so-called “put-up or shut-up” date.  Takeover Code, supra note 69, at r. 2.4(b).  When the “put-up or shut-up” deadline arrives, the potential bidder either has to “put-up” a bid or “shut-up” and is forbidden to make any further bid for the target for a period of six months as a sanction.  Id. r. 2.8.  The amount of time given to the potential acquirer varies case by case, but is typically six to eight weeks.  Committee Report, supra note 80, at 4.  Although the purpose of the put-up or shut-up mechanism was to protect the target from being under “protracted siege,” in practice there were many instances where the target board would decline to ask the Panel to impose a put-up or shut-up deadline when approached by a potential acquirer because of pressure exerted by stockholders eager to allow the potential acquirer to have all the time it desired to formulate an offer.  Id. at 6–7.  Thus, in practice, the put-up or shut-up deadline was much less potent than what was originally contemplated.  Id.  Under the Code Committee’s proposal, however, it will no longer be up to the target company whether or not to approach the Panel and seek the initiation of the put-up or shut-up clock.  Rather, under the Code Committee’s proposal, as soon as the potential offeror is identified—and under the proposal the potential offeror must be made known, even if it wishes to remain anonymous in a friendly deal—the put-up or shut-up clock begins to tick and the potential offeror has 28 days to either make a bid, announce a firm intention to make a bid, or announce its intention not to make a bid and subject itself to the restrictions in Rule 2.8 of the Code.  Id. at 11.

   [82].         Committee Report, supra note 80, at 15.

   [83].         Hob Nobs are a popular “biscuit” or cookie in England manufactured by the U.K. multinational, McVitie’s.

   [84].         See In re Dollar Thrifty S’holder Litig., 14 A.3d 573, 603–04 (Del. Ch. 2010) (“It is no small thing for a strategic acquirer to come public about its desire to buy another industry player.  Although management-side doctrinal junkies will cry that a board’s interest in buying another industry competitor does not mean that the company would be well served by a similar transaction in which it is the seller—i.e., that the company is ‘in play’—the reality is that the announcement of interest in a strategic transaction does signal that some other business strategy rather than the status quo would, in the board’s judgment, be optimal.”).

   [85].         See NACCO Indus. v. Applica Inc., 997 A.2d 1, 19 (Del. Ch. 2009) (“Bidders in particular secure rights under acquisition agreements to protect themselves against being used as a stalking horse and as consideration for making target-specific investments of time and resources in particular acquisitions.”).

   [86].         Others in the United Kingdom agree that the proposed changes are unlikely to have a meaningful effect in changing how takeover bids turn out in the United Kingdom.  See Richard Lambert, Takeover Code Tweaks Won’t Affect Corporate Behaviour, The Guardian (July 28, 2010), http://www.guardian.co.uk
/commentisfree/2010/jul/28/takeover-panel-corporate-behaviour (arguing that “in the end, tweaking the [T]akeover [C]ode will not make any substantial difference to corporate behaviour in the UK,” and that instead, the United Kingdom should focus on regulatory and tax changes that would encourage and make more permanent long-term investments by holders such as pension funds).

   [87].         A majority of American states, but not Delaware, have such statutes.  See William J. Carney & George B. Shepherd, The Mystery of Delaware Law’s Continuing Success, 2009 U. Ill. L. Rev. 1, 35–36 (2009) (noting that thirty states in the United States have adopted “other constituency statutes” that “effectively give directors carte blanche discretion by allowing them to consider other constituencies, which effectively makes them unaccountable to shareholders”).

   [88].         See supra note 53 and accompanying text; see also John C. Coates, IV, Takeover Defenses in the Shadow of the Pill: A Critique of the Scientific Evidence, 79 Tex. L. Rev. 271, 312 (2000) (stating that the “principal finding” of an early study about the poison pill’s effectiveness has held up over time: “firms that have adopted pills before a bid or other acquisition receive higher premiums than firms that have not” (citing Georgeson & Co. Inc., Poison Pill Impact Study (Mar. 31, 1988))); Martin Lipton, Pills, Polls, and Professors Redux, 69 U. Chi. L. Rev. 1037, 1054 (2002) (“The pill and the proxy contest have proved to yield the perfect balance. . . . A board cannot say ‘never,’ but it can say ‘no’ in order to obtain the best deal for its shareholders.”).

   [89].         See, e.g., Marcel Kahan & Edward B. Rock, supra note 53, at 897–98 (noting the high level of M&A activity despite the various protections, including poison pills, that corporate law affords target boards and arguing that shareholders will apply pressure to boards that do not effectively use takeover defenses to enhance shareholder value rather than entrench management); Coates, supra note 71 (showing, on the basis of empirical data from the years 1990–2008, that there is a higher incidence of bids for control of U.S. companies than there is for U.K. companies).

