Issue 3

The Hidden Nature of Executive Retirement Pay

There are two competing theories of why public companies pay executives generous retirement benefits. One is that retirement pay is easier to hide from shareholders than other forms of compensation. The other is that retirement benefits align executives’ interests with those of long-term creditors, since the executives may not receive their payouts if the firm goes bankrupt. The latter view depends on the assumption that retirement benefits put executives in a similar contractual position as the company’s creditors. Yet no previous work has tested that assumption.

This Article provides the first systematic study of the contractual structure of executive retirement payouts. Using retirement pay data for thousands of executives, we show that a large proportion of executives link the value of their payouts to the company’s stock price and receive the bulk of these payouts immediately following their departure—features that contradict the incentive-alignment theory of retirement pay. The evidence also shows that the full amount and structure of retirement pay are undisclosed—findings consistent with the camouflage theory. While the structure of some executives’ payouts can be reconciled with the incentive-alignment theory, current rules do not give investors the information they need to tell the difference between payouts that align incentives and those that camouflage compensation. Lawmakers should require companies to reveal the structure of these payouts, and neither regulators nor commentators should assume that retirement benefits suppress top managers’ appetite for risk.

De Facto Supremacy: Supreme Court Control of State Commercial Law

In 1842, Swift v. Tyson gave federal courts permission to ignore state decisional law in cases that presented commercial questions. Modern writers criticize Swift for attempting to create an exclusive federal forum for commercial cases in order to unify the commercial law. These same writers also criticize Swift for creating less uniformity in the commercial law; Erie R. Co. v. Tompkins, which ended Swift’s ninety-six year reign, relied at least in part on the idea that Swift had promised a uniform commercial law and failed to deliver. Swift has few modern defenders.

This Note shows that Swift may have unified the general commercial law more than modern federal courts theorists suggest. State courts sought to promote uniformity in the commercial law. In deciding their state commercial law cases, they would look not just to their own law, but to the law of other states, the United States, or foreign countries, and choose the position they felt would most likely evolve into a uniform rule. State courts often followed Supreme Court precedent because they felt it would be most likely to become the uniform rule of the country. Through its power to influence the consensus view, the Supreme Court could change not just the commercial law to be applied in federal courts, but the commercial law to be applied in the state courts as well. Contrary to modern federal courts theory, the Supreme Court not only tried, but succeeded in regulating and unifying commercial law in the antebellum United States.

Atrocity, Entitlement, and Personhood

For a generation since Margaret Jane Radin’s classic article

Property and Personhood

, scholars have viewed personhood as a conception of property that affirms autonomy, dignity, and basic civil rights, a progressive alternative to traditional, more economically focused property theories. This Article presents a fundamental challenge to personhood as a progressive approach to property. It shows that personhood claims often derive from violent and other harmful acts committed in the course of acquiring and owning property. This persistent and pervasive connection between personhood and violence—the “atrocity value” in property—upends core assumptions about the American property tradition and complicates the progressive social function of property law. This Article explains why atrocity creates entitlement, drawing from social psychology and accounts of law and violence to show how violence can foster personhood. The Article then explores the deep historical roots of atrocity within the American property tradition, which helped establish an abiding cultural value that encouraged personal identification with property. Finally, the Article surveys how atrocity continues to foster personhood in an array of contexts involving common ownership, exclusion, and use. Ultimately, personhood emerges less as a progressive value in property than as a challenge that the law has had to negotiate. Property law is often successful in promoting progressive and cooperative goals because courts do not attempt to decide cases on the basis of a personhood value in property.

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