Business Law Prof Blog

Of Directorships: Reconfiguring the Theory of the Firm

It always is a great pleasure to pass along and promote the work of a colleague.  And today, I get to post about the work of a UT Law colleague!  Many of you know Tomer Stein, who came to join us at UT Law back in the summer.  He is such an ideal colleague and, like many of us, has broad interests across business finance and governance.

This post supports a recent draft governance piece, the title of which is the same as this post--Of Directorships: Reconfiguring the Theory of the Firm.  You can find the draft here.  The abstract is included below.

This Article develops a novel account of directorships and then uses it to reconfigure the theory of the firm. This widely accepted theory holds that firms emerge to satisfy the economic need for carrying out vertically integrated business activities under a fiduciary contract that substitutes for the owners’ multiple agreements with contractors and suppliers. As per this theory, the fiduciary contract is inherently incomplete, yet often preferable: while it cannot address all future contingencies in the firm, it will effectively direct all unaccounted-for firm events by placing them under the owners’ purview as a matter of default, or residual right. Under this contractual mechanism, firm owners, such as corporate shareholders, acquire the status of residual claimants who have the power to decide on all contractually unenumerated contingencies.

This view of the firm is conceptually flawed and normatively mistaken. Firms do carry vertically integrated business activities managed by their fiduciaries, but those fiduciaries—agents, trustees, and directors—are not functional equivalents from either the legal or economic standpoint. Unlike agents and trustees who receive commands from principals and settlors, respectively, directors manage the firm’s business by exercising decisional autonomy. Conceptually, shareholders who hire directors do not run the firm’s business as residual claimants. Rather, it is the directors who manage the firm as residual obligors—all contractually unaccounted for contingencies are placed under the fiduciary’s purview as a matter of obligation. This feature makes directorship an attractive management mechanism that often outperforms other fiduciary mechanisms, and the residual-claimant structure that stands behind them, in a broad variety of contexts. By developing this critical insight, the Article proposes not only to reconfigure the prevalent theory of the firm, but also to redesign both federal and state laws in a way that will facilitate directorships not only in corporations, but also across several indispensable dimensions of our financial, communal, and familial organizations.

As someone who understands both the central role of the director in corporate governance and the incomplete and inaccurate principal/agent relationship between shareholders and directors, I have enthusiasm for this project!  But I also am intrigued by the thought that the ideas in the paper can be translated to non-business institutions and groups.

Read on, and enjoy!

What Business Lawyers Needs to Ask their Clients About Generative AI Usage

Last week I had the pleasure of joining my fellow bloggers at the UT Connecting the Threads Conference on the legal issues related to generative AI (GAI) that lawyers need to understand for their clients and their own law practice. Here are some of the questions I posed to the audience and some recommendations for clients. I'll write about ethical issues for lawyers in a separate post. In the meantime, if you're using OpenAI or any other GAI, I strongly recommend that you read the terms of use. You may be surprised by certain clauses, including the indemnification provisions. 

I started by asking the audience members to consider what legal areas are most affected by GAI? Although there are many, I'll focus on data privacy and employment law in this post.

Data Privacy and Cybersecurity

Are the AI tools and technologies you use compliant with relevant data protection and privacy regulations, such as GDPR and CCPA? Are they leaving you open to a cyberattack?

This topic also came up today at a conference at NCCU when I served as a panelist on cybersecurity preparedness for lawyers.

Why is this important?

ChatGPT was banned in Italy for a time over concerns about violations of the GDPR. The Polish government is investigating OpenAI over privacy issues. And there are at least two class action lawsuits in California naming Microsoft and OpenAI. Just yesterday, a US government agency halted the use of GAI due to data security risks. 

It’s also much easier for bad actors to commit cybercrime because of the amount of personal data they can  scrape and analyze and because deepfake technology allows impersonation of images and voices in a matter of seconds. The NSA and FBI have warned people to be worried about misinformation and cyberthreats due to the technology. On a positive note, some are using GAI to fight cybercrime.

Surveillance and facial recognition technology can violate privacy and human rights. Governments have used surveillance technology to tamp down on and round up dissidents, protestors, and human rights defenders for years. Now better AI tools makes that easier. And if you haven't heard some of the cautions about Clearview AI and the misidentification of citizens, you should read this article. A new book claims that this company could "end privacy as we know it."

What should (you and) your clients do?

• Ensure algorithms minimize collection and processing of personal data and build in confidentiality safeguards to comply with privacy laws
• Revise privacy and terms of use policies on websites to account for GAI
• Build in transparency for individuals to control how data is collected and used
• Turn on privacy settings in all AI tools and don’t allow your data to be used for training the large language models
• Turn off chat history in settings on all devices
• Prevent browser add-ons
• Check outside counsel guidelines for AI restrictions (or draft them for your clients)
• Work with your IT provider or web authority to make sure your and your clients’ data is not being scraped for training
• Use synthetic data sets instead of actual personally identifiable information
• Ensure that you have a Generative AI Security Policy
• Check vendor contracts for AI usage
• Enhance cybersecurity training
• Conduct a table top exercise and make sure that you have an incident response plan in place
• Check cyberinsurance policies for AI clauses/exclusions

What about the employment law implications?

