Volume 2, Issue 1

Published February 1, 2021

Articles

ONLINE ONBOARDING: CORPORATE GOVERNANCE TRAINING IN THE COVID-19 ERA

Seth C. Oranburg & Benjamin P. Kahn

Onboarding new directors is critical in the best of circumstances. What should organizations do when training new board members must be completed online? COVID-19 has forced both ordinary and extraordinary business functions to be conducted primarily online, and online onboarding may be necessary or preferred in a number of business contexts. This Article first reviews the best practices in director onboarding and explains the functional goals of those practices. It then explains how to leverage the power of virtual data rooms and virtual conference software to successfully onboard new corporate directors with virtual meetings. These strategies apply to both for-profit and non-profit boards and can be employed to enhance any online meeting or conference where the goals include informing and engaging participants while encouraging them to socialize.

FIXING THE JOBS ACT AND INVITING THE TOKENIZED FUTURE, THE NEED FOR CONGRESSIONAL ACTION

Paul H. Jossey

This article reviews the private-market milieu including what makes it incredibly successful but also exclusionary for most of the five million U.S. small businesses. It examines—including through market-actor perspectives—how SEC hostility thwarted the JOBS Act via empirically questionable investor protections. It also proposes statutory solutions to push American capital raising into the 21st century. These bright-line proposals abjure overreliance on SEC staff or state-equivalent interpretation and “facts and circumstances” analysis. These solutions may jar lawmakers accustomed to ceding discretion to agencies with immense power over the nation’s entrepreneurial spirit. But the world will not wait for the Commission to change cultures and the Final Rules prove if left alone it will remain inert.

WHEN JUSTICE IS SERVED: USING DATA ANALYTICS TO EXAMINE HOW FRAUD-BASED LEGAL ACTIONS AFFECT EARNINGS MANAGEMENT

Dr. John Paul, ESQ., CPA

To investigate the possibility that corporate managers change their discretionary accrual policies in response to federal legal decisions, a discretionary accrual model was formulated. Specifically, this model tests whether the magnitude of an entity’s discretionary accruals increases or decreases after the filing of fraud-based legal actions and the issuance of fraud-based legal rulings. The results indicate that overall, the magnitude of an entity’s discretionary accruals: (1) increases in response to the filing of a fraud-based legal action; (2) decreases in response to the issuance of a favorable fraud-based legal ruling; (3) increases in response to the issuance of an unfavorable fraud-based legal ruling; (4) decreases in response to the issuance of a mixed fraud-based legal ruling; and (5) changes according to industry factors in response to the issuance of a fraud-based legal ruling.

DO TRADERS BECOME ROGUES OR DO ROGUES BECOME TRADERS? THE OM OF JEROME AND THE KARMA OF KERVIEL

Ravi Kashyap

We present a study of Jerome Kerviel, a trader at Société Générale, and how he racked up positions far exceeding his authorized risk limits resulting in a spectacular loss and in the process becoming the perpetrator of the biggest rogue trading scandal, thus far, in recorded history. We focus on many aspects of the financial markets and attempt to provide an appropriate context to the proceedings by considering some historical matters and furnishing an alternate definition for a rogue trader. With the goal of highlighting policy relevant insights, we look at the organization structure, trading profits, risk management, regulation, ethics and the many conflicts that arise therein with some focus on Kerviel and his immediate environment.  We provide a simple guide for the budding rogue trader that could also be helpful for the aspiring control agent. We conclude by delving deeper into the ethical issues regarding rogue trading and provide possible ways to mitigate, if not resolve, the many moral dilemmas that arise in business, life and elsewhere.

We consider many conundrums related to: the question of size of financial firms, organization behavior, designing social systems, ethics, enhancing human welfare, excessive reliance on mathematics, the role played by auditors, better comprehension of history, evolution and the need for universal education. We have strived to ensure that the manuscript is written in a style such that it can be read by almost anyone, with or without a strong business background. Some of the topics we discuss are: A Joke at First and Also at Last; History: A Product Structured by Winners; Rogue One on Delta One; Depart-Mental Drill Down; Confessions of The Control Agents; A Slow Walk On A Tight Rope; The Glass Castle Called Basel; “e” for Everything, Everyone, Everywhere including Evolution, Education and Ethics; Sick Lesson from Nick Leeson; Rogue Trading Guide for Dummies; Mathematically Sophisticated Models or Merely Superior Mora.

BLOCK-CHAIN REACTION: CORPORATE CONSIDERATIONS FOR COMPLIANCE WITH EXPORT CONTROLS AND REGULATIONS

Tyler Godbehere

This Note analyzes the constitutionality of the deemed export requirement and proposes blockchain technology as a solution for businesses to comply with Export Controls. Part II explains the licensing requirements of Export Controls and the impacts the current policy has on business and employees. Part III considers the constitutionality of Export Controls under an Equal Protection Analysis in light of the national security and foreign policy considerations. This Note takes the position that export control regulations are constitutional when tailored around the protection of information related to national security—rather than economic policy based on the national origin of the employee. Part IV, irrespective of the constitutional analysis, proposes that the application of blockchain technology has a potential solution for businesses to comply with export laws. This section begins with an overview of blockchain and how this technology applies to Export Controls. It then evaluates the benefits and challenges associated with integrating blockchain technology to data security systems. Lastly, Part IV explains how the blockchain addresses national security concerns and why companies using this technology will obtain more deemed export licenses.

