Thursday, August 14, 2014

How I Try to Make Business Associations Less Terrifying for the “Suits” Crowd

A brief ten-question survey is one of the most effective tools I have used in my three years as an academic. I first used one when teaching professional responsibility and then used it for my employment law, corporate governance seminar, and business associations courses. I’m using it for the first time with my civil procedure students. I count class participation in all of my classes for a portion of their grade, and responding to the survey link by the first day of class is their first “A” or first “F” of the semester.

I use survey monkey but other services would work as well. The survey serves a number of uses. First, I will get an idea of how many students actually read my emails before next Tuesday’s first day of class—interestingly as of Thursday morning, 62% of my incoming 1Ls have completed their survey, while 42% of the BA students have done theirs. Second, my BA students work in mini law firms for a number of drafting exercises and simulations. The students can pick their own firms, but I designate a “financial expert” to each firm based upon the survey responses. I remind them that they should never leave the classroom thinking they are “experts” in the real world-- they are just experts compared to the "terrified." I use this tactic to avoid having all of the MBAs and bitcoin owners (yes, I had some last year) sit together and unintentionally intimidate the other firms with their perceived advantage.

Third, I get an idea of how students have learned about business prior to BA and what news sources they use. Fourth, I tailor my remarks and hypotheticals (when appropriate) to reach the litigators or those who plan to specialize in nontransactional work. I want them to know how BA will relate to the practice areas they think they will enter. I tell them on the first day that I went to Columbia for college because it didn’t have a math requirement and I planned to do public interest work, went to law school because the LSAT was the only graduate school entrance exam that had no math on it (ok- my professor Jack Greenberg at Columbia also said I should go). I tell them that I became a litigator to avoid business and spent my first years as a non-corporate person having to learn about FASB and the definition of a "security" because I was a big-firm commercial litigator. I tell them that when I went in-house I had to take accounting for lawyers and although I don’t love the accounting, we will discuss some basics because they never know where they will end up. Many of them mat even represent entrepreneurs. My first day speech is meant to reach the 79% of my students (as of this morning) who say they want to be litigators.

Finally, I feel as though I’m not walking in on the first day completely ignorant of my students. I often use the names or storylines from popular shows or movies in class when I can. The show Suits, by the way, is the runaway favorite for my 1Ls and I know my BA students watch it as well. My BA survey questions are below. If you are interested in seeing my Civ Pro questions, email me at mnarine@stu.edu.

1. Please enter your first and last name. If your name is hard to pronounce, please provide a phonetic spelling as well (rhymes with ___ or NUH-RHINE for Narine). 

2. Have you had any experience working in a legal setting (firm, court, agency, clinic, other) BEFORE coming to law school or DURING law school? Please answer yes or no and then describe the experience if you answered "yes".

 a) Yes- please complete comment box

 b) No

Other (please specify) 

3. Which type of practice appeals to you more?

 a) Planning (e.g. transactional)

 b) Dispute resolution (e.g. litigation)

 c) I do not plan to practice law after graduation

Other (please specify) 

4. Have you or a close family member ever owned a business?

 Yes, and I have been completely involved in management and/or business discussions

 Yes, and I have been somewhat or occasionally involved in management and/or business discussions

 Yes, but I have had no involvement in management and/or business discussions

 No

5. Do you own any stocks, bonds, other types of securities (individually or through a mutual fund or trust) or bitcoin?

 Yes

 No

6. Choose up to THREE fields of law in which you would most prefer to practice

 a) bankruptcy

 b) civil rights/constitutional law

 c) corporate and securities law (including business planning)

 d) criminal law (prosecution)

 e) criminal law (defense)

 f) labor and employment law

 g) trusts and estates

 h) family law

 i) health law

 j) immigration

 k) intellectual property

 l) real estate/land use

 m) litigation (plaintiff side)

 n) litigation (defense side)

 o) sports and entertainment

 p) tax

 q) other, please describe

Other (please specify) 

7. Do you have an MBA, business, finance, accounting, or economics degree?

Yes

No

8. Do you read any business related newspapers, magazines or blogs? Do you watch any business-related television shows or listen to podcasts or radio shows? If so, please name them.

9. Other than to pass the class, what are your learning goals for this course? Are there particular topics that interest or frighten you?

