Sunday, September 16, 2018
I knew it would be impossible. There was no way to relay my excitement about the potential of blockchain technology in a concise way to lawyers and law students last Friday at the Connecting the Threads symposium at the University of Tennessee School of Law. I didn't discuss cryptocurrency or Bitcoin other than to say that I wasn't planning to discuss it. Still, there wasn't nearly enough time for me to discuss all of the potential use cases. I did try to make it clear that it's not a fad if IBM has 1500 people working on it, BITA has hundreds of logistics and freight companies signed up to explore possibilities, and the World Bank, OECD, and United Nations have studies and pilot programs devoted to it. As a former supply chain person, compliance officer, and chief privacy officer, I'm giddy with excitement about everything related to distributed ledger technology other than cryptocurrency. You can see why when you read my law review article in a few months in Transactions.
I've watched over 100 YouTube videos (many of them crappy) and read dozens of articles. I go to Meetups and actually understand what the coders and developers are saying (most of the time). A few students and practitioners asked me how I learned about DLT/blockchain. First, see here, here, here, and here for my prior posts listing resources and making the case for learning the basics of the technology. What I list below adds to what I've posted in the past.
Here are some of the podcasts I listen to (there are others, of course):
1) The Decrypting Crypto Podcast
2) Block that Chain
3) Block and Roll
4) Blockchain Innovation
Here are some of the videos that I watched (that I haven't already linked to in past posts):
There are dozens more, but this should be enough to get you started. Remember, none of these videos or podcasts will get you rich from cryptocurrency. But they will help you become competent to know whether you can advise clients on these issues.
September 16, 2018 in Compliance, Corporate Governance, Corporations, CSR, Current Affairs, Financial Markets, Human Rights, Law Firms, Law Reviews, Law School, Lawyering, Marcia Narine Weldon | Permalink | Comments (1)
Monday, September 3, 2018
Like many in the law academy, I find three-day holiday weekends a great time to catch my breath and catch up on work items that need to be addressed. This Labor Day weekend--including today, Labor Day itself--is no exception to the rule. I am working today, honoring workers through my own work. My husband and daughter are doing the same.
This blog post and the announcement it carries are among my more joyful tasks for the day. I have been remiss in not earlier announcing and promoting our second annual Business Law Prof Blog symposium, which will be held at The University of Tennessee College of Law on September 14. The symposium again focuses on the work of many of your favorite Business Law Prof Blog editors, with commentary from my UT Law faculty colleagues and students. This year, topics range from the human rights and other compliance implications of blockchain technology to designing impactful corporate law, with a sprinkling of other entity and securities law related topics. I am focusing my time in the spotlight (!) on professional challenges in the representation of social enterprise firms. More information about the symposium is available here. For those of you who have law licenses in Tennessee, CLE credits are available.
I am looking forward to again hosting some of my favorite law scholars at this symposium. I am sure some will blog about their presentations here (Marcia already has previewed her talk and summarized all of our presentations, and I plan to later blog about mine), Transactions (our business law journal) will publish the symposium proceedings, and videos will be processed and posted on UT Law's CLE website later in the year. But if you are in the neighborhood, stop by and hear us all in person! We would love to see you.
Saturday, September 1, 2018
Did I lose you with the title to this post? Do you have no idea what a DAO is? In its simplest terms, a DAO is a decentralized autonomous organization, whose decisions are made electronically by a written computer code or through the vote of its members. In theory, it eliminates the need for traditional documentation and people for governance. This post won't explain any more about DAOs or the infamous hack of the Slock.it DAO in 2016. I chose this provocative title to inspire you to read an article entitled Legal Education in the Blockchain Revolution.
The authors Mark Fenwick, Wulf A. Kaal, and Erik P. M. Vermeulen discuss how technological innovations, including artificial intelligence and blockchain will change how we teach and practice law related to real property, IP, privacy, contracts, and employment law. If you're a practicing lawyer, you have a duty of competence. You need to know what you don't know so that you avoid advising on areas outside of your level of expertise. It may be exciting to advise a company on tax, IP, securities law or other legal issues related to cryptocurrency or blockchain, but you could subject yourself to discipline for doing so without the requisite background. If you teach law, you will have students clamoring for information on innovative technology and how the law applies. Cornell University now offers 28 courses on blockchain, and a professor at NYU's Stern School of Business has 235 people in his class. Other schools are scrambling to find professors qualified to teach on the subject.
To understand the hype, read the article on the future of legal education. The abstract is below:
The legal profession is one of the most disrupted sectors of the consulting industry today. The rise of Legal Tech, artificial intelligence, big data, machine learning, and, most importantly, blockchain technology is changing the practice of law. The sharing economy and platform companies challenge many of the traditional assumptions, doctrines, and concepts of law and governance, requiring litigators, judges, and regulators to adapt. Lawyers need to be equipped with the necessary skillsets to operate effectively in the new world of disruptive innovation in law. A more creative and innovative approach to educating lawyers for the 21st century is needed.
For more on how blockchain is changing business and corporate governance, come by my talk at the University of Tennessee on September 14th where you will also hear from my co-bloggers. In case you have no interest in my topic, it's worth the drive/flight to hear from the others. The descriptions of the sessions are below:
Session 1: Breach of Fiduciary Duty and the Defense of Reliance on Experts
Many corporate statutes expressly provide that directors in discharging their duties may rely in good faith upon information, opinions, reports, or statements from officers, board committees, employees, or other experts (such as accountants or lawyers). Such statutes often come into play when directors have been charged with breaching their procedural duty of care by making an inadequately informed decision, but they can be applicable in other contexts as well. In effect, the statutes provide a defense to directors charged with breach of fiduciary duty when their allegedly uninformed or wrongful decisions were based on credible information provided by others with appropriate expertise. Professor Douglas Moll will examine these “reliance on experts” statutes and explore a number of questions associated with them.
Session 2: Fact or Fiction: Flawed Approaches to Evaluating Market Behavior in Securities Litigation
Private fraud actions brought under Section 10(b) of the Securities Exchange Act require courts to make a variety of determinations regarding market functioning and the economic effects of the alleged misconduct. Over the years, courts have developed a variety of doctrines to guide how these inquiries are to be conducted. For example, courts look to a series of specific, pre-defined factors to determine whether a market is “efficient” and thus responsive to new information. Courts also rely on a variety of doctrines to determine whether and for how long publicly-available information has exerted an influence on security prices. Courts’ judgments on these matters dictate whether cases will proceed to summary judgment and trial, whether classes will be certified and the scope of such classes, and the damages that investors are entitled to collect. Professor Ann M. Lipton will discuss how these doctrines operate in such an artificial manner that they no longer shed light on the underlying factual inquiry, namely, the actual effect of the alleged fraud on investors.
