Corporate Governance

  • August 11, 2010
    Guest Post

    By Scott Nova and Ben Hensler. Nova is Executive Director and Hensler is General Counsel for the Worker Rights Consortium, a university-based organization that investigates working conditions and promotes respect for labor rights in manufacturing facilities around the world.  
    Every year, hundreds of thousands of apparel workers around the world are cheated of legally-earned income when their employers fail to pay mandatory severance benefits. This pernicious form of wage theft, which costs workers the equivalent of at least several months' wages, has afflicted workers sewing clothes for just about every major apparel brand. However, since it is the brands' contract factories that directly employ the workers, the brands insist it's not their problem to fix. Factories close, bosses skip town, the brands wash their hands of the matter - and workers are left high and dry.

    On July 21, Nike signed an accord under which it agreed, in effect, to accept financial responsibility for severance owed to workers by two contract factories (workers with the accord pictured left). This sharp break with business as usual by the world's leading sports apparel brand - the result of intense pressure from student activists and the company's university business partners - has significant implications for the global apparel industry.

    Outsourcing and Accountability in the Apparel Industry

    Outsourcing production to contract factories in the developing world, where labor law enforcement ranges from anemic to non-existent, yields a deregulatory double bonus for American clothing brands. Factories are able to violate worker rights with impunity, affording the brands big savings on labor costs. At the same time, outsourcing insulates brands from any legal accountability, since the lawbreaking from which the brands profit is committed by third parties operating outside the United States.

    The primary goal of the contemporary anti-sweatshop movement has been to make it harder for the industry to play this game, by replacing the legal accountability that outsourcing has largely eliminated with accountability to civil society, generated through both consumer and political pressure, and, increasingly, private contractual relations. Activism in the 1990s compelled most apparel brands to publicly accept responsibility for working conditions at contract factories and to adopt private codes of conduct and monitoring regimes ostensibly designed to compel contractors to respect workers' rights.

    Unfortunately, these corporate codes have been ineffective at protecting workers and, as a result, sweatshop conditions remain the norm throughout the industry. Brands have taken responsibility in theory, but have been highly adept at avoiding responsibility in practice. Achieving genuine improvements in working conditions would require brands to forego the savings extracted when labor standards are ignored and, instead, pay contractors prices consistent with producing in a lawful manner. Brands have refused to do this, continuing instead to push suppliers to accept prices that can only be met by running roughshod over the rights of workers. Yet despite this, brands have done an effective job of persuading many opinion leaders and consumers that their monitoring programs reflect a sincere effort to raise standards.

  • June 25, 2010
    In the string of decisions issued yesterday by the Supreme Court, the case involving the honest-services provision of a federal anti-fraud drew plenty of media attention, but the high court also ruled in another corporate fraud case that according to some court-watchers continues a trend of weakening regulations aimed at preventing corporate fraud.

    Writing for SCOTUSblog, Lyle Denniston states:

    Dismantling a legal edifice built up by lower courts over nearly a half-century, the Supreme Court on Thursday ruled that America's main law against securities fraud does not apply to investment deals that occur outside of this country, even if they have some domestic impact or effect. For the first time, the Court declared that the most-used U.S. stock fraud law cannot be used in American courts to challenge a "transnational" securities deal involving a company whose stock is not traded in the U.S., and when the trade does not occur inside the U.S. With evident sarcasm, Justice Antonin Scalia's opinion for the Court rapped Circuit Courts for having created, by judicial invention, the authority to decide such lawsuits when filed by private investors. This, Scalia said, is "judicial-speculation-made-law."

  • May 12, 2010
    Guest Post

    By Jay Austin & Bruce Myers, Senior Attorneys, Environmental Law Institute

    Big business versus the little guy. The Ninth Circuit running amok. The specter of "frankencrops." All of these tropes -- some familiar to Supreme Court-watchers, one more novel -- were potentially in play last month when the Court considered Monsanto v. Geertson Seed Farms, its first case dealing with federal regulation of genetically modified organisms (GMOs). Yet the oral argument found the justices preoccupied with fine points of jurisdiction, administrative law, and equity, suggesting that their actual ruling may turn out to be a narrow one.

    Geertson arose from a Bush Administration decision to deregulate "Roundup Ready" alfalfa, Monsanto's proprietary strain that has been engineered to resist Monsanto pesticides. Mr. Geertson and other conventional farmers sued the Animal and Plant Health Inspection Service under the National Environmental Policy Act (NEPA), claiming the agency failed to produce an environmental impact statement (EIS) that fully considers the risk of cross-pollination between GMO crops and conventional crops. If such contamination occurs, the plaintiffs' GMO-free status -- and thus their entire business model -- could be in jeopardy.

  • May 7, 2010
    Guest Post

    By Simon Lazarus and Sergio Munoz, Attorneys, National Senior Citizens Law Center

    On May 5 and 6, House and Senate committees held back-to-back hearings on legislation to override a June 2009 Supreme Court decision that stripped older workers of vital protections against bias on which they had relied for over 40 years. In this ruling, which Justice Stevens in dissent characterized as "unabashed judicial law-making," "irresponsible," and in "utter disregard" of the Court's own precedents and "Congressional intent," a narrow 5-4 majority so weakened the 1967 Age Discrimination in Employment Act (ADEA), that employers are left with little incentive to comply. The case, Gross v. FBL Financial Services, illustrates the accuracy of President Obama's recent observation that we "are now seeing a conservative jurisprudence" that is both "activist" and bent on gutting laws that, like the ADEA, were enacted to protect ordinary people.

  • May 6, 2010
    Guest Post

    By Lee Harris, Associate Professor of Law, University of Memphis, where he teaches coporate law. Prof. Harris' most recent article, "Shareholder Campaign Funds: A Campaign Subsidy Scheme for Corporate Elections," can be downloaded here.

    Goldman Sachs has a stellar reputation. Even Warren Buffet, who recently plucked down around $5 billion to purchase a piece of the firm, trusts Goldman.

    But, perhaps the Goldman magic is just that -- smoke, mirrors, a fancy outfit, a distractingly attractive assistant, a show built on illusion.

    Consider the Securities and Exchange Commission's recent lawsuit against Goldman and the impending threat of criminal action against the firm for some of its conduct in allegedly deceiving investors and perhaps even helping instigate the mortgage meltdown and current financial crises.

    With the lawsuit, Goldman joins the long list of other storied financial services companies that have been accused of misconduct recently, including AIG and Stanford Financial, among others.

    According to the SEC, Goldman allegedly helped create, hype, recommend, and ultimately sell investments in housing that was doomed to fail. They charge that Goldman and the employee who allegedly helped size and package the doomed investment, Fabrice Tourre, a French national, committed fraud by failing to disclose details regarding the investment. One e-mail apparently from a Goldman employee, not the Frenchman, described such investments as "sh***y".

    Excuse my French.