Toward a global shareholder society

University of Pennsylvania Journal of International Economic Law

Volumn 30, Issue 1, 2008, Pages 101-181

  Hockett, Robert ^a  

^a MIT Sloan School of Management

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EID: 58149314325     PISSN: 10867872     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (279)

1. See Morning Edition: Offshoring Doubles, But Political Focus on Retraining Workers, (NPR radio broadcast Mar. 3, 2008) (discussing the phenomenon of increased offshoring of jobs coupled with political reactions to the increase), http://www.npr.org/templates/story/story.php?storyId= 87851332.
2. Id.
3. See, e.g., LOU DOBBS, WAR ON THE MIDDLE CLASS: HOW THE GOVERNMENT, BIG BUSINESS, AND SPECIAL INTEREST GROUPS ARE WAGING WAR ON THE AMERICAN DREAM AND HOW TO FIGHT BACK (2006) (examining the negative impact of special interest groups and other political organizations on the American middle class);
4. LOU DOBBS, EXPORTING AMERICA: WHY CORPORATE GREED IS SHIPPING AMERICAN JOBS OVERSEAS (2004) (decrying the impact of free trade on the American middle class). May God forgive me for citing these but they do appear to be representative of a distinct and increasingly pronounced strain of the present day discourse on globalization.
5. See generally Hockett, Global Macro-Hedging, supra headnote (suggesting solutions to systemic inequities in the new global economy).
6. Id.
7. Id.
8. One even encounters discussion, not only of deindustrialization, but of backward movement along such venerable metrics of basic human development as health, education, and even literacy in the United States, for example.
9. See, e.g., id. Hence, one presumes, the popularity of such phrases as "trading places," used of the developed and developing economies.
10. See generally Hockett, Three Pillars, supra headnote (discussing how the IMF, the World Bank, and the GATT/WTO can, and should, promote equal treatment and market completion).
11. Id.
12. See, e.g., Hockett, Limits, supra headnote (reviewing and critiquing a treatise on international law that details the prominence of state actors in a global society). For more of the aforementioned "reflection, "
13. see Hockett, Three Pillars, supra headnote; Hockett, Gestalt-Switch, supra headnote; Hockett, Global Macro-Hedging, supra headnote.
14. See also Robert Hockett, The Deep Grammar of Distribution: A Meta-Theory of justice, 26 Cardozo L. Rev. 1179 (2005) [hereinafter Hockett, The Deep Grammar of Distribution] (examining common schemes within numerous distribution theories);
15. Robert Hockett, Taking Distribution Seriously (Cornell Legal Stud. Res., Paper No. 08-004, 2008), available at http://papers.ssrn.com/sol3/ papers.cfm?abstract-id=1108217 [hereinafter Hockett, Taking Distribution Seriously];
16. Robert Hockett, The Impossibility of a Prescriptive Paretian (Cornell Legal Stud. Res., Paper No. 06-027, 2006), available at http://papers.ssrn.com/sol3/papers.cmf?abstract-id=930460;
17. Robert Hockett, Why Paretians Can't Prescribe: Preferences, Principles and Imperatives in Law and Policy (Cornell Legal Stud. Res., Paper No. 08-028, 2008), available at http://papers.ssrn.com/sol3/papers.cfm ?abstract-id=1266270.
18. See Hockett, Three Pillars, supra headnote (describing how the Bretton Woods institutions, particularly the World Bank, have fallen short of their potential to bring about a just world economic order); Hockett, Global Macro-Hedging, supra headnote, at 114 (setting forth proposals for "more just and efficient systemic income-risk-sharing" among employers and employees).
19. So would the growing chorus of anti-WTO protests worldwide, and also the protectionist backlash of the 1930s-forebear to the postwar Bretton Woods institutions themselves.
20. See Hockett, Gestalt-Switch, supra headnote (restating many criticisms of the Bretton Woods institutions and the failure of the global market to promote global economic justice).
21. Id. (discussing the question of agency on the part of beneficiaries and victims of global markets, and proposing a role for international financial institutions to undertake in pursuit of distributive justice).
22. "Endowment dispositions" refers to certain behavioral- psychological tendencies that behavioral economists and legal scholars have in recent years documented extensively. I will elaborate, as well as endeavor to substantiate the claims I have just made.
23. See infra Sections 3 and 4 (elaborating on "endowment dispositions" and the means by which distribution goals ought to be accomplished).
24. See also Hockett, Whose Ownership?, supra headnote (exploring the theoretical structure of ownership in an equal-opportunity society).
25. "Endowment psychology" here refers to such familiar "behaviouralist" heuristics as loss-aversion-interpretive dispositions with which the proposals herein make accommodation. See infra Section 3.
26. See, e.g., AMIYA KUMAR BAGCHI, PERILOUS PASSAGE: MANKIND AND THE GLOBAL ASCENDANCY OF CAPITAL (2005) (challenging a Eurocentric view of economic history that minimizes the interests and activities of non-European players and portrays globalization as necessarily a zero-sum game).
27. The proposal can accordingly be taken for conditional in nature: if the premises drawn out in Section 2 are correct-which may be plausible but there is no space here to do more than partly corroborate this assertion-then the proposal would seem attractive.
28. Supra note 11, and accompanying text.
29. By "patronage" I mean simply a sustained mode of relation between persons and firms.
30. See generallyHENRY HANSMANN, THE OWNERSHIP OF ENTERPRISE (1996) (enumerating different patterns of ownership of firms favored within different industries and nations); infra Section 4. In the case of ESOPs, labor is the salient form of patronage. But see infra Section 4 (arguing that there are other forms of patronage, including faultlessly lost employment on the part of those lacking in "retooling" opportunity).
31. The principal IFIs we will consider are the International Monetary Fund ("Fund," IMF) and the International Bank for Reconstruction and Envelopment ("World Bank," "Bank," IBRD). But much that Section 6 sets forth carries over to the missions of other IFIs, including the International Finance Corporation (IFC), the African Development Bank (ADB), the Asian Development Bank (ABD), the Inter-American Development Bank (IADB), and the European Bank for Reconstruction and Development (EBRD). Like remarks apply to the Group of Eight (G8), the Organization for Economic Cooperation and Development (OECD), and other constituent institutions of the so-called "New International Financial Architecture" (NIFA). On the latter, as well as the mentioned institutions, see Hockett, Macro to Micro, supra headnote; infra Section 6.
32. See Hockett, Global Macro-Hedging, supra headnote (exploring the intended role of the Bretton Woods IFIs).
33. Infra Section 6 (arguing that the International Trade Organization's envisioned role may be carried out by a reinvented IMF and World Bank).
34. See also Hockett, Macro to Micro, supra headnote (defending the IMF's departure from its stated mandate in dealing with Asian financial crises in the late 1990s).
35. This is what I call them in the sources cited supra headnote. Some call them "luck," some "advantage," some "resources."
36. See, e.g., Hockett, Three Pillars, supra headnote, at 111. Another name for them that has been proposed elsewhere is "material opportunity." All of these variants work, but they bear the weakness of suggesting that the user of the term is unaware that some resources, advantages, etc. are themselves the product of responsible action on the part of the beneficiary, in which case they are ethically endogenous and not the sort of thing that concerns us here. See PETER DRUCKER, THE PENSION FUND REVOLUTION (1996).
37. Hillel Steiner has an evocative name for it, calling it the "global fund." See HILLEL STEINER, AN ESSAY ON RIGHTS 270 (1994).
