Tuesday, January 22, 2019

ComplianceNet2 - Business Ethics - Last Call for "Early Bird" Registration!

ComplianceNet2 Conference Invitation Announcement: Early Bird Registration Deadline is THIS FRIDAY, January 25th!

The second-annual ComplianceNet conference will take place on June 3-4, 2019. Villanova University Charles Widger School of Law and its Girard-diCarlo Center for Ethics, Integrity and Compliance will host the conference. Like the highly successful inaugural conference at UC Irvine in 2018, this conference will allow scholars from across disciplines and different legal and regulatory topics to exchange research and explore connections for collaboration.

The timing of this year’s conference is designed to follow on the heels of the Law & Society meeting in nearby Washington, D.C. If you are already headed to Law & Society, Villanova is a short train-ride away and easily accessible by public transportation. Regardless of whether you will be attending Law & Society, Villanova is in a beautiful location right outside Philadelphia, easily serviced by major international airports (Philadelphia (PHL), Newark (EWR), Baltimore (BWI), two more in NYC, and two more in DC); 90 minutes from NYC; and two hours from D.C.

The theme of this year's conference is "Business Ethics", although we welcome additional papers discussing compliance across diverse settings. This year’s theme seeks to engage the question of how to run ethical companies, and how to encourage ethical behavior within organizations. The conference welcomes attempts to explore the strengths and limitations of various approaches, to identify how measurement strategies have shaped practices, and to understand how we can improve outcomes, for instance through new technology and combining methods. Submissions do not need to align with the meeting theme, but we encourage you to consider relating to it. The conference is also open to scholars and other experts who want to attend without presenting a paper.

The conference will host a business meeting of ComplianceNet, during which members may discuss future activities. To register for the conference either as a presenter or attendee, please fill out the form by following this link. The URL is https://www.eventbrite.com/e/the-second-annual-compliancenet-conference-tickets-50784542935.

For individual papers, please submit the paper title and abstract (up to about 200 words). For panels (3 papers minimum with a maximum of 5 per panel), please submit an integrative statement explaining the panel (approximately 200 words), the titles of each paper and their authors, and an abstract for each paper (approximately 200 words). At our website, ComplianceNet.org, there is also a form to nominate papers for awards. Papers may be considered for awards whether they come through the nomination link or are presented at the conference.

The early registration discount deadline to submit papers and panels is January 25, 2019. The regular registration deadline for papers and panels is February 22, 2019. The registration deadline to attend without a paper or panel (as space available) is March 29, 2019. Registration for the conference includes the yearly membership in ComplianceNet. If you have questions regarding the call for proposals or about the conference, please contact Benjamin van Rooij (bvanrooij@law.uci.edu).

January 22, 2019 in Compliance, Conferences, Ethics, Joan Heminway | Permalink | Comments (0)

Friday, December 7, 2018

Do Investors Really Care About Environmental, Social, and Governance Factors?

In January 2018, Larry Fink of Blackrock, the world’s largest asset manager, shocked skeptics like me when he told CEOs:

In the current environment, these stakeholders are demanding that companies exercise leadership on a broader range of issues. And they are right to: a company’s ability to manage environmental, social, and governance matters demonstrates the leadership and good governance that is so essential to sustainable growth, which is why we are increasingly integrating these issues into our investment process. Companies must ask themselves: What role do we play in the community? How are we managing our impact on the environment? Are we working to create a diverse workforce? Are we adapting to technological change? Are we providing the retraining and opportunities that our employees and our business will need to adjust to an increasingly automated world? Are we using behavioral finance and other tools to prepare workers for retirement, so that they invest in a way that will help them achieve their goals?

In October 2018, Blackrock declared, “sustainable investing is becoming mainstream investing.” The firm bundled six existing ESG EFT funds and launched six similar funds in Europe and looked like the model corporate citisen.

So does Blackrock actually divest from companies with human rights violations or that do not provide meaningful disclosures on human trafficking, child slavery, forced labor, or conflict minerals? The company did not publicly divest from gun manufacturers although it did “speak with” them in February after the Parkland school shooting; the company has stated that due to fiduciary concerns, it cannot divest from single companies in a portfolio. 

In theory, a behemoth like Blackrock could have a significant impact on a firm’s ESG practices, if it so chose. It could set an example for companies and for other institutional investors by seeking (1) additional information after reviewing disclosures and/or (2) demanding changes in management if companies did not in fact, show a true commitment to ESG.

But I shouldn’t pick on Blackrock. Based on what I heard last week in Geneva at the UN Forum on Business and Human Rights, other investors outside of the SRI arena aren’t pressuring companies either.  I attended the Forum for the fourth time with over 2,000 members from the business, NGO, civil society, academic, and governmental communities. There was a heavy focus this year on supply chain issues because 80% of the world’s goods travel through large, international companies.The Responsible Business Alliance and others stressed the importance of eradiating forced labor. Apple, Google, Microsoft, Intel, and Amnesty International focused on tech companies, artificial intelligence, and human rights implications. Rio Tinto and Nestle allowed an NGO to publicly criticize their disclosure reports in painstaking detail. An activist told the entire plenary that states needed to stop killing human rights defenders. In other words, business as usual at the Forum. Here are some of the takeaways from some of the sessions:

  1. NGO PODER warned that investors should not divest when companies are not living up to their responsibilities  but instead should engage companies on ESG factors and demand board seats.
  2. The UN Working Group on Business and Human Rights observed that rating agencies can and should be a fast track to the board on ESG issues. 
  3. A representative from the Sustainable Stock Exchanges Initiative, a joint initiative of UNCTAD, PRI, the UN Global Compact, and UNEP-FI, indicated that investors want to know if ESG information is material. It may be salient, but not material to some. 79 stock exchanges around the world have partnered with the SSEI. 39 have voluntary ESG disclosures and 16 have mandatory disclosures.
  4. The Business and Human Rights Resources Center noted that of 7,200 corporate statements mandated by the UK Modern Slavery Act, only 25% met the minimum requirements required by law. As they shocked the audience with this statistic, news alerts went out the Australia had finally passed its own anti slavery law.
  5. 40% of companies in apparel, agricultural, and extractive industries have a 0 (zero) score for human rights due diligence, indicating weak implementation of the UN Guiding Principles on Business and Human Rights. The average score in the benchmark was only 27%.
  6. French companies must respond to the French Duty of Vigilance Law and the EU Nonfinancial Disclosure regulations, which have different approached to identifying risks. It could take six months to do an audit to do the disclosure, but investors rarely question the companies directly or the data. 
  7. SAP Ariba found that 66% of consumers believe they have a duty to buy goods that are good for society and the environment and that sustainability is mostly driven by millennials and generation Z consumers. 
  8. Nestle, the biggest food and beverage company in the world, requires its 165,000 suppliers to follow responsible sourcing standard especially for child and forced labor. The conglomerate partners with NGOs to conduct human rights impact assessments for their upstream suppliers. 
  9. Apple has returned 30 million USD in recruitment fees to workers since 2008 to address forced labor and illegal practices. HP has also returned fees. The hotel industry has banded together to fight forced labor. Most responsible businesses have banned the use of recruitment fees but many workers still pay them to personnel agencies in the hopes of getting jobs with large companies. 
  10. Many companies are now looking at human rights and ESG issues throughout their own supply chains but also with their joint venture, merger, and other key business partners.
  11. Rae Lindsay of Clifford Chance noted that avoiding legal risk is not the main role of human rights due diligence but lawyers working across disciplines can make sure that clients don’t inadvertently add to legal risk in deals. She encourages deal lawyers to become familiar with the risks and law and business students to learn about these issues. 

So do investors care about ESG? Are these disclosure rules working? You wouldn’t think so by hearing the speakers at the Forum. On the other hand, proxy advisory firm ISS recently launched an Environmental and Social Quality Score to better evaluate the ESG risks in its portfolio companies. I’ll keep an eye out for any divestments or shareholder proposals. 

I’m not holding my breath for too much progress next year at the Forum. While I was encouraged by the good work of many of the companies that attended, I remain convinced that the disclosure regime is ineffective in effectuating meaningful change in the world’s most vulnerable communities. Unless governments, rating agencies, investors, or consumers act, too many companies will continue to pay lip service to their human rights commitments.  

 

 

 

December 7, 2018 in Compliance, Conferences, Corporate Governance, Corporations, CSR, Current Affairs, Human Rights, International Business, International Law, Marcia Narine Weldon, Shareholders | Permalink | Comments (1)

Monday, November 12, 2018

ComplianceNet2 Conference Invitation Announcement & Call for Papers

ComplianceNetLogo

Friend of the BLPB Josephine Nelson informs us of the following:

The second-annual ComplianceNet conference will take place on June 3-4, 2019. Villanova University Charles Widger School of Law and its Girard-diCarlo Center for Ethics, Integrity and Compliance will host the conference. Like the highly successful inaugural conference at UC Irvine in 2018, this conference will allow scholars from across disciplines and different legal and regulatory topics to exchange research and explore connections for collaboration.

The timing of this year’s conference is designed to follow on the heels of the Law & Society meeting in nearby Washington, D.C. If you are already headed to Law & Society, Villanova is a short train-ride away and easily accessible by public transportation. Regardless of whether you will be attending Law & Society, Villanova is in a beautiful location right outside Philadelphia, easily serviced by major international airports (Philadelphia (PHL), Newark (EWR), Baltimore (BWI), two more in NYC, and two more in DC); 90 minutes from NYC; and two hours from D.C.

