Tuesday, January 26, 2021
Over at Law & Liberty, James Rogers reviews Cass Sunstein's "Too Much Information: Understanding What You Don't Want to Know." Below is a brief excerpt from the review. There are apparently at least some references to the SEC in the book.
[Sunstein] writes, “The primary question in this book is simple: When should government require companies, employers, hospitals, and others to disclose information?” His answer, he writes, is simple, although perhaps deceptively simple. Government should require disclosure “When information would significantly improve people’s lives.” The surprise is that the book focuses mainly on the argument that making judgment of when disclosure “improves people’s lives” can be so complicated that government policymakers often should not attempt it except under carefully identified conditions.... The book reads almost as though Sunstein started the book with one hypothesis in mind—that he would develop a framework that would help with developing sensible government disclosure policies going forward—but he instead became increasingly skeptical of his initial project as he worked through the research.
Sunday, January 24, 2021
Professor Megan Wischmeier Shaner (Associate Dean for Research & Scholarship; President's Associates Presidential Professor of Law, University of Oklahoma College of Law) recently published Privately Ordered Fiduciaries (28 Geo. Mason L. Rev. 345 (2020)). Below is an excerpt from the Introduction that might be of interest to readers.
Over the past two decades, legal and practical hurdles to developing doctrine addressing the corporate officer have been cleared away. In 2004, the Delaware Code was amended to provide for personal jurisdiction over nonresident officers of Delaware corporations. “Around this same time there was a dramatic shift underway in corporate governance norms that had been buttressed by federal regulation to create greater board independence from officers.” With fewer board seats occupied by company executives, officer conduct was no longer reliably regulated by bootstrapping obligations to an officer's concurrent director status, underscoring the need for specific rules addressing officer obligations.
The separation of director and officer status in public corporations led to a heightened focus on officers as distinct legal actors in the corporation and on the accompanying legal standards that would govern them. The Delaware Supreme Court's 2009 decision in Gantler v. Stephens clarified, in part, the fiduciary obligations and accountability of corporate officers. In Gantler, the court held that “officers of Delaware corporations, like directors, owe fiduciary duties of care and loyalty, and that the fiduciary duties of officers are the same as those of directors.” These developments in corporate law, individually and collectively, cleared a path for the exploration and development of the legal contours of officer duties. The courts, stockholders, and their counsel, however, have declined the invitation to tackle officer accountability and responsibility. And somewhat ironically, when faced with the few officer challenges that have been brought before them, the Delaware courts have applied a director-centric lens in evaluating officer issues, narrowing the potential avenues for legal challenges, closing the door on future doctrinal development, and limiting the guidance available to market actors.
The absence of officer doctrine has not gone unnoticed. Academics, jurists, corporate managers, and their counsel have all commented on the ambiguity that exists with respect to the legal rules governing officer decisionmaking and liability. In fall 2018, the Officer Liability Task Force (the “Task Force”) of the American Bar Association (“ABA”) met for the first time to discuss: (1) the uncertainty in the law surrounding the nature and scope of the fiduciary duties of, and applicability of the business judgment rule to, corporate officers; and (2) potential ways to address that uncertainty, including whether any potential products, such as annotated model employment agreements, would assist in providing additional clarity. The Task Force's objectives are, however, relatively narrow ….
This Article tackles the broader issues raised by the Task Force's work, taking a deep dive into the issue of private ordering of corporate officer fiduciary obligations and liability.
Wednesday, January 20, 2021
Via Christopher Rufo (here):
Today, President Biden rescinded the Trump executive order banning critical race theory training programs from the federal government.
Critical race theory is a grave threat to the American way of life. It divides Americans by race and traffics in the pernicious concepts of race essentialism, racial stereotyping, and race-based segregation—all under a false pursuit of “social justice.” Critical race theory training programs have become commonplace in academia, government, and corporate life, where they have sought to advance the ideology through cult-like indoctrination, intimidation, and harassment.
It is time to fight back. Last year, I declared a “one-man war” against critical race theory, which led to the presidential order banning these trainings from the federal government. Today, I am announcing a new coalition of law firms and legal foundations with the explicit goal of fighting critical race theory in the courts. This coalition, called Stop Critical Race Theory, has already filed three lawsuits against public institutions conducting critical race theory programs and, in the coming months, will file additional lawsuits in the state and federal courts.
Our ambition is to take one of these cases to the United States Supreme Court and establish that critical race theory-based programs—which perpetuate racial stereotypes, compel discriminatory speech, and create hostile working environments—violate the Civil Rights Act of 1964 and the United States Constitution.
Monday, January 18, 2021
[I found the following in my inbox this morning and subsequently received permission from Dean Peters to republish it here.]