According to a Society for Human Resources Management Member Survey about AI usage:

• 79% use AI for recruiting and hiring

• 41% use AI for learning and development

• 38% use AI for performance management

• 18% use AI for productivity monitoring

• 8% use Ai for succession planning

• 4% use AI or promotional decisions

GAI algorithms can also have significant bias for skin color. The National Institute of Standards and Technology (NIST) released research showing that "not just dark African-American faces, but also Asian faces were up to 100 times more likely to be failed by these systems than the faces of white individuals.”

Then there’s the question of whether recruiters and hiring managers should use AI to read emotions during an an interview. The EU says absolutely not. 

The Equal Employment Opportunity Commission has taken notice. In a panel discussion, Commissioner Keith Sonderling explained, “carefully designed and properly used, AI has potential to enhance diversity and inclusion, accessibility in the workplace by mitigating the risk of unlawful discrimination. Poorly designed and carelessly implemented, AI can discriminate on a scale and magnitude greater than any individual HR professional.” The EEOC also recently settled the first of its kind AI bias case for $365,000.

What to do 

• Use AI screening tools to disregard name, sec, age, national origin, etc.
• Use bots for interviews to eliminate bias because of accents
• Check local laws such as New York City's automated decision tools guidance for employers
• Be careful about training large language models on current workforce data because that can perpetuate existing bias
• Review the EEOC Resource on AI

Questions to Ask Your Clients:

• How are you integrating human rights considerations into your company's strategy and decision-making processes, particularly concerning the deployment and use of new technologies?

• Can you describe how your company's corporate governance structure accounts for human rights and ethical considerations, particularly with regards to the use and impact of emerging technologies?

• How does your company approach balancing the need for innovation and competitive advantage with the potential societal and human rights impact of technologies like facial recognition and surveillance?

• As data becomes more valuable, how is your company ensuring ethical data collection and usage practices?

• Are these practices in line with both domestic and international human rights and privacy standards?

• How is your organization addressing the potential for algorithmic bias in your technology, which can perpetuate and exacerbate systemic inequalities?

• What steps are you taking to ensure digital accessibility and inclusivity, thereby avoiding the risk of creating or enhancing digital divides?

• How is your company taking into account the potential environmental impacts of your technology, including e-waste and energy consumption, and what steps are being taken to mitigate these risks while promoting sustainable development?

• Are you at risk of a false advertising or unfair/deceptive trade practices act claim from the FTC or other regulatory body due to your use of AI?

Whether or not you're an AI expert or use GAI in your practice now, it's time to raise these issues with your clients. Future posts will address other legal issues and the ethical implications of using AI in legal practice. 

The LLC As a Corporation -- The Hits Keep Coming

A new opinion this week tells us that "Defendant, Intermed Resources TN, LLC, [is] a Tennessee limited liability company that markets medical equipment."  Camber Spine Technologies v. Intermed Resources TN, LLC, No. CV 22-3648, 2023 WL 5182597, at *1 (E.D. Pa. Aug. 11, 2023). The opinion later, though, tells us that Intermed is a "Tennessee limited liability corporation." It was right, before it was wrong. 

The United States Supreme Court has told us that the test for general personal jurisdiction for LLCs is the same test that is used for corporations. Daimler AG v. Bauman, 571 U.S. 117, 123 (2014). Unfortunately, in that case, Justice Ginsburg referred to "MBUSA" as "a Delaware limited liability corporation." MBUSA is an LLC, not a corporation. It's a little less clear in cases of specific jurisdiction, so there is least some potential litigation value in the getting this right, in addition the more general principle of being accurate. 

Camber Spine was one the case calling an LLC a corporation that I found this week. Last week there were four more: 

1.  Ocean Tomo LLC v. Golabs, Inc., No. 22 C 4966, 2023 WL 4930348, at *2 (N.D. Ill. Aug. 2, 2023) )" Plaintiff is a limited liability corporation with a principal place of business in Illinois . . . ."). 
2. Jackson v. Reliance Constr. Servs., LLC, No. 1:20-CV-799, 2023 WL 4933269, at *2 (S.D. Ohio Aug. 2, 2023) ("Defendant Reliance Construction is a limited liability corporation that is currently unrepresented.").
3. Universitas Educ., LLC v. Benistar, No. 3:20-CV-00738 (KAD), 2023 WL 4932034, at *4 (D. Conn. Aug. 2, 2023) ("Greyhound Partners is a Connecticut limited liability corporation with the following current members: Greyhound Management Inc. and Constance Ann Carpenter.") 
4. NetApp, Inc. v. Cinelli, No. 2020-1000-LWW, 2023 WL 4925910, at *12, n.172 (Del. Ch. Aug. 2, 2023) (citing "Metro Communication Corp. BVI v. Advanced Mobilecomm Techs. Inc., 854 A.2d 121, 153-55 (Del. Ch. 2004)  and stating that "imputing fraud to the corporation where the manager of a limited liability corporation designated by the corporation made false statements.")

I suppose it is painfully obvious I am not going to let this go. If nothing else, these cases are reinforcing the need for my new paper, with Samantha Prince (available on SSRN): An LLC By Any Other Name Is Still Not A Corporation. We're still talking to editors for those interested in helping us clean up this mess.  One day, we hope to put an end to this madness.

