Thursday, May 21, 2015

White Collar Rationalizations

My last post outlined the criminological and behavioral ethics theories that help explain why corporate executives commit unethical and illegal acts.  I’d like to unpack that a bit more by providing some specific rationalizations used by white collar offenders.  This list includes the first five rationalizations to be identified by researches (sometimes called the “famous five”), and then supplements three others that are particularly relevant.  Not surprisingly, there are disagreements as to exactly how many rationalizations there are and precisely how they operate.  But, as one team of researchers put it, what is interesting about rationalization theory is what rationalizations do, “not the flavors they come in.”

Denial of Responsibility.  Called the “master account,” the denial of responsibility rationalization occurs when the offender defines her conduct in a way that relieves her of responsibility, thereby mitigating “both social disproval and a personal sense of failure.”  Generally, offenders deny responsibility by claiming their behavior is accidental or due to forces outside their control.  White collar offenders deny responsibility by pleading ignorance, suggesting they were acting under orders, or contending larger economic conditions caused them to act illegally.

Denial of Injury.  This rationalization focuses on the injury or harm caused by the illegal or unethical act.  White collar offenders may rationalize their behavior by asserting that no one will really be harmed.  If an act’s wrongfulness is partly a function of the harm it causes, an offender can excuse her behavior if no clear harm exists.   The classic use of this technique in white collar crime is an embezzler describing her actions as “borrowing” the money—by the offender’s estimation, no one will be hurt because the money will be paid back.  Offenders may also employ this rationalization when the victim is insured or the harm is to the public or market as a whole, such as in insider trading or antitrust cases.

Denial of the Victim.  Even if a white collar offender accepts responsibility for her conduct and acknowledges that it is harmful, she may insist that the injury was not wrong by denying the victim in order to neutralize the “moral indignation of self and others.”   Denying the victim takes two forms.  One is when the offender argues that the victim’s actions were inappropriate and therefore he deserved the harm.  The second is when the victim is “absent, unknown, or abstract,” which is often the case with property and economic crimes.  In this instance, the offender may be able to minimize her internal culpability because there are no visible victims “stimulat[ing] the offender’s conscience.”  White collar offenders may use this rationalization in frauds against the government, such as false claims or tax evasion cases, and other crimes in which the true victim is abstract.

Condemning the Condemners.  White collar offenders may also rationalize their behavior by shifting attention away from their conduct on to the motives of other persons or groups, such as regulators, prosecutors, and government agencies.  By doing so, the offender “has changed the subject of the conversation”; by attacking others, “the wrongfulness of [her] own behavior is more easily repressed.”  This rationalization takes many forms in white collar cases: the offender calls her critics hypocrites, argues they are compelled by personal spite, or asserts they are motivated by political gain.  The claim of selective enforcement or prosecution is particularly prominent in this rationalization.  In addition, white collar offenders may point to a biased regulatory system or an anticapitalist government.

Appeal to Higher Loyalties.  The appeal to higher loyalties rationalization occurs when an individual sacrifices the normative demands of society for that of a smaller group to which the offender belongs.  The offender does not necessarily reject the norms she is violating; rather, she sees other norms that are aligned with her group as more compelling.  In the white collar context, the group could be familial, professional, or organizational.  Offenders rationalizing their behavior as necessary to provide for their families, protect a boss or employee, shore up a failing business, or maximize shareholder value are employing this technique.  Notably, female white collar offenders have been found to appeal to higher family loyalties more than their male counterparts.

Metaphor of the Ledger.  White collar offenders may accept responsibility for their conduct and acknowledge the harm it caused, yet still rationalize their behavior by comparing it to all previous good behaviors.  By creating a “behavior balance sheet,” the offender sees her current negative actions as heavily outweighed by a lifetime of good deeds, both personal and professional, which minimizes moral guilt.  It seems likely that white collar offenders employ this technique, or at least have it available to them, as evidenced by current sentencing practices—almost every white collar sentencing is preceded by a flood of letters to the court supportive of the defendant and attesting to her good deeds.

Claim of Entitlement.  Under the claim of entitlement rationalization, offenders justify their conduct on the grounds they deserve the fruits of their illegal behavior.  This rationalization is particularly common in employee theft and embezzlement cases, but is also seen in public corruption cases.

Claim of Relative Acceptability/Normality.  The final white collar rationalization entails an offender justifying her conduct by comparing it to the conduct of others.  If “others are worse” or “everybody else is doing it,” the offender, although acknowledging her conduct, is able to minimize the attached moral stigma and view her behavior as aligned with acceptable norms.  In white collar cases, this rationalization is often used by tax violators and in real estate and accounting frauds.

I’ve identified the use of these rationalizations by white collar offenders such as Rajat Gupta, Peter Madoff, Allen Stanford, and others.  But I’d be interested to hear from readers where they’ve seen “vocabularies of motive” in the white collar world.  (If you’re not sure, try starting with Bloomberg's oral history of Drexel Burnham Lambert, in what has to be the largest collection of rationalizations ever assembled.) 

May 21, 2015 in Corporate Governance, Ethics, White Collar Crime | Permalink | Comments (0)

Thursday, May 14, 2015

Did a Slave Make Your Product and Do You Care? The California AG Thinks So

Last week, I looked lovingly at a picture of a Starbucks old-fashioned grilled cheese sandwich. It had 580 calories. I thought about getting the sandwich and then reconsidered and made another more “virtuous” choice. These calorie disclosures, while annoying, are effective for people like me. I see the disclosure, make a choice (sometimes the “wrong” one), and move on.

Regular readers of this blog know that I spend a lot of time thinking about human rights from a corporate governance perspective. I thought about that uneaten sandwich as I consulted with a client last week about the California Transparency in Supply Chains Act. The law went into effect in 2012 and requires retailers, sellers, and manufacturers that exceed $100 million in global revenue that do business in California to publicly disclose the degree to which they verify, audit, and certify their direct suppliers as it relates to human trafficking and slavery. Companies must also disclose whether or not they maintain internal accountability standards, and provide training on the issue in their direct supply chains. The disclosure must appear prominently on a company’s website, but apparently many companies, undeterred by the threat of injunctive action by the state Attorney General, have failed to comply. In April, the California Department of Justice sent letters to a number of companies stating in part: 

If your company has posted the required disclosures on its Internet website or, alternatively, takes the position that it is not required to comply with the Act, we request that – within 30 days of this letter’s date – you complete the form accessible at http://oag.ca.gov/sb657 and provide this office with (1) the web links (URLs) to both your company’s Transparency in Supply Chains Act disclosures and its homepage containing a link to the disclosures; and/or (2) information demonstrating your company is not covered by the Act.

There are no financial penalties for noncompliance. Rather, companies can face reputational damage and/or an order from the Attorney General to post something on their websites. A company complies even if that disclosure states that the company does no training, auditing, certification, monitoring or anything else related to human trafficking or slavery. The client I spoke to last week is very specialized and all of its customers are other businesses. Based on their business profiles, those “consumers” are not likely to make purchasing decisions based on human rights due diligence. I will be talking to another client in a few weeks on the California law. That client is business to consumer but its consumers specifically focus on low cost—that’s the competitive advantage for that client. Neither company-- the B2B nor the B2 (cost conscious)C-- is likely to lose significant, if any business merely because they don’t do extensive due diligence on their supply chains. Similarly, Apple, which has done a great job on due diligence for the conflict minerals law will not set records with the sale of the Apple Watch because of its human rights record. I bet that if I walked into an Apple Store and asked how many had seen or heard of Apple’s  state of the art conflict minerals disclosure, the answer would be less than 1% (and that would be high).

