Friday, November 18, 2022

Why the Judge Was Right to Rule Against DeSantis' Stop WOKE Act

As much as I love being a professor, it can be hard. I’m not talking about the grading, keeping the attention of the TikTok generation, or helping students with the rising mental health challenges.

I mean that it’s hard to know what to say in a classroom. On the one hand, you want to make sure that students learn and understand the importance of critical thinking and disagreeing without being disagreeable.

On the other hand, you worry about whether a factual statement taken out of context or your interpretation of an issue could land you in the cross hairs of cancel culture without the benefit of any debate or discussion.

I’m not an obvious person who should be worried about this. Although I learned from some of the original proponents of critical race theory in law school, that’s not my area of expertise. I teach about ESG, corporate law, and compliance issues.

But I think about this dilemma when I talk about corporate responsibility and corporate speech on hot button issues. I especially think about it when I teach business and human rights, where there are topics that may be too controversial to teach because some issues are too close to home and for many students and faculty members, it’s difficult to see the other side. So I sometimes self censor.

My colleagues who teach in public universities in Florida had even more reason to self censor because of the Stop WOKE act, which had eight topics related to race, gender, critical race theory and other matters that the State deemed “noxious” or problematic.

Yesterday, a federal court issued a 139-page opinion calling the law “dystopian.” The court noted that Justice Sotomayor could violate the law by guest lecturing in a law school and reading from her biography where she talks about how she benefitted from affirmative action. That’s absurd.

I had the chance to give my views to the Washington Post yesterday. This law never personally affected me but as the court noted, the university is the original marketplace of ideas. I told the reporter that one of my areas of expertise, ESG, is full of the kinds of issues that the government of the State of Florida has issues with. I told him that I was glad that I worked at a private university because academic freedom makes me more comfortable to raise issues.  I noted that students need the ability to play devil's advocate and speak freely because there's no way to mold the next generation of thinkers and lawmakers without free speech. I explained that you can't write the laws if you're not willing to hear more than one point of view. 

I hope that we get back to the days when professors don’t self censor, whether there’s a law in place or not. Of course there are some statements that are unacceptable and should never be taught in a classroom.

But I worry that some in this generation don’t know the difference between controversial and contemptible. That goes for my friends of all ideologies.

I worry that some students are missing out on so much because our society doesn’t know how to engage in civil discourse about weighty topics. So people either rant or stay silent.

In any event, my rant is over.

Today is a day for celebration.

Congratulations to my colleagues in public universities.

Reason has won out.

November 18, 2022 in Constitutional Law, CSR, Current Affairs, Human Rights, Law School, Lawyering, Legislation, Litigation, Marcia Narine Weldon, Teaching | Permalink | Comments (2)

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)

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)

Friday, July 29, 2022

Practical Tips for Teaching or Training Adult Learners

Millions of law school graduates around the US just took the bar exam. Others are preparing to enter colleges and graduates schools in a few weeks. How will these respective groups do? While a lot depends on how much and how well they study, a large part of their success or failure may depend on how they've been taught. I recently posted about how adults learn and what the research says we should do differently. In this post, I'll show how I used some of the best practices in the last ten days when I taught forty foreign lawyers from around the world  and thirty college students in separate summer courses offered by the University of Miami as well as nine Latin American lawyers who were taking courses in business law from a Panamanian school. I taught these disparate groups about ESG, disclosures, and human rights. With each of the cohorts, I conducted a simulation where I divided them into groups to prioritize issues based on whether they were a CEO, an investor, a consumer, the head of an NGO, and for the US college students, I added the roles of a member of Congress or influencer. In a future post, I will discuss how the groups prioritized the issues based on their demographics. Fascinating stuff. 

Depending on what you read, there are six key principles related to adult learning:

1. It seems obvious, but adults need to know why they should learn something. Children learn because they are primed to listen to authority figures. Too often in law school or corporate training, there's no correlation to what they learn and what they actually do. When I taught the two groups of foreign lawyers, I talked about the reality and the hype about ESG and how the topic could arise in their practices with specific examples. When I spoke to the college students who were considering law school, I focused on their roles and responsibilities as current consumers and as the future investors, legislators, and heads of NGOs. Same powerpoint but different emphasis.

2. Adults are self-directed. Under one definition, "self-directed learning describes a process by which individuals take the initiative, with or without the assistance of others, in diagnosing their learning needs, formulating learning goals, identifying human and material resources for learning, choosing and implementing appropriate learning strategies, and evaluating learning outcomes." This may seem radical because many of my colleagues complain that today's students need a lot of hand holding and spoon feeding, and I agree to some extent. But I also think that we don't give students enough credit and we underestimate them. I developed my curriculum for the practicing lawyers but I also asked what they wanted to learn and what would be most useful for them. I only had a few hours with them, so I wasn't able to explore this much as I would have. But in some of my traditional courses at the law school and when I train adults in other contexts, I often give a choice of the exam type and topic. This ensures that they will submit a work product that they are passionate about. At the end of my traditional classes at the law school, I also ask them to evaluate themselves and me based on the learning outcomes I established at the beginning of the semester. They tend to be brutally honest about whether they've taken responsibility for their own learning.

3. Adults filter what we tell them through their life experiences. In my traditional classes, I send out a survey to every student before the semester starts so that I understand their backgrounds, perspectives, and what's important to them. I often pick hypotheticals in class that directly address what I've learned about them through the surveys so it resonates much more clearly for them. With my three groups this week, I didn't have the chance to survey them but I knew where they were all from and used examples from their countries of origin, when I could. When the college students entered the Zoom room, I asked them to tell me why they picked this class. This helped me understand their perspectives. I also picked up on some of their comments during discussion and used those data points to pivot quickly when needed. It would have been easy to focus on my prepared lecture. But what does ESG mean to a lawyer in Bolivia, when that's not a priority? College students quickly grasped the context of socially responsible investing, so I spent more time there than on the Equator Principles, for example. The cultural and generational differences were particularly relevant when talking about the responsibility of tech companies from a human rights perspective. The lawyers and students from authoritarian regimes looked at social media and the power to influence the masses in one way, while the college students saw the issues differently, and focused more on the mental health issues affecting their peers. Stay tuned for a future post on this, including interesting discussion on whether Congress should repeal Section 230.

4. Adults become ready to learn only when they see how what they are learning applies to what they need to do at work and at home. With the foreign lawyers, I focused on how their clients could have to participate in due diligence or disclosure as part of a request from a company higher up in the supply chain. I focused on reputational issues with the lawyers who worked at larger companies. College students don't deal with supply chains on a regular basis so I spent more time focusing on their role as consumers and their participation in boycotts at their universities and their activism on campus and how that does or does not affect what companies do. 

5. Adults need a task-centered or problem-focused approach to learning. I had to lecture to impart the information, but with each group, they learned by doing. I had 12 hours with the Latin American lawyers so to test them on their understanding of US business entities, instead of having them complete a multiple choice quiz, I asked them to interview me as a prospective client and develop a memo to me related providing the advice, which is what they would do  in practice. They, with the other groups, also prioritized the issues discussed above from their assigned roles as CEO, NGO head, institutional investor, or consumer. When I teach my compliance course to law students, they draft policies, hold simulated board meetings, and present (fake) CLEs or trainings. My business and human rights students  have the option to draft national action plans, write case studies on companies that they love or hate, or write develop recommendations for governments for their home country. Students are much more likely to engage with the material and remember it when they feel like they are solving a real problem rather than a hypothetical.