Session 3: Lawyering for Social Enterprise
Professor Joan Heminway will focus on salient components of professional responsibility operative in delivering advisory legal services to social enterprises. Social enterprises—businesses that exist to generate financial and social or environmental benefits—have received significant positive public attention in recent years. However, social enterprise and the related concepts of social entrepreneurship and impact investing are neither well defined nor well understood. As a result, entrepreneurs, investors, intermediaries, and agents, as well as their respective advisors, may be operating under different impressions or assumptions about what social enterprise is and have different ideas about how to best build and manage a sustainable social enterprise business. Professor Heminway will discuss how these legal uncertainties have the capacity to generate transaction costs around entity formation and management decision making and the pertinent professional responsibilities implicated in an attorney’s representation of such social enterprises.
Session 4: Beyond Bitcoin: Leveraging Blockchain for Corporate Governance, Corporate Social Responsibility, and Enterprise Risk Management
Although many people equate blockchain with bitcoin, cryptocurrency, and smart contracts, Professor Marcia Narine Weldon will discuss how the technology also has the potential to transform the way companies look at governance and enterprise risk management. Companies and stock exchanges are using blockchain for shareholder communications, managing supply chains, internal audit, and cybersecurity. Professor Weldon will focus on eliminating barriers to transparency in the human rights arena. Professor Weldon’s discussion will provide an overview of blockchain technology and how state and nonstate actors use the technology outside of the realm of cryptocurrency.
Session 5: Crafting State Corporate Law for Research and Review
Professor Benjamin Edwards will discuss how states can implement changes in state corporate law with an eye toward putting in place provisions and measures to make it easier for policymakers to retrospectively review changes to state law to discern whether legislation accomplished its stated goals. State legislatures often enact and amend their business corporation laws without considering how to review and evaluate their effectiveness and impact. This inattention means that state legislatures quickly lose sight of whether the changes actually generate the benefits desired at the time off passage. It also means that state legislatures may not observe stock price reactions or other market reactions to legislation. Our federal system allows states to serve as the laboratories of democracy. The controversy over fee-shifting bylaws and corporate charter provisions offers an opportunity for state legislatures to intelligently design changes in corporate law to achieve multiple state and regulatory objectives. Professor Edwards will discuss how well-crafted legislation would: (i) allow states to compete effectively in the market for corporate charters; and (ii) generate useful information for evaluating whether particular bylaws or charter provisions enhance shareholder wealth.
Session 6: An Overt Disclosure Requirement for Eliminating the Duty of Loyalty
When Delaware law allowed parties to eliminate the duty of loyalty for LLCs, more than a few people were appalled. Concerns about eliminating the duty of loyalty are not surprising given traditional business law fiduciary duty doctrine. However, as business agreements evolved, and became more sophisticated, freedom of contract has become more common, and attractive. How to reconcile this tradition with the emerging trend? Professor Joshua Fershée will discuss why we need to bring a partnership principle to LLCs to help. In partnerships, the default rule is that changes to the partnership agreement or acts outside the ordinary course of business require a unanimous vote. See UPA § 18(h) & RUPA § 401(j). As such, the duty of loyalty should have the same requirement, and perhaps that even the rule should be mandatory, not just default. The duty of loyalty norm is sufficiently ingrained that more active notice (and more explicit consent) is necessary, and eliminating the duty of loyalty is sufficiently unique that it warrants unique treatment if it is to be eliminated.
Session 7: Does Corporate Personhood Matter? A Review of We the Corporations
Professor Stefan Padfield will discuss a book written by UCLA Law Professor Adam Winkler, “We the Corporations: How American Businesses Won Their Civil Rights.” The highly-praised book “reveals the secret history of one of America’s most successful yet least-known ‘civil rights movements’ – the centuries-long struggle for equal rights for corporations.” However, the book is not without its controversial assertions, particularly when it comes to its characterizations of some of the key components of corporate personhood and corporate personality theory. This discussion will unpack some of these assertions, hopefully ensuring that advocates who rely on the book will be informed as to alternative approaches to key issues.
September 1, 2018 in Ann Lipton, Compliance, Conferences, Contracts, Corporate Governance, Corporate Personality, Corporations, Current Affairs, Employment Law, Human Rights, Intellectual Property, International Business, Joan Heminway, Joshua P. Fershee, Law School, Lawyering, LLCs, Marcia Narine Weldon, Real Property, Shareholders, Social Enterprise, Stefan J. Padfield, Teaching, Technology, Web/Tech | Permalink | Comments (0)
Tuesday, August 28, 2018
Are corporations (and other business associations) political actors? Of course. Some of Marcia's posts here on the BLPB have raised, for example, questions about the use of boycotts as firm political activity. See, e.g., here. Marcia also pointed out here that National Football League teams (typically owned by and operated through some form of business association) have been caught up in political activity surrounding the players-kneeling-during-the-national-anthem controversy.
The Vanderbilt Law Review has recently published an essay on the political corporation written by a Dream Team of sorts--two friends who are married to each other--at the University of South Carolina School of Law, Susan Kuo and Ben Means. Susan teaches advocacy and dispute resolution courses (currently focusing on criminal law and procedure, conflicts, and social justice issues) and is the Associate Dean for Diversity and Inclusion. Ben is likely known to many BLPB readers as a business law guy (with a special focus on small and family owned busnesses). He's been a member of the executive committee for the Association of American Law Schools (AALS) Section on Business Associations and is past chair of the AALS Section on Agency, Partnership, LLCs, and Unincorporated Business Associations. They bring their individual and collective talents to this essay, entitled The Political Economy of Corporate Exit. Here is the SSRN abstract.
Corporate political activity is understood to include financial contributions, lobbying efforts, participation in trade groups, and political advertising, all of which give corporations a “voice” in public decisionmaking. This Essay contends that the accepted definition of corporate political activity overlooks the importance of “exit.” Corporations do not need to spend money to exert political influence; when faced with objectionable laws, they can threaten to take their business elsewhere. From the “grab your wallet” campaign to the fight for LGBT rights in states such as Georgia, Indiana, and North Carolina, corporate exit has played a significant role in recent political controversies.
This Essay offers the first account of corporate exit as a form of political activity and identifies two basic rationales: (1) attaching economic consequences to public choices, and (2) avoiding complicity with laws that violate a corporation’s values. This Essay also shows how citizens can harness corporate economic power when conventional political channels are inaccessible. In an era of hashtag activism and boycotts sustained via social media, corporations cannot afford to ignore consumers, employees, investors, and other stakeholders.
I communicated with Ben about this piece a while back and was excited about it then. I am looking forward to getting into it in short order. Looks like a relevant, insightful read.
