Friday, March 17, 2023
Wake Forest Law - ESG and Blockchain
I am honored to be speaking later today on ESG, blockchains, and corporate governance at this symposium at Wake Forest University School of Law. This practitioner-centered symposium promises to offer significant information useful to my teaching and scholarship. My fellow speakers hail from law firms and other organizations across the United States. I am excited to share and learn!
March 17, 2023 in Conferences, Corporate Governance, Current Affairs, Joan Heminway | Permalink | Comments (0)
Thursday, February 16, 2023
Heminway on Fiduciary Duties and Succession - Tonight!!
As I noted in a post a few weeks ago, I am presenting on corporate fiduciary duties tonight as the Roy/Demoulas Distinguished Professor of Law and Business at the Waystar/ROYCO School of Law. The title of my presentation is: What the Roys Should Learn from the Demoulas Family (But Probably Won't). The presentation will run from 9:00 pm to 10:00 pm Eastern on Zoom at the following link: https://us02web.zoom.us/j/86783560319?pwd=cTJza2N6elFyVGhBUFVjdk1Gb2oxQT09.
If you do not know about the Demoulas family and their fiduciary duty tangles up in Massachusetts, my presentation will inform you (and may even get you interested). Members of the family were locked in litigation with each other for over 20 years. Much of that litigation relates to alleged breaches of corporate and trust fiduciary duties. And for those who have not watched the HBO Max series Succession, I will offer a window on some of the characters and plot lines, tying them in to observations about the Demoulas family.
I welcome your attendance and participation!
February 16, 2023 in Business Associations, Corporate Governance, Corporations, Family Business, Joan Heminway | Permalink | Comments (0)
Wednesday, February 15, 2023
Aggarwal, Choi & Lee on Meme Corporate Governance
I'm an avid reader of Matt Levine's Money Stuff newsletter. Yesterday, he discussed a recently posted article by Dhruv Aggarwal, Albert H. Choi, and Yoon-Ho Alex Lee, Meme Corporate Governance. Although I've not yet had time to review the paper, it's now on my reading list, and I thought other BLPB readers might want to add it to theirs too! Here's the abstract:
"In 2021, several publicly traded companies, such as GameStop and AMC, experienced a dramatic influx of retail investors in their shareholder base. This Article analyzes the impact of the “meme stock surge” phenomenon on the companies, particularly with respect to their governance outcomes and structures. The paper presents three principal findings. First, as a preliminary matter, we show how the “meme stock” frenzy was affected by the introduction of the commission-free trading platform, such as Robinhood, in 2019. We show empirically that the meme stock companies experienced a larger trading volume when commission-free trading was widely introduced. Second, we examine how the influx of retail shareholders has directly affected the governance outcomes at the meme stock companies. The main finding is that, notwithstanding the promise of more active shareholder base, meme stock companies have experienced a significant decrease in participation by their shareholders, including voting and making shareholder proposals. Third, we examine other popular governance metrics—such as ESG and board diversity indices—and show that while the diversity index has not improved, the ESG measure has gotten worse for the meme stock companies. While there is an issue of generalizability, our findings show that the influx of retail shareholders at meme stock companies have not translated into more “democratic” governance regimes."
February 15, 2023 in Colleen Baker, Corporate Governance | Permalink | Comments (0)
Friday, February 3, 2023
Are People in the Tech Industry the Most Powerful People in the World? Part One
My mind is still reeling from my trip to Lisbon last week to keynote at the Building The Future tech conference sponsored by Microsoft.
My premise was that those in the tech industry are arguably the most powerful people in the world and with great power comes great responsibility and a duty to protect human rights (which is not the global state of the law).
I challenged the audience to consider the financial price of implementing human rights by design and the societal cost of doing business as usual.
In 20 minutes, I covered AI bias and new EU regulations; the benefits and dangers of ChatGPT; the surveillance economy; the UNGPs and UN Global Compact; a new suit by Seattle’s school board against social media companies alleging harmful mental health impacts on students; potential corporate complicity with rogue governments; the upcoming Supreme Court case on Section 230 and content moderator responsibility for “radicalizing” users; and made recommendations for the governmental, business, civil society, and consumer members in the audience.
Thank goodness I talk quickly.
Here are some non-substantive observations and lessons. In a future post, I'll go in more depth about my substantive remarks.
1. Your network is critical. Claire Bright, a business and human rights rock star, recommended me based on a guest lecture I did for her class. My law students are in for a treat when she speaks with them about the EU Corporate Sustainability Reporting Directive (that she helped draft) next month.
2. Your social media profile is important. Organizers looked at videos that had nothing to do with this topic to see how I present on a stage. People are always watching.
3. Sometimes you can’t fake it until you make it. This is one of the few times where I didn’t know more than my audience about parts of my presentation. I prepared so that I could properly respect my audience’s expertise. For example, I watched 10 hours of video on a tech issue to prepare one slide just in case someone asked a question during the networking sessions.
4. Speak your truth. Going to a tech conference to tell tech people about their role in human rights and then going to a corporate headquarters to do the same isn’t easy, but it’s necessary and I had no filter or restrictions. I didn't hold back talking about Microsoft-backed ChatGPT even though they invited me to Lisbon for the conference. It was an honor to speak to Microsoft employees the day after the conference with Claire, Luis Amado, former head of B Lab Europe, and Susana Guedes to discuss sustainability, ESG, diversity, and incentivizing companies and employees to do the right thing, even when it's not popular.
5. Explore and leave the hotel even when you’re tired. I was feeling run down last Friday night and wanted to stay in bed with some room service. Manuela Doutel Haghighi (one of my new favorite people) organized a dinner at an Iranian restaurant owned by a former lawyer with 6 badass women, and I now have new colleagues and collaborators.
Stay tuned for my next post where I'll cover some of my remarks.
February 3, 2023 in Compliance, Conferences, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Ethics, Human Rights, International Business, Lawyering, Marcia Narine Weldon | Permalink | Comments (0)
Saturday, January 21, 2023
waystar/ROYCO School of Law: Classes Start This Week!
As some of you may have heard, following on the success of the Yada Yada Law School, administered by friend-of-the-BLPB Greg Shill, a group of law faculty are getting together to teach classes in the waystar/ROYCO School of Law this semester. Classes start this week. Class meetings will be held weekly, on prescribed days, at 6pm-7pm Pacific/8pm-9pm Central/9pm-10pm Eastern. The first two sessions are as follows:
Tuesday, January 24:
Professor Diane Kemker
Introduction: Using “Succession” (And Scripted Entertainment) to Teach Law: How and Why
[Assignment: Required: any/all of “Succession,” Seasons 1-3; Optional/recommended: any/all of “Yellowstone,” Seasons 1-5]
Wednesday, February 1:
Professor Megan McDermott
Greg Needs a Lawyer. Is He Getting an Ethical One?
[Assignment: Season 3, Ep. 2]
I will be presenting on February 16 on What the Roys Should Learn from the Demoulas Family (But Probably Won't), a lesson on corporate law fiduciary duties.
General information is provided in the syllabus included below. A full schedule of class sessions will be available soon. I will publish that, too. I hope many of you will plan on attending.
“Succession and the Law”
About the course
This is a completely unofficial course for lawyers and law professor fans (or anti-fans!) of the HBO show, “Succession.” It has been organized for informal educational/entertainment purposes only! Over the course of the spring semester, as we await the premiere of Season 4, we will look back at past episodes from a legal point of view. Depending on when Season 4 begins, we may also schedule some additional group “watch parties” and real-time discussion groups.
We have assembled a terrific group of faculty from across the country and across a variety of disciplinary specialties.
We are Prof. Diane Kemker and Prof. Susan Bandes, the organizers of our fun course on “‘Succession’ and the Law.” Diane has a background in professional responsibility and wills and trusts, and Susan is one of the nation’s most-cited experts in criminal law and procedure. Both of us have a longstanding interest in the use of popular culture for legal pedagogy. In the spring of 2023, Diane will be a Visiting Professor of Law at DePaul University College of Law, from which Susan retired/took emeritus status in 2017.
Meeting time: 6pm-7pm Pacific/8pm-9pm Central/9pm-10pm Eastern
Meeting day: Our class will meet on a weekly basis by Zoom. Please note that we will meet on different nights of the week in different weeks, but always at the same time.
Meeting ID: 867 8356 0319
Contact Diane or Susan for the meeting passcode.
