Research

The American political economy faces a familiar but newly dangerous threat: systematic corruption. Unlike garden-variety graft, “systematic corruption” refers to the manipulation of economic privileges by politicians to secure political loyalty and thereby entrench their political power. This practice defined much of the early American republic, when state actors routinely handed out corporate charters and other valuable privileges based on partisan allegiances. But today’s version is different—and much more alarming. Instead of being dispersed across many local, state, and federal actors, it is concentrated in the hands of an increasingly powerful, centralized, and unrestrained federal executive. If left unchecked, this fusion of economic and political power threatens to both hobble the American economy and drive the nation toward autocracy.

To chart a way out of this crisis, this Essay recovers the lessons of the legal reforms that earlier generations devised to curb systematic corruption. It focuses on reforms in four key areas during the nineteenth century: corporate chartering, government personnel, government contracts, and public debt. I argue that successful reforms generally shared three key features: constraints on the discretion of those making decisions, insulation of the decision-making process from partisan control, and countervailing power structures. Constraints on discretion helped to stop officials from dispensing economic privileges based on political favoritism, insulation from partisan control served a similar purpose by altering the incentive structure for decision-makers, and countervailing power structures created ways for other actors to counteract ambition with ambition.

Applying these insights to the current political moment, the Essay analyzes how four areas of law—corporate law, antitrust, administrative law, and the law of the political process—might serve as vehicles for addressing systematic corruption today. I argue that existing proposals in these areas sometimes fail to adequately reckon with the systematic corruption that they could facilitate, but carefully designed reforms that carry the right features—constraints on discretion, insulation from partisan control, and countervailing power structures—hold promise. By taking stock of how the law can both facilitate and confront systematic corruption, we can design our legal and political institutions to more effectively address this urgent challenge.

How pervasive is the strategic use of corporate political spending to fight regulatory enforcement? Despite public outcry about the perceived influence of money in politics, previous scholarship suggests that such practices may be uncommon, with periodic scandals being outliers rather than reflections of systematic conduct. This Article provides a corrective to this conventional wisdom. Contrary to the view that these influence-seeking activities are unusual, I offer new empirical evidence that companies regularly use political spending to defend against enforcement.

Proceeding on the theory that companies seeking political influence over enforcement will ramp up their political spending when under investigation, I assemble extensive data on nearly two decades of corporate lobbying expenditures, political action committee contributions, and investigations by the U.S. Securities and Exchange Commission. I begin my analysis by documenting the basic descriptive fact that political spending is relatively common and intense for companies that have run into regulatory trouble, with investigated companies engaging in lobbying and campaign contributions at much higher rates and in much higher amounts than other companies. Shifting to a causal analysis, I also find evidence that companies change their political spending in direct response to investigations, both by increasing their lobbying expenditures and by reallocating campaign contributions toward more strategically valuable candidates, increasingly favoring incumbents, party leaders, oversight committee leaders, and majority members. This evidence of a causal relationship suggests deliberate efforts by companies to influence enforcement, as opposed to mere happenstance. Lastly, I find evidence that CEOs engage in similar strategic behavior.

Supposing that “lobbying against enforcement” is commonplace, should we be concerned? Although such practices could in theory provide valuable information to lawmakers, I propose reasons for skepticism about this informational rationale, drawing on both theory and empirical evidence. I conclude by discussing potential policy interventions for those who wish to restrict the practice.

How do voting laws impact elections? We highlight how laws targeting a specific group of citizens can have weak effects on turnout and vote shares but substantial effects on policy platforms, thereby influencing substantive representation even if there are no observable effects on participation. To parse these effects, we analyze a model of electoral competition with endogenous turnout and targeted voting costs. Each party anticipates the direct effect of raising one side’s voting costs: discouraging targeted citizens from voting. Consequently, both platforms shift toward the untargeted group. These platform adjustments mobilize targeted citizens and demobilize the untargeted, muting the net impact on turnout and vote shares—consistent with empirical evidence for small electoral effects. Policy effects, however, hurt targeted citizens and their aligned party. The targeted group’s size amplifies these effects. Our results address party competition, participation, representation, and normative and empirical evaluations of voting laws.

