Friday, February 16, 2018
Corporate Governance, Compliance, Social Responsibility, and Enterprise Risk Management in the Trump/Pence Era
This may be obsolete by the time you read this post, but here are my thoughts on Corporate Governance, Compliance, Social Responsibility, and Enterprise Risk Management in the Trump/Pence Era. Thank you, Joan Heminway and the wonderful law review editors of Transactions: The Tennessee Journal of Business Law. The abstract is below:
With Republicans controlling Congress, a Republican CEO as President, a “czar” appointed to oversee deregulation, and billionaires leading key Cabinet posts, corporate America had reason for optimism following President Trump’s unexpected election in 2016. However, the first year of the Trump Administration has not yielded the kinds of results that many business people had originally anticipated. This Essay will thus outline how general counsel, boards, compliance officers, and institutional investors should think about risk during this increasingly volatile administration.
Specifically, I will discuss key corporate governance, compliance, and social responsibility issues facing U.S. public companies, although some of the remarks will also apply to the smaller companies that serve as their vendors, suppliers, and customers. In Part I, I will discuss the importance of enterprise risk management and some of the prevailing standards that govern it. In Part II, I will focus on the changing role of counsel and compliance officers as risk managers and will discuss recent surveys on the key risk factors that companies face under any political administration, but particularly under President Trump. Part III will outline some of the substantive issues related to compliance, specifically the enforcement priorities of various regulatory agencies. Part IV will discuss an issue that may pose a dilemma for companies under Trump— environmental issues, and specifically shareholder proposals and climate change disclosures in light of the conflict between the current EPA’s position regarding climate change, the U.S. withdrawal from the Paris Climate Accord, and corporate commitments to sustainability. Part V will conclude by posing questions and proposing recommendations using the COSO ERM framework and adopting a stakeholder rather than a shareholder maximization perspective. I submit that companies that choose to pull back on CSR or sustainability programs in response to the President’s purported pro-business agenda will actually hurt both shareholders and stakeholders.
February 16, 2018 in Compliance, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Employment Law, Marcia Narine Weldon, Securities Regulation, Shareholders | Permalink | Comments (0)
Saturday, February 3, 2018
Time's Up for Board Members: Sexual Misconduct Allegations Against CEOs of Wynn and the Humane Society Should Send a Message
Perhaps I'm a cynic, but I have to admit that I was stunned when the news of hotelier Steve Wynn's harassment allegations at the end of January caused a double-digit drop in stock price. What began as an unseemly story of a $7.5 million settlement to a manicurist at one his of his resorts later morphed into a story about his resignation as head of the finance chair of the Republican National Committee. Not only did he lose that job, he also lost at least $412 million (the company at one point lost over $3 billion in value). His actions have also led regulators in two states to scrutinize his business dealings and settlements to determine whether he has violated "suitability standards." Nonetheless, Wynn has asked his 25,000 employees to stand by him and think of him as their father. The question is, will the board stand by him as it faces potential liability for breach of fiduciary duty?
The Wynn board members should take a close look at what happened with the Humane Society yesterday. That board chose to retain the CEO after ending an investigation into harassment allegations. A swift backlash ensued. Major donors threatened to pull funding, causing the CEO to resign. A number of board members also reportedly resigned. However, not all of the board members resigned out of principle. One female director resigned after stating, " Which red-blooded male hasn’t sexually harassed somebody? ... [w]omen should be able to take care of themselves.” Unfortunately, the reaction of this board member did not surprise me. She's in her 80s and in my twenty years practicing employment law on the defense side, I've heard similar sentiments from many (but not all) men and women of that generation. Indeed, French actress Catherine Deneuve initially joined other women in denouncing the #MeToo movement before bowing to public pressure to apologize. We have five generations of people in the workplace now, and as I have explained here, companies need to reexamine the boundaries. What may seem harmless or "normal" for some may be traumatic or legally actionable to someone else.
As the Wynn and the Humane Society situations illustrate, the sexual harassment issue is now front and center for boards so general counsels need to put the issue on the next board agenda. As I wrote here, boards must scrutinize current executives as well as those they are reviewing as part of their succession planning roles to ensure that the executives have not committed inappropriate conduct. Because definitions differ, companies must clarify the gray areas and ensure everyone knows what's acceptable and what's terminable (even if it's not per se illegal).This means having the head of human resources report to the board that company policies and training don't just check a box. In fact, board members need to ask about the effectiveness of policies and training in the same way that they ask about training on bribery, money laundering, and other highly regulated compliance areas. Boards as part of their oversight obligation must also ensure that there are no uninvestigated allegations against senior executives. Prudent companies will review the adequacy of investigations into misconduct that were closed prematurely or without corroboration.Companies must spend the time and the money with qualified, credible legal counsel to investigate claims that they may not have taken seriously in the past. Because the #MeToo movement shows no signs of abating, boards need to engage in these uncomfortable, messy conversations. If they don't, regulators, plaintiffs' counsel, and shareholders will make sure that they do.
Friday, January 26, 2018
On Wednesday, I spoke with Kimberly Adams, a reporter for NPR Marketplace regarding CSX's decision to require its CEO to disclose health information to the board. I don't have a link to post, sorry. As you may know, CSX suffered a significant stock drop in December when its former CEO died shortly after taking a medical leave of absence and after refusing to disclose information about his health issues. CSX has chosen the drastic step of requiring an annual CEO physical in response to a shareholder proposal filed on December 21st stating, “RESOLVED, that the CEO of the CSX Corporation will be required to have an annual comprehensive physical, performed by a medical provider chosen by the CSX Board, and that results of said physical(s) will be provided to the Board of Directors of the CSX Corporation by the medical provider.” Adams asked my thoughts about a Wall Street Journal article that outlined the company's plans.
I'm not aware of any other company that asks a CEO to provide the results of an annual physical to the board. As I informed Adams, I hope the board has good counsel to avoid running afoul of the Americans with Disabilities Act, HIPAA, the Genetic Information Nondiscrimination Act of 2008, and other state and federal health and privacy laws. While I believe that the board must ensure that it takes its role of succession planning seriously, I question whether this is the best means to achieve that. I also remarked that although a CEO would know in advance that this is a condition of employment and would negotiate with the aid of counsel what the parameters would be, I was concerned about the potential slippery slope. How often would the CEO have to update the board on his/her health condition? Who else would have access to the information? Will this deter talented executives from seeking the top spot at a corporation?
One could argue that the health of the CEO is material information. But if that's the case, why haven't more shareholders made similar proposals? Perhaps there haven't been more of these proposals because the CSX situation was extreme. Shareholders were asked to bless the $84 million compensation package of a man who was so ill that he required a portable oxygen tank but who refused to disclose his condition or prognosis. Hopefully, other companies won't take the same approach.