New Paper: An LLC By Any Other Name Is Still Not A Corporation

It's been little while since I posted here, but long-time readers of theis blog will not be surprised by the topic.  I am happy to say that, after a lot of work with an exceptional co-author who shares my concerns, Professor Samantha Prince from Penn State Dickinson Law, we have an article documenting the problems with mislabeling LLCs and providing a variety of solutions.  I have been writing on this for nearly 15 years, and unfortunately, not a lot has changed. 

The article, An LLC By Any Other Name Is Still Not A Corporation, is now available on SSRN, here, and has been submitted for publication. In the meantime, we welcome thoughts and comments.  

Here is the abstract: 

Business entities have their own unique characteristics. Entrepreneurs and lawyers who represent them select an entity structure based on the business’s current and projected needs. The differing needs of each business span across myriad topics such as capital requirements, taxation, employee benefits, and personal liability protection. These choices present advantages and disadvantages many of which are built into the type of entity chosen.

It is critically important that people, especially lawyers, recognize the difference between entities such as corporations and limited liability companies (LLCs). It is an egregious, nearly unforgivable, error in our view to call an LLC a “limited liability corporation.” In part, this is because lawyers should try to get things right, but it is also because conflating the two entity types can lead to unpredictable outcomes. Perhaps more important, it could lead to incorrect and unjust outcomes. A prime example lies within the veil piercing context.

Lest you think that this is not a prevalent occurrence, there are nearly 9,000 references to the phrase “limited liability corporation” in court cases. Practicing attorneys are not the only people messing this up. Judges, legislators, federal and state agency officials, and media pundits are also getting it wrong. Most recently, Justice Samuel Alito scribed an op-ed that was published in the Wall Street Journal where he misused the term. Even the TV show Jeopardy! allowed as correct the answer, “What is a limited liability corporation?,” during one episode.

Enter artificial intelligence. AI relies on information it can find, and therefore AI generators, like ChatGPT, replicate the incorrect term. With a proliferation of users and programs using ChatGPT and other AI, the use of incorrect terminology will balloon and exacerbate the problem. Perhaps one day, AI can be used to correct this problem, but that cannot happen until there is widespread understanding of the distinct nature of LLCs and a commitment to precise language when talking about them.

This article informs of the looming harms of misidentifying and conflating LLCs with corporations. Additionally, it presents a warning together with ideas on how to assist with correcting the use of incorrect terminology in all contexts surrounding LLCs.

Matteo Gatti on Corporate Governing

I am excited to highlight the recent posting by Matteo Gatti of his draft paper entitled Corporate Governing: Promises and Risks of Corporations as Socio-Economic Reformers.  I got a preview of this work at the National Business Law Scholars Conference back in June.  The title of the paper is both descriptive and clever, as the abstract below reveals.

Corporations are involved in public affairs: racial equity, women’s rights, LGBTQIA rights, climate efforts are just a few examples of an increasingly long list of areas in which corporations are active and vocal. One phenomenon is well-known: corporations promote, contrast, or finetune governmental initiatives through political messaging. In addition, corporations perform quasi-governmental functions when the actual government cannot (because of its dysfunction) or does not want to (because of its political credo) perform such functions. Economists, legal scholars, and policymakers are split as to whether corporations should take this role.

This Paper contributes to the literature in several ways. First, it maps various areas of reform by corporations in the socio-economic sphere. Then, it provides legal and policy frameworks for corporate governing by analyzing the underlying conducts under our current laws and by evaluating its multifaceted normative merits: Is there a business case for corporate governing? Is corporate governing strategically wise for corporations? Does it help social advocacy and society at large? Does corporate governing undermine actual government and imperil democratic institutions? Further, this Paper assesses corporate governing by looking into its promises and risks from a corporate and from a societal perspective and singles out two risks. First, corporate governing cannot help society in fields in which corporations have a conflicting interest, like on themes such as antitrust, tax, labor, privacy, financial and corporate reform. Second, with corporations having a greater role in policymaking, citizens may become less accustomed to expecting reform via traditional politics: addressing this risk requires efforts from citizens, civil society, and politicians to preserve democratic values and institutions—corporate governance can help but cannot be the driving force.

The article offers helpful, coherent observations about and analyses of the roles business firms play--and should play--in political governance, as well as the possible effects of those political governance engagements.  I look forward to spending more time with this work!

Is Your Law School Ready for Generative AI? Fifteen Questions You Should Consider

Greetings from SEALS, where I've just left a packed room of law professors grappling with some thorny issues related to ChatGPT4, Claude 2, Copilot, and other forms of generative AI. I don't have answers to the questions below and some are well above my pay grade, but I am taking them into account as I prepare to teach courses in transactional skills; compliance, corporate governance, and sustainability; and ethics and technology this Fall.

In no particular order, here are some of the questions/points raised during the three-hour session. I'll have more thoughts on using AI in the classroom in a future post.

