Saturday, September 19, 2020

New Book | Predatory Lending and the Destruction of the African-American Dream

Cheryl Wade and Janis Sarra have a new book out entitled, Predatory Lending and the Destruction of the African-American Dream.  It's available to order now.  My copy is on the way and I'm looking forward to getting into it.  The authors describe the book this way:

Since the Great Recession of 2008, the racial wealth gap between black and white Americans has continued to widen. In Predatory Lending and the Destruction of the African-American Dream, Janis Sarra and Cheryl Wade detail the reasons for this failure by analyzing the economic exploitation of African Americans, with a focus on predatory practices in the home mortgage context. They also examine the failure of reform and litigation efforts ostensibly aimed at addressing this form of racial discrimination. This research, augmented by first-hand narratives, provides invaluable insight into the racial wealth gap by vividly illustrating the predation that targets African-American consumers and examining the intentionally obfuscating settlement terms of cases brought by the U.S. Department of Justice, states attorneys, and municipalities. The authors conclude by offering structural, systemic changes to address predatory practices. This important work should be read by anyone seeking to understand racial inequality in the United States.

Predatory lending in the home mortgage market has been in the news before.  I recall this Times article detailing some allegations that Wells Fargo and other lenders steered African-American borrowers into subprime loans when white applicants with similar credit profiles were offered better rates and prime loans. These kinds of lending practices would undoubtedly contribute to the enormous wealth gap between black and white Americans. 

September 19, 2020 | Permalink | Comments (0)

Friday, September 18, 2020

Where Were The Gatekeepers Pt 2- Social Media's Social Dilemma

Two weeks ago, I wrote about the role of compliance officers and general counsel working for Big Pharma in Where Were the Gatekeepers- Part 1. As a former compliance officer and deputy general counsel, I wondered how and if those in-house sentinels were raising alarm bells about safety concerns related to rushing a COVID-19 vaccine to the public. Now that I’ve watched the Netflix documentary “The Social Dilemma,” I’m wondering the same thing about the lawyers and compliance professionals working for the social media companies.

The documentary features some of the engineers and executives behind the massive success of Google, Facebook, Pinterest, Twitter, YouTube and other platforms. Tristan Harris, a former Google design ethicist, is the star of the documentary and the main whistleblower. He raised concerns to 60 Minutes in 2017 and millions have watched his TED Talk.  He also testified before Congress in 2019 about how social media companies use algorithms and artificial intelligence to manipulate behavior. Human rights organizations have accused social media platforms of facilitating human rights abuses. Facebook and others have paid billions in fines for privacy violations.  Advertisers boycotted over Facebook and hate speech. But nothing has slowed their growth.

The documentary explicitly links the rising rate of youth depression, suicide, and risk taking behavior to social media’s disproportionate influence. Most of my friends who have watched it have already decreased their screen time or at least have become more conscious of it. Maybe they are taking a cue from those who work for these companies but don’t allow their young children to have any screen time. Hmmm … 

I’ve watched the documentary twice. Here are some of the more memorable quotes:

If you’re not paying for the product, then you’re the product.”

“They sell certainty that someone will see your advertisement.” 

“It’s not our data that’s being sold. They are building models to predict our actions based on the click, what emotions trigger you, what videos you will watch.” 

“Algorithms are opinions embedded in code.”

”It’s the gradual, slight, imperceptible change in our own behavior and perception that is the product.”

“Social media is a drug.”

”There are only two industries that call their customers ‘users’: illegal drugs and software.”

”Social media is a marketplace that trades exclusively in human futures.”

”The very meaning of culture is manipulation.”

“Social media isn’t a tool waiting to be used. It has its own goals, and it has its own means of pursuing them.”

“These services are killing people and causing people to kill themselves.”

“When you go to Google and type in “climate change is,” you will get a different result based on where you live … that’s a function of … the particular things Google knows about your interests.”

“It’s 2.7 billion Truman Show. Each person has their own reality, their own facts.” 

“It worries me that an algorithm I worked on is increasing polarization in society.”

“Fake news on Twitter spreads six times faster than real news.”

“People have no idea what is true and now it’s a matter of life and death.”

“Social media amplifies exponential gossip and exponential hearsay to the point that we don’t know what’s true no matter what issue we care about.”

“If you want to control the operation of a country, there’s never been a better tool than Facebook.”

"The Russians didn't hack Facebook. What they did was use the tools Facebook created for legitimate advertisers and legitimate users, and they applied it to a nefarious purpose." 

“What [am I] most worried about? In the short term horizon? Civil War.”

“How do you wake up from the matrix when you don’t know you’re in the matrix”?

“You could shut down the service and destroy . . . $20 billion in shareholder value and get sued, but you can’t in practice put the genie back in the model.”

“We need to accept that it’s ok for companies to be focused on making money but  it’s not ok when there’s no regulation, no rules, and no competition and companies are acting as de facto governments and then saying ‘we can regulate ourselves.’ “

“There’s no fiscal reason for these companies to change.”

This brings me back to the beginning of my post. We’ve heard from former investors, engineers, and algorithm magicians from these companies, but where were and are the gatekeepers? What were they doing to sound the alarm?  But maybe I’m asking the wrong question. As Ann Lipton’s provocative post on Doyle, Watson, and the Purpose of the Corporation notes, “Are you looking at things from outside the corporation, in terms of structuring our overall legal and societal institutions?  Or are you looking at things from inside the corporation, in terms of how corporate managers should understand their jobs and their own roles?”

If you’re a board member or C-Suite executive of a social media company, you have to ask yourself, what if hate speech, fake news, polarization, and addiction to your product are actually profitable? What if perpetuating rumors that maximize shareholder value is the right decision? Why would you change a business model that works for the shareholders even if it doesn’t work for the rest of society? If social media is like a drug, it’s up to parents to instill the right values in their children. I get it. But what about the lawyers and the people in charge of establishing, promoting, and maintaining an ethical culture? To be clear, I don’t mean in any way to impugn the integrity of lawyers and compliance professionals who work for social media companies. I have met several at business and human rights events and privacy conferences who take the power of the tech industry very seriously and advocate for change.

The social media companies have a dilemma. Compliance officers talk about “tone at the top,” “mood in the middle,” and the “buzz at the bottom.” Everyone in the organization has to believe in the ethical mandate as laid out and modeled by leadership. Indeed, CEOs typically sign off on warm, fuzzy statements about ethical behavior in the beginning of the Code of Conduct. I’ve drafted quite a few and looked at hundreds more.  Notably, Facebook’s Code of Conduct, updated just a few weeks ago, has no statement of principle from CEO Mark Zuckerberg and seems very lawyerlike. Perhaps there’s a more robust version that employees can access where Zuckerberg extols company values. Twitter’s code is slightly better and touches more on ethical culture. Google’s Code states, “Our products, features, and services should make Google more useful for all our users. We have many different types of users, from individuals to large businesses, but one guiding principle: “Is what we are offering useful?”’ My question is “useful” to whom? I use Google several times a day, but now I have to worry about what Google chooses to show me. What's my personal algorithm? I’ve been off of Facebook and Instagram since January 2020 and I have no plans to go back.

