Friday, April 4, 2014
According to Professor Grant, giving, matching, and taking “are three fundamental styles of social interaction.” Givers give without thought of what they will get in return; givers are generous, other-focused, and give without keeping score. Matchers give expecting quid pro quo; matchers “believe in tit for tat…and believe in an even exchange of favors.” Takers give expecting a positive return; takers put “their own interests ahead of others’ needs.” (pgs. 4-5).
Grant is quick to admit that, “the lines between [giving, taking, and matching] are not hard and fast.” (pg. 5) Most of us fall somewhere in the middle, as more exacting or less exacting "matchers."
In his book, Grant cites studies of medical students, engineers, salespeople, and others to support his thesis that the “worst performers and the best performers are givers; takers and matchers are more likely to land in the middle.” (pg. 7) (emphasis added). (While Grant cites a number of academic studies, this book is written for a popular audience.)
If "givers" end up at both ends of the success spectrum, the key question becomes: what distinguishes successful givers from unsuccessful givers?
Grant claims that successful givers switch to a matching strategy when they interact with takers (to avoid becoming doormats for the takers), but the successful givers only make the switch to “generous tit for tat” not an unforgiving version of tit for tat. Successful givers also draw appropriate boundaries. See below for Professor Grant’s video clip on avoiding the doormat effect:
Grant’s thesis likely holds for professors. I know a number of givers who have risen to the top of the professorial ranks. I am less optimistic about large law firm partners, though I know a small handful of partners who have done well as givers.
A related Authors at Google talk by Professor Grant is below. (Side note, I wish more companies did events like Authors at Google...and posted them for us to watch.)
Thursday, April 3, 2014
As regular readers of this blog may know, I sit on the Department of Labor's Whistleblower Protection Advisory Committee. The Occupational Health and Safety Administration, a division of the Department of Labor, may not be the first agency that many people think of when it comes to protecting whistleblowers, but in fact the agency enforces almost two dozen laws, including Sarbanes-Oxley and the Consumer Financial Protection Bureau's law on whistleblowers. The Consumer Financial Protection Act was promulgated on July 21, 2010 to protect employees against retaliation by entities that offer or provide consumer financial products.
Today OSHA released its interim regulations for protecting CFPB whistleblowers. The regulation defines a “covered person” as “any person that engages in offering or providing a consumer financial product or service.” A “covered employee” is “any individual performing tasks related to the offering or provision of a consumer financial product or service.” A “consumer financial product or service” includes, but is not limited to, a product or service offered to consumers for personal, family, or household purposes, such as residential mortgage lending and servicing, private student lending and servicing, payday lending, prepaid debit cards, consumer credit reporting, credit cards and related activities. The Consumer Financial Protection Act protects “covered employees” of “covered persons” from retaliation who report violations of the law to their employer, the CFPB, or any other federal, state, or local government authority or law enforcement agency. Employees are also protected from retaliation for testifying about violations, filing reports or refusing to violate the law.
Retaliation is broadly defined as firing or laying off, reducing pay or hours, reassigning, demoting, denying overtime or promotion, disciplining, denying benefits, failing to hire or rehire, blacklisting, intimidating, and making threats. An employee or representative who believes that s/he has suffered retaliation must bring a claim within 180 days after the alleged retaliatory action. If OSHA finds that the complaint has merit, the agency will issue an order requiring the employer to put the employee back to work, pay lost wages, restore benefits, and provide other relief. Either party can request a full hearing before an ALJ of the Department of Labor. A final decision from an ALJ may be appealed to the Department’s Administrative Review Board and an employee may also file a complaint in federal court if the Department of Labor does not issue a final decision within certain time limits.
Although the statute is part of Dodd-Frank, the CFPB whistleblowers don’t get the same monetary benefits as Dodd-Frank whistleblowers who go to the SEC. The SEC Dodd-Frank whistleblower rule allows the recovery of between 10-30% of any monetary award of more then $1million of any SEC enforcement action to those individuals who provide original information to the agency. The SEC announced that in 2013 it awarded $14,831,965.64 during its fiscal year to 4 whistleblowers based on 3,238 tips. The vast majority—more than $14 million went to a single individual. The top three allegations involved corporate disclosures and financials (17.2%), offering fraud (17.1%) and manipulation (16.2%).
