Testing conventional wisdom is a major part of Jens Dammann’s job.
As an empirical scholar on corporate structure and governance, Dammann, the Ben H. and Kitty King Powell Chair in Business and Commercial Law at Texas Law, takes an unbiased deep dive into how – and where – companies operate.
“There are some questions that are important today, that will still be very important 10 or 15 or 100 years from now,” Dammann notes. “And they’re important because they relate to basic conceptual or philosophical differences in corporate law.”
Dammann brings an open-minded approach to these fundamental concepts. As an empirical researcher, he requires careful analysis of the facts underlying legal frameworks, with conclusions that might not follow neat hypotheses. He often combines this empirical, evidence-based approach with a comparative lens, exploring parallels among legal and regulatory regimes in U.S. states and internationally.
Who should govern corporations?
One area Dammann’s recent research addresses is codetermination, the idea that constituencies other than shareholders – such as employees – should play a role in determining the direction of a company, including by electing board members. Dammann says the concept has been “a bit fashionable” in recent years, as 2020 presidential candidates Elizabeth Warren and Bernie Sanders both advocated for some degree of employee codetermination. In large part, the focus of those conversations was empowering workers and curbing corporate power. While Dammann references these concepts in his work on codetermination, the focus of his research has been on even broader implications such as the overall economic impact and potential effects on democracy.
In an article on “Codetermination: A Poor Fit for U.S. Corporations” published in the Columbia Business Law Review, Dammann and co-author Horst Eidenmüller of Oxford University compared codetermination structures like those proposed by Warren and Sanders with Germany’s codetermination regime, which has been around since the 1970s and provides for employees of large corporations to elect up to half of a company’s directors.
The article concluded that, under current U.S. legal, social, and institutional structures, the economic costs of codetermination to companies and ultimately to the U.S. economy outweigh the potential financial benefits. For example, the paper discusses the importance of risk taking in U.S. companies compared with German companies and takes the position that a decrease in risk taking that may result from more employee control would in turn result in decreased innovation.
Dammann’s 2022 article in the University of Illinois Law Review on “Corporate Law and the Democratic State,” also co-authored by Eidenmüller, highlighted one of the potential non-economic justifications for codetermination, finding that it can diminish the risk that corporate power will undermine democratic institutions. “Codetermination ensures that control over the country’s largest and most powerful corporations does not end up in only a few hands with a single interest” and ultimately would strengthen democracy as a whole, the article concludes.
Both papers prompt broader questions about the underlying justifications for corporations and assumptions about how they should operate.
“What do we actually want to achieve? If we give workers a stronger voice, is this about wealth distribution? Are we trying to get workers better paid? Is this about limiting corporate power?” Dammann asks.
Why Delaware?
Another focus of Dammann’s recent scholarship has been on whether other states benefit from following the lead of Delaware in corporate law. Dammann’s stock in trade is exploring the underpinnings of conventional wisdom in corporate law; the role of Delaware as a favorite for incorporation is about as conventional as it gets in this context. According to one of Dammann’s articles, while small privately held corporations are often incorporated locally, large privately held corporations typically choose Delaware as their corporate domicile.
While research in this area frequently looks at legislation and regulation – such as Delaware’s traditionally shareholder-friendly laws – Dammann is exploring the impact of Delaware’s dominance from a different angle: common law precedent. For example, his research found that companies incorporated in states where courts expressly adopt Delaware precedent see some positive impact on stocks.
When asked what is next on his scholarly agenda, Dammann notes that his research often takes four or five years to complete. “I don’t spontaneously wake up in the morning and have something figured out the next day,” he comments. As an empirical scholar, he relies upon direct, verifiable observation, which can be time consuming to develop.
Dammann explains his process by noting, “Most commonly, the identification of a research question starts with a puzzle or with the realization that a commonly accepted wisdom is not really supported by evidence.” After identifying a potential research question, he then screens ideas to determine whether the question is important and if he can provide a substantial new contribution to the subject.
What’s next?
As he continues to study the impact of competing corporate regulatory regimes and the influence of Delaware, Damman is also working on a comparative study of the goals and designs of corporate codetermination methods.
His thorough approach to study is apparent from his CV, with multiple law degrees from Yale University and the Johann Wolfgang Goethe-Universität in his native Germany, as well as a Masters and a PhD in economics from the University of Texas.
Dammann credits Texas Law for supporting his research. “The most important thing that a law school can do is to be open to the kind of research you’re doing,” Dammann says, “and the University of Texas School of Law very much accepts empirical studies as an important pillar of legal scholarship.” He has been with the law school since 2005, before which he served a year as a Visiting Assistant Professor at Cornell Law School. When he began his teaching career, he wanted to work in the U.S. because of the leading role of U.S. law schools in interdisciplinary research in law and economics.
Empirical work can lead to counterintuitive findings, like Dammann’s findings on the differing impacts of regulatory competition in corporate law.
“You have to be willing to test something and then be open to whatever result it will give you,” Dammann says of his work, noting somewhat lightheartedly, “That makes empiricists fairly pleasant people to deal with, because they aren’t zealots, by and large.”
With this careful approach to weighty questions of how the businesses that shape our markets and societies work, Dammann is just the kind of person who should be testing conventional wisdom.