Fifty years ago, Milton Friedman uttered the famous statement, “There is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” The social media companies have written the rules of the game. There is no competition. Now that the “Social Dilemma” is out, there really isn’t any more deception or fraud.

Do the social media companies actually have a social responsibility to do better? In 2012,  Facebook’s S-1 proclaimed that the company’s mission was to “make the world more open and connected.” Facebook’s current Sustainability Page claims that, “At Facebook, our mission is to give people the power to build community and bring the world closer together.” Why is it, then that in 2020, people seem more disconnected than ever even though they are tethered to their devices while awake and have them in reach while asleep? Facebook’s sustainability strategy appears to be centered around climate change and supply chain issues, important to be sure. But is it doing all that it can for the sustainability of society? Does it have to? I have no answer for that. All I can say is that you should watch the documentary and judge for yourself.

September 18, 2020 in Ann Lipton, Compliance, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Ethics, Family, Film, Human Rights, Lawyering, Management, Marcia Narine Weldon, Psychology, Shareholders, Television | Permalink | Comments (0)

Thursday, September 17, 2020

Doyle, Watson, and the Purpose of the Corporation

Sherlock Holmes aficionados distinguish between literary criticism that is “Watsonian” in perspective, and criticism that is “Doylist.”  As any fan knows, the stories were written by Arthur Conan Doyle as a first-person narrative; they purport to be the work of John Watson, who is recounting the exploits of his brilliant friend and sometime-roommate, Sherlock Holmes.  Fans who analyze the stories, then, have a choice: They can take an “outsider” perspective and discuss them as works of fiction authored by the real-life person Arthur Conan Doyle, or they can take an “in-universe” perspective and discuss them as the actual literary product of John Watson, unreliable narrator.  Depending on which viewpoint you adopt, you may end up in strikingly different conversations.  For example, a Doylist might look at inconsistencies in how Watson’s wife is described throughout the series, and attribute them to the multi-year period over which the stories were drafted; a Watsonian might argue that Watson was covering for a gay relationship with Holmes and couldn’t keep his lies straight.  Neither viewpoint is incorrect, but the two fans are talking past each other; in order to communicate, they have to define the relevant playing field.

That’s how I feel about a lot of the conversations currently surrounding corporate purpose, especially the ones you see in popular media. 

We’ve had a lot of soul-searching recently about whether corporations should be run to benefit society overall, or whether they should be run to benefit their shareholders alone.  But that conversation is incoherent unless you first clarify your perspective.  Are you looking at things from outside the corporation, in terms of structuring our overall legal and societal institutions?  Or are you looking at things from inside the corporation, in terms of how corporate managers should understand their jobs and their own roles?

From a societal, or Doylist, perspective, I don’t think there’s any dispute that corporations exist to serve the community as a whole.  We charter corporations, we create rules for their operation, we develop infrastructure to facilitate investing, all because we believe that on balance, corporations are (or can be) a net good.  They are an efficient way of doing business, which means they contribute to innovation and economic development, provide necessary (or even just enjoyable) goods and services, generate wealth not only for investors, but also for workers and governments (through tax payments).  They can provide outlets for creativity and generally contribute to human flourishing.  That is the social purpose of a corporation.

But corporations harness and coordinate labor and capital on a potentially global scale, and thus are very powerful tools.  Any form of power can be misused.  Corporations might exploit and injure workers, or consumers, or the environment, perhaps to the point where the benefits are not worth the costs.  Thus, we need to arrange our societal institutions to minimize these harms, and maximize the benefits.

Corporate purpose debates are not about those principles – on which, I suspect, everyone agrees.  The debate about corporate purpose is a debate about method.  If we agree that corporations exist to benefit society, and if we agree that we need some kind of legal and/or market structure to ensure this occurs, what does that structure look like?

And this is when we switch to the Watsonian perspective, from within the corporation itself.  And here, the question is, is it better that corporate managers understand themselves to be servants of society, and manage the corporation to effectuate that purpose?  Or is it better if managers understand themselves to be serving investors, while other societal institutions – regulation, contract law, and the like – protect the rest of society?

This is a point I’ve made repeatedly, most recently in Beyond Internal and External, but also in Not Everything is About Investors, and I’m hardly the first to do so.  For example, though Henry Hansmann’s & Reinier Kraakman’s essay, The End of History for Corporate Law, has received its share of ribbing for being a bit premature, it lays out this framework very neatly, while arguing that society overall benefits if managers focus on investors, while we reserve other types of regulation to protect non-investor constituencies. 

Unless these premises are understood by everyone in the conversation, it devolves into the same incoherence one would expect from a Doylist discussing Watson’s marriages with a Watsonian.  So, for example, the New York Times recently published a retrospective on Milton Friedman, with soundbites from assorted businesspeople and academics.  You will, I’m sure, be shocked to learn that every business person included argues that corporations should be run to benefit all stakeholders.

Now, there’s a certain banality to this exercise – what CEO is going to say “screw my customers, I’m all about the stock price”? – but more importantly, there is no dispute that corporations should operate to benefit all stakeholders; the issue is how do we make that happen. One method – and only one method – is to rely on managerial largesse to distribute surplus to shareholders and stakeholders alike. (We’ll call this the “Martin Lipton” method*)  But there are other mechanisms to constrain corporate behavior besides managerial largesse, and it’s impossible to talk about the merits of such largesse without acknowledging those mechanisms and discussing how they function.  The question, properly framed, isn’t whether CEOs should consciously operate their companies to serve society, but what are the options we have for making sure they do so, and which mechanisms are more effective than others, and why?  If CEO altruism is one of our options, is it better or worse than other possibilities, and if we are going to rely on altruism, what institutions do we need to generate that altruism and channel it appropriately?

Which is why I find the NYT piece so frustrating, because it’s got the Doylists and the Watsonians all mixed together as though they’re talking about the same thing.  Many of the academics are Doylistically describing the types of societal structures we need to corral corporate power and ensure that capitalism benefits everyone.  Meanwhile, Starbucks’s Howard Schultz, Home Depot’s Ken Langone, J&J’s Alex Gorsky, and BlackRock’s Larry Fink, among others, take the Watsonian view, which is to say, they argue what all businesspeople argue: CEOs should run the company with a view toward serving shareholders because you cannot serve shareholders without serving the rest of society.  From Watson’s perspective, if the CEO is focused on maximizing profits, s/he will make good products that consumers want to buy, and create good jobs that attract high-quality employees, which satisfies Doyle’s desire for a better society overall. 