Should there be such a disparity between those whistleblowers who protect consumers and those who protect investors? Maybe not, but studies consistently show that whistleblowers don’t report to government agencies for the money so perhaps the absence of a large financial reward won’t be a deterrence. Time will tell as to whether any of these whistleblower laws will prevent the next financial crisis. But at least those who work in the financial sector will have some protection.
I seem to have reached the unfortunate age where one begins to lose friends and colleagues. Not long ago, my good friend and colleague John Gradwohl died. Now, my first academic mentor, Alan Bromberg, a long-time professor at SMU’s School of Law, has died. His obituary is here.
Many of you know Alan as an outstanding scholar of securities and partnership law. I can’t count the number of times I have turned to his treatises on securities fraud and partnership. But I owe Alan a personal debt I could never repay. Alan was the person most responsible for my entry into the profession I love, legal academia.
Alan was of counsel to the Dallas firm for which I worked when I decided to become a law professor. He advised me, served as a reference, and helped me obtain my first academic job—a visiting position at SMU. He continued to advise me and often provided feedback on the reprints I sent him. I called on Alan several times during the course of my career, and he always went out of his way to help.
Alan was a great scholar, but, more important than that, he was an extremely kind and gentle man. His death is a great loss, and not just to legal education.
The Tennessean story is here.
While Alberto Gonzales is certainly a controversial figure in some circles, I believe that people should be given multiple chances in life. He brings a wealth of high level experience to his new position, including:
- Partner at Vinson & Elkins,
- Justice on the Texas Supreme Court,
- Texas Secretary of State,
- General Counsel to the Governor of Texas,
- Counsel to the President of the United States,
- 80th Attorney General of the United States, and
- Visiting Professor at Texas Tech University
My office is across campus at Belmont University's business school, but I will teach Business Associations in the law school this fall (in addition to my courses in the business school), and I look forward to interacting with our new law school dean.
Wednesday, April 2, 2014
Fellow BLPB contributor and friend, Haskell Murray, bravely posted his view of FOMA and Family yesterday. I am contributing to the conversation with my own view of the issues he raised. Both of our posts are born of conversations we have been having off line for the past several months.
We are approaching (if not there already) the point in the semester when I typically feel overloaded by remaining materials for class and year-end administrative responsibilities, fatigue from spring writing deadlines and travel, and a little puzzled by how a summer that isn’t even here yet, already feels “full”. I know that I haven’t struck the right balance, especially not with an infant at home. And yet, if the phone rang tomorrow with an opportunity that I couldn’t pass up, I would instantly add it into the mix subtracting from “free” time and further bloating the scheduled column. I know that I am not alone.
I want to explore two ideas: “opportunities that can’t be passed up” and “free time”.
The bottom line is that I am grateful to have a job that is rewarding, engaging, flexible, and ultimately fun. I look at the pool of candidates we bring in each fall and consider myself immeasurably lucky to be on this side of the vote. At the base of my gratitude is a sneaking suspicion that maybe I don’t belong and that a mistake or an oversight was made in hiring me. So I work very hard to hide that unscratchable itch of doubt in myself and to allay it, should it arise, in any colleagues. From this place of uncertainty all opportunities, any opportunity, can look like one that can’t be passed up or turned down. I have confessed to Haskell that I feel like if I say no that it will turn the tide of good fortune against me, and I will lose all of the good luck that brought me to this profession, and to my school. And so I say yes. To everything.
I want to adopt a lens that helps me view opportunities as what they are—a potential path, not a destination. Opportunities and invitations are not things to be hoarded, gobbling up as many as I can count. Invitations are not validation. [Note that as I write this, I am gripped with the fear that someone reading this was thinking about inviting me to something and now they won’t…is it too contradictory to ask that you still consider inviting me?]. Invitations to present or to collaborate are an opportunity to move in a direction. But we can’t move in all directions at once: we must focus on where it is we actually want to go.