We have created a Facebook group, waystar/RoyCo School of Law, to support the class. It will be a place for ongoing discussion of the show, of our sessions, and related issues. To be added, please send a Direct Message to Diane Kemker.
Professor Diane Kemker (email@example.com)
Visiting Professor of Law, DePaul University College of Law and Southern University Law Center
Dean and Gerri Kellman Professor of Professional Responsibility, waystar/RoyCo School of Law
Professor Susan Bandes (firstname.lastname@example.org)
Centennial Distinguished Professor of Law, Emerita, DePaul University College of Law
Greg Hirsch Professor of Affectionate Litigation
Professor Anat Alon-Beck
Associate Professor of Law, Case Western Reserve University School of Law
Professor Karyn Bass-Ehler
Assistant Chief Deputy Attorney General, Illinois Attorney General's Office
Professor Gillian Calder
University of Victoria (Canada) Law
Professor Joan MacLeod Heminway
Interim Director of the the Institute for Professional Leadership, Rick Rose Distinguished Professor of Law
The University of Tennessee College of Law
Roy/Demoulas Distinguished Professor of Law and Business
Professor Lenese Herbert
Professor of Law
Howard University School of Law
Professor Rebecca Johnson
Associate Director, Indigenous Law Research Unit
Director, Graduate Program
University of Victoria (Canada) Law
Professor Richard McAdams
Bernard D. Meltzer Professor of Law
University of Chicago Law School
Professor Megan McDermott
Associate Teaching Professor
University of Wisconsin School of Law
Honorary Fellow at the Collingwood Centre for Ethics and Civility (Eastnor, England)
Professor Benjamin Means
Professor of Law and John T. Campbell Chair in Business and Professional Ethics
University of South Carolina School of Law
Professor Douglas Moll
Beirne, Maynard & Parsons, L.L.P. Professor of Law
University of Houston Law Center
Professor Robin Wagner
Pitt, McGehee, Palmer, Bonanni & Rivers
NRPI Adjunct Lecturer of Employment Law
All meetings are at 6pm-7pm Pacific/8pm-9pm Central/9pm-10pm Eastern
January 21, 2023 in Corporate Governance, Corporations, Family Business, Joan Heminway, Shareholders, Teaching, Television | Permalink | Comments (0)
Monday, January 16, 2023
MLK and ESG
I have given several talks on ESG (environmental, social, and governance) matters in the past few months. And, of course, it is a subject discussed in the classroom. As we celebrate the birthday of Dr. Martin Luther King Jr. today (and this week), I could not help but feel that his work provided a foundation for—somehow embraced—current ESG discussions and actions. So, I went poking around on the Internet.
I guess I am not the only one who noticed this connection.
On the environmental part of ESG, Los Padres ForestWatch offers that:
Dr. King’s actions and teachings led to many important acts being passed in congress including the Civil Rights Act of 1964 and the Voting Rights Act of 1965. It’s through this work that Dr. King created a movement that was meant for us to understand how we are mutually tied together and that all life is interrelated. It’s this structure of thinking that has led many to believe that his work was the early structure for the Environmental Justice Movement. We see after Dr. King’s passing that environmentalists were able to pass the Clean Air Act of 1970, the Clean Water Act of 1972 and the Endangered Species Act. All of which that had a direct effect on communities of color which are often marginalized and impacted heavily by climate change.
Yet, Dr. King's social issue impacts—including especially the social justice effects of his work—are far more central to communities and corporations. Jeff Hilimire notes in a piece published on the Hands on Atlanta's website, that "[a]fter fighting for human rights for all Americans, Dr. King began to focus on employment and corporations as the next evolution of equality. He believed that companies have a responsibility to be forces of good in the world, and that their influence could make powerful change." Finally, Natalie Runyon at Thomson Reuters Institute hints at governance accountability when she notes in an online article that, while Dr. King would view current ESG efforts favorably, "Dr. King . . . stated that words are not enough—action must follow, with measurement to demonstrate progress."
I will be giving Dr. King's connection to ESG more thought this week as we celebrate his legacy. But regardless of Dr. King's level of responsibility for ESG, his work resonates for me in ESG discussions and debates.
January 16, 2023 in Corporate Governance, Current Affairs, Joan Heminway | Permalink | Comments (0)
Saturday, January 14, 2023
Can The Next Generation of Lawyers Save the World?
An ambitious question, yes, but it was the title of the presentation I gave at the Society for Socio-Economists Annual Meeting, which closed yesterday. Thanks to Stefan Padfield for inviting me.
In addition to teaching Business Associations to 1Ls this semester and running our Transactional Skills program, I'm also teaching Business and Human Rights. I had originally planned the class for 25 students, but now have 60 students enrolled, which is a testament to the interest in the topic. My pre-course surveys show that the students fall into two distinct camps. Most are interested in corporate law but didn't know even know there was a connection to human rights. The minority are human rights die hards who haven't even taken business associations (and may only learn about it for bar prep), but are curious about the combination of the two topics. I fell in love with this relatively new legal field twelve years ago and it's my mission to ensure that future transactional lawyers have some exposure to it.
It's not just a feel-good way of looking at the world. Whether you love or hate ESG, business and human rights shows up in every factor and many firms have built practice areas around it. Just last week, the EU Corporate Sustainability Reporting Directive came into force. Like it or not, business lawyers must know something about human rights if they deal with any company that has or is part of a supply or value chain or has disclosure requirements.
At the beginning of the semester, we discuss the role of the corporation in society. In many classes, we conduct simulations where students serve as board members, government officials, institutional investors, NGO leaders, consumers, and others who may or may not believe that the role of business is business. Every year, I also require the class to examine the top 10 business and human rights topics as determined by the Institute of Human Rights and Business (IHRB). In 2022, the top issues focused on climate change:
- State Leadership-Placing people at the center of government strategies in confronting the climate crisis
- Accountable Finance- Scaling up efforts to hold financial actors to their human rights and environmental responsibilities
- Dissenting Voices- Ensuring developmental and environmental priorities do not silence land rights defenders and other critical voices
- Critical Commodities- Addressing human rights risks in mining to meet clean energy needs
- Purchasing Power- Using the leverage of renewable energy buyers to accelerate a just transition
- Responsible Exits- Constructing rights-based approaches to buildings and infrastructure mitigation and resilience
- Green Building- Building and construction industries must mitigate impacts while avoiding corruption, reducing inequality, preventing harm to communities, and providing economic opportunities
- Agricultural Transitions- Decarbonising the agriculture sector is critical to maintaining a path toward limiting global warming to 1.5 degrees
- Transforming Transport- The transport sector, including passenger and freight activity, remains largely carbon-based and currently accounts for approximately 23% total energy-related CO2 global greenhouse gas emissions
- Circular Economy- Ensure “green economy” is creating sustainable jobs and protecting workers
The 2023 list departs from the traditional type of list and looks at the people who influence the decisionmakers in business. That's the basis of the title of this post and yesterday's presentation. The 2023 Top Ten are:
- Strategic Enablers- Scrutinizing the role of management consultants in business decisions that harm communities and wider society. Many of our students work outside of the law as consultants or will work alongside consultants. With economic headwinds and recessionary fears dominating the headlines, companies and law firms are in full layoff season. What factors should advisors consider beyond financial ones, especially if the work force consists of primarily lower-paid, low-skilled labor, who may not be able to find new employment quickly? Or should financial considerations prevail?
- Capital Providers- Holding investors to account for adverse impacts on people- More than 220 investors collectively representing US$30 trillion in assets under management have signed a public statement acknowledging the importance of human rights impacts in investment and global prosperity. Many financial firms also abide by the Equator Principles, a benchmark that helps those involved in project finance to determine environmental and social impacts from financing. Our students will serve as counsel to banks, financial firms, private equity, and venture capitalists. Many financial institutions traditionally focus on shareholder maximization but this could be an important step in changing that narrative.
- Legal Advisors- Establishing norms and responsible performance standards for lawyers and others who advise companies. ABA Model Rule 2.1 guides lawyers to have candid conversations that "may refer not only to law but to other considerations such as moral, economic, social and political factors, that may be relevant to the client's situation." Business and human rights falls squarely in that category. Additionally, the ABA endorsed the United Nations Guiding Principles on Business and Human Rights ten years ago and released model supply chain contractual clauses related to human rights in 2021. Last Fall, the International Bar Association's Annual Meeting had a whole track directed to business and human rights issues. Our students advise on sanctions, bribery, money laundering, labor relations, and a host of other issues that directly impact human rights. I'm glad to see this item on the Top 10 list.
