jump to navigation

politics and financial stability August 23, 2019

Posted by Bradley in : financial regulation , add a comment

Regulators in the US are relaxing regulatory constraints on financial institutions introduced in response to the financial crisis, although recent episodes of volatility in financial markets and suggestions that recessions are underway or developing raise some questions about whether this makes sense.  It is not clear that the post crisis regulatory changes had a negative effect on SME financing, for example (the Financial Stability Board suggested this in the summer,  and asked for reactions).  And, in addition to purely economic considerations there are political developments which raise questions about risks to financial stability, such as the concerns banks in Hong Kong have raised about protests there.

Jerome Powell today had some words about financial stability:

At the end of the day, we cannot prevent people from finding ways to take excessive financial risks. But we can work to make sure that they bear the costs of their decisions, and that the financial system as a whole continues to function effectively. Since the crisis, Congress, the Fed, and other regulatory authorities here and around the world have taken substantial steps to achieve these goals. Banks and other key institutions have  significantly more capital and more stable funding than before the crisis. …  We have not seen unsustainable borrowing, financial booms, or other excesses of the sort that occurred at times during the Great Moderation, and I continue to judge overall financial stability risks to be moderate. But we remain vigilant.

However, he also pointed out that “fitting trade policy uncertainty” into the Fed’s analysis was “a new challenge.” Recent events are complex:

The three weeks since our July FOMC meeting have been eventful, beginning with the announcement of new tariffs on imports from China. We have seen further evidence of a global slowdown, notably in Germany and China. Geopolitical events have been much in the news, including the growing possibility of a hard Brexit, rising tensions in Hong Kong, and the dissolution of the Italian government. Financial markets have reacted strongly to this complex, turbulent picture. Equity markets have been volatile. Longterm bond rates around the world have moved down sharply to near post-crisis lows. Meanwhile, the U.S. economy has continued to perform well overall, driven by consumer spending. Job creation has slowed from last year’s pace but is still above overall labor force growth. Inflation seems to be moving up closer to 2 percent.

It’s not clear to me that at this point suggesting to financial institutions that they should be taking on more risk makes sense.

business judgment and the business roundtable on corporate social responsibility August 23, 2019

Posted by Bradley in : law , add a comment

Alison Frankel discusses the implications of the Buisness Roundtable’s new Statement of Principles here. Will a Board that decides to act in the interests of non-shareholder stakeholders risk losing the protection of the business judgment rule or not?  The article predicts that when

“shareholder firms start filing suits claiming that directors shouldn’t be concerned with global climate change or overseas labor laws.. [t]he business judgment rule is going to get a whole new workout.”

As the article points out many of the shareholder primacy emphasizing decisions relate to M&A transactions. The context matters, I think. There’s a big difference between a decision about the value of the payout a shareholder will get as the result of such a transaction and a decision as to how to allocate the corporation’s budget. The first in some sense isn’t really a business judgment.

I think there is a risk of liability (following from disapplication of the business judgment rule)  if Boards decide to behave like Henry Ford, and announce that they are adopting climate friendly or employee friendly policies because it’s the right thing to do and they don’t care about shareholders.  And there are corporate executives who behave in ways that suggest some disinterest in compliance with legal rules (e.g. disruptive businesses designed to challenge existing structures and rules). But I don’t expect there to be many cases like this. Corporations are likely to engage in climate risk mitigation where the law requires them to do so (e.g. when the risks are seen as material) or where concerns for reputation turn the longer term issues of financial risk into shorter term issues of reputation risk. Do businesses stop using plastic straws to save the environment from plastic or because they think many of their actual and potential customers care about plastic pollution?

A business decision to engage in climate risk mitigation that is presented as a decision to protect long term value and the current reputation of the corporation should benefit from the protection of the business judgment rule. Whether investors will kick up a fuss is a different question.

g7 summit to focus on the fight against inequalities August 22, 2019

Posted by Bradley in : governance , add a comment

The background brief states that:

France’s Presidency overarching theme is the “fight against inequalities” which has been reflected in all G7 work streams: inequality of income and opportunities, gender inequalities, digital inequalities, inequalities related to environmental degradation, security and development issues.