6. Adults need extrinsic and intrinsic rewards. Everyone I taught this week will get some sort of certificate of completion. But they all chose to take these courses and those who weren't part of the UM program either self paid or were reimbursed by their employers. None of them were required to attend the classes, unlike those in elementary and high school. When students choose a course of study and learn something relevant, that's even more important than the certificate or diploma. 

I hope this helps some of you getting ready for the upcoming semester. Enjoy what's left of the summer, and if you try any of these suggestions or have some of your own, please leave a comment.

 

July 29, 2022 in Business Associations, Corporate Governance, Corporations, CSR, Current Affairs, Financial Markets, Human Rights, International Business, Law School, Lawyering, LLCs, M&A, Marcia Narine Weldon, Teaching | Permalink | Comments (0)

Monday, July 4, 2022

Celebrating Independence without the Trappings: A Business Law Prof "Take"

Stefan's Independence Day post is far more erudite than mine.  Kudos and thanks to him for the substantive legal content.  This post covers more of a teaching point--one that I often think about in the background but want to being to the fore here.

I am focused in writing this on things like family reunions, local holiday festivities, grilling out, and fireworks.  It has been a rocky road to the Fourth in these and other aspects this year.  Overlapping causes can easily be identified.  As if the continuing COVID-19 nightmare were not enough . . . .

I will start with COVID-19, however.  I have heard of many who are missing family and other events this weekend because of positive COVID-19 diagnoses, test results, or exposures.  I was sad to learn, for example, that Martina Navratilova had to miss the historic Wimbledon centennial celebration, including the Parade of Champions, yesterday.  But there is more.

The air travel debacles have been well publicized.  Weather, labor shortages, and other issues contribute to the flight changes and cancellations airlines need to make on this very popular travel weekend--expected to set records.  And gas prices have stymied the trips of some by land (again, at a time during which travel was expected to be booming), although news of some price drops in advance of the weekend was certainly welcomed.  Even for those who are well and able to travel to spend holiday time with family, it has been a challenge.

The cost of your cookout this year also may be higher, should you choose to have one.  Supply chain turmoils and the effects of inflation and the war in Ukraine all are listed as contributing factors.  (The linked article does note that strawberries are a good buy, nevertheless, which is welcome news to me.)

And yes, fireworks displays also have been disrupted.  The causes include both concerns about weather (dry conditions and flammables do not mix well!) as well as the impact of labor shortages, inflation, and other factors influencing the supply of goods.  Of course, there also is a high demand for fireworks in the re-opened socio-economic environment.  All have been widely reported.  See here, here, here, and here.

These holiday weekend disappointments create personal strife.  But why should a business law prof care about all of this? 

I find that stepping back and looking at the state of business at given times can be instructive in reflecting on the ways in which business law policy, theory, and doctrine do and should operate in practice.  In an inflationary period with labor shortages, what profit-seeking business would not be looking at customers, clients, and employees as an important constituencies?  In an era of supply chain dislocations, what business managers would not be focused on strong, positive relationships with those who sell them goods and services significant to their business?  And, of course, with investment returns of direct and indirect import to the continued supply of funding to business ventures, firms need to pay heed to investor concerns.  Note how these observations allow for commentary on principles of/underlying contract law, contract drafting, securities regulation, fiduciary duty in (and other elements of) business associations law, insurance law, and more.

Looking at legal theory, policy, and doctrine in practical contexts can useful to a business law prof for teaching, scholarship, and service--depending on the nature of a person's appointment and the institution at which the prof teaches.  The current Fourth of July woes are but one example of how those connections can be made.  But I want to invite folks to make them, especially in their teaching--in current courses (if you are teaching over the summer) and in fall and spring course planning, which I know many folks are now doing.

In closing, I send sympathetic vibes to all who had plans foiled by (or who decided to have a "staycation" and avoid) some or all of the holiday weekend dislocations I highlight in this post.  I hope you found joy in your Independence Day weekend nonetheless.

July 4, 2022 in Business Associations, Contracts, Corporate Finance, Current Affairs, Financial Markets, Insurance, Joan Heminway, Law School, Lawyering, Research/Scholarhip, Service, 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)

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)

Tuesday, June 7, 2022

Comment Letter of Securities Law Scholars on the SEC’s Authority to Pursue Climate-Related Disclosure

This post alerts everyone to a comment letter, drafted by Jill Fisch, George Georgiev, Donna Nagy, and Cindy Williams (signed by the four of them and 26 other securities law scholars, including yours truly and Ann Lipton), affirming that the Securities and Exchange Commission’s recent proposal related to the enhancement and standardization of climate-related disclosures for investors is within its rulemaking authority.  The letter was filed with the Commission yesterday and has been posted to SSRN.  The SSRN abstract is included below.

This Comment Letter, signed by 30 securities law scholars, responds to the SEC’s request for comment on its March 2022 proposed rules for the “Enhancement and Standardization of Climate-Related Disclosures for Investors” (the “Proposal”). The letter focuses on a single question—whether the Proposal is within the SEC’s rulemaking authority—and answers this question in the affirmative.

The SEC’s authority for the Proposal is grounded in the text, legislative history, and judicial interpretation of the federal securities laws. The letter explains the objectives of federal regulation and demonstrates that the Proposal’s requirements are properly understood as core capital markets disclosure in the service of those objectives. The statutory framework requires the SEC to adjust and update the content of the federal securities disclosure regime in response to the evolution of the economy and markets, and, in recent decades, the SEC has done so to require disclosures on a variety of subjects from Y2K readiness, to cybersecurity, to human capital management, to the effects of the Covid-19 pandemic. Rules mandating climate-related disclosure fit with this pattern of iterative modernization. Such rules do not represent a foray into new and uncharted territory, since the SEC has a long history of requiring disclosure on environmental and climate-related topics dating back more than 50 years. Finally, the federal securities laws do not impose a materiality constraint on the SEC’s authority to promulgate climate-related disclosure requirements.

The Comment Letter therefore concludes that the SEC has the statutory authority to promulgate the Proposal, and that the climate-related disclosure rules under consideration are consistent with close to nine decades of regulatory practice at the federal level and with statutory authority dating back to 1933 that has been repeatedly reaffirmed by Congress and the courts.

There is more that has been, can, and will be said about the Commission's rulemaking proposal as a matter of process and substance.  But I will leave that for another day.  For now, we just wanted you to know about the filing of the letter and offer you an easy way to find it and review it.

June 7, 2022 in Ann Lipton, Current Affairs, Joan Heminway, Securities Regulation | Permalink | Comments (11)

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)

Friday, April 29, 2022

"We Know Wrongful Trading When We See It" - Some Observations Concerning the Recent Senate Hearing on the Insider Trading Prohibition Act

Earlier this month, the U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing on the Insider Trading Prohibition Act (ITPA), which passed the house with bipartisan support in May of last year. Some prominent scholars, like Professor Stephen Bainbridge, have criticized the ITPA as ambiguous in its text and overbroad in its application, while others, like Professor John Coffee, have expressed concern that it does not go far enough (mostly because the bill retains the “personal benefit” requirement for tipper-tippee liability).

