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Many corporate governance professionals have been scratching their heads lately. In November, a federal judge in Delaware ruled that Wal-Mart had wrongfully excluded a shareholder proposal by Trinity Wall Street Church regarding the sale of guns and other products. Specifically, the proposal requested amendment of one of the Board Committee Charters to:

27. Provid[e] oversight concerning the formulation and implementation of, and the public reporting of the formulation and implementation of, policies and standards that determine whether or not the Company [i.e., Wal-Mart] should sell a product that:

1) especially endangers public safety and wellbeing;

2) has the substantial potential to impair the reputation of the Company; and/or

3) would reasonably be considered by many offensive to the family and community values integral to the Company’s promotion of its brand. 

Wal-Mart filed with the SEC under Rule 14a-8 indicating that it planned to exclude the proposal under the ordinary business operations exclusion. The SEC agreed that there was a basis for exclusion under 14a-8(i)(7), but the District Court thought otherwise because the proposal related to a “sufficiently significant social policy.” In mid-January Wal-Mart appealed to the Third Circuit arguing among other things that the district court should have deferred to…

I oppose the Dodd-Frank conflict minerals rule, which requires companies to conduct due diligence and report on their sourcing of certain minerals from the war-ravaged Democratic Republic of Congo and surrounding countries. As I have written before repeatedly on this blog, a law review article, and an amicus brief, it is a flawed “name and shame law” that assumes that consumers and investors will change their purchasing decisions based upon a corporate disclosure, which they may not read, understand, or care about. The name and shame portion of the law was struck down on First Amendment grounds, and the business lobby, the SEC, and the NGO community are eagerly awaiting a decision by the full DC Circuit Court of Appeals.

A disclosure law that does not take into account the true causes for the violence that has killed millions is not the most effective way to have a meaningful impact for the Congolese people. The Democratic Republic of Congo needs outside governments to provide more aid on security sector, criminal justice, education, and judicial reform at the very least. Indeed, the Congolese government is still trying to defeat the rebels that this law was meant to weaken…

One week after the SEC levied the largest dark pool trading violation fine against USB, a group of nine banks (including Fidelity, JP Morgan, BlackRock, etc.) introduced a new dark pool platform, an independent venture called Luminex Trading & Analytics.  Dark trading pools are linked to the role of high frequency trading and the notion that certain buyers and sellers should not jump the queue and shouldn’t be the first to buy or sell in the face of a large order. The financial backers of Luminex were quoted in a Bloomberg article describing it as a platform “where the original purpose of dark pools, letting investors buy and sell shares without showing their hand to others, will go on without interference.”

The announcement raises public scrutiny about dark pools, but among financial circles (like those at ZeroHedge, it is being touted as a smart self-regulatory move by the major mutual funds to prevent the money leach to HFT’s, which some seeing as the beginning of the end for HFTs. 

If you are looking for more resources on dark pools and HFTs– there are two brand new SSRN postings on the subject:

Greetings from Dublin. Between the Guinness tour, the champagne afternoon tea, and the jet lag, I don’t have the mental energy to do the blog I planned to write with a deep analysis of the AALS conference in DC. I live tweeted for several days and here my top 25 tweets from the conference. I have also added some that I re-tweeted from sessions I did not attend. I apologize for any misspellings and for the potentially misleading title of this post:

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Environmental groups and other opponents of high-volume hydraulic fracturing (also known as fracking) for oil and natural gas have roundly applauded Governor Cuomo’s decision to ban the process in the state of New York. The ban, which confirms New York’s more than five-year moratorium on the process, has been lauded as an environmental success and a model for other states.   The ban is neither. 

Oil and natural gas prices are at their lowest prices in years. Interest in expanding drilling in the Marcellus Shale, which is the geologic formation holding natural gas deposits under New York, Pennsylvania, and West Virginia, is correspondingly low.  That makes the fracking ban an easy decision because there is relatively limited interest in drilling in state.

There are those with interest in drilling in New York, of course, but as long as prices are low and there are other places to drill (like Pennsylvania and West Virginia), that interest will remain modest.  The ban also raises the value of Pennsylvania and West Virginia mineral rights by reducing competition, so companies with interests in the entire region have little reason to weigh in forcefully.

