Monday, June 26, 2017
This post follows on my earlier travel posts on prepacking and packing for conference travel. For last week's post, I used my trip to Mexico City for the Law and Society Association conference as an example. This week, I assess my packing skills by chronicling briefly what I used and commenting on that assessment. Bottom line: I did OK but could have left a few items of clothing and my flip flops at home.
For my plane travel to Mexico City a week ago last Sunday, I wore the reversible dance leggings (pattern side facing out), one of the tank tops, the embellished sweatshirt, and the suit jacket wth my sneakers.
Once I got to the hotel, I determined to take a walk through Chapultepec Park (Mexico's rough equivalent of New York's Central Park). For the walk (and the rest of the day), I swapped out the sweatshirt and jacket for one of the button-downs I had brought--a medium green insect-repelling shirt I originally had bought to use when I taught in a study abroad program in Brazil.
For Monday, another sightseeing day (but one that I planned to end with an Ashtanga yoga class), I dressed for the day at the outset: reversible yoga shorts (pattern side facing out), light blue tank top, same green button down, and sneakers.
I noticed during the day that folks in Mexico City do not wear yoga shorts around. So, I would revisit my decision to wear them all day on that basis.
Sunday, June 25, 2017
The law firm Cooley is updating its packet of startup tips and financing documents https://t.co/IBQXR3hdxF— TechCrunch (@TechCrunch) June 21, 2017
Saturday, June 24, 2017
The second season premiere of Queen Sugar, a television adaptation of Natalie Baszile’s novel, aired earlier this week, and if you’re the kind of person who likes to catch pop cultural depictions of business issues, this is a nice sleeper to add to your viewing list. It airs on Oprah Winfrey’s OWN network, and was created by Selma director Ava DuVernay. (Interestingly, in a departure from most Hollywood productions, every episode is directed by a woman.)
Queen Sugar is about three black siblings who inherit their father’s ailing sugarcane farm in Louisiana (I admit, there’s a bit of provincialism to my fondness for this show – it takes place just outside of New Orleans), and struggle to turn it into a viable business.
Nova, an investigative journalist specializing in the racial disparities of the Louisiana criminal justice system, has difficulty reconciling her political commitments and her romantic life. Ralph Angel, the little brother, was recently released from prison, and his efforts to raise his young son are hobbled by lingering legal limitations and what he perceives as his ongoing infantilization at the hands of his older sisters and his aunt.
Charley, the show’s main focus, is a business woman, and only a half-sibling, who has spent most of her time among the wealthy and powerful (white) Los Angeles elite. (In a telling detail, Charley is noticeably lighter-skinned than her brother and sister). Charley’s career until now has been devoted to managing her husband, a successful basketball star. When the marriage ends – due to a sexual assault scandal – Charley is forced to confront the reality that as a black woman, unmoored from her famous husband, her business savvy and experience carries far less weight. Charley’s arrogance can be counterproductive, but her anger and frustration at her diminished social status (not unlike the frustration Ralph Angel experiences) are channeled into ambition for the farm.
Thus, Queen Sugar is a family drama that revolves around the difficulties of running a small business, intersected with issues of race, class, and gender. As the siblings navigate their interfamily tensions, they must simultaneously contend with various setbacks, including their own farming inexperience, their dwindling financial resources, and an ongoing feud with the wealthy white Landry family, which controls the local sugar mill and uses its monopoly power to squeeze black farmers.
Queen Sugar’s story unfolds at a leisurely, measured pace that might not be for everyone, and the performances can veer into the stagey. Nonetheless, it tells a compelling David-and-Goliath story of small business owners versus the larger industry, featuring realistically flawed characters who are devoted to each other as family and united in purpose, but who can’t fully put their differences aside.
Friday, June 23, 2017
Brooks paid each participant $100 for 90 minutes.
The group was well-facilitated, and the group members stayed incredibly engaged. The 90-minutes flew by.
The research Brooks was conducting on both shoe design and marketing was extremely qualitative. It was essentially a brainstorming session. I do think Brooks could have gotten more out of the time if they would have had everyone privately write down their own ideas first, as there were about three or four of the ten of us who dominated the discussion.