The theme of this year's conference is Business Ethics, although we welcome additional papers discussing compliance across diverse settings. This year’s theme seeks to engage the question of how to run ethical companies, and how to encourage ethical behavior within organizations. The conference welcomes attempts to explore the strengths and limitations of various approaches, to identify how measurement strategies have shaped practices, and to understand how we can improve outcomes, for instance through new technology and combining methods. Submissions do not need to align with the meeting theme, but we encourage you to consider relating to it. The conference is also open to scholars and other experts who want to attend without presenting a paper.

The conference will host a business meeting of ComplianceNet, during which members may discuss future activities.

To register for the conference either as a presenter or attendee, please fill out the form by following this link. The URL is https://www.eventbrite.com/e/the-second-annual-compliancenet-conference-tickets-50784542935.

For individual papers, please submit the paper title and abstract (up to about 200 words). For panels (3 papers minimum with a maximum of 5 per panel), please submit an integrative statement explaining the panel (approximately 200 words), the titles of each paper and their authors, and an abstract for each paper (approximately 200 words). At our website, ComplianceNet.org, there is also a form to nominate papers for awards. Papers may be considered for awards whether they come through the nomination link or are presented at the conference.

The early registration discount deadline to submit papers and panels is January 25, 2019. The regular registration deadline for papers and panels is February 22, 2019. The registration deadline to attend without a paper or panel (as space available) is March 29, 2019. Registration for the conference includes the yearly membership in ComplianceNet. If you have questions regarding the call for proposals or about the conference, please contact Benjamin van Rooij (bvanrooij@law.uci.edu).

 . . . 

---For conference updates, please refer to the ComplianceNet website at www.ComplianceNet.org--- 

Sounds like a great event.  I note (and informed Josephine) that this conference overlaps with the Impact Investing Legal Working Group (IILWG)/Grunin Center for Law and Social Entrepreneurship’s 2019 Conference on “Legal Issues in Social Entrepreneurship and Impact Investing – in the US and Beyond,” scheduled for June 4-5 at the NYU Schools of Law in NYC.  More on that conference later.  In any event, it looks like there is a lot to do up North after the Law and Society Association conference!  One could spend the whole week away presenting papers. . . .

November 12, 2018 in Compliance, Conferences, Ethics, Joan Heminway | Permalink | Comments (0)

Saturday, October 13, 2018

Has the Dodd-Frank Conflict Minerals Rule Really Made a Difference and is Blockchain The Answer?

Last week Dr. Denis Mukwege won the Nobel Peace Prize for his work on gender-based violence in the Democratic Republic of Congo (DRC). This short video interview describes what I saw when I went to DRC in 2011 to research the newly-enacted Dodd-Frank disclosure rule and to do the legwork for a non-profit that teaches midwives ways to deliver babies safely. For those unfamiliar with the legislation, U.S. issuers must disclose the efforts they have made to track and trace tin, tungsten, tantalum, and gold from the DRC and nine surrounding countries. Rebels and warlords control many of the mines by controlling the villages. DRC is one of the poorest nations in the world per capita but has an estimated $25 trillion in mineral reserves (including 65% of the world's cobalt). Armed militia use rape and violence as a weapon of war in part so that they control the mineral wealth. 

The stated purpose of the Dodd-Frank rule was to help end the violence in DRC and to name and shame companies that do not disclose or that cannot certify that their goods are DRC-conflict free (although that labeling portion of the law was struck down on First Amendment grounds). I  wrote a law review article in 2013 and co-filed an amicus brief during the litigation arguing that the law would not help people on the ground. I have also blogged here about legislation to end the rulehere about the EU's version of the rulehere about the differences between the EU and US rule, and half a dozen times since 2013.

I had the honor of meeting Dr. Mukwege in 2011, who at the time did not support the conflict minerals legislation. He has since endorsed such legislation for the EU. During our trip, we met dozens of women who had been raped, often by gangs. On our way to meet midwives and survivors of a massacre, I saw five corpses of villagers lying in the street. They were slain by rebels the night before. I saw children mining gold from a river with armed soldiers only a few feet away.  That trip is the reason that I study, write, and teach about business and human rights. I had only been in academia for three weeks when I went to DRC, and I decided that my understanding of supply chains and corporate governance from my past in-house life could help others develop more practical solutions to intractable problems. I believed then and I believe now that using a corporate governance disclosure to solve a human rights crisis is a flawed and incomplete solution. It depends on the belief that large numbers of consumers will boycott companies that do not do enough for human rights. 

What does the data say about compliance with the rule? The General Accounting Office puts out a mandatory report annually on the legislation and the state of disclosures. According to the 2018 report:

Similar to the prior 2 years, almost all companies required to conduct due diligence, as a result of their country-of-origin inquiries, reported doing so. After conducting due diligence to determine the source and chain of custody of any conflict minerals used, an estimated 37 percent of these companies reported in 2017 that they were able to determine that their conflict minerals came from covered countries or from scrap or recycled sources, compared with 39 and 23 percent in 2016 and 2015, respectively. Four companies in GAO’s sample declared their products “DRC conflict-free,” and of those, three included the required Independent Private Sector Audit report (IPSA), and one did not. In 2017, 16 companies filed an IPSA; 19 did so in 2016. (emphasis added).

But what about the effect on forced labor and rape? The 2017 GAO Report indicated that in 2016, a study in DRC estimated that 32 percent of women and 33 percent of men in these areas had been exposed to some form of sexual and gender-based violence in their lifetime. Notably, just last month, a coalition of Congolese civil society organizations wrote the following to the United Nations seeking a country-wide monitoring system:

... Armed groups and security forces have attacked civilians in many parts of the country...Today, some 4.5 million Congolese are displaced from their homes. More than 100,000 Congolese have fled abroad since January 2018, raising the risk of increased regional instability... Since early this year, violence intensified in various parts of northeastern Congo’s Ituri province, with terrifying incidents of massacres, rapes, and decapitation. Armed groups launched deadly attacks on villages, killing scores of civilians, torching hundreds of homes, and displacing an estimated 350,000 people. Armed groups and security forces in the Kivu provinces also continue to attack civilians. According to the Kivu Security Tracker, assailants, including state security forces, killed more than 580 civilians and abducted at least 940 others in North and South Kivu since January 2018. (emphasis added)

The U.S. government provides $500 million in aid to the DRC and runs an app called Sweat and Toil for people who are interested in avoiding goods produced by exploited labor. As of today, DRC has seven goods produced with exploitative labor: cobalt (used in electric cars and cell phones), copper, diamonds, and, not surprisingly, tin, tungsten, tantalum, and gold- the four minerals regulated by Dodd-Frank. The app notes that "for the second year in a row, labor inspectors have failed to conduct any worksite inspections... and [the] government also separated as many as 2,360 children from armed groups...[t]here were numerous reports of ongoing collaboration between members of the [DRC] Armed Forces and non-state armed groups known for recruiting children... The Armed Forces carried out extrajudicial killings of civilians including children, due to their perceived support or affiliation with non-state armed groups. .."

For these reasons, I continue to ask whether the conflict minerals legislation has made a difference in the lives of the people on the ground. The EU, learning from Dodd-Frank's flaws, has passed its own legislation, which goes into effect in 2021.  The EU law applies beyond the Democratic Republic of Congo and defines conflict areas as those in a state of armed conflict, or fragile post-conflict area, areas with weak or nonexistent governance and security such as failed states, and any state with a widespread or systematic violation of international law including human rights abuses. Certain European Union importers will have to identify and address the actual potential risks linked to conflict-affected areas or high-risk areas during the due diligence of their supply chains. 

Notwithstanding the statistics above, many investors, NGOs, and other advocates believe the Dodd-Frank rule makes sense. A coalition of investors with 50 trillion worth of assets under management has pushed to keep the law in place. It's no surprise then that many issuers have said that they would continue the due diligence even if the law were repealed. I doubt that will help people in these countries, but the due diligence does help drive out inefficiencies and optimize supply chains.

Stay tuned for my upcoming article in UT's business law journal, Transactions, where I will discuss how companies and state actors are using blockchain technology for due diligence related to human rights. Blockchain will minimize expenses and time for these disclosure requirements, but it probably won't stop the forced labor, exploitation, rapes, and massacres that continue in the Democratic Republic of Congo. (See here for a Fortune magazine article with a great video discussing how and why companies are exploring blockchain's uses in DRC). The blockchain technology won't be the problem-- it's already being used for tracing conflict diamonds. The problem is using the technology in a state with such lawlessness. This means that blockchain will probably help companies, but not the people the laws are meant to protect. 

 

 

 

 

 

 

 

 

 

October 13, 2018 in Compliance, Corporate Governance, Corporations, CSR, Current Affairs, Human Rights, International Business, International Law, Legislation, Marcia Narine Weldon, Securities Regulation | Permalink | Comments (1)

Sunday, September 16, 2018

How I Became (Semi) Literate About Distributed Ledger and Blockchain Technology

I knew it would be impossible. There was no way to relay my excitement about the potential of blockchain technology in a concise way to lawyers and law students last Friday at the Connecting the Threads symposium at the University of Tennessee School of Law. I didn't discuss cryptocurrency or Bitcoin other than to say that I wasn't planning to discuss it. Still, there wasn't nearly enough time for me to discuss all of the potential use cases. I did try to make it clear that it's not a fad if IBM has 1500 people working on it, BITA has hundreds of logistics and freight companies signed up to explore possibilities, and the World Bank, OECD, and United Nations have studies and pilot programs devoted to it. As a former supply chain person, compliance officer, and chief privacy officer, I'm giddy with excitement about everything related to distributed ledger technology other than cryptocurrency. You can see why when you read my law review article in a few months in Transactions.