   [90].         Ken Sweet, NYSE, Deutsche Boerse Agree to Merge, CnnMoney (Feb. 15, 2011), http://money.cnn.com/2011/02/15/markets/NYSE_exchange_merger
/index.htm.

   [91].         The Canadian Press, Potash Corp. Making Good on Pledge Made to Saskatchewan in Bitter Takeover Battle, TheRecord.com (Feb. 14, 2011), http://catch21.ca/Wire/News_Wire/Agriculture/article/853033 (noting that Saskatchewan is the world’s leading producer of potash and accounts for approximately 25–30% of world production).

   [92].         See Canpotex Company Profile, Canpotex, http://canpqlx.sasktelwebhosting.com/company_profile.pdf (last visited Feb. 27, 2012) (“[Canpotex’s] sole marketing focus is overseas, and [Canpotex’s] main objectives are to maximize exports and efficiently serve [Canpotex’s] customers to the benefit of [Canpotex’s member producers] and the Province of Saskatchewan.”).

   [93].         E.g., Rob Gillies, Canada Wary of Potential Foreign Takeover of Potash, Law.com (Sept. 21, 2010), http://www.law.com/jsp/law/international
/LawArticleFriendlyIntl.jsp?id=1202472308213 (noting that the premier of Saskatchewan, Brad Wall, expressed doubt as to whether the Saskatchewan people would be better off after a BHP acquisition); James Wood, Say No BHP Takeover of PotashCorp, Saskatchewan Legislature Urges Federal Government, Leader-Post (Oct. 29, 2010), http://www.leaderpost.com/news/takeover
+PotashCorp+Saskatchewan+legislature+urges+federal+government/3742049/story.html (reporting that the Saskatchewan provincial legislature unanimously passed a resolution calling on Ottawa to not approve the BHP bid for Potash Corporation).

   [94].         Investment Canada Act, R.S.C. 1985, c. 28 § 16; Thresholds, Industry Canada, http://www.ic.gc.ca/eic/site/ica-lic.nsf/eng/h_lk00050.html (last modified Dec. 21, 2011).

   [95].         Ian Austen, Canada Blocks BHP’s Purchase of Potash, N.Y. Times, Nov. 4, 2010, at B14; Alexander Deslongchamps & Greg Quinn, BHP May Fail to Save Potash Bid in Politicized Rebuff, Bloomberg (Nov. 5, 2010), http://www.bloomberg.com/news/2010‑11‑05/bhp‑may‑fail‑to‑save‑potash‑bid‑after-canada-s-highly-politicized-rebuff.html.

   [96].         See, e.g., Founding Principles, Conservative Party Of Can., http://www.conservative.ca/party/founding_principles/ (last visited Feb. 27, 2012) (“The Conservative Party will be guided in its constitutional framework and its policy basis by the following principles: . . . A belief that the greatest potential for achieving social and economic objectives is under a global trading regime that is free and fair.”).

   [97].         See, e.g., I. Serdar Dinc & Isil Erel, Economic Nationalism in Mergers & Acquisitions (June 28, 2010) (working paper), available at http://web.mit.edu
/dinc/www/research/assets/Dinc%20and%20Erel%20‑‑%20Nationalism%20in%20Corporate%20Mergers.pdf (observing that “[g]overnment interventions are very effective in preventing foreign bidders from completing the merger and in helping domestic bidders succeed”); id. at 12 (describing a situation that took place in 2006 in Spain in which the Spanish government, in response to a German hostile bid for a Spanish energy company, “laid down onerous requirements for the [German company’s] bid through its influence over the supposedly-independent Spanish energy regulator”); see also Bernard S. Black, The First International Merger Wave (and the Fifth and Last U.S. Wave), 54 U. Miami L. Rev. 799, 808 (2000) (observing that although it is an “exception[] to a more liberal general rule,” national governments still block mergers when doing so would “stop a major company from falling into foreign hands”); Will Germany Control Europe’s Power Switch?, TheTrumpet (Mar. 1, 2006), http://www.thetrumpet.com/?q=2179.975.0.0 (reporting that the Spanish government denounced the German hostile takeover bid of the Spanish energy company Endesa as a “national security threat”).

   [98].         Foreign Acquisitions and Takeovers Act 1975 (Cth) (Austl.), available at http://www.austlii.edu.au/au/legis/cth/consol_act/faata1975355/.

   [99].         Dinny McMahon et al., Chinese Investors Mull Bid for Potash, Wall St. J., Aug. 24, 2010, at B1.

   [100].        I use the OECD label as a rough proxy for the United States, Canada, the EU nations, Australia, New Zealand, Japan, and South Korea.  The United States, Canada, Australia, New Zealand, Japan, and South Korea are all currently members of OECD as are twenty-one of the twenty-seven member states of the European Union (Bulgaria, Cyprus, Latvia, Lithuania, Malta, and Romania are members of the European Union but not OECD).  List of OECD Member Countries, OECD,http://www.oecd.org/document/58/0,2340,en_2649
_201185_1889402_1_1_1_1,00.html (last visited Feb. 27, 2012).

