July 2014

Warning- do not click on the first link if you do not want to see nudity.

Dov Charney founded retailer American Apparel in 1998 and it became an instant sensation with its 20-something year old consumer base. He mixed a “made in America- sweatshop free” CSR focus with a very sexy/sexual set of ads (hence the warning- – when I first created the link, the slideshow went from a topless “Eugenia in disco pants in menthe” (seriously) to a shot of adorable children’s clothing in about 10 seconds).  No wonder my 18-year old son, who leaves for art school in two weeks, appreciates the ad campaigns. Most of his friends do too- both the males and females. In fact, he indicated that although they all know about the “sweatshop free” ethos, because “it’s in your face when you walk in the stores,” that’s not what draws them to the clothes. As a person who blogs and writes about human rights and supply chains, I almost wish he had lied to me. But he’s no different than many consumers who over-report their interest in ethical sourcing, but then tend to buy based on quality, price and convenience. I am still researching…

A few weeks ago a group of CEOs, business execs, policy-makers, academics and spiritual guides converged for a three-day symposium in Switzerland to discuss specific pathways for blending “inspiration,” “innovation,” and “investment”.  Indeed, the title and central theme of this year’s symposium was “Daring for Big Impact — Blending Inspiration, Innovation and Investment” and I was humbled to be invited to present my work on Shareholder Cultivation and New Governance. I left feeling inspired and with a renewed sense of purpose, and recently posted a summary of the discussions on the HuffPo. A link to that piece is available here.

There is a new face on an old problem — American companies “moving” overseas in part to avoid U.S. taxes — that has increased in popularity in the last several years and recently gained political attention. Last week President Obama and Treasury Secretary Jacob J. Lew called for tax reform to encourage economic patriotism and to deter corporate defectors, calling the overseas moves legal, but immoral.

Two structural features of the U.S. tax code incentivize corporations to move abroad. The U.S. corporate tax rate, at 35 percent, is high compared to the average Organization for Economic Cooperation and Development (OECD) rate of 25 percent, and the average European Union rate of 21 percent. Many corporations effectively pay much less than 35 percent, after factoring in loopholes and deductions, policies that cost approximately $150 billion in untaxed revenue last year. But the reported tax rate is high compared to other jurisdictions and the complexity required to reduce that rate in practice also is a deterrent.

Second, other countries like the United Kingdom become attractive foreign tax locations because they operate under a territorial system that does not tax profits earned outside of the home country. Under the U.S. system, however, returning…

While I will miss my friends at the wonderful SEALS conference, I am excited to be attending and presenting at the Academy of Legal Studies in Business (ALSB) conference in Seattle next week.

For the ALSB conference, the organizers have set up a Guidebook App.  I am just now exploring all the features, but it looks like an impressive and useful tool.

The App includes:

  • The conference program.
  • The conference schedule.
  • Your schedule. You create your own schedule and can have reminders send to your phone.
  • Full text of all the conference papers, organized by subject, author, and title.
  • An attendee list, where attendees can share their contact information.
  • In-app social networking.
  • Information about exhibitors.
  • A survey.
  • Information about Seattle (restaurants, attractions, etc.) 

There is a free version of Guidebook, but it looks like this ALSB Conference App has features of the rather expensive paid plans.  The free version is limited to 200 downloads and doesn’t appear to allow inclusion of presentation materials.  Given the textbook publisher listed at the bottom of the App, I am guessing that the textbook publisher paid at least part of the cost, though that is pure speculation on my part.

While pricey…

This week, two of my co-bloggers shared some great insights on the revamped American Apparel board of directors.  See Marcia Narine quoted in The Guardian article American Apparel adds its first woman to revamped board of directors; Joan Heminway, American Apparel 1, NFL 0. For those not following the American Apparel saga, the New York Times recently reported:

The founder and chief executive of American Apparel, Dov Charney, was fired this week because an internal investigation found that he had misused company money and had allowed an employee to post naked photographs of a former female employee who had sued him, according to a person with knowledge of the investigation. 

Beyond the public relations problems surrounding Charney’s departure, American Apparel is struggling financially as sales have dropped dramatically. As an initial step in trying start a turnaround, the company announced four new board members, including the company’s first female director, Colleen Birdnow Brown, former chief executive of Fisher Communications. 

When I opened the Guardian article quoting Marcia, I had another article open in the tab next to it from the Washington Post’s On Leadership section: For women and minorities, advocating for diversity has a downside.  That article explained:

In corporate America, diversity is about as controversial as motherhood and apple pie. CEOs love to tout the number of women in their upper ranks. Human resource departments like to trumpet their diversity programs in glossy reports.

