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Between the US Supreme Court’s decision to let Newman stand and the Delaware Supreme Court’s Sanchez decision, the intersection of friendship and corporate governance has been a hot topic this past week.  While the commentary has been enlightening, it’s always good to reflect on the primary sources.  To that end, I have collected below a series of what I perceive to be interesting quotes from the relevant opinions as follows (I also included an excerpt from a law review article referencing Reg FD, which has something to say about the extent to which we need to protect insider communications with analysts):

1.  Dirks v. S.E.C., 

2.  United States v. Newman, 

3.  United States v. Salman, 

4.  Delaware Cnty. Employees Ret. Fund v. Sanchez, 

5.  Dirks v. S.E.C. (dissent, excerpt 1),

6.  Dirks v. S.E.C. (dissent, excerpt 2), and 

7.  Donna M. Nagy & Richard W. Painter, Selective Disclosure by Federal Officials and the Case for an Fgd (Fairer Government Disclosure) Regime.

Obviously, Sanchez may be viewed as an outlier here, but perhaps this will spur some creative work on how the standard for director independence might inform the standard for improper tipping or vice versa.

Like many of you, I have been discussing the Volkswagen emission scandal in my business law classes.

Yesterday, Michael Horn, President and CEO of Volkswagen Group of America testified before the House Committee on Energy and Commerce Subcommittee on Oversight and Investigations. Horn’s testimony is here. 

West Virginia University, home of co-blogger Joshua Fershee, is featured on the first page of the testimony as flagging possible non-compliance issues in the spring of 2014.

The testimony includes multiple apologies, acceptance of full responsibility, and the statement that these “events are fundamentally contrary to Volkswagen’s core principles of providing value to our customers, innovation, and responsibility to our communities and the environment.”

I plan to follow this story in my classes as the events continue to unfold. 

My wife and I both have many close family members in South Carolina, so the recent flood has been on our minds recently.

My first thoughts are with all of those affected by the flood.  

Relevant to this blog, the flood also reminds me of one of the opening passages in Conscious Capitalism by Whole Food’s co-CEO John Mackey. In that passage, Mackey recalls the massive flood in Austin, TX in 1981. At that time, Whole Foods only had one store, and the flood filled that store with eight feet of water. Whole Foods had loses of $400,000 and no savings and no insurance.

Mackey notes that “there was no way for [Whole Foods] to recover with [its] own resources” and then:

  • “[a] wonderfully unexpected thing happened: dozens of our customers and neighbors started showing up at the store….Over the next few weeks, dozens and dozens of our customers kept coming in to help us clean up and fix the store…It wasn’t just our customers who helped us. There was an avalanche of support from our other stakeholders as well [such as suppliers extending credit and deferring payment]. . . . It is humbling to think about what would

…

As a life-long Detroit Lions fan, last night’s loss to the Seattle Seahawks was largely expected.  How they lost was new, though the fact that the Lions lost in a creative way, was also to be expected.  As actor Jeff Daniels said, being a Lions fan is more painful than being a Cubs fan.

In recent years, there is ample evidence that random and uncommon rules have shown up to hurt my already mediocre team. This got me to thinking, though, of the old adage, bad facts make bad law. For the Lions, I think that’s not necessarily apt.  It may be that bad football makes for better football later.   

To understand how one might get there, one needs to know a little what it’s like to be a Lions fan, so here’s a little insight into how life as a Lions fan works: 

I watched the start of the game last night with my ten-year-old son.  Part of the pre-game programming is all of the announcers and studio people make their pick for the game.  The ten or so predictions were unanimously for the Seahawks.  I turned to my son and said, “Well, the Lions will probably…

Today I will present on a panel with colleagues that spent a week with me this summer in Guatemala meeting with indigenous peoples, village elders, NGOs, union leaders, the local arm of the Chamber of Commerce, a major law firm, government officials, human rights defenders, and those who had been victimized by mining companies. My talk concerns the role of corporate social responsibility in Guatemala, but I will also discuss the complex symbiotic relationship between state and non-state actors in weak states that are rich in resources but poor in governance. I plan to use two companies as case studies. 

The first corporate citizen, REPSA (part of the Olmeca firm), is a Guatemalan company that produces African palm oil. This oil is used in health and beauty products, ice cream, and biofuels, and because it causes massive deforestation and displacement of indigenous peoples it is also itself the subject of labeling legislation in the EU. REPSA is a signatory of the UN Global Compact, the world’s largest CSR initiative. Despite its CSR credentials, some have linked REPSA with the assassination last month of a professor and activist who had publicly protested against the company’s alleged pollution of rivers with…

For many businesses a good online reputation can significantly increase revenue.