Friday, August 24, 2018
Two weeks ago, I blogged about why lawyers, law professors, and judges should care about blockchain. I'll be speaking about blockchain, corporate governance, and enterprise risk management on September 14th at our second annual BLPB symposium at UT. To prepare, I'm reading as many articles as I can on blockchain, but it can be a bit mind numbing with all of the complexity. After hearing Carla Reyes speak at SEALS, I knew I had to read hers, if only because of the title If Rockefeller Were A Coder.
I recommend this article in general, but especially for those who teach business organizations and want to find a way to enliven your entity selection discussions. The abstract is below.
The Ethereum Decentralized Autonomous Organization (“The DAO”), a decentralized, smart contract-based, investment fund with assets of $168 million, spectacularly crashed when one of its members exploited a flaw in the computer code and stole $55 million. In the wake of the exploit, many argued that participants in the DAO could be jointly and severally liable for the loss as partners in a general partnership. Others claimed that the DAO evidenced an entirely new form of business entity, one that current laws do not contemplate. Ultimately, the technologists cleaned up the exploit via technological means, and without engaging in any further legal analysis, many simply concluded that the DAO, other decentralized autonomous organizations, and the Ethereum protocol itself signify opportunities to do away with legal business organizational forms as they presently exist. In this Article, I argue that precisely the opposite is true. Instead of creating a new type of corporate entity through computer code, The DAO and other smart contract-based organizations may resurrect a very old, frequently forgotten, business entity—the business trust, which Rockefeller first used to solve the technology-business organization law divide of his time.
This Article offers the first analysis of blockchain-based business ventures under business organization law at three separate levels of the technology: protocols, smart contracts and decentralized autonomous organizations. The Article first reveals the practical and theoretical deficits of using partnership as the only default entity option for blockchain-based business ventures. The Article then demonstrates that incorporation and LLC formation will also pose both practical and doctrinal difficulties for some such businesses. When faced with a similar conundrum in the nineteenth century, Rockefeller turned to the common law business trust as a substitute business entity. This Article argues that if Rockefeller were a coder building a blockchain-based business, he would again turn to the business trust as an additional choice of entity. The Article concludes by considering, in light of Rockefeller’s history, whether the law should anticipate any challenges with the rise of blockchain-based business trusts.
Monday, August 13, 2018
On Saturday evening, I returned from the 2018 Southeastern Association of Law Schools (SEALS) annual conference (program here). My week-long tour of duty as a conference registrant spanned three different areas of engagement: (1) volunteerism in the portion of the conference dedicated to helping prepare prospective law faculty for the law school appointments process; (2) attendance at programs of interest on substantive law, law schools, and law teaching; and (3) participation (through presentation and commentary) in business law discussion groups. Although I was exhausted by the time I left (especially because I also attended portions of two meetings of the SEALS Board of Trustees), I also was rewarded by each of the three types of involvement in the conference.
The prospective law teachers component of the conference offers the opportunity for a select group of future teacher-scholars to present a sample job talk, receive comments on their draft CVs, and engage in mock interviews. This year, I participated as a mentor in all three components. Some folks needed more support with pieces of the process than others, as you might imagine. But all were amply qualified and deserving of appointments. Several sent me nice "thank you" messages. I hope that we will stay in touch.
I was able to attend a few sessions (or parts of sessions) of various kinds that did not focus on business law directly. Some featured my UT Law colleagues; others represented areas of interest wholly outside or only indirectly related to business law. For example, I attended an international panel on "Fake News" in a Digital Era, a discussion session on Strategies for Bar Preparation and Success, a New Scholars Workshop panel focusing on works-in-process relating to regulatory questions in various areas of law, a program entitled Workshop on Teaching to Engage, and a healthcare and bioethics discussion session. All had something relevant to offer to my scholarship, teaching, or service. As a result of the teaching session, I plan to move one day of office hours a week to our law school commons c=area, so that students can just drop in individually or in groups. I will try to remember to report out on that experiment.
Finally, I did participate in three discussion groups and attend a fourth as part of the Business Law Workshop at the conference. Specifically: I co-chaired--with John Anderson--an insider trading discussion session (U.S. v. Martoma and the Future of Insider Trading Law); chaired a second discussion forum on Alternative ways of Going Public; commented on forthcoming works in a Corporate Governance discussion group; and participated in a final discussion forum on The Role of Corporate Personhood in Masterpiece Bakeshop organized and chaired by our own BLPB co-editor Stefan Padfield. Fellow co-editor Marcia Narine Weldon also attended and participated in this and other programming at the conference. The discussions in these sessions were rich and varied. Perhaps Stefan will have more to say about the discussion group he organized . . . . I think he was pleased with the result of his call for participation. I found the conversation stimulating and fascinating
The 2019 conference is scheduled to start at the end of July (July 29-August 4) in Boca Raton, Florida. Look for news on it here, or sign up for the SEALS blog, through which SEALS makes major announcements of interest to subscribing faculty. If you would like to organize a business law program for next year's conference, please feel free to contact me for advice. I helped originate the SEALS Business Law Workshop years ago and can provide assistance with the proposal submission process.
Sunday, August 12, 2018
We’re a month away from our second annual Business Law Professor Blog CLE, hosted at the University of Tennessee on Friday, September 14, 2018. We’ll discuss our latest research and receive comments from UT faculty and students. I’ve entitled my talk Beyond Bitcoin: Leveraging Blockchain for Corporate Governance, Corporate Social Responsibility, and Enterprise Risk Management, and will blog more about that after I finish the article. This is a really long post, but it’s chock full of helpful links for novices and experts alike and highlights some really interesting work from our colleagues at other law schools.
Two weeks ago, I posted some resources to help familiarize you with blockchain. Here’s a relatively simple definition from John Giordani at Forbes:
Blockchain is a public register in which transactions between two users belonging to the same network are stored in a secure, verifiable and permanent way. The data relating to the exchanges are saved inside cryptographic blocks, connected in a hierarchical manner to each other. This creates an endless chain of data blocks -- hence the name blockchain -- that allows you to trace and verify all the transactions you have ever made. The primary function of a blockchain is, therefore, to certify transactions between people. In the case of Bitcoin, the blockchain serves to verify the exchange of cryptocurrency between two users, but it is only one of the many possible uses of this technological structure. In other sectors, the blockchain can certify the exchange of shares and stocks, operate as if it were a notary and "validate" a contract or make the votes cast in online voting secure and impossible to alter. One of the greatest advantages of the blockchain is the high degree of security it guarantees. In fact, once a transaction is certified and saved within one of the chain blocks, it can no longer be modified or tampered with. Each block consists of a pointer that connects it to the previous block, a timestamp that certifies the time at which the event actually took place and the transaction data.
