Wentong Zheng has published Corporations As Private Regulators, 55 U. Mich. J.L. Reform 649. The paper can be downloaded here. Below is an excerpt.

In August 2018, technology giant Microsoft made headlines by announcing that it would soon require its suppliers and contractors with more than fifty employees to offer workers at least twelve weeks of paid parental leave.¹ Microsoft’s new policy closely mirrors a Washington state law requiring that workers in the state receive twelve weeks of paid family leave; it is an effort to extend that same level of benefit to workers outside of the company’s home state.²

While groundbreaking for the world of paid family leave, Microsoft’s move was only one example of an increasingly common trend of corporations weighing in on public policy through corporate action. Following the 2018 mass shooting at Marjory Stoneman Douglas High School in Parkland, Florida, Dick’s Sporting Goods banned sales of assault-style weapons and raised the minimum age for purchase of firearms and ammunition in its stores to twenty-one.³ Citigroup placed restrictions on their new retail business clients, prohibiting them from selling guns to customers who have not passed a background check and are under the…

From what I can tell, law schools are seemingly falling over one another to hire this season. Following an understandable period of dormancy, lots of schools are apparently looking to fill a lot of slots — perhaps restocking to get back to pre-pandemic student-faculty ratios. But there appear to be some dark clouds looming. The news on college enrollments is not great (cf. “First-year and transfer enrollment at Rutgers-Camden is down 27%, and faculty are concerned“), hiring is slowing in some areas (cf. “Some law firms are ‘pulling back the throttle’ on hiring as expenses rise and deal work slows“), winter is coming (cf. “Europe’s household electrical bills could surge by $2 trillion by next year amid a worsening energy crisis“), and some smart market watchers are predicting a long period of significant economic pain ahead (cf. “Chamath Palihapitiya goes into detail on the 2022 economic crisis and warns about an imminent and very prolonged recession.“). Of course, these sorts of predictions are fraught with peril, and — despite the click-bait title of this post — I’m not arguing that newly-hired faculty will be fired even if the gloomy predictions pan out…

I received the following in an email and thought it might be of interest to BLPB readers.

MEDIA ADVISORY

MONDAY: NCLA Presents Oral Argument in Case Challenging Nasdaq Board Diversity Rules  

WHO: NCLA Senior Litigation Counsel Peggy Little, NCLA Litigation Counsel Sheng Li

WHAT: NCLA will appear before Judges Carl E. Stewart, James L. Dennis, and Stephen A. Higginson, in the U.S. Court of Appeals for the Fifth Circuit for a hearing in the case of National Center for Public Policy Research v. SEC.

On August 6, 2021, SEC narrowly approved a Rule requiring disclosure of the aggregate race, gender, and sexual preference of Nasdaq-listed companies, with two of five Commissioners dissenting. The Board Diversity Rule subjects Nasdaq-listed companies to the following requirements: (a) they must disclose information about their board’s self-identified gender, race, and sexual preference; and (b) either (i) meet minimum quotas of individuals of a certain gender, racial, and sexual preference, or (ii) publicly explain why the board does not meet such quotas.

The Board Diversity Rules fall outside of the agency’s regulatory authority.

WHERE: Room 209 of the Wisdom Courthouse, 600 S Maestri Pl, New Orleans, LA 70130

The hearing is open to the public.…

FINRA has returned to the SEC with a new proposed rule change to address problems with its expungement system.  Although the proposal continues to use arbitration to facilitate stockbroker expungements, the new proposal makes some significant changes over prior proposals.

A bit of history may help put this in context.  Two years ago, FINRA released a proposal to reform its expungement process. I wrote two comment letters in response to that proposal, prompting FINRA to amend the proposal twice.   The twice-revised proposal was ultimately withdrawn so FINRA could study the issue before returning with another proposal.  That new proposal is now here.  I put together this chart to track some of my recommendations to see what has been adopted and what has not.

…

I’m currently working on a piece on anti-ESG legislation for our upcoming BLPB Symposium. According to The Heartland Institute (here), as of April 5, 2022, twenty-eight states have initiated some form of “anti-ESG action.” So, recent news of Florida Governor Ron DeSantis pushing for further action in this area caught my eye. Here is an excerpt from relevant coverage by WFSU (go read the full piece here):

DeSantis plans to have the State Board of Administration, which oversees investments, direct pension-fund managers against “using political factors when investing the state’s money.” So-called ESG policies have drawn criticism from Republicans across the country…. Renner, who will become House speaker after the November elections, called the corporate practices a national-security issue and a pocketbook issue. “What we have is these large corporations and banks that are pursuing a woke agenda that is artificially driving up our costs in energy,” Renner said. “There’s a reason why we haven’t built new refineries. There’s a reason why we’re not drilling for oil even though we have more reserves in this country than any other place in the world, it’s because the banks and this woke agenda is choking off their ability to

…

Last week, I posted the abstract to my paper Crony Stakeholder Capitalism (here).  One of the comments to that post perspicaciously noted the issue of “how to ensure democratic accountability for private actors that are taking on social goals historically reserved for democratically accountable government.”  In my brief reply, I focused on the duties to shareholders, but I want to follow-up here to note that I do in fact flag the relevant threat to democracy in a footnote in my paper:

A related concern is the potential for stakeholder capitalism to undermine our political system by shifting governmental power to private actors, thereby undermining public accountability of government. Cf. Dorothy S. Lund, Asset Managers as Regulators, THE CLS BLUE SKY BLOG (June 16, 2022) (“allowing three private investment companies that lack political accountability to set regulatory policies for the U.S. economy is dangerous for our democracy”), available at https://clsbluesky.law.columbia.edu/2022/06/16/asset-managers-as-regulators/ ….

Along these lines, I recently came across some related podcast comments from Vivek Ramaswamy, author of Woke, Inc.: Inside Corporate America’s Social Justice Scam, and co-founder and Executive Chairman of Strive Asset Management (“Our mission is to restore the voices of everyday citizens in the…

I have posted a draft of my latest paper, Crony Stakeholder Capitalism (Kentucky Law Journal, forthcoming), on SSRN (here).  The abstract is below.  Comments are most welcome.

Capitalism in the context of corporate governance may be understood as an economic system that equates efficiency with corporate managers only pursuing projects that they reasonably expect will have a positive impact on the value of the corporation’s shares (accounting for opportunity costs). Such projects may be referred to as positive net-present-value (NPV) projects. Stakeholder capitalism, on the other hand, may be understood a number of different ways, including: (1) an improved form of calculating NPV; (2) a conscious choice to sacrifice some NPV in order to advance broader social objectives; (3) a form of rent-seeking; (4) a form of green-washing; (5) a manifestation of the agency problem whereby managers prioritize their personal political preferences over NPV; (6) a manifestation of the agency problem whereby managers prioritize their personal financial wealth over NPV; (7) a form of crony capitalism. Of these, an argument can be made that only the first is both legal and efficient, at least in the case of Delaware corporations operating under the relevant default rules. Given the…