A new business form known as a benefit corporation is now available in twenty-six states and the District of Columbia. The statues creating the new corporate form require directors to balance shareholders’ pecuniary interests with the needs of the community, the environment, and non-shareholder constituents, such as employees and consumers. These statutes appear to reject the notion that corporations exist to maximize shareholder value. This Note, however, proposes an alternative interpretation: Rather than creating duties towards the community at large, benefit corporations give voice to a class of shareholders who would prefer (at least in part) to fund corporate social initiatives with the very resources that would have been used to increase shareholder value. By serving both as the shareholders’ investment vehicle and preferred philanthropic organization, benefit corporations empower shareholders with greater control over the ends, and to a limited extent the means, of corporate governance. The result is an entity that embraces shareholder primacy more than the traditional corporate form itself.
Note
We the People: The Original Meaning of Popular Sovereignty
The Constitution is based on popular sovereignty. But who are the People? Two hundred and twenty six years after the ratification of the Constitution, the answer to this question is still debated. This Note jumps into the fray, closely examining the Constitution itself and the history surrounding its adoption in order to reverse-engineer a coherent theory of American popular sovereignty as it was understood at the time of ratification and the adoption of the Bill of Rights. Did the state peoples exist as sovereigns before the Constitution? If yes, did the Constitution consolidate them into one unitary national people? If not, is there a national people in addition to the state peoples? In short, there is a national people, but it coexists with the sovereign state peoples. Furthermore, the national people must be interpreted through a lens of state peoples—the People is national in scope and importance, but it is defined in reference to the state peoples. The reservoir of reserved powers—those uses of governmental authority that are not expressly mentioned in the text of the Constitution—defaults to the state level. This balance of peoples means that the American system is one of limited sovereignty. Neither the federal nor the state governments can eliminate or alter the other; they reinforce each other in a structure that presupposes its perpetuity. Dual popular sovereignty is the essence of federalism, and it has broad implications for the fundamental distribution of power between the federal government and the states.
Glass Versus Steagall: The Fight over Federalism and American Banking
In 1933, Congress passed the Glass-Steagall Act as a response to the Great Crash of 1929. Two basic responses to the banking crisis were on the table in the weeks prior to the Act’s passage: unification of the national banking system under federal control or preservation of the state unit banking system augmented by a full federal guarantee of deposits made in every American bank. The conflict between these two alternatives represented the final episode in the nearly 150-year-long struggle between state and federal authorities for control over the banking system.
The competition dated back to 1791 and posed the question of how the values and structure of American republican federalism should be engrafted onto the banking system. This Note begins by arguing that the answer, in 1791, was competitive dual federalism. It frames this federal-versus-state competition and then presents the two broad ideologies that drove the struggle, typified by Senator Carter Glass and Representative Henry Steagall. Next, this Note presents the so-called Vandenberg Amendment—adopted as part of the Glass-Steagall Act—as representative of a long-overlooked model of cooperative federalism for banking.
This Note concludes by suggesting that, contrary to the traditional scholarly account, the Glass-Steagall Act as shaped by the Vandenberg Amendment represented a fundamental change to the existing American banking structure, reversing the choice made in 1791 by rejecting a competitive dual federalism model in favor of a cooperative federalism one.