I've watched over 100 YouTube videos (many of them crappy) and read dozens of articles. I go to Meetups and actually understand what the coders and developers are saying (most of the time). A few students and practitioners asked me how I learned about DLT/blockchain. First, see herehere, here, and here for my prior posts listing resources and making the case for learning the basics of the technology. What I list below adds to what I've posted in the past.

Here are some of the podcasts I listen to (there are others, of course):

1) The Decrypting Crypto Podcast 

2) Block that Chain

3) Block and Roll

4) Blockchain Innovation

Here are some of the videos that I watched (that I haven't already linked to in past posts):

1) Using Blockchains for Supply Chains

2) IBM and Maersk demo: Cross-border supply chain solution on blockchain

3) How to Activate a Blockchain with IBM (Demo)

4) Examples of Blockchain Changing Every Day Life

5) 19 Industries The Blockchain Will Disrupt

6) Vitalek Buterin Explains Ethereum

7) In Conversation with Vitalik Buterin, Justin Drake and Karl Floersch (Ethereum Foundation)

8) Fireside Chat With Vitalek Buterin

9) Blockchain and Food Safety With IBM and Walmart

10) Applying Blockchain Technology to Customs Declarations

11) Your 31st Human Right Guaranteed by Blockchain

12) How Blockchain Can Transform India

13) Blockchain, A Tool for Social Good

14) Blockchain for Social Impact

15) Bitcoin, Blockchain, and the Law

16) Blockchain and the Law: What Lawyers (And their Clients) Need to Know

17) Blockchain and the Law: The Rule of Code

18) The Blockchain: A Revolution You Need to Understand

19) Vitalik Buterin on Ethereum, Bitcoin, and Scaling

20) Exploring Blockchain Use Cases: Microsoft Azure

21) How the Blockchain is Changing Money and Business

22) Blockchain and Corporate Law

23) Blockchain Innovation in Law and Corporate Governance

24) Changing the Legal Game With Blockchain

25) Blockchain and Smart Contracts

26) Code is Not the Law: Blockchain and Artificial Intelligence

27) Linklaters Blockchain Legal & Regulation Panel

28) How Do You Square Blockchain with Privacy Laws

29) Jeff Jonas on GDPR and Integrating IBM Blockchain with Senzing at IBM Think 2018

30) CPDP 2018: BLOCKCHAIN AND DATA PROTECTION: CHALLENGES AND OPPORTUNITIES

31) John McAfee: about blockchain, bitcoins and cyber security

There are dozens more, but this should be enough to get you started. Remember, none of these videos or podcasts will get you rich from cryptocurrency. But they will help you become competent to know whether you can advise clients on these issues. 

 

September 16, 2018 in Compliance, Corporate Governance, Corporations, CSR, Current Affairs, Financial Markets, Human Rights, Law Firms, Law Reviews, Law School, Lawyering, Marcia Narine Weldon | Permalink | Comments (1)

Saturday, September 1, 2018

Should Corporate Lawyers and Business Law Professors Be Talking About DAOs?

Did I lose you with the title to this post? Do you have no idea what a DAO is? In its simplest terms, a DAO is a decentralized autonomous organization, whose decisions are made electronically by a written computer code or through the vote of its members. In theory, it eliminates the need for traditional documentation and people for governance. This post won't explain any more about DAOs or the infamous hack of the Slock.it DAO in 2016. I chose this provocative title to inspire you to read an article entitled Legal Education in the Blockchain Revolution.

The authors Mark Fenwick, Wulf A. Kaal, and Erik P. M. Vermeulen discuss how technological innovations, including artificial intelligence and blockchain will change how we teach and practice law related to real property, IP, privacy, contracts, and employment law. If you're a practicing lawyer, you have a duty of competence. You need to know what you don't know so that you avoid advising on areas outside of your level of expertise. It may be exciting to advise a company on tax, IP, securities law or other legal issues related to cryptocurrency or blockchain, but you could subject yourself to discipline for doing so without the requisite background. If you teach law, you will have students clamoring for information on innovative technology and how the law applies. Cornell University now offers 28 courses on blockchain, and a professor at NYU's Stern School of Business has 235 people in his class. Other schools are scrambling to find professors qualified to teach on the subject. 

To understand the hype, read the article on the future of legal education. The abstract is below:

The legal profession is one of the most disrupted sectors of the consulting industry today. The rise of Legal Tech, artificial intelligence, big data, machine learning, and, most importantly, blockchain technology is changing the practice of law. The sharing economy and platform companies challenge many of the traditional assumptions, doctrines, and concepts of law and governance, requiring litigators, judges, and regulators to adapt. Lawyers need to be equipped with the necessary skillsets to operate effectively in the new world of disruptive innovation in law. A more creative and innovative approach to educating lawyers for the 21st century is needed.

For more on how blockchain is changing business and corporate governance, come by my talk at the University of Tennessee on September 14th where you will also hear from my co-bloggers. In case you have no interest in my topic, it's worth the drive/flight to hear from the others. The descriptions of the sessions are below:

Session 1: Breach of Fiduciary Duty and the Defense of Reliance on Experts

Many corporate statutes expressly provide that directors in discharging their duties may rely in good faith upon information, opinions, reports, or statements from officers, board committees, employees, or other experts (such as accountants or lawyers). Such statutes often come into play when directors have been charged with breaching their procedural duty of care by making an inadequately informed decision, but they can be applicable in other contexts as well. In effect, the statutes provide a defense to directors charged with breach of fiduciary duty when their allegedly uninformed or wrongful decisions were based on credible information provided by others with appropriate expertise. Professor Douglas Moll will examine these “reliance on experts” statutes and explore a number of questions associated with them.

Session 2: Fact or Fiction: Flawed Approaches to Evaluating Market Behavior in Securities Litigation

Private fraud actions brought under Section 10(b) of the Securities Exchange Act require courts to make a variety of determinations regarding market functioning and the economic effects of the alleged misconduct. Over the years, courts have developed a variety of doctrines to guide how these inquiries are to be conducted. For example, courts look to a series of specific, pre-defined factors to determine whether a market is “efficient” and thus responsive to new information. Courts also rely on a variety of doctrines to determine whether and for how long publicly-available information has exerted an influence on security prices. Courts’ judgments on these matters dictate whether cases will proceed to summary judgment and trial, whether classes will be certified and the scope of such classes, and the damages that investors are entitled to collect. Professor Ann M. Lipton will discuss how these doctrines operate in such an artificial manner that they no longer shed light on the underlying factual inquiry, namely, the actual effect of the alleged fraud on investors.

Session 3: Lawyering for Social Enterprise

Professor Joan Heminway will focus on salient components of professional responsibility operative in delivering advisory legal services to social enterprises. Social enterprises—businesses that exist to generate financial and social or environmental benefits—have received significant positive public attention in recent years. However, social enterprise and the related concepts of social entrepreneurship and impact investing are neither well defined nor well understood. As a result, entrepreneurs, investors, intermediaries, and agents, as well as their respective advisors, may be operating under different impressions or assumptions about what social enterprise is and have different ideas about how to best build and manage a sustainable social enterprise business. Professor Heminway will discuss how these legal uncertainties have the capacity to generate transaction costs around entity formation and management decision making and the pertinent professional responsibilities implicated in an attorney’s representation of such social enterprises.

Session 4: Beyond Bitcoin: Leveraging Blockchain for Corporate Governance, Corporate Social Responsibility, and Enterprise Risk Management

Although many people equate blockchain with bitcoin, cryptocurrency, and smart contracts, Professor Marcia Narine Weldon will discuss how the technology also has the potential to transform the way companies look at governance and enterprise risk management. Companies and stock exchanges are using blockchain for shareholder communications, managing supply chains, internal audit, and cybersecurity. Professor Weldon will focus on eliminating barriers to transparency in the human rights arena. Professor Weldon’s discussion will provide an overview of blockchain technology and how state and nonstate actors use the technology outside of the realm of cryptocurrency.

Session 5: Crafting State Corporate Law for Research and Review

Professor Benjamin Edwards will discuss how states can implement changes in state corporate law with an eye toward putting in place provisions and measures to make it easier for policymakers to retrospectively review changes to state law to discern whether legislation accomplished its stated goals. State legislatures often enact and amend their business corporation laws without considering how to review and evaluate their effectiveness and impact. This inattention means that state legislatures quickly lose sight of whether the changes actually generate the benefits desired at the time off passage. It also means that state legislatures may not observe stock price reactions or other market reactions to legislation. Our federal system allows states to serve as the laboratories of democracy. The controversy over fee-shifting bylaws and corporate charter provisions offers an opportunity for state legislatures to intelligently design changes in corporate law to achieve multiple state and regulatory objectives. Professor Edwards will discuss how well-crafted legislation would: (i) allow states to compete effectively in the market for corporate charters; and (ii) generate useful information for evaluating whether particular bylaws or charter provisions enhance shareholder wealth.

Session 6: An Overt Disclosure Requirement for Eliminating the Duty of Loyalty

When Delaware law allowed parties to eliminate the duty of loyalty for LLCs, more than a few people were appalled. Concerns about eliminating the duty of loyalty are not surprising given traditional business law fiduciary duty doctrine. However, as business agreements evolved, and became more sophisticated, freedom of contract has become more common, and attractive. How to reconcile this tradition with the emerging trend? Professor Joshua Fershée will discuss why we need to bring a partnership principle to LLCs to help. In partnerships, the default rule is that changes to the partnership agreement or acts outside the ordinary course of business require a unanimous vote. See UPA § 18(h) & RUPA § 401(j). As such, the duty of loyalty should have the same requirement, and perhaps that even the rule should be mandatory, not just default. The duty of loyalty norm is sufficiently ingrained that more active notice (and more explicit consent) is necessary, and eliminating the duty of loyalty is sufficiently unique that it warrants unique treatment if it is to be eliminated.