And this brings me to free time. Leaving personal free time aside (and my desire to spend one morning a week with my son over the summer), I want to focus on something even less discussed: professional free time. I want to carve out space to be contemplative about my direction and the steps that I need to take in order to develop my scholarship. I don’t mean setting a writing deadline for my next article, but I mean thinking broadly about what I want to do with my research. Of course we all want to do good work, and outside of tenure standards, individually we make our own value judgments about what “good work” means. Instead of writing the next article as an act of self-propelling force driven by submission cycles and symposiums, I want to revisit the notion of a scholarly agenda like the ones provided by candidates each fall. I want to map out where I need to go and the skills necessary to get there. I think that if I let my FOMA drive me to commit to everything that I will remain a slave to the schedule and fail to stake out my own path, set my own course, and pick the right opportunities to take me where I want to go. Only if I regain a bit of control over my schedule, can I ever hope to strike the right balance professionally and for my family.
So I turn the question to you—do you experience professional FOMA and how do you counter it?
Tuesday, April 1, 2014
A friend with two small children recently told me that he has a bad case of FOMO (“fear of missing out”) at work because of his obligations at home. His comment struck a chord with me because I recently turned down an opportunity to present a paper because the conference falls on my son’s upcoming first birthday. Last year, I passed on another wonderful opportunity because it was extremely close to my son’s due date. (Privileged, first world problems, I realize). Unlike some of our readers, I am not usually inundated with requests to speak, so both of these opportunities were difficult to turn down.
Do not get me wrong, the flexibility provided by a career as a professor is fabulous for raising a family. However, while the baseline day-to-day work requirements for professors are relatively limited, the possible uses of our time are infinite. For Type-A people like me (and most business and law professors I know), it can be difficult to know where to draw the line at work. And even when we do draw the line, like I did in the two cases mentioned above, there can be nagging feelings that we are missing out, that those types of opportunities will not surface again, and that we will “fall behind” our peers.
My FOMO is exacerbated by the fear that I am simply not good enough. Surrounded by brilliant Harvard-Yale-Stanford graduates, I have a gigantic state-school chip on my shoulder. With no disrespect to my alma mater intended, every time I am introduced at a conference as a graduate of Georgia State University School of Law – usually surrounded by people with much more impressive resumes – I fear I will be taken a bit (or a lot) less seriously than others. I am also (constantly) reminded how incredibly fortunate I am to have a tenure-track professor position.
I have plenty on my plate for the rest of 2014, but missed opportunities still eat at me.
Yes, I know, I am experiencing only a very small fraction of what female professors experience. I do not approach Professor Usha Rodrigues’ schedule and sacrifices that she blogged about in January 2013. That said, as a man who wants to be deeply involved at home, but also wants to excel as a professor—I live in that family-work tension.
As I discussed briefly last week, I think reverse veil piercing in the Hobby Lobby case is a bad idea, in part because it uses a doctrine designed to prevent fraud to impute characteristics to the entity. One of the reasons this concerns me is that there are other recent decisions that imply courts may be missing the point about the separate and distinctive nature of entities, even as the individual rights of entities appear to be expanding.
In a recent West Virginia case, for example, a lower court allowed a wildly improper use of the statutory provision, “Unknown claims against dissolved corporation” to be the basis what became a $25 million jury award for punitive damages for emotional impact to a former entity’s shareholders. In the Order Addressing AIG Posttrial Motions (pdf) of May 1, 2012 (“Order”) Ryan Environmental, Inc. v. Hess Oil Co., Inc., Civil Action No. 10-C-20, the court adopted a plaintiff’s argument that, under W. Va. Code § 31D-14-1407(d), “the interests of the shareholders are joined with the interests of the corporation after a corporation’s dissolution.” See Order at 7. The court later explained its view that, because the plaintiff’s former entity was dissolved, damages and hardships attributable to the shareholders were a sufficient basis for the defendants’ liability directly to the shareholders and that such damages and hardships did not need to attributed to the former entity. That is, the defendants’ liability ran to the entity’s shareholders post-dissolution even though the harms claimed were never attributable to the entity. Click below to read more.
Monday, March 31, 2014
Michael Lewis, the author of Liar's Poker and The Big Short, has just released a new book, Flash Boys: A Wall Street Revolt. He argues that high-speed trading results in “rigged” securities markets. I don't always agree with Lewis's positions, but he writes well and it should be an interesting book.
Here are two other interesting takes on the effect of high speed trading on securities markets:
- Yesha Yadav, Beyond Efficiency in Securities Regulation. An academic article arguing that the rise of algorithmic trading “profoundly challenges” notions of market efficiency.