But by focusing on the Watsionian viewpoint and eliding the Doylist challenge of the academics, these businesspeople avoid any test of the very specific factual claim that undergirds their argument: that the interests of shareholders and the interests of other stakeholders are aligned.  And in order for that to be true – that shareholders cannot profit unless the rest of society benefits – nonshareholder constituencies must be sufficiently powerful Doylistically to extract a price for corporate malfeasance.  They must have, in Galbraith’s words, countervailing power, from labor unions, a strong regulatory system, consumer advocacy groups, and so forth. 

That line of thinking yields two possibilities: We can maximize the benefits provided by corporations, and minimize their harms, by strengthening these countervailing institutions, or we can do it by weakening corporations. The latter, for example, was long the goal of antitrust law, and it’s why there’s so much advocacy around limiting corporate political donations.

Which brings me to Jens Dammann and Horst Eidenmueller, who have written a pair of papers that arguing that co-determination (whereby employees, as well as shareholders, get to vote for corporate directors) may not strengthen corporate functioning but instead weaken it, by creating a type of separation of powers within the corporate form, and that itself may be net beneficial to society.  I made a similar point in Beyond Internal and External, where I argued that the regulatory system shapes shareholders to have divergent preferences in a manner akin to the separation of powers.  The separation of powers has two Watsonian functions.  The first is that it encourages a variety of incentives and goals among corporate managers, which encourages a broader perspective in corporate decisionmaking.  The second is that it impedes any kind of corporate action in the first place, by making it more difficult for corporations to reach a consensus.  In that vein, certain kinds of corporate governance reforms – elimination of dual-class stock, separating chair and CEO roles, and so forth – seem less about ensuring good (profit-maximizing) governance than creating friction in governance, because by impeding the corporation’s ability to act, we necessarily strengthen other constituencies. 

Okay, yeah, so just imagine I have a pithy conclusion here.  Whatever, it’s a blog post.

*no relation

September 17, 2020 in Ann Lipton | Permalink | Comments (6)

Wednesday, September 16, 2020

Wyoming Approves Special Purpose Depository Institution Charter for Kraken

This news story in the Cowboy State Daily, Kraken: World's First Digital Bank to Open in Wyoming, came to my attention this afternoon.  Wyoming granted Kraken a Special Purpose Depository Institutions Charter, a type of state bank charter enacted into Wyoming law in 2019.  The Kraken blog notes that "From paying bills and receiving salaries in cryptocurrency to incorporating digital assets into investment and trading portfolios, Kraken Financial will enable Kraken clients in the U.S. to bank seamlessly between digital assets and national currencies."  Its "vision is to become the world’s trusted bridge between the crypto economy of the future and today’s existing financial ecosystem."      

Not surprisingly, the banking law academic in me has lots of questions, and I'll look forward to sharing some with BLPB readers when I've had more time to learn about this development.   

As a side note, in July 2020, the Office of the Comptroller of Currency (OCC) announced that "federally chartered banks and thrifts may provide custody services for crypto assets."  The OCC charters national banks, and individual states grant state bank charters.     

 

September 16, 2020 | Permalink | Comments (0)

Tuesday, September 15, 2020

What Do People Really Think of Insider Trading? Part III

This is the third installment of a multi-part guest blog presenting some of the results of the first comprehensive, large-scale, national survey of public attitudes regarding insider trading. My co-authors (Jeremy Kidd and George Mocsary) and I present the survey’s complete results in our forthcoming article, Public Perceptions of Insider Trading. This installment focuses on the public’s views concerning the morality of insider trading.

The survey asked participants (1) whether they would trade on inside information if it came into their possession; (2) whether they believe that insider trading is morally wrong; and (3) whether they believe that insider trading should be illegal. The following table offers a demographic breakdown of the results.

 

Would you trade based on inside info?

Is insider trading morally wrong?

Should insider trading be illegal?

 

Yes

No

Yes

No

Yes

No

Overall

44.9%

55.1%

62.8%

35.5%

66.7%

33.3%

Gender

Female

45.9%

54.1%

59.4%

39.3%

62.5%

37.5%

Male

43.6%

56.4%

66.7%

31.2%

71.5%

28.5%

Race

Asian

56.1%

43.9%

56.1%

42.4%

62.1%

37.9%

Black

59.0%

41.0%

43.3%

55.1%

45.5%

54.5%

Latinx

61.5%

38.6%

45.8%

51.8%

48.2%

51.8%

Native Am.

66.7%

33.3%

58.3%

41.7%

58.3%

41.7%

White

39.7%

60.2%

68.6%

29.7%

72.6%

27.4%

Other

40.9%

59.1%

59.1%

40.9%

72.7%

27.3%

Trading Status

Invest

51.3%

48.7%

66.5%

31.6%

71.3%

28.7%

Abstain

40.3%

59.7%

59.3%

39.3%

62.4%

37.6%

As expected, a majority of respondents (63%) view insider trading as immoral and 66% think it should be illegal. These numbers are relatively close—at the margin of error for the poll. But the story is more complex when considered in light of responses concerning trading preferences. 18% of respondents said insider trading is immoral but also said they would trade on it—reflecting some cognitive dissonance or a lack of moral clarity. 10% said insider trading is not immoral but also said they would not trade on it--call them cautious abstainers.

We attempted to use these figures to get a clearer sense of respondents’ “true” moral attitudes regarding insider trading. If we take the number who said it is immoral and subtract out those who’s moral clarity is weak, we get 44.2% who have a clear sense that insider trading is wrong. If we take those who would not trade on inside information and subtract those who abstain only out of caution (e.g., fear of prosecution), we get 44.6% who abstain on moral grounds. It is interesting that these two numbers are so close, and this consistency tracks across most demographic subgroups. The numbers suggest that there is a core group of respondents (~44%) who have moral clarity that insider trading is wrong, and who would not trade on inside information for that reason.

The data therefore offers some evidence that the “true” percentage of respondents who believe that insider trading is immoral is probably less than 62%, and could be as low as 44%. See here for a more complete discussion of these and other findings from our survey.

The next installment of this post will share survey responses to a number of scenario-based questions.

September 15, 2020 in Securities Regulation, White Collar Crime | Permalink | Comments (0)

Monday, September 14, 2020

Monday Haiku - Lawyers as Leaders

Lawyers as leaders.
Reputation is sacred.
So, guard it closely.