This article reconciles conflicting views about the political landscape of corporate America with new data on the revealed political preferences of 97,469 corporate directors and executives at 9,005 different U.S. companies. Driven largely by turnover, I find that average observed ideology for directors and executives has shifted meaningfully to the left over time, changing from modestly conservative in 2001 to roughly centrist by 2022. This finding supports a middle-ground position between conventional wisdom casting “big business” as a conservative stronghold and revisionist views holding the opposite. Counterfactual simulations and a difference-in-differences design suggest multifaceted reasons for these changes, and hand-collected data on corporate stances on LGBTQ-related legislation suggest a strong connection between corporate political activity and individual views. Overall, this transformation has profound implications for American politics, as the individuals comprising one of the most powerful interest groups—corporate elites—appear to be fracturing ideologically and to some degree even switching sides.

How does the push and pull between law and politics shape the work of executive branch lawyers charged with providing “neutral” interpretations of the law? To shed light on this longstanding question, this Article undertakes the first large-scale computational analysis of legal interpretation in the executive branch of the United States federal government. Leveraging a novel dataset comprised of the texts of 12,879 pages of opinions issued by the Office of Legal Counsel (OLC), an elite unit of the Department of Justice (DOJ) that provides authoritative legal opinions to top executive branch officials, I use machine learning methods to explore markers of partisanship and ideology in these high-profile executive branch decisions.

Several important findings emerge from this analysis. Broadly, I detect a significant partisan gap in the language used by the OLC. Yet this gap appears to have experienced limited growth in recent years, suggesting some degree of disconnect between the OLC and the broader, increasingly polarized political environment. Focusing on more fine-grained distinctions in the use of specific words and phrases, I find that Democrats and Republicans have differed along a number of salient dimensions, including the types of legal arguments invoked, substantive policy-related language, and institutional issues involving the separation of powers. One of the sharpest distinctions relates to executive power, with Republicans being more likely to adopt language associated with expansive presidential authority. I also find evidence that Republicans have more closely associated executive power with various markers of authoritarianism, such as language related to violence, the armed forces, and nationalism. But neither party appears to have consistently associated executive power with markers of democracy more than the other, complicating this picture.

These findings have important implications for law and politics. To start, the existence of significant partisan differences in the OLC’s language use casts doubt on the prospect that high-ranking executive branch lawyers will act as “neutral expositors” when rendering legal opinions. At the same time, the apparent disconnect from broader trends in polarization arguably offers some sliver of hope for those who would prefer neutrality. Another issue that has attracted both scholarly and popular attention relates to the role of executive branch lawyers in safeguarding against—or alternatively facilitating—democratic backsliding. My results highlight the risks of relying on executive branch lawyers to uphold constitutional guardrails against presidential overreach, especially amidst attempts by certain political actors to increase politicization within the DOJ. Such concerns underscore the potential importance of other institutions in preserving democratic norms.

In this article, I present a partisan theory of agency enforcement and empirically investigate the possibility of partisan bias in the enforcement of the federal securities laws. Leveraging plausibly exogenous shocks to partisan control of the U.S. Securities and Exchange Commission (SEC), I find evidence that a firm’s partisan alignment with the SEC substantially reduces the likelihood of enforcement. For a firm that is ex ante equally likely to be targeted for enforcement or not, my estimates indicate that a typical increase in partisan alignment following a change in party control of the SEC reduces the likelihood of enforcement by over 19%. Partisan alignment also appears to reduce aggregate monetary sanctions, though these estimates are less certain. By contrast, I find little evidence of partisan bias in the initial opening of investigations. These findings suggest there may be meaningful partisan bias in SEC enforcement and have important implications for democratic governance.

This Article argues that the conventional wisdom about corporate raiders and activist hedge funds—raiders break things and activists fix them—is wrong. Because activists have a higher risk of mistargeting—mistakenly shaking things up at firms that only appear to be underperforming—they are much more likely than raiders to destroy value and, ultimately, social wealth.

As corporate outsiders who challenge the incompetence or disloyalty of incumbent management, raiders and activists play similar roles in reducing “agency costs” at target firms. The difference between them comes down to a simple observation about their business models: raiders buy entire companies, while activists take minority stakes. This means that raiders are less likely to mistarget firms underperforming by only a slight margin, and they are less able to shift the costs of their mistakes onto other shareholders. The differences in incentives between raiders and activists only increase after acquiring their stake. Raiders have unrestricted access to nonpublic information after acquiring ownership of a target company, which allows them to look under the hood to determine whether changing the target’s business strategy is truly warranted. Activists, by contrast, have limited information and face structural conflicts of interest that impair their ability to evaluate objectively what’s best for the target company.