Session 7: Does Corporate Personhood Matter? A Review of We the Corporations

Professor Stefan Padfield will discuss a book written by UCLA Law Professor Adam Winkler, “We the Corporations: How American Businesses Won Their Civil Rights.” The highly-praised book “reveals the secret history of one of America’s most successful yet least-known ‘civil rights movements’ – the centuries-long struggle for equal rights for corporations.” However, the book is not without its controversial assertions, particularly when it comes to its characterizations of some of the key components of corporate personhood and corporate personality theory. This discussion will unpack some of these assertions, hopefully ensuring that advocates who rely on the book will be informed as to alternative approaches to key issues.

 

September 1, 2018 in Ann Lipton, Compliance, Conferences, Contracts, Corporate Governance, Corporate Personality, Corporations, Current Affairs, Employment Law, Human Rights, Intellectual Property, International Business, Joan Heminway, Joshua P. Fershee, Law School, Lawyering, LLCs, Marcia Narine Weldon, Real Property, Shareholders, Social Enterprise, Stefan J. Padfield, Teaching, Technology, Web/Tech | Permalink | Comments (0)

Sunday, August 12, 2018

Why Lawyers, Law Professors, and Judges Should Care About Blockchain

We’re a month away from our second annual Business Law Professor Blog CLE, hosted at the University of Tennessee on Friday, September 14, 2018. We’ll discuss our latest research and receive comments from UT faculty and students. I’ve entitled my talk Beyond Bitcoin: Leveraging Blockchain for Corporate Governance, Corporate Social Responsibility, and Enterprise Risk Management, and will blog more about that after I finish the article. This is a really long post, but it’s chock full of helpful links for novices and experts alike and highlights some really interesting work from our colleagues at other law schools.

Two weeks ago, I posted some resources to help familiarize you with blockchain. Here’s a relatively simple definition from John Giordani at Forbes:

Blockchain is a public register in which transactions between two users belonging to the same network are stored in a secure, verifiable and permanent way. The data relating to the exchanges are saved inside cryptographic blocks, connected in a hierarchical manner to each other. This creates an endless chain of data blocks -- hence the name blockchain -- that allows you to trace and verify all the transactions you have ever made. The primary function of a blockchain is, therefore, to certify transactions between people. In the case of Bitcoin, the blockchain serves to verify the exchange of cryptocurrency between two users, but it is only one of the many possible uses of this technological structure. In other sectors, the blockchain can certify the exchange of shares and stocks, operate as if it were a notary and "validate" a contract or make the votes cast in online voting secure and impossible to alter. One of the greatest advantages of the blockchain is the high degree of security it guarantees. In fact, once a transaction is certified and saved within one of the chain blocks, it can no longer be modified or tampered with. Each block consists of a pointer that connects it to the previous block, a timestamp that certifies the time at which the event actually took place and the transaction data.

These three elements ensure that each element of the blockchain is unique and immutable -- any request to modify the timestamp or the content of the block would change all subsequent blocks. This is because the pointer is created based on the data in the previous block, triggering a real chain reaction. In order for any alterations to happen, it would be necessary for the 50%-plus-one of the network to approve the change: a possible but hardly feasible operation since the blockchain is distributed worldwide between millions of users.

In case that wasn’t clear enough, here are links to a few of my favorite videos for novices. These will help you understand the rest of this blog post.

To help prepare for my own talk in Tennessee, I attended a fascinating discussion at SEALS on Thursday moderated by Dean Jon Garon of Nova Southeastern University Shepard Broad College of Law called Blockchain Technology and the Law.

For those of you who don’t know how blockchain technology can relate to your practice or teaching, I thought I would provide a few questions raised by some of the speakers. I’ve inserted some (oversimplified)links for definitions. The speakers did not include these links, so if I have used one that you believe is incomplete or inaccurate, do not attribute it to them.

Professor Del Wright, University of Missouri-Kansas City School of Law;

Del started the session by talking about the legal issues in blockchain consensus models. He described consensus models as the backbones for users because they: 1) allow users to interact with each other in a trustless manner; 2) ensure the integrity of the ledger in both normal and adversarial situations; and 3) create a “novel variety of networks with extraordinary potential” if implemented correctly. He discussed both permissioned (e.g. Ripple) and permissionless (Bitcoin) systems and how they differ. He then explained Proof of Work blockchains supported by miners (who solve problems to add blocks to the blockchain) and masternodes (who provide the backbone support to the blockchain). He pointed out how blockchains can reduce agency costs and problems of asymmetrical information and then focused on their utility in financial markets, securities regulation, and corporate governance. Del compared the issues related to off-chain governance, where decisionmaking first takes place on a social level and is then actively encoded into the protocol by the developers (used by Bitcoin and Ethereum) to on-chain governance, where developers broadcast their improvement protocols on-chain and then, once approved, those improvements are implemented into the code. He closed by listing a number of “big unanswered issues” related to regulatory guidance, liability for the performance of the technology and choice of consensus, global issues, and GDPR and other data privacy issues.

Professor Catherine Christopher, Texas Tech University School of Law;

Catherine wants to help judges think about smart contracts. She asked, among other things, how judges should address remedies, what counts as substantial performance, and how smart contract audits would work. She questioned whether judges should use a consumer protection approach or instead follow a draconian approach by embracing automation and enforcing smart contracts as drafted to discourage their adoption by those who are not sophisticated enough to understand how they work.

Professor Tonya Evans, University of New Hampshire School of Law (follow her on Twitter; see her blog on blockchain here);

Tonya focuses on blockchain and intellectual property. Her talked raised the issues of non-fungible tokens generated through smart contracts and the internet of value. She used the example of cryptokitties, where players have the chance to collect and breed digital cats. She also raised the question of what kind of technology can avoid infringement. For more on how blockchain can disrupt copyright law, read her post here.

Professor Rebecca Bratspies, CUNY School of Law;

In case you didn’t have enough trust issues with blockchain and cryptocurrency, Rebecca’s presentation focused on the “halo of immutability” and asked a few central questions: 1) why should we trust the miners not to collude for a 51% attack 2) why should we trust wallets, which aren’t as secure as people think; and 3) why should we trust the consensus mechanism? In response, some members of the audience noted that blockchain appeals to a libertarian element because of the removal of the government from the conversation.

Professor Carla Reyes, Michigan State University College of Law- follow her on Twitter at Carla Reyes (@Prof_CarlaReyes);

Carla talked about crypto corporate governance and the potential fiduciary duties that come out of thinking of blockchains as public trusts or corporations. She explained that governance happens on and off of the blockchain mechanisms through social media outlets such as Redditt. She further noted that many of those who call themselves “passive economic participants” are actually involved in governance because they comment on improvement processes. She also noted the paradox that off chain governance doesn’t always work very well because participants don’t always agree, but when they do agree, it often leads to controversial results like hard forks. Her upcoming article will outline potential fiduciaries (miner and masternode operators for example), their duties, and when they apply. She also asked the provocative question of whether a hard fork is like a Revlon event.

Professor Charlotte Tschider, William Mitchell College of Law (follow her on Twitter);

As a former chief privacy officer, I have to confess a bias toward Charlotte’s presentation. She talked about blockchain in healthcare focusing on these questions: will gains in cybersecurity protection outweigh specific issues for privacy or other legal issues (data ownership); what are the practical implications of implementing a private blockchain (consortium, patient-initiated, regulatory-approved); can this apply to other needed uses, including medical device applications; how might this technology work over geographically diverse regulatory structures; and are there better applications for this technology (e.g. connected health devices)? She posited that blockchain could work in healthcare because it is decentralized, has increased security, improves access controls, is more impervious to unauthorized change, could support availability goals for ransomware attacks and other issues, is potentially interoperable, could be less expensive, and could be controlled by regulatory branch, consortium, and the patient. She closed by raising potential legal issues related to broad data sharing, unanswered questions about private implementations, privacy requirements relating to the obligation of data deletion and correction (GDPR in the EU, China’s cybersecurity law, etc); and questions of data ownership in a contract.

Professor Eric Chason, William & Mary Marshall-Wythe School of Law;

Eric closed by discussing the potential tax issue for hard forks. He explained that after a hard fork, a new coin is created, and asked whether that creates income because the owner had one entitlement and now has two pieces of ownership. He then asked whether hard forks are more like corporate reorganizations or spinoffs (which already have statutory taxation provisions) or rather analogous to a change of wealth. Finally, he asked whether we should think about these transactions like a contingent right to do something in the future and how that should be valued.

Stay tuned for more on these and other projects related to blockchain. I will be sure to post them when they are done. But, ignore blockchain at your peril. There’s a reason that IBM, Microsoft, and the State Department are spending money on this technology. If you come to UT on September 15th, I’ll explain how other companies, the UN, NASDAQ, and nation states are using blockchain beyond the cryptocurrency arena.

 

August 12, 2018 in Commercial Law, Compliance, Conferences, Contracts, Corporate Governance, Corporations, Current Affairs, Entrepreneurship, Human Rights, Law School, Lawyering, Legislation, Marcia Narine Weldon, Research/Scholarhip, Securities Regulation, Shareholders, Teaching, Technology, Writing | Permalink | Comments (0)

Friday, July 27, 2018

Beyond Bitcoin: Why You Should Care About Blockchain and Smart Contracts-Part 1

Pura vida from Costa Rica. Between recovery from carpal tunnel surgery a few weeks ago and an ATV flip two days ago, I don’t have much mental or physical energy to do a full post. I haven’t mastered dictation so I’m typing this on an iPad with one hand. Next week, I’ll provide more substance as well as a preview on my September talk at our second annual BPLB symposium at the University of Tennessee. Today, I want to pass on some resources for those who don’t know anything about blockchain. 