Dear members of the Akron Law family,
Over the weekend, I revisited Martin Luther King Jr.’s astounding Letter from a Birmingham Jail. If you haven’t read it, or haven’t read it recently, it is worth ten minutes of your time on this day devoted to Dr. King’s legacy. (Be aware that Dr. King twice repeats an offensive epithet in the Letter to describe racist insults in the South.) Letter from a Birmingham Jail is essential reading for all Americans, and it carries particular significance for lawyers.
Dr. King wrote Letter from a Birmingham Jail in April 1963, at the height of the Civil Rights Movement and a few months before his “I Have a Dream” speech in Washington. He and his colleagues had been arrested for illegally marching to protest segregation in Birmingham, Alabama, the fiefdom of the infamous Theophilus Eugene “Bull” Connor and his fire hoses and police dogs. While Dr. King sat in jail, a group of white Alabama clergymen published an open letter denouncing King’s methodology of public (and sometimes illegal) protest and resistance. The white clergy insisted that the anti-segregationist cause “should be pressed in the courts and in negotiations among local leaders, not in the streets.”
Letter from a Birmingham Jail was Dr. King’s response to this indictment, and there are many aspects of it that remain strikingly resonant today. The Letter is a cogent defense of civil disobedience, one of the most eloquent explorations of that topic ever written. But it is not an excuse for thoughtless lawbreaking or a call for disobedience without consequences. And it is a powerful rejection of the urge to violence.
In the Letter, Dr. King argued that while a person “has not only a legal but a moral responsibility to obey just laws, … one has a moral responsibility to disobey unjust laws.” But King was meticulous about the distinction between just and unjust laws. An unjust law is not simply a law that one does not like, or even a law that one personally believes to be unjust. Rather, an unjust law is one that is rotten at its core – a law that is made or applied so as to deny the equal humanity of those it purports to bind. For example, King wrote, “[a] law is unjust if it is inflicted on a minority that, as a result of being denied the right to vote, had no part in enacting or devising the law.”
Segregationist laws were unjust in this way, Dr. King understood, and so disobedience of them was justified. But even those who engage in justified disobedience had to be willing to pay the consequences: “In no sense do I advocate evading or defying the law …. That would lead to anarchy. One who breaks an unjust law must do so openly, lovingly, and with a willingness to accept the penalty.” For King, “an individual who breaks a law that conscience tells him is unjust, and who willingly accepts the penalty …, is in reality expressing the highest respect for law.”
Dr. King thus accepted the crucial distinction between peacefully resisting a particular unjust law and “defying the law” itself. And he emphatically rejected the legitimacy of violent disobedience of the law. In his Letter, King denounced the “force … of bitterness and hatred” that tugged at some opponents of segregation, one that “comes perilously close to advocating violence.” In place of violence, King advocated “a type of constructive, nonviolent tension which is necessary for growth. … It seeks so to dramatize [an] issue that it can no longer be ignored.”
These central threads of Dr. King’s message – the legitimacy of peaceful civil disobedience and the illegitimacy of unequal laws; the importance of respect for the underlying institution of the law; and above all the utter rejection of violence – deserve our attention now. And there is another dimension of Letter from a Birmingham Jail that carries lessons for us today. The Letter is an unfailingly civil document and a fastidiously reasoned one. King takes his antagonists to task, certainly; but he never insults them or the intelligence of his readers. He recognizes that his real audience is the nation and posterity, not the intransigent white clergymen whose letter sparked his reply. And so he is careful about his facts and scrupulous about his assertions. He lets his arguments speak for themselves.
Dr. King was an extraordinary man who lived in extraordinary times. We live in such times too, and although we can only glimpse Dr. King’s greatness across the distance of years, we can aspire for ourselves to the values he espoused: civility in the face of deep disagreement; reasoned argument supported by facts; abhorrence of violence; and an unflinching desire to make our laws more just.
Please be well; be safe; and be kind and respectful to each other.
Thursday, December 17, 2020
AALS Panel: Perspectives on Shareholder and Stakeholder Primacy (Friday, January 8, 2021, 1:15 - 2:30 pm)
If you are attending the AALS Annual Meeting, I hope to see you here (Zoom link details forthcoming):
For Whose Benefit Public Corporations? Perspectives on Shareholder and Stakeholder Primacy
Sponsored by the Section on Socio-Economics
Co-Sponsored by the Sections on Business Associations and Securities Regulation
Friday, January 8, 2021, 1:15 - 2:30 pm
(Papers drawn from this program will be published in the University of the Pacific Law Review)
On August 19, 2019, the Business Roundtable, a self-described “association of chief executive officers of America’s leading companies,” issued a statement seeking to redefine the purpose of the corporation by moving away from shareholder primacy and towards a “commitment to all stakeholders.” Since that time, corporate governance experts have continued to vigorously debate the merits of shareholder primacy and stakeholder primacy. Focusing on tensions and synergies among the financial and other socio-economic interests of the corporation and its fiduciaries, shareholders, and other stakeholders, this panel seeks to provide relevant perspectives on the current state of this debate.