Wednesday, January 17, 2018
Call for Papers From The NYU Stern Center for Business and Human Rights and the Global Business and Human Rights Scholars Association
Call for Papers
The NYU Stern Center for Business and Human Rights and the Global Business and Human Rights Scholars Association invite you to submit papers: 4th Annual Conference of the Global Business and Human Rights Scholars Association at New York University, New York City, on September 14-15, 2018. Scholars from all disciplines are invited to apply, and we invite contributions that reflect the interdisciplinary character of BHR in theory and in practice.
We will also consider applications to participate as observers and discussants. Anyone interested in this possibility should submit their application in a few sentences to the email address below. Doctoral candidates are not eligible to present their research at this workshop, but they are welcome to attend. To discuss their work, PhD students may apply to the Young Researchers Summit (https://bhr.stern.nyu.edu/youngresearchers/). This is a workshop to discuss research-in-progress; papers must be unpublished at the time of presentation.
In addition to presenting a paper at the conference, participants are expected to read and be prepared to comment on and discuss the papers of other participants. The conference will be organized around three parallel working groups. Please indicate in your application to which of the three broad tracks you would like to contribute: (1) preventing, managing, and measuring BHR; (2) human rights in global supply chains and specific industry settings; or (3) conceptual approaches to BHR.
To apply, please submit an abstract of no more than 250 words to firstname.lastname@example.org with the subject line Business & Human Rights Conference Proposal. Please include your name, affiliation, contact information, workshop theme preference, and short curriculum vitae. The proposals will be assessed by an organizing committee comprised of Dorothée Baumann-Pauly (NYU Stern, Program Chair and head of the committee), Justine Nolan (University of New South Wales), Penelope Simons (University of Ottawa), Kish Parella (Washington & Lee School of Law), Karin Buhmann (Copenhagen Business School), Merryl Lawry-White (Debevoise & Plimpton LLP), César González Cantón (CUNEF, Madrid), Humberto Cantú Rivera (University of Monterrey), Stephen Park (University of Connecticut), Michael Santoro (University of Santa Clara, President of the Global Business and Human Rights Scholars Association) and Anita Ramasastry (University of Washington School of Law, Vice-President of the Global Business and Human Rights Scholars Association).
The deadline for submission of abstracts is March 1, 2018. Scholars whose submissions are selected for the symposium will be notified no later than March 15. Full papers must be submitted by August 1.
About the Global BHR Scholars’ Association The Global Business and Human Rights Scholars’ Association is a non-profit, non-partisan membership association dedicated to bringing together a global and interdisciplinary group of scholars with an interest in the area of business and human rights, raising awareness of the human rights and other potentially harmful impacts of business activity, and promoting respect for international human rights among states, business enterprises, and other organizations. Membership is free and open to business and human rights scholars from every country and region of the world. More information about the Association and membership is available on our website: www.bhrscholarsassociation.org
Wednesday, January 10, 2018
Swedish clothing giant H & M caused a huge stir this week with an ad campaign depicting a young black boy in a sweatshirt that proclaimed him the "Coolest Monkey In the Jungle." The company's misstep is surprising given the public condemnations of the use of the word "monkey" in Europe over the past few years when soccer fans have used it as a slur against black players. Notwithstanding H & M's many apologies, several megastars have denounced the company and some have even pulled their fashion collaborations. As usual, several have called for boycotts of the retailer. But will all of this really matter? The sweatshirt was still for sale in the UK days for days after the controversy erupted, and the Weeknd, one of the megastars who vowed to never work with H & M, still has his 18-piece H & M collection available online and available for purchase on the store's U.S. portal.
I'm headed out of the country tomorrow and in my quest for a new sweater, I glanced in the H & M store in my local mall earlier today. The store was packed and likely with fans of the artists who called for a boycott. No one was walking with picket signs outside. But as I have written about here, here, here, here and at other times on this blog, I'm not sure that young American consumers--H & M's fast fashion demographic--have the staying power to sustain a boycott. Perhaps the star power behind this boycott will make a difference (but I doubt it).Wall Street hasn't punished the store either. The stock did not take a major hit. Moreover, CNBC has reported that in December, the company reported its biggest quarterly drop in ten years. This means that H & M's pre-existing financial woes will make it even more difficult to determine whether a boycott actually affected the bottom line.
Time will tell regarding the success of this latest boycott effort but in the age of hashtag activism, I don't have much confidence in this latest boycott effort.
Wednesday, January 3, 2018
At a time when many boards may be thinking of tax planning and possible M & A deals, they may have to start focusing more on the unseemly topic of their executives' sex lives because the flood of terminations and resignations due to sexual misconduct shows no signs of slowing down. One of the most shocking but underreported terminations in 2017 related to VISA. The CEO, one year into the role, chose to terminate one of his most valuable executives after an anonymous tip about sexual misconduct. He wanted his employees to know that the corporate culture and values mattered. Board members should look closely at the VISA example.
We will continue to see the rise of the #MeToo movement spurred on in part by the messaging from a star-studded task force formed to address Hollywood issues and the establishment of a multimillion-dollar legal defense fund to help blue-collar workers. Even Supreme Court Chief Justice Roberts addressed sexual harassment in the court system in his Year-End Report on the Federal Judiciary. More people than ever may now choose to come forward with claims of harassment or assault. Whether companies choose to terminate wrongdoers or the accused choose to resign "to spend more time with their families," it's a new day. As I've written here, companies will need to re-evaluate policies and training to navigate these landmines.
Board members will need to step up too. Boards of any size institution (including nonprofits) need to take the job of CEO succession planning seriously because the chief executive could leave, retire, or die. Boards must not only consider the possibility of a harassment scandal in the C-Suite but they must also worry about their fellow board members. Unfortunately, a KPMG study revealed that only 14% of board members believe they have a detailed succession plan for themselves. Members of the C-suite will also need to think more clearly about succession planning in the lower ranks. HR may have to redouble efforts to ensure that high-potential employees have no skeletons in the closet that have been swept under the rug.