While this type of focus group was not cheap---$1000 in payment plus renting the room plus travel for two employees from Seattle---it was surely a very small fraction of their production and marketing budget. And I do think Brooks got some valuable ideas. Brooks does this sort of thing all over the country, and their employees said that they do start to hear patterns in the responses. It is those patterns that Brooks acts on, as they can't possibly address every one-off comment.
This focus group made me think that universities should consider similar focus groups with applicants and with local companies. I know a bit of this happens informally at most places, and perhaps it happens formally at some places, but I do wonder if it is done with the same regularity and intensity as for-profit firms like Brooks. I think the insights would be valuable, and even if the insights are poor, the organizing institution does get to explain itself (and show it really cares) to the focus group participants.
Thursday, June 22, 2017
Wednesday, June 21, 2017
Yesterday, during a conversation with a law student about whether corporate social responsibility is a mere marketing ploy to fool consumers, the student described her conflict with using Uber. She didn’t like what she had read in the news about Uber’s workplace culture issues, sex harassment allegations, legal battles with its drivers, and leadership vacuum. The student, who is studying for the bar, probably didn’t even know that the company had even more PR nightmares just over the past ten days--- the termination of twenty employees after a harassment investigation; the departure of a number of executives including the CEO’s right hand man; the CEO’s “indefinite” leave of absence to “mourn his mother” following a scathing investigative report by former Attorney General Eric Holder; and the resignation of a board member who made a sexist remark during a board meeting (ironically) about sexism at Uber. She clearly hadn’t read Ann Lipton’s excellent post on Uber on June 17th.
Around 1:00 am EST, the company announced that the CEO had resigned after five of the largest investors in the $70 billion company issued a memo entitled “Moving Uber Forward.” The memo was not available as of the time of this writing. According to the New York Times:
The investors included one of Uber’s biggest shareholders, the venture capital firm Benchmark, which has one of its partners, Bill Gurley, on Uber’s board. The investors made their demand for Mr. Kalanick to step down in a letter delivered to the chief executive while he was in Chicago, said the people with knowledge of the situation.
… the investors wrote to Mr. Kalanick that he must immediately leave and that the company needed a change in leadership. Mr. Kalanick, 40, consulted with at least one Uber board member, and after long discussions with some of the investors, he agreed to step down. He will remain on Uber’s board of directors.
This has shades of the American Apparel controversy with ousted CEO Dov Charney that I have blogged about in the past. Charney also perpetuated a "bro culture" that seemed unseemly for a CEO, but isn't all that uncommon among young founders. The main difference here is that the investors, not the Board, made the decision to fire the CEO. As Ann noted in her post this weekend, there is a lot to unpack here. I’m not teaching Business Associations in the Fall, but I hope that many of you will find a way to use this as a case study on corporate governance, particularly Kalanick’s continuation as a board member. That could be awkward, to put it mildly. I plan to discuss it in my Corporate Compliance and Social Responsibility course later today. As I have told the students and written in the past, I am skeptical of consumers and their ability to change corporate culture. Sometimes, as in the case of Uber, it comes down to the investors holding the power of the purse.
Tuesday, June 20, 2017
A friend who is a member of a university faculty (non-law) some years ago recommended that I read Straight Man, by Richard Russo. I am forever thankful. The book is a novel set in a small town in Pennsylvania and follows the trials and tribulations of an English-department faculty member at a college besieged by budget challenges, a dysfunctional department, and his own lack of motivation.
The book is funny -- sometimes laugh-out-loud funny -- and for anyone on a faculty, I am willing to wager that, despite occasional absurdity, this faculty will feel like it could be yours. The main character is sympathetic, to a point, but he is also part of the problem. It is a fast read, and it's one I come back to every couple years. Perhaps it is just a guilty pleasure, but the universality of the characters and the bit of hope that emerges are things I find to be comforting in some way. It may be that the book serves as a reminder that we're not alone in our craziness. Everyone who has taught for a while knows a Hank, a Finny, a Gracie DuBois, Jacob Rose, a Billy Quigley.
The book also a good reminder of traps we, as faculty (and administrators), can fall into, and hopefully, help us avoid them. If you need a break from research and heavy reading, I highly recommend you put this in the rotation.