People buy products because they want them. The majority of people won’t bother to look for what’s in or behind the product, although that information is readily available through apps or websites. If that information stares the consumer in the face (thanks Starbucks), then the consumer may make a different choice. But that assumes that (1) the consumer cares and (2) there is an equally viable choice.

To be clear, I believe that companies must know what happens with their suppliers, and that there is no excuse for using trafficked or forced labor. But I don’t know that the use of disclosures is the way to go. Some boards will engage in the cost benefit analysis of reputational damage and likelihood of enforcement  vs cost of compliance rather than having a conversation about what kind of company they want to be. Many board members will logically ask themselves, “should we care if our customers don’t care?”

My most recent law review article covers this topic in detail. I’ll post it in the next couple of weeks because I need to revise it to cover the April development on the California law, and the EU’s vote on May 19 on their own version of the conflict minerals law. In the meantime, ignorance is bliss. I’m staying out of Starbucks and any other restaurant that posts calories- at least during the stressful time of grading exams.

May 14, 2015 in Corporate Finance, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Ethics, International Business, Law Reviews, Marcia Narine, Securities Regulation | Permalink | Comments (3)

Explaining the Duality of Corporate Wrongdoers

My post from last week posed the question of why corporate executives do what they do.  Why do they commit unethical and illegal acts?  If you ask almost anyone this, the answer comes back the same: corporate executives are greedy.  That’s why they lie, cheat, and steal.  Follow that up with the question of what should be done about it, and most people say that more law and more prison time is the solution

I’ve never bought into that thinking (as to the cause or the fix).  Sure, some of us are greedy.  And some small percentage of us are looking to break the law to advance our own interests at every opportunity.  But I’ve seen too many good people do bad things, and vice versa, to think that the cause of illegal corporate behavior (or almost any behavior) is somehow an inherently binary condition—good or bad, right or wrong, greedy or selfless.  The reality is that many of us are both good and bad at the same time.  But how does that actually work?  How can someone like Rajat Gupta, the former managing director of Goldman Sachs, spend his time chairing three international humanitarian organizations and positively impacting “humanity writ large” (can you say that?), while also passing boardroom secrets to his billionaire hedge fund pal, Raj Rajaratnam

Criminological and behavioral ethics theories help explain this duality.  In the 1960’s, a criminologist named Donald Cressey conducted a study of hundreds of convicted embezzlers.  Cressey determined that three key elements are necessary for violations of trust—the essence of almost all white-collar crime—to occur: (1) an individual possesses a “nonshareable problem,” i.e., a problem the individual feels cannot be solved by revealing it to others; (2) the individual believes the problem can be solved in secret by violating a trust, which is usually tied to their employment; and (3) the individual “verbalizes” the relationship between the nonshareable problem and the illegal solution in “language that lets him look on trust violation as something other than trust violation.”  Put another way, the individual uses words and phrases during an internal dialogue that makes the behavior acceptable in his mind, such as by telling himself he is “borrowing” the embezzled money and will pay it back.  Cressey believed that these verbalizations—what we commonly call rationalizations—were “the crux of the problem” of white collar crime, because they allowed an offender to keep his perception of himself as an honest citizen intact while acting in a criminal manner.  This, in essence, is the psychological mechanism that allows good people to do bad things.

Importantly, Cressey (and others after him) found that rationalizations were not simply after-the-fact excuses offenders used to lessen their culpability upon being caught.  Instead, rationalizations were “vocabularies of motive,” words and phrases that existed as group definitions labeling deviant behavior as appropriate, rather than excuses invented by the offender “on the spur of the moment.”  In other words, offender rationalizations are drawn from larger society and put into use prior to the commission of criminal acts.  This insight—that offenders rationalize their unethical or criminal conduct before they act, which then allows their conduct to proceed—is considered a key insight into white collar criminal behavior and has greatly influenced criminologists and behavioral ethicists alike.

In the next post, I will set out some of the most common rationalizations used by white collar offenders.  And we’ll see that these rationalizations are present in many, if not most, of today’s headline-grabbing cases of corporate wrongdoing.

May 14, 2015 in Corporate Governance, Ethics, White Collar Crime | Permalink | Comments (0)

Friday, May 8, 2015

Scholarship & Advocacy Conflicts + Corporate Constitutional Rights

Thanks to faithful BLPB reader Scott Killingsworth for the tip about this new article appearing in the New Yorker detailing the scholarship and advocacy of renowned Harvard constitutional law professor Laurence Tribe.  The article raises questions about conflicts of interest between scholarship and advocacy.

[I]t would also be foolish to ignore the inherent tension in searching for truth while also working for paying clients. The scholar-warrior may lapse into a far more contemptible figure: the scholar for hire, who sells his name and his title for cash. A subtler danger comes from the well-known and nearly unavoidable tendency lawyers have of identifying with their clients. 

The article also highlights his role in the current debate on corporate constitutional rights.

Tribe has taken a strong view of individual rights; his view of corporate rights is similar, and in this capacity he has at times advanced constitutional arguments that might invalidate great parts of the administrative state, in a manner recalling the Supreme Court’s jurisprudence of the nineteen-twenties and thirties. In that sense, the current condemnation of Tribe can be seen as part of a larger progressive backlash against the use of the Bill of Rights to serve corporate interests.

This short article is absolutely worth making your Friday procrastination list or your weekend "catch-up" reading list.

-Anne Tucker

May 8, 2015 in Anne Tucker, Constitutional Law, Corporate Personality, Corporations, Ethics, Law School | Permalink | Comments (0)

Thursday, May 7, 2015

Why Do Corporate Executives Do What They Do?

As I begin my guest spot here at Business Law Profs Blog, I’ve really enjoyed reading the recent posts by Ann Lipton (here) and Marcia Narine (here) on corporate whistleblowers.  What has always fascinated me about whistleblowers is the “why” question: why do they do it knowing all the negatives—to their career, their family, their psyche—in store for them? 

While I don’t have any great insights as to the answer (although others do), trying to figure out why corporate executives do what they do—particularly in the realm of business ethics and white collar crime—is something I’ve been focused on for a while, first as a white collar criminal defense attorney and now as an academic.  One way I’ve tried to look at the issue is by pulling together disciplines that provide some understanding of why business people commit bad acts and what our collective response to that should be.  This has led me primarily into the areas of criminology, behavioral ethics, and federal sentencing.  And what emerges from that soup, at least for me, is the concept of rationalization—that very powerful, and very human, way of viewing oneself positively (say, as an upstanding citizen, family man, etc.), while taking actions inconsistent with that view according to society’s standards (say, by passing a stock tip to a friend, misrepresenting your company’s financials, etc.).  I see rationalization as the critical step in the commission of white collar crime, and thus what should be the focus of our corporate compliance and white collar crime enforcement efforts. 