In the meantime, I and other former members of the Department of Labor Whistleblower Protection Advisory Committee have written an op-ed in the Boston Globe. Even if I had not co-authored the piece, as a former defense-side employment lawyer and compliance officer, I would recommend that company leaders take a look at it. Some of our recommendations for strengthening corporate culture are below:
1) have a trustworthy, independent system, with multiple reporting mechanisms, staffed with the proper skills to conduct swift, full, and fair investigations and to carry them to a just resolution, observing principles of confidentiality and discretion, and including ongoing protection of those who report;
2) make sure that there is a clear, credible anti-retaliation policy that protects accusers and witnesses who come forward in good faith;
3) require strong accountability for all levels of management for reporting and responding to complaints;
4) implement specific policies that direct bonuses, raises, and other incentives and opportunities to those who, in addition to meeting business targets, actively prevent and respond appropriately to harassment, retaliation, and other compliance problems. Consider clawbacks if unsupportive behavior later comes to light. Call out injurious behavior (without necessarily naming names) and credit exemplary behaviors;
5) periodically assess the culture and require an independent outside entity to confidentially administer anonymous surveys and interviews. The best of these use benchmarked and validated questions that can provide insight into the effectiveness of the compliance program and whether employees trust the system; and
6) make sure to involve unions and other formal and informal employee groups in developing new policies.
I wish all of our readers a happy and healthy new year. I wish board members and company executives good luck.
Thursday, December 21, 2017
Earlier this week, President Trump gave his annual speech on national security. As in the past, he failed to stress human rights (unlike his predecessors) but did allude to cooperation, even with China and Russia, when warranted by geopolitical interests. Over the last several months, he has touted bilateral trade agreements. Coincidentally, my latest law review article on a potential bilateral investment treaty with Cuba came out the same day. As you may recall, Trump recently reversed some Obama-era policies on Cuba over human rights. My article may help his administration reconcile some of the apparent contradictions in his policies. The abstract is below.
You Say Embargo, I Say Bloqueo—A Policy Recommendation for Promoting Foreign Direct Investment and Safeguarding Human Rights In Cuba
The United States is the only major industrialized nation that restricts
trade with Cuba. Although President Obama issued several executive orders
that have facilitated limited trade (and President Trump has scaled some
back), an embargo remains in place, and by law, Congress cannot lift it until,
among other things, the Cuban government commits to democratization and
human rights reform. Unfortunately, the Cuban and U.S. governments
fundamentally disagree on the definition of “human rights,” and neither side
has shown a willingness to compromise. Meanwhile, although some U.S.
investors clamor to join their European and Canadian counterparts in
expanding operations in Cuba, many have an understandable concern
regarding the rule of law and expropriation in a communist country. Bilateral
investment treaties aim to address those concerns.
After discussing the legal and political barriers to lifting the embargo, I
propose a partial solution to the stalemate on human rights, which will: (1)
facilitate foreign direct investment in Cuba; (2) protect investor interests
through a bilateral investment treaty; and (3) require an examination of
human rights impacts on the lives of Cuban citizens before investors can
receive the protection of the treaty.
Specifically, I recommend the inclusion of human rights clauses in bilateral
investment treaties (BITs) and investor-state dispute mechanisms as a condition precedent
to lifting the embargo. My solution also requires “clean hands” so that investors seeking relief must
provide proof that their business interests have not exacerbated or been
complicit in human rights abuses, rebut claims from stakeholders that their
business interests have not exacerbated or been complicit in human rights
abuses, or both. Finally, I propose revisions to the 2016 U.S. National Action
Plan on Responsible Business Conduct to incorporate human rights
requirements in future BITs and other investment vehicles going forward.
Anyone with connections to Rex Tillerson is free to pass it on. Happy Holidays to all.
Wednesday, December 13, 2017
I'm in the midst of grading, revising an article, researching for another article, starting a travel blog, and preparing for next semester. Normally, this would cause some level of stress. But this year, for the first time, I chose to take a vacation before grading. I took a cruise around the Canary Islands and the Spanish coast. I didn't think about work at all, and I have come back refreshed and ready to grade. Now, when I'm reading exams, I'm more relaxed and less frustrated. I'm convinced that the pre-grading vacation led to my state of mind, and will likely lead to a better grading process for me. If you're grading and frustrated, here are some pictures to help you relax too.
Thursday, December 7, 2017
Two weeks ago, I asked whether companies were wasting time on harassment training given the flood of accusations, resignations, and terminations over the past few weeks. Having served as a defense lawyer on these kinds of claims and conducted hundreds of trainings, I know that most men generally know right from wrong before the training (and some still do wrong). I also know that in many cases, people look the other way when they see or hear about the complaints, particularly if the accused is a superstar or highly ranked employee. Although most men do not have the power and connections to develop an alleged Harvey Weinstein-type "complicity machine" to manage payoffs and silence accusers, some members of management play a similar role when they ignore complaints or rumors of inappropriate or illegal behavior.
The head in the sand attitude that executives and board members have displayed in the Weinstein matter has led to a lawsuit arguing that Disney knew or should have known of Weinstein's behavior. We may see more of these lawsuits now that women have less fear of speaking out and Time honored the "Silence Breakers" as the Person of the Year. As I read the Time article and watched some of the "silence breakers" on television, it reminded me of 2002, when Time honored "The Whistleblowers." Those whistleblowers caused Congress to enact sweeping new protection under Sarbanes-Oxley. Because of all of the publicity, companies around the country are now working with lawyers and human resources experts to review and revamp their antiharassment training and complaint mechanisms. As a result, we will likely see a spike in internal and external complaints. But do we need more than lawsuits? Would more women in the boardroom and the C-Suite make a difference in corporate culture in general and thereby lead to more gender equity?
Last week, Vĕra Jourová, the EU Commissioner for Justice and Gender Equality put forth some proposals to redress the gender pay gap in Member States’ businesses. She recommends an increase in the number of women on boards for companies whose non-executive Boards are more than 60% male. These companies would be required to “prioritize” women when candidates of “equal merit” are being considered for a position. Germany, Sweden, and the Netherlands have already previously rejected a similar proposal.
I'm generally not in favor of quotas because I think they produce a backlash. However, I know that many companies here and abroad will start to recruit more female directors and executives in an effort to appear on top of this issue. Will it work? We will soon see. After pressure from institutional investors such as BlackRock and State Street to increase diversity, women and minorities surpassed 50% of S & P open board seats in 2017. Stay tuned.
Wednesday, November 15, 2017
Call For Papers-3rd Global Meeting Indiana University Europe Gateway, Berlin, Germany July 10 & 11, 2018
I'm passing this on from Karen Bravo at IU given all of the ESG disclosures on slavery, supply chains, and human trafficking.
Call for Papers:
SLAVERY PAST, PRESENT & FUTURE: 3rd Global Meeting
Indiana University Europe Gateway, Berlin, Germany
July 10 & 11, 2018
Throughout history, slavery (the purchase and sale of human beings as chattel), enslavement (through conquest, and exploitation of indebtedness, among other vulnerabilities), and similar extreme forms of exploitation and control have been an intrinsic part of human societies.