Robert Ashford (Syracuse)
Lucian Bebchuk (Harvard)
Margaret Blair (Vanderbilt)
June Carbone (Minnesota)
Joshua Fershée (Dean, Creighton)
Sergio Gramitto (Monash)
Stefan Padfield (Moderator, Akron)
Edward Rubin (Vanderbilt)
Marcia Narine Weldon (Miami)
From the SEC press release (here):
The Securities and Exchange Commission today charged Robinhood Financial LLC for repeated misstatements that failed to disclose the firm’s receipt of payments from trading firms for routing customer orders to them, and with failing to satisfy its duty to seek the best reasonably available terms to execute customer orders. Robinhood agreed to pay $65 million to settle the charges.
According to the SEC’s order, between 2015 and late 2018, Robinhood made misleading statements and omissions in customer communications, including in FAQ pages on its website, about its largest revenue source when describing how it made money – namely, payments from trading firms in exchange for Robinhood sending its customer orders to those firms for execution, also known as “payment for order flow.” As the SEC’s order finds, one of Robinhood’s selling points to customers was that trading was “commission free,” but due in large part to its unusually high payment for order flow rates, Robinhood customers’ orders were executed at prices that were inferior to other brokers’ prices. Despite this, according to the SEC’s order, Robinhood falsely claimed in a website FAQ between October 2018 and June 2019 that its execution quality matched or beat that of its competitors. The order finds that Robinhood provided inferior trade prices that in aggregate deprived customers of $34.1 million even after taking into account the savings from not paying a commission.
Tuesday, December 15, 2020
"$20,000 in scholarships are available to the high school students who best answer why 'free speech is a better idea than censorship.'"
For the high school student in your life:
The mission of FIRE is to defend and sustain individual rights at America’s colleges and universities. These rights include freedom of speech, legal equality, due process, religious liberty, and sanctity of conscience—the essential qualities of individual liberty and dignity. In addition to defending the rights of students and faculty, FIRE works to educate students and the general public on the necessity of free speech and its importance to a thriving democratic society.
The freedom of speech, enshrined in the First Amendment to the Constitution, is a foundational American right. Nowhere is that right more important than on our college campuses, where the free flow of ideas and the clash of opposing views advance knowledge and promote human progress. It is on our college campuses, however, where some of the most serious violations of free speech occur, and where students are regularly censored simply because their expression might offend others....
In a persuasive letter or essay, convince your peers that free speech is a better idea than censorship.
Tuesday, December 8, 2020
Over at Defining Ideas, Richard Epstein notes:
This past week, Nasdaq announced that it had applied to the Securities and Exchange Commission for authorization to impose diversity requirements on the boards of directors of its listed companies. The substantive proposal requires that each company include on its board at least two diverse directors, one of whom must be a woman (or, more precisely, one who self-identifies as female) and one who self-identifies as a member of an underrepresented minority, including “Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, two or more races or ethnicities,” or as “LGBTQ+.” Whenever these targets are not met, the listed company must offer a public explanation as to why that is the case.... In defense of its diversity mandate, Nasdaq tries to bring itself within ... traditional rationales by claiming that increasingly diverse boards will help “prevent fraudulent and manipulative acts and practices.” Such avoidance of fraud and manipulation purportedly follows from a decrease in groupthink that comes from airing diverse perspectives.
This made me wonder whether we'll soon be seeing a similarly structured viewpoint diversity proposal from Nasdaq, given that according to the Free Enterprise Project:
The vast majority of members of the boards of directors of the largest companies in the United States are, where their viewpoints are discernable, demonstrably left of center. As Baron Political Affairs, LLC revealed in 2019, every single director of a Fortune 1-10 company who had been elected to political office or who had worked for an administration was (or had worked for) a Democrat. The ratio shifted to 2 Democrats for every Republican in the Fortune 100 generally, but only to 5:1 for financial or tech firms within that group. FEP’s own research, as part of a proposal-review proceeding this past winter, confirmed this trend at AT&T, where every member of the board of directors who had held elective or appointed office had done so as a Democrat or with a Democratic administration.
Turning back to the Defining Ideas piece, Epstein further notes that:
it is appropriate to ask whether the SEC, as a government agency, should give its explicit approval to a policy that introduces explicit racial and gender classifications.... Government imprimatur might give rise to serious constitutional challenges that the Nasdaq report never addresses, let alone resolves.