Over the next few posts, I’ll try and flesh out these ideas, explaining how rationalizations operate, their most common iterations in the white collar world, and how our current regulatory and corporate compliance efforts, by failing to consider the role of rationalizations, might actually be leading to more corporate wrongdoing. 

Stay tuned.

May 7, 2015 in Ethics, White Collar Crime | Permalink | Comments (0)

Friday, May 1, 2015

Guest Blogger: Todd Haugh

Thaugh_med

Professor Todd Haugh (Indiana University - Kelley School of Business) will be joining us as a guest blogger for the month of May. Todd is an assistant professor of business law & ethics and has focused his research on white collar crime and sentencing. His most recent work deals with "the financial crisis and how white collar offenders rationalize their conduct." We welcome Todd to the Business Law Prof Blog and look forward to his posts.   

May 1, 2015 in Business School, Ethics, Haskell Murray | Permalink | Comments (2)

The New White Collar Whistleblower: Compliance and Audit Professionals as Tipsters

I’ve been thinking a lot about whistleblowers lately. I serve as a “management” representative to the Department of Labor Whistleblower Protection Advisory Committee and last week we presented the DOL with our recommendations for best practices for employers. We are charged with looking at almost two dozen whistleblower laws. I've previously blogged about whistleblower issues here.

Although we spend the bulk of our time on the WPAC discussing the very serious obstacles for those workers who want to report safety violations, at the last meeting we also discussed, among other things, the fact that I and others believed that there could be a rise in SOX claims from attorneys and auditors following the 2014 Lawson decision. In that case, the Supreme Court observed that: “Congress plainly recognized that outside professionals — accountants, law firms, contractors, agents, and the like — were complicit in, if not integral to, the shareholder fraud and subsequent cover-up [Enron] officers … perpetrated.” Thus, the Court ruled, those, including private contractors, who see the wrongdoing but may be too fearful of retaliation to report it should be entitled to SOX whistleblower protection.

We also discussed the SEC's April KBR decision, which is causing hundreds of companies to revise their codes of conduct, policies, NDAs, confidentiality and settlement agreements to ensure there is no language that explicitly or implicitly prevents employees from reporting wrongdoing to the government or seeking an award.

Two weeks ago, I spoke in front of a couple hundred internal auditors and certified fraud examiners about how various developments in whistleblower laws could affect their investigations, focusing mainly on Sarbanes-Oxley and Dodd-Frank Whistleblower. I felt right at home because in my former life as a compliance officer and deputy general counsel, I spent a lot of time with internal and external auditors. Before I joined academia, I testified before Congress on what I thought could be some flaws in the law as written. Specifically, I had some concerns about the facts that: culpable individuals could receive awards; individuals did not have to consider reporting wrongdoing internally even if there was a credible, functioning compliance program; and that those with fiduciary responsibilities were also eligible for awards without reporting first (if possible), which could lead to conflicts of interest. The SEC did make some changes to Dodd-Frank. The agency now weighs the whistleblower’s participation in the firm’s internal compliance program as a factor that may increase the whistleblower’s eventual award and considers interference with internal compliance programs to be a factor that may decrease any award. It also indicated that compliance or internal audit professionals should report internally first and then wait 120 days before going external.

Before I launched into my legal update, I gave the audience some sobering statistics about financial professionals:

  • 23% have seen misconduct firsthand
  • 29% believe they may have to engage in illegal or unethical conduct to be successful
  • 24% would engage in insider trading if they could earn $10 million and get away with it 

I also shared the following awards with them:

  • $875,000 to two individuals for “tips and assistance” relating to fraud in the securities market;
  • $400,000 to a whistleblower who reported fraud to the SEC after the employee’s company failed to address internally certain securities law violations;
  • $300,000 to an employee who reported wrongdoing to the SEC after the company failed to take action when the employee reported it internally first;
  • $14 million- tip about an alleged Chicago-based scheme to defraud foreign investors seeking U.S. residency; and
  • More than $30 million to a tipster living in a foreign country, who would have received more if he hadn't delayed reporting

I also informed them about a number of legal developments that affect those that occupy a position of trust or confidence. These white-collar whistleblowers have received significant paydays recently. Last year the SEC paid  $300,000 to an employee who performed “audit or compliance functions.” I predicted more of these awards, and then to prove me right, just last week, the SEC awarded its second bounty to an audit or compliance professional, this time for approximately 1.4 million.

I asked the auditors to consider how this would affect their working with their peers and their clients, and how companies might react. Will companies redouble their efforts to encourage internal reporting? Although statistics are clear that whistleblowers prefer to report internally if they can and don’t report because they want financial gain, will these awards embolden compliance, audit, and legal personnel to report to the government? Will we see more employees with fiduciary duties coming forward to report wrongdoing? Does this conflict with any ethical duties imposed upon lawyers or compliance officers with legal backgrounds? SOX 307 describes up the ladder reporting requirements, but what happens to the attorney who chooses to go external? Will companies consider self-reporting to get more favorable deferred and nonprosecution agreements to pre-empt the potential whistleblower?

I don’t have answers for any of these questions, but companies and boards should at a minimum look at their internal compliance programs and ensure that their reporting mechanisms allow for reports from outside counsel and auditors. In the meantime, it’s now entirely possible that an auditor, compliance officer, or lawyer could be the next Sherron Watkins.

And by the way, if you were in Busan, South Korea last Wednesday, you may have heard me on the morning show talking about whistleblowers. Drop me a line and let me know how I sounded. 

May 1, 2015 in Case Law, Corporate Governance, Corporations, Current Affairs, Ethics, Financial Markets, Legislation, Marcia Narine, Securities Regulation | Permalink | Comments (0)

Friday, April 17, 2015

UConn Social Enterprise and Entrepreneurship Conference│ Storrs, CT │ April 23-24, 2015

SE2-Logo2

At the end of next week, I will be at the University of Connecticut School of Business and the Thomas J. Dodd Research Center for their Social Enterprise and Entrepreneurship Conference.

Further information about the conference is available here, a portion of which is reproduced below:

In October 2014, Connecticut joined a growing number of states that empower for-profit corporations to expand their core missions to expressly include human rights, environmental sustainability, and other social objectives. As a new legal class of businesses, these benefit corporations join a growing range of social entrepreneurship and enterprise models that have the potential to have positive social impacts on communities in Connecticut and around the world. Designed to evaluate and enhance this potential, SE2 will feature a critical examination of the various aspects of social entrepreneurship, as well as practical guidance on the challenges and opportunities presented by the newly adopted Connecticut Benefit Corporation Act and other forms of social enterprise.