10. Please describe your level of familiarity with business, finance and/or accounting.

 I am an expert and could teach this class

 I have some experience, but could use a refresher

 I have no experience, but am willing to learn

 I am completely terrified

My goals this year: help my students think like business people so that they can add value, help them pass the bar, and most important, help them realize that business isn't so terrifying. Now I just have to get my Civ Pro students to realize that the show Franklin and Bash is probably not the best way to learn about legal practice.

 

August 14, 2014 in Business Associations, Corporate Governance, Corporations, Current Affairs, Entrepreneurship, Law School, Marcia Narine, Securities Regulation, Teaching, Television | Permalink | Comments (3)

Thursday, July 31, 2014

Was Dov Charney too hot for the American Apparel Board to handle?

Warning- do not click on the first link if you do not want to see nudity.

Dov Charney founded retailer American Apparel in 1998 and it became an instant sensation with its 20-something year old consumer base. He mixed a "made in America- sweatshop free" CSR focus with a very sexy/sexual set of ads (hence the warning- - when I first created the link, the slideshow went from a topless “Eugenia in disco pants in menthe” (seriously) to a shot of adorable children’s clothing in about 10 seconds).  No wonder my 18-year old son, who leaves for art school in two weeks, appreciates the ad campaigns. Most of his friends do too- both the males and females. In fact, he indicated that although they all know about the “sweatshop free” ethos, because “it’s in your face when you walk in the stores,” that’s not what draws them to the clothes. As a person who blogs and writes about human rights and supply chains, I almost wish he had lied to me. But he’s no different than many consumers who over-report their interest in ethical sourcing, but then tend to buy based on quality, price and convenience. I am still researching this issue for my upcoming article on CSR, disclosure regimes and human rights but see here, here, here and here for some sources I have used in the past.  My son’s friends--the retailer’s target demographic-- appreciate that the clothes are “sweatshop free” but don’t make their buying decisions because of it. They buy because of the clothes and to a lesser extent, the ads.

The first time I ever really thought about the store was after a 2005 20/20 expose about Charney, who was accused of, among other things, sexually harassing and intimidating numerous employees.  At the time I was a management-side employment lawyer and corporate compliance officer and thought to myself “what a nightmare for whomever has to defend him.” It’s pretty hard to shock an employment lawyer, but the allegations, which continued until his ouster last month, were pretty egregious.  After over 10 years of lawsuits, the company terminated him for breaching his fiduciary duty, violating company policy, and misusing corporate assets.

Recently, American Apparel’s employment practices liability insurance rose from $350,000 to $1 million, I can only assume, because of his actions and not due to the other 10,000 company employees. The company has been sued repeatedly by the EEOC and not just for sexual allegations. Purportedly, the company, which has never traded above $7.00 a share and today is a steal at $.97, could not get financing from some sources as long as Charney was at the helm.

My son and his friends did not know about the termination or the harassment allegations over the years, but he says that the nature of the allegations could have caused some of his friends to stop and think about whether they wanted to patronize the stores. I have some 30-something friends who refuse to shop there. Could this be why the store chose to add a female director? As I explained to a reporter last week, the company shouldn’t need a female perspective to realize that the founder is, to put it mildly, a risk. And in fact, as studies cited by my co-blogger Josh Fershee noted earlier this week, being the “woman’s voice” may minimize her perceived effectiveness. Yes, it’s true that American Apparel took more decisive action than the NFL last week, as Joan Heminway observed, but what took them so long? Is it too little too late? Where was the general counsel when Charney allegedly refused to take his sexual harassment training, which is required by law in California every two years? Where were the other board members who allowed the settlement of case after case involving Charney? I have often found that some of the most vigilant supporters of women in the workplace, especially in harassment matters, are older males who have daughters and wives and who know what it’s like for them. When did the board worry about whether the CEO's well-publicized alleged attacks on employees contradicted the heavy corporate responsibility branding? Did the board meet its Caremark duties?

Ironically, the company’s 10-K filed two months before his termination indicated that, “In particular, we believe we have benefited substantially from the leadership and strategic guidance of Dov Charney. The loss of Dov Charney would be particularly harmful as he is considered intimately connected to our brand identity and is the principal driving force behind our core concepts, designs and growth strategy.”