These three elements ensure that each element of the blockchain is unique and immutable -- any request to modify the timestamp or the content of the block would change all subsequent blocks. This is because the pointer is created based on the data in the previous block, triggering a real chain reaction. In order for any alterations to happen, it would be necessary for the 50%-plus-one of the network to approve the change: a possible but hardly feasible operation since the blockchain is distributed worldwide between millions of users.
In case that wasn’t clear enough, here are links to a few of my favorite videos for novices. These will help you understand the rest of this blog post.
- Blockchain Expert Explains One Concept in 5 Levels of Difficulty
- 19 Industries That Blockchain Will Disrupt
- How Blockchain is Changing Money and Business
To help prepare for my own talk in Tennessee, I attended a fascinating discussion at SEALS on Thursday moderated by Dean Jon Garon of Nova Southeastern University Shepard Broad College of Law called Blockchain Technology and the Law.
For those of you who don’t know how blockchain technology can relate to your practice or teaching, I thought I would provide a few questions raised by some of the speakers. I’ve inserted some (oversimplified)links for definitions. The speakers did not include these links, so if I have used one that you believe is incomplete or inaccurate, do not attribute it to them.
Del started the session by talking about the legal issues in blockchain consensus models. He described consensus models as the backbones for users because they: 1) allow users to interact with each other in a trustless manner; 2) ensure the integrity of the ledger in both normal and adversarial situations; and 3) create a “novel variety of networks with extraordinary potential” if implemented correctly. He discussed both permissioned (e.g. Ripple) and permissionless (Bitcoin) systems and how they differ. He then explained Proof of Work blockchains supported by miners (who solve problems to add blocks to the blockchain) and masternodes (who provide the backbone support to the blockchain). He pointed out how blockchains can reduce agency costs and problems of asymmetrical information and then focused on their utility in financial markets, securities regulation, and corporate governance. Del compared the issues related to off-chain governance, where decisionmaking first takes place on a social level and is then actively encoded into the protocol by the developers (used by Bitcoin and Ethereum) to on-chain governance, where developers broadcast their improvement protocols on-chain and then, once approved, those improvements are implemented into the code. He closed by listing a number of “big unanswered issues” related to regulatory guidance, liability for the performance of the technology and choice of consensus, global issues, and GDPR and other data privacy issues.
Catherine wants to help judges think about smart contracts. She asked, among other things, how judges should address remedies, what counts as substantial performance, and how smart contract audits would work. She questioned whether judges should use a consumer protection approach or instead follow a draconian approach by embracing automation and enforcing smart contracts as drafted to discourage their adoption by those who are not sophisticated enough to understand how they work.
Tonya focuses on blockchain and intellectual property. Her talked raised the issues of non-fungible tokens generated through smart contracts and the internet of value. She used the example of cryptokitties, where players have the chance to collect and breed digital cats. She also raised the question of what kind of technology can avoid infringement. For more on how blockchain can disrupt copyright law, read her post here.
In case you didn’t have enough trust issues with blockchain and cryptocurrency, Rebecca’s presentation focused on the “halo of immutability” and asked a few central questions: 1) why should we trust the miners not to collude for a 51% attack 2) why should we trust wallets, which aren’t as secure as people think; and 3) why should we trust the consensus mechanism? In response, some members of the audience noted that blockchain appeals to a libertarian element because of the removal of the government from the conversation.
Professor Carla Reyes, Michigan State University College of Law- follow her on Twitter at Carla Reyes (@Prof_CarlaReyes);
Carla talked about crypto corporate governance and the potential fiduciary duties that come out of thinking of blockchains as public trusts or corporations. She explained that governance happens on and off of the blockchain mechanisms through social media outlets such as Redditt. She further noted that many of those who call themselves “passive economic participants” are actually involved in governance because they comment on improvement processes. She also noted the paradox that off chain governance doesn’t always work very well because participants don’t always agree, but when they do agree, it often leads to controversial results like hard forks. Her upcoming article will outline potential fiduciaries (miner and masternode operators for example), their duties, and when they apply. She also asked the provocative question of whether a hard fork is like a Revlon event.
As a former chief privacy officer, I have to confess a bias toward Charlotte’s presentation. She talked about blockchain in healthcare focusing on these questions: will gains in cybersecurity protection outweigh specific issues for privacy or other legal issues (data ownership); what are the practical implications of implementing a private blockchain (consortium, patient-initiated, regulatory-approved); can this apply to other needed uses, including medical device applications; how might this technology work over geographically diverse regulatory structures; and are there better applications for this technology (e.g. connected health devices)? She posited that blockchain could work in healthcare because it is decentralized, has increased security, improves access controls, is more impervious to unauthorized change, could support availability goals for ransomware attacks and other issues, is potentially interoperable, could be less expensive, and could be controlled by regulatory branch, consortium, and the patient. She closed by raising potential legal issues related to broad data sharing, unanswered questions about private implementations, privacy requirements relating to the obligation of data deletion and correction (GDPR in the EU, China’s cybersecurity law, etc); and questions of data ownership in a contract.
Eric closed by discussing the potential tax issue for hard forks. He explained that after a hard fork, a new coin is created, and asked whether that creates income because the owner had one entitlement and now has two pieces of ownership. He then asked whether hard forks are more like corporate reorganizations or spinoffs (which already have statutory taxation provisions) or rather analogous to a change of wealth. Finally, he asked whether we should think about these transactions like a contingent right to do something in the future and how that should be valued.
Stay tuned for more on these and other projects related to blockchain. I will be sure to post them when they are done. But, ignore blockchain at your peril. There’s a reason that IBM, Microsoft, and the State Department are spending money on this technology. If you come to UT on September 15th, I’ll explain how other companies, the UN, NASDAQ, and nation states are using blockchain beyond the cryptocurrency arena.
August 12, 2018 in Commercial Law, Compliance, Conferences, Contracts, Corporate Governance, Corporations, Current Affairs, Entrepreneurship, Human Rights, Law School, Lawyering, Legislation, Marcia Narine Weldon, Research/Scholarhip, Securities Regulation, Shareholders, Teaching, Technology, Writing | Permalink | Comments (0)
Friday, July 27, 2018
Pura vida from Costa Rica. Between recovery from carpal tunnel surgery a few weeks ago and an ATV flip two days ago, I don’t have much mental or physical energy to do a full post. I haven’t mastered dictation so I’m typing this on an iPad with one hand. Next week, I’ll provide more substance as well as a preview on my September talk at our second annual BPLB symposium at the University of Tennessee. Today, I want to pass on some resources for those who don’t know anything about blockchain.
For those who want to provide resources for students, Walter Effross has put together a great site:
The following sources come from Professor Tonya Evans at UNH, who has developed an online curriculum on blockchain:
Blockchain + Law:
Next week, I’ll talk about my research into how blockchain is used in corporate governance, compliance, supply chain management, enterprise risk management, cybersexurity, and human rights.