But a new study finds that for female and minority executives, being seen as an advocate for diversity could actually have a downside. The researchers behind the study, which will be presented at the Academy of Management’s annual conference in early August, found that women and minorities who were rated by their peers as being good at managing diverse groups or respecting gender or racial differences also tended to get lower performance ratings. That’s because they may be viewed as “selfishly advancing the social standing of their own low-status demographic groups,” the researchers write, a no-no when it comes to rating good managers.

Please click below to read more.

As many readers (and all of my friends) know, I am a bit of a sports fan.  Having been a college athlete (field hockey, at Brown University, for trivia buffs), I focus most of my attention on college games.  I even served on The University of Tennessee’s Athletics Board for a few years.  But my Dad and I used to watch professional football and baseball a lot together when I was a kid (still do, when we are in the same place at the right time), so I also maintain a casual interest in professional sports.

I also have an interest in fashion, especially women’s fashion (maybe less well known, except by close friends).  I have friends in the industry and find aspects of it truly fascinating.  I even used to subscribe to Women’s Wear Daily, the fashion industry trade rag.  I am the faculty advisor to the College of Law’s Fashion and Business (FAB) Law student organization.

This personal background is prelude to my interest in two current events stories that I see as parallels.  I am trying to sort them through on a number of levels. Maybe you can help.  Here are the top lines of each story.

  • Last Thursday, the National Football League (NFL) suspended Baltimore Ravens running back Ray Rice for two games, fined him $58,000 dollars, and asked him to seek counseling after its investigation of an incident relating to a video in which Rice was depicted dragging his then-fiance, now wife, by her hair after punching her in the face (allegedly rendering her unconscious).
  • The very same day, American Apparel (AA) announced a new slate of directors who will assume positions on the AA board in early August as a result of investor intervention and a boardroom blood bath following on lagging profits and continuing investigations of allegations of sexual misconduct (most of it, as I understand it, not new news) against AA’s founder and former CEO and director, Dov Charney, whose management roles at the firm were suspended by the board back in June.

The new crowdfunding exemption in section 4(a)(6) of the Securities Act will, once the SEC adopts the rules required to implement it, allow ordinary investors to invest in unregistered securities offerings. Will those unsophisticated investors go down in flames or will they be able to make rational investment choices?

Some proponents of crowdfunding argue that crowdfunding benefits from the so-called “wisdom of the crowd“: that the collective, consensus choice that results from crowdfunding is better than what any individual could do alone, and often as good as expert choices. A recent study seems to support that view.

Two business professors—Ethan R. Mollick at the Wharton School and Ramana Nanda at Harvard—looked at crowdfunding campaigns for theater projects. They submitted those projects to people with expertise in evaluating theater funding applications and compared the expert evaluations to the actual crowdfunding results.

Mollick and Nanda found a strong positive correlation between the projects funded by the crowd and those rated highly by the experts. In other words, crowds were more likely to fund the campaigns the experts preferred. In addition, projects funded by the crowd that were not rated highly by the experts did just as well as the…

I have posted an updated draft of my latest piece, “Corporate Social Responsibility & Concession Theory” (forthcoming __ Wm. & Mary Bus. L. Rev. __) on SSRN (here). Here is the abstract:

This Essay examines three related propositions: (1) Voluntary corporate social responsibility (CSR) fails to effectively advance the agenda of a meaningful segment of CSR proponents; (2) None of the three dominant corporate governance theories – director primacy, shareholder primacy, or team production theory – support mandatory CSR as a normative matter; and, (3) Corporate personality theory, specifically concession theory, can be a meaningful source of leverage in advancing mandatory CSR in the face of opposition from the three primary corporate governance theories. In examining these propositions, this Essay makes the additional claims that Citizens United: (A) supports the proposition that corporate personality theory matters; (B) undermines one of the key supports of the shareholder wealth maximization norm; and (C) highlights the political nature of this debate. Finally, I note that the Supreme Court’s recent Hobby Lobby decision does not undermine my CSR claims, contrary to the suggestions of some commentators.

I expect to have at least one more meaningful round of edits, so all comments…

Alabama

Last year, when many law schools made no new hires, Alabama was one of the most active law schools on the market. Alabama hired a new dean and five new faculty members.  It appears that Alabama is looking to hire again this year.  

The University of Alabama School of Law is seeking applications from entry level or lateral candidates.   They will accept applications from applicants in all subject areas, but have a particular interest in applicants that research and teach in one or more of the following areas:

business law (including enterprise, finance, and/or securities); administrative regulation (including the regulatory state and/or regulated industries or activities); intellectual property (specifically trademark and copyright); and criminal law (including substantive criminal law and/or criminal procedure).

(Emphasis added, for the benefit of our business law readers.)

More information is available here.