38. A remarkably illurninating discussion of the global advantages conferred by birth into a language community is found in DAVID SINGH GREWAL, NETWORK POWER AND GLOBAL ARCHITECTURE: THE SOCIAL DYNAMICS OF GLOBALIZATION (forthcoming from Yale University Press, 2008).
39. The claim here is not that such stuff is the sole "input" to well-faring, or "welfare," but simply that these items are among such inputs-that physical items are one of the foundational aspects of human well-being or welfare.
40. For more on this, see Hockett, Taking Distribution Seriously, supra note 10.
41. "The Creator has bestowed this manna upon all of us," one might say in a more venerable idiom.
42. See Hockett, The Deep Grammar of Distribution, supra note 10 and Hockett, Three Pillars, supra headnote, for more on the near-universality of these ethical postulates.
43. See generally Hockett, Limits, supra headnote (reviewing a treatise on international law that discussed state actors and their strategies, and relative differences in the distribution of assets among individuals).
44. Id.
45. It could be argued that the U.N. Universal Declaration of Human Rights, and, more strongly, the International Covenant on Economic, Social, and Cultural Rights enshrine such norms. But thus far neither the Declaration nor the Covenant appear to have been widely read -or at any rate vindicated by state action-in so fulsome a manner. See id. It is to be hoped-and advocated-that matters on this score will change.
46. For some purposes, three would suffice; for others, five or more might be preferable. This will be developed later in the Article.
47. A presently salient group of actual "Fours" (or even "Fives") might be those confined to the refugee camps of Darfur, for example.
48. Insofar as handicaps are genetic and undeserved, it seems sensible to think of them as resource-deficits in this sense.
49. See Hockett, Taking Distribution Seriously, supra note 10 (analyzing the legal and policy aspects of distribution of social welfare).
50. The "Twos" could drop out of the account without loss to the principal thrust of the argument, for reasons that will shortly become clear.
51. For extensive empirical corroboration of this point, and graphic illustration of how comparatively few (in the neighborhood of five percent of) people hold so comparatively large percentage (over ninety) of corporate securities in the United States for example, see Hockett, Of ESOPs, supra headnote, at 897-912. Such figures, released annually by the U.S. Federal Reserve, among other compilers, might temper some of the more extravagant claims one sometimes hears in the States, to the effect that the United States is already possessed of an "equity culture." This Article, along with its predecessors cited above in the headnote, can accordingly be viewed in part as prompted by a hope to bring the United States, and the world economy more generally, into closer approximation to that ideal which some seem to think is already realized.
52. There is substantial statistical evidence to the effect that the overwhelmingly greater part of corporate securities-both equity and debt instruments-held by Americans is inherited. See infra, Section 4; Hockett, Of ESOPs?, supra headnote, at 873-90 (discussing the concentrated nature of securities ownership in the United States).
53. Again, the point here is not that there are not many people who have lacked in some of these advantages and nevertheless made successes of their lives. The point is simply that there are many who have built such successes on the basis of good background conditions but little if any inherited business capital.
54. The assumption here would not rule out non-negligible stock-holding and bond-holding-direct, indirect, or beneficial-by "Twos" and "Threes." The assumption simply argues that these groups′ ownership and creditor stakes are very much less than are those of the "Ones." For empirical corroboration of this suspicion, as well as specification of what "direct," "indirect," and "beneficial" firm-owning are, please see infra, Section 4; Hockett, Of ESOPs?, supra headnote, at 873-85.
55. See Hockett, Of ESOPs?, supra headnote, at 873-85 (comparing the value of stocks held by "Ones" to the relatively low value of stocks held by "Twos" and "Threes");
56. see also Hockett, Jeffersonian Republics, supra headnote (promoting the ideals of an "ownership society").
57. See Hockett, Three Pillars, supra headnote (detailing how the IMF and the Bank worked towards equitable distribution in the aftermath of the Argentine and Asian financial crises);
58. See also Hockett, Global Macro-Hedging, supra headnote (arguing that despite global market liberalization there is a disparity in profit distribution).
59. It would happen, of course, in any of several familiar ways: firms in the developed world would outsource or threaten to outsource to less regulated jurisdictions. Firms in the developing and less regulated world, for their parts, would export to the once-regulated developed world, and would do so cheaply by dint of the costs saved via non-regulation. And the latter course strengthens the force of the former course.
60. See id.
61. I am ignoring longer-term "rising tides lift all boats" type claims for the moment.
62. See generally sources cited in supra headnote.
63. See, e.g., Hockett, Global Macro-Hedging, supra headnote (discussing the effects of global market liberalization on the global economic order).
64. It might also be argued, of course, that they ignore the lowering of prices, which benefits "everybody." This argument is weak precisely because "everyone" benefits in this sense. The benefit here is quite thinly spread, whereas the harms that these people are concerned about are quite thickly concentrated-on precisely the wrong people. He who loses his income and cannot retool is not consoled by the fact that his poisonous toothpaste or his child's toxic toy now will cost pennies less.
65. One might seek to escape the prescriptive indeterminacy by falling back upon a maximizing rule, of course, as countenanced above in the Introduction; but then one will have relinquished the effort to conform one's prescriptions to what is distributively just.
66. Trivalent because, for the purposes of assessing the transfers, "Twos" and "Threes" can be lumped together as those whose holding of the global endowment of ethically exogenous "stuff" is just about right. It is the "Ones" and the "Fours" who are the real "outliers"-those with much more and much less, respectively, of their pro rata entitlements. The "two-valued formulae," then, are: "Ones" as compared to "Twos-and-Threes" in the case of those who unequivocally decry globalization, "Twos-and-Threes" as compared to "Fours" in the case of those who univocally defend it.
67. The fuller significance of institutional design as means of more adequately addressing normative-theoretical problems is discussed fully in Hockett, Taking Distribution Seriously, supra note 10. This role of the practical in solving even theoretical problems should not be surprising when it is normative theory that is under consideration. For normative theory is always at bottom about action. Normative theory is a species of what since Aristotle's day we have called "practical reason."
68. This Article treats the WTO as the embodiment, more or less, of what the Bretton Woods founders envisaged for the then-planned ITO, which had to wait 50 years for its effective implementation.
69. See generally Hockett, Macro to Micro to "Mission Creep," supra headnote (discussing international schema created in response to global financial crises).
70. Employee Retirement Income Security Act of 1974, codified at 29 U.S.C. § 1001 (2000) et seq. [hereinafter cited by ERISA section number].
71. See also DRUCKER, supra note 23; JOHN H. LANGBEIN & BRUCE A. WOLK, PENSION AND EMPLOYEE BENEFIT LAW (The Found. Press, Inc. 1990) (discussing a variety of employment law topics, including ERISA). Here the discussion ignores such proposals as that to diminish or even eliminate capital gains taxation. Such proposals appear to be aimed at-and doubtless would have the effect of-more rewarding of those who already own than fostering wider ownership.
72. Congressional action culminating in the passage of ERISA was precipitated by the folding of the Studebaker corporation, which, bankruptcy proceedings subsequently discovered, had grossly underfunded, and indeed "raided," its employee pension fund, leaving the suddenly unemployed pensioners doubly bereft.
73. See Langbein & Wolk, supra note 52, at 68-84. Those familiar with recent bankruptcies, particularly in the airline industry, might be tempted to say plus ça change.