Monday, December 7, 2020
Friend of the blog Bernard Sharfman has posted The Conflict between Blackrock's Shareholder Activism and ERISA's Fiduciary Duties (Case Western Reserve Law Review, Forthcoming) on SSRN (here). The abstract:
The focus of this Article is on the agency costs that may be created by the empty voting of investment advisers to index funds and how they can be mitigated so as to protect the value of private employee pension benefit plans. This Article focuses on BlackRock because it has taken a leadership role in the leveraging of its delegated voting authority. Therefore, the issue I address in this white paper is whether the fiduciary duties of a plan manager of an “employee pension benefit plan,” as authorized under the Employee Retirement Income Security Act of 1974 (“ERISA”), requires it to investigate BlackRock’s shareholder activism. This indirect approach is required as the fiduciary duties of ERISA do not generally extend to mutual funds and ETFs and their investment advisors.
This Article takes the position that a plan manager has a fiduciary duty, the duty of prudence, to investigate BlackRock’s shareholder activism. This duty applies not only to the BlackRock’s mutual funds or ETFs that an ERISA plan invests in but also to those BlackRock fund selections that it makes available to its participants and beneficiaries in self-directed accounts.
Given these fiduciary duties, this Article argues that if a plan manager were to investigate BlackRock’s shareholder activism, especially its engagement strategy, it would likely find it to be in conflict with the manager’s fiduciary duties. Such a finding would require a plan manager to seek out other reasonably available alternatives that is not associated with such shareholder activism.
While the focus of this Article is on BlackRock’s delegated voting authority and associated shareholder activism, it is meant to apply to any and all investment advisers who attempt to leverage their delegated voting authority for purposes of engaging in such activism. Moreover, the Department of Labor should provide guidance to plan managers on when the investment products of investment advisers with delegated voting authority need to be excluded.
This Article was presented at the George A. Leet Business Law Symposium (Case Western Reserve University School of Law) on Nov. 6, 2020.
Thursday, December 3, 2020
The world lost an intellectual giant this week when the economist Walter E. Williams passed away. Williams was the John M. Olin Distinguished Professor of Economics at George Mason University, an economist’s economist, a scholar’s scholar, and an unparalleled communicator of economic wisdom and ideas. He loved liberty, defended it eloquently, and went to great lengths to show how good intentions don’t readily translate into good outcomes.
Thomas Sowell, as quoted by his Twitter tribute account:
There was a time when the black conservative community would have consisted of me and Walter Williams. I know Walter used to say the two of us should never fly on the same plane otherwise the whole movement will disappear if the plane goes down.
Here are some prominent Conservative Black Intellectuals who have written extensively on race/ethnic relations. Many have argued, with evidence, that affirmative action does not largely help its intended beneficiaries, and that statistical disparities do not imply discrimination[: Thomas Sowell, Walter E. Williams, Shelby Steele, Jason Riley, Candace Owens, Clarence Thomas, Ben Carson, John McWhorter, Larry Elder, Star Parker.] Will any of their books and articles be included in the enhanced efforts to study and reduce "racial injustice?" Probably not.
Williams was an Army veteran, a Ph.D. economist published in numerous peer-reviewed journals, an author of 11 books, a syndicated columnist whose work appeared in newspapers across the country, a substitute radio host whose voice was heard by millions, a subject of two documentaries, a former chair of the Mason Economics department and a professor at Mason since 1980....
As Williams persisted well beyond retirement age, his passion for economics undimmed, he was the kind of man that made you say, “He’s going to teach until the day he dies.” On Dec. 1, he taught his last class of ECON 811 to complete the semester, ending the 7:20-10:00 p.m. block around 30 minutes early, as was typical. Fewer than 12 hours later, he died, aged 84. R.I.P.
Walter Williams’s last syndicated weekly newspaper column:
Several years ago, Project Baltimore began an investigation of Baltimore's school system. What they found was an utter disgrace. In 19 of Baltimore's 39 high schools, out of 3,804 students, only 14 of them, or less than 1%, were proficient in math. In 13 of Baltimore's high schools, not a single student scored proficient in math. In five Baltimore City high schools, not a single student scored proficient in math or reading. Despite these academic deficiencies, about 70% of the students graduate and are conferred a high school diploma -- a fraudulent high school diploma.
The Detroit Public Schools Community District scored the lowest in the nation compared to 26 other urban districts for reading and mathematics at the fourth- and eighth-grade levels. A recent video captures some of this miseducation in Milwaukee high schools: In two city high schools, only one student tested proficient in math and none are proficient in English. Yet, the schools spent a full week learning about "systemic racism" and "Black Lives Matter activism." ....