1. AI detectors that schools rely on have high false positives for nonnative speakers and neurodivergent students and they are easy to evade. How can you reliably ensure that students aren't using AI tools such as ChatGPT if you've prohibited it?
2. If we allow the use of AI in classrooms, how do we change how we assess students?
3. If our goal is to teach the mastery of legal skills, what are the legal skills we should teach related to the use of AI? How will our students learn critical thinking skills if they can rely on generative AI?
4. How should we keep up with the rapid pace of change?
5. How will adjuncts use AI with our students if they are already integrating it into their practice? Alternatively, will adjuncts see the use of AI as cheating?
6. If students use papers as writing samples, should there be attestations indicating that they are AI free? Same question for journals/law reviews.
7. Can clinicians and others use generative AI to help with access to justice? If so, how can we ensure that the information is reliable and not a hallucination??
8. How should schools assess faculty coming up for promotion and tenure? Will junior faculty feel pressured to rely on AI to be more productive?
9. Can generative AI be helpful with students with disabilities and neurodivergent students? AI tools can help with creating study schedules, note taking (organizing by topic), time management, summarizing large articles, staying on task, academic support tool, ascertaining how long will tasks take, planning meals and more. If a policy prohibits the use of generative AI in the classroom, should its use be a reasonable accommodation?
10. Do we as faculty members have the growth mindset to deal with this change? Or will we teach the way we always do, which may do a disservice to our students. How do we prepare our students to deal with generative AI in practice?
11. Do you need a uniform policy or should each professor have their own policy? Should the default policy be that students cannot use it for work that gets academic credit unless the professor has specifically opted in?
12. Should we embrace AI especially for students who can’t write? Is using ChatGPT any different from using a calculator? Is it any different from asking a partner for a template so you don't have to start from scratch?
13. Should we use more in-class exams? Should they be closed book? Do we need more oral presentations? How might this affect space planning at exam time?
14. Should class participation count for more than it already does?
15. If you're not familiar with generative AI tools, where should you start?

How many of these questions have  you asked yourself, your colleagues, or your dean? If you have some best practices or thoughts, please share them in the comments. 

 

 

 

 

 

 

 

 

 

 

 

Generative AI Is the Greatest Thing Since the Discovery of Fire And/Or Will Kill Us All

Depending on who you talk to, you get some pretty extreme perspectives on generative AI. In a former life, I used to have oversight of the lobbying and PAC money for a multinational company. As we all know, companies never ask to be regulated. So when an industry begs for regulation, you know something is up. 

Two weeks ago, I presented the keynote speech to the alumni of AESE, Portugal’s oldest business school, on the topic of my research on business, human rights, and technology with a special focus on AI. If you're attending Connecting the Threads in October, you'll hear some of what I discussed.

I may have overprepared, but given the C-Suite audience, that’s better than the alternative. For me that meant spending almost 100 hours  reading books, articles, white papers, and watching videos by data scientists, lawyers, ethicists, government officials, CEOs, and software engineers. 

Because I wanted the audience to really think about their role in our future, I spent quite a bit of time on the doom and gloom scenarios, which the Portuguese press highlighted. I cited the talk by the creators of the Social Dilemma, who warned about the dangers of social media algorithms and who are now raising the alarms about AI's potential existential threat to humanity in a talk called the AI Dilemma.

I used statistics from the Future of Jobs Report from the World Economic Forum on potential job displacement and from Yale's Jeffrey Sonnenfeld on what CEOs think and are planning for. Of the 119 CEOs from companies like Walmart, Coca-Cola, Xerox and Zoom, 34% of CEOs said AI could potentially destroy humanity in ten years, 8% said that it could happen in five years,  and 58% said that could never happen and they are “not worried.” 42% said the doom and gloom  is overstated, while 58% said it was not. I told the audience about deepfakes where AI can now mimic someone's voice in three seconds.

But in reality, there's also a lot of hope. For the past two days I've been up at zero dark thirty to watch the live stream of the AI For Good Global Summit in Geneva. The recordings are available on YouTube. While there was a more decidedly upbeat tone from these presenters, there was still some tamping down of the enthusiasm.

Fun random facts? People have been using algorithms to make music since the 60s. While many are worried about the intellectual property implications for AI and the arts, AI use was celebrated at the summit. Half of humanity's working satellites belong to Elon Musk. And  a task force of 120 organizations is bringing the hammer down on illegal deforestation in Brazil using geospatial AI. They've already netted 2 billion in penalties. 

For additional perspective, for two of the first guests on my new podcast, I've interviewed lawyer and mediator, Mitch Jackson, an AI enthusiast, and tech veteran, Stephanie Sylvestre, who's been working with OpenAI for years and developed her own AI product somehow managing to garner one million dollars worth of free services for her startup, Avatar Buddy. Links to their episodes are here (and don't forget to subscribe to the podcast).

If you’re in business or advising business, could you answer the following questions I asked the audience of executives and government officials in Portugal?

• How are you integrating human rights considerations into your company's strategy and decision-making processes, particularly concerning the deployment and use of new technologies?

 

• Can you describe how your company's corporate governance structure accounts for human rights and ethical considerations, particularly with regards to the use and impact of emerging technologies?

 

• How are you planning to navigate the tension between increasing automation in your business operations and the potential for job displacement among your workforce?

 

• How does your company approach balancing the need for innovation and competitive advantage with the potential societal and human rights impact of technologies like facial recognition and surveillance?

 

• In what ways is your company actively taking steps to ensure that your supply chain, especially for tech components, is free from forced labor or other human rights abuses?

 

• As data becomes more valuable, how is your company ensuring ethical data collection and usage practices? Are these practices in line with both domestic and international human rights and privacy standards?

 

• What steps are you taking to ensure digital accessibility and inclusivity, thereby avoiding the risk of creating or enhancing digital divides?