In my new role as Interim Director of UT Law's Institute for Professional Leadership (IPL, for short), I have made a commitment to sit in on the classes in the Institute's curriculum.  One of them, Lawyers as Leaders, is the flagship course--the course that catalyzed the establishment of the IPL.  This semester, it is being hosted on Zoom.

In that course this afternoon, the students wrestled with attorney misconduct--and how to punish it.  During the first hour of the two-hour session, they spent time in breakout rooms discussing three cases that involved different lapses of professional responsibility rules (and, in some cases, criminal law rules).  They were asked to report out/comment on several things about those cases, including the propriety and relative severity of the penalties imposed on the respective transgressor attorneys.  During the second hour of class, the students had the opportunity to listen to one of the three offenders tell his story and share what he learned about leadership through his misconduct.  They also were invited to ask him questions.

The story that the students heard was the one involved in this case.  But they heard about the facts in a way that the Tennessee Supreme Court could not possibly convey them.  And they heard about the personal family tragedy that intersected with the case. 

The class was a very moving experience for me--even though I have heard the story told before.  I can only hope that the learning done by the students was as powerful as the teaching.  The haiku that introduces this post only covers the top line; there is so much more richness there that can only be appreciated by hearing the story in person.  I found myself wishing that I had been afforded the opportunity to learn about professional responsibility and leadership in a similarly compelling way during my law school career.  I am grateful for the opportunity to lead this program.

September 14, 2020 in Ethics, Joan Heminway, Lawyering | Permalink | Comments (2)

Sunday, September 13, 2020

Sept 15 Deadline - Call for Submissions: AALS Section on Financial Institutions and Consumer Financial Protection

Dear BLPB readers:

The AALS Section on Financial Institutions and Consumer Financial Protection invites submissions of no more than five pages for the 2021 annual meeting. Selected speakers would present on Tuesday, January 5, from 1:15 to 2:30 pm ET.  The submission can be the abstract and/or introduction from a longer paper, and it should relate to the following session description:

After the 2008 financial crisis, Congress overhauled financial regulation. The Dodd-Frank Act of 2010 created a new consumer protection agency, limited bank investment, imposed new capital and liquidity requirements, created an umbrella financial council, and reworked derivatives oversight, among many significant pieces. This session will explore ideas about what the next sweeping financial legislation should entail.

Please send your anonymized materials by September 15, 2020, to Joseph Graham, jgraham@bu.edu. Please also indicate (a) whether you are tenured, pre-tenure, or other; (b) how far along the full article is, and (c) optionally, any other information that might benefit the committee in selecting a diverse panel of speakers.

On behalf of the Section on Financial Institutions and Consumer Financial Protection

Chair: Rory Van Loo (Boston University)

Chair-Elect: Pat McCoy (Boston College)

Executive Committee Members:

Hilary Allen (American University)

Felix Chang (University of Cincinnati)

Gina-Gail Fletcher (Duke University)

Kathryn Judge (Columbia University)

Michael Malloy (University of the Pacific)

Christopher Odinet (University of Iowa)

Paolo Saguato (George Mason University)

Jennifer Taub (Western New England University)

Andrew Tuch (Washington University)

David Zaring (University of Pennsylvania)

 

September 13, 2020 in Call for Papers, Colleen Baker | Permalink | Comments (0)

Guest Blog: ULC's work on Coercive Labor Practices in Supply Chains, Part 5

Welcome to the final guest blog discussing the work of the ULC study committee that focuses on coercive labor practices.  In previous blogs I have discussed other frameworks the study committee is considering, including disclosure-based regimes and frameworks that are centered on procurement.  In this final blog, I will examine what some consider the next frontier for combating coercive labor practices in supply chains: mandatory human rights due diligence.   

More after the jump …

Continue reading

September 13, 2020 | Permalink | Comments (0)

Saturday, September 12, 2020

Everybody wants the next thing to be just like the first

I write briefly to call attention to the opinion in SEB Investment Mgmt v. Align Tech., 2020 U.S. Dist. LEXIS 164661 (N.D. Cal. Sept. 9, 2020), partially dismissing a 10(b) action against Align Technology, the manufacturer of Invisalign teeth-straightening products.  Plaintiffs alleged, among other things, that the company’s financial projections were false for failing to consider what would happen when its patents expired and competitors entered the space.  The court rejected this claim on the ground that the projections were protected by the PSLRA’s safe harbor, which insulates forward-looking statements if they are “accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement.”  15 U.S.C. § 78u-5.  According to the PSLRA’s legislative history, “boilerplate warnings will not suffice.... The cautionary statements must convey substantive information about factors that realistically could cause results to differ materially from those projected.”  Thus, in the Align case:

The Court agrees with Defendants that the statement was accompanied by adequate warnings. Defendants explain that, at the beginning of the investor call, Align’s representative stated:

As a reminder, the information that the presenters discuss today will include forward-looking statements, including statements about Align’s future events, product outlook and the expected financial results for the third quarter of 2018. These forward-looking statements are only predictions and involve risks and uncertainties that are set forth in more detail in our most recent periodic reports filed with the Securities and Exchange Commission. Actual results may vary significantly, and Align expressly assumes no obligation to update any forward-looking statement. We’ve posted historical financial statements, including the corresponding reconciliations and our second quarter conference call slides on our website under Quarterly Results. Please refer to these files for more detailed information.

The warning, in turn, thus explicitly incorporated risks identified in written filings with the SEC, specifically with respect to “competition, promotions, and decreased ASP.” …

Defendants are correct that substantially similar disclaimers have repeatedly been held by the Court to be a sufficient “meaningful cautionary statement” for purposes of the PSLRA Safe Harbor. For example, in In re Fusion-io, Inc. Securities Litigation, the Court found sufficient a disclosure at the beginning of an earnings call “that forward-looking statements were predictions based on current expectations and assumptions, that these expectations and assumptions involved risks and uncertainties, and [that] referred listeners to Fusion’s registration statements and reports filed with the SEC.” No. 13-CV-05368-LHK, 2015 WL 661869, at *13 (N.D. Cal. Feb. 12, 2015). Similarly, in McGovney v. Aerohive Networks, Inc., the Court found sufficient a disclaimer at the beginning of a call “that the call would contain ‘forward-looking statements’ that involve a ‘number of risks and uncertainties,’ and that investors should reference the ‘Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our recent annual report on Form 10-K and quarterly report on Form 10-Q.’“ McGovney v. Aerohive Networks, Inc., 367 F. Supp. 3d 1038, 1061 (N.D. Cal. 2019).