Thursday, July 26, 2018
One of the business law academy's power couples, Amy and Bert Westbrook, recently posted an intriguing piece on SSRN that Bert and I have been communicating about a bit this summer. It is entitled Snapchat's Gift: Equity Culture in High-Tech Firms, and it is, indeed, a lovely gift--well conceived and packaged. It is a look at dual class common equity in technology firms--and equity more generally--that confronts and incorporates many perspectives from law, economics, and other social sciences.
Some of you, like me, teach basic corporate finance in a variety of courses. In those situations, it is important for instructors to have a handle on descriptions of the basic instruments of corporate finance--debt, equity, hybrid, and other. What is the package of rights each instrument represents that incentivizes investors to supply money or other valuable assets? In my classes, we ultimately discuss equity as a bundle of rights that includes potentials for financial gain and governance. Snapchat's Gift digs into the validity of these perceived rights in relevant part by focusing on recent changes in the primary public offering market for equity securities in the United States--in particular, the advent of highly publicized and fully subscribed initial public offerings of nonvoting common shares.
Monday, June 4, 2018
It was great to see co-blogger Marcia Narine Weldon (albeit briefly) at the Sixth Biennial Conference: To Teach is to Learn Twice: Fostering Excellence in Transactional Law and Skills Education hosted by Emory Law's Center for Transactional Law and Practice. I had the opportunity to present and attend some of the presentations on Friday. I had to leave Saturday morning to teach Contract Law to ProMBA students in Knoxville Saturday afternoon, however, and missed hearing half the conference program as a result. Even on Friday, due to the number of super concurrent sessions, I had to forego a lot of great presentations. Consequently, I was delighted to read Marcia's post on Tina Stark's presentation. Great stuff.
At the conference, I offered insights on my document "treasure hunt" teaching method in a "try this" session on Friday afternoon. More specifically, I talked about and demonstrated a corporate finance treasure hunt. After laying a substantive and practical foundation, I sent the audience, some of whom are not corporate finance folks, on a search for blank check preferred stock provisions in Delaware corporate charters. Then, I called on them to share their search logic and make observations about what they found, relating their treasure to the example I had given them. They did so well with this exercise! Everyone found a blank check stock provision, and many in the audience were willing to talk about what they found.
I went to several other "try this" sessions on Friday (billed as forums "for individual presenters to demonstrate in-class activities"). They included:
The Creative Aspect of Transactional Lawyering: Structuring the Transaction and Drafting the Agreement to Resolve a Legal Issue
John F. Hilson
UCLA School of Law
Stephen L. Sepinuck
Gonzaga University School of Law
Teaching Contract Law, Terms, and Practice Skills Through Problems
Marquette University Law School
Teach the Basics of Contract Drafting, Corporate Governance & Transactional Law in One Sentence
Neil J. Wertleib
UCLA School of Law
Each session offered much to think about, a hallmark of this conference. I plan to consider over the course of the summer--and beyond--how I may use some of the demonstrated techniques in my teaching and writing. The proceedings of the conference will be published in principal part in Transactions: The Tennessee Journal of Business Law, UT Law's business law journal, during the 2018-19 academic year. I will try to remember to let folks know when that volume of Transactions is available.
This week, I am off to New York and Toronto for two additional conferences (in New York, the Impact Investing Legal Working Group (IILWG)/Grunin Center for Law and Social Entrepreneurship’s 2018 Conference on “Legal Issues in Social Entrepreneurship and Impact Investing–in the US and Beyond,” and in Toronto, the Law and Society Association Annual Meeting on "Law at the Crossroads: Le Droit à la Croisée des Chemins"). I am at the airport waiting for my first (delayed) flight as a type this. I expect to be able to report out on both next week.
Friday, June 1, 2018
Greetings from Atlanta, Georgia, site of the Emory Transactional Law & Skills Conference. After only a few hours of presentations, I'm already inspired to make some changes in my new transactional lawyering class. I will write about some of the lessons learned next week. Today, I want to share some of Tina Stark's remarks from the conference dinner that ended moments ago. Although she initially teased the audience by stating that she would make "subversive" statements, nothing that she said would scandalize most law students or surprise practicing lawyers.
Her "radical" proposal entailed having transactional skills education be a part of every law student's curriculum. In support, she cited ABA Standard 301(a), which states:
OBJECTIVES OF PROGRAM OF LEGAL EDUCATION (a) A law school shall maintain a rigorous program of legal education that prepares its students, upon graduation, for admission to the bar and for effective, ethical, and responsible participation as members of the legal profession.
She argued that for the academy to meet this standard, schools must go beyond a narrow reading of ABA rules and provide every student with the foundation to practice transactional law, particularly because half of graduates will practice in that area even if they don't know it while they are in law school. She also referenced ABA Standard 302, which states in part:
LEARNING OUTCOMES A law school shall establish learning outcomes that shall, at a minimum, include competency in the following: (a) Knowledge and understanding of substantive and procedural law; (b) Legal analysis and reasoning, legal research, problem-solving, and written and oral communication in the legal context.
Stark correctly observed that notwithstanding the litigation focus in law school, lawyers write more than predictive memos and briefs. She emphasized that competency in oral and communication skills is particularly important for deal lawyers.
If she came even close to being "radical," (and I don't think she did), it's because she went beyond calling on more schools to offer, much less require drafting courses. Instead, she recommended that schools add at least one credit to the first year contracts course so that students can learn the structure of contracts and build a foundation for more advanced work. She likened law students failing to learn the parts of a contract to medical students studying anatomy without doing dissections.
She anticipated the argument that schools do not have enough time to add an extra credit to the basic contracts course by countering that another first year course could be moved to the second year. This would allow professors to spend the first part of the semester teaching 1Ls to read and analyze a contract so that they can understand business drivers when reading cases in contracts and property class.
Although some in the academy might resist the proposal, I believe that members of the bar and business community would applaud this move. If the long waiting list for my transactional lawyering course and similar ones around the country are any indication, law students would appreciate more balance in the curriculum as well.
Friday, May 4, 2018
Does CSR Really Exist in Latin America? Should Corporations be Treated as Persecutors Under Asylum Law? Is Labor an Extractive Industry? Buy This Book and Find Out
In 2015, I and several academics and other experts traveled to Guatemala as part of the Lat-Crit study space. The main goal of the program was to examine the effect of the extractive industries on indigenous peoples and the environment. During our visit, we met with indigenous peoples, government ministers, the chamber of commerce, labor leaders, activists (some who had received multiple death threats), and village elders.
