Corporate Personality

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If you read the title, you’ll see that I’m only going to ask questions. I have no answers, insights, or predictions until the President-elect announces more cabinet picks. After President Trump won the election in 2016, I posed eleven questions and then gave some preliminary commentary based on his cabinet picks two months later. Here are my initial questions based on what I’m interested in — compliance, corporate governance, human rights, and ESG. I recognize that everyone will have their own list:

  1. How will the Administration view disclosures? Will Dodd-Frank conflict minerals disclosures stay in place, regardless of the effectiveness on reducing violence in the Democratic Republic of Congo? Will the US add mandatory human rights due diligence and disclosures like the EU??
  2. Building on Question 1, will we see more stringent requirements for ESG disclosures? Will the US follow the EU model for financial services firms, which goes into effect in March 2021? With ESG accounting for 1 in 3 dollars of assets under management, will the Biden Administration look at ESG investing more favorably than the Trump DOL? How robust will climate and ESG disclosure get? We already know that disclosure of climate

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The post below is the first in Lécia Vicente’s December series that I heralded in my post on Friday.  Due to a Typepad login issue, I am posting for her today.  We hope to get the issue corrected for her post for next week. 

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My series of blog posts cover the recent “Study on Directors’ Duties and Sustainable Corporate Governance” (“Study on Directors’ Duties”) prepared by Ernst & Young for the European Commission. This study promises to set the tone of the EU’s policymaking in the fields of corporate law and corporate governance. The study explains that the “evidence collected over 1992-2018 period shows there is a trend for publicly listed companies within the EU to focus on short-term benefits of shareholders rather than on the long-term interests of the company.” The main objective of the study is to identify the causes of this short-termism in corporate governance and determine European Union (EU) level solutions that permit the achievement of the United Nations (UN) Sustainable Development Goals (SDGs) and the objectives of the Paris Agreement.

Both the United Nations 2030 Agenda and the Paris Agreement are trendsetters, for they have elevated the discussion on sustainable development and climate change mitigation to the global level. That discussion has been captured not only by governments and international environmental institutions but also by corporations. Several questions come to mind.

What is sustainability? This one is critical considering that the global level discussion is often monotone, with the blatant disregard of countries’ idiosyncrasies, the different historical contexts, regulatory frameworks, and political will to implement reforms. The UN defined sustainability as the ability of humanity “to meet the needs of the present without compromising the ability of future generations to meet their own needs.”

The other question that comes to mind is: what is development? Is GDP the right benchmark, or should we be focusing on other factors? There is disagreement among economists on the merit of using GDP as a development measure. Some economists like Abhijit Banerjee & Esther Duflo say, “it makes no sense to get too emotionally involved with individual GDP numbers.” Those numbers do not give us the whole picture of a country’s development.

The Study on Directors’ Duties maintains as a general objective the development of more sustainable corporate governance and corporate directors’ accountability for the company’s sustainable value creation. This general objective would be specifically implemented either through soft law (non-legislative measures) or hard law (legislative measures) that redesign the role of directors (this includes the creation of a new board position, the Chief Value Officer) and directors’ fiduciary duties. This takes me to a third question.

What is the purpose of the company? In other words, what is it that directors should be prioritizing? In a recent blog post, Steve Bainbridge says

I don’t “disagree with the assertion that the law does not mandate that a corporation have as its purpose shareholder wealth maximization” but only because I don’t think it’s useful to ask the question of “what purpose does the law mandate the corporation pursue?

[…] Purpose is always associated with the intellect. In order to have a purpose or aim, it is necessary to come to a decision; and that is the function of the intellect. But just as the corporation has neither a soul to damn nor a body to kick, the corporation has no intellect.

Bainbridge prefers “to operationalize this discussion as a question of the fiduciary duties of corporate officers and directors rather than as a corporate purpose.”

If you’re sipping some hot chocolate while reading this post or buying your Hanukah or Christmas candy, chances are you’re consuming a product made with cocoa beans harvested by child slaves in Africa. Almost twenty years ago, the eight largest chocolate companies, a US Senator, a Congressman,  the Ambassador to the Ivory Coast, NGOs, and the ILO pledged through the Harkin Engel Protocol to eliminate “the worst forms of” child slavery and forced labor in supply chains. In 2010, after seeing almost no progress, government representatives fom the US, Ghana, and the Ivory Coast released a Framework of Action to support the implementation and to reduce the use of child and forced labor by 70% by 2020. But, the number of child slaves has actually increased.

2020 has come and almost gone and one of the Harkin Engel signatories, Nestle, and another food conglomerate, Cargill, had to defend themselves in front of the Supreme Court this week in a case filed in 2005 by former child slaves. The John Does were allegedly kidnapped in Mali and forced to work on cocoa farms in the Ivory Coast, where they worked 12-14 hours a day in 100-degree weather, spoke a different language…

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…

No. You didn’t miss Part 1. I wrote about Weinstein clauses last July. Last Wednesday, I spoke with a reporter who had read that blog post.  Acquirors use these #MeToo/Weinstein clauses to require target companies to represent that there have been no allegations of, or settlement related to, sexual misconduct or harassment. I look at these clauses through the lens of a management-side employment lawyer/compliance officer/transactional drafting professor. It’s almost impossible to write these in a way that’s precise enough to provide the assurances that the acquiror wants or needs.