My own view is that there are some good, bad, and ugly aspects of the bill. Starting with what’s good about the bill:

  • If made law, the ITPA would end what Professor Jeanne L. Schroeder calls the “jurisprudential scandal that insider trading is largely a common law federal offense” by codifying its elements.
  • The ITPA would bring trading on stolen information that is not acquired by deception (e.g., information acquired by breaking into a file cabinet or hacking a computer) within its scope. Such conduct would not incur Section 10b insider trading liability under the current enforcement regime.
  • The ITPA at least purports (more on this below) to only proscribe “wrongful” trading, or trading on information that is “obtained wrongfully.” Since violations of our insider trading laws incur criminal liability and stiff penalties, I have argued for some time that liability should be limited to conduct that is morally wrongful.
  • The ITPA preserves the “personal benefit” test as a limiting principal on what otherwise would be an ambiguous and potentially overbroad test for when tipping would breach a fiduciary or similar duty of trust and confidence. Traders need (and justice demands) bright lines that will allow them to determine ex ante whether their trading is legal or will incur 20 years of prison time (but more on this below).

Now, turning to what is bad about the bill, I share some concerns raised by Professor Todd Henderson in his testimony before the Senate Committee:

  • Though the ITPA codifies the personal benefit test as a limit on liability, it includes “indirect personal benefit[s]” within its scope. As Henderson points out, “[i]t is possible to describe virtually any human interaction as providing an ‘indirect benefit’ to the participants. Instead, the law should reflect the common sense notion that the source of information either received something tangible and valuable in return or what amounts to a monetary gift to a relative or friend.” The personal benefit test only fulfills its intended function as a limiting principle if it imposes real limits on liability. The test should therefore only be satisfied by objective evidence of self-dealing. If indirect psychological or other benefits that can be found in any voluntary human action can satisfy the test, then it cannot function as a limit on liability.
  • At least some versions of the ITPA include a catchall provision to the definition of wrongfully obtained or used information that would include “a breach of a confidentiality agreement, [or] a breach of contract.” Not only does this challenge the time-honored concept of efficient breach in the law of contracts, but as Professor Andrew Verstein has argued, this provision can open the door to the weaponization of insider trading law through the practice of “strategic tipping.” Professor Henderson raised this concern before the Senate committee, noting that so broad an understanding of wrongful trading is “ripe for abuse, with companies potentially able to prevent individual investors from trading merely by providing them with information whether they want it or not.” The recent examples of Mark Cuban and David Einhorn come to mind.
  • The ITPA would impose criminal liability for “reckless” conduct. As Henderson explained to the Committee, under the ITPA, “anyone who ‘was aware, consciously avoided being aware, or recklessly disregarded’ that the information was wrongfully obtained or communicated can have a case brought against them. The ITPA is silent on the meaning of ‘recklessly disregarded,’ which would appear to rope in innocent traders along with actual wrongdoers.” Moreover, permitting mere recklessness to satisfy the mens rea element of insider trading liability will no doubt have a chilling effect on good-faith transactions based on market rumors that would otherwise be value enhancing for traders, their clients, and the markets. The loss of such trades will diminish market liquidity and reduce price accuracy.
  • Finally, Henderson raised the concern that the ITPA lacks an “exclusivity clause stating that it will be the sole basis for bringing federal insider trading claims.” Henderson explained that “allowing prosecutors to cherry pick their preferred law is no way to provide clear rules for the market.” Professor Karen Woody has written about how prosecutors may be starting to bring insider trading cases under 18 U.S.C. § 1348 to avoid the court-imposed personal benefit test under Exchange Act §10b. Without an exclusivity clause, prosecutors will be free to make the same end run around the personal benefit test imposed by the ITPA.

Finally, the ITPA is straight-up ugly because, while it promises that it will limit insider trading liability (which can be punished by up to 20 years imprisonment) to only “wrongful” conduct, the bill defines the term “wrongful” in a way that suggests the drafters have no intention of delivering on that promise. For example, as noted above, some versions of the bill define any breach of contract as “wrongful,” but this is in clear tension with common sense, common law, and the doctrine of efficient breach.

In addition, though there is ambiguity in the text, current versions of the ITPA appear to embrace SEC Rule 10b5-1’s “awareness” test for when trading on material nonpublic information incurs insider trading liability. Under the awareness test, a corporate insider incurs insider trading liability if she is aware of material nonpublic information while trading for totally unrelated reasons. In other words, liability may be imposed even if the material nonpublic information played no motivational role in the decision to trade. But if the material nonpublic information played no motivational role, then the trading cannot be judged “wrongful” under any common-sense understanding of that term.

For these (and other reasons there is no space to address here), the ITPA leaves too much room for play in its definition of what constitutes “wrongful” trading and tipping to cohere with our common-sense understanding of that term. Former SEC Commission Robert J. Jackson assured the Committee that “we know wrongful trading when we see it.” Presumably Professor Jackson’s implication was that the SEC and DOJ can be trusted to exercise sound discretion in interpreting the play in the statutory language. In response, I offer the following question for Professor Jackson or any reader of the ITPA to consider: Would issuer-licensed insider trading violate the statute? I have defined “issuer licensed insider trading” as occurring where:

(1) the insider submits a written plan to the firm that details the proposed trade(s);

(2) the firm authorizes that plan;

(3) the firm has previously disclosed to the investing public that it will permit its employees to trade on the firm’s material nonpublic information when it is in the interest of the firm to grant such permission; and

(4) the firm discloses ex post all trading profits resulting from the execution of these plans.

I have argued that trading under these conditions is neither morally wrongful nor harmful to markets. If it violates ITPA, what provisions? I hope some readers will share their thoughts on this in the comments below!

April 29, 2022 in Current Affairs, Ethics, Financial Markets, John Anderson, Securities Regulation, White Collar Crime | Permalink | Comments (1)

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)

Sunday, March 27, 2022

The SEC’s Climate Disclosure Proposal: Critiquing the Critics

The following post comes to us from George Georgiev at Emory Law.  It follows quite nicely on Ann's post yesterday on Climate Change and Wahed Invest.  I know a bunch of us will be commenting over time on the SEC's climate change release, and we are grateful that George has offered his ideas here.  Please note that more of the post is below the fold and can be accessed by clicking on the "continue reading" jump link.

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The SEC’s Climate Disclosure Proposal: Critiquing the Critics
George S. Georgiev

The SEC released its long-awaited Climate Disclosure Proposal a few days ago, on March 21, 2022. The Proposal is expansive, the stakes are high, and, predictably, the critical arguments that started appearing soon after the SEC kicked off this project a year ago are being raised ever more forcefully in preparation for a potential court challenge. A close review of the Proposal, however, suggests that it is firmly grounded within the traditional SEC disclosure framework that has been in place for close to nine decades. The Proposal is certainly ambitious (and overdue), but it is by no means extraordinary. This, in turn, suggests that challenges to the Proposal’s legitimacy ought to fail, even if certain aspects of the Proposal could stand to be improved as part of the ongoing rulemaking process.

This view is not universally held. In voting against the Proposal, SEC Commissioner Hester Peirce admonished that it “turns the disclosure regime on its head” and erects “a hulking green structure” that will “trumpet” a “revised mission” for the SEC: “‘protection of stakeholders, facilitating the growth of the climate-industrial complex, and fostering unfair, disorderly, and inefficient markets.’” This certainly sounds problematic—and, indeed, quite dramatic. But once we set aside the entertaining rhetorical flourishes, we see that many of the arguments against the Proposal misstate the applicable legal constraints and mischaracterize important aspects of the Proposal. Moreover, even though Commissioner Peirce goes out of her way to praise “the existing regulatory framework that for many decades has undergirded consistent, comparable, and reliable company disclosures,” her lengthy dissenting statement reveals that she actually opposes many important and established elements of the very framework she says she wants to conserve.

