Monday, February 6, 2023

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.

February 6, 2023 in Business Associations, Corporate Finance, Corporations, Joan Heminway, M&A | 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.

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

WaystarROYCOlogo

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

January 21, 2023 in Corporate Governance, Corporations, Family Business, Joan Heminway, Shareholders, Teaching, Television | 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:

  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. 

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 23, 2022

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. 

Thumbnail_ContractsCon Flyer - 1 page (12-23-2022)

  • 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).

December 23, 2022 in Conferences, Contracts, Corporations, Current Affairs, Law Firms, Law School, Lawyering, Marcia Narine Weldon, Negotiation | Permalink | Comments (0)

Tuesday, December 13, 2022

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.

December 13, 2022 in Corporations, Current Affairs, Joan Heminway, Marketing, Music | 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)

Friday, November 4, 2022

How Generation, Nationality, and Expertise Influence Stakeholder Prioritization of Tech Social Issues- Pt. 2

Last month, I posted about an experiment I conducted with students and international lawyers. I’ve asked my law student, Kaitlyn Jauregui to draft this post summarizing the groups’ reasoning and provide her insights. Next week, I’ll provide mine in light of what I’m hearing at various conferences, including this week’s International Bar Association meeting. This post is in her words.

After watching The Social Dilemma, participants completed a group exercise by deciding which social issues were a priority in the eyes of different tech industry stakeholders. The Social Dilemma is a 2020 docudrama that exposes how social media controls that influences the behavior, mental health, and political views of users by subjecting them to various algorithms. Director Jeff Orlowski interviewed founding and past tech employees of some of the biggest companies in Silicon Valley to bring awareness to viewers.  

Groups of primarily American college students, primarily American law students, one group of Latin American lawyers, and one group of international lawyers completed the exercise. Each of the groups deliberated from the perspective of a CEO, investor, consumer, or NGO.  Acting as that stakeholder, the team then ranked the following issues in order of importance: Incitements to violence, Labor Issues, Suppression of Speech, Mental Health, Surveillance, and Fake News. 

How The Groups Performed

The college students attend an American law school, but they are not necessarily all American. The groups’ logic behind their rankings could not be provided. I provided the rankings in the last post.

Law Students

The law students attend and American law school, but they are not necessarily all American. They considered six social issues.

Team CEO: Law Students

1.    Labor Issues in the Supply Chain

2.    Surveillance

3.    Mental Health

4.    Fake News

5.    Suppression of Speech

6.    Incitements to Violence

The law students assigned to view the issues as a CEO based their rankings on an internal to external approach. They believed the CEO is responsible for the operations of the company so would first try to solve internal issues such as labor issues because that would directly affect the bottom line. Surveillance and mental health ranked #2 because the team assumed that these issues directly related to customer satisfaction and retention. Because this group took on the role as a tech CEO and not a social media CEO, they did not view 4-6 as important. Fake news was only relevant if it was about the company. Suppression of speech was not problematic to them because it would not directly impact their business. Finally, they did not view incitement to violence as relevant to the business operations so ranked it last.

Team Investor: Law Students

1.    Labor Issues in the Supply Chain

2.    Incitements to Violence

3.    Surveillance

4.    Suppression of Speech

5.    Fake News

6.    Mental Health

The law students who prioritized social issues as if they were an Investor approached the task considering market forces. They chose labor issues first because it poses challenges to business operations. Whatever looks bad for revenue generation such as incitement to violence and surveillance means their investment would look bad as well. It is important to note they viewed this assignment as an institutional investor. The remaining factors were not imperative to the success of the tech company so were ranked lower.

Team NGO: Law Students

1.    Fake News

2.    Incitement to Violence

3.    Mental Health

4.    Labor Issues in Supply Chain

5.    Surveillance

6.    Suppression of Speech

The law students who took on a role as an NGO based their sense of urgency on the danger and risks the involved in each issue. At the top was fake news because they thought misinformation when taken as fact was unhealthy for making decisions and forming opinions. Incitement to violence closely followed because political polarization can lead to hateful actions outside of social media. They found mental health to be important because of statistics showing teens committing self-harm or worse as a result of social media use. Although labor Issues are abroad, the NGO team could not ignore it. Surveillance was not key to them because they believed platforms are already taking measures against it. And lastly, suppression of speech was not as important to them as deleting hate speech and fake news.