So at what point between April and June did Charney’s actions go off the scale on the enterprise risk management heat map? COSO, the standard bearer for ERM, encourages boards to focus on: what the firm is willing to accept as it pursues shareholder value; a knowledge of management’s risk management processes that have identified and assessed the most significant enterprise-wide risks; a review of the risk portfolio compared to the risk appetite; and whether management is properly responding to the most significant risks and apprising the board of those risks. Could such an objective risk assessment have even occurred with Charney (the risk) in the room? How could the company have the right tone at the top when the founder/CEO failed to comply with Code of Ethics Rule #2 --“service to the Company never should be subordinated to personal gain and advantage”? The stock price has been falling for years and the company has been struggling. Did the high rates to insure Charney’s conduct finally become too hot to handle? On the other hand, would the directors have made the same decision if the shares were trading at $97 instead of .97? Some shareholders are raising concerns too about why any of the original board members remain given the appalling financial performance.

The board now has a “suitability committee,” which will review the results of an independent investigation into Charney’s actions. Even if the report clears Charney and he’s brought back, the new independent directors will have a lot of questions to answer. The question of whether there is a woman on the board seems to be almost irrelevant given the history. For the record, even though the literature is mixed on the financial benefits of gender and racial diversity, I am a strong proponent of the diversity of viewpoints, particularly those that the underrepresented can bring to the table.

But this board needs to re-establish trust among its investors and funders and then focus on what any retailer should- potential supply chain disruptions, the impact of any immigration reform, currency fluctuations, and keeping their customer base happy and out of competitors H & M and Forever 21. The last thing they need to worry about is how to pay off the victims of their founder’s latest escapades.

 

July 31, 2014 in Corporate Governance, Corporations, Current Affairs, Ethics, Joan Heminway, Joshua P. Fershee, Marcia Narine, Securities Regulation, Television | Permalink | Comments (0)

Friday, July 4, 2014

A Corporate Idealist’s Conflict About Going to Brazil for the World Cup (Twice)- Part One

The title of this post refers to the thought-provoking book by former BP executive, Christine Bader, The Evolution of a Corporate Idealist: When Girl Meets Oil. I will save a review for next week in Part 2 of this post. Briefly, Bader discusses the internal and external struggles that she and other “corporate idealists” face when trying to provide practical, culturally appropriate, innovative ways to implement corporate social responsibility and human rights programs around the world. Much of what she said resonated with me based upon my years as a compliance and ethics officer for a multinational corporation and as a current consultant on these issues.

Like comedian/TV commentator John Oliver, I am torn about the World Cup and the significant power that soccer/futbol’s international governing body FIFA has over both Brazil and its residents. His hilarious but educational rant is worth a close watch, and I experienced the conflict he describes firsthand during my two recent trips to Salvador, Brazil. I went to watch what the rest of the world calls “the beautiful game” in a country where soccer is a religion. That's not an exaggeration by the way-- I bought a statuette of a monk holding a soccer ball in a local cathedral. The monk had a place of honor in the display case right next to the rosaries. The Cup has political consequences as well -- if Brazil doesn’t win the Cup at home, politicians will feel it in Fall’s election.

Trip one to Brazil was purely for pleasure with sixteen aficionados to experience one of the world's most diverse and beautiful cultures while catching two matches. Because I have spent the last couple of year’s researching and writing on business and human rights, when the US team advanced to the quarter finals, I took advantage of my frequent flyer miles, hastily organized some meetings with human rights activists that I had never met, snagged a ticket to the US v. Belgium match, and spent three days mixing business with pleasure.

I had done my homework of course (see e.g. this on the money aspect, this petition to vote for the worst sponsor, this on police response to protestors, and this from David Zirin on Brazil's actions with the World Cup and Olympics). I also knew that FIFA, the nonprofit with a one billion dollar reserve, pays no taxes to the host country. Indeed, while FIFA will earn several billions in profit from the 2014 Cup, Brazil will have spent over ten billion to host. Luckily Brazil loves soccer, but as you may have seen on the news, protests have erupted in the major cities about the perceived broken promises from the government to the people. The infrastructure, schools, hospitals and other projects have not materialized as promised. And while FIFA only requires eight stadiums for a World Cup, Brazil inexplicably built twelve. The Manaus Stadium in the middle of the Amazon cost $250 million and there is no soccer team there. At least the Salvador stadium, which cost $350 million to tear down and rebuild, can host its two teams as well as some of the soccer for the 2016 Olympics. The favelas where the poorest residents live are in clear view of the luxurious new facility in Salvador because they are within walking distance.