 

• How is your company taking into account the potential environmental impacts of your technology, including e-waste and energy consumption, and what steps are being taken to mitigate these risks while promoting sustainable development?

 

• What financial incentives do you have in place to do the ”right thing” even if it’s much less profitable? What penalties do you have in place for the “wrong” behavior?

 

• Will governments come together to regulate or will the fate of humanity lie in the hands of A few large companies?

Luckily, we had cocktails right after I asked those questions.

Are you using generative AI like ChatGPT4 or another source in your business 0r practice? If you teach, are you integrating it into the classroom? I'd love to hear your thoughts. 

Trust in Business Associations: Fiduciary Duties

The University of Tennessee College of Law's business law journal, Transactions: The Tennessee Journal of Business Law, recently published my essay, "The Fiduciary-ness of Business Associations."  You can find the essay here.  This essay--or parts of it, anyway--has been rattling around in my brain for a bit.   It is nice on a project like this to be able to get the words out on a page and release all that tension building up inside as you fashion your approach.

The abstract for the essay is included below. 

This essay offers a window and perspective on recent fiduciary-related legislative developments in business entity law and identifies and reflects in limited part on related professional responsibility questions impacting lawyers advising business entities and their equity owners. In addition—and perhaps more pointedly—the essay offers commentary on legal change and the legislative process for state law business associations amendments in and outside the realm of fiduciary duties. To accomplish these purposes, the essay first provides a short description of the position of fiduciary duties in U.S. statutory business entity law and offers a brief account of 21st century business entity legislation that weakens the historically central role of fiduciary duties in unincorporated business associations. It then reflects on these changes as a matter of theory, policy, and practice before briefly summarizing and offering related reflections in concluding.

Although I always welcome thoughts on my work, I am especially interested in your thoughts on this essay. It relates to all three of my activities as a law professor--my scholarship, teaching, and service.  And I know that fiduciary duty waivers and opt-ins have different impacts in different business sectors . . . .  So, let me know what you think.

University of Miami Law School Seeks Law & Technology Resident Fellow: Apply by July 1, 2023

I'm excited to announce this new position. It's particularly timely as just this morning, I had breakfast with venture capitalists, founders, and others in the tech ecosystem nurtured and propelled by the founders of Emerge Americas. This is a great time to be in Miami. Here are the details.

The University of Miami School of Law seeks to appoint an Inaugural Law & Technology Resident Fellow.  

This will be an exciting opportunity as the Fellow will join a vibrant community of scholars and practitioners working at the intersection of law and technology. Miami-Dade County and the surrounding Tech Hub is enjoying a dramatic expansion in technology-related startups and finance.  MiamiLaw has an established J.D. degree concentration in Business of Innovation, Law, and Technology (BILT). Faculty have set up numerous technology-related programs including Law Without Walls (LWOW) and the We Robot conference.

MiamiLaw currently offers courses in: AI and Robot Law; Blockchain Technology and Business Strategies; Digital Asset and Blockchain Regulation; Digital Transformation Services: Business & Legal Considerations; Dispute Resolution; Technology and The Digital Economy; E-Sports; Electronic Discovery; Genomic Medicine, Ethics and the Law; Intellectual Property in Digital Media; Introduction to Programming For Lawyers; NFTs: Legal and Business Considerations; Scientific Evidence; Tax Issues Relating to Movement of Foreign Tech Founders Into Miami in the 21St Century; Space Law: Regulating and Incentivizing Private Commercial Activities in Outer Space; a Startup Clinic and a class in Startup Law and Entrepreneurship; The Digital Economy and International Taxation--National and International Responses; Law, Technology, and Practice; Law, Policy & Technology; and Tiktok, Twitter and Youtube: The Legal Framework Governing Social Media.

We aim to enhance these substantial and growing technology-related activities by hiring a Law & Technology Resident Fellow. We seek a recent law graduate interested in studying and teaching about the impact artificial intelligence (AI) will have on the legal field, from the impact on legal education to the impact on legal practice and legislative reform.  We are specifically interested in candidates who would connect our students and our faculty both with new technologies and with tech startups in Miami.

In order to provide a space for training of and experimentation by the law school community, the initial Fellow also will be responsible for designing and then setting up an Artificial Intelligence Technology Lab—which could be real or virtual—that will, among other things, support faculty in their courses and research. The Fellow would be expected to teach one technology-related course, subject to approval by the Vice Dean and the law school’s Curriculum Committee, once the Lab is functional.

Applicants must have completed their J.D. degree prior to the beginning of the fellowship. Experience with Artificial Intelligence as it pertains to law and law practice, or optionally a degree in Computer Science or a related field, would also be helpful. The fellowship begins on August 1 and lasts for one year; a Fellow in residence may apply for a second year of support.

The University of Miami offers competitive salaries and a comprehensive benefits package including medical and dental benefits, vacation, paid holidays and much more.

Applications should include the following:

• A cover letter indicating your interest in the Resident Fellowship
• A resume or CV
• A law/graduate school transcript
• Two letters of recommendation

Applications for the Law & Tech Resident Fellowship must be received no later than July 1, 2023.

Please apply online and submit an application in electronic form to Carolina Morris ([email protected]).

The University of Miami is an Equal Opportunity Employer - Females/Minorities/Protected Veterans/Individuals with Disabilities are encouraged to apply. Applicants and employees are protected from discrimination based on certain categories protected by Federal law. Click here for additional information.