For those who want to provide resources for students, Walter Effross has put together a great site:

http://blockchainforlawstudents.com/

The following sources come from Professor Tonya Evans at UNH, who has developed an online curriculum on blockchain:

Use Cases: 

https://medium.com/fluree/blockchain-for-2018-and-beyond-a-growing-list-of-blockchain-use-cases-37db7c19fb99

https://www.mycryptopedia.com/16-promising-blockchain-use-cases/

Education:

https://medium.com/universablockchain/blockchain-in-education-49ad413b9e12

Blockchain + Law:

http://www.abajournal.com/news/article/lawyers_can_contribute_to_the_rise_of_blockchain_by_understanding_it

https://abovethelaw.com/2018/02/blockchain-can-smart-contracts-replace-lawyers/

https://www.mycase.com/blog/2017/09/bitcoin-blockchain-lawyers-need-know/

Next week, I’ll talk about my research into how blockchain is used in corporate governance, compliance, supply chain management, enterprise risk management, cybersexurity, and human rights. 

July 27, 2018 in Compliance, Conferences, Contracts, Corporate Governance, Corporations, CSR, Current Affairs, Human Rights, Law School, Lawyering, Marcia Narine Weldon | Permalink | Comments (0)

Saturday, April 21, 2018

Can Contract Clauses Stop Human Trafficking?

Last week, I blogged blogged about lawsuits against chocolate makers alleging unfair and deceptive trade practices for failure to disclose that the companies may have used child slaves to harvest their products. Today, I want to discuss steps that the Business Law Section of the American Bar Association is taking to provide more transparency in supply chain practices.

In 2014, the ABA House of Delegates adopted Model Principles on Labor Trafficking and Child Labor developed by over 50 judges, in-house counsel, outside counsel, academics, and NGOs. The Model Principles address the UN Guiding Principles on Business and Human Rights and other hard and soft law regimes. At last week’s ABA Business Law Spring Meeting, academics David Snyder and Jennifer Martin presented on human rights issues in supply chains alongside practicing lawyers and in-house executives. Many of them (and several others) had formed a Working Group to Draft Human Rights Protections in Supply Contracts. The Group aims to provide contract clauses that are “legally effective” and “operationally likely.”

As a former Deputy GC for a supply chain management company, I can attest that the ABA’s focus is timely as companies answer questions from customers, regulators, shareholders, and other stakeholders. Human rights issues play out in dozens of regulations, including, but not limited to: the Foreign Corrupt Practices Act, Trafficking Victims Protection Act, Dodd-Frank Conflict Minerals Act, California Transparency in Supply Chains Act, the UK Modern Slavery Act, the Trade Facilitation and Trade Enforcement Act, and the updated Federal Acquisition Regulations. Australia and at least seven EU countries are currently working on their own regulations. Savvy lawyers have use the Alien Tort Statute, RICO, negligence, and false advertising allegations to state claims, with varying success.

The following statistics may provide some context. Thanks to e. Christopher Johnson, Jr., CEO of the Center for Justice, Rights, and Dignity.
- there are 21 million victims of human trafficking
- Human trafficking provides $150 billion in profit
- Women and girls are 55% of the victims, and children 17 and under are 26%

To help companies mitigate their supply chain risks, the Business Law and UC Article 1 and Article 2 Committees have drafted more specific model clauses to incorporate human rights provisions in certain contracts. The Committees are also establishing an information exchange with NGOs and developing a Toolkit for Canadian lawyers.

One of the most practical features of the Group’s work is Schedule P, the warranties and remedies to protect human rights in the supply chain. The Working Group’s Report provides guidance on how to use the clauses as well as potential limitations. It’s a long read but I recommend that you look at the report and consider whether the model clauses and Schedule P, an appendix to supplier agreements, will help in the fight to combat human trafficking and forced labor. 

April 21, 2018 in Compliance, Contracts, Corporate Governance, Corporations, CSR, Current Affairs, Human Rights, Marcia Narine Weldon | Permalink | Comments (0)

Friday, April 13, 2018

Can a CSR Report Be Used Against A Company in Court?

Greetings from the ABA Business Law Meeting in sunny Orlando, Florida. Today, I attended an excellent program on Protecting Human Rights in Supply Chains; Moving from Policy to Action. I plan to blog more about the meeting next week, highlighting the work surrounding draft human rights clauses for supplier contracts. The project was spearheaded by David Snyder of American University and corporate lawyer Susan Maslow. In this post, I want to address one of the topics Susan Maslow discussed-- the recent spate of lawsuits brought by consumers who allege unfair trade practices based on what companies say (or don’t say) about their human rights records.

I’ve blogged (incessantly for the past five years) and written longer articles about the various ESG disclosure regimes. I’ve argued that in theory, disclosure is a good thing. But without meaningful financial penalties from regulators for violations, many corporations won’t do anything more than the bare minimum for human rights, even with the threat of (often short-lived) consumer boycotts. Further, most consumers suffer from disclosure overload or don’t understand or remember what they read.

The disclosure issue has now reached the courts. In 2015, a law firm filed cases in California under unfair competition and false advertising laws against the Hershey Company, Mars, and Nestle. The firm likely chose those causes of action because there’s no private right of action under the California Transparency in Supply Chain Act.  The suits claimed, among other things that:

  • in violation of California law, Hershey’s, Mars and Nestle failed to disclose that their suppliers in the Ivory Coast relied on child laborers and profitted from the child labor that supplies the chocolate sold to American consumers,
  • the children subjected to the forced labor are victims of hazardous work involving dangerous tools, transport of heavy loads and exposure to toxic substances, and,
  • “sometimes extremely poor people sell their own children into slavery for as little as $30. Children that are sometimes not even 10 years old carry huge sacks that are so big that they cause them serious physical harm. Much of the world’s chocolate is quite literally brought to us by the back-breaking labor of child slaves.”

Plaintiffs lost those cases because the court found that these companies had no legal duty to disclose on their labels that African child slaves might have been involved in manufacturing their cocoa. Had the plaintiffs won, I imagine that the First Amendment argument that prevailed in the Dodd-Frank conflicts minerals litigation would have played a prominent role in the appeal.

Fast forward a few years and the same law firm has now filed a similar class action lawsuit against Hershey in Massachusetts. This claim alleges unjust enrichment in violation of the state’s consumer protection law. According to plaintiffs, “much of the world’s chocolate is quite literally brought to us by the back-breaking labor of children, in many cases under conditions of slavery.” Moreover, they claim, “Hershey’s material omissions and failure to disclose at the point of sale [are] all the more appalling considering that Hershey’s Corporate Social Responsibility Report state[s] that ‘Hershey has zero tolerance for the worst forms of child labor in its supply chain.’ But Hershey does not live up to its own ideals.”

Hershey, like many companies, produces a CSR report showcasing its efforts and progress in accordance with the Global Reporting initiative, the gold standard for CSR. Companies like Hershey also report on their CSR initiatives in good faith with the knowledge that their statements are generally not legally binding, at least not in the United States. I’ll be following this case closely. If the court grants class certification, this could have a chilling effect on what companies say in their CSR reports, and that would be a shame.

April 13, 2018 in Compliance, Conferences, Corporate Finance, Corporations, CSR, Current Affairs, Human Rights, Marcia Narine Weldon | Permalink | Comments (0)

Friday, March 16, 2018

Do the Benefits of Regulation Outweigh the Costs?

Matt Kelly of Radical Compliance has posted on the costs and benefits of regulation. His post is timely considering this week's rollback of certain Dodd-Frank banking provisions by the Senate. Among other things, Kelly notes that according to a draft OMB report, "across 133 major rules, the average annualized cost (in 2015 dollars) was $92.8 billion, average annualized benefit $554.8 billion. Benefits were six times larger than costs." He further writes, with some skepticism, that the OMB is seeking comment from "peer reviewers with expertise... in regulatory policy" on its cost-benefit analysis as it finalizes its report. 

He also cited GW public policy professors who looked at over two hundred major rules adopted between 2007-2010 and found that "The design of the rulemaking process can both increase the pace with which rules are promulgated and reduce the level of detail in which they are presented, but only when care is taken to ensure the individuals intimately involved have greater breadth – relative to depth – in the competencies they bring to the endeavor." As Kelly, observed, " Teams with more “breadth of competencies” (one subject matter expert, one lawyer, one economic analyst, one regulatory affairs specialist, and so forth) tended to write rules more quickly and keep them simpler. In contrast, teams with depth of competency (a whole bunch of lawyers, or policy analysts, or subject matter experts) tended to take more time and, as the authors wonderfully phrased it, “elongated the resulting rules.”'

Although Kelly looks at these issues through the lens of a compliance expert, his post is worth a read as Congress and the SEC look at regulatory reform. He correctly focuses on the need to look at the quality rather than the quantity of regulation.

March 16, 2018 in Compliance, Corporations, Marcia Narine Weldon, Securities Regulation | Permalink | Comments (0)

Friday, February 16, 2018

Corporate Governance, Compliance, Social Responsibility, and Enterprise Risk Management in the Trump/Pence Era

This may be obsolete by the time you read this post, but here are my thoughts on Corporate Governance, Compliance, Social Responsibility, and Enterprise Risk Management in the Trump/Pence Era. Thank you, Joan Heminway and the wonderful law review editors of Transactions: The Tennessee Journal of Business Law. The abstract is below:

With Republicans controlling Congress, a Republican CEO as President, a “czar” appointed to oversee deregulation, and billionaires leading key Cabinet posts, corporate America had reason for optimism following President Trump’s unexpected election in 2016. However, the first year of the Trump Administration has not yielded the kinds of results that many business people had originally anticipated. This Essay will thus outline how general counsel, boards, compliance officers, and institutional investors should think about risk during this increasingly volatile administration. 