Here's the Amazon.com Review:
First Jane Smiley came out of the comedy closet with Moo, a campus satire par excellence, and now Richard Russo has gotten in on the groves-of-academe game. Straight Man is hilarious sport, with a serious side. William Henry Devereaux Jr., is almost 50 and stuck forever as chair of English at West Central Pennsylvania University. It is April and fear of layoffs--even among the tenured--has reached mock-epic proportions; Hank has yet to receive his department budget and finds himself increasingly offering comments such as "Always understate necrophilia" to his writing students. Then there are his possible prostate problems and the prospect of his father's arrival. Devereaux Sr., "then and now, an academic opportunist," has always been a high-profile professor and a low-profile parent.
Though Hank tries to apply William of Occam's rational approach (choose simplicity) to each increasingly absurd situation, and even has a dog named after the philosopher, he does seem to cause most of his own enormous difficulties. Not least when he grabs a goose and threatens to off a duck (sic) a day until he gets his budget. The fact that he is also wearing a fake nose and glasses and doing so in front of a TV camera complicates matters even further. Hank tries to explain to one class that comedy and tragedy don't go together, but finds the argument "runs contrary to their experience. Indeed it may run contrary to my own." It runs decidedly against Richard Russo's approach in Straight Man, and the result is a hilarious and touching novel.
Monday, June 19, 2017
As I am traveling and conferencing, my thoughts already have turned to next summer's conference schedule. It seems like a good time to get two important business law conferences on the agenda for next year. Those two conferences are: the sixth biennial conference on teaching transactional law and skills, “To Teach is to Learn Twice: Fostering Excellence in Transactional Law and Skills Education,” which will be held on June 1 - 2, 2018, at Emory Law in Atlanta, GA and the National Business Law scholars conference, which will be held at the University of Georgia School of Law in Athens, GA on June 21-22, 2018. Emory Law's "Save the Date" notice hit my in box this morning and appears below, FYI.
* * *
SAVE THE DATE
Emory’s Center for Transactional Law and Practice cordially invites you to attend its sixth biennial conference on the teaching of transactional law and skills. The conference, entitled “To Teach is to Learn Twice: Fostering Excellence in Transactional Law and Skills Education,” will be held at Emory Law, beginning at 1:00 p.m. on Friday, June 1, 2018, and ending at 3:45 p.m. on Saturday, June 2, 2018.
We welcome you to share your experiences teaching any aspect of transactional law and skills, focused primarily on what general approaches, teaching methods, and specific exercises have been the most effective. Additionally, we want to know how you have implemented the ABA’s standards on learning outcomes and assessment and whether your teaching has changed as a result.
A formal request for proposals will be distributed in the fall.
Note: For this Sixth Biennial Conference, we will be offering a discounted registration rate for new teachers as well as for adjunct professors. Please encourage your colleagues to attend.
Looking forward to seeing all of you in June of 2018!
Sue Payne Katherine Koops
Executive Director Assistant Director
Hola de la Ciudad de Mexico. I arrived in Mexico City for the Law and Society Association conference yesterday to get acclimated and take some personal time to see the city. Today, I carry forward the theme I posted on last week: packing for conference travel. Last week, I shared my prepacking strategy. This week, I will offer some parameters for packing for the actual trip, using the trip I am on now as an example. This is what I was working toward (and achieved).
I noted in my post last week that I almost always travel with one carry on duffle-like bag (soft-sider) and one tote bag that holds, among other things, my handbag for the trip. That is what I chose for this trip! The main advantage is that I do not have to check bags. I had a tight connection yesterday in Atlanta, and my grab-and-go luggage helped me to make that connection with time to spare.
To quote the Talking Heads, " . . . you may ask yourself, well, how did I get here?"