Team Consumer: Law Students

1.    Surveillance

2.    Mental Health

3.    Incitement to Violence

4.    Suppression of Speech

5.    Fake News

6.    Labor Issues in Supply Chain

The law students who took on their natural roles as consumers found social issues more important than financial forces. They referred to the many advertisements that tech companies like Apple and Google are posting against surveillance. The effects of social media on mental health and even physical health also stood out to them. As a group of law students, they are informed individuals who can spot fake news so did not see that as a priority. Lastly, labor issues are not in the consumers’ sight so are out of mind and therefore not a priority.

Latin American Lawyers

*The Latin American Lawyers did not consider Fake News or Incitements to Violence.

Team CEO: Latin American Lawyers

1.    Labor Issues in the Supply Chain

2.    Surveillance

3.    Suppression of Speech

4.    Mental Health

5.    -

6.    -

The Latin American lawyers ranked the social issues regarding business success and long-term goals. Labor issues were their top concern because it influences the legal challenges faced by the company and the costs of production. “Information is power” so surveillance restrictions would greatly decrease money earned from selling data gathered. They did not see suppression of speech as an issue because the company itself is not limited. Mental health was ultimately last because it does not impair business operations.

Team Investor: Latin American Lawyers

1.    Mental Health

2.    Surveillance

3.    Labor Issues in the Supply Chain

4.    Suppression of Speech

5.    -

6.    -

The Latin American lawyers listed their priorities as a socially responsible Investor. Mental health triggered the most urgency for them because the negative influence of social media on users is growing and is not slowing down. Heavy surveillance conflicts with the rights of persons like themselves so it is a great risk for them. Although labor issues were important, they did not think of it as a widespread issue affecting large populations of people. Lastly, suppression of speech was not a concern at all for them.

Team NGO: Latin American Lawyers

1.    Surveillance

2.    Suppression of Speech / Fake News

3.    Mental Health

4.    Labor Issues in Supply Chain

5.    -

6.    -

The Latin American lawyers who participated as an NGO focused their efforts on user experience and rights. They found surveillance to be a growing concern and a human right violation for users. Suppression of speech was also very important to them, especially in the scope of the team’s nationality because of political distress in their home countries. For countries with political instability, their citizens are more conscious of infringed rights through social media. Fake news and censorship on virtual platforms can ultimately destroy the democracy of countries in their point of view. The team preferred life over work so chose to rank mental health higher than labor issues.

Team Consumer: Latin American Lawyers

1.    Surveillance

2.    Suppression of Speech / Fake News

3.    Mental Health

4.    Labor Issues in Supply Chain

5.    -

6.    -

The Latin American lawyers used their personal perspective as consumers to rank in accordance with social concerns. Surveillance was seen as a major problem because it makes users uncomfortable knowing that their activity is tracked and sold as data. Suppression of speech was grouped with fake news as an important issue regarding the rights and freedom of the consumers. The gatekeeping of information from mainstream media in general was a concern for these consumers because they feel as if they are being controlled and concealed from the truth. Although the negative mental health results on teens from social media is important, the consumers thought this was the responsibility of parents and not of other consumers. Labor issues were of no concern because the consumers felt as if they have no control over the matter. 

International Lawyers

The International Group comprised of participants from Bolivia, Brazil, Bulgaria, Canada, Colombia, Ecuador, Egypt, Ethiopia, India, Iran, Jamaica, Mexico, Nepal, Sweden, Switzerland, and Ukraine. The group was not assigned to rank Mental Health as a social issue. The groups’ logic behind their rankings could not be provided.

Team CEO: International Lawyers

1.    Fake News

2.    Labor Issues in the Supply Chain

3.    Surveillance

4.    Incitement to Violence

5.    Suppression of Speech

6.    -

Team Investor: International Lawyers (Socially Responsible)

1.    Incitement to Violence

2.    Fake News

3.    Labor Issues in the Supply Chain

4.    Surveillance

5.    Suppression of Speech

6.    -

Team Investor: International Lawyers (Institutional)

1.    Labor Issues in the Supply Chain

2.    Incitements to Violence

3.    Suppression of Speech

4.    Fake News

5.    Surveillance

6.    -

Team NGO: International Lawyers

1.    Fake News

2.    Labor Issues in Supply Chain

3.    Suppression of Speech

4.    Incitements to Violence

5.    Surveillance

6.    -

 