Is slavery an inevitable part of the human condition?
Controversial estimates indicate that up to 35 million people worldwide are enslaved today. This modern re-emergence of slavery, following legal abolition over two hundred years ago, is said to be linked to the deepening interconnectedness of countries in the global economy, overpopulation, and the economic and other vulnerabilities of the individual victims and communities.
This conference will explore slavery in all its dimensions and, in particular, the ways in which individual humans and societies understand and attempt to respond to it.
The varieties of contemporary forms of exploitation appear to be endless. Consider, for example, enslavement or mere “exploitation” among:
- fishermen in Thailand’s booming shrimping industry,
- children on Ghana’s cocoa plantations,
- immigrant farmworkers on U.S. farms,
- truck drivers in the port of Los Angeles.
- prostituted women and girls on the streets and in the brothels of Las Vegas,
- the dancing boys (bacha bazi) of Afghanistan,
- the sex workers of The Netherlands’ Red Light Districts and in Italian cities,
- Eritrean and other sub-Saharan Africans fleeing to Israel and trafficked and exploited in the Sinai,
- Syrian refugees in Jordan, Turkey, and Lebanon, and
- migrant workers from Southeast Asia and other countries who flock to the oil rich Gulf States for work.
Does the persistence and mutations of different forms of extreme human-of-human exploitation mean that the world may not have changed as much as contemporary societies would like to believe since worldwide abolition and the recognition of universal individual and collective human rights? Like the ‘consumers’ of past eras, such as early industrialization, are we dependent on the abhorrent exploitation of others?
Potential themes and sub-themes of the conference include but are not limited to:
- Defining Slavery:
- What do we mean when we talk about “slavery”
- Using “slavery” to obscure other endemic forms of exploitation
- Teaching and learning about historic slavery and contemporary forms of exploitation
- Slaveries of the Past
- Classical (Egyptian, Greco-Roman, etc.) slavery
- Conquests and colonizations – Aboriginal Australians, indigenous peoples of the New World, dividing and colonizing Africa and Asia
- Slaveries in Europe before the Trans-Atlantic Slave Trade and Industrialization, such as villeinage and serfdom
- Trans-Atlantic Slavery and the trans-Atlantic Slave Trade
- Systems of slavery in tribal and traditional societies
- WWII and post-WWII forced labor camps
- Human Trafficking and other Forms of Contemporary Exploitation
- Types of human trafficking
- Organ trafficking
- The focus on sex trafficking: reasons, purpose, effects
- Can nation states enslave?
- Is human trafficking “slavery”
- Contemporary usage and depictions of slavery
- Civil society anti-trafficking activism:
- Anti-trafficking policies and legislation
- Assessing contemporary anti-trafficking and/or anti-“slavery” Initiatives
- Systems and Structures of Enslavement and Subordination (historic and contemporary)
- Role of slavery in national and global economies
- Economic, political, legal structures – their role in enslavement and exploitation
- Slavery’s impact on culture
- Cultural impacts of historic slavery
- Voices of the Enslaved
- Slave narratives of the past and present
- Descendants’ interpretation of their enslaved and slave-holding ancestors
- Legacies of slavery
- Identifying and mapping contemporary legacies – economic, social, cultural, psychological
- Assessment of slavery’s impact – economic, political, other
- Commemorations of enslavers and/or the enslaved
- Debating reparations
- Anti-slavery movements:
- Economic compensation
- Restorative justice
- Teaching and learning about slavery
- Relationship to the global racial hierarchy
- Abolitionism and law: effects and (in)effectiveness
- The role of media and social media
Submissions to this conference are sought from people from all genders and walks of life, including academics (from multiple disciplines, such as art, anthropology, sociology, history, ethnic studies, politics, social work, economics) and non-academics; social workers, activists, and health care professionals; government representatives and policy makers; former slaves and indentured laborers; members of at-risk populations such as migrant and guest workers, non—regularized immigrants, and refugees.
Karen E. Bravo (Indiana University Robert H. McKinney School of Law, IN, USA)
David Bulla (Augusta University, GA, USA)
Sheetal Shah (Webster University, Leiden, The Netherlands)
Polina Smiragina (University of Sydney, Australia)
Submitting Your Proposal
Proposals should be submitted no later than Friday, March 2, 2018 to:
Karen E. Bravo, Indiana University Robert H. McKinney School of Law, Indianapolis: email@example.com
E-Mail Subject Line: Slavery Past Present & Future 3 Proposal Submission
File Format: Microsoft Word (DOC or DOCX)
The following information must be included in the body of the email:
2. Affiliation as you would like it to appear in the conference program
3. Corresponding author email address
The following information must be in the Microsoft Word file:
1. Title of proposal
2. Body of proposal (maximum of 300 words)
3. Keywords (maximum of ten)
Please keep the following in mind:
1. All text must be in Times New Roman 12.
2. No footnotes or special formatting (bold, underline, or italicization) must be used.
Evaluating Your Proposal
All abstracts will be double-blind peer reviewed and you will be notified of the Organizing Committee’s decision no later than Friday, 16 March 2018. If a positive decision is made, you will be asked to promptly register online. You will be asked to submit a draft paper of no more than 3000 words by Friday, 01 June 2018.
The conference registration fee is Euro (€) 200. Please note that we are not in a position to provide funding to facilitate your participation.
A selection of papers will be published in an edited volume, to be submitted to Brill’s ‘Studies in Global Slavery’ book series.
Wednesday, November 1, 2017
Every year, the United Nations holds a symbolic but important vote on a resolution condemning the U.S. embargo against Cuba and every year the United States and Israel are the only two countries to vote against it. Last year, the United States abstained in accordance with the rapprochement that the Obama administration began in 2014. A few hours ago, the U.S. and Israel stood alone and voted once again against the UN resolution, while 192 other nations voted for it. Ambassador Haley explained that the vote demonstrated, “continued solidarity with the Cuban people and in the hope that they will one day be free to choose their own destiny.” Prior to the vote she announced to the General Assembly that "today, the crime is the Cuban government's continued repression of its people and failure to meet even the minimum requirements of a free and just society… The United States does not fear isolation in this chamber or anywhere else. Our principles are not up for a vote … We will stand for respect for human rights and fundamental freedoms that the member states of this body have pledged to protect, even if we have to stand alone." The United States is indeed isolated in its thinking. Furthermore, the vote and the embargo inflame tensions with allies in Latin America that the U.S. needs for the war on terror and drug smuggling.
