July 22, 2019

Archives for October 23, 2015

Social Responsibility — Doing Good While Also Making Money And Protecting Owner Interests

BLI_2015Editor’s Note: The following article is excerpted from Herrick Lidstone’s materials for the 2015 Business Law Institute on October 28, 2015. Mr. Lidstone is leading a panel discussion about social responsibility in business. For discussion of the questions he raises below, attend the Business Law Institute. Register here or by clicking the links below.

By Herrick K. Lidstone, Jr.

There are a huge number of issues surrounding corporate/entity social responsibility. Even understanding what “social responsibility” is in this context has a divergent path. For the purposes of this discussion, it can be described as “Doing Good While Also Making Money And Protecting Owner Interests.”[1] This demonstrates the potential conflict – should an investor in a business entity (the owner) look to the entity to “do good” or merely to comply with legal requirements (do not pollute; do not violate the law) while making money for the owners (profit maximization). Should the owner have a say in the business entity’s choices?

Should an entity selling t-shirts worry about the workers in Bangladesh? Should an entity selling coffee worry about how it is grown and harvested? Should an entity selling beef burritos worry about how the cattle are slaughtered?

The legal landscape in which these questions must be considered has changed dramatically in the last five years. Consumer attitudes toward many of these issues have also changed. Some businesses are now extolling their social responsibility, while others apparently continue to consider that to be a secondary consideration, at best. Citizens United v. Federal Election Comm’n, 130 S. Ct. 876 (2010), interprets the Constitution to give business entities the right of free speech in political campaigns in a manner that is not necessarily answerable to the owners.[2] Has Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751 (2014), done similarly for social responsibility and business philanthropy?

The following points are more than can be discussed at one sitting, but hopefully will form a basis for an interesting presentation.

  1. Does Hobby Lobby change the landscape for business enterprises to consider factors other than profit in making their business decisions?
  2. The duties of the Board of Directors after Hobby Lobby – can a for-profit corporation consider social responsibility even if it has the effect of reducing profits?
  3. Where investors are concerned, what is the role of disclosure regarding consideration of alternative constituencies?
  4. Should a for-profit corporation desiring to include a focus on social responsibility at the expense of profit expressly so state in its articles of incorporation or adopt a form such as (in Colorado) a public benefit corporation?
  5. Is there a religious and moral side to profit maximization and corporate social responsibility?
  6. Is there a difference between corporate social responsibility and social entrepreneurship?
  7. Are alternative entities important, and must they be carefully crafted?
  8. Is it a question of marketing?
  9. Where does “blind philanthropy” fit in?
  10. Once you have done it, can you go back?
  11. Is it the Millennials (born 1980-1995) versus the Baby Boomers (born 1945-1960)?
  12. Whither the future?

[1] Of course, the concept of “doing good” has potentially a variety of meanings depending on political, moral, religious, and other deeply held beliefs. This paper will not focus on the potentially contradictory definition of “good.” In the most controversial extreme, consider the “rights of the unborn” versus “freedom of choice” as a justification for abortion. This paper will leave the definition of “good” to others.

[2] In August 2011, the “Committee on Disclosure of Corporate Political Spending” filed a petition for rehearing with the Securities and Exchange Commission (http://www.sec.gov/rules/petitions/2011/petn4-637.pdf) in which the committee asked “that the Commission develop rules to require public companies to disclose to shareholders the use of corporate resources for political activities.” Those rules still do not exist for 1934 Act reporting companies. The SEC does have rules prohibiting investment advisors from making political contributions to encourage political subdivisions to hire them as advisors. See 17 CFR § 275.206(4)-5.

Herrick K. Lidstone, Jr., Esq., is a shareholder of Burns Figa & Will, P.C. in Greenwood Village, Colorado. He practices in the areas of business transactions, including partnership, limited liability company, and corporate law, corporate governance, federal and state securities compliance, mergers & acquisitions, contract law, tax law, real estate law, and natural resources law. Mr. Lidstone’s work includes the preparation of securities disclosure documents for financing transactions, as well as agreements for business transactions, limited liability companies, partnerships, lending transactions, real estate and mineral property acquisitions, mergers, and the exploration and development of mineral and oil and gas properties. He has practiced law in Denver since 1978.


CLE Program: Colorado Business Law Institute

This CLE presentation will take place Wednesday, October 28, 2015 at the Grand Hyatt Denver Downtown. Live program only – click here to register or call (303) 860-0608.

Can’t make the live program? Click here to order the CD homestudy or click here for the MP3 audio homestudy.

Colorado Court of Appeals: Announcement Sheet, 10/22/2015

On Thursday, October 22, 2015, the Colorado Court of Appeals issued six published opinions and 44 unpublished opinions.

People v. Eastwood

People v. Gee

People v. Riley

People v. Baca

People v. Pendleton

People v. Douglas

Summaries of these cases are forthcoming, courtesy of The Colorado Lawyer.

Neither State Judicial nor the Colorado Bar Association provides case summaries for unpublished appellate opinions. The case announcement sheet is available here.

Tenth Circuit: Indictment Still Effective Until End of Probationary Period During Conditional Discharge

The Tenth Circuit Court of Appeals issued its opinion in United States v. Saiz on Tuesday, August 18, 2015.

Gabriel Saiz pleaded guilty to burglary, battery, and larceny in New Mexico state court in 2011. At sentencing the court entered a conditional discharge order, under which Saiz was placed on probation but not convicted of the crimes. Upon completion of the probationary period the guilty plea would be eradicated and there would be no conviction. During the probationary period, Saiz was convicted on two federal charges of unlawful firearm possession. He pleaded guilty. The district court applied a sentence enhancement due to Saiz’s status as a “prohibited person,” meaning “any person under indictment for a crime punishable by imprisonment for a term exceeding one year.” The district court added two sentence enhancements and one reduction for acceptance of responsibility, resulting in a Guidelines range of 70 to 87 months’ imprisonment. Without the enhancements, the Guidelines range would have been 57 to 71 months. The district court varied downward and sentenced Saiz to 60 months’ imprisonment.

Saiz appealed, arguing the conditional discharge did not count as an indictment for purposes of the sentence enhancement. The Tenth Circuit disagreed, reasoning that because the charges in the indictment remain suspended during the period of probation, and because the court retains jurisdiction during the pendency of the probation, the indictment is still in effect during the probationary period. Persons under conditional discharge are neither adjudicated guilty nor convicted, and does not dispose a case to the fullest extent possible.

The district court’s sentence was affirmed.

Tenth Circuit: Unpublished Opinions, 10/22/2015

On Thursday, October 22, 2015, the Tenth Circuit Court of Appeals issued one published opinion and two unpublished opinions.

United States v. Garcia

Hays v. Colvin

Case summaries are not provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.