Presenters at the academic symposium on April 23 are:

  • Mystica Alexander, Bentley University
  • Norman Bishara, University of Michigan
  • Kate Cooney, Yale University
  • Lucien Dhooge, Georgia Institute of Technology
  • Gwendolyn Gordon, University of Pennsylvania
  • Gil Lan, Ryerson University
  • Diana Leyden, University of Connecticut
  • Haskell Murray, Belmont University
  • Inara Scott, Oregon State University

Presenters at the practitioner conference on April 24 are:

  • Gregg Haddad, State Representative, Connecticut General Assembly (D-Mansfield)
  • Spencer Curry & Kieran Foran, FRESH Farm Aquaponics
  • Sophie Faris, Community Development, B-Lab
  • James W. McLaughlin, Associate, Murtha Cullina LLP
  • Michelle Cote, Managing Director, Connecticut Center for Entrepreneurship and Innovation
  • Mike Brady, CEO, Greyston Bakery
  • Jeff Brown, Executive Vice President, Newman’s Own Foundation
  • Justin Nash, President, Veterans Construction Services, and Founder, Til Duty is Done
  • Vishal Patel, CEO & Founder, Happy Life Coffee
  • Anselm Doering, President & CEO, EcoLogic Solutions
  • Dafna Alsheh, Production Operations Director, Ice Stone
  • Tamara Brown, Director of Sustainable Development and Community Engagement, Praxair

April 17, 2015 in Business Associations, Business School, Conferences, Corporate Governance, CSR, Entrepreneurship, Ethics, Haskell Murray, Social Enterprise | Permalink | Comments (0)

Thursday, April 16, 2015

The EU's Conflict over Conflict Minerals

Regular readers know that I have blogged repeatedly about my opposition to the US Dodd-Frank conflict minerals rule, which aims to stop the flow of funds to rebels in the Democratic Republic of Congo. Briefly, the US law does not prohibit the use of conflict minerals, but instead requires certain companies to obtain an independent private sector third-party audit of reports of the facilities used to process the conflict minerals; conduct a reasonable country of origin inquiry; and describe the steps the company used to mitigate the risk, in order to improve its due diligence process. The business world and SEC are awaiting a First Amendment ruling from the DC Circuit Court of Appeals on the “name and shame” portion of the law, which requires companies to indicate whether their products are DRC Conflict Free.” I have argued that it is a well-intentioned but likely ineffective corporate governance disclosure that depends on consumers to pressure corporations to change their behavior.

The proposed EU regulation establishes a voluntary process through which importers of certain minerals into the EU self-certify that they do not contribute to financing in “conflict-affected” or “high risk areas.” Unlike Dodd-Frank, it is not limited to Congo. Taking note of various stakeholder consultations and the US Dodd-Frank law, the EU had originally limited the scope to importers, and chose a voluntary mechanism to avoid any regional boycotts that hurt locals and did not stop armed conflict. Those importers who choose to certify would have to conduct due diligence in accordance with the OECD Guidance, and report their findings to the EU. The EU would then publish a list of “responsible smelters and refiners,” so that the public will hold importers and smelters accountable for conducting appropriate due diligence. The regulation also offers incentives, such as assistance with procurement contracts.

One of the problems with researching and writing on hot topics is that things change quickly. Two days after I submitted my most recent article to law reviews in March criticizing the use of disclosure to mitigate human rights impacts, the EU announced that it was considering a mandatory certification program for conflict minerals. That meant I had to change a whole section of my article. (I’ll blog on that article another time, but it will be out in the Winter issue of the Columbia Human Rights Law Review). Then just yesterday, in a reversal, the European Parliament’s International Trade Committee announced that it would stick with the original voluntary plan after all.The European Parliament votes on the proposal in May.

Reaction from the NGO community was swift. Global Witness explained: 

Today the European Parliament’s Committee on International Trade (INTA) wasted a ground-breaking opportunity to tackle the deadly trade in conflict minerals. […] Under this proposal, responsible sourcing by importers of tin, tantalum, tungsten and gold would be entirely optional. The Commission’s proposed voluntary self-certification scheme would be open to approximately 300-400 companies—just 0.05% of companies using and trading these minerals in the EU, and would have virtually no impact on companies’ sourcing behaviour. The law must be strengthened to make responsible sourcing a legal requirement for all companies that place these minerals on the European market–in any form. This would put the European Union at the forefront of global efforts to create more transparent, responsible and sustainable business practices. It would also better align Europe with existing international standards on responsible sourcing, and complement mandatory requirements in the US and in twelve African countries.

I’m all for due diligence in the supply chain and for forcing companies to minimize their human rights impacts. Corporations should do more than respect human rights-- they must pay when they cause harm. I plan to spend part of my summer researching and writing in Latin America about stronger human rights protections for indigenous peoples and the deleterious actions of some multinationals.

But a mandatory certification scheme on due diligence is not the answer because it won’t solve deep, intractable problems that require much more widespread reform. To be clear, I don't think the EU has the right solution either. Reasonable people can disagree, but perhaps the members of the EU Parliament should look to Dodd-Frank. SEC Chair Mary Jo White disclosed last month that the agency had spent 2.75 million dollars, including legal fees, and 17,000 hours writing and implementing the conflict minerals rule. A number of scholars and activists have argued that the law has in fact harmed the Congolese it meant to help and news reports have attempted to dispel some of the myths that led to the passage of the law.

So let’s see what happens in May when the EU looks at conflict minerals again. Let’s see what happens in June when the second wave of Dodd-Frank conflict minerals filings come in. As I indicated in my last blog post about Dodd-Frank referenced above, the first set of filings was particularly unhelpful. And let’s see what happens in December when parents start the holiday shopping—how many of them will check on the disclosures before buying electronics and toys for the members of their family? Most important, let's see if someone can actually tie the money and time spent on conflict minerals disclosure directly to lower rates of rape, child slavery, kidnapping, and forced labor-- the behaviors these laws intend to stop. 

April 16, 2015 in Corporate Governance, Corporations, CSR, Current Affairs, Ethics, Financial Markets, International Business, Law Reviews, Marcia Narine, Securities Regulation | Permalink | Comments (0)

Thursday, April 9, 2015

Would the world be a better place if law students were shareholders?

It’s that time of year again where I have my business associations students pretend to be shareholders and draft proposals. I blogged about this topic last semester here. Most of this semester’s proposals related to environmental, social and governance factors. In the real world, a record 433 ESG proposals have been filed this year, and the breakdown as of mid-February was as follows according to As You Sow:

Environment/Climate Change- 27%

Political Activity- 26%

Human Rights/Labor-15%

Sustainability-12%

Diversity-9%

Animals-2%

Summaries of some of the student proposals are below (my apologies if my truncated descriptions make their proposals less clear): 

1) Netflix-follow the UN Guiding Principles on Business and Human Rights and the core standards of the International Labour Organization

2) Luxottica- separate Chair and CEO

3) DineEquity- issue quarterly reports on efforts to combat childhood obesity and the links to financial risks to the company

4) Starbucks- provide additional disclosure of risks related to declines in consumer spending and decreases in wages

5) Chipotle- issue executive compensation/pay disparity report

6) Citrix Systems-add board diversity

7) Dunkin Donuts- eliminate the use of Styrofoam cups

8) Campbell Soup- issue sustainability report

9) Shake Shack- issue sustainability report

10) Starbucks- separate Chair and CEO

11) Hyatt Hotels- institute a tobacco-free workplace

12) Burger King- eliminate GMO in food

13) McDonalds- provide more transparency on menu changes

14) Google-disclose more on political expenditures

15) WWE- institute funding cap

One proposal that generated some discussion in class today related to a consumer products company. As I skimmed the first two lines of the proposal to end animal testing last night, I realized that one of my friends was in-house counsel at the company. I immediately reached out to her telling her that my students noted that the company used to be ”cruelty-free,” but now tested on animals in China.  She responded that the Chinese government required animal testing on these products, and thus they were complying with applicable regulations. My students, however, believed that the company should, like their competitors, work with the Chinese government to change the law or should pull out of China.  Are my students naïve? Do companies actually have the kind of leverage to cause the Chinese government to change their laws? Or would companies fail their shareholders by pulling out of a market with a billion potential customers? This led to a robust debate, which unfortunately we could not finish.

