Greetings from Havana. I spent 3 days last week with the Florida bar learning about the Cuban legal system and foreign investment from local and Canadian lawyers and a Cuban-based American reporter. I have spent the past several days looking at art from over 40 countries at the Biennal. My internet is spotty and I’m typing this on my phone so please excuse any spacing issues. Only 5 percent of people have internet access so a hotel lobby is prized real estate.
Over the next few months I will be researching about Cuba, foreign investment, and the human rights implications. I have a particular interest in this because for many years pre-academy I had to ensure that my former company and its subsidiaries did not violate the law by doing business with Cuba. Although the embargo is still in place, more and more US companies are applying every day for OFAC licenses to enter the Cuban market.
If you have any insight/opinions on the pros/cons of bilateral investment treaties (there are already dozens with Cuba), whether Cuba will follow the VietNam model for modernizing its economy, or whether foreign investment can spur human rights reforms or just perpetuate the status
The outsourcing of human rights enforcement to corporations- EU-style
I haven’t met Hollywood producer Edward Zwick, who brought the movie and the concept of Blood Diamonds to the world’s attention, but I have had the honor of meeting with medical rock star, and Nobel Prize nominee Dr. Denis Mukwege. Both Zwick and Mukwege had joined numerous NGOs in advocating for a mandatory conflict minerals law in the EU. I met the doctor when I visited Democratic Republic of Congo in 2011 on a fact finding trip for a nonprofit that focuses on maternal and infant health and mortality. Since Mukwege works with mass rape victims, my colleague and I were delighted to have dinner with him to discuss the nonprofit. I also wanted to get his reaction to the Dodd-Frank conflict minerals regulation, which was not yet in effect. I don’t remember him having as strong an opinion on the law as he does now, but I do remember that he adamantly wanted the US to do something to stop the bloodshed that he saw first hand every day.
The success of the Dodd-Frank law is debatable in terms of stemming the mass rape, use of child slaves, and violence against innocent civilians. Indeed, earlier this month
Call for Papers: Business and Human Rights
Business and Human Rights Junior Scholars Conference
The Rutgers Center for Corporate Governance, The University of Washington School of Law, and the Business and Human Rights Journal (Cambridge University Press) announce the first Business and Human Rights Junior Scholars Conference, to be held September 18, 2015 at the Rutgers School of Law – Newark in Newark, New Jersey, just outside of New York City. The Conference will pair approximately ten junior scholars writing at the intersection of business and human rights issues with senior scholars in the field. Junior scholars will have an opportunity to present their papers and receive feedback from senior scholars. Upon request, participants’ papers may be considered for publication in the Business and Human Rights Journal (BHRJ), published by Cambridge University Press.
All junior scholars will be tenure-track professors who are either untenured or have been tenured in the past three years. The Conference is interdisciplinary; scholars from all disciplines are invited to apply, including law, business, human rights, and global affairs. The papers must be unpublished at the time of presentation.
To apply, please submit an abstract of no
Did a Slave Make Your Product and Do You Care? The California AG Thinks So
Last week, I looked lovingly at a picture of a Starbucks old-fashioned grilled cheese sandwich. It had 580 calories. I thought about getting the sandwich and then reconsidered and made another more “virtuous” choice. These calorie disclosures, while annoying, are effective for people like me. I see the disclosure, make a choice (sometimes the “wrong” one), and move on.
Regular readers of this blog know that I spend a lot of time thinking about human rights from a corporate governance perspective. I thought about that uneaten sandwich as I consulted with a client last week about the California Transparency in Supply Chains Act. The law went into effect in 2012 and requires retailers, sellers, and manufacturers that exceed $100 million in global revenue that do business in California to publicly disclose the degree to which they verify, audit, and certify their direct suppliers as it relates to human trafficking and slavery. Companies must also disclose whether or not they maintain internal accountability standards, and provide training on the issue in their direct supply chains. The disclosure must appear prominently on a company’s website, but apparently many companies, undeterred by the threat of injunctive action by the state Attorney
Is a national bar exam on the way?