If you have any questions about what it's like to work at UM or live in Miami, please reach out at [email protected].

Ten Questions Lawyers Should Ask Themselves about AI

A few months ago, I asked whether people in the tech industry were the most powerful people in the world. This is part II of that post.

I posed that question after speaking at a tech conference in Lisbon sponsored by Microsoft. They asked me to touch on business and human rights and I presented the day after the company announced a ten billion dollar investment in OpenAI, the creator of ChatGPT. Back then, we were amazed at what ChatGPT 3.5 could do. Members of the audience were excited and terrified- and these were tech people. 

And that was before the explosion of ChatGPT4. 

I've since made a similar presentation about AI, surveillance, social media companies to law students, engineering students, and business people. In the last few weeks, over 10,000 people including Elon Musk, have called for a 6-month pause in AI training systems. If you don't trust Musk's judgment (and the other scientists and futurists), trust the "Godfather of AI," who recently quit Google so he could speak out on the dangers, even though Google has put out its own whitepaper on AI development. Watch the 60 Minutes interview with the CEO of Google.

Just yesterday, the White House held a summit with key AI stakeholders to talk about AI governance. 

Between AI-generated photos winning competitions, musicians creating songs simulating real artists' voices, students using generative AI to turn in essays that fool professors, and generative AI's ability to hallucinate (come up with completely wrong answers that look correct), what can we as lawyers do? Are our jobs at risk? Barrons has put out a list.  IBM has paused hiring because it believes it can gain efficiencies though AI.  Goldman Sachs has said that 300 million jobs might be affected by this technology. I'm at a conference for entrepreneurs and the CEO of a 100-million dollar company said that he has reassigned and is re-skilling 90% of his marketing team because he can use AI for most of what they do. 

Should we be excited or terrified? I've been stressing to lawyers and my students that we need to understand this technology to help develop the regulations around it as well to wrestle with the thorny legal and ethical issues that arise. Here are ten questions, courtesy of ChatGPT4, that lawyers should ask themselves:

1. Do I understand the basic principles and mechanics of AI, including machine learning, deep learning, and natural language processing, to make informed decisions about its use in my legal practice?
2. How can AI tools be used effectively and ethically to enhance my practice, whether in legal research, document review, contract drafting, or litigation support, while maintaining high professional standards?
3. Are the AI tools and technologies I use compliant with relevant data protection and privacy regulations, such as GDPR and CCPA, and do they adequately protect client confidentiality and sensitive information?
4. How can I ensure that the AI-driven tools I utilize are unbiased, transparent, and fair, and what steps can I take to mitigate potential algorithmic biases that may compromise the objectivity and fairness of my legal work?
5. How can I obtain and document informed consent from clients when using AI tools in my practice, ensuring that they understand the risks, benefits, and alternatives associated with these technologies?
6. What are the intellectual property implications of using AI, particularly concerning AI-generated content, inventions, and potential copyright or trademark issues that may arise?
7. How can I assess and manage potential liability and accountability issues stemming from the use of AI tools, including understanding the legal and ethical ramifications of AI-generated outputs in my practice?
8. How can I effectively explain and defend the use of AI-generated evidence, analysis, or insights in court, demonstrating the validity and reliability of the methods and results to judges and opposing counsel?
9. What measures should I implement to supervise and train my staff, including paralegals and support personnel, in the responsible use of AI tools, ensuring that ethical and professional standards are maintained throughout the practice?
10. How can I stay up-to-date with the latest advancements in AI technology and best practices, ensuring that I continue to adapt and evolve as a legal professional in an increasingly technology-driven world?

Do you use ChatGPT or any other other generative AI in your work? Can you answer these questions? I'll be talking about many of these issues at the Connecting the Threads symposium and would love to get your insights as I develop my paper. 

Neyland, Bates, and Lv on "Who Are the Best Law Firms?"

Professors Jordan Neyland (George Mason, Antonin Scalia Law School), Tom Bates (Arizona State University), and Roc Lv (ANU/Jiangxi University), have recently posted their article, Who Are the Best Law Firms? Rankings from IPO Performance to SSRN. Here's the Description:

If you have ever wondered who the best law firms are (which lawyer hasn’t?), have a look at our new ranking. My co-authors—Tom Bates at ASU and Roc Lv at ANU/Jiangxi University—and I developed a ranking method based on law firms’ clients’ outcomes in securities markets. 

There is no shortage of recent scandals in rankings in law. In particular, U.S. News’ law school rankings receive criticism for focusing too much on inputs, such as student quality or acceptance rates, instead of student outcomes like job quality and success in public interest careers. Many schools even refuse to submit data or participate in the annual ranking. Similar critiques apply to law firm rankings. We propose that our methodology improves upon existing methods, which frequently use revenue, profit, or other size-related measures to proxy for quality and reputation. Instead, we focus on the most important outcomes for clients: litigation rates, disclosure, pricing, and legal costs.

By focusing on the most relevant outcomes, this ranking system makes it harder for those being ranked to “game the system” without actually producing better results. Moreover, we use multivariate fixed-effect models to control for confounding effects, which provides some assurance that the ranking is based on a law firm’s skill rather than good timing or choosing “better” clients with a lower risk of getting sued.