- Scott Patterson, Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market. A very interesting look at the rise of high-speed, computerized trading and its effect on the market.
Sunday, March 30, 2014
Our friends at The Conglomerate recently conducted an excellent online symposium on the Hobby Lobby case.
All of the posts have been collected here.
It was refreshing to read such a thoughtful and balanced set of posts.
In my article, “The Silent Role of Corporate Theory in the Supreme Court’s Campaign Finance Cases,” 15 U. Pa. J. Const. L. 831, I criticized the Supreme Court justices for failing to acknowledge the role of competing conceptualizations of the corporation in their corporate political speech cases. I noted, however, that former Chief Justice Rehnquist was arguably the lone modern justice to deserve at least some praise in this area.
Justice Rehnquist's stand-alone dissent in Bellotti provides arguably the sole example in these opinions of a Justice affirmatively adopting a theory of the corporation for purposes of determining the constitutional rights of corporations--though not via the express adoption of one of the traditionally recognized theories. Specifically, Justice Rehnquist relied on Justice Marshall's Dartmouth College opinion to conclude that: “Since it cannot be disputed that the mere creation of a corporation does not invest it with all the liberties enjoyed by natural persons . . . our inquiry must seek to determine which constitutional protections are ‘incidental to its very existence.”’ Thus, while it may be true that “a corporation's right of commercial speech . . . might be considered necessarily incidental to the business of a commercial corporation[, i]t cannot be so readily concluded that the right of political expression is equally necessary to carry out the functions of a corporation organized for commercial purposes.” I would argue that this is a formulation most aligned with concession theory because not only does Justice Rehnquist rely on Dartmouth College, but he also goes on to say: “I would think that any particular form of organization upon which the State confers special privileges or immunities different from those of natural persons would be subject to like regulation, whether the organization is a labor union, a partnership, a trade association, or a corporation.” Stefan J. Padfield, The Silent Role of Corporate Theory in the Supreme Court's Campaign Finance Cases, 15 U. Pa. J. Const. L. 831, 853 (2013) (quoting First Nat'l Bank of Bos. v. Bellotti, 435 U.S. 765 (1978)).
While this is only one data point, I think it suggests the former Chief Justice would have been hesitant to grant corporations any form of free exercise rights, since it is difficult to see how free exercise rights are more incidental to a corporation’s existence than political speech rights. Cf. Kent Greenawalt, Religion and the Rehnquist Court, 99 Nw. U. L. Rev. 145, 146 (2004) (“With limited qualifications, the Rehnquist Court has abandoned the possibility of constitutionally-required free exercise exemptions.”).
For more on concession theory, I shamelessly suggest my more recent article, “Rehabilitating Concession Theory,” 66 Okla. L. Rev. 327 (2014) (“the reports of concession theory's demise have been greatly exaggerated”). And if you find that of interest, you can check out my latest SSRN posting, “Corporate Social Responsibility & Concession Theory.”
Saturday, March 29, 2014
This semester, I’m teaching Securities Litigation at Duke Law. It’s my first time teaching, so I’ve had to construct a syllabus (relying in part on syllabi provided to me by instructors at other law schools who teach similar courses).
There is a casebook, Securities Litigation and Enforcement, that I’ve been relying upon. However, in my class, I plan to deal not only with federal law claims, but also claims brought under state law. State law isn’t a part of this casebook, and I haven't found anyone else who has taught it. So, for this part of the class, I’m on my own.
[More under the cut]
Friday, March 28, 2014
Just received my confirmation for the Harvard Negotiation Institute, which takes place this June at Harvard Law School.
I decided to jump right into the "Advanced Negotiation" workshop, so we will see how that goes. It is pricey, but I hope it to be a good investment for my institution and something I can draw on in my classes.
Like I have said before, I believe that negotiation should be a required course at law schools and business schools everywhere (though I realize that is now a self-interested opinion). Every lawyer and business person spends a great deal of time negotiating.
After the Institute, I am sure I will blog about the experience.
Now that I am teaching MBA courses in negotiation, I see negotiations everywhere.