Specifically, the reporter wanted to know whether it was unusual that Chevron had added this clause into its merger documents with Noble Energy. As per the Prospectus:

Since January 1, 2018, to the knowledge of the Company, (i), no allegations of sexual harassment or other sexual misconduct have been made against any employee of the Company with the title of director, vice president or above through the Company’s anonymous employee hotline or any formal human resources communication channels at the Company, and (ii) there are no actions, suits, investigations or proceedings pending or, to the Company’s knowledge, threatened related to any allegations of sexual harassment or other sexual misconduct by any…

Two weeks ago, I wrote about the role of compliance officers and general counsel working for Big Pharma in Where Were the Gatekeepers- Part 1. As a former compliance officer and deputy general counsel, I wondered how and if those in-house sentinels were raising alarm bells about safety concerns related to rushing a COVID-19 vaccine to the public. Now that I’ve watched the Netflix documentary “The Social Dilemma,” I’m wondering the same thing about the lawyers and compliance professionals working for the social media companies.

The documentary features some of the engineers and executives behind the massive success of Google, Facebook, Pinterest, Twitter, YouTube and other platforms. Tristan Harris, a former Google design ethicist, is the star of the documentary and the main whistleblower. He raised concerns to 60 Minutes in 2017 and millions have watched his TED Talk.  He also testified before Congress in 2019 about how social media companies use algorithms and artificial intelligence to manipulate behavior. Human rights organizations have accused social media platforms of facilitating human rights abuses. Facebook and others have paid billions in fines for privacy violations.  Advertisers boycotted over Facebook and hate speech. But nothing has…

I think that the GCs at Big Pharma have hacked into my Zoom account. First, some background. Earlier this week, I asked my students in UM’s Lawyering in a Pandemic course to imagine that they were the compliance officers or GCs at the drug companies involved in Operation Warp Speed, the public-private partnership formed to find a vaccine for COVID-19 in months, rather than years. I asked the students what they would do if they thought that the scientists were cutting corners to meet the government’s deadlines. Some indicated that they would report it internally and then externally, if necessary.

I hated to burst their bubbles, but I explained that the current administration hasn’t been too welcoming to whistleblowers. I had served on a non-partisan, multi-stakeholder Department of Labor Whistleblower Protection Advisory Committee when President Trump came into office, which was disbanded shortly thereafter. For over a year after that, I received calls from concerned scientists asking where they could lodge complaints. With that background, I wanted my students to think about how company executives could reasonably would report on cutting corners to the government that was requiring the “warp speed” results in the first place. We didn’t even…

Two weeks ago, I wrote about wokewashing and the board of directors. I discussed companies that tout their social justice credentials to curry favor with consumers but in fact treat their employees differently. I touched on the difference between companies jumping on the “anti-racism” bandwagon and those like Nike, which took an unpopular stand in 2018 by supporting Colin Kapernick, who at the time was considered a pariah for taking a knee during the national anthem. Some commentators predicted boycotts but in fact, Nike had a 31% increase in sales following the ad campaign. One sporting good store owner who publicly called for a boycott actually went out of business.

Four years after Kapernick took a knee, professional basketball, hockey, soccer, and tennis players took a walk protesting a police-involved shooting of a Black man. Although the Milwaukee Bucks spurred the walkout by refusing to play against the Orlando Magic in the playoffs on Wednesday, LeBron James reportedly led what could have been a season-ending strike of the West Coast teams. One hundred league staffers also temporarily walked off the job today in support. Michael Jordan, basketball legend and team owner, helped broker a deal for the…

As an academic and consultant on environmental, social, and governance (ESG) matters, I’ve used a lot of loaded terms — greenwashing, where companies tout an environmentally friendly record but act otherwise; pinkwashing, where companies commoditize breast cancer awareness or LGBTQ issues; and bluewashing, where companies rally around UN corporate social responsibility initiatives such as the UN Global Compact.

In light of recent events, I’ve added a new term to my arsenal—wokewashing. Wokewashing occurs when a company attempts to show solidarity with certain causes in order to gain public favor. Wokewashing isn’t a new term. It’s been around for years, but it gained more mainstream traction last year when Unilever’s CEO warned that companies were eroding public trust and industry credibility, stating:

 Woke-washing is beginning to infect our industry. It’s polluting purpose. It’s putting in peril the very thing which offers us the opportunity to help tackle many of the world’s issues. What’s more, it threatens to further destroy trust in our industry, when it’s already in short supply… There are too many examples of brands undermining purposeful marketing by launching campaigns which aren’t backing up what their brand says with what their brand does. Purpose-led…

I’ve finally gotten around to updating my SSRN page.  I would love to hear any comments you might have.

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2.  Totalitarian Nudges, Illusory Externalities, and Utopian Benefits: Reflections on the 34th Economics Institute for Law Professors

3.  Killing Corporations to Save Humans: How Corporate Personhood, Human Rights, and the Corporate Death Penalty Intersect

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