In this environment, then, an outright ban was easier to put in…

On December 10, the press reported the Second Circuit’s decision in the insider trading prosecution of Todd Newman and Anthony Chiasson (two of multiple defendants in the original case).  In its opinion, the court reaffirms that tippee liability for insider trading is predicated on a breach of fiduciary duty based on the receipt of a personal benefit by the tipper and clarifies that insider trading liability will not result unless the tippee has knowledge of the facts constituting the breach (i.e., “knew that the insider disclosed confidential information in exchange for a personal benefit”).  The court summarized its opinion, which addresses these matters in the context of the Newman case, a criminal case, as follows:

[W]e conclude that, in order to sustain a conviction for insider trading, the Government must prove beyond a reasonable doubt that the tippee knew that an insider disclosed confidential information and that he did so in exchange for a personal benefit. Moreover, we hold that the evidence was insufficient to sustain a guilty verdict against Newman and Chiasson for two reasons. First, the Government’s evidence of any personal benefit received by the alleged insiders was insufficient to establish the tipper liability from which defendants’ purported tippee liability would derive. Second, even assuming that the scant evidence offered on the issue of personal benefit was sufficient, which we conclude it was not, the Government presented no evidence that Newman and Chiasson knew that they were trading on information obtained from insiders in violation of those insiders’ fiduciary duties.

In many companies, executives and employees alike will give a blank stare if you discuss “human rights.”  They understand the terms “supply chain” and “labor” but don’t always make the leap to the potentially loaded term “human rights.” But business and human rights is all encompassing and leads to a number of uncomfortable questions for firms. When an extractive company wants to get to the coal, the minerals, or the oil, what rights do the indigenous peoples have to their land? If there is a human right to “water” or “food,” do Kellogg’s, Coca Cola, and General Mills have a special duty to protect the environment and safeguard the rights of women, children and human rights defenders? Oxfam’s Behind the Brands Campaign says yes, and provides a scorecard. How should companies operating in dangerous lands provide security for their property and personnel? Are they responsible if the host country’s security forces commit massacres while protecting their corporate property? What actions make companies complicit with state abuses and not merely bystanders? What about the digital domain and state surveillance? What rights should companies protect and how do they balance those with government requests for information?

The disconnect between “business” and “human…

As regular readers know, I research and write on business and human rights. For this reason, I really enjoyed the post about corporate citizenship on Thanksgiving by Ann Lipton, and Haskell Murray’s post about the social enterprise and strategic considerations behind a “values” message for Whole Foods, in contrast to the low price mantra for Wal-Mart. Both posts garnered a number of insightful comments.

As I write this on Thanksgiving Day, I’m working on a law review article, refining final exam questions, and meeting with students who have finals starting next week (being on campus is a great way to avoid holiday cooking, by the way). Fortunately, I gladly do all of this without complaint, but many workers are in stores setting up for “door-buster” sales that now start at Wal-Mart, JC Penney, Best Buy, and Toys R Us shortly after families clear the table on Thanksgiving, if not before. As Ann pointed out, a number of protestors have targeted these purportedly “anti-family” businesses and touted the “values” of those businesses that plan to stick to the now “normal” crack of dawn opening time on Friday (which of course requires workers to arrive in the middle of the night). The…

The DC Circuit will once again rule on the conflicts minerals legislation. I have criticized the rule in an amicus brief, here, here, here, and here, and in other posts. I believe the rule is: (1) well-intentioned but inappropriate and impractical for the SEC to administer; (2) sets a bad example for other environmental, social, and governance disclosure legislation; and (3) has had little effect on the violence in the Democratic Republic of Congo. Indeed just two days ago, the UN warned of a human rights catastrophe in one of the most mineral-rich parts of the country, where more than 71,000 people have fled their homes in just the past three months.

The SEC and business groups will now argue before the court about the First Amendment ramifications of the “name and shame” rule that required (until the DC Circuit ruling earlier this year), that businesses state whether their products were “DRC-Conflict Free” based upon a lengthy and expensive due diligence process.

The court originally ruled that such a statement could force a company to proclaim that it has “blood on its hands.” Now, upon the request of the SEC and Amnesty International, the court…

In June 2014, the Supreme Court decided Fifth Third Bancorp v. Dudenhoeffer holding that fiduciaries of a retirement plan with required company stock holdings (an ESOP) are not entitled to any prudence presumption when deciding not to dispose of the plan’s employer stock.  The presumption in question was referred to as the Moench presumption and had been adopted in several circuits.  You may have heard of these cases as the stock drop cases, as in the company stock price crashed and the employee/investors sue the retirement plan fiduciaries for not selling the stock.  The Supreme Court opinion didn’t throw open the courthouse doors for all jilted retirement investors, and limited recovery to complaints (1) alleging that the mispricing was based on something more than publically available information, and also (2) identifying an alternative action that the fiduciary could have taken without violating insider trading laws and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it.

The Supreme Court in Fifth Third recognized the required interplay between ERISA and securities laws stating:

 [W]here a complaint faults fiduciaries for failing to decide, based on negative inside information, to

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