74. See Hockett, Of ESOPs, supra headnote, at 914-23 (arguing that ESOPs can be part of the method of distributing the benefits of globalization to all citizens).
75. See JOSEPH RAPHAEL BLASI, EMPLOYEE OWNERSHIP: REVOLUTION OR RIPOFF? 64-84 (1988) (briefly cataloguing ESOP types).
76. Id.
77. Id. at 68-78.
78. The principal non-credit-employing ESOPs-so-called "non-leveraged ESOPs," "tax-credit ESOPs" ("TRASOPs"), and "payroll ESOPs" ("PAYSOPs")-are briefly elaborated id. at 64-84.
79. The transactions which follow are related, in slightly differing order and somewhat less detail, in EMPLOYEE BENEFIT RESEARCH INSTITUTE, FUNDAMENTALS OF EMPLOYEE BENEFIT PROGRAMS 121-22 (3d ed. 1987).
80. ERISA § 407(d)(6). Defined contribution, or "DC" plans, are to be distinguished from so-called "defined benefit" or "DB" plans. The former prescribe a schedule of payments made into an account for the benefit of the employee, who in turn bears both "upside" gains and "downside" losses realized by her investment portfolio over time. DB plans, by contrast, prescribe payments made out to the employee upon her retirement, and the employing firm-or the insurance company from whom the firm purchases annuities on behalf of its employee beneficiaries-in effect bears the aforementioned upside gains and downside losses realized by the fund out of which payments are made.
81. ERISA § 403(a). The idea, of course, is both to insulate funds earmarked for employees from the other financial operations of the firm, and to afford the employee beneficiaries the benefit of fiduciary obligations owed to them by the plan's trustee. It is regrettably not clear, however, whether the trust protections offered employees by pension trusts are as fulsome as those offered to beneficiaries of other trusts.
82. See, e.g., In re WorldCom, Inc. ERISA Litigation, 263 F. Supp. 2d 745 (S.D.N.Y. 2003) (finding that ERISA defines "fiduciaries," "fiduciary functions," and "fiduciary duties" more narrowly than does common law trust doctrine).
83. See also infra note 84 for cases regarding the fiduciary duty of ESOP trustees under ERISA.
84. ERISA § 403(a)(1). A partial exception, which need not here detain us, is found at ERISA § 403(a)(2).
85. ERISA § 404(a)(1).
86. Only "partly" for reasons that will be made plain over the next several sentences.
87. Because the shares are purchased at fair market value, the purchase is sometimes misleadingly described by ESOP-proponents as an equity injection. In actuality, it is publicly subsidized debt financing, accompanied by a stock giveaway.
88. So the sponsoring/employing firm is, in effect, both borrowing and paying back on behalf of employees for the purchase of its own stock-it gives out partial ownership of itself as an employee benefit. This dilutes the stake of previous owners-more on this presently.
89. Typically the shares become transferable or redeemable only upon retirement or exit of the firm, and typically the firm buys them back. There are voting restrictions (even to the vanishing point) as well, as will be shown presently. That is all significant when it comes to the question of just what"owning" should mean here, but it is not the subject of this Article. For more on that question, see Hockett, Whose Ownership?, supra headnote.
90. With one possible-though minimal-caveat to be noted below, the employee/beneficiaries neither pay nor pledge anything. The firm, in effect, does it all (or nearly all, as the government's role will show).
91. Hansmann, supra note 19, at 105.
92. Id.
93. See, e.g., id. at 105 (describing the proliferation of ESOPs since the 1970s); Corey Rosen, Employee Ownership: Performance, Prospects, and Promise, in UNDERSTANDING EMPLOYEE OWNERSHIP 10-11,20 (Corey Rosen & Karen M. Young eds., 1991) (listing firms that participate in ESOPs); Gianna Durson, The Structure and Implementation of ESOPs in Public Companies, in The Expanding Role of ESOPs in Public Companies 11, 23-27 (Karen M. Young ed., 1990) (listing additional firms that participate in ESOPs);
94. DAVID P. ELLERMAN, THE DEMOCRATIC WORKER-OWNED FIRM 110 (1990) (noting the large numbers of ESOPs in the United States). ESOP-like structures have made significant headway in non-US jurisdictions as well. See Rosen, supra note 71, at 18-19 (discussing interest in, or attempts to implement, ESOPs in firms in other countries). A helpful catalogue of the thousand largest firms with more than four percent employee ownership is found in JOSEPH RAPHAEL BLASI & DOUGLAS LYNN KRUSE, THE NEW OWNERS 257-301 (1991).
95. The catalogue does not disaggregate employee ownership by ESOP, profit-sharing, 401 (k), and option plans, but is nonetheless suggestive in light both of (a) ESOPs′ accounting for slightly less than half of employee-owned equity, and (b) the surprising number of firms on the list that are twenty or more percent employee-owned.
96. See NATIONAL CENTER FOR EMPLOYEE OWNERSHIP, STATISTICAL PROFILE OF EMPLOYEE OWNERSHIP (1997) (estimating that nine percent of equity is employee-owned, with profit-sharing, 401 (k), and stock option plans accounting for the non-ESOP balance). It should be noted that about four percent of ESOPs are estimated to be terminated each year. Id.
97. Id.
98. Rosen, supra note 71, at 10-11,20; Durson, supra note 71, at 23-27.
99. Kelso routinely announced such putative discoveries as "Say′s Law" is being "violated" in modern capitalist economies, that contemporary economists remain wedded to the labor theory of value, and that there are "two factors" that enter into production-capital and labor-with the first of those accounting for an ever-growing share of value-added.
100. See generally Hockett, Hamiltonian Means, supra headnote, at 124-42 (providing background on Kelso's ideas and writings). Economists do not appear to have found these discoveries compelling. It should be noted, however, that Kelso's motives, energy, and inventiveness, as distinguished from his sallies into theory, were nothing if not worthy of praise. And he was a lawyer and investment banker, not an academic theorist, typically pitching his advocacy to legislators and the general public rather than fellow theorists. See generally Speiser, infra note 79.
101. HANSMANN, supra note 19, at 105.
102. ELLERMAN, supra note 71, at 120 (emphasis omitted).
103. LOUIS O. KELSO & PATRICIA HETTER KELSO, DEMOCRACY AND ECONOMIC POWER 62 (1986).
104. STUART SPEISER, A PIECE OF THE ACTION 429 (1985) (emphasis added). See supra note 76 for more on this "pays for itself" locution.
105. John Case, A Company of Business People, INC., (Apr. 1993), http://www.inc.com/magazine/19930401/3492.html (discussing the growing interest in getting employees more involved in managing the business they work for).
106. See BLASI, supra note 55, at 25-27, 221-38 for plenary-and not unsympathetic -discussion of what evidence there is.
107. I.R.C. § 404(a)(3)(A)(i)(I). ESOPs enjoy other tax advantages enjoyed by employee pensions more generally, most of which are noted below, but this Article's focus will nevertheless be primarily upon what is unique to ESOPs.
108. ERISA § 404(a)(1)(C).
109. ERISA § 404(a)(2). At least that is ordinarily the case. Courts have in some instances agreed with the Department of Labor that there can be circumstances in which the prudent investor standard would require the ESOP trustee to refrain from purchasing employer stock.