Our labor of love, From Extraction to Emancipation Development Reimagined, edited by Raquel Aldana and Steve Bender, was released this week. My chapter "Corporate Social Responsibility in Latin America: Fact or Fiction" introduces the book. I first blogged about CSR in the region in 2015 in the context of a number of companies that had touted their records but in fact, had been implicated in environmental degradation and even murder. Over the past few years, one of the companies I blogged about, Tahoe Resources, has been sued in Canada for human rights violations, the Norwegian pension fund has divested, and shareholders have filed a class action based on allegations re: the rights of indigenous people.
Although the whole book should be of interest to business law professors and practitioners, chapters of particular interest include a discussion of the environment and financial institutions, the Central American experience with investor protections under CAFTA, whether corporations should be treated as persecutors under asylum law, climate adaptation and climate justice, the impact of mining on self-determination, environmental impact assessments, and labor as an extractive industry.
Other chapters that don't tie directly to business also deserve mention including my mentor Lauren Gilbert's closing chapter on gender violence, state actions, and power and control in the Northern Triangle, and other chapters on the right to water and sanitation in Central America, community-based biomonitoring, and managing deforestation.
We encourage you to buy the book and to invite the chapter authors to your institutions to present (shameless plug for panels, but we would love to share what we have learned).
Friday, April 27, 2018
Music star/clothing designer Kanye West stirred up controversy on Wednesday when he began tweeting about his support of Donald Trump, calling him his “brother,” discussing their shared “dragon energy,” and showing off his MAGA hat, autographed by President Trump himself. The President thanked West for the support, and some level of outrage ensued among liberal pundits and many in the black community about West’s actions. A number of marketing experts opined that West’s vocal support had the potential to adversely affect sales of his Yeezy line of clothing and sneakers, which had already suffered a decline of late, even though earlier releases of his product sold out in minutes online. In the past, Yeezy sneakers’ assoication with Adidas helped that company double its stock price.
As fans threatened to get rid of their Yeezy gear, news outlets wondered if West had killed his brand. But a funny thing happened. GQ Magazine reported today that Yeezy sales are actually up and West has even more Twitter followers than ever. The article described the backlash and boycott threats that other sneaker companies faced after their executives supported President Trump. Even Kim Kardashian, West’s wife and marketing, urged him to cease his public support.
What’s the explanation? Is West a marketing genius? Are a number of Yeezy consumers secret Trump supporters? It’s actually likely more simple than that. As a founder of a sneaker retailer stated in October 2017 during earlier threats of boycotts of high end sneakers, “Our consumer is pretty superficial. They’re driven by hype, so I think a very small margin of our consumer base is insightful enough to come up with their own opinions on these types of things. Most would rather just see a trend happening on social media and go by that.”
Yeezy shoppers tend to be millennial with a lot of disposable income. A recent study indicated that 60% of millennials buy on the basis of their beliefs. The West/Trump saga provides an example to challenge some of those statistics. As I have written in the past, people often claim that ethical consumerism drives them (not that supporting Trump is unethical), but in practice, most consumers actually purchase what they want. Perhaps West’s consumer base is just more transparent. Will other CEOs follow West’s example and voice their support of President Trump? It’s doubtful, especially if they run public companies, but I will be watching.
Saturday, April 21, 2018
Last week, I blogged blogged about lawsuits against chocolate makers alleging unfair and deceptive trade practices for failure to disclose that the companies may have used child slaves to harvest their products. Today, I want to discuss steps that the Business Law Section of the American Bar Association is taking to provide more transparency in supply chain practices.
In 2014, the ABA House of Delegates adopted Model Principles on Labor Trafficking and Child Labor developed by over 50 judges, in-house counsel, outside counsel, academics, and NGOs. The Model Principles address the UN Guiding Principles on Business and Human Rights and other hard and soft law regimes. At last week’s ABA Business Law Spring Meeting, academics David Snyder and Jennifer Martin presented on human rights issues in supply chains alongside practicing lawyers and in-house executives. Many of them (and several others) had formed a Working Group to Draft Human Rights Protections in Supply Contracts. The Group aims to provide contract clauses that are “legally effective” and “operationally likely.”
As a former Deputy GC for a supply chain management company, I can attest that the ABA’s focus is timely as companies answer questions from customers, regulators, shareholders, and other stakeholders. Human rights issues play out in dozens of regulations, including, but not limited to: the Foreign Corrupt Practices Act, Trafficking Victims Protection Act, Dodd-Frank Conflict Minerals Act, California Transparency in Supply Chains Act, the UK Modern Slavery Act, the Trade Facilitation and Trade Enforcement Act, and the updated Federal Acquisition Regulations. Australia and at least seven EU countries are currently working on their own regulations. Savvy lawyers have use the Alien Tort Statute, RICO, negligence, and false advertising allegations to state claims, with varying success.
The following statistics may provide some context. Thanks to e. Christopher Johnson, Jr., CEO of the Center for Justice, Rights, and Dignity.
- there are 21 million victims of human trafficking
- Human trafficking provides $150 billion in profit
- Women and girls are 55% of the victims, and children 17 and under are 26%
To help companies mitigate their supply chain risks, the Business Law and UC Article 1 and Article 2 Committees have drafted more specific model clauses to incorporate human rights provisions in certain contracts. The Committees are also establishing an information exchange with NGOs and developing a Toolkit for Canadian lawyers.
One of the most practical features of the Group’s work is Schedule P, the warranties and remedies to protect human rights in the supply chain. The Working Group’s Report provides guidance on how to use the clauses as well as potential limitations. It’s a long read but I recommend that you look at the report and consider whether the model clauses and Schedule P, an appendix to supplier agreements, will help in the fight to combat human trafficking and forced labor.
Friday, April 13, 2018
Greetings from the ABA Business Law Meeting in sunny Orlando, Florida. Today, I attended an excellent program on Protecting Human Rights in Supply Chains; Moving from Policy to Action. I plan to blog more about the meeting next week, highlighting the work surrounding draft human rights clauses for supplier contracts. The project was spearheaded by David Snyder of American University and corporate lawyer Susan Maslow. In this post, I want to address one of the topics Susan Maslow discussed-- the recent spate of lawsuits brought by consumers who allege unfair trade practices based on what companies say (or don’t say) about their human rights records.
I’ve blogged (incessantly for the past five years) and written longer articles about the various ESG disclosure regimes. I’ve argued that in theory, disclosure is a good thing. But without meaningful financial penalties from regulators for violations, many corporations won’t do anything more than the bare minimum for human rights, even with the threat of (often short-lived) consumer boycotts. Further, most consumers suffer from disclosure overload or don’t understand or remember what they read.