Let's begin with the things I packed in the blue soft-sider. I started by considering what I plan do on the trip. For this trip, I have four days of conference proceedings (for which I will dress up) and three days of walking/sight-seeing. I also plan to attend at least two yoga classes and have to teach Barbri in Nashville on my way home. I next consider the climate. I am in one place almost the whole time, and the weather is forecasted to be pretty consistent--mid-eighties (Fahrenheit) during the day and mid-fifties in the evenings. Chances of rain are slim most days, but higher at the end of the week. Here's what I chose to pack:
A three-piece coordinated suit set: skirt, cropped trousers, and jacket
9 shirts/blouses (6 tank tops--3 with shelf bras--and 3 wrinkle-resistant long-sleeved button-downs)
1 pair of reversible yoga shorts
1 pair of reversible dance/yoga leggings
PJs (undershirt tank top and boxers)
1 light rain jacket
1 French terrycloth embellished sweatshirt
Appropriate underwear items (gals, you can PM me for details, if you'd like)
2 extra pairs of earrings
1 pair of pumps
1 pair of fold-up flats
1 pair of sneakers
1 pair of flip-flops
1 traveling yoga mat
[Addendum: I forgot to add that I also packed a printed silk scarf and a printed cotton bandana scarf! I almost always travel with a scarf or two to accessorize outfits and make them look different when I am reusing the same basic suit pieces.]
Sunday, June 18, 2017
Saturday, June 17, 2017
More Uber miscellany this week:
Last week, I posted about Uber and publicness – namely, that Uber is a private company that nonetheless is conducting itself as though it has public obligations. Of course, right after I posted things got exponentially more interesting: Uber’s board met in a marathon session to discuss the results of an internal investigation of its corporate culture, resulting in the dismissal of the CEO’s right-hand man and the CEO/founder/powerful shareholder taking an indefinite leave of absence, Uber publicly announced the recommendations generated as a result of the internal investigation, and an Uber director resigned after making a sexist comment at the employee meeting intended to address workplace sexism.
There’s an awful lot to unpack here: Uber, the legendarily valuable startup, is now operating without a CEO, CFO, or COO (Twitter joke: “I guess this is the closest it’s ever been to a self-driving car company”); the recommendations, which are telling in what they don’t tell (alcohol and controlled substances should not be consumed during business hours, yikes!); the fact that all of this was sparked by a blog post by an ex-employee detailing her sexual harassment and – amazingly enough – she was believed (one Forbes writer even recommended her for a Pulitzer); sexism that cannot be contained for the length of one employee meeting; the fact that Uber apparently is hemorrhaging talent and can’t hire more –
But mostly, just to reiterate the point I made last week, to me the truly extraordinary thing is that all of this is happening at a private company - and one that still provides an exceptionally popular service. Nonetheless, Uber felt obligated to publicize the results of an internal investigation regarding its corporate culture, and regularly updates the news media on its governance structure. Ordinarily, the whole point of staying private, roughly speaking, is to avoid this level of public scrutiny. Yet as companies stay private longer – and attract more and more capital, often from “public” investors (large mutual funds, pension funds, etc) – apparently, they are feeling the obligations of publicness. Or Uber is; we’ll see how much of a precedent it sets.
The other issue I wanted to discuss concerns this article in the New York Times, describing Uber’s, umm, unusual employee buyback plan. Uber has begun offering to buy back certain employee shares, because – in the absence of an IPO – employees have no other way to cash out. As I understand it from the article, for some employees, Uber requires that if the employees sell any portion of his/her shares back to the company, the employee must also agree to sign over the voting rights of all of his/her remaining shares to Travis Kalanick (the CEO/founder) personally.
Now, with all appropriate disclaimers about how I haven’t read the employee agreements, and I’m relying solely on one news article that lacks specifics, I say – huh?
Uber is using corporate resources to allocate additional votes to the founder personally? Which – presumably – he can then use to vote to advance his personal interests? After all, outside of specific fiduciary duties for controllers, shareholders are free to cast their votes for their own idiosyncratic reasons; for example, Kalanick could vote against a merger proposal merely because he wanted to keep control, even if the proposal would be in the best interests of Uber shareholders generally.
It's not like I expect to see any fiduciary duty lawsuits - for one thing, the amounts involved may be minimal, and I assume Uber has somewhat close relationships with its stockholders - but it's fairly textbook that corporate resources cannot be used to buy more power for the personal use of the controllers. The fact that this was (apparently) permitted seems to be another data point suggesting that Uber has deep governance issues it needs to address.
Friday, June 16, 2017
Next week, I will write about my focus group experience with Brooks Running.