I feel strongly about this issue having visited the island three times in the past two years to research business and human rights issues. I’ve sat on a panel with Cuban lawyers and judges in Havana to discuss the embargo. I’ve attended countless seminars and meetings with lawyers and businesses who want to trade with Cuba. At the American Bar Association International Law Section meeting last week there were at least 6 sessions on Cuba. The world wonders why the United States places so much attention on this tiny island nation.
A few minutes ago, I put my finishing touches on my third law review article on Cuba (I had to wait to add in the UN vote). I argue that if and when the U.S. lifts the embargo and considers a bilateral investment treaty, it should require human rights provisions as a condition precedent for investor-state dispute resolution. I will post more about the article when it’s finally published but here’s a sneak peek of an argument relevant to today’s UN vote and the United States’ purported concern about the lack of human rights in Cuba:
[P]rior to lifting the embargo, the United States needs to examine its own record on human rights and how it treats other violators, otherwise it will have no credibility with the Cuban government. The U.S. Congress demands human rights reform in Cuba but has not been consistent in its own business dealings with other authoritarian or socialist regimes. For example, although the U.S. Department of State has criticized Cuba’s human rights record, China, another communist country with a poor human rights record, is the United States’ third largest trading partner. The United States lifted its trade embargo with Communist Vietnam twenty years ago and major U.S. companies now operate there today even though the U.S. government has leveled some of the same human rights criticism against Vietnam as it has against Cuba. The communist government of Laos did not fare much better than Cuba in human rights states department reports, but the U.S. government actively promotes potential investment opportunities there. This inconsistency in approach to human rights violators diminishes the U.S. government’s integrity in negotiating with Cuba. Tellingly, in its 2017 World Report, Human Rights Watch, a respected NGO, warned of the dangers of the Trump Administration from a human rights perspective. This hardly puts the U.S. in a strong bargaining position with Cuba when discussing the conditions on lifting the embargo.
The Trump Administration still has not released its official changes to the trade rules that it announced in June. In the meantime, although it’s hardly easy to do business in Cuba or with the Cuban government, U.S. businesses now remain in limbo until the implementing rules come into force. To be clear, I do not condone the human rights violations that the Cuban government commits against its people. In my upcoming article, I propose mechanisms to prevent foreign investors from perpetuating violations themselves. However, these same businesses that cannot do business with Cuba have no problem doing business with Russia, China, or other regimes with oppressive human rights records. Perhaps the Trump administration has not read State Department and NGO reports on those countries, but I have. Today, the hypocrisy was once again on full display for the world community to see.
Wednesday, October 25, 2017
Today I sat through a panel at the ABA International Law Section Meeting entitled, I, Robot - The Increasing Use and Misuse of Technology by In-House Legal Departments. I have already posted here about Ross and other programs. I thought I would share other vendors that in-house counsel are using according to one of the panelists:
- Deal point - virtual deal room.
- Casetext - legal research.
- Disco AI; Relativity; Ringtail - apply machine learning to e-discovery.
- Ebrevia; Kira Systems; RAVN - contract organization and analysis.
- Julie Desk - AI "virtual assistant" for scheduling meetings.
- Law Geex - contract review software that catches clauses that are unusual, missing, or problematic.
- Legal Robot - start-up uses AI to translate legalese into plain English; flags anomalies; IDs potentially vague word choices.
- LexMachina - litigation analytics.
- NeotaLogic - client intake and early case assessment.
- Robot Review - compares patent claims with past applications to predict patent eligibility.
- Ross Intelligence - AI virtual attorney from IBM (Watson).
These and their future competitors lead to new challenges for lawyers, law professors, and bar associations. Will robots engage in the unauthorized practice of law? What are the ethical ramifications of using artificial intelligence in legal engagements? How much do you tell clients about how or what is doing their legal research? What about data security issues for this information? How do we deal with discovery disputes? Can robot lawyers mediate? Why should lawyers who bill by the hour want the efficiency of artificial intelligence and machine learning? Finally, how do we help students develop skills in “judgment” and how to advise and counsel clients in a world where more of the traditional legal tasks will be automated (and 23% of legal task already are)? These are frightening and exciting times, but I look forward to the challenge of preparing the next generation of lawyers.
Wednesday, October 11, 2017
Earlier this week, I had the pleasure of hearing a talk about universal proxies from Scott Hirst, Research Director of Harvard’s Program on Institutional Investors.
By way of background, last Fall under the Obama Administration, the SEC proposed a requirement for universal proxies noting:
Today’s proposal recognizes that few shareholders can dedicate the time and resources necessary to attend a company’s meeting in person and that, in the modern marketplace, most voting is done by proxy. This proposal requires a modest change to address this reality. As proposed, each party in a contest still would bear the costs associated with filing its own proxy statement, and with conducting its own independent solicitation. The main difference would be in the form of the proxy card attached to the proxy statement. Subject to certain notice, filing, form, and content requirements, today’s proposal would require each side in a contest for the first time to provide a universal proxy card listing all the candidates up for election.
The Council of Institutional Investors favors their use explaining, “"Universal" proxy cards would let shareowners vote for the nominees they wish to represent them on corporate boards. This is vitally important in proxy contests, when board seats (and in some cases, board control) are at stake. Universal proxy cards would make for a fairer, less cumbersome voting process.”
The U.S. Chamber of Commerce has historically spoken out against them, arguing:
Mandating a universal ballot, also known as a universal proxy card, at all public companies would inevitably increase the frequency and ease of proxy fights. Such a development has no clear benefit to public companies, their shareholders, or other stakeholders. The SEC has historically sought to remain neutral with respect to interactions between public companies and their investors, and has always taken great care not to implement any rule that would favor one side over the other. We do not understand why the SEC would now pursue a policy that would increase the regularity of contested elections or cause greater turnover in the boardroom.
I can't speak for the Chamber, but I imagine one big concern would be whether universal proxies would provide proxy advisors such as ISS and Glass Lewis even more power than they already have with institutional investors. When I asked Hirst about this, he did not believe that the level of influence would rise significantly.
Hirst’s paper provides an empirical study that supports his contention that reform would help mitigate some of the distortions from the current system. It’s worth a read, although he acknowledges that in the current political climate, his proposal will not likely gain much traction. The abstract is below:
Contested director elections are a central feature of the corporate landscape, and underlie shareholder activism. Shareholders vote by unilateral proxies, which prevent them from “mixing and matching” among nominees from either side. The solution is universal proxies. The Securities and Exchange Commission has proposed a universal proxy rule, which has been the subject of heated debate and conflicting claims. This paper provides the first empirical analysis of universal proxies, allowing evaluation of these claims.