Team Consumer: International Lawyers

1.    Incitements to Violence

2.    Suppression of Speech

3.    Fake News

4.    Labor Issues in Supply Chain

5.    Surveillance

6.    -

 Insights

When given a business or financial oriented role, the teams ranked the social issues by focusing on whether it impacts company performance. Teams with community or advocate roles tended to rank the social issues according to impact on society. Team CEO prioritized labor issues and surveillance the most. Labor issues along with incitements to violence were of top concern for Team Investor. Fake news was the number one issue for Team NGO. Team Consumer, which reflects the average personal view of the participants, believed incitements to violence and surveillance were the most pressing social issues in the tech industry. Labor issues were the least important to the consumer participants, which is interesting in scope of consumer purchase decisions overall and not just in tech.

The Team Consumer data is reflective of each of the groups’ personal beliefs because all participants are also consumers. The College Students prioritized mental health. Both the law students and the Latin American lawyers found surveillance the most important tech issue. International lawyers instead thought incitement to violence more pressing. A possible explanation is that people in the U.S. and Latin America are trying to protect their privacy from intrusive technology. Because the international lawyers had participants from countries where incitement to violence are occurring, that may be why it was important to them.

Suppression of speech closely followed for Latin American Lawyers and International Lawyers whereas Mental Health was the second priority for the primarily American law Students. Many citizens of countries around the globe face oppressive governments that censor speech which may be influential in why Suppression of Speech was ranked highly. In the United States, citizens are guaranteed freedom of speech and press which is why this issue may not be as concerning for them. American teens also suffer from more mental illness as a result of social media use, possibly why it is second place.

Practices in corporate culture and opinions on social issues are influenced by the ethnic makeup of the employees. Although the stakeholder roles the groups took are the most determinative factor, their nationality is naturally a bias in their decision-making.

The Lewis Model is a triangular spectrum that identifies the prominent features of different cultures. Richard Lewis spoke 10 languages, visited 135 countries, and work in over 20 of them to find observable variability in social behavior. He recognized that stereotypes are unfair, but also emphasized that social norms are standards in each country. There are three defined points of culture: Linear Active, Multi-active, and Reactive.

  • Linear actives — those who plan, arrange, organize, do one thing at a time, follow action chains. They are truthful rather than diplomatic and do not fear confrontation. Their work and as well as personal life is based on logic rather than emotions. Linear actives like facts, fixed agenda and they are very job oriented. They are able to separate social-private and professional life.
  • Multi-actives — people belonging to this cultural category are able to do many things at once, planning their priorities not according to a time schedule, but according to the relative thrill or importance that each appointment brings with it. These cultures are very talkative and impulsive. These characteristics predict their orientation on people. They feel uncomfortable in silence. Multi-active people prefer face to face sessions.
  • Reactives — member of this group has in the priority list courtesy and respect on the top. This group is best listening culture. Listening quietly, reacting calmly and carefully to the other side's proposals are their traits as well. Reactive cultures are the world’s best listeners in as much as they concentrate on what the speaker is saying, do not interrupt a speaker while the discourse or presentation is on-going. Reactive people have large reserves of energy. Reactives tend to use names less frequently than other cultural categories.

How does the Lewis Model explain the results?

The primarily American college and law students fall under linear-active with their priorities aligned with individual rights and performance.

The Latin American lawyers are multi-active, think about the social issues in terms of impact on the community and on building relationships.

The International lawyers are comprised of participants all over the world, bringing in aspects from all over the spectrum.

The Lewis Model most likely plays a part in how each participant individually arrived at their own rankings and how they then communicated to agree on a reflective ranking together. The conversations guiding to the final result would have probably shown more insight as to how and why these social issues are important.

Age

The age of the participants is another influential factors because of the generational variation in trust in surveilling technologies. Generation Z, Millennials, and Generation X+ were asked in a survey how comfortable they felt with programs like Alexa or Siri on a scale from 1 to 10, 1 being very and 10 being not.

Generation Z: 7.73

Millennials: 8.28

Generation X+: 8.90

Older generations are more uneasy about virtual assistant technology.

With age comes more experience and better foresight. Researchers in Texas found that “older adults use the experience in decision-making accumulated over their lifetime to determine the long-term utility and not just the immediate benefit before making a choice. However, younger adults tend to focus their decision-making on instant gratification.”

How does age explain the results?

The majority of the college and law students were Generation Z or Millennials whereas the practicing attorneys were mostly Millennials or more senior.