- Risk Evaluators- Reforming the role of credit rating agencies and those who determine investment worthiness of states and companies. Our students may have heard of S&P, Moody's, & Fitch but may not know of the role those entities played in the 2008 financial crisis and the role they play now when looking at sovereign debt. If the analysis from those entities are flawed or laden with conflicts of interest or lack of accountability, those ratings can indirectly impact the government's ability to provide goods and services for the most vulnerable citizens.
- Systems Builders- Embedding human rights considerations in all stages of computer technology. If our students work in house or for governments, how can they advise tech companies working with AI, surveillance, social media, search engines and the spread of (mis)nformation? What ethical responsibilities do tech companies have and how can lawyers help them wrestle with these difficult issues?
- City Shapers- Strengthening accountability and transformation in real estate finance and construction. Real estate constitutes 60% of global assets. Our students need to learn about green finance, infrastructure spending, and affordable housing and to speak up when there could be human rights impacts in the projects they are advising on.
- Public Persuaders- Upholding standards so that advertising and PR companies do not undermine human rights. There are several legal issues related to advertising and marketing. Our students can also play a role in advising companies, in accordance with ethical rule 2.1, about persuaders presenting human rights issues and portraying controversial topics related to gender, race, indigenous peoples, climate change in a respectful and honest manner.
- Corporate Givers- Aligning philanthropic priorities with international standards and the realities of the most vulnerable. Many large philanthropists look at charitable giving as investments (which they are) and as a way to tackle intractable social problems. Our students can add a human rights perspective as advisors, counsel, and board members to ensure that organizations give to lesser known organizations that help some of the forgotten members of society. Additionally, Michael Porter and Mark Kramer note that a shared-value approach, "generat[es] economic value in a way that also produces value for society by addressing its challenges. A shared value approach reconnects company success with social progress. Firms can do this in three distinct ways: by reconceiving products and markets, redefining productivity in the value chain, and building supportive industry clusters at the company's locations." Lawyers can and should play a role in this.
- Business Educators- Mainstreaming human rights due diligence into management, legal, and other areas of academic training. Our readers teaching in business and law schools and focusing on ESG can discuss business and human rights under any of the ESG factors. If you don't know where to start, the ILO has begun signing MOUs with business schools around the world to increase the inclusion of labor rights in business school curricula. If you're worried that it's too touchy feely to discuss or that these topics put you in the middle of the ESG/anti-woke debate, remember that many of these issues relate directly to enterprise risk management- a more palatable topic for most business and legal leaders.
- Information Disseminators- Ensuring that journalists, media, and social media uphold truth and public interest. A couple of years ago, "fake news" was on the Top 10 and with all that's going on in the world with lack of trust in the media and political institutions, lawyers can play a role in representing reporters and media outlets. Similarly, lawyers can explain the news objectively and help serve as fact checkers when appearing in news outlets.
If you've made it to the end of this post, you're either nodding in agreement or shaking your head violently in disagreement. I expect many of my students will feel the same, and I encourage that disagreement. But it's my job to expose students to these issues. As they learn about ESG from me and the press, it's critical that they disagree armed with information from all sides.
So can the next generation of lawyers save the world? Absolutely yes, if they choose to.
January 14, 2023 in Business Associations, Business School, Compliance, Conferences, Consulting, Contracts, Corporate Finance, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Ethics, Financial Markets, Human Rights, International Business, International Law, Law Firms, Law School, Lawyering, Management, Marcia Narine Weldon, Private Equity, Shareholders, Stefan J. Padfield, Teaching, Technology, Venture Capital | Permalink | Comments (0)
Friday, December 9, 2022
FIFA, ESG, and BS
I'm a huge football fan. I mean real football-- what people in the US call soccer. I went to Brazil for the World Cup in 2014 twice and have watched as many matches on TV as I could during the last tournament and this one. In some countries, over half of the residents watch the matches when their team plays even though most matches happen during work hours or the middle of the night in some countries. NBC estimates that 5 billion people across the world will watch this World Cup with an average of 227 million people a day. For perspective, roughly 208 million people, 2/3 of the population, watched Superbowl LVI in the US, which occurs on a Sunday.
Football is big business for FIFA and for many of its sponsors. Working with companies such as Adidas, Coca-Cola, Hyundai / KIA, Visa, McDonald's, and Budweiser has earned nonprofit FIFA a record 7.5 billion in revenue for this Cup. Fortunately for Budweiser, which paid 75 million to sponsor the World Cup, Qatar does not ban alcohol. But in a plot twist, the company had to deal with a last-minute stadium ban. FIFA was more effective in Brazil, which has banned beer in stadiums since 2003 to curb violence. The ban was temporarily lifted during the 2014 Cup. I imagine this made Budweiser very happy. I know the fans were.
This big business is a big part of the reason that FIFA has been accused of rampant corruption in the award of the Cup to Russia and Qatar, two countries with terrible human rights records. The Justice Department investigated and awarded FIFA hundreds of millions as a victim of its past leadership's actions related to the 2018 and 2022 selections. Amnesty International has called these games the "World Cup of Shame" because of the use of forced labor, exorbitant recruitment fees, seizure of passports, racism, delayed payments of $220 per month, and deaths. Raising even more awareness, more than 40 million people have watched comedian John Oliver's 2014 , 2015, and 2022 takedowns of FIFA.
The real victims of FIFA's corruption are the millions of migrant workers operating under Qatar's kafala system. I remember sitting at a meeting at the UN Forum on Business and Human Rights in Geneva when an NGO accused the Qatar government of using slaves to build World Cup Stadiums. I also remember both FIFA and the International Olympic Committee pledging to consider human rights when selecting sites in the future. Indeed, FIFA claims that human rights were a "key factor" when choosing the Americas to host the 2026 Cup.
With all of the talk about ESG including human rights and anti-discrimination from FIFA, Coca Cola, Budweiser and others related to the World Cup, how do those pronouncements square with FIFA's ban on team captains wearing the One Love Rainbow Arm Band? Qatar has banned same sex relations so seven EU team captains had planned to wear the arm bands as a gesture to "send a message against discrimination of any kind as the eyes of the world fall on the global game." This was on brand with FIFA 's own strong and repeated statements against racism after several African players suffered from taunts and chants from fans in stadiums. FIFA reiterated its stance after the death of George Floyd. Just today, FIFA issued another statement against discrimination, noting that over 55% of players received some kind of discriminatory online abuse during the Euro 2020 Final and AFCON 2022 Final.
It's curious then that despite FIFA's and the EU team's pledges about anti-discrimination, just three hours before a match, the teams confirmed that they would not wear the arm bands after all. Apparently, they learned that players could face yellow card sanctions if they wore them. Qatar also bans advocacy and protests about same sex relationships. Unlike the stadium beer ban, this wasn't new.
And the human rights abuse allegations against FIFA aren't new. I've blogged about FIFA and the issues I encountered when meeting human rights activists in Brazil several times including here. So I will end with the questions I asked years ago about FIFA and its sponsors and add the answers as I know them today.
1) Is FIFA, the nonprofit corporation, really acting as a quasi-government and if so, what are its responsibilities to protect and respect local communities under UN Guiding Principles on Business and Human Rights? Answer: FIFA has pledged to comport with the UN Guiding Principles on Business and Human Rights, but its arm band ban shows otherwise.
2) Does FIFA have more power than the host country and will it use that power when it requires voters to consider a bidding country’s human rights record in the future? Answer: See the answer to #3. Also, it will be interesting to see what FIFA demands of 2026 host Florida, a state which is divesting of funds with a focus on ESG and which has proposed anti-ESG legislation.
3) If Qatar remains the site of the 2022 Cup after the various bribery and human rights abuse investigations, will FIFA force that country to make concessions about alcohol and gender roles to appease corporate sponsors? Answer: Nope
4) Will/should corporate sponsors feel comfortable supporting the Cup in Russia in 2018 and Qatar in 2022 given those countries’ records and the sponsors’ own CSR priorities? Answer: Yep, despite public statements to the contrary. It's just too lucrative.