Last week, on Global Running Day, Brooks announced “the biggest athlete endorsement deal in sports history” saying that they want to endorse everyone who runs….with $1 and a chance to win Brooks running gear.
This would have made a decent April Fools Day joke, but as a serious attempt at building brand value, it is pretty weak.
Brooks would have done much better to follow the lead of Oiselle, a women's athletic apparel company that I have spoken and written about before in regard to their multi-level team of professional, semi-pro, and recreational athletes. The main differences between Brooks and Oiselle is that Oiselle provides value to the team members and creates shared experiences. Oiselle athletes get team gear (even though the recreational runners pay for the gear), and they get invited to numerous group events. Oiselle has state team leaders and helps connect the team members for training and races. The “birds”, as they call themselves, really seem to support each other.
Now, the Oiselle method is definitely more complicated, and it probably comes with various legal risks. For example, what if one the team leaders turns violent or what if a team member gets hit by a car on a run led by a team leader or what if someone gets a bit out of control at one of their camps or parties? (I am sure Oiselle has everyone sign waivers, but as we know, waivers don't always prevent costly litigation and liability). There is also a fair bit temporal and financial costs involved in creating the team singlet, sending out newsletters, updating social media, planning events, etc. But building real community and brand value is almost never easy. (And Oiselle is far from perfect and has its critics, but I applaud Oiselle's effort. That said, if they are still requiring the recreational athletes to both pay and only post photos of themselves on social media in Oiselle gear, that seems overly restrictive. If they are going for authentic, they should provide suggestions instead of mandates. With sponsored athletes, I better understand the restrictions, though even with sponsored athletes you can usually tell a difference between organic and forced marketing posts.)
Sadly, Brooks' “endorsement” isn’t about building community, rather it is a pretty transparent attempt to buy your e-mail address and lure potential customers for $1. (Also, I uncovered in the fine print that they limited the $1 payment to the first 20,000; they have over twice that many signed up already).
As I will write next week, I was impressed with the people running the Brooks focus group, but they didn’t ask us about this “endorsement” idea, and if they asked others about it, I think they got bad advice. Brooks might get a bit of press, and they will probably even get a fair number of email addresses from curious people, but I doubt they will get much of lasting value.
[I wonder how many people who signed up read the fine print. For example, there is a Code of Conduct that will be sent to participants. Also, see the clause below the break seemed incredibly broad.]
Thursday, June 15, 2017
"the Chamber of Commerce has been remarkably successful.... before the Roberts Court"— Stefan Padfield (@ProfPadfield) June 12, 2017
67 Case W. Res. L. Rev. 721, 722 (2017) #corpgov
"the new speech tradition instrumentalizes listeners' rights in the service of ... corporate speech" 69 Stan. L. Rev. 1389, 1396 #corpgov— Stefan Padfield (@ProfPadfield) June 12, 2017
Tuesday, June 13, 2017
I am such a fan of Sinclair Oil Corp. v. Levien, 280 A.2d 717 (Del. 1971), that I use the case in both Business Organizations and in Energy Law. The case does a great job of giving a basic overview of parent-subsidiary relationships, some of the basic fiduciary duties owed in such contexts, and it sets up the discussion of why companies use subsidiaries in the first place.
On fiduciary duties and when the intrinsic (entire) fairness test applies:
A parent does indeed owe a fiduciary duty to its subsidiary when there are parent-subsidiary dealings. However, this alone will not evoke the intrinsic fairness standard. This standard will be applied only when the fiduciary duty is accompanied by self-dealing — the situation when a parent is on both sides of a transaction with its subsidiary. Self-dealing occurs when the parent, by virtue of its domination of the subsidiary, causes the subsidiary to act in such a way that the parent receives something from the subsidiary to the exclusion of, and detriment to, the minority stockholders of the subsidiary
On what test to apply to parent-subsidiary dividends:
We do not accept the argument that the intrinsic fairness test can never be applied to a dividend declaration by a dominated board, although a dividend declaration by a dominated board will not inevitably demand the application of the intrinsic fairness standard. Moskowitz v. Bantrell, 41 Del.Ch. 177, 190 A.2d 749 (Del.Supr. 1963). If such a dividend is in essence self-dealing by the parent, then the intrinsic fairness standard is the proper standard. For example, suppose a parent dominates a subsidiary and its board of directors. The subsidiary has outstanding two classes of stock, X and Y. Class X is owned by the parent and Class Y is owned by minority stockholders of the subsidiary. If the subsidiary, at the direction of the parent, declares a dividend on its Class X stock only, this might well be self-dealing by the parent. It would be receiving something from the subsidiary to the exclusion of and detrimental to its minority stockholders. This self-dealing, coupled with the parent's fiduciary duty, would make intrinsic fairness the proper standard by which to evaluate the dividend payments.