I will make the case that the SEC’s Climate Disclosure Proposal is in keeping with longstanding regulatory practice by examining several features of the traditional disclosure regime and the new Proposal. I will focus my analysis on arguments I’ve developed in prior research, certain other less-known arguments, and the particular aspects of the new Proposal. This piece is not intended to be comprehensive, and I want to note that the broader issue of ESG disclosure has generated extensive debate and much insightful analysis. As always, I welcome comments and amendments via email.

Shareholders, Stakeholders, and Expert Groups

The SEC’s Climate Disclosure Proposal immediately prompts the well-worn question: Is this disclosure intended for shareholders or for stakeholders? But posing this as a binary choice automatically shifts the terms of the debate in favor of opponents of climate-related disclosure, regardless of the actual content of the Proposal. Since climate change has society-wide implications, information about it will inevitably resonate beyond the boundaries of the disclosing firm and the capital markets, even when the focus is on financially-material disclosure relying on investor- and issuer-generated disclosure frameworks (as is the case here). The social resonance of climate-related disclosure can drown out its clear-cut financial relevance, render any proposed disclosure rule suspect, and lead to a situation that, when we stop and think about it, is quite illogical: A subject matter’s relevance to one audience (stakeholders) is used as an argument to cancel out the well-established relevance of that same subject matter to another audience (investors). This is a general vulnerability that applies not just to climate-related disclosure, but to other ESG disclosure as well. It is important to understand it and de-bias policymaking accordingly.

Commissioner Peirce’s dissenting statement deftly zeroes in on this vulnerability by asserting that the Proposal “tells corporate managers how regulators, doing the bidding of an array of non-investor stakeholders, expect them to run their companies” and “forces investors to view companies through the eyes of a vocal set of stakeholders, for whom a company’s climate reputation is of equal or greater importance than a company’s financial performance.” Reading this, one would think that the Proposal was written by the Sierra Club and the National Resources Defense Council—or by a D.C. bureaucrat, who, in Peirce’s telling, is both clueless and corruptible. Yet, nothing could be further from the truth. 

The SEC’s Proposal draws on technical frameworks for financially-material disclosure developed by expert groups such as the Task Force on Climate-Related Financial Disclosures (TCFD) and the Greenhouse Gas Protocol. Take the TCFD, for example: Its members include representatives of mainstream investors (including BlackRock and UBS Asset Management), banks (JP Morgan, Citibanamex), insurance companies (Aviva, Swiss Re, Axa), giant industrial firms (BHP, Eni, Tata Steel, Unilever), rating agencies (Moody’s, S&P), accounting firms (Deloitte, E&Y), and others. Its secretariat is headed by a leader in the financial industry and capital markets, Mary Schapiro, who holds the unique distinction of having served as Chair of the SEC, Chair of the CFTC, and CEO of FINRA. And, for better or worse, no environmental NGOs or stakeholder organizations are represented on the TCFD. As its name suggests, the TCFD’s focus is on financial disclosures of the kind that investors require and use. The TCFD has generated an impressive roster of supporters and official adopters in just over six years, and, importantly, each of the “big three” (BlackRock, State Street, and Vanguard) has endorsed the TCFD framework.

Commissioner Peirce rightly points out that the SEC does not have the depth of expertise on climate-related matters that other, specialized regulators have. Such expertise, however, is not necessary here since the SEC is not setting GHG emission limits, calculating carbon trading prices, drawing up climate transition plans, or setting climate resilience standards for businesses. The SEC’s Proposal is limited to disclosure—and only disclosure—on a technical topic, and the SEC has decades-long experience handling disclosures on technical topics. For example, the SEC is not an energy regulator, but it drew up a specialized disclosure framework for oil and gas extraction activities in the 1970s (with help from expert groups, much like it has done here), and it has administered this framework successfully since then. As the composition of the economy has changed, the SEC has had to develop some expertise in cybersecurity disclosure, tech disclosure, and in other specialized areas. The Climate Disclosure Proposal does not veer away from this time-tested approach; the only difference is that it concerns a hot-button topic.

Statutory Authority and Regulatory Practice: Recalling Schedule A of the Securities Act

A central challenge to the Proposal is that it goes beyond the authority given to the SEC by Congress because the rules are too prescriptive, not rooted in “materiality” (more on which later), and because Congress has not directed the SEC to pursue rulemaking on this particular topic. A fair amount of debate has focused on what it means for the SEC to act as “necessary or appropriate in the public interest or for the protection of investors”—language that has been part of the securities laws since they were passed in the 1930s but that has not been tested in court.

Continue reading

March 27, 2022 in Ann Lipton, Current Affairs, Joan Heminway, Securities Regulation | Permalink | Comments (2)

Friday, March 25, 2022

Post-pandemic evolution, change management, and the role of in-house counsel

Join me in sunny Miami on April 26 for this in-person conference featuring outside counsel, inhouse practitioners, and academics. 

Panel topics include:

Change Management: The Legal Department of the Future -  More and more, in-house legal departments are employing new hybrid and remote work models, incorporating artificial intelligence and technology in their workflows, and restructuring and absorbing new teams after mergers, acquisitions, and divestitures. This panel discussion will focus on how the in-house legal department can be a champion in leading successful developmental and transformational change by implementing change management best practices to be effective and efficient, remaining client-focused, and being a trusted business advisor.

Remote Work:  Accelerated Adoption and Related Challenges - Which option would you choose: on-site, hybrid, or virtual? We will discuss the pros and cons of remote work arrangements, including the challenges of implementing a remote work policy in Latin America where the legal framework is a complex patchwork of requirements, as well as the strategies for creating culture and building a team in a remote work environment.

Counseling the Board of Directors (the panel I'm on)-  This panel will focus on issues that arise when counseling the board of directors and address important topics, including governance, ethics, fiduciary duties, director liability, best practices (diversity and environmental, social, and governance (ESG)), privileged insurance, and D&O insurance all in the context of private and public companies operating in the United States and Latin America.

Supply Chain: Challenges and Opportunities- Lessons learned from recent disruptions in global supply chains will shape crossborder business in the coming years. Our panel will discuss short- and long-term challenges and opportunities in supply chain management and logistics, as well as practical strategies for using technology, contractual protections, and risk-transfer solutions to overcome future supply-chain challenges.

What Is Your Company’s ESG Score? This panel will discuss the origins of climate change management, sustainability and how to operationalize it at your company, as well as how to transition to a low-carbon economy— including standards and disclosures. Panelists will also discuss the importance of implementing mechanisms to adopt a company’s ESG score as an ethical obligation to company commitments and as a governance imperative.

Click here to register.

If you make it down to Miami, I promise to buy you a mojito or cafecito. And don't worry, hurricane season doesn't start until June. 

 

March 25, 2022 in Compliance, Conferences, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Ethics, Financial Markets, International Business, Law Firms, Lawyering, Marcia Narine Weldon | Permalink | Comments (0)

Monday, February 28, 2022

2022 Online Symposium – Mainstreet vs. Wallstreet: The Democratization of Investing Friday, March 4 12:30-3:30

2022 Online Symposium – Mainstreet vs. Wallstreet: The Democratization of Investing

I'm thrilled to moderate two panels this Friday and one features our rock star BLPB editor, Ben Edwards. 