5) Does FIFA’s antidiscrimination campaign extend beyond racism to human rights or are its own actions antithetical to these rights? Answer: Yes the campaign does but again, the arm band ban shows otherwise.
6) Are the sponsors commenting publicly on the protests and human right violations? Should they and what could they say that has an impact? Should they have asked for or conducted a social impact analysis or is their involvement as sponsors too attenuated for that? Answer: Amnesty International is seeking corporate support for compensation reform, but hasn't been very successful.
7) Should socially responsible investors ask questions about whether companies could have done more for local communities by donating to relevant causes as part of their CSR programs? Answer: In my view, yes. The UN has guidance on this as well.
8) Are corporations acting as "bystanders", a term coined by Professor Jena Martin? Answer: Yes.
9) Is the International Olympic Committee, a nonprofit, nongovernmental organization, taking notes? Answer: Yes. Despite or perhaps because of the outrage over selecting China for the Olympics, the IOC has recently approved a Strategic Framework on Human Rights.
10) Do consumers, the targets of creative corporate commercials and viral YouTube videos, care about any of this? Answer: It depends on the demographics, but I would say no. How do I know this? Because I teach and write about business and human rights and I have still scheduled my grading of exams and meetings around the World Cup. Advertisers can't miss out on having 25% of the world's eyeballs on their products. And FIFA knows that the human rights noise will all go away for most fans as soon as the referee blows the whistle to start the match.
In any event, my business and human rights students will enjoy grappling with the ugly side of the beautiful game next semester as we work on proposals for the city of Miami to live up to its 2021 commitments to human rights whether FIFA does or not.
December 9, 2022 in Compliance, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Ethics, Games, Human Rights, Law School, Marcia Narine Weldon, Sports | Permalink | Comments (0)
Friday, November 25, 2022
Zhaoy Li Compares the U.S. and China on Judicial Review of Directors' Duty of Care
Zhaoyi Li, Visiting Assistant Profoessor of Law at the Univeristy of Pittsburgh School of Law, has published a new article, Judicial Review of DIrectors' Duty of Care: A Comparison Between U.S. & China. Here's the abstract:
Articles 147 and 148 of the Company Law of the People’s Republic of China (“Chinese Company Law”) establish that directors owe a duty of care to their companies. However, both of these provisions fail to explain the role of judicial review in enforcing directors’ duty of care. The duty of care is a well-trodden territory in the United States, where directors’ liability is predicated on specific standards. The current American standard, adopted by many states, requires directors to “discharge their duties with the care that a person in a like position would reasonably believe appropriate under similar circumstances.” However, both the business judgment rule and Delaware General Corporate Law (“DGCL”) Section 102(b)(7) shield directors from responsibility for their actions, which may weaken the impact of the duty of care requirement on directors’ behavior.
To better allocate the responsibility for directors’ violations of the duty of care and promote the corporations’ development, it is essential that Chinese company law establish a unified standard of review governing the duty of care owed by directors to companies. The majority of Chinese legal scholars agreed that a combination of subjective and objective standards would function best. Questions remain regarding how to combine such standards and implement them. In order to promote the development of China’s duty of care, these controversial issues need to be solved. This article argues that China’s Company Law should hold a first-time violator of the duty of care liable only in cases of gross negligence but hold directors liable in the cases of ordinary negligence if they have violated the duty of care in the past.
November 25, 2022 in Business Associations, Corporate Governance, Corporations, International Business, John Anderson | Permalink | Comments (0)
Tuesday, November 1, 2022
Griffin on the Index Fund Voting Process
Professor Caleb Griffin (University of Arkansas School of Law) offered testimony before the Senate Committee on Banking, Housing, and Urban Affairs in June of 2022 on problems associated with the fact that the “Big Three” index fund managers (Vanguard, BlackRock, and State Street) cast almost a quarter of the votes at S&P 500 companies. As a result, enormous power is concentrated in the hands of just a few index fund managers, whose interests and values may not align with those whose shares they are voting. Professor Griffin proposed two solutions to this problem: (1) “categorical” pass-through voting, and (2) vote outsourcing. Professor Griffin’s remarks were recently posted here, and here’s the abstract:
In recent years, index funds have assumed a new and unprecedented role as the most influential players in corporate governance. In particular, the “Big Three” index fund managers—Vanguard, BlackRock, and State Street—occupy a pivotal role. The Big Three currently cast nearly a quarter of the votes at S&P 500 companies, and that figure is expected to grow to 34% by 2028 and over 40% in the following decade.
The best solution to the current problem—where we have virtually powerless index investors and enormous, concentrated power in the hands of index fund management—is to transfer some of that power to individual investors.
There are two primary ways to do so. The first is to allow individual investors to set their own voting instructions with “categorical” pass-through voting, where investors are able to give semi-specific instructions on common categories of topics. The second approach is vote outsourcing, where investors could instruct management to vote their shares in alignment with a third party representative.
Pass-through voting preserves the economies of scale at the Big Three while addressing the root of the problem: concentrated voting power in the hands of a small, unaccountable group. Ultimately, index funds occupy a unique and important role in financial markets, not least because they're disproportionately owned by smaller, middle-income investors. These investors have a valuable voice, and pass-through voting would help us hear it.
November 1, 2022 in Corporate Governance, Corporations, Financial Markets, John Anderson, Securities Regulation | Permalink | Comments (0)
Monday, October 3, 2022
The Wit and Wisdom of Tom N.
It was so wonderful to be able to host an in-person version of our "Connecting the Threads" Business Law Prof Blog symposium on Friday. Connecting the Threads VI was, for me, a major victory in the continuing battle against COVID-19--five healthy bloggers and a live audience! Being in the same room with fellow bloggers John Anderson, Colleen Baker, Doug Moll (presenting with South Carolina Law friend-of-the-BLPB Ben Means), and Stefan Padfield was truly joyful. And the topics on which they presented--shadow insider trading, exchange trading in the cloud, family business succession, and anti-ESG legislation--were all so salient. (I offered the abstract for my own talk on fiduciary duties in unincorporated business associations in last week's post.) For a number of us, the topic of our presentations arose from work we have done here on the BLPB.
This year, as I noted in my post last week, we had a special guest as our luncheon speaker. That guest would be known to many of you who are regular readers as "Tom N." Tom has commented on our blog posts here on the BLPB for at least eight years. (I rooted around and found a comment from him as far back as 2014.) And Tom lives right here in Tennessee--in middle Tennessee, to be exact (closer to Haskell Murray than to me). You can check out his bio here. I am delighted that we were able to coerce Tom to give up a day of law practice to come join us at the symposium.
The title/topic for Tom's talk was "A Country Boy Busines Lawyer's View from Down in the Weeds." The talk was, by design, a series of reflections on Tom's wide-ranging business law practice here in the state of Tennessee. He tries to stay out of the courtroom, but by his own recounting, he has been in court in every county in the state--and Tennessee has 95 counties!
In the end, Tom ended up offering a bunch of tips for law students and lawyers (both of whom were in attendance at the symposium). I took notes during Tom's talk. I have assembled them into a list below. The key points are almost in the order in which they were delivered. The stories that led to a number of these snippets of practical advice were priceless. You had to be there. Anyway, here is my list, together with a few editorial comments of my own. Tom can feel free to add, correct, or dispute my notes in the comments!
- Take tax courses; if you fear they may hurt your GPA, audit them.
- Use all available resources to get more knowledge. (Tom indicated that he bought Westlaw/used Practical Law as a solo practitioner for many years but recently gave it up. he also noted that he regularly reads a number of the law prof blogs.)
- Be a bar association member and access the resources bar associations provide. (Tom noted the excellent written materials published by the American Bar Association and the superior continuing legal education programs produced by the Tennessee Bar Association.)
- “You are going to learn to write in law school.” (Tom advised focusing on clear, efficient writing—something I just emphasized with my Business Associations students last week.)
- Publish in the law. (Tom shared his view that writing in the law improves both knowledge and analysis.)
- Expect the unexpected, especially in court (e.g., confronting in court transactions in pot-bellied pigs involving a Tennessee nonprofit). And as a Corollary: "You can't make this stuff up." The truth often is stranger than anything you could make up . . . .)
- In business disputes, never assume that an attorney was there on the front end. (And yes, there was mention of the use by many unknowledgeable consumers of online entity formation services.)
- As a lawyer, be careful not to insert your own business judgment. The business decision is the client's to make.