The disclosure issue has now reached the courts. In 2015, a law firm filed cases in California under unfair competition and false advertising laws against the Hershey Company, Mars, and Nestle. The firm likely chose those causes of action because there’s no private right of action under the California Transparency in Supply Chain Act. The suits claimed, among other things that:
- in violation of California law, Hershey’s, Mars and Nestle failed to disclose that their suppliers in the Ivory Coast relied on child laborers and profitted from the child labor that supplies the chocolate sold to American consumers,
- the children subjected to the forced labor are victims of hazardous work involving dangerous tools, transport of heavy loads and exposure to toxic substances, and,
- “sometimes extremely poor people sell their own children into slavery for as little as $30. Children that are sometimes not even 10 years old carry huge sacks that are so big that they cause them serious physical harm. Much of the world’s chocolate is quite literally brought to us by the back-breaking labor of child slaves.”
Plaintiffs lost those cases because the court found that these companies had no legal duty to disclose on their labels that African child slaves might have been involved in manufacturing their cocoa. Had the plaintiffs won, I imagine that the First Amendment argument that prevailed in the Dodd-Frank conflicts minerals litigation would have played a prominent role in the appeal.
Fast forward a few years and the same law firm has now filed a similar class action lawsuit against Hershey in Massachusetts. This claim alleges unjust enrichment in violation of the state’s consumer protection law. According to plaintiffs, “much of the world’s chocolate is quite literally brought to us by the back-breaking labor of children, in many cases under conditions of slavery.” Moreover, they claim, “Hershey’s material omissions and failure to disclose at the point of sale [are] all the more appalling considering that Hershey’s Corporate Social Responsibility Report state[s] that ‘Hershey has zero tolerance for the worst forms of child labor in its supply chain.’ But Hershey does not live up to its own ideals.”
Hershey, like many companies, produces a CSR report showcasing its efforts and progress in accordance with the Global Reporting initiative, the gold standard for CSR. Companies like Hershey also report on their CSR initiatives in good faith with the knowledge that their statements are generally not legally binding, at least not in the United States. I’ll be following this case closely. If the court grants class certification, this could have a chilling effect on what companies say in their CSR reports, and that would be a shame.
Friday, April 6, 2018
Within the next few weeks, the Supreme Court will decide a trio of cases about class action waivers, which I wrote about here. The Court will decide whether these waivers in mandatory arbitration agreements violate the National Labor Relations Act (which also applies in the nonunion context) or are permissible under the Federal Arbitration Act.
I wonder if the Supreme Court clerks helping to draft the Court's opinion(s) are reading today's report by the Economic Policy Institute about the growing use of mandatory arbitration. The author of the report reviewed survey responses from 627 private sector employers with 50 employees or more. The report explained that over fifty-six percent of private sector, nonunion employees or sixty million Americans must go to arbitration to address their workplace rights. Sixty-five percent of employers with more than one thousand employees use arbitration provisions. One-third of employers that require mandatory arbitration include the kind of class action waivers that the Court is looking at now. Significantly, women, low-wage workers, and African-Americans are more likely to work for employers that require arbitration. Businesses in Texas, North Carolina, and California (a pro-worker state) are especially fond of the provisions. In most of the highly populated states, over forty percent of the employers have mandatory arbitration policies.
Employers overwhelmingly win in arbitration, and the report proves that the proliferation of these provisions has significantly reduced the number of employment law claims filed. According to the author:
The number of claims being filed in employment arbitration has increased in recent years. In an earlier study, Colvin and Gough (2015) found an average of 940 mandatory employment arbitration cases per year being filed between 2003 and 2013 with the American Arbitration Association (AAA), the nation’s largest employment arbitration service provider. By 2016, the annual number of employment arbitration case filings with the AAA had increased to 2,879 (Estlund 2018). Other research indicates that about 50 percent of mandatory employment arbitration cases are administered by the AAA (Stone and Colvin 2015). This means that there are still only about 5,758 mandatory employment arbitration cases filed per year nationally. Given the finding that 60.1 million American workers are now subject to these procedures, this means that only 1 in 10,400 employees subject to these procedures actually files a claim under them each year. Professor Cynthia Estlund of New York University Law School has compared these claim filing rates to employment case filing rates in the federal and state courts. She estimates that if employees covered by mandatory arbitration were filing claims at the same rate as in court, there would be between 206,000 and 468,000 claims filed annually, i.e., 35 to 80 times the rate we currently observe (Estlund 2018). These findings indicate that employers adopting mandatory employment arbitration have been successful in coming up with a mechanism that effectively reduces their chance of being subject to any liability for employment law violations to very low levels.
This data makes the Court's upcoming ruling even more critical for American workers- many of whom remain unaware that they are even subject to these provisions.
Friday, March 30, 2018
Corporate Boycotts, A Change of Heart from CEOs, and H & M's Diversity Initiative- A Roundup of The Week's News Stories
Within the past 24 hours, I've seen at least three news article that led me to reflect on my past blog posts. Rather than write a full post on each article, I've decided to note some observations.
The Tweet That Launched A Boycott (And Maybe a Buycott)
I've been skeptical in the past about whether boycotts work. Perhaps times are changing. This week, Parkland shooting survivor David Hogg tweeted that advertisers on Laura Ingraham's cable show should pull out after she tweeted, "David Hogg Rejected By Four Colleges To Which He Applied and whines about it. (Dinged by UCLA with a 4.1 GPA...totally predictable given acceptance rates.) https://www.dailywire.com/news/28770/gun-rights-provocateur-david-hogg-rejected-four-joseph-curl …" On March 28th, the 17-year old activist responded with "Soooo
@IngrahamAngle what are your biggest advertisers ... Asking for a friend. #BoycottIngramAdverts." He then provided a list of her top twelve sponsors.
As of 8:00 p.m. tonight, the following companies dumped the Fox show, eleven after the talk show host had apologized, stating “On reflection, in the spirit of Holy Week, I apologize for any upset or hurt my tweet caused him or any of the brave victims of Parkland... For the record, I believe my show was the first to feature David immediately after that horrific shooting and even noted how ‘poised’ he was given the tragedy ... As always, he’s welcome to return to the show anytime for a productive discussion.”
The companies that have pulled their advertising include Nutrish, Office Depot, Jenny Craig, Hulu, TripAdvisor, Expedia, Wayfair, Stitch Fix, Nestlé, Johnson & Johnson, Jos A Bank, Miracle Ear, Liberty Mutual and Principal. But will they ever return to the show after the attention moves to something else? Will the sponsors face a "buycott," where Ingraham's fans boycott the boycotters or increase their support of the advertisers that Hogg specifically named but have chosen to stay with Ingraham? Time will tell.
Silicon Valley CEOs Warm to President Trump
Last year, I posted about various CEOs choosing to distance themselves from President Trump by resigning from advisory councils because they disagreed with his actions or positions on everything from immigration to his reaction to the events in Charlottesville. Today, the New York Times reported that some of the same CEOs that bemoaned Trump's election and/or publicly condemned him have now had a change of heart. Apparently, they have more common ground than they thought on areas of tax reform, infrastructure, and looser regulation. I look forward to seeing whether any of these companies or CEOs refrain from criticizing him in the future or, more tellingly, whether they choose to use PAC money or personal funds to support his re-election.
