Hao Liang & Luc Renneboog have posted “The Foundations of Corporate Social Responsibility” on SSRN.  Here is the abstract:

We investigate the roles of legal origins and political institutions – believed to be the fundamental determinants of economic outcomes – in corporate social responsibility (CSR). We argue that CSR is an essential path to economic sustainability, and document strong correlations between country-level sustainability ratings and various extensive firm-level CSR ratings with global coverage. We contrast the different views on how legal origins and political institutions affect corporations’ tradeoff between shareholder and stakeholder rights. Our empirical evidence suggest that: (a) Legal origins are more fundamental sources of CSR adoption and performance than firms’ financial and operational performance; (b) Among different legal origins, the English common law – widely believed to be mostly shareholder-oriented – fosters CSR the least, (c) Within the civil law countries, firms of countries with German legal origin outperform their French counterparts in terms of ecological and environmental policy, but the French legal origin firms outperform German legal origin companies in social issues and labor relations.Companies under the Scandinavian legal origin score highest on CSR (and all its subfields); (d) Political institutions – democratic rules and constraints to political executives – are not preconditions for CSR and sustainability, and sometimes even hinder CSR implementation. Our results are robust after controlling for corporate governance, culture, firm-level financial performance and constraints, and different indices of political institutions.

Alicia Plerhoples is leading an innovative Social Enterprise and Nonprofit Clinic at Georgetown University Law Center.  She presented her “Representing Social Enterprise” article at AALS in 2013, and her article was recently published by the Clinical Law Review.  I recommend the article to all those interested in social enterprise and/or clinical education.  The article will be helpful to the academic, practitioner, and clinician (perhaps because Professor Plerhoples has experience in all three roles).   “Representing Social Enterprise” includes a deep discussion of the models of social enterprise, thoughtful analysis of the corporate governance issues that are likely to arise when representing social enterprises, and interesting insights into Georgetown’s clinic. 

The abstract is reproduced below and the entire article can be found on SSRN here:

“This article explores the representation of social enterprises — i.e., nonprofit and for-profit organizations whose managers strategically and purposefully work to create social, environmental, and economic value or achieve a social good through business techniques — in the Social Enterprise & Nonprofit Law Clinic at Georgetown University Law Center. The choice to represent social enterprise clients facilitates a curriculum that explicitly focuses on the business models, governance tools, and legal mechanisms that these organizations use to accomplish sustainability and charitable objectives. By serving social enterprise clients, clinic students learn to solve novel and unstructured problems and engage in information sharing and knowledge creation essential to legal advocacy. Legal issues unique to social enterprises compel clinic students to question corporate law and its underlying normative values and employ transactional lawyering for public interest purposes.”

Cross-posted at SocEntLaw.

On Tuesday, I attended the oral argument for the National Association of Manufacturers v. SEC—the Dodd-Frank conflict minerals case. Trying to predict what a court will do based on body language and the tone of questioning at oral argument, especially in writing, is foolish and crazy, but I will do so anyway.

I am cautiously optimistic that the appellate court will send the conflict mineral rule back to the SEC to retool based on the three arguments generated the most discussion. First, the judges appeared divided on whether the SEC  had abused its discretion by changing the statutory language requiring issuers to report if minerals “did” originate from the DRC or surrounding companies rather than the current SEC language of “may have” originated. This language would sweep in products in which there is a mere possibility rather than a probability of originating in covered countries. One judge grilled the SEC like I grill my law students about the actual statutory language and legislative intent, while another appeared satisfied with SEC’s explanation that issuers did not have to file if the lack of certainty was due to a small number of responses from suppliers or for lack of information. My prediction- if the SEC loses, they will have to rewrite this section to comport with Congressional intent.

The second main issue concerned the SEC’s failure to apply a de minimis exception to the rule. NAM’s lawyer provided a real-life example of a catalyst used in producing automobiles that sometimes washed away during production but at other times could leave just one part per million of tin in the finished product. Judge Srinivasan pointed out that if the mineral could wash away but the product could still function, then perhaps it wasn’t “necessary” as the law required for reporting. Judge Sentelle raised a concern about “breaking new ground” by requiring the SEC to enact a de minimis exception. The SEC bolstered its argument by indicating that no commentator that had proposed such an exception during the rulemaking process  had provided a workable threshold. My prediction- this is a toss up. This was the SEC’s most successful argument of the day.