- Relatedly, let the business people hand you the framework of the deal.
- Along the same lines: "I am not paying people to tell me I can’t do it; I am paying people to tell me how to do it.” (As heard by Tom from his father, a business owner-manager. I think many of us have heard this or learned this—sometimes the hard way . . . . I do try to prevent my students from learning that lesson the hard way by telling them outright.)
- And further: “You want to screw up a deal, put the lawyers in the center of it.”
- As a courtroom lawyer, know the judges and—perhaps more importantly—court clerks!
- Introduce yourself to everyone; they may be in a position to help you now or later (referencing the time he introduced himself, unknowingly, to John Wilder, the former Lt. Governor of Tennessee, who proceeded to introduce him to the local judges).
- Preparation for the bar exam is a curriculum of its own. (That's close to a quote.)
- “A lot of things go more smoothly of you can get people talking.” (Tom is more of a fan of mediation than arbitration.)
- Local rules of court may not be even published; sometimes, you just need to pick up the phone and call the court clerk. (Another reason to get to know local court clerks!)
- Developing rapport with a judge is incredibly important to successful courtroom lawyering.
- Saying "I don’t know" does not hurt anything; in fact, it may help judges/others develop confidence in you and your integrity.
- Your law school grades will not matter after your first or second job. Employers will be looking at you and your professional record, not your grades.
I am sure I missed something along the way. Maybe my fellow bloggers in attendance will have something to add. But this list alone is, imv, pure gold for students and starting lawyers.
October 3, 2022 in Colleen Baker, Conferences, Corporate Governance, Family Business, Haskell Murray, Joan Heminway, John Anderson, Lawyering, Securities Regulation, Stefan J. Padfield, Unincorporated Entities | Permalink | Comments (1)
Monday, August 8, 2022
Corporations as Political Actors - SEALS 2022
Another semester teaching business associations law is just around the corner. In fact, our fall semester begins next week. This post is dedicated to those who, like me, are prepping for and teaching that course this semester.
I was invited to participate in a discussion group entitled "Pressure on and Backlash against Corporations as Political Actors" at the 2022 Southeastern Association of Law Schools (SEALS) annual conference last week. The description for the session is as follows:
When businesses wade into political issues like abortion, the environment, gun control, LGBTQ rights, Black Lives Matter, and international affairs, they potentially face consumer backlash and even governmental retribution. Remaining silent can also be risky, potentially upsetting other consumers and employees. And silence/inaction is not always an option: either a business remains in Russia after its invasion into Ukraine or closes its operations there, sometimes at considerable expense. This discussion group will analyze these issues from corporate, tax, policy, electoral, and constitutional law perspectives. Should businesses like Nike, McDonalds, Disney, and Ben & Jerry’s take political stances, stay out of politics altogether, focus on profits or something broader, and what are the practical and legal ramifications of these views? More broadly, what is the proper role of the corporation in society?
As you might guess from the program description, the discussion generated broadly (and, in cases, deeply) divergent viewpoints and engaging conversation. I offer here a rough summary (constructed from my talking points) of my personal "opener" from the session for everyone to poke at. Enjoy!
Pressure on and Backlash against Corporations as Political Actors
My thesis is that corporations come at political engagement as a natural implication of corporate theory, policy, doctrine, and practice. My work intersects with and addresses this claim in a number of ways.
Corporate boards have complex tasks. Corporate directors’ and officers’ fiduciary duties are, in most contexts in most states, owed to the corporation. So, understanding what the corporation is—as a matter of theory, policy, legal doctrine, and law practice—is critical. And folks have different views on that . . . .
My perspective? Corporations are aggregations of constituencies managed by a board of directors acting alone or through corporate officers to manage and serve those various constituencies. The constituencies include shareholders, debt holders, and other security holders. They include employees. They include suppliers, customers/clients, state, local, and national governments. My perspective is, perhaps, closest to the team production theory articulations in which the board is the mediating hierarch.
My views are rooted in the notion that corporate law exists to facilitate individuals in conducting business—business that is critical to our lives. They also are rooted in corporate doctrine, which hands overall management responsibility to the board of directors—corporations are managed by or under the direction of the board under all state statutes. Finally, my views are framed by 15 years of work on teams of lawyers that advised corporate boards—where we did not blindly advise directors that shareholders always come first in every board decision (noting a primary shareholder allegiance in certain contexts, including certain M&A transactions--especially those involving Delaware public corporations).
Corporate theory views the corporation in many different ways. And there are differences in state law—Delaware corporate law in the public company context is different from, e.g., Tennessee corporate law in the public and private company contexts. Talking in generalities in these regards is not helpful to a complete understanding.
It also bears mentioning that corporations are alternatives to government in providing for us and regulating our affairs in certain social and economic settings. Notably, corporations and other business associations are primary providers of health and welfare benefits, which are supplied by governments in other countries.
Thus, as servants to a variety of corporate constituencies and as statutory entities bearing systemic social and economic responsibility (for, e.g., employee health and welfare), corporations are natural political actors. But imv, they are not actors with a particular political viewpoint. Any political viewpoint expressed by a corporation optimally results from the board's careful consideration of the corporation's obligations to its various constituencies.
August 8, 2022 in Conferences, Corporate Governance, Corporations, Joan Heminway | Permalink | Comments (0)
Friday, July 29, 2022
Practical Tips for Teaching or Training Adult Learners
Millions of law school graduates around the US just took the bar exam. Others are preparing to enter colleges and graduates schools in a few weeks. How will these respective groups do? While a lot depends on how much and how well they study, a large part of their success or failure may depend on how they've been taught. I recently posted about how adults learn and what the research says we should do differently. In this post, I'll show how I used some of the best practices in the last ten days when I taught forty foreign lawyers from around the world and thirty college students in separate summer courses offered by the University of Miami as well as nine Latin American lawyers who were taking courses in business law from a Panamanian school. I taught these disparate groups about ESG, disclosures, and human rights. With each of the cohorts, I conducted a simulation where I divided them into groups to prioritize issues based on whether they were a CEO, an investor, a consumer, the head of an NGO, and for the US college students, I added the roles of a member of Congress or influencer. In a future post, I will discuss how the groups prioritized the issues based on their demographics. Fascinating stuff.
Depending on what you read, there are six key principles related to adult learning:
1. It seems obvious, but adults need to know why they should learn something. Children learn because they are primed to listen to authority figures. Too often in law school or corporate training, there's no correlation to what they learn and what they actually do. When I taught the two groups of foreign lawyers, I talked about the reality and the hype about ESG and how the topic could arise in their practices with specific examples. When I spoke to the college students who were considering law school, I focused on their roles and responsibilities as current consumers and as the future investors, legislators, and heads of NGOs. Same powerpoint but different emphasis.
2. Adults are self-directed. Under one definition, "self-directed learning describes a process by which individuals take the initiative, with or without the assistance of others, in diagnosing their learning needs, formulating learning goals, identifying human and material resources for learning, choosing and implementing appropriate learning strategies, and evaluating learning outcomes." This may seem radical because many of my colleagues complain that today's students need a lot of hand holding and spoon feeding, and I agree to some extent. But I also think that we don't give students enough credit and we underestimate them. I developed my curriculum for the practicing lawyers but I also asked what they wanted to learn and what would be most useful for them. I only had a few hours with them, so I wasn't able to explore this much as I would have. But in some of my traditional courses at the law school and when I train adults in other contexts, I often give a choice of the exam type and topic. This ensures that they will submit a work product that they are passionate about. At the end of my traditional classes at the law school, I also ask them to evaluate themselves and me based on the learning outcomes I established at the beginning of the semester. They tend to be brutally honest about whether they've taken responsibility for their own learning.
3. Adults filter what we tell them through their life experiences. In my traditional classes, I send out a survey to every student before the semester starts so that I understand their backgrounds, perspectives, and what's important to them. I often pick hypotheticals in class that directly address what I've learned about them through the surveys so it resonates much more clearly for them. With my three groups this week, I didn't have the chance to survey them but I knew where they were all from and used examples from their countries of origin, when I could. When the college students entered the Zoom room, I asked them to tell me why they picked this class. This helped me understand their perspectives. I also picked up on some of their comments during discussion and used those data points to pivot quickly when needed. It would have been easy to focus on my prepared lecture. But what does ESG mean to a lawyer in Bolivia, when that's not a priority? College students quickly grasped the context of socially responsible investing, so I spent more time there than on the Equator Principles, for example. The cultural and generational differences were particularly relevant when talking about the responsibility of tech companies from a human rights perspective. The lawyers and students from authoritarian regimes looked at social media and the power to influence the masses in one way, while the college students saw the issues differently, and focused more on the mental health issues affecting their peers. Stay tuned for a future post on this, including interesting discussion on whether Congress should repeal Section 230.