Moreover, these cautionary statements are virtually identical to language approved by the Ninth Circuit as “meaningful cautionary language” for purposes of the PSLRA Safe Harbor. See, e.g., Police Ret. Sys. v. Intuitive Surgical, Inc., 759 F.3d at 1059-60 (approving cautionary language in earnings call warning that comments may contain forward-looking statements, that such statements may differ based on “certain risks and uncertainties,” and referring listeners to “the company’s [SEC] filings”); In re Cutera Sec. Litig., 610 F.3d 1103, 1112 (9th Cir. 2010) (approving cautionary language at beginning of earnings call that remarks contained forward-looking statements “concerning future financial performance and guidance,” and that “Cutera’s ability to continue increasing sales performance worldwide could cause variance in the results.”) (internal quotation marks omitted).

Plaintiff’s arguments to the contrary are unpersuasive. For example, Plaintiff argues that these warnings were “boilerplate risk disclosures” that were thus too generic. Opp’n at 17. However, as explained above, this Court as well as the Ninth Circuit has found substantially similar disclosures to be adequate cautionary statements.

See, these warnings are exactly like the warnings of every other company for past 10 years; therefore they’re not generic!

(Yes, apparently the defendants made reference to the SEC filings, which may have had more detail, but the court seemed entirely unconcerned with the contents of those filings.)

Suffice to say, when warnings for “risks and uncertainties” and that “[a]ctual results may vary significantly” are held not to be boilerplate, we really have given up on the concept of “meaningful cautionary statements” altogether.  Which really goes to show that there’s something very incongruous about relying on precedent to determine whether a risk warning passes muster under the PSLRA in the first place.  These warnings are supposed to be tailored to each company’s circumstances; that one company’s warning, concerning particular statements at a particular time, satisfied the PSLRA, should have little relevance to the sufficiency of the warnings of a completely different company, facing different risks, and often operating in an entirely different industry.

In fact, I previously blogged about a paper that purports to show that judges, and the SEC, reward longer, more generic warnings, which only encourages companies to copy the warnings of their industry peers.

To be fair, the SEC has been trying to improve the situation.  In its latest amendments to Regulation S-K, the SEC is now requiring that a summary of risk factors be provided if the full list is particularly lengthy, and that issuers group their risk factors by topic, with generally-applicable risk factors to be included in a “General Risk Factors” category.  So, I guess we’ll see whether that makes a difference, either to issuers or to regulators.

September 12, 2020 in Ann Lipton | Permalink | Comments (1)

Thursday, September 10, 2020

The Rough Landscape for Financial Advice

Earlier today, The Institute for the Fiduciary Standard held a panel on financial advice.  I served as the moderator for three fantastic panelists, Donald Langevoort, James Cox, and Ann Lipton.  As part of my role, I opened the panel with a summary of the current landscape for financial advice.  Hopefully this helps others who are trying to understand the current state of play:

In the past, American retirements had often been supported by three different sources of retirement income: an employer-sponsored, defined-benefit pension; social security; and personal savings.  Today, few Americans have all three sources of support.  Employers have largely shifted to offering defined-contribution retirement plans, allowing participants to contribute a portion of their salary to a 401k plan or similar plan, which the employer may or may not also make some contributions to.  At the same time, Americans, on the whole, generally lack financial sophistication, and often struggle to navigate our increasingly complex financial landscape.  In short, Americans need access to competent, trustworthy advice to make decisions.

 

Sadly, far too many Americans struggle to access high-quality and trustworthy financial advice.  Our fragmented regulatory system makes this even harder.  A person holding themselves out as a financial adviser might actually be a stockbroker, a registered investment adviser, an insurance salesperson, something else entirely, or some combination of the forgoing!  Unsurprisingly, investors often do not understand the system.  One survey found that about half of investors over the age of sixty either didn’t understand how they paid for financial advice or mistakenly assumed that financial advisers work for free.  And you can’t blame them.  It’s dizzyingly complex with a mixture of different federal and state laws coming into play.

 

A variety of reforms have been implemented, struck down, and proposed.  I’ll attempt to sketch the current state of play by breaking the persons giving financial advice into categories.

 

Let’s start with stockbrokers.  The broker-dealer industry is primarily regulated by the FINRA, the Financial Industry Regulatory Authority.  It’s a self-regulatory organization sitting somewhere in between a trade group and part of the federal government.  Although funded by member dues, its rules are approved by the Securities and Exchange Commission.  FINRA had long required brokers to give advice that was “suitable” for investors.  These brokers receive transaction-based compensation.  In essence, they collect commissions for selling financial products.  This creates a rather obvious conflict of interest to sell the product which pays the most—so long as it remains suitable.

 

Earlier this year, the SEC supplanted the suitability standard with Regulation Best Interest, which requires stockbrokers to “act in the best interest of the retail customer at the time the recommendation is made, without placing the financial or other interest of the broker. . . ahead of the interest of the retail customer.”  If you’re not quite sure what that means, you’re not alone.

 

Let’s turn to the second category of persons giving financial advice. Registered Investment Advisers have long owed a fiduciary duty under the Advisers Act.  The duty was recognized by the Supreme Court a famous case called Capital Gains

 

These fiduciaries generally do not sell products on commission and are paid for their advice.  Historically, the fiduciary duty owed by Advisers has been understood as requiring them to put their clients’ interests first. 

 

When it issued regulation best interest, the SEC also issued a new interpretation of an advisers duty of loyalty.  Now, the SEC says that “the duty of loyalty requires that an adviser not subordinate its clients’ interests to its own.”  If you’re not quite sure what that means, you’re not alone.

 

The SEC also issued a new regulation calling for brokers and advisers to distribute a short customer relationship summary describing their duties.  Early testing revealed that many ordinary humans struggled to understand the system even after receiving the SEC's template.

 

Adding to the confusion, insurance salespeople also give financial advice and sell complex financial products.  The states have historically regulated their sales practices, but their duties have not been as clear.  In 2016, the Department of Labor issued a Fiduciary Rulemaking under the Employee Retirement Income Security Act, which would have affected all three categories of advice-givers. In short, the rulemaking would have applied a tough fiduciary standard to advice about assets held within retirement accounts.  It would have also applied to insurance sales.  In a case filed by Eugene Scalia, the Fifth Circuit struck down Labor’s fiduciary rulemaking.  Later, President Trump appointed Scalia to run the Department of Labor, which recently proposed a new fiduciary rulemaking—largely unwinding the changes and proposing to generally defer to the SEC’s standards. 

 

But wait, there is more.  Private self-regulatory groups also offer their own standards and certifications.  Investors who struggle to understand this system may simply choose to work with an adviser who holds the right badge or certification.  The largest such group is the CFP Board which certifies financial planners.  In October of 2019, it updated its standards and requires its representatives to act in the best interest of clients, properly disclose conflicts, and to manage conflicts.