110. See, e.g., Herman v. NationsBank Trust Co., 126 F.3d 1354 (11th Cir. 1997) (finding that ESOP trustee had duty to act prudently with shares, even if that action went against a provision of the ESOP); Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995) (holding that, because ERISA and ESOPs sometimes have competing goals, the actions of fiduciaries of ESOPs regarding shares will be subject to an abuse of discretion standard); Kuper v. Iovenko, 66 F.3d 1447 (6th Cir. 1995) (holding that courts will presume that ESOP fiduciaries′ decisions to remain invested in employer stock is reasonable, although it may be challenged). It should also be pointed out that any other assets in which the ESOP might invest remain subject to the general diversification requirement, ERISA § 404(a)(1).
111. I.R.C. § 61(a)(4) (including "interest" in the general definition of gross income).
112. I.R.C. § 133(a). But see Small Business Job Protection Act of 1996, Pub. L. No. 104-188, §§ 1602(a), 1602(c), I.R.C. § 164 (repealing the interest exclusion previously allowed under I.R.C. § 133(a) for all securities acquisition loans made after August 20, 1996, except for loans made pursuant to a binding written contract which was in effect before June 10,1996).
113. This is true based on the revenue code's definition of corporate taxable "income." See I.R.C. § 311(a) (providing that a corporation may not deduct dividends from its gross income).
114. I.R.C. § 404(k).
115. I.R.C. § 501(a), (c), (d). This advantage is not unique to ESOPs as distinguished from other ERISA plans.
116. I.R.C. § 1042(b)(l)-(2). Among the conditions are provisions stipulating that proceeds of the sale must be reinvested within one year in a domestic corporation, and that after the sale the ESOP will own at least thirty percent of the sponsoring firm's shares.
117. I.R.C. § 2057 (repealed 1989).
118. I.R.C. § 2210 (repealed 1989).
119. I.R.C. § 4975(c)(1)(A).
120. 26 U.S.C. § 408(e).
121. 26 U.S.C. § 408(b)(3), I.R.C. § 4975(d)(3).
122. Including many newly owning employees, were they able to vote their shares (discussed infra).
123. I say "nominally" independent here partly owing to several ESOP governance features to be noted presently, and partly owing to the role of the sponsoring firm's board in selecting and directing, indeed even functioning as, the ESOP trustee, see infra note 104.
124. See Shamrock Holdings, Inc. v. Polaroid Corp., 559 A.2d 278, 290-91 (Del. Ch. 1989) (denying an injunction to halt the issuance of stock because the company's action was a good-faith, reasonable defense to a takeover). But see NCR Corp. v. Am. Tel. & Tel. Co., 761 F. Supp. 475, 501-03 (S.D. Ohio 1991) (holding that the plan was unenforceable because the primary purpose of the ESOP was to thwart a takeover, not to provide for employees' retirement).
125. A few details are in order here. Most stock held by ESOPs considered in aggregate is nonvoting stock: the median ESOP holds ten percent of its sponsoring firm's shares, but only five percent of that firm's voting rights.
126. See U.S. GOVERNMENT ACCOUNTING OFFICE, EMPLOYEE STOCK OWNERSHIP PLANS: BENEFITS AND COSTS OF ESOP TAX INCENTIVES FOR BROADENING STOCK OWNERSHIP 39-40 (GAO/PEMD-87-8 1986) ("... some of the stock held by ESOPs does not carry voting rights."). How can this be? Partition the class of ESOPs into those sponsored by closely held firms and those sponsored by publicly traded firms. Consider the first of those subclasses. With little exception, closely held sponsoring firms enjoy all applicable ESOP tax benefits even if their ESOPs do not pass acquired stock voting rights through to employee/beneficiaries. The only exception is voting on "fundamental" transactions-matters which must, according to charter or applicable law, be decided by supermajorities of outstanding shares voted.
127. See I.R.C. §§ 409(e)(3), 401(a)(22) (including matters such as "approval or disapproval of any corporate merger or consolidation, recapitalization, reclassification, liquidation, dissolution, sale of substantially all assets of a trade or business, or such similar transaction as the Secretary may prescribe in regulations"). Next, consider the second subclass. While in the case of publicly held firms voting rights must be passed through to the employee/beneficiaries, it is so only in respect to stock actually allocated to employee accounts.
128. See generally I.R.C. § 4975(e)(7) (defining ESOPs). Allocation, however, occurs only gradually as the original loan is amortized. Note also that this lack of control rights ought to give pause to those who would see in the current "ESOP revolution" any real harbinger of an incipient "workplace democracy."
129. I am by no means the first to suggest the importance of public support for the spread. See, e.g., BLASI, supra note 55, at 64-84 (cataloguing ESOP types and their benefits);
130. Hansmann, supra note 19 (noting the rapid expansion of ESOPs and their benefits for employees);
131. Ellerman, supra note 71, at 110 (observing the significant impact of growing ESOPs).
132. For one thing, the evidence is scant. See ELLERMAN, supra note 71, at 90 (discussing trade-offs in political democracies), BLASI, supra note 55, at 263 (detailing the relationship between retained earnings and funding for ESOPs). As a theoretical matter it seems highly unlikely that rational employees would be willing to reduce their wages sufficiently to offset the dilution. The diluting shares issued to them are, after all, deferred compensation which confers none of the consumption benefits of control. Additionally, they are undiversified investments. It would be far more sensible for employees willing to sacrifice pay for stock to insist upon voting and/or diversified stock. Hence, they would not offer any sacrifices sufficient to offset the dilution of their own firms′ owners′ stock.
133. See infra Section 3.3. The other-regarding ones might partly be actuated by ideological/political motivations.
134. Certainly some seem to think so. See, e.g., Michael W. Melton, Demythologizing ESOPs, 45 TAX L. REV. 363, 363-64 (1990) (arguing that ESOPs do not efficiently achieve capital formulation, wealth redistribution, and other goals);
135. Richard L. Doernberg & Jonathan R. Macey, ESOPs and Economic Distortion, 23 Harv. J. legis. 103, 103 (1986) (claiming that ESOPs cause inefficient market distortion due to overly strict regulations in ESOP legislation).
136. For more on the invariance of these dispositions across cultures and subcultures, see, for example, Hockett, The Deep Grammar of Distribution, supra note 10, for a description of common intuitions of distributive justice, and Hockett, Taking Distribution Seriously, supra note 10, for a description of how the concept of distribution should be treated in law and economic literature.
137. See Hockett, Whose Ownership?, supra, headnote, at 31-51 (arguing that most people support a norm of parity and fairness vis-á-vis goverment);
138. Hockett, Jeffersonian Republic, supra headnote, at 57-68 (noting that it may now be possible to design an equal "ownership society" in agricultural, commercial, and industrial spheres);
139. see also Hockett, Three Pillars, supra headnote, at 93 (describing the Bretton Woods Institutions as supportive of equality of opportunity).
140. See sources cited supra note 105.
141. See sources cited supra note 105.
142. See sources cited supra note 105.
143. See Hockett, Whose Ownership?, supra headnote, at 58-72,80-87 (observing that most people support giving to the "have-nots," though not necessarily at the expense of "haves");
144. Hockett, ]effersonian Republic, supra headnote, at 73-83 (describing support in American political traditions for an "efficient equal-opportunity republic").
145. See sources cited supra note 109. I employ scare-quotes here to register the fact that the "newness" and "taking" in question are experienced as such pre-reflectively, as their proceeding from cognitive dispositions would suggest. I am speaking of predisposed framings here rather than considered judgments.