4. Adults become ready to learn only when they see how what they are learning applies to what they need to do at work and at home. With the foreign lawyers, I focused on how their clients could have to participate in due diligence or disclosure as part of a request from a company higher up in the supply chain. I focused on reputational issues with the lawyers who worked at larger companies. College students don't deal with supply chains on a regular basis so I spent more time focusing on their role as consumers and their participation in boycotts at their universities and their activism on campus and how that does or does not affect what companies do.
5. Adults need a task-centered or problem-focused approach to learning. I had to lecture to impart the information, but with each group, they learned by doing. I had 12 hours with the Latin American lawyers so to test them on their understanding of US business entities, instead of having them complete a multiple choice quiz, I asked them to interview me as a prospective client and develop a memo to me related providing the advice, which is what they would do in practice. They, with the other groups, also prioritized the issues discussed above from their assigned roles as CEO, NGO head, institutional investor, or consumer. When I teach my compliance course to law students, they draft policies, hold simulated board meetings, and present (fake) CLEs or trainings. My business and human rights students have the option to draft national action plans, write case studies on companies that they love or hate, or write develop recommendations for governments for their home country. Students are much more likely to engage with the material and remember it when they feel like they are solving a real problem rather than a hypothetical.
6. Adults need extrinsic and intrinsic rewards. Everyone I taught this week will get some sort of certificate of completion. But they all chose to take these courses and those who weren't part of the UM program either self paid or were reimbursed by their employers. None of them were required to attend the classes, unlike those in elementary and high school. When students choose a course of study and learn something relevant, that's even more important than the certificate or diploma.
I hope this helps some of you getting ready for the upcoming semester. Enjoy what's left of the summer, and if you try any of these suggestions or have some of your own, please leave a comment.
July 29, 2022 in Business Associations, Corporate Governance, Corporations, CSR, Current Affairs, Financial Markets, Human Rights, International Business, Law School, Lawyering, LLCs, M&A, Marcia Narine Weldon, Teaching | Permalink | Comments (0)
Monday, July 18, 2022
Stakeholder Thread at the Global Meeting on Law and Society
Greetings from Cervera, Spain. As you know from my post last week, I am traveling in the Catalonia region of Spain for a few days this week after the 2022 Law and Society Association Global Meeting on Law and Society, which was held in Lisbon, Portugal this year. I have the blessing of staying with a friend (whom I met through Zoom mindful yoga practices during the pandemic) in her private home.
I want to offer a quick post this week to reflect on what turned out to be a mini-theme in the presentations I attended at the Global Meeting on Law and Society. That mini-theme was, perhaps unsurprisingly, corporate stakeholderism. (And I note with some interest that Stefan has recently written and blogged on an aspect of corporate stakeholderism as well.) The following programs from the collaborative research network (CRN) to which I belong picked up on this theme, in one way or another:
- an entire paper panel entitled: "Corporations, Shareholders, and Other Stakeholders," which featured academic work focusing on corporate governance and finance from a number of different stakeholder perspectives;
- a roundtable discussion entitled "Corporations & Engendering Public Trust," billed as a session that "brings together corporate law experts to investigate how information and communications with stakeholders, investors, and the market can enhance trust in corporations and the corporate sector as a whole";
- an Author Meets Reader session celebrating Reconstructing the Corporation: From Shareholder Primacy to Shared Governance (2021), co-authored by Grant Hayden and Matt Bodie (which, as many of you likely know, takes a hard look at the current state of corporate governance and offers a new model in which shareholders and employees play a stronger role);
- a paper panel entitled, "Corporations and Society," which featured Grant and Matt's new paper, Democratic Participation as Corporate Purpose;
- a roundtable session entitled "Present and Future of Corporations in Society," which addressed ways in which corporate law and securities regulation impact the relationship of corporations to environmental and social concerns; and
- a roundtable entitled "Awakening Capitalism," catalyzed by Alan Palmiter's Capitalism, heal thyself essay (which I wrote about in an earlier post).
Of course, papers and commentary in other programs and papers also raised the stakeholderism theme and related issues. And, of course, the prominence of this theme may not be news to any of you, given the central role that ESG has been playing in recent corporate finance and corporate governance discussions. Finally, of course, I may be suffering from anchoring, an immediacy effect, or other cognitive biases in identifying this substantive thread that tied together so many programs and presentations. Yet, I do not remember a dominant theme like this emerging from our CRN's programming in the past. In any event, it seems we should be looking out for a bunch of business law research publications in the coming months that offer insights on stakeholder rights, opportunities, and concerns . . . .
July 18, 2022 in Conferences, Corporate Finance, Corporate Governance, Joan Heminway | Permalink | Comments (2)
Tuesday, June 21, 2022
More Commentary on the SEC's ESG Proposal - Sharfman and Copland
June 21, 2022 in Corporate Finance, Corporate Governance, Corporations, Current Affairs, Joan Heminway, Securities Regulation | Permalink | Comments (0)
Monday, June 20, 2022
So much to say today . . . .
Having just come back from the first in-person National Business Law Scholars Conference since 2019 (at The University of Oklahoma College of Law, pictured here), I have many thoughts swirling through my head. I always love that conference. The people, whom I dearly missed, are a big part of that. And Megan Wischmeier Shaner was an awesome planning committee host. But the ideas that were shared . . . . Wow. So many great research projects were shared by these wonderful law teachers and scholars! Over time, I hope to share many of them with you.
But for today, I want to focus on one thing that I heard in a few presentations at the conference: that the shareholder wealth maximization norm is and always has been the be-all and end-all of corporate purpose and board decision making. I am posting on that topic today not only because of my engagement with the conference, but also because the issue is implicated in Ann's post on Saturday (Bathrooms are About Stakeholders) and by Stefan's post yesterday (ESG & Communism?). I want to focus on a part of Stefan's post (and Stefan, you may that issue with my remarks here, based on your response in the comments to your post), but I promise to work in a reference to Ann's post, too, along the way.
Like Paul, I am somewhat troubled by the connections made in abstract for the article featured in Stefan's post—albeit perhaps for different reasons. I will read the article itself at some point to learn more about the issues relating to the Fed. And I agree with Stefan's commentator Paul that the Elizabeth Warren reference in the abstract is a bit of a stalking horse. I want to address here, then, only the asserted corroboration of an “incipient trend” offered as an aside at the end of the abstract excerpted in Stefan's post.
As readers may know from my published work and commentary on the BLPB, I do not accept that there is a legal duty to maximize shareholder wealth embedded in corporate law. (Articles have pointed out that the shareholder wealth maximization mantra has not existed consistently over the course of corporate history, but I will leave commentary on that literature for another day.) Regardless, to be sustainable, a corporation must make profit that inures to the benefit of shareholders, while also understanding and being responsive to the corporation's other shareholder commitments—commitments that may vary from corporation to corporation. But that does not mean that the board must maximize shareholder wealth, especially in each and every board decision. (Let's leave Revlon duties aside, if you would, for these purposes.). It also does not mean that shareholder wealth is properly ignored in corporate decision making, but in my experience, few firms actually completely ignore short-term and long-term effects on shareholder wealth in making decisions.
In essence, the standard shareholder wealth maximization trope would have us believe that the board's task is too simple, as I have noted in some of my work. A compliant, functional board engaged in corporate decision making first needs to understand as well as it can the firm's business and the markets in which the firm operates and then needs to assess in that context how the corporation should proceed. Some of the board's decisions may require it taking a stand on what have (regrettably, imv) become highly politicized social justice and commercial issues. It involves weighing and balancing. It is hard work. But that is the board's job. The board may want to inform itself of which political party likes what (especially as it relates to its various constituencies), but the board's decisions ultimately need to be made in good faith on the basis of what, after being fully informed in all material respects, they collectively believe to be in the best interest of the corporation (including its shareholders).