Many commenters believed that the third argument—the First Amendment claim– was spurious and/or a Hail Mary plea when NAM first raised it last year. Yet this argument provided the most interesting discussion of the day, especially since Judge Randolph specifically reminded NAM’s counsel to discuss it and not save it for rebuttal as NAM had planned. NAM argued that by requiring companies to declare on their websites that their products were not “DRC-Conflict Free,” thereby denouncing their own products, this amounted to a “scarlet letter.” NAM conceded that the government could ask for the information and could post it, but maintained that requiring companies to “shame” themselves was unconstitutional. This argument gained traction with both judges Randolph and Sentelle, who called it “compelled speech.” The judges also questioned the SEC on: whether the SEC had ever or should focus its efforts on communications to consumers; how the SEC would enforce the rule, asking whether a group of scientists would do product inspections; how this rule would achieve Congress’ intent of securing the safety of the Congolese people; whether the government could require companies to indicate whether they had used child labor overseas; and whether the intent of the shaming provision was to cause a boycott- bingo! My prediction- the SEC loses on this provision.

If the SEC does have to go back to the drawing board, it will be interesting to see how current Chair Mary Jo White influences the rule given her public statements about the rule being out of the SEC’s purview. I hope that the European Commission, which has done an impact analysis, will pay close attention as they roll out their own conflict minerals legislation to the EU.

Many have asked what I think the government should have done to help the people of Congo. Put simply, the government could and should fund and enforce the DRC Relief, Security, and Democracy Promotion Act of 2006, which has over a dozen provisions addressing security sector reform, minerals, infrastructure and other matters that could provide a more holistic solution. Next week, I will blog about other ways that the government could incentivize business to address human rights issues around the world.

This has been a good week for those who care about the human rights crisis in the Democratic Republic of the Congo.  Green Bay Packers quarterback Aaron Rodgers joined actress Robin Wright as the latest in a string of celebrities raising awareness about “conflict minerals”, the tin, tantalum and gold that appear in cell phones, computers, automobiles, baby diapers and toothpaste. Speaking at the Consumer Electronics Show  in Las Vegas on Monday, the CEO of Intel got as much press for his declaration that his products will be “conflict-free” in 2014 as he did for his discussion about new innovations. 

The “conflict minerals” at issue are the subject of a complex regulation in Dodd-Frank that requires certain US issuers, regardless of size to conduct extensive due diligence and disclose whether or not their products are “DRC-Conflict free” so that consumers and investors can make informed decisions about whether the products may be supporting rebels involved in rape, torture and child slavery. The purpose of the law, which the SEC will regulate and enforce, is to bring peace, security and stability to the Democratic Republic of Congo. By drying up funding for the rebels, the theory goes, sexual and gender-based violence, conscription of child slaves, forced labor and other atrocities will cease.

I am on the board of an NGO, Footprints Foundation, that works in the eastern part of the country with rape survivors and with medical personnel who treat artisanal miners and their families—the people the law purports to protect. One of the doctors we work with there confirmed to me just this morning that the level of violence has not changed. I co-authored an article with a medical anthropologist about rule of law initiatives that help Congolese rape survivors finally get justice. I attended a conference at the UN in Geneva last month on Business and Human Rights, where attendees focused on making businesses more responsive to and responsible for human rights issues in supply chains. And prior to academia, I was the compliance officer for a company that manages other companies’ supply chains, so I know the ins, outs and criticality of due diligence.

I am hardly an apologist for big business, but I happily joined on to an amicus brief arguing against the Dodd-Frank conflicts minerals law, not because it may be expensive, but because I think it’s bad public policy to expect a governance disclosure to solve a geopolitical crisis.  I joined because I fear that smaller companies (not the Intels, HPs and Apples, which have done great work) will pull out of the Congo because of the expense and complexities involved in complying with the law. One Asian company that sought my consulting advice last year indicated that as a supplier for US companies, it would make sure not to source from Congo to avoid having to deal with the reporting and due diligence.  The law has no financial penalties for failing to file, but filing false or misleading reports could lead to private class actions and Section 18 liability under the Securities Exchange Act. I have blogged and written repeatedly about the reasons for my objections here,  here, here, and here among other places.

This week, the DC Circuit Court of Appeals held oral argument on a case brought by the National Association of Manufacturers against the SEC. I left sunny Florida to attend the argument and will report my impressions briefly in Part II.  For an excellent and thorough description of the argument, see here. For my play by play of the argument see my tweets at @mlnarine. 