We suggest that our innovation can provide some guidance and help improve upon extant methods. Rankings can be valuable tools to help evaluate a firm, school, or other institution. Despite the limitations and criticisms of rankings in law, perhaps the solution is to improve the current system instead of withdrawing from it altogether.

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!

Carney & Sharfman: Whither Judicial Valuation?

I teach a unit on the legal aspects of valuation in my Corporate Finance planning and drafting seminar every year.   I have often been able to secure as a guest speaker on one day during that unit a friend of mine who is a seasoned valuation expert (and was the expert whose opinion carried the day in the most recent Tennessee Supreme Court case on valuation in an M&A context).  

There is a relatively large body of academic literature on appraisal (a/k/a dissenters') rights and, more generally, the history of valuation law and practices in the M&A context.  In the Business Associations textbook of which I am a coauthor, I excerpt from Mary Siegel's 1995 article, Back to the Future: Appraisal Rights in the Twenty-First Century (32 Harv. J. on Legis. 79).  Her 2011 follow-on article, An Appraisal of the Model Business Corporation Act's Appraisal Rights Provisions (74 Law & Contemp. Probs 231 (2011)), also is a good read on appraisal rights history.  Other legal academics who have dipped their toes into these waters include George Geis, Bayless Manning, Brian JM Quinn, Randall Thomas, and Barry Wertheimer (who is no longer a law professor), and many more. 

I am excited to report that there is a new kid (really, two coauthor new kids) on the block.  Bill Carney has coauthored a new article on appraisal rights with Keith Sharfman entitled: The Exit Theory of Judicial Appraisal (28 Fordham J. Corp. & Fin. L 1 (2023)).  The SSRN abstract follows.

For many years, we and other commentators have observed the problem with allowing judges wide discretion to fashion appraisal awards to dissenting shareholders on the basis of widely divergent, expert valuation evidence submitted by the litigating parties. The results of this discretionary approach to valuation have been to make appraisal litigation less predictable and therefore more costly and likely. While this has been beneficial to professionals who profit from corporate valuation litigation, it has been harmful to shareholders, making deals costlier and less likely to complete.

In this Article, we propose to end the problem of discretionary judicial valuation by tracing the origins of the appraisal remedy and demonstrating that its true purpose has always been to protect the exit rights of minority shareholders when a cash exit is otherwise unavailable, and not to judge the value of the deal. So understood, judicial appraisal should not be a remedy for dissenting shareholders when a market exit or equivalent protection is otherwise available.

While such reform would be costly to valuation litigation professionals, their loss would be more than offset by the benefit of such reforms to shareholders involved in future corporate transactions. Shareholders presently have adequate protections, both from private arrangements and legal doctrines involving fiduciary duties.

I am grateful that Bill passed a copy of the article along to me yesterday.  This is a topic that generates significant interest in a variety of business law courses that I teach/have taught (including, in addition to Corporate Finance, Advanced Business Associations, Business Associations, and Mergers & Acquisitions).  Students love puzzling through the issues, asking, e.g.:

• Why do appraisal rights exist? 
• Why do we not see many reported appraisal rights opinions?
• How do planners and drafter address the existence of appraisal rights in practice?

Based on a quick peek at the table of contents of Bill's and Keith's article, I sense their work will offer the reader some answers to these and other related questions.

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.

 

 

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.

++++++++++++

SYLLABUS
“Succession and the Law”
Spring 2023

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.

Organizers

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.

Contact info

Diane: [email protected]
Susan: [email protected]

Meeting Details

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.

Zoom Link

https://us02web.zoom.us/j/86783560319?pwd=cTJza2N6elFyVGhBUFVjdk1Gb2oxQT09

Meeting ID: 867 8356 0319

Contact Diane or Susan for the meeting passcode.

Facebook Group

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.

https://www.facebook.com/groups/857390295272757

waystar/ROYCO Administration

Professor Diane Kemker ([email protected])
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 ([email protected])
Centennial Distinguished Professor of Law, Emerita, DePaul University College of Law
Greg Hirsch Professor of Affectionate Litigation

Our Faculty

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
Associate Professor
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
Attorney
Pitt, McGehee, Palmer, Bonanni & Rivers
NRPI Adjunct Lecturer of Employment Law

All meetings are at 6pm-7pm Pacific/8pm-9pm Central/9pm-10pm Eastern

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:

1. State Leadership-Placing people at the center of government strategies in confronting the climate crisis
2. Accountable Finance- Scaling up efforts to hold financial actors to their human rights and environmental responsibilities
3. Dissenting Voices- Ensuring developmental and environmental priorities do not silence land rights defenders and other critical voices
4. Critical Commodities- Addressing human rights risks in mining to meet clean energy needs
5. Purchasing Power- Using the leverage of renewable energy buyers to accelerate a just transition
6. Responsible Exits- Constructing rights-based approaches to buildings and infrastructure mitigation and resilience
7. Green Building- Building and construction industries must mitigate impacts while avoiding corruption, reducing inequality, preventing harm to communities, and providing economic opportunities
8. Agricultural Transitions- Decarbonising the agriculture sector is critical to maintaining a path toward limiting global warming to 1.5 degrees
9. 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
10. 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:

1. 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?
2. 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. 
3. 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. 
4. 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.
5. 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?
6. 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. 
7. 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. 
8. 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. 
9. 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. 
10. 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. 

