The power of shareholders to replace the board is a central element in the accepted theory of the modern public corporation with dispersed ownership. This power, however, is largely a myth. I document in this paper that the incidence of electoral challenges during the 1996–2005 decade was very low. After presenting this evidence, the paper analyzes why electoral challenges to directors are so rare, and then makes the case for arrangements that would provide shareholders with a viable power to remove directors. Under the proposed default arrangements, companies will have, at least every two years, elections with shareholder access to the corporate ballot, reimbursement of campaign expenses for candidates who receive a sufficiently significant number of votes (for example, one-third of the votes cast), and the opportunity to replace all the directors; companies will also have secret ballot and majority voting in all directors elections. Furthermore, opting out of default election arrangements through shareholder-approved bylaws should be facilitated, but boards should be constrained from adopting without shareholder approval bylaws that make director removal more difficult. Finally, I examine a wide range of possible objections to the proposed reform of corporate elections, and I conclude that they do not undermine the case for such a reform.
In “International Human Rights in American Courts,” Judge William Fletcher analyzes the implications of the Supreme Court’s recent opinion in Sosa v. Avarez-Machain. The plaintiff in Sosa brought suit for tortious violation of customary international law under 28 U.S.C. § 1350, the Alien Tort Statute (“ATS”). The Court held that the federal courts can enforce norms of customary international law in suits brought under the ATS only if the norms are established with sufficient clarity to satisfy the restrictive criteria set forth in the Court’s opinion.
According to Judge Fletcher, the Court answered two questions in Sosa. First, there is a limited federal common law of international human rights based on customary international law. Second, that federal common law is both jurisdiction-conferring in the sense of “arising under” federal law, and supreme in the sense of the Supremacy Clause. Professors Jack Goldsmith and Curtis Bradley, among others, had raised questions about the legitimacy of the line of human rights cases based on customary international law that began with the Second Circuit’s 1980 decision in Filartiga v. Pena-Irala. The Court’s response was that, within the scope of the federal common law permitted by Sosa, Filartiga remains good law.
However, the Supreme Court in Sosa did not answer questions about the possible preemptive scope of the federal common law on international human rights. Judge Fletcher explores three examples — (1) a wholly international case in which an alien sues another alien for a violation of international human rights abroad; (2) a partially international case in which an alien sues an American corporation for such a violation abroad; and (3) a wholly domestic case in which a defendant in a American court contends that a State’s death penalty violates international human rights. Judge Fletcher points out that these preemption questions are going to arise in both state and federal courts. He further points out that the federal courts may, in some cases not covered by federal common law, be required by Erie Railroad v. Tompkins to follow state courts’ decisions on questions of international human rights.
This Essay advances a new understanding of the controversial doctrine of strict criminal liability. While the conventional view holds that strict criminal liability aims at alleviating the administrative burden of proving defendants’ mental state, this Essay argues that this doctrine also can induce genuinely ignorant offenders to acquire information. The predominant mens rea standard assures ignorant offenders that they can engage in the prohibited conduct without being penalized. This drawback, however, is mitigated when offenders find that the market imposes too high a cost on ignorance. If ignorance is sufficiently costly, offenders will take steps to become (or remain) informed notwithstanding the adverse incentive created by the mens rea standard. The Essay thus predicts that, other things being equal, strict liability is likely to be especially useful in those elements of a criminal offense for which ignorance is virtually costless. The Essay demonstrates the illuminating power of this explanation by analyzing the application of strict liability to liquor sale to minors, statutory rape, child pornography, regulatory offenses, criminal liability of corporate officers, and mistakes of law and fact. The Essay concludes by exploring whether alternative doctrines may induce offenders to acquire information without producing the harsh and unfair consequences often attributed to strict liability.