146. See sources cited supra note 109. Scare-quotes are used in a similar manner as those in the text accompanying the previous footnote.
147. See sources cited supra note 109.
148. Apologies, of course, to Mary Poppirts and her creators.
149. Thanks to Joel Trachtman and Annelise Riles in particular for pressing me on this matter of transparency.
150. Apologies this time to Homer; and to Jon Elster.
151. See JON ELSTER, ULYSSES AND THE SIRENS: STUDIES IN THE SUBVERSION OF RATIONALITY (1979).
152. It is in part or potential ethically exogenous in two senses; one trivial, the other less so. First, one must use it responsibly in order to derive "utility" from it; it is a kind of resource. Second and less trivially, the quantum of this resource that one has is at least in part-and sometimes indeed in significant part-the product of fortune or fate rather than effort. One can hold less than another simply by dint of having been born to the wrong parents.
153. See generally Hockett, Whose Ownership?, supra headnote, at 31-51 (describing different political perceptions about, and opinions on, the U.S. "ownership society").
154. "Superficially" in light of what was observed supra, Section 3.2.
155. That is to say it is viewed as an "employee benefit," as something predicated upon lengthy labor-patronage for-a kind of "loyalty to"-the firm. More on this infra, Sections 4,5.
156. See Hockett, Jeffersonian Republic, supra headnote, at 98-120,143-53.
157. Id. at 135-37.
158. Id.at98-120,143-53.
159. So far as I have been able to determine, the only scholar who has devoted much discussion to the relations between patronage and firm ownership is Hansmann.
160. See HANSMANN, supra note 19 (exploring different schemes for ownership of various firm types). However, my use of the concept of patronage will be somewhat more elastic than Hansmann's-as it is perhaps intimated by my addition of the qualifier "ethically salient." My understanding of the term will accordingly be a bit different as well. I do not believe, however, that my understanding and employment of the term will be incompatible with Hansmann's. See supra notes 111-12 for an example of my use of the term.
161. Hansmann appears to be less explicitly concerned with the "ongoingness" of patronage relations, while being more explicitly concerned with a particular species of relating to the firm-namely, selling to or purchasing from it-than I. See supra note 118. I think our distinct concerns with patronage are nonetheless compatible, however. First, my concern with the possible ethical salience of patronage naturally lends itself to an emphasis upon longer-term relations, at least among those who purchase from or contribute to firms in small increments per transaction. (Duration of relations substitutes for magnitude of individual transaction.) Second, patronage relations, as potentially involving more than purchasing and selling alone, are implicit in Hansmann's own understanding of the term, because the occasional recourse to the broader relational concept of "supplying" figures prominently in Hansmann's treatment of stock-holders as financial capital suppliers. HANSMANN, supra note 19, at 12-16.
162. Hansmann defines "patrons" as "persons who transact with a firm either as purchasers of the firm's products or as sellers to the firm of supplies, labor, or other factors of production." HANSMANN, supra note 19, at 12. Much of the thrust of Hansmann's often astonishingly insightful monograph is devoted to showing both (a) that it is typically a particular class of patrons which owns most of the firms operating within a particular industry, and (b) why it is that the particular classes which tend to own in particular industries end up being the more efficient owners. My interest in this Article, though not incompatible with Hansmann's interest, is nonetheless distinct. The distinction accounts for my somewhat broadened understanding and employment of the concept of patronage. My concern is with patronage as a form of ongoing relation between persons and firms, such as can be viewed in part as the patron's consistent conferral of some manner of benefit upon the firm. This can in turn engage our willingness to view the patron's coming to own a share of the firm as ethically unobjectionable-as something better than the product of a mere handout. That is to say my angle on patronage here is as a "desert basis" in the sense described supra, note 169. I do not believe that this basis for interest in patronage places me at odds with Hansmann's efficiency-grounded basis for interest in the same; I do not here suggest that firms should be owned by patrons of a different kind than those that he shows to be the more efficient owners of firms in particular industries. Rather, I simply propose that more patrons within the class be added to the rosters of owners. The remainder of this Section will both make this plain and unpack more fully the ways in which patronage relations might be seen as ethically underwriting benefit-conferrals upon current non-owners within patronage classes.
163. Please see the discussion in Section 3.3, supra, which suggests reasons why ESOPs are publicly favored.
164. Indeed, in some industries customers constitute the most efficient class of firm owners. Examples are the farm supply industry, in which consumer cooperatives constitute an oft-encountered firm form; rural electricity, in which customer cooperatives again figure prominently; clubs that afford their members high-status "associative goods," which again tend to be owned by their members; and urban housing, in which housing cooperatives figure prominently.
165. See generally HANSMANN, supra note 19, at 149-223 (detailing customer-owned industries and firm types).
166. Again, sometimes this happens quite "naturally," for reasons that appear to be rooted in the comparative efficiencies of governance and contracting. See source cited supra note 109. But the reasons for interest in an "ownership society" warrant considering the fostering of ownership even where it does not quite "naturally" arise, which of course seems to be what has occurred in the case of ESOP proliferation. See supra Section 3 (describing how ESOPs operate). Those same reasons presumably afford at least a preliminary answer to prospective objections rooted in the same normative source as familiar objections to disgorgement remedies in contract, owing to their inefficiently coupling purchases with investments in firms.
167. See Hockett, sources cited supra headnote. Thank you to Daniel Markovits for pressing me here.
168. I am thinking of Ithaca, NY, where I live. But there are countless similarly situated locales, not all of them university towns and not all of them as relatively isolated as Ithaca. Indeed, this example might also be plausibly applied to a community-like neighborhood or sector of a large city, such as is commonly found in New York, Chicago, and Los Angeles. Yet please bear in mind that the example following this one will make no reference to community-like towns at all. All examples in this Article are meant to be illustrative and suggestive, even to spur additional visualizations; they do not purport to be exclusive or exhaustive.
169. I am alluding to Wegman's in Ithaca NY, a store about which many indeed speak with pride. This firm is not publicly traded, so I am asking that the reader pretend that it is.
170. It is one of those towns that has difficulty attracting and keeping nationally or even regionally known merchant establishments.
171. There are a variety of grounds upon, and the three principal American political traditions to which, the notion of an "ownership society" might be attractive.
172. See generally Hockett, Whose Ownership?, supra headnote, at 5-78.
173. Of course it is not the case that facilitating ownership of local businesses will afford optimal diversification. After all, personal incomes and the incomes of town-sharing or region-sharing firms can to some extent co-vary-for example, in the case of local or regional slumps. But I ask that the reader bear with me a bit longer. The examples below show that diversification grows. Moreover, the aim here is to make use of patronage relations as ethically salient grounds for public action facilitating ownership, pursuant both (a) to the hypothesis posited supra Section 3.3, concerning why the public is willing to subsidize ESOP expansion, and (b) to expand the hypotheses of this Article's predecessor pieces, concerning why we have acted similarly to promote home-owning and the spread of higher education. Please note, for a discussion of the project of democratizing income-risk-sharing across localities and even across nations in a separate article, Hockett, Global Macro-Hedging, supra headnote at 212-56. These pieces read together aim to provide at least a rough template for how best to render society more "owning," more risk-spread-efficient, and more just.
174. In a way, so was the store in the previous example. Small towns support less competition among smallish suppliers than do cities.
175. This SOP is not to be confused with the "consumer stock ownership plan" proposed by Kelso, which latter appears to be little more than a producer co-op.