I currently teach two classes that are on the bar exam—civil procedure and business associations. Many of my BA students are terrified of numbers and don’t know much about business and therefore likely would not take the course if it were not required. I know this because they admit that they take certain classes only because they are required or because they will be tested on the bar, and not because they genuinely have an interest in learning the subject. I went to Harvard for law school and although I had an outstanding education, I learned almost nothing that helped me for the NY, NJ, or FL bars (hopefully that has changed). I owe all of my bar passages to bar review courses so naturally (naively?), I think that almost any student can learn everything they need to know for the bar in a few short months assuming that they had some basic foundation in law school and have good study habits.
The pressure to ensure that my students pass the bar exam definitely informs the way I teach. Though there has only been one round of civil procedure testing on the multistate, this semester I found myself ensuring that
The New White Collar Whistleblower: Compliance and Audit Professionals as Tipsters
I’ve been thinking a lot about whistleblowers lately. I serve as a “management” representative to the Department of Labor Whistleblower Protection Advisory Committee and last week we presented the DOL with our recommendations for best practices for employers. We are charged with looking at almost two dozen whistleblower laws. I’ve previously blogged about whistleblower issues here.
Although we spend the bulk of our time on the WPAC discussing the very serious obstacles for those workers who want to report safety violations, at the last meeting we also discussed, among other things, the fact that I and others believed that there could be a rise in SOX claims from attorneys and auditors following the 2014 Lawson decision. In that case, the Supreme Court observed that: “Congress plainly recognized that outside professionals — accountants, law firms, contractors, agents, and the like — were complicit in, if not integral to, the shareholder fraud and subsequent cover-up [Enron] officers … perpetrated.” Thus, the Court ruled, those, including private contractors, who see the wrongdoing but may be too fearful of retaliation to report it should be entitled to SOX whistleblower protection.
We also discussed the SEC’s April KBR decision, which is causing hundreds
Tennessee . . . . The Business Law State? Yay For Us!
OK. So, Tennessee is not Delaware. But the Tennessee legislature and Supreme Court have been busy bees this spring on business law matters. Here’s the brief report.
In the last week of the legislative term, the Tennessee Senate and House adopted the For-Profit Benefit Corporation Act, about which I earlier blogged here, here, and here. Although I remain skeptical of the legislation, it looks like the governor will sign the bill. So, we will have benefit corporations in Tennessee. We’ll see where things go from there . . . .
The Tennessee legislature also passed a technical corrections bill for the Tennessee Business Corporation Act. The bill was drafted by the Tennessee Bar Association’s Business Entity Study Committee (on which I serve and to which I have referred in the past), a joint project of the Tennessee Bar Association’s Business Law Section and Tax Law Section. The governor has already signed this bill into law.
Separately, in a bit of a stealth move (!), the Tennessee Supreme Court recently announced the establishment of a business court, an institution many other jurisdictions already have. The court is being introduced as a pilot project in Davidson County (where Nashville resides)–but only, as I understand it, to iron the kinks out before introducing the court on a permanent basis. Interestingly, the Tennessee Bar Association Business Law Section Executive Council was not informed about the new court project until its public announcement in the middle of March. Although we found that a bit odd, the “radio silence” is apparently attributable to the excitement of the Tennessee Supreme Court to get the project started effective as of May 1 and the deemed lack of need for a study on the subject before proceeding. Regardless, I think it’s safe to say that the bar welcomes the introduction of a court that specializes in business law cases as a matter of principle. Again, we’ll see where it goes from here.
A few reflections on all this follow.