A number of non-G7 “Partners” will participate, including African countries (a part of the program is to focus on relations between the G7 and Africa).

But when two of the core G7 countries are led by people who think colonialism was good or that a powerful country should just be able to buy territory it fancies anything could happen.

a thought on how corporations can help stakeholders – end mandatory arbitration August 21, 2019

Posted by Bradley in : compliance, ethics , add a comment

If corporations were to be really serious about a move from shareholder primacy to emphasizing a range of stakeholder interests there are various ways they could go about this. But one positive move would be to end mandatory arbitration agreements with class action waivers in contracts with employees and customers, to signal a willingness to comply with the law.

consultations and timing August 20, 2019

Posted by Bradley in : brexit, consultation , add a comment

The UK’s Department for Environment, Food and Rural Affairs is consulting on a National Food Strategy. The Terms of Reference state:

The National Food Strategy will build on the work underway in the Agriculture Bill, the Environment Bill, the Fisheries Bill, the Industrial Strategy and the Childhood Obesity Plan. It is intended to be an overarching strategy for government, designed to ensure that our food system:

But the stated closing date for submission of evidence is October 25th, before the UK looks to be crashing out of the EU. And the Terms of Reference do say that “the strategy will consider our relationships with the devolved administrations, the European Union and our other trading partners.” As with every other policy issue the UK faces at the moment the details of the future relationship of the UK with the EU, and of the various components of the UK with each other matter enormously.  Access to high quality and affordable food is one of the issues the Call for Evidence is interested in,  so having some idea how Brexit actually affects access to food is surely important. Asking people about these issues now to make policy to be implemented in an uncertain future makes no sense at all.

business roundtable statement on the purpose of a corporation August 19, 2019

Posted by Bradley in : markets, Uncategorized , add a comment

The Statement on the Purpose of a Corporation emphasizes stakeholders – all stakeholders and not just shareholders. The announcement states:

Since 1978, Business Roundtable has periodically issued Principles of Corporate Governance. Each version of the document issued since 1997 has endorsed principles of shareholder primacy – that corporations exist principally to serve shareholders. With today’s announcement, the new Statement supersedes previous statements and outlines a modern standard for corporate responsibility.

The announcement of this change makes sense in the current (uncertain) political environment, but what it may mean in practice is unclear. Before the announcement corporations put a lot of effort into seeming to care about corporate social responsibility and esg measures (it is hard to monitor how real any of this is) . After the announcement many shareholders will continue to demand their profits.  

undocumented minors in america August 15, 2019

Posted by Bradley in : ethics, Uncategorized , add a comment

The 9th Circuit interpreted the settlement in  the Flores litigation to the effect that minors entitled under the settlement agreement to be held in safe and sanitary conditions have the right to “adequate sleep, essential hygiene items, and adequate, clean food and water” and that the district court’s decision that held this did not modify the safe and sanitary conditions provision of the settlement agreement. The safe and sanitary language was not too vague to be enforced. The court wrote:

Assuring that children eat enough edible food, drink clean water, are housed in hygienic facilities with sanitary bathrooms, have soap and toothpaste, and are not sleep-deprived are without doubt essential to the children’s safety. The district court properly construed the Agreement as requiring such conditions rather than allowing the government to decide whether to provide them.

It is shocking to think that the government argued that it was not necessary to provide incarcerated minors (children) with soap and water and ensure that they were not sleep deprived.

university of miami law dean- tony varona June 11, 2019

Posted by Bradley in : um , add a comment

We have a new Dean of the Law School.

100 years of women in english law February 18, 2019

Posted by Bradley in : gender , add a comment

The UK Association of Women Judges is launching an open lecture series celebrating 100 years of women in law.

The launch event – which marks the centenary of women’s entry to the legal profession – will be held at the Supreme Court, Little George Street, London SW1P 3BD – on Thursday March 21, from 6pm to around 8pm.


brexit podcast January 14, 2019

Posted by Bradley in : brexit , add a comment

This week, in anticipation of tomorrow’s vote in Parliament: The Chaos of Brexit (Miami Explainer Season 2, Episode 1).