 

As you can see, it’s a complex environment.  We have three panelists here to help talk about these developments and what they mean.  My brief introductions . . . 

 

September 10, 2020 | Permalink | Comments (0)

Wednesday, September 9, 2020

Professor Odinet on Predatory Fintech and the Politics of Banking

Just today, Professor Christopher Odinet posted Predatory Fintech and the Politics of Banking (forthcoming, Iowa Law Review) to SSRN (here).  It's already been downloaded over 100 times, and I can't wait to read it!  Here's the Abstract:

With American families living on the financial edge and seeking out high cost loans even before COVID-19, the term financial technology or “fintech” has been used like an incantation aimed at remedying everything that’s wrong with America’s financial system. Scholars and supporters from both the public and private sector proclaim that innovations in financial technology will “bank the unbanked” and open new channels to affordable credit. This exuberance for all things tech in finance has led to a quiet yet aggressive deregulatory agenda, including, as of late, a federal assault via rulemaking on the ability of states to police the cost and privilege of extending credit within their borders. This deregulation and the ethos behind it have made space for growth in high cost, predatory lending that reaches across state lines via websites and smart phones and that is aggressively targeting cash-strapped families. These loans are made using a business model whereby funds are funneled through a group of lightly regulated banks in a way designed to take advantage of federal preemption. Fintech companies rent out and profit from the special legal status of these bank partners, which in turn keeps the bank’s involvement in the shadows. Stripping down fintech’s predatory practices and showing them for what they really are, this Article situates fintech in the context of this country’s longstanding dual banking wars, both between states and the federal government and between consumer advocates and banking regulators. And it points the way forward for scholars and regulators willing to shake off fintech’s hypnotic effect. This means, in the short term, using existing regulatory tools to curtail the dangerous lending identified here, including by taking a more expansive view of what it means for a bank to operate safely and soundly under the law. In the long term, it means having a more comprehensive and national discussion about how we regulate household credit in the digital age, specifically through the convening of a Twenty-First Century Commission on Consumer Finance. The Article explains how and why the time is ripe to do both. As the current pandemic wipes out wages and decimates savings, leaving desperate families turning to predatory fintech finance ever more, the need for reform has never been greater.

September 9, 2020 in Colleen Baker, Financial Markets | Permalink | Comments (0)

Tuesday, September 8, 2020

What Do People Really Think of Insider Trading? Part II

This is the second installment of a multi-part guest blog presenting some of the results of the first comprehensive, large-scale, national survey of public attitudes regarding insider trading. My co-authors (Jeremy Kidd and George Mocsary) and I present the survey’s complete results in our forthcoming article, Public Perceptions of Insider Trading. This installment focuses on some of our results pertaining to the effect of insider trading on the public’s confidence in the integrity of our capital markets.

It turns out that most Americans believe that insider trading is pervasive. The following table breaks down respondents’ answers to the question, “How common do you think insider trading is?”

 

Very Common

Common

Rare

Very Rare

Overall

25.4%

55.0%

15.0%

4.6%

Gender

Female

24.0%

57.0%

14.4%

4.5%

Male

26.8%

52.7%

15.9%

4.6%

Race

Asian

25.8%

51.5%

18.2%

4.5%

Black

41.6%

38.8%

15.2%

4.5%

Latinx

25.3%

55.4%

14.5%

4.8%

Native Am.

25.0%

58.3%

0.0%

16.7%

White

22.3%

58.3%

15.1%

4.3%

Other

22.7%

54.6%

13.6%

9.1%

Trading Status

Invest

30.5%

52.1%

14.4%

3.0%

Abstain

21.5%

56.9%

15.9%

5.7%

           

Approximately 80% of Americans believe insider trading is common or very common. If insider trading’s perceived pervasiveness undermines market confidence, we would expect that those who actually invest in the stock market would be less likely to believe that insider trading is common or very common. But, in fact, the opposite is true: investors are actually slightly more likely (82.6%) to believe insider trading is pervasive than those who abstain from investing in the stock market (78.4%).

Respondents were also asked the following open-ended question with an opportunity to fill in a response: “If you had done your research and found a company that you liked and wanted to invest in, is there anything that might keep you from buying stock in that company?” Notably, despite knowing that the study was about insider trading, only 0.4% indicated that insider trading in the company would deter them from investing in that company. This suggests that, if awareness of insider trading does undermine market confidence, it is not among the public’s principal concerns.

The study did, however, find some support for the market-confidence theory. For example, consider the responses to the following questions that specifically address the market confidence issue:

 

 “If you thought that a small number of people were trading on inside information concerning a company you have been researching, would it make you more likely to buy stock in that company, less likely, or make no difference?”

 

Less

Likely

No Difference

More Likely

Δ Less Likely vs. Market

Overall

48.2%

34.3%

17.5%

+4.9%

“If you knew insider trading was common in the stock market, would you be more likely to invest, less likely, or would it make no difference?”

 

Less

Likely

No Difference

More Likely

Δ Less Likely vs. Company

Overall

43.3%

40.6%

14.9%

-4.9%

While fewer than half of the survey’s participants said that they would be less likely to trade in a given stock (48.2%) or the market generally (43.3%) if they knew insider trading was taking place, these are not trivial numbers. Assuming that some of these respondents who would be less likely to trade do actually abstain from trading for that reason, this offers support for the market confidence justification for the regulation of insider trading. For a full demographic breakdown of the answers to these questions, as well as a table summarizing respondents’ explanations for their responses, see here.

The next installment of this post will explore public perceptions of the morality of insider trading, whether it should be illegal, and what penalties should be imposed.

September 8, 2020 in Securities Regulation, White Collar Crime | Permalink | Comments (0)

Monday, September 7, 2020

Teaching Through the Pandemic - Part VI: Labor Day

Screen Shot 2020-09-07 at 4.15.53 PM

I have written here in the past about laboring on Labor Day.  Most recently.  I wrote about the relationship between work and mindfulness in this space last year.  But it seems I also have picked up this theme here (in 2018) and here (at the end of my Labor Day post in 2017).  Being the routine "Monday blogger" for the BLPB does give me the opportunity to focus on our Monday holidays!

This year, however, Labor Day--like so many other days in 2020--is markedly different in one aspect: I am required to teach today.  When I logged in to the campus app on my phone this morning to do my routine daily health screening, I was greeted by this (in clicking through from the main event schedule page):

LaborDayTeaching2020(5)

This is the first day in my 20 years of teaching, and maybe in my 35 years of post-law school work, that I have been required to work on Labor Day.  My daughter, a Starbucks night shift manager, is required to work every year on Labor Day.  But this is new to me . . . .