I look forward to Tuesday’s class when we will continue these discussions and I will show them the sobering statistics of how often these proposals tend to fail. Hopefully we can also touch on the Third Circuit decision, which may be out on the Wal-Mart/Trinity Church shareholder proposal issue.These are certainly exciting times to be teaching about business associations and corporate governance.

April 9, 2015 in Business Associations, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Ethics, Financial Markets, Law School, Marcia Narine, Securities Regulation, Teaching | Permalink | Comments (1)

Tuesday, April 7, 2015

Time to Grow Up: the Business of College Sports, Men's Basketball Edition

So, Duke is the 2015 NCAA Men's Basketball champion. As a Michigan State basketball fan, this was at least mildly gratifying because the Spartans final losses the past two seasons have been to the eventual champion. (MSU's final two losses this season: Wisconsin and Duke.) Hardly the same as winning the whole thing, but after a loss, one takes what one can get. 

This semester I am teaching Sports Law for the first time, and it has been an interesting and rewarding experience. As our recent guest, Marc Edelman, recently noted, there is a lot going on right now in college sports (there probably always is), with questions about paying NCAA players and players' rights to unionize, among other things, leading the way.  

I am a big fan of college sports, and I generally prefer college sports to professional sports. I don't, however, have any illusion that big-time college sports are, in any real sense, pure or amateur. (For that matter, I don't know what "pure" means, but I hear complaints that colleges sports are "no longer pure," so it appears there is some benchmark somewhere.)  College sports are a modified form of professional sports or, as the term I used to hear from time to time in other contexts, semi-pro sports.

What College Sports Are

College sports, in the simplest sense, are highly talented young people competing on behalf of educational institutions in exchange for the opportunity to pursue a mostly funded college education, if they so choose and can make it fit in with their athletic obligations.  The athletes are compensated for their efforts with opportunities that are varied and wide ranging, depending on the athlete and the institution for which they compete.  

Obviously, the experience for the high-profile college athlete -- generally football and men's and women's basketball -- is different from that of the less-watched sports, such as gymnastics, track, and golf.  But in all instances, the athletes represent their institution on and off the field, and they all have significant obligations that come along with their participation on their team. (Not all athletes have full or even partial scholarships, which can vary the obligations, though often all athletes have similar requirements.)

(To read more, please click below)

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April 7, 2015 in Current Affairs, Ethics, Joshua P. Fershee, Law and Economics, Sports | Permalink | Comments (2)

Thursday, March 26, 2015

Corporations, the State, and the Rule of Law- Call for Papers

Below is a call for papers and description of a weeklong project on business and human rights. If you are interested, please contact one of the organizers below. I plan to participate and may also be able to answer some questions.

Lat Crit Study Space Project in Guatemala

Corporations, the State, and the Rule of Law

We are excited to invite you to participate in an exciting Study Space Project in Guatemala. Study Space, a LatCrit, Inc. initiative, is a series of intensive workshops, held at diverse locations around the world. This 2015 Study Space project involves a 7 working day field visit to Guatemala between Saturday June 27 (arrival date) and Saturday July 4, 2015 (departure date).  We are reaching out to you because we believe that your interests, scholarship, and service record align well with the proposed focus of our trip.

This call for papers proposes a trip to Guatemala to study more closely the phenomena of failed nations viewed from the perspective of the relationship of the state of Guatemala with corporations. With the recent surge of Central American unaccompanied minors and children fleeing with their mothers, the United States has had to confront the human face of children and women whose claim to asylum or other immigration relief is rooted in the dire reality that the countries from which they flee cannot or will not protect them. Largely, these fleeing migrants are escaping violence perpetuated by private actors, at times gang members or even their own parents or spouses. Their stories of flight cannot be disengaged from the broader context in which the violence occurs. Theirs is also the story of failed nations, characterized by ineptitude, weakness, and even worse, indifference or at times even complicity.

This story of failed nations applies beyond the reign of private “rogues” whom everyone agrees are bad actors (i.e., gangs, drug traffickers, violent criminals). The other side of the coin, invisible in this new wave of Central American refugees, is a more nuanced story about the failing role of some of these Central American nations in regulating the acts of corporations, whether owned by the oligarchy or operated by transnational actors. Corporations are entities with great potential to promote and further the public good, such as through job creation and economic development. Corporations, however, can also be the cause of social ills, particularly when left unregulated or at times even supported by the state to pursue private interests that conflict with the public good. In Guatemala, examples of deeply problematic unregulated arenas abound-- from the lack of antitrust legislation to the absence of meaningful environmental protections to protect even the most precious of natural resources, such as water. There is also the misuse of public institutions and laws to shield corporations from their public and fiscal responsibility or to aid them in capitalizing on public goods, including minerals or land. Ironically, here, the state apparatus functions quite effectively to exert its authority in the execution of laws. The failure, however, rests in the illegitimacy of law, not in its execution.

Guatemala is a nation that is experiencing tremendous social upheaval from the acts of corporations on issues that include mining, water uses, deforestation, genetically modified seeds, free-trade zones, and maquiladoras, to name a few. Caught between the state and corporations are the communities most deeply affected by both the absence and the presence of law in ways that appear to conflict with the public interest. The questions that arise include how law can and should restore the balance between the promotion of investment and economic development with the protection of the public interest and the preservation of the public good. These inquiries also involve issues related to the protection of rights, whether of individuals or communities in the collective, including the right to self-determination, the right to food and water, or the right to dignified work.

The purpose of this trip is not to single out Guatemala for scrutiny. The reality is that the bilateral and multilateral relations that Guatemala is forced to sustain with other more powerful nations aggravate many of its pressing problems. Questions about Guatemala’s regulation of corporations must also address the relationship between the powerful transnational forces of globalization and the domestic laws of Guatemala, including those related to trade liberalization and intellectual property. This inquiry must also acknowledge how the absence of accountability of transnational corporations operating in Guatemala in the corporation’s own nation-state – including the power these corporations have to influence law-making-- should lead us to a discussion of shared responsibility and a proposal for solutions that are transnational and international in character.

Should you decide to participate, you would be encouraged and welcomed to suggest specific topics (and field visits) you would like to be included as part of this project. While we are still working on a precise itinerary (which you can help us shape), our projected goals right now are to visit with government officials, non-profits, community groups and the private sector with a special focus on labor and environment. The trip would include time in Guatemala City but also time in key rural sectors. For example, we are planning to visit a transnational mining site and the free-trade zone where maquiladoras are concentrated in Guatemala. As part of the trip, we will include orientations and debriefings with the group so we can share knowledge, impressions, and insights as the trip progresses. 