. . . . The dividends resulted in great sums of money being transferred from Sinven to Sinclair. However, a proportionate share of this money was received by the minority shareholders of Sinven. Sinclair received nothing from Sinven to the exclusion of its  minority stockholders. As such, these dividends were not self-dealing. We hold therefore that the Chancellor erred in applying the intrinsic fairness test as to these dividend payments. The business judgment standard should have been applied.
On whether shareholder of one subsidiary should be allowed to participate in ventures pursued by other subsidiaries:
The plaintiff proved no business opportunities which came to Sinven independently and which Sinclair either took to itself or denied to Sinven. As a matter of fact, with two minor exceptions which resulted in losses, all of Sinven's operations have been conducted in Venezuela, and Sinclair had a policy of exploiting its oil properties located in different countries by subsidiaries located in the particular countries.
It makes sense for companies, often, to use subsidiaries to keep certain businesses well organized and to protect assets for shareholder. That is, I might only want to invest in a subsidiary doing business in Mexico because I trust that the assets there are secure. I may not want to participate in work in Venezuela, which I might deemed riskier. And it's not just shareholders who might feel that way. Creditors, too, may view such investments very differently and may only be willing to participate in ventures where the risks can be more easily assessed.
Monday, June 12, 2017
It's conference season, yet again. It seems like just yesterday that I was embarking on my June Scholarship and Teaching Tour 2016. In fact, it was over a year ago. My, how time flies . . . .
This year, I am doing the "City" tour for the first part of the summer season. I have already been to Kansas City, MO (Midwest Symposium on Social Entrepreneurship), New York City, NY (Legal Issues in Social Entrepreneurship and Impact Investing: In the US and Beyond), and Salt Lake City, UT (National Business Law Scholars Conference). Next week, I will be in Mexico City, Mexico for the Law and Society Association's International Meeting on Law and Society. Not fitting into the "City" theme is my teaching day for Barbri in Nashville, TN and the Southeastern Association of Law Schools conference in Boca Raton, FL at the end of the summer.
Because of my travel schedule throughout the year, I often am asked about packing for my conference trips, which typically include some personal elements (e.g., touring, yoga, walking, or other exercise, etc.). So, I decided to do a few posts on some packing tips and hacks that I use.
Today, I focus on having a prepacked bag. Given that I am a woman and choose to dress up for conferences, men and those who dress more casually will have to make significant modifications to my system. Nevertheless, I hope that by sharing my conventions, I am offering something new to think about (at the very least).
First things first: the generalities of my luggage (such as it is). Unless I am teaching in a study abroad program (which I have not done since 2010), I pack in a soft-sided carryall and a tote large enough to fit my handbag (usually a small cross-body bag). This combination works well for me. (I am sure, however, that my doctor doesn't approve and would like me to use a wheelie bag, given the cervical and thoracic issues that I have in my neck and back.) I do not like to have to lift wheelie bags into the overhead bins. The carryall lifts easily and typically fits nicely, even in the overhead bins on the small puddle-jumper planes that I sometimes must take from my beloved TYS (Knoxville's McGee-Tyson Airport).
Sunday, June 11, 2017
Saturday, June 10, 2017
Matt Levine at Bloomberg continually expresses his view that private markets are the new public markets. What he means by that is, given the availability of private capital (due to SEC rules and concentrations of private pools of capital in a relatively small number of hands), companies that need capital to expand can access the private markets; they only go for the public markets when private investors are ready to cash out.
Well, as the Case of Uber makes clear, “publicness” can exist in private markets, too.