The paper’s analysis shows that unilateral proxies can lead to distorted proxy contest outcomes, which disenfranchise shareholders. By removing these distortions, universal proxies would improve corporate suffrage. Empirical analysis shows that distorted proxy contests are a significant problem: 11% of proxy contests at large U.S. corporations between 2001 and 2016 can be expected to have had distorted outcomes. Contrary to the claims of most commentators, removing distortions can most often be expected to favor management nominees, by a significant margin (two-thirds of distorted contests, versus one-third for dissident nominees). A universal proxy rule is therefore unlikely to lead to more proxy contests, or to greater success by special interest groups.
Given that the arguments made against a universal proxy rule are not valid, the SEC should implement proxy regulation. A rule permitting corporations to opt-out of universal proxies would be superior to the SEC’s proposed mandatory rule. If the SEC chooses not to implement a universal proxy regulation, investors could implement universal proxies through private ordering to adopt “nominee consent policies.
Thursday, October 5, 2017
On Monday, the Supreme Court heard argument on three cases that could have a significant impact on an estimated 55% of employers and 25 million employees. The Court will opine on the controversial use of class action waivers and mandatory arbitration in the employment context. Specifically, the Court will decide whether mandatory arbitration violates the National Labor Relations Act or is permissible under the Federal Arbitration Act. Notably, the NLRA applies in the non-union context as well.
Monday’s argument was noteworthy for another reason—the Trump Administration reversed its position and thus supported the employers instead of the employees as the Obama Administration had done when the cases were first filed. The current administration also argued against its own NLRB’s position that these agreements are invalid.
In a decision handed down by the NLRB before the Trump Administration switched sides on the issue, the agency ruled that Dish Network’s mandatory arbitration provision violates §8(a)(1) of the NLRA because it “specifies in broad terms that it applies to ‘any claim, controversy and/or dispute between them, arising out of and/or in any way related to Employee’s application for employment, employment and/or termination of employment, whenever and wherever brought.’” The Board believed that employees would “reasonably construe” that they could not file charges with the NLRB, and this interfered with their §7 rights.
The potential impact of the Supreme Court case goes far beyond employment law, however. As the NLRB explained on Monday:
The Board's rule here is correct for three reasons. First, it relies on long-standing precedent, barring enforcement of contracts that interfere with the right of employees to act together concertedly to improve their lot as employees. Second, finding individual arbitration agreements unenforceable under the Federal Arbitrations Act savings clause because are legal under the National Labor Relations Act gives full effect to both statutes. And, third, the employer's position would require this Court, for the first time, to enforce an arbitration agreement that violates an express prohibition in another coequal federal statute. (emphasis added).
This view contradicted the employers' opening statement that:
Respondents claim that arbitration agreements providing for individual arbitration that would otherwise be enforceable under the FAA are nonetheless invalid by operation of another federal statute. This Court's cases provide a well-trod path for resolving such claims. Because of the clarity with which the FAA speaks to enforcing arbitration agreements as written, the FAA will only yield in the face of a contrary congressional command and the tie goes to arbitration. Applying those principles to Section 7 of the NLRA, the result is clear that the FAA should not yield.
My co-bloggers have written about mandatory arbitration in other contexts (e.g., Josh Fershee on derivative suits here, Ann Lipton on IPOs here, on corporate governance here, and on shareholder disputes here, and Joan Heminway promoting Steve Bradford’s work here). Although Monday’s case addresses the employment arena, many have concerns with the potential unequal playing field in arbitral settings, and I anticipate more litigation or calls for legislation.
I wrote about arbitration in 2015, after a New York Times series let the world in on corporate America’s secret. Before that expose, most people had no idea that they couldn’t sue their mobile phone provider or a host of other companies because they had consented to arbitration. Most Americans subject to arbitration never pay attention to the provisions in their employee handbook or in the pile of paperwork they sign upon hire. They don’t realize until they want to sue that they have given up their right to litigate over wage and hour disputes or join a class action.
As a defense lawyer, I drafted and rolled out class action waivers and arbitration provisions for businesses that wanted to reduce the likelihood of potentially crippling legal fees and settlements. In most cases, the employees needed to sign as a condition of continued employment. Thus, I’m conflicted about the Court’s deliberations. I see the business rationale for mandatory arbitration of disputes especially for small businesses, but as a consumer or potential plaintiff, I know I would personally feel robbed of my day in court.
The Court waited until Justice Gorsuch was on board to avoid a 4-4 split, but he did not ask any questions during oral argument. Given the questions that were asked and the makeup of the Court, most observers predict a 5-4 decision upholding mandatory arbitrations. The transcript of the argument is here. If that happens, I know that many more employers who were on the fence will implement these provisions. If they’re smart, they will also beef up their compliance programs and internal complaint mechanisms so that employees don’t need to resort to outsiders to enforce their rights.
My colleague Teresa Verges, who runs the Investor Rights Clinic at the University of Miami, has written a thought-provoking article that assumes that arbitration is here to stay. She proposes a more fair arbitral forum for those she labels “forced participants.” The abstract is below:
Decades of Supreme Court decisions elevating the Federal Arbitration Act (FAA) have led to an explosion of mandatory arbitration in the United States. A form of dispute resolution once used primarily between merchants and businesses to resolve their disputes, arbitration has expanded to myriad sectors, such as consumer and service disputes, investor disputes, employment and civil rights disputes. This article explores this expansion to such non-traditional contexts and argues that this shift requires the arbitral forum to evolve to increase protections for forced participants and millions of potential claims that involve matters of public policy. By way of example, decades of forced arbitration of securities disputes has led to increased due process and procedural reforms, even as concerns remain about investor access, the lack of transparency and investors’ perception of fairness.
I’ll report back on the Court’s eventual ruling, but in the meantime, perhaps some policymakers should consider some of Professor Verges’ proposals. Practically speaking though, once the NLRB has its full complement of commissioners, we can expect more employer-friendly decisions in general under the Trump Administration.
 Murphy Oil USA v. N.L.R.B., 808 F.3d 1013 (5th Cir. 2015), cert. granted, 137 S. Ct. 809, 196 L. Ed. 2d 595 (2017); Lewis v. Epic Sys. Corp., 823 F.3d 1147 (7th Cir. 2016), cert. granted, 137 S. Ct. 809, 196 l. Ed. 2d. 595 (2017); Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016), cert. granted, 137 S. Ct. 809, 196 L. Ed. 2d 595 (2017)
Wednesday, September 27, 2017
You couldn't pay me enough to be the owner of an NFL team right now. I almost feel sorry for them. Even if you're not a fan, by now you've heard about the controversy surrounding NFL free agent Colin Kaepernick, and his decision to kneel during the national anthem last year. You've also probably heard about the President's call for NFL owners to fire players who don't stand while the anthem is played and his prediction of the league's demise if the protests continue. Surprisingly, last Sunday and Monday, some of the same owners who made a business decision to take a pass on Kaepernick despite his quarterback stats (citing among other things, the potential reactions of their fans) have now themselves made it a point to show solidarity with their players during the anthem. The owners are locking arms with players, some of whom are now protesting for the first time.