For example, in reading about the extremely interesting NLRB ruling in favor of the Northwestern University football players – holding that the players are “employees” and can unionize – I came across this Sports Illustrated article: Northwestern ruling sends clear message: NCAA, it's time to negotiate.
Given this ruling, which will be appealed, and the O’Bannon v. NCAA case which is set for trial on June 9, there is likely to be a great deal of negotiation between the NCAA and players outside of the courtroom over the next few months. As the cases move closer to potential resolutions in favor of the players, the NCAA’s BATNA (best alternative to a negotiation) weakens. The NCAA, however, may raise doubts about the players’ BATNA, by raising things like the possible tax implications of a court victory.
These will be complex, multi-party, multi-issue negotiations. The parties with interests at stake include current and former players, coaches and athletic directors, colleges and universities, the NCAA, and the lawyers on either side. The sports fans also have interests at stake, but while we may be considered, I doubt we will get an actual seat at the negotiation table.
The interests of all these groups create quite the confusing web. The NCAA and the players would be wise to ask questions aimed at uncovering all of the underlying interests of the other parties and try to reach a mutually beneficial resolution outside of court.
For more information, from other professors, on the NLRB ruling in favor of the Northwestern football players see below:
- Marc Edelman (CUNY)
- Darryll Jones (FAMU)
- Kim Krawiec (Duke)
- Michael McCann (New Hampshire) (here and here)
- Steven Wilborn (Nebraska)
This short post caught my eye for two reasons.
Second, since my move to a business school last fall, I have heard the term “networking” with increasing frequency. Sure, “networking” is discussed in law schools and there are some networking events, but in business schools the term “networking” is ubiquitous and the events focused on “networking” are constant.
"Networking" has some negative connotations, but I think Blumenthal’s attack is misplaced. Instead of attacking “networking,” Blumenthal would have done better to attack “selfishness.”
There is nothing wrong, and much good, in the dictionary definition of “networking”:
the exchange of information or services among individuals, groups, or institutions; specifically: the cultivation of productive relationships for employment or business.
Networking can be a wonderful thing, for everyone involved, if you can keep the selfishness at a minimum. Unfortunately, many people network in a selfish manner.
Blumenthal also writes about breaking down the walls between our work and personal lives, but sometimes those walls are healthy. He writes about the joys of involving friends in business, but sometimes involving friends in business is unwise.
Those of us in the corporate law world have seen and read about countless businesses that turned friend against friend, mentor against mentee, and family member against family member.
I am thankful that my professional and personal contacts overlap significantly. Just yesterday, I had two long phone conversations with people I consider both professional contacts and valued personal friends. That said, I am also thankful that I have friends who have nothing to do with work and some professional contacts who never venture outside of my work circles.
In short, while I understand Blumenthal’s negative reaction to “networking,” I think "selfishness" is the real problem. Further, I understand the great happiness he may be experiencing by involving friends in his business, but I also hope he recognizes that business may put great strain on those personal relationships.
Thursday, March 27, 2014
I wonder how many people are boycotting Hobby Lobby because of the company’s stance on the Affordable Health Care Act and contraception. Perhaps more people than ever are shopping there in support. Co-blogger Anne Tucker recounted the Supreme Court’s oral argument here in the latest of her detailed posts on the case. The newspapers and blogosphere have followed the issue for months, often engaging in heated debate. But what does the person walking into a Hobby Lobby know and how much do they care?
I spoke to reporter Noam Cohen from the New York Times earlier today about an app called Buycott, which allows consumers to research certain products by scanning a barcode. If they oppose the Koch Brothers or companies that lobbied against labels for genetically modified food or if they support companies with certain environmental or human rights practices, the app will provide the information to them in seconds based on their predetermined settings and the kinds of “campaigns” they have joined. Neither Hobby Lobby nor Conestoga Woods is listed in the app yet.
Cohen wanted to know whether apps like Buycott and GoodGuide (which rates products and companies on a scale of 1-10 for their health, environmental and social impact) are part of a trend in which consumers “vote” on political issues with their purchasing power. In essence, he asked, has the marketplace, aided by social media, become a proxy for politics? I explained that while I love the fact that the apps can raise consumer awareness, there are a number of limitations. The person who downloads these apps is the person who already feels strongly enough about an issue to change their buying habits. These are the people who won’t eat chocolate or drink coffee unless it’s certified fair trade, who won’t shop in Wal-Mart because of the anti-union stance, and who sign the numerous change.org petitions that seek action on a variety of social and political topics.
