Corporate Governance

  • September 29, 2011
    Guest Post

    By Arthur Bryant, Executive Director, Public Justice. This post is cross-posted at Public Justice’s “Access To Justice Update.”

    The U.S. Supreme Court starts its new term the first Monday of every October – this year, October 3.  That’s when the Court opens for business. Sadly, a growing number of people believe that is who the Court is now open for.

    On December 27, 2010, The New York Times published an editorial “Temple of Justice,” that said the Supreme Court’s rulings “tend to deny rather than promote access to justice.” At almost the same time, the Constitutional Accountability Center released a study, Open for Business: Tracking the Chamber of Commerce’s Supreme Court Success Rate from the Burger Court through the Rehnquist Court and into the Roberts Court. It found a dramatic increase in the Chamber’s win percentage and the Court’s ideological divide under Justice Roberts. Shortly after that, the Alliance for Justice published Unprecedented Injustice: The Political Agenda of the Roberts Court, starting with a section on “Shielding Corporations from Liability.”  The Alliance now refers to the Supreme Court as “The Corporate Court.”

    The Court’s rulings last term heavily reinforced this perception.  To pick just (the worst?) three:

    • In AT&T Mobility v. Concepcion, the Court struck down 5-to-4 a California rule of law that stopped corporations from banning class actions against them for cheating large numbers of people out of individually small amounts of money. Isn’t that when class actions are most needed?

    • In Wal-Mart v. Dukes, the Court held 5-to-4 that a national class action could not be brought against the nation’s largest retailer for sex discrimination against its current and former women employees. If the company is discriminating – and evidence shows women workers there did far worse in pay and promotions than men – how is it to be held accountable?

    • In Pliva, Inc., v. Mensing, the same five members of the Court ruled that generic drug manufacturers cannot be sued for failing to warn of their drugs’ dangers, although name-brand manufacturers can be – even name-brand manufacturers of the same drug with the identical warning label. What sense does that make? Congress did not say it; the statue says nothing about this. Who does it help, except for the generic drug manufacturers?

  • September 20, 2011

    by Nicole Flatow

    Whether Google’s business practices “serve consumers” or “threaten competition” will be the subject of a Senate subcommittee hearing tomorrow.

    The hearing follows the Federal Trade Commission’s announcement in June that it will begin an antitrust probe of Google to determine whether it has “abused its dominance in Web-search advertising.”

    Among the concerns the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights hearing will address is the prominence of "Google-affiliated content” in search results. For example, if a user inputs the name of a business into the Google search engine, the results page might feature a Google map or the company’s stock information via Google Finance.

    As PCWorld’s Ian Paul explains, “That may be handy for you, but the downside of Google's actions is that sites that used to get traffic from a Google search such as Mapquest, Expedia, or weather and stock information sites, lose traffic. With Google providing the answers users are looking for instead of third-party Websites, the search results for competing products are effectively demoted.”

    Google Executive Chairman Eric Schmidt, who will be the first to testify, told ABC News’ Christiane Amanpour that he is looking forward to the opportunity.

    “What we want is sort of a fast hearing on all of these issues,” he said. “I think at the moment this is more of an awareness issue. We have an opportunity to communicate what we’re doing. Senators have an opportunity to communicate their concerns and I think that’s very good.”

    Watch the hearing live at 2 p.m. eastern time tomorrow via the Senate Judiciary Committee’s webcast feed or on C-SPAN’s Capitol Hearings page.

  • August 30, 2011
    Guest Post

    By Michael R. Siebecker, Professor of Law, University of Florida Levin College of Law

    Recently, a group of law professors petitioned the Securities & Exchange Commission (SEC) to adopt rules requiring corporations to disclose expenditures for political activities. The petition advances a variety of convincing yet fairly conservative arguments supporting both the need to adopt new political disclosure rules and the mechanisms for disseminating sufficient information. Although the petition adopts a properly dispassionate tone and focuses on pragmatic steps the SEC could easily take, the potential implications of a failure to adopt a political expenditure disclosure rule, or of a defeat of any new disclosure rule based on a First Amendment challenge, are much more striking than the petition conveys.

    First, the failure to require public corporations to disclose their political expenditures would exacerbate a tragedy of transparency that already threatens the collapse of the market for corporate social responsibility (CSR), where consumers and investors employ various political, social, environmental, or ethical screening criteria before purchasing a company’s stock or products. On a worldwide basis, owners or managers of assets exceeding $14 trillion make investment decisions based on one or more CSR criteria. 

    In an efficient market, fully informed consumers and investors could reward companies that engage in desired CSR practices by purchasing their products or stock, and, conversely, could punish companies that fail to engage in desired practices by refusing to purchase their products or stock. To the extent consumer and investor preferences for CSR provide compliant companies greater economic benefits (e.g., through higher consumer prices, stock premiums, or cheaper access to capital) than the cost of embracing CSR practices, an opportunity for true wealth creation exists that satisfies the preferences of consumers, investors, and corporate shareholders alike. That classic win-win opportunity quickly devolves into economic waste, however, if investors and consumers stop rewarding companies for engaging in socially responsible behavior. 

  • August 18, 2011

    by Jonathan Arogeti

    This past Term of the Supreme Court proved “very tough for consumers,” says Robert Peck, president of the Center for Constitutional Litigation, in a video interview with The National Law Journal’s Tony Mauro.

    “This is a court that doesn’t seem to like litigation, and especially doesn’t like litigation against business,” Peck said. “They’ve taken a number of cases [in] which plaintiffs are now going to have great difficulty achieving justice and recompense for things that happen at the hands of corporations.”

    Peck discusses two of the cases that had the greatest impact on litigants: PLIVA v. Mensing and Wal-Mart v. Dukes.

  • August 1, 2011

    by Jeremy Leaming

    Beyond fighting caps on bailed-out bankers’ salaries and pressuring Congress for a so-called tax holiday, allowing corporations to bring overseas profits back home at a significant tax-break, business interests are also feverishly working to undercut the Dodd-Frank financial overhaul bill that was enacted last year.

    The Wall Street Journalreports that the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness is contemplating legal action against an Securities and Exchange Commission (SEC) rule adopted in spring that encourages people to alert the SEC to corporate malfeasance, which could in turn “lead to penalties exceeding $1 million,” the newspaper’s Jean Eaglesham reports.

    The Future Industry Association, the WSJ, is also mulling over challenges to another provision of the Dodd-Frank bill that prohibits some “trading practices in commodities and other derivatives.”

    The WSJ and ABA Journal noted that a recent opinion by the U.S. Court of Appeals for the D.C. Circuit has prompted business interests to consider further challenges to Dodd-Frank. A three-judge panel of the appeals court last week invalidated an SEC rule intended to make “it easier for shareholders of publicly traded companies to nominate corporate directors,” The Blog of LegalTimes reported. The BLT continued, “The appeals court sided with the business groups’ lawyers, who argued that investors with special interests, including unions and state and local governments, would be likely to put the maximization of the shareholder value second to other interests.”

    A wide-ranging panel discussion at the ACS 10th Anniversary National Convention explored the future of securities litigation pursuant to Dodd-Frank. Video of that discussion is available here.