FIDUCIARY DUTY AND SOCIAL RESPONSIBILITY: IMPLICATIONS OF THE BUSINESS ROUNDTABLE'S STATEMENT ON THE FIDUCIARY DUTIES OF BOARDS OF DIRECTORS TO CORPORATE STAKEHOLDERS OTHER THAN SHAREHOLDERS.

Megan E. Weeren

For Nobel economist Milton Friedman, it was simple: “There is one and only one social responsibility of business . . . to engage in activities designed to increase its profits.” Companies must obey the law, Friedman noted, but beyond that, a company’s job is to earn a profit for its shareholders. In the American economy, Friedman’s view prevailed. For the last fifty years, Friedman’s philosophy of “shareholder primacy” has been the core operating principle of public companies, both on Wall Street and in the corporate boardroom. The ideology of shareholder primacy defined American corporate culture. Indeed, it was this mindset that informed corporate raiders like the late T. Boone Pickens, and contributed to an unwavering focus on quarterly earnings reports. From economics, to law, to pop culture, shareholder primacy and the idea that “greed is good” is the lens through which American business is viewed.

…[T]his Paper will focus on Delaware corporate law and governance in addressing the challenge posed by The Business Roundtable’s 2019 Statement. In the exercise of their authority and discretion, should the Board of Directors of for-profit, business corporations be deemed to have a fiduciary duty to take into account and act to benefit the interests of all stakeholders in the corporation, including non-shareholder stakeholders, and if so, does this affect or change their fiduciary duties of loyalty and care to shareholders?

Comments

WHO REALLY CONTROLS THE PRIVACY CONVERSATION? THE NEED FOR A FUNDAMENTAL RIGHT TO PRIVACY IN THE UNITED STATES

Alexa Lynn Weber

The nature of online privacy differs in concrete and substantial ways around the world. These differences are reflected within online privacy regulations that limit access to personal information. Hindered communication between global citizens is one large, although perhaps unintended, consequence of these regulations. The European Union recognizes a fundamental right to privacy in all aspects of life. Nonetheless, European courts have recognized that balancing the value of privacy with other such fundamental rights has proven difficult as social media and data corporations such as Facebook and Google continue to be primary sources of worldwide information. By contrast, United States federal laws and regulations have refused to recognize privacy as a fundamental right standing on its own, which prioritizes the free flow of information but results in a patchwork of different legislations to which privacy applies. These two differing protections of privacy do not work in harmony, contradict each other both in practical application and everyday life, and fail to account for changing definitions of what privacy means in the digital age. California’s Consumer Privacy Act, to be amended by the California Privacy Rights Act in 2023, embodies the ineffectiveness of state-by-state privacy regulations. The internet and social media supersede physical boundaries and allow individuals to do the same. With every “share,” “like,” or “tweet,” traditional notions of privacy are left at the doorstep—an inevitable consequence of the modern world. The United States Congress must preempt and in effect, limit, current and future state legislation by drafting legislation to circumvent a Dormant Commerce Clause analysis to state regulations. However, in order to enact that federal legislation, this comment argues that it is necessary to define privacy as a fundamental right in the United States.

COMITY, TIPPING POINTS, AND COMMERCIAL SIGNIFICANCE: WHAT TO EXPECT OF THE HAGUE JUDGMENTS CONVENTION

Olivia Stitz

On July 2, 2019, the 22nd Diplomatic Session of the World Organization for Cross-border Co-operation in Civil and Commercial Matters (“HCCH”) passed the Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (“Hague Judgments Convention”). Intended to promote global commercial trade under a reliable judicial system, the Hague Judgments Convention offers core rules for recognition of foreign court judgments, attempting to create international uniformity and predictability.

This article will analyze the Hague Judgments Convention’s implication for international commercial contracts and predict the Hague Judgments Convention’s future significance in international dispute resolution. To offer meaningful analysis, the Hague Judgments Convention will be compared to the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) and the 2019 United Nations Convention on International Settlement Agreements Resulting from Mediation (“Singapore Convention”). After introducing the issue at hand in Part I, Part II will offer background information on the three relevant conventions to this comment: The Hague Judgments Convention, the New York Convention, and the Singapore Convention, after which the Singapore Convention will take a back seat. In Part III, the article will consider what it will take for states to sign on to the new Hague Judgments Convention, analyzing concerns of comity but also statistical considerations that would be required for the Hague Judgments Convention to reach any commercial significance. The article will then hypothesize whether, once sufficient countries have signed the Hague Judgments Convention, businesses are more or less likely to transition from arbitration to litigation, putting the Hague Judgments Convention into full effect. Part IV concludes.

In sum, it remains questionable whether the Hague Judgments Convention will ever reach the required members to reach commercial significance. The New York Convention’s popularity and success will overshadow the Hague Judgments Convention’s promise as this new Convention faces the drawbacks that come with enforcing a foreign court ruling and implementing change in the immediate future. Although a noble idea, international trade is not yet ready for the Hague Judgments Convention. Current mindsets and customs will offer significant pushback. Mediation under the Singapore Convention, however, will reach new heights as a steppingstone to more aggressive yet binding dispute resolution mechanisms.