   [101].        For a succinct and provocative discussion of the perils of globalizing markets without globalizing effective and just regulatory institutions, see Dani Rodrik, Hooray for Nation States, The New Republic, Feb. 17, 2011, at 12, 13.

   [102].        Donald McRae, Measuring the Effectiveness of the WTO Dispute Settlement System, (Working Paper, 2008), available at http://ssrn.com/abstract
=1140452 (citing William J. Davey, The WTO Dispute Settlement System: The First Ten Years, 8 J. Int’l Econ. L. 17, 50 (2005)) (hailing the WTO’s success in channeling disputes into its highly regarded dispute resolution mechanism and noting that WTO-authorized sanctions are not compensatory, but instead retaliatory measures that can incentivize countries to comply with WTO Dispute Settlement Body reports); see, e.g., Press Release, European Commission, European Union Welcomes Suspensions of US Sanctions Following Resolution of WTO Banana Dispute (July 2, 2001) (IP/01/930) (announcing that in consideration for the European Union’s agreement to loosen import restrictions on bananas coming from the United States, the United States had agreed to suspend the increased duties it was assessing on certain EU exports that had been authorized by the WTO as a sanction against the EU).

   [103].        Kenneth W. Abbott & Duncan Snidal, Strengthening International Regulation Through Transnational New Governance: Overcoming the Orchestration Deficit, 42 Vand. J. Transnat’l L. 501, 501 (2009) (noting the failure of traditional international law mechanisms such as treaties and intergovernmental organizations to adequately regulate international business and observing that “[n]ongovernmental organizations, business firms, and other actors, singly and in novel combinations, are creating innovative institutions to apply transnational norms to business”); Patrick Macklem, Labour Law Beyond Borders, J. Int’l Econ. L. 605, 605 (2002) (noting that despite the fact that international organizations, such as the International Labour Organization, have articulated core principles which firms ought to comply with as a matter of public international law, “these developments [still] primarily relate to international efforts to hold states accountable to public international labour standards when devising domestic labour market policy” and further that privately adopted “[c]orporate codes of conduct potentially enable transnational implementation of international labour standards in ways that do not rely on traditional modes of international legal authority”); Chantal Thomas, Should the World Trade Organization Incorporate Labor and Environmental Standards?, 61 Wash. & Lee L. Rev. 347, 350–57 (characterizing both international labor law and international environmental law as severely lacking in their enforcement capabilities); Charles Sabel et al., Ratcheting Labor Standards: Regulation for Continuous Improvement in the Global Workplace (John F. Kennedy Sch. of Gov’t Harvard Univ., Faculty Res. Working Paper No. RWP00-010, 2000) (noting that in the absence of an international organization charged with monitoring working conditions many have proposed the creation of such international organization responsible for promulgating universal minimum working standards, but that “the machinery to compel global producers to adopt those standards does not exist and will be quite difficult to build”).

   [104].        See Carl Felsenfeld & Genci Bilali, The Role of the Bank for International Settlements in Shaping the World Financial System, 25 U. Pa. J. Int’l Econ. L. 945, 1017 (2004) (observing that although all major banks engage in international, cross border activity, “each bank has a strong domestic orientation” and is subject to each country’s domestic regulation, which “do not match each other”); R. Michael Gadbaw, Systemic Regulation of Global Trade and Finance: A Tale of Two Systems, 13 J. Int’l Econ. L. 551, 563 (2010) (“The international financial regulatory system became a fragmented, complex, multi-tiered, multi-dimensional, resource-oriented system that accommodates the different domains and regulatory prerogatives of financial officials, central bankers, and bank regulators as well as the private financial community by creating a variety of different organizations . . . .”).

   [105].        E.g., Alvin K. Klevorick, Reflections on the Race to the Bottom, in 1 Fair Trade And Harmonization 459, 459–60 (Jagdish N. Bhagwati & Robert E. Hudec eds., 1996) (“[G]overnments will choose policies—for example, environmental standards, occupational health and safety standards, competition policy—that entail suboptimal requirements, which afford their citizens too little protection—whether from environmental hazards, unsafe or unhealthy working conditions, or cartel behavior.  The idea is that to make its country a hospitable location in which to do business, a government would establish lax standards to be imposed upon those it wishes to draw.”); Chris Brummer, Post-American Securities Regulation, 98 Cal. L. Rev. 327, 333 (2010) (observing that securities regulators and lawmakers compete globally by fashioning regulatory regimes to attract capital).