Give Yourself the Gift of Understanding Contract Drafting and Negotiation In Miami or Virtually February 2023

It's the holidays and it's time to treat yourself and members of your team to practical training and fantastic networking in sunny Miami in February. We don't have bomb cyclones down here. The Transactional Skills Program at the University of Miami School of Law couldn't be more excited to host the How to Contract Conference from February 15-17, 2023. 

• ContractsCon is a training and networking EXTRAVAGANZA focused on the practical contract drafting and negotiating skills that in-house counsel and contracts professionals need to know. 
• This event is a zero-fluff, to-the-point training on the nitty-gritty details. ContractsCon includes:
  • speakers who get the in-house experience and can explain why we draft the way we do
  • training centered around provision-level playbooks for you and your company to use when you return to work
  • workshops that provide a deeper dive into more nuanced topics and include interactive group activities
  • ContractsCon Playbook, featuring the advice and drafting approaches discussed at ContractsCon
  • access to How to Contract’s SaaS Contracts Training Library, with 20+ hours of training videos, the Cloud Services Agreement Playbook, and lots more (through March 31, 2023)
  • CLE pending in 26 states for up to 7 hours for virtual ticket holders and up to 13 hours for in-person attendees
• ContractsCon is an annual training and networking event for in-house counsel and  contract professionals presented by How to Contract and Law Insider and hosted by University of Miami School of Law. This 2-day event will feature over 20 live training sessions with some of the most well-known contract experts.
• Our promise is to share with you the core skills and expertise you need to work in-house on commercial contracts. All you have to do is show up ready to learn.
• ContractsCon is designed for in-house lawyers and professionals who want to learn:
  • the insights and techniques needed to handle the commercial contracts filling their inbox every day,
  • how experienced lawyers manage risk, work efficiently, and make the hard decisions in challenging circumstances,
  • WHAT to say, WHY to say it that way, and HOW to reach the best-negotiated deal you can with your contract counterparties.
• Give us two days of your time and you'll walk away with enhanced skills that enable you to better protect your company and clients. You'll gain more confidence.  You'll finally leave those "I don't know" and "I'm not sure" frustrations behind you. You'll also be able to network with other lawyers and professionals who share your desire to improve your skills and overcome any traces of imposter syndrome. 

Click here to get your ticket. And I'll see you in Miami, mojito in hand (after I do my session, of course).

Victoria's Secret: The Song and the Business

Posting something light tonight . . . .

I have found myself fascinated listening to Jax's recent hit "Victoria's Secret," a clever pop ballad about female body image concerns and intimates retailer Victoria's Secret.  The refrain is catchy and, itself, tells a story--a business story.

I know Victoria's secret
And, girl, you wouldn't believe
She's an old man who lives in Ohio
Making money off of girls like me"
Cashin' in on body issues
Sellin' skin and bones with big boobs
I know Victoria's secret
She was made up by a dude (dude)
Victoria was made up by a dude (dude)
Victoria was made up by a dude

Because I knew some of the history of the Victoria's Secret business, I understood that the allusion to the "old man who lives in Ohio"--the "dude"--is a reference to Leslie Wexner, the founder of L Brands (earlier famous for owning major brands like The Limited, Express, and Abercrombie & Fitch, as well as Victoria's Secret).  Victoria's Secret became an independent publicly traded firm, Victoria's Secret & Co., last year through a tax-free spin-off from L Brands (now known as Bath & Body Works, Inc.).  From the Victoria's Secret & Co. website:

On August 3, 2021, L Brands (NYSE: LB) completed the separation of the Victoria’s Secret business into an independent, public company through a tax-free spin-off to L Brands shareholders. The new company, named Victoria’s Secret & Co., includes Victoria’s Secret Lingerie, PINK and Victoria’s Secret Beauty. Victoria’s Secret & Co. is a NYSE listed company trading under the ticker symbol VSCO.

In conjunction with this announcement, L Brands changed its name to Bath & Body Works, Inc. and now trades under the ticker symbol BBWI.

According to (among other sources) a Newsweek piece from last summer, Wexner did not found Victoria's Secret.  He bought it in 1982 from the founder.  However, he did elevate the brand to cult status and financial success.  So, one might say that he did "make up" Victoria (as she is conceptualized in the song's lyrics). 

Having said that, it also seems fair to note that Ed Razek, long-time L Brands chief marketing officer, is credited (in that same Newsweek article) with overseeing the iconic Victoria's Secret fashion shows that ran from 1995 to 2018.  In the minds of many, these fashion shows created--or at least popularized--the image of the Victoria in Jax's lyrics ("skin and bones with big boobs").

Victoria's Secret & Co. has been working to change its image.  Its website includes value statements consistent with greater inclusion and features some photos of nontraditional intimates models--models that are not reflective of the Victoria described in the "Victoria's Secret" song lyrics.  Moreover, the Victoria's Secret & Co. CEO reportedly reached out to Jax to thank her for highlighting body image issues through her song.

With the craziness of current business stories, grading, and the holiday season, this post is designed to offer some amusement (if not educational value).  I have endeavored to ensure that BLPB readers now know Victoria's Secret--the company--a bit better.  I also hope you enjoy the Jax song and appreciate its encouragement of positive body image.

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.

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.