Football is big business, earning $13 billion last year, and the owners are sophisticated businessmen with franchises that are worth on average $2.5 billion dollars each. They care about their fans of course, and I'm sure that they monitor the various boycotts. They are also reading about lawmakers calling for funding cuts for teams that boycott. But they also care about their sponsors. Fortunately for the NFL (and for the players who have lucrative deals), most sponsors that have made statements have walked a fine line between supporting both the flag and free speech. The question is, how long will all of this solidarity last? There is no clear correlation between the rating shifts and the protests but as soon as there is definitive proof or sponsors start to pull out, I predict the owners will do a difficult cost-benefit analysis. Most teams aren't like the Green Bay Packers, which has no "owner," but instead has over 100,000 shareholders. Most teams don't have boards of directors or shareholders to answer to. Most of these owners used their own money or have very few business partners.
The NFL teams owners' decision to maintain support of the players will likely be more difficult than those of the many CEOs who have expressed their disagreement with the President over race-related matters by quitting his advisory boards (see my previous post ). Those CEOs could point to their own corporate codes of conduct or social responsibility statements. Those CEOs considered the reputational ramifications with their employees and their consumers, and the choice was relatively straightforward, especially because there was a more unified public outrage. The NFL owners, on the other hand, have highly skilled "employees" from a finite pool of talent who have been called SOBs by the President but who are also being booed by the fans, their consumers. The owners can't be fired, and it's very difficult to remove them. Should the owners stick with the players (some of whom are brand new to the protest scene) or should they wait to see the latest polls about what fans think about the leadership of America's favorite sport? Should they fire players, as they probably could under their contracts? The big test may come during a planned boycott by veterans during Veteran's Day Weekend. Perhaps I will be proven wrong, and maybe boycotts will have an effect on what the NFL owners and players do, but I predict the players and owners will want to get back to the business of playing football sooner rather than later. I'll keep monitoring the situation this Sunday and for the rest of the season.
Wednesday, September 20, 2017
What keeps general counsels and compliance officers up at night? Here's what boards should be discussing
No one had a National Compliance Officer Day when I was in the job, but now it’s an official thing courtesy of SAI Global, a compliance consulting company. The mission of this one-year old holiday is to:
- Raise awareness about the importance of ethics and compliance in business and shine a spotlight on the people responsible for making it a reality.
- Provide resources to promote the wellness and well-being of ethics and compliance professionals so they can learn how to overcome stress and burnout.
- Grow the existing ethics and compliance community and help identify and guide the next generation of E&C advocates.
Although some may look at this skeptically as a marketing ploy, I’m all for this made-up holiday given what compliance officers have to deal with today.
Last Saturday, I spoke at the Business Law Professor Blog Conference at the University of Tennessee about corporate governance, compliance, and social responsibility in the Trump/Pence era. During my presentation, I described the ideal audit committee meeting for a company that takes enterprise risk management seriously. My board agenda included: the impact of climate change and how voluntary and mandatory disclosures could change under the current EPA and SEC leadership; compliance budgetary changes; the rise of the whistleblower; the future of the DOJ’s Yates Memo and corporate cooperation after a recent statement by the Deputy Attorney General; SEC and DOJ enforcement priorities; data protection and cybersecurity; corporate culture and the risk of Google/Uber- type lawsuits; and sustainability initiatives and international governance disclosures. I will have a short essay in the forthcoming Transactions: The Tennessee Journal of Business Law but here are a few statistics that drove me to develop my model (and admittedly ambitious) agenda:
- According to an ACC survey of over 1,000 chief legal officers:
- 74% say ethics and compliance issues keep them up at night
- 77% handled at least one internal or external compliance-related investigation in their department
- 33% made policy changes in their organizations as a result of geopolitical events.
- 28% were targeted by regulators in the past two years
- Board members polled in September 2016 were most concerned about the following compliance issues:
- Regulatory changes and scrutiny may heighten
- Cyber threats
- Privacy/identity and information security risks
- Failure of corporate culture to encourage timely identification/escalation of significant risk issues
- During the 2017 proxy season, shareholders submitted 827 proposals (down from 916 in 2016):
- 112 related to proxy access,
- 87 related to political contributions and lobbying,
- 35 focused on board diversity (up from 28 in 2016),
- 34 proposals focused on discrimination or diversity-related issues (up from 16 in 2016),
- 69 proposals related to climate change (3 of those passed, including at ExxonMobil)
- 19 proposals focused on the gender pay gap (up from 13 in 2016)
General counsels are increasingly taking on more of a risk officer role in their companies, and compliance officers are in the thick of all of these issues. The government has also recently begun to hold compliance officers liable for complicity with company misdeeds. My advice- if it’s not against your company/school policy, take SCCE’s suggestion and hug your compliance officer. I’m sure she’ll appreciate it.
Sunday, September 17, 2017
As I earlier reported, on Saturday, The University of Tennessee College of Law hosted "Business Law: Connecting the Threads", a conference and continuing legal education program featuring most of us here at the BLPB--Josh, me, Ann, Doug, Haskell, Stefan, and Marcia. These stalwart bloggers, law profs, and scholars survived two hurricanes (Harvey for Doug and Irma for Marcia) and put aside their personal and private lives for a day or two to travel to Knoxville to share their work and their winning personalities with my faculty and bar colleagues and our students. It was truly wonderful for me to see so many of my favorite people in one place together enjoying and learning from each other.
Interestingly (although maybe not surprisingly), in many of the presentations (and likely the essays and articles that come from them), we cite to each other's work. I think that's wonderful. Who would have known that all of this would come from our decision over time to blog together here? But we have learned a lot more about each other and each other's work by editing this blog together over the past few years. As a result, the whole conference was pure joy for me. And the participants from UT Law (faculty, students, and alums) truly enjoyed themselves. Papers by the presenters and discussants are being published in a forthcoming volume of Transactions: The Tennessee Journal of Business Law.