176. KELSO & KELSO, supra note 78, at 67-73.
177. The justification of appropriable rents for property rights appears to originate, at least in its canonical formulation, with Harold Demsetz.
178. See Harold Demsetz, Toward a Theory of Property Rights, 57 Am. Econ. Rev. 347, 347 (1967) (arguing that property rights are essential for markets to perform efficiently).
179. This claim, associated with Richard Epstein, is of course hyperbolic. But one can readily grasp the intuition that underwrites it. For the hyperbole, see, for example, RICHARD A. EPSTEIN, TAKINGS: PRTVATE PROPERTY AND THE POWER OF EMPNENT DOMAIN (1985) (arguing that many kinds of governmental takings, such as progressive and special taxes, may be unconstitutional under a broader interpretation of the Takings Clause).
180. See, for example, id., for a representative screed.
181. See also Michael J. GRAETZ & IAN SHAPIRO, DEATH BY A THOUSAND CUTS: THE FIGHT OVER TAXING INHERITED WEALTH (2005), for a morbidly fascinating, documentary account of the exploitation of citizen cognitive error by champions of the tax-evading well-to-do.
182. I employ scare-quotes here because I am simply conveying, rather than participating in, that attitude pursuant to which some view the government as an alien force rather than an agent of collective action. Perhaps the current iteration of this line of hostile thinking all began with the disillusionments of the 1960s, which seem to have fed directly into the populist "tax revolts" of the 1970s, out of which so much of current rightward-leaning ideology seems to have grown.
183. This suggestion is taken up infra Section 6.
184. Scare-quotes again indicate that I am attempting to express a pre-reflective manner of perception. I should note here that I am exceedingly uncomfortable with this particular perception, and find it to be a compromise with territorialist psychological dispositions that are regrettable at best. But bear with me for a moment. Such primitive intuition like this underwrites the judgment that, for example, coal found between Canada and Mexico is "American" coal, rather than North American coal or "the coal of mankind." While, ideally I would prefer to repudiate the intuition, if we are stuck with it then we may as well harness it to good purpose.
185. In 1978 and 1980, voters′ initiatives were introduced to establish the Alaska General Stock Ownership Corporation (AGSOC), which would have provided Alaskan citizens with ownership interests in the Alaska Oil Pipeline. Pursuant to a tentative agreement with the British Petroleum Company, the latter was to sell its interest in the Alaska Pipeline to AGSOC. AGSOC would have enjoyed the backing of state credit to borrow. Under federal matching legislation-specifically, Subchapter U of Chapter 1 under Subtitle A of the Internal Revenue Code-AGSOC would also have enjoyed favorable federal income tax treatment. See Revenue Act of 1978, Pub. L. No. 95-600, 92 Stat. 2763, 2892 (1978) (noting the potential creation of a stock ownership corporation). The AGSOC plan also would have prohibited any one individual from taking ownership of more than ten shares, in order to prevent concentrated ownership.
186. See William Greider, Alaska Inc. An Economic Experiment, THE WASH. POST, Oct. 22, 1978, at Al (describing the planned distribution of wealth from the energy development to Alaskan citizens).
187. The Alaskan ballot measure nevertheless lost on a close popular vote (approximately 78,000 to 72,000). See, for example, the Alaskan state government's website, Initiatives that Have Been on Alaska's Ballots, http://www.elections.alaska.gov/initbal.php (last visited Oct 25, 2008) which lists Alaskan ballot initiatives since 1960;
188. see also Elliot Jacobson, Senator Gravel Assumes Leadership of "People's Lobby"!, 1 NATIONAL INITIATIVE FOR DEMOCRACY (2002), http://www.ni4d.us/en/nin-l-5/ (last visited Oct. 25, 2008) (discussing, in part, Senator Gravel's involvement in the AGSOC proposal). Notwithstanding the failure of the ballot initiative, Alaska did adopt a cognate program. See infra note 144.
189. See generally Hockett, Limits, supra hednote.
190. This is not to be confused with Kelso's proposed "RECOPs," "GSOPs," or "COMCOPs," which, though apparently geared toward spreading ownership of some firms cognate with those under consideration here, are both (a) argued for on entirely different-indeed, puzzling-grounds, and more importantly (b) presumably for that reason, financially structured differently. See KELSO & KELSO, supra note 78, at 75-83,88-92,99-103. For a more general charitable interpretation and correction of Kelsonian "theories" and schemes, see Hockett, Jeffersonian Republic, supra headnote at 124-42.
191. The matter of crafting terms is ignored for present purposes so as to avoid conflict with court decisions overturning state laws burdening interstate travel, decided under the Commerce Clause of Article I, the Privileges and Immunities or Equal Protection Clauses of the Fourteenth Amendment, or some "penumbral emanation" from those or other provisions of the U.S. Constitution. In Zobel v. Williams, the Supreme Court rejected Alaskan legislation that awarded pipeline dividends to state residents based on the duration of their residence up to the point at which distributions began. 457 U.S. 55, 64 (1982). But allowing the number of shares distributed thenceforth to grow with years of residence would not seem to be constitutionally offensive so long as one could begin to accumulate shares immediately upon taking up residence. See, e.g., Shapiro v. Thompson, 394 U.S. 618, 618 (1969) (establishing a fundamental "right to travel"); Edwards v.California, 314 U.S. 160, 160 (1941) (declaring unconstitutional a law that prohibited residents from bringing non-resident "indigent persons" into the state).
192. This is not just as a matter of capacity, but as a matter of law, as well. In the United States, for example, the Banking Code's lending limits could kick-in. See 12 U.S.C. § 84(a)(1) (2006) (limiting the amount that banks may loan at a given point or to a given individual). According to the code, the total outstanding nonfully-secured loans and credit extended by a national banking association to an individual, including a trust, must not exceed fifteen percent of that banking association's unimpaired capital and unimpaired surplus. 12 U.S.C. § 84 (a)(2) additionally requires that total outstanding fully-secured loans and credit extensions made by a national banking association not exceed ten percent of the association' unimpaired capital and unimpaired surplus.
193. See, e.g. 1 ADAM SMITH, AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS 161-63 (R.H. Campbell, et al, ed., 1976) (describing rent as a monopoly price that remains independant of expenses laid out by the rentier); DAVID RICARDO, THE PRINCIPLES OF POLITICAL ECONOMY AND TAXATION 33-45 pent & Sons 1969) (arguing that rentiers are windfall beneficiaries of scarcity).
194. HANSMANN, supra note 19 at 173-79 (suggesting a number of reasons for the absence of urban utility co-ops analogous to rural electrical co-ops, among them the comparative transience of urban dwellers relative to rural dwellers and conflicts of interest among disparate classes of prospective urban owners). While such phenomena presumably account in part for the absence of spontaneously generated (sorry-pun foreseen but not intended) urban utility cooperatives, they do not, so far as I can see, stand in the way of publicly facilitated partial ownership of corporate utilities by their customers. Moreover, to whatever degree we might worry that partial ownership by customers is "not enough," we can readily mitigate the worry by means familiar to other, existing utilities-ownership scenarios. Hence, rates can be regulated with a view to preventing price-discrimination as among classes of users. Similarly, any worry over the development of, for example, "absentee ownership" in the long run would seem to be mitigated by: (a) the fact that highly transient residents of a municipality likely will not come to acquire much in the way of shares; (b) the possibility of recourse to required redemption-indeed, we might even arrange to have transients trade their erstwhile utilities' shares for shares in utilities located in their new locales, with the utilities themselves in turn exchanging the shares; or at worst; and (c) the possibility of recourse to mere beneficial ownership by the new owners, legal ownership to remain with consumer trusts established for the purpose of retained legal ownership. Indeed, as Hansmann himself points out, some municipal utilities can readily be likened to cooperatives, since they are organized quite similarly.