As the Conglomerate, M&A Law Prof Blog, and WSJ have reported, Chancellor Leo Strine, Jr. has been nominated by Delaware Governor Jack Markell for the Chief Justice of the Delaware Supreme Court position.  The official announcement is here, courtesy of Brian Quinn.

Chancellor Strine’s office was just a few feet from mine when I clerked for former Vice Chancellor Stephen Lamb, and I can confirm that Chancellor Strine is every bit as colorful and witty as his opinions suggest.  Chancellor Strine (then a Vice Chancellor and called “VCS” by the clerks) is also the only judge (other than my own) that I chose to watch in action while in Delaware.  

My former co-clerk wonders, on Twitter, why Chancellor Strine would even want this job, as his current position as Chancellor arguably gives him more direct influence over the course of corporate law.  As Chancellor, he not only gets a more steady dose of corporate cases, but also is the sole author of those cases.  As Chief Justice, he will have to share the pen, and will hear plenty of non-corporate cases.  My guess is that Strine will enjoy having a hand in shaping the controlling precedent handed down from the Delaware Supreme Court, and perhaps this is a precursor to an even more prestigious position.

Finally, I agree with Gordon Smith that Larry Hamermesh would make an excellent new Chancellor (if Professor Hamermesh is interested in the job), or a new Vice Chancellor, with one of the current Vice Chancellors stepping into the Chancellor role.  Among the current Vice Chancellors, my judge’s replacement, Vice Chancellor Travis Laster, is probably the most academic, has been called “Strine on Steroids” and could be in the running.

Update:  Andre (“Andy”) Bouchard is rumored to be an early favorite to replace Strine, though Andy Bouchard did not respond to a request for comment in the Reuters article.  Some of my friends in Delaware tell me that VC Laster is an extremely unlikely successor; I knew Laster was controversial, but so was/is Strine. 

From the posting:

The Louis D. Brandeis School of Law at the University of Louisville seeks to hire a visitor for the 2014-15 academic year.  Primary areas of curricular need are tax, decedents’ estates and related courses.  Other curricular needs may include commercial law and/or family law.  The visitor will teach four courses during the 2014-15 academic year.  Both entry-level and experienced applicants will be considered.  Salary will be commensurate with experience.

 The University of Louisville is located in Louisville, Kentucky.  Louisville is a city of 1.3 million with vibrant arts, educational, medical and business communities, and was named Lonely Planet’s Top US Travel Destination for 2013.  Information about the law school is available at the school’s website at http://www.law.louisville.edu/.  For further information about the school, or to apply, please contact Associate Dean for Academic Affairs Timothy S. Hall at hallt@louisville.edu or (502) 852-6830.

 The University of Louisville is an equal opportunity institution and does not discriminate against persons on the basis of race, age, religion, sex, disability, color, sexual orientation, national origin or veteran status.  Applications from individuals who will contribute to the diversity of our law school are encouraged.

Tonight, I will teach my first negotiation class, to a group of Belmont University MBA students.  Over the past months, I have read a number of books on negotiation and reflected upon the negotiation I did in practice and am still doing in my professional life and personal life.  The more I read and think about the subject, the more I am convinced that law students and lawyers (in addition to business students and business people) need more training in negotiation.

In litigation, I have heard that well over 90% of cases settle before trial, requiring negotiation, and in the transactional context, negotiation is ever-present.    

The late-Roger Fisher of Harvard Law School (and co-author of the perennial best seller Getting to Yes) has a short video clip about negotiation v. litigation posted below. My legal training did a good job sharpening my critical thinking, improving my attention to detail, and preparing me to “win” arguments.  However, I cannot remember much time devoted to joint-problem solving, uncovering underlying interests, and dealing with people problems.  While much of what is written in Getting to Yes and its progeny is common sense, it is easy to stray from its guidelines without considerable practice.

I am excited about teaching this “Decision Making and Negotiation Skill” MBA class and may add additional blog posts as the semester progresses.  Each class includes mock negotiations from Harvard Law School’s Program on Negotiation and/or The Dispute Resolution Research Center at the Kellogg School of Managment at Northwestern University. 

Perhaps some of the business law professors reading this blog would like to incorporate some of the negotiation/dispute resolution literature into their classes.  I know a number of professors who include one or more mock negotiations in their classes, but wonder how many also talk about the theory and research on the subject to inform the classroom interaction.  For those interested in doing further reading in the area, I enjoyed Negotiation And Settlement Advocacy: A Book Of Readings, which does a nice job of compiling and editing a range of articles.  Also, Professor Leigh Thompson (Northwestern) has an excellent book entitled The Mind and Heart of the Negotiator, which we use in our course. 