I had a number of comments for Cohen that delved deeper than the efficacy of the apps. The educated consumer can make informed choices and feel good about them but how does this affect corporate behavior? Although the research is inconsistent in some areas, most research shows that companies care about their reputations but the extent to which a boycott is effective depends on the amount of national media attention it gets; how good the company’s reputation was before the boycott (many firms with excellent reputations feel that they can be buffered by previous pro-social behavior and messaging); whether the issue is one-sided (child labor) or polarizing (gay marriage, Obamacare, climate change); how passionate the boycotters are; how easy it is to participate (is the product or service unique); and how the message is communicated.
Many activists have done an excellent job of messaging. The SEC Dodd-Frank conflict minerals regulation made it through Congress through the efforts of NGOs that had been trying for years to end a complex, geopolitical crisis that has killed over 5 million people. They got consumers, social media and Hollywood actors talking about “blood on the mobile” or companies being complicit in rape and child slavery in Congo because when they changed the messaging they elicited the appropriate level of moral outrage. The conflict minerals “name and shame” law depends on consumers learning about which products are sourced from the Congo and surrounding countries and making purchasing decisions based on that information. Congress believes that this will solve an intractable human rights crisis. The European Union, which has a much stronger corporate social responsibility mandate for its member states has taken a different view. Although it will also rely on consumers to make informed choices, its draft recommendations on dealing with conflict minerals makes reporting voluntary, which has exposed the EU to criticism. As I have written here, here, here here and here, relying on consumers to address a human rights crisis will only work if it leads to significant boycotts by corporations, investors or governments or if it leads to legislation, and that legislation cannot harm the people it is intended to help.
So what do I think of apps like GoodGuide, BuyCott and 2ndVote (for more conservative causes)? I own some of them. But I also send letters to companies, vote regularly, call people in Congress and write on issues that inspire me. How many of the apps’ users go farther than the click or the scan? Some researchers have used the word “slacktivists” to describe those who participate in political discussions through social media, online petitions and apps. The act of pressing the button makes the user feel good but has no larger societal impact.
What about the vast majority of consumers? The single mother shopping for her children in a big-box retailer or in the fast food restaurant that has been targeted for its labor practices may not have the time, luxury or inclination to buy more “ethically sourced” products. Moreover, studies show that consumers often overreport on their ethical purchasing and that price, convenience and costs typically win out. The apps’ developers may have more modest intentions than what I ascribe to them. If they can raise consumer awareness- admittedly for the self-selected people who buy the app in the first place- then that’s a good thing. If the petitions or media attention lead to well-crafted legislation, that’s even better.
Wednesday, March 26, 2014
A little more than six weeks ago The Lego Movie hit theaters. Without getting into too much detail for those of you who have not yet seen the movie or who will never get around to seeing the movie, in essence it’s about an ordinary guy who’s mistakenly identified as an extraordinary “MasterBuilder”. He is recruited to fight against a Lego villain (President Business-we can call him P.B.) who is intent on gluing everything together. The anti-PB crusaders like having the freedom to dismantle, break, and re-make their Lego creations and shudder at the thought of having everything permanently fixed in place. PB, on the other hand, is intent on perma-gluing the Lego bricks together because he likes the certainty and control of knowing where everything is, and he is wary of innovation or change. Hence, his admonition- “EVERYTHING MUST STAY IN PLACE.”
Now as I watched this battle unfold between President Business’ pro-gluing supporters on one hand, and the pro-change supporters on the other, I could not help but see some similarities between the Lego people’s contested views on the purpose of Legos and our society’s contested views on the purpose of corporations. In The Lego Movie it is a contest between staying in place and the freedom to innovate and create, while in the corporate purpose debate it is a contest between profit maximization/shareholder primacy and ANYTHING ELSE THAT DARES TO SAY ANYTHING OTHER THAN SHAREHOLDER PRIMACY (e.g., creating shared value; stakeholder theory; team production).