195. Id. at 177.
196. A variation, perhaps, on the 1979 Remington electric razor advertisement, in which Victor Kiam averred, "I liked it so much, I bought the company." See I Liked the Slogan So Much., http://news.bbc.co.Uk/l/ hi/uk/1357091.stm (last visited Oct. 23,2008) (describing the popular influence of powerful slogans).
197. See Telecommunications Act of 1996 Pub. L. No. 104-104, 110 Stat. 56 (1996) (codified at 47 U.S.C. § 251 (2000)). For commentary on the Telecommunications Act and how it restructured telephone markets, see PETER W. HUBER ET AL., THE T ELECOMMUNICATIONS ACT OF 1996 (1996); 74 AM. JUR. 2d Telecommunications § 16 (2001) (describing the Telecommunications Act and how it restructured telephone markets).
198. See 47 U.S.C. §336 (a) (2000) ("[T]he Commission...(1) should limit the initial eligibility for such licenses [for use of advanced spectrum] to persons that. are licensed to operate a television broadcast station or hold a permit to construct such a station. and (2) shall adopt regulations that allow the holders of such licenses to offer such ancillary or supplementary services on designated frequencies as may be consistent with the public interest, convenience, and necessity."). For a discussion of the FCC's grant of a free spectrum for HDTV under the Act, see Matthew Spitzer, Dean Krattenmaker's Road Not Taken: The Political Economy of Broadcasting in the Telecommunications Act of 1996, 29 CONN. L. REV. 353,365-67 (1996).
199. I discuss such "retooling" costs, along with other determinants of "Peter's" faultlessness, at length in Hockett, Global Macro-Hedging, supra headnote; Hockett, Hamiltonian Means, supra headnote; Hockett, What Kinds of Stock Ownership Plans Should There Be?, supra headnote.
200. I do not think the more sinister characterization is true of the vast majority of "Marys." But there seems to be some truth in the characterization insofar as it has made of some Marys with friends in today's Washington, D.C., for example. One need only consider the 1996 Telecommunications Act noted above at Section 4 to get the idea (describing how lobbying can influence legislation).
201. Telecommunications Act of 1996.
202. See Trade Adjustment Assistance Reform Act of 2002, Pub. L No. 107-210 §116, (codified as amended in scattered sections of 19 U.S.C.) (providing aid to workers adversely affected by increased importation).
203. China, for example, and other governments control domestic enterprises by maintaining majority stakes there in.
204. See Hockett, Macro to Micro, supra headnote.
205. Id.
206. Note that this is not the same thing as conditioning trade liberalization upon trading partners′ subjecting their firms to the same labor, environmental, and other regulatory standards as those to which domestic firms are subjected. It is only to require that "Marys" who exploit such differentials share the gains that they realize with the "Peters." Lest you worry that the effect will nevertheless be the same, differing only in degree rather than kind by dint of the "Marys" then turning to invest more in domestic firms that also do not employ "Peter," please read on. That is the loophole that I intend to close next.
207. See, e.g., sources cited supra headnote.
208. See also Section 3.3., supra (noting the universality of equality norms).
209. See Hockett, Whose Ownership?, supra headnote at 29-56. That is where I endeavor to locate an overlapping consensus among our dominant political traditions-a consensus that converges upon a shared ideal I label that of an "efficient equal-opportunity republic."
210. See also Hockett, Global Macro-Hedging, supra headnote at 142-73 (linking the concepts justice and efficiency).
211. see generally Hockett, The Deep Grammar of Distribution, supra note 10. The "self-evidence" remark, of course, alludes to Thomas Jefferson, A Declaration by the Representatives of the United States of America, in General Congress Assembled, July 4, 1776,
212. in THOMAS JEFFERSON: WRITINGS 19 (Merril D. Peterson ed., 1984).
213. See Hockett, Whose Ownership?, supra headnote at 36-51.
214. See supra Section III.C.
215. The United States′ first large-scale post-Homesteading era education-spreading-hence, "human capital" spreading-programs began with veterans as beneficiaries. Hockett, Hamiltonian Means, supra headnote at 144-46. It would be fitting to recognize other forms of service in similar ways.
216. Note that we do this already with federal home finance and higher education assistance. We employ both financial need criteria and law-abidingness criteria.
217. See id. at 97.
218. refer to Prime Minister Blair's Child Trust Fund-or more popularly, "baby bonds"-a plan implemented in 2001. See Blair Banks On Baby Savings Scheme, BBC NEWS, Apr. 27, 2001, http://news.bbc.co.Uk/l/ hi/uk-politics/1297324.stm. Former Senator Bob Kerrey of Nebraska proposed something similar in the United States at the turn of the past century. His were called "KidSave Accounts." See Idea of the Week: KidSave, DEMOCRATIC LEADERSHIP COUNCIL, Oct. 13, 2000, http://www.dlc.org/ndol-ci.cfm?contentid=2372&kaid =131&subid=207.
219. President Clinton proposed "universal savings accounts," or "USAs," in 1999. A similar structure of private accounts, now without government income support, figured into George W. Bush's 2005 "State of the Union" address. See generallyJOHN MAYNARD KEYNES, HOW TO PAY FOR THE WAR (1940) (describing Keynes's visionary and, as it turned out, prophetic proposal); President Clinton Introduces Universal Savings Accounts, INVESTMENT COMPANY INSTITUTE, Apr. 16, 1999, available at http://www.ici.org/issues/ret/arc-leg/99-pres-usas.html; Press Release, The White House, Office of the Press Secretary, President Clinton Announces USA Accounts, (Apr. 14, 1999), available at http://clinton4.nara.gov/WH/New/html/19990414-3020.html; Pamela Perun, Matching Private Savings with Federal Dollars, URBAN INSTITUTE, NOV. 1, 1999, http://www.urban.org/publications/ 309272.html (evaluating the effectiveness of Clinton's USA Account proposals); Ron Gebhardtsbauer, American Academy of Actuaries,USA ACCOUNTS, http://www.actuary.org/pdf/pension/ usaccounts.pdf (reviewing the advantages and disadvantages of the Universal Savings Accounts); WhiteHouse.gov, Strengthening Social Security for Future Generations, http://www.whitehouse.gov/infocus/social-security (affirming the importance of reforming Social Security); Bush Pushes Private Accounts,CBS NEWS, May 4, 2005, http://www.cbsnews.com/stories/ 2005/05/04/poUtics/rnain692991.shtml7source=search-story (advocating the idea that private investment accounts created from Social Security payroll taxes is the best approach). On Keynes's role in designing the Fund, see, for example, Hockett, Mission Creep, supra headnote.
220. Though, of course, this also might be deemed unnecessary in the United States in view of the full faith and credit enjoyed by a federal institution. Indeed, even were the trust to function as a government sponsored entity ("GSE"), it would in effect be viewed as being fully 80% as credit-worthy as the federal government itself for purposes of bank capital adequacy regulation. See Risk-Based Capital Guidelines, 12 C.F.R. pt.3 app. A (2008).