                                                                     REGISTER HERE

The University of Miami Business Law Review is hosting its 2022 online symposium on Friday, March 4, 2022. The symposium will run from 12:30 PM to 3:30 PM. The symposium will be conducted via Zoom. Attendees can apply to receive CLE credits for attending this event—3.5 CLE credits have been approved by the Florida Bar. 

The symposium will host two sessions with expert panelists discussing the gamification of trading platforms and the growing popularity of aligning investments with personal values.

The panels will be moderated by Professor Marcia Narine Weldon, who is the director of the Transactional Skills Program, Faculty Coordinator of the Business Compliance & Sustainability Concentration, and a Lecturer in Law at the University of Miami School of Law.

Panel 1: Gamification of Trading 

This panel will focus on the role of social media and “gamification” of trading apps/platforms in democratizing investing, and the risks that such technology may influence investor behavior (i.e., increase in trading, higher risk trading strategies like options and margin use, etc.).

Gerri Walsh:

Gerri Walsh is Senior Vice President of Investor Education at the Financial Industry Regulatory Authority (FINRA). In this capacity, she is responsible for the development and operations of FINRA’s investor education program. She is also President of the FINRA Investor Education Foundation, where she manages the Foundation’s strategic initiatives to educate and protect investors and to benchmark and foster financial capability for all Americans, especially underserved audiences. Ms. Walsh was the founding executive sponsor of FINRA’s Military Community Employee Resource Group. She serves on the Advisory Council to the Stanford Center on Longevity and represents FINRA on IOSCO’s standing policy committee on retail investor education, the Jump$tart Coalition for Personal Financial Literacy, NASAA’s Senior Investor Advisory Council and the Wharton Pension Research Council.

Prior to joining FINRA in May 2006, Ms. Walsh was Deputy Director of the Securities and Exchange Commission’s Office of Investor Education and Assistance (OIEA) and, before that, Special Counsel to the Director of OIEA. She also served as a senior attorney in the SEC’s Division of Enforcement, investigating and prosecuting violators of the federal securities laws. Before that, she practiced law as an associate with Hogan Lovells in Washington, D.C.

Ari Bargil:

Ari Bargil is an attorney with the Institute for Justice. He joined IJ’s Miami Office in September of 2012, and litigates constitutional cases protecting economic liberty, property rights, school choice, and free speech in both federal and state courts.

In 2019, Ari successfully defended two of Florida’s most popular school choice programs, the McKay Program for Students with Disabilities and the Florida Tax Credit Program, before the Florida Supreme Court. As a direct result of the victory, over 120,000 students in Florida have access to scholarships that empower them to attend the schools of their choice.

Ari also regularly defends property owners battling aggressive zoning regulations and excessive fines in state and federal court nationwide and litigates on behalf of entrepreneurs in cutting-edge First Amendment cases. He was co-counsel in a federal appellate court victory vindicating the right of a Florida dairy creamery to tell the truth on its labels, and he is currently litigating in federal appellate court to secure a holistic health coach’s right to share advice about nutrition with her clients. In 2017, Ari was honored by the Daily Business Review as one of South Florida’s “Most Effective Lawyers.”

In addition to litigation, Ari regularly testifies before state and local legislative bodies and committees on issues ranging from occupational licensing to property rights regulation. Ari has also spearheaded several successful legislative campaigns in Florida, including the effort to legalize the sale of 64-ounce “growlers” by craft breweries and the Florida Legislature’s passage of the Right to Garden Act—a reform which made it unlawful for local governments to ban residential vegetable gardens throughout the state.

Ari’s work has been featured by USA Today, NPR, Fox News, Washington Post, Miami Herald, Dallas Morning News and other national and local publications.

Christine Lazaro:

Christine Lazaro is Director of the Securities Arbitration Clinic at St. John’s University School of Law. She joined the faculty at St. John’s in 2007 as the Clinic’s Supervising Attorney. She is also a faculty advisor for the Corporate and Securities Law Society.

Prior to joining the Securities Arbitration Clinic, Professor Lazaro was an associate at the boutique law firm of Davidson & Grannum, LLP.  At the firm, she represented broker-dealers and individual brokers in disputes with clients in both arbitration and mediation.  She also handled employment law cases and debt collection cases.  Professor Lazaro was the primary attorney in the firm’s area of practice that dealt with advising broker-dealers regarding investment contracts they had with various municipalities and government entities.  Professor Lazaro is also of Counsel to the Law Offices of Brent A. Burns, LLC, where she consults on securities arbitration and regulatory matters.

Professor Lazaro is a member of the New York State and the American Bar Associations, and the Public Investors Arbitration Bar Association (PIABA). Professor Lazaro is a past President of PIABA and is a member of the Board of Directors.  She is also a co-chair of PIABA’S Fiduciary Standards Committee, and is a member of the Executive, Legislation, Securities Law Seminar, and SRO Committees. Additionally, Professor Lazaro is the co-chair of the Securities Disputes Committee in the Dispute Resolution Section of the New York State Bar Association and serves on the FINRA Investor Issues Advisory Committee. 

Panel 2: ESG Investing

The second panel will address the growing popularity of ESG funds among investors that want to align their investments with their personal values, and the questions/concerns that arise with ESG funds, including: 1) explaining what they are; 2) discussing the varying definitions and disclosure issues; 3) exploring if investors really give up better market performance if they invest in funds that align with their values; and 4) asking if the increased interest in ESG funds affect corporate change? 

Thomas Riesenberg:

Mr. Riesenberg is Senior Regulatory Advisor to Ceres, working on climate change issues. He previously worked as an advisor to EY Global’s Office of Public Policy on ESG regulatory issues. Before that he worked as the Director of Legal and Regulatory Policy at The Sustainability Accounting Standards Board pursuant to a secondment from EY. At SASB he worked on a range of US and non-US policy matters for nearly seven years. He served for more than 20 years as counsel to EY, including as the Deputy General Counsel responsible for regulatory matters, primarily involving the SEC and the PCAOB. Previously he served for seven years as an Assistant General Counsel at the U.S. Securities and Exchange Commission where he handled court of appeals and Supreme Court cases involving issues such as insider trading, broker-dealer regulation, and financial fraud. While at the SEC he received the Manuel Cohen Outstanding Younger Lawyer Award for his work on significant enforcement cases. He also worked as a law clerk for a federal district court judge in Washington, D.C., as a litigator on environmental matters at the U.S. Department of Justice, and as an associate at a major Washington, D.C. law firm.

Mr. Riesenberg graduated from the New York University School of Law, where he was a member of the Law Review and a Root-Tilden Scholar (full-tuition scholarship). He received a bachelor’s degree from Oberlin College, where he graduated with honors and was elected to Phi Beta Kappa. He is a former chair of the Law and Accounting Committee of the American Bar Association, former president of the Association of SEC Alumni, former treasurer of the SEC Historical Society, and a current member of the Advisory Board of the BNA Securities Regulation and Law Report. For seven years he was an adjunct professor of securities law at the Georgetown University Law Center. He is an elected member of the American Law Institute. He serves on the boards of several nonprofit organizations, including the D.C. Jewish Community Relations Council and the Washington Tennis & Education Foundation. He is the author of numerous articles on securities law and ESG disclosure issues.