While shareholder primacy has both normative and pragmatic appeal, one cannot help but wonder whether this traditional conceptualization of corporations is open to being re-made, or must it be immovable and “stay in place”. In other words, if we accept that our world today is markedly different from the one that existed when shareholder primacy came into vogue, are we selling ourselves short by clinging to a mantra that may no longer be ideal or that may need to be revamped?
Consider a new report by McKinsey [Dr. Maximilian Martin of Impact Economy], titled “Impact Economy, Driving Innovation through Corporate Impact Venturing – A Primer on Business Transformation”. In essence, the report finds that pursuing a profit-as-usual model with “CSR” as a tangential activity is “fast coming to an end.” According to the report, this is because “[a] new paradigm is emerging in its place that is responding to structural changes in the operating environments of business.” The McKinsey [Impact Economy] report points to four “megatrends” that are nudging corporations towards a more transformative and holistic view of their role and purpose – what McKinsey [Impact Economy] terms “sustainable value creation.” These four trends are: (i) significant opportunities at the Base of the Pyramid (BoP); (ii) a $540 billion market for “Lifestyles of Health and Sustainability Consumption”; (iii) the growth in markets “resulting from green growth and the circular economy”; and (iv) the “modernization of the welfare state.” The conclusion reached by the report is that “companies are well advised to grasp the changing tectonics of value creation and tackle markets accordingly if they want to remain competitive in the long run.”
This new McKinsey [Impact Economy] report is of course not alone in making the case for a more expansive view of corporate purpose (for example, the Aspen Business & Society Program’s report on long-term value creation, or Michael Porter’s work on creating shared value). But what does it take to move the needle? In the Lego Movie, it took President Business and the head of the pro-change supporters realizing that their views were really not that far apart. Maybe that too is the winning answer for the corporate purpose debate – those corporations who are successful in responding to the aforementioned mega trends and other societal needs stand to be the ones who provide the most value creation for society and their shareholders.
UPDATE 4/15/14: The original version of this post improperly identified McKinsey as the source of the “Impact Economy, Driving Innovation through Corporate Impact Venturing – A Primer on Business Transformation” report. The post has been corrected to reflect the fact that the report was written by Dr. Maximilian Martin of Impact Economy.
Tuesday, March 25, 2014
I had the distinct honor and privilege of attending oral argument in the Hobby Lobby/Conestoga case at the Supreme Court today. I will be writing a substantive post on the experience in the future, but for now I wanted to share with you the highlights of the corporate-focused arguments. It will be quick because the issues of whether corporations are persons and therefore have standing under RFRA and whether corporations can have religious identies got relatively little attention during the 90 minute argument.
Justice Sotomayor lead the charge on the corporate issues challenging Paul Clement (arguing for Hobby Lobby/Conestoga) to identify where the law protects corporate religion and how can a corporation have religious beliefs. Justice Sotomayor also asked how courts will decide the religion of the corporation-- is it 51% of shareholders' beliefs? dependent upon officers? the board? (This line of quesitoning tracks with an argument that I made here in an Op-ed). Clements, pointing to the scienter doctrine, suggested that the law has already decided that corporations have beliefs and intent. Clement also suggested that the nature of a corporation's belief could be judged by looking at corporate governance documents and that it would become a question of sincerity.
The sincerity of the corporate religious belief is a thread that Chief Justice Roberts picked up in his questioning of Soliciter General Donald Verrilli, arguing for the Government. Chief Justice Roberts suggested that he was willing to leave for another day questions about the extention of the exception sought by Hobby Lobby to large, public companies, noting that it would turn, in part, on the sincerity of the corporate belief.
The absence of legal precedent for corporate religious rights advanced by Verrilli was quickly countered by Justice Scalia that corporate religious rights had never been denied.
U.S. v. Lee was raised several times during the oral argument. This case was signifcant in the oral argument, and I think will be a major part of the final opinion. At issue in Lee was a religious exemption claim brought by an Amish employer to avoid paying social security taxes. The Lee opinion recognized that religious interests were infringed upon, but found that the countervailing interests in the social security system and the rights of the other employees tipped the balance against the exemption. The Lee opinion discussed the choice and consequences of entering the marketplace, a theme that was returned to in oral argument today. Drawing on Lee, both Justices Alito and Breyer questioned whether using the corporate form required the forfeiture of free exercise and religious freedoms.