Of course, the ongoing pandemic is the reason for this change.  By compacting the semester, we are endeavoring to keep folks who are attending class in person here on campus in a more constrained environment until the holidays (at which time we will release everyone to their families and friends until the new semester begins in January).  Our campus website offers the following by way of a top-level explanation of the adjustments to the ordinary, customary academic calendar:

Screen Shot 2020-09-07 at 2.50.38 PM

Thank you, COVID-19, for yet one more "first" in this year of many unprecedented things (including the 2019 novel coronavirus itself).

I have tried to make the best of teaching on the holiday, especially given the great weather we are having here in East Tennessee right now.  I taught both of my classes today in the outfit I would have worn if I had been at home (as shown above at the top of the post and below, in both cases in my Corporate Finance class this morning--photo credits to Kaleb Byars and Landon Foody and mask design and sewing credit to my sister, Susan) and encouraged my in-person Business Associations students (almost half of my hybrid class) to come to school in the clothes they would typically wear to a Labor Day BBQ.  I also brought in a special treat for my Corporate Finance students (what could be better at 8:30 am than equity instruments and donuts?) and sent my online Business Associations students into breakout rooms to connect over one of our assigned cases with a smaller group of their classmates while the in-person students wrestled with a case of their own.  There was sparse but constructive attendance at Zoom office hours after class.  In the end, it all has worked out fine.  Not a bad day.

Screen Shot 2020-09-07 at 4.21.25 PM

Wishing a happy Labor Day 2020 to all.  Whether you are working today (at home or at a workplace outside the home) or taking the day off, stay safe and well.  Personally, I look forward to Labor Day hamburgers tonight!

September 7, 2020 in Business Associations, Corporate Finance, Joan Heminway, Teaching | Permalink | Comments (5)

Sunday, September 6, 2020

Guest Blog: ULC's work on Coercive Labor Practices in Supply Chains, Part 4

Welcome to the ongoing guest blog that discusses the work of the ULC study committee that focuses on coercive labor practices.  In the last two blogs (here and here) I discussed two frameworks the study committee was considering: one that focuses on disclosure and one that examines labor procurement. Both of these frameworks rely on the government-as-regulator model. In this next blog I examine the government-as-purchaser model, one that would harness the enormous buying power of many of our states into a uniform law. 

More after the jump …

Continue reading

September 6, 2020 | Permalink | Comments (0)

Saturday, September 5, 2020

Where Were The Gatekeepers Pt 1- Big Pharma and Operation Warp Speed

I think that the GCs at Big Pharma have hacked into my Zoom account. First, some background. Earlier this week, I asked my students in UM’s Lawyering in a Pandemic course to imagine that they were the compliance officers or GCs at the drug companies involved in Operation Warp Speed, the public-private partnership formed to find a vaccine for COVID-19 in months, rather than years. I asked the students what they would do if they thought that the scientists were cutting corners to meet the government’s deadlines. Some indicated that they would report it internally and then externally, if necessary.

I hated to burst their bubbles, but I explained that the current administration hasn’t been too welcoming to whistleblowers. I had served on a non-partisan, multi-stakeholder Department of Labor Whistleblower Protection Advisory Committee when President Trump came into office, which was disbanded shortly thereafter. For over a year after that, I received calls from concerned scientists asking where they could lodge complaints. With that background, I wanted my students to think about how company executives could reasonably would report on cutting corners to the government that was requiring the “warp speed” results in the first place. We didn’t even get into the potential ethical issues related to lawyers as whistleblowers.

Well the good news is that Pfizer, Moderna, Johnson & Johnson, GlaxoSmithKline, and Sanofi  announced on Friday that they have signed a pledge to make sure that they won’t jeopardize public safety by ignoring protocols. Apparently, the FDA may be planning its own statement to reassure the public. I look forward to seeing the statements when they’re released, but these companies have been working on these drugs for months. Better late than never, but why issue this statement now? Perhaps the lawyers and compliance officers – the gatekeepers – were doing their jobs and protecting the shareholders and the stakeholders. Maybe the scientists stood their ground. We will never know how or why the companies made this decision, but I’m glad they did. The companies hadn’t announced this safety pledge yet when I had my class and at the time, almost none of the students said they would get the vaccine. Maybe the pledge will change their minds.

Although the drug companies seem to be doing the right thing, I have other questions about Kodak. During the same class, I had asked my students to imagine that they were the GC, compliance officer, or board member at Kodak. Of course, some of my students probably didn’t even know what Kodak is because they take pictures with their phones. They don’t remember Kodak for film and cameras and absolutely no one knows Kodak as a pharmaceutical company. Perhaps that’s why everyone was stunned when Kodak announced a $765 million federal loan to start producing drug ingredients, especially because it’s so far outside the scope of its business. After all, the company makes chemicals for film development and manufacturing but not for life saving drugs. Kodak has struggled over the past few years because it missed the boat on digital cameras and has significant debt, filing for bankruptcy in 2012. It even dabbled in cryptocurrency for a few months in 2018. Not the first choice to help develop a vaccine.

To be charitable, Kodak did own a pharmaceutical company for a few years in the 80’s. But its most recent 10-K states that “Kodak is a global technology company focused on print and advanced materials and chemicals. Kodak provides industry-leading hardware, software, consumables and services primarily to customers in commercial print, packaging, publishing, manufacturing and entertainment.” 

The Kodak deal became even more newsworthy because the company issued 1.75 million in stock and options to the CEO and other grants to company insiders and board members before the public announcement of the federal loan. The CEO had only had the job for a year. I haven’t seen any news reports of insiders complaining or refusing the grants. In fact, the day after the announcement of the loan, a Kodak board member made a $116 million dollar donation to charity he founded. Understandably, the news of the deal caused Kodak’s shares to soar. Insiders profited, and the SEC started asking questions after looking at records of the stock trades.

Alas, the deal is on hold as the SEC investigates. The White House’s own trade advisor has said that this may be “one of the dumbest decisions by executives in corporate history.” I’m not sure about that, but there actually may be nothing to see here. Some believe that there was a snafu with the timing of the announcement and that the nuances of Reg FD may get Kodak off the hook .I wonder though, what the gatekeepers were doing? Did the GC, compliance officer, or any board member ask the obvious questions? “Why are we doing something so far outside of our core competency?” They didn’t even get the digital camera thing right and that is Kodak’s core competency. Did anyone ask “should we really be issuing options and grants right before the announcement? Isn’t this loan material, nonpublic information and shouldn’t we wait to trade?”

I’ll keep watching the Kodak saga and will report back. In coming posts, I’ll write about other compliance and corporate governance mishaps. In the meantime, stay safe and please wear your masks.