H & M Asks One of Its Lawyers To Lead Diversity Initiative
H & M has lots of problems from underperforming designs (billions in unsold clothes) to continued fallout from its "coolest monkey in the jungle" hoodie. As you may recall, in January, a number of consumers, public figures, and other called for a boycott of the company after a young black boy advertised a green hoodie with the word "monkey." H & M even had to close its store in South Africa. The fast fashion company has now turned to one of its in-house lawyers to lead a 4-person team to focus on diversity and inclusiveness. The lawyer will report directly to the CEO in Stockholm. Notably, the board is all white. Should the board diversify as well? It's hard to say. While I support diversity in the executive ranks and the boardroom, there is no evidence that the monkey hoodie led to the 62% drop in operating profit in Q1. Instead, experts note that consumers just didn't like the selections, even at steep discounts. Further, the average H & M customer probably has no idea about this new diversity initiative and even if the customer knew, it'sdoubtful that would change buying habits. Even so, I applaud H & M for taking concrete steps. The company already produces a compelling Sustainability Report. I look forward to seeing if the company can return to profitabiity while keeping its commitment to diversity.
Friday, March 16, 2018
Matt Kelly of Radical Compliance has posted on the costs and benefits of regulation. His post is timely considering this week's rollback of certain Dodd-Frank banking provisions by the Senate. Among other things, Kelly notes that according to a draft OMB report, "across 133 major rules, the average annualized cost (in 2015 dollars) was $92.8 billion, average annualized benefit $554.8 billion. Benefits were six times larger than costs." He further writes, with some skepticism, that the OMB is seeking comment from "peer reviewers with expertise... in regulatory policy" on its cost-benefit analysis as it finalizes its report.
He also cited GW public policy professors who looked at over two hundred major rules adopted between 2007-2010 and found that "The design of the rulemaking process can both increase the pace with which rules are promulgated and reduce the level of detail in which they are presented, but only when care is taken to ensure the individuals intimately involved have greater breadth – relative to depth – in the competencies they bring to the endeavor." As Kelly, observed, " Teams with more “breadth of competencies” (one subject matter expert, one lawyer, one economic analyst, one regulatory affairs specialist, and so forth) tended to write rules more quickly and keep them simpler. In contrast, teams with depth of competency (a whole bunch of lawyers, or policy analysts, or subject matter experts) tended to take more time and, as the authors wonderfully phrased it, “elongated the resulting rules.”'
Although Kelly looks at these issues through the lens of a compliance expert, his post is worth a read as Congress and the SEC look at regulatory reform. He correctly focuses on the need to look at the quality rather than the quantity of regulation.
Friday, March 9, 2018
I love teaching courses that develop practical skills. This summer, I am teaching a 2-credit transactional drafting course for the first time. In the past, I have taught 2-credit skills courses that had a drafting element, but the students enrolled in those courses typically had taken business associations, and therefore we could do entity selection exercises, portions of bylaws, operating agreements, asset purchase agreements, NDAs, and employment agreement clauses. This time, BA will not be a prerequisite, and I am likely to have a number of rising 2Ls enroll.
I have a pile of proposed textbooks that I'm looking to for inspiration (and to select for the course), but I'm specifically seeking tips and best practices for teaching these skills to students who are fresh off of their 1L year. I plan to have a number of practicing lawyers speak to the students about common pitfalls in negotiating and drafting because I have the luxury of one three-hour block of time per week. At a minimum, students will draft, edit, and redline (where appropriate) a retainer letter, time sheets, a nondisclosure agreement, an independent contractor or employment agreement, and a license or settlement agreement. The goal is to have them draft some documents from scratch, some from forms, learn interviewing and negotiation techniques, and apply some business judgment to address client concerns.
What has worked (or bombed) when you've taught a transactional drafting class, especially to those who have not taken BA? For the practicing attorneys, what would you want your interns or junior associates to have worked on prior to joining you? Inquiring minds want to know. Please comment below or feel free to email me at firstname.lastname@example.org.
Friday, March 2, 2018
I live in South Florida and have friends who live in Parkland, Florida, the site of the most recent school shooting. Like many, I've found solace and inspiration in the young survivors and their families who have taken to the streets and visited Washington, D.C. to demand action to prevent the next tragedy. Who knows whether they will succeed where others have failed. I certainly hope so.
I'm more surprised though, with the reactions of major companies such as WalMart, Dicks, REI, United Airlines, Hertz, Symantec and others that have cut ties with the National Rifle Association or have changed their sales practices. Skeptics have observed that corporations take "controversial" stances only when it's cheap or easy and that this stance against the NRA isn't even that controversial. But, it certainly hasn't been "cheap" for Delta Airlines. Notwithstanding the fact that the airline employs 33,000 people in the state, Georgia has passed a bill to eliminate a proposed $50 million tax break because Delta announced plans to end its discount for NRA members.
The gun control issue is the latest in a string of public policy debates that have divided corporations over the past year. CEOs have taken positions on the travel ban, Charlottesville, the NFL protests, the Paris Climate Accord, transgender bathroom laws, and immigration. Some of these positions are more closely tied to their core business than others, and some have been driven by social media activism.
Cautious companies have guidance and momentum on their side when deciding whether to weigh in on social issues. According to the Conscious Capitalism credo, “.. business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can elevate our existence and it is heroic because it lifts people out of poverty and creates prosperity. Free enterprise capitalism is the most powerful system for social cooperation and human progress ever conceived. It is one of the most compelling ideas we humans have ever had. But we can aspire to even more.” This movement focuses on a higher purpose than generating profits; a stakeholder orientation; leaders that cultivate a culture of care and consciousness; and a conscious culture that permeates the people, purpose, and process.
Blackrock, with $1.7 trillion under management, made that even more clear in its January 2018 letter to CEOs, which stated, among other things:
Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth...
Companies must ask themselves: What role do we play in the community? How are we managing our impact on the environment? Are we working to create a diverse workforce? Are we adapting to technological change? Are we providing the retraining and opportunities that our employees and our business will need to adjust to an increasingly automated world? Are we using behavioral finance and other tools to prepare workers for retirement, so that they invest in a way that will help them achieve their goals?
What does this mean for the future? Is corporate social responsibility more of a business imperative than ever? Boards are now entering proxy season. Will shareholders demand more? Will state and federal governments use their power, as Georgia has, to send a message to the C-Suite? Will consumers engage in boycotts or buycotts? (See here, here, here, here) for my views on boycotts). I look forward to seeing how whether the corporations sustain this conscious capitalism over the long term even when it is no longer "cheap" and "easy."