Corporate governance

  • November 13, 2015
    Guest Post

    by Justin Pidot, Associate Professor of Law, University of Denver Sturm College of Law

    News broke last week that the New York Attorney General is investigating Exxon Mobil for providing false information about climate change to investors and the public. Similar investigations of other energy companies may be on the horizon.

    Specifics about the investigation are in short supply. This could be, as an article in Forbes suggests, the opening salvo in a billion dollar litigation campaign like that brought against big tobacco for concealing information about the health risks of smoking. Or it could be a more limited effort to ensure that energy companies fully comply with their obligations to disclose information under securities laws.

    My guess is the latter is true. Just four days ago, the New York AG’s office announced that it had entered a settlement with Peabody Coal under which the company would revise shareholder documents and more fully disclose climate risk in the future. In 2008 and 2009, the New York AG entered similar settlements with three other energy companies. These settlements do not involve million or billion dollar payments, but rather, simply require better information about the risks that climate change poses to the financial health of the companies involved. Frankly, they look a lot like run-of-the-mill settlements of potential securities violations. No one would pay any attention except they involve the words “climate change.”

    Not only does this investigation seem relatively unremarkable, it also seeks to vindicate principles upon which we should generally be able to agree. Legal regimes that require information disclosure need enforcement to stay vigorous.

  • November 13, 2015
    Guest Post

    by Reuben A. Guttman and Caroline M. Poplin, M.D., J.D. Guttman practices law with Guttman, Buschner & Brooks PLLC and was counsel for whistleblowers in cases involving Abbott, Pfizer, GSK, CHS and Pharmerica, among others. Poplin, M.D., J.D., is Medical Director and Of Counsel for Guttman, Buschner & Brooks PLLC and also was involved in cases against Abbott, Pfizer, GSK, CHS and Pharmerica.

    In recent months, Planned Parenthood, a health care provider for low-income women, has been under the focused scrutiny of a Congressional oversight committee. Among its many healthcare services, many of which involve preventive care, Planned Parenthood also provides abortions. The organization has been accused in political circles of selling fetal tissue. Though this may be a crime, there have been no criminal indictments let alone convictions and the evidence seems flimsy, if not fabricated, with congressional oversight itself pretextual.

    Of course, if Capitol Hill politicians are sincerely interested in looking into how federal dollars are being spent for preventive medicine, care for the nation’s children, and care for the infirmed and the elderly, there are real targets to focus on; targets where billions of dollars have been spent for medical care which, in some cases, has neglected the fundamental tenet that has passed from practitioner to practitioner through the ages: “first, do no harm.”

    For starters, look no farther than the pharmaceutical industry where some of the world's largest drug companies – which feed on funds from Medicare, Medicaid, and the Veterans Administration – have pled guilty to conduct that has admittedly placed lives at risk. Abbott, GlaxoSmithKline, Pfizer, and Johnson & Johnson are just a few of the names that make the list.

  • August 31, 2015
    Guest Post

    by Reuben Guttman, partner, Guttman, Buschner & Brooks, PLLC; member, ACS Board of Directors

    This month, former United States Congressman Michael Grimm will begin an extended vacation courtesy of the United States Federal Bureau of Prisons. Mr. Grimm was awarded an eight month getaway as the prize for a scheme to defraud the Internal Revenue Service while running a New York health food restaurant. He pled guilty last December but was formally sentenced in July, 2015.

    A December 23, 2014 press release issued by the United States Attorney’s Office for the Eastern District of New York stated that “Michael Grimm has now publicly admitted that he hired unauthorized workers whom he paid ‘off the books’ in cash, took deliberate steps to obstruct the federal and state governments from collecting taxes he properly owed, cheated New York State out of workers’ compensation insurance premiums, caused numerous false business and personal tax returns to be filed for several years, and lied under oath to cover up his crimes.”

    As Mr. Grimm counts down his final days of freedom, there is no question that the summer of 2015 is for him a far cry from his summer of 2011 when he was a member of the House Finance Committee and hawked legislation requiring whistleblowers to report wrongdoing to corporate internal compliance groups before disclosing information to the Securities and Exchange Commission. Back then Grimm explained that “most companies want to know if an employee is doing something wrong or hurting customers.” Mr. Grimm’s choice of words was telling. Employees doing something wrong? What about their bosses?

    These days Mr. Grimm is a poster child for why employees should not be required to blow the whistle internally before reporting to government regulators. What is the likelihood that one of Mr. Grimm’s employees would have had their grievances fully and completely addressed if they complained about being paid off the books? The truth is that when the boss is the culprit, internal compliance programs are not a viable means of redress for employees. Enron, Tyco and WorldCom all had internal compliance programs, none of which worked.