As generations progress, younger people are more comfortable with surveillance technology than older people.

Expertise

Expertise of the participants surely impacted how they ranked social issues. The knowledge of experts in comparison to novices gives them a wider and practical approach to business and social issues. Here are some key aspects:

  1. Experts notice features and meaningful patterns of information that are not noticed by novices.
  2. Experts have acquired a great deal of content knowledge that is organized in ways that reflect a deep understanding of their subject matter.
  3. Experts’ knowledge cannot be reduced to sets of isolated facts or propositions but, instead, reflects contexts of applicability: that is, the knowledge is “conditionalized” on a set of circumstances.
  4. Experts are able to flexibly retrieve important aspects of their knowledge with little attentional effort.
  5. Though experts know their disciplines thoroughly, this does not guarantee that they are able to teach others.
  6. Experts have varying levels of flexibility in their approach to new situations.

Perhaps the practicing attorneys foresaw further down the line as to why one social issue was more pressing than another.

Thank you, Kaitlyn for providing your analysis of the results. Next week, I’ll provide mine.

November 4, 2022 in Business Associations, Comparative Law, Compliance, Corporate Personality, Corporations, CSR, Current Affairs, Human Rights, International Law, Law School, Lawyering, Marcia Narine Weldon, Social Enterprise, Teaching | 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)

Friday, October 7, 2022

How to Contract Conference- February 16-17 in Miami

I had originally planned to post Pt. 2 of the blog post I did a couple of weeks ago, but this announcement is time sensitive.

I'm thrilled to announce that the Transactional Skills Program at the University of Miami School of Law is partnering with Laura Frederick for the second How to Contract conference. It's time sensitive because we are considering holding a side event with a contract drafting and negotiation competition for law students if there's enough interest. If you think you would be interested, please email me at [email protected].

For lawyers, there are virtual and live options for the contract conference. I've cut and pasted from the website so you can see why you should come to sunny Miami (and it won't be hurricane season):

It is not about the mega deals.

ContractsCon is about the contracts you work on EVERY DAY. We want to help you learn how to draft and negotiate the deals you see all the time.

Because for every 100-page specialized contract sent to outside counsel, there are thousands of smaller but important ones that in-house counsel and professionals do day in and day out.

ContractsCon focuses on how we manage risk and make the tough decisions with less time and information than we need.

It is not a summary of recent case law.

ContractsCon is about providing actionable advice to help you do the work that you have sitting in your inbox RIGHT NOW.

It's not about case names or citations and we don't get into academic explanations.

ContractsCon focuses on the real-world expertise from experienced practitioners that you need to improve your contract skills and expertise and become better at drafting and negotiating in the real world.

It is not going to put you to sleep.

ContractsCon is about the fun and awesomeness of contracts. We are organizing it to be a true lovefest for everything contracts.  

Why not combine learning about contracts with having fun?

You'll meet other lawyers and professionals passionate about contract drafting and negotiating. Our sessions and workshops feature contracting superstars who love what they do and will share their excitement with you. Plus we're planning a ton of activities on-site and online to keep you engaged. 

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.

Virtual ticket holders get access to 6 HOURS of no-fluff practical contract training by experienced practicing lawyers.

People who attend in person in Miami get 12 HOURS of training, including 6 hours of interactive skills workshops.

I hope to see you in Miami in a few months. Don't forget to follow Laura Frederick on LinkedIn for great contract drafting tips and to let me know whether you and your students might be interested in participating in a contract drafting competition. 

 

 

 

 

 

 

October 7, 2022 in Commercial Law, Conferences, Contracts, Corporations, Law Firms, Law School, Lawyering, LLCs, M&A, Marcia Narine Weldon, Negotiation, Teaching, Unincorporated Entities | Permalink | Comments (0)

Friday, September 23, 2022

How Generation, Nationality, and Expertise Influence Stakeholder Prioritization of ESG Issues Pt. 1

You can’t read the business press without seeing some handwringing about ESG. It’s probably why I’ve been teaching, advising, and sitting on a lot more panels about the topic lately. Like it or not, it’s here to stay (at least for now) so I decided to do a completely unscientific experiment on lawyer and law student perceptions of ESG using a class simulation. Over the past three months, I’ve used the topic of tech companies and human rights obligations to demonstrate how the “S” factor plays out in real life. I used the same simulation for foreign lawyers in UM’s US Law in Action program, college students who participated in UM’s Summer Legal Academy, Latin American lawyers studying US Business Entities, and my own law students in my Regulatory Compliance, Corporate Governance, and Sustainability class at the University of Miami.