For the privilege of hosting the Cup, Brazil agreed to suspend its 2003 law banning alcohol in stadiums so that Budweiser could sell beer; institute World Cup courts to fast track convictions; exempt sponsor companies from some taxes; and establish exclusion zones 2 kilometers around FIFA-designated areas so that no local vendors can sell their wares—this in a country that is at the bottom 10% on the world for income inequality.

A few hours after I landed, I met with an organizer of the some of the protests in Salvador, Brazil’s third largest city. The next day I met with an activist for the homeless in the office of the Public Defender for Human Rights. Despite government funding, the Public Defender and activist communities in Salvador work closely together to address human rights abuses. I learned the following, among other things. Over 250,000 people throughout Brazil were displaced for the games, many with no compensation. Salvador, a city with over 4,000 homeless, only developed housing for 200 families despite knowing about the games for seven years. Homeless people who did not move when told were harassed by the police. If the harassment didn’t work, police confiscated their documentation and/or clothing and destroyed them. If that didn’t work, street cleaning trucks bombarded them with soap and water as though they were trash. Through the joint efforts of the Public Defender and activists, this activity, which started last September, largely stopped.

I also learned that religious groups can protest against abortion and drug use in exclusion zones but those protesting against FIFA must secretly hand out pamphlets in groups smaller than three people to avoid detection, arrest and jail time (sometimes charged as “terrorists.”). FIFA established almost a dozen agencies to ensure that the Cup went smoothly but most locals have experienced nothing but serious disruption. Hundreds of vendors who had eagerly staked out spaces to sell to tourists were banned and the government gave them no place else to go. People have died and suffered serious injury as FIFA has pressured the Brazilian government to complete projects on time. Although protestors have not focused on them, others have raised questions about the environmental impact of the Cup.

Sony, Johnson & Johnson, Budweiser, Coca-Cola, and McDonald's -- all key sponsors paying upwards of a minimum of $10 million-- tout their corporate social responsibility programs so I have the following ten questions about the business of the World Cup.

1)   Is FIFA, the nonprofit corporation, really acting as a quasi-government and if so, what are its responsibilities to protect and respect local communities?

2)   Does FIFA have more power than the host country and will it use that power when it requires voters to consider a bidding country’s human rights record when awarding the 2026 Cup as it has suggested?

3)   If Qatar remains the site of the 2022 Cup after the various bribery and human rights abuse investigations, will FIFA force that country to make concessions about alcohol and gender roles to appease corporate sponsors?

4)   Will/should corporate sponsors feel comfortable supporting the Cup in Russia in 2018 and Qatar in 2022 given those countries’ records and the sponsors’ own CSR priorities?

5)   Does FIFA’s antidiscrimination campaign extend beyond racism to human rights or are its own actions antithetical to these rights?

6)   Are the sponsors commenting publicly on the protests and human right violations? Should they and what could they say that has an impact? Should they have asked for or conducted a social impact analysis or is their involvement as sponsors too attenuated for that?

7)   Should socially responsible investors ask questions about whether companies could have done more for local communities by donating to relevant causes as part of their CSR programs?

8)   Are corporations acting as "bystanders", a term coined by Professor Jena Martin?      

9)   Is the International Olympic Committee, a nonprofit, nongovernmental organization, taking notes?

10)  Do consumers, the beneficiaries of creative corporate commercials and  viral YouTube videos, care about any of this?

I have thoughts but no answers to my questions and will spend my summer on these corporate responsibility issues. I definitely don’t envy the corporate idealists working for any of these sponsors.

 

 

July 4, 2014 in Business Associations, Corporate Governance, Corporations, Current Affairs, Ethics, Marcia Narine, Television, Travel | Permalink | Comments (0)

Wednesday, April 30, 2014

Breaking Bad and the Law

My wife claims that I wasted quite a bit of time watching the Breaking Bad TV series on Netflix over the past few months, but given this recent call for papers, I may claim I was just doing professional development.