Some folks seem to ignore that reality. Instead, they assume (in many cases without adequate articulated foundation) that a board is catering to or rejecting, e.g., ESG initiatives based on a political viewpoint. I have more faith in corporate boards than that. I urge people to check those assumptions before making them (and to leave their own political preferences behind in doing so). Although I have seen a few dysfunctional boards in my 37 years as a lawyer and law professor, I have seen many more that are looking out for the long-term sustainability of the firm for the financial and other benefit of shareholders. That does require that employee interests, customer/client interests, and the interest of other stakeholders be understood and incorporated into the board’s decision making. Ann seems to agree with this last point when she writes in her post that: "despite occasional rhetoric to the contrary, it may very well be profit-maximizing to bow to employee demands; it doesn’t mean the CEO is pursuing a personal political agenda, it simply means that restive employees make a company difficult to run."
In concluding, I do not see an “incipient trend” or any “diametric opposition” of the kind noted in the abstract posted by Stefan. I also see board (and overall corporate management) support for ESG—although I admittedly am not a fan of looking at all the E, S, and G together—as the probable acknowledgement of an economic or financial reality in or applicable to those firms. Economies and markets are changing, and firms that do not respond to those changes one way or another will not survive. And that will not inure to the benefit of shareholders or other corporate stakeholders. The Business Roundtable Statement on the Purpose of the Corporation acknowledges the importance of corporations in our local, national, and global economies and, in light of that, articulates management’s recognition of the need to create sustainable economic and financial symbiosis through the firm's decision making: “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”
As scholars, we should recognize the realities of the boardroom and of firm management in general, which optimally involve complex, individualized decision-making matrices. Moreover, as we theorize about, and assess the policy objectives of, the laws we study and on which we comment, we should keep those realities in mind. Rather than assuming why boards (and C-suite officers, for that matter) act the way they do based on our theoretical and political viewpoints, we should interrogate their management decisions thoroughly, understanding and critiquing the actual bases for those decisions and, when possible, suggesting a "better way."
Thanks to the National Business Law Scholars Conference participants for their stimulating presentations and to Ann and Stefan for their posts. I hope that this post serves to illuminate my perspective on shareholder wealth maximization a bit. The conversation is important, even if a common understanding may not be forthcoming.
June 20, 2022 in Ann Lipton, Conferences, Corporate Governance, Corporations, Joan Heminway, Management, Stefan J. Padfield | Permalink | Comments (4)
Friday, June 10, 2022
Why Transactional Lawyers Need to Educate Themselves on Compliance
Prior to joining academia, I served as a compliance officer for a Fortune 500 company and I continue to consult on compliance matters today. It's an ever changing field, which is why I'm glad so many students take my Compliance, Corporate Governance, and Sustainability course in the Fall. I tell them that if they do transactional or commercial litigation work, compliance issues will inevitably arise. Here are some examples:
- In M&A deals, someone must look at the target's bribery, money laundering, privacy, employment law, environmental, and other risks
- Companies have to complete several disclosures. How do you navigate the rules that conflict or overlap?
- What do institutional investors really care about? What's material when it relates to ESG issues?
- What training does the board need to ensure that they meet their fiduciary duties?
- How do you deal with cyberattacks and what are the legal and ethical issues related to paying ransomware?
- How do geopolitical factors affect the compliance program?
- Who can be liable for a compliance failure?
- What happens when people cut corners in a supply chain and how can that affect the company's legal risk?
- What does a Biden DOJ/SEC mean compared to the same offices under Trump?
- Who is your client when representing an organization with compliance failures?
- and so much more
I'm thrilled to be closing out the PLI Compliance and Ethics Essentials conference in New York with my co-panelist Ben Gruenstein of Cravath, Swaine, & Moore. It's no fun being the last set of presenters, but we do have the ethics credits, so please join us either in person or online on June 28th. Our areas of focus include:
- Risk assessment, program assessment, and attorney-client privilege
- Ethical obligations for lawyers and compliance officers
- Which compliance program communications can (and should) be privileged?
In addition to discussing the assigned issues, I also plan to arm the compliance officers with more information about the recent trend(?) of Caremark cases getting past the motion to dismiss stage and compliance lessons learned from the Elon Musk/Twitter/Tesla saga.
Here's the description of the conference, but again, even if you're not in compliance, you'll be a better transactional lawyer from learning this area of the law.
Compliance and ethics programs are critically important to the success of any organization. Effective programs allow organizations to identify and mitigate legal risks. With an increasingly tough enforcement environment, and greater demands for transparency and accountability, an effective compliance program is no longer just “nice-to-have.” It’s essential.
Whether you are new to the area or a seasoned compliance professional, PLI’s program will give you the tools you need to improve your organization’s compliance program. We will review the principal elements of compliance programs and discuss best practices and recent developments for each. Our distinguished faculty, drawn from major corporations, academia, law firms and the government, can help you improve your program, increase employee awareness and decrease legal risk. Compliance and Ethics Essentials 2022 is highly interactive and includes case studies, practical tools and real-time benchmarking.
What You Will Learn
- Designing and conducting effective compliance risk assessments that enhance your program
- Structuring your program for appropriate independence and authority
- The evolving role of the board
- ESG and your compliance program
- Using data analytics to improve your program
- Encouraging reporting and investigating allegations of wrongdoing
- Best practices in compliance codes, communications, training and tools
- Ethics for compliance professionals
Who Should Attend
If you are involved in any aspect of corporate compliance and ethics as in-house counsel, a compliance and ethics officer, human resources executive, outside counsel, or risk management consultant, this event should be on your annual calendar.
Special Feature: Special luncheon presentation with guest speaker
If you do come to the conference, I would love to grab a cup of coffee with you, so reach out.
June 10, 2022 in Compliance, Conferences, Consulting, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Ethics, Financial Markets, Lawyering, Legislation, M&A, Marcia Narine Weldon | Permalink | Comments (0)
Friday, May 20, 2022
What Do FIFA, Nike, and PornHub Have In Common?
It's a lovely Friday night for grading papers for my Business and Human Rights course where we focused on ESG, the Sustainable Development Goals (SDGs), and the UN Guiding Principles on Business and Human Rights. My students met with in-house counsel, academics, and a consultant to institutional investors; held mock board meetings; heard directly from people who influenced the official drafts of EU's mandatory human rights and environmental due diligence directive and the ABA's Model Contract Clauses for Human Rights; and conducted simulations (including acting as former Congolese rebels and staffers for Mitch McConnell during a conflict minerals exercise). Although I don't expect them all to specialize in this area of the law, I'm thrilled that they took the course so seriously, especially now with the Biden Administration rewriting its National Action Plan on Responsible Business Conduct with public comments due at the end of this month.
The papers at the top of my stack right now:
- Apple: The Latest Iphone's Camera Fails to Zoom Into the Company's Labor Exploitation
- TikTok Knows More About Your Child Than You Do: TikTok’s Violations of Children’s Human Right to Privacy in their Data and Personal Information
- Redraft of the Nestle v. Doe Supreme Court opinion
- Pornhub or Torthub? When “Commitment to Trust and Safety” Equals Safeguarding of Human Rights: A Case Study of Pornhub Through The Lens of Felites v. MindGeek
- Principle Violations and Normative Breaches: the Dakota Access Pipeline - Human rights implications beyond the land and beyond the State
- FIFA’s Human Rights Commitments and Controversies: The Ugly Side of the Beautiful Game
- The Duty to Respect: An Analysis of Business, Climate Change, and Human Rights
- Just Wash It: How Nike uses woke-washing to cover up its workplace abuses
- Colombia’s armed conflict, business, and human rights
- Artificial Intelligence & Human Rights Implications: The Project Maven in the ‘Business of war.’
- A Human Rights Approach to “With Great Power Comes Great Responsibility”: Corporate Accountability and Regulation
- Don’t Talk to Strangers” and Other Antiquated Childhood Rules Because The Proverbial Stranger Now Lives in Your Phone
- Case studies on SnapChat, Nestle Bottling Company, Lush Cosmetics, YouTube Kidfluencers, and others
Business and human rights touches more areas than most people expect including fast fashion, megasporting events, due diligence disclosures, climate change and just transitions, AI and surveillance, infrastructure and project finance, the use of slave labor in supply chains, and socially responsible investing. If you're interested in learning more, check out the Business and Human Rights Resources Center, which tracks 10,000 companies around the world.
