Friday, June 5, 2020

This has not exactly been a week of great productivity on the subject of corporate governance theory

So instead, I’ll just say, like my co-blogger Stefan who posted yesterday, I’ve also been paying attention to corporate responses to protest movement. Because we’re both talking about that subject, I’ll just start by quickly reproducing the links that I gave Stefan in my comments on his post:

Many Claim Extremists Are Sparking Protest Violence. But Which Extremists?

The Justice Department’s rhetoric focuses on antifa. Its indictments don’t.

Misinformation About George Floyd Protests Surges on Social Media

Twitter says fake "Antifa" account was run by white supremacists

And one I forgot to add:

Armed white residents lined Idaho streets amid ‘antifa’ protest fears. The leftist incursion was an online myth.

Anyhoo, as I said, I’ve been watching how corporations are responding, but unlike Stefan, I haven’t perceived silence at all - quite the opposite.  But, what corporations are saying is interesting.  These are the articles that captured my attention:

Corporate Voices Get Behind ‘Black Lives Matter’ Cause (“Some companies were more cautious in their approach. Target, which is based in Minneapolis and was hit by looting at a store there last week, described ‘a community in pain’ in a blog post but never mentioned the word ‘black.’”)

What CEOs Said About George Floyd’s Death (“Few companies talked about law enforcement or other forms of authority. Dell Technologies Inc. was the only company to use the words ‘police brutality.’”)

Adidas Voices Solidarity While Closing Its Stores (“Companies like Adidas and Nike have long paid black entertainers and athletes to pitch their products, and it is often black teenagers in the country’s largest cities who determine which brands are fashionable and subsequently sell big in the white suburbs. This is a particular bone of contention for black employees at Adidas…”)

#BlackoutTuesday: A Music Industry Protest Becomes a Social Media Moment (“Beyond the confluence of hashtags, some in the music industry questioned what was being done beyond promises for reflection and general statements of support.”)

‘Blackout Tuesday’ Prompts Debate About Activism and Entertainment (“Other celebrities voiced skepticism over the efforts and concern that it would dilute more urgent forms of activism.”)

Silent No More on Race, America's CEOs Fumble for Right Words (“Unlike syrupy messages in support of nurses and essential workers fighting the coronavirus pandemic or a call for unity after 9/11, there is no happy medium for a position on white privilege.”)

Brands Have Nothing Real to Say About Racism (“Facebook and Citibank weighed in, as did the gay dating app Grindr and even the cartoon cat Garfield.”)

Ben & Jerry’s pointed call to ‘dismantle white supremacy’ stands out among tepid corporate America statements (N.B.: take a moment to absorb that this article appears in the Washington Post Food section)

People On Nextdoor Say The Platform Censored Their "Black Lives Matter" Posts (“while the company may be officially saying that it supports the Black Lives Matter movement, this week, many of its volunteer moderators took a contrary position, stifling conversations about race, police, and protests while removing comments and postings with the very phrase the company had tweeted just three days ago.”)

Venture firms rush to find ways to support Black founders and investors (“Black entrepreneurs and investors are questioning the motivations of these firms, given the weight of evidence that shows inaction in the face of historic inequality in the technology and venture capital industry.”)

SoftBank launches $100M+ Opportunity Growth Fund to invest in founders of color (“Just a couple of weeks ago, the CEO and founder of one of its portfolio companies, Banjo, resigned after it was revealed that he once had ties to the KKK.”)

For more equitable startup funding, the ‘money behind the money’ needs to be accountable, too (“Consider that already, most VCs today sign away their rights to invest in firearms or alcohol or tobacco when managing capital on behalf of the pension funds, universities and hospital systems that fund them. What if they also had to agree to invest a certain percentage of that capital to founding teams with members from underrepresented groups?”)

 

I’ll finish by noting that however tepid, many of the corporate statements do explicitly reference Black Lives Matter. And since even that sentiment was considered controversial a few years ago, we can safely conclude that the needle has moved. 

https://lawprofessors.typepad.com/business_law/2020/06/this-has-not-exactly-been-a-week-of-great-productivity-on-the-subject-of-corporate-governance-theory.html

Ann Lipton | Permalink

Comments

Thanks, Ann. Obviously, I never claimed corporations were staying silent. I said they were staying silent when it comes to condemning the riots, which is a claim I don’t believe any of your posted items undercuts, and which continues to strike me as interesting. We can break at least some of this down to the following questions:

1. Why aren’t corporations condemning the riots?
2. Does Antifa constitute a violent threat to our country?
3. Did Antifa play a role in the rioting?

You’ve pointed out a lot of good reasons to conclude the answer to #3 is “no” – but that doesn’t answer the other two questions. While the country is united in condemning the killing of George Floyd, condemning the riots appears to be more of a partisan issue. So, the relevant silence of corporations on that front plays into the “leftist corporations” narrative. There are good business reasons for corporations to embrace that narrative, but it may also be the case that they are simply dominated by lefties.

On your final point, I agree that corporations expressly aligning themselves with BLM represents a shift. As has always been the case, the proposition is incontrovertible. The movement/foundation, however, is more controversial because it has unfortunately become associated, at least in some circles, with a hatred of law enforcement. Thus, many people perceive the movement to not just stand for calls to improve policing along with condemnation of racist cops, which are unifying themes – but rather a divisive condemnation of the police, as an institution, as racist (along with the even more divisive assertion that our nation is a fundamentally racist nation). So, more fodder for the “leftist corporations” narrative.