Should we blame this education tragedy on racial discrimination or claim that it is a legacy of slavery? Dr. Thomas Sowell's research in "Education: Assumptions Versus History" documents academic excellence at Baltimore's Frederick Douglass High School and others.
Some say that educational expenditures explain the gap, but is that true? Look at educational per pupil expenditures: Baltimore city ranks fifth in the U.S. for per pupil spending at $15,793. The Detroit Public Schools Community District spends more per student than all but eight of the nation's 100 largest school districts, or $14,259.... There appears to be little relationship between educational expenditures and academic achievement.
Sunday, November 29, 2020
Came across the abstract below as part of my WestClip Alerts, you can find the SSRN version here.
The approaching anniversary of E.I. duPont deNemours & Co. v. Christopher is the impetus for this exploration and evaluation of the role of “commercial morality” in trade secret misappropriation doctrine. Christopher is the well-known industrial espionage case in which the U.S. Court of Appeals for the Fifth Circuit held that flying an airplane over an under-construction manufacturing facility to take photos of briefly-but-inevitably exposed trade secrets was an “improper means” of accessing a trade secret and was contrary to standards of “commercial morality.”
Commercial morality has played a significant but shifting role in trade secret law over the past seven decades and has become an important part of the contemporary trade secret doctrine lexicon, yet courts and commentators have not explored the meaning of this term. This study fills that gap in the literature by analyzing the origins of the commercial morality doctrine and its proper application in trade secret law. The development of U.S. commercial morality doctrine breaks down into four distinct time periods that illustrate the evolution of the doctrine in trade secret law over time, including the shift from the doctrine's initial use as a way to justify nascent trade secret law and its liability expansion to the doctrine's modern equitable role in structuring injunctive relief for misappropriation.
The analysis also shows that while courts invoke commercial morality when adjudicating misappropriation claims, they do not define the meaning of the term or provide reasoned analysis of its application. This is problematic when courts use the term in lieu of careful analysis of the facts and reasoning underlying their decision. Explicit recognition of the equitable nature of commercial morality doctrine would facilitate judicial application of the concept in a principled and effective manner.
Lynda J. Oswald, The Role of "Commercial Morality" in Trade Secret Doctrine, 96 Notre Dame L. Rev. 125 (2020).
Wednesday, November 25, 2020
For the one BLPB reader who doesn't also check in on The CLS Blue Sky Blog:
Based on an analysis of public communications around earnings announcements, we find that managers are 34 to 43 percent more likely to cite stakeholder value maximization during periods following earnings announcements that fall short of market expectations. This finding is consistent with concerns that the inability to measure stakeholder value may reduce managers’ accountability for firm performance....
Managers seem to be aware that stakeholder-oriented goals may reduce their accountability for performance, but does the manager’s push for stakeholder objectives sway the board’s evaluation of an underperforming manager? We use CEO turnover-performance sensitivity, a measure used in numerous prior studies of CEO evaluation, to determine whether this behavior produces any observable benefit to the manager. Indeed, we find that it does; CEOs that cite stakeholder value maximization as an objective are less likely to see turnover following poor performance.
Tuesday, November 24, 2020
ICYMI: "SEC Proposes Temporary Rules to Facilitate Measured Participation by Certain 'Platform Workers' in Compensatory Offerings"
The Securities and Exchange Commission today voted to propose rules that, on a temporary basis and subject to percentage limits (no more than 15% of annual compensation), dollar limits (no more than $75,000 in three years) and other conditions, would permit an issuer [to] provide equity compensation to certain "platform workers" who provide services available through the issuer's technology-based platform or system.
The proposed rules reflect the significant evolution that has taken place in the composition and participation of the workforce since the Commission last substantively amended Rule 701 or Form S-8, particularly the development of the so-called "gig economy," which has resulted in new work relationships.
Thursday, November 19, 2020
Over at the Harvard Business Law Review, Sanjai Bhagat has posted Economic Growth, Income Inequality, and the Rule of Law (here). Here's what caught my eye:
Besides the size of the national pie, which is measured by GDP, senior policy makers and the media across the globe are increasingly concerned about how this pie is sliced, that is, about income inequality. We find that countries with greater adherence to Rule of Law are characterized by less income inequality. Additionally, we find that countries with greater GDP per capita are characterized by less income inequality; however, once we control for Rule of Law in the country, we do not observe this negative correlation between GDP per capita and income inequality. This further highlights that adherence to the Rule of Law relates to reducing income inequality.
Monday, November 16, 2020
FIRE on "How parents and educators can push back against chilled speech and thought conformity in K-12 education."