The cost of your participation (excluding flight) is $1,900.  This fee will cover housing, food, in-country transportation, conference space, and other fees that we will pay such as to translators, community groups assisting with logistics, and a modest fee to Luis Mogollón (a Guatemalan lawyer with significant law school academic program development experience in Guatemala) who will spend countless hours making this trip safe and enjoyable for all of us.  The flight to Guatemala from the United States should range between $600 to $800. 

Our aim is to publish essays from this project as a book in Spanish and English. We hope to have between 15-20 contributions. While ideally participants will speak Spanish, we can accommodate non-Spanish speakers (or those who only speak “un poquito”) and will hire interpreters to work with you during the trip to Guatemala.  Keep in mind that you may need to conduct some research in Spanish (at least for primary sources) depending on the focus on your project. We also hope to present papers about this project at several conferences upon the completion of our project, including at LatCrit, Inc. and ideally in Guatemala.

The organizing Committee is comprised of Raquel Aldana, Associate Dean for Faculty Scholarship at Pacific McGeorge School of Law; Steven Bender, Associate Dean for Research and Faculty Development at Seattle University School of Law; José R. Juárez, Professor of Law and Director of the Spanish for Lawyers Program at the University of Denver, Sturm College of Law; Beth Lyon, Director of the Farmworker Legal Aid Clinic and Professor of Law at Villanova University School of Law; Mario Mancilla, Technical Assistant of the Secretariat of Environmental Matters, CAFTA-DR; Luis Mogollón, Adjunct Professor and Consultant of the Inter-American Program from Pacific McGeorge; Rachael Salcido, Professor of Law at Pacific McGeorge School of Law; and Enrique Sánchez-Usera, Chair of the Inter-Disciplinary Studies at the University of Rafael Landívar Law School.

Please do not hesitate to contact any of us with questions. We do hope you decide to join us in this great project.

 

 

March 26, 2015 in Business Associations, Call for Papers, Corporate Governance, Corporations, CSR, Current Affairs, Ethics, International Business, Law Reviews, Marcia Narine, Travel | Permalink | Comments (0)

Friday, March 13, 2015

The Sweet Briar Situation

If you keep up with higher education news, you have already read about the decision to close Sweet Briar College. This story hit close to home, in part because I am a professor and in part because I graduated from a small liberal arts college.

My biggest question is why the administration took so long to tell the students and faculty. By making the announcement in the spring semester, the administration seems to have harmed students who will be looking to transfer and faculty members who will be looking for new jobs. More reading on the faculty members' situation is available in The Atlantic.

Given the general demand for students, I assume the students will be able to find new college homes, though their options might be be somewhat more limited than if the announcement were made in the fall. Most of the Sweet Briar College faculty members, however, will be in an incredibly tough bind. Most academic hiring happens during the fall semester.

With a nearly $100 million endowment (some of which is supposedly restricted), one wonders whether the administration could have kept the school open for one more school year, for the benefit of the faculty and students looking for a place to land. Alternatively, what prevented an announcement this past fall? Perhaps administration worried about students and faculty leaving en masse if given longer lead time, but if the school is closing anyway, I do not see why that would be a problem. Perhaps creditors played a role?

Also, I wonder why the school did not make a more desperate and direct plea to their alums. Instead of abruptly announcing that the school would close, why didn't the administration say that the school would close unless they raise X dollars in Y time period?

As outsiders, we obviously do not know all the facts, but, in any event, it appears to be a sad situation.

March 13, 2015 in Ethics, Haskell Murray, Teaching | Permalink | Comments (1)

Competition: Winning and How You Play the Game

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At Belmont, we have been basking in the glow of a dramatic win in the men’s basketball OVC championship game.

While I could not be prouder of all the members of our team, many of whom are majoring in business, I am most proud of the way they played and conducted themselves – with heart, effort, intelligence, humility, confidence, and class. Murray State, holder of a 25-game win-streak and ranked #25 in the country coming into the game, played just as hard and conducted themselves with class as well.

The OVC championship game was the best basketball game I have ever seen and it was a shame that either team had to lose. In the unlikely event that any selection committee members are reading this, I think Murray State deserves a spot in the NCAA tournament as well; how do you justify dropping a team from #25 to outside the top-68 teams after a well-played 1-point loss to another strong team?

Since that basketball game, I have been thinking a lot about “winning” as compared to “how you play the game.” Growing up, I was insanely competitive and was obsessed with winning. I loved the quote attributed to Vince Lombardi: “winning isn’t everything, it is the only thing” and I despised the claim that “it isn’t whether you win or lose, it is how you play the game.” (Interestingly, some argue that Lombardi never said those words, claiming instead that he said “[w]inning is not everything, but making the effort to win is,” which is much closer to the statement I despised.) 

Perhaps, I am getting softer as I age or maybe it is being a father that is changing me, but I now believe that how you play the game is much more important than whether you win or lose. Results of games, like Belmont’s recent one, could turn on a fraction of an inch, but conduct during the entire game (and before and after the game) tells you a great deal more about the character of the competitors. 

I am still not in the “everyone gets a trophy” camp and I still think winning and losing are important parts of competition, but I do think that “winning” should be subordinated to certain overriding principles. When the overriding principles govern, you get things like Bobby Bowden sharing his playbook with the Marshall University team that lost most of its members in a plane crash OR the carrying of an injured opponent around the bases OR the helping of a fallen runner. When winning is seen as “the only thing,” teams and individuals skirt rules to gain an advantage (doping in baseball, cycling, and track; recruiting violations; spygate; deflategate; etc.)

Next week I will apply some of these concepts to business. 

March 13, 2015 in Ethics, Haskell Murray, Sports | Permalink | Comments (0)

Thursday, March 12, 2015

Should Law Professors Abstain From Online NCAA Tournament Pools?

This Sunday, the NCAA will announce the 68 basketball teams that are scheduled to participate in this year's men's basketball tournament.  Then, the true "madness" begins.  

At many schools, one or more professors will likely organize an NCAA Tournament pool.  The pool will likely include entry fees and prize money. The pool's rules and standings will often appear on a public website.

All of this may sound like innocuous fun -- especially during the anxiety-ridden days of waiting for ExpressO and Scholastica acceptances to arrive.  However, law professors playing in online, pay-to-enter NCAA Tournament pools technically are acting in violation of several federal laws -- albeit, laws that are rarely enforced,

One federal law that seems to prohibit online, pay-to-enter NCAA Tournament pools is the Interstate Wire Act of 1961.  This act disallows individuals from “engaging in the business of betting or wagering [through the knowing use of] a wire communication for the transmission in interstate or foreign commerce.”  According to various recent court decisions, the Wire Act applies to contests hosted via the Internet, as well as those hosted over the phone.  And even though the act was originally passed to crack down on organized crime, even "upstanding" individuals such as law professors, at least in theory, are not immune from prosecution.

A second federal law that seems to prohibit online, pay-to-enter NCAA Tournament pools is the Professional and Amateur Sports Protection Act ("PASPA").  Passed in 1992 at the behest of America’s five premier professional sports leagues (including the NCAA), PAPSA makes it illegal for any private person to operate a wagering scheme based on a competitive game in which “professional or amateur athletes participate."  Of course, PASPA includes a grandfather clause that exempts previously authorized government sponsored sports gambling in four states -- Nevada, Delaware, Oregon, and Montana.  But it doesn't include any exception whatsoever for private March Madness pools.