   [106].        E.g., Chrystia Freeland, The Rise of the New Global Elite, The Atlantic, Jan.–Feb. 2011, at 44, 44 (“Our light-speed, globally connected economy has led to the rise of a new super-elite that consists, to a notable degree, of first- and second-generation wealth.  Its members are hardworking, highly educated, jet-setting meritocrats who feel they are deserving winners of a tough, worldwide economic competition—and many of them, as a result, have an ambivalent attitude toward those of us who didn’t succeed so spectacularly.  Perhaps most noteworthy, they are becoming a transglobal community of peers who have more in common with one another than with their countrymen back home.  Whether they maintain primary residences in New York or Hong Kong, Moscow or Mumbai, today’s super-rich are increasingly a nation unto themselves.” (emphasis added)); Randall S. Thomas & Harwell Wells, Executive Compensation in the Courts: Board Capture, Optimal Contracting, and Officers’ Fiduciary Duties, 95 Minn. L. Rev. 846, 862 (2011) (reporting that in 2007 the average U.S. CEO of a major company earned 275 times more than a typical worker (citing Lawrence Mishel et al., The State of Working America 2008/2009, at 220 (2009))).  Current CEO pay and the gap between that pay and the salary of ordinary workers is much larger today than it has been in the past.  See, e.g., Shanon Lynn, CEO Salaries: What is the Average Salary of a CEO?, Payscale (July 31, 2008), http://blogs.payscale.com/content/2008/07/ceo
-salaries—1.html (reporting that in 1970, the average CEO salary was around $700,000 and that that number represented a salary 25 times the salary of an average production worker).

   [107].        Marcel Kahan & Edward Rock, Embattled CEOs, 88 Tex. L. Rev. 987, 1007, 1031 (2010) (observing that the rise in institutional shareholder activism has led to decreased CEO power and a correspondent tendency, on the part of boards of directors, to be increasingly willing to remove CEOs even in mere anticipation of poor future performance); Murali Jagannathan & A.C. Pritchard, Does Delaware Entrench Management? 23 (Univ. of Mich. Law and Econ., Olin Working Paper No. 08-024, 2011), available at http://papers.ssrn.com/sol3
/papers.cfm?abstract_id=1313274 (arguing that Delaware CEOs experience greater turnover in part because large institutional investors exert pressure on board members to be active monitors of management performance).

   [108].        Cf. Lawrence E. Mitchell, Financialism: A Lecture Delivered at Creighton University School of Law, 43 Creighton L. Rev. 323, 332 (2010) (“Traditional small lending institutions thus became further removed from their clients, and banks sought greater profits in the process of securitization, which brought higher profits than mere lending and allowed banks to evade capital restrictions.  Securitization . . . [also] allowed loan officers to pay less attention to the safety of their loans, since they were promptly to be sold off and removed from banks’ balance sheets (although not entirely from the risk assumed by the banks).”).

   [109].        Milton Friedman, The Social Responsibility of Business is to Increase its Profits, N.Y. Times Mag., Sept. 13, 1970 (quoting Milton Friedman, Capitalism and Freedom 134 (University of Chicago Press 2002) (1962)).  Others in the academy have harbored similar misgivings toward the notion that corporations, nonhumans, can have a “social responsibility.”  See, e.g., Michael Jensen & William Meckling, Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure, in The Economic Nature of the Firm 209, 215–16 (Louis Putterman ed., 1996) (“Viewing the firm as the nexus of a set of contracting relationships among individuals also serves to make it clear that the personalization of the firm implied by asking questions such as ‘what should be the objective function of the firm’, or ‘does the firm have a social responsibility’ is seriously misleading.  The firm is not an individual.  It is a legal fiction which serves as a focus for a complex process in which the conflicting objectives of individuals (some of whom may ‘represent’ other organizations) are brought into equilibrium within a framework of contractual relations.  In this sense the ‘behavior’ of the firm is like the behavior of a market; i.e., the outcome of a complex equilibrium process.  We seldom fall into the trap of characterizing the wheat or stock market as an individual, but we often make this error by thinking about organizations as if they were persons with motivations and intentions.”).

   [110].        See The Federalist No. 51 (James Madison) (“If men were angels, no government would be necessary.  If angels were to govern men, neither external nor internal controls on government would be necessary.  In framing a government which is to be administered by men over men, the great difficulty lies in this: You must first enable the government to control the governed; and in the next place, oblige it to control itself.  A dependence on the people is no doubt the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions.”).

   [111].        Leo E. Strine, Jr., Human Freedom and Two Friedmen: Musings on the Implications of Globalization for the Effective Regulation of Corporate Behaviour, 58 U. Toronto L.J. 241, 272–73 (2008) (arguing that the globalization of capital in recent decades counsels strongly in favor of establishing a globalized regulatory system capable of monitoring responsible corporate behavior that “advances social welfare”).

   [112].        Dani Rodrik, Hooray for Nation States, The New Republic, Feb. 17, 2011, at 12.

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