Prior to the simulation, I required the students to watch The Social Dilemma,  the Netflix documentary about the potentially dangerous effects of social media on individuals and society at large. I also lectured on the shareholder v. stakeholder debate; the role of investors, consumers, NGOs, and governments in shaping the debate about ESG; and the basics of business and human rights. Within business and human rights, we looked at labor, surveillance, speech, and other human rights issues that tech and social media companies may impact.

Participants completed a prioritization exercise based on their assigned roles as either CEO, investor, government, NGO, consumer, or influencer. It’s not an apples-to-apples comparison because some groups did not look at all of the issues and some had different stakeholders. In this post, I will provide the results. In a future post, I’ll provide some thoughts and analysis.

The topics for prioritization were:

Labor- in complex global supply chains that often employ workers in developing countries, how much responsibility should companies bear for forced labor particularly for Uyghur labor in China and child labor in global mining and supply chains? What about the conditions in factories and warehouses before and during the COVID era? 

Surveillance- how much responsibility do tech companies bear for the (un)ethical use of AI and surveillance of citizens and employees?

Mental Health- how much should companies care about the impact of the “like” button and the role social media plays in bullying, self-esteem, anxiety, depression, addiction, and suicide, especially among pre-teens and teens?

Fake News- should a social media company allow information on platforms that is demonstrably false? What if allowing fake news is profitable because it keeps more eyeballs on the page and thus raises ad revenue? Should Congress repeal Section 230?

Incitement to violence- what responsibilities do social media companies have when content leads to violence? We specifically looked at some of the issues with Meta (Facebook) and India, but we also examined this more broadly.

Suppression of Speech- should a social media company ever suppress speech? This was closely related to fake news and the incitement to violence prompt and some groups combined these.  

The Rankings

 

International Lawyers (approximately 40 total participants)

The international lawyer group consisted of participants from Bolivia, Brazil, Bulgaria, Canada, Colombia, Ecuador, Egypt, Ethiopia, India, Iran, Jamaica, Mexico, Nepal, Sweden, Switzerland, and Ukraine. The group was not assigned to rank mental health as a social issue.

CEO:

  1. Fake news
  2. Labor
  3. Surveillance
  4. Incitement to violence
  5. Suppression of speech

Socially responsible investors:

  1. Incitement to violence
  2. Fake news
  3. Labor
  4. Surveillance
  5. Suppression of speech

Institutional investors:

  1. Labor
  2. Incitement to violence
  3. Suppression of speech
  4. Fake news
  5. Surveillance

NGO:

  1. Fake news
  2. Labor
  3. Suppression of speech
  4. Incitement to violence
  5. Surveillance

Consumers:

  1. Incitement to violence
  2. Suppression of speech
  3. Fake news
  4. Labor
  5. Surveillance

Latin American Lawyers (approximately 10 total participants)

The Latin American lawyers combined fake news and incitements to violence with suppression of speech.

 CEOs:

  1. Labor
  2. Surveillance
  3. Suppression of speech
  4. Mental health

Investors (they chose socially responsible investors):

  1. Mental health
  2. Surveillance
  3. Labor
  4. Suppression of speech

NGO:

  1. Surveillance
  2. Suppression of speech
  3. Mental health
  4. Labor

Consumers:

  1. Surveillance
  2. Suppression of speech
  3. Mental health
  4. Labor

 

Law Students (approximately 52 total participants)

The law students considered six social issues. Several are LLMs or not from the United States, although they attend school at University of Miami.

CEOs:

  1. Labor
  2. Surveillance
  3. Mental Health
  4. Fake News
  5. Suppression of Speech
  6. Incitements to Violence

Investors:

  1. Labor
  2. Incitements to violence
  3. Surveillance
  4. Suppression of speech
  5. Fake news
  6. Mental health

NGO:

  1. Fake news
  2. Incitement to violence
  3. Mental health
  4. Labor
  5. Surveillance
  6. Suppression of speech

Consumers:

  1. Surveillance
  2. Mental Health
  3. Incitement to Violence
  4. Suppression of speech
  5. Fake news
  6. Labor

College Students

Given how little work experience this group had, I divided them into groups of CEOs, investors (no split between institutional and socially responsible investors), members of Congress, social media influencers, and consumers. They also combined suppression of speech, fake news, and incitement to violence in one category.