The EU’s Conflict over Conflict Minerals
Regular readers know that I have blogged repeatedly about my opposition to the US Dodd-Frank conflict minerals rule, which aims to stop the flow of funds to rebels in the Democratic Republic of Congo. Briefly, the US law does not prohibit the use of conflict minerals, but instead requires certain companies to obtain an independent private sector third-party audit of reports of the facilities used to process the conflict minerals; conduct a reasonable country of origin inquiry; and describe the steps the company used to mitigate the risk, in order to improve its due diligence process. The business world and SEC are awaiting a First Amendment ruling from the DC Circuit Court of Appeals on the “name and shame” portion of the law, which requires companies to indicate whether their products are DRC Conflict Free.” I have argued that it is a well-intentioned but likely ineffective corporate governance disclosure that depends on consumers to pressure corporations to change their behavior.
The proposed EU regulation establishes a voluntary process through which importers of certain minerals into the EU self-certify that they do not contribute to financing in “conflict-affected” or “high risk areas.” Unlike Dodd-Frank, it is not limited to Congo.
Makin’ Tennessee For-Profit Benefit Corporation Sausage
“Laws, like sausages, cease to inspire respect in proportion as we know how they are made.” — John Godfrey Saxe
This is a brief legislative update on the progress of Tennessee’s current bills, introduced in the house (HB0767–amendment not yet filed) and senate (SB0972), to institute the benefit corporation as a distinct for-profit business corporation in the State of Tennessee. The links provided are to the current versions of the bill, which reflect a significant amendment, as described below.
As you may know from my prior posts (including here and here), I am a benefit corporation skeptic. Please read those posts for details. And within the Tennessee Bar Association (TBA) Business Law Section Executive Council and Business Entity Study Committee (our state bar committee that vets changes to Tennessee business associations and other business laws), I am not alone. We have rejected bills of this kind several times over the past few years when the matter has been put to us for review by the TBA. This year was no different. We opposed the benefit corporation bills that were introduced in Tennessee this year, too.
What was different this time around, was that the folks at B Lab had gotten the attention of the Chamber of Commerce and Industry in Tennessee, who appear(ed) to have some misunderstandings about the current state of Tennessee corporate governance law and came to push for adoption of the bill in committee in both houses of the legislature. Given that we were late to the party and that the members of our TBA Council and Committee are very busy lawyers, our efforts to re-educate members of the relevant committees were not as effective as we would have liked. But we ultimately were afforded two weeks to attempt to write an amended bill–one that better reflected Tennessee law and norms.
Now, any of you who have worked on a project like this before know that two weeks is not enough time to do a professionally responsible job in spotting and tracking down all of the issues that the introduction of a new business form routinely and naturally raises. Heck. We couldn’t even get all the constituents around the table that we would want around the table to debate and review the legislation in two weeks! [It seems hardest to find a plaintiff’s bar lawyer to sit in with us, but we found a great one for our recent work on the Tennessee Business Corporation Act (TBCA).] Our requests for more time to work on the proposed legislation were, however, rejected.
So, we set out to make a better sausage . . . .
Would the world be a better place if law students were shareholders?
It’s that time of year again where I have my business associations students pretend to be shareholders and draft proposals. I blogged about this topic last semester here. Most of this semester’s proposals related to environmental, social and governance factors. In the real world, a record 433 ESG proposals have been filed this year, and the breakdown as of mid-February was as follows according to As You Sow:
Environment/Climate Change- 27%
Political Activity- 26%
Human Rights/Labor-15%
Sustainability-12%
Diversity-9%
Animals-2%
Summaries of some of the student proposals are below (my apologies if my truncated descriptions make their proposals less clear):
1) Netflix-follow the UN Guiding Principles on Business and Human Rights and the core standards of the International Labour Organization
2) Luxottica- separate Chair and CEO
3) DineEquity- issue quarterly reports on efforts to combat childhood obesity and the links to financial risks to the company
4) Starbucks- provide additional disclosure of risks related to declines in consumer spending and decreases in wages
5) Chipotle- issue executive compensation/pay disparity report
6) Citrix Systems-add board diversity
7) Dunkin Donuts- eliminate the use of Styrofoam cups
8) Campbell Soup- issue sustainability report
9) Shake Shack- issue sustainability report
10) Starbucks- separate