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September 5, 2020 in Compensation, Compliance, Corporate Governance, Corporate Personality, Corporations, Current Affairs, Ethics, Financial Markets, Lawyering, Management, Marcia Narine Weldon, Securities Regulation, Shareholders, Technology | Permalink | Comments (0)

Friday, September 4, 2020

I Just Read the Department of Labor's New ERISA Voting Proposals and Boy Are My Fingers Tired (from typing)

I’ve talked before in this space about how regulation of ERISA plans and ERISA plan voting is really part of a larger debate about the proper role of shareholders in corporate governance, and even whether the purpose of the corporation is to maximize shareholder value.  And a few weeks ago, I blogged about how the Department of Labor had proposed new rules/interpretations to limit ESG investing for ERISA-governed retirement plans, and promote investments in private equity.

Apparently to honor Labor Day, the DoL took it a step further this week to limit ERISA plans’ ability to vote their shares, in large part because – it says – of excess costs due to “the recent increase in the number of environmental and social shareholder proposals introduced. It is likely that many of these proposals have little bearing on share value or other relation to plan interests…”

A lot of words after the jump. So many words.

Continue reading

September 4, 2020 in Ann Lipton | Permalink | Comments (0)

Thursday, September 3, 2020

Call for Presenters - AALS Section on Real Estate Transactions and Section on Academic Support

Dear BLPB readers:

AALS Section on Real Estate Transactions and Section on Academic Support

The Changing Architecture of Legal Education: 

Real Estate Transactions as a Case Study

Seeking Panelists:

What real property law courses should law schools be teaching?

Who should be teaching these courses?

How should the courses be taught?

The Section on Real Estate Transactions and the Section on Academic Support seek to explore these questions and related issues at their joint online session during the 2021 AALS Annual Meeting, The Changing Architecture of Approaches to Legal Education: Real Estate Transactions as a Case Study.

Members of the legal academic community are invited to submit statements of interest in joining the panel of presenters who will discuss the following in the context of real property law and related courses (mortgage finance, securitization, commercial leasing, housing law, real estate development, etc.):

  • Law schools’ curricular choices
  • Course content and design
  • Teaching and pedagogy application.

As explained more in the “Background” section below, the Sections are specifically looking to highlight issues related to course offerings, curricular design, and teaching methodologies that can better prepare students for modern practice and ensure student achievement of course objectives. Statements of interest (including a description/summary of your proposed presentation) should be emailed to Andrea Boyack at andrea.boyack@washburn.edu by September 17, 2020.

There is no formal paper requirement associated with participation on the panel. 

The full call for presenters is here: Download AALS Section on Real Estate Transactions and Section on Academic Support Call for Presenters

September 3, 2020 in Colleen Baker | Permalink | Comments (0)

Wednesday, September 2, 2020

Call for Papers In Legal Strategy, Ethics, Leadership, and Compliance For Organizations

Dear BLPB readers:

CALL FOR PAPERS IN
LEGAL STRATEGY, ETHICS, LEADERSHIP, AND COMPLIANCE FOR ORGANIZATIONS

The Tobias Leadership Center at Indiana University, the Center for Legal Studies & Business Ethics in the Spears School of Business at Oklahoma State University, and the American Business Law Journal to Cohost 2021 Symposium:

Ethical Leadership and Legal Strategies for Post-2020 Organizations

The Tobias Leadership Center at Indiana University, the Center for Legal Studies & Business Ethics at the Spears School of Business, and the American Business Law Journal (ABLJ) welcome submissions on legal strategy, ethics, leadership, and compliance issues that may advance positive organizational change following the multiple challenges of 2020: Public health issues, an economic recession, civil rights and social justice movements, changing working conditions, environmental concerns, innovation, and evolving legal norms. This theme is consistent with 2020 AACSB Standard 9. The ABLJ anticipates publishing a special issue devoted to the symposium theme.

The challenges facing organizations around the globe following the convergence of monumental events in 2020 require a renewed focus on ethical leadership and legal strategies that build structures and organizations to make a positive societal impact. Often times, the law is lagging in its ability to address new means of interacting and conducting business. Given the severity and reach of challenges in 2020, it is imperative to advance the legal and ethical research to meet the moment. This symposium hopes to generate a broad range of scholarship that develops options and opportunities for organizations to contribute positively to their communities and the world following the disruptions of 2020. Only submissions on the symposium theme will be considered for presentation. Interdisciplinary submissions are especially welcome.

The complete call for papers is here: Download Call for papers

September 2, 2020 in Call for Papers, Colleen Baker | Permalink | Comments (0)

Tuesday, September 1, 2020

Sergio Gramitto on "Artificial Agents in Corporate Boardrooms"

Sergio Gramitto, co-author (with Lynn Stout and Tamara Belinfanti) of Citizen Capitalism: How a Universal Fund Can Provide Influence and Income to All just published Artificial Agents in Corporate Boardrooms in the Cornell Law Review.  Here is the abstract:

Thousands of years ago, Roman businessmen often ran joint businesses through commonly owned, highly intelligent slaves. Roman slaves did not have full legal capacity and were considered property of their co-owners. Now business corporations are looking to delegate decision-making to uberintelligent machines through the use of artificial intelligence in boardrooms. Artificial intelligence in boardrooms could assist, integrate, or even replace human directors. However, the concept of using artificial intelligence in boardrooms is largely unexplored and raises several issues. This Article sheds light on legal and policy challenges concerning artificial agents in boardrooms. The arguments revolve around two fundamental questions: (1) what role can artificial intelligence play in boardrooms? and (2) what ramifications would the deployment of artificial agents in boardrooms entail?

September 1, 2020 in Stefan J. Padfield | Permalink | Comments (0)

Statement on Race/Racism in Business Law Courses

On Saturday, Cathy Hwang, Carliss Chatman, and I released a draft statement on race/racism in business law.  Thus far, we have 242 law professors publicly joining this statement:

We are law professors, and many of us write and teach about business law.

 

We think race and racism are important to the study of business law, just as they are important to the study of any area of law. From slavery and redlining to lack of opportunity in the workplace and limited access to capital, race and racism have always been part of business and business law.

 

To our colleagues and our students: we welcome the opportunity to engage in these discussions and commit to thinking hard about how to incorporate them into our research and our teaching.

Thank you to all of our colleagues who join us in recognizing that issues of race and racism are important to the study and teaching of business law.  Jessica Erickson has also helped compile resources here, which were gathered by soliciting the AALS Business Law Section list-serve.  She will continue to update it as additional resources come in.  If you would like to join the statement, you can still register support here.

September 1, 2020 | Permalink | Comments (1)