The editorial board New Mexico Law Review does not list any business law topics in their areas of particular interest, but I can think of a few.  Accounting fraud and money laundering feature prominently.  The IRS is involved in some episodes.  Magrigal (a global conglomerate), Los Pollos Hermanos (a restaurant chain), and A1A car wash (which becomes a family-owned business) are three businesses that take center stage.  There is a sale of a company (the car wash) in one episode and possible fiduciary duty issues throughout.  I may even see a benefit corporation angle to explore...

This is a fun idea for a special law review issue. 

April 30, 2014 in Business Associations, Conferences, Haskell Murray, Television | Permalink | Comments (0)

Thursday, January 23, 2014

Can lawyers ever be happy?

Even before I read the book The Happy Lawyer by my former colleagues Nancy Levit and Doug Linder, I loved every legal job I ever had from judicial law clerk to BigLaw associate (twice), to deputy general counsel. I am still a happy lawyer after twenty-two years in the profession. I am clearly an anomaly among my attorney friends, most of whom looked at me with envy when I said that I was leaving practice to pursue academia. One friend, a partner in a South Florida firm quipped, “litigation has to be one of the only professions where your client hates you, your opposing counsel hates you, and the judge probably thinks you’re an idiot. When the outcome is positive, the client loves you until they see the bill.” No wonder lawyers aren’t happy.

But the situation for lawyers is more serious than a few clients grumbling about high bills. Earlier this week CNN reported that lawyers are the 4th most unhappy professionals behind dentists, pharmacists, and physicians, and are 3.6 times more likely to suffer from depression than non-lawyers. According to the article, 40% of law students report that they have suffered from depression before graduation. That acknowledgement of a diagnosis of depression or indeed seeking any help for mental illness or substance abuse can adversely affect the graduate’s chances for admission to the bar.

Eight states, including my home state of Florida, have added a mental health component to the continuing legal education requirement, in part to address a rise in attorney suicides.  No one can pinpoint the cause for the increase in unhappiness. Perhaps it’s the recession, which led to layoffs at every level and which will forever alter the legal landscape. Perhaps, like doctors, pharmacists and dentists, lawyers tend to be type A personalities who thrive on perfection and success and drive themselves harder than others. 

I  read the CNN article while was on a tour in Switzerland two days ago. I thought I wanted to live the life of the Swiss with their low taxes, 3.1% unemployment rate, high income and great medical and social insurance programs, when the tour guide stunned us by acknowledging that Switzerland has the third highest suicide rate in the world.  “It’s the relentless pressure to succeed and the tremendous competition here,” he explained.  It seems as though the Swiss have something in common with American lawyers.   

I was actually in Switzerland for the 4th annual kickoff of the innovative LawWithoutWalls program founded by University of Miami Professor Michele DeStefano. The program requires law and business students from around the world to work on teams to develop a project of worth addressing a problem facing the legal profession or legal education. I serve as an academic mentor with entrepreneurs, venture capitalists, in house counsel, practitioner mentors and lawyers from sponsor Eversheds. The students learn about the commoditization of legal services from the very firms that are disrupting the profession, Axiom and LegalZoom, who have representatives serving as mentors or thought leaders. They watch actual pitches on legal innovations to venture capitalists. They learn about doing a business plan for their projects of worth from entrepreneurs, and they use that knowledge when they present their project in a Shark Tank-like presentation in April. The next few months of their lives as part of this program will help the students learn skills and make contacts for an ever-evolving global legal market. Hopefully, they will be better equipped to handle what’s out there than the students who take their career cues from the television show Suits.

But what about the practicing lawyers? Not everyone wants to or can make the leap to academia. There are few LawWithoutWalls programs for veteran, burned-out lawyers. Many attorneys will continue to suffer from soul-crushing anxiety, depression or boredom. I don’t have the answer but look out for the follow-up to Levit and Linder’s book entitled The Good Lawyer: Seeking Quality in the Practice of Law due out this summer.  

 

January 23, 2014 in Corporations, Current Affairs, Entrepreneurship, Marcia Narine, Teaching, Television | Permalink | Comments (2)