“Publicness,” a concept first developed by Hillary Sale, refers to the general social obligations a corporation is perceived to have toward the public in terms of transparency and regularity of operations. Companies that conduct themselves poorly may find themselves pressured to reform by consumers, investors, and regulators, in part because they are viewed as having public obligations almost akin to those of governments. Prof. Sale explores, for example, the case of JP Morgan Chase and the London Whale scandal.
Uber is a private company, but as its various recent troubles demonstrate (and demonstrate and demonstrate and...),it is increasingly viewed through the lens of publicness – and is responding as though it recognizes, and hopes to meet, those obligations.
In other words, the public views Uber as having certain duties in terms of ethics and propriety of operations, and Uber is attempting to fulfill those duties. Uber is a private company that nonetheless has the responsibilities associated with publicness.
In that regard, it is interesting to compare to Mylan, a public company that seems to feel no pressure of “publicness.” As a recent NYT article makes clear, Mylan has apparently adopted a business model of performing contrition in the face of public approbation, but failing to take any concrete steps to reform its operations. It will respond to legal obligations (somewhat), but not moral ones. It’s also picking a very public fight with ISS (and thus, potentially, investors) over ISS’s refusal to allow Mylan to review a draft copy of its recommendations to shareholders, which I assume is a conscious effort to buttress proposed GOP regulation of proxy advisors. (Side note: How much does the GOP want to advertise that Mylan, in particular, agrees with its proposed regulation)?
In other words, Uber – a private company – at least seems to recognize that it has public obligations, while Mylan – a public company – does not. What accounts for the difference? Is it that Mylan faces less competition due to the value of its intellectual property? Uber feels more vulnerable to shareholder demands due to operational losses that require raising new capital?
This is ultimately a question of corporate theory, and as private becomes the new public (and as the federal government retreats from a regulatory role), it will become increasingly important.
Friday, June 9, 2017
In August, 2015, Chinese conglomerate, Wanda Group, acquired IRONMAN (primarily known for its long distance triathlon races) from a private equity group for $650 million.
To start, I had no idea organizing endurance sports had become such big business, but given the increasing popularity and the increasing entry fees, perhaps I should have known.
Personally, I have mixed feelings about big corporations dominating endurance sports, which, previously, had been much less commercial. On one hand, because of their scale, larger corporations like Competitor Group can conduct their events in a very professional manner, produce slick event shirts, measure the courses precisely, host impressive expos before the races and impressive after-parties, maintain plenty of insurance, take proper precautions, and market effectively to bring new participants into the events.
On the other hand, the big corporations often seem focused on a single, financial line. They raise entry fees as high as they can and often seem to spend an incredible amount on marketing. The races organized by big corporations often lack the individual touch of local races. That said locally organized races are a mixed bag. Sometimes they are organized by complete amateurs, and their lack of experience or financial backing shows in things like poorly measured and marked courses. Other times, when organized by devotees of the sport, locally organized races can provide a superior event without the marketing, frills, and shiny gadgets. Perhaps there will be room all types of organizers, especially because the locally organizers are usually nonprofit operations, and therefore are a bit of a different animal.
This strategic acquisition by IRONMAN may be telling regarding the trajectory of races. The long distance races like the IRONMAN (2.4 mile swim, 112 mile bike, 26.2 mile run) had skyrocketed in popularity, but, while those races are still currently popular, I think that many people are starting to realize they don't have the time or the money (the entry fee is often over $500) for that kind of event. Competitor Group brings not only a portfolio of marathons (26.2 miles) to the table, but also half marathons (13.1 miles, which is growing in popularity), 5Ks (3.1 miles), and even 1 mile races.
In any case, I do wish IRONMAN the best with this acquisition, and I hope they will consider all stakeholders as they move forward.
Thursday, June 8, 2017
ICYMI: Eric Chaffee's "The Origins of Corporate Social Responsibility" Makes SSRN Top Downloads For Corporate Governance Network List
The paper can be downloaded here: https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2957820
A portion of the abstract:
[T]his Essay and my other works introduce a new theory of the firm, collaboration theory. This theory views the corporation as a collaborative effort among a state government and those individuals organizing, operating, and owning the business entity to pursue economic development and economic gain. This theory is superior to the prevailing essentialist theories of the corporation because it explains both how and why the corporation exists.
