Goodbye Goldman, Hello Academia

Why am I doing a PhD, studying corporate liability? Because it’s interesting. Why is corporate liability interesting? Because it’s so freaking weird.

Huntsman Hall, and my home for the next 8 years.

Corporations are really freaking weird. And it’s partially for this reason that I’ve decided to essentially dedicate my life to studying them.

I took a big, unexpected step in my life these past few months. As a Wharton graduate with coursework in strategic management, finance, statistics, and the like, and with a resume that includes Goldman Sachs, a center-left think tank, and an actuarial benefits consulting firm, I will be starting a PhD in the fall in Legal Studies & Business Ethics at Wharton. In September, I told Goldman I wouldn’t be coming back, and accepted a comfy job as a management trainee at an industrial supplies company in Chicago.

That didn’t last long, though. I backed out once I was invited to apply to and was accepted to the PhD program in February (the committee had heard my name from some former Professors). I plan on pairing this PhD with a JD — a total of 8 more years of schooling. Given my previous curriculum and job experiences, this seems weird to say the least.

Friends, family, and strangers often ask me — “why?” And their confusion is usually, if not always, eclipsed by my own. Why am I doing this? I have found that this question turns on the answer to an intricately linked, bigger question — What do I want do with my life?

I’ve found that, through much of my high school and college years, I took the first as the immediate question. I didn’t need to have an answer for what I want to do with my life to decide what undergrad school I went to or what internship I wanted, surely. I just had to have proximate reasons. I had to get good grades in high school. Why? To get into a good college. I had to get good grades in college. Why? To get a good internship. Why? To get a good job, and so on.

This was and is all, however, presumably in pursuit of a “good life.” But how does one begin a pursuit without knowing the object of his pursuit?

I suppose the pursuit of every profession benefits from superior academic performance. And an internship at a bank or think tank can never hurt. But what happens after that? I realize this is a very privileged question, but a persisting, important one nonetheless: Should one pursue wealth, or something else?

Coming out of Wharton, I think the pursuit of at least modest wealth is relatively straight-forward. The average starting salary is around 75k plus an average of a 10–15k bonus (generally also coming with full medical, dental, and vision coverage, and a good retirement plan). And keep in mind this is an average. A lot of people make more than that. If you’ve done well at Wharton, you’re at six figures before you’ve even put on your cap and gown, often with an extra 10k in cash for a signing bonus. Ten years down the road, you make more. Unless you do something illegal or incredibly stupid, you’ve got a golden brick road to the upper middle class, and if you work a little harder than the rest, you’re set! Or, as one friend put it, you’re “set as f*ck.”

It would be crude to discuss the specifics of my job offers, but they, like most jobs, did offer more than a PhD student might earn, at least during the program. So am I “squandering” the next eight years?

Let me abate this post’s mounting inventory of (likely irritating) rhetorical questions with an answer: No, I’m not.

And here’s why.


The short of it is that I like to do things, talk about things, and write about things that interest me.

I hate being bored and frustrated. And while academia surely has its share of the frustrating and mundane, the cons of any life dedicated primarily to growing the bank account of any company or individual seem unbearable.

I don’t think this is true for everyone. For me, though, I think this is indisputable truth. Put me in a chair, show me a carrot, and give me an uninteresting task; I’ll run right past the carrot out the door. Give me an interesting question, a few hours or a couple days to answer it, and I’ll render my services free of charge (or, I guess, free of vegetables?).

For the rest of this post, I shall offer a couple short insights into what is so interesting about corporate liability, which is what I intend to focus my research on. My senior thesis on third party corporate tort liability is a bit long to be rehashed here, but message me if you want to chat about it.

I begin my discussion with an operetta. Those that know me know that I enjoy classical singing and (relatively) obscure English operettas, mainly of the Gilbert and Sullivan variety (see geeky photo of me below in a performance).

Center, Me in a production of Gilbert and Sullivan’s Pirates of Penzance

Perhaps the most gratuitous intersection of my obscure core interests is Gilbert and Sullivan’s 1893 light opera, Utopia, Limited. As masters of parody and satire, G&S built a canon replete with commentary on business practices (see here for a great JSTOR article by Alan Borowitz on that). This particular work is most incisive with regard to liability issues. It depicts a society that organizes itself and all of its inhabitants as “joint-stock companies,” or what we Americans now call limited liability companies (here’s a good definition of an LLC, or feel free to ask me about it). Borowitz and I share a favorite song from the piece, from which I reproduce only one stanza:

“Though a Rothschild you may be
In your own capacity,
As a Company you’ve come to utter sorrow —
But the Liquidators say,
“Never mind — you needn’t pay,”
So you start another company to-morrow!