            CEOs:

  1. Speech
  2. Surveillance
  3. Labor issues
  4. Mental health ramifications

            Investors:

  1. Labor issues
  2. Speech
  3. Surveillance
  4. Mental Health

            Congress:

  1. Speech
  2. Surveillance
  3. Labor
  4. Mental Health

     Consumers:

  1. Mental Health
  2. Speech
  3. Labor
  4. Surveillance

            Influencers:

  1. Mental Health
  2. Speech
  3. Labor
  4. Surveillance

What does this all mean? To be honest, notwithstanding my sophisticated, clickbait blog title, I have no idea. Further, with two of the groups, English was not the first language for most of the participants. Obviously, the sample sizes are too small to be statistically significant. I have thoughts, though, and will post them next week. If you have theories based on the demographics, I would love to hear your comments. 

September 23, 2022 in Corporate Personality, Corporations, CSR, Current Affairs, Human Rights, International Business, Law School, Lawyering, Marcia Narine Weldon, Technology | Permalink | Comments (0)

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!

+++++

SEALS 2022
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)

Tuesday, June 21, 2022

More Commentary on the SEC's ESG Proposal - Sharfman and Copland

Courtesy of friend-of-the-BLPB Bernie Sharfman, I am linking to his coauthored (with James Copland) comment letter to the Securities and Exchange Commission (SEC) on the climate change rule-making proposal.  The letter includes copious footnotes.  As with other comment letters that have been written on the substance of the SEC proposal, there are some interesting definitional questions on which intelligent folks disagree.  E.g., what is included under the umbrella of investor protection?  What regulation promotes "efficiency, competition, and capital formation"?  These all are among the big picture issues on which the SEC has the opportunity to speak.  I expect thoughtful responses.

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 . . . .

NBLS2022(OULawPhoto)

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:

  1. Apple: The Latest Iphone's Camera Fails to Zoom Into the Company's Labor Exploitation
  2. 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
  3. Redraft of the Nestle v. Doe Supreme Court opinion
  4. 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 
  5. Principle Violations and Normative Breaches: the Dakota Access Pipeline - Human rights implications beyond the land and beyond the State
  6. FIFA’s Human Rights Commitments and Controversies: The Ugly Side of the Beautiful Game
  7. The Duty to Respect: An Analysis of Business, Climate Change, and Human Rights
  8. Just Wash It: How Nike uses woke-washing to cover up its workplace abuses
  9. Colombia’s armed conflict, business, and human rights
  10. Artificial Intelligence & Human Rights Implications: The Project Maven in the ‘Business of war.’
  11. A Human Rights Approach to “With Great Power Comes Great Responsibility”: Corporate Accountability and Regulation
  12. Don’t Talk to Strangers” and Other Antiquated Childhood Rules Because The Proverbial Stranger Now Lives in Your Phone
  13. 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)

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.

Thanks, Elon.

Signed,

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)

Monday, April 4, 2022

Business Associations & Relationships on the Future Bar Exam: A Virtual Symposium (Part V)

It's been one week since I announced and started posting in this virtual symposium on the NextGen Bar Exam. Thanks to Josh, Ben, and John for joining me in commenting on the proposed content scope outline relating to Business Associations and Relationships.  You can find their posts here, here, and here, respectively. 

We have raised issues about terminology.  And there are a few areas that are lacking in clarity or specificity.  In addition, two important overarching points have emerged to date in our posts.  One is that it is important to indicate the source of the law being tested, since the default rules operative in various areas of LLC and corporate law are not the same in the dominant national statutory frameworks.  (I offer another example of how this may matter in the discussion of corporate director and officer fiduciary duties, below.)  The other is that the default rules in business associations law tell only part of the story.   Constitutional issues, authorized private ordering, and decisional law that both supplements and interprets state legislative enactments can all play roles.

In this post, I offer a few more points that illustrate or add to these observations.

Partnership Nomenclature

The outline notes that distinctions between or among partnerships (denominated "general partnerships" in the outline), limited liability partnerships, and limited partnerships will be tested.  That seems appropriate.  But the next few prompt all refer to "general partners."  Neither partnerships nor limited liability partnerships have general partners.  They just have partners.  Only limited partnerships distinguish general partners from limited partners.