This insight has profound implications for corporate law and policy. Delaware and federal law alike have focused on keeping raiders outside the gates, but they ignore the real threat: activists that are already inside. This Article proposes reforms to both state and federal law that would equalize the regulation of raiders and activists.

With increased calls from investors, legislators, and academics for corporations to consider employee, environmental, social, and governance factors (“EESG”) when making decisions, boards and managers are struggling to situate EESG within their existing reporting and organizational structures. Building on an emerging literature connecting EESG with corporate compliance, this Essay argues that EESG is best understood as an extension of the board’s duty to implement and monitor a compliance program under Caremark. If a company decides to do more than the legal minimum, it will simultaneously satisfy legitimate demands for strong EESG programs and promote compliance with the law. Building on that insight, we explain how boards can marry existing corporate compliance programs with budding EESG programs. By integrating compliance and EESG, corporations can meet growing societal demands in an effective and efficient manner that capitalizes on existing structures. Lastly, we address how EESG and corporate compliance responsibilities should be allocated at the board and senior management level. Instead of separating compliance and EESG oversight, this Essay suggests that boards embrace a functional approach, delegating similar compliance and EESG oversight to the same committee and managers. By situating EESG within the board’s existing fiduciary duties, this Essay provides academics, legislators, investors, and managers with a novel framework to conceptualize EESG while also offering a path forward for boards struggling to place the current EESG movement within their existing corporate structure.

According to the conventional wisdom, “one size does not fit all” in corporate governance. Firms are heterogeneous with respect to their governance needs, implying that the optimal corporate governance structure must also vary from firm to firm. This one-size-does-not-fit-all axiom has featured prominently in arguments against numerous corporate law regulatory initiatives, including the SEC’s failed Rule 14a-11—an attempt to impose mandatory, uniform “proxy access” on all public companies—which the D.C. Circuit struck down for inadequate cost–benefit analysis.

This Article presents an alternative theory as to the role of standardization in corporate governance—in which investors prefer standardized terms—and empirical evidence that is consistent with this theory. Under my theory, shareholders prefer standardization because they must incur considerable transaction costs to exercise control rights that contain idiosyncratic terms. Standardization reduces these transaction costs. Consistent with this theory, I find that standardization, not heterogeneity, has pervaded the post–Rule 14a-11 private ordering of proxy access. Shareholder proposals and adopted bylaws alike have converged around standardized terms, and regression analysis suggests that this standardization reflects shareholder preferences. Moreover, employing a regression-discontinuity design, I find evidence indicating that markets have generally reacted favorably to the passage of these standardized proposals. However, robustness checks cast some doubt on the internal validity of this regression-discontinuity design, and thus these results should be taken with a grain of salt.

My theory and empirical findings have important implications for longstanding normative debates in corporate law. With a proper understanding of the role of standardization in corporate governance, the one-size-fits-all critique—though not baseless—takes on a different meaning. Although lawmakers would still do well to retain a presumption in favor of default rules instead of mandatory rules, the need for heterogeneity does not appear to be as great as some have supposed, and lawmakers may benefit from a greater focus on encouraging optimal standardization instead of optimal heterogeneity. These insights bear both on optimal regulatory design in the abstract and on the wisdom of currently pending federal legislation in a more concrete way.

In its landmark Cracker Barrel no-action letter, the SEC staff announced a bright-line rule permitting exclusion of any shareholder proposal pertaining to a company’s management of its general workforce, even if focused on a significant social policy issue such as employment discrimination, under the “ordinary business operations” exclusion. The SEC reversed Cracker Barrel in 1998, returning to a case-specific approach to determining whether proposals fall under the exclusion. This Note examines 250 no-action letters from the 2015 proxy season and finds evidence indicating that the staff has, contrary to official SEC policy, returned to a rule-like approach to the ordinary business operations exclusion. Normatively, this de facto rulemaking by the staff is problematic when evaluated according to the rules’ democratic legitimacy, transparency, or inclusivity. To address these concerns, this Note proposes two solutions. First, the SEC should recast the ordinary business operations exclusion as a “catalog” and create mechanisms to ensure that there is adequate public participation in updates to that catalog. Second, the SEC should replace the social policy exception’s “significance” requirement with a numerical cap on proposals and a standard rooted in corporations’ purpose clauses, which would allow for some private ordering. These changes would enhance the exclusion’s democratic legitimacy, shine light on the opaque process through which the staff determines excludability, and remove the staff from its uneasy role as social policy censor.