Finally, a third federal law that may disallow online, pay-to-enter NCAA Tournament pools is the Uniform Internet Gambling Enforcement Act.  This act, which was passed most recently in 2006, makes it illegal for those "engaged in the business of betting or wagering" to “knowingly accept” funds in connection with the participation of another person in unlawful Internet gambling.  Although the UIGEA offers a special carve-out provision for “fantasy sports,” this carve-out does not apply to March Madness pools because winning outcomes are based on the final score of actual game results, and not individual player performances

Of course, the likelihood of anyone going to jail for simply participating in an online NCAA Tournament pool may seem next to nil.  But if you are going to play in one of these contests, I have two simple recommendations: (1) let someone else other than you collect the money; and (2) encourage the host to 'grade' the brackets by hand, rather than posting contestant names and picks on an Internet website.

March 12, 2015 in Ethics, Games, Sports, Web/Tech | Permalink | Comments (1)

Friday, March 6, 2015

March Madness Is Coming -- And Legally Speaking, It Is Madness

Ten days from now will mark the start of the 2015 NCAA men's basketball tournament -- one of the most watched sporting events of the year.   Recently, the NCAA sold 14 years worth of television broadcast rights to the NCAA Tournament for $10.8 Billion.  On an annual basis, that comes to an annual sum of  $770 Million per year.  

The athletes who play in these games, by contrast, do not receive any share of the derived revenues, nor are they allowed to endorse products or sign autographs for money.  In addition, the most successful teams in this tournament will have athletes that are required to miss upwards of nine class days based on a tournament schedule that is created to accommodate television broadcasts.

As a guest blogger for the month of March, I will be discussing the legal issues related to NCAA amateurism and the economic realities of the NCAA men's basketball tournament.  Some of the topics I will discuss include why the NCAA is indeed an economic cartel, why the U.S. district court's decision in O'Bannon v. NCAA does not go far enough to protect college athletes, why perhaps the National Labor Relations Board should grant college athletes the right to unionize, and how the NCAA men's basketball tournament could be structured differently if student education, rather than athletic revenues, were truly a top priority.  

Thank you to Haskell Murray for providing me with this wonderful forum to share my ideas and scholarship.  And to all of the Business Law Prof Blog readers, please do not worry: I have no plans to be a Debbie Downer.  I will, however, talk seriously about the economic and legal realities of college sports and how we, as academics, can make a difference.

March 6, 2015 in Current Affairs, Ethics, Games, Sports | Permalink | Comments (0)

Friday, February 20, 2015

Did Wal-Mart Prove Me Wrong? Do Boycotts Work?

I have just finished a draft of an article arguing that disclosures don’t work because consumers and investors don’t read them, can’t understand them, don't take any real action when they do pay attention to them, and fail to change corporate behavior when they do threaten boycott. I specifically pointed out the relative lack of success of consumer protests over the years. I also noted that Wal-Mart continues to get bad press for how it treats its employees despite the fact the Norwegian Pension Fund divested hundreds of millions of dollars due to the company’s labor practices, prompting other governments and cities to follow. My thesis—it takes a lot more than divestment and threats of boycott to change company behavior. But perhaps I’m wrong. Yesterday, Wal-Mart CEO Doug McMillon announced a significant wage increase declaring:

We’re strengthening investments in our people to engage and inspire them to deliver superior customer experiences… We will earn the trust of all Walmart stakeholders by operating great retail businesses, ensuring world-class compliance, and doing good in the world through social and environmental programs in our communities.

The letter to Wal-Mart associates is here. I don’t know which was more striking, the $1 billion dollar move to $9 and then eventually $10 per hour or the fact that he used the word “stakeholders.” Wal-Mart also announced changes that would affect health insurance and shift scheduling, but the main headline concerned the wage hike. Main Street may be happy but Wall Street was not, and the stock price fell after the announcement. Others pointed out that the pay raise is still not enough to pull workers out of poverty.

Does this move mean that boycotts and advocacy really do work and that we will see more of them? Do I have to edit my article or will this be an anomaly? Will other big retailers or fast food chains follow? Will socially responsible investors reinvest in Wal-Mart? Is Wal-Mart trying to pre-empt government regulation on the minimum wage? Is Wal-Mart signaling to regulators in foreign countries that it cares about workers so should be allowed to operate there more freely? 

I will be teaching a course in transnational business and international human rights in the Fall and Wal-Mart will be a case study. A few years ago, I used the company’s CSR report in my corporate governance, compliance, and social responsibility seminar.  I asked the students to consider why Wal-Mart’s report looked and felt so different from Target’s, which essentially has many of the same labor issues. I wanted them to think about the marketing behind CSR from a reputational and regulatory perspective. I posited that Wal-Mart’s CSR report was written for regulators. Two weeks later, the company announced its massive and still ongoing bribery investigation. I’m happy for the workers but a bit curious as to what caused the company to make this announcement now. In the meantime, I will be watching the reaction from advocates, the markets, and other companies closely.  

February 20, 2015 in Corporate Governance, Corporations, CSR, Current Affairs, Ethics, Financial Markets, International Business, Marcia Narine, Teaching | Permalink | Comments (3)

Thursday, January 22, 2015

Disruption in Dublin

I have just returned from Dublin, which may be one of my new favorite cities. For the fifth year in a row, I have had the pleasure of participating as a mentor in the LawWithoutWalls (“LWOW”) program run by University of Miami with sponsorship from the Eversheds law firm. LWOW describes itself as follows:

LawWithoutWalls, devised and led by Michele DeStefano, is a part-virtual, global, multi-disciplinary collaboratory that focuses on tackling the cutting edge issues at the intersection of law, business, technology, and innovation.  LawWithoutWalls mission is to accelerate innovation in legal education and practice at the same time.  We collaborate with 30 law and business schools and over 450 academics, students, technologists, venture capitalists, entrepreneurs, business professionals, and lawyers from around the world. We seek to change how today’s lawyers approach their practice and how tomorrow’s lawyers are educated and, in so doing, sharpen the skills needed to meet the challenges posed by the economic pressures, technologization, and globalization of the international legal market. We seek to create the future of law, today. Utilizing a blend of virtual and in-person techniques, LawWithoutWalls offers six initiatives: LWOW Student Offerings,LWOW LiveLWOW INC., and LWOW Xed.  

 I first joined the program as a practitioner mentor and have now served as an academic mentor for two years. Each team has students from law or business school who develop a project of worth addressing a problem in legal education or the legal profession. Mentors include an academic, a practitioner, an entrepreneur, and an LWOW alum.

In the LWOW Live version, the students and mentors meet for the first time in a foreign city (hence the trip to Dublin) and then never see each other in person again until the Conposium, a Shark-Tank like competition in April at the University of Miami, where they present their solution to a venture capitalist, academic, and practitioner in front of a live and virtual audience.