Translation: Even if you’re rich as hell, people who liquidate your company can only recover what is inside the company, not what is in your pockets. In short, “you needn’t pay.” In fact, you could start a new company the very next day (rhyme intended).

People reading this may immediately see parallels to political and economic questions of today.

Donald Trump has been criticized for making his money and happily taking advantage of Chapter 11 bankruptcy for a number of his companies (but never himself!). In the words of Hillary Clinton:

“He’s written a lot of books about business — but they all seem to end at Chapter 11. Go figure. And over the years, he intentionally ran up huge amounts of debt on his companies and then he defaulted. He bankrupted his companies — not once, not twice, but four times.”

Trump’s response, which does not seem unreasonable (unlike most things he says), was that “hundreds of companies” use bankruptcy; he “used the law four times and made a tremendous thing.” To him, it’s a business practice. And many would say, if bankruptcy is beneficial to shareholders, not only can someone use it — they are obligated to do so.

The question here is whether there is some obligation of companies to its creditors, one that perhaps persists alongside companies’ obligations to their respective shareholders. This is not a question of facts and who said what — both sides are telling the truth. It’s a philosophical question. And it’s one that makes theories of corporate liability so interesting and so relevant.

G&S also played off of the seeming absurdities of the incorporation craze at the time. Today, to incorporate a ruler and an entire populous would seem preposterous. But the craze hasn’t waned. People today incorporate their planes, their boats — in perhaps the most famous corporate liability case, Walkovszky v. Carlton, an owner incorporated each cab of his parent company as their very own corporations. 10 cabs would mean 10 separate corporations, plus a parent corporation. In this scheme, any victim of damage by or a crash with any of the cabs was able to recover only the minimal state-required insurance on that particular cab, in addition to whatever liquidable residual value of the cab. Someone can own a cab company being only minimally liable for what his/her cabs get themselves into.

There are two questions presented by this case. One, is limited liability even moral? Can businesses, as Justice Story says, “ justly disclaim responsibility for accidents which may fairly said to be characteristic of [their] activities”?There is surprisingly little literature on this question. I hope to add some!

The second question presented by this case is — what hell is a corporation? If it can’t be a single cab or a single boat, or a ruler of a Utopia, what can it be? The general question has prompted its own entire body of literature known as “theories of the firm.” There are contractarian theories (e.g. Easterbrook and Fischel), political theories (e.g. Ceipley), behavioral theories, legal theories (e.g. Orts), team production theories (e.g. Alchian and Demsetz), transaction cost theories (e.g. Williamson), and the list goes on. We interact and refer to these entities everyday in common parlance, and yet don’t really yet know what their boundaries are. How cool is that?

The cab case isn’t a fringe case — it’s an often-cited, hallmark one. It is notoriously difficult even today to sue the shareholders of a corporation for anything beyond the equity already in the company (a practice which is known as attempting to “pierce the veil” of a corporation). When it does happen, it is not always clear why. In the words of Easterbrook and Fischel:

“Piercing seems to happen freakishly. Like lightning, it is rare, severe, and unprincipled.”

The questions that Utopia, Limited put forth, questions on the nature of a corporation’s obligations to its creditors and the nature of the corporation itself, are only two of the many that are available to me. I’m curious as to whether corporations have a moral duty to obey the law (can they champion civil rights as Apple putatively did when it refused the FBI’s subpoena to decrypt an iPhone?). I’m curious as to whether benefit corporations (specially-incorporated businesses who also hold social good as a primary mission) are even coherent in terms of what a corporation is. I’m curious as to whether a corporation can really be held responsible for something its employee did, even when the corporation specifically instructs him/her not to do it (the subject of my thesis). I’m curious as to whether it makes sense to blame corporations, given that corporations cannot feel emotions (i.e. given that they lack affect); we cannot blame a rock, why may be blame a corporation?

There is a rich supply of questions already and new ones emerging each day.

Why wouldn’t I want to think about incredibly interesting things for the rest of my life?

~~~

Check out my personal website at mcaulfield.com

One clap, two clap, three clap, forty?

By clapping more or less, you can signal to us which stories really stand out.