Specifically, I will discuss key corporate governance, compliance, and social responsibility issues facing U.S. public companies, although some of the remarks will also apply to the smaller companies that serve as their vendors, suppliers, and customers. In Part I, I will discuss the importance of enterprise risk management and some of the prevailing standards that govern it. In Part II, I will focus on the changing role of counsel and compliance officers as risk managers and will discuss recent surveys on the key risk factors that companies face under any political administration, but particularly under President Trump. Part III will outline some of the substantive issues related to compliance, specifically the enforcement priorities of various regulatory agencies. Part IV will discuss an issue that may pose a dilemma for companies under Trump— environmental issues, and specifically shareholder proposals and climate change disclosures in light of the conflict between the current EPA’s position regarding climate change, the U.S. withdrawal from the Paris Climate Accord, and corporate commitments to sustainability. Part V will conclude by posing questions and proposing recommendations using the COSO ERM framework and adopting a stakeholder rather than a shareholder maximization perspective. I submit that companies that choose to pull back on CSR or sustainability programs in response to the President’s purported pro-business agenda will actually hurt both shareholders and stakeholders.

February 16, 2018 in Compliance, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Employment Law, Marcia Narine Weldon, Securities Regulation, Shareholders | Permalink | Comments (0)

Saturday, February 3, 2018

Time's Up for Board Members: Sexual Misconduct Allegations Against CEOs of Wynn and the Humane Society Should Send a Message

Perhaps I'm a cynic, but I have to admit that I was stunned when the news of hotelier  Steve Wynn's harassment allegations at the end of January caused a double-digit drop in stock price.  What began as an unseemly story of a $7.5 million settlement to a manicurist at one his of his resorts later morphed into a story about his resignation as head of the finance chair of the Republican National Committee. Not only did he lose that job, he also lost at least $412 million (the company at one point lost over $3 billion in value). His actions have also led regulators in two states to scrutinize his business dealings and settlements to determine whether he has violated "suitability standards."  Nonetheless, Wynn has asked his 25,000 employees to stand by him and think of him as their father. The question is, will the board stand by him as it faces potential liability for breach of fiduciary duty?

The Wynn board members should take a close look at what happened with the Humane Society yesterday. That board chose to retain the CEO after ending an investigation into harassment allegations. A swift backlash ensued. Major donors threatened to pull funding, causing the CEO to resign. A number of board members also reportedly resigned. However, not all of the board members resigned out of principle. One female director resigned after stating, " Which red-blooded male hasn’t sexually harassed somebody? ... [w]omen should be able to take care of themselves.” Unfortunately, the reaction of this board member did not surprise me. She's in her 80s and in my twenty years practicing employment law on the defense side, I've heard similar sentiments from many (but not all) men and women of that generation. Indeed, French actress Catherine Deneuve initially joined other women in denouncing the #MeToo movement before bowing to public pressure to apologize. We have five generations of people in the workplace now, and as I have explained here, companies need to reexamine the boundaries. What may seem harmless or "normal" for some may be traumatic or legally actionable to someone else. 

As the Wynn and the Humane Society situations illustrate, the sexual harassment issue is now front and center for boards so general counsels need to put the issue on the next board agenda. As I wrote here, boards must scrutinize current executives as well as those they are reviewing as part of their succession planning roles to ensure that the executives have not committed inappropriate conduct. Because definitions differ, companies must clarify the gray areas and ensure everyone knows what's acceptable and what's terminable (even if it's not per se illegal).This means having the head of human resources report to the board that company policies and training don't just check a box. In fact, board members need to ask about the effectiveness of policies and training in the same way that they ask about training on bribery, money laundering, and other highly regulated compliance areas. Boards as part of their oversight obligation must also ensure that there are no uninvestigated allegations against senior executives. Prudent companies will review the adequacy of investigations into misconduct that were closed prematurely or without corroboration.Companies must spend the time and the money with qualified, credible legal counsel to investigate claims that they may not have taken seriously in the past. Because the #MeToo movement shows no signs of abating, boards need to engage in these uncomfortable, messy conversations. If they don't, regulators, plaintiffs' counsel, and shareholders will make sure that they do. 

February 3, 2018 in Compliance, Corporate Governance, Corporations, Current Affairs, Employment Law, Ethics, Marcia Narine Weldon, Shareholders | Permalink | Comments (3)

Monday, January 29, 2018

Teaching Disclosure Law to 3Ls - Sexual Misconduct and Risk Management

At The University of Tennessee College of Law, we have a four-credit-hour, four-module course called Representing Enterprises that is one of three capstone course offerings in our Concentration in Business Transactions.  In Representing Enterprises, each course module focuses on a different aspect of transactional business law, often a specific transaction or task.  We try to both ask the enrolled students to apply law that they have learned in other courses (doctrinal and experiential) and also introduce the students to applied practice in areas of law to which they have not or may not yet have been exposed.

I have been teaching the first module over the past few weeks.  We finish up tomorrow.  My module focuses on disclosure regulation.  I have five class meetings, two hours for each meeting, to cover this topic.  Each class engages students with a hypothetical that raises disclosure questions.

The first class focused on general rule identification regarding the applicable laws governing disclosure in connection with the purchase of limited liability membership interests.  Specifically, our client had bought out his fellow members of a member-managed Tennessee limited liability company at a nominal price and without giving them full information about a reality television opportunity our client had with his wife.  As things turned out, the television show was picked up and popularized the brand name of the limited liability company, making the husband and wife, over the next few years, significant income.  Now, of course, the former limited liability company members are contending that, had they known the complete facts, they would have demanded a higher price for their limited liability membership interests from our client.  The students did some nice, creative thinking here in identifying applicable legal rules, pointing to Tennessee limited liability company fiduciary duty law (although they missed our closely held limited liability company doctrine), federal and state securities law, business torts, potential contract law issues, etc.

Subsequent class meetings broke disclosure law down into component pieces commonly seen in a business transactional law context.  The second class centered on work for another client, a Delaware corporation, concerning fiduciary duty disclosure issues under Delaware corporate law in connection with a merger.  The third class focused on a client's obligations under mandatory disclosure and antifraud elements of the federal securities laws.  The fourth class involved a hypothetical that raises specialized disclosure regulation questions for a talent agency that is an indirect subsidiary of a New York Stock Exchange ("NYSE") listed company.  I may post later about the fifth class meeting, which will take place tomorrow.  It involves Uber's recently publicized data security breach and related disclosure matters.

I want to focus today on the fourth class meeting.  In that class, one of the things the students had to wrestle with was determining how the parent's status and regulation as a NYSE-listed firm might impact or be impacted by disclosure compliance at the subsidiary level.  The NYSE Listed Company Manual provides, e.g., 

202.03 Dealing with Rumors or Unusual Market Activity

The market activity of a company's securities should be closely watched at a time when consideration is being given to significant corporate matters. If rumors or unusual market activity indicate that information on impending developments has leaked out, a frank and explicit announcement is clearly required. If rumors are in fact false or inaccurate, they should be promptly denied or clarified. A statement to the effect that the company knows of no corporate developments to account for the unusual market activity can have a salutary effect. It is obvious that if such a public statement is contemplated, management should be checked prior to any public comment so as to avoid any embarrassment or potential criticism. If rumors are correct or there are developments, an immediate candid statement to the public as to the state of negotiations or of development of corporate plans in the rumored area must be made directly and openly. Such statements are essential despite the business inconvenience which may be caused and even though the matter may not as yet have been presented to the company's Board of Directors for consideration. . . .

Having identified this and other related rules, we posited situations in which operations or activities at the subsidiary level might require disclosure by the parent company under the NYSE listed company rules.  We dug in most specifically on what might lead to market rumors or cause unusual market activity.  Having just discussed in the prior class meeting disclosure standards under the federal securities laws, the students understood that materiality was a distinct, separate disclosure-triggering standard and that the parent firm might have different--even conflicting--disclosure obligations under the federal securities laws and the NYSE listed company rules.  With these observations as a foundation, I asked the students what types of conduct or information at the subsidiary level might generate market rumors or unusual market activity.

Given that the firm was a talent agency, I was not surprised when one of the first answers referenced the allegations against Harvey Weinstein.  The disparate pay issues relating to the Mark Wahlberg/Michelle Williams affair that I wrote about in a different context a few weeks ago (w/r/t which the same talent agency advised both actors) also came up.  In each case we tried to envision what the subsidiary should be disclosing to the parent, and when, to enable the parent to satisfy its NYSE obligations.  Among other things, we discussed the financial and non-financial impacts of the facts we were generating on the trading price and volume of parent's stock.  It was a great brainstorming session, imv.  By the end of class, we could see that a communication-oriented compliance plan for the subsidiary seemed to be in order.

Interestingly, the Steve Wynn story then broke the next day.  I was pleased in the aftermath to see this article in The New York Times that validated the nature of our discussion and the complexity involved in assessing market risk in these kinds of situations.

The question, though, is what specifically investors are now pricing in. One risk is that regulators make it difficult for Wynn Resorts to expand. The Massachusetts gaming watchdog said on Friday that it would review plans for a new casino in Boston.

