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I am looking forward to presenting at this conference next month. Looks like a great group of academics and practitioners.

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University of Cincinnati College of Law

The 29th Annual Corporate Law Center Symposium – Corporate Social Responsibility and the Modern Enterprise

March 18, 2016

8:45 a.m. – 3:30 p.m.

Hilton Netherland Plaza

Pavilion Ballroom

This event is free. CLE: 5.0 hours, pending approval.

Presented by the University of Cincinnati College of Law’s Corporate Law Center and Law Review.

Symposium materials will be available on March 14 at: law.uc.edu/corporate-law-center/2016-symposium

Please register by contacting Lori Strait: email Lori.Stait@uc.edu; fax 513-556-1236; or phone 513-556-0117

Introduction, 8:45 a.m.

Keynote, 9:00 a.m.

Clare Iery, The Procter & Gamble Company

Social Enterprises and Changing Legal Forms, 9:30 a.m.

Mark Loewenstein, University of Colorado Law School

William H. Clark, Jr., Drinker Biddle & Reath LLP

Haskell Murray, Belmont University College of Business

Russell Menyhart, Taft Stettinius & Hollister LLP

Sourcing Dilemmas in a Globalized World, 11:00 a.m.

Steve Slezak, University of Cincinnati College of Business

Marsha A. Dickson, University of Delaware Department of Fashion & Apparel Studies

Tianlong Hu, Renmin University of China Law School

Anita Ramasastry, University of Washington School of Law

CSR …

Two weeks ago I posted about whether small businesses, start ups, and entrepreneurs should consider corporate social responsibility as part of their business (outside of the benefit corporation context). Definitions of CSR vary but for the purpose of this post, I will adopt the US government’s description as:

entail[ing] conduct consistent with applicable laws and internationally recognised standards. Based on the idea that you can do well while doing no harm … a broad concept that focuses on two aspects of the business-society relationship: 1) the positive contribution businesses can make to economic, environmental, and social progress with a view to achieving sustainable development, and 2) avoiding adverse impacts and addressing them when they do occur.

During my presentation at USASBE, I admitted my cynical thoughts about some aspects of CSR, discussed the halo effect, and pointed out some statistics from various sources about consumer attitudes. For example:

  • Over 66% of people say they will pay more for products from a company with “good values”
  • 66% of survey respondents indicated that their perception of company’s CEO affected their perception of the company
  • 90% of US consumers would switch brands to one associated with a cause, assuming comparable price

…

I will miss many of you at AALS this weekend because on Sunday morning I am speaking on a panel on corporate social responsibility in small businesses and startups at a conference for the United States Association for Small Business and Entrepreneurship (USASBE) in San Diego. My co-panelists include: Julian Lange, Governor Craig R. Benson Professor of Entrepreneurship and Public Policy, Associate Professor, Babson College; Megan M. Carpenter, Professor of Law, Co-Director, Center for Law and Intellectual Property, Faculty Director, IP and Technology Law Clinic, Faculty Director, Entrepreneurship Law Clinic, Texas A&M University School of Law; Sandra Malach, Senior Instructor, Entrepreneurship & Innovation, Haskayne School of Business, University of Calgary, Canada, former counsel at the Venture Development Legal Clinic, and previous positions at Stantec Engineering, Bennett Jones Barristers & Solicitors, Enron, and SAIT; and John Tyler, General Counsel and Corporate Secretary, the Ewing Marion Kauffman Foundation. The abstract that we presented to conference organizers stated:

Entrepreneurial and small businesses are increasingly incorporating “people, planet, and profits” into their business models and operations to a degree that goes beyond simply fulfilling the requirements of government regulations. Moreover, it can be argued that expanding a company’s mission to include…

Facebook (not surprisingly) and other social media blew up when Facebook CEO, Mark Zuckerberg, and his wife, Dr. Priscilla Chan, released an open letter to their new baby daughter, Max. (Congratulations to all, by the way.) The Chan Zuckerberg family announced that they would be giving a ton of money to support important causes, which caused people to get excited, get skeptical, and get mad.

One big complaint has been that the family chose a limited liability company (LLC), which is not a corporation (more on that later), rather than a not-for-profit entity to do the work.  Some say this makes it a scam.  I say hooey.  Even if it were a scam, it’s not because they chose an LLC. 

  1. First, without knowing the LLCs members or structure, there’s no reason to say the LLC cannot be a 501(c)(3). But, more important, the Letter to Max never says they will give money to charity.  Never. 