May 20, 2022 in Compliance, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Ethics, Financial Markets, Human Rights, International Business, International Law, Marcia Narine Weldon, Securities Regulation, Teaching | Permalink | Comments (0)
Monday, May 16, 2022
AALS Section on Business Associations - Call for Papers for 2023 Annual Meeting
Dear Section Members --
On behalf of the Executive Committee for the AALS section on Business Associations, I'm writing with details of our two sessions at the 2023 AALS Annual Meeting, which will be held in San Diego, CA from January 4-7, 2023.
First, our main program is entitled, "Corporate Governance in a Time of Global Uncertainty.” We anticipate selecting up to two papers from this call for papers. To submit, please submit an abstract or a draft of an unpublished paper to Professor Mira Ganor, email@example.com, on or before Friday, August 19, 2022. Authors should include their name and contact information in their submission email but remove all identifying information from their submission. Please include the words “AALS - BA- Paper Submission” in the subject line of your submission email.
Second, we are excited to announce that we will again hold a "New Voices in Business Law" program, which will bring together junior and senior scholars in the field of business law for the purpose of providing junior scholars with feedback and guidance on their draft articles. Junior scholars who are interested in participating in the program should send a draft or summary of at least five pages to Professor Summer Kim at firstname.lastname@example.org on or before Friday, August 19, 2022. The cover email should state the junior scholar’s institution, tenure status, number of years in his or her current position, whether the paper has been accepted for publication, and, if not, when the scholar anticipates submitting the article to law reviews. The subject line of the email should read: “Submission—Business Associations WIP Program.”
For further details on both sessions, please see the attached calls for papers. [Ed. Note: the calls for papers are included below.]
Chair, AALS Business Associations Section
Call for Papers for the
Section on Business Associations Program on
Corporate Governance in a Time of Global Uncertainty
January 4-7, 2023, AALS Annual Meeting
The AALS Section on Business Associations is pleased to announce a Call for Papers for its program at the 2023 AALS Annual Meeting in San Diego, CA. The topic is Corporate Governance in a Time of Global Uncertainty. Up to two presenters will be selected for the section’s program.
Businesses are operating at an exceptional level of global uncertainty. Mounting pressures from myriad fronts leave boards of directors to navigate new frontiers while maneuvering lingering challenges. In addition to adjusting to uncertain economic and financial implications of geopolitical events and the global pandemic, businesses are asked to assume a distinct social role. Proliferation of calls for corporate disengagement from certain states comes amidst continued disruption in supply chains and mounting diversity, inequality, climate, and cybersecurity challenges, as well as increased disclosure requirements. This panel will explore the implications of global uncertainty on corporate governance and the role of corporations and their boards in these changing times.
Please submit an abstract or a draft of an unpublished paper to Mira Ganor, email@example.com, on or before Friday, August 19, 2022. Authors should include their name and contact information in their submission email but remove all identifying information from their submission. Please include the words “AALS - BA- Paper Submission” in the subject line of your submission email. Papers will be selected after review by members of the Executive Committee of the Section. Presenters will be responsible for paying their registration fee, hotel, and travel expenses.
We recognize that the past couple of years have been incredibly challenging and that these challenges have not fallen equally across the academy. We encourage scholars to err on the side of submission, including by submitting early stage or incomplete drafts. Scholars whose papers are selected will have until December to finalize their papers.
Please direct any questions to Mira Ganor, the University of Texas School of Law, at firstname.lastname@example.org.
Call for Papers
AALS Section on Business Association
New Voices in Business Law
January 4-7, 2023, AALS Annual Meeting
The AALS Section on Business Associations is pleased to announce a “New Voices in Business Law” program during the 2023 AALS Annual Meeting in San Diego, CA. This works-in-progress program will bring together junior and senior scholars in the field of business law for the purpose of providing junior scholars with feedback and guidance on their draft articles. To complement its other session at the Meeting, this Section is especially interested in papers relating to corporate governance in a time of global uncertainty, but it welcomes submissions on all business-related topics.
PROGRAM FORMAT: Scholars whose papers are selected will provide a brief overview of their paper, and participants will then break into simultaneous roundtables dedicated to the individual papers. Two senior scholars will provide commentary and lead the discussion about each paper.
SUBMISSION PROCEDURE: Junior scholars who are interested in participating in the program should send a draft or summary of at least five pages to Professor Summer Kim at email@example.com on or before Friday, August 19, 2022. The cover email should state the junior scholar’s institution, tenure status, number of years in his or her current position, whether the paper has been accepted for publication, and, if not, when the scholar anticipates submitting the article to law reviews. The subject line of the email should read: “Submission—Business Associations WIP Program.”
Junior scholars whose papers are selected for the program will need to submit a draft to the senior scholar commentators by Friday, December 9, 2022.
ELIGIBILITY: Junior scholars at AALS member law schools are eligible to submit papers. “Junior scholars” includes untenured faculty who have been teaching full-time at a law school for ten or fewer years. The Committee will give priority to papers that have not yet been accepted for publication or submitted to law reviews.
Pursuant to AALS rules, faculty at fee-paid non-member law schools, foreign faculty, adjunct and visiting faculty (without a full-time position at an AALS member law school), graduate students, fellows, and non-law school faculty are not eligible to submit. Please note that all presenters at the program are responsible for paying their own annual meeting registration fees and travel expenses.
May 16, 2022 in Business Associations, Call for Papers, Conferences, Corporate Governance, Family Business, Research/Scholarhip | Permalink | Comments (0)
Saturday, April 23, 2022
Elon Musk is a Blessing and a Curse
I'm doing what may seem crazy to some- teaching Business Associations to 1Ls. I have a group of 65 motivated students who have an interest in business and voluntarily chose to take the hardest possible elective with one of the hardest possible professors. But wait, there's more. I'm cramming a 4-credit class into 3 credits. These students, some of whom are learning the rule against perpetuities in Property and the battle of the forms in Contracts while learning the business judgment rule, are clearly masochists.
If you're a professor or a student, you're coming close to the end of the semester and you're trying to cram everything in. Enter Elon Musk.
I told them to just skim Basic v. Levenson and instead we used Rasella v. Musk, the case brought by investors claiming fraud on the market. Coincidentally, my students were already reading In Re Tesla Motors, Inc. Stockholder Litigation because it was in their textbook to illustrate the concept of a controlling shareholder. Elon's pursuit of Twitter allowed me to use that company's 2022 proxy statement and ask them why Twitter would choose to be "for" a proposal to declassify its board, given all that's going on. Perhaps that vote will be moot by the time the shareholder's meeting happens at the end of May. The Twitter 8-K provides a great illustration of the real-time filings that need to take place under the securities laws, in this case due to the implementation of a poison pill. Elon's Love Me Tender tweet provides a fun way to take about tender offers. How will the Twitter board fulfill it's Revlon duties? So much to discuss and so little time. But the shenanigans have made teaching and learning about these issues more fun. And who knew so many of my students held Twitter and Tesla stock?
I've used the Musk saga for my business and human rights class too. I had attended the Emerge Americas conference earlier in the week and Alex Ohanian, billionaire founder of Reddit, venture capitalist, and Serena Williams' husband, had to walk a fine line when answering questions about Musk from the CNBC reporter. The line that stuck out to me was his admonition that running a social media company is like being a head of state with the level of responsibility. I decided to bring this up on the last day of my business and human rights class because I was doing an overview of what we had learned during the semester. As I turned to my slide about the role of tech companies in society, we ended up in a 30 minute debate in class about what Musk's potential ownership of Twitter could mean for democracy and human rights around the world. Interestingly, the class seemed almost evenly split in their views. While my business associations students are looking at the issue in a more straightforward manner as a vehicle to learn about key concepts (with some asking for investment advice as well, which I refused), my business and human rights students had a much more visceral reaction.
Elon is a gift that keeps on giving for professors. He's a blessing because he's bringing concepts to life at a time in the semester where we are all mentally and physically exhausted. Depending on who you talk to in my BHR class and in some quarters of the media, he's also a curse.
All I know is that I don't know how I'll top this semester for real-world, just-in-time application.
A tired but newly energized professor who plans to assign Ann Lipton's excellent Musk tweets as homework.
April 23, 2022 in Corporate Governance, Corporate Personality, Corporations, Current Affairs, Financial Markets, Law School, Management, Marcia Narine Weldon, Securities Regulation, Shareholders | Permalink | Comments (0)