What corporate law can teach us about impeachment

If you believe the several law professors who testified before the House Judiciary Committee, it is a “high crime or misdemeanor” for a president to call for an investigation of a political rival. Harvard professor Noah Feldman declared: “The abuse of power occurs when the president uses his office for personal advantage or gain.”

This argument is too rich. Every time the president acts it is in part for their personal gain. If serving one’s own purposes were impeachable, politicians would be out of business. If it was forbidden to investigate other politicians, it would open up massive loopholes. After all, the Obama Administration investigated then-candidate Trump. The key question, which is being ignored in the impeachment proceedings, is how do we sort between decisions that are purely selfish and those that are not?

One approach can be found in the law’s treatment of another type of chief executive — the corporate CEO. Any corporate decision might serve the CEO’s personal interests, the company’s interests, or both. Most CEO decisions are not reviewable, because it is thought that what benefits the CEO flows from what benefits the company. Making profits may cause the CEO’s pay to rise, but this is good for everyone. But there are checks on CEOs — directors, shareholders, and, of course, the stock price.

What goes for CEOs goes for presidents, too. Lowering unemployment, making peace, and improving the operation of government programs are unobjectionable, even though they may be undertaken in part to help bolster reelection chances. There is no rule that the president actually believes these things are in the public interest. In fact, the president may do them solely to be reelected — for his or her personal gain.

But, in both the corporate and political worlds, there are cases in which special rules are justified when there is a direct conflict of interest. The canonical corporate law case is Bayer v. Beran from New York in 1944. The CEO had the company hire his wife to be the lead in its new advertising campaign. Objectors claimed that no other CEO would have hired her, and therefore the contract should have been void. The CEO in that case stood on both sides of the transaction in a way that another CEO would not have.

The old rule was that these deals were forbidden. CEOs could not engage in “interested-party transactions” — the risk of self-dealing was simply too great. Those stating that the president may never investigate a political rival are advocating such a blanket rule.

But this rule was overbroad in the corporate world, and is so in the political world as well. An outright ban would prevent deals obviously beneficial to the company — the CEO’s spouse might be the best choice. In the political context, it simply cannot be that a president can never investigate a rival. After all, if the Bidens were involved in corrupt dealings in Ukraine, the U.S. government, led by Mr. Trump, should get to the bottom of it; however, he should not investigate them solely to discredit them.

There is a way forward, drawing from the corporate law analog. Congress should use its impeachment power to pass a law requiring the president to be recused in cases involving direct political rivals, with the penalty being having to bear the burden of proof in any Senate trial — that is, having to show that the investigation was in the interests of the United States. Putting the onus on the president would not only make conviction more likely in some cases, but also give the president the incentive to turn the matter to disinterested prosecutors in the first place.

CEO transactions tainted by self-interest are now permissible, but only if they comply with this type of procedural protection. The primary way to insulate an interested transaction is through disclosure to and approval by a disinterested majority of the board of directors. In the corporate case, if disclosure is not made and the action not approved by disinterested parties, the burden falls on the corporation to prove to a court that the transaction was “fair” to the corporation. In Bayer, the corporation satisfied this by showing that the CEO’s spouse was qualified and didn’t earn an outsized fee.

The president does not work for a board of directors, so applying this to decisions to investigate is not straightforward. But the essence of the requirement is disclosure of the conflict and approval by a second set of eyes.

Had the president publicly announced an intent to look into the Bidens and perhaps recused himself in the spirit of this corporate law rule, there would have been less concern. Mr. Trump could have raised the issue with the Ukrainian president — who, after all, may have better access to information about dealings in Ukraine — and then announced it publicly.

Political pressure might be enough to constrain the worst behavior. But the rules should encourage the president to have someone in the Justice Department handle the matter independently after he raises it.

If Congress tweaks the burden of proof in impeachment cases, a future president contemplating an investigation of a rival would think instead about hiring someone with bi-partisan credibility and impeccable ethics to lead the charge. In that way, we can ensure the laws are enforced without letting presidents use the law as a political cudgel.

M. Todd Henderson is a law professor at the University of Chicago and the author of “The Trust Revolution: How the Digitization of Trust Will Revolutionize Business and Government.”