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A (veiled) hint at the future of Canadian corporate law jurisprudence?

Please check out my case comment on the SCC's recent decision in Chevron Corp. v. Yaiguaje in the Canadian Business Law Journal - you can read the decision here and the comment here. The Court's decision is primarily concerned with affirming and clarifying a liberal approach to the recognition and enforcement of foreign judgments pursuant to an equally liberal conceptualization of comity. But the Court's decision also offers an intriguing (if veiled) hint at the near future of Canadian corporate law jurisprudence, including the possibility of recognizing the principle of enterprise liability in respect of close corporate groups.

The NFL, concussions and playing through it

I recently finished reading Mark Fainaru-Wada and Steve Fainaru’s excellent League of Denial, which tells the story of how the NFL has dealt with the concern that playing pro-football caused brain injuries that likely resulted in the deaths, some by suicide, of a number of retired NFL players. (Spoiler alert: the NFL dealt with it much like Big Tobacco dealt with the link between smoking and lung cancer, including co-opting academic researchers with big research grants). On January 14, Judge Anita Brody denied preliminary approval of a $765 million settlement of a consolidated lawsuit brought by former players and their families. 

Although the NFL continues to claim that a causal link between football and chronic traumatic encephalopathy (CTE) hasn’t been proven, notwithstanding that 25of 26 brains of deceased football players examined showed evidence of CTE, the League has taken steps to educate players about the dangers of concussion injuries and to reduce the number of players returning to the field after a possible concussion.

While these steps are important, changing the culture of football will take more than hanging a poster in the locker room. Football players are tough and, as League of Denial describes, toughness will sometimes be the difference between being naturally talented and playing football for a living. More generally, playing through pain and injury, sacrificing one’s body and (occasionally) soul for the greater glory of the team, is a large part of the appeal for sports fans. Kirk Gibson hitting a walk-off home run in Game One of the 1988 World Series with injuries to both legs. Kerri Strug completing a vault with a broken ankle in the 1996 Olympics, securing gold for the US Women’s team.  But there is a certain egoism at work here too. The idea that your team can’t win without you. There may be times when this is true, as in Strug’s case. Could the Red Sox have won the World Series without David Ortiz? Maybe not. But did keeping Hanley Ramirez in the line-up with a fractured rib really improve the Dodger’s chances against the Cardinals in the National League Championship? Doubtful. So, yes, playing through injury is part and parcel of competing in elite sports. But playing through any injury in any game is not. There must be a sense of when the risk of permanent injury is too great an individual price to pay and it's time to let your teammates do the job. Being an athlete is risky, certainly more risky than being a law professor, and that’s ok. But that doesn’t mean that sports’ governing bodies, both professional and amateur, don’t have a social and moral responsibility to minimize those risks within the parameters of the game. But they can’t do it without fans also shifting their own attitudes that athletes are ‘soft’ if they don’t play through it.

The New Kid on the (Corporate Law) Block: “Public Benefit Corporations”

Ah, Labour Day: a day to watch some football, gear up for the first day of school and catch up on recent developments in Delaware corporate law!

For those readers who are not corporate law aficionados, Delaware is sort of like the New York Yankees of corporate law: a lot of companies choose to incorporate there, what Delaware does affects other jurisdictions and, love it or hate it, everyone pays attention to what’s happening there.

So, it is significant that on August 1, 2013, Delaware became the nineteenth US state to enact legislation concerning “public benefit corporations”. As the name suggests, public benefit corporations are corporations that expressly commit to provide a “public benefit”, as specified in the articles of incorporation, and to “operate in a responsible and sustainable manner”, as well as make money for shareholders. “Public benefit” is defined as a “positive effect (or reduction of negative effects) on 1 or more categories of persons, entities, communities or interests (other than stockholders in their capacities as stockholders)”. The boards of directors of public benefit corporations must balance the financial interests of shareholders, “the best interests of those materially affected by the corporation’s conduct” and the public benefit specified in the articles. For a helpful summary of this and other recent amendments to Delaware corporate law, see here.

I see two troubling implications of creating a separate category of public benefit corporations. First, I have a problem with the implication that regular vanilla corporations do not provide a public benefit. The generally accepted justification for the separate legal personality of corporations and the limited liability of shareholders is the public benefits that flow from facilitating investment in for-profit business enterprises. Apart from creating employment and products and services people need and want, corporations' profitable endeavours also make artistic, cultural, educational, environmental and technological contributions - the types of public benefits listed in the statute. Second, I have a problem with the implication that regular vanilla corporations are not, or ought not to be, run in a “responsible and sustainable manner”. By implying that only designated corporations provide a public benefit and that only designated corporations need to be responsible and sustainable, public benefit corporations could undermine both the legitimacy of the corporate form and efforts to make all corporations more responsible for their negative social impacts.

Business and human rights, the domestic version

When we hear the phrase “business and human rights”, we tend to think about Canadian mining companies operating in developing countries. Last week, I attended a conference presentation that brought the issue of business and human rights closer to home. Dr. Laverne Jacobs began her presentation with an anecdote about the difficulties faced by individuals who use a standard power wheelchair to access certain Air Canada flights. The problem is that the cargo hold of Embraer jets, purchased by Air Canada and then transferred to one of its Air Canada Express operators, is not large enough to fit a standard power wheelchair. The focus of Dr. Jacobs’ presentation was consultation (or the lack thereof) with stakeholder groups regarding government regulations that will affect disability rights. This got me thinking about whether Air Canada had any duty to consult with, or at least to consider the impacts on stakeholders of using these particular Embraer jets. In BCE v 1976 Debentureholders, the Supreme Court of Canada suggested that, in certain circumstances, corporate boards of directors “may be obliged” to consider the interests of stakeholders in fulfilling their duty to act in the “best interests of the corporation” (para 66). Use of a jet that affects interests protected under the Canadian Human Rights Act would seem to be the type of circumstance the Court was contemplating. Even if the BCE decision doesn’t lead to this conclusion, the UN “Protect, Respect and Remedy” framework on business and human rights does. The framework requires corporations to take steps to “respect” human rights, that is, to avoid causing or contributing to “adverse impacts” on individual’s human rights. Compliance with national laws, in this case the Canadian Human Rights Act and the Transportation Act, does not necessarily exhaust corporations’ responsibilities under the framework. It is hard to believe that Air Canada was unaware of this consequence when it decided to use the Embraer jets. So, did this factor into its decision-making? Were alternatives considered that would not impact customers who rely on standard power wheelchairs? If those alternatives weren’t feasible, was a plan put in place to mitigate the impact? I could not find anything in Air Canada’s public disclosure (media releases, its website and the documents cited below) to answer these questions. But what I did find begs the question whether anyone saw this as a human rights issue at all. The Human Rights section of Air Canada’s Corporate Policy and Guidelines on Business Conduct is five lines long and states that Air Canada does not recruit child labour and supports laws against child sexual exploitation. That is very nice, but doesn’t really relate to how Air Canada operates its business. Air Canada’s 2011 Corporate Sustainability Report claims that human rights are not “a significant stakeholder issue”. This is the criticism often leveled at “corporate social responsibility” or “CSR”: corporate officials fail to connect it to the manner in which the company operates or makes decisions. By narrowly defining human rights issues, Air Canada may have missed an opportunity to demonstrate its commitment to the basic human rights of its customers.