All the foregoing makes for one of the interesting corporate governance issues: Are the corporate executives making these decisions doing so in accordance with their fiduciary duty to become informed of all material information reasonably available (which requires consideration of the impact of these decisions on the bottom line), or are they simply acting on the basis of some echo-chamber supported confidence in the obvious rightness of their beliefs – completely ignoring, if not being downright disdainful of, the views of the half of the country that believes law and order, blue lives, and black lives all matter? Such a conscious disregard of reasonably available material information would constitute not only a breach of their duty of care, but also bad faith.

Posted by: Stefan Padfield | Jun 6, 2020 5:58:48 AM

It seems to me that this statement: "many people perceive the movement to not just stand for calls to improve policing along with condemnation of racist cops, which are unifying themes – but rather a divisive condemnation of the police, as an institution, as racist (along with the even more divisive assertion that our nation is a fundamentally racist nation)" is doing a lot of work here.

Posted by: Ann Lipton | Jun 6, 2020 6:31:52 AM

Hi Stephan, interesting points you raise that are well summarized in your last paragraph. I hope I can shed some light on them:

-"Are the corporate executives making these decisions doing so in accordance with their fiduciary duty to become informed of all material information reasonably available (which requires consideration of the impact of these decisions on the bottom line)..."
IZ- Of course they are! Many cases have held that companies can acquire much goodwill and better pr from such community action (examples have included charitable donations and philanthropy to local schools, including HBCUs). Or a more "hip" take: African American culture might be the most profitable marketing material source in the world, people all over the global love the various arts that come from our (unfortunately) marginalized communities.

-"..., or are they simply acting on the basis of some echo-chamber supported confidence in the obvious rightness of their beliefs"
IZ- One of the best aspects of the American system compared to those of the English commonwealths in my estimation is the lack of mental probing done to business decision-makers. What a ridiculous assertion it would be that there was some pro-Black echo-chamber effect in board rooms that are under criticism for having virtually no Black board members, right? Moreover, where are you getting their ideas or confidences in their beliefs from? You wouldn't be just making it up?

-"– completely ignoring, if not being downright disdainful of, the views of the half of the country that believes law and order, blue lives, and black lives all matter?"
IZ- Again, it is unclear where you're getting your facts from, I am unable any factual support for this. Also, I think you might want to check the poll numbers on people's preferences. Moreover, supporting BLM and Civil rights for marginalized communities does not put you in opposition to law, order, or any other life. In fact many have quite intelligently and correctly pointed out that suggesting that supporting BLM and Civil Rights does put you in opposition is flat-out racist. Moreover, many have also correctly pointed out that alleging that one who supports BLM and Civil Rights supports riots is also in completely disregard of the gulf separating factual and disingenuously racist.
Or consider this: "half" the country believes the world is flat, must board members take factor that unscientific argument into their decisions?

-"Such a conscious disregard of reasonably available material information would constitute not only a breach of their duty of care, but also bad faith."
IZ- Well, as I've pointed out these "conscious disregards" would be impossible to prove and are only based on conjecture. Moreover, there is a duty of care to all members of the community, so supporting a group such as BLM and civil rights would be beneficial to all members, a rising tide raises all ships. Whereas disapproval of these groups might certainly fit your criterion as they are of benefit to exactly no one. Further, consider the ramifications of your approach-> would not every corporation face the exact same liability for putting their name on a College Football Bowl Game should a "riot" breakout?

There are also very fundamental definition problems that makes your post somewhat difficult to read. Do you mind, asking a civil rights attorney/ leader to explain these groups beliefs because your misstating a large number of them. At any rate, hope this helps!

Posted by: Idriss Z | Jun 11, 2020 6:33:56 PM

Thank you for your feedback, Idriss. I’ve been thinking about your comments since I read them. This morning, those ruminations led to a simple question: “Can you affirm ‘Black Lives Matter’ without qualification?”

The answer to that was an obvious “yes” for me.

Black lives matter.

That was followed by the question: “Is it important to affirm that expressly and without qualification right now?”

Again, my answer was “yes.”

Black lives matter.

I’ll continue to chew on how that impacts my analysis of the other issues I raised in my comment, and in the related paper I recently posted on SSRN, but again – thank you.

Posted by: Stefan Padfield | Jun 13, 2020 6:08:30 AM

Perhaps of interest -- recent Pew data on support for BLM movement:

Overall:
Strongly support: 38%
Somewhat support: 29%
Combined support: 67%

Black Americans:
Strongly support: 71%
Somewhat support: 15%
Combined support: 86%

https://www.pewsocialtrends.org/2020/06/12/amid-protests-majorities-across-racial-and-ethnic-groups-express-support-for-the-black-lives-matter-movement/

Posted by: Stefan Padfield | Jun 13, 2020 7:30:33 AM

More numbers from the Pew poll:
White Americans:
Strongly support: 31%
Somewhat support: 30%
Combined support: 60% (not sure why it’s not 61%)

Posted by: Stefan Padfield | Jun 13, 2020 11:56:37 AM

I've finally gotten around to responding to your comment point-by-point, Idriss (sorry for the delay). My response turned into a blog post that you can find here: https://lawprofessors.typepad.com/business_law/2020/06/more-on-corporate-responses-to-the-protests-and-riots.html

Posted by: Stefan Padfield | Jun 14, 2020 10:30:45 AM