Professor Morley Delivers Inaugural Augustus E. Lines Lecture
Professor John D. Morley ’06 delivered his inaugural lecture as Augustus E. Lines Professor of Law on Feb. 24, 2025 to a large group of colleagues, students, friends, and family.
Morley’s lecture, titled “Generational Equity: Temporariness and Permanence in Businesses and Societies,” analyzed the challenges posed by “generational conflict” — Morley’s term for when the equity holders of the present have different interests from the equity holders of the future.
He began his lecture by paying tribute to Augustus E. Lines, a noted New Haven engraver who established the chair in 1908, as well as the faculty members who previously held the chair, including Henry B. Hansmann ’74, now the Oscar M. Ruebhausen Professor Emeritus of Law at Yale Law School, who Morley called “the greatest scholar of legal organization in history.”
“None of the ideas that I’ll be able to describe to you this afternoon would have been possible without the light of Henry’s genius, and so it is indeed a special honor to inherit his chair,” said Morley.
In his lecture, Morley offered some findings from an in-progress book project on the topic of corporate organization.
“What makes the investor-owned business corporation extraordinary is that it offers to the people who own it a kind of claim that lasts indefinitely,” he said. “The eternal character of this claim … deeply shapes how you cooperate with others as an equity holder of the firm, and how you and your fellow stockholders work together to make this corporation successful.”
Key to Morley’s argument was a contrast between what he called “permanent” equity with what he called “temporary” equity. The former, he said, is a residual financial claim that lasts as long as the company that issues it. The latter is a residual claim that does not last as the company. Most ordinary business companies are permanent equity firms. Temporary firms include businesses like law firms, mutual funds, credit unions, and retail cooperatives.
“Temporary and permanent equity each have attractive features, and the choice between them is an optimization problem for which there’s no universally correct solution. But the generational conflict created by temporary equity is always a challenge, and the ability of permanent equity to solve it may well represent one of the greatest legal and social achievements of modernity,” Morley said.
Generational conflicts can take several forms, Morley said: one is that temporary equity holders don’t have incentives to make long-term investments in a firm. Another is that temporary equity holders can leave in a spiraling cycle of withdrawal that resembles a run on a bank.
Morley offered an example of how problems with generational conflict can endanger law firms, which tend to use a temporary equity structure. When a partner leaves a firm, that “changes the leave-stay calculus for the others who remain,” he argued. If the departing partner takes clients with her, and the profits of the firm decline, the remaining partners’ compensation declines as well, creating a self-propelling cycle of departure.
In setting up a firm, entrepreneurs must balance the costs of temporariness against the costs of permanence; the solution will differ from firm to firm, said Morley.
The development of permanent equity has allowed us to shape the world in “uniquely and historically unprecedented, long-lasting ways,” he concluded. “Whether we use these powers for good or for ill may become the most significant social question not only of our generation, but also of all the generations that will follow.”
In her introductory remarks, Dean Heather K. Gerken noted the distinguished faculty who have held the Augustus E. Lines professorship, including the late professor John G. Simon ’53 LL.B., who passed away in 2022, and Hansmann.
“It is fitting that John will take up Henry [Hansmann]’s mantle, as he has emerged as the leading figure for his own generation,” she said. “His work is institutionally inflected and wide-ranging, able to surprise and delight readers from across many disciplines.”
Gerken listed several of Morley’s honors from the last several years, including the fact that his recent work has been recognized by the Corporate Practice Commentator four times; and that a recent publication he co-authored with Professor of Law Taisu Zhang ’08, titled “The Modern State and the Rise of the Business Corporation,” won the 2023 William Nelson Cromwell Foundation Prize for Legal History Article of the Year.
“But what makes this moment all the more celebratory is that John is a beloved member of this community … The care and intelligence and astonishing fair-mindedness that one sees in John’s scholarly work are exactly the qualities that one sees in the person who walks these halls,” said Gerken.
Morley is an expert on the regulation and structure of investment funds, including mutual funds, private equity funds, and hedge funds. He has also written broadly about a wide variety of other organizations, including law firms, directed trusts, business trusts, and marriages.
At Yale Law School, Morley teaches courses including “Business Organizations,” “Securities Regulation,” and “Wills, Trusts and Estates.” He is the faculty director for the Chae Initiative in Private Sector Leadership.