Under this theory, corporations are obligated to seek profit based on the deal struck among the state and individuals owning, operating, and organizing the corporation, but the co-adventurers in the corporation are obligated to treat each other in good faith whenever possible. This means corporations should only engage in socially irresponsible ways in which the financial benefit to the corporation is clear. Because of the uncertainty of life, this is only going to be the rarest of circumstances. In these rare circumstances, to control bad behavior on the part of the corporation, the government must engage in affirmative lawmaking and regulation to alter the cost–benefit analysis to force corporations to be ethical.
Wednesday, June 7, 2017
In 2016, a number of news outlets focused on Wal-Mart’s reputation crisis and outdated management style. Many, including union leaders, doubted the sincerity behind the company’s motivation in raising wages last year. I’ve blogged about Wal-Mart before, but today, there appears to be a different story to tell. Wal-Mart, the bogeyman of many NGOs and workers’ rights groups, actually believes that “serving the customers and society is the same thing… [and] putting the customer first means delivering for them in ways that protect and preserve the communities they live in and the world they will pass on to future generations.” This comes from the company’s 148-page 2016 Global Responsibility Report. Target’s report is a paltry 43 pages in comparison.
What accounts for the difference? Both use the Global Reporting Initiative framework, which aims to standardize sustainability reporting using materiality factors and items in the 10-K. Key GRI disclosures include: a CEO statement; key impacts, risks, and opportunities; markets; collective bargaining agreements; supply chain description; organizational changes; internal and external CSR standards (such as conflict mineral policy, LEED etc); membership associations; governance structure; high-level accountability for sustainability; consultation between stakeholders and the board; board composition; board knowledge of sustainability; board pay; helplines or hotlines for reporting unethical or unlawful behavior; climate change risks; energy consumption; GhG emissions; employee benefits; health and safety; performance appraisal process; human rights assessments; wage and hour audits; supplier diversity; community engagement; PAC contributions by party; and more.
Whew! Companies can of course glean a lot of this information from their proxy, 10-K and other disclosures, but it still takes the average company months to complete. It may not even be worth it. Although 82% of consumers say they want to buy from a socially-responsible company, only 17% have actually read a CSR report, according to one study. To be honest, I’m surprised the number of CSR report readers is that high. My informal survey during Monday's class revealed that one student out of the 12 had read a CSR report, and this is in a group that chose to take a two-hour course in compliance and CSR that meets at 7:30 pm in the summer.
Here’s what I learned about Wal-Mart by reading the first four pages its report (it cleverly has big colorful picture blocks of statistics). I knew from press reports that Wal-Mart is currently facing numerous employment law class actions and may soon pay $300 million to the DOJ settle its bribery scandal. But the CSR report made Wal-Mart look like the model corporate citizen. The company earned 482 billion in revenue, employs 2.3 million employees, operates in 28 countries, and had 260 million weekly customer visits in 2016. It has invested 2.7 billion over 2 years in wages and benefits for its employees. It will train 1 million female farmers and factory workers around the world. It has eliminated 35.6 million metric tons of greenhouse gas emissions from its supply chain. Target, which has settled for 18.5 million with several states over data breaches, took a different approach for its report. Its first few pages has pictures and charts too but focuses on what it has achieved/exceeded and what it hasn’t based on its own 20 goals. The Target 2015 report is a decidedly more humble looking document than the Wal-Mart product (the next Target report is due this year).
I tend to believe that these CSR reports are designed for the consumption of regulators and lawmakers- hence the longer and more robust Wal-Mart report. Although Target claims in its report that CSR can enhance its reputation, the average Wal-Mart and Target consumer will not stop to read the report and many who boycott these stores will not likely change their minds be reading these reports. Instead, they may view them as an expensive marketing tool. Although Target doesn't face the same level of legal problems or reputational issues as Wal-Mart, it has still lost market share to Wal-Mart and Amazon, proving my theory that no matter what consumers say about shopping ethically, they really focus on convenience, quality, and price.
I look forward to hearing what my students think at tonight’s class. I fear I may already traumatize them with the videos they will see about Nike, fair trade, and whether boycotting sweatshops make sense.