The letter says: 

As you begin the next generation of the Chan Zuckerberg family, we also begin the Chan Zuckerberg Initiative to join people across the world to advance human potential and promote equality for all children in the next generation. Our initial areas

…

The Department of Labor issued new interpretive guidelines for pension investments governed by ERISA.  A thorny issue has been to what extent can ERISA fiduciaries invest in environmental, social and governance-focused (ESG) investments?  The DOL previously issued several guiding statements on this topic, the most recent one in 2008, IB 2001-01, and the acceptance of such investment has been lukewarm. The DOL previously cautioned that such investments were permissible if all other things (like risk and return) are equal.  In other words, ESG factors could be a tiebreaker but couldn’t be a stand alone consideration. 

What was the consequence of this tepid reception for ESG investments?  Over $8.4 trillion in defined benefit and defined contribution plans covered by ERISA have been kept out of ESG investments, where non-ERISA investments in the space have exploded from “$202 billion in 2007 to $4.3 trillion in 2014.” 

In an effort to correct the misperceptions that have followed publication of IB 2008-01, the Department announced that it is withdrawing IB 2008-01 and is replacing it with IB 2015-01. 

The new guidance admits that previous interpretations may have

“unduly discouraged fiduciaries from considering ETIs and ESG factors. In particular, the Department is

…

I recently received information about this social enterprise & nonprofit clinical teaching fellowship position at Georgetown University Law Center. My friend, Georgetown law professor Alicia Plerhoples, is the director of the clinic, and the fellowship sounds like an excellent opportunity.

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Georgetown Law Graduate Clinical Teaching Fellowship

Description of the Clinic 

The Social Enterprise & Nonprofit Law Clinic at Georgetown University Law Center offers pro bono corporate and transactional legal services to social enterprises, nonprofit organizations, and select small businesses headquartered in Washington, D.C. and working locally or internationally. Through the Clinic, law students learn to translate theory into practice by engaging in the supervised practice of law for educational credit. The Clinic’s goals are consistent with Georgetown University’s long tradition of public service. The Clinic’s goals are to:

  • Teach law students the materials, expectations, strategies, and methods of transactional lawyering, as well as an appreciation for how transactional law can be used in the public interest.
  • Represent social enterprises and nonprofit organizations in corporate and transactional legal matters.
  • Facilitate the growth of social enterprise in the D.C. area.

The clinic’s local focus not only allows the Clinic to give back to the community it calls home, but also…

Fellow BLPB editor Haskell Murray highlighted Laureate Education’s IPO (here on BLPB) last week as the first publicly traded benefit corporation.  Steven Davidoff Solomon, the “Deal Professor” on Dealbook at NYT, focused on the interesting issues that can be raised by public benefit corporations in his article, Idealism That May Leave Shareholders Wishing for Pragmatism, which appeared yesterday.  Among the concerns he raised were the  vagueness of the “benefit”provided by the company, the potential laxity or at least untested waters of benefit auditing, and the potential for management rent seeking at the expense of shareholder profit in the new form.  Davidoff Solomon, who (deliciously and derisively) dubs benefit corporations the “hipster alternative to today’s modern company, which is seen as voracious in its appetite for profits,” is certainly skeptical. But the concerns are valid and will have to be worked out successfully for this hybrid form to carve out a place in the securities market.  What I found particularly interesting was his focus on the role of institutional investors, who as fiduciaries for their individual investors, have fiduciary obligations to pursue profits which may be in conflict with or at least require greater monitoring when investing in…

Alicia Plerhoples (Georgetown) has the details about the first benefit corporation IPO: Laureate Education.*

She promises more analysis on SocEntLaw (where I am also a co-editor) in the near future.

The link to Laureate Education’s S-1 is here. Laureate Education has chosen the Delaware public benefit corporation statute to organize under, rather than one of the states that more closely follows the Model Benefit Corporation Legislation. I wrote about the differences between Delaware and the Model here.

Plum Organics (also a Delaware public benefit corporation) is a wholly-owned subsidiary of the publicly-traded Campbell’s Soup, but it appears that Laureate Education will be the first stand-alone publicly traded benefit corporation.

*Remember that there are differences between certified B corporations and benefit corporations. Etsy, which IPO’d recently, is currently only a certified B corporation. Even Etsy’s own PR folks confused the two terms in their initial announcement of their certification.

Unfortunately, touting a business as socially-consious does not seem to lessen the chance of scandal.

Some companies known for their commitment to social causes have been in the news for all the wrong reasons. A few are noted below:

Predictably, the media latches onto these stories and claims of hypocrisy fly. See, e.g., Here’s The Joke Of A Sustainability Report That VW Put Out Last Year and Whole Foods Sales Sour After Price Scandal and BP’s Hypocrisy Problems.

No business is perfect, so what should social businesses do to limit the impact of these scandals? First, before a scandal hits, I think social businesses need to be candid about the fact that they are not perfect. Second, after the scandal, the social business needs to take responsibility and take significant corrective action beyond what is legally required. 

Patagonia’s founder does a really nice job of admitting the imperfection of his company and the struggles they face in his book The Responsible Company. Whole Foods supposedly offered somewhat above-market…