The Foundation for Individual Rights in Education (FIRE) was founded in 1999 in response to "hundreds of communications and pleas for help from victims of illiberal policies and double standards that violated their rights and intruded upon their private consciences." Now, FIRE reports that from "partisan lessons, to schoolwide 'belief' statements, to demands for performative activism, we have never seen such intense ideological orthodoxy and compelled speech at the K-12 level." Thus, FIRE is hosting a virtual event: "How parents and educators can push back against chilled speech and thought conformity in K-12 education." The event is scheduled for Nov 19, 2020, at 01:00 PM, and you can register here.
Sunday, November 15, 2020
The following is excerpted from Richard A. Epstein, The Civil Rights Juggernaut, 2020 U. Ill. L. Rev. 1541, 1542–44 (2020).
[T]he expansions in the 1970s and early 1980s of the various provisions of the Civil Rights Act of 1964 were done to advance the purpose of ending segregation and promoting integration. I continue to feel much uneasiness about these decisions, in part because they move away from the initial “colorblind” standard by creating preferences for protected classes and allowing affirmative action in their favor. But none of these cases, whatever their merits, had the effect of targeting small and isolated businesses and individuals for powerful government sanctions. Instead, the earlier string of successes were targeted to make sure that powerful groups did not themselves engage in various forms of invidious discrimination--here the word “invidious” is used to allow for affirmative action programs but only in favor of protected groups. Today, all too many civil rights commissions especially at the state level function only to pressure small businesses and individuals to conform to a powerful and overriding vision of the “right” view of the evils of discrimination across the board. The situation marks a powerful change from the landscape that existed at the start of the civil rights movement in 1938, when Justice Harlan Fiske Stone warned that lax standards of review would not be sufficient to protect what he termed in Carolene Products the “discrete and insular minorities” of today. Today those minority groups are in fact the dominant power-brokers on matters of civil rights, and their influence is all-pervasive, dealing not only with matters of race and sex discrimination, but also with freedom of speech and religion for groups that are not members of the dominant coalition.
It is important to understand that the pervasive modern references to “diversity and inclusion” are not renewed calls to heed the lesson of Dr. Martin Luther King Jr., who proclaimed that what matters is the content of one's character and not the color of one's skin. Nor do such references refer to reaching out to make sure that individuals from all groups and all walks of life are included in modern social discourse. Rather, it is evident from the constant insistence that diversity and inclusion are compelling state interests that any other concern, including freedom of speech and conscience, must take a subordinate place when pitted against them, if only so that people whose views do not fit this modern conception can be shouted down with the justification that their views are so odious that they do not require refutation. One general theme in this discourse is a strong distaste for capitalism and an embrace of controversial causes as though they embody eternal truths….
This creeping orthodoxy is not confined to any single subject matter. As is evident from the pronouncements of once great institutions like Harvard University and the University of California, that same authoritarian impulse now guarantees that the phrase “diversity and inclusion” is transformed into a commitment to establish, in both hiring and admissions, systematic preferences in favor of women and some minority groups, with the deliberate intention of reducing and marginalizing the position of those who do not share that common vision.
Thus, forty-seven years after Professor Baum's early death, both the agenda and the players in the civil rights movement are far different from what they were in those distant times. I often say to myself, virtually every day, that the news will contain some disturbing story about how it is that the civil rights movement has deviated from its original mission. In this lecture I shall talk about some of the cases that I think should give pause to the way in which we think about civil rights.
Wednesday, November 11, 2020
First: To all the veterans -- thank you for your service! As an immigrant who became a U.S. citizen in college and served 6 years of active duty in the U.S. Army before attending law school, I am proud to have joined you in taking the oath to support and defend the Constitution of the United States against all enemies, foreign and domestic.
Second: Jody Greene and Sharif Youssef have published "Human Rights after Corporate Personhood: An Uneasy Merger" (you can order an examination copy here or pre-order via Amazon here). I am grateful to have had the opportunity to contribute a chapter: "Killing Corporations to Save Humans: How Corporate Personhood, Human Rights, and the Corporate Death Penalty Intersect." Here's the University of Toronto Press pitch:
Human Rights after Corporate Personhood offers a rich overview of current debates, and seeks to transcend the "outrage response" often found in public discourse and corporate legal theory. Through original and innovative analyses, the volume offers an alternative account of corporate juridical personality and its relation to the human, one that departs from accounts offered by public law. In addition, it explores opportunities for the application of legal personality to assist progressive projects, including, but not limited to, environmental justice, animal rights, and Indigenous land claims.
Presented accessibly for the benefit of non-specialist readers, the volume offers original arguments and draws on eclectic sources, from law and poetry to fiction and film. At the same time, it is firmly grounded in legal scholarship and, thus, serves as an essential reference for scholars, students, lawmakers, and anyone seeking a better understanding of the interface between corporations and the law in the twenty-first century.