Over the period of a few months the students and mentors, who are all in different cities, work together and meet virtually. Students also attend mandatory weekly thought leader sessions. Past topics have included developments in legal practice around the world and the necessity of a business plan. For many law students, this brings what they learned in Professional Responsibility and Business Associations classes to life. At the Dublin kickoff, audience members watched actual live pitches to venture capitalists from three startups, learned about emotional intelligence and networking from internationally-renowned experts, and started brainstorming on mini projects of worth.

This year, I am coaching a virtual LWOW Compliance team working on a problem submitted by the Ethics Resource Center. My students attend school in London and Hamburg but hail from India and Singapore. My co-mentors include attorneys from Dentons and Holland and Knight. The winner of the LWOW Compliance competition will present their solution to the Ethics Resource Center in front of hundreds of compliance officers. In past years, I have had students in LWOW Live from Brazil, Israel, China, the US, South Africa, and Spain and mentees who served as in-house counsel or who were themselves start-up entrepreneurs or investors. Representatives from the firms that are disrupting the legal profession such as Legal Zoom serve as mentors to teams as well. In the past students have read books by Richard Susskind, who provides a somewhat pessimistic view of the future of the legal profession, but a view that students and mentors should hear.

As I sat through the conference, I remembered some of the takeaways from the AALS sessions in Washington in early January. The theme of that conference was “Legal Education at the Crossroads.” Speakers explained that firms and clients are telling the schools that they need graduates with skills and experience in project management, technology, international exposure, business acumen, emotional intelligence, leadership, and working in teams. Law schools on average don’t stress those skills but LWOW does. Just today, LWOW’s team members were described as "lawyers with solutions." I agree and I’m proud to be involved in shaping those solutions.

 

January 22, 2015 in Books, Business School, Conferences, Entrepreneurship, Ethics, International Business, Law School, Marcia Narine, Teaching | Permalink | Comments (0)

Monday, January 5, 2015

Animal Law Is (Or At Least Can Be) Business Law

I just left the Association of American Law Schools annual meeting this morning.  I came back to a flat tire at the airport, but let's not dwell on that . . . .  The conference was a good one, as these zoo-like mega conferences go.  

I presented at the conference as part of a panel that focused on teaching courses and topics at the intersection of animals and the law.  (Thanks for the plug, Stefan!)  Yes, although it is a little known fact, I do teach courses involving animals and the law.  Regrettably, it is a somewhat rare thing for me, since I always have to teach these courses as an overload.  However, I also am the faculty advisor to our campus chapter of the Student Animal Legal Defense Fund and UT Pro Bono's Animal Law Project (which compiled and annually updates a Tennessee statutory resource used by animal control and other law enforcement officers, as well as other animal-focused professionals, in the State of Tennessee).  In addition, I coach our National Animal Law Competitions team.  These non-classroom activities  give me ample time to teach in different ways . . . .

I will not rehash all of my remarks from the panel presentation here.  In fact, I want to make a very limited point in this post.  While my calling to legal issues involving non-human animals is rooted in large part in being the "animal mom" of a rescue dog and rescue cat, I also participate in educational efforts in this area because I see it as my professional responsibility as a lawyer--and in particular, as a business lawyer.

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January 5, 2015 in Business Associations, Conferences, Corporations, Ethics, Joan Heminway | Permalink | Comments (1)

Thursday, November 27, 2014

Can a socially responsible person shop on Thanksgiving or Black Friday?

As regular readers know, I research and write on business and human rights. For this reason, I really enjoyed the post about corporate citizenship on Thanksgiving by Ann Lipton, and Haskell Murray’s post about the social enterprise and strategic considerations behind a “values” message for Whole Foods, in contrast to the low price mantra for Wal-Mart. Both posts garnered a number of insightful comments.

As I write this on Thanksgiving Day, I’m working on a law review article, refining final exam questions, and meeting with students who have finals starting next week (being on campus is a great way to avoid holiday cooking, by the way). Fortunately, I gladly do all of this without complaint, but many workers are in stores setting up for “door-buster” sales that now start at Wal-Mart, JC Penney, Best Buy, and Toys R Us shortly after families clear the table on Thanksgiving, if not before. As Ann pointed out, a number of protestors have targeted these purportedly “anti-family” businesses and touted the “values” of those businesses that plan to stick to the now “normal” crack of dawn opening time on Friday (which of course requires workers to arrive in the middle of the night). The United Auto Workers plans to hold a series of protests at Wal-Mart in solidarity with the workers, and more are planned around the country.

I’m not sure what effect these protests will have on the bottom line, and I hope that someone does some good empirical research on this issue. On the one hand, boycotts can be a powerful motivator for firms to change behavior. Consumer boycotts have become an American tradition, dating back to the Boston Tea Party. But while boycotts can garner attention, my initial research reveals that most boycotts fail to have any noticeable impact for companies, although admittedly the negative media coverage that boycotts generate often makes it harder for a companies to control the messages they send out to the public. In order for boycotts to succeed there needs to be widespread support and consumers must be passionate about the issue.

In this age of “hashtag activism” or “slacktivism,” I’m not sure that a large number of people will sustain these boycotts. Furthermore, even when consumers vocalize their passion, it has not always translated to impact to lower revenue. For example, the CEO of Chick-Fil-A’s comments on gay marriage triggered a consumer boycott that opened up a platform to further political and social goals, although it did little to hurt the company’s bottom line and in fact led proponents of the CEO’s views to develop a campaign to counteract the boycott.

Similarly, I’m also not sure of the effect that socially responsible investors can have as it relates to these labor issues. In 2006, the Norwegian Pension Fund divested its $400 million position (over 14 million shares in the US and Mexico operations) in Wal-Mart. In fact, Wal-Mart constitutes two of the three companies excluded for “serious of systematic” human rights violations. Pension funds in Sweden and the Netherlands followed the Fund’s lead after determining that Wal-Mart had not done enough to change after meetings on its labor practices. In a similar decision, Portland has become the first major city to divest its Wal-Mart holdings. City Commissioner Steve Novick cited the company’s labor, wage and hour practices, and recent bribery scandal as significant factors in the decision. Yet, the allegations about Wal-Mart’s labor practices persist, notwithstanding a strong corporate social responsibility campaign to blunt the effects of the bad publicity. Perhaps more important to the Walton family, the company is doing just fine financially, trading near its 52-week high as of the time of this writing.

I will be thinking of these issues as I head to Geneva on Saturday for the third annual UN Forum on Business and Human Rights, which had over 1700 companies, NGOs, academics, state representatives, and civil society organizations in attendance last year. I am particularly interested in the sessions on the financial sector and human rights, where banking executives and others will discuss incorporation of the UN Guiding Principles on Business and Human Rights into the human rights policies of major banks, as well as the role of the socially responsible investing community. Another panel that I will attend with interest relates to the human rights impacts in supply chains. A group of large law firm partners and professors will also present on a proposal for an international tribunal to adjudicate business and human rights issues. I will blog about these panels and others that may be of interest to the business community next Thursday. Until then enjoy your holiday and if you participate in or see any protests, send me a picture.

November 27, 2014 in Ann Lipton, Conferences, Corporate Finance, Corporate Governance, Corporations, CSR, Current Affairs, Ethics, Financial Markets, Haskell Murray, International Business, Marcia Narine, Securities Regulation, Social Enterprise | Permalink | Comments (0)