  • May 22, 2015
    Guest Post

    by Thomas O. McGarity is a Member Scholar and past president of the Center for Progressive Reform, and a professor at the University of Texas Law School. He is the author of Freedom to Harm: The Lasting Legacy of the Laissez Faire Revival.

    The Wall Street Journal recently devoted nearly two pages of its Saturday Review section to an editorial by Charles Murray of the American Enterprise Institute urging American corporations to violate laws that they deem to be “pointless, stupid or tyrannical” as acts of civil disobedience.  The article, which is a capsule summary of his recently published book titled By the People: Rebuilding Liberty Without Permission,” betrays a profound misunderstanding of the concept of civil disobedience and a deplorable contempt for the laws that Congress and state legislatures have enacted to protect their citizens from corporate malfeasance.

    This is, of course, the same Charles Murray who has made millions of dollars writing poorly documented books like The Bell Curve and Losing Ground, which were designed to allow conservative politicians to feel good about reducing welfare for the poor, limiting immigration from Latin America, and eliminating affirmative action policies.  If for no other reason than that Charles Murray is one of almost-candidate Jeb Bush’s favorite authors, his newest salvo bears close scrutiny.

    The essential underlying premise of the article is that the Code of Federal Regulations is chock full of senseless regulations, the violation of which could not possibly lead to any actual harm to anyone.  This premise is an article of faith for critics of federal regulation, but it has little basis in fact.  The one actual regulation he cites (an OSHA standard requiring railings for exposed stairway floor openings to be 42 inches high) may be far more detailed in its specification than it needs to be, but it is by no means senseless.  As Murray recognizes, it is intended to prevent workers from precipitous falls.

    Murray’s big idea is for companies in various regulated industries to get together and agree to engage in acts of “civil disobedience” by consciously violating regulations they deem senseless.  He points out that regulatory agencies have become so debilitated that they do not have nearly enough inspectors to detect violations of any of their regulations.  The agencies therefore depend to a great extent on voluntary compliance with their regulations.  Murray suggests that if companies just quit voluntarily complying with what they deem to be pointless, stupid or tyrannical regulations, the agencies would probably not penalize them (just as the traffic cop stationed next to a crowded freeway does not try to pull over speeders who are traveling with the flow of traffic), and the world would be a better place.  Those violators that the agencies did prosecute should fight the government tooth and nail to send the message that corporate America will no longer tolerate the injustice of senseless regulation. What’s more, he proposes that as part of this conspiracy to break the law, the corporations should create “defense funds” to which they’d all contribute, to pay the legal fees of the ones who get caught.

    Murray’s idea is a gross perversion of the concept of civil disobedience as the nonviolent violation of a law that the violator deems to be unjust and the willingness to suffer the legal consequences to demonstrate the law’s injustice.

  • May 1, 2015
    Guest Post

    by Rena Steinzor and Thomas McGarity, past presidents and founders of the Center for Progressive Reform. Steinzor is a professor at the University of Maryland Carey Law School, and McGarity is a professor at the University of Texas Law School. Steinzor is author of Why Not Jail? Industrial Catastrophes, Corporate Malfeasance, and Government Inaction. McGarity is author of Freedom to Harm: The Lasting Legacy of the Laissez Faire Revival.

    With the announcement that GM Chief Executive Officer Mary Barra received the outsized compensation of $16.2 million in 2014, what should have been a year of humiliation and soul-searching for that feckless automaker instead ended on a disturbingly self-satisfied note.  Purely from a public relations perspective, Barra worked hard for her money.  Appearing repentant, sincere, and downcast, she persuaded star-struck members of Congress that the company was committed to overhauling a culture characterized by what she called the “GM shrug,” loosely translated as avoiding individual accountability at all costs.  Even as she blinked in the television lights, GM fought bitter battles behind the scenes to block consumer damage cases and exploit corporate tax loopholes.

    Largely on the basis of her political adeptness, Barra has been taking victory laps in the business press, hailed as the rare (female) CEO who has led her corporation out of a morass that could happen to anyone.  This performance and the accolades it inspired provide a troubling coda to what was a destructive year for American drivers.  Dubbed “the year of the recall,” automakers recalled an unprecedented 64 million vehicles ‒ about one in five cars on the road; GM led with 26 million of this total.

    To restore justice to GM’s beleaguered customers – and the scores of families who lost loved ones in crashes caused by the defective switch – we can only hope that the Justice Department’s criminal investigation of the company and its senior executives results in prosecutions that could offset the unjust favors the legal system is already prepared to bestow.