Wednesday, November 4, 2020
Over at Law & Liberty (here), George R. La Noue argues that: "Training sessions based on critical race theory run contrary to an employer’s responsibility to avoid creating a hostile work environment." Here is an excerpt:
Asking one set of employees to confess to the sins of their racial ancestors or their individual current white privilege runs contrary to an employer’s responsibility to avoid creating a hostile work environment.
Laws about hostile or toxic work environments are based in both Title VII and Title IX of the Civil Rights Act. The U.S. Equal Employment Opportunity Commission defines a hostile or toxic work environment as one that involves “unwelcome conduct that is based on race, color, religion, national origins, age, disability, or genetic information.” That conduct “may include, but is not limited to offensive jokes, slurs, epithets or name calling, physical assaults or threats, intimidation, ridicule or mockery, insults or put downs, offensive objects or pictures and interference with work performance.” CRT certainly can involve “slurs, epithets or name calling,” as well as “ridicule or mockery, insults or put downs.”
EEOC cautions against making petty slights, annoyances, or isolated incidents illegal, but calling out one racial group as privileged or fragile in official training sessions or institutional statements surely does create a work environment that is “intimidating, hostile or offensive to reasonable people.” It is impossible to have a civil fact-based discussion about race when the discussion is centered on stereotyping people on the basis of race.
Friday, October 23, 2020
It’s hard to believe that the US will have an election in less than two weeks. Three years ago, a month after President Trump took office, I posted about CEOs commenting on his executive order barring people from certain countries from entering the United States. Some branded the executive order a “Muslim travel ban” and others questioned whether the CEOs should have entered into the political fray at all. Some opined that speaking out on these issues detracted from the CEOs’ mission of maximizing shareholder value. But I saw it as a business decision - - these CEOs, particularly in the tech sector, depended on the skills and expertise of foreign workers.
That was 2017. In 2018, Larry Fink, CEO of BlackRock, told the largest companies in the world that “to prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society…Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders.” Fink’s annual letter to CEOs carries weight; BlackRock had almost six trillion dollars in assets under management in 2018, and when Fink talks, Wall Street listens. Perhaps emboldened by the BlackRock letter, one year later, 181 CEOs signed on to the Business Roundtable's Statement on the Purpose of a Corporation, which “modernized” its position on the shareholder maximization norm. The BRT CEOs promised to invest in employees, deal ethically and fairly with suppliers, and embrace sustainable business practices. Many observers, however, believed that the Business Roundtable statement was all talk and no action. To see how some of the signatories have done on their commitments as of last week, see here.
Then came 2020, a year like no other. The United States is now facing a global pandemic, mass unemployment, a climate change crisis, social unrest, and of course an election. During the Summer of 2020, several CEOs made public statements on behalf of themselves and their companies about racial unrest, with some going as far as to proclaim, “Black Lives Matter.” I questioned these motives in a post I called “"Wokewashing and the Board." While I admired companies that made a sincere public statement about racial justice and had a real commitment to look inward, I was skeptical about firms that merely made statements for publicity points. I wondered, in that post, about companies rushing to implement diversity training, retain consultants, and appoint board members to either curry favor with the public or avoid the shareholder derivative suits facing Oracle, Facebook, and Qualcomm. How well had they thought it out? Meanwhile, I noted that my colleagues who have conducted diversity training and employee engagement projects for years were so busy that they were farming out work to each other. Now the phones aren’t ringing as much, and when they are ringing, it’s often to cancel or postpone training.
Why? Last month, President Trump issued the Executive Order on Combatting Race and Sex Stereotyping. As the President explained:
today . . . many people are pushing a different vision of America that is grounded in hierarchies based on collective social and political identities rather than in the inherent and equal dignity of every person as an individual. This ideology is rooted in the pernicious and false belief that America is an irredeemably racist and sexist country; that some people, simply on account of their race or sex, are oppressors; and that racial and sexual identities are more important than our common status as human beings and Americans ... Therefore, it shall be the policy of the United States not to promote race or sex stereotyping or scapegoating in the Federal workforce or in the Uniformed Services, and not to allow grant funds to be used for these purposes. In addition, Federal contractors will not be permitted to inculcate such views in their employees.
The Order then provides a hotline process for employees to raise concerns about their training. Whether you agree with the statements in the Order or not -- and I recommend that you read it -- it had a huge and immediate effect. The federal government is the largest procurer of goods and services in the world. This Order applies to federal contractors and subcontractors. Some of those same companies have mandates from state law to actually conduct training on sexual harassment. Often companies need to show proof of policies and training to mount an affirmative defense to discrimination claims. More important, while reasonable people can disagree about the types and content of diversity training, there is no doubt that employees often need training on how to deal with each other respectfully in the workplace. (For a thought-provoking take on a board’s duty to monitor diversity training by co-blogger Stefan Padfield, click here.)