Kashmir Hill, who I know from my time in NYC, has done some interesting reporting on businesses buying a good online reputation.

Earlier this week Kashmir posted the results of her undercover investigation into the problem of fake reviews, followers, and friends. When asking questions as a journalist, those selling online reviews insisted they only did real reviews on products they actually tested.

Kashmir then created a make-believe mobile karaoke business, Freakin’ Awesome Karaoke Express (a/k/a F.A.K.E), and found how easy it was to artificially inflate one’s online reputation. She writes:

For $5, I could get 200 Facebook fans, or 6,000 Twitter followers, or I could get @SMExpertsBiz to tweet about the truck to the account’s 26,000 Twitter fans. A Lincoln could get me a Facebook review, a Google review, an Amazon review, or, less easily, a Yelp review.

All of this for a fake business that the reviewers had, obviously, never frequented. Some of the purchased fake reviews were surprisingly specific. In a time when many of us rely on online reviews, at least in part, this was a sobering story. It was somewhat encouraging, however…

The New York Times reports that Facebook may add a “dislike” button. I am with the many people (probably now all or mostly over 35) who use Facebook and have thought a dislike button would be a nice option.  

“Just had a car accident.”  “Lovely dog just passed.” “Kids barfing wildly.”  Dislike. 

But I assume Facebook has skipped this for a reason. That is, it could be used in a terrible manner. 

“Proud to announce we’re engaged.” “Welcome to our new baby boy.” “This is my new painting.” Dislike. 

I understand the desire for symmetry, but dislike is probably not the button for a good experience with Facebook.  Maybe an “I’m sorry” or “That’s too bad” button, would work better.  I don’t know, but when I put this blog post on Facebook, a little part of me will be happy there’s no dislike button.

Not that the lack of such a button ever stopped a snarky comment or six.  

I think my life as a compliance officer would have been much easier had the DOJ issued its latest memo when I was still in house. As the New York Times reported yesterday, Attorney General Loretta Lynch has heard the criticism and knows that her agency may face increased scrutiny from the courts. Thus the DOJ has announced via the “Yates Memorandum” that it’s time for some executives to go to jail. Companies will no longer get favorable deferred or nonprosecution agreements unless they cooperate at the beginning of the investigation and provide information about culpable individuals.

This morning I provided a 7-minute interview to a reporter from my favorite morning show NPR’s Marketplace. My 11 seconds is here. Although it didn’t make it on air, I also discussed (and/or thought about) the fact that compliance officers spend a great deal of time training employees, developing policies, updating board members on their Caremark duties, scanning the front page of the Wall Street Journal to see what company had agreed to sign a deferred prosecution agreement, and generally hoping that they could find something horrific enough to deter their employees from going rogue so that they wouldn’t be…

Has Wal-Mart reformed? Last week I blogged about whether conscious consumers or class actions can really change corporate behavior, especially in the areas of corporate social responsibility or human rights. I ended that post by asking whether Wal-Mart, the nation’s largest gun dealer, had bowed down to pressure from activist groups when it announced that it would stop selling assault rifles despite the fact that gun sales are rising (not falling as Wal-Mart claims). Fellow blogger Ann Lipton did a great post about the company’s victory over shareholder Trinity over a proposal related to the sale of dangerous products (guns with high capacity magazines). There doesn’t appear to be anything in the 2015 proxy that would necessitate even the consideration of a change that Wal-Mart fought through the Third Circuit to avoid.

So why the change? Is it due to the growing public weariness over mass shootings? Did they feel the sting after Senator Chris Murphy praised them for ceasing the sale of Confederate flags but called them out on their gun sales? Even the demands of a Senator won’t overcome the apparent lack of political will to enact more strict gun control, so fear of legislation is not…

I’m the socially-conscious consumer that regulators and NGOs think about when they write disclosure legislation like the Dodd-Frank conflict minerals law that I discussed last week. I drive a hybrid, spend too much money at Whole Foods for sustainable, locally-farmed, ethically-sourced goods, make my own soda at home so I minimize impacts to the environment with cans and plastic bottles, and love to use the canvas bags I get at conferences when I shop at the grocery store. As I (tongue in cheek) pat myself on the back for all the good I hope to do in the world, I realize that I may be a huge hypocrite. I know from my research that consumers generally tell survey takers that they want ethically sourced goods, but they in fact buy on quality, price, and convenience.

I thought about that research when I read the New York Times expose and CEO Jeff Bezos’ response about Amazon’s work environment. As a former defense-side employment lawyer and BigLaw associate for many years, I wasn’t in any way surprised by the allegations (and I have no reason to believe they are either true or false). I have both provided legal defenses and lived…