Benjamin Edwards:

Benjamin Edwards joined the faculty of the William S. Boyd School of Law at the University of Nevada, Las Vegas in 2017. In addition to being the Director of the Public Policy Clinic, he researches and writes about business and securities law, corporate governance, arbitration, and consumer protection. Prior to teaching, Professor Edwards practiced as a securities litigator in the New York office of Skadden, Arps, Slate, Meagher & Flom LLP. At Skadden, he represented clients in complex civil litigation, including securities class actions arising out of the Madoff Ponzi scheme and litigation arising out of the 2008 financial crisis.

Max Schatzow:

Max Schatzow is a co-founder and partner of RIA Lawyers LLC—a boutique law firm that focuses almost exclusively on representing investment advisers with legal and regulatory issues. Prior to RIA Lawyers, Max worked at Morgan Lewis representing some of the largest financial institutions in the United States and at another law firm where he represented investment advisers and broker-dealers. Max is a business-minded regulatory lawyer that always tries to put himself in the client’s position. He assists clients in all aspects of forming, registering, owning, and operating an investment adviser. He prides himself in preparing clients and their compliance programs to avert regulatory issues, but also assists clients through examinations and enforcement issues. In addition, Max assists advisers that manage private investment funds. In his little spare time, Max enjoys the Peloton (both stationary and road), golf, craft beer, and spending time with his wife and two children.

February 28, 2022 in Compliance, Conferences, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Ethics, Financial Markets, Law Reviews, Law School, Lawyering, Legislation, Marcia Narine Weldon, Research/Scholarhip, Securities Regulation | Permalink | Comments (0)

Reflections on Music, Business, and Law Teaching in the Wake of the Invasion of Ukraine

Yesterday, I was privileged to attend a wonderful Knoxville Symphony Orchestra performance as part of its Chamber Classics Series.  The featured piece was the Bach Concerto for Two Violins--an amazing piece of work.  It was preceded in the program by a wonderfully catchy Stravinski Octet.  The second half of the program focused solely on a Shostakovich piece (arranged by Rudolph Barshai): Chamber Symphony, Op. 73a.  I want to focus here for a moment on this last composition.

Dmitri Shostakovich was a Russian (Soviet) composer.  He died back in 1975.  As my husband and I looked at the program in anticipation of the Shostakovich work, we could not help but think of the ongoing Russian invasion of Ukraine.  We have watched with horror and sadness the violence, destruction, displacement, and more.  Of course, the program for the concert today was many months in the making; the Knoxville Symphony Orchestra could not have anticipated that a Russian composer's music would be played in these circumstances . . . .

In his introduction to the Shostakovich Chamber Symphony, our conductor, Aram Demirjian, explained that Shostakovich was periodically critical of the Soviet government, despite its patronage of his work.  He explained that the arrangement we were about to hear was derived from a Shostakovich string quartet with Shostakovich's consent.  The original string quartet was composed in 1946 after an earlier symphony composition was censured by the Soviet government.  Demirjian noted that Shostakovich labeled the five movements of the quartet as follows:

  1. Blithe ignorance of the future cataclysm
  2. Rumblings of unrest and anticipation
  3. Forces of war unleashed
  4. In memory of the dead
  5. The eternal question: why? and for what?

As he expressly noted, Shostakovich's five movements reflecting on the progression of war at an earlier time seem eerily appropriate given our circumstances today . . . .

The Shostakovich piece--plus the rollouts of deepening economic sanctions against Russia and its President, concern about cyberattacks, and fears of nuclear warfare--have had me thinking about short-term and long-term impacts on cross-boarder transactions and multinationals.  I have been teaching the regulation of securities offerings in my Securities Regulation course, including offers and sales of securities made by foreign issuers or offshore.  Early news of and speculation about the impact of the Ukraine invasion on investment markets has been published.  See, e.g., here and here.  Corporate finance, writ large, is affected by the invasion and the West's responses to it.  The New York Times reported that "[t]he market volatility generated by the crisis has . . . chilled I.P.O.s and complicated dealmaking."

In that same article, the Times noted effects on business more broadly.  "Multinationals have halted operations in Ukraine and moved employees to safety, with Russia’s assault sending shudders through boardrooms around the world."  Other news outlets have published similar reports.  See, e.g., here, here, and here.

It seems important to be raising issues in our business law classrooms relating to all of this.  In addition to the public offering/corporate finance angle, there are at least two connections to the material in my Securities Regulation course that may be productive to explore.  I will share both briefly here, in case they may be of interest for the teaching done by some of our readers.

The first idea is to focus in on the investor side of the equation, given the investor protection policy underpinnings of the federal securities laws.  A few weeks ago, we spent a class day on investors--who they are in today's markets and how theory and policy may impact and be impacted by those demographics.  The mews media also have been covering the investor side of the corporate finance equation, including retail investing issues.  See, e.g., here.  In my classroom, we can revisit and think through how (if at all) the market impacts of the Ukraine invasion change investor protection--and the concept of the reasonable investor.

The second idea is to work in a discussion of the funding of the Ukrainian war effort when addressing the definition of "underwriter" for purposes of the registration exemption in Section 4(a)(1) of the Securities Act of 1933, as amendedThe New York Times reported that "Ukraine and allied nonprofits are raising money from donors (including in cryptocurrency) to fund resistance forces."  In covering underwriter status, I teach the SEC v. Chinese Consolidated Benevolent Association case.  For those of you who are unfamiliar with the case, it involves efforts among Chinese persons here in the United States to fund China's efforts to resist Japanese aggression in the second Sino-Japanese conflict.  (FYI, this book chapter offers lots of great background information on context that the case does not provide.)  It would seem appropriate to offer hypotheticals relating to funding any long-term Ukrainian resistance through the sale of investment interests that may be securities and to discuss the possible effects of the advent of cryptocurrencies (and blockchains more generally) on securities regulation in financings and other investment contexts.

I am sure some of you have your own ideas about whether and how to work discussions of the current, disquieting news relating to the Ukrainian invasion into your business law classrooms.  Please share thoughts that you may have in the comments to this post.  As the conflict continues, there will no doubt be more to talk about.

February 28, 2022 in Current Affairs, International Business, Joan Heminway, Teaching | Permalink | Comments (2)

Friday, February 11, 2022

Business and Sports

Between the Winter Olympics and the Superbowl, this weekend is a sports-lover's dream. But it can also be a nightmare for others. Next week in my Business and Human Rights class, we'll discuss the business of sports and the role of business in sports. For some very brief background, under the UN Guiding Principles on Business and Human Rights, the state has a duty to protect human rights but businesses have a responsibility (not a duty) to "respect" human rights, which means they can't make things worse. Businesses should also mitigate negative human rights impacts. I say "should" because the UNGPs aren't binding on businesses and there's a hodgepodge of due diligence and disclosure regimes that often conflict and overlap. But things are changing and with ESG discussions being all the rage and human rights and labor falling under the "S" factor, businesses need to do more. The EU is also finalizing mandatory human rights due diligence rules and interestingly, some powerful investors and companies are on board, likely so there's some level of certainty and harmonization of standards. 

I've blogged in the past about human rights issues in sports, particularly the Olympics and World Cup in Brazil, where hundreds of thousands of people were displaced, FIFA had its own courts, and human rights issues abounded. For more on human rights and megasporting events, see this post about the Russian Olympics. The current Olympics in China and the future World Cup in Qatar have been rife with controversy because of the long-standing human rights abuses in those countries. Some athletes have even called the Winter Olympics the Genocide Olympics.