Perhaps because of the federal government’s buying power, the U.S. Chamber of Commerce felt compelled to act. On October 15th, the Chamber and 150 organizations wrote a letter to the President stating:
As currently written, we believe the E.O. will create confusion and uncertainty, lead to non-meritorious investigations, and hinder the ability of employers to implement critical programs to promote diversity and combat discrimination in the workplace. We urge you to withdraw the Executive Order and work with the business and nonprofit communities on an approach that would support appropriate workplace training programs ... there is a great deal of subjectivity around how certain content would be perceived by different individuals. For example, the definition of “divisive concepts” creates many gray areas and will likely result in multiple different interpretations. Because the ultimate threat of debarment is a possible consequence, we have heard from some companies that they are suspending all D&I training. This outcome is contrary to the E.O.’s stated purpose, but an understandable reaction given companies’ lack of clear guidance. Thus, the E.O. is already having a broadly chilling effect on legitimate and valuable D&I training companies use to foster inclusive workplaces, help with talent recruitment, and remain competitive in a country with a wide range of different cultures. … Such an approach effectively creates two sets of rules, one for those companies that do business with the government and another for those that do not. Federal contractors should be left to manage their workforces and workplaces with a minimum amount of interference so long as they are compliant with the law.
It’s rare for the Chamber to make such a statement, but it was bold and appropriate. Many of the Business Roundtable signatories are also members of the U.S. Chamber, and on the same day, the BRT issued its own statement committing to programs to advance racial equity and justice. BRT Chair and WalMart CEO Doug McMillon observed, “the racial inequities that exist for many Black Americans and people of color are real and deeply rooted . . These longstanding systemic challenges have too often prevented access to the benefits of economic growth and mobility for too many, and a broad and diverse group of Americans is demanding change. It is our employees, customers and communities who are calling for change, and we are listening – and most importantly – we are taking action.” Now that's a stakeholder maximization statement if I ever heard one.
Those who thought that some CEOs went too far in protesting the Muslim ban, may be even more shocked by the BRT’s statements about the police. The BRT also has a subcommittee to address racial justice issues and noted that “For Business Roundtable CEOs, this agenda is an important step in addressing barriers to equity and justice . . . This summer we took on the urgent need for policing reform. We called on Congress to adopt higher federal standards for policing, to track whether police departments and officers have histories of misconduct, and to adopt measures to hold abusive officers accountable. Now, with announcement of this broader agenda, CEOs are supporting policies and undertaking initiatives to address several other systems that contribute to large and growing disparities.”
Now that stakeholders have seen so many of these social statements, they have asked for more. Last week, a group of executives from the Leadership Now Project issued a statement supporting free and fair elections. However, as Bennett Freeman, former Calvert executive and Clinton cabinet member noted, no Fortune 500 CEOs have signed on to that statement. Yesterday, the Interfaith Center on Corporate Responsibility (ICCR) sent a letter to 200 CEOs, including some members of the BRT asking for their support. ICCR asked that they endorse:
- Active support for free and fair elections
- A call for a thorough and complete counting of all ballots
- A call for all states to ensure a fair election
- A condemnation of any tactics that could be construed as voter intimidation
- Assurance that, should the incumbent Administration lose the election, there will be a peaceful transfer of power
- Ensure that lobbying activities and political donations support the above
Is this a pipe dream? Do CEOs really want to stick their necks out in a tacit criticism of the current president’s equivocal statements about his post-election plans? Now that JPMorgan Chase CEO Jamie Dimon has spoken about the importance of respect for the democratic process and the peaceful transfer of power, perhaps more executives will make public statements. But should they? On the one hand, the markets need stability. Perhaps Dimon was actually really focused on shareholder maximization after all. Nonetheless, Freeman and others have called for a Twitter campaign to urge more CEOs to speak out. My next post will be up on the Friday after the election and I’ll report back about the success of the hashtag activism effort. In the meantime, stay tuned and stay safe.
October 23, 2020 in Contracts, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Employment Law, Ethics, Financial Markets, Human Rights, Legislation, Management, Marcia Narine Weldon, Nonprofits, Stefan J. Padfield | Permalink | Comments (1)
Monday, October 19, 2020
Lots of virtual events that should be of interest to our readers, including the "Showcase Discussion" on Thursday 11/12 from 11:00 a.m. – 12:15 p.m.: A Discussion with Professors Robert George and Cornel West on Freedom of Speech, Freedom of Thought, the Black Lives Matter Movement, and the Cancel Culture. You can find the full schedule and register here.