 

The following information was shared with me by my friend, Professor Ciara Torres-Spelliscy at Stetson Law.  On February 28, 2014, Stetson Law in Gulfport, FLorida, will host: 

Taking Stock of Citizens United: How the Law Has (and Has Not) Changed Four Years Later.

Panel One: Quantifying the Problem of Money in Politics
Citizens United opened a new avenue for corporations and unions to spend in politics by purchasing political ads. This ability to spend was added to older avenues of political activity such as corporate and union segregated funds (SSFs or PACs), lobbying and direct contributions in certain states. The question of what political spenders get in return for this largess remains an open one.
 
Panel Two: The Risk of Corruption Collides with Free Speech
From a Constitutional law perspective, the courts have long wrestled with the placing political spending into a single paradigm. On one hand, courts have recognized that running for political office is costly and fundraising implicates First Amendment concerns such as the freedom of speech and association. On the other hand, campaign spending can be a corrupting force in the democratic process. Layered on top of this is an impulse by the courts to treat different political spenders in distinct ways: state contractors, corporations, unions, nonprofits, political parties, PACs and individuals may find themselves subject to distinct legal rules in the same election.

Panel Three: Making New Rules that Help Taxpayers, Voters, Investors, Employees and Members
While Citizens United limited the scope of solutions that are available for campaign finance legislation, the decision leaves ample room for a wide range of reforms in the realm of tax law, employment law, corporate law and securities law. And the barriers to reform that Citizens United has constructed has inspired several legal and grassroots groups to work on a Constitutional Amendment to overturn the decision.

Registration is available online.

Before joining the academy, Professor Torres-Spelliscy worked as counsel in the Democracy Program of the Brennan Center for Justice at NYU School of Law.  The symposium line up contains a who’s who of corporate political spending and first amendment scholars (include John Coates & Lawrence Lessig from Harvard) and industry experts.  The panels will provide balanced and in-depth discussions of the impact of Citizens United 4 years later.

 -Anne Tucker

News Release: 

The Federal Energy Regulatory Commission (FERC) and the Commodity Futures Trading Commission (CFTC) have signed two Memoranda of Understanding (MOU) to address circumstances of overlapping jurisdiction and to share information in connection with market surveillance and investigations into potential market manipulation, fraud or abuse. The MOUs allow the agencies to promote effective and efficient regulation to protect energy market competitors and consumers.

Finally, the CFTC and FERC seem to have resolved some serious jurisdictional overlap problems between the agencies related to Dodd-Frank (section 720(a)(1)), which required the agencies to adopt a Memorandum of Understanding (MOU) to resolve several key issues. It’s taken a while to get here.  Recall that settling (or at least improving) jurisdictional questions became especially acute in the wake of the Brian Hunter case, where the CFTC joined the defendant against FERC claiming that the CFTC had exclusive jurisdiction over Hunter’s alleged trading violations.  The DC Circuit agreed with Hunter and the CFTC (opinion pdf). 

At long last, there are two MOUs, one related to jurisdiction (pdf) and the other related to information sharing (pdf). According to the FERC news release, the jurisdiction MOU provides a process the agencies will use to notify one another of  issues “that may involve overlapping jurisdiction and coordinate to address the agencies’ regulatory concerns.“  The information sharing MOU creates procedures for the agencies to share information “of mutual interest related to their respective market surveillance and investigative responsibilities, while maintaining confidentiality and data protection.”

Perhaps the more interesting news (H/T: Craig Silverstein & Nathan Endrud) is the possibility of new licensing for wholesale power and natural gas market participants to deal with the people actually committing fraud and/or manipulating markets.   There is not agreement from all the commissioners that this is necessary, but it is an idea of note for this continually evolving market. 

Stephen Bainbridge has an excellent post on the need for academics to disclose conflicts of interest–specifically, who’s funding their research. I agree with Steve 100%. If someone’s paying an academic for research or for consulting related to the research, I want to know about it.

A conflict of interest does not mean the research is unreliable. (I’m sick of both the left and the right dismissing research out of hand because it was funded by the right-wing [Fill-in-the-blank] Foundation or the left wing [Fill-in-the-blank] Institute.) But, if someone’s paying an author for the work, I am going to pay much closer attention to the methodology and the analysis, even if the author otherwise has a good reputation.