So whose problem is it? If businesses know that there's almost always some human rights impact with megasporting events and they know sponsorship doesn't really add to the bottom line, should they get out of the sponsorship business all together? Are they complicit or merely (innocent) bystanders?

Here are the questions I've asked my students to consider for class this week. 

  1. My hometown of Miami is vying for a spot to host the 2026 World Cup. What are the obligations of the "state" when it's a city? As the US government begins revising its National Action Plan on Responsible Business Conduct in accordance with the UNGPs, should a city do more than the national government? Should FIFA look at issues such as the effect of the games on the cities beyond revenue that will enrich only a few?
  2. Cities have a human rights obligation to protect their citizens but what responsibility do companies have to make sure they don't exacerbate pre-existing homelessness issues?
  3. Does it matter if the company sponsoring is Nike (directly working with athletes), Coca Cola (providing beverages), or another company that's just an advertiser? Is there a difference in the degree of corporate responsibility (if any)?
  4. Commentators have accused Nike and other companies of using forced labor in China. Is there a conflict with their support of Colin Kaepernick and the Black Lives Matter movement while also participating in events where there are alleged human rights abuses?
  5. What about the issue of human trafficking and megasporting events? It's such a big problem that the NFL has partnered with US Customs and Border Patrol for a public service announcement about it in light of the Superbowl. Are public service announcements enough?
  6. Should athletes boycott events in countries with poor human rights records? How would that affect their sponsorships and their other contractual obligations? A Boston Celtic called for a boycott of the Beijing Olympics, but who's really listening?
  7. How do what athletes say about Black Lives Matter and taking a knee square with participating in events in China? Should athletes, who are businesses, just shut up and dribble? If an athlete/businessman like LeBron James takes on Black Lives Matter does he have an equal obligation to protest against the use of forced labor in China?
  8. FIFA and the International Olympic Committee are corporations that base their human rights policies in part on the UNGPs. They have spoken out against discrimination, human rights, and  racism in sport.  Is it too much or too little? How far should a company like FIFA or the NFL go before they alienate fans by talking about hot button issues?
  9. Should fans boycott events that are known for human rights abuses? How does that affect the livelihood of the workers who depend on that revenue? Would a boycott benefit or hurt those who need the support the most?

I look forward to a lively discussion in class on Wednesday about the respective roles and responsibilities of the state, the companies, and the fans. Will you look at sports any differently after reading this post?  If you have thoughts, please leave a comment or email me at mweldon@law.miami.edu.

 

 

 

February 11, 2022 in Corporations, CSR, Current Affairs, Ethics, Human Rights, International Business, Law School, Marcia Narine Weldon, Sports | Permalink | Comments (0)

Monday, January 31, 2022

Honoring Peter J. Henning

image from people.wayne.edu

I have been remiss in writing to honor the life and legacy of one of our colleagues (and one of my friends), Peter J. Henning.  Peter, a Professor at Wayne State University Law School until his untimely passing, died earlier this month after wrestling with a long-term, debilitating illness.  Our mutual friend, Stetson Law Professor Ellen Podgor, published a post in his memory back on the 18th on the White Collar Crime Prof Blog.  In the post, she reflected on their long-term friendship and initial co-editorship on the White Collar Crime Prof Blog.  She began by saying: "Peter Henning was an incredible writer, scholar, and teacher. Most of all to me - he was a good friend."  I could have started this post the same way . . . .  Ellen also linked to the announcement posted by Wayne State Law.

Peter was one among a number of colleagues whom I believe understood me and my work well.  He valued my practice experience and encouraged my use of it in research and writing.  While our work intersected most in the insider trading realm, he motivated and supported my scholarship and teaching more broadly.  He enjoyed our discussion groups at the Association of American Law Schools and Southeastern Association of Law Schools conferences (although my recollection is that he had to skip out on a bunch of the latter because of conflicting wedding anniversary celebrations . . .).

I was invited to speak at Wayne State Law (and write for the Wayne Law Review) twice at his suggestion.  Each time, he was the consummate host.   I remember hm taking me to a local eatery on one of those trips--a burger and beer place, as I recall.  I was too late for the normal lunch hour, but he wanted to make sure I had a bite to eat.  He was concerned that it was not upscale enough for me.  I assured him that it was just my style (which it was!).

His pieces for The New York Times were spot on.  You can find his columns for the paper's White Collar Watch here.  His work will continue to bless and inform us all for many years to come. 

I miss Peter for all this and more.  He was a great colleague and leader.  I know he is now free of his earthly burdens, which does give me some solace.  May he rest in eternal peace.

January 31, 2022 in Current Affairs, Joan Heminway, Law School, White Collar Crime | Permalink | Comments (1)

Friday, December 31, 2021

New Year's Resolution for Lawyers

People rarely keep resolutions, much less ones they don’t make for themselves, but here are some you may want to try.

  1. Post information about the law and current events that lay people can understand on social media. You don’t need to be a TikTok lawyer and dance around, but there’s so much misinformation out there by “influencers” that lawyers almost have a responsibility to correct the record.
  2. Embrace legal tech. Change is scary for most lawyers, but we need to get with the times, and you can start off in areas such as legal research, case management, accounting, billing, document automation and storage, document management, E-discovery, practice management, legal chatbots, automaton of legal workflow, contract management, artificial intelligence, and cloud-based applications. Remember, lawyers have an ethical duty of technological competence.
  3. Learn about legal issues related to the metaverse such as data privacy and IP challenges.
  4. Do a data security audit and ensure you understand where your and your clients’ data is and how it’s being transmitted, stored, and destroyed. Lawyers have access to valuable confidential information and hackers know that. Lawyers also have ethical obligations to safeguard that information. Are you communicating with clients on WhatsApp or text messages? Do you have Siri or Alexa enabled when you’re talking about client matters? You may want to re-think that. Better yet, hire a white hat hacker to assess your vulnerabilities. I'll do a whole separate post on this because this is so critical. 
  5. Speaking of data, get up to speed on data analytics. Your clients use data every day to optimize their business performance. Compliance professionals and in-house lawyers know that this is critical. All lawyers should as well.
  6. Get involved with government affairs. Educate legislators, write comment letters, and publish op-ed pieces so that people making the laws and influencing lawmakers can get the benefit of your analytical skills. Just make sure you’re aware of the local, state, and federal lobbying laws.
  7. Learn something completely new. When you do your CLE requirement, don’t just take courses in your area of expertise. Take a class that has nothing to do with what you do for a living. If you think that NFTs and cryptocurrency are part of a fad waiting to implode, take that course. You’ll either learn something new or prove yourself right.
  8. Re-think how you work. What can you stop, start, and continue doing in your workplace and family life?
  9. Be strategic when thinking about diversity, equity, and inclusion. Lawyers talk about it, but from what I observe in my lawyer coaching practice and the statistics, the reality is much different on the ground and efforts often backfire.
  10. Prioritize your mental health and that of the members on your team. Do you need to look at billable hours requirements? What behavior does your bonus or promotion system incentivize? What else can you do to make sure that people are valued and continually learning? When was the last time you conducted an employee engagement survey and really listened to what you team members are saying? Whether your team is remote or hybrid, what can you do to make people believe they are part of a larger mission? There are so many resources out there. If you do nothing else on this list, please focus on this one. If you want help on how to start, send me an email.