Partnership Governance

Only the duty of loyalty between and among partners and the partnership is proposed to be tested as a matter of partnership fiduciary duties.  Why not care?  And what about the obligation of good faith and fair dealing?  These governance rules are all equally important.  And duties of care and loyalty exist in agency law, unincorporated business associations law, and corporate law.

Moreover, the outline notes under "Duty of loyalty": "This topic includes the consequences of a partner acting outside the scope of the partner’s authority to bind the partnership."  This annotation is perplexing to me.  I have two principal substantive comments about it.

First, a partner's authority to bind the partnership is a matter of agency authority--the authority to transact with third parties.  A partner's fiduciary duties are a matter of internal governance (as the relevant outline topic, "Rights of . . . partners among themselves" indicates).  Two separate parts of the Revised Uniform Partnership Act (the "RUPA") address relations with third parties and internal governance--Articles 3 and 4, respectively.  So, the annotation introduces an apples-and-oranges problem--the illumination of an internal governance rule by reference to a third-party relations rule.

Second, the duty of loyalty of partners in a RUPA partnership is relatively specific.  It consists of three exclusive components: 

(1) to account to the partnership and hold as trustee for it any property, profit, or benefit derived by the partner in the conduct and winding up of the partnership business or derived from a use by the partner of partnership property, including the appropriation of a partnership opportunity;

(2) to refrain from dealing with the partnership in the conduct or winding up of the partnership business as or on behalf of a party having an interest adverse to the partnership; and

(3) to refrain from competing with the partnership in the conduct of the partnership business before the dissolution of the partnership.

It is hard for me to see how a partner acting outside of their agency authority would implicate any of the three components of the duty of loyalty.  That conduct does not, of itself, result in the partner: deriving or taking any property, profit, or benefit of or belonging to the partnership; having conflicting interests, or competing with the partnership.

Corporations and LLCs, Generally

I agree with John that LLCs and corporations should each have their own category.  The doctrinal rules (structure, governance, and finance) are simply too different.  The general categories under each (and under partnerships, for that matter)--formation, management and control, fiduciary duties, agency, third-party liability, etc.--can be almost exactly the same.   Topics like veil piercing, pre-organizational contracting, and shareholder/member litigation that apply to both corporations and LLCs in similar ways can be noted in the outline for each with a cross-reference to the other or can be called out separately in the outline (with any unique corporate or LLC nuances addressed in that broader context).

Corporate Director (and Officer) Fiduciary Duties

While Josh and Ben have focused some pointed and valuable comments on jurisdictional differences in limited liability company fiduciary duties (comments that I endorse), I am at least as troubled by jurisdictional differences in corporate fiduciary duties.  I have written in the past in this space (here, here, and here) about the challenges in teaching corporate fiduciary duty law.  Delaware's classification of Caremark oversight duties as good faith questions actionable as breaches of the duty of loyalty runs counter to decisional law in other jurisdictions that characterizes oversight failures as breaches of the duty of care.  In sum, the relative narrowness of the fiduciary duty of care in Delaware, the capaciousness of Delaware's duty of loyalty, and the Delaware judiciary's reinterpretation of a director's obligation of good faith as a component of the duty of loyalty distinguish the law of director fiduciary duties in Delaware from the law of fiduciary duties elsewhere. 

Generally

Like others, I have doubts about the fairness and efficacy of bar exams as meaningful gatekeepers for the profession.  But I assume good faith in constructing the NextGen Bar Exam.  With that in mind, any bar exam should assess the law that licensed practitioners should know.  And it should use normative terms in signaling the law to be tested and recognize the use of normative terms in evaluating performance.  In this regard, it is important to note that there are parallel types of legal rules in agency, unincorporated business associations law, and corporate law.  There are recognized, well-worn labels for describing these component legal rules in agency and business associations law.  Why reinvent the wheel?  If parallel legal doctrine from business associations and relationships laws is to be tested, the content scope outline should use the acknowledged customary descriptors for those rules.

These comments round out my thoughts on the "Business Associations and Relationships" portion of the proposed Content Scope Outlines for the NextGen Bar Exam of the Future.  I welcome additional posts and any responses here on the BLPB, and as I noted in my initial post, comments can be filed with the National Conference of Bar Examiners hereThe comment period closes on April 18, 2022. 

April 4, 2022 in Business Associations, Corporations, Joan Heminway, LLCs, Partnership | Permalink | Comments (0)