The issue of whether a corporation is a "person" for purposes of RFRA was largely left to the Dictionary Act, which includes corporations. Soliciter General Verrilli argued that "free exercise" however was not defined and left open quesitons of applicability to corporations. No one was distracted by the corporate personhood debate today.
UPDATED: I am participating in a Huffington Post Live recap on Hobby Lobby oral argument at 2:00 today (March 26th)--access it here.
(1) As I explained here, entities should be able to take on a racial, religious, or gender identity in discrimination claims. I would add that I feel similarly about sexual orientation, but (though I think it should be) that is still not generally federally protected. To the extent the law otherwise provides a remedy, I’d extend it to the entity.
(2) It is reasonable to inquire, why is discrimination different than religious practice? For me, I just don’t think religious exercise by an entity is the same as extending discrimination protection to an entity. There is something about the affirmative exercise of religion that I don’t think extends well to an entity. That is, discrimination happens to a person or an entity. Religious practice is an affirmative act that is different. Basically, reification of the entity to the point of religious practice crosses a line that I think is unnecessary and improper because discrimination protection should be sufficient.
As a follow up to that, I also think it's a reasonable question to ask: Why is religion different than speech? To me it is different because entities must speak, but entities don’t have to practice religion. The entity needs speech to conduct business. A public entity speaks in its public filings. Speech is not just something an entity could do. It is something it must do. Religion, at the entity level is not necessary.
(3) Reverse piercing is not as good a solution as it might appear. Professor Bainbridge suggests that reverse veil piercing is one way in which the religion of the shareholders could be used to justify extending a religious identity to the Hobby Lobby entity, thus allowing the entity to object to certain provisions of the federal healthcare mandate. His argument is, as usual, reasonable and plausible. Still, as explained above, I don't think this is necessary.
More important, though, I don’t like expanding the use of any form of veil piercing. Veil piercing is supposed to be used (at least in my view) solely as a heightened level of fraud protection. It is already used too often and too haphazardly, and further degradation of the line between the entity and others is a dangerous proposition, regardless of the purpose. That is, as people (and courts) get more comfortable with disregarding the entity, they are more likely to disregard the entity. As a general proposition, I think that’s a bad outcome. That alone is reason enough for me to hope the Court will pass on reverse veil piercing as a potential remedy.
Monday, March 24, 2014
Two of the reference librarians at my school, Marcia Dority Baker and Stefanie Perlman, have compiled and published a bibliography of all the scholarship by Nebraska College of Law faculty going back to 1892: Marcia L. Dority Baker & Stefanie S. Perlman, A BIBLIOGRAPHY OF UNIVERSITY OF NEBRASKA COLLEGE OF LAW FACULTY SCHOLARSHIP 1892-2013 (2014).
I don’t know if others schools have done anything like this, but I think it’s a great idea. It’s really interesting to look at what people were writing one hundred years ago, and to consider the body of work of my current colleagues, only a couple of whom I believe were here a hundred years ago. I found the 14 pages of entries for the great legal scholar Roscoe Pound, including dozens of books, humbling.
On the domestic front, I’m happy to report that my listing is twice as long as my wife’s, although I’m not sure she will be happy to know that I reported that. I want to make it clear that she was not here a hundred years ago.
Sunday, March 23, 2014
I'm trying out a new weekly blog post theme, "The Weekly BLT," wherein I highlight a few interesting business law tweets that I've come across in the past week that have not yet made it to the BLPB.
"The problem ... is that ... Kiobel ... ignore[s] the robust corporate identity [recognized in Citizens United]" http://t.co/RI0BefWUUr— Stefan Padfield (@ProfPadfield) March 18, 2014
"Only ... 10 percent of S&P 500 companies reported the number of environmental fines paid." http://t.co/rthzXPwy2w— Stefan Padfield (@ProfPadfield) March 17, 2014
John Cunningham: "one of the best discussions I’ve ever seen about the application of veil-piercing doctrine to LLCs" http://t.co/xJae7nGqQm— Stefan Padfield (@ProfPadfield) March 17, 2014
"traditional theory about shareholder voting..does not reflect recent fundamental changes as to who shareholders are" http://t.co/e9LsR4YUtp— Stefan Padfield (@ProfPadfield) March 17, 2014