221. For a good sampling of the aims, ambitions and operations of various national pension programs, see, for example, THE ECONOMICS OF PENSIONS: PRINCIPLES, POLICIES, AND INTERNATIONAL EXPERIENCE (Salvador Valdes-Prieto ed., 1997)
222. A limiting case, then, might be that of the offspring of wealthy families, who perhaps would not qualify for any benefit of this particular (CitSOP) sort. It might, however, on the other hand be deemed preferable not to "needs test" at all, on more or less the same political popularity grounds as ground the U.S. Supplemental Security Income's abstention from needs testing.
223. See supra note 1 37 and accompanying text (discussing adjustment relief through taxation).
224. See generally TOM COPELAND ET AL., VALUATION: MEASURING AND MANAGING THE VALUE OF COMPANIES 131-297 (3d ed. 2000) (describing cash flow valuation). Individual issuer shares would be valued as are any issuer's-by "the market" in the case of publicly valued firms, pursuant to the "cashflow" method in the case of closely held firms.
225. Id. I ignore here the question of means of avoiding imprecisions occasioned by market fluctuations, accounting mdeterminacies, etc., as there seem to be no difficulties specific to the present case and not already dealt with by familiar means in other investment company contexts.
226. This would also hold trup for SOP trust beneficiaries.
227. For example, were an insufficient variety of firm types participating in CitSOP arrangements.
228. We might even subsidize or require-the latter perhaps in the form of benefit conditionality- some baseline degree of financial counseling, as we do in the case of our federal home- and education-finance programs. See Hockett, Jeffersonian Republic, supra headnote, at 112, 151 (comparing federal home and education financing assistance).
229. More on this history infra, text accompanying notes 179-85.
230. See generally Hockett, Macro to Micro, supra headnote.
231. Hockett, Global Macro-Hedging, supra headnote.
232. See generally sources cited supra headnote, para. 2.
233. See also infra notes 177-97.
234. See generally Hockett, Macro to Micro, supra headnote.
235. Id.
236. Id.
237. "Indirectly" by effectively encouraging private lending in addition to supplying funds directly.
238. See id.; Hockett, Three Pillars, supra headnote.
239. See Hockett, Macro to Micro, supra headnote, at 156-57 (detailing how and why the International Monetary Fund has moved from focusing solely on strictly macro-economic concerns to also involving issues such as domestic bankruptcy laws, corporate policies, and political governance).
240. see also Hockett, Gestalt-Switch, supra headnote (illustrating potential ways that IFIs could benefit individuals instead of just macro-economic actors).
241. See Hockett, Macro to Micro, supra headnote, at 191 (noting changes in the Bank's system of assessment of necessary economic infrastructure).
242. see also Hockett, Three Pillars, supra headnote, at 121 (supporting the IMF and the Bank in their recognition of effective social-insurance programs following the Asian Financial Crisis and the Argentine meltdown).
243. See Hockett, Macro to Micro, supra headnote, at 177-89 (analyzing the IMF's Articles of Agreement).
244. Id. at 162 (describing how "relations between aggregate wealth, trade, and money" gave rise to IFIs).
245. See generally Hockett, Macro to Micro, supra headnote (suggesting that the IMF's focus on domestic markets is actually in line with the founders' original goals).
246. See generally Hockett, Gestalt-Switch, supra headnote (suggesting ways that IFIs could benefit individuals instead of just macro-economic actors).
247. Id.
248. Id.
249. On the benefit side, finance amounts to opportunity in the quite literal sense that it enables people, through the exercise of diligence, to "make real" their potentially value-adding ideas. In effect, this is precisely what micro-loans, small business loans, corporate finance, and venture capital finance all amount to. On the burden side, finance amounts to a means of trading, sharing, or more thinly spreading what would otherwise be thickly concentrated risk. This, of course, is one reason why insurance companies are considered to be financial institutions. It is also, of course, quite clearly observed not only in derivative and other hedging markets, but even in the more garden variety corporate securities markets themselves, a principal role of which is to assist firms′ owners in diversifying their investments and thus lessening their financial risks.
250. See generallyROBERT HOCKETT, CASES AND MATERIALS ON FINANCE, FINANCIAL INSTITUTIONS AND FINANCIAL REGULATION (forthcoming 2008).
251. See Hockett, Gestalt-Switch, supra headnote, at 193 (suggesting that IFIs could work to achieve global distributive justice by harnessing international financial markets).
252. Hockett, Three Pillars, supra headnote (supporting the IMF and the Bank in their recognition of effective social-insurance programs following the Asian financial crisis and the Argentine meltdown).
253. Hockett, Three Pillars, supra headnote.
254. See also Hockett, Global Macro-Hedging, supra headnote (arguing that profit distribution remains inequitable despite increasing globalization, and suggesting and evaluating methods to change this).
255. Robert Hockett, Gaming as Microinsurance (2008) (unpublished manuscript on file with author).
256. See Hockett, Gestalt-Switch, supra headnote, at 195 (describing the Bank's facilitation of state programs for project development).
257. Id at 195-96.
258. Id.
259. See Hockett, Gestalt-Switch, supra headnote.
260. That is what we mean in calling him "faultless."
261. See supra, Sections 2,3.3.
262. See generally Hockett, Gestalt-Switch, supra headnote; Hockett, Three Pillars, supra headnote.
263. See supra note 141, and accompanying text.
264. We are not apt to wish to "reinvent the wheel" here.
265. Hence my proposals in Hockett, Of ESOPs, supra headnote at 885-97 (arguing that an ESOP is a "tentative, but incomplete" step towards disseminating the benefits of globalization to all citizens).
266. Id.
267. See generally Hockett, Whose Ownership?, supra headnote (detailing "straightforward betterness").
268. Robert Hockett, Market Completeness, Market Neutrality, and Ethically Cognizable Efficiency: An Ordinal Equivalence Theorem (2008) (unpublished manuscript on file with author) (formalizing the proof of this claim).
269. That is to say, by their enabling treaties, whose mandates as enshrined in their constitutive documents.
270. See, e.g., HAL SCOTT, INTERNATIONAL FINANCE 863-85 (13th ed., 2006) (evaluating the increased demand for international solutions in an increasingly dependent world).
271. Id. at 17 (proving that cross-border savings and investment has increased dramatically).
272. See generally Hockett, Three Pillars, supra headnote, at 105 (describing the IFIs′ role in balancing the concerns of equal treatment and market optimization).
273. See generally Hockett, Whose Ownership?, supra headnote (detailing the interactions between social insurance and financial regulation).
274. ROBERT HOCKETT, FINANCE, FINANCIAL INSTITUTIONS, AND FINANCIAL REGULATION (forthcoming 2008).
275. See generally Hockett, Macro to Micro, supra headnote.
276. For a particularly recent example, witness the current turmoil across financial markets generally rooted in the particular decisions of a few overeager subprime mortgage lenders several years ago. Such examples can, of course, be proliferated from decade to decade.
277. See JOEL SELIGMAN, THE TRANSFORMATION OF WALL STREET 577-78 (3rd ed., 2003) (asserting that, even under the Reagan administration and its generally more anti-regulatory position, the SEC experienced a "staggering" increase its in workload).
278. See Hockett, Macro to Micro, supra headnote, at 165-68 (discussing the proposals of Keynes and White and the resulting Bretton Woods institutions).
279. Two words come to mind here: "Smoot-Hawley."