MANAGEMENT OF CORPORATIONS

What We Can Learn from Amazon.com

Discussion led by: Lisa, Reza, Ara and Jay

Corporations

Not For-Profit

Government-owned

For-Profit• Public• Closed

• S-Corp

•Is Amazon a For-Profit?

Amazon

Regulation of Corporations

For-Profit Corp

Model Business

Corporation Act (MBCA)

Non-Profit Corp

Model Nonprofit

Corporation Act (MNCA)

Foreign & Alien

Corporation

Due Process

Commerce Clause

• Is Amazon a Foreign Corp?

Amazon

Regulation of Foreign & Alien Corporations

Due Process Clause Commerce Clause

Jurisdiction over the foreign corporation Minimum contacts a state Does not offend traditional

fair play & substantial justice

benefits theory

May require foreign corporations to comply with local laws Law serves a legitimate state

interest State has chosen the least

burdensome means of promoting that interest

Legitimate state interest outweighs the statue’s burden on interstate commerce

• Is there min contact with CA?

• Is there a state interest?

Amazon

Foreign Corporation Doing Business Subject to state courts Subject to taxation Qualified to carry activities in state State regulation of internal affairs

• Is Amazon a subject to CA taxes?

Amazon

The Board of Directors Provides general direction of

corporation; delegates day-to-day to executives

Authority to appoint and remove officers

Power to issue and repurchase stock, set dividend policy adopt laws

Most large companies have 15 or more board members

Elected by shareholders

Directors’ & Officers’ Fiduciary Duties Acting within authority of their position Acting in good faith Acting in best interests of the

corporation Duty of care (business judgment rule)

Liability of the Corporation Doctrine of respondeat superior – liable

for employee’s tort if authorized conduct Criminal liability of corporations when

criminal act performed by:Board of directorsAn officerHigh level administrator who has

supervisory responsibility

Unocal Test

Supreme Court of Delaware ruling Board must show

Make reasonable investigation into threats of takeover

Motivated primarily to protect company and shareholders against those threats

Only reasonable defenses against threat

The Sales Tax Battle: A Timeline

1992 Quill Corp. v. North Dakota• No presence,

no sales tax

1994 Amazon incorporates in WA• Strategy to

minimize tax collection

2008 Amazon revenue tops $19 billion• $10 billion in

the U.S.

2008-09 States face

severe budget

shortfalls

Amazon’s “Good” & “Bad” States

Estimated Losses• An estimated $11 billion

uncollected taxes from online sales last year

• Since the financial crisis of 2008, about $50 billion

• Amazon will lose about 1.4% of $45 billion revenue by collecting tax in all states

Entity or Liability Isolation

Shareholders

Amazon Corporate LLC (DE)

Amazon.com Int’l Sales, Inc

(DE)

Nv Services, Inc. (NV)

Amazon EU S.a.r.l.

(Luxembourg)

Amazon.com (WA)

Ethical Issues Issue

Unfair competitionUnfair price

advantageTax

avoidance/practicesHigher taxes on other

state improvements

AmazonRetreat from states

with unfriendly tax requirement

California Indian reservations tactic

Wholly own subsidiaries tactic

Limiting activities of candidates/employees