Wishing you a safe, healthy, and happy 2022.

December 31, 2021 in Compliance, Contracts, Corporations, Current Affairs, Ethics, Film, Intellectual Property, Jobs, Law Firms, Lawyering, Legislation, Management, Marcia Narine Weldon, Technology, Wellness | Permalink | Comments (0)

Friday, September 24, 2021

Ten Ethical Traps for Business Lawyers

I'm so excited to present later this morning at the University of Tennessee College of Law Connecting the Threads Conference today at 10:45 EST. Here's the abstract from my presentation. In future posts, I will dive more deeply into some of these issues. These aren't the only ethical traps, of course, but there's only so many things you can talk about in a 45-minute slot. 

All lawyers strive to be ethical, but they don’t always know what they don’t know, and this ignorance can lead to ethical lapses or violations. This presentation will discuss ethical pitfalls related to conflicts of interest with individual and organizational clients; investing with clients; dealing with unsophisticated clients and opposing counsel; competence and new technologies; the ever-changing social media landscape; confidentiality; privilege issues for in-house counsel; and cross-border issues. Although any of the topics listed above could constitute an entire CLE session, this program will provide a high-level overview and review of the ethical issues that business lawyers face.

Specifically, this interactive session will discuss issues related to ABA Model Rules 1.5 (fees), 1.6 (confidentiality), 1.7 (conflicts of interest), 1.8 (prohibited transactions with a client), 1.10 (imputed conflicts of interest), 1.13 (organizational clients), 4.3 (dealing with an unrepresented person), 7.1 (communications about a lawyer’s services), 8.3 (reporting professional misconduct); and 8.4 (dishonesty, fraud, deceit).  

Discussion topics will include:

  1. Do lawyers have an ethical duty to take care of their wellbeing? Can a person with a substance use disorder or major mental health issue ethically represent their client? When can and should an impaired lawyer withdraw? When should a lawyer report a colleague?
  2. What ethical obligations arise when serving on a nonprofit board of directors? Can a board member draft organizational documents or advise the organization? What potential conflicts of interest can occur?
  3. What level of technology competence does an attorney need? What level of competence do attorneys need to advise on technology or emerging legal issues such as SPACs and cryptocurrencies? Is attending a CLE or law school course enough?
  4. What duties do lawyers have to educate themselves and advise clients on controversial issues such as business and human rights or ESG? Is every business lawyer now an ESG lawyer?
  5. What ethical rules apply when an in-house lawyer plays both a legal role and a business role in the same matter or organization? When can a lawyer representing a company provide legal advice to an employee?
  6. With remote investigations, due diligence, hearings, and mediations here to stay, how have professional duties changed in the virtual world? What guidance can we get from ABA Formal Opinion 498 issued in March 2021? How do you protect confidential information and also supervise others remotely?
  7. What social media practices run afoul of ethical rules and why? How have things changed with the explosion of lawyers on Instagram and TikTok?
  8. What can and should a lawyer do when dealing with a businessperson on the other side of the deal who is not represented by counsel or who is represented by unsophisticated counsel?
  9. When should lawyers barter with or take an equity stake in a client? How does a lawyer properly disclose potential conflicts?
  10. What are potential gaps in attorney-client privilege protection when dealing with cross-border issues? 

If you need some ethics CLE, please join in me and my co-bloggers, who will be discussing their scholarship. In case Joan Heminway's post from yesterday wasn't enough to entice you...

Professor Anderson’s topic is “Insider Trading in Response to Expressive Trading”, based upon his upcoming article for Transactions. He will also address the need for business lawyers to understand the rise in social-media-driven trading (SMD trading) and options available to issuers and their insiders when their stock is targeted by expressive traders.

Professor Baker’s topic is “Paying for Energy Peaks: Learning from Texas' February 2021 Power Crisis.” Professor Baker will provide an overview of the regulation of Texas’ electric power system and the severe outages in February 2021, explaining why Texas is on the forefront of challenges that will grow more prominent as the world transitions to cleaner energy. Next, it explains competing electric power business models and their regulation, including why many had long viewed Texas’ approach as commendable, and why the revealed problems will only grow more pressing. It concludes by suggesting benefits and challenges of these competing approaches and their accompanying regulation.

Professor Heminway’s topic is “Choice of Entity: The Fiscal Sponsorship Alternative to Nonprofit Incorporation.” Professor Heminway will discuss how for many small business projects that qualify for federal income tax treatment under Section 501(a) of the U.S. Internal Revenue Code of 1986, as amended, the time and expense of organizing, qualifying, and maintaining a tax-exempt nonprofit corporation may be daunting (or even prohibitive). Yet there would be advantages to entity formation and federal tax qualification that are not available (or not easily available) to unincorporated business projects. Professor Heminway addresses this conundrum by positing a third option—fiscal sponsorship—and articulating its contextual advantages.

Professor Moll’s topic is “An Empirical Analysis of Shareholder Oppression Disputes.” This panel will discuss how the doctrine of shareholder oppression protects minority shareholders in closely held corporations from the improper exercise of majority control, what factors motivate a court to find oppression liability, and what factors motivate a court to reject an oppression claim. Professor Moll will also examine how “oppression” has evolved from a statutory ground for involuntary dissolution to a statutory ground for a wide variety of relief.

Professor Murray’s topic is “Enforcing Benefit Corporation Reporting.” Professor Murray will begin his discussion by focusing on the increasing number of states that have included express punishments in their benefit corporation statutes for reporting failures. Part I summarizes and compares the statutory provisions adopted by various states regarding benefit reporting enforcement. Part II shares original compliance data for states with enforcement provisions and compares their rates to the states in the previous benefit reporting studies. Finally, Part III discusses the substance of the benefit reports and provides law and governance suggestions for improving social benefit.

All of this and more from the comfort of your own home. Hope to see you on Zoom today and next year in person at the beautiful UT campus.

September 24, 2021 in Colleen Baker, Compliance, Conferences, Contracts, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Delaware, Ethics, Financial Markets, Haskell Murray, Human Rights, International Business, Joan Heminway, John Anderson, Law Reviews, Law School, Lawyering, Legislation, Litigation, M&A, Management, Marcia Narine Weldon, Nonprofits, Research/Scholarhip, Securities Regulation, Shareholders, Social Enterprise, Teaching, Unincorporated Entities, White Collar Crime | Permalink | Comments (0)

Friday, August 6, 2021

SEC Approves Nasdaq Board Diversity Rule Amendments

The SEC's order is available here.  Chairman Gensler's comments on the new rules are available here.  In pertinent part, Chairman Gensler offers the following observations:

These rules will allow investors to gain a better understanding of Nasdaq-listed companies’ approach to board diversity, while ensuring that those companies have the flexibility to make decisions that best serve their shareholders. . . .  

 . . . These rules reflect calls from investors for greater transparency about the people who lead public companies, and a broad cross-section of commenters supported the proposed board diversity disclosure rule. Investors are looking for consistent and comparable data when making decisions about their investments. I believe that our markets work best when investors have access to such information.

The focus on standardized disclosures in this commentary is of particular interest to me. 

The order is lengthy and includes copious footnotes with references to the many comment letters received on the Nasdaq rule-making proposal.  For those (like me) who research and write in the area, this SEC order is a "must read."  I look forward to spending time with it in the near future.

August 6, 2021 in Corporate Governance, Current Affairs, Joan Heminway, Securities Regulation | Permalink | Comments (0)