My presentation at the conference focused on the professional responsibility and ethics challenges posed by complexity and rapid change in business law. I will post on my related article at a later date. But if you have any thoughts you want to share on the topic, please let me know. A picture of me delivering my talk, courtesy of Haskell, is included below. (Thank you, Haskell!) So, now you at least know the title, in addition to the topic . . . . :>) Also pictured are my two discussants, my UT Law faculty colleague George Kuney and UT Law 3L Claire Tuley.
Thursday, August 31, 2017
Uber has a new CEO. Perhaps his first task should be to require one of his legal or compliance staff to attend the FCPA conference at Texas A & M in October given the new reports of an alleged DOJ investigation.. I might have some advice, but Uber needs to hear the lessons learned from Walmart, who will be sending its Chief Compliance Officer. Thanks to FCPA expert, Mike Koehler, aka the FCPA Professor, for inviting me. Mike has done some great blogging about the Walmart case (FYI- the company has reported spending $865 million on fees related to the FCPA and compliance-related costs). Details are below:
THE FCPA TURNS 40:
AN ASSESSMENT OF FCPA ENFORCEMENT POLICIES AND PROCEDURES
Thursday, October 12, 2017
Texas A&M University School of Law
Fort Worth, Texas
This conference brings together Foreign Corrupt Practices Act enforcement officials, experienced FCPA practitioners, and leading FCPA academics and scholars to discuss the many legal and policy issues relevant to the current FCPA enforcement and compliance landscape.Register here
Registration, 8:30 a.m.
Morning Session, 9:00 a.m. to Noon
FCPA Legal and Policy Issues
- Daniel Chow, Professor, Ohio State School of Law
China’s Crackdown on Government Corruption and the FCPA
- Mike Koehler, Professor, Southern Illinois School of Law
Has the FCPA Been Successful In Achieving Its Objectives?
- Peter Reilly, Associate Professor, Texas A&M School of Law
The Fokker Circuit Court Opinion and Deferred Prosecution of FCPA Matters
- Juliet Sorensen, Professor, Northwestern School of Law
The Phenomenon of an Outsize Number of Male Defendants Charged with Federal Crimes of Corruption
- Marcia Narine Weldon, Professor, Univ. of Miami School of Law
What the U.S. Can Learn from Enforcement in Other Jurisdictions and What Other Jurisdictions Can Learn from Us
Luncheon, Noon to 1:00 p.m.
Afternoon Session, 1:00 to 3:00 p.m.
(1:00 to 2:00 p.m.)
- Jay Jorgensen
Executive Vice President, Global Chief Ethics and Compliance Officer, Walmart
Follow-up panel (2:00 to 3:00 p.m.):
FCPA Enforcement and Compliance Landscape: Past, Present, and Future
- Kit Addleman, Attorney, Haynes and Boone LLP, Dallas and Fort Worth Offices
- Jason Lewis, Attorney, Greenberg Traurig LLP, Dallas Office
Monday, August 28, 2017
I am excited and proud to make the following announcement about a cool (!) upcoming program being held on Saturday, September 16 at UT Law in Knoxville:
The University of Tennessee College of Law will host a conference and CLE program that will focus on trends in business law. Discussions will take place throughout the day featuring panel discussions that center upon business law scholarship, teaching and law practice.
Topics will include business transaction diagramming; risks posed by social enterprise enabling statutes; fiduciary obligations and mutual fund voting; judicial dissolution in LLCs; Tennessee for-profit benefit corporation law and reporting; corporate personality theory in determining the shareholder wealth maximization norm; and professional responsibility issues for business lawyers in the current, evolving business environment.
The presenters for the program panels are . . . well . . . us! All of the BLPB editors and contributing editors, except Anne Tucker (we'll miss you, Anne!), are coming to Knoxville to share current work with each other and conference attendees. Each editor will anchor a panel that also will include a faculty and student discussant. The BLPB blogger papers and the discussants' written commentaries will all be published in a future issue of our business law journal, Transactions: The Tennessee Journal of Business Law. We also have secured one of our former visiting professors as a lunch-time speaker.
UT Law looks forward to hosting this event. For more information, you can look here. I expect some of us will post on the conference and the conference papers at a later date.
Wednesday, August 16, 2017
Business leaders probably didn’t think the honeymoon would be over so fast. A CEO as President, a deregulation czar, billionaires in the cabinet- what could possibly go wrong?
When Ken Frazier, CEO of Merck, resigned from one of the President’s business advisory councils because he didn’t believe that President Trump had responded appropriately to the tragic events in Charlottesville, I really didn’t think it would have much of an impact. I had originally planned to blog about How (Not) To Teach a Class on Startups, and I will next week (unless there is other breaking news). But yesterday, I decided to blog about Frazier, and to connect his actions to a talk I gave to UM law students at orientation last week about how CEOs talk about corporate responsibility but it doesn’t always make a difference. I started drafting this post questioning how many people would actually run to their doctors asking to switch their medications to or from Merck products because of Frazier’s stance on Charlottesville. Then I thought perhaps, Frazier’s stance would have a bigger impact on the millennial employees who will make up almost 50% of the employee base in the next few years. Maybe he would get a standing ovation at the next shareholder meeting. Maybe he would get some recognition other than an angry tweet from the President and lots of news coverage.
By yesterday afternoon, Under Armour’s CEO had also stepped down from the President’s business advisory council. That made my draft post a little more interesting. Would those customers care more or less about the CEO's position? By this morning, still more CEOs chose to leave the council after President Trump’s lengthy and surprising press conference yesterday. By that time, the media and politicians of all stripes had excoriated the President. This afternoon, the President disbanded his two advisory councils after a call organized by the CEO of Blackstone with his peers to discuss whether to proceed. Although Trump “disbanded” the councils, they had already decided to dissolve earlier in the day.
I’m not teaching Business Associations this semester, but this is a teachable moment, and not just for Con Law professors. What are the corporate governance implications? Should the CEOs have stayed on these advisory councils so that they could advise this CEO President on much needed tax, health care, immigration, infrastructure, trade, investment, and other reform or do Trump’s personal and political views make that impossible? Many of the CEOs who originally stayed on the councils believed that they could do more for the country and their shareholders by working with the President. Did the CEOs who originally resigned do the right thing for their conscience but the wrong thing by their shareholders? Did those who stayed send the wrong message to their employees in light of the Google diversity controversy? Did they think about the temperament of their board members or of the shareholder proposals that they had received in the past or that they were expecting when thinking about whether to stay or go?
Many professors avoid politics in business classes, and that’s understandable because there are enough issues with coverage and these are sensitive issues. But if you do plan to address them, please comment below or send an email to firstname.lastname@example.org.
August 16, 2017 in Business Associations, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Ethics, Law School, Marcia Narine Weldon, Shareholders, Teaching | Permalink | Comments (1)