The threat of parting ways with an influential executive, until now a reasonable steward of shareholder value, is also potent. Over the past decade, Wynn Resorts’ average 10.5 percent shareholder return is a shade higher than that of the Standard & Poor’s 500-stock index — despite a slump in 2014 after China toughened rules on holiday gamblers.

Investors’ strong response to the reports is now the problem of Wynn Resorts’ 10-person board, which contains just one woman. Others surely will learn from how the Wynn board responds.

My students did identify regulatory risk (and the rest of the class was spent talking about California and New York laws regulating talent agencies, which are regulated and require licensure) and the risks associated with an iconic founder or chief executive at the heart of a controversy.  I love it when current events dovetail with classroom activities!

Have any of you taught a course or course component like this before?  I would be interested to know.  I found it hard to teach the securities regulation issues to the students who were not interested in securities regulation work.  I tried to break the legal foundations down into relatively small policy and doctrinal chunks, and I told them that every business lawyer needs to know a little bit about securities regulation, whether advising or litigating in connection with business transactions.  But those who had not taken and were not taking our Securities Regulation course (a majority of the class) seemed to mentally almost shut down.  Some of that may be 3L-itis.  But I am rethinking how to engage students more happily with this part of the course.  I will be asking the students for help on this.  But any thoughts you have from your own experience (or otherwise) would be a great help to me as I think this through.

January 29, 2018 in Compliance, Current Affairs, Joan Heminway, Securities Regulation | Permalink | Comments (0)

Friday, January 26, 2018

Should a Board Have Access To A CEO's Health Information?

On Wednesday, I spoke with Kimberly Adams, a reporter for NPR Marketplace regarding CSX's decision to require its CEO to disclose health information to the board. I don't have a link to post, sorry. As you may know, CSX suffered a significant stock drop in December when its former CEO died shortly after taking a medical leave of absence and after refusing to disclose information about his health issues. CSX has chosen the drastic step of requiring an annual CEO physical in response to a shareholder proposal filed on December 21st stating, “RESOLVED, that the CEO of the CSX Corporation will be required to have an annual comprehensive physical, performed by a medical provider chosen by the CSX Board, and that results of said physical(s) will be provided to the Board of Directors of the CSX Corporation by the medical provider.” Adams asked my thoughts about a Wall Street Journal article that outlined the company's plans. 

I'm not aware of any other company that asks a CEO to provide the results of an annual physical to the board. As I informed Adams, I hope the board has good counsel to avoid running afoul of the Americans with Disabilities Act, HIPAA, the Genetic Information Nondiscrimination Act of 2008, and other state and federal health and privacy laws. While I believe that the board must ensure that it takes its role of succession planning seriously, I question whether this is the best means to achieve that. I also remarked that although a CEO would know in advance that this is a condition of employment and would negotiate with the aid of counsel what the parameters would be, I was concerned about the potential slippery slope. How often would the CEO have to update the board on his/her health condition? Who else would have access to the information? Will this deter talented executives from seeking the top spot at a corporation?

One could argue that the health of the CEO is material information. But if that's the case, why haven't more shareholders made similar proposals? Perhaps there haven't been more of these proposals because the CSX situation was extreme. Shareholders were asked to bless the $84 million compensation package of a man who was so ill that he required a portable oxygen tank but who refused to disclose his condition or prognosis. Hopefully, other companies won't take the same approach. 

 

 

January 26, 2018 in Compliance, Corporate Governance, Corporations, Current Affairs, Employment Law, Marcia Narine Weldon, Shareholders | Permalink | Comments (1)

Wednesday, January 3, 2018

Sex and Succession Planning- A New Agenda Item for Boards?

At a time when many boards may be thinking of tax planning and possible M & A deals, they may have to start focusing more on the unseemly topic of their executives' sex lives because the flood of terminations and resignations due to sexual misconduct shows no signs of slowing down. One of the most shocking but underreported terminations in 2017 related to VISA. The CEO, one year into the role, chose to terminate one of his most valuable executives after an anonymous tip about sexual misconduct.  He wanted his employees to know that the corporate culture and values mattered. Board members should look closely at the VISA example.

We will continue to see the rise of the #MeToo movement spurred on in part by the messaging from a star-studded task force  formed to address Hollywood issues and the establishment of a multimillion-dollar legal defense fund to help blue-collar workers. Even Supreme Court Chief Justice Roberts addressed sexual harassment in the court system in his Year-End Report on the Federal Judiciary.  More people than ever may now choose to come forward with claims of harassment or assault. Whether companies choose to terminate wrongdoers or the accused choose to resign "to spend more time with their families," it's a new day. As I've written here, companies will need to re-evaluate policies and training to navigate these landmines.

Board members will need to step up too. Boards of any size institution (including nonprofits) need to take the job of CEO succession planning seriously because the chief executive could leave, retire, or die. Boards must not only consider the possibility of a harassment scandal in the C-Suite but they must also worry about their fellow board members. Unfortunately, a KPMG study revealed that only 14% of board members believe they have a detailed succession plan for themselves. Members of the C-suite will also need to think more clearly about succession planning in the lower ranks. HR may have to redouble efforts to ensure that high-potential employees have no skeletons in the closet that have been swept under the rug. 

In the meantime, I and other former members of the Department of Labor Whistleblower Protection Advisory Committee have written an op-ed in the Boston Globe. Even if I had not co-authored the piece, as a former defense-side employment lawyer and compliance officer, I would recommend that company leaders take a look at it. Some of our recommendations for strengthening corporate culture are below:

1) have a trustworthy, independent system, with multiple reporting mechanisms, staffed with the proper skills to conduct swift, full, and fair investigations and to carry them to a just resolution, observing principles of confidentiality and discretion, and including ongoing protection of those who report;

2) make sure that there is a clear, credible anti-retaliation policy that protects accusers and witnesses who come forward in good faith;

3) require strong accountability for all levels of management for reporting and responding to complaints;

4) implement specific policies that direct bonuses, raises, and other incentives and opportunities to those who, in addition to meeting business targets, actively prevent and respond appropriately to harassment, retaliation, and other compliance problems. Consider clawbacks if unsupportive behavior later comes to light. Call out injurious behavior (without necessarily naming names) and credit exemplary behaviors;

5) periodically assess the culture and require an independent outside entity to confidentially administer anonymous surveys and interviews. The best of these use benchmarked and validated questions that can provide insight into the effectiveness of the compliance program and whether employees trust the system; and

6) make sure to involve unions and other formal and informal employee groups in developing new policies.

I wish all of our readers a happy and healthy new year. I wish board members and company executives good luck. 

January 3, 2018 in Compensation, Compliance, Corporate Governance, Corporations, CSR, Current Affairs, Employment Law, Ethics, Marcia Narine Weldon | Permalink | Comments (0)

Thursday, December 7, 2017

Will More Women on Boards Change Corporate Culture and Stem the Tide of Harassment Complaints?

Two weeks ago, I asked whether companies were wasting time on harassment training given the flood of accusations, resignations, and terminations over the past few weeks. Having served as a defense lawyer on these kinds of claims and conducted hundreds of trainings, I know that most men generally know right from wrong before the training (and some still do wrong). I also know that in many cases, people look the other way when they see or hear about the complaints, particularly if the accused is a superstar or highly ranked employee. Although most men do not have the power and connections to develop an alleged Harvey Weinstein-type "complicity machine" to manage payoffs and silence accusers, some members of management play a similar role when they ignore complaints or rumors of inappropriate or illegal behavior. 

The head in the sand attitude that executives and board members have displayed in the Weinstein matter has led to a lawsuit arguing that Disney knew or should have known of Weinstein's behavior. We may see more of these lawsuits now that women have less fear of speaking out and Time honored the "Silence Breakers" as the Person of the Year. As I read the Time  article and watched some of the "silence breakers" on television, it reminded me of 2002, when Time honored "The Whistleblowers." Those whistleblowers caused Congress to enact sweeping new protection under Sarbanes-Oxley.  Because of all of the publicity, companies around the country are now working with lawyers and human resources experts to review and revamp their antiharassment training and complaint mechanisms. As a result, we will likely see a spike in internal and external complaints. But do we need more than lawsuits? Would more women in the boardroom and the C-Suite make a difference in corporate culture in general and thereby lead to more gender equity?

Last week, Vĕra Jourová, the EU Commissioner for Justice and Gender Equality put forth some proposals to redress the gender pay gap in Member States’ businesses. She recommends an increase in the number of women on boards for companies whose non-executive Boards are more than 60% male. These companies would be required to “prioritize” women when candidates of “equal merit” are being considered for a position. Germany, Sweden, and the Netherlands have already previously rejected a similar proposal.

I'm generally not in favor of quotas because I think they produce a backlash. However, I know that many companies here and abroad will start to recruit more female directors and executives in an effort to appear on top of this issue. Will it work? We will soon see. After pressure from institutional investors such as BlackRock and State Street to increase diversity, women and minorities surpassed 50% of  S & P open board seats in 2017. Stay tuned. 

 

December 7, 2017 in Compliance, Corporate Governance, CSR, Current Affairs, Employment Law, Ethics, Marcia Narine Weldon, Shareholders | Permalink | Comments (1)

Thursday, October 5, 2017

Should Employees Have Their Day in Court? The Supreme Court and Mandatory Arbitration

On Monday, the Supreme Court heard argument on three cases[1] that could have a significant impact on an estimated 55% of employers and 25 million employees. The Court will opine on the controversial use of class action waivers and mandatory arbitration in the employment context. Specifically, the Court will decide whether mandatory arbitration violates the National Labor Relations Act or is permissible under the Federal Arbitration Act. Notably, the NLRA applies in the non-union context as well.

Monday’s argument was noteworthy for another reason—the Trump Administration reversed its position and thus supported the employers instead of the employees as the Obama Administration had done when the cases were first filed. The current administration also argued against its own NLRB’s position that these agreements are invalid.

In a decision handed down by the NLRB before the Trump Administration switched sides on the issue, the agency ruled that Dish Network’s mandatory arbitration provision violates §8(a)(1) of the NLRA because it “specifies in broad terms that it applies to ‘any claim, controversy and/or dispute between them, arising out of and/or in any way related to Employee’s application for employment, employment and/or termination of employment, whenever and wherever brought.’” The Board believed that employees would “reasonably construe” that they could not file charges with the NLRB, and this interfered with their §7 rights.

The potential impact of the Supreme Court case goes far beyond employment law, however. As the NLRB explained on Monday:

The Board's rule here is correct for three reasons. First, it relies on long-standing precedent, barring enforcement of contracts that interfere with the right of employees to act together concertedly to improve their lot as employees. Second, finding individual arbitration agreements unenforceable under the Federal Arbitrations Act savings clause because are legal under the National Labor Relations Act gives full effect to both statutes. And, third, the employer's position would require this Court, for the first time, to enforce an arbitration agreement that violates an express prohibition in another coequal federal statute. (emphasis added).

This view contradicted the employers' opening statement that:

Respondents claim that arbitration agreements providing for individual arbitration that would otherwise be enforceable under the FAA are nonetheless invalid by operation of another federal statute. This Court's cases provide a well-trod path for resolving such claims. Because of the clarity with which the FAA speaks to enforcing arbitration agreements as written, the FAA will only yield in the face of a contrary congressional command and the tie goes to arbitration. Applying those principles to Section 7 of the NLRA, the result is clear that the FAA should not yield.

My co-bloggers have written about mandatory arbitration in other contexts (e.g., Josh Fershee on derivative suits here, Ann Lipton on IPOs here, on corporate governance here, and on shareholder disputes here, and Joan Heminway promoting Steve Bradford’s work here). Although Monday’s case addresses the employment arena, many have concerns with the potential unequal playing field in arbitral settings, and I anticipate more litigation or calls for legislation.  

I wrote about arbitration in 2015, after a New York Times series let the world in on corporate America’s secret. Before that expose, most people had no idea that they couldn’t sue their mobile phone provider or a host of other companies because they had consented to arbitration. Most Americans subject to arbitration never pay attention to the provisions in their employee handbook or in the pile of paperwork they sign upon hire. They don’t realize until they want to sue that they have given up their right to litigate over wage and hour disputes or join a class action.

As a defense lawyer, I drafted and rolled out class action waivers and arbitration provisions for businesses that wanted to reduce the likelihood of potentially crippling legal fees and settlements. In most cases, the employees needed to sign as a condition of continued employment. Thus, I’m conflicted about the Court’s deliberations. I see the business rationale for mandatory arbitration of disputes especially for small businesses, but as a consumer or potential plaintiff, I know I would personally feel robbed of my day in court.

The Court waited until Justice Gorsuch was on board to avoid a 4-4 split, but he did not ask any questions during oral argument. Given the questions that were asked and the makeup of the Court, most observers predict a 5-4 decision upholding mandatory arbitrations. The transcript of the argument is here. If that happens, I know that many more employers who were on the fence will implement these provisions. If they’re smart, they will also beef up their compliance programs and internal complaint mechanisms so that employees don’t need to resort to outsiders to enforce their rights.

My colleague Teresa Verges, who runs the Investor Rights Clinic at the University of Miami, has written a thought-provoking article that assumes that arbitration is here to stay. She proposes a more fair arbitral forum for those she labels “forced participants.” The abstract is below:

Decades of Supreme Court decisions elevating the Federal Arbitration Act (FAA) have led to an explosion of mandatory arbitration in the United States. A form of dispute resolution once used primarily between merchants and businesses to resolve their disputes, arbitration has expanded to myriad sectors, such as consumer and service disputes, investor disputes, employment and civil rights disputes. This article explores this expansion to such non-traditional contexts and argues that this shift requires the arbitral forum to evolve to increase protections for forced participants and millions of potential claims that involve matters of public policy. By way of example, decades of forced arbitration of securities disputes has led to increased due process and procedural reforms, even as concerns remain about investor access, the lack of transparency and investors’ perception of fairness.

I’ll report back on the Court’s eventual ruling, but in the meantime, perhaps some policymakers should consider some of Professor Verges’ proposals. Practically speaking though, once the NLRB has its full complement of commissioners, we can expect more employer-friendly decisions in general under the Trump Administration.

 

[1] Murphy Oil USA v. N.L.R.B., 808 F.3d 1013 (5th Cir. 2015), cert. granted, 137 S. Ct. 809, 196 L. Ed. 2d 595 (2017); Lewis v. Epic Sys. Corp., 823 F.3d 1147 (7th Cir. 2016), cert. granted, 137 S. Ct. 809, 196 l. Ed. 2d. 595 (2017); Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016), cert. granted, 137 S. Ct. 809, 196 L. Ed. 2d 595 (2017)

October 5, 2017 in Compliance, Corporate Governance, Corporations, Current Affairs, Employment Law, Legislation, Litigation, Marcia Narine Weldon | Permalink | Comments (0)

Friday, September 29, 2017

Pollman and Barry on Regulatory Entrepreneurship

I recently finished Elizabeth Pollman and Jordan Barry's article entitled Regulatory Entrepreneurship. The article is thoughtfully written and timely. I highly recommend it. 

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This Article examines what we term “regulatory entrepreneurship” — pursuing a line of business in which changing the law is a significant part of the business plan. Regulatory entrepreneurship is not new, but it has become increasingly salient in recent years as companies from Airbnb to Tesla, and from DraftKings to Uber, have become agents of legal change. We document the tactics that companies have employed, including operating in legal gray areas, growing “too big to ban,” and mobilizing users for political support. Further, we theorize the business and law-related factors that foster regulatory entrepreneurship. Well-funded, scalable, and highly connected startup businesses with mass appeal have advantages, especially when they target state and local laws and litigate them in the political sphere instead of in court.

Finally, we predict that regulatory entrepreneurship will increase, driven by significant state and local policy issues, strong institutional support for startup companies, and continued technological progress that facilitates political mobilization. We explore how this could catalyze new coalitions, lower the cost of political participation, and improve policymaking. However, it could also lead to negative consequences when companies’ interests diverge from the public interest.

September 29, 2017 in Business Associations, Compliance, Current Affairs, Entrepreneurship, Haskell Murray, Management, Research/Scholarhip, Technology | Permalink | Comments (1)

Wednesday, September 20, 2017

What keeps general counsels and compliance officers up at night? Here's what boards should be discussing

No one had a National Compliance Officer Day when I was in the job, but now it’s an official thing courtesy of SAI Global, a compliance consulting company. The mission of this one-year old holiday is to:

  • Raise awareness about the importance of ethics and compliance in business and shine a spotlight on the people responsible for making it a reality.
  • Provide resources to promote the wellness and well-being of ethics and compliance professionals so they can learn how to overcome stress and burnout.
  • Grow the existing ethics and compliance community and help identify and guide the next generation of E&C advocates.

Although some may look at this skeptically as a marketing ploy, I’m all for this made-up holiday given what compliance officers have to deal with today.

Last Saturday, I spoke at the Business Law Professor Blog Conference at the University of Tennessee about corporate governance, compliance, and social responsibility in the Trump/Pence era. During my presentation, I described the ideal audit committee meeting for a company that takes enterprise risk management seriously. My board agenda included: the impact of climate change and how voluntary and mandatory disclosures could change under the current EPA and SEC leadership; compliance budgetary changes; the rise of the whistleblower; the future of the DOJ’s Yates Memo and corporate cooperation after a recent statement by the Deputy Attorney General; SEC and DOJ enforcement priorities; data protection and cybersecurity; corporate culture and the risk of Google/Uber- type lawsuits; and sustainability initiatives and international governance disclosures. I will have a short essay in the forthcoming Transactions: The Tennessee Journal of Business Law but here are a few statistics that drove me to develop my model (and admittedly ambitious) agenda:

  • According to an ACC survey of over 1,000 chief legal officers:
    • 74% say ethics and compliance issues keep them up at night
    • 77% handled at least one internal or external compliance-related investigation in their department
    • 33% made policy changes in their organizations as a result of geopolitical events.
    • 28% were targeted by regulators in the past two years
  • Board members polled in September 2016 were most concerned about the following compliance issues:
    • Regulatory changes and scrutiny may heighten
    • Cyber threats
    • Privacy/identity and information security risks
    • Failure of corporate culture to encourage timely identification/escalation of significant risk issues
  • During the 2017 proxy season, shareholders submitted 827 proposals (down from 916 in 2016):
    • 112 related to proxy access,
    • 87 related to political contributions and lobbying,
    • 35 focused on board diversity (up from 28 in 2016),
    • 34 proposals focused on discrimination or diversity-related issues (up from 16 in 2016),
    • 69 proposals related to climate change (3 of those passed, including at ExxonMobil)
    • 19 proposals focused on the gender pay gap (up from 13 in 2016)

General counsels are increasingly taking on more of a risk officer role in their companies, and compliance officers are in the thick of all of these issues. The government has also recently begun to hold compliance officers liable for complicity with company misdeeds. My advice- if it’s not against your company/school policy, take SCCE’s suggestion and hug your compliance officer. I’m sure she’ll appreciate it.

September 20, 2017 in Compliance